The “Invisible Hand” Vs Planned Economies

Still under the weather to the point that I’m very surprised this turned out as long as it did.  I was really expecting to do a short one.

Let’s go back to the beginnings of economics as a science, with Adam Smith and the Wealth of Nations.  One of the key elements of The Wealth of Nations was Smith’s “invisible hand”–each individual acting according to his or her self-interest in combination with all the others engaging in voluntary exchanges, with each only making the exchange if they believe they’ll benefit from it.  We might think of that as much like the way the mostly random individual motion of molecules biased toward higher to lower energy states causes the wind and the rain without the direction of any particular molecule or group of molecules.

In the 18th and 19th centuries much of our understanding of the natural world through the mechanism of science blossomed.  With so much increased understanding, and new discoveries on a regular basis, it was perhaps inevitable that people would think that conscious direct, “managed” or “controlled” economies would be more efficient than the unconscious action of Smith’s “invisible hand.”

The result was the development of socialism–the idea that the “means of production” (capital) should be taken out of individual hands and directed for the “common good.” Marx and Engles added the idea of a “workers revolution” with violent overthrow of the existing order to accomplish that transfer of means of production from those who have built and accumulated it to “the workers”.

It was an interesting idea, of scientifically managing the economy for everyone’s benefit.  And it’s popularity was widespread.  By the early 20th century it was considered the inevitable wave of the future.

There were, however, problems.  For example, whether one was taking outright ownership of the means of production (socialism/communism) or leaving people with ownership “on paper” and “merely” taking control (fascism/naziism) you’re left with the problem of who makes the decisions and how to ensure the decisions they make are actually for the “common good” and not for their own self-interest.  That, by itself, is a serious problem that remains unsolved to this day.

As serious as that problem is, a second problem is even worse.  In an economy based on voluntary exchange, each individual, knowledgeable about their own particular situation, makes the best choices for themselves.  If I, for instance, am going to buy a car, I can look at the various offerings and find the combination of price, features, and performance that best suits my needs.  If the cars available are too expensive, or don’t suit my needs, I can look at motor scooters or even bicycles.  If a lot of people decide cars are too expensive, the people producing cars find they aren’t able to sell them and have to do something to either increase their sales (reduce prices or add features that attract people back to car buying) or accept lower sales volumes which will mean less resources (steel, plastic, energy, and labor among many others) going into car production and instead being available for other industries.

But it’s not just cars.  The same kind of decision is made for each of the thousands upon thousands of goods and services people trade each day.  Do we raise price on paperclips and increase production, using more steel for this and less for butter knives?  Do we produce more laptop computers and fewer desktops?  Do we string more fiber optic cable or maybe put up more satellites for computer networking?

It is simply not possible for any human or committee to have sufficient knowledge to make those decisions in such a way as to provide the goods and services that the people want in amounts coming anywhere close to matching demand.  Indeed, it might not even be something that could be solved by sufficient knowledge.  Economies may well be chaotic systems where even a very small difference in one part could lead to large and unpredictable changes elsewhere.

Milton Friedman used the example of a pencil to illustrate that idea.  No one person can make a pencil.  You have the wood, that comes from certain trees.  There’s the steel of the saws used to cut the tree.  The people making the brass for the ferrules do not need to know how many pencils will be produced.  They only need to know the price people are willing to pay for that brass.  The people mining graphite don’t need to know the mix of graphite and clay for a number 2 pencil.  Again, they just need to know how much they can sell at what price.  And so on and so on, thousands of people from around the world cooperating without even knowing it simply because of the action of the price mechanism.

Consider instead the old Soviet Union.  The planning committees would get catalogs from the West so that they could get some idea of what relative prices “should be”–relying on societies where the price system and voluntary exchanges worked things out to figure out what they simply could not from scratch.

It’s even worse when the price to be determined is that of labor.  Consider unpleasant or dangerous jobs in the US–lineman working for electric utilities, garbage collection.  These jobs usually pay pretty well.  The danger or unpleasantness of the job is going to make many people hesitant to enter those fields.  Going up tall towers in the middle of thunderstorms to restore electricity to people’s homes?  Not me.  Going around in a truck, picking up disgusting, vile smelling garbage cans to dump into the back of that truck?  I’ll pass, thank you.  But somebody’s got to do those jobs so how do you entice them?  Wages and benefits are the usual method.  If you’re not getting enough people to do it, then you end up having to offer more to get people to decide it’s worth it.

For a command economy it’s simply not possible for the decision makers to know what wages and benefits will attract enough people to each of the myriad jobs that go into making up an economy.  The result is that one has to use some kind of “force” to accomplish it.  A common tactic is simply to set arbitrary standards (often “competitive examination”) for the safe jobs with more pleasant working conditions and leave others with no choice but to take jobs they would never take at that level of pay and benefits in a freer market economy.

In the end, due not just to the venality but the insufficient knowledge, command economies begin to resemble feudal states, with people bound to their status not because of their individual abilities and choices, but because of what those “commanding” the command economy decides.  The bulk of the people become, essentially, serfs.

But don’t just take my word for it.  F. A. Hayek said it much better, and at greater length, in his book “The Road to Serfdom”:

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Convincing People

As I said recently, if we want to move the country in the direction of more liberty, we need less “electing the right people” and more “creating a climate of opinion” so that whoever is elected will find it politically profitable to support liberty rather than tyranny.

As someone said, politics is downstream of culture.  It’s the “culture war” we need to win.  Which is why it is so important for those of us who believe in the value of a free society to get out there and use whatever influence we have to try to persuade others. Persuade. And may I suggest to some of the die hard “Big L” Libertarian types that insulting anyone who is not 100% in agreement with you is, perhaps, not the best strategy for doing that.

Encourage folk in points of agreement. Educate in those where they don’t. Recognize that there are areas where reasonable individuals can legitimately disagree.

Do not drive away people who want to move in the direction of greater individual liberty just because they disagree on how to accomplish that or on just how far that move should go. Even if you think they don’t go far enough so long as they’re helping move things in the right direction they are potential allies.

It will be difficult.  The opposition holds the media, the entertainment industy, and the eductation-industrial complex in a stranglehold.   Add in the “deplatforming” by big social media sites and the deck definitely seems stacked against us. That just means that personal contacts are that much more important. And it’s important to use the platforms we do have.

What we need is modern day “committees of correspondence.” (If you’re not familiar with that term, look it up.)

Try to find concise, pithy ways to convey basic ideas.  If you can come up with a clever, catchy expression–a “meme”–that conveys an idea of liberty, use it.  Spread it.  Some folk dismiss memes as oversimplifications that ignore the complexity of the real world.  This is true.  However, when much of the population has the attention span of a goldfish, you need something short and “punchy” to reach them.  Memes are tools.  They can be (and often are) used to oversimplify bad ideas and make them palatable by appealing to the stupid.  They can also be used to render the “high points” of good ideas and reach people who would simply respond (at best) “TL:DR” to a more thought out rendering.  After all:

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You may get discouraged and think that there’s no point, that the person you’re arguing with won’t possibly change his or her mind.  That’s okay.  The “true believer” on the other side is not your target.  Your target is the person on the sidelines watching your argument.  Argument and debate, particularly Internet Argument, is a spectator sport.

Consider, about 300,000 people are born in the US every year.  That means that that on average of every thousand people who see your arguments about one will be seeing it for the first time.  A larger number will be people who may have seen it but aren’t yet convinced one way or the other.  The more you speak out, the more people who hear your side, the more people you have to convince.

You may not see them, but they’re there, and they’re listening.  And every person you convince is one more person to help spread the word to others.

It’s a hard struggle and it won’t be over quickly.  We didn’t get where we are in an instant and we won’t get out of it in one either.  And while there are no guarantees of success, nothing is ever certain (except death and taxes).  Still, “no guarantees” applies to the other side as well–that is, unless we simply give up and roll over for them.  Yes, there will be setbacks.  Don’t take them as signs we have lost or that we cannot win.  As John Paul Jones is reported as saying “I have not yet begun to fight.”

To which a marine, lying bleeding at his feet, perhaps responsed “There’s always some poor sonofabitch that doesn’t get the word.”

“Morally Right”?

So this from the new Representative from New York Alexandria Ocasio-Cortez:

I think there’s a lot of people more concerned about being precisely, factually, and semantically correct than with being morally right.

This is a clear attempt to seize the moral high ground with an “oh, you’re just worried about those uncouth facts when I’m talking morals here!” implying that those of us worried about factual accuracy aren’t concerned about “morals.”

Nothing could be further from the truth.  In fact, I submit that something cannot be “morally right” unless it is first factually correct.  If your “moral” position requires two plus to to equal five, then it’s not either:  not equal to five and not moral.  And all the wishing in the world won’t make it so.

One might think that providing unlimited healthcare to every single individual is “morally right” but wishing for that does not render healthcare immune to the economic principle of scarcity.  There is never enough of any good for everyone to have all they want.  No matter how much you make available, someone will want more.  And the resources being used for that then become unavailable for alternative uses. (Really, this is basic economics–one would think someone with even a Bachelors in economics would understand this.)

One might think that something should be “low cost”, available at an “affordable” price however one defines “affordable” but that does not make the laws of supply and demand go away.  Price controls that force prices to be less than the “free market” price invariably cause shortages as potential suppliers look at the price and decide, instead, to turn their resources elsewhere and people who would use less of what is made under those price control conditions than they would under free market prices, leaving less available for others.

Thomas Sowell and the late Milton Friedman were both fond of saying how dangerous it is to judge a policy on its intentions rather than its results.  This is where you end up with “moral” without factual accuracy.  Or, as the late Robert Heinlein put into the mouth of his character Lazarus Long:

What are the facts? Again and again and again – what are the facts? Shun wishful thinking, ignore divine revelation, forget what “the stars foretell,” avoid opinion, care not what the neighbors think, never mind the unguessable “verdict of history” – what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!

You can’t even begin to discuss “morally right” until you have the facts correct.  Once you have the facts right, you can then consider what, within the constraints of those facts will make the overall situation better or worse, what tradeoff (and it’s always a tradeoff, there are no ultimate “answers”) will be the “best.” Indeed, until you have factual accuracy, you can’t even decide what “best” might be.  Anything made without factual accuracy is nothing more than a pipe dream, a poorly written fantasy story that need not even be internally consistent.

Get the facts correct first.  Only then can we discuss what is “morally right.”

Disney on Ice

Brief post today.

My ex (credit where credit is due) bought tickets for Athena and me to the Disney on Ice show for today.  This worked out well for a number of reasons.  One of them is that the timing is superb.  Athena had recently (after, as it happened, the tickets were purchased) become interested in ice skating.  I’d gotten her into figure skating lessons.  Unfortunately, after those lessons started we find out that there will be a time conflict with Athena’s ballet rehearsals (competition and performance events coming up).  So, most of the money for those lessons just went down a hole.

Sigh.  Well, better luck next time.

So, Disney on Ice.  The show concept was that Captain Hook’s crew had taken “magic”, including in the opening bit Tinkerbell’s wand, trapping Tink in a lantern.  To free her the folk on the ice have to decipher the “clues” on the pirate map to “fill the magic meter”.  As stories go it’s…good for kids.  The “clues” are basically excuses to get songs from various Disney (and Pixar) movies:  Beauty and the Beast, Toy Story, Aladdin, Moana, Coco, and finishing with Frozen.

It was fun.  There was some good ice skating.  The story was silly, yet fun.  The bits from the various Disney movies were just enough to draw on the emotions of the movies themselves.  I spent much of the show happily sniffling in the audience. (What can I say?  I’m just a sentimental fool.) Oh, I didn’t really “get” the “Coco” scene since I haven’t seen that one, but skating was still good.

Say what you will about Disney’s handling of some of their properties, (I’m looking at you Star Wars) but in general they still know how to put on a show that’s just plain fun to watch.  Athena had a good time.  I think I had a better one.

The Way You Change Things…

I’m going to put out a minor heresy here:

People worry entirely too much about electing “the right candidate” as though that would be some magic bullet that would get them the government they want.  However, that’s going about it the wrong way.  You can vote for a candidate far outside the political mainstream and perhaps that candidate will actually win and perhaps will do some things that will make things better (in a limited fashion because there are all those other candidates in other races winning because they are in the political mainstream who will limit what your “right candidate” can do).  But it will not last, the next one along will simply undo the changes and probably double down on the “wrong things” (as you and your out of power “right candidate” see them) in backlash.

As Milton Friedman put it, the way we change things is not by electing the right people.  It’s good to elect the right people, but that’s not the way we change things.  No, the way we change things is by creating a climate of opinion such that it becomes politically profitable for the wrong people to do the right things.

That means that you need to worry less about the candidates running and more about convincing the electorate of the principles and values you want to further.

Anyone reading this blog very much should know that I lean very strongly libertarian.  What I mostly want government to do is “don’t.” Don’t do this.  Don’t do that.  That other thing?  Don’t do it either.  There are very limited areas where government can work to increase the overall liberty of the people.  (Being able to defend myself with arms is freedom; having to constantly do so because there’s no law and order is not.  thus, there is some small level of government where the freedom of the individual is maximized.) Yes, the bounds of those limits are fuzzy and hard to precisely nail down.  Yes, government will use any power it has to use that “fuzziness” to expand its power and continue to do so.  Those are part of that “eternal vigilance” thing.  It takes active, ongoing work to keep government in check to prevent it from growing beyond those narrow bounds.  And, sadly, humanity has historically seemed to have the attention span of a goldfish and so lets that vigilance slip so that government inevitably grows more and more invasive.

Ostensibly, the Libertarian Party exists to fight back against that growth of government.  the problem, from my experience dealing with folk involved in the official party, they tend to be focused too much on “electing the right people” (and generally focusing the vast majority of their attention on the Presidency) and far, far too little on “creating a climate of opinion.”

Outreach and recruitment is not exactly their strong suit.  Particularly since entirely too many have an all or nothing approach and so we get.

“You know, I really think government is much too intrusive, but if we cut all these programs cold turkey, a lot of people will be hurt at least in the short term and that will cause a backlash against…”
“Statist!  Taxation is Theft!”

“You know, I like the idea of a truly free society but if we import a lot of people who don’t believe in that then…”
“Statist!  Open borders!  People should be free to come here if they wish!”

“I really like the idea of free trade, but some places that don’t follow that have control of critical resources we need in order to maintain our standard of living.  Perhaps if we have some kind of leverage between just letting them bleed us and outright conquest then…”
“Warmonger!  You just want to impose your will on them by force!”

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Frankly, I wonder sometimes if the Libertarians want to win.  After Jim Weeks, a prospective Libertarian candidate for President stripped down to his briefs on stage at the Libertarian candidate debate to…prove what exactly?  In my personal encounter with may Libertarian Party supporters I have come to the conclusion that they aren’t really interested in “winning” but in feeling good about their “no compromise” position. (Really?  How is support for forcing a baker to use his artistic skills to make and decorate a custom cake for a cause to which he is religiously opposed a “no compromise” position on Liberty?  Yet that’s one of the positions Libertarian Candidate Gary Johnson stated in the last election.)

If they want to make themselves feel good, that’s fine.  Just close the door behind you and wash your hands afterward.

What we need is more outreach, more persuasion, more attempt to shift that “climate of opinion” so that liberty becomes politically profitable.  That means being prepared to engage people and explain, calmly and rationally, why liberty is good both for them and for the public at large.  It means accepting that not everyone, not even very many, will agree with everything right off the bat.  And that’s okay.  As long as they’re moving in the direction we want to go right now, in the direction of greater liberty, be willing to let go the points of disagreement for the time being.  Get things moving in the direction of greater liberty, even if it’s only a little bit.  Keep the big picture in mind.  Where do we want to go?  Is someone helping us get closer or are they moving us farther away?  If it’s moving us closer, even if it’s flawed, even if it’s extremely flawed, then it’s something we should be encouraging.

One things are moving in the direction of more liberty and once people see that the increased liberty is good then, with further encouragement, that will further snowball into yet more climate of opinion in favor of liberty.

And then it will be much easier to elect the right people.  It will also be much less necessary to elect the right people because even the wrong people will be doing the right things.

After all, it will be in their political self interest to do so.

Social what?

As I have mentioned before, I was the guy who always got bullied growing up.  Late developing physically making me the “runt” all the time.  Slower, weaker, and less coordinated than my classmates.  “Odd” interests (space, science fiction, science in general).  Oh, and poverty.  Can’t forget poverty.  All of those added up to the “weird kid” that everyone picked on.

Take all that.  Add in a bit of “face blindness” (faces, unless I know them really well, tend to look alike to me; take two faces and let me compare feature by feature and I can differentiate them so long as I have both in front of me, but try to recognize someone, particularly in a crowd?  Not happening).  And even without the weird way my mind can be “wired” and it’s a recipe for never learning to read “social cues.”

I don’t get social cues.  And, as a result, I have major, major social anxiety issues.

So when this picture popped up on my social media feed, I got it, totally:

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As what I said above suggests, I have no idea what “flirting” looks like on the receiving end.  Part of that is that, in addition to the above reasons, because I’m a big ugly, relatively “low status” by most markers (neither of remarkable physical attractiveness, nor with any significant wealth, nor fame, nor power/influence) guy so I don’t get flirted with much.  Even if I did I wouldn’t recognize it.  So, maybe I do get flirted with but just don’t recognize it.

If I did recognize it, I have no idea how to flirt back.  So, if someone were to flirt with me, getting no response, they probably wouldn’t do it twice.

And that’s just talking about casual flirtation.  If I wanted to go beyond flirtation to a relationship or even a dalliance?  Troubles just begin there.

What I said up above about not getting social cues?  That applies here.  Even if by some miracle I recognized “flirting”, I have no idea what “signals” suggest that moving beyond casual flirtation would be welcome.

And if, somehow I managed to recognize those signals (perhaps if said signals were applied with a baseball bat–see Neil Gaiman’s bit on “how to seduce a writer”–more on that in a bit), I have no idea how to actually take whatever steps I need to take to move things in that direction. (I don’t know and would be deathly afraid of crossing some line that I don’t get because I. don’t. get. social. cues.)

There’s also a problem with that “signals applied with a baseball bat”.  You see, sometimes in the past young women (this was mostly when I was in school) would do just that.  And in every case but three, they were doing it as part of a “set up” in which I ended up as the butt of some rather cruel joke–making me think I had a chance only to jerk the rug out from under me in a very public and messy fashion, leaving me humiliated.  Each of those three exceptions, well, they turned out badly for other reasons.

Did I mention social anxiety?  That’s a large part of it right there.

When people trying to be helpful say “you just…” every word after “just” turns into the adults talking in the old Peanuts’ cartoons.  “wah wah wah wah wah.” Okay, not that bad.  I mean, the words sound like English but they don’t combine into anything that makes sense to me.

So, yeah, Goku.  I get it.  More than you know, I get it.