One of my favorite lectures that I gave to the ICES high school economics workshops was the final one on Institutions. Institutions are often thought of as the “rules of the game,” or in more detail:
“Institutions are the humanly devised constraints that structure political economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights).” (North 1991:97)
We are easily aware of the “obvious” institutions that are consciously designed by an authority and handed down to us like laws and statutes or religious doctrines that guide our actions, but these “formal” institutions are but a small fraction of the set of institutions that constrain our behavior. Continue reading →
Here is an interesting article in the Wall Street Journal about the evolutionary life cycle of words. It appears that a group of physicists, using data compiled by Google’s scans of books since 1800, have empirically measured how specific words emerge, persist, and fall out of use.
Language, of course, is a sporder like many others – where we can conceive of individual words as the “agents” that collectively cultivate a vocabulary that emerges among speakers. Roughly, individual words compete against other words for describing precise ideas, and certain words are collectively selected over time based on their characteristics (length, spelling, economy, phonetics, aesthetics, dialects, etc).
The authors classify their findings under the new empirical science of culture, or “culturomics” as they call it.
Unfortunately, I was unable to find the original journal article with the published findings in Science.
Over the summer, I wrote an essay on the spontaneous order of science (for the Carl Menger Essay Contest). I discussed the existence of systemic error in science and implications of sporder for improving science. My argument is basically that attempts at top down control or regulation of a sporder are doomed to fail, and we should be skeptical of government involvement in science. Instead, bottom up approaches that improve incentives should be emphasized.
Since then, I came across a mind-blowing paper by Robin Hanson that makes a powerful case for using prediction markets on scientific hypotheses to sharply reduce bias and systemic error from science: Could Gambling Save Science.I highly recommend looking at Hanson’s paper, it’s a very interesting and exciting idea. In light of this, I updated my paper with a section on prediction markets as the best solution we are likely to get.
Andy Kessler’s Op-Ed in the Wall Street Journal brings up a great lesson about the power of markets and social order. In a time where everyone actively focuses on the obvious rise in the income gap, it’s a shame that they’re passively neglecting the less conspicuous closing of the consumption gap:
For the most part, the wealthy bust their tail, work 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can’t enjoy much that the middle class doesn’t also enjoy. Where’s the fairness? What does Google founder Larry Page have that you don’t have? Continue reading →
Politics has a lot of problems. Lacking a price system to make rational decisions, government is very inefficient. Lacking the incentives of competition, government pursue’s it’s own interests and is unaccountable to the populace. Lacking effective external constraints, government overreaches its bounds.
How to go about getting better government is an age old problem. But economics has some profound insights to offer. In free markets, competition serves to create market prices, which enable economic efficiency and cooperation on a global scale; competition creates strong incentives for firms to be accountable to their customers; competition from other firms limits the power of any one firm.
Competition between governments can bring these benefits to politics. But governments are large territorial monopolies, and citizens are basically captive given the costs of switching countries. Enter Patri Friedman (grandson of the famous economist Milton Friedman), a visionary who wants to build floating self-governing cities on the ocean. Patri analyzes governance as an industry, and points out that there has been practically no innovation at all since the advent of representative democracy. There are no start-ups experimenting with new ideas in governance. This is because the costs of entering the industry are enormous: since all land has been claimed by governments, you would need to win a war or a revolution.
Patri’s solution is to build on the ocean and open up a new frontier for startup governments to innovate and compete for customers. He founded the Seasteading Institute to make it happen. A similar land-based vision is promoted by the fellow-traveler Free Cities Institute. A related project is the Charter Cities initiative, which is essentially to replicate the Hong Kong model by creating special economic zones governed by market friendly rules.
Provided that international legal challenges can be overcome, these projects to create start-up governments and increase competition between governments could very likely radically transform the world. The benefits are too many to count, but I’ll list a few important ones. There would be much more choice of what type of society you could live in. More importantly, people in countries with bad governance (i.e., the third world) would have new opportunities to escape, especially since start-up countries would be seeking new residents. Competition would foster innovation and discovery of better rules and institutions that every other government could adopt. And emigration from bad countries to good countries would put competitive pressure on bad countries to shape up or lose its residents.
This decentralized, bottom up approach to revolutionizing politics is a great example of the power of spontaneous order. In fact, this was the central motivation for the whole Sporder project. Our long term goal is to create a virtual frontier—in a massively multi-player video game—to allow for the emergence of social order from within the game. Let a thousand nations bloom!
Here’s a short video of Patri Friedman explaining why seasteading is such an amazing idea:
This could have easily become another blog about economics or politics or philosophy or current events, as all of us are eagerly interested and fairly qualified to comment on these subjects. But we chose to center our blog around the idea of sporders.
I want to take a moment to describe why I think several economically-savvy bloggers, most of us aspiring to become professional economists, are taking a broader leap outside of normal “economics” to explore sporders. Of course, this is just my own opinion and ex-post facto rationalization. But nonetheless, I think this approach brings something new and useful to the table of understanding our world and seeking to improve it. The sporder framework seems to be effective, honest, and interesting. Continue reading →
I have particularly obsessed with epistemology in the last few weeks – that is, the nature of knowledge. I’ve always found the subject interesting, but since my intellectual transformation to (and through) the Austrian school of Economics, methodology of the social sciences has always puzzled me. Apriorism and extreme rationalism no longer sits well with me like it once did, so I am exploring its ontological possibility and its practical limits. But that’s for another series of posts and probably a paper.
At the beginning of the summer, I wrote a blog post called “A Critical Rationalist Epiphany at a Bookstore” (on my old blog, now long gone), exploring the nature of critical rationalism and the sporder of knowledge. I wrote this before we launched Sporder and I started re-framing most of my thoughts in terms of sporders. I wanted to repost it here for two reasons (aside from the fact that I find the subject fascinating): 1) It deals with the sporder of knowledge and 2) I want to use it as a reference to dive more deeply into epistemology in some forthcoming posts.
And I am currently reading Popper’s Logic of Scientific Discoveryso I am slowly gaining credibility to grapple with his ideas.
Below is a quote from a website of one of the major alliances in EVE online. Their plans are to crash a part of the EVE economy by cornering the market for an essential fuel. They speak in a lot of lingo, but that is the basic jist of their plans. This is fully within the games rules, and I’m guessing that the developers will not intervene.
help release this pubbie from his eternal burden. by suicide bombing him.
It’s time to inflict Goonswarm’s rage on Empire once again. Jihadswarm was a way for Goons to cause suffering and rage in unsuspecting pubbies, who (naturally) had no idea that they could be hurt in empire space. Unfortunately, Jihadswarm had few lasting effects on the EVE universe. By hitting everywhere, it failed to hit hard enough in any one spot. That all has changed now, as the finance team has come up with a way to hit a small slice of empire space, and yet have a much larger impact. The isolated pain of random pubbies is not enough. It is time for Goonswarm to hurt everyone in EVE, and so reap the misery of a wronged universe.
Science is an example of a bottom-up, emergent social order. The community of scientists is not organized in a top-down fashion with some guiding purpose; there is no scientific central planning board.
Rather, individual scientists pursue their own research interests—there is an ‘anarchy of production’ in scientific research. And yet science is quite orderly and productive: the global scientific community functions as a coherent, integrated whole. A bottom-up order emerges because of the incentives and feedback mechanisms that guide scientists in their decisions of where to allocate their research resources. Science, in a word, is self-regulating. Continue reading →
