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  • Proper Incentives

    Posted by ken on February 9th, 2005 (All posts by )

    Capitalism is really and truly a wonderful thing. What it all boils down to is that people are rewarded for providing something of value for their fellow human beings, by the recipient himself according to the judgement of the recipient – not busybodies who purport to speak on behalf of the recipient – as to how valuable that something is. Produce something that actually improves the lives of others from their own point of view, and they’ll reward you; produce nothing but excuses, and they’ll reward someone else who can deliver.

    Of course, in order for this system to work as advertised, participants must not be able to substitute force for production. They have to be restricted to getting people to pay them voluntarily; otherwise, stealing wealth is easier and more profitable than earning it or asking nicely for it.

    Anarcho-capitalists have suggested that police and military protection can be offered on the competitive market, with continuing customer service, process efficiency, and cost improvements typical of relatively unregulated private industries. The problem there, of course, is that these agencies must use force, and lots of it, in order to do their jobs – but that same force can be used more profitably for plunder rather than protection.

    At least for a while. A good long term strategy would be to deliver real protection and generate lots of repeat business from increasingly wealthy customers.

    Machiavelli pointed out, long before Adam Smith was even born, that a prince who encourages people to peacefully trade and work and keep their profits from doing so will find his state growing in wealth and strength. For best results, a prince who wanted long term wealth and strength would keep economic and other laws liberal while ruthlessly cracking down on violence and theft, attract productive people from other realms and encourage those at home to exercise their abilities to the utmost, maintain a force sufficient to prevent armed interference from rulers and insurgents more interested in plunder or the cheap thrill of pushing people around, and take just enough from his subjects to keep the operation going, while allowing his geese to lay their golden eggs in peace and leaving most of those golden eggs to hatch into new geese, who lay more golden eggs, and so on. Keep it up long enough, and that prince can end up ruling the Galaxy.

    Except, thanks to long-familiar and still unsolved medical afflictions (i.e., the aging process), that prince would have ended up dead long before then. A prince doomed to a short lifespan, as all princes throughout human history were, would find it more profitable over his pitiful lifetime to grab all those golden eggs, throw lavish parties to attract lots of beautiful princesses, maids, etc., sink huge amounts of wealth into half-baked enterprises to grab attention and get more statues of himself built (a poor substitute for actual immortality, but the best available under the circumstances), and if people complain, keep executing them until they shut up.

    So we wound up with the republic as a kludgy workaround. If the prince can’t collect the long-term profit that could be had in running the state well, then voters can act as a check on the new republican government to stop it from stealing all their golden eggs. Unfortunately, that tends to degenerate into a situation where the voters scheme to steal the golden eggs from each other, and elected officials still sink large amounts of money in half-baked schemes to attract attention and get their names in the history books (the modern-day equivalent of those old statues).

    Which means that, far from ruining society, a cure for aging would lead to lots of noticeable improvements in its governance. Even voters might hesitate to vote for more “benefits” for themselves if the alternative is a huge difference in the overall wealth available in their society, and the ease in earning it for oneself, in two hundred years’ time. And libertarian kings and dictators, unfortunately an extremely endangered species up to now, might find themselves in the drivers’ seat and exploit the opportunity to become absolute rulers of humanity’s next superpowers.

     

    2 Responses to “Proper Incentives”

    1. Shannon Love Says:

      “a cure for aging would lead to lots of noticeable improvements in its governance”

      Babara W. Tuchman in “A Distant Mirror” made the observation that perhaps the reason the people of the medieval ages were so “excitable” and quick to fight was because they were all so young. She listed the major figures of the period and a great many of the decision makers were people in their teens and twenties.

      A generally aging population probably helps this problem to some extent but I think that a meritocracy helps it more. I would imagine that the average age of decision makers in Western countries today is far older than the average age of decision makers of the medieval period, most of whom were born to their positions. In the modern epic, it takes time to demonstrate ones merit as one rises up the decision making hierarchy.

      I think the wise rulers of the past who tried to establish economically enlightened regimes were in the end always defeated by warfare. The tax burdens needed for wars, even defensive wars, always crushed the hands off approach.

      Of course, rule by lineage always had the weakness that the child would eventually not be as wise (or even as sane) as the parent. It took only a few years of bad rule to wreck many places.

    2. Varenius Says:

      “a cure for aging would lead to lots of noticeable improvements in its governance”

      That assumes an extended lifetime automatically brings with it improved foresight. There’s no particular reason to think that living longer will make people better at long-term thinking. Next week will always loom larger than something that might perhaps conceivably happen 200 years from now.