*Radical Markets*

by on March 1, 2018 at 12:11 am in Books, Economics, Law, Uncategorized | Permalink

The authors are Eric A. Posner and E. Glen Weyl, and the subtitle is Uprooting Capitalism and Democracy for a Just Society.

“Suppose the entire city of Rio is perpetually up for auction.”  To be clear, I don’t agree with these proposals.  But if you want a book that is smart, clearly written, dedicated to Bill Vickrey, and sees its premises through to their logical conclusions, I am happy to recommend this one.  Think of it as a bunch of social choice and incentive mechanisms, based on market-like ideas, though not markets in the sense of a traditional medieval fair.

The authors call for perpetually open auctions, quadratic voting, a kind of apprenticeship system for the private sponsorship of immigrants, a ban on mutual fund diversification within sectors (to preserve competition by limiting joint ownership), and creating more explicit markets in personal data.  If nothing else, it will force you to clarify what you actually like about markets, or don’t, and what you actually like about economics, or don’t.

Most of all, I differ from the authors in seeing a larger gap between models and the real world than they do, and thinking we need a greater variety of kinds of evidence before making very radical changes.  But at the very least, it is worth thinking through why we do not handle life as a second price auction.

1 So Much For Subtlety March 1, 2018 at 12:26 am

“Suppose the entire city of Rio is perpetually up for auction.”

You mean it is not? OK I suppose it is not nice to troll Thiago but it is hard to resist. Not that he has ever been near Rio.

The authors call for perpetually open auctions, quadratic voting

So a kind of qualified oligarchy where the rich literally buy the laws? Seems intriguing.

a kind of apprenticeship system for the private sponsorship of immigrants

So indentured labor? That worked out well last time it was tried.


2 OneGuy March 1, 2018 at 9:58 am

From each according to his ability, to each according to his needs.

How original. Works well in Venezuela..


3 Steve Sailer March 1, 2018 at 12:28 am

Posner & Weyl’s solution for the chief trouble of Wheeling, West Virginia (namely, the high cost of local dog walkers) is particularly memorable:


But I’m waiting for them to write a article on why we need to go back to employing five-year-old boys as chimney sweeps.


4 Ray Lopez March 1, 2018 at 1:08 am

SS sez: “But I’m waiting for them to write a article on why we need to go back to employing five-year-old boys as chimney sweeps.” – indirect birth control? Bad joke.


5 Ray Lopez March 1, 2018 at 1:07 am

Something Prior Approval might say: “The authors call for…a ban on mutual fund diversification within sectors” – and this from a so-called free marketeer? A ban enforced by Big Brother?


6 dan1111 March 1, 2018 at 1:23 am

Who is a “so-called free marketeer”? Is somebody confusing Eric Posner with Richard Posner (his father) again?

Given the “uprooting capitalism” in the title, I would think this is an explicitly anti-free-market book.


7 Ray Lopez March 1, 2018 at 1:30 am

@dan1111 – I see, you’re probably right.

I also see that some version of Arrow’s Impossibility Theorem (https://en.wikipedia.org/wiki/Arrow%27s_impossibility_theorem) is being violated by E. Posner’s reasoning behind quadratic voting: (blurb from Eric’s blog link): “Quadratic voting is a procedure that a group of people can use to jointly choose a collective good for themselves. Each person can buy votes for or against a proposal by paying into a fund the square of the number of votes that he or she buys. The money is then returned to voters on a per capita basis. Weyl and Lalley prove that the collective decision rapidly approximates efficiency as the number of voters increases. ” – balderdash. This is simply vote buying, with a kickback to the bought voters (it’s done all the time here in the Philippines elections, from roughly $5 to $20 a bought vote, btw I find the higher number hard to believe, but that’s what’s been reported to me) and from what I understand it is, contrary to Eric’s blog, actually already done, albeit somewhat imperfectly, in bankruptcy law (the parties with the most money invested in the bankrupt company usually get the most say in bankruptcy court, according to a formula of priority for secured creditors, unsecured).


8 Doug Jones March 2, 2018 at 5:09 pm

Arrow’s Impossibility Theorem is about the impossibility of aggregating individual rankings of candidates into a group ranking in such a way that you’re guaranteed not to violate any of various desirable conditions. It doesn’t apply to Quadratic Voting, which is about scalar preferences (expressed in dollars) rather than rankings. That’s not to say QV is a good idea. Obviously it would be wise to experiment with it in the context of, say, shareholder voting, to figure out whether it really works as advertised.

Regarding indentured servant immigrants, we could go even further: many past societies allowed people to sell themselves into slavery. From a radical market perspective this is a capitalist act between consenting adults, so why not? True, just about every society has a sphere of inalienable possessions it considers too sacrosanct to be put on the market (although what goes into that sphere varies). But maybe sacred values and Inalienable rights are just a bunch of archaic mumbo-jumbo destined to be swept away by the progress of Reason and Enlightenment. Eric Posner’s dad suggested a radical market response to the shortage of adoptable babies: let adoption agencies sell them to the highest bidder. In that spirit, maybe we could mine earlier literature for further market-based ideas. I hope that Posner and Weyl take up the possibility of handling marital breakups by reviving the custom of wife selling (in a suitably updated gender-neutral version, obviously), as in “The Mayor of Casterbridge.” And Jonathan Swift had another proposal.


9 clockwork_prior March 1, 2018 at 1:47 am

No, what I would say is that Prof. Cowen has a different vision for policy in this regard – ‘‘We also would build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro Favela. The quality of the water and electrical infrastructure might be low by American standards, though we could supplement the neighborhood with free municipal wireless. Hulu and other web-based TV services would replace more expensive cable connections for those residents. Then we would allow people to move there if they desired. In essence, we would be recreating a Mexico-like or Brazil-like environment in part of the United States, although with some technological add-ons and most likely greater safety.’’ Average is Over – link to the left on your screen.

And of course, the idea of ‘creating more explicit markets in personal data’ is the sort of thing that is already against data privacy laws in the EU. Oddly, most people here seem to approve of not having any market in personal data, regardless of what Facebook or Equifax think about it. Admittedly, maybe ‘more explicit’ means actually requiring approval from the person that owns the data – you – first.

Though such a perspective would be opposed by a person in a position like this – ‘In one notable exchange, Sen. Catherine Cortez Masto (D-Nev.) asked the interim chief executive officer of Equifax, Paulino do Rego Barros, why consumers do not have a say in opting in or out of the company’s data collection.

“This is part of the way the economy works,” Barros said. But he was swiftly interrupted. “The consumer doesn’t have a choice, sir. The consumer does not have a choice on the data that you’re collecting,” Masto said.

Her line of questioning echoed other lawmakers who have pushed back against fundamental aspects of Equifax’s business, which have faced widespread scrutiny after the data breach came to light.

After confirming with Barros that it is Equifax, and not consumers, that owns all the granular data collected about them, and that consumers cannot request to exit the company’s files, Sen. Cory Gardner (R-Col.) asked the current Equifax chief if it was right that the company maintains that arrangement. “I think it’s not my perspective to say it’s right or wrong,” Barros said.’ https://www.washingtonpost.com/news/the-switch/wp/2017/11/08/equifax-says-it-owns-all-its-data-about-you/

What the CEO of Equifax confirned is that Equifax actively engages in what EU data privacy laws forbid.


10 stasi March 1, 2018 at 3:55 am

what I like about markets is that things can go bust, without anybody having to make a top down decision. Using market like mechanisms to solve problems (eg as New Labour did in the UK) is questionable and as likely as not to lead to bureaucracy.


11 rayward March 1, 2018 at 6:39 am

Ideas like this one have their genesis in Thomas Jefferson’s idea for Generational Sovereignty, pursuant to which each generation (which Jefferson defined as roughly 19 years) all contracts would be abrogated, all debts forgiven. Fortunately for Jefferson, his friend James Madison prevailed upon Jefferson not to promote his idea lest everyone hearing it think Jefferson had gone round the bend. And you thought single payer is a bad idea. I suppose Jefferson was an “ideas person”. Another example, which came to him while serving as the U.S. ambassador to France, are the many ideas he offered for the French constitution while the French revolutionaries were busy wearing out the guillotine. Today we have many ideas persons, with ideas ranging from cryptocurrencies (as an alternative to money) to signaling (as an alternative to language). We could use another James Madison.


12 Enrique Guerra-Pujol March 1, 2018 at 9:41 am

While we’re at it, why not experiment with “Bayesian verdicts” in law cases? See: http://beta.briefideas.org/ideas/c09a8265991caca80dfcb890abedf208


13 Tanturn March 1, 2018 at 12:24 pm

“If nothing else, it will force you to clarify what you actually like about markets, or don’t, and what you actually like about economics, or don’t.”

I’m not a big fan of Posner and Weyl.


14 byomtov March 1, 2018 at 6:03 pm

I differ from the authors in seeing a larger gap between models and the real world than they do,..

I’m glad to learn this. Now explain the gap to your uber-libertarian friends.


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