Well-Off

Many economists build a case against policies that are aimed at reducing inequality in income and wealth. Their argument rests on two premises:

1. Societies should seek to be maximally productive, because this is the best way to provide for the needs of the members of the society, and
2. There is a trade-off between equality and efficiency - policies that promote equality tend to reduce productivity.

I'm not convinced. 

The first premise invokes Coase: well-defined property rights ensure that any redistribution (of wealth, property, or rights) that will increase societal welfare will happen through the mechanism of the market without the need for the intervention of the government - provided that transaction costs are negligible. 

Transaction costs are rarely negligible, but even if we set that aside there is still a problem. Arnold Kling gives an example that illustrates the problem with Coase. Prof. Kling considers the case of a biker who needs to use a bike path that crosses private land. Here's my retelling: The biker is willing to pay a heavy toll (a large percentage of his total wealth) in order to be allowed to use the path, because he wants to reach the hospital where his father is dying to see his father one last time. If he doesn't use the path then he has to take a much longer route and will not reach the hospital in time. The landowner wants to exclude the biker from using the path because the landowner doesn't like to have strangers on his land. Let's assume essentially zero transaction costs - the biker carries a transponder that automatically computes and pays his toll (with his agreement), according to the rate the landowner has set. The landowner sets the toll at a level that compensates him for the unpleasantness he experiences at having strangers cross his land. 

The problem is that the biker is very poor, and the landowner is very wealthy, and as a result, the price the landowner sets is much higher than what the biker can pay, even though the biker places a very high value on using the path. Under Coase, as long as the biker gets more value out of using the path than the landowner loses when the biker uses the path, then they should be able to agree on a price that compensates the landowner. Why doesn't that work in this case? Clearly, the biker places a very high intrinsic value on using the path - equal to a large percentage of his total wealth!

It doesn't work because the landowner and the biker value money, dollars, differently. Essentially the biker and the landowner are not using a common unit of exchange. You could say that the landowner sets the price in apples, but that the biker is paying in oranges. Or to highlight the difference in value, the landowner is setting the price in coal, but the biker must in diamonds. 

There is a further, even more radical implication to all of this, and that is that when there are differences in wealth among the members of a society, transfers from the wealthy to the poor INCREASE net societal welfare. This is because when a dollar is taken from a wealthy man and given to a poor man, the loss of intrinsic value experienced by the rich man is less than the gain in intrinsic value experienced by the poor man. Prices don't clear the market because prices are not established in units of intrinsic value.

As far as premise number two, I haven't seen any good measures of the magnitude of that trade-off. Is it significant? Is it significant at some degrees of intervention, but not significant at others? If you know where i can see data that describe this relationship I would be very interested.

PostScript: None of this addresses the libertarian arguments against policies that are aimed at reducing inequality. Nor does it address the question of whether governments are needed to effect redistribution (when it is desirable), or whether non-coercive institutions and norms could be a more optimal solution than government.

The Point Of This Blog

"Without new technologies, an economy might grow slowly. But without decent rules, an economy cannot even make use of the technologies that already exist."


-Sebastian Mallaby

Of mind control, paranoia, and secret government...

...I can't even finish the title. Are you still reading this, or have I already driven you away?

Beginning in the 1950s, something strange began in the US. It involved experimentation with powerful chemical compounds that had the ability to alter behavior and brain function. Documentation shows it lasted through the 1960s and may continue to this day.

No, it's not the hippie era, but that's a good guess. I'm referring to MK-ULTRA, the covert CIA program that studied how people responded to LSD and other drugs, presumably to determine how the agency could make use of the chemicals in other secret CIA settings.

The implications are far-reaching, the fodder of conspiracy theorists and mind control authorities (nearly all of whom seem to have their own blog, book, and following).

It's a lot to weed through, but here's what is certain:

• There really was a project named MK-ULTRA, and they really did do experimentation with dangerous drugs on unconsenting subjects.

To be honest, I was prepared to debunk the whole thing as ridiculous conjecture, but it isn't possible. Most of the documentation was destroyed in the 70s, but some it remains, and what it says doesn't bode well for the non-paranoid.

At least some of the research was applied to "unwitting subjects in normal life settings. It was noted earlier that the capabilities of MKULTRA substances to produce disabling or discrediting effects or to increase the effectiveness of interrogation of hostile subjects cannot be established solely through testing on volunteer populations." They freely admit that, regarding this controversial aspect, "No effective cover story appears to be available."

They weren't unaware of what might happen, but in paired sentences say that "possible sickness and attendant economic loss are inherent contingent effects of the testing" AND "that the program is not intended to harm test individuals." I guess hiding under the shelter of "intentions" is a fine justification.

At least one death is attributed to this program, that of Frank Olson, who was a specialist in biological warfare and had LSD slipped into his drink during a meeting with CIA personnel. Reading about that incident begins to sound like a Tom Clancy plot point, and the exact circumstances are difficult to find; so much of it is tangled up with speculation and wild leaps to bleak conclusions. That the CIA gave him LSD without his knowledge is documented. Under what circumstances he then fell from the 13th story window is not as clear.

Many people think that the program never ended. Its scope was certainly larger than the available papers describe.

In March 2010, the effects uncovered in this understated article give a better picture of the involuntary research. This is where I started to think that there are perhaps far more implications than I had considered.

What does it all mean? It's hard to add up all the facts, hard even to separate what we actually know from the ridiculous notions people are quick to invent.

On the other hand, knowing that something like this certainly existed, and that there is much we don't know, doesn't add to my confidence that government programs like this probably don't exist now, and that if they do they're tame little experiments that don't do anyone any harm.

It's nearly impossible to be a naive optimist anymore. But how much paranoia is appropriate?

Great links

I am completely endeared by this Lego street art. Using Lego for minor city repair work is brilliant. Here at Dispatchwork.

This is the scariest jewelry I have ever seen. There must be a better way to dispose of old Barbie dolls. (But, yes, baby limb coatrack is worse. Gah.)

More than you ever wanted to know about the giant sea creature that is leaving people startled and horrified.

Think you have a great gadget idea? Sorry, the Japanese already thought of it.

And, finally, why are we so grossed out by this and not the cheese we normally eat?

Roots of Government

Government is coercive. Concentrated application of force is what government is for.

I imagine two stories for how government arises. The first is government as the embodiment of the social contract, where the contract in question is not figurative or proverbial, but literal. According to this story, government is chartered through an agreement among parties to defer power to an enforcer. This is the process by which townships of the old west incorporated, and hired a mayor to attend to administer the activities of government and a sheriff to physically enforce law and order. The people of the town authorized the government explicitly, and explicitly agreed to be subject to the law and to the officers who carried it out. They further participated in government through town hall meetings and by bearing arms in the defense of the law as deputies.

This same kind of government can be found in clubs and private organizations, and in businesses. The fact that in this story government originates in an agreement among the parties to be governed should not obscure the fact that the government is adopted specifically for the purpose of exercising coercion over the governed. Consider the freelance labor crew who wishes to maximize their profit. They may choose to hire a foreman who is brutally forceful, in order to ensure that every member of the crew works hard and no one is allowed to free ride.

In the second story of the origin of government, government is imposed on local people from outside of their own community, and without their consent. This is the feudalistic story of government, where small farming villages are robbed repeatedly by regional bandits. Eventually the theft becomes routine, and competent leadership among the bandits leads to a sustainable level of pillaging that doesn't destroy the farmer's ability to continue producing each year. Full-fledged feudalism is justified as protection of the serf class by the bandits, who claim that the bandits of the next fiefdom over are far more brutal than they are. So, a social contract-like mantle legitimizes the theft and coercion.

In both of these stories, government exists for the purpose of exercising force.More particularly, it is for the purpose of imposing the will of a powerful coalition, who may be a majority or may simply be a sufficiently powerful elite, upon the rest of the society. The townsfolk impose law and morality upon the lawless and the eccentric, the crew of laborers impose hard work upon the lazy, and the bandits impose taxation upon the serfs. The difference is in what fraction of the population is represented by the government, and what fraction is victimized by it.

Pictures

Map of Christianity

Rob and I both loved this map of Christianity across the US, linked by Wehr in the World (with great discussion) from Floating Sheep (with more maps).

And the corresponding map of Europe:

I noted how much less diversity there is in Europe. Rob responded with this line of thinking:

You know, what you said about the Europe map showing less diversity supports the argument that the availability of religious choice in the US is part of the reason that religion has remained vital and satisfying to Americans while it hasn't for Europeans.

And that makes me wonder about the dynamics of religion in other parts of the world...Japan (low diversity, low interest in religion)...the middle east (high diversity mixed with religious violence maybe promotes interest in religion and in group identity)...Africa (see the middle east)...

I don't know much about religion in other parts of the world. I guess S. America is mostly Catholic? Are the native religions alive at all? How long has China been relatively irreligious? Probably since before the cultural revolution I'll bet. Otherwise the cultural revolution probably wouldn't have been possible. How do Indian Hindus feel about their religion? I just don't know.

I love how this man thinks.