From: Chen Yixiong, Eric (cyixiong@yahoo.com)
Date: Fri Aug 10 2001 - 23:58:40 MDT
Reposted Reply from Charles Champion from MSAL discussion groups:
>Whether past attempts of setting up colonies had failed have little
relevance to a
> new attempt that uses radically different ideas and technology.
I think you may mean that past attempts failing may have little relevance to
the question of whether it is possible to set up a new colony. But the
experience and empirical data from previous attempts, both successful and
unsuccessful, has a great deal of relevance to the any actual effort to start
a new colony or society. In scientific method, reason is used to evaluate
empirical data from the real world, experience with reality gained by
experiment. Reason is not nearly so effective without data to analyze. That
is why the scientific method involves the use of reason (to develop
hypotheses) followed by experiment, (to test a hypothesis) followed by more
reason (to re-evaluate the hypothesis in light of experimental data) ad
infinitum. Therefore experience and the data provided by history are
relevant. Not as relevant is if the same technology were to be used, but
relevant nonetheless. Particularly with regard to the internal processes of
the new society. Those, after all, deal with people who have not changed
much in the past few thousand years.
Please recall that I have not asserted that starting a new colony or society
is impossible, in fact I have pointed out which attempts succeeded and which
ones failed and some possible reasons why. My point in doing so is to bring
to the discussion relevant data. In developing theories about the real world
using reason, it is necessary to check those theories against experience to
determine whether the theories are valid.
>> You and I have discussed these issues a lot without seeming to reach any
>> mutual conclusions. The book "Law's Order" by David Friedman which I am
now
>> reading has some new thinking on this very subject. I have found it very
>> interesting. I think you would too. At the very least it is likely to
change the
>> terms of the discussion between us on topics like this one.
> I had downloaded the draft version of the book from
>http://www.best.com/~ddfr/laws_order/index.shtml and will read it soon. I
had read >another book by the same author entitled "Hidden Order: The
Economics of >Everyday Life".
Good. Let me know what you think of the new book. I haven't read Hidden
Order yet.
> I do like the author's style and the concepts expounded, however, I find
that the >book relies on an incomplete theory.
What's incomplete about his theory? And by the way, if you want a more
complete evaluation of the subject, that's where you might find "Human
Action" by Ludwig von Mises to fill in a lot of the gaps in what Friedman
says. But being more complete, it's a very long book.
> An incomplete theory does not mean an invalid theory, but a theory that had
left
> out some important factors and would thus distort reality. For instance,
the theory
> that Earth had a flat topology would suffice for making small local maps,
but not
> world maps. For the issue of using our knowledge of economics to design a
better
> economical system, looking *only* through the confines of our textbooks only
> seek to confine our minds and restrict us from arriving at a better
solution.
I hope you don't think of Friedman's writings, especially "Law's Order" as a
dusty old textbook of conventional theory accepted by generation after
generation. It was published in the year 2000, and most of the ideas in it
have never been published before. I'm all for new thinking, even newer than
last year's books. I guess one of the reasons you might feel that I'm
talking about "restrictions" is that I keep pointing out that new colonies
I've studied which did not have private property and free market principles
coincidentally all suffered more than 50% fatality rate in the first year as
a direct result of economic problems. You may find the implication that
private property and free markets are essential to be confining or
restricting, but it seems to me that they are a liberating tool which makes
possible things (such as distant new colonies) which would otherwise be much
more dangerous or difficult if not impossible. Maybe you can find a better
tool. Good luck. But you might find it less confining to look at the vast
amount of things which can be done with these tools instead of trying for
radical improvements in those particular economic tools.
> Actual economies, especially with governments intervening, do not always
> correspond to the concepts based in the textbooks.
If you can find a textbook with things like Friedman writes in it, let me
know. Every single textbook on economics I've ever read has drastically
different (and in my opinion mostly wrong) economic ideas in it.
> Highly volatile stock markets wreak havoc with the theory of market
equilibriums,
What theory of market equilibriums? Are you refering to the idea that at a
given level of supply and demand that prices seek an equilibrium between the
two? Highly volatile stock markets are completely consistent with that
theory. In fact, that theory helps explain why markets are sometimes
volatile. It's simple. If there is an equilibrium price at a particular
level of supply and a particular level of demand, then what will happen if
the amount of supply changes? There will then be a different equilibrium
price. The market price will then move. If the demand level changes what
happens? The price moves toward the new equilibrium. The fact is that
supply and demand of the stocks of actively traded companies change rapidly.
Therefore prices change radically. You can use the Yahoo.com finance section
to get stock quotes and if you look you will find stocks which don't have
much trading activity. The supply and demand of the stock sometimes remains
unchanged for the entire day. In such cases the price usually also remains
unchanged for the entire day.
> people behave in irrational manners such as by their purchasing of lottery
tickets,
> our societies do not have free flow of information implicit in many
economical
> theories, and people have an irritating tendency not to choose the best
alternative
> but the best perceived one.
People cannot do otherwise. As you know, people can only base their
decisions on the information they have. They choose the alternative they
perceive as best because they cannot base their decision on things they do
not perceive. There are economic theories dealing with situations (such as
are common in the real world) where decisionmakers do not have all the
necessary information.
You might want to consider the role that prices and markets serve in
processing information. The price of something conveys in one number
critical information about all the costs which went into the production of
that thing. The market price simultaneously signals producers how much to
produce (based on whether it is higher or lower than their production costs)
and it signals users on whether to increase or decrease use of such a product
(depending on how expensive it is). Profit margins signal entrepreneurs
which industries to get into or out of. Investment yields signal investors
where to allocate capital. Investment decisions signal businesses whether to
invest in new production facilities or cut back and economize. All these
signals are based upon numbers which are produced by markets. Those numbers
and the vast number of market participants having the independent
decisionmaking authority to react to them based upon their own desires,
knowledge and abilities, is a method for processing economic information.
Could it be done better by computer? Much of it is done by computer. The
parts which are done by people are the parts which mostly cannot be done by
computers of the current technology level. Or in some cases it is not cost
effective to computerize some functions even though it may be possible.
You can criticize as unrealistic economists who set up economic models which
assume everyone has perfect information. But actual free markets (not
economists) process economic information more effectively than any other
method ever devised and they can do that only when there is private property
and economic freedoms. It is a self-organizing, decentralized system for
accomplishing this.
Is there a better way for the economy to operate? Yes. This is perhaps the
most important thing about free markets. They contain methods for automatic
self-improvement. Of course, government interventions are not so easy for
the market to correct, but other factors involving poor education, bad
engineering, management blunders, irrational acts, excessively high prices or
obsolete technology and many other things are constantly being improved and
corrected by market forces which provide incentives for such things to be
corrected.
>While the complexities involved here have such great magnitudes that certain
> people believe that we can never design an economy (and sometimes citing
> evolution and chaos theory), however, if we confine ourselves to discussing
how to
> create and design a rational society, then we may actually succeed.
Is a free market and private property inconsistent with a rational society?
Ludwig von Mises builds a case in "Human Action" that these are consistent
with a rational society and that elimination or infringement of private
property and the end to the free market are not consistent with a society of
rational people.
> Not all people can and will join, but this has no relevance because we
logically
> cannot find ourselves worst off by *voluntarily* experimenting with a new
concept in
> isolation since we can always fall back to the old system easily.
Go for it. Just don't set it up too far from other settlements. That was
one of the mistakes some of the other colonies found. Many made mistakes.
The ones who died from them were the ones which were too far away from other
settlements, old or new, to get help when things went wrong.
>> Keep in mind that government officials, police, judges, jailers,
prosecutors and
>> legislators and even the people who design societies are also just as
liable to
>> behave maliciously in order to benefit themselves. The tool with which
you seek >> to solve the problem has the same problem.
> I disagree. The economical system of the proposed project would have an
entirely
> different structure.
Okay. You were the one who spoke of people "behaving maliciously in order to
benefit themselves." My point is that you cannot rely upon any group of
people not to behave in their own self-interest. Perhaps they will even do
so in ways you consider to be malicious. Even so-called altruism is
motivated in all cases I've ever heard of by self-interest of some kind.
Whether or not you have police or legislators it is important to take into
account this feature of human behavior. Even those who design societies tend
to be motivated by self-interest and it affects the design of the society.
> Of the many classes of economical systems, our current "capitalist" system
has
> an orientation towards rewarding those who achieved the most.
Is there a better alternative? Should we reward those who achieve less?
Those who achieve not at all? Those whose actions are positively destructive
of the achievements of others? Rewarding achievement inspires more
achievement. Doing anything else is, among other things, inefficient.
> I hypothesize that the result of this orientation causes people to develop
their
> greedy nature, even if originally nature predisposed these people in such a
> manner. Greed (and its opposite, fear), as shown in game theory, clearly
depletes
> the common good for the individual good.
Greed and fear are not opposites. In game theory they often motivate
opposite actions, but greed and fear themselves are not opposites. Greed, is
generally defined as an unreasonable acquisitiveness. This consists of two
factors, unreasonableness, whose opposite is reasonableness, and
acquisitiveness, whose opposite would be lack of acquisitiveness. The
opposite of fear is a feeling of security.
>I hypothesise that *rational* people would prefer solutions that maximise the
> common good because we usually don't play one-off zero-sum games in real
life
> and we can gain immense benefits over the long run from such behavior.
Why would rational peole prefer maximizing the common good? If they are
motivated by rational self-interest, and sane people are, then they would of
course prefer to maximize the common good since some portion of it inures to
them personally. That is, assuming that there was no cost or inconvenience
to them to maximize the common good. If there is, then you will find people
behaving in a manner to maximize the common good to the extent that their
personal cost from such action is less than their personal gain from it
(along with the gain of everyone else who benefits).
On the other hand, would a rational person prefer to maximize the common good
even if his share of that common good is less than the cost to him of such
maximization? Some people will say so, but that is because they derive a
benefit from saying so. You'll think better of people who say so, won't you?
They know that, so they say so. Their actions tend to differ from such
statements although actions will sometimes be made which seem to be
sacrifices for the common good if the benefits of being a "good guy" willing
to make such sacrifices adds sufficient additional benefit.
Perhaps that doesn't make the case well. Take the principle beyond a small
cost or inconvenience. If it is a matter of life or death will people prefer
to maximize the common good? Sure. Especially if they can increase the
chances that the group which they are a part of will survive. Will they
volunteer to die so that the group will benefit? Not usually unless they are
either going to die either way, or unless the group which will be saved
includes close relatives, especially the volunteer's own children. This too,
is self-interest, only it is behavior perhaps genetically motivated by genes
in the self-interest of the genes. "The Selfish Gene" by Dawkins has some
interesting things to say on that subject.
But anyway, assume that no one in the group is a relative. Would a rational
person volunteer to die so that the group would benefit? Why? How is that
rational? It is certainly not rational self-interest. Is self-interest
rational? For the self, yes. For a group? Well, if a group were capable of
rational thought in any other manner than as individuals, maybe the
group-mind would (in its own self-interest) favor the interest of the group
(itself) rather than any individual. But as long as individuals are the
entities who engage in rational thought, self-interest is rational. If a
group (via mindlinking technology or some such thing) thinks for itself, its
self-interest becomes rational for it.
> To do this (or maximise it to above the chatic threshold), a few conditions
must >exist:
> 1) Perfect flow of information (with computer networks). From openness,
comes >trust.
Computer networks do not result in perfect flow of information for purposes
of economics. For example, the personal preferences of every single person
on Earth with regard to what they would like to have for their next meal and
their order of preference of all the possible things they could eat and their
preferences adjusted for price, convenience, location, ambiance, who else
they might share the meal with, whether the food is hot or cold, etc. Most
people don't, for example, consider their relative preference for all the
possible foods and all the possible companions they could have for a meal.
But to have *perfect* information, *all* of this would have to be included.
How could you, in a lifetime, ever rank even your own preferences for every
human being on Earth as luncheon companions. Or even your own preference for
every possible food, cooked every possile way. Yet these preferences change
constantly for everyone on Earth.
Maybe we can imagine that someday we'll have the bandwidth to transmit such a
vast amount of data, but I doubt it is possible to *gather* the data in the
first place.
I propose the hypothesis that it is impossible to gather all economically
relevant information. It might not be possible to analyze it perfectly if it
could be gathered, but that is irrelevant if my hypothesis is correct since
it cannot be gathered.
If the hypothesis is correct, all economic decisions must be made with
imperfect information. Of course, that is the way all economic decisions are
in fact made.
> 2) Empowered people (by virtue of skills, abilities, knowledge, wisdom
etc.) must >exist.
> Thus, I infer that, in a society of rational people with this conditions,
then these
> people will have prefer to contribute to the common good rather than hoard
> resources to maximise their own utility.
Is it rational to hoard resources? Wouldn't it be more rational to sell them
if you have a surplus? Isn't that in fact what people usually do?
> This has one following condition: That the economical system must
*compensate*
> these people, not reward or punish them, so that the amount of resources
they
> acquire and expend would eventually balance to zero.
If you include all transfers of property, including those at death, you will
find that that is true. On the other hand, if at any point where a person is
still alive he finds himself with absolutely zero resources, further survival
may be difficult. It is also not easy to predict exactly how many and what
kind of resources will be needed. This is why most rational people prefer to
have some money saved up.
> These people would also most rationally do something they like to do to
instead of
> having to take a job they dislike and work on their "hobbies" after work
hours.
All rational people prefer to work on something they like to do. The only
reason people work is when the rewards from working are preferable to not
working. Why is it that anyone works, ever? Some are forced to do it,
convicts, military personnel, children given tasks by their parents. But
what about all the others. Why do they work? Is it possible for them to
live the way they want to without working on things they don't like? I think
it is clear that they haven't figured out a way to do it.
> The open source movement may support this hypothesis, for in spite of an
> economical system that does not reward those who contribute to the common
> good, some people do have the initiative to do so.
A free market economic system (which is not the same thing as the current
system in your country or mine) does not preclude reward of those who
contribute to the common good. It is important to keep in mind that it is
not obvious to anyone exactly what does contribute to the common good, what
contributes enough to be worth the effort, and what activity contributing to
the common good is optimal as opposed to inefficient. It is further not easy
to determine whether time and resources spent on some particular activity to
benefit everyone would not produce more overall benefit than using the same
time and resources on some activity which may be more productive but benefits
only the people in one city, or one family, or even just one person. Who
decides? Unless there is plenty of "reward" for every activity to be
rewarded regardless of its efficiency, then who decides which activities are
rewarded and which more than others?
If by reward you refer to material goods, those kinds of "rewards" serve to
motivate (via self-interest) people to do more of whatever will obtain them.
Only if such goods go to those who produce them is there full incentive to
produce them. Without such incentive, many or all of the goods in question
will not exist. They will not be produced.
There are people who work to invent things which can benefit everyone, or to
produce things which everyone has an opportunity to buy if they can give
equal value in exchange. They do get rewarded. But if a new medicine helps
only certain people (who have a hereditary disease) rather than everyone, it
is not the "common good" that is helped, but only the good of the people who
need it. Yet that deserves reward too, doesn't it? Helping just one person
is good, isn't it? Shouldn't that be rewarded? If you see the point here,
you will see that helping *only* the common good is not an optimal use of
resources even if there were no other considerations. And if you want a
system which rewards people who help anyone, even one at a time, rather than
all at once, you will find that a free market system does that. Not only
does it do it, it does it better than any other system and it has a few other
features thrown in (such as requiring payment from the beneficiary of help)
which motivate people to ask for only as much help as they need and to make
sure that such help is rationed among those most able to help others in
return.
>You also imply that the person who designs societies may have more power in
that
>society,
Not necessarily more power. His design may be completely ignored and he may
have no power at all. But if we look at the design, we will almost certainly
find that in creating it he was motivated by self-interest and that the
motivation affected the design.
> but this may not always apply (refer to Intellicracy) and even then, we may
>not have a person but the entire society designing itself (as I intend).
Good. Because they all will try to do so to some extent whether you want
them to or not.
> Then, the founders would merely need to establish a set of "seed"
principles that
> will allow such development and avoid any problems like power domination by
> having "checks and balances" (such as by full disclosure of all information
and >limiting of society membership).
Keep in mind that everyone else will have their own ideas about what are the
right "seed" principles.
> Meanwhile, the implication that societies will always have a dedicated
police,
> judiciary and other components may or may not apply to an actual society of
a
> different design to those existing today.
Of course.
> I must also debunk the incomplete theory that evolution would always
produce the
> best solutions.
Can you define an "incomplete" theory? Theories are generally evaluated as
being useful or not useful, valid or invalid or perhaps also untested. They
are sometimes referred to as right or wrong in more common terminology. But
incomplete? How are we to evaluate a theory that is "incomplete?" If
Einstein wrote that E=MC and left off the final notation, it would be
incomplete in the sense that an additional notation would make it correct.
But more importantly, it would be wrong.
So let us consider this theory that evolution always produces the best
solutions. I think it is wrong. Not incomplete, wrong. Biological
evolution in nature involves much random chance. There is no reason to
consider it infallible. It tends towards improvements. That's not at all
the same thing as saying it "always" produces the "best". I'm not sure who
stated this theory, but as it has been written here it is clearly invalid.
> We can see that the design of our eyes, with its blind spot, had to do with
a less
> than optimal design by nature. We can also see that the QWERTY computer
> keyboard we use now, that had resulted from "free" competition, actually
*slows*
> down our typing speed.
The evolution of ideas and technology also does not always produce the best
solution from the point of view of engineering. It may produce the best
result when we include economic factors and the inability of various people
to come up with different ideas at different times as well as the costs of
fixing mistakes or making improvements to things which had already been built
or even typists who had already been trained in a certain way. Or maybe it
does not produce the best effect even if we do consider economic factors.
I don't see why you use the QWERTY keyboard as an argument against "free"
competition or why you put "free" in quotes.
> Sometimes, we need intelligent design to get from a good solution to an
excellent
> one.
Is this an argument between "evolved" solutions rather than designed ones?
If so, it is a poor example. The QWERTY keyboard was designed, not evolved.
It was deliberately designed to cause the typist to type slower. This was in
order to solve a problem with early typewriters. If there was not enough
time delay between striking each key, the typewriter would jam. I've used
typewriters like that so I know it's no myth.
>The status quo knowledge may sound nice and comforting, but if one wishes to
>transcend it to find a better solution, then one must look for new
alternative
>solutions.
One must also convince people to pay any costs associated with a new
solution. If you can convince people who have already learned to type on a
QWERTY keyboard that the extra speed is worth buying a new keyboard and
learning how to type on it, (and not being able to type quickly on QWERTY
keyboards anymore) you could get people to make the change now. There are
reasons the very highest technology is not used to solve every problem. One
of those reasons is cost. Not just monetary cost, but cost in time, money,
resources, inconvenience, etc.
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