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Mar 25, 2010

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Josh Mueller

I'm not an economist but I like a good parable. Thanks for "dumbing it down" for us regular folks!

The interesting thing about your story is the context: it's not about efficiency, political gain, or even plain legal rights but about survival (hurricane coming)! Now if SURVIVAL is at stake, you gotta wonder why there is no option mentioned that looks at the very simple mathematical equation how many and which vehicles would get the most people far away enough from town with 100 gallons (including options like carpooling, stuffing 6 or 7 people in a 5 passenger car, filling up busses first before smaller cars etc.).

The point I'm trying to make is this: why are we looking at the financial bottomline primarily when the greater need seems to be the understanding: we are all in the same boat, each life is precious, we'll help each other as much as possible without looking at personal survival first?

ceemac

This is interesting and informative.

I would not have believed it until a month or so ago but there are actually people who advocate for something at least close to the open conflict approach as a norm. I stumbled on a lengthy debate in the Reason magazine blog between limited government Republicans types, libertarians, minarchists (a new term for me), and anarchists. For some of anarchists Somalia was actually their theoretical paradise because it has no institutional structures.

Michael W. Kruse

"Now if SURVIVAL is at stake, you gotta wonder why there is no option mentioned that looks at the very simple mathematical equation how many and which vehicles would get the most people far away enough from town with 100 gallons (including options like carpooling, stuffing 6 or 7 people in a 5 passenger car, filling up busses first before smaller cars etc.)"

This is option #2, need. You are getting at the point I was making about the downside of this parable. While we certainly might do what your are suggesting with 10 people, how would you sort this out with 300 million people? There is no "Great Mind" that would sort out who needs what and how we would get it there.

If I take responsibility for my survival, that is one less person you have to aid in the overall survival plan. You taking responsibility for your survival is one less person I will need to aid. We aid each other in this way. With enough of us who have taken responsibility for ourselves we will then be in a position to aid those around us who truly need help. ("In case of a loss of cabin pressure a mask will drop the panel above. Place the mask on yourself first and begin the oxygen flow. Then aid those in need around you.")

The market is a real time feedback loop where people who are taking responsibility for themselves place bids for what they need into the auction. Suppliers then respond according the level of demand they see in the auction. By bidding for what we need in the market we are solving that one tiny allocation problem.

Self-love and care is not wrong nor is it antithetical to love of God or love others. It is simply a love that must be weighed in the mix of these other loves. Taking responsibility for ourselves so we can be of service to others is an essential element of stewardship.

Markets coordinate "commercial society," integrating the work and needs of millions of people. But there are also our "face-to-face communities," where we know enough about each other that we can truly know how to aid each other. Here is where I suggest your vision of us all looking out for each other in more intimate ways comes into play. As our face to face communities take care of each other we feed our collective needs into the auction generating better feed back about what is needed. The market allows us to coordinate the caring work in our face-to-face communities. We simply don't have the capacity to think and act that way toward 300 million people.

Josh Mueller

Thanks, Michael! That really puts it into a better, more nuanced perspective for me.

Michael W. Kruse

Getting my hand wrapped around the implications of face-to-face community versus commercial society was a major epiphany for me. I keep trying new ways to describe it but not sure I've quite got it down. Glad I at least made sense! :-)

Josh

Well, more power to ya!

Maybe you can help me with one more question. I seem to recall an article or post you wrote talking about our resources as a pie and that one of the flaws of redistributive justice was the focus on the issue of dividing the existing pie and forgetting about the dynamics that could make the pie bigger. Could you provide me a link to that post? I unfortunately wasn't able to find it here anymore.

Michael W. Kruse

Josh, is this the one?

Bridging the theology-economy gap - Susan Lee

Josh Mueller

Yes, thank you very much!

PamBG

Most would agree that the “first come, first serve,” “equal treatment,” “cronyism,” and “open conflict” options do not lead to an efficient or just distribution.

I am a late-in-life ordained Christian minister and I spent over 20 years working in finance.

I think that for Christian, the moral and ethical problems here are a lot more complicated and much less black and white than that.

I'm not sure, for instance, that we could take the stories of Jesus' teachings as reflected in the Gospels and make that statement with any kind of confidence.

From an economic point of view, the situation outlined above actually reflects a situation of total control of supply (our gas station attendant). This is typically called a monopoly. No traditional "secular" economist would claim that a monopolistic situation is one where efficient markets prevail.

And I can't imagine any ethical system blessing "I can exploit others as much as I want" as being "just". Even secular ethical systems tend to regard "How can I maximize my own personal good?" as being immorally inferior to "How can I help others?"

PamBG

The most efficient and just allocation system is for people to take responsibility for themselves, earn an income, and bid for what they need in an auction system.

My husband and I recently moved from the UK to one of the most economically depressed areas of the US in order to be near and help out my elderly parents. We've found it incredibly difficult to get jobs of any stripe and we've found it impossible - at this particular time - for either of us to find full time jobs with benefits. We've spent the last 9 months underemployed and not able to pay all of our bills from our current income (our bills are very modest and our current income below official poverty levels).

Although we are lucky because we are able to supplement our income from savings, I'm still sick and tired of hearing the rhetoric about being individuals who are not prepared to take responsibility for ourselves. Perhaps this is a complicated way of saying "There but for the grace of God go I in a difficult economy"? I hope so.

This part of the US has lost many, many industrial jobs which have traditionally made up the bulk of employment opportunities. It's now widely accepted that the "recession" in the manual-labor, industrial sector is equal to or worse than The Great Depression.

I like to see the reaction in Michigan or Detroit if someone stood up and told these people that the problem in the region is that they have failed to take responsibility for themselves.

Again, the situation is a heck of a lot more complex than that.

Michael W. Kruse

First off, Pam, I sorry to hear of your financial struggles. I've been unemployed for months at a time myself and fewer things are more stressful than living under that kind of pressure.

As to the parable, it is exactly that ... a parable. Pushed too far any parable collapses. As I noted, the downside of shrinking the economy down to a parable like this is that it radically understates complexity. So you could say the gas station has a monopoly but let the gas station stand for the entire national supply of gasoline and the ten people are 300 million people. How will you allocate the gasoline? The parable sacrifices complexity so we can get at the gist of the problem.

As I've written elsewhere we need to distinguish between face-to-face community and commercial society. There is a small community of people who I'm in ongoing face-to-face relationships with. I know these people and they know me. I'm capable of offering them personalized care and sharing because of this knowledge. But as a finite being I can only know a few people at this level of intimacy.

How am I to know the needs and stories of 300 million so I can help them? It is impossible. So how shall we coordinate economic activity beyond the confines of our face-to-face communities? How does one determine what is equitable and helpful on individual cases for 300 million people? I'm suggesting the market is the cornerstone for integrating and coordinating productivity and consumption in commercial society. If not markets, how else? I've listed options from the parable. Is there an option Halteman or I have missed?

I'm sorry that you took my statement of people "taking responsibility for themselves" as condemnation toward you. My point was to articulate the normative functioning of society. Of course there are many people at any given moment that can't take economic responsibility for themselves for any number of reasons. But I think you would agree that you want to be back in a situation where you can take responsibility for your self. You see that as the normative way life works. I don't think you would agree that the normative way for society to operate is for people to take no responsibility and just hope for benevolence from others.

You are right that is more complex. This is the first post in a series. At the bottom of the post I wrote, "Yet the market auction is not perfect. There are reasons why market intervention is needed. Stay tuned."

PamBG

How am I to know the needs and stories of 300 million so I can help them? It is impossible. So how shall we coordinate economic activity beyond the confines of our face-to-face communities? How does one determine what is equitable and helpful on individual cases for 300 million people?

What's your underlying presumption here? That if we're going to create a just society, we need to determine which individuals are and are not deserving of receiving justice?

I'm suggesting the market is the cornerstone for integrating and coordinating productivity and consumption in commercial society. If not markets, how else?

I see only two broad options: markets or totalitarian allocation resources. I agree with you that the latter is a disastrous way to try to run an economy. Where I think I may not agree with you is that I don't believe that laissez-faire capitalism automatically results in justice or ethical goodness.

I've listed options from the parable. Is there an option Halteman or I have missed?

I think you've missed the fact that the auction system doesn't automatically result in a just allocation of resources. What if a very rich person came along and offered $2 million for that 100 gallons of gas just because s/he could? Would you still say that resulted in the most justice?

And what if the gas station attendant said "Hey, look, let's just take this 100 gallons of gas, put it in a bus and then 60 of us could get out of the hurricane's way"? Granted, that solution would create ethical issues of its own. But you'd get more people out of the hurricane zone than you would if the highest bidders got the gas, stuck it in their cars and drove off.

As is beautifully demonstrated here, the solution of those who believe firmly in individualistic capitalism results in less people getting away. Nonetheless we are very happy to confidently declare that this is absolutely the best solution and that the solution of everyone working together is somehow less just.

But I think you would agree that you want to be back in a situation where you can take responsibility for your self.

Actually, what I'm doing is challenging your assumption that being underemployed through no fault of our own is "not taking responsibility for ourselves". Are you actually suggesting that if we were more "responsible" we could just find a good job at a good salary with good benefits tomorrow? I wonder what it is that you think we are being irresponsible about?

Michael W. Kruse

"Where I think I may not agree with you is that I don't believe that laissez-faire capitalism automatically results in justice or ethical goodness."

"I think you've missed the fact that the auction system doesn't automatically result in a just allocation of resources."

Pam, I wrote a key paragraph at the end of the post and I quoted it one more time at the end of my comment above. I will repeat it a third time in large print. Please read it!

"YET THE MARKET AUCTION IS NOT PERFECT. THERE ARE REASONS WHY MARKET INTERVENTION IS NEEDED. STAY TUNED."

And as I noted, this is the first post in the series. We are moving now into why the market is not perfect and how we go about addressing it. How is this lazzie-faire capitalism? I said the most efficient and just way of allocating goods on a normative basis is the market. I nowhere said it was perfect or without need of intervention.

Despite having now explained the limitations of the parable twice I will try a third time. Parables can only be pressed so far. The gas station is a metaphor for all of society's gas and the ten cars are 300 million people. Who has the money to buy all the gas and take it off the market? Magically having a bus appear doesn't resolve the societal allocation problem. How are 300 million people going to efficiently and justly distribute the gas among themselves.

"What's your underlying presumption here? That if we're going to create a just society, we need to determine which individuals are and are not deserving of receiving justice?"

I don't understand what you're driving at. I'm asking you what justice looks like in the allocation of a limited quantity of gasoline to 300 million people and what process will you use to evaluate each individual's circumstances to know that justice has been done?

I'm saying 300 million people get up each day to go about their various tasks ... from the critical to the frivolous. Forget the hurricane example. Gasoline has to be allocated to each of 300 million people. What system will you use to achieve the most efficient and just allocation?

First come, first serve? Then those unoccupied with other cares and with the greatest mobility will always get privileged care and critical needs will go unmet.

Equal treatment? The person who likes to cruise around all day, the person who drives 30 miles to work each day, the police officer, and the person who only drives to the market on occasion all get the same amount of gas. Is this efficient and just?

Cronyism? Gas is procured at the whims of base on your relationship with powerful people. Is this going to be a just and efficient use of resources.

Open Conflict? The biggest bully gets the gas?

All of these are grossly inefficient and unjust methods. The auction method is far more efficient and just than any of these methods. You could say the options above have an efficiency and justice index of 10 or 20 on a scale of 100. I'm saying that the auction method is something like a 70. It is vastly more efficient and just than any other option but it is not perfect nor can it ever be.

"I wonder what it is that you think we are being irresponsible about?"

I don't think you are being irresponsible. And I realized later after I wrote this that my language was imprecise. I'm contrasting "taking responsibility" with "dependence" and I wrote "economic responsibility" not responsibility in general. What I'm getting at is that we normally provide for our needs from earnings from our labor or from selling the product of our labor. When we lose employment for an extended period of time we can exhaust all our resources. We are incapacitated from being able to provide for ourselves via our own means. It is in this sense that I mean we are unable to take responsibility for providing for ourselves and are dependent on others.

While dependence can come from irresponsibility, it can also come from mental/physical incapacitation, from loss of a job, on any number of events that are beyond our control. We still take responsibility for ourselves in the general sense but we can't take economic responsibility and provide for ourselves in an economic sense.

PamBG

I think I'll just wait and see what else you have to say.

We seem to have gotten off on the wrong foot and I'm now doubting whether any constructive conversation is going to be possible. It's a potentially interesting discussion, though.

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