incentives – Page 2 – The Rational Argumentator

The Businessman as Radical Revolutionary in Zoltan Istvan’s “The Transhumanist Wager” – Article by G. Stolyarov II

December 15, 2014 Gennady Stolyarov II Comments 0 Comment

G. Stolyarov II

December 15, 2014

******************************

Zoltan Istvan’s 2013 science-fiction novel The Transhumanist Wager portrays how a combination of business enterprises, united to achieve a philosophical goal, can transform the world. The novel’s protagonist, Jethro Knights, develops a wide-ranging business enterprise that simultaneously operates as its own country – Transhumania – and withstands a military offensive from the combined navies of the world powers. Transhumania then serves as the platform from which Jethro’s vision of transhumanism – the transcendence of age-old human limitations through science and technology – can spread throughout the world and become universally adopted.

The Transhumanist Wager takes place in a near-future world where economic malaise, resurgent Luddite sentiments, and labyrinthine political barriers to technological innovation have resulted in a climate of stagnation. Jethro Knights endeavors to change all this, knowing that the status quo will eventually result in his own death. He takes a highly principled, completely uncompromising, and often militant approach toward achieving his goal: indefinite life extension through science and technology. Jethro endeavors to avoid death through any rational means possible, while simultaneously striving to become the “omnipotender” – “an unyielding individual whose central aim is to contend for as much power and advancement as he could achieve, and whose immediate goal is to transcend his human biological limitations in order to reach a permanent sentience” (Istvan 2013, 33). As a college student, Jethro formulates his philosophical system of Teleological Egocentric Functionalism (TEF), which he later explains to an audience of fellow transhumanists:

Teleological—because it is every advanced individual’s inherent design and desired destiny to evolve. Egocentric—because it is based on each of our selfish individual desires, which are of the foremost importance. Functional—because it will only be rational and consequential. And not fair, nor humanitarian, nor altruistic, nor muddled with unreachable mammalian niceties. The philosophy is essential because it doesn’t allow for passive failure. It doesn’t allow transhumanists to live in delusion while our precious years of existence pass. (Istvan 2013, 84)

Jethro circumnavigates the world on his sailboat and works as a journalist in conflict-ridden areas, with the aim of learning as much as possible about the world. Upon returning to the United States, Jethro founds the activist organization Transhuman Citizen, which aims to promote emerging technologies – particularly biotechnological research into indefinite life extension. He must also to foil the increasingly violent and destructive attacks against cutting-edge scientists and research centers by Christian fundamentalist terrorists spearheaded by the Neo-Luddite Reverend Belinas. The Redeem Church, headed by Belinas, has no qualms about hiring thugs to brutally murder transhumanist scientists. At the same time, Belinas maintains a façade of public respectability and functions as a high-profile “moral leader.” He influences public opinion and prominent politicians – including Jethro’s former college classmate Senator Gregory Michaelson – to despise radical technological progress and crack down on transhumanist research through prohibitions and force. After Jethro’s wife and unborn child are murdered by Belinas’s henchmen and Transhuman Citizen rapidly loses support due to Belinas’s political and public-relations war, Jethro’s dream seems to be on the verge of total collapse. Jethro’s only opportunity for a turnaround arrives in the form of the Russian oil tycoon Frederich Vilimich.

Vilimich is not the ideal rights-respecting free-market capitalist; his rise to power during the chaotic post-Soviet era is marred by the suspicious death of a general with whom he illegally seized a large number of bankrupt oil companies. Vilimich has high business acumen and recognizes the benefits of using the best technology available: “Against the opinion of many people—including the general—Vilimich used every ruble of the company’s booming earnings to acquire the most technologically advanced oil extraction equipment available. Within a few years, the company quadrupled its oil output and became a dominant player in the worldwide energy field” (Istvan 2013, 174). Vilimich can be capricious and tyrannical but understands economic incentives and is ruthless about harnessing them to fulfill his objectives:

He was loathed by his own people for never giving one ruble to charity. He treated his workers poorly compared with other large oil companies, but paid them better. Governments feared him for his habit of impetuously shutting down his oil pipeline for days at a time, thus creating worldwide spikes in energy prices. Some said he did it just to amuse himself; others insisted he just wanted higher oil prices; still others grumbled that he just wanted to remind people who was in control. (Istvan 2013, 175).

Vilimich is a tragic figure; all joy had left his life when his wife and son were murdered by terrorists two decades earlier. Vilimich dedicates his time and his vast oil fortune to repeated, unsuccessful attempts to bring them back from the dead. Vilimich’s redeeming quality is his understanding and embrace of the necessity of radical technological progress: “Vilimich was a believer in change via technology. It had always been a natural instinct for him” (Istvan 2013, 176). Upon learning of the concerted worldwide crackdown against Transhuman Citizen, Vilimich’s reaction is to sympathize with Jethro: “The world was afraid of evolution, Vilimich told himself, shaking his head in frustration. His grueling but successful battle against colon cancer reminded him that life was not open-ended” (Istvan 2013, 175). Vilimich realizes that some of his previous, mystical attempts to revive his family could not possibly have worked; “however, advanced scientific technology, hard work, and wits most certainly could. They were the exact same things he had used to create his sprawling oil empire.” (Istvan 2013, 176).

Vilimich initially approaches Jethro with the aim to redirect Jethro’s quest for biological immortality toward bringing back the dead instead. He tells Jethro, “I can give you billions of dollars for exactly that mission. We can build a nation of scientists to accomplish it. It may not follow the pure transhuman and immortality quests you wanted, but it’s close enough” (Istvan 2013, 179). Not even Vilimich’s billions, however, can redirect Jethro from his overarching plan for transforming the world in the pursuit of indefinite life extension, as outlined in his TEF Manifesto. Jethro points out that biological life extension for the living is a far more realistic and proximately achievable goal than reviving the dead. He replies to Vilimich, “What you want is just not even on the transhuman timeline right now. And it would be irresponsible to dedicate more than only a fraction of transhuman resources to it at a moment when the real goals of the movement are, literally, on the verge of collapse; when the longevity of our own lifespans are so immediately threatened” (Istvan 2013, 180). A clash of personalities ensues. Jethro attempts to reason with Vilimich: “But your money could be used for more practical and possible goals, for near-term successes like your own immediate health and longevity. Then, at some later point, you could consider tackling the monumental task of bringing back the dead. What you want is not even reasonable just yet” (Istvan 2013, 180). To this Vilimich responds, “I didn’t get to be so successful because I was always reasonable” (Istvan 2013, 180). Both Vilimich and Jethro have lost their families to violence. However, unlike Jethro, who seeks to base his decisions on an overarching “machine-like” rationality, Vilimich is driven by his passionate obsession with bringing back his loved ones above all. Both men are stubborn and unyielding, and their initial meeting ends in an impasse.

However, four days later, Vilimich becomes swayed to give Jethro 10 billion dollars – half of Vilimich’s stake in Calico Oil – unconditionally. Vilimich sees much of himself in Jethro’s intransigence and single-mindedness, and his reversal makes all the difference for Jethro. Immediately, Jethro undertakes an elaborate scheme to conceal the money from the world’s governments, which would have expropriated it:

The next morning, in a rented private jet, Jethro flew around the world to Vanuatu, Singapore, Lebanon, Panama, Maldives, Djibouti, and Switzerland. He spent two weeks establishing bank accounts for various pop-up companies and corporations in out-of-the-way places, acting as the sole manager. He made up odd business names like Antidy Enterprises, Amerigon LLC, and Dumcros Inc. The money was wired in small, varying portions to all his hidden accounts belonging to the companies so it could never be frozen, tracked, or calculated by the NFSA [National Future Security Agency – a US federal agency established to crack down on transhumanist research] or anyone else on the planet. Even the Phoenix Bank president wasn’t aware of the account names or numbers, as third-party escrow accounts were used to hide and deflect all traceable sources. Jethro sent secondary codes and addresses to Mr. Vilimich, as the only other person capable of locating the money. But even he wasn’t allowed to know everything or control anything. On every account, there was a different company, a different address, a different identification number, a different mission statement. The ten billion dollars was split in a hundred different ways, all with digital tentacles that led only to Jethro Knights.

When the money was safe, he emailed Vilimich:

Dear Mr. Vilimich,

Thank you. The money is safe and being put to good use for the right reasons. I’ll be in touch as the transhuman mission progresses. Furthermore, you have my pledge that I will not forget that picture in your pocket.

Jethro Knights (Istvan 2013, 184)

What Jethro does with Vilimich’s money is nothing short of revolutionary. He endeavors to construct an independent community of cutting-edge scientists – Transhumania – on a floating platform – a seastead – in international waters, away from any country’s jurisdiction. Jethro fabricates the appearance of Transhuman Citizen’s continued decline, so as to trick the anti-transhumanist politicians and religious leaders into thinking that their victory against Jethro is imminent. In secret, Jethro reaches out to architect Rachel Burton, who pioneered many concepts for futuristic structures but is frustrated at the lack of interest in ambitious architectural projects due to the ongoing economic and technological stagnation in mainstream societies. Although the acerbic Burton is initially wary of Jethro, she becomes elated when he explains his vision to her:

“A floating city should shield transhumanists and the people I need away from those forces, giving me certain worldwide legal protections. The city will have to be built to house approximately 10,000 scientists and their immediate families. You’ll have to build up, because I want most of the city open for creating green spaces, jungles, and parks—so people like living there. Actually, so they love living there. These will be very picky people, some of the smartest in the world. They’ll want the best of everything, and they deserve it. I want them to be enthralled with every bit of their new home. I want the city big enough to have an airport for passenger jets, but small enough to comfortably ride a bike around in twenty minutes. I want to build the most modern metropolis on the planet, a utopia for transhumanists and their research.” (Istvan 2013, 192)

Unlike Vilimich, who pays his workers well but treats them poorly, Jethro is more focused on the quality of his employees’ lives. He understands the importance of employee motivation and creating a rewarding work environment and the opportunity for fulfilling personal lives outside of the workplace. Because Jethro must attract the best and brightest in order to have a hope of realizing his goal of living indefinitely, he needs to give these creative minds the best possible quality of life in order to entice them to come to Transhumania.

The platform and infrastructure for Transhumania – dominated by three towering skyscrapers – are assembled in Liberia at Burton’s recommendation. She outlines the geopolitical and economic considerations behind this choice: “West Africa is far off the radar screen for the rest of the world, so hopefully, there won’t be any troublesome interruptions by the media or the NFSA. Besides, Liberia has cheap labor, good weather, and lots of beach space to launch this puppy. It’s going to be at least ten soccer fields long, you know. We’re going to need lots and lots of space.” (Istvan 2013, 193) The construction effort is a massive project – requiring an “army of 15,000 workers” to labor for five months (Istvan 2013, 193). Jethro is a hands-on project manager who spends much time at the construction site and gets involved in the details of the plan for the seastead, as well as the means by which it is assembled. Jethro hires an international team of workers and, with the help of a multilingual foreman, sets up a work rotation to facilitate uninterrupted construction: “The work was endless: Twenty-four hours a day, there was a symphony of hammering, drilling, welding, grinding, and shouting. There was no break from the movement; sprawling bodies and their machines zipped tirelessly around the platform. The sheer creation process was a marvel to behold” (Istvan 2013, 195).

As Transhumania nears completion, Jethro travels throughout the world to clandestinely invite leading scientists to live there. Jethro becomes an expert presenter:

Jethro mastered his task of pitching the spectacular possibilities of the transhuman nation to his chosen candidates. His invitation to share in the rebirth of the transhuman mission and its life extension goals was compelling, exciting, and novel. Part of his presentation was done in 3D modeling on a holographic screen that shot out of his laptop computer. The state-of-the-art technology Burton’s company provided was impressively futuristic. (Istvan 2013, 196).

Jethro promises the candidate scientists that they will live in “The most modern buildings in the world. Every luxury and convenience you can imagine: spas, five-star restaurants, botanical gardens, farmers’ markets, an entertainment plaza, a world-class performing arts center. Then over there would be your offices and laboratories. No expense spared on your research equipment. The most sophisticated on the planet—I guarantee it.” (Istvan 2013, 196-197). Furthermore, Jethro emphasizes the tremendous freedom that scientists would have to pursue their research in the absence of political restraints: “Once scientists arrived there, he promised hassle-free lives from bossy governments and others that disapprove of transhumanist ways. The United Nations decreed three decades ago that rules and ownership 200 miles away from any land masses on the planet do not exist” (Istvan 2013, 197). Jethro grasps the essential harmony of interests between a well-run business and its employees, and therefore does not forget about providing generous pay and benefits, as well as creating a family-friendly living environment on Transhumania:

Additionally, he promised the scientists amazing salaries, stellar healthcare, and citizenship to Transhumania if people desired. For their children, there would be competitive schools, sports groups, piano tutors, French classes, tennis lessons, and swim teams. Dozens of varied restaurants and cafes would serve organic, sustainable, and cruelty-free foods. Coffee shops, juice bars, and drinking pubs would be ubiquitous. Movie theaters, art galleries, fitness centers, libraries, science and technology museums, and shopping centers would dot the city. Innovative designers would set up furniture and clothing outlets, including those that created products and garments with the latest intelligent materials capable of bio-monitoring the body. Whatever you wanted or needed, no matter how far-fetched; it would all be there. Jethro laid out the promise of an ideal, advanced society, the chance to belong to a country with everything going for it. (Istvan 2013, 197).

Jethro’s hiring policy is enlightened and meritocratic with regard to avoiding any prejudice based on attributes irrelevant to a person’s ability to get the job done. However, Jethro is also unforgiving of sub-optimal performance and ruthless about preventing or suppressing any possible behavior or institution that would get in the way of the fulfillment of his overarching vision for Transhumania. Moreover, Jethro – unlike a principled libertarian – does not brook significant ideological dissent in his country:

His hiring policy was simple. He didn’t give a damn where you came from, or what color you were, or with whom you had sex, or what gender you were, or if you had disabilities, or whether you were a criminal or not. But if you were hired for a position, and you failed to meet the goals assigned to you, or if you hindered other hires from meeting the goals assigned to them, then you would be fired and forced off Transhumania at once. There were no labor unions allowed. No workers’ compensation. No welfare. No freebies. In short, there was no pity, or even pretense at pity. There was just usefulness—or not. And if you didn’t like it, or didn’t agree with it, then you didn’t belong on Transhumania. Every contract of every scientist who wanted to join bore this severe language, as well as their consensual agreement to uphold the [tenets] of the TEF Manifesto and the core mission of transhumanism. (Istvan 2013, 197)

Because Jethro acts not only as the head of a vast business but also as the leader of a de facto independent city-state, it is not clear whether his behavior is consistent with respect for individual rights. On the one hand, every arrangement into which Transhumania’s residents enter is a freely chosen contract. On the other hand, they lose every association with Transhumania if they fail to adhere to Jethro’s demanding terms. They not merely lose their jobs, but they may no longer live or own property on Transhumania. Ultimately, Jethro facilitates comfortable lifestyles and offers abundant economic incentives not out of a devotion to individual freedom per se, but out of a recognition that a considerable allowance for economic liberty (though constrained by Jethro’s overarching purpose) would be the most conducive to rapid technological innovation and the eventual discovery of a means to reverse biological senescence and live indefinitely.

In spite of the severity of some of Jethro’s terms, the scientists who come to work on Transhumania know what they are getting into. Many come willingly after being inspired by a speech filled with Jethro’s characteristic militant, uncompromising rhetoric:

After so many years of being professionally stifled, intellectually muted, and socially ostracized, many transhuman entrepreneurs and scientists of the world cheered. While the speech was worded stronger than they themselves would have delivered, they respected Jethro Knights’ unwillingness to compromise the transhuman mission. They valued his promotion of the determined and accomplished individual. They applauded his hero’s journey to reverse the falling fortunes of the immortality quest. They especially appreciated the face-slapping of religion, human mediocrity, and overbearing government. Modern society was at a tipping point of such cowardly self-delusion and democratic self-sacrifice that someone needed to stand up and fight for what everyone wanted and admitted secretly to themselves: I want to reach a place of true power and security that can’t be snatched from me at the world’s whim. (Istvan 2013, 203)

Vilimich is pleased with his investment and sends Jethro a one-line note, “Thanks for punching the world for me” – to which Jethro replies, “Thanks for giving me muscles to do so” (Istvan 2013, 203). Through this exchange, Istvan illustrates the indispensability of these two visionary, intransigent men’s business partnership to making Transhumania possible.

Jethro raises the incentives for coming to Transhumania by offering each researcher “a tax-free million dollar signing bonus. It was more money than many had accumulated in decades of work. If they brought approved colleagues from their fields with them, an additional hundred thousand dollars was given. The main obligations of those who joined the transhuman nation included staying their full five-year term and reaching reasonable performance goals in their work” (Istvan 2013, 203). Jethro also creates the possibility of owning real estate: “One-, two-, three-, and four-bedroom residences were sold at enticing prices. Jethro made it cheaper to own than to rent, and most people opted to buy upon arriving. It replenished the cash Transhumania needed for actual research and city operations” (Istvan 2013, 204). Jethro understands that ownership of private property (limited though it may be by the requirement to adhere to the TEF Manifesto) gives the owner a powerful incentive to strive for the economic progress of the community where the property is located. By turning his employees into stakeholders of Transhumania, he not only enhances Transhumania’s revenue stream but also turns his scientists into more motivated, dedicated producers and innovators. Essentially, Jethro utilizes the principles of running a successful start-up technology firm and applies them to an entire small country: “Jethro ran the entire nation as if it were an aggressive, expanding technology company racing to bring an incredible invention to market. Every scientist had stock in its success, in the urgency of its mission. The result was a hiring domino effect. Soon, hundreds of scientists were showing up weekly to make tours of Transhumania and to sign contracts” (Istvan 2013, 204).

Jethro succeeds in cultivating a motivated, even inspired, workforce, with a prevailing “can-do” ethos:

Problems occurred, but they were quickly worked out for the most part. These were not people who complained about a broken hot shower or a bad Internet connection. These were professionals of the highest order, and they were all building the nation together. They fixed things themselves, went out of their way to improve operations, and helped one another when they could. These citizens were people of action, of doing—and doing it right. (Istvan 2013, 205).

Jethro is also able to vastly improve his scientists’ quality of life by restoring their sense that an amazing future can be created through their own work:

Many scientists commented they felt like graduate students again—when the world was something miraculous to believe in, when anything was still possible, when the next great discovery or the next great technological leap was perhaps just months away. […]At night, many of them looked at the stars from the windows of their skyscrapers and felt as if they had arrived on a remarkable new planet. They were never happier or more productive, or bound with a greater sense of drive. (Istvan 2013, 205).

In his discussion of the incentives and outcomes found in Transhumania, Istvan illustrates that the best-run businesses will not only generate economic value but will also inspire employees with the prospect of improving the human condition and creating a better world. Even though Jethro’s methods of sweeping aside all opposition are questionable, his goals of overcoming disease, lengthening lifespans without limit, and producing life-improving technological advances on all fronts are clearly some of the most admirable aims for any enterprise.

Five years after Transhumania’s founding, a major breakthrough enables the goal of indefinite lifespans to approach fruition. Jethro’s colleague, the scientist Preston Langmore announces that “The new cell-like substance that we’ve developed has so many applications. The manipulation of its DNA, controlled by our nanobots, will bring unprecedented changes to human life in the next decade, perhaps even in the next few years. We will begin our ascent to a truly immortal life form, full of all the benefits of what it means to be a transhuman being” (Istvan 2013, 222).

But the obstacles to the realization of Jethro’s dream do not cease once Transhumania becomes economically and scientifically successful. Jethro recognizes that anti-transhumanist organizations and governments will not simply allow Transhumanian research to continue in peace. Therefore, he devotes a third of Transhumania’s budget to defense. Transhumania’s vast revenues enable the construction of a missile shield, four megasonic airplanes, and ten combat robots, as well as the world’s most advanced cyber-warfare infrastructure. Shortly after Transhumania’s defensive capabilities are deployed, Belinas orchestrates Jethro’s kidnapping and torture. However, Jethro’s colleagues manage to locate the compound where he is held hostage, and one of the Transhumanian combat robots destroys Belinas’s thugs and kills Belinas himself. Jethro is freed, and Belinas’s crimes are broadly publicized, to the shame of the world’s governments. However, too many politicians and military leaders have become personally vested in attempting to seize Transhumania’s scientific and economic production for themselves, and it is too late to stop them from mobilizing their combined navies in an assault on Transhumania. Jethro’s hackers manage to cripple most of the invaders’ missile-guidance systems, causing the nations’ fleets to destroy one another. Only some extremely obsolete Russian missiles, whose use Jethro did not anticipate, manage to inflict moderate damage. Within twenty-four hours, the ingenuity of Transhumania’s scientists enables them to anticipate these missiles and effectively defend against them as well. By establishing the framework for the world’s freest and most innovative economy, Jethro enables the emergence of the ample resources needed to resist those who would stand in the way of his ambition.

Having defeated the combined might of the world’s navies, Jethro considers it impossible for Transhumania to peacefully coexist with the political status quo. Now that he possesses the technological means to easily outmaneuver and foil any nation’s military, Jethro is able to occupy much of the world after destroying all of the major religious and political monuments of traditional human societies. This is where Jethro crosses the line from justifiable self-defense of his society and into aggression against the rest of humanity – becoming an authoritarian world dictator in his quest to be the omnipotender. What distinguishes Jethro’s rule from historical totalitarianism is his instrumental use of free-market policies and incentives to facilitate technological and economic growth – but, again, only insofar as this serves his overarching goal of transforming the human condition along the path outlined in the TEF Manifesto. Jethro’s approach to the population of Earth is more utilitarian than based on any absolute, inviolate concept of individual rights; Jethro will recognize a semblance of personal freedom, but only for those who are useful to his broad ambition of turning humanity into a rapidly advancing, transhuman species. Those who cast their lot with Jethro during the early days of Transhumania are, on the other hand, rewarded with unprecedented power. Jethro urges his Transhumanian colleagues to renew their contracts and oversee vast swaths of the transhumanist-dominated Earth:

“You will have a choice, of course, to do as you desire and go where you like, and take the wealth you’ve earned. Nevertheless, in the best interest of the transhuman mission, I feel it expedient to appoint you as interim leaders of your birth nations and its major cities. Many of you will also oversee massive new science projects that only the resources of individual continents can foster. Others of you will be asked to found and build new universities and educational institutes, some of which will become the largest, most populated learning centers in the world.

“It is my hope that in your new appointments, you will seed and cultivate a surplus of amazing new transhuman projects to fruition for us all. As incentive to accept these new duties asked of you, your compensation packages will be staggering. I aim to make each and every one of you—as well as all other citizens on Transhumania—some of the richest and most powerful people in the world.” (Istvan 2013, 231)

In effect, Jethro takes the meritocracy he established in Transhumania and transposes it onto the wider world, turning the best and brightest into world leaders and fulfilling the age-old dream of some thinkers to put enlightened “philosopher-kings” in charge of human society. Jethro explicitly announces that the entire world will become Transhumania writ large:

“Earth, and human habitation of it, will be redesigned. It will no longer be many different countries with different cultures on different continents, but one committed transhuman alliance. It will be transformed into one global civilization bound to advancing science—one great transhuman planet. There will be no more sovereign nations, only Transhumania. Our transhuman goals will be the same as before; there will just be a lot more people working towards them, and a lot more resources to help us achieve success.” (Istvan 2013, 231)

With all of the Earth’s resources at his disposal, Jethro continues his quest to overcome disease and death, and by the novel’s end it appears that he is successful. Jethro is even able to be cryonically frozen and subsequently revived. He begins to venture into the possibility raised by Vilimich of eventually recovering deceased loved ones – but this quest remains unconcluded, and Istvan leaves the question of its feasibility as open-ended.

The Transhumanist Wager is a story about the clever use of a vast business structure and carefully crafted economic incentives to achieve the most revolutionary transformation of humankind conceivable: a revolution against contemporary societies and in favor of a global culture committed to rapid technological progress and the defeat of death above all. Jethro Knights is more of a utilitarian than a libertarian, and his choice of means eventually departs starkly from principled libertarianism, since a consistent respect for the individual rights of all people, including those whom one considers deeply hostile to one’s vision of progress, must ultimately clash with the desire to become an “omnipotender” and achieve as much power as possible. However, during the stage in which Jethro uses free-market policies and innovative business management as instruments toward the attainment of his vision, he is able to create an admirable and inspiring model for human progress.

Reference

Istvan, Zoltan. 2013. The Transhumanist Wager. San Bernardino: Futurity Imagine Media LLC.

Henry Hazlitt’s “Time Will Run Back”: Unleashing Business to Improve the Human Condition – Article by G. Stolyarov II

December 14, 2014 Gennady Stolyarov II Comments 0 Comment

G. Stolyarov II

December 13, 2014

******************************

The free-market economist, journalist, and editor Henry Hazlitt wrote his novel The Great Idea in 1951; the book was re-released under the title Time Will Run Back in 1966 in order to emphasize the rediscovery of the lost ideas of free-market capitalism by the novel’s protagonists. In addition to being the most rigorous work of fiction available for the teaching of economic ideas, Time Will Run Back highlights the role of business in taking a society from a condition of destitution, misery, and brutality to one of widespread prosperity, progress, and personal fulfillment.

The novel’s hero, Peter Uldanov, is the son of Stalenin, the dictator of Wonworld – a socialist dystopia that, in the year 2100 (282 A.M. – After Marx) spans the entire globe. Peter, raised away from politics by his mother, has not been indoctrinated into Wonworld’s ideology of totalitarian central planning of all aspects of its citizens’ lives. While completely new to politics, Peter is highly intelligent and an accomplished pianist and mathematician. Stalenin is dying and, out of paternal affection, seeks to engineer Peter’s succession. Peter is intellectually honest and is perplexed at the widespread poverty, famines, and shortages of Wonworld, as well as the constant climate of terror in which its subjects live – even though the regime claims to have “liberated” them from oppression by the capitalists of old. Peter attempts to introduce a series of reforms to allow criticism of the government and free elections, but his goal of achieving human liberation fails to take hold so long as the economy remains completely centrally planned. Peter’s nemesis is Stalenin’s second-in-command Bolshekov, who zealously defends the system of command and control while he is the main agent of torture, execution, and mismanagement within it. Peter enlists the assistance of Thomas Jefferson Adams – the third-highest official in Wonworld. Adams is disillusioned with the socialist system and gropes for alternatives but, like Peter, does not have the benefit of the lessons of history – since any works of literature, economics, philosophy, and political theory that disagreed with Marxism-Leninism were purged after Wonworld’s establishment a century earlier. Adams has become cynical by observing decades of attempted “reforms” within Wonworld, which tinkered with specific policies and plans but never challenged the overarching fact of total central planning. Peter, as an outsider with a fresh perspective, is more willing to overhaul the system’s most fundamental features. In the genuine search for greater prosperity and more humane treatment for Wonworld’s population, he begins to dismantle the socialist system piece by piece, at first without even recognizing that this is the effect of his actions.

Much of the novel depicts Peter and Adams groping toward a system of incrementally freer markets and greater individual liberty as they discuss possible reforms and attempt to understand both their direct and secondary, unintended consequences. As a result of their stepwise sequence of liberalizations, Peter and Adams inadvertently rediscover the old system of capitalism that Wonworld sought to stamp out. Adams often acts as a foil to Peter, proposing modified central plans or mixed-economy systems and attempting to posit the arguments made by inflationists and protectionists that emerge as milder obstacles to liberalization once private property, money, and decentralized economic planning by individuals are restored. Peter, however, is sufficiently wise to be able to perceive the secondary consequences of these proposals and to consistently espouse and act in favor of unhampered individual economic liberty.

Peter’s first successful reform is to permit people to exchange ration coupons which they were allocated for various specific commodities. Previously, each citizen of Wonworld received ration coupons that were limited to his personal use, and there was no way to realize any value from coupons for goods that the individual did not wish to personally consume. Initially, the citizens of Wonworld – terrorized for generations – are reluctant to exchange coupons for fear of being tricked into showing disloyalty, but after a few months of encouragement by Peter’s government, exchanges begin to occur:

At first individuals or families merely exchanged ration tickets with other persons or families living in the same room with them. Then in the same house. Then in the same neighborhood or factory. The rates at which the ration tickets exchanged was a matter of special bargaining in each case. They at first revealed no describable pattern whatever. In one tenement or barracks someone would be exchanging, say, one shirt coupon for five bread coupons; next door one shirt coupon might exchange for fifteen bread coupons.

But gradually a distinct pattern began to take form. The man who had exchanged his shirt coupon for five bread coupons would learn that he could have got fifteen bread coupons from someone else; the man who had given up fifteen bread coupons for one shirt coupon would learn that he might have got a shirt coupon for only five bread coupons. So people began to “shop around,” as they called it, each trying to get the highest bid for what he had to offer, each trying to get the greatest number of the coupons he desired for the coupons with which he was willing to part. The result, after a surprisingly short time, was that a uniform rate of exchange prevailed at any given moment between one type of coupon and another. (Hazlitt 1966, 103)

This reform inaugurates a price system, which facilitates rational planning by individuals and the effective allocation of goods to their most highly valued uses. It also leads to the emergence of markets where large volumes of exchanges can take place:

Then another striking thing happened. People had at first shopped around from house to house and street to street, trying to get the best rate in the kind of coupons they valued most for the kind of coupons they valued least. But soon people anxious to trade their coupons took to meeting regularly at certain places where they had previously discovered that they found the most other traders and bidders and could get the best rates in the quickest time. These meeting points, which people took to calling coupon “markets,” tended to become fewer and larger.

Two principal “markets” gradually established themselves in Moscow, one in Engels Square and the other at the foot of Death-to-Trotsky Street. Here large crowds, composed in turn of smaller groups, gathered on the sidewalk and spread into the street. They were made up of shouting and gesticulating persons, each holding up a coupon or sheet of coupons, each asking how much he was bid, say, in beer coupons for his shirt coupon, or offering his shirt coupon for, say, twelve beer coupons, and asking whether he had any takers. (Hazlitt 1966, 103-104)

As markets take hold, professional brokers emerge to handle large numbers of transactions for ordinary people in exchange for a percentage of ration coupons. The brokers quickly become adept at spotting and eliminating discrepancies among exchange rates between any two types of coupons:

Their competitive bids and offers continued until the relationships were ironed out, so that no further profit was possible for anybody as a result of a discrepancy. For the same reason, Peter found, the ratios of exchange in the market at Engels Square were never far out of line for more than a very short period with the ratios of exchange on Death-to-Trotsky Street; for a set of brokers were always running back and forth between the two markets, or sending messengers, and trying to profit from the least discrepancy that arose between the markets in the exchanges or quotations.

A special name—”arbitrage business”—sprang up for this sort of transaction. Its effect was to unify, or to universalize, price relationships among markets between which this freedom of arbitrage existed. (Hazlitt 1966, 105)

By allowing free exchange and permitting private entrepreneurs to take advantage of arbitrage opportunities, Peter enables a solution to emerge for Wonworld’s previously intractable problem of how to make the best use of scarce resources to fulfill as many human needs as possible. Peter recognizes that, even though the adjustments to prices that guide this process of rational resource allocation may appear automatic, they are in fact the effect of the actions of businesspeople seeking to earn a profit:

They took place solely because there was an alert group of people ready to seize upon the slightest discrepancy to make a transaction profitable to themselves. It was precisely the constant alertness and the constant initiative of these specialists that prevented any but the most minute and short-lived discrepancies from occurring. (Hazlitt 1966, 105)

Allowing free exchange of ration tickets leads to the spontaneous emergence of a monetary system as exchange rates begin to be quoted in terms of only a few leading types of coupons and eventually only in terms of cigarette coupons. These are superseded by packages of cigarettes themselves, which are in turn eventually replaced by gold.

The power struggle between Peter and Bolshekov escalates until Bolshekov engineers Stalenin’s assassination and seizes power in Wonworld. Peter and Adams flee to North America, assisted by their loyal Air Force, and establish their own country – Freeworld – where Peter’s economic reforms continue. Private ownership of land and capital goods is introduced, and large factories are privatized through the issuance of transferable shares to their workers, entitling them to receive a percentage of the profits from the enterprise. This greatly raises the incentives for production, responsibility, and prudent management of resources, as the newly empowered citizens inform Peter:

When he asked one of these new peasant-proprietors about his changed attitude, his explanation was simple: “The more work I and my family put into the farm, the better off we are. Our work is no longer offset by the laziness and carelessness of others. On the other hand, we can no longer sit back and hope that others will make up for what we fail to do. Everything depends on ourselves.”

Another farmer-owner put it this way: “The greater the crop we raise this year, the better off my family will be. But we also have to think of next year and the year after that, so we can’t take any risk of exhausting the soil. Every improvement I put into the farm, whether into the soil or into the buildings, is mine; I reap the fruits of it. But there is something that to me is more important still. I am building this for my family; I am increasing the security of my family; I will have something fine to turn over to my children after I am gone. I don’t know how I can explain it to you, Your Highness, but since my family has owned this land for itself, and feels secure in its right and title to stay here undisturbed, we feel not only that the farm belongs to us but that we belong to the farm. It is a part of us, and we are a part of it. It works for us, and we work for it. It produces for us, and we produce for it. You may think it is just a thing, but it seems as alive as any of us, and we love it and care for it as if it were a part of ourselves.” (Hazlitt 1966, 131)

The ability of individuals to own and run their business and earn a profit turns Freeworld into an economic powerhouse. Whereas Wonworld had, for a century, remained at the level of technological advancement approximately resembling that of 1918-1938, Freeworld becomes a haven for invention, the benefits of which disseminate rapidly to the population. Freeworld’s development appears to rapidly catch up to the condition of Hazlitt’s 1950s and 1960s America:

Constant and bewildering improvements were being made in household conveniences, in fluorescent lighting, in radiant heating, in air-conditioning, in vacuum cleaners, in clothes-washing machines, in dishwashing machines, in a thousand new structural and decorative materials. Great forward leaps were now taken in radio. There was talk of the development, in the laboratories, of the wireless transmission, not merely of music and voices, but of the living and moving image of objects and people.

Hundreds of new improvements, individually sometimes slight but cumulatively enormous, were being made in all sorts of transportation—in automobiles and railroads, in ships and airplanes. Inventors even talked of a new device to be called “jet-propulsion,” which would not only eliminate propellers but bring speeds rivaling that of sound itself.

In medicine, marvelous new anesthetics and new lifesaving drugs were constantly being discovered …

“In our new economic system, Adams,” said Peter, “we seem to have developed hundreds of thousands of individual centers of initiative which spontaneously co-operate with each other. We have made more material progress in the last four years, more industrial and scientific progress, than Wonworld made in a century.” (Hazlitt 1966, 153)

Instead of dreading work and needing to be terrorized into toil, the people begin to welcome and yearn for productive innovation:

Peter was struck by the startling change that had come over the whole spirit of the people. They worked with an energy and zeal infinitely greater than anything they had shown before. Peter now found people everywhere who regarded their work as a pleasure, a hobby, an exciting adventure. They were constantly thinking of improvements, devising new gadgets, dreaming of new processes that would cut costs of production, or new inventions and new products that consumers might want. (Hazlitt 1966, 139)

Peter explains to Adams that this “is precisely what economic liberty does. It releases human energy” (Hazlitt 1966, 139). Whereas, previously, only the Central Planning Board could decide how to direct resources,

Now everybody can plan. Now everybody is a center of planning. The worker can plan to shift to another employer or another line of production where the rewards are higher. He can plan to train himself in a new skill that pays better. And anybody who can save or borrow capital, or who can get the co-operation of other workers or offer them more attractive terms of employment than before, can start a new enterprise, make a new product, fill a new need. And this puts a quality of adventure and excitement into most people’s lives that was never there before. In Wonworld, in effect, only the Dictator himself could originate or initiate: everybody else simply carried out his orders. But in Freeworld anybody can originate or initiate. And because he can, he does. (Hazlitt 1966, 139)

Hazlitt frequently emphasizes the connection between the economic empowerment that freedom in business offers and the resulting surge in the quality of life and daily experience – a sense of responsibility, opportunity, self-direction, and the ability to chart one’s own future that permeates an economy where individuals are their own economic masters. While under central planning, no progress occurs unless initiated by the exceptionally rare enlightened rulers at the top, in a free market every businessman and worker can be an agent of human progress. Peter observes that a free-market system is meritocratic and tends to reward contributions to human well-being: “Everyone tends to be rewarded by the consumers to the extent that he has contributed to the needs of the consumers. In other words, free competition tends to give to labor what labor creates, to the owners of money and capital goods what their capital creates, and to enterprisers what their co-ordinating function creates” (Hazlitt 1966, 139). Adams responds that, to the extent a free-market system is able to achieve this, “no group would have the right to complain. You would have achieved an economic paradise” (Hazlitt 1966, 139). In a later discussion, Peter notes that the profits realized by businesspeople in a free-market system cannot be maintained on the whole except in a growing economy where consumers are increasingly better off; a free-market system cannot be called a profit system “in a declining or even in a stationary economy. It is, of course, a profit-seeking system” (Hazlitt 1966, 150), but the search for profit in a free economy will only succeed if human needs are fulfilled by the entrepreneur in the process.

Cultural and esthetic progress, too, are facilitated by the actions of Freeworld’s entrepreneurs. Hazlitt points out that “it was not merely in material progress that Freeworld achieved such amazing triumphs. No less striking were the new dignity and breadth that individual freedom brought about in the whole cultural and spiritual life of the Western Hemisphere” (Hazlitt 1966, 155). By contrast with Wonworld’s regime-monopolized “art” designed to praise the ruling ideology, the outpouring of creativity and variety in Freeworld “showed itself in novels and plays, in criticism and poetry, in painting, sculpture and architecture, in political and economic thinking, in most sciences, in philosophy and religion” (Hazlitt 1966, 155). Even though freedom in artistic production results in catering “to the presumed tastes of a mass public; and the bulk of what was produced was vulgar and cheap” (Hazlitt 1966, 155), there also emerges the opportunity for some artists to pursue lasting greatness:

What counted, as Peter quickly saw, was that each writer and each artist was now liberated from abject subservience to the state, to the political ruling clique. He was now free to select his own public. He did not need to cater to a nebulous “mass demand.” He could, if he wished, write, build, think, compose or paint for a definite cultivated group, or for his fellow specialists, or for a few kindred spirits wherever they could be found. And plays did have a way of finding their own special audience, and periodicals and books of finding their own special readers.

In contrast with the drabness, monotony and dreariness of Wonworld, the cultural and spiritual life of Freeworld was full of infinite variety, flavor, and adventure. (Hazlitt 1966, 155)

The intellectual honesty of Peter Uldanov enables him to transform the role of inadvertent world dictator to that of guardian of individual freedom. Freeworld overcomes Bolshekov’s Wonworld in a largely bloodless military campaign, due to Freeworld’s overwhelming superiority in production and the eagerness of Wonworld’s citizens to throw off Bolshekov’s totalitarian rule. At the novel’s end, Peter decides to hold free elections and subject his own position to the people’s approval. Running against the mixed-economy “Third Way” advocate Wang Ching-li, Peter narrowly wins the election and becomes the first President of Freeworld, even though his preference would be to devote his time to playing Mozart. Peter has the wisdom to unleash the productive forces of free enterprise and then to step aside, except in maintaining a system that punishes aggression, protects private property, and provides a reliable rule of law. The ending of Time Will Run Back is a happy one, but it is made possible by one key tremendously fortunate and unlikely circumstance – the ability of a fundamentally decent person to find himself in a position of vast political power, whose use he deliberately restrains and channels toward liberalization instead of perpetuating the abuses of the old system. Peter is, in effect, a “philosopher-king” who reasons his way toward free-market capitalism, unleashing private business to bring about massive human progress. Without such an individual, Wonworld could have lingered in misery, stagnation, and even decline for centuries. In our world, however, where the vestiges of free enterprise and the history of economic thought are much stronger, we do not need to rediscover sound economic principles from whole cloth, so perhaps existing societies could eventually muddle through toward freer economies, even though no philosopher-kings are to be found. Hazlitt gave us Peter Uldanov’s story to enable us to understand which reforms and institutions can improve the human condition, and which can only degrade it.

Reference

Hazlitt, Henry. [1966.] 2007. Time Will Run Back. New York: Arlington House. Ludwig von Mises Institute. Available at http://library.freecapitalists.org/books/Henry%20Hazlitt/Time%20Will%20Run%20Back.pdf. Accessed December 13, 2014.

For the Love of Money? – Article by Gary M. Galles

April 13, 2014 Gary M. Galles Comments 0 Comment

Gary M. Galles

April 13, 2014

Recommend this page.

******************************

It’s not unusual to hear market systems criticized for relying too much on money, as if this comes at the expense of the altruistic relationships that would otherwise prevail. Ever heard the phrase “only in it for the money”? It’s as if self-interest has a stink that can corrupt transactions that generate benefits for others, turning them into offenses. So this line of thinking suggests reliance on market systems based in self-ownership would be tantamount to creating a world where people only do things for money, and lose the ability to relate to one another on any other terms.

People Don’t Do Everything for Money

One need not go far to see the falsity of the claim that everything is done for money in market systems. My situation is but one example: I have a Ph.D. in economics from a top graduate program. It is true that, as a result, I have an above-average income. But I did not do it all for the money. One of my major fields was finance, but if all I cared about was money—as my wife reminds me when budgets are particularly tight—I would have gone into finance rather than academia and made far more. But I like university students. I think what I teach is important, and I value the ability to pass on whatever wisdom I have to offer. I like the freedom and time to pursue avenues of research I find interesting. I enjoy the ability to tell and write the truth as I see it (particularly since I see things differently from most) and I prefer a “steady job” to one with far more variability.

Every one of those things I value has cost me money. Yet I chose to be a professor (and would do it again). While it’s true that the need to support my family means that I must acquire sufficient resources, many things beyond just money go into choosing what I do for a living. And the same is true for everyone.

Ask any acquaintances of yours who they know that only does things for money. What would they say? They would certainly deny it about themselves. While they might apply this characterization to people they don’t know, beyond Dickens’s Ebenezer Scrooge and his comic book namesake, Scrooge McDuck, they would be unable to provide a single convincing example. If market critics performed that same experiment, they would recognize that they are condemning a mirage, not market arrangements.

Confusing Ends and Means

Beyond the fact that all of us forego some money we could earn for other things we value, the fact that every one of us gives up money we have earned for a vast multitude of goods, services, and causes also reveals that individuals don’t just do things for the money. Each of us willingly gives up money up to further many different purposes we care about. Money is not the ultimate end sought, but a means to a vast variety of possible ends. Mistakenly treating money as the end for which “people do everything” is fundamentally flawed—both for critics of the market and for the participants in it.

To do things for money is nothing more than to advance what we care about. In markets, we do for others as an indirect way of doing for ourselves. This logic even applies to Scrooge. His nephew Fred’s assertion that he doesn’t do any good with his wealth is false; he lends to willing borrowers at terms they find worth meeting, expanding the capital stock and the options of others.

That an end of our efforts is to benefit ourselves, in and of itself, merits neither calumny nor congratulations. Money’s role is that of an amoral servant that can help us advance whatever ends we ultimately pursue, while private property rights restrict that pursuit to purely voluntary arrangements. Moral criticism cannot attach to the universal desire to be able to better pursue our ends or to the requirement that we refrain from violating others’ rights, only to the ends we pursue.

To do things for money in order to achieve world domination could justify moral condemnation. But the problem is that your intended end will harm others, not the fact that you did some things for money, benefitting those you dealt with in that way, to do so. Using money to build a leprosarium, as Mother Teresa did with her Nobel Prize award, does not justify moral condemnation. Similarly, using money to support your family, to live up to agreements you made with others, and to try not to burden others is being responsible, not reprehensible. Further, there is nothing about voluntary arrangements that worsens the ends individuals choose. But by definition, they place limits on ends that require harming others to achieve them.

It is true that money represents purchasing power that can be directed to ends others object to. Money is nothing more than a particularly powerful tool, and all tools can be used to cause harm. Just as we shouldn’t have to forego the benefits of hammers because somebody could cause harm with one, there’s no reason to think society would be better off without money or the market arrangements it makes possible just because some people can use those things for harmful ends. And if the ends aren’t actually causing harm, then the objections over them come down to nothing more than disagreements about inherently subjective valuations. Enabling a small class of people to decide which of these can be pursued and which can’t makes everyone worse off.

Those who criticize people for doing everything for money also do a great deal for money themselves. How many campaigns have religious groups and non–profit organizations run to get more money? How much of government action is focused on getting more money? Why do the individuals involved not apply the same criticism to themselves? Because they say they will “do good” with it. But every individual doing things for money also intends to do good, as he or she sees it, with that money. And if we accept that people are owners of themselves, there is no obvious reason why another’s claims about what is “good” should trump any “good” that you hold dear, or provide for another in service through exchange.

Criticizing a Straw Man

Given that the charge that “people do everything for money” in market systems is both factually wrong and logically lame, why do some keep repeating it? It creates a straw man easier to argue against than reality, by misrepresenting alternatives at both the individual and societal level.

At the individual level, this assertion arises when people disagree about how to spend “public” resources (when we respect private property, this dispute disappears, because the owner has the right to do as he or she chooses with it, but cannot force others to go along with or allow it; “public” resources are obtained by force). The people who wish to spend other people’s confiscated resources in ways the original owners disagree with claim a laundry list of caring benefits their choice would provide, but foreclose similar consideration of the harms that would be caused to those they claim care only about money. That, in turn, is used to imply that the purportedly selfish person’s claims are unworthy of serious attention. (Something similar happens when politicians count “multiplier effects” where government money is spent, but ignore the symmetrical negative “multiplier effects” radiating from where the resources are taken.)

This general line draws support from a misquotation of the Bible. While more than one recent translation of 1 Tim 6:10 renders it “the love of money is a root of all sorts of evils,” the far less accurate King James Version rendered it, “the love of money is the root of all evil.” When one simply omits or forgets the first three words, it becomes something very different—“money is the root of all evil.” Portray those who disagree with your “caring” ends as simply loving money more than other people, and they lose every argument by default. Naturally, it’s a seductive strategy.

At the societal level, criticizing market systems as tainted by the love of money implies that an alternate system would escape that taint and therefore be morally preferable. By focusing attention only on an imaginary failing of market systems that would be avoided, it allows the implication of superiority to be made without having to demonstrate it. This is a version of the Nirvana fallacy.

By blaming monetary relationships for people’s failings, “reformers” imply that taking away markets’ monetary nexus will somehow make people better. But no system makes people angels; all systems must confront human flaws and failings. That means a far different question must be addressed: How well will a given system do with real, imperfect, mostly self-interested people? And it shouldn’t be necessary, but most political rhetoric makes a second question nearly as important: Does the given system assume that people are not imperfect and self-interested when they have power?

Given that the utopian alternatives offered always involve some sort of socialism or other form of tyranny, an affirmative case for them cannot be made. Only by holding the imaginary “sins” of market systems to impossible standards, while holding alternatives to no real standards except the imagination of self-proclaimed reformers, can that fact be dodged. But there’s nothing in history or theory that demonstrates that overwriting markets with expanded coercion makes people more likely to do things for others. As Anatole France noted, “Those who have given themselves the most concern about the happiness of peoples have made their neighbors very miserable.” And as economist Paul Heyne wrote, “Market systems do not produce heaven on earth. But attempts by governments to repress market systems have produced . . . something very close to hell on earth.

Money at the Margin

Money is not everything. But changes in the amounts of money to be earned or foregone as a result of decisions change our incentives at the many margins of choice we face, and so change our behavior. Such changes—money at the margin—are the primary means of adjusting our behavior in the direction of social coordination in a market system.

Changes in monetary incentives are how we adapt to changing circumstances, because whatever their ultimate ends, everyone cares about commanding more resources for those purposes they care about. It is how we rebalance arrangements when people’s plans get out of synch, which is inevitable in our complex, dynamic world. In such cases, changing money prices allow each individual to provide added incentives to all who might offer him assistance in achieving his ends, even if he doesn’t know them, doesn’t know how they would do so, and doesn’t think about their well–being (in fact, it applies even if he dislikes those he deals with, as long as the benefits of the arrangements exceed his perceived personal cost of doing so).

For instance, consider a retail gas station faced with lengthy lines of cars. That reflects a failure of social cooperation between the buyers and the seller. Those in line are revealing by their actions that they are willing to bear extra costs beyond the current price to get gas, but their costs of waiting do not provide benefits to the gas station owner. So the owner will convert those costs of waiting in line, which are going to waste, into higher prices (unless prevented by government price ceilings or antigouging directives) that benefit him. That use of money at the margin benefits both buyers and sellers and results in increased amounts of gasoline supplied to buyers.

Further, people can change their behavior in response to price changes in far more ways than “outsiders,” unfamiliar with all the local circumstances, realize. This makes prices, in turn, far more powerful than anyone recognizes.

Consider water prices. If water prices rose, your first thought might well be that you had no choice but to pay them. You might very well not know how many different responses people have already had to spikes (ranging from putting different plants in front yards to building sophisticated desalinization plants). Similarly, when airline fuel prices rose sharply, few recognized in advance the number of changes that airlines could make in response: using more fuel-efficient planes, changing route structures, reducing carry-on allowances, lightening seats, removing paint, and more.

If people recognized how powerful altered market prices are in inducing appropriate changes in behavior, demonstrated by a vast range of examples, they would recognize that the cost of abandoning money at the margin, which enables these responses by offering appropriate incentives to everyone who could be of assistance in addressing the problem faced, would enormously exceed any benefit.

Massive Improvements in Social Cooperation

If we could just presume that individuals know everyone and all the things they care about and the entirety of their circumstances, we could imagine a society more focused on doing things directly for others. But in any extensive society, there is no way people could acquire that much information about the large number of people involved. Instead, this would extend the impossible information problem that Hayek’s “The Use of Knowledge in Society” laid out in regard to central planners. You can care all you want, but that won’t give you the information you need. Beyond that insuperable problem, we would also have to assume that people cared far more about strangers than human history has evidenced.

Those information and other-interestedness requirements would necessarily dictate a very small society. But the costs of those limitations, if people recognized them, would be greater than virtually anyone would be willing to bear.

Without a broad society, the gains from cross-pollination of ideas and different ways of doing things would be hamstrung. The gains from comparative advantage (areas and groups focusing on what they do best, and trading with others doing the same thing) would similarly be sharply curtailed. A very small society would eliminate the incentive for large-scale specialization (requiring more extensive markets) and division of labor that makes our standard of living possible. Virtually every product that involves a large number of separate arrangements—such as producing cars or the gasoline to power them—would disappear, because the arrangements would be overwhelmed by the costs of making them without money as the balance-tipper. As Paul Heyne once put it,

The impersonal transactions that constitute the market system . . . have, over the course of a few centuries, enormously expanded our ability to provide [for] one another . . . while at the same time vastly extending our freedom both by offering us a multitude of options and by freeing us from arbitrary restrictions on our choice of life goals and on the means to further those goals. To reject impersonal transactions as unethical amounts to rejecting the foundation of modern life.

Conclusion

A pastiche of false premises leads many to reject out of hand what Hayek recognized as the “marvel” of market systems, which, if they had arisen from deliberate human design, “would have been acclaimed as one of the greatest triumphs of the human mind.” This is great for those who seek power over others—they have an endless supply of bogeymen to promise to fight.

But it’s a disaster for social coordination. The record of disasters inflicted on society demonstrates what follows when voluntary arrangements are replaced by someone else’s purportedly superior vision.

But it’s often forgotten. We must continue to make the case.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read. Send him mail.

This article was originally published by The Foundation for Economic Education.

The Paradox of Public Assistance – Article by David J. Hebert

January 27, 2014 David J. Hebert Comments 0 Comment

David J. Hebert

January 26, 2014

Recommend this page.

******************************

Let’s put ideology aside for a moment. One might not think it’s morally or politically justifiable to take from one person in order to help another. But for now, let’s ask another question: Does it help?

A lot of people see the existence of “poverty amid plenty,” wherein a few people have acquired a lot of wealth while the overwhelming majority struggles to make ends meet. The standard call is to provide some means of transferring those resources from the haves to the have-nots, either through a progressive tax policy or via some direct transfer program.

The problem with these policies is obviously not in their stated goals. Who could argue against the desire to help people? Nor is it, entirely, the coercive nature of redistribution. The real problem comes in the ability of welfare advocates to actually reduce poverty in an effective and long-lasting manner.

World Coyne

In his latest book, Doing Bad by Doing Good, Chris Coyne discusses problems with delivering effective humanitarian aid to other countries. Coyne identifies two potential problems: the planner’s problem and the incentive problem.

Briefly, the planner’s problem refers to the impossibility of people outside of a society actually to possess the information required to assist in fostering continued economic development. The incentive problem refers to the idea that the planners may face perverse incentives to go ahead and do something that the planner’s problem suggests is impossible to start with.

These points are all well and good, and should be well received at least by readers of this publication. But I think we can go further to urge that the problems Coyne identifies apply equally to issues related to domestic intervention.

Disconnect

The people who advocate most strongly for poverty relief programs are not, in fact, people who are poor. Rather, they are people who are typically either politicians seeking reelection or wealthy people who have some overwhelming desire to do something (usually they want to get other people to give them money to do something). They are not poor, but rather they simply do not like seeing poor people suffer and feel some desire to help. However, because they are not poor themselves, they have absolutely no idea what it is that poor people actually want.

Do they want shelter, clothing, and food? Yes. Do they want education, hygiene, and employment? Of course. But in what order, how much, and of what type? In a world of scarcity, the answers to these questions are of crucial importance if we are to find ways to help the most people as quickly and effectively as possible. And yet, the answers to these questions are wholly unknowable to outside observers.

Similarly, and perhaps more importantly, the incentive problem that the planners face also applies to domestic intervention. Politicians are people who, just like us, are primarily concerned with helping themselves. Given their position, what is in their interest might sometimes in be the interest of the “general public” (providing genuine public goods, the rule of law, etc.) but as James Buchanan and Gordon Tullock rightfully point out in their groundbreaking book, The Calculus of Consent, this is not guaranteed to be true at all times and in all cases. In fact, it may be the case that as a direct result of political involvement, incentives may direct their behavior in ways that enrich concentrated interests and impoverish poor people even more.

The War on Poverty

One answer is that the disparity might be much, much worse without government intervention—that is, the rich would be even richer and the poor would be even poorer. But another possibility is that the war on poverty directly contributes to a burgeoning underclass. How can we adjudicate between these positions?

On the surface, giving people aid seems like a straightforward proposition. We observe people suffering and then send resources to them to alleviate that suffering. On the other hand, as Buchanan pointed out in 1975, we run into problems in which the aid designed to alleviate poverty actually perpetuates it, creating dependency. This dependency, in turn, means that an increasing number of people derive the majority of their income from aid.

Paid to Be Poor

That some of the poor get most of their income from the government is not to argue that welfare recipients are lazy or don’t wish to work. Rather it suggests that the incentives they face may make them reluctant to accept employment opportunities at offered wages. We can think through this proposition logically: Suppose I offer you $240 per week in financial aid while you are between jobs. You would be receiving that money for zero hours of work per week. Being an honest person, you go out and look for work, eventually finding a job that pays you $8 per hour, or $320 per week working full time. Should you take that job?

On the one hand, you would receive more money by taking that job than you would by accepting the aid. However, economics teaches us the value in thinking at the margin. Doing so reveals that you would only receive an additional $120 per week in exchange for your 40 hours of work. In other words, taking into account your opportunity cost, you would really only be earning $3 per hour! While I certainly cannot speak for everyone, I feel reasonably confident in saying that few people in this country value their time at only $3 per hour. Realizing this, it is no puzzle why people receiving aid tend to stay unemployed for so long. The Cato Institute recently published a study offering evidence of the work versus welfare trade-off, which can be found here.

Politics and Perquisites

Now that we understand why domestic aid programs may lead to the perpetuation of poverty among the poor, we’re ready to discuss how they may lead to the enrichment of the already wealthy. When politicians decide to try to do something about an issue, one of the first things that they do is convene special hearings about the issue. Here, they call upon the testimonies of experts to try to figure out (1) what can be done and then (2) how best to do it.

The problem here is that the very people who are best equipped to detail how to solve the problem will typically explain that they themselves (or the people that they represent) are in fact the best to solve the problem and should be awarded the contract to solve the problem. We see this in government all the time. Take, for example, the company that was placed in charge of rebuilding Iraq after the US invasion in 2006: Halliburton, which was formerly run by then-Vice President Dick Cheney. Is it any wonder why this company was awarded these contracts? Kwame Kilpatrick, when he was mayor of Detroit, would routinely award offices and several perks to his friends and family members. Don’t forget about the legendary William Tweed, better known as “Boss Tweed.” The point here is not that all politicians are corrupt, but that knowing a politician who is in a position to award perks puts you in good stead to be the recipient of largesse. And, of course, if that’s true, you have very good reasons to create incentives for the politician to steer favors in your direction. It is the nature of politics.

What to Do

Evidencing the failure of domestic aid to help combat poverty, Abigail Hall has an excellent article, forthcoming in the Journal of Private Enterprise, detailing the failure of the Appalachian Regional Commission. This line of research might lead one to the sobering conclusion that there is little that can be done to alleviate the suffering of the poor. Nothing could be further from the truth, however.

We can take away a couple of things from this type of work:

1) The limits of what can be directly achieved through political means of alleviating poverty; and

2) The idea that the expansion of opportunity ultimately drives economic growth and helps the poor.

Rather than focusing on giving poor people the resources to live well, we should instead focus on removing the barriers that prevent people from discovering ways to be productive. Doing so would not only provide them with the tools to lift themselves out of poverty, but would also provide the basis of dignity.

David Hebert is a Ph.D. student in economics at George Mason University. His research interests include public finance and property rights.

This article was originally published by The Foundation for Economic Education.

That Cold-Hearted Discipline – Article by David J. Hebert

November 7, 2013 David J. Hebert Comments 0 Comment

David J. Hebert

November 6, 2013

Recommend this page.

******************************

But of all the duties of beneficence, those which gratitude recommends to us approach nearest to what is called a perfect and complete obligation. What friendship, what generosity, what charity, would prompt us to do with universal approbation, is still more free, and can still less be extorted by force than the duties of gratitude. —Adam Smith, The Theory of Moral Sentiments

A recent article by Wharton Professor Adam Grant has been popping up here and there, most recently in Psychology Today. Grant suggests that studying economics breeds greed, and he cites several studies to support his claim. The studies conclude economics professors give less money to charity than other professions, economics students are more likely to deceive others for personal gain, and people who study economics have less of a concern for fairness and tend to think that “greed” is okay.

To his credit, Grant does consider the alternative: that maybe economics actually attracts greedy people or that greedy people tend to thrive by studying economics. He dismisses these possibilities by noting that “there is evidence for selection . . . but this doesn’t rule out the possibility that studying economics pushes people further toward the selfish extreme.” He goes on to chide practitioners of the discipline for teaching self-interest in the classroom.

Finally, he concludes with four points that are meant to provide evidence of the social harm in studying economics, which can be summarized in two overarching points:

1) Economics justifies greedy behavior, and

2) Studying economics makes people less altruistic.

I want briefly to discuss these two points here.

Economics Justifies Greedy Behavior?

Studying economics, and specifically the role of incentives, teaches us that relying on altruism is a brave assumption that has but limited applicability. For example, among people we know, we can rely on a certain degree of altruism or benevolence. I know, for example, that my family and friends will be there for me not because I pay them to do so, but because they care about me. Similarly, they know I will be there for them. However, I don’t know the same thing about random people I encounter on the street.

And yet in order to enjoy the immense wealth that the division of labor affords us, society demands that we have interactions both with people we know well and people we do not know at all. These two distinct spheres of activity require two distinct forms of cooperation, which one might get from reading Adam Smith’s twin pillars of economics: The Theory of Moral Sentiments and The Wealth of Nations.

More tidily, perhaps, F. A. Hayek describes this situation in The Fatal Conceit by noting the difference between the macroeconomy and the microeconomy. Macro, in this context, refers to society as a whole, while micro refers to just the people to whom we are close. Hayek says that if we were to apply the same rules of the family unit to the macro, as would be the case if we were to allocate resources altruistically, we would destroy the macro. This is because there would be a complete lack of economic calculation, resources would be misallocated, and plans would fail to be coordinated (see these articles for more on economic calculation).

Hayek also notes that the reverse is true: If we were to apply the rules of the market to the family, we would destroy it as well. We don’t need prices and incomes at the dinner table to allocate the food. Even the most ardent defender of markets would agree that having prices and such as the means of allocating food at the dinner table would be wrong, just like paying your friends to help you move across town would be strange. (Beer and pizza don’t count.)

Instead, students of economics recognize not that greed is good, as the saying goes, but that greed can be transformed into the service of others given the proper institutional setting. That institutional setting, which has been thoroughly discussed elsewhere, is one that celebrates the role of property rights, prices, and profits (and losses) and recognizes their role in creating the incentives to properly husband resources, generates the information about the relative scarcities of various goods and transmits this information to consumers and producers in a quick and efficient manner, all of which provides a feedback mechanism to drive continued innovation.

Economics Makes People Less Altruistic?

Grant cites a 2005 article by Neil Gandal et. al. as concluding that “students who planned to study economics rated helpfulness, honesty, loyalty, and responsibility as just as important as students who were studying communications, political science, and sociology,” but that by the third year, economics students rated these values “significantly less important than first-year economics students.”

While the Gandal study does include such conclusions, it also includes much more. For example, economics students attribute less importance to fairness. Evidencing this, Gandal points out that, when questioned about the allocation of radio frequencies to different mobile-phone service providers, students who study economics are more likely to advocate selling the rights to the highest bidder while students of other disciplines are more likely to advocate for allocating the rights to “anybody who meets some minimal eligibility criteria.”

Students of economics do not advocate for property rights because we are greedy; we advocate for property rights because we understand and take seriously potential incentive problems in politics. The notion of minimal eligibility requirements may sound nice, for example, but problems may lie in who gets to draw that line, by what process that line gets drawn, and the incentives faced by the line-drawers. As Madison points out in Federalist 51, “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.”

Economics students know men are no angels. And as Nobel laureate James Buchanan points out, government officials are human beings, too, with their own hopes, dreams, and aspirations—and yes, forms of avarice. Supporting the allocation of resources to the highest bidder sidesteps the issues raised by these potential incentive problems. This means that the choice of how to allocate resources fundamentally comes down to a choice of institutions.

We can have a central authority establish guidelines by which anyone who wants can use the radio frequencies, or we can let the market decide. The former leads to a standard tragedy of the commons problem, whereby the radio frequency gets overused. In the case of cell phones, this means that the frequency would be crowded with multiple conversations simultaneously; imagine trying to shout to your friend across a crowded bar. The latter leads to the frequencies being allocated to the person who is best able to utilize them to serve the general population. So AT&T, for example, gets exclusive rights to a certain bandwidth and then tries to figure out how to best serve its customers. In this case, the customer gets to enjoy a clear phone call without the distraction of several other conversations in their ear simultaneously.

In any case, these are not examples of quelling altruism, but of keeping it in its place.

Less Greed, More Cooperation

Viewed in this light, economics does not so much teach greed but rather the beauty of cooperation. How else could we explain how a woolen coat gets made, how Paris gets fed, or how a pencil gets made? And if allocating, say, radio frequencies based on highest valued use makes people learn to discard fairness, well, how exactly is that a bad thing?

David Hebert is a Ph.D. student in economics at George Mason University. His research interests include public finance and property rights.

This article was originally published by The Foundation for Economic Education.

***

Editor’s Note by Gennady Stolyarov II: Mr. Hebert’s article is excellent in focusing on the true significance of economics and the need for private property rights. In one important respect, though, my position differs from his when it comes to the allocation of radio frequency to highest bidders such as AT&T and other entities exercising similar coercively granted monopoly and quasi-monopoly powers.

My position, arising out of similar libertarian principles, is that the allocation of radio frequencies to AT&T (and similar local/regional telecommunications monopolies) through the political process would not result in an economically optimal allocation, even if AT&T were the highest bidder. The reason for this is that AT&T’s very bidding ability arises out of (1) its decades-long history as the telephone monopoly in the United States and (2) the protections from competition that it enjoys in certain jurisdictions as a local or regional monopoly provider of certain services wrongly considered “natural monopolies” – such as high-speed cable services. In a pure free-market system, there would likely need to be some sort of allocation process for radio frequencies, so long as the use of radio frequencies by some parties has the physical ability to interfere with the use of the same frequencies by other parties. However, the outcome of such a free-market allocation process would differ considerably from the outcome of a bidding process in today’s status quo, conditioned by decades of deleterious path-dependency arising out of the privileges granted to AT&T and similar local/regional monopolists. Probably, an auction of radio spectrum on a purely free market would result in many smaller firms buying up many smaller ranges of spectrum and competing with one another more vigorously to provide superior customer service than do a handful of large, politically privileged telecommunications companies (AT&T, Comcast, Verizon, et al.) today. In this path-dependent, partially unfree environment it may be, in some cases, that allocations to lower bidders would result in better uses of resources and improved consumer outcomes, as long as institutional political privilege (e.g., enforced monopolies or historical insulation from competition) of the higher bidders can be incorporated into the bidding process in the form of some reasonable handicap used in considering their bids.

Free Your Talent and the Rest Will Follow – Article by Orly Lobel

October 18, 2013 Orly Lobel Comments 0 Comment

Orly Lobel

October 17, 2013

Recommend this page.

******************************

Imagine two great cities. Both are blessed with world-class universities, high-tech companies, and a concentration of highly educated professionals. Which will grow faster? Which will become the envy and aspiration for industrial hubs all around the world?

Such was the reality for two emerging regions in the 1970s: California’s Silicon Valley and the high-tech hub of Massachusetts Route 128. Each region benefited from established cities (San Francisco and Boston), strong nearby universities (University of California-Berkeley/Stanford and Harvard/MIT), and large pools of talented people.

We’ve all heard about Silicon Valley, but not so much Route 128. Despite their similarities, and despite the Bostonian hub having three times more jobs than Silicon Valley in the 1970s, Silicon Valley eventually overtook Route 128 in number of start-ups, number of jobs, salaries per capita, and invention rates.

The distinguishing factor for Silicon Valley was an economic environment of openness and mobility. For more than a century, dating back to 1872, California has banned post-employment restrictions. The California Business and Professions Code voids every contract that restrains someone from engaging in a lawful profession, trade, or business. This means that unlike most other states, California’s policy favors open competition and the right to move from job to job without constraint. California courts have repeatedly explained that this ban is about freeing up talent, allowing skilled people to move among ventures for the overall gain of California’s economy.

The data confirm this intuition: Silicon Valley is legendary for the success of employees leaving stable jobs to work out of their garages, starting new ventures that make them millionaires overnight. Stories are abundant of entire teams leaving a large corporation to start a competitive firm. Despite these risks, California employers don’t run away. On the contrary, they seek out the Valley as a prime location to do business. Despite not having the ability to require non-compete clauses from their employees, California companies compete lucratively on a global scale. These businesses think of the talent wars as a repeat game and find other ways to retain the talent they need most.

In fact, the competitive talent policy is also supported by a market spirit of openness and collaboration. Even when restrictions are legally possible—for example, in trade secret disputes—Silicon Valley firms frequently choose to look the other way. Sociologist Annalee Saxenian, who studied the industrial cultures of both Silicon Valley and Route 128 in Massachusetts, found that while Boston’s Route 128 developed a culture of secrecy, hierarchy, and a conservative attitude that feared exchanges and viewed every new company as a threat, Silicon Valley developed an opposing ethos of fluidity and networked collaborations. These exchanges of the Valley gave it an edge over the autarkic environment that developed on the East Coast. In Massachusetts, firms are more likely to be vertically integrated—or to have internalized most production functions—and employee movement among firms occurs less frequently.

New research considering these different attitudes and policy approaches toward the talent wars supports California’s modus operandi.

A recent study by the Federal Reserve and the National Bureau of Economic Research examined job mobility in the nation’s top 20 metropolitan areas and found that high-tech communities throughout California—not only Silicon Valley—have greater job mobility than equivalent communities in other states. Network mapping of connections between inventors also reveals that Silicon Valley has rapidly developed denser inventor networks than other high-tech hubs have.

Researching over two million inventors and almost three million patents over three decades, a 2007 Harvard Business School study by Lee Fleming and Keon Frenken observes a dramatic aggregation of the Silicon Valley regional networks at the beginning of the 1990s. Comparing Boston to Northern California, the study finds that Silicon Valley mushroomed into a giant inventor network and a dense superstructure of connectivity, as small isolated networks came together. By the new century, almost half of all inventors in the area were part of the super-network. By contrast, the transition in Boston occurred much later and much less dramatically.

Michigan provides a natural experiment for understanding the consequences of constraining talent mobility. Until the mid-1980s, Michigan, like California, had banned non-competes. In 1985, as part of an overarching antitrust reform, Michigan began allowing non-competes, like most other states. Several new studies led by MIT Sloan professor Matt Marx look at the effects of this change on the Michigan talent pool. The studies find that not only did mobility drop, but that also once non-competes became prevalent, the region experienced a continuous brain drain: Its star inventors became more likely to move elsewhere, mainly to California. In other words, California gained twice: once from its intra-regional mobility supported by a strong policy that favors such flows, and once from its comparative advantage over regions that suppress mobility.

A virtuous cycle can be put into motion geographically where talent mobility supports professional networks, which in turn enhance regional innovation. Firms can learn to love these environments of high risk and even higher gain. Rather than thinking of every employee who leaves the company as a threat and an enemy, smart companies are beginning to think of their former employees as assets, just as universities wish for the success of their alumni. Companies like Microsoft and Capital One have established networks of alumni. They showcase their former employees’ achievements and practicing rehiring of their best talent, hoping that at least some of those who leave will soon realize that the grass is not always greener elsewhere.

Most importantly, motivation and performance are triggered by commitment and positive incentives to stay, rather than threats and legal restrictions against leaving. In behavioral research I’ve conducted with my co-author On Amir, we find that restrictions over mobility can suppress performance and cause people to feel less committed to the task. Cognitive controls over skill, knowledge, and ideas are worse than controls over other forms of intellectual property because they prevent people from using their creative capacities, they don’t just prevent firms from using inventions that are already out there. So instead of requiring non-competes or threatening litigation over intellectual property, California companies use rewards systems, creating the kind of corporate cultures where employees want to work and do well. Again, a double victory.

Unsurprisingly, when Forbes recently looked at the most inventive cities in the country for 2013 using OECD data, the two top cities were in California: bio-tech haven San Diego, and the legendary home of Silicon Valley, San Francisco. Boston, still vibrant and highly innovative despite its most restrictive attitudes, came in third. Competition is the lifeblood of any economy, and fierce competition over people is the essence of the knowledge economy.

Orly Lobel is the Don Weckstein Professor of Law at the University of San Diego and founding faculty member of the Center for Intellectual Property and Markets. Her latest book is Talent Wants to be Free: Why We Should Learn to Love Leaks, Raids, and Free-Riding (Yale University Press, September 2013).

This article was originally published by The Foundation for Economic Education.

Oklahoma: The Economic Storm – Article by David J. Hebert

May 26, 2013 David J. Hebert Comments 0 Comment

David J. Hebert

May 25, 2013

Recommend this page.

******************************

A tornado ravaged Oklahoma last week, destroying hundreds of homes, killing dozens, and injuring hundreds more. Unfortunately, it looks like the citizens of Oklahoma are about to be ravaged by another storm brought on by the Oklahoma Attorney General, Scott Pruitt.

According to ABC News, Mr. Pruitt and his staff began “aggressively combing the region for fraud just hours after the tornado … and immediately [found] businesses violating the law. ”

What laws were the businesses accused of violating? Anti-price-gouging laws. Using powers granted by the Emergency Price Stabilization Act, Mr. Pruitt is hoping to help the people of Oklahoma by preventing businesses from profiting off of the suffering of the townspeople, many of whom just lost their homes. He goes so far as to say, “[the townspeople] never anticipate or expect that someone would take advantage of them right now, but this situation is what criminals prey upon. ”

While Mr. Pruitt no doubt intends to help the local citizens, his misunderstanding of the workings of the price mechanism will lead only to folly and the prolonged suffering of the very people that he is trying to help. What he is effectively arguing for is a price ceiling on basic commodities, such as water (which is reportedly being sold for $40 per case today as opposed to only $3-$4 just a few weeks ago).

This has very predictable results: a shortage.

When prices are held below their market value, the effect is that there will be a large number of people who are willing to purchase water at that price but very few sellers willing to sell the water at that price. This means that people will compete on non-price margins to acquire water, that is, they will queue, sometimes for hours on end. The time that they spend waiting in line, however, is a deadweight cost as it is value that is forgone but is not captured by anyone. So now, instead of contributing towards the reconstruction of the town, the people are stuck waiting in line for water.

The beauty of the price mechanism is what it accomplishes in situations like this, assuming, of course, officials allow it to function properly. In this situation, demand in Oklahoma rises and producers, seeing an opportunity to profit, reroute trucks/planes to Oklahoma, thus increasing the quantity of water supplied in the area that needs it most.

Absent the rise in price, we would have to rely on the benevolence of these companies to help the people in need (and assume that they knew what the people of Oklahoma wanted to begin with).

This isn’t in and of itself terrible. Obviously companies DO send extra water to places that experience disasters, and the Red Cross DOES send volunteers and such. But notice that nothing in the preceding analysis precludes this benevolence. Why rely merely on benevolence when we can also rely on self-interest? If the goal is to help people get clean drinking water, it stands to reason that we ought to incentivize producers as many ways as possible, be they other-regarding, self-regarding or both.

David Hebert is a Ph.D. Fellow at the Mercatus Center at George Mason University.

This article was originally published by The Foundation for Economic Education.

Open Badges and Proficiency-Based Education: A Path to a New Age of Enlightenment – Article by G. Stolyarov II

March 10, 2013 Gennady Stolyarov II Comments 7 comments

G. Stolyarov II

March 9, 2013

Recommend this page.

******************************

A major and tremendously promising opportunity has emerged to achieve a new Age of Enlightenment through technology and to enable large numbers of people to desire, seek out, and enjoy learning. Open Badges are an initiative spearheaded by Mozilla but made available to virtually any organization in an open-source, non-restrictive manner. Open Badges can make learning appealing to many by rewarding concrete and discrete achievements – whether it be mastering a skill, performing a specific task, participating in an event, meeting a certain set of standards, or possessing a valuable combination of “soft skills” that might otherwise go unrecognized. But even beyond this, Open Badges allow for the portability of skill recognition in a manner that far outperforms the compartmentalization present in many of today’s formal institutions of schooling, accreditation, and employment. Individuals would no longer need to “prove themselves” anew every time they interact with a new institution.

Open Badges are still in their infancy, but you can begin participating in this exciting movement and earning your badges today. Based on the economic understanding of network effects, the more people actively use Open Badges, the more opportunities will become available through the system. An introduction to open badges (along with the opportunity to try out the system and earn several badges) can be found at OpenBadges.org. For a more detailed discussion, Dave Walter’s paper “Open Badges: Portable rewards for learner achievements” is recommended. (This paper, too, will enable you to earn a badge.)

Various organizations already issue badges. To immerse yourself in the earning of Open Badges, you will be able to find several introductory badges on the Badge Bingo page from Codery. For badges that can demonstrate some basic skills, the Mozilla Webmaker series enables earners to validate their basic HTML coding knowledge. For individuals and organizations seeking to issue their own badges, sites such as Credly offer an easy way to create and grant these awards.

Mozilla Backpack can currently be used to host and share the badges, though other compatible systems also exist or are in development. Mozilla Backpack gives you the option to accept, reject, and classify badges into various “collections”. For instance, you can see a collection of all the Open Badges I have earned so far here, and a more skill-specific subset – all of my Mozilla Webmaker Badges – here. In a future world where badges will exist for a wide variety of competencies, one could imagine linking a prospective employer, business partner, educator, or online discussion partner to a page that documents one’s skills and knowledge relevant to the exchange being contemplated. Unlike a resume, whose value is unfortunately diminished by those dishonest enough to present falsehoods about their past, Open Badges are more robust, because they include metadata linking back to the issuer and containing a brief description of the criteria for earning the badge. Moreover, Mozilla Backpack offers you complete control over which badges you allow to be publicly visible, so you remain in control over what you emphasize and how.

Open Badges make possible a development I had anticipated and hoped to partake in for years: proficiency-based education. I have only known about Open Badges for less than a week at the time of writing this article. Serendipitously, I learned of their existence while reading “Ubiquity U: The Rise of Disruptive Learning” by Mark Frazier, and I was so intrigued that I embarked that same day on intensive research regarding Open Badges and the current status of their implementation. In the next several days, I strove to discover as many issuers of Open Badges as I could and to earn as many badges as I could feasibly obtain within a short timeframe.

However, my earlier writings have looked forward to the availability of this type of innovation. As a futurist, I take pride in having been able to accurately describe the future in this respect.

In February 2013, in “The Modularization of Activity” (here, here, and here), I wrote that “Education could be greatly improved by decoupling it from classrooms, stiff metal chair-desks, dormitories, bullies, enforced conformity, and one-size-fits-all instruction aimed at the lowest common denominator. The Internet has already begun to break down the ‘traditional’ model of schooling, a dysfunctional morass that our culture inherited from the theological universities of the Middle Ages, with some tweaks made during the mid-nineteenth century in order to train obedient soldiers and factory workers for the then-emerging nation-states. The complete breakdown of the classroom model cannot come too soon. Even more urgent is the breakdown of the paradigm of overpriced hard-copy textbooks, which thrive on rent-seeking arrangements with formal educational institutions. Traditional schooling should be replaced by a flexible model of certifications that could be attained through a variety of means: online study, apprenticeship, tutoring, and completion of projects with real-world impact. A further major breakthrough might be the replacement of protracted degree programs with more targeted ‘competency’ training in particular skills – which could be combined in any way a person deems fit. Instead of attaining a degree in mathematics, a person could instead choose to earn any combination of competencies in various techniques of integration, differential equations, abstract algebra, combinatorics, topology, or a number of other sub-fields. These competencies – perhaps hundreds of them in mathematics alone – could be mixed with any number of competencies from other broadly defined fields. A single person could become a certified expert in integration by parts, Baroque composition, the economic law of comparative advantage, and the history of France during the Napoleonic Wars, among several hundreds of relatively compact other areas of focus. Reputable online databases could keep track of individuals’ competencies and render them available for viewing by anyone with whom the individual shares them – from employers to casual acquaintances. This would be a much more realistic way of signaling one’s genuine skills and knowledge. Today, a four-year degree in X does not tell prospective employers, business partners, or other associates much, except perhaps that a person is sufficiently competent at reading, writing, and following directions as to not be expelled from a college or university.”

Even earlier, in 2008, I offered, as a starting point for discussion, an outline of my idea of proficiency-based education to PRAXIS, the Hillsdale College student society for political economy and economics. Below is my (very slightly expanded) outline. It pleases me greatly that the infrastructure to support my idea now exists, and I hope to contribute to its widespread implementation in the coming years.

Proficiency-Based Education: A Spontaneous-Order Approach to Learning

Outline by Gennady Stolyarov II from September 2008

The Status Quo

– Shortcomings of classroom-based education – “one size fits all”

– Shortcomings of course-based education – difficulty accommodating individual skills, interests, and learning pace. Grades lead to stigma of failure instead of iterative learning.

– Information problem of communicating one’s qualifications

– Negative cultural effects of segregating people by age and by generation – i.e., the “teen culture” generation gap

– Factory-based education system versus meaningful individualized education

Proficiency-Based Education

– Proficiencies replace courses.

– Proficiency levels replace grades.

– Proficiencies are easily visible and communicable to employers.

– Proficiencies are transferable by those who have them, up to their level of proficiency.

Emergence of Proficiency-Based Education

– Can be done privately by individuals or firms

– Can be done in person or on the Internet

– Can be done within and outside the university system

– Can be done for pay or for free

– People with proficiencies can pass the proficiencies on to their children/relatives/friends

– Incentives exist to restrict transfer of proficiencies to qualified persons.

– Networks of providers of Proficiency-Based Education can form. It will not be a centrally planned or directed system.

Advantages of Proficiency-Based Education

– Faster learning

– More individually tailored learning

– Ease of displaying one’s exact set of skills

– More hiring will be based on merit, since merit will be easier to see and verify.

– Indoctrination in politically or socially favored but objectively absurd notions will be much more difficult.

– The “teen culture” will disappear. Young people will be better integrated into adult society and will assume meaningful rights and responsibilities sooner.

– Proficiency-Based Education takes full advantage of all existing technologies, leading to a more technologically literate population with greater ability to control and improve the world.

– Greater integration of theory and practice and market selection of ideas that tend to bring about useful practical results

***

Open Badges provide the mechanism to coordinate the many thousands of competency-based or proficiency-based certifications and other achievements that I envision. While the processes leading to the demonstration of competency or accomplishment can be undertaken in any way that is convenient – online or in person – it is essential to have a universally usable digital system documenting and affirming the achievement. The system should be compatible with most websites and organizations and should not be locked down by “proprietary” protections. Proficiency-based education can only work if the educational platform is not inextricably attached to any particular provider of certifications, or else the very use of the proficiency system will remain compartmentalized and inapplicable to vast areas of human endeavor.

The free, open-source, and user-driven design of Open Badges provides exactly these desirable characteristics. At the same time, while Open Badges are free to create and issue, individual badges can be designed and offered by organizations that offer paid instruction – so that even traditional classes could be revolutionized by the introduction of competency-based elements, perhaps as a replacement for grades or, in the interim, as a mechanism for earning a grade. With the latter method, to get an “A” in a course or on a project, one would not need to pass a timed exam where every wrong answer constitutes a permanent reduction of one’s grade. Rather, one would need to earn certain kinds of badges demonstrating the completion of course objectives.

The motivational aspect of Open Badges stems from the immense engagement that is possible as a result of visible, incremental progress. This same motivating tendency explains the tremendous popularity of computer games. (Indeed, one initiative, 3D Game Lab, is developing an explicit educational computer game that will allow integration with coursework and Open Badges.) By enabling the earning of granular achievements (similar to “achievement” in a computer game), Open Badges keep learners focused on honing their skill sets and pursuing concrete objectives. At the same time, Open Badges facilitate creative approaches to learning and recognize the diversity of optimal individualized learning paths by leaving the choice of activities and their sequence entirely up to individual badge earners.

If billions of humans could become “addicted” to learning in the same way that some are said to be “addicted” to computer games, our civilization would experience a rapid transformation in a mere few years. Technological progress, institutional innovation, and the general level of human decency and morality would soar to unprecedented levels, at an ever-accelerating pace. Age-old menaces to our civilization, arising from pervasive human failings and institutional flaws, could finally be eradicated through vastly enhanced knowledge and a voluntary, enticing channeling of many people’s desires and enjoyments into highly productive paths that produce “positive externalities” (to use the jargon of economists). Open Badges, proficiency-based education, and the addition of game-based learning elements (up to and including full-fledged games, like the Mars Curiosity Activity from Starlite Digital Badges – just a hint of what is to come) can enable humankind to make decisive strides in its efforts to build up our civilization and beat back the forces of death, decay, and ruin.

The Breakthrough Prize in Life Sciences: Turning the Tide for Life Extension – Video by G. Stolyarov II

February 27, 2013 Gennady Stolyarov II Comments 0 Comment

The tide of funding for life-extension research has turned. With the announcement of the Breakthrough Prize in Life Sciences – sponsored by such renowned entrepreneurs as Yuri Milner, Sergei Brin, and Mark Zuckerberg, as well as Zuckerberg’s wife Priscilla Chan and Anne Wojcicki of 23andMe – there is now a world-class mechanism for rewarding outstanding scientists whose work contributes to understanding and curing debilitating diseases and extending human life. Mr. Stolyarov explains the incentives that the Breakthrough Prize creates for cutting-edge life-extension research and a more meritocratic society.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational discourse on this issue.

Support these video-creation efforts by donating here and here.

References
– “The Breakthrough Prize in Life Sciences: Turning the Tide for Life Extension” – Essay by G. Stolyarov II –
– Article on Transhumanity.net
– Breakthrough Prize in Life Sciences Website
– List of first 11 laureates of the Breakthrough Prize
– “Mark Zuckerberg, Sergey Brin, Yuri Milner Create $33 Million Breakthrough Prize For Medical Research” – Addy Dugdale – Fast Company – February 20, 2013
– “Breakthrough Prize announced by Silicon Valley entrepreneurs” – Rory Carroll – The Guardian
– “Bill Gates Wants to Be Immortal” – Adam Clark Estes – Motherboard

The Breakthrough Prize in Life Sciences: Turning the Tide for Life Extension – Article by G. Stolyarov II

February 23, 2013 Gennady Stolyarov II Comments 0 Comment

G. Stolyarov II

February 23, 2013

Recommend this page.

******************************

The tide of funding for life-extension research has turned. With the announcement of the Breakthrough Prize in Life Sciences – sponsored by such renowned entrepreneurs as Yuri Milner, Sergei Brin, and Mark Zuckerberg, as well as Zuckerberg’s wife Priscilla Chan and Anne Wojcicki of 23andMe – there is now a world-class mechanism for rewarding outstanding scientists whose work contributes to understanding and curing debilitating diseases and extending human life. (You can find out more about this prize from The Guardian and Fast Company.) The first eleven laureates of the prize have already been selected, and every subsequent year eleven more will receive $3 million each.

The incentives behind the Breakthrough Prize are exactly right. In short, they move our society ever closer to a meritocracy. By receiving a sizable fortune, each scientist – still at the top of his or her career – would no longer need to worry about finances. He or she would at last have a justly deserved reward for ingenious work that advances the struggle of human civilization against disease, decay, and death. To produce ground-breaking research in biology, medicine, and biotechnology requires a kind of passion that does not get extinguished just because one’s day-to-day material needs have been satisfied. By getting the material worries out of the way, that passion is allowed full and free rein. Innovation becomes the dominant motive force of further projects, and further research and breakthroughs can proceed without fear of running out of funding.

The people funding the prize are themselves excellent exemplars of meritocracy. They became wealthy by their own efforts – not through inheritance, political pull, or expropriation of others, but through providing services that millions of people voluntarily sought out and recognized as enhancing their lives. It is not surprising that these entrepreneurs of merit would seek to reward the merit in others – particularly merit that, through its further exercise, can eventually save the lives of us all, from the wealthiest to the poorest. The ideal of a societal meritocracy is one in which personal wealth is directly proportional to earned achievement. Meritocracy does not require central planning, because people of merit will naturally seek to exchange values and reward one another on a free market – provided that central planners do not distort the incentives toward doing so. The distribution of wealth will, over time, approach a purely meritocratic one solely as a result of such enlightened and free interactions. Of course, we are far from having a pure meritocracy today, for the incentives are significantly distorted by special political favors, barriers to entry, and the cultural corruption they engender. However, given the slightest opening, the meritocratic ideal will gradually penetrate into an ever-expanding array of endeavors. By the accident of history, computer and internet technologies have been some of the least centrally controlled in the 20^th and early 21^st centuries. The result was the emergence of a group of merit-based entrepreneurs who could use their wealth to fund productive benefactors of humankind in other fields.

Another ubiquitously known member of the larger group of merit-based achievers is Bill Gates, who has recently expressed his personal desire not to die during a Reddit AMA. This makes perfect sense: a man who has everything that wealth in today’s world can provide, and who leads a happy and fulfilling life besides, must still confront the fundamental injustice of his personal demise – an injustice that the wealthiest among us have not been able to rectify, yet. While Bill Gates is not sponsoring the Breakthrough Prize (at least not at present), his philanthropic efforts are already going a long way toward alleviating many life-shortening diseases in the less-developed parts of the world. We can all hope that, over time, he and others like him will devote increasing shares of their wealth toward overcoming the more formidable barriers of biological senescence.

For now, the Breakthrough Prize in Life Sciences is an excellent start. It will raise the profile of life-extension research and inspire others to pursue ambitious projects in hopes of earning the prize. Unlike the Nobel Prize, which scientists earn many decades after their most prominent achievements, this prize will come much sooner to those whose transformational work strikes blows against some our least tractable adversaries. With the accelerating pace of technological progress, it only makes sense not to wait over a generation before recognizing their accomplishments. Not only the recipients, but also their benefactors – Milner, Brin, Zuckerberg, Chan, and Wojcicki – are to be saluted for giving a critical and ongoing boost to life-extension efforts on many fronts.

The Rational Argumentator

A Journal for Western Man – Championing Reason, Rights, and Progress Since 2002

Browsed by
Tag: incentives

The Businessman as Radical Revolutionary in Zoltan Istvan’s “The Transhumanist Wager” – Article by G. Stolyarov II

December 15, 2014 Gennady Stolyarov II Comments 0 Comment

Henry Hazlitt’s “Time Will Run Back”: Unleashing Business to Improve the Human Condition – Article by G. Stolyarov II

December 14, 2014 Gennady Stolyarov II Comments 0 Comment

For the Love of Money? – Article by Gary M. Galles

April 13, 2014 Gary M. Galles Comments 0 Comment

The Paradox of Public Assistance – Article by David J. Hebert

January 27, 2014 David J. Hebert Comments 0 Comment

That Cold-Hearted Discipline – Article by David J. Hebert

November 7, 2013 David J. Hebert Comments 0 Comment

Free Your Talent and the Rest Will Follow – Article by Orly Lobel

October 18, 2013 Orly Lobel Comments 0 Comment

Oklahoma: The Economic Storm – Article by David J. Hebert

May 26, 2013 David J. Hebert Comments 0 Comment

Open Badges and Proficiency-Based Education: A Path to a New Age of Enlightenment – Article by G. Stolyarov II

March 10, 2013 Gennady Stolyarov II Comments 7 comments

The Breakthrough Prize in Life Sciences: Turning the Tide for Life Extension – Video by G. Stolyarov II

February 27, 2013 Gennady Stolyarov II Comments 0 Comment

The Breakthrough Prize in Life Sciences: Turning the Tide for Life Extension – Article by G. Stolyarov II

February 23, 2013 Gennady Stolyarov II Comments 0 Comment