Curt Doolittle

Theme: Incentives

  • Law’s Perverse Incentives

    [R]ule of law, given a homogenous and therefore universal definition of property rights, constitutes a central authority. Just as mathematical operations constitute a central authority. Just as the scientific method constitutes a central authority. Humans must make judgements. A central authority can be reduced to judgements and decidability requires humans to make decisions.  If we articulate a sufficiently calculable rule of law, they only need determine the truth or falsehood of human testimony, and all questions are decidable. The problem in constructing rule of law is too often to protect the credibility of the state, so that it does not miscarry justice.  Instead, if we focus on the incentive for truth telling. Incentives: 1) Universal standing (ability to sue), universal vulnerability. 2) Warranty of for one’s truth telling. 3) Restitution plus costs, for truth telling. 4) Triple damages plus costs for not truth telling. 5) Ten times damages for immoral (illegal) directives. No limit of liability. No immunity in the chain of command. All employees personally insured, and all personally accountable. Truth telling matters. Right now lying does not increase risk. And so the law is currently constructed to provide perverse incentives. We all err. We need not lie.

  • Law’s Perverse Incentives

    [R]ule of law, given a homogenous and therefore universal definition of property rights, constitutes a central authority. Just as mathematical operations constitute a central authority. Just as the scientific method constitutes a central authority. Humans must make judgements. A central authority can be reduced to judgements and decidability requires humans to make decisions.  If we articulate a sufficiently calculable rule of law, they only need determine the truth or falsehood of human testimony, and all questions are decidable. The problem in constructing rule of law is too often to protect the credibility of the state, so that it does not miscarry justice.  Instead, if we focus on the incentive for truth telling. Incentives: 1) Universal standing (ability to sue), universal vulnerability. 2) Warranty of for one’s truth telling. 3) Restitution plus costs, for truth telling. 4) Triple damages plus costs for not truth telling. 5) Ten times damages for immoral (illegal) directives. No limit of liability. No immunity in the chain of command. All employees personally insured, and all personally accountable. Truth telling matters. Right now lying does not increase risk. And so the law is currently constructed to provide perverse incentives. We all err. We need not lie.

  • Rents.

    Economic Rents create lost opportunities for exchange. A cost.  They grant a privilege whose results are incalculable (unavailable because profit and loss are externalized) and therefore unmeasurable (comparable with other investments) and invisible (they are forgotten and never rise again), instead of creating a calculable, measurable, investment and return for the polity.

    Unfortunately, democracy – majority rule – forces us to create these lost opportunities to exchange rents and privileges which are incalculable.

    Furthermore, the pooling of taxes into general funds,  rather than charging fees for services, for the payments of debts, and collecting returns on investments, create opportunities for rents. It is this system of rents that we systemically MUST construct under democracy. Democracy does not let us do otherwise.

    Worse, it is this system of rents, that allows the predatory and parasitic rent-seeking bureaucracy to exist, and expand like a cancer uncontrollably.

    Conversely, if we enforced (a) a universal requirement for operational calculability, (b)universal standing for the prosecution of rent seeking, (c) and the negotiation of contracts, rather than the competition for rents in order to obtain power necessary to issue laws (commands), then it is impossible to seek rents. And even if rents are somehow obtained, impossible to hold them.

    Yet enforcing (a)(b)(c) does not require that we abandon the construction of commons. Only that we abandon the rentiers. So while it was necessary to centralize rents in order to extinguish family, guild and tribal rents, it is now equally necessary to ban rents permanently.

    All that is required is contracts instead of laws, universal standing, and operational calculability.

  • Rents.

    Economic Rents create lost opportunities for exchange. A cost.  They grant a privilege whose results are incalculable (unavailable because profit and loss are externalized) and therefore unmeasurable (comparable with other investments) and invisible (they are forgotten and never rise again), instead of creating a calculable, measurable, investment and return for the polity.

    Unfortunately, democracy – majority rule – forces us to create these lost opportunities to exchange rents and privileges which are incalculable.

    Furthermore, the pooling of taxes into general funds,  rather than charging fees for services, for the payments of debts, and collecting returns on investments, create opportunities for rents. It is this system of rents that we systemically MUST construct under democracy. Democracy does not let us do otherwise.

    Worse, it is this system of rents, that allows the predatory and parasitic rent-seeking bureaucracy to exist, and expand like a cancer uncontrollably.

    Conversely, if we enforced (a) a universal requirement for operational calculability, (b)universal standing for the prosecution of rent seeking, (c) and the negotiation of contracts, rather than the competition for rents in order to obtain power necessary to issue laws (commands), then it is impossible to seek rents. And even if rents are somehow obtained, impossible to hold them.

    Yet enforcing (a)(b)(c) does not require that we abandon the construction of commons. Only that we abandon the rentiers. So while it was necessary to centralize rents in order to extinguish family, guild and tribal rents, it is now equally necessary to ban rents permanently.

    All that is required is contracts instead of laws, universal standing, and operational calculability.

  • CENTRALIZE RENTS THEN EXTERMINATE THEM Economic Rents create lost opportunities

    CENTRALIZE RENTS THEN EXTERMINATE THEM

    Economic Rents create lost opportunities for exchange by granting a privilege that is incalculable instead of a return to the polity that is calculable (measurable). Majority rule creates lost opportunities to exchange rents and privileges which are incalculable, for returns to the polity that are calculable (measurable). Pooling of taxes rather than fees for services, the payments of debts, and returns on investments, create opportunities for rents. It is this system of rents that we systemically MUST construct under democracy. It is this system of rents, when replaced with requirement for operational calculability (operationalism) that allows the predatory and parasitic rent-seeking bureaucracy to exist. Conversely, with a universal requirement for operational calculability, universal standing for the prosecution of rent seeking, and the negotiation of contracts, rather than the competition for rents in order to obtain power necessary to issue laws (commands), it is impossible to seek rents. And even if rents are obtained, impossible to hold them. Yet this system does not require that we abandon the construction of commons. Only abandon the rentiers. So while it was necessary to centralize rents in order to extinguish family, guild and tribal rents, it is now equally necessary to necessary to ban rents permanently. All that is required is universal standing and operational calculability.

    Source date (UTC): 2014-09-27 13:06:00 UTC

  • Can Professors At Universities Teach And Have Opinions That Are Very Much Contrary To The Scientific Community At Large?

    THE BEST ANSWER YOU WILL FIND

    All university departments hold biases, and the careers of the members of the department depend upon upholding those biases, because of the incentives to publish, and the authoritarian hierarchy of the university and departments that was inherited from the church – which invented the university.  There is very little practical difference between the practice of ideology and the practice of academic research in this regard. In practice, ideas die with their originators and sponsors, not when they are disproved. The investment is too high. The incentive to over-invest in a paradigm to retain one’s position is too high.  This is why students must choose departments based upon what the department members publish.

    Sowell’s recommended “fix” is to financially and organizationally separate research departments (that do not serve the interests of students whatsoever) from teaching departments (whose only concern is the students) but the administration (serving neither the students or the researchers) is currently consuming all the vast investment americans are making in educations (that have questionable return, and in some cases negative return.)  Realistically if undergrad students paid teaching professors, not researchers, for their education, and we regulated administration and capital acquisition to 20% of fees, education would be absurdly inexpensive, and students would leave with little debt.  We could then ask grad students and phd students and the government to bear the costs of research, rather than the undergrads. And we would shrink the administration back to it’s necessary and sufficient size.  (Financially, academia now has absorbed all the costs originally saved by eliminating the church.  For all intents and purposes, we have merely replaced academia and church with academia. In fact, I am pretty confident that academia is far more expensive than the post-enlightenment church was in every form of capital consumption.)

    But the university system is not designed for students and their careers, it is designed to provide economic rents to researchers and administrators, by selling faulty products to students,  that in any other industry would be open to class action lawsuits for fraudulent representation, and possible only because of inflationary pressure on by the government, in the same way that the government created inflationary pressure on the housing industry leading to the 2008 crash.

    See Sowell’s work and Caplan’s work.  Caplan is always someone you must be skeptical of nearly everything he says, so his his empirical work is what you can appreciate, but you must ignore all his conclusions. (Sort of like reading Marx.)

    https://www.quora.com/Can-professors-at-universities-teach-and-have-opinions-that-are-very-much-contrary-to-the-scientific-community-at-large

  • Can Professors At Universities Teach And Have Opinions That Are Very Much Contrary To The Scientific Community At Large?

    THE BEST ANSWER YOU WILL FIND

    All university departments hold biases, and the careers of the members of the department depend upon upholding those biases, because of the incentives to publish, and the authoritarian hierarchy of the university and departments that was inherited from the church – which invented the university.  There is very little practical difference between the practice of ideology and the practice of academic research in this regard. In practice, ideas die with their originators and sponsors, not when they are disproved. The investment is too high. The incentive to over-invest in a paradigm to retain one’s position is too high.  This is why students must choose departments based upon what the department members publish.

    Sowell’s recommended “fix” is to financially and organizationally separate research departments (that do not serve the interests of students whatsoever) from teaching departments (whose only concern is the students) but the administration (serving neither the students or the researchers) is currently consuming all the vast investment americans are making in educations (that have questionable return, and in some cases negative return.)  Realistically if undergrad students paid teaching professors, not researchers, for their education, and we regulated administration and capital acquisition to 20% of fees, education would be absurdly inexpensive, and students would leave with little debt.  We could then ask grad students and phd students and the government to bear the costs of research, rather than the undergrads. And we would shrink the administration back to it’s necessary and sufficient size.  (Financially, academia now has absorbed all the costs originally saved by eliminating the church.  For all intents and purposes, we have merely replaced academia and church with academia. In fact, I am pretty confident that academia is far more expensive than the post-enlightenment church was in every form of capital consumption.)

    But the university system is not designed for students and their careers, it is designed to provide economic rents to researchers and administrators, by selling faulty products to students,  that in any other industry would be open to class action lawsuits for fraudulent representation, and possible only because of inflationary pressure on by the government, in the same way that the government created inflationary pressure on the housing industry leading to the 2008 crash.

    See Sowell’s work and Caplan’s work.  Caplan is always someone you must be skeptical of nearly everything he says, so his his empirical work is what you can appreciate, but you must ignore all his conclusions. (Sort of like reading Marx.)

    https://www.quora.com/Can-professors-at-universities-teach-and-have-opinions-that-are-very-much-contrary-to-the-scientific-community-at-large

  • LAW’S PERVERSE INCENTIVES Rule of law given a homogenous and therefore universal

    LAW’S PERVERSE INCENTIVES

    Rule of law given a homogenous and therefore universal definition of property rights, constitutes a central authority. Just as mathematical operations constitute a central authority. The question is whether the central authority can be reduced to calculations rather than judgments. Humans must make judgements. If we constitute a sufficient rule of law, they only need determine the truth or falsehood of human testimony.

    Incentives: Restitution plus costs, via truth telling. Triple damages plus costs for deception. Truth telling matters. Right now lying does not increase risk. The law is currently constructed to provide perverse incentives.

    No immunity in the chain of command. All employees personally insured, and personally accountable. Ten times damages for immoral (illegal) directives. No limit of liability.

    We all err. We need not lie.

    Source date (UTC): 2014-09-24 09:47:00 UTC

  • I am not sure that I understand what has happened but Fashion just changed in re

    I am not sure that I understand what has happened but Fashion just changed in response to status signals worldwide.

    I can see it in the economy – which drives fashion. I can see it in fashion this fall. I can feel my own taste shift. I can feel what my intuition is rejecting. I can see designers are confused as well.

    It feels like a search for a less flamboyant conservatism. And thats harder than the experimentalism thats been universal for so long.

    I sensed german influence was ascendant, and that new york had lost touch, but not that Californian influence was in decline. It is partly generational as well as economic as the boomers and their hedonistic proletarianism wane in influence.

    I wish I had contacts at the fashion editorial level.

    This will drive me nuts until I figure it out.

    Source date (UTC): 2014-09-16 10:31:00 UTC

  • THE MEANING OF “AUSTRIAN” (as I understand it today.) (draft) Note: I’ve wanted

    THE MEANING OF “AUSTRIAN” (as I understand it today.)

    (draft)

    Note: I’ve wanted to put this together for some time, since I have some significant issues with the way that Boettke has written it – even if he has written the best to date. I believe this form of articulation is more analytical and less romantic. But this is still just a draft. And each bullet needs a paragraph of explanation. – Thanks.

    VALUE

    1) Value as incentive to act.

    2) Subjectivity of Value.

    3) Marginal Value.

    4) Opportunity Cost.

    5) Exchange as only test of value and therefore production or consumption

    6) Morality as voluntary exchange. (Propertarianism’s addition: productive, fully informed warrantied, exchange that is free of externality.)

    VOLUNTARY ORGANIZATION OF PRODUCTION

    1) Property. Without property one cannot choose between alternative actions available to him.

    2) Commodity money allows for the evolution of prices.

    3) Prices function as information about what others want and need.

    4) Information provides incentives. Prices make actions and resources commensurable, so that complex choices and planning are possible.

    5) With Property,Money,Prices,Information and Incentives, individuals can voluntarily choose to participate in production.

    6) If many people possess this choice, a polity can evolve the Voluntary Organization of Production. Without these choices, people cannot voluntarily organize production, and must be involuntarily organized. (It is not clear that all people prefer the voluntary organization of production, even if they prefer the rewards of living under a voluntary organization of production.)

    THE ORGANIZATION AND REORGANIZATION OF VOLUNTARY ORGANIZATIONS

    1) Increases in participation in voluntary organization of production increase the division of knowledge and labor and by consequence their participation produces variations in productivity and prices.

    2) People Evolve complex organizations from Sustainable Patterns of Specialization and Trade.

    3) Changes in preferences cause alteration of the existing sustainable patterns of specialization and trade (Reorganization).

    4) Innovation (Discovery) provides incentives to alter the existing sets of preferences, and the existing organizations of production to satisfy those preferences.

    5) Changes in the scarcity of resources (Shocks) alter prices and by consequence alter preferences, and the existing organizations of production change in order to satisfy those changes in preferences.

    6) Changes in innovation, resources and preferences create opportunities for the satisfaction of preferences.

    7) People, and organizations of people, demonstrate flocking and schooling in response to opportunities.

    8) Business cycles evolve from the exploitation and exhaustion of opportunities available in the current organization of production, and the evolution of new opportunities in new organizations of production, and the need for the reorganization of the existing patterns of specialization into new organizations of production. (ie: equilibration is a fallacy of numeracy.)

    INTERFERENCE IN THE INFORMATION SYSTEM, ORGANIZATION, AND CAPITAL

    1) The state distorts information under Keynesian employment policy by flooding the market with cheap money and misinforming individuals as to what actions they should take.

    2) Unnecessary shortages of money also misinform individuals as to what actions that they should take.

    3) Economists and philosophers have not solved the problem of supplying money independent of shortages, (although it appears possible by increasing taxes along with interest rates).

    4) The cost of distortion is an opportunity cost between one possible set of affairs and another possible set of affairs. We just can never recover a lost set of affairs.

    5) Monetary prices may be neutral in the long run, but distortion of those prices produces externalities that are non-neutral.

    6) Distortions impact all capital Human capital (skills), Reproductive capital (family structure and gene pool), Normative Capital (inter-generational habits, values, traditions, myths), and Institutional Capital (Formal institutions, including the law). While economic activity may be easily quantifiable, accounting for gains or losses in the remaining forms of capital are not.

    PROPERTARIAN EXTENSIONS TO AUSTRIAN THEORY

    1) The first means of production is reproduction, and is the purpose for all other production.

    2) The organization of reproduction and the organization of economic production are interdependent, and for one to change so must the other.

    3) Moral rules are those that prevent parasitism: free riding, involuntary transfer (fraud), and imposed cost (theft and violence), and family structure heavily influences moral rules, which only property rights and law can change.

    4) Voluntary exchange requires the exchange is productive, fully informed, warrantied, and free of externality.

    5) Trust is the word we use for the feeling we have, when transaction costs (risks) of free riding, rent seeking, fraud, theft and violence are eliminated – leaving only error in forecasting of demand as the possible risk.

    6) Trust is developed by increasing the scope of property rights to exclude all actions that make free riding possible, and therefore eliminate transaction costs.

    7) The common (organic) law of property rights, being specific positive assertions of the general negative prohibition on parasitism in order to make cooperation rational, is the only means of scientifically (experimentally) evolving law that corresponds with morality.

    8) It is not clear that savers have a moral claim to appreciation of the value of currency from saving, albeit they do have a claim to against inflation of the currency. It is quite hard to argue otherwise.

    OPPOSITIES: AUSTRIAN (aristocratic) VS PSEUDO-AUSTRIAN (cosmopolitan).

    Austrian theory is broken into two branches: (a)The Cosmopolitan (Jewish) Branch (Mises/Rothbard/Hoppe) and (b) the Aristocratic (Hayekian) Branch (Hayek/Popper and as far as I know, myself).

    It may be novel idea or not, but the difference is largely in the Aristocratic use of the commons and high trust as a competitive strategy, and the cosmopolitan attempt to privatize all commons, and eschew high trust in favor of low trust, as a means of evolutionary strategy that COMPETES with the high trust producers of commons. In other words, the Misesian/Rothbardian if not Hoppeian Austrian branch produces behavior that eschews all commons. For these reasons, the Misesian/Rothbardian/Hoppeian branch is not an Austrian branch but a cosmopolitan competitor specifically articulated as an attack on the high trust aristocratic commons.

    In the early 2000’s I had assumed that I could reunite Mises and Hayek, because I understood that Hayek was speaking politically and Mises individually. But I did not at the time understand that these are competing and mutually exclusive social strategies. That the purpose of the Cosmopolitan strategy was to preserve levantine low trust, and to privatize all possible commons. That the aristocratic strategy is to produce commons because no other group has been able to.

    Hayek may have challenged the view among academics that fascism was a capitalist reaction against socialism. He argued that fascism and socialism had common roots in central economic planning and empowering the state over the individual. But just as we must mobilize one another for war, fascism was an effort to mobilize us against communism. So while it may be true that fascism and socialism possess common roots, but it is also true that war is not a process of exploration as is capitalism – it is a deliberate concentration of all production into fighting. And the fascist war against communism most likely saved the west.

    So, these two branches are not tastes. They are polar opposite propositions. They ask us to choose between levantine low trust morality and aristocratic high trust morality. And that is an easy choice.

    Only warriors can produce aristocracy.

    Curt Doolittle

    The Propertarian Institute

    Kiev Ukraine.

    Source date (UTC): 2014-09-15 14:15:00 UTC