Ancap Economies Don't Bootstrap Prices
posted by sleepy-sniper on July 15th, 2023 at 9:41PM
posted by sleepy-sniper on July 15th, 2023 at 9:41PM
> Give us the tl;dr
This is the best summary I can give you (5 paragraphs, instead of 22), but you should make your comments on BG's blog instead, in case he has anything to respond with.
Markets are an excellent mechanism for organizing production and distribution, but they aren’t magic. They don’t generate prices ex nihilo. Market prices are circular. The price of a product depends on the prices of the inputs to its production. The price also depends on the supply and demand for the product, given the prices of other products.
A market is a mechanism for continuously optimizing a collection of prices relative to one another. The price of any product depends on the prices of the inputs to its production, as well as the prices of competing products, and the current supply and demand. So, prices depend on prices. This circularity must be bootstrapped for markets to work.
In modern societies, prices are bootstrapped in an ad hoc way, without any design or plan. This makes market prices somewhat random. They depend on external conditions in ways that are unclear and unchosen.
The best way to bootstrap market prices is to appraise the physical inputs to the economy, AKA "natural resources", based on their utility, scarcity and downstream effects (such as pollution). Natural resource taxation should be applied at the point of use, extraction or degradation. All prices ultimately depend on the prices of natural resources, and the prices of natural resources are not entirely determined by the market.
Libertarians might complain that natural resource taxation would require price-setting by government bureaucrats, which is an opportunity for corruption. That is true, but prices have to be bootstrapped somehow. Markets aren’t magic. Implicit, ad hoc pricing creates more opportunities for corruption and evasion. If we don’t price natural resources, then markets are not bootstrapped, and we have a tragedy of the commons. Currently, we have a mixture of ad hoc pricing and no pricing.
This is the best summary I can give you (5 paragraphs, instead of 22), but you should make your comments on BG's blog instead, in case he has anything to respond with.
Markets are an excellent mechanism for organizing production and distribution, but they aren’t magic. They don’t generate prices ex nihilo. Market prices are circular. The price of a product depends on the prices of the inputs to its production. The price also depends on the supply and demand for the product, given the prices of other products.
A market is a mechanism for continuously optimizing a collection of prices relative to one another. The price of any product depends on the prices of the inputs to its production, as well as the prices of competing products, and the current supply and demand. So, prices depend on prices. This circularity must be bootstrapped for markets to work.
In modern societies, prices are bootstrapped in an ad hoc way, without any design or plan. This makes market prices somewhat random. They depend on external conditions in ways that are unclear and unchosen.
The best way to bootstrap market prices is to appraise the physical inputs to the economy, AKA "natural resources", based on their utility, scarcity and downstream effects (such as pollution). Natural resource taxation should be applied at the point of use, extraction or degradation. All prices ultimately depend on the prices of natural resources, and the prices of natural resources are not entirely determined by the market.
Libertarians might complain that natural resource taxation would require price-setting by government bureaucrats, which is an opportunity for corruption. That is true, but prices have to be bootstrapped somehow. Markets aren’t magic. Implicit, ad hoc pricing creates more opportunities for corruption and evasion. If we don’t price natural resources, then markets are not bootstrapped, and we have a tragedy of the commons. Currently, we have a mixture of ad hoc pricing and no pricing.
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Shorter, Better Summary of Natural Resource Taxation
posted by sleepy-sniper on July 16th, 2023 at 2:19AM I made a shorter, better summary (4 paragraphs instead of 5):
Markets are an excellent mechanism for organizing production and distribution, but they don't generate prices *ex nihilo*. Market prices are circular. The price of a product depends on three factors: 1. The prices of the inputs to its production. 2. The prices of competing products. 3. The supply and demand for the product, given the prices of other products. So, prices depend on prices. Markets are a way to continuously optimize a collection of prices relative to one another, but this circularity must be bootstrapped for markets to work. In modern societies, prices are bootstrapped in an ad hoc way, using a combination of resource extraction fees, regulations, licenses, taxes, government fiat, etc. This causes market prices to depend on external conditions in ways that are random and unclear, without any design or plan. The best way to bootstrap market prices is to appraise the physical inputs to the economy, natural resources, based on their utility, scarcity and downstream effects (such as pollution). Natural resource taxation should be applied at the point of use, extraction or degradation. All prices ultimately depend on the prices of natural resources, and the prices of natural resources are not entirely determined by the market. Libertarians might complain that natural resource taxation would require price-setting by government bureaucrats, which is an opportunity for corruption. That is true, but prices have to be bootstrapped somehow. Markets aren’t magic. Implicit, ad hoc pricing creates more opportunities for corruption and evasion. If we don’t price natural resources, then markets are not bootstrapped, and we have a tragedy of the commons. Currently, we have a mixture of ad hoc pricing and no pricing.
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