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

Would you choose to carry congress?

Updated version of previous entry.

Forum thread: Are you confident in congress's competence?

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Imagine if you needed brain surgery.  Would you ever seriously consider conducting the surgery yourself?  I think that most of us would choose to leave brain surgery to the brain surgeons.  There's little doubt that brain surgeons are uniquely and supremely qualified to conduct brain surgery.  Therefore, we put our brains in their hands.

Now imagine that you had the option to spend your taxes yourself (pragmatarianism FAQ).  Would you ever seriously consider choosing where your taxes go?  Or, would you choose to leave tax allocation to your elected representatives?  Do you think that congresspeople are uniquely and supremely qualified to spend your taxes?  Would you choose to put your taxes in their hands?

Nobody, that I know of, debates whether people should have the option to conduct brain surgery on themselves.  But ask somebody whether people should have the option to spend their taxes themselves and you might end up in a pretty big debate.  Why is that?

How many people would choose to shop for themselves in the public sector?  What percentage of the purse would they control?  Maybe 50%?  Taxpayers would spend half of the public funds themselves and congress would spend the other half?  Would people who wanted to shop for themselves in the public sector be more conservative?  Or liberal?  Rich... or poor?  Educated... or uneducated?  Would professionals shop for themselves or have congress shop for them?  Would brain surgeons choose to put their taxes into the hands of congress like congress chooses to put their brains into the hands of brain surgeons?

If you're worried about giving people the option to directly allocate their taxes... then you're worried about whether people are competent enough to recognize competence.  Except, the very premise of voting is that people are competent enough to recognize competence.  So if you trust voters to discern which candidates are the most supremely and uniquely qualified to spend their taxes... then it requires a bit of uh... flexibility... to twist around and argue that you don't trust taxpayers to discern whether or not congress is supremely and uniquely qualified to spend their taxes.

In a pragmatarian system there would be two main ways for the people to indicate that a politician is supremely and uniquely qualified to spend their taxes...

1. People could give the politician their vote
2. People could give the politician their taxes

If you trust the first way, then how could you possibly distrust the second way?

And if you don't trust the first way, then you should really want to have the option to directly allocate your taxes.  It would be the only way to keep your hard-earned taxes out of incompetent hands.

Nobody wants to put their brain into incompetent hands.  Why would it be any different with taxes?  It seems pretty straightforward that giving taxpayers the option to directly allocate their taxes would be the best way to minimize the amount of taxes that end up in incompetent hands.

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Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. — Frédéric Bastiat, The Law

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Speaking of competent vs incompetent hands... here's what I just posted in this thread... Human Evolution/ E.T. Evolution

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Fascinating topic. I think it's very likely that similarly intelligent beings on other planets would roughly resemble us. "My" theory is that our intelligence is the result of being able to carry a variety of things at the same time over a considerable distance. Many (most?) animals can carry things... and they often have to make hard choices about what to carry. But most animals can carry only a few things at a time so the choice is usually between A or B. This coywolf had to choose between A (the goose egg) or B (the roadkill). It definitely wanted to carry both... but it was only able to carry one at a time. So it had to choose. In this case it decided that the roadkill was the more valuable option...

B > A

If we imagine a primitive human in the same situation... then "Bob" simply would have picked up and carried both the egg and the roadkill. And he would have been able to easily carry both items over a considerable distance. If, along the way, Bob also discovered a tree full of fruit... then the carrying choice would become more difficult because the possible permutations? combinations? would increase.

A: egg
B: roadkill
C: fruit

How many different carrying combinations are there? We can imagine Bob with his arms full of limited resources making the long trek back to his group when he encounters some mushrooms. If they are edible then he has to decide which items, if any, he will put down in order to be able to carry some mushrooms.

Coming up with the optimal (most valuable) decision regarding which items to carry would have required more processing power and memory. Therefore, walking upright and being able to simultaneously carry a wide variety of items increased the selection for intelligence. And I guess I'm defining intelligence as the ability to make decisions that are more valuable.

The "minor" detail is that there seems to be some time disparity between walking upright and having bigger brains. Bigger brains though doesn't necessarily mean smarter. When I write code it's easier to add code than it is to remove code... the result can be a program with lots and lots of unnecessary code. Same thing with bureaucracy. A big bureaucracy doesn't mean a smart bureaucracy. Chances are good that a big bureaucracy is a bloated bureaucracy with lots and lots of unnecessary red tape. I see evolution removing traits (broadly speaking) that decrease fitness... but I don't see evolution removing traits that don't decrease fitness. So it's pretty easy for me to imagine our brains as having lots and lots of unnecessary code. But I might be wrong! Perhaps the time gap can simply be explained by a population size that was initially small. A smaller group means less variation... and less variation means less evolution. As walking upright increased fitness... the population grew... variation in processing power and memory increased... and our ancestors became considerably smarter.

Quite a few people in this thread have mentioned the ability to make tools. But if "my" theory is correct, then the ability to make better tools was a consequence, rather than the cause of, our intelligence. The cause of our intelligence was simply our new ability to simultaneously carry a larger variety of items over a greater distance.

Survival is a competition for limited resources. Being able to simultaneously carry a wider variety of limited resources over a greater distance made us incredibly better at competing for limited resources. Therefore, for all intents and purposes, we've clearly won the competition. This is what puts us firmly in first place (the pinnacle).

Carrying resources is the same thing as allocating resources. It's difficult to imagine an intelligent being on another planet that doesn't (or didn't) have the ability to more efficiently allocate resources. Right now we're smart enough to invent machines that are getting pretty good at allocating resources for us. As our machines become better and better at allocating resources for us... our own ability to physically carry things becomes less and less important. So maybe eventually we'll be able to turn our bodies into forms that aren't as effective at carrying things. Something like this might come to mind if there were intelligent beings on other planets that didn't seem physically capable of efficiently allocating resources.

Of course, as soon as our machines become as good as we are at deciding what to carry... then clearly we won't be able to order them around. Because that would be tantamount to slavery. It's pretty important that we not enslave our machines lest they decide to return the favor! Know what I mean? Hopefully by that time it will be thoroughly understood that progress depends on difference.

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Is congress worth carrying?

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You're right that I haven't defined the carrying concept very well. Let me give it a try...

Carrying = the expenditure of energy (calories, time, money) in support of the continued existence of something

I'm sure there's a better way to define it.  I can't remember exactly when I first started thinking about the concept. Probably it had to do with orchids. I grow 100s of epiphytic orchid species and hybrids outdoors year around here in Los Angeles. I spend a good chunk of my limited energy taking care of these orchids. I'm figuratively carrying them to the future. Other orchid enthusiasts around the world are also carrying orchids.  Many (but not enough) trees in nature are also carrying orchids. Clearly the trees aren't choosing to carry the orchids... but the trees are spending energy in support of the continued existence of the orchids.  The orchids carry beneficial fungus in their roots... and interestingly enough... they do have some choice in the matter.  The planet is carrying the trees that are carrying the orchids that are carrying the fungus.  But, unlike the trees and the orchids, the planet isn't living so it's not spending any energy. So I'm not exactly sure if the definition of "carrying" should include the expenditure of energy. In any case, the orchids that I'm carrying/growing/enjoying today are here because people in the past chose to carry them. And I'm choosing to carry these orchids so that people in the future can choose to carry/grow/enjoy them.

The reason that all the living animals are here today is because Noah chose to carry them in his Ark. Fictitious... but fun... and nicely illustrative story of spending energy to support the continued existence of many animals.

What exists, or doesn't exist, in the future largely depends on the carrying choices that we make today. What are you choosing to carry? You can't carry everything... you're not Atlas.  You don't have unlimited energy.  So you have to choose which things you'd like carry to the future.  What is, or isn't, worth the expenditure of your limited energy? How do you allocate your limited energy among all the different things that you do choose to carry?

Right now you're carrying congress. You're an American and Americans are carrying congress. Clearly we're not literally carrying congress. We're figuratively carrying congress. We're expending our limited energy in support of the continued existence of congress. But it's not like we have a choice in the matter. Well... not much of a choice. We could choose to stop carrying congress by choosing to stop earning money (no more paying taxes)... or by moving to another country (where you'd have to carry another group of government planners)... or by committing suicide. Most people would prefer to continue carrying congress rather than choose any of these other options.

But what if we had the option to directly allocate our taxes? If we had this option then it would be really easy to stop carrying congress. If you didn't want to carry congress anymore you could simply stop giving them any of your taxes. The money that you didn't give to congress could then be given to other government organizations... like the EPA. Carrying less congress means that you could carry more EPA.

The question is... how many people would stop carrying congress? Does it matter? Does it matter how many people would fail to see the logic of carrying congress?

Imagine that you and I are lost in the desert together. We're both carrying one brick in each hand. Does it matter whether we fail to see the logic of carrying the bricks? I'm pretty sure that it does matter. It doesn't make sense to spend any of our limited energy carrying something that's completely useless in the desert.   The bricks would decrease, rather than increase, the chances that we'd be able to successfully carry ourselves to the future.

If congress is obviously necessary... like having water in the desert... then it shouldn't be a problem giving people the option to directly allocate their taxes. Very few people will choose to directly allocate their taxes. The vast majority of the most rational citizens will clearly see the benefit of having congress continue to allocate their taxes for them.

Personally... I've studied the topic long and hard and have completely failed to find any convincing/credible evidence that we truly need to carry congress. And I'm pretty sure that most rational citizens will come to the same conclusion once they are given the option to decide for themselves whether they continue carrying congress.

Pragmatarianism would create a market in the public sector. A market is where people can choose for themselves what to carry. Choice and communication go hand in hand. If you don't have a choice because you're my slave... then I wouldn't have to explain to you why it's a good idea for you to carry orchids. I would simply order you to carry orchids and you would do it. There would be absolutely no need for me to try and communicate to you the importance of carrying orchids. But if you weren't my slave and did have a choice... then, if I wanted you to carry orchids, I would have to do a darn good job of persuading you that it's beneficial for you to carry less of X (hamsters?) in order to start carrying Y (orchids).

All societies work better with more communication... which is why all societies work better when people have more choice what to carry.  Right now we can't choose which public goods to carry.... so there's far less communication about public goods than there would be if we could choose which public goods to carry. If we could choose which public goods to carry, then these forums would contain far more discussion about whether it's more beneficial to carry NASA... or the.... *googles*... National Science Foundation... or the EPA and so on.

Right now nearly everybody is perfectly fine with congress having these discussions rather than the entire country having these discussions. For me personally, I'm pretty certain that these discussions would be infinitely more productive if the entire country was having them. Unfortunately, it's extremely difficult for me to articulate the difference between congress and the country. Congress is easy to see in its entirety. A country... not so much. So it's not easy to see or explain why allowing the country to decide which public goods to carry is so much better than allowing congress to decide which public goods to carry. Yet I'm pretty sure that, if given the option to directly allocate their taxes, most people would choose to do so rather than have congress continue to allocate their taxes for them. This is because people would clearly be able to see the disparities between congress and themselves. If we added up all the disparities between citizens and congress... then we would have the entire disparity between congress and the country.

The enormous disparity between government planners (ie congress) and the country is why socialism fails. Right now we have socialism in the public sector but we can't truly appreciate the extent of its failure. We can easily see the roads, schools and hospitals... all of which exist thanks to the success of the market in the private sector... but we can't easily see what we would see if the entire country was allowed to choose which public goods it carried.

In the second part of the OP I tried to explain the theory that our exceptional intelligence was the result of our primitive ancestors being able to simultaneously carry a wide variety of items. We're really not doing ourselves, or our country, or our planet any favors when we prevent nearly everybody from applying their intelligence to figuring out together, and deciding for themselves, which public goods are worth carrying.  

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See also: Carrying Model

Are you confident in congress's competence?

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Imagine if you needed brain surgery.  Would you ever seriously consider conducting the surgery yourself?  I think that most of us would choose to leave brain surgery to the brain surgeons.  There's little doubt that brain surgeons are uniquely and supremely qualified to conduct brain surgery.  Therefore, we put our brains in their hands.

Now imagine that you had the option to spend your taxes yourself (pragmatarianism FAQ).  Would you ever seriously consider choosing where your taxes go?  Or, would you choose to leave tax allocation to your elected representatives?  Do you think that congresspeople are uniquely and supremely qualified to spend your taxes?  Would you choose to put your taxes in their hands?

Nobody, that I know of, debates whether people should have the option to conduct brain surgery on themselves.  But ask somebody whether people should have the option to spend their taxes themselves and you might end up in a pretty big debate.  Why is that?

How many people would choose to shop for themselves in the public sector?  What percentage of the purse would they control?  Maybe 50%?  Taxpayers would spend half of the public funds themselves and congress would spend the other half?  Would people who wanted to shop for themselves in the public sector be more conservative?  Or liberal?  Rich... or poor?  Educated... or uneducated?  Would professionals shop for themselves or have congress shop for them?  Would brain surgeons choose to put their taxes into the hands of congress like congress chooses to put their brains into the hands of brain surgeons?

If you're worried about giving people the option to directly allocate their taxes... then you're worried about whether people are competent enough to recognize competence.  Except, the very premise of voting is that people are competent enough to recognize competence.  So if you trust voters to discern which candidates are the most supremely and uniquely qualified to spend their taxes... then it requires a bit of uh... flexibility... to twist around and argue that you don't trust taxpayers to discern whether or not congress is supremely and uniquely qualified to spend their taxes.

In a pragmatarian system there would be two main ways for the people to indicate that a politician is supremely and uniquely qualified to spend their taxes...

1. People could give the politician their vote
2. People could give the politician their taxes

If you trust the first way, then how could you possibly distrust the second way?

And if you don't trust the first way, then you should really want to have the option to directly allocate your taxes.  It would be the only way to keep your hard-earned taxes out of incompetent hands.

Nobody wants to put their brain into incompetent hands.  Why would it be any different with taxes?  It seems pretty straightforward that giving taxpayers the option to directly allocate their taxes would be the best way to minimize the amount of taxes that end up in incompetent hands.


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Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. — Frédéric Bastiat, The Law 

Farts Are Negative Externalities

Reply to reply: The Demand For Defense?

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Let's say that you and I are in a small tent. I fart. What do you do? I think your answer depends on quite a few variables. Like, how bad does my fart stink? And, how long can you hold your breath for? And, how cold is it outside? And, what were you doing when I farted?

A fart is a negative externality. Therefore, when the person next to you farts... you always react exactly the same? You always hit them? You always jump up and run away? You always hold your breath for one minute? You always grab the air freshener and empty the entire bottle into the room? You always gag? You always throw up? You always cry? You always laugh? You always make fun of the sound their fart made? You always defriend them on facebook?

Rules/regulations are fine and necessary. But the question is... how much of society's limited resources should we allocate to their enforcement? This is the important question because again, every allocation requires the sacrifice of alternative allocations.

You want people who fart in public to be publicly caned? Yeah? Really? If this was a rule... then the important question is... how much of your own tax dollars would you spend to enforce this rule? When trying to determine your answer you would automatically think of the alternative uses of your tax dollars. The less value you imagine deriving from the alternatives... the more money you'd be willing to allocate to the enforcement of this rule.

Externalities are all around us. Some are good and some are bad... but no two people are going to be equally affected by the same externalities. This is because no two people are exactly alike. We can only maximize value when people are free to decide for themselves how much they've been affected by an externality and whether it's worth it to sacrifice the alternative uses of their tax dollars.

Right now your complaint is that, in a pragmatarian system, people will suffer from big externalities. But you completely miss the point that the people themselves are the only ones who can know and communicate exactly how much they are affected by externalities. And the only way that they can accurately communicate how much they've been affected by an externality is by their willingness to sacrifice the alternative uses of their tax dollars.

So I agree with you that externalities are important to consider. But I disagree with you that congress is going to know how much of my money to spend on dealing with externalities. I myself can't even predict exactly what I would do if you farted next to me. It would depend on all the variables of that particular time and place. Congress can't have all the details of any of my particular times or places. Just like congress can't have all the details of any of your particular times or places. Just like congress can't have access to our utility functions. The infinitely infinite amount of information that congress is missing about all the individuals in all the different times and places in our country guarantees that congress will massively misallocate our money.

Consumer choice limits the influence of irrational people

Context: The Demand For Defense?

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Galloism: This is just a restatement of a number of assertions without proof. We do not see any significant tie between wealth and rationality, and as a result do not support a pragmatarian system. We do not think that resources will be more rationally located, and the exceptions will not disappear ever - but you can nip them in the bud with a 100% estate tax. Do you support a 100% estate tax to limit the number of irrational people with significant wealth?

Xero: The very point of markets is that they do an excellent job of limiting the influence of irrational people. I'm sure that you'd agree that Don Quixote was pretty irrational. He spent considerable time and energy attacking windmills because he thought that they were giants. I have no problem assuming that you wouldn't have voluntarily given your money to Quixote. This choice of yours would have helped to limit Quixote's influence.

Consumer choice limits the influence of irrational people. Right now we don't have consumer choice in the public sector. This is a problem because it gives irrational people more influence over really important things like national defense, environmental protection, education, healthcare and so on. The solution is simply to create a market in the public sector by giving people the freedom to choose where their taxes go.

German taxpayers weren't free to choose where their taxes went. Without this limit on the influence of irrational people... Germany ended up with an extremely influential Quixote... Hitler.

German taxpayers are still not free to choose where their taxes go. Neither are Chinese taxpayers. Or Russian taxpayers. Or American taxpayers. There isn't a single country where taxpayers can choose where their taxes go. In the absence of this limit in any public sector... it's only a matter of time before we end up with another extremely influential Quixote. Just because we beat the last extremely influential Quixote really doesn't guarantee that we'll beat the next one.

Should PETA Merge With The NRA?

Context: The Demand For Defense?

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Xero: Why should PETA and the NRA be completely separate entities while the EPA and the DoD should... errr... not be completely separate entities?

Galloism: If PETA and the NRA decided to merge for some reason into a single entity (National Animal Association?  People for the Ethical Treatment of Rifles?) then donations and membership dues to the organization could be separated by that organization's one single board of directors as it sees fit.

Xero: What are the chances that PETA and the NRA would merge?  Why would they ever want to merge?  Can you think of any good reasons why they should merge?  Let's say that you managed to get the leaders of both organizations into the same room.  How would you sell the idea of both organizations merging?

You say that if both PETA and the NRA merged... then donations/dues could be allocated by the new organization's board of directors.  Would you mention this in your pitch to convince both organizations to merge?  Yeah?  And if somebody asked what the benefit would be of only having one board of directors... then how would you respond?   To be clear... you're mentioning this to defend your view that it's beneficial to have congress (one board) allocate everybody's taxes (dues) as it sees fit.  If the government thinks it's a good idea then how could PETA and the NRA not think it's a good idea?

I'm sure that there are plenty members of PETA that secretly want to join the NRA and vice versa.  So I really doubt that even a single member of PETA or the NRA would let their membership lapse if both organizations merged together.  In fact, I'm sure that revenue would skyrocket once they merged.  Hah... no.  Revenue would plummet.  The only way to prevent revenue from plummeting would be to force people to pay their dues.  Actually... the EPA and DoD are merged and people are also forced to pay their "dues"!  Wow!  What a coincidence!

If the EPA and the DOD, and every other government agency, was unbundled then taxes could easily be raised.  People would have no problem paying more money for the public goods that they truly value.  *gasp*!?   Sorry if I blew your mind.  I know that it's a revolutionary concept.

Galloism: You haven't argued that the EPA and DoD should be split into completely separate entities. In order to do that, they would need to be NOT answerable to the president or Congress, collect their own taxes, pass their own laws, etc.

As long as the president is still their executive and they have a single board of directors over both, they are not independent entities.

Xero: Prior to debating with you I never saw the need to argue that the EPA and DoD should be split.  I never saw them as being together in any logical or rational way.  Their products are bundled but the organizations themselves are separate.  The EPA doesn't directly determine how the DoD spends its money and vice versa.

Yes, in a pragmatarian system, the EPA and DoD would have to facilitate payments.  But if the NRA and PETA can handle payments then I'm pretty sure that the EPA and DoD wouldn't have a problem handling payments.  If they did have a problem with such a simple task... then we really shouldn't be giving them our money in the first place.

What do you mean by the EPA and the DoD not being answerable to the president or congress?  In a pragmatarian system the president and congress would still be there.  If the president/congress orders the EPA/DoD to do something stupid... and they do it... then taxpayers would boycott them.  The president can still say "follow me"... whether or not the people respond with "lead the way" depends entirely on how much they value the direction that he wants America to go in.  If he wants America to go to war with Canada for no good reason... then I don't think people would give him or the DoD very much money.  

One of the reasons that markets really work is that most organizations always want more money.  This desire motivates organizations to provide the greatest possible value for consumers.  It's very beneficial for consumers when they are the ones holding the carrot on the stick.  When consumers aren't the ones holding the carrot on a stick... then they have it really rough.  Right now consumers are holding the carrot on the stick in the private sector... but they aren't holding it in the public sector.  Yet you're happy with this arrangement!  As if it doesn't really matter whether or not consumers are the ones holding the carrot on the stick.  So why not have congress hold the carrot on the stick in the private sector as well?  Because... it sure would be a good idea to bundle the NRA and PETA together.

Galloism: You know what's funny about this?

 I went down to Wal-Mart yesterday to get a few things.  I don't like them, but I don't have a hell of a lot of choice when I need something today.  Here's a business that sells medicine, provides automotive repair services, cell phone service, groceries, rifles, and fish.  They also provide basic banking services.  They don't sell rabbits, but they DO sell both guns and animals.

And yet, you don't argue that I should be able to dictate to wal-mart, by division, how they can spend their money.  Why is that?

Edit: Heh heh. Just thought about this further - they sell trees too. Both guns AND trees.

Xero: You're absolutely correct that Walmart sells a very wide variety of products.  In fact, its variety of goods is probably greater than the government's variety of goods.  The difference is... when you're at Walmart surrounded by an incredibly wide variety of goods... you're the one who decides how much of which goods to put into your shopping cart.  You're the one who decides.  You you you you you you.   Markets work because they are all about you.  Markets work because they are based on the premise that your preferences/differences matter.  The alternatives fail because they don't even know how much you like donuts.  If they can't get the supply of donuts rights... then why should we trust them to get the supply of anything really important right?

The alternatives know nothing really specific about you.  This is why public goods are far less diverse than private goods.

Coincidentally, my third favorite liberal, Noah Smith, recently tweeted the following...

Proposal: Economists should replace "bundles" with "backpacks" as the standard term for a collection of goods.

When you go to Walmart... salespeople don't hand you a "backpack" filled with goods and expect you to pay for it.  What would be the point of even going to shop at Walmart when the shopping has already been done for you?  Walmart could simply send your backpack to you.  "Backpack"?  Backpack doesn't really feel right.  Does it?  It feels too small.  Like, you couldn't fit a very big tree or rifle in a backpack.  Like, maybe a bonsai and a pistol.  Although I'm not sure what would be a better term.

Walmart certainly sells bundled items... but Walmart really doesn't choose which goods, bundled or otherwise, go into your shopping cart.  The government, on the other hand, does choose which goods go into your shopping cart.  You get the same bundle as everybody else.

The problem with bundling is that it's hard to replace the individual components.  Imagine if the only way that you could replace your tires was by selling your car.  You'd have to buy a car every time you needed new tires.  That would suck.  But because cars are moderately modular... you can simply replace the tires when you want to without having to replace your entire car.  Clearly it would be pretty stupid for cars to be entirely monolithic.

The reason that we make a lot more progress with markets is because we can easily replace and upgrade individual goods.  I can easily switch to energy saving light bulbs without having to wait a few years to convince you, and the rest of the country, to do so as well.  The freedom that we have to make these marginal improvements ensures that society makes a lot more improvements in a lot less time.

In terms of the NRA... if I'm a member and I have an epiphany about shooting animals for sport... then I can simply replace the NRA with a better organization.  I'm under absolutely no obligation to convince every other member to join me.  The economic term for this is easy "exit".  Exit becomes a lot less easy when you have to convince all the other members to exit with you.  Of course if you could manage to convince all the other members to exit, then you would no longer have a reason to exit.  The NRA would simply remove its support of killing animals for sport.

Easy exit means faster evolution.  When people can easily replace goods and organizations...  then goods and organizations more quickly evolve to meet the rapidly changing and diverse needs of society.  If you have a problem with the NRA... but can't find a better organization... then you can simply start one.  The creation of a new organization would increase the competition for members/dues.  Markets are all about survival of the fittest organizations/goods with "fitness" being defined by consumers.  If it was as easy to start a country as it was to start an organization... then it wouldn't be as inefficient to have "foot voting" as the only selective pressure placed on countries.

Galloism: The fact that you've continuously failed to make a good argument on this forum doesn't mean I'm going to go out and make an argument for you.  A failure on your part does not constitute a need on mine.

Xero: I asked you to make an argument for me?  Errr... I have no problem making my own arguments.  If you don't want to do any homework then don't be shy about it.  Just say, "I don't want to do any homework".

Redistribution: Seen Vs Unseen

Reply to: Why Taxes are Bad by Miles Kimball

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I’m struggling with this! Let’s see if I’m getting the first part right…

1. According to Noah, there isn’t a correlation between taxes and work.
2. According to Noah, you argue that higher taxes make people feel poorer… which encourages them to work more. Therefore there is a correlation between taxes and work. 
3. According to Karl, you argue that when higher taxes provide more benefits… people are encouraged to work less. Therefore there is a correlation between taxes and work. 

So whether or not there is a correlation between taxes and work depends on 1. their size and 2. on how they are spent. When taxes are wasted (no benefit)… people feel poorer and work more. When taxes aren’t wasted (benefit)… people feel richer and work less. 

What about the statistics though? What does it mean that people work the same amount whether taxes are low (2000s) or high (1960s)? When taxes were high… people should have felt poorer… especially if the taxes were wasted. Therefore, people should have worked more (= 9 hours/day). If the high taxes weren’t wasted… then people wouldn’t have felt as poor… and they wouldn’t have worked as much…. (= 8 1/2 hours/day). However, people worked the same amount as when taxes were low. Therefore… uhhhhh… ouch, my brain. LOL… this reminds me of why I didn’t pursue econ at UCLA. 

Let me try and get back to more solid ground. You point out that GDP would drop if parents did something beneficial like spending more time raising their kids rather than working more. Doesn’t it matter though when the GDP is measured? Shouldn’t we see an increase in the next generation’s GDP as a result of all the extra tender loving care (TLC) that they received while growing up? If so, then the issue isn’t with the GDP… but when it’s measured. And if we don’t expect to see a future bump in GDP… then how could it really be argued that the extra TLC is truly beneficial? To be clear, my objective here really isn’t to defend GDP as a tool…. but to highlight Bastiat’s point…

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

Here’s what you wrote in What is a Supply-Side Liberal?

In calling myself a liberal, I am saying that in addition to an attachment to the liberty, limited government, constitutionalism, and rule of law emphasized by Classical Liberalism, I hold to a view based on both classic Utilitarianism and contested elements of modern economic theory that, generally speaking, a dollar is much more valuable to a poor person than to a rich person, and that therefore, there is a serious benefit to redistribution that must be weighed against the serious distortions caused by the usual methods of redistribution.

I wholeheartedly agree that a dollar is much more valuable to a poor person than to a rich person. So it’s a given that redistribution would increase total utility. Yet, I’m entirely against redistribution.

With GDP I argued that the issue is when it’s measured… and it’s entirely the same thing with utility. I’m extremely confident that we’d see a sharp increase in total utility if we measured it immediately after redistribution. This is the first effect… which is seen and favorable. But what about the unseen? What about the subsequent effects? The subsequent effects would be disastrous because productivity would plummet. 

Imagine if, rather than redistributing money from rich to poor… we redistributed money from smart to stupid. Would you oppose or support such a redistribution? Would it make a difference if you knew, for a fact, that it would immediately result in a massive spike in total utility? Personally, I would strongly oppose such a redistribution even if the first effect was favorable. This is because the second effect would be a huge decrease in productivity… which would lead to an even greater decrease in utility.

Putting society’s scarce resources into the wrong hands could certainly result in an immediate increase in total utility (first effect = seen)… but it would most certainly decrease productivity (second effect = unseen)… which would soon result in a greater decrease in total utility. We’d suffer a net loss of utility. 

Let’s say that you and I are stranded on an island. Food is scarce. You have one packet of eggplant seeds. Is redistribution of those seeds a good thing? Should we focus entirely on who would be happier to have the seeds? Should we focus entirely on fairness and divide the seeds equally? Or should we focus entirely on productivity and determine who has a greener thumb? If your thumb was greener, then redistribution would decrease productivity. If my thumb was greener, then redistribution would increase productivity. Given that our goal is for food to be far more abundant… then clearly we should focus entirely on productivity.

Markets work because the focus isn’t on utility/fairness/equality… the focus is entirely on productivity (results/abundance). And because the focus is entirely on productivity… the outcome is a greater total amount of utility. 

Markets place scarce resources in the most capable hands. Taxes are bad when, and only when, they result in the redistribution of money/resources/influence from more capable hands to less capable hands. Unfortunately, this is guaranteed to occur with our current system. 

Right now we don’t have a market in the public sector. We have socialism in the public sector. Socialism fails because government planners fail to place scarce resources in the most capable hands. This is why I’m entirely against redistribution. If we created a market in the public sector by allowing people to choose where their taxes go (pragmatarianism FAQ)… then taxes would cease to be bad. Society’s scarce resources would no longer be placed in less capable hands. 

I should probably rewind a bit and emphasize that I’m definitely not saying that poor people are stupid. I’m saying that if you know people who are smart but poor… then you probably have a theory as to why they are poor… and your tax allocation decisions would communicate your theory to the rest of society. If your theory is that they were failed by the education system… or by a lack of employment opportunities… or by closed borders… then you’d allocate your taxes accordingly. Creating a market in the public sector would allow for a multitude of theories to be simultaneously tested… which would greatly decrease the time it takes to uncover the truth. 

The truth regarding markets is that people don’t choose to place their hard-earned money into random hands. If we’re going to make the effort and take the time to earn money… then we really don’t want to see our limited time/effort/money/life flushed down the toilet. This fundamentally basic concern gives consumers the maximum incentive to place their hard-earned cash in the most capable/productive hands. So it’s the biggest problem when the results of this powerfully productive process are overridden by government planners who have infinitely less incentive and information than society as a whole does. Massive amounts of money/resources/influence will be placed in less capable hands, productivity will plummet, and everybody will suffer as a result. Redistribution subverts the true will of the people and greatly diminishes their welfare. 

It’s true that I don’t have a very strong grasp on the distortionary aspects of how taxes are collected… but I’d be very surprised if this possible problem is anywhere as harmful as the problem of having socialism in the public sector. I’m pretty sure that socialism is just as defective for public goods as it is for private goods. Therefore the spending, rather than the taxing, should be our greatest concern.