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Comment by lmm | Hacker News Reader

So how about we spend a few minutes trying to solve those problems rather than just throwing up our hands?

A sufficiently low-friction market already resolves a lot of the attribution issues, and we're already seeing that happen - as transaction costs shrink it becomes more and more practical to outsource more of a business. What if it reached the point where every company was <50 people - small enough that everyone knew everyone? Or even the point where everyone was a freelancer?

Externalities are of course a thing. But technology is improving to the point where we can track them and build them into the market. What if e.g. for every gram of pollution, you were charged in real time?

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  > *sufficiently low-friction market*

.. drives the rate of profit to zero at all points along the value chain, except where there is a monopoly or "rent" that can extract all the value. Example: San Francisco is a system for moving money from venture capital to real estate.

Exactly! 15 years ago, I was interested in economics. Since I originally studied physics, and I couldn't help noticing that some very simple examples are missing from the economic textbooks, namely how to build the macroeconomic model (aggregate functions) from the microeconomic ones.

One very simple example is to have two markets, one between producer and distributor and another between distributor and consumer. It turns out, there is no "rule" as to what the distributor's cut should be. Any margin is possible! It depends on relative negotiation positions of all parties.

So, to say (sufficiently) free markets are the answer is pretty much as no answer at all..

There is no rule because the answer becomes a (semi-)stable equilibrium of a system of feedback loops. Much of the cases where "sufficiently free markets" are used as an (invalid) answer happen when someone assumes a-priori what the equilibirum will be without considering the actual feedback loops in the system.

If the distributor's cut becomes too large then some producers will switch to become distributors, and vice versa.

That may happen, but it doesn't answer the question what the cut will be. I don't think there is an answer, since as GP pointed out, in free market, both margins should approach 0, so the ratio can be anything in that limit.

This also raises a question, if no one can make a profit, why should people want free market? Basically, free market promises subsistence wages to workers.

And what about consumers switching to distributors? That's the problem, you (wrongly) see economy as having two parts - one part producers, another part consumers (and so presumably you put distributors together with producers), but it really isn't like that, it's cyclic. You can't always hammer it into some supply-demand model (that's actually what makes the example interesting!).

> So how about we spend a few minutes trying to solve those problems rather than just throwing up our hands?

If I were to solve it, I would just give people democratic rights (pretty much everyone the same vote) to decide how economic resources are allocated. But lots (if not most) of people are against that idea.

Such solution has some obvious failure modes. For instance:

- People optimize locally, working for what they think is their best interest, even if on aggregate they lose. This is basic coordination problem; the very reason we form societies is because global optimization, often requiring to fogoe individual short-term gain, leads to better outcomes.

- The way people vote strongly depends on education they get; especially in our technological civilization, a lot of important issues (like energy) are beyond the understanding of majority of electorate. Democracy depends on educated populace.

- People are not independent actors wrt. to voting; in the age of free media, your votes will not reflect the "will of the many", but the will of most charismatic people on TV. Note that "the most charismatic" usually does not mean "the smartest".

Your three points comes down to the old `people are too dumb to vote' stance that every democratic movement had to fight through history.

And the `elite' optimizes locally as well, directly at the expense of the weakest.

I don't see the two statements being wrong, and definitely not mutually exclusive. With non-elected elite there's at least a chance that said elite has any actual qualifications instead of just being popular.

To be clear - I'm not that big on authoritarianism. I just don't see the value proposition of democracy being actually realized. Given the points I mentioned previously, we are still ruled by elite, except that it is constrained to choose their options only based on popularity, and unable to make hard decisions in areas that matter[0]. About the only thing democracy delivers as promised is bloodless government transition. Even the actual work in democractic country's administration is done by unelected officials.

At this point I've given up hoping that democratic governments will help solve climate change or energy problems. Private companies may be able to, but that's only because they're capable of behaving in inherently undemocratic ways, like releasing a new technology upon the world (nobody asked us to vote whether we want to have Facebook or not) or projecting the will of single individuals onto the society ("you will drive electric cars, whether you want it or not", said Musk, and proceed to burn as much money as it took to make electric cars compete with ICE ones[1]).

[0] - even if such decision wouldn't immediately piss of half of the electorate by itself, your political opponents will make sure it will render you practically unelectable

[1] - yes, there were electric cars before, but it took Tesla to basically force the market into accepting them as an option, and they did that on purpose

Lets not paint all Democracy with the 'US Federal Election' brush! My local county Attorney is very qualified and dedicated.

Please clone your Attorney and send the copy to my city. We need more honest, qualified and dedicated people. Alas, the whole system is tuned to actively eliminate such people and replace them with ones that can pander to the public. That's what I'm complaining about.

I understand completely. But many public officials are there because they believe strongly in something. At the local level at least, in Iowa at least, there is a lot of good-will and honest intent.

My sympathy to the system is probably inversely proportional to the scale at which it operates. I've also noticed that at local levels you tend to have greater amount of honest people who believe in something and are willing to push for the ideas based on merit. I think a big part of it is that they have a much bigger personal connection with the issues and the citizens. Such people have my utmost respect.

The first two objections, while they are real, are true for any agent and any decision system. Currently we live in era where people on Earth are most connected and most educated in human history. We could sure do better, but there are countries with democratic tradition that worked extremely well for much less educated and connected population.

The last objection I don't understand. The best way to know person preferences is just to ask them. If someone charismatic changes their preferences, so what? People change their preference based on other people all the time. As long as it is clearly their preference, we have to assume that it's in their interest.

The point of democracy is that people express their interest. There may be smarter people doing smarter decisions, but why should they make the decisions in the interest of someone else?

In any case, I think it's a good idea, often neglected, to structure society so that impact of any wrong decision at any level is minimized. Things like democratic decision-making, subsidiarity principle, reversibility of laws, non-discrimination, limited liability, social security, no capital punishment, time limited government contracts and free access to information all help.

RE first two points, true, though one could make an argument similar to the popular saying - "in any given situation there best thing is to make the right decision, the second best is to make a wrong one, and the worst thing is not to make any decision at all". In current democracies, the very important issues are so important, that they become turned into political games. No significant changes are being made because there's always a side that will fight tooth and nail to oppose it for purely political reasons. We can't get anywhere, because no single person (or group) has enough power (or incentive) to just make a call and go through with it.

As for the last objection - the typical voter's preference will be reflecting the political battles described above.

> People change their preference based on other people all the time. As long as it is clearly their preference, we have to assume that it's in their interest.

The problem is, it's not people changing their mind because they've heard someone reasonable saying something that makes sense. Politicians lie. Lie blatantly and lie on purpose. They hire the entire advertising machine, built out of professional liers and bullshiters, to convince people that their side of the debate is right by whatever means necessary. The average voter has to oppose people who are trained specialists in lying. I don't see how you could argue it's actually their preference.

But back to the primary reason. I could accept that start of affairs as fair, as long as we're dealing with things that don't matter much. But at this moment in time, we have several important problems - like supergerms, climate change and depletion of fossil fuels - that are going to destroy humanity in few decades, or at least pull us back into the medieval age. This shit matters. We need to make some hard choices and do some decisive actions soon if we want to have any kind of civilization surviving to the end of this century. And the democratic process is by design incapable of making those hard choices.

TL;DR: I don't want to "give power to the smarter" or a king or anything. I just want someone to actually do something about global warming and power issues before this stupid textbook-level coordination problem kills us all.

You're assuming representative democracy; there are other kinds of democratic systems. For example, the indecision could be easily resolved by referendum. Although I admit that general population tends to vote pretty conservatively in referendums.

> The average voter has to oppose people who are trained specialists in lying. I don't see how you could argue it's actually their preference.

People have to oppose these people in all areas of life. By having democracy, you actually distribute power more equally and using money to gain influence becomes more costly (its much cheaper to buy a senator than to influence people to vote certain way, and the latter poses much higher risk).

I don't think people are that stupid. I agree they can be temporarily confused by lack of information or fear, and that in representative democracy, there is a risk of the person lying. But that's a problem with that system, and there are many options how to prevent that. For example, in Switzerland, on some referendums, people can get a summary information with arguments for and against. And often the debate itself is very healthy.

It seems to me this argument is blaming the victim. In all other areas of life, we call out the liar. Whether or not you can tell it's a preference depends on the information you have. Say a girl decides to sleep with a ladies' man, and he breaks up with her afterwards. If she knew, maybe she wouldn't do it. But at the time, she expressed her preference.

> But at this moment in time, we have several important problems - like supergerms, climate change and depletion of fossil fuels

As far as I know (at least in U.S. and my country), based on various opinion polls and so on, general public is pretty positive towards solving these problems. It's the actual politicians who are reluctant to act.

> You're assuming representative democracy; there are other kinds of democratic systems.

True. I'm basing on I need to learn more about those other systems, I might revise some of my opinions, which are currently based on my experiences with the democracies I know - Poland where I live from direct experience, and few big Western countries from news and reading stuff.

> By having democracy, (...) using money to gain influence becomes more costly

That's a win only if the cost is too high to pay; as it seems to me now, the cost is higher but not limiting, so the result is that more of society's resources are redirected towards that. See: presidential campaigns, and how much money, energy, time and manpower is wasted on what amounts to a zero-sum game.

> I don't think people are that stupid. I agree they can be temporarily confused by lack of information or fear

Yeah, I don't want to imply people are idiots - but it seems to me that the state of lack of information (and sometimes fear) is a constant in our societies. From what I read about the history of democracy, its basic assumption is that of a population well-educated in the issues to be decided.

> and that in representative democracy, there is a risk of the person lying. But that's a problem with that system, and there are many options how to prevent that. For example, in Switzerland, on some referendums, people can get a summary information with arguments for and against. And often the debate itself is very healthy.

I wish to know more. I'd love if someone with direct experience of Swiss process could tell how good is it.

> In all other areas of life, we call out the liar.

That's actually my core problem with continued existence of advertising/marketing industry (I include political campaigning under the term 'marketing' here). In other areas of life we don't tolerate such nonsense. If your friend tried to pull on you the stuff that is standard practice in marketing, you'd punch him in the face. And yet we accept this from companies and politicians, and we even turned it into a respectable occupation choice.

> As far as I know (at least in U.S. and my country), based on various opinion polls and so on, general public is pretty positive towards solving these problems. It's the actual politicians who are reluctant to act.

The issue I see here, and why I blame the democratic process for that, is that people may be "pretty positive towards solving these problems" as long as it doesn't require any sacrifices from them. Start talking about CO₂ emissions tax and suddenly you'll be violently opposed by people. Point out we need a new nuclear power plant, and the NIMBYsts wake up. This feeds back into the democratic process and so (that's why I think) politicians stay away from solutions. At this point we really need someone to force some solutions on people, whether they like it or not, and I don't see how (representative) democracy can help with that.

> I need to learn more about those other systems, I might revise some of my opinions

I really recommend looking at Switzerland; U.S. on state level also has lot of direct democracy and similar tradition.

> the cost is higher but not limiting, so the result is that more of society's resources are redirected towards that

It's not a failure of democracy, it's absence of it. Some people have more power due to economic inequality.

> basic assumption is that of a population well-educated in the issues to be decided

This is not really an issue. Switzerland and places in U.S. (not to mention Iceland) have more than 100 year tradition in direct democracy, do you think back then the population was better educated? And the sky didn't fall, in fact these places are some of the most advanced in the world.

> And yet we accept this from companies and politicians, and we even turned it into a respectable occupation choice

I agree.

> people may be "pretty positive towards solving these problems" as long as it doesn't require any sacrifices from them

In practice, not always true. There have been some examples in direct democracies where people voted for e.g. higher taxes. As long as it is fair, people can actually accept it quite well. But it requires lot of trust in the society, which Eastern Europe countries, for instance, may not have. Good democracy actually produces this trust.

> At this point we really need someone to force some solutions on people

The problem is once you start forcing solutions onto people, you have opened a really bad can of worms. Lot of dictators had good intentions in the beginning, but somehow their "forcing of solutions" got a little out of hands.

You miss the key: a huge amount of my value is generated by tools created by our ancestors -- who deserves credit for those tools? Me? Those dead people's children?

You presumably bought the tools at a fair price that reflects how much value they add for you.

I actually didn't.. They are just there! I got them for free (as a part of my training) and they have immense value.

You argument hints at something called labor theory of value, which quickly leads to contradictions, once you include time and technological progress into your models (such as people should get more for labor even if they are doing less of it).

Honestly, I think if people are honest to themselves, they will see that there is plenty of stuff providing value for free (a simple example - tree that grows apples). Then asking to be paid just for your merit is obviously a losing proposition.

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