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Money: the zero-sum game

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Sun, 2014-07-27 07:14
Lorsa Lorsa's picture
Pyrite wrote:The biggest
Pyrite wrote:
The biggest issue is that it enables people to be targeted, whether for being fired from their jobs or for random violence and harassment.
It is quite easy to institute laws to prevent employers from firing people just for supporting a certain political campaign. At least in Sweden, we already have quite a lot of anti-discrimination laws, and this could be part of that. My goal isn't necessarily to track individual people's political views though, but rather from which sources politicians get their money. I do believe that public access to every individuals income level would be generally beneficial to the democratic process though.
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Sun, 2014-07-27 09:14
Smokeskin Smokeskin's picture
Lorsa wrote:
Lorsa wrote:
There was one thing I wanted to comment on however (as much of the rest is for a discussion about capitalism).
Smokeskin wrote:
The problems are too deep to be solved with more education. The democratic system itself is inherently so that if the actors in it are rational, some actors can cooperate to screw over the rest. On a free market, if I make a deal with someone, it is win-win - otherwise, one of us would say no. We’re always choosing what we think is best for us, and we do it individually, billions of people and corporations are doing win-win trades to optimize their situation. (EDIT: there can still be externalities like pollution or risks for other people of course) Democracy doesn’t work that way. First off, the effects on people are rarely individually tailored like the trades people do on free markets. It is one size fits all - everyone must obey their decisions. Second, democratic decision processes are not win-win. You have deals between politicians, officials, interest groups, lobbyists, the majority, swing voters or whoever is party to a given decision, and for them it is win-win. But they can (and they do) force a “lose” on everyone else. Democracy is win-win-lose. There’s no getting around it. You can’t educate the voters out of it. It’s not an education problem. It’s a problem with people being rational.
You are making the mistake of assuming that the only rational choice is to be short-term self-serving. I disagree with that. There are many other, much more rational viewpoints, to base political decisions on. I would argue that it is much more rational to base decisions on what would benefit society as a whole the most, or what would provide optimal fairness and equality, etc. There isn't an equal sign between personal greed and rationality.
Self-interest isn't the same as greed. Self-interest is whatever you care about, be it money, the environment or killing heathens. Acting in accordance with your self-interest is rational. I agree that political decisions should be based on what benefits society the most (even if that isn't easy to determine). The problem is that politicians and officials are rational and make decisions according to their self-interest, and that's generally not what benefits society, or even what the citizens want. Expecting politicians to act against their self-interest is unrealistic. The problem becomes even worse when you begin considering interest groups and lobbyists. Only the politicians who have their support get the campaign funds needed to get elected, and this twists the whole system even further.
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In the strictest of sense, you are correct that a free market provides win-win deals. However, as you yourself pointed out with your "externalities", it doesn't turn out that way in practice. There are plenty of win-win-lose trades going on, where the loosing part is someone who wasn't part of the deal at all.
In practice, the markets produces much fewer and much less severe externalities than governments do. It's not even close. Market failures tend to relate to the free rider problem, where you can't get funding for projects because you can't restrict the benefits to only those that pay for it. There's also stuff like pollution and risk, though a strong case can be made that this is often the result of government failure, where environmental regulation and limited liability laws prevent people from suing polluters. Inspired by our discussion I found a free introductory pdf on public choice theory some days ago. I'm not through it yet, but it seems good. It was a bit extreme in the beginning, but it turns out it lays things out like "these first people who looked into it thought X, but later research has shown that it is only Y". You can download it at http://www.iea.org.uk/sites/default/files/publications/files/IEA%20Publi... If you're interested in making government work, public choice theory is mandatory reading imo.
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Sun, 2014-07-27 09:22
Smokeskin Smokeskin's picture
Lorsa wrote:
Lorsa wrote:
I still haven't gotten a satisfactory answer to if money should be treated as anything other than a zero-sum game. So unless someone can convince me that it isn't so, I'm going to proceed with that assumption.
There's several problems with your proposal though. It will mean stagflation or deflation, which is known to be poison for an economy. Also you would get liquidity shortages on the lending market, another severe issue that central banks normally address. I'm not sure if the options for financial innovation would also be reduced, but if they are, that would mean less growth too.
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Sun, 2014-07-27 11:34
Erulastant Erulastant's picture
Lorsa wrote:I still haven't
Lorsa wrote:
I still haven't gotten a satisfactory answer to if money should be treated as anything other than a zero-sum game. So unless someone can convince me that it isn't so, I'm going to proceed with that assumption.
Well, because it isn't. Many of the activities people undertake to gain money increase the total amount of value in the world. So, for example, if the world is 100 people, money starts out perfectly evenly distributed: -Everyone would like to be more wealthy. -Each person goes out and produces some amount of goods of equal value. (Not necessarily the same goods, some maybe services instead). -Suppose everyone then sells all their goods to China. Well, everyone in this hypothetical country has just produced something, and sold it, but none of them have gained any money just because they have not gained *relative to each other*. Hopefully that was a good argument, I have to go now. Marathoning the LoTR extra-long versions, I'll be back next week. q:
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You, too, were made by humans. The methods used were just cruder, imprecise. I guess that explains a lot.
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Sun, 2014-07-27 12:35
Lorsa Lorsa's picture
Smokeskin wrote:Self-interest
Smokeskin wrote:
Self-interest isn't the same as greed. Self-interest is whatever you care about, be it money, the environment or killing heathens. Acting in accordance with your self-interest is rational. I agree that political decisions should be based on what benefits society the most (even if that isn't easy to determine). The problem is that politicians and officials are rational and make decisions according to their self-interest, and that's generally not what benefits society, or even what the citizens want. Expecting politicians to act against their self-interest is unrealistic. The problem becomes even worse when you begin considering interest groups and lobbyists. Only the politicians who have their support get the campaign funds needed to get elected, and this twists the whole system even further.
Yes, I know that self-interest isn't the same as greed. Perhaps I should have phrased it differently. I would still argue that the rational thing to do with making policy for a society is to look at society's interests and not your own. How is it unrealistic to expect that?
Smokeskin wrote:
Inspired by our discussion I found a free introductory pdf on public choice theory some days ago. I'm not through it yet, but it seems good. It was a bit extreme in the beginning, but it turns out it lays things out like "these first people who looked into it thought X, but later research has shown that it is only Y". You can download it at http://www.iea.org.uk/sites/default/files/publications/files/IEA%20Publi... If you're interested in making government work, public choice theory is mandatory reading imo.
I will have to study it more closely when I have time, but thanks for the link nonetheless.
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Sun, 2014-07-27 12:45
Lorsa Lorsa's picture
Erulastant wrote:Lorsa wrote
Erulastant wrote:
Lorsa wrote:
I still haven't gotten a satisfactory answer to if money should be treated as anything other than a zero-sum game. So unless someone can convince me that it isn't so, I'm going to proceed with that assumption.
Well, because it isn't. Many of the activities people undertake to gain money increase the total amount of value in the world. So, for example, if the world is 100 people, money starts out perfectly evenly distributed: -Everyone would like to be more wealthy. -Each person goes out and produces some amount of goods of equal value. (Not necessarily the same goods, some maybe services instead). -Suppose everyone then sells all their goods to China. Well, everyone in this hypothetical country has just produced something, and sold it, but none of them have gained any money just because they have not gained *relative to each other*. Hopefully that was a good argument, I have to go now. Marathoning the LoTR extra-long versions, I'll be back next week. q:
It was actually a bit confusing. What are you arguing for or trying to show? If the world is 100 people and they all sell goods for the same amount of value to each other then everyone still has their equal share of the zero-sum game. If there's a China to sell to then the world isn't 100 people anymore, and they've all gained money on behalf of the individuals there. At any given point in time, there is a finite amount of money. All finite resources are zero-sum games, in the meaning that a gain for you have to be met with a loss for someone else. The amount of resources in the world definitely [i]isn't[/i] a zero-sum game, but that is very different than from our system of distributing them (which is currently a bit inefficient).
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Sun, 2014-07-27 15:04
Smokeskin Smokeskin's picture
Lorsa wrote:
Lorsa wrote:
I would still argue that the rational thing to do with making policy for a society is to look at society's interests and not your own. How is it unrealistic to expect that?
A middle manager in a private company will be promoted by the CEO if he writes a positive report on an R&D project. The project is somewhat flawed though, but the CEO has staked a lot on it and he's not willing to accept that the board drops it. What does the middle manager do - what is good for himself or the company? At least some would act selfishly in that situation, wouldn't you agree? Why would politicians and officials be any different? Are these people all saints who are self-sacrificing and act against their own interests? 2 political parties are running for the top spot. The one of them that is most dedicated in supporting a certain interest group's proposal will win the campaign contribution needed to win the election. Nobody but the interest group wants to see their proposal passed. What if one of them falls for the temptation to take the campaign money? Maybe they justify it with "It's just one proposal, and think of all the good we can do once elected". A more realistic scenario: 2 political parties are running for the top spot. The one of them that manages to attract campaign contributions from 20 interest groups will win the election. Nobody but the interest groups wants to see any of their proposals passed. What if one of them falls for the temptation to take the campaign money? That party wins, and we get all 20 proposals passed. The consequence here is that the most self-interested party gets elected, rather than the one that wants to serve society's interest. What if we eliminate all this campaign money from the political system? Well, turns out the problem is still there. Imagine each voter only wants taxes to increase by a maximum of 5%. There are 5 voter segments of equal size, each segment has a public project they want to see completed, and each project requires a 2% tax increase. They vote for candidates that support their favorite project, and eventually the elected politicians get together, and form a majority government that votes for 3 of the project, and they get completed. Taxes have now increased by 6%, which none of the voters wanted, and that money has been used for individual projects that 80% of the population didn't want. But the politicians behind the 3 projects got the power and higher pay that comes from winning the government seats. Again, the selfish prevail and gets awarded government. Through this mechanism, the amount of government projects, regulation and taxes will rise above what the population actually wants.
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Mon, 2014-07-28 15:40
Smokeskin Smokeskin's picture
So I've been thinking about
So I've been thinking about this. Let us imagine we had a free society. And we had 2 competing currencies. The Kroners is your usual currency - inflationary, its central continually prints money, when you deposit it the bank only has to have 3% of the amount as a reserve and the rest it can loan out. The banks give you interest for this, but there is risk and it loses value. The there's Dolsars. Dolsars are fixed amount. They increase in value. Banks have to keep a full reserve, so there's almost no risk. The banks aren't making money on it so you'll have to pay them for your savings account instead of getting interest. But no risk and increasing value. People might - I might - choose to use the Dolsars. It sounds good. I think we would probably see less growth, but maybe we're seeing too much growth, too much consumption. Maybe the monopoly on money is being used to pump up the economy far more than what we actually want.
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Mon, 2014-07-28 15:49
Lorsa Lorsa's picture
Smokeskin wrote:So I've been
Smokeskin wrote:
So I've been thinking about this. Let us imagine we had a free society. And we had 2 competing currencies. The Kroners is your usual currency - inflationary, its central continually prints money, when you deposit it the bank only has to have 3% of the amount as a reserve and the rest it can loan out. The banks give you interest for this, but there is risk and it loses value. The there's Dolsars. Dolsars are fixed amount. They increase in value. Banks have to keep a full reserve, so there's almost no risk. The banks aren't making money on it so you'll have to pay them for your savings account instead of getting interest. But no risk and increasing value. People might - I might - choose to use the Dolsars. It sounds good. I think we would probably see less growth, but maybe we're seeing too much growth, too much consumption. Maybe the monopoly on money is being used to pump up the economy far more than what we actually want.
There is also the problem that the Kroners system [i]requires[/i] growth to work, whereas the Dolsars system does not. As you mentioned, economic growth just for the sake of it might not be something we want. Also, exponential growth curves become troublesome after a while, both for the environment and for the amount of productivity society has to put out. I am glad you can see some merit in my idea.
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Mon, 2014-07-28 16:56
Smokeskin Smokeskin's picture
There's merit to the idea in
There's merit to the idea in that you and other people might prefer it. I don't know how I missed that but instead just droned on with the official line of "what's good for the economy". Sometimes it's just so hard to think through the biases that come from what you've been taught, from what people around you say. The really funny thing is that many of my political persuasion complain over the government counterfeit money we're forced to use, and I never really got what they meant. And then a statist got the penny to drop :) I wish we had a free society, with competing currencies so someone would make Dolsars and we would see how it works and how many would use it.
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