Category: Commentary

‘No’ Saves Resources

In most jobs, the goal is to ‘get to yes’. But all the focus on yes can cause us to under-appreciate the immense value of no. No saves resources. Those resources can be redeployed to productive ventures, like turning more maybe’s into yes’s.

Unfortunately, it’s not fun to say no. People like to be liked and they like to be nice. When a question, invitation, request or commitment is hanging out there to which we’d like to say no, we often run away from it, ignore it and say nothing, hoping it will go away. We assume our neglect will send a message to the asker that will make them stop asking without putting us in the uncomfortable position of telling them no to their face.

The problem is, no answer doesn’t always mean no. It can mean yes, I forgot, maybe, not now, how about a slightly different version, or any number of things. It does not send a clear signal to the seeker that lets them know whether, to what extent, and in what way they should spend more time and resources pursuing an answer. This means the next most valuable items on their list have to wait.

I have come to love hearing no. Of course, I’d always rather hear yes, but apart from yes or variations of it (yes later, yes with modifications, etc.), no is the best response. No answer is the worst. It means all my effort gained me nothing. I have no idea whether or not to keep going or how much time to put in. I’m back at square one.

This is true in every industry and circumstance I can think of. It’s true in sales. It’s no less true in accounting, dating, or parenting. No creates value by freeing up resources to pursue other ends. Don’t be afraid to say no. You just might be helping the person on the other end of the question.

A Noble Library

We love to go to Barnes & Noble.  It’s one place everyone in the family enjoys.  There’s WiFi and coffee for me and my wife, there are books and toys for the kids, and it’s free!

It’s great to have a peaceful place full of books where you can go to read, think, browse and let the kids do the same.  Such places used to be called libraries.  Before we moved to South Carolina, there was a library closer to us than a large bookstore.  We would go from time to time for story hour or just to meander.  It was OK, but pales in comparison to B&N.

B&N charges no membership fee.  Nor to they do they take money coerced out of taxpayers.  They have Starbuck whereas the library doesn’t even want you to drink inside, besides the crusty drinking fountain.  There are toys for kids of all ages.  The architecture and lighting are fresher and newer, unlike the Societ-esque design of most public libraries.  You can browse books in both, but if you really like one at B&N, you can buy it too.  They have wonderful story times and special events for kids.  And it’s located close to other places we like to go, unlike suburban libraries which are often far from retail areas.

You can look at books for free or you can buy them, but you cannot borrow them.  This may be a major downside for some people, but I’ve never found it much of a problem.  For one thing, children’s books are usually so short that you can read it all to your kids in the store in one sitting.  As for myself, I try to read books that I think worth buying anyway, and I am increasingly moving to all eBooks.

Suburban libraries seem pretty silly now.  There are wonderful and spacious bookstores.  There are all kinds of non tax supported niche libraries at everything from local churches to the Polish American Club.  For people who use libraries to do serious research, there are a growing number of online solutions like JSTOR and others, and of course universities maintain their own, often much more extensive, libraries for such purposes.

All of this seems sufficient to at least propose an end to tax dollars flowing to libraries.  Some would certainly survive by charging higher membership fees, raising donations, or finding some other revenue model.  Some would disappear.  The adjustment doesn’t really seem that difficult given what’s available online and the kind of experience offered for free by large bookstores.

I am constantly reminded of just how amazing commerce is as a civilizing force.  Who could have imagined a business model where you let anyone off the street waltz in to your store and thumb through all of your merchandise as long as they like with no charge?  If I’d never seen it myself and you asked me whether a service like that could be provided on the market, I would have said no.  Entrepreneurs have shown time and again how things no one could imagine being done outside of a coercive monopoly can be done, and done better, through voluntary markets.

Keep an open mind and think about what else might be possible if legal barriers that prevent entrepreneurs from providing other services were removed.

When it’s Good to be a Failure

I’m a failure according to my own definition.

The current me doesn’t think I’m a failure – I’m pretty happy about where I’m at in life and feel I’m doing what I love at the moment. It’s one of the versions of me from the past that thinks I’m a failure.

There was a time (I shudder to recall) when I thought being an elected politician was the way to live and spread freedom. I went to work in the legislature to see how to become a lawmaker. During that time I met a lot of people who didn’t know me before and haven’t kept up since. They knew the Isaac who defined success as being an elected official. Friends and relatives saw me working in politics and could foresee what a successful end in that realm looked like in their minds. For these people, my life won’t be a success until I achieve what I was then pursuing.

Along the way I learned more about myself. My goals didn’t change, just the way I visualized achieving them. I was pursuing a certain ideal and a bundle of sensations. I was pursuing freedom. I was incapable of imagining anything but a crude vision of political freedom, and my worldview was so simple I thought politicians created it. Therefore I wanted to be one. Freedom is still what I want, but with more experience and knowledge I have come to believe being involved in politics would be the worst possible way to achieve it. My definition of success morphed.

This happens all the time with humans. A child may say he wants to be a firefighter only because in his world, firefighter is one of the four or five options he can imagine. It’s the one that makes him feel the most excited and good about helping people.

As they grow, children learn about a huge range of activities in the world and realize that, to achieve the feeling they desire, firefighting is an inferior method to being a paramedic, a teacher, an entrepreneur, or an X-Games athlete. It’s not that we sell out on our dreams, it’s just that our dreams were crude representations of what we thought we wanted.  When we learn more, we make different decisions. C.S. Lewis talks about the, “[I]gnorant child who wants to go on making mud pies in a slum because he cannot imagine what is meant by the offer of a holiday at the sea.”

Once we learn what’s possible, we laugh at what we previously thought of as the ultimate achievement. This growth is all well and good until we confront people from our past who have us locked in to our previous dreams.

Sometimes people ask me when I’m going to be president, and no matter what answer I give, it seems to them like a cop-out or excuse for my own failure. They refuse to believe me when I say I wouldn’t wish political office on my worst enemy, let alone myself. They think I’m being modest.

I have a friend who went to Hollywood wanting to be an actor and now realizes his creative energies are far broader. People back home always want to know when they’ll see him on the big screen. We sometimes joke that someday, when he has millions and is producing, directing, writing and doing whatever he wants in life, his friends back home will say, “Haven’t seen you on TV…you just haven’t caught that break yet, huh?”

It can be a little weird to describe how and why your dreams and definitions of success change over time. A lot of people don’t actually want to know. They just want to know if you’re Governor yet, or an Oscar winning actor. That’s alright. Don’t fret over it and don’t spend too much energy trying to convince them you’re really not a failure. If they insist on defining success they way you did before you knew better, just let them think you’re a failure and laugh at the absurdity.

If I’m a failure for not being the silly thing I once wanted to be, it’s good to be a failure.

Don’t Let Words Own You

I had a recent discussion with some passionate people who were frustrated by various public figures describing themselves as libertarian.  They felt it imperative to police the use of this word and go on the offensive, making sure to publicly demonstrate how wrong it was for people to use the word to describe themselves unless they believe certain things.  I’m not sure this is a productive response.

I understand the frustration.  When you use a word to describe yourself or your philosophy, you become increasingly attuned to how the word is used and perceived among the masses.  Christians and other religious groups have this problem, as do political ideologies.  It’s easy to feel like the labels you use abandon you as they become hijacked by people with views entirely different from your own.  The often cited example of the word “liberal” serves as a warning in the minds of many of what happens if you don’t fight to protect definitions.  It used to describe the ideas of people who favored more freedom from government power, now it means something far more nebulous and sometimes it is even used to describe the ideas of people who see more government power as the solution to nearly everything.

But who has “lost” in the transition?  It is true certain words sound nicer than others, but the word was always a shortcut to convey ideas.  The ideas are still here.  You are no less free to believe in less state power because the word “liberal” has changed meaning over the years.  You are no less free to use the word as you choose either.

To say that a word is hijacked is to assume it was first owned.  Can you really own a word?  Language is a constantly evolving spontaneous order.  You can use it, influence it, and benefit from it.  You can’t really own it.  If you spend your time feeling bitter and robbed when people use language in ways you don’t like, you will probably enjoy life less and you’ll be no more able to stand athwart language and yell, “stop!”

There are two potentially productive responses.  You can simply ignore the misuse.  Stop using the word if you must.  Or keep using it if it makes sense.  Or use it sometimes and not others.  Ask people to clarify what they mean by a word if you’re not sure, but don’t demand they stop using it.  Try going label-less.  Be indescribable.  It can be a little inconvenient, but it can also be a lot of fun.

Maybe labels are too important to you to drop and you want to influence the way they are used.  Instead of getting mad, see it as a kind of game or challenge.  What can you do to alter the way people perceive a word?  If you want people to associate good things with labels you use, live a life that impresses and attracts them.  Your ideas and your example are likely to do more to shape the meaning of the word than direct attempts to define it.  When you hear the word “Buddhist” or “Atheist” do you think only of the dictionary definition, or do you think about the way people using that label speak and behave?   Living your ideas will certainly do more for them than brow-beating word abusers.

Live your philosophy and don’t worry about trying to own the words that describe it.  Either live without labels, or live in such a way that it improves the public image of your labels.  Appointing yourself language police and waging war over words is likely to make you look small and grumpy.

If you live in perpetual fear that whatever label you belong to might move in a direction you don’t approve of, then you’re being owned by that label.  Language is an awesome and beautiful tool, but it won’t be made a slave and it’s a poor master.  It can be used, but it can’t be owned.  When you try, it tends to own you.

Don’t Let Your Success Define You

My good friend and blogger over at Tough Minded Optimism, T.K. Coleman, just wrote the blog post I intended to write today. This should not come as a surprise, as we have talked at length on this topic and most of my ideas on it come from him. I’ll quote him at length, because he nails it:

“Every time I attempt to create, I am confronted by two aspects of my self: T.K. the brand and T.K. the creator.

T.K. the brand is the part of me that feels a need to protect my reputation from the fatal possibilities of being seen as incompetent, uncreative, inconsistent, and unintelligent.

This is the P.R. department of my psyche and it never approves of me experimenting with new techniques out in the open.

It always reminds me, with the very best of intentions, of course, that the subtlest miscalculation could result in permanent damage to my image as a writer, a thinker, or an innovator.

T.K. the creator is the part of me that wants to exploit every experience as an opportunity to discover something new.

The creator is not concerned with saving face, protecting the brand, or subjecting creative impulses to quality approval tests.

This conflict is more acute the more successful you are at your “branded” activity. If you get a paycheck, or acceptance in your social circles for being the X guy, it’s a lot harder to be the Y guy. Even if you’re not the best at X, the mere fact that you’ve been doing it for some time and are known for it makes it more secure than Y. While it makes sense to specialize and go where returns are greatest, it’s also wise to make sure we include our own fulfillment in how we define returns.

I love music making, songwriting, poetry, short stories, and other creative forms of expression. I happen to think I’m not very good at them, but I get a lot of joy out of trying. It’s hard to let that part of myself show, because I’ve engaged in so much more public commentary and analysis. Whether or not I’m good at the latter, I’m comfortable with it and many people I know got to know me as a person who engages in that. To introduce a new aspect of myself is scary and a little embarrassing. But it feels even worse to repress it.

There was a special on an NFL game earlier this year about 49ers tight end Veron Davis and his love of art. Davis opened an art gallery in San Francisco where he displays and sells art, much of it his own. I was impressed. Not with the art as much as with the courage of a top tier athlete to put another side of himself out there for public scrutiny. Whether or not his art is good, it will tend to be seen as art produced by a non-artist, or the opening of his gallery as a self-indulgent act by a guy too rich for anyone to tell him he’s not an artist. I happened to think his art was pretty good, but that’s not the point. The point is he was willing to recreate himself, or enlarge his brand beyond what had worked before. I respect that. He was not letting the public perception define the private reality.

T.K. ends with some advice from his experience,

“I’ve been somewhat of a rebel towards the first voice [of risk aversion] for over a year and I’ve gotten more creative work done during that time than in my entire life combined.

I’ve discovered that it’s not enough to merely FIND work that’s worth doing. One must also FIGHT for the permission to keep doing the kind of work that turns them on, to avoid the trap of being boxed-in by the demands of the brand.

We each have to find our own ways of negotiating the concerns of our brand while making sure our creative evolution is not stunted in the process.

I leave the details of the process up to you.

My point is philosophical:

A brand is a great asset, but a very poor master.

At all costs, avoid becoming its slave.”

The Only Place is Out

I saw a man on a corner street
Yelling out a name

He told me, “Vote for this guy”
I said, “They’re all the same”

He yelled, “This one’s different
He’ll give us what we need”

“That’s what I’m afraid of”
I said, and turned to leave

The man yelled, “Wait! Stop!
I still don’t understand”

I said, “What I need ain’t the business
Of any other man”

He hung his head and groaned
Still clearly in the dark

And said, “You’re with the other party
They’ve surely missed the mark!”

I said, “Sir, I don’t care too much for parties,
Freedom’s what I’m about

Whether it’s in the bedroom or the boardroom
The only place for government is out”

Ten Reasons to Blog Regularly

1. Self Discipline – Like all disciplines, it makes you a better person; more in control of your schedule and habits.  It is empowering to do something on a regular basis.

2. Self Translation – You hold a set of beliefs and ideas about the world.  You may not even know exactly what they are, but they exist.  Blogging helps you translate those ideas into a form that you and others can use.

3. Self Education – You have no idea how much you know, or how capable you are of understanding and explaining things.  Once you start blogging, you’ll be surprised to discover what a genius you are.

4. Observation – Every day you are taking in loads of sensory information.  You see news clips, billboards, emails, people; you hear music, talk, etc.  When you start to blog you learn to find meaning in the things your senses take in, and find story lines.  You learn to observe.

5. Humor – The things noted above are often hilarious, you just don’t always realize it at the time.  Regular blogging helps you recreate experiences you’ve had, which often reveals their hilariousness.

6. Writing – Blogging ain’t great literature, but it can be.  Any kind of writing regularly will improve your skills.  Blogging will especially help you learn to be more concise and interesting.

7. Self Knowledge – You may not know your area(s) of interest and expertise – regular blogging will help you discover what you are interested in and good at as you begin to see patterns and reoccurring themes in your posts.

8. Experimentation – Blogging allows you to be a pundit on any issue.  You can comment on things you normally don’t have time or knowledge for.  You are allowed to speculate and think out loud on a blog in ways that more formal media do not allow.

9. Crash-testing – Blogging regularly will inevitably produce some pretty good writing.  Blogging every day will help you get all kinds of stuff out, and then look back and see if any of it is worthy of refinement and publication elsewhere.  It’s a great testing ground for ideas, themes, articles, outlines, etc.

10. Archiving – Regular blogging for just a year can result in hundreds of articles on hundreds of topics.  You will develop an archive of your thoughts and a record of how they’ve evolved over time.  When someone asks for your opinion on an issue you won’t have to start from scratch.  You can send them a link to that time you expressed it so well.

Why Government Fails – Public Choice for Everyone

There are innumerable arguments about the legitimacy and morality of government and its proper scope, all of which are worth exploring.  Public Choice Theory examines an entirely different question than what government ought to do.  It asks what government actually does.

Public Choice is the study of the operations of government using the analytical tools of economics.  In short, the same assumptions about human interests and actions are applied to the political market as the market for economic goods.

The real power in this theory is its ability to reveal how poorly government works in practice.  It does not address lofty notions of the ideal state, or the right and wrong of state action, but rather examines the actual operations of states to see if they are effective at achieving their stated goals.

Public Choice theory by that name is relatively new among schools of economic thought, but the application of economic insights to political institutions is not new.

This is a basic overview of the core insights of Public Choice Theory.

Why government?

The need for government is typically justified by the claim that there are certain “public goods” which cannot be supplied by the voluntary forces of the market, but are nonetheless beneficial to all members of society.

The standard analysis describes goods like roads, for example, and spends a great deal of time analyzing the incentives in the market to explain why roads will not be sufficiently provided.  It is supposed that everyone would benefit from a road and it would be “non-excludable”.  That is, once constructed, it would be too costly to prevent members of society from using the road whether they paid for it or not.  Because of this non-excludability, rationally self-interested individuals would be unwilling to contribute to a voluntary fund for the maintenance of the road.  Each individual knows that their contribution is small relative to the entire road fund, and furthermore that without their contribution, they will still enjoy use of the road.  With these incentives facing everyone, no one will contribute and the road will decay.  It is in no one’s individual interest to pay for road maintenance, but everyone would be better off if each person contributed.

You may substitute any number of “public goods” for roads, but the standard analysis is the same.  It looks closely at the incentives in the market, deems them unfit to provide the good in question, and concludes that the good must be provided by the state.

Let’s grant, for the sake of argument, that the analysis of the market is correct.  (There is ample evidence to the contrary of course: Nearly any “public good” you can imagine has at some point been, or is even today, provided by the private sector, even though theorists sometimes fail to imagine how.)  If we accept the inability of the market to sufficiently provide the good, there’s still something missing in the standard story.

All the time is spent analyzing what would happen in a market of rationally self-interested individuals and what the incentive structure would produce.  When deemed insufficient, no time is spent analyzing what happens when government attempts to provide the good.  (This is what Art Carden has colorfully dubbed the political economy of the Underpants Gnomes.) What happens if we use the same assumptions and analytical rigor when examining government provision of public goods as we do for the market?

Political self-interest

In order for government to solve public goods problems it would require selfless politicians.  The political actors who use tax dollars to maintain the road would have to be counted on to discharge this duty rather than, say, spend the money on something else or give it to a subpar contractor who happens to be their friend.  But if we are consistent in our analysis, we must treat politicians as rationally self-interested people too.  They have every incentive to act to their own benefit at the expense of the taxpayer.

How can the self-interest of the political class be kept in check?  The textbook answer is democracy.

Democracy as a restraint

Does democracy ensure that the political class will pursue the interest of the public, rather than their own?  The answer is a resounding ‘no’.  The reason is because voters are also self-interested.

It is well known that, statistically, an individual vote in a state or national election is meaningless.  The odds of one vote changing the outcome of a national election are worse than the odds of winning the lottery.  The odds of getting in a car accident on the way to the polls are greater than the odds of an individual vote making a difference.  In other words, the possibility of an individual vote resulting in measurable benefits to that individual is almost nonexistent.

In order for democracy to keep the self-interest of politicians in check, voters need to have an understanding of what they’re voting on and what policies are good for the whole of society.  This would take a tremendous amount of time and effort.  A single bill may be several hundred pages of technical legalese, and most elected officials vote on hundreds of bills in each term.  For a citizen to be informed enough to know what policies are good for society vs. good only for the politicians is incredibly costly.  Yet the individual vote of a citizen has almost no chance of changing the outcome or conferring any benefit.  The rational response is to be ignorant of policies, because the cost of being informed is so much greater than the chance of benefiting from being informed.  A dedicated, informed voter has one vote that is cancelled out by just one ignorant voter.

The result is what economists call “rational ignorance”.  Voters are ignorant of policies and positions because to be otherwise is a burden with no reward.  But there are some people for whom knowledge of policies is beneficial; namely, the small groups that are directly affected by those policies.

A bill to give a $100 million subsidy to Acme co. is worth a great deal to that company.  They would not be foolish to spend $99 million lobbying for its passage, as they would still come out $1 million ahead.  Voters, on the other hand, have no incentive to lobby against the bill because spread out across taxpayers it might cost each just a few dollars, while active opposition – even just a letter to a Congressperson – might take hours of time that could be spent doing something worth more than a few dollars.  This is why democracy results in concentrated benefits and dispersed or diffused costs.  The rationale of politics is to provide benefits to concentrated interests and spread the costs as far and wide as possible – including into the future by way of borrowing or inflating to pay for it.

The obvious result is a myriad of special interests seeking benefits at the expense of the broader public.  In the end, everyone is worse off, but every group has the incentive to continue to seek privileges, if for no other reason than to offset the costs they are bearing for the privileges lavished on every other group.  This is why Frederic Bastiat described the state as, “That great fiction by which everyone tries to live at the expense of everyone else.”  It has been described elsewhere as a game where people stand in a circle and the state takes a penny from each person, then awards five pennies to one of them at the end of the round (the other five being kept by the state).  The game is repeated until each person has been the “winner” of five pennies at least once.  They all begrudge the loss of a single penny each round, but all eagerly expect to be the winner in another round, not realizing that at the end of the game every single person in the circle has less than they started with.

The incentives in a democratic system lead to special interests lobbying for and receiving privileges at the expense of society.  Far from keeping the self-interest of politicians in check, instead democracy promotes and rewards it, so long as those politicians also provide benefits to every imaginable minority and hand the majority the bill.

But let’s ignore all that…

Let’s assume away rational ignorance on the part of voters.  Let’s pretend that voters will expend every effort to become knowledgeable and constrain the self-interest of politicians.  Let’s say the “will of the voters” can keep officials in check.

But what is “the will of the voters”?  It is not an easy question to answer.  Let’s walk through the selection of a preferred policy through the democratic process.  The policy in question is what to do with troops in Iraq.

Option A: Keep troop levels the same

Option B: Increase troop levels

Option C: Remove all troops

Now let’s look at the preferences of three different voters.

Voter 1: A>B>C – Prefer to keep the same level of troops, but if any change is going to occur would rather increase troops and “get the job done” than to pull out.

Voter 2: B>C>A – Prefer to increase troops to “get the job done”, but if that’s not going to happen better to pull out entirely than keep the same level of troops.

Voter 3: C>A>B – Prefer to remove all troops, but short of that, better to leave the same number of troops there than to add more.

Whether or not you agree with the preferences of these voters, it is clear that each of them has a rational sequence of preferences among the given policy options.  You probably have met people who hold each of these views.  To determine the “will of the voters”, let’s put these options to a vote and see what policy the elected officials should follow…

In a vote between policy A and B, policy A would win.  Two of the voters prefer A to B.  If we put policy B and C to a vote, policy B would win.  Finally, if we put policy A and C to a vote, policy C would win.

So what is the will of the voters?  According to the votes, they prefer A>B, B>C, and C>A.  In practical terms, it means the “will of the voters” is to have the same level of troops instead of more, more troops instead of none, and no troops instead of the same number.  That would be like a person saying that, between Snickers, Baby Ruth and Heath bars, they prefer Snickers above all, followed by Baby Ruth, followed by Heath, which they prefer to Snickers.  This is a non-transitive set of preferences, and is one of the definitions of a mentally impaired person.  The will of the voters is a logical impossibility. This is called vote cycling, or Arrow’s Impossibility Theorem.

You can see how, based on the structure of the voting process, entirely different preferences can emerge.  This means that even if the voters were well informed, democracy would fail to provide a clear “will of the voters” for politicians to be accountable to.  Take this simple example of three clear policies and substitute a number of politicians each with positions on dozens of different policies and it is utterly impossible to know what the “will of the voters” is based on the results of elections.

Okay, let’s also ignore all that…

Let’s go a step further.  Let’s pretend that voters are not only informed, but that by some magic the “will of the voters” is clear as day and easily ascertainable through the democratic process.  If we grant these two monumental assumptions surely democracy will serve to protect the interest of the public at large from those of politicians and special interests…right?  Unfortunately for democracy, its problems are even greater than rational ignorance and the impossibility of a clear “will of the voters.”  The “will of the voters” may actually be for policies that are harmful to those voters themselves and the public at large.  This is what Brian Caplan has called “Rational irrationality”.

Voting is not the same as purchasing something in the market.  To vote is to express a preference, while to purchase something is to demonstrate a preference.  Voting, like filling out an anonymous survey, is “free”.  You can voice whatever preference you like without being held accountable for the result.  Imagine if a grocery store sent a survey to nearby residents and asked them to vote for what items they would like on the shelves.  It’s not hard to see what a disaster this would be for patrons of the store.  People may vote for bizarre items just to be funny.  People may vote for items they think they ought to buy, rather than items they actually do buy; or items they think their neighbors should like, rather than what they do like.

When people are asked whether they like it when companies outsource production to countries where labor is cheaper, most will say no.  Yet many of these same people purchase lower priced items produced overseas instead of more expensive domestically produced alternatives.  Their stated preference is for American made goods, but they demonstrate by their actions that they see foreign goods as more beneficial to their own well-being.  It is “free” to say you want to protect American manufacturing jobs, and it may feel better to voice that opinion, but if faced with the costs that result from the outcome of a protective tariff, people may choose otherwise.

Voting is a free way to indulge irrational biases.  Voters do not vote for policies that they themselves favor, but for policies that make them feel good to vote for.  They vote for the candidate who promises to stop immigration because it feels right on an emotional level, yet they hire the migrant worker to landscape their business because it benefits them more than the alternative.

Voting separates the voter from the results of his vote, and creates an incentive to use votes carelessly and in ways contrary to his actual interest.  Even if we grant the most generous assumptions imaginable – voters who are fully informed no matter the cost to them and the fact that they have no chance of benefiting from being informed, and a democratic process that can clearly express a single “will of the voters” across a complex range of issues – democracy still provides incentives for policies that harm the public by their own definition.

Public goods revisited

We began the exploration of how government works by assuming it was the solution to public goods problems.  Government was supposed to the solve those instances where it is in no individual’s interest to bear the cost of overcoming a problem, but where everyone would be better off if all would share the cost.  What Public Choice reveals is that, rather than solving public goods problems, democracy is the greatest public good of all.  It is in no individual’s interest to bear the cost of being informed and voting their true preferences, but in order for the system to work everyone would have to sacrifice their self-interest to the greater good.

Regardless of the moral standing of the state, the practical outcomes of government activity are inferior to what the market produces.  Even in cases of so-called “market failure”, it may be better for the government to take no action than to intervene and make things worse with the even greater “government failure” embedded in the incentives of the state.  In other words, whether or not government is an evil, it may be an unnecessary one.

Hope?

To reduce the harmful effects of the perverse incentives in government, it must be reduced to its smallest possible form.  The scope of activities taken on by the state must be narrowed as far as can be accomplished.  Many practitioners of Public Choice theory advocate constitutional checks, supermajorities and other adjustments to government procedures in the hope that these will change the incentives and create a more accountable government.  The flaw in this approach is that the parties responsible for making such changes are themselves part of the government apparatus and face all the same incentives they are hoping to overcome.

If followed to its logical conclusion, pure Public Choice theory would lead us to believe that the state would be all-encompassing even now.  The incentives are aligned, for example, so that there should be mandates on every facet of our lives in every industry and the sphere of freedom should be nonexistent.  Yet this is not the state of affairs in which we find ourselves.  Why, given the incentives in the system, has the state been restrained at all, little though the restraint may seem to us?

In the final analysis, it is the beliefs of the public that create the ultimate check on the state.  If the public has a firm belief that alcohol should be legal, the interests of bootleggers and Baptists will not be sufficient to bring prohibition back.  We cannot reasonably expect incentives to be overcome or people to act against their self-interest, but we can and do see incentives change as people’s view of what is in their self-interest changes.  Most people would not find it worth their while to attempt to stop the passage of a subsidy to Midwestern beet farmers; but a great number of people consider it worth their while to attempt to stop the passage of a new prohibition bill.

Only when it is widely believed that farm subsidies are as absurd as alcohol prohibition will the incentives change enough to produce a more restrained state.

Further reading

Public Choice, A Primer – Eamonn Butler

Beyond Politics – Randy T. Simmons

Government Failure – Gordon Tullock, Arthur Seldon, and Gordon L. Brady

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*I am indebted to Professor Benjamin Powell for the basic structure of the arguments in this article, which he presents in a lecture for the Foundation for Economic Education.

*I am indebted to Matthew Mitchell for the example of vote cycling.

*This was originally posted at LibertarianChristians.com.  I thought it prudent to repost here because there are so few basic intros to Public Choice and because many would-be readers who are not interested in Christianity or Libertarianism may overlook it at the original site.

Rational Choice Robots Are Real (and they are us)

One of my pet peeves is when characters in movies don’t behave like real people.  I don’t mean when people teleport, or fly, or grab onto the landing gear of a moving plane – I love sci-fi, action and fantasy.  These things don’t make sense in our world, but can be perfectly consistent with the rules of the world in the film.  What gets me is when the storytellers try to convince us that the characters are normal humans, just like you an me, regardless of whether gravity is the same, yet they behave completely irrationally.

I don’t mean irrationally as in crazy, or emotional, or too short-sighted; real people do that.  I mean in ways that do not benefit them in any way, even according to what we are supposed to believe is their own subjective valuation.  Movie villains are notorious for this.  How often are they portrayed as hell-bent on a particular goal, only to stall just before realizing the goal to deliver some one-liner.  If the character is supposed to crave attention and the recognition of being witty above all else, this might make sense, but that’s not often what we’re supposed to believe about them.  How many movies portray business tycoons as so greedy for more money that they do things that will guarantee them less money?

I have a hunch that this unrealistic portrayal of humans in extraordinary circumstances stems from an unrealistic understanding of humans in ordinary circumstances.  There seems to be a failure among writers and the general public to appreciate the power of rational choice theory in explaining human behavior.  Too many people do not see everyday actions as the result of rational self-interest.  If you don’t think people pick a brand of black beans based on rational choice, then why would they pick a method of murdering their nemesis any more rationally?

Critics of rational choice theory correctly point out that real people are not robots that calculate their projected “utility” with every decision.  This critique is correct insofar is the calculation is not often conscious nor does it involve anything called a “util”.  But calculations of self-interest do occur all the time, and in dizzying complexity.  To take a well-documented example, when seat-belt laws are enacted, injury from accidents tends to increase slightly.

Economist use a rational choice model to explain that humans comfortable with a certain level of risk will maintain that level and if you make them wear seat-belts  they may compensate by driving more dangerously.  I doubt anyone consciously gets into their car after a seat-belt law is passed and says, “I’m comfortable with a 0.7% chance of death every time I drive, and this damn seat-belt lowered it to 0.5%.  I’m going to speed up!”  Still, we make subtle, marginal calculations like this all the time without realizing it.  If you crave a candy bar you may be willing to get in your car and drive at night through the rain to get one – an act that dramatically increases your risk of injury.  But if it’s snow mixed with rain, you may deem it not worth the risk.  A very minor change in risk alters your decision.

It is impossible for an economist to get inside anyone else’s head and understand their subjective preferences or what creates them.  It’s hard enough to understand what generates our own.  Absent some telepathic ability, we are left with few tools to analyze the decisions people make and the norms and institutions that result.  We could assume that people behave in completely irrational, unpredictable ways and have no expectation of generating a desired result when they take any action.  But then, why would someone act if they did not believe, whether rightly or wrongly, that acting would yield some benefit (as defined by them, not some objective standard)?  An assumption of rationally self-interested individuals is the only tool available to us, and it turns out it’s amazingly powerful.

Since value (in the economic sense anyway) is subjective, calling someone a rational chooser does not mean they have no emotions or impulses.  These things are part of what form their judgements of what is valuable.  Neither does it mean people will always choose the most effective means of getting what they desire.  No one is perfectly informed and we often have false ideas about cause and effect.  What we value also changes over time and with circumstance.  All it means is that, given the knowledge and preferences we have we will choose the actions that we perceive as yielding the greatest benefit (subjectively defined) at the time of choosing.  So simple it’s often dismissed as an unhelpful truism.  But how many times do we forget this and assume all kinds of far-fetched things about people’s choices instead?

When we apply this model, even some of the most bizarre behaviors can start to make at least some sense, given the constraints (real or perceived) and context.  (Check out some of the work of Peter Leeson).  This can help us see the root causes of behaviors and social phenomena and, if we so choose, attempt to change the cost/benefit equation and alter the situation.  Without this model we are left making wild and arbitrary guesses and claims about what motivates actions and we pursue remedies that do nothing to change the underlying incentives.  “They hate us because we’re free”, for example, might make one feel better, but it doesn’t offer any valuable insight into why someone rational enough to plan for months would conduct a seemingly irrational act like a suicide bombing.

I love a tall tale at the movies, but it would be a lot better if writers kept their characters actions consistent with the motives and values they are supposed to have.  Understanding real human behavior is the first step in creating pretend worlds that really capture the imagination of real world viewers.

When to not Play the Game

Yesterday, I talked about seeing life as full of overlapping and complex games.  Doing what is socially acceptable in certain contexts is part of the game.  Playing it is fine, so long as it’s not confused with real life.  Getting bitter at is is not usually productive.  But when is opting out a good idea?  The short answer is, only you can decide for yourself.

Russ Roberts and Bryan Caplan have been discussing being “weird”, the pressure to conform, and the costs and benefits of non-conformity.  At Cafe Hayek, Roberts is more optimistic about the rewards gained by breaking free from status quo games.  At EconLog, Caplan seems to think it rarely pays off.  Both offer valuable considerations.  It is very costly to opt out of social games and prevailing narratives.  But the biggest rewards often come to those who don’t just play games and win, but who “change the game”, to use some business buzz-wordage.

Peter Thiel discusses the common traits of weirdos and great individuals in this fascinating lecture.  Thiel seems to think innovators share traits from both tails of the distribution curve of “normal” people.  He channels the ideas of philosopher René Girard, particularly his idea of Scapegoats.  Girard claims that societies tend to focus all of their violence or conflict (born of envy) on a few individuals, and destroy them as a form of sacrifice while alternately worshiping them.  This deification and sacrifice is seen in religious beliefs and rituals throughout history, as well as the treatment of celebrities by major media.

It seems realizing that a dominate game is immoral or inefficient and refusing to play has the potential to make you a criminal outcast or an innovative hero, possibly both.  There may be ways of opting out of social games in quiet fashion without incurring too much cost, but is there any way to change games, create new games, and achieve greatness while avoiding the wrath of the mob?  I’d like to think so, but I’m not sure.

Life as a Game

The great storyteller C.S. Lewis says in one of his stories (though I can’t remember which) that some of the most sinister things are those that look like or pretend to be something they are not.  I’d modify this slightly and say that the worst things are those that actually believe themselves to be something they are not.  Life is full of stories and games.  It is not the playing or telling that causes trouble, but when we begin to believe the game is the reality.

Take sports.  Imagine if a professional football player actually believed that the game was life.  If winning was not just the artificial end within the construct of the game, but the actual end in life, you might see things like the scene in the ridiculous movie Any Given Sunday, where a player shoots a would be tackler.  Players would hurt or kill opponents regularly and some would proudly become martyrs just to win.  Critics of sports will say that this already occurs, but if you think hard about it, even the most over-committed behave as if they are in a game and that life is something else.  The most criticized decisions, like bounties for injuring players, or keeping an injured player in, are egregious precisely because it is so universally acknowledged that sports is a game and it is improper to treat it like life.

It’s harder to see the other games and stories, and games and stories nested within games and stories, that we regularly engage in.  Language itself is a kind of game.  When you transform an idea into a mental image or words in your mind, you produce a symbol that represents the idea, but not perfectly.  When you put those symbols into audible form, they are still less representative of the core idea.  The hearer unbundles the words and facial expressions, translates them into ideas in their own mind, and finally translates them into a response or action.  At the end of this game, the action of the hearer may manifest something quite different from the idea with which you began.  You played the game of verbal communication.  The better you are at the game, the more the response you got was what you wanted.

But this paints too simple a picture of the games we play.  Language takes place in a social context.  It is nested within several overlapping games.  If you are talking at a work party, everyone involved is operating within a rich narrative about appropriate behavior, what words and actions mean, who relates to who in what ways, who plays what roles within the group, and so on.  We are regularly navigating multiple complex narratives and games.

This is not a bad thing.  Games and stories are useful and inevitable.  We haven’t yet found a way to telepathically share abstract ideas, and I’m not even sure we’d enjoy it if we could.  Games and stories help us make sense of the world, form relationships, predict causality, and move closer to our goals.  Games are useful and they’re also a lot of fun.  The danger is when you forget it’s a game and think it’s life itself.

I hate formal attire.  It’s uncomfortable and I think it looks like a silly costume.  Still, in certain contexts, a game has evolved wherein everyone wears certain costumes that come bundled with certain signals and ideas.  I play the game, even if I sometimes wish everyone would find a more comfortable way to create the context of formality.  I don’t mistake the game for real life – and thank goodness.  If being a savvy dresser was the goal; if it was itself success, seriousness, intelligence, I’d be in trouble.  I’m not very good at dressing well.  Luckily, it’s a game and a way to communicate these concepts, albeit imperfectly, and it is tied up with a lot of other ways to communicate.  I can do it enough to get by, but if dressing well meant living well, I’d be having a rough go of life.  By recognizing unspoken dress codes as a game, I can actually have some fun with them and not feel so choked by my necktie.

Upon seeing games for what they are, it’s tempting to refuse to play and reject them altogether in favor of “the real thing”.  This is a mistake in the opposite direction.  There may be a time when I can always refuse to wear a suit and it won’t harm me, but for now, it would hinder my other goals in life.  It would alienate me from people whose company I enjoy.  I try not to be bitter at the games people play, but enter in on my own terms and navigate them toward my own ends.  Even a hermit monk plays games.  He has entered a narrative that gives explanatory power to his unusual behavior, and thereby protects him from some of the hurt that comes from not being understood.  The social story of the hermit exists as a kind of fortress within which he can opt-out of other games with less harm to his relationships with others.  (Of course hermitage is a game that, once chosen, can be hard to deviate from without significant cost, but the concept of getting stuck in our own games is for another day.)

It is incredibly liberating to realize the game-like nature of life.  We are constantly telling and acting in stories and playing games.  Once we awaken to this realization, we can step back and remind ourselves that the object of the particular game ought not be confused with the object of our life.  We can seek to find the truth that resonates with us to our core, but on the journey we will inevitably have to play games with their own objectives.  Don’t despise or run away from the games, but don’t forget that they’re just games!  Play them, enjoy them, master them, fail at them, laugh at them, love them.  It will make your journey towards fulfillment a better one.

(For a great read in this vein, I recommend Finite and Infinite Games by James P. Carse)

Waging Generational Warfare Against Yourself

I just read a wonderful book called How They Succeeded.  I was struck by how many of the highly accomplished individuals interviewed mentioned staying out of debt as a key to success.  It’s obvious that being debt free has practical benefits like the ability to accumulate capital, the maintenance of good credit and a good reputation.  But these seemed rather simple and obvious and not enough to warrant the repeated advice.  None of them mentioned personal hygiene or other obvious practical disciplines, so why debt?

I think there are reasons beyond the practical and material for minimizing debt.  There is a psychological loss of freedom that can take place with the knowledge of debt hanging over ones head.  This can subtly subvert free-thinking and creativity and narrow the lens through which one sees the world.

This is probably not the case for everyone in every circumstance.  If you’re involved in lots of business endeavors where you need to operate on credit you may be very comfortable with and adept at handling debt.  I know people who do not seem to have any trouble with a constantly fluctuating personal balance sheet.  It’s not that way for me.  I definitely feel the steady pressure of debt like white noise in the background of all I do.

On the one hand, it seems odd that debt would be problematic.  Borrowing money from the probable excess of the future to subsidize consumption of the tighter present can make financial sense and result in an overall increase in enjoyment of life.  Indeed, if we never changed or grew and our preferences were the same through time, debt would make perfect sense as a way to smooth the ups and downs of material pleasures.  But that’s just it, we change.

This excellent blog post about doing what you love mentions being stuck with the career choices made by your teenage self.  If you are determined to be a lawyer or a doctor at a young age and persist down that path at some point you may realize you no longer enjoy it, but your options have narrowed with your skill set.  You are a captive to the choices of your earlier self.  It’s no different with consumption decisions than educational or career decisions.  Going in to debt is a way for your present self to borrow from your future self.  Think about the level of presumption.  Are you really confident your future self will be the type of person who would think it a good idea?  Might they have other uses to put the debt payments to?

When you go into debt, you are binding another person – your future self – to subsidize the desires of your present self.  It may be a good idea in some cases, but it warrants very careful consideration.  It’s not merely a question of whether your future self will have the resources to subsidize your present preferences; it’s also a question of whether you’ll be happy about doing it.  I don’t want to be bitter at my former self for the financial obligations I have.  I’d rather the self of the past, present and future work together towards the fulfillment of our individual and shared life goals.

Death and Life

The throes of death do bear contempt,
From the breast of ev’ry man,
Nearly doth he taste,
Else he understand.

When seen but from fair distance
The blackness drowns all light,
Or rather blackness nay it was,
When seen with eyes aright.

Yet in his breast man needs a cower,
From eyes so far and cold,
Lest digest he the second fruit,
These mysteries unfold.

Still very this hour
Doth terry not ever,
Whence all tales be told;

Cold becomes bright forever.

Fantasy Football and Economics

An article from last month’s edition of The Freeman in which I discuss some economic lessons from fantasy football and at the same time grind an ax with a former fantasy football commissioner. Maybe it’s wrong to use economic principles and a great outlet like The Freeman as a way to vent frustration, but it worked and I am now over it…mostly.

The article is here.