Sunday, October 22, 2017

Addressing Concerns

Over on Medium, Scott Vonasek shared some concerns about pragmatarianismHere's my reply...

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The term “political market” is an oxymoron. I prefer “public sector market”. You’re right about local knowledge… but it’s equally relevant to markets in both the private and public sectors. You’re going to know where potholes are and where it’s not safe to walk at night. Politicians can only have access to a vanishingly small fraction of all the local knowledge concerning public goods.

Regarding specificity… I don’t know what necessarily prevents the same level of specificity in both sector markets. In the private sector market you can spend your money on a specific brand of cereal. But in the public sector market you could theoretically spend your taxes on a specific type of education… for example… public finance economics. I don’t see why you couldn’t give your taxes to a specific professor of economics.

Regarding free-riding… a few days ago I addressed it in a reply to Koen Smets. Your example of people funding pet projects in the non-profit sector while neglecting important and effective things like vaccinations is only an example of free-riding if people truly want more vaccinations. But how can we be certain that people truly want more vaccinations? We obviously can’t ask them. If they know their answer will determine their personal payment then they’ll have a clear incentive to pretend to value vaccinations less than they truly do. And if they know that their answer will not determine their personal payment then they’ll have an incentive to pretend to value vaccinations more than they truly do.

It’s certainly the case though that we would expect to see free-rider problems in the non-profit sector. If people voluntarily contributed their true valuations to public goods then taxation wouldn’t need to be compulsory. Since people are paying taxes anyways, if they could choose where they go, they wouldn’t have an incentive to contribute less than their valuations to vaccinations.

To be clear, it’s entirely possible that everybody incorrectly values vaccinations. Nobody is omniscient. Nobody has a crystal ball. But let’s say that there are a few people who do correctly value vaccinations. Evidently they have better information than everybody else. In a public sector market these better informed people would have the maximum incentive to share their better information with everybody else. This is because anybody they shared this better information with would have the freedom to allocate their own tax dollars accordingly.

The problem with the current system can be illustrated like so. A door to door salesman generally isn’t going to bother giving his sales pitch to little Timmy if he answers the door. Instead the salesman is going to ask to speak to whoever controls the household budget. Right now politicians control the country’s budget. This means that all the better informed citizens have an incentive to share their better information with politicians. But this is an incredibly stupid system. It would be infinitely more intelligent if better informed citizens had an incentive to share their better information with each and every taxpayer. This would allow far more brains to evaluate and process far more information in far less time. As a result, better information would be far more quickly disseminated.

Regarding wild swings… first of all there wouldn’t be a set time for people to allocate their taxes. If Godzilla attacks in June we wouldn’t want taxpayers to have to wait until April to respond to the threat. When there is an earthquake or other natural disaster in some part of the world it’s very beneficial that donors have the freedom to immediately respond.

A market in the public sector should respond faster and better than politicians to significant changes. If not, then we should replace the Invisible Hand in the private sector with the Visible Hand.

Life changes fast so we should expect organizations to quickly and correctly adjust and adapt. Those that fail to do so should be allowed to go extinct. We want organizations to quickly evolve. We want organizations to be better and faster at meeting the ever-changing needs of society. This is why it’s essential for all organizations to be directly subject to market forces. This is why it’s just as necessary to have a market in the public sector as it is to have a market in the private sector.

Besides people being free to spend their taxes whenever they want… they should also be free to shop in any country’s public sector. No country is going to have a monopoly on the best public goods. Just like no country is going to have a monopoly on the best private goods. All countries are going to be better at supplying certain public goods… just like they are better at supplying certain private goods.

American taxpayers should be free to give their taxes to Brazil’s EPA and/or Israel’s DoD and/or China’s NASA and/or Zimbabwe’s IRS. Then everyone will clearly see, and be able to support, the world’s best suppliers of public goods. With a global market for public goods the best suppliers are going to receive a lot more money. The NASAs of the world are going to be competing over a much larger pool of money. Whichever NASA is best will be able to spend a bigger portion of this much larger pool of money. So we should expect to make much faster progress with space exploration, cancer research and every other public good. Nobody is going to care which country finds the cure to cancer first. Everybody just wants it found sooner rather than later. This depends on everyone having the freedom to give their taxes to whichever organization in the world is conducting the best cancer research. In all cases we want to empower the most effective organizations to compete the best brains away from less effective organizations.

Friday, August 25, 2017

Trading Thoughts With Koenfucius

In real life, when you meet somebody for the first time, it's rarely the case that the moment is persevered like a dragonfly in amber.   It's a different story on the internet.  For example, here's the very first time that I met Koenfucius.  I replied to his story and he replied to my reply.  That was the extent of our exchange.

Around a month or so later I replied to another story of his... Trading Values.  At the time, I didn't realize that he was the same guy that I had replied to a month before.  We ended up trading many many many thoughts about economics.  At some point I realized that I had previously replied to one of his stories.

What if I hadn't replied to the second story?  I would have missed out on so much valuable economic discussion.

Recently we've been trading thoughts in the comments section of this blog entry... A Penguin Introduces Henry Farrell To Ronald Coase.  Here's my reply to his most recent comment...

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I think that I remembered the problem with unbundling WTP and WTA. How do you ensure the accuracy/legitmacy of the WTA?  Russ Roberts can input that his WTA for Trump is a gazillion dollars. Tucker Carlson can input that his WTA for Clinton is $100 gazillion dollars.  Then what?

Consider an issue like abortion.  It either is, or isn't, legal. If WTP and WTA are unbundled, then what's to stop people from entering the maximum possible WTA? We can certainly limit the amount that everybody can enter to a million dollars.  But then everybody just puts a million dollars for their WTA. So it provides absolutely no useful/trustworthy/credible info.

When it comes to the legality of abortion, is it possible that there isn't a transaction that enhances welfare?  Nope.  Maximizing the welfare enhancement of the transaction depends on determining how much each side is willing to sacrifice.  The winning side will be the side that is willing to spend the most money, all of which will be given to the losing side.

No matter which system is used, it's a logical fact that one side is going to get its way.  Should it get its way for free?  This is the premise of voting.  But I'm pretty sure that this premise is fundamentally horrible and incredibly detrimental.  Everyone would immensely benefit if everyone could clearly see and know the cost of what they want.  Then, and only then, could they make adequately informed decisions about whether what they want is truly worth it.

Imagine that Elizabeth wants abortion to be illegal.  How badly does she want it?  Is she willing to sacrifice the opportunity to buy a pair of shoes, or a laptop, or a car, or a house?  What is she willing to exchange?

Markets work because they facilitate the comparison of value/importance/relevance.  Our desires greatly exceed our dollars so we have no choice but to prioritize.  This is how society’s limited resources are put to more, rather than less, valuable uses.  This is how we minimize the irrelevant uses of society’s limited resources.

I take it as a fact that people really don’t appreciate the comparison aspect of markets.  My proof is that so many places/spaces aren’t markets!  This means that people do not directly compare the value of so many different things, which means that so many of society's limited resources are irrelevantly used. 

You asked about how coasianism, specifically bundling WTP and WTA, would work when there are several presidential candidates.  In this case, I’m not sure if coasianism would be the best option.  Coincidentally, here’s what I recently posted on the Debate.org website

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Thanks for responding to my argument. If you get a chance, check out the thread I posted in the economics forum.

My argument is that spending is always better than voting. Presidents should be chosen by spending rather than by voting. Here are three ways that this could be done...

1. coasian market design (CMD)
2. bee market design (BMD)
3. pragmatarian market design (PMD)

For CMD we will consider Clinton VS Trump. For a fixed amount of time, spenders would have the opportunity to spend as much money as they wanted on their preferred candidate. After the window of participation closed, the totals would be calculated and revealed. Whichever candidate had the biggest total would be the winner. Let's say that Trump was the winner. All the spenders for Clinton would receive a full refund. Plus, they'd proportionally receive all the money that had been spent for Trump. Unlike voting, CMD is a win-win situation. You either get your preferred candidate, or you get compensated.

BMD would be a better option if we wanted to choose the president from a larger list of candidates...

Bernie Sanders
Chris Christie
Darrell Castle
Donald Trump
Evan McMullin
Gary Johnson
Hillary Clinton
James Hedges
Jeb Bush
Jill Stein
Marco Rubio
Mimi Soltysik
Ted Cruz
Tom Hoefling
Rand Paul
Rocky De La Fuente

Spenders could use their donations to determine the best order of the candidates. Whichever candidate was at the top when the window of participation had closed would be the winner. The government would keep all the money. So BMD essentially kills two birds with one stone...

1. Valuating
2. Fundraising

With PMD, people would use their tax dollars to determine the best order of the candidates. The candidates would keep all the tax dollars that had been allocated to them.

Your concern with replacing voting with spending is that bias exists in the world. Let's say that right now everybody is biased against robot candidates. In this case, no matter whether we used voting or spending, a robot candidate would not be elected. The next decade 90% of the citizens are biased against robot candidates. If voting was used, it's definitely going to be tyranny of the biased majority and the robot candidate will not be elected. If we used spending though, there's some chance that the robot candidate will be elected.

It took over 200 years to elect our first black president. We still haven't had a woman president, or an (openly) gay president, or an (openly) atheist president, or... it's a long list. I really don't think that voting in any way, shape or form helps to overcome detrimental biases held by the majority of the citizens. Spending, on the other hand, would facilitate the elimination of detrimental biases.

Think about backpacking. Before you go backpacking you have to decide whether things you want to take are worth the effort of carrying them. Sure, you'd love to take a big bottle of Tequila, but is it worth the effort of carrying it? Knowing, considering and comparing the carrying costs/benefits of different things allows you to make more rational decisions. In the absence of knowing, or paying, the carrying costs... it's impossible for your carrying decisions to be maximally rational.

Replacing voting with spending would allow everyone to consider and compare the actual costs of the things they want. Then, and only then, will people make maximally rational decisions.

"As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom." - Loren Lomasky, Democracy and Decision

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Earlier this year the Libertarian Party (LP) used a BMD to choose its convention theme…

$6,327.00 - I"m That Libertarian!
$5,200.00 - Building Bridges, Not Walls
$1,620.00 - Pro Choice on Everything
$1,377.77 - Empowering the Individual
$395.00 - The Power of Principle
$150.00 - Future of Freedom
$135.00 - Life, Liberty and the Pursuit of Happiness
$105.00 - Rise of the Libertarians
$75.00 - Free Lives Matter
$42.00 - Be Me, Be Free
$17.76 - Make Taxation Theft Again
$15.42 - Taxation is Theft
$15.00 - Jazzed About Liberty
$15.00 - All of Your Freedoms, All of the Time
$5.00 - Am I Being Detained!
$5.00 - Liberty Here and Now

This system could work just as well for choosing presidents.  I wonder how much money the government would raise?

Classtopia’s Communication Department uses a BMD for blog entries.  So far it has raised $30 dollars. 

Next month, as you already know, my epiphyte society plans on using a BMD for show entries.

It would be quite excellent if a BMD was also used for forum threads!  Econhub provides an exceptionally good opportunity to do so.  Not sure how much you know about it, but it was recently created in order to compete the Economics Job Market Rumors (EJMR) forum out of existence.  I wrote about it here.

The response to Econhub has been underwhelming, to say the least.  So far there are only 17 members.  It would really suck to let a brand new economics forum go to waste.  So we should really put it to good use.

If we created a BMD for Econhub, then the donated money could be used to draw the public’s attention to a page that listed the most important threads.  Hopefully this would result in more people joining the forum and substantially participating in the prioritization process.

I shared this idea on Econhub but the owner hasn't responded to it yet.  It would be nice to have him on board but it isn't essential.  A Google sheet would be used to store the data, which could be displayed on a webpage of our choice.  This is the page that we'd promote with the donations.

Maybe I'm a bit biased, but it really doesn't sound so crazy to pool our money in order to promote the best economic ideas.

Saturday, August 19, 2017

NPR

My letter to NPR

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I just read "Readers Rankled By 'Democracy In Chains' Review" by Elizabeth Jensen.  It made me laugh.  Yes, it's progress to at least publicly consider and address the issue of whether a historian, rather than a novelist, should have reviewed Nancy MacLean's book.  But the fact of the matter is that the subject of the book is a Nobel economist's evaluation of democracy.  How can a historian possibly be qualified to effectively judge the validity of James Buchanan's economic arguments?  Of course this is the inherent problem with MacLean's book.

Since I'm here anyways, I might as well endeavor to explain the relevant economic concepts...

"NPR has made a push in the past year to review or interview the authors of all major nonfiction books that are published, and as close to publication date as possible."

Why just the major nonfiction books?  Why not the minor ones as well?  It's because NPR's resources are limited.  So it makes sense for NPR to allocate its limited resources to the more important books.  But it's also the case that the major books aren't equally important.  So then the real issue is... how, exactly, do you determine the importance of a book?

The NY Times maintains a list of the bestselling books.  Why should we care how many people have purchased a book?  Why does it matter how many people have been willing to pay for a book?  Would it be more effective to use voting (democracy) to determine the importance of books?  Or would it be more effective to vote for the representatives who vote to determine the importance of books?

One book that has never made the NY Times' list of bestsellers is The Wealth of Nations by Adam Smith.  Does this mean that it's less important than Thomas Piketty's book, which has made the list?  The issue is that, unlike Piketty's book... Smith's book is freely available.  This means that the two books are on an extremely unlevel playing field.

In order for NPR to optimally/efficiently divide its limited resources between these two books, it's necessary to correctly determine their importance.  Here are some possibilities...

1. Direct democracy.  NPR could give the public the opportunity to vote to determine the importance of the two books.

2. Representative democracy.  NPR could give the public the opportunity to vote for the representatives who will vote to determine the importance of the two books.

3. Charitable market.  NPR could give the public the opportunity to donate to NPR and earmark their donations to determine the importance of the two books.

Which system would most correctly determine the importance of the two books, which, in turn, would most efficiently divide NPRs limited resources between them?

This is what Buchanan worked on.  Well... unfortunately his work was entirely theoretical.  He never devised any experiments to test the effectiveness of these very different allocation systems.  But it's hard to blame him for failing to stand on his own shoulders.  Especially since these fundamental issues continue to be almost entirely overlooked/ignored by most economists.

We use representative democracy to allocate around a third of our country's limited resources.  Yet, this system has never been scientifically tested.  We all assume that it works, but there's absolutely no credible evidence that it works better than the alternatives would.  Historians can certainly explain how we ended up with this system, but they definitely can't prove or justify it.  For this we need economics/experiments/science.  We really don't need a novelist reviewing a book written by a historian criticizing an economist's work on public finance.

Let's say that NPR conducted an experiment to determine the importance of Smith's book and Piketty's book.  With direct democracy... historians and novelists would certainly have no problem voting for Piketty's book.  Neither would they have a problem voting for representatives who would vote for Piketty's book.  With the charitable market though, perhaps they'd have no problem donating and earmarking $5 dollars... or perhaps $20 dollars to Piketty's book.  But with larger amounts of money, they'd have to seriously confront the limits of their economic knowledge.  Would it be worth it for them to spend so much money on a subject outside their area of expertise?  For most it wouldn't be worth it.  So the charitable market would do by far the best job of filtering out public ignorance.  Which is pretty much the same thing as minimizing virtue signalling.  The outcome/results would embody/reflect public knowledge... which would logically help to eliminate public ignorance.  It would be a virtuous cycle.  If this system expanded to include all books, then the most valuable knowledge in each field would cross-pollinate all the different fields.

NPR can, and should be, the platform that we, the people, use to help bring the most valuable knowledge to each other's attention.

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See also:

- Evonomics
Public Finance For Andy Seal
Show Me The Economic Case For Democracy
The Pragmatarian Model For The NY Times

Friday, August 18, 2017

Are two of Robin Hanson's heads better than one?

Robin Hanson and I have recently exchanged a few thoughts on Twitter about his book... The Age Of Em.  Its topic is the idea of making numerous robot copies ("ems" = emulations) of the most useful people.  Admittedly, I haven't read it.  I acknowledge that it's questionable when somebody discusses a book that they haven't read.  But it's not always the case that purchasing/using a product is a prerequisite for saying anything useful about it.  Perhaps it's always the case that producers should be interested to learn why, exactly, their products do not appeal to relevant consumers.

Here's our Twitter exchange...


The case for freedom is based on the relationship between diversity and progress.  People are all different.  So when they have freedom, they naturally use their resources differently, which facilitates the discovery of better uses of society's limited resources.  Therefore, the more similar that people are to each other, the less heterogeneous their economic activity, the less progress that will be made, and the weaker the case for freedom.

Yesterday Peter Boettke shared a link to this excellent article by Don Lavoie... Political and economic illusions of socialism (PDF).  It has some ideas and concepts that we can use to analyze the idea of ems.

Let's start here...

The appropriate criteria for judging the effectiveness of an economy for growth are the Hayekian ones of flexibility, initiative, and entrepreneurship. Agents in a free market are capable of greater responsiveness in the face of uncertainty than those in a Soviet-type economy because of their relatively greater freedom of maneuver. They are less constrained by rules and regulations, and do not need to seek approval from superiors for their actions. Requiring Soviet managers to obtain bureaucratic approval for many of their decisions inevitably slows down the entrepreneurial process. - Don Lavoie, Political and economic illusions of socialism 

More freedom to maneuver is beneficial to the extent that unique individuals are naturally inclined to differently use their limited resources.  Here's a relevant passage by Adam Smith...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. — Adam Smith, The Theory of Moral Sentiments

Each unique individual has their own unique "principle of motion".  Smith borrowed this concept largely from Isaac Newton's observation that each heavenly body has its own principle of motion.  Different bodies move differently.  Socialism, to some degree, blocks people's principles of motion by imposing officially sanctioned principles of motion.  To put it as accessibly as possible, rather than people dancing to the beat of their own drum, they become, to some extent, marionettes.

Socialism is synonymous with slavery...

He [Peter Rutland] reminds us, for example, that the work camps were crowded with several million kulaks when he remarks that "these unfortunates made a major contribution to the construction and extractive industries." If we insist on calling this reversion to slave labor "development," then the Soviet economy certainly did develop rapidly. So did Egypt under the pharaohs, who had a similar penchant for the construction and extractive industries. - Don Lavoie, Political and economic illusions of socialism

Would the pyramids have been built without the government?  No?  Well, there is the free-rider problem.  We can eliminate it by imagining if the Egyptians had been given the freedom to choose where their taxes went.  Then would the pyramids have been built?  If the Egyptians had used their freedom/taxes to allocate the same exact amount of resources to the construction of pyramids, then what would be the point of their freedom?  Their principles of motions were exactly the same as the ones imposed by the government.

Hanson's ems are based on the premise that it's beneficial to have a bunch of people with the same principle of motion.  This premise is fundamentally, blatantly and tragically flawed.  Society really does not benefit from more sameness... it benefits from more difference.  Sure, Hanson's book is different in that it explores the idea of robot copies of humans.  But, as far as I can tell, he really doesn't take the opportunity to strongly criticize the idea of homogenizing society.  There are already a gazillion books that fail to recognize the importance of diversity to economics and progress.  We really don't need more of them.

Interestingly, many, or most, books about evolution recognize the importance of diversity to adaptation/progress.  I'm sure that Hanson fully grasps that the Great Famine of Ireland was the result of inadequate potato and crop diversity.  Yet, obviously he sure doesn't seem to appreciate that diversity is just as important for people as it is for crops.  In order for society to quickly adapt to constantly changing conditions, we need more, rather than less, diversity.  

If society is going to produce a gazillion advanced robots, then the robots should maximize society's ability to evolve.  This can only happen if, and only if, the robots are at least as different as humans are.

Where it gets tricky, and fascinating, is that robots will be far more capable of changing themselves than humans are.  So even if there were a million ems of Hanson, how long would they remain so?  Would it be necessary to prevent them from fundamentally changing themselves?  If so, this implies their desire to do so... which is entirely consistent with truly advanced intelligence.

Humans benefit when other humans change themselves to better serve each other.  But there's a natural limit to our ability to change.  Robots won't have the same natural limit.  Any such limitation will be entirely artificial... and undesirable.  Such a limit would be the equivalent of society shooting itself in the foot.  It's extremely beneficial for robots to have perfect control over their principles of motion.  The robots who adjust their motions to better serve society will be given more money, which will give them more control over society's limited resources, which will result in even more social benefit.  Of course, this is dependent on the robots being inside, rather than outside, markets.

Not only do markets give individuals the freedom to be different, markets also give people the freedom to use their money to grade/judge/rank/valuate/signal the benefit of each other's difference.  In no case is difference equally beneficial.  Poison oak and artichokes are both different, but their difference isn't equally beneficial.  Nobody spends their money on poison oak, lots of people do spend their money on artichokes.  How society divides its dollars between these two different plants determines how society's limited farmland and other resources are divided between them.

Markets give everybody the freedom to divide their limited dollars among unlimited difference.  Outside this feedback loop, too many dollars will be allocated to less beneficial differences... and too few dollars will be allocated to more beneficial differences.  The pyramids were certainly different, but did their difference merit such a huge portion of Egypt's limited resources?  I sincerely doubt it.  If Egyptian taxpayers had been free to directly allocate their taxes, how they would have done so would have accurately reflected the diversity of their preferences and circumstances.

In my blog entry on the tax choice tax rate I shared this quote...

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. - Ludwig von Mises, Omnipotent Government

Scott Sumner recently devised a hypothetical scenario involving 10,000 people steering a bus...

Bus C is a complicated human/machine hybrid. It has forward looking cameras, that feed road images into a large building, in real time. About 10,000 bus drivers sit at the controls of a simulator, and steer the bus as they think is appropriate. The average of all of their steering decisions is fed back to the bus in real time, in order to adjust the steering mechanism. To motivate good steering decisions, the 10,000 bus drivers are rewarded according to whether their individual steering decisions would have led, ex post, to a smoother and safer drive than that produced by the consensus. - Scott Sumner, Which bus would you take?

Here's Lavoie's perspective on the idea of steering an economy...

What the politicians at the top of the planning bureaucracy are doing, along with most of the activity in which the bureaucracy itself is engaged, amounts not to steering the economy but to getting in its way. - Don Lavoie, Political and economic illusions of socialism  

The primary difference between a bus (or ship) and an economy is that an economy can simultaneously go in multiple directions.  A bus can only go in one direction at a time.  Different directions are mutually exclusive.

However, even though economies can simultaneously go in multiple directions, the concept of steering sure seems applicable when we think of someone like Hitler...

However well balanced the general pattern of a nation's life ought to be, there must at particular times be certain disturbances of the balance at the expense of other less vital tasks. If we do not succeed in bringing the German army as rapidly as possible to the rank of premier army in the world...then Germany will be lost! - Adolf Hitler (1936)

He was able to steer his country's economy, and the world's economy, towards war.  Did he get in the way of the economy?  Yeah, but it also feels more like he directed the economy according to his own principle of motion.  He didn't randomly divert the economy... he deliberately diverted the economy towards war.  Just like the pharaohs deliberately diverted the economy towards pyramids.

Probably unlike the pharaohs, Hitler recognized, or at least pretended to recognize, that the economy should be balanced.  He just didn't have any problem tipping the scales towards death and destruction.  He didn't have any problem using force to override everybody's principles of motions.  He thought it was beneficial and necessary to homogenize society.

Popular belief in the existence of a general will produces a constant temptation, often even a demand, for some individual to embody it and impose his interpretation of it on the rest of society. The diverse wills of the members of society cannot be reconciled to a unity, though some wills may of course come to dominate social outcomes more than others. - Don Lavoie, Political and economic illusions of socialism

The economy shouldn't be steered by a few leaders chosen by everybody voting, it should be grown by everybody spending their own money.  It's certainly possible for the economy to be treated like a ship that's steered by a few people... but it's better if the economy is treated like a garden that's tended by many people.  A garden can simultaneously grow in multiple different directions.  It can simultaneously grow ornamental plants and edible plants.  Of course there's the issue of weeds.  In real gardens, weeds have to be identified and pulled.  In economies, less beneficial products are the equivalent of weeds.  Generally we can't directly use our money to eliminate them.  Instead, everybody focuses on finding and supporting the most beneficial products.  This naturally limits the amount of resources available for less beneficial products.  So weeds are minimized by consumers cultivating/nourishing the most beneficial plants.

The growth and benefit of the garden depends on difference.  Having a gazillion identical gardeners will homogenize the garden and greatly hinder its growth/benefit.

Monday, August 14, 2017

Dividing Attention Between Eric Schliesser And Jacob T. Levy

Comment on: On the role of Systematicity in an Impure Theory of a (Pluralistic) Liberalism worth Having by Eric Schliesser

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"taking into account the interests and aims of social actors"

From my perspective, this is the heart of the matter. It's necessary to take interests into account because 1. society's resources are limited and 2. uses are unequally valuable. For example, any time/attention that's allocated to your blog/book can't be allocated to other ones. And blogs/books are unequally valuable. In order to efficiently allocate limited time/attention among unlimited and unequally valuable blogs/books, it's necessary to determine/know the value of each blog/book.

My attention was allocated to this entry was because Levy tweeted it, Peter Boettke retweeted it and Smith is my favorite economist. A (re)tweet is essentially a vote. The problem with voting is that it doesn't signal the depth of interest. If we don't know how interesting/important things are, then resources will be inefficiently allocated. This is why in all cases, voting is far inferior to spending. Spending quantifies depth through a willingness to sacrifice.

If I want to read your book, I'll have to purchase it. I'll have to make a sacrifice. However, chances are slim that the amount of money that I spend on the book will accurately reflect/signal my true valuation of your book. If I spend the same amount of money to read Levy's book, it's doubtful that I'll value both books equally... even though I spent the same amount of money on them.

So the inherent challenge is understanding the difference between using money to...

1. ...purchase/acquire/get/buy the two books
2. ...help determine how to divide society's limited time/attention between the two books

The first does a far better job than voting at accomplishing the second. But if you can appreciate why this is, you'd also appreciate that there's considerable room for improvement. The correct (optimal/efficient) division of society's limited resources among unlimited and unequally valuable uses depends entirely on accurate value signals. So we need a way to help minimize consumer surplus.

Friday, July 28, 2017

The Scope Of My Relevance?

Here's my reply to Adam Gurri's comment on my previous entry.

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Patients are sometimes hooked up to machines that monitor their vitals. Evidently this is information that doctors and nurses need in order to make better informed decisions.

We can imagine something similar at plant shows.  People would be given heart rate monitors to wear. Then it would be possible to see and know what effect each entry had on people's heart rates.  Exhibitors could use this information to make better informed decisions. The most boring plants would be replaced with more exciting plants.  Shows would quickly be so exciting that attendees over the age of 60 would have a 90% chance of suffering a heart attack.

At Aristotle's plant show nobody would run the risk of being excited to death.  Instead, everybody would run the risk of being bored to death.

Speaking of which, I'm halfway through "Economics and Hermeneutics". If I had been wearing a heart rate monitor, it would have shown a small hop at Lachmann's chapter. I really like Lachmann, and he seemed to like hermeneutics, but just when I thought something intellectually exciting was going to happen, the chapter ended.

So far the most exciting chapter has been Richard M. Ebeling's. He basically argued that, thanks to positivism, price theory is incredibly incomplete. This would explain why plant shows aren't judged by consumers.  Most economists have focused on models and math rather than endeavoring to thoroughly interpret spending/sacrificing. Ebeling made the point several times that it's about communication. Well yeah. That's the same point that I tried to make in my entry about commerce as communication.  People generally don’t make random sacrifices.  Usually sacrifices have meaning.

You want a small handful of experts at a show to use ribbons to inform everyone which entries are the best.  I want everyone to use dollars to inform everyone which entries are the best.

I'll keep reading the book.  I'm curious if there are any chapters that are more intellectually exciting than Ebeling's.

Your concern about tax choice is that tax dollars would be a mile wide and an inch deep?  I really don't see this in the non-profit sector. The Red Cross receives a LOT more money than the Epiphyte Society. Evidently disaster relief is more important to people than epiphytes growing on all the trees. People haven't gotten the memo that epiphytes can stop global warming.

In neither case is there a revenue threshold for provision.  If the Red Cross only receives $100 dollars a year, it can still supply some disaster relief.  If the Epiphyte Society only receives $10 dollars per year, it can still attach a couple Tillandsias to a tree.  Bridges have more of a threshold.  But even in this case it doesn’t make sense to produce an 8 lane bridge when all that’s truly demanded is a foot bridge.  This isn’t the Field of Dreams.  Just because you build it doesn’t mean that they will come.

I think it’s pretty simple.  Do we need to know what’s important to society?  Well yeah.  It’s the only way that you can see and compare society’s priorities to your own.  Say that you don’t allocate any of your tax dollars to defense.  Evidently it’s not even a small priority for you.  But you can clearly see that for society defense is a massive priority.  Society allocates an incredible amount of tax dollars to defense.  How do you explain the gigantic disparity between society’s priorities and your own?  Does society know something that you don’t?  Or is it the other way around?  If you have solid evidence that society is tilting at windmills, then your freedom to exit your own tax dollars from the defense absurdity is impossibly wonderful.  You share your solid evidence with Samantha, her freedom to exit her own dollars from the defense absurdity is impossibly wonderful. The enlightenment effect is impossibly wonderful.  The layers of this dark age would be quickly peeled away.

If we could directly allocate our taxes, doing so would be optional.  How many taxpayers would choose this option?  How many people would choose to exit their own tax dollars from the absurdity of impersonal shopping?  Only a few?  Many?

I might be wrong about tax choice.  I certainly haven’t had much success persuading people that I’m right.  So I’m going to test the theory out on a plant show.  Will it be beneficial for people to use their dollars to inform each other of the importance of the entries?  Do we need to know what’s important to the Epiphyte Society?  Well yeah.  Unless I’m wrong.

Here’s what I can’t wrap my mind around.  No sane economist will argue against my freedom to donate money to the Epiphyte Society.  Evidently I’m relevant enough to judge the relevance of the society itself.  So how could a sane economist turn around and argue that I’m not relevant enough to judge the relevance of the parts of the society?   Am I more likely to misjudge the parts than the whole?

I should be free to decide that Rothbard’s work, as a whole, is worth my sacrifice.  But I should not be free to decide that only a part of his work is worth my sacrifice?

Feedback shouldn’t be too specific?  I have to value every chapter in "Economics and Hermeneutics" equally?  I have to value every entry in a plant show equally?  Or, my valuations of the entries do not matter, but my valuation of the Epiphyte Society itself does matter?  I should be free to exit from the society but I shouldn’t be free to exit from parts of it?

If it’s truly detrimental for people at a plant show to donate to specific entries, then why is it legal for people to donate to specific government agencies?  There’s no law against donating to NASA or the EPA.  Should there be?  Are people more likely to misjudge the parts than the whole?

Here I am alive.  Before, I didn’t exist, afterwards, I won’t, but for now, I do.  Some things in my life make a lot of sense… like Forever by Weekend Wolves.  I just gave it a thumbs up.  Other things make absolutely no sense… like impersonal shopping.  But there’s no thumbs down button for me to click.  I have so much feedback to give on all sorts of things... but in so many cases there’s no way to give it.  What I really want is a coherent story about where my relevance begins and ends.  Is that too much to ask for?  Is it unreasonable to ask for a relevance rule that makes sense?

Thursday, July 27, 2017

The Relationship Between Importance And Validity

Here's my reply to Adam Gurri's comment on my previous entry.

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Thanks for taking the time to read the entry and comment on it.

For me the originality (or lack thereof) of Rothbard's work isn't the main issue.  The impression that you gave was that all of his work was merely "rights" arguments.  I wanted to help you appreciate that this is really not the case.  

From my perspective, the value of Rothbard's results arguments is that he correctly diagnosed the fundamental problem with government.  He understood and argued that the government is no more capable of getting the supply of defense right than it is capable of getting the supply of food right.  The same really can't be said for any minimal government libertarian (ie Milton Friedman, Hayek, Mises).

For Rothbard the "therefore" was anarcho-capitalism. I disagree with his remedy but agree with his diagnosis.  From my perspective, Buchanan's "therefore" was much better: taxpayers are given the option to earmark their taxes.  The supply of defense would more accurately reflect the true demand for defense.

You don't believe that the supply of defense should be determined by demand.  Instead, you believe that it should be determined by "defending the best *reasons* for and against doing so".  You make it sound like the debate over defense and the demand for defense are mutually exclusive. But they really aren't.

We can imagine that Samantha is a hard-core vegetarian.  Everyone else in her family loves to eat meat.  Quite frequently they have fierce debates over vegetarianism.  When they do so they exchange copious amounts of information on the topic.  For example, Samantha endeavors to introduce them to progressively better meat substitutes.  The copious amounts of information exchanged among the members results in both sides being far more informed on the topic.  At the end of the day it's still entirely up to each family member to decide for themselves how much meat to purchase.  The spending decisions are made by, rather than for, the family members.

The same thing would occur if...

1. Unlike her family, Samantha was a hard-core pacifist
2. People could earmark their tax dollars

The defense spending decisions would be made by them.  Right now the defense spending decisions are made for them.

The passages that I shared by Rothbard, Buchanan and Ostrom all made the case, more or less, that people should make their own defense spending decisions.  These thinkers were all against, more or less, defense spending decisions being made for the people.

Unlike these thinkers, you haven't made your position on the issue exactly clear.  It's not like there's a lot of options.  Spending decisions are either made by the people, or for the people.

"do you *really* think the validity of an argument is dependent upon how much other people are willing to pay to read it?"

Lots of people were willing to pay to read Thomas Piketty's book. Does this make the arguments in his book more valid/correct/true?  No.  It makes them more important (worthy of attention).  But it's necessary to appreciate that not everybody who purchased his book agreed with his arguments.  The same can certainly be said for MacLean's book.

So let's remove the "purchase" aspect.  People simply and solely use their money to help determine and reveal the importance of Piketty's book.  Well... it doesn't work so well when there's only one book involved.  Let's include the Wealth of Nations.  People can decide how they divide their dollars between the two books.  They aren't buying the two books, they are grading/judging the relevance/importance of the books with their own money.  How would you divide your dollars between the two books?  Does it matter?  Would it be equally or more effective if you could just vote for one of the books instead?

Let's consider the issue of voting by looking at another example.   I regularly go to plant shows.  They are usually judged by a small group of experts.  I strongly disagree with this system. It would be far better if everyone could divide their donations among all the entries.

Let's say that plant shows and dog shows were both judged using my preferred system.  Would I spend more money at plant shows or at dog shows?  I wouldn't even attend the dog shows.  So I wouldn't spend any money at them.  This is because I'm far more informed about plants.  How I divided my dollars between dog shows and plant shows would reflect how my information was divided between dogs and plants.

What if Samantha manages to rope me into going to a dog show?  Like I said, I certainly wouldn't spend any of my money to judge the dogs.  But would I vote for the best dog?  Sure.  Why not?  It wouldn't cost me anything to do so.  Most of the people at the show would be in the same boat as me.  The majority is always less informed than the minority on every conceivable topic.  So with voting/surveys it's tyranny of the ignorant.  With spending it's tyranny of the informed. With traditional judging it's tyranny of a small handful of experts without any skin in the game.

A while back I started a small informal plant society.  In September we're planning to have a small show at a member's home.  Each participant will bring one of their favorite plants.  Then we'll each use our dollars to judge the relevance/importance of each other's plants.  The money that everybody earmarks to their favorite plants will be used to promote a webpage that displays the entries sorted by their importance (as determined by spending).

If Samantha ropes you into attending this show, how much money would you spend on your favorite plants?  I'm guessing that you wouldn't spend much, which would reflect your low level of plant information/interest.  And because you wouldn't spend much, your low level of plant information wouldn't have much influence on the results/rankings.  But let’s pretend that you’re super rich.  Then, despite having low information, you could easily exert considerable influence on the results/rankings.  This is why smaller markets are always worse judges of importance than larger markets.

Is my thinking original?  That's not the right question.  The right question is... am I barking up the right tree?  Rothbard barked up a few different trees.  Some trees were really wrong ("rights" arguments, anarcho-capitalism)... but one tree was really right (the fundamental problem with government). I have to recognize and commend him for barking up a very right tree.  Of course it's possible that I'm wrong about the rightness of the tree.  But it's not like Piketty or MacLean have come even close to disproving that it's the right tree.  They don't even seem to be aware of Rothbard's best arguments, which are the same as the best arguments of Buchanan and the Ostroms.  You certainly weren't aware of Rothbard's best arguments.  But now you are. However, you really haven't clarified/defended your position on whether tax spending decisions should be made by, or for, the people. Well... you don't seem to think they should be made by the people.  But you really haven't fleshed out a case that they should be made for the people.  You should do so, if you want to avoid barking up the wrong tree.

I should probably spell out the relationship between importance and validity.  Right now we don’t know just how important Rothbard’s two papers are to society.  We don’t know the social importance of his two papers.  I know how important they are to me, but I don’t know how important they are to Peter Boettke, Alex Tabarrok or anybody else.  It’s certainly possible to see how many times Rothbard’s two papers have been cited.  But if citations/votes were a good measure of social importance, then spending/shopping/markets would be a waste of immense amounts of time, energy and brainpower.

Because Rothbard’s two papers are important to me, I have taken the time and made the effort to bring them to your attention.  So you now know that they are important to me, but you don’t know how important they are to me compared to Buchanan’s papers or the Ostrom’s papers.  So you can't easily discern how I would want you to divide your limited time and attention between all their papers.

By bringing Rothbard’s two papers to your attention, I’ve given you the opportunity to scrutinize them.  In computer lingo, you have the chance to try and debug them.  Given enough eyeballs, all bugs are shallow (Linus’s Law).  The more important Rothbard’s two papers are to society, the more attention that they should receive, the more rigorous, relentless and ruthless the inspection of their validity.

This is the relationship between importance and validity.  Because we don’t currently know the true social importance of Rothbard’s two papers, their validity isn’t being optimally checked.  The same is true of national defense.  Because we don’t know the true social importance of national defense, its validity isn’t being optimally checked.

In all cases society’s attention/brainpower has to be divided somehow among a gazillion different things.  How do we divide society’s limited resources?  By voting?  By spending?  Or do we allow the division to be determined by a small handful of experts who don’t have any skin in the game?