RoR: Forum

Some capitalistic truth arising from the development of a finance program I am creating:

One rewards virtue in a trade via being a benefactor in one service in exchange for being a beneficiary in another service of equal market value. Transferring ownership of a resource is a kind of service. Money is a kind of resource.

Post 41

Monday, December 3, 2012 - 8:32pm

Dean:

If you want some discussion on this you're going to have to put it in some sort of context and amplify it.

Sam

Post 42

Monday, December 3, 2012 - 9:05pm

Stealing is a transfer. Self service?

Post 43

Tuesday, December 4, 2012 - 4:53am

A trade is a collection of services where: where the trade's participants agree that the market value is preserved for each participant through the performance of the trade's services.

A theft from a victim is usually not a service (of negative market value, a disservice) that is part of a trade since no agreement between victim and other participants had been made prior to the theft.

A theft could become part of a trade: If both the victim and thief perform set of reimbursements and disincentivements which they both agree result in justice from their perspectives, then the set of theft, reimbursement, and disincentivements could be considered a trade.

Reimbursement: The victim is given enough resources that his current resources are equal (or greater) in market value to what they would be if the theft hadn't occurred.

Disincentivement: The thief has enough disincentivements (losses of resources and freedom) that the thief will be disincentivized (expect future potential thefts will result in the thief's loss)

Justice for the victim: The victim wants to be reimbursed and wants the thief to be disincentivized.

Justice for the thief: The thief wants the minimum amounts of reimbursement and disincentivement where he believes the victim will be reimbursed and he will be disincentivized.

Perfect Justice: Equal market value reimbursement and 1/infinity expected loss of market value in disincentivement.

Its difficult to accomplish perfect justice. Its impossible to know exactly how much market value the victim would have if the theft were not to have occurred (for the victim or anyone else). The victim might lie about how much market value was lost (throwing off reimbursements), and doesn't know exactly what the thief's goals were. Its impossible to know what will disincentivize the thief (unless you are the thief). The thief might lie about or be unable to communicate what his goals were (throwing off disincentivements).

Whether someone wants perfect justice depends on their relationships with the victim and the thief.

Post 44

Tuesday, December 4, 2012 - 7:19am

Ed:

p.s. It just hit me that there is a flip-side to this poll: Would you be willing to reward virtue?

I think it is even more important than punishing crime.

Post 45

Tuesday, December 4, 2012 - 7:25am

I like the idea of taking a basic look at any form of exchange and seeking out commonalities, and the theory of justice, particulary in the area of law where we define penalties for theft, would benefit from improvements to theory and application.

But in Dean's post above what became the most basic element was 'service' and because of that theft, reimbursement, disincentivement and justice, all got squished somewhat to fit the mold. The most basic element should have been voluntary participation. Trade is a voluntary exchange. Theft is not. Theft could never be "part of a trade" - that is a violation of the core meaning of 'trade.' Even if reimbursement and disincentive amount could be voluntarily agreed upon (not possible given that it happens with the law holding the thief by the collar) it can never go back in time and erase the violation of rights of the property owner.

I don't agree with the use of 'market value' in the various definitions. My loss, should something be stolen from me, is unlikely to be 'market value' of the item. I may place a greater or lessor value on the item and I will likely have a strong disvalue associated with the awareness that it was stolen. That makes achieving a just reimbursement difficult, even though it remains desireable. Market value is set by a market and not a single, individual, voluntary trade.

With disincentivement, we also have psychology interferring with the ability to find a numerical or precise measure. We want to disincentivize people from committing theft, but each person will have different values, degrees of denial that they'll be caught, and other defense mechanisms that complicate things.

Justice is a moral concept and Dean is on the right track where he says,

Justice for the victim: The victim wants to be reimbursed and wants the thief to be disincentivized.

Justice for the thief: The thief wants the minimum amounts of reimbursement and disincentivement where he believes the victim will be reimbursed and he will be disincentivized.

The problem is that psychology makes it impossible to translate into specific dollar amounts. And I'm not sure there is a way to come up with quantifiable moral-justice units. And Dean recognizes these problems at the end of his post.

Post 46

Tuesday, December 4, 2012 - 8:07am

In the realm of evolution - for entities without volition - the equation is fairly simple. Those traits that are both replicated and beneficial to the survival of the organism will tend to win out over organisms without traits as beneficial. Life is action and those actions that are 'right' for life will tend to win over those that aren't so much. Nature judges and justice predominates.

Those facts remain so for humans, but choice adds a complication. We have to discover what is right and choose to value it enough that 'right action' follows. We call types of right actions 'virtues' and hopefully we value them enough that they move us to take those right actions. (One could say that evolution of the human species will be furthered by any philosophical system that improves discovery and implementation of the most successful traits).

Choice allows us to adopt a course that is counter to a good outcome in reality. It is this fact that gives rise to the concept of justice. Men have choice, their choice may be consistent with what will further man's well-being, or it may go the other way.

And there is another element involved: chance. When we talk about evolution, we are talking about the aggregate outcomes, not the individual. Even the fastest gazelle might get eaten on a bad day, despite the fact that over time, more slow gazelles will be meals than the fast ones.

And for humans, sometimes we value the right things, and we act consistently with those values, and we have done nothing wrong, yet we are not rewarded. That is unjust. Justice is where right action delivers right reward, and where wrong action is punished.

Objectivism has a wonderfully keen appreciation for this. It recognizes that the sanction of the victim is a form of supporting injustice and rewarding wrong behavior. In the realm of psychology it values self-esteem. It recognizes that we should celebrate what we value, reward its existence, and that includes right actions. In art, this is the heroic. It is a malicious twist in psychology that has humility as a value, or some peculiar affinity for the anti-hero, or the dark themes in life that get celebrated when they represent, to some degree, abandoning that crisp connection between the right actions and the fact that they lead to flourishing. In art, choice is given a metaphysical impact and choosing to show wrong acts leading to success is like putting a wart on the face of a beautiful women's portrait - it's unjust. It isn't an accident that Rand was fierce in her judgments of right and wrong, while making her entire life about a passionate portrayal of man as he ought to be, and his resulting success.

Post 47

Thursday, December 6, 2012 - 5:33am

Fred,

That rang true when you said it.

Steve,

Great points. One of the most disturbing things I discovered while looking at Game Theory research is that you can have a great capitalist system evolve without using intelligence. Basically, you start with a computer program that has "agents" interact with each other and very slowly "learn" from the interaction. Eventually, you get laissez-faire capitalism (you get cooperation in production and trade, with very little defection).

That's disturbing to me because I thought you had to be smart to know that capitalism is good. Here is an easy example:

One group, the Polly Pushovers, never punishes bad behavior -- reward everyone.
One group, the Tit-for-Tat Toms, punishes bad behavior and rewards good behavior.
One group, the Defector Dans, always perform bad behavior (defect in trade agreements).

Just starting with a mix of these 3 groups, you can predict what will happen over time if you allow them to interact and reproduce.

Ed

Post 48

Thursday, December 6, 2012 - 10:46am

Ed, Re: disturbing... its disturbing because you only thought humans do it? Or its disturbing because despite how obvious it is that capitalism is "better", that people still chose to steal/tax/regulate? Clearly some people do not care about your success.

Are you able to run a test where one group A is capitalist within its own group, but steals from group B and retaliates against group B attacks... and group B is capitalist within its own group, gets retaliated against when it attacks group A, and allows group A to steal from them without a retaliating?

Does such a relationship as I described in the above paragraph exist today between subgroups of humans?

Post 49

Thursday, December 6, 2012 - 10:59am

Ed,

You wrote:

Basically, you start with a computer program that has "agents" interact with each other and very slowly "learn" from the interaction. Eventually, you get laissez-faire capitalism (you get cooperation in production and trade, with very little defection).

That's disturbing to me because I thought you had to be smart to know that capitalism is good.

Don't worry. Intelligence is all over the place in this example.

The programmers put their assumptions of what is better (value judgements) into the code - i.e., "Reward," "good behavior," etc. The 'agents' were given the 'intelligence' to apply their 'values' to transactional situations.
-------------

I think that all that is happening here is we are seeing that "good" as a moral value (i.e., Capitalism permits the greatest freedom of action), is also "good" as the most effective or practical system (i.e., results in the most rewards). Conclusion: That which is morally good is also practical, and visa versa.

I think this can create a slightly startling sensation in us because we were brought up in the culture dominated by moral values that ran counter to what is practical, or personally enjoyable. And the surprise that what arises out of self-interest would also be good for the collective.

I think you are surprising yourself by looking at some conclusions you already have... conclusions from Objectivism/Austrian Economics but now being seen through this new-to-you window of game theory... and it makes the conclusions seem sort of new and that contrast to the the old culture of altruism and economic collectivism gets experienced anew.

Post 50

Thursday, December 6, 2012 - 11:10am

Dean,

You wrote:

...where one group A is capitalist within its own group, but steals from group B...

I believe that represents a fallacy. Capitalism is description of a political/economic system that exists within a nation state. If one group is legally able to steal from another, then to that extent, the entire system is NOT capitalist. You have to examine the traits of the whole system to properly categorize the whole system. For example, we are not a full capitalist state because we have welfare laws and corporate cronyism and regulations that violate economic freedoms.

Post 51

Thursday, December 6, 2012 - 12:29pm

Difficult to figure out what the questions in the poll mean. It assumed that everyone would, under some circumstances, act so as to punish a criminal, thus ignoring the existence of total pacifists. I doubt Buddha or Jesus would have felt any of these answers were adequate.

Given the many hidden assumptions imbedded in this poll, I answered "even if I was the only one to do it" based on this logic:

1) In the absence of government police, I would prefer to outsource much of justice dispensing to the private protection agency I would hire.

2) I don't feel it is my responsibility to take care of the rights violations inflicted upon strangers. Let them hire their own protection agency.

3) Sometimes the best person to dispense justice is yourself, or to prevent violations of your rights in the first place. If someone breaks into your house intending to rape and kill your wife or daughters, you need a shotgun, not a protective agency to show up after the fact and draw chalk lines around the corpses.

Post 52

Thursday, December 6, 2012 - 6:02pm

Dean,

Steve, in post 49, hit the nail on the head regarding how I view this stuff.

Are you able to run a test where one group A is capitalist within its own group, but steals from group B and retaliates against group B attacks... and group B is capitalist within its own group, gets retaliated against when it attacks group A, and allows group A to steal from them without a retaliating?

Does such a relationship as I described in the above paragraph exist today between subgroups of humans?

Again, I would defer to what Steve said but I'll address the last question. Politics is such an underhanded, Alice-in-Wonderland enterprise. Capitalists don't fight because it doesn't pay. The reason that it appears as if capitalists fight is because crony capitalists (i.e., non-capitalists) have the public tricked into believing lies. Take Warren Buffett. If you took a poll, then almost everyone would answer that he's a capitalist. But you have to be careful about calling someone a capitalist in Rand's sense of the term. In Buffett's case, he gets special deals from the current administrators of government and then goes on a return-the-favor campaign for them -- involving distorted nonsense about tax rates for the really rich.

Now, get this. Buffett says the super-rich should pay really high income tax rates, but what is the real story? The real story is that people as rich as him either don't earn traditional income, or whatever traditional income they earn can be dealt with in tax-avoiding ways. So the real story is that if top marginal tax rates were 39% -- or even if they were 99%! -- then Buffett would still be fine. So, knowing that high income tax rates don't hurt Buffett, we can ask:

What effect do they actually have in reality (who do they hurt)?

They hurt small businesses. In fact, high income tax rates are de facto "protectionism" for Big Business. This is like the story about established newspapers pulling up the ladder (to the top) in Capitalism: The Unknown Ideal. If top income tax rates are high, then small businesses who cannot afford to divert their profits around those taxes will be held down.

Small businesses will no longer be able to uproot Big Business.

There will be no more "creative destruction" (Schumpeter's description of capitalism). Instead of capitalism, there will be a few Big Businesses in bed with the government and working to increase the taxes and the multiply the regulations in the world. This is because they already have the excess funds to adapt to increased taxes and regulation -- but upstarts won't already have the same excess of funds. They purposefully "unlevel" the playing field. These people are they same kinds of people that get us into wars -- and again, lying to the public about what the wars are really about.

They call themselves capitalists. If you want to find the devil, then look first in the church. The very same people that tell you they want these high tax rates and tons of regulations in order to help the "little guy" are the ones profiteering off of the closed-off, monopolized markets created by nothing other than those very same high tax rates and those very same tons of regulations. These people claim to be the champion of the little guy, all the while holding him down in the depths of poverty and back-breaking toil.

There is a very good reason why Chinese politicians tend to retire as billionaires (and that something like 40 out of the top 100 richest people in the world are nothing other than non-value-producing Chinese politicians).

Ed

Post 53

Thursday, December 6, 2012 - 6:29pm

And Dean, here are a few lines from the preface of Herbert Gintis' book: Game Theory Evolving:

Evolutionary game theory is about the emergence, transformation, diffusion, and stabilization of forms of behavior.

Evolutionary game theory deploys the Darwinian notion that good strategies diffuse across populations of players rather than being learned by rational agents.

... we provide agent-based computer simulations of games, showing that really stupid critters can evolve toward the solution of games previously thought to require "rationality" and high-level information processing capacity.

... epistemic game theory, ... which gives us a language and a set of analytical tools for modeling an aspect of social reality with perfect clarity.

The book is very technical in detail, but so are you -- so I recommend it to you. I think that you would actually devour the information inside of it. I wish it had more graphs, though. I'll say more about it later.

Ed

p.s. I'm afraid to buy Gintis' magnum opus -- The Bounds of Reason -- because I fear that I will find fault in it, however small, and then speak out about it; thereby preventing my chances of ever working with him on something which I currently view as being potentially world-changing. If you met Midas in person and had the chance to befriend him, would you ever want to insult him (thereby losing your chance of obtaining an unprecedented amount of gold)? Now, you can say: "Ed, just simply refrain from finding fault with Gintis. That way you will maximize your chances of being able to work with him some day!" My retort is Aristotelean: The truth is more important than such an otherwise-valuable "friendship."

The best scenario, however, would be if he contacted me and said: "You know, Ed, you're not nearly as smart as I am, but you have a gift of seeing how things connect together. I'm not mad that you corrected me about using defection in the Prisoner's Dilemma game as a model of market competition in my book: Game Theory Evolving. Everybody makes mistakes, you know. I'm actually glad you corrected me on that. Hey Ed, let's work together."

:-)

Post 54

Thursday, December 6, 2012 - 7:20pm

Above I mentioned 3 groups of agents interacting:

Polly Pushovers
Tit-for-Tat Toms
Defector Dans

Gintis gave an example that is close to this '3-groups-interacting' scenario in a version of the Hawk-Dove game, a version he calls Hawk-Dove-Bourgeois. Let's say that everyone is simultaneously homesteading land ...

p. 48

The hawk (H) strategy is to escalate battle until injured or your opponent retreats. The dove (D) strategy is to display hostility but retreat before sustaining injury if your opponent escalates.

p. 153

The hawk-dove game (3.10) is an inefficient way to allocate property rights, especially if the cost of injury w is not much larger than the value v of the property.

... whenever two players have a property dispute, one of them must have gotten there first, and the other must come later. We may call the former the "incumbent" and the latter the "contester." The new strategy, B, called the "bourgeois" strategy, always plays hawk when incumbent and dove when contester.

Gintis then goes on to show how it is that the payoff to bourgeois against bourgeois is greater than the payoff to hawk against bourgeois and also is greater than the payoff to dove against bourgeois. This is kind of a test for the evolutionary or economic viability of something:

What would happen if I deal with someone who is exactly like me?

In this case, the bourgeois is the character who best exemplifies a rights-respecting capitalist -- if he got there first, he'll actually fight you for that property; but if he didn't, he won't. If you got there first, he will not fight you for it. What it shows is that capitalists work really very well together, better than do pushovers and thugs (i.e., better than altruists). If a pushover or a thug meets someone just like them on the street for some kind of value exchange, they do not acquire the kind of traded-up value that a capitalist gets when meeting another capitalist.

Ed

Post 55

Friday, December 7, 2012 - 5:01am

Ed:

They call themselves capitalists. If you want to find the devil, then look first in the church. The very same people that tell you they want these high tax rates and tons of regulations in order to help the "little guy" are the ones profiteering off of the closed-off, monopolized markets created by nothing other than those very same high tax rates and those very same tons of regulations. These people claim to be the champion of the little guy, all the while holding him down in the depths of poverty and back-breaking toil.

For an example of a smoking gun, there is IRS 1706, and the story of how it came about(IBM via bought and paid for Moynihan.) We've discussed that before here. In this America. An abominable, torturous justification, Graham-Rudmann turned on its ear: IBM's special tax treatment of overseas operations 'paid for' by a bit of tyranny aimed at self-employed engineers and software professionals, a law whose intent is to keep these folks tethered to the local dead wood. It's good when you can 'pay for' a law that benefits IBM with a law that benefits IBM. A twoFer.

That's incredibly smart. It just isn't capitalism.

regards,
Fred

Post 56

Friday, December 7, 2012 - 11:14am

Fred,

Another smoke-n-mirrors bait-n-switch by anti-man statists is this garbage about European austerity. If you ask Rob Reich -- funny, I just noticed how both of his names point to the Taker Syndrome -- if you ask Robert Reich about European austerity, he'll tell you it failed. What is austerity? It is belt-tightening, it's when you underlive your budget. What is austerity when applied to a whole country? It is shrinkage of the government in relation to the economy.

What failed again?

When anti-man statists like Rob Reich say austerity failed, they want you to believe that shrinking government will fail. But that's not the "austerity" performed by countries such as Italy. Instead of shrinking government, they grew government -- and merely "referred" to the growth as "austerity." As far as I can tell, all they ever did was raise taxes there. Not one dime of spending cuts were implemented.

There is even the possibility that they are spending more than before -- all while supposedly trying out "austerity."

It is high taxes that failed in Italy, not austerity. Tricksters like Reich try to cash-in on people not understanding the truth of the matter.

Ed

Post 57

Friday, December 7, 2012 - 3:36pm

Steve,

I believe that represents a fallacy. Capitalism is description of a political/economic system that exists within a nation state. If one group is legally able to steal from another, then to that extent, the entire system is NOT capitalist. You have to examine the traits of the whole system to properly categorize the whole system.

I was using "capitalism" to describe the relationships between people. If you really have an issue with the idea of describing a relationship between two individuals as "capitalistic" then call group A one "nation state" and call group B another "nation state". Walla, its not a "fallacy" anymore. Or I can describe it a different way:

Ed,

Are you able to run a test where members of group A interact Tit-for-Tat Toms with other group A members, but play Defector Dans when interacting with group B members. Group B members interact Tit-for-Tat Toms with other group B members, but play as Polly Pushovers with group A members?

Does such a relationship as I described in the above paragraph exist today between subgroups of humans?

Post 58

Friday, December 7, 2012 - 4:27pm

Dean,

I'll research game theory literature to see if that has ever been done before. What you are describing might be called "parochial capitalism" -- where those in the in-group are treated with respect, whereas those in the out-group are not. It may be a few days before I can confidently say whether such a study already exists or not. Where is Samuel Bowles or Herbert Gintis (my 2 favorite game theory researchers) when you need them?

:-)

Ed

Post 59

Friday, December 7, 2012 - 5:51pm