Value Signals

Just as I was about to publish this...I noticed Noah Smith's most recent blog entry...How should Charles Koch use his power?  It's a bit of synchronicity that we're both kinda answering the same question.  So I stuck a link to his entry here so you can compare our answers.

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The other day when I searched Google images for value signals...I didn't find any images that were even vaguely similar to the images that I had in mind.  So even though the photoshopped image above is pretty crappy...it's the best one of its kind.  Well...that I know of.  It's entirely possible that searching for other terms would yield similarly "instructive" images.  If you know of any...please share them.

What's a value signal?  A value signal is anything which indicates where there's value to be found.  If it helps highlight/reveal/locate value...then it's a value signal.  Prices, profits and wages are all value signals.   So is a treasure map.

Value signals are important because they help ensure that society's limited resources are put to their most valuable uses.  If value signals are distorted...then society, as a whole, will invariably be worse off.  This is because resources will flow in less valuable directions.  When resources flow in less valuable directions...the result is far less abundance of the things that we value most.

Using the image above...let's imagine that the true value signals are as follows...

$ = rescuing a cat from a tree
$$ = stopping a bank robber
$$$ = preventing Gotham's imminent destruction

Clearly society, as a whole, would be harmed if the Joker distorted the value signals...

$$$ = rescuing a cat from a tree
$$ = stopping a bank robber
$ = preventing Gotham's imminent destruction

Batman would respond to the wrong value signal.  As a result, his valuable skills would be wasted on saving a cat rather than saving Gotham.

Perhaps this might seem pretty obvious...but if it truly was...then I wouldn't have to write about it.

So how can we try and make the sanctity of value signals more obvious to more people?  Here are some of the things that crossed my mind.  In no particular order...

Bat signal - As you can see...the bat signal (Google images) was the option that I went with.  From Wikipedia...

The Bat-Signal is a distress signal device appearing in the various interpretations of the Batman mythos. It is a specially modified Klieg searchlight with a stylized symbol of a bat attached to the light so that it projects a large Bat emblem on the sky or buildings of Gotham City. In the stories, the signal is used by the Gotham City Police Department as a method of contacting and summoning Batman to their assistance in the event of a serious crisis and as a weapon of psychological intimidation to the numerous villains of Gotham City.

Flare - A flare is another type of distress signal.  We can imagine some people lost at sea during a stormy night.  They shoot a red flare to help rescuers find them.

Three kings (wise men) - The Bible story how three kings from the East followed an exceptionally bright star to find baby Jesus.  The Google images are quite relevant to the concept of a value signal.   From Matthew 2...

9 When they had heard the king, they departed; and, lo, the star, which they saw in the east, went before them, till it came and stood over where the young child was.
10 When they saw the star, they rejoiced with exceeding great joy.
11 And when they were come into the house, they saw the young child with Mary his mother, and fell down, and worshipped him: and when they had opened their treasures, they presented unto him gifts; gold, and frankincense and myrrh.

Treasure map - Helps people find where the treasure/value is.  Entrepreneurs are treasure hunters.  As a society, we benefit when they find things that we value.  A fake treasure map is a fake value signal.  As a society we really don't benefit when entrepreneurs...

1. go on wild goose chases
2. bark up the wrong trees
3. tilt at windmills
4. leap without looking (at the correct information)

Gold rush - Prospectors hurry to the same general location because they all saw the same value signal.  The brighter the signal...the larger the rush.  People need incentives to be at the right (most valuable) place at the right (most valuable) time.

Easter Eggs - Kids make the effort to find Easter Eggs because they perceive it's worth it to do so.

Painting the target - Military term for when a laser guidance system is used to help direct a missile to its target.  Markets allow the crowd to use their dollar votes to guide resources to their most valuable uses.  As a result, consumers get the most bang for their buck.

Sirens / flashing lights - They help communicate priority...and right of way.  A path is cleared for more valuable uses of society's resources.  Flow is facilitated.

Traffic signals - A green light signals for resources to flow in a certain direction.

Can anybody think of any others?

It's imperative that we figure out how to help the crowd easily understand the harm caused by distorting value signals.  As it stands there's plenty of popular support for higher minimum wages and stronger unions.  Just like there's popular support for putting a ceiling on how much CEOs can earn.  In the past there's been popular support for lowering the cost of rent...and lowering the price of gasoline.

Consumers, as utility maximizers, clearly want to pay less money for things that they value...but they don't grasp that distorting value signals will divert resources to less valuable uses.  The logical result?  Far less abundance of the things that we value most.

If the price of gas is artificially lowered...then this prevents entrepreneurs from accurately gauging the demand for energy.  If entrepreneurs don't know exactly how much society values energy...then they can't make informed decisions as to whether they should risk making the effort to find/improve alternative forms of energy.  So in the not-so-long run...distorting the value signal will result in an inadequate and inferior supply of homogeneous energy.  The people who argued for lower gas prices are the same people who then argue that the government should subsidize alternative forms of energy.  

Raising minimum wages might seem beneficial...but the future harm is far greater than the momentary benefit.  If the minimum wage is raised...then this is a green light for unskilled labor.  More kids are incentivized to drop out of school and more people are incentivized to immigrate to the US.  This results in a surplus of unskilled labor.  Higher rates of unemployment results in more poverty.  The people who shouted for higher minimum wages are the same people who then shout that there's a greater need for government welfare.

This isn't anything new.  Bastiat wrote about it...

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. - Frederic Bastiat, Seen vs Unseen

Adam Smith wrote about it as well.  Smith provided a very detailed description of the logical and harmful consequences of distorting value signals...

When the government, in order to remedy the inconveniences of a dearth, orders all the dealers to sell their corn at what it supposes a reasonable price, it either hinders them from bringing it to market, which may sometimes produce a famine even in the beginning of the season; or if they bring it thither, it enables the people, and thereby encourages them to consume it so fast as must necessarily produce a famine before the end of the season. The unlimited, unrestrained freedom of the corn trade, as it is the only effectual preventative of the miseries of a famine, so it is the best palliative of the inconveniences of a dearth; for the inconveniences of a real scarcity cannot be remedied, they can only be palliated. No trade deserves more the full protection of the law, and no trade requires it so much, because no trade is so much exposed to popular odium. 

In years of scarcity the inferior ranks of people impute their distress to the avarice of the corn merchant, who becomes the object of their hatred and indignation. Instead of making profit upon such occasions, therefore, he is often in danger of being utterly ruined, and of having his magazines plundered and destroyed by their violence. It is in years of scarcity, however, when prices are high, that the corn merchant expects to make his principal profit. He is generally in contract with some farmers to furnish him for a certain number of years with a certain quantity of corn at a certain price. This contract price is settled according to what is supposed to be the moderate and reasonable, that is, the ordinary or average price, which before the late years of scarcity was commonly about eight-and-twenty shillings for the quarter of wheat, and for that of other grain in proportion. In years of scarcity, therefore, the corn merchant buys a great part of his corn for the ordinary price, and sells it for a much higher. That this extraordinary profit, however, is no more than sufficient to put his trade upon a fair level with other trades, and to compensate the many losses which he sustains upon other occasions, both from the perishable nature of the commodity itself, and from the frequent and unforeseen fluctuations of its price, seems evident enough, from this single circumstance, that great fortunes are as seldom made in this as in any other trade. The popular odium, however, which attends it in years of scarcity, the only years in which it can be very profitable, renders people of character and fortune averse to enter into it. It is abandoned to an inferior set of dealers; and millers, bakers, mealmen, and meal factors, together with a number of wretched hucksters, are almost the only middle people that, in the home market, come between the grower and the consumer.   

The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the public, seems, on the contrary, to have authorized and encouraged it. - Adam Smith, Wealth of Nations

What I shared was just a small portion of Adam Smith's painstaking efforts to help people understand the importance of value signals.  Yet, more than 200 years later...it's painfully obvious that the "inferior ranks of people" still do not understand the sanctity/significance of "extraordinary profits".

Is the problem that people haven't read Adam Smith?  Or is the problem that they have read him but haven't understood him?  If the problem is the latter...then sharing relevant passages by Adam Smith will match Einstein's definition of insanity...doing the same thing over again but expecting a different outcome.

What am I doing differently?  I shared an illustration!  Look at the illustration and then read Adam Smith and then look at the illustration.  And then?  Read Adam Smith again.  And now?  Read Oskar Lange...

The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people. - Oskar Lange, On the Economic Theory of Socialism: Part Two

Read Smith again...

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. - Adam Smith, Wealth of Nations

Look at the illustration again...

Read Lange again...

The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people. - Oskar Lange, On the Economic Theory of Socialism: Part Two

Read Smith again...

The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art which might never otherwise have been thought of. The miserable effects of which the company complained were the cheapness of consumption and the encouragement given to production, precisely the two effects which it is the great business of political œconomy to promote. - Adam Smith, Wealth of Nations

Look at the illustration again...

Read Lange again...

The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people. - Oskar Lange, On the Economic Theory of Socialism: Part Two

Read Smith again...

The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture, is always a speculation, from which the projector promises himself extraordinary profits. These profits sometimes are very great, and sometimes, more frequently, perhaps, they are quite otherwise; but in general they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades. - Adam Smith, Wealth of Nations

Look at the illustration again...

Read Lange again...

The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people. - Oskar Lange, On the Economic Theory of Socialism: Part Two 

Read Smith again...

When by an increase in the effectual demand, the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market are generally careful to conceal this change. If it was commonly known, their great profit would tempt so many new rivals to employ their stocks in the same way, that, the effectual demand being fully supplied, the market price would soon be reduced to the natural price, and perhaps for some time even below it. If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept. - Adam Smith, Wealth of Nations

Look at the illustration again...

Read Lange again...

The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people. - Oskar Lange, On the Economic Theory of Socialism: Part Two 

Did you cheat?  Did you just skim and glance rather than carefully read and seriously look?   If so, then try again.

We really don't fool batman, superman and wonder woman (political correctness...sigh) by honestly signaling what our true values are.  And we certainly stand to benefit when they endeavor to save Gotham rather than rescue a cat from a tree.

On the flip side...we really don't want batman, superman and wonder woman forming a cartel.  If there's one thing that Adam Smith wrote more about than the importance of value signals...it's that producers are only too happy to use the government to limit competition.  The solution is to clarify the demand for public goods.

But producers really aren't the only ones who want a free lunch.  This means that democracy fails for the same reason that taxation must be compulsory.  In case you missed it, the solution is to clarify the demand for public goods.

Can David Brin Cite Hayek And Smith?

Comment on: A Brincipiled take on things

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This was the first search result for "neoreaction "adam smith"". Turns out that if it wasn't for Brin...this post wouldn't have been a result.

I'm going to try and help both of you out...

Isn't that the central basis for the libertarian creed? The notion that educated free adults can be trusted with matches... not to mention their bank accounts and votes? If the masses are intrinsically stupid -- sheep -- then the paternalists are right and no future society of maximized freedom will ever be possible. - David Brin, Essences, Orcs and Civilization: The Case for a Cheerful Libertarianism

The problem isn't with the masses being stupid sheep. Nope. It has to do with the fact that they all want a free lunch. They are only too happy to try and externalize the costs of their benefits. As a result of this very faulty input, resources are redirected from more valuable uses to less valuable uses.

Neoreactionaries correctly discern that there is a problem with democracy...but they lack the economics to correctly diagnose the problem. As a result, they end up barking up the really wrong tree. Brin should have, but didn't, point this out. Why didn't he?

The solution is simple...we create a market in the public sector. If Brin doesn't support this solution...can he still cite Hayek and Smith?

I have just summarized Hayek and Smith correctly. And dig this… neo reactionaries want to set up systems that will reduce the net number of deliberators, decision makers and allocators FAR below the requisite smart mob that Smith and Hayek recommend. Do not cite Smith or Hayek, you insult them.

Nope, if Brin doesn't support tax choice (many more "allocators and deciders")...then he can't cite Smith or Hayek either. Personally, I can cite both for days...

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. - Adam Smith, Wealth of Nations

If government planners can't discern the "natural proportion" of milk, then clearly they can't discern the "natural proportion" of defense. By definition, you can't discern one without the other. If Smith could have stood on his own shoulders...then he certainly would have figured it out. Hayek missed it because Mises missed it. Rothbard caught it...but then his solution was to destroy the entire public sector. Errr...yeah. He missed the part where taxation and individual taxation are not mutually exclusive.

So...I'm just kidding about revoking Brin's citation rights. We need more, not less, people citing Smith and Hayek.

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In case anybody is curious...the reason I searched for "neoreaction "adam smith"" was because I was curious whether any neoreactionaries had shared this passage from Smith...

Even a bad sovereign feels more compassion for his people than can ever be expected from the farmers of his revenue. He knows that the permanent grandeur of his family depends upon the prosperity of his people, and he will never knowingly ruin that prosperity for the sake of any momentary interest of his own. - Adam Smith, Wealth of Nations

If any neoreactionary wants to cite Adam Smith in defense of monarchism...then I suppose that would be a pretty decent passage to use.  But if any neoreactionary wants to defend monarchism...then...errrr...perhaps they should do a "bit" more reading.

Samuelson, Tiebout, Buchanan and Exit Granularity

There are 25 irrelevant search results for "Exit Granularity"

Reply to reply: Is This Forum A Market?

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[note]I say this sincerely and with no malice: you're taking peoples' complaints about the repetitive nature of your threads far too seriously. - Orham[/note]

It's just a helpful reminder. Kinda like some people need a friendly reminder that coffee from McDonald's is hot.

Eh, I'll go with the "forums are economies" metaphor. It's not entirely baseless, though it's not strictly true either. Anyway, on to the nitty-gritty then. - Orham

I like the part where you're the first person to point out that this forum is a mixed economy. Except, you didn't even come close to tackling my actual argument.

You spent quite a bit of time spelling out the obvious...that the supply of police isn't determined by the demand for police...but then when it came time to explaining why the visible hand wouldn't work for threads (my actual argument)...this is all the magic I got for my moment...

A moderation market, and especially an unregulated one (which it would need to be in order to be a characteristically pure market rather than a regulated market), would be unable to deliver objective rulings guided solely by the forum's equivalent to rule of law. - Orham

Your mission, if you choose to accept, is to explain to me why it wouldn't work to elect representatives to choose which threads consumers reply to. I know the answer...do you? If you don't know the answer...then how can you know that your answer regarding police is correct?

See? Supply and demand, as far as moderation is concerned, aren't being guided by market activity. The moderation supply is being rationed, distributed according to a planned schedule and set protocol which operates independently of present demand levels or consumer preferences for a particular sort or amount. - Orham

If the command outcome for police is more valuable than the market outcome would be...then why isn't this also true for threads? This is my question...which is based on my argument...which you entirely failed to address.

This forum, if it is to be metaphorically examined as an economy at all, is definitely neither a pure market system nor a pure command system. It is certainly a mixed system, and the reason why is because some services it provides are delivered according to command principles rather than market principles. - Orham

You missed my argument the first time. And I thought it was quite obvious. So perhaps it will help if I make it even more obvious. So...ok...I'm not disagreeing that this forum is a mixed economy. And, mad props for pointing that out. But, it doesn't help us tackle the issue of why elected representatives couldn't create more value by choosing which threads we replied to.

Xero, there are forums and websites where moderators are elected officials rather than appointed ones. Rational Wiki is an example. - Orham

Again, and again, and again...there aren't any forums which choose for you which threads you reply to. Should there be? If not, then why not? If so, then please let me know when you start one. Maybe then you'll learn why command economies fail. How priceless would it be to have that knowledge?

You dug yourself pretty deep with this one considering there are sites which charge premiums for use of their services (online tutoring services come to mind), forum moderators may or may not be elected officials (Rational Wiki), and NS is a profitable site regardless of the fact that its moderation services are rationed. - Orham

Again, again, again and again...there aren't any forums which determine which threads you spend your time on. Why is that?

...really, you've dug so deep I can't even see you anymore. - Orham

Errrr...you've simply closed your eyes...that's why you can't see me anymore. If you want to bury me that badly...then start a forum where elected representatives choose which threads you reply to. If it thrives...then my world view would be annihilated. It will be an extremely unpleasant feeling. But so be it. I prefer reality. What about yourself?

If you had a million dollars laying around...I'm sure you wouldn't hesitate throwing $10,000 at the development of your proof. But that's not the case right? And I don't think you're going to sell your car to start a representative forum. And you're probably not going to ask the bank for a loan. So why not try and crowdfund it?

If you try and crowdfund it...then you can see if there's any demand for a forum where elected representatives dictate which threads you reply to.

While I'm here...let me share a bit of my reality with you.

In my OP I mentioned The Pure Theory of Public Expenditure. It was written in 1954 by the Nobel Prize winning liberal economist Paul Samuelson. It is by far the most widely cited economic justification for government.

His argument was that, because people can benefit from public goods without having to pay for them, it wouldn't work to simply ask people how much they value public goods. People would have an incentive to state that they value public goods less than they actually do. As a result, public goods would be undersupplied. Therefore, compulsory taxation is necessary.

Samuelson and I agree on this pretty fundamental point. Everybody wants a free lunch. We all want to externalize costs.

This leaves us with the issue of determining how much people truly value public goods. Is it important to figure this out? Well...yeah...the optimal supply depends on this information. You can't say, "hey man nice shot" if you don't know where the target is. In economics, the target is demand. The value of the supply is judged by its proximity to demand. How valuable is this thread? The answer depends on how closely it matches the preferences of consumers.

What Samuelson did was simply assume that government planners already know what our preferences are. In other words, he just assumed that government planners are omniscient. Seriously. I really disagree with Samuelson on this fundamental point. And I sure wasn't the only one.

Two years after Samuelson published his paper...Charles Tiebout published A Pure Theory of Local Expenditures. It's been cited over 10,000 times...which gives you a pretty decent idea of its importance.

Tiebout's paper was a response to Samuelson's argument that it was impossible to discern people's true preferences for public goods. In his paper, Tiebout argued that people will move to whichever communities supply levels of public goods which most closely match their preferences. Basically, foot voting solves the preference revelation problem. Well...it was a great argument because there was a decent amount of truth to it...but many economists were not very satisfied with the answer. Therefore, many economists have been trying to figure out other ways to get people to reveal how much they value public goods.

Now, I'm pretty sure you've never even heard of Tiebout or his extremely well cited paper. Just like I'm sure you've never heard of any of the economists since then who've attempted to solve the preference revelation problem. Clearly you're not even aware of the preference revelation problem.

I'm especially bringing up Tiebout though because of his relevance to your post. In the real world...there are significant costs to moving to a new community. Foot voting is not cheap. So the push/pull has to be pretty significant before you'll move to the next community...let alone to another country.

But this really isn't the case with forums. Foot voting for a different forum is far less costly than foot voting for a different real life community. It was pretty much the easiest thing for people to migrate from Friendster to MySpace to Facebook. And unlike real communities...we can live simultaneously in numerous online communities. This means that the supply of public goods in forums will more closely match the preferences of consumers than the supply of public goods in towns will. It's far easier to start a new forum than it is to start a new town.

So you're right that this forum is a mixed economy...but the supply of public goods is more accurate/valuable (closer to the target) because leaving (exit) is relatively easy. If it was just as easy to move in the real world...then it wouldn't be as important to try and help people understand why pragmatarianism is by far the best option.

In 1963, seven years after Tiebout published his paper, the Nobel Prize winning market economist, James Buchanan, published The Economics of Earmarked Taxes. It's only been cited 246 times. Sometimes it takes the crowd a while to recognize an Easter Egg. That being said, the crowd finds infinitely more Easter Eggs than government planners can.

Buchanan's argument was basically that if people have to pay taxes anyways, then it's in their selfish interest to spend their taxes on the public goods that most closely match their preferences. If your buck is a foregone conclusion, then you might as well spend it on whatever gives you the most bang. If your moment is a foregone conclusion, then you might as well spend it on whatever gives you the most magic. If you've already paid for a buffet...then you might as well select the dishes that you find most delicious. When consumers are free to spend their time/money on the items that most closely match their preferences...producers have the strongest possible incentive to try and supply better items. As I said in an earlier post...consumer choice has very beneficial consequences.

To summarize...

1954 - Samuelson - omniscient government planners
1956 - Tiebout - foot voting
1963 - Buchanan - tax voting

Foot voting and tax voting are by no means mutually exclusive. But it's the epitome of throwing the baby out with the bath water if people totally exit because they don't have the option to specifically exit. It would destroy value if the only way you could exit from this thread would be to exit from this forum. Therefore, you should be free to exit from funding the war on drugs just like you're free to exit from this thread. You should be free to exit from funding the DoD just like you're free to exit from the NRA.

Imagine how absurd it would be if the only way vegetarians could avoid buying meat would be to move to a town where nobody purchased meat. If you take that absurdity and multiply it by a really giant number you end up with our public sector.

First you move your money/time...and if that doesn't work...then you move yourself.

I like your sig by the way. At this stage in the game...there's no such thing as bad publicity.

Also, out of curiosity...have you ever wondered whether you're more analytical than most?

Forced Rider Problem vs Free Rider Problem

Post over at the Libertarian reddit... Which problem is worse...forced riders or free riders?

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My reply to Gordon Clark On Unionism

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I created the Wikipedia page for the forced rider problem. It was butchered by the same idiots who got me banned from Wikipedia. One of the things they did was change the title from "Forced rider problem" to "Forced rider". They also removed the part about unions. Here's the original version...forced rider problem...with some relevant passages.

Check out the disparity in article traffic statistics between the forced rider problem article and the free-rider problem article...

Forced_rider has been viewed 166 times in the last 30 days
Free_rider_problem has been viewed 19,408 times in the last 30 days

How crazy is that?

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The existence of Wikipedia means that clearly there are significant exceptions to the free rider problem.  But the fact that I was the only one developing not just the forced rider problem article but numerous other market articles means that the free-rider problem is a real problem.

If you're a libertarian...then chances are good that you want the government to do far less than it currently does.  But if you kick "public goods" over to the public sector...then yes, you eliminate the forced rider problem, but you risk subjecting the public goods to the free-rider problem.

If you're aware of the beneficial consequences of consumer choice...then you could make a convincing argument that a smaller quantity of an effective public good is superior to a larger quantity of a defective public good.  For example, a smaller supply of effective private education is superior to a larger supply of defective public education.  How effective could public education really be when the Wikipedia entry on the forced rider problem only received 166 visits in the past month?

But if you're aware of the beneficial consequences of consumer choice...then why not avoid the free-rider problem critique altogether by supporting tax choice?

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Two comments at Of Free Riders and Forced Riders: America's Cup edition

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Taxpayers are invited to allocate their taxes to various bits of it (probably in small increments continuously so as to avoid everyone dumping everything into their favourite programs). In that model, not unlike a kickstarter for the entire program of government expenditure, and in the present time, I strongly suspect that "the yacht race" would get its proposed funding without a single one of "your" tax dollars being contributed to it. - Michael Albert 

While I can perhaps fantasize about systems like the one you suggest (which also has problems), I simply hope that, at the margin, things like America's Cup could be flipped over to voluntary payment regimes. - Eric Crampton

[My reply to Albert]  Every tax dollar spent on a yacht race is a tax dollar that couldn't be spent on public healthcare. So I'm pretty sure that, in a pragmatarian system, insufficient demand breadth would remove a yacht race from the "menu".

What about football though? Would the average joe rather spend 1 tax dollar on subsidizing the popular pastime or on public healthcare? No idea. But at least he would have no choice but to internalize the cost.

It gets interesting when we imagine taxpayers being able to order from any country's "menu". How well subsidized would the World Cup be? Maybe more well subsidized than the Brazilian EPA? Personally, protecting the rainforest is a far more urgent priority than watching a ball get kicked back and forth.

[My reply to Crampton]  Oooooooo, I'd really love to read your in-depth analysis of those problems. For reference...tax choice FAQ and tax choice economics.

The Beneficial Consequences Of Consumer Choice

There are zero search results for "The Beneficial Consequences Of Consumer Choice"

Reply to reply: Is This Forum A Market?

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"Representative democracy" has zero to do with markets. It can't be turned into a command economy, because it's not a fucking economy. There's no trade involve, merely free distribution. It's no more a market than throwing things out of a window is. - Salandriagado

Representative democracy is where impersonal shoppers choose which items are placed in your shopping cart. For all intents and purposes it is a command economy.

I'm not giving you time. I am choosing to spend my time throwing my opinions around the internet. - Salandriagado

Of course you're giving me time. You're clearly allocating your time to this product that I created.

There is no trade involved, no exclusivity. This is no more a market than walking around outside shouting my opinions is. - Salandriagado

I agree that walking around shouting your opinions is not a market...any more than a song is a market. Products aren't markets.

If you walk around outside shouting your opinions...and people can choose to spend their time listening to your sermon on the mount...then it's a market.

If the sidewalk is full of street performers...and you can choose which performances you spend your time/money consuming...then it's a market.

If the bar is full of single ladies...and you can choose which ladies you spend your time chatting up...then it's a market.

If the class is full of students...and you can choose which students you spend your time studying with...then it's a market.

If the forum is full of threads...and you can choose which threads you spend your time replying to...then it's a market.

All forums, without exception, are markets. Why is that? Not a single person has attempted to answer this extremely straightforward question.

Consumer choice has logical and extremely beneficial consequences. Something happens to the supply of goods...

Variety? Skyrocket
Quality? Skyrocket
Cost? Plummet

If you eliminate consumer choice...then what do you think happens to the supply?

Variety? Plummet
Quality? Plummet
Cost? Skyrocket

If kids couldn't choose which candies they spent their money on...then what do you think would happen to the supply of candies?

Variety? Plummet
Quality? Plummet
Cost? Skyrocket

Right now consumers can't choose which public goods they spend their money on. But if they could...what would happen to the supply of public goods?

Variety? Skyrocket
Quality? Skyrocket
Cost? Plummet

The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art which might never otherwise have been thought of. The miserable effects of which the company complained were the cheapness of consumption and the encouragement given to production, precisely the two effects which it is the great business of political œconomy to promote. - Adam Smith, Wealth of Nations

Cleaver Greene's Speech

Nuclear attack, marauding refugees, avian flu, communists in broom closets, White-tailed spiders...so many things we fear.  Scary scary women we fear.  So many things we fear...including, sometimes, the truth.  There is, is there not, ladies and gentlemen of the jury, so much we can learn about ourselves if we have the integrity, the courage, to stand up and not only tell the truth, but to listen to it.  It has a distinctive ring to it the truth. A purifying timbre that will not be silenced, even by the monotonous drone of governments and corporations.   Joshua  Floyd has reminded us that the truth exists and defines itself as a function of who we are. It may be ugly, it may be unwelcome, it may be the very last thing we wish to confront, but the only way that we can confront it, is to know it, to embrace it. The only way we can move onward, is to know that which is manifest about ourselves. - Cleaver Greene, Rake

Rake is a really wonderful show.  Recently watched it on Netflix and felt the need to give it a bit of public love.

Not exactly sure how it happened...but I ended up with a taste for Australia cinema.  Maybe it was The Man From Snowy River?  And then perhaps Crocodile Dundee sealed the deal.  I was just a kid when I watched them.  Then I remember loving Strictly Ballroom.  Genre wise...it really didn't fit with the movies I was watching at the time.  Next was Siam Sunset and now...Rake.

Why did I choose to share this speech?  It's because we don't know what the demand is for public goods.  And there doesn't seem to be much interest in clarifying the demand.  But it's absolutely imperative that we open our eyes.  To steal Greene's words...the demand for public goods may be ugly, it may be unwelcome, it may be the very last thing we wish to confront, but the only way we can confront it, is to know it, to embrace it.  The only way we can move onward, is to know that which is manifest about ourselves.

If we created a market in the public sector, then the way people spent their taxes would reveal the wide variety of things that they fear...and love.

If a woman told us that she loved flowers, and we saw that she forgot to water them, we would not believe in her "love" for flowers.  Love is the active concern for the life and the growth of that which we love.  Where this active concern is lacking, there is no love. - Erich Fromm, The Art of Loving

This right here is my active concern for Rake.  Could I truly say that I loved the show if I didn't bother telling anybody about it?  Of course not.  So here I am spending my time writing about the show and sharing it with whoever finds this blog entry.  This is my input...it's what is manifest about myself...and it's free to flow.

In the absence of our input (active concern)...how could resources possibly be put to their most valuable uses?  How could Rake and Australian cinema possibly grow and thrive if people around the world aren't free to express and communicate their active concern?  How could Platycerium superbum possibly grow and thrive without rain?

Right now we aren't free to choose which public goods we put in our shopping carts.  And that's a problem.  We might not agree with what other people put in their shopping carts...but how can we possibly know where there's the greatest need for improvement if we don't know where people's hearts truly are?

Why Is Every Forum A Market?

A thread I posted over at the Nation States forum...Is This Forum A Market?

Linked to it from reddit...

Libertarian subreddit: Challenge to Liberals:  1 upvote, 6 downvotes
Dark Enlightenment subreddit: Challenge to Liberals:  4 upvotes, 1 downvote
Economics subreddit: Challenge to Liberals:  1 upvote, 3 downvotes

The economics subreddit is mostly liberals...so that makes sense.  But I'm not sure how to explain the disparity between the libertarians and the neoreactionaries.

****************************************************

[note]You don't have to be here. Really.[/note]

In a few threads I've argued that this forum is a market. Nearly everybody categorically rejects the concept.

In the most recent thread where I brought it up, I was given the green light to create a thread dedicated to the topic.

So here I am. Why do I think this forum is a market?

First off...it's not just this forum...any forum is a market. Forums are markets because they have...

1. demand
2. supply
3. choice

Right now I'm being a producer. I'm using society's limited resources to create/produce/supply a new option (builderism). The resources that I'm using are...

My own resources...

-Brain
-Time
-Energy
-Calories
-Keyboard
-Computer
-Monitor
-Mouse
-Internet
-Electricity
-etc

This website's resources...

-Software
-Server
-Storage space
-etc

The variety of resources required to create this one thread are really too numerous to list in their entirety. This concept was wonderfully illustrated by the I, Pencil video.

So here I am taking these resources and putting them to a new use. I'm actually being quite unreasonable...

The reasonable man adapts himself to the conditions that surround him. The unreasonable man adapts surrounding conditions to himself. All progress depends on the unreasonable man. - George Bernard Shaw

The economist who has by far done the most work in the area of entrepreneurship is Israel M. Kirzner...

Entrepreneurial discovery represents the alert becoming aware of what has been overlooked. The essence of entrepreneurship consists in seeing through the fog created by the uncertainty of the future. When the Misesian human agent acts, he is determining what indeed he 'sees' in this murky future. He is inspired by the prospective pure profitability of seeing that future more correctly than others do. These superior visions of the future inform entrepreneurial productive and exchange activity. The dynamic market process is made up of such profit-motivated creative acts in regard to the future. - Israel M. Kirzner, How Markets Work

I'm sure some of you will quickly object, "Hey! But you're not making any money by creating this thread!"

As a society we do tend to equate profit with money...but it's more accurate to think of profit as gain. I'm making the effort to put a new option on the table because my individual foresight indicates that it might be worth the risk to do so. Clearly I want the largest benefit for the smallest cost. If I perceived that the only thing that I'd gain from this endeavor was an old dirty sock...then I would do other things with my resources.

Personally I like to dream that this new thread/product/option will help everybody understand how markets work. Economic enlightenment has extremely beneficial consequences.

It's important for me to emphasize that it's my potential personal gain/benefit that incentivizes me to make the effort to put a new option on the table. Incentives really matter.

Land occupied by such tenants is properly cultivated at the expence of the proprietor as much as that occupied by slaves. There is, however, one very essential difference between them. Such tenants, being freemen, are capable of acquiring property, and having a certain proportion of the produce of the land, they have a plain interest that the whole produce should be as great as possible, in order that their own proportion may be so. A slave, on the contrary, who can acquire nothing but his maintenance, consults his own ease by making the land produce as little as possible over and above that maintenance. - Adam Smith, Wealth of Nations

Once I put this new option/thread/product on the table...then it's up to you, the consumer, to decide whether you'll "buy" it. Buying this thread won't cost you money...it will cost you time. And your time is an extremely limited resource. This isn't a video game where we get unlimited lives. Not yet at least.

It is through the gaze of my extinguished self that I realize the limitations that make scarcity necessary. Through this gaze into my own limitedness - a limit always established by the impending cessation of space and time for me - through this gift of death, I discover in nature the best way to be efficient. Thanks to death I must choose x rather than y. This has become a feature of 'nature' - a demystified 'nature' that bears no possibility of participation in the eternal. This is consistent with capitalism. - D. Stephen Long

You, as the consumer, inherently understand that any time you spend on this thread (x) can't also be spent on other threads (y). This is one of the most important economic concepts...opportunity cost.

Given that your time is limited...you desire to get the most value for your time. The most mucus for your minute. Ugh, that's really not right. The most marjoram for your minute? The most mayo for your minute? The most mustard for your minute? The most macadamias for your minute? The most maybelline for your minute? The most muscles for your minute? The most music for your minute? HAHA...I got it! The most magic for your minute! The most magic for your moment? The most magic for your musical moments?

Markets are magic because of consumer choice. You, the consumer, you know your preferences, you consider your circumstances, you survey your situation, you ponder your priorities, you weigh the alternative uses of your time and you sacrifice the least valuable uses. As a result of your choice (demand/input), how society's resources are used (supply/output) becomes that much more relevant/valuable/magical to you. Consumer choice is consumer sovereignty.

But if only one person buys my product (this thread)...then my buddy and I...we aren't going to significantly shift the supply in our direction. In order for more resources to flow in our direction...more and more consumers would have to agree that this is a valuable direction. Imagine 100 people replying....1,000 people replying....10,000 people replying. Visualize people joining this forum in droves in order to reply.

More and more replies to this thread would require more and more servers and more and more servers require more and more space...one warehouse...one block...two blocks...more and more blocks of server space.

In a market, supply shifting is the epitome of a group valuation/vetting process. Significant supply shifts require crowd vouching.

The multitudes vouching for my use of society's resources means that I'd receive a mountain of minutes...a moon of moments. A mountainous moon of magically musical moments. And it's easy to see the moon...and it's easy to see that I'm the only one who owns it...and it's easy to think that it's unfair. But is it unfair? Did I force anybody to give me their time? In case you missed it, you don't have to be here. Really.

Some threads in this forum are more magical than others...and resources are allocated accordingly. As a result of the free flow of input, the allocation (distribution) of resources is efficient. This means that redistributing moments would definitely destroy magic. It would destroy magic to mandate the minimum amount of minutes/replies that every member of this forum earns.

People want minimum wages just like they fail to grasp that this forum is a market. The two are one in the same. If somebody grasps that this forum is a market then they won't want minimum wages to be mandated.

If this forum wasn't a market...then it would be a command economy. We wouldn't be able to shop around for the most valuable threads to spend our time on. Instead, we'd be marionettes, our time would be allocated for us. Planners would create threads and allocate our time/replies accordingly. It's a given that we'd spend most of our limited time reading and writing about topics that really didn't match our preferences.

Do you think it's a coincidence that there isn't a single forum that is a command economy or a representative democracy? Maybe? Perhaps it's just been overlooked? It's entirely possible that nobody thought to create a forum structured exactly like our public sector. Well...now the thought is out there. If you truly believe that our public sector creates so much value...then you'll jump at the chance to earn your own magic moon by starting a representative forum.

Just take your business proposal to the bank. Tell the loan officer that you want to start a forum that works exactly like our public sector. How could he possibly doubt the business model? Or, if you want to be ironic, try and crowdfund your top down forum.

Boy...wouldn't I be surprised if one of you actually did it? I'd be even more surprised if you made any money. Holy cow would you make me eat my words. How awesome would that be for you? You'd have plenty of money and real evidence that command economies can function and even thrive.

It's funny because the Nobel Prize winning liberal economist who provided the best (most widely cited) economic justification for our government is the same guy who said, "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

C'mon you believer...create your command forum. If the proof doesn't quickly materialize then cry aloud to Samuelson; for he is a god; either he is talking, or he is pursuing, or he is in a journey, or peradventure he sleepeth, and must be awaked.