Monday, October 01, 2012

Traffic, Economics, and Constructal Law

There are a large number of different kinds of self-organizing processes, from chemical to biological to neurological to social. As we learn from the constructal law, these processes are fundamentally flows. And the flows create patterns. And the patterns affect the flow.

In each of these kinds of self-organizing processes, we see coordination of behavior. From this emerges patterns. In social systems, incentives matter. To understand the behaviors of a system, understand the incentives involved.

Traffic is a self-organizing process. A variety of orders emerge in traffic, ranging from steady flow to utter standstills. Traffic jams are a kind of order which emerges -- though most people would certainly classify it as an unwanted, even a "perverse" order. But how do traffic jams emerge?

Let us leave aside for a moment accidents, which will certainly slow traffic. They are hardly the only source. How many times have you been in heavy traffic and wondered what on earth was causing the slowdown, only to find traffic suddenly open up so that you are driving along as a more reasonable rate of speed -- only there appeared to be no reason for either the slowdown or the speedup?

The main cause of such slowdowns is the fact that when we are driving, benefits are concentrated while costs are dispersed. Worse, costs are dispersed behind us, where it won't affect us.

For example, if we find we are in a turnoff lane and we don't want to turn off, most of us will try to switch lanes, even if it means causing others to hit the brakes. In heavy-enough traffic, one person hitting the brakes will result in others hitting their brakes. This results in a chain-reaction slowdown that may only dissipate after a half mile or more. And this is assuming that nobody changes lanes, keeping the slowdown in one lane. Naturally, there will be those who want to continue going at the rate of speed they are going at and will therefore switch lanes. They gain, but at the expense of another lane slowing down. Thus there can be a chain reaction both down and across lanes. And all because people are responding to what will benefit us without considering the costs to others. And, like I said, those others are behind us, so we are typically left unaware of what we have done. And since we don't know any of those people, we probably don't care all that much, anyway. Further, any cost we may incur on ourselves is going to be much less than the benefit we gain by switching lanes.

Thus, the incentives overall are for us to switch lanes to our benefit. However, if none of us did so, traffic jams would be very rare. One does not see too many traffic jams on carpool lanes precisely because one cannot switch lanes on them -- they are one lane, and they are difficult to get on and off of. As a result, traffic moves much faster.

All of this is merely an analysis of what happens. Knowing this, I am not going to stop switching lanes, because since nobody else is going to stop doing so, I'm not going to make any difference on things other than to slow myself down getting to where I am going. And even if most people did stop switching lanes except when absolutely necessary to enter or exit, there would be a number of free riders taking advantage of everyone else following the rule, thus causing traffic to slow for the rule-followers. And since enforcement of any lane-switching rule would actually slow traffic more (not to mention be rather arbitrary, as it would only be enforced if an officer is around, and then the officer would have to read your mind to understand your intention in switching lanes, which is impossible, making the law impossible to enforce) from stops and from drivers changing their mind if they think they see a police officer, legislation would only make things worse. Other than trying to design roads that take human behavior and constructal law into conscious consideration, there is not much one can do.

And even with such conscious design, there will still be people making mistakes, slow drivers, fast drivers, etc. According to constructal law, differences in flow speed cause structures to emerge. People driving slower than the flow of traffic or faster than the flow of traffic, causing people to switch lanes and hit their brakes. But again, there is nothing that can be done about differences in speed. There simply cannot be a law stating that people have to drive exactly 60 miles per hour, no faster, no slower. People do have to enter and exit, etc. -- aside from the practical problems of enforcement. And if there is a traffic slowdown, are you going to ticket everyone?

Traffic acts as a good way of understanding incentive structures. There is no way of getting around the fact that benefits are concentrated on you while the costs are distributed onto a large number of drivers, most of whom are behind you. Certainly one could just deal with the fact that you made a mistake about what lane you should be in and exit and turn around or re-enter traffic further down. But how many people are realistically going to do that to the benefit of unknown strangers? If you haven't done so, you're one of those people who wouldn't. That's because the cost would be concentrated on you, while the benefits would be distributed to unknown strangers.

Politics works the same way as traffic. Benefits are concentrated, while costs are distributed. If the government gave me $300 million, that would benefit me greatly. But it would only cost $1 per person in the United States. It's not a big deal for you to give up a dollar, but it's a very big deal for me to receive $300 million. And this is the argument we repeatedly hear from politicians arguing for their pet projects, subsidies, etc. "Why, this program only costs ten million dollars." And when you break it down per taxpayer, it's not that much. But ten million here, ten million there, and soon you're talking about real money. This particular driver not switching lanes isn't going to make much of a difference on traffic, though his switching lanes may benefit him. One would have to get everyone to change their behaviors to get a change in traffic behavior. And that would mean a structural change in incentives.

While political sytems act like traffic, economic systems act the opposite of traffic. In a free market economy, costs are concentrated and benefits are dispersed. Any business owner who makes a mistake loses their business, but successful businesses distribute their benefits out to customers with the increase in goods or services, including increases in quality, etc. from competition. A free market would be like a traffic system in which somehow drivers who did things that would slow traffic were removed from traffic and made to start over again, thus making the flow of traffic improve for everyone else. How quickly would people learn what they needed to do to keep traffic flowing well? Yet, because of the incentive structure of free market economies, this is precisely what happens in the economy.

Of course, many prefer the traffic/political model because the concentrated benefits are easy to see, while the distributed costs are difficult to see in these models. On the contrary, in economic processes the distributed benefits are difficult to see, while the concentrated costs are easy to see. It is easy to see the benefits of the government stepping in to rescue General Motors; it is difficult to see the distributed benefits of letting it die off. It takes considerable amount of understanding of economics to understand the latter, so we should not be surprised people don't see it that easily. Like the lane-switching driver, the benefits are immediate and clear; the costs lay far behind among the unknown many. Worse, even if you do understand this, there's not a lot of incentive to do anything other than to continue to switch lanes to your own, concentrated, benefit.


Xerographica said...

As a resident of Los Angeles I'm pretty well versed in traffic problems. But I'm not sure if I necessarily agree with your analysis. The problem simply seems to boil down to supply and demand.

It bugs me when I'm sitting in traffic while the people going the opposite direction have absolutely no traffic to deal with. It would be far more efficient if the center divider automatically moved over and took an extra lane (or two) from their side and gave it to our side. It wouldn't be practical though because of too many obstacles.

That's kind of what the political debate boils down to though...where should the center divider be between the public and private sectors. How should we divide the labor between the two sectors? But that's what the invisible hand is move the center divider to the benefit maximizing location. That would easily happen simply by concentrating the costs of public goods onto the people who actually pay for them...taxpayers.

It's really not easy to explain to people the benefits of concentrating costs though. I fail miserably at it. Which is amazing because the foundation is already there...1. "The price of anything is the amount of life you exchange for it." - Henry David Thoreau and 2. "treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." - Bastiat

Troy Camplin said...

Actually, I should have mentioned the issue of supply and demand. In a situation in which costs increase due to low supply, what typically happens? People discover alternatives. This is true with traffic as well. If the major highways become too congested, people find alternative routes. In fact, it has been demonstrated that increasing the number of lanes does not necessarily increase traffic flow. Quite the contrary. With the addition of new lanes, people stop using their alternative routes, with the resulting increasing often more than making up the difference. Add a new lane or two, and you might have an even more congested highway. If highways were the only way to get around, you would be right that adding lanes would help. But the existence of alternative routes which can be rejected can in fact make an increase in supply reduce perceived costs much more than actual costs, meaning more congestion, not less.

Xerographica said...

Most of us would not consider working in a sweatshop to be a "good" option. Yet, in the 50s and 60s when manufacturing jobs really started to go overseas (because of unions) people in the receiving countries flocked to work in the newly created factories. What does that tell us? It tells us that for those people...working in a sweatshop was "better" than their previous "best" option. What was their previous "best" option? Who knows? Maybe subsistence agriculture?

If we add another lane to a freeway...and people choose that option instead of their previous "best" option (biking to work, taking public transportation, taking surface streets, etc)...then all we can know is that we gave them a "better" option.

When liberals argue against sweatshops, minimum wages, discrimination, etc...they really piss me off. That's not how you help people. If they want to truly help people then they will give them "better" options. You really really don't help people by taking away their "best" options.

How can you tell whether you've given somebody a "better" option? It's easy...they choose the option you've offered them.

What makes one option better than another is based on the fundamental economic truth that everybody wants more for less. As Henry David Thoreau said, "The price of anything is the amount of life you exchange for it."

Given that everybody wants more for less...suppliers have a strong incentive to do more with less. Doing more with less is resourcefulness. Resourcefulness is how we overcome scarcity.

But people don't truly understand the implications of everybody wanting more for less. If they did then I wouldn't have to break my brain trying to figure out how to persuade them of the value of allowing taxpayers to seek more for less in the public sector.

If we allowed taxpayers to seek more for less in the public sector...then would they choose to spend their taxes on adding another lane to the freeway? Or would they choose to give their taxes to a government organization that gives bicycles to people? Giving bicycles to people would reduce healthcare costs and reduce pollution. Or maybe it wouldn't.

If we understand the process...then there's no need to debate the actual outcome because whatever the actual outcome will will represent a far far far greater abundance of the public goods that people value enough to voluntarily exchange a portion of their lives for.

Troy Camplin said...

There is nothing you said with which I disagree. It's all true. However, it's also all beside the point. My analysis has nothing to do with whether or not one should expand then number of lanes to give people more choices. The analysis has to do with the traffic patterns which emerge and why. If you expand the number of lanes, people will have another choice -- but in making that choice, the road in question will not become less congested, because it will reach a new equilibrium in which congestion is the same or worse. One may still argue that one should nevertheless expand the number of lanes, but one has to take my emergent-patterns analysis into consideration as much as the one of increasing choices. The point of my analysis was to show that there are emergent, self-organizing systems whose behaviros emerge because of concentrated benefits and distributed costs. In this sense, government actions are more like traffic than a catallaxy.

Xerographica said...

But the emergent patterns on a freeway are more like a catallaxy* than government action. On a freeway if I perceive that I stand to benefit by changing lanes...(and who doesn't want to benefit?)...then I do so. The choice is mine and mine alone and I move me and me alone (and perhaps a couple voluntary passengers).

There certainly are ripple effects...the person who was behind me in my previous lane speeds up in order to prevent somebody who drives slower than him from getting in front of him. But every choice signals an opportunity...just like it does in a catallaxy.

The people who are good at deciding when it's worth it to change lanes make better than average progress (aka taxpayers)...and people who are terrible at deciding when it's worth it to change lanes make less than average progress.

For your analogy to work...we'd all have to elect representatives to decide for us when we change lanes. Or...perhaps there would only be 100 buses for us to get on...and we'd vote on who the bus drivers should be. Then we'd all shout at them that they are going the wrong way.

Allowing 538 people to spend 150 million people's taxes (1/4 of our nation's revenue) is so absurd that any decent analogy would sound ridiculous. The closest real life example is how parents spend money for their kids. But that's 2 people representing the interests of 2.5 other people that they know better than anybody else does.

We elect representatives to decide whether our taxes should be spent on adding a new lane and/or adding more public transportation. The costs are dispersed among millions of taxpayers while the benefits are concentrated among a small group of lobbyists.

Clearly it's not worth it for any given taxpayer to make the effort to protest that $10 of his taxes were spent on farm subsidies. And clearly it is worth it for farmers to lobby for millions and millions of dollars of subsidies.

That's the point of concentrated benefits and dispersed costs...and I don't think the freeway analogy is really the best way to help people understand it.

I really wished the government worked like a freeway. If I wasn't happy with how much progress a government organization was making with my taxes...then I'd simply change lanes and give my taxes to another government organization. The government organizations that made the most progress would get the most funding. As the diminishing returns too would the incentive to change lanes.

What would happen if all the lanes were filled? Would people want to pay less taxes or would they lobby for another government organization be added? The more government organizations that were added the higher the tax rate would go...or vice versa...until we reached a benefit maximizing tax rate.

*I had to look it up. I'll see your catallaxy and raise you with my ephemeralization.

Troy Camplin said...

Again, you're missing the point of my analysis. This has nothing at all to do with who is paying for the roads, to expand the roads, etc.

The point is, given a particular stretch of highway on any given day, there are reasons we see particular traffic patterns. The reasons we see those patterns is because the system is self-organizing and because costs are concentrated and benefits are dispersed. In the latter sense -- and ONLY in this latter sense -- does the actions of the actors involved resemble the actions of the actors involved in government.

In the market economy, the patterns within the spontaneous order are created in no small part because costs are concentrated and benefits are dispersed.

In the democratic order, the patterns are created because costs are dispersed (to the taxpayer) and benefits are concentrated (on the recipients of government largess).

In traffic, the patterns are created because costs are dispersed (to the other drivers) and benefits are concentrated (on you).

In each case, you have patterns created by rational, self-interested action. I am arguing that government action is equivalent to the actions that result in a traffic jam, while economic action results in patterns that would be the opposite of a traffic jam. In other words, the more one engages in rational, self-interested action, the smoother traffic would flow -- if traffic were more like a free market economy than like government action INSOFAR as the way costs and benefits are concentrated or distributed.

All that other stuff is completely irrelevant to the analysis I did or to the metaphor I made.

Xerographica said...

A non-accident traffic jam occurs because the demand for space exceeds the supply of available space...aka rush hour traffic.

If I change lanes when I shouldn't have...then I watch people in my old lane pass me by. The more people that pass me by the more I regret my decision to change lanes. The more people that pass me by the bigger my mistake becomes. But if costs were truly dispersed then nobody would ever pass me by when I made a mistake...everybody would slow down proportionally.

But when everybody does slow down it has absolutely nothing to do with everybody suddenly making more mistakes. Suddenly the rules of the freeway change and it's a mistake to be self-interested?

The freeway is always directed by the invisible hand (with a few non-relevant exceptions). The same of course cannot be said of the government.

So your metaphor just doesn't work. When I make a mistake to change lanes when I shouldn't have...then I alone bear the costs...I went into a lane that slowed my rate of progress diminished. But my mistake to change lanes when I shouldn't have has a vanishingly small effect on the flow of traffic.

Just like if I gamble my home on a failed business idea...then my mistake has a vanishingly small effect on the economy. But if I gamble all the homes on my block on a failed business idea...then my mistake has a more pronounced effect. When 538 congresspeople gamble 1/4 of our nation's revenue on failed government programs...then the consequences are depressions/recessions. We could easily prevent recessions/depressions simply by promoting heterogeneous activity in the public sector...which could be accomplished by allowing 150 million taxpayers to choose which government organizations they gave their taxes to.

Please tell me exactly where my train of thought chugged itself into irrelevant land.

Troy Camplin said...

Now you're on topic. :-)

I am not saying that in traffic one cannot make a mistake that costs you individually. Nor am I saying it is suddenly a bunch of people making mistakes. And yes, it is an invisible hand/spontaneous order -- but not all unintended consequences are beneficial.

Let's look at your examples.

If you think the next lane is moving faster, and you move over, but then discover it's slower, did you only create a cost for yourself? Hardly. Nor have you necessarily made a mistake. You may have been right at the moment of your decision, but did not know that there were people ahead of you making the same decision, which would slow down the lane you are going into. When someone moves into a faster lane, they are not doing so costlessly. Nor are they the only one observing the other lane is moving faster. As others notice lane B is moving faster than lane A, some people will choose to move into B. As they do so, they slow B. The new space created by their switching lanes allows lane A to now move faster. This will of course result in people in the now slower B want to move to A. Some will, resulting in A slowing and B speeding up. Etc.

Thus, there is both distributed cost and distributed benefit, just as there is concentrated cost and concentrated benefit. But which dominates and affects your decision-making most? It is the fact that you perceive the benefits to be concentrated. You may be wrong, but the fact is you are concerned much more with benefits than with costs, precisely because they costs you incur are not put back on you, but are distributed to others -- just as others' costs are distributed onto you. You thus do not make a mistake when moving into another lane that then slows down; rather, you are reaping the costs of others doing so ahead of you to try to gain.

In the market, you are attempting to reduce your costs, which can be done in a more direct way. Yes, you want to benefit -- but you want to do so in such a way that you reduce your own personal costs as much as possible. A business owner is always looking to reduce costs. It is in so doing that they reap more benefits. However, it is customers who benefit most from the cost-cutting of the business. And if the business goes out of business (high cost), the customer simply goes elsewhere (low cost; still higher benefit).

A democracy is also a spontaneous order with costs and benefits being distributed. However, it does so in a way different -- indeed, opposite -- from the market.

In democracy, the market, and traffic, there are individual actors acting in their own rational self-interest in an ongoing process. People can enter and exit freely. There are costs and benefits. But the patterns of costs and benefits differ from order to order. I still continue to see the cost-benefit pattern of traffic as more closely resembling democracy than the market.

Xerographica said...

My comment exceeded the character I posted it here...dispersed costs and concentrated benefits.

Troy Camplin said...

Today we are going to hear from a lot of people about how little PBS costs each of us -- only $0.25 per year -- while the benefits for the PBS stations are immense. The argument is precisely that so little money doesn't matter much, given how much it benefits this particular entity. Costs are distributed, benefits are concentrated.

It is in people's best interest to get government subsidies -- and the sbusidies can be easily gotten -- precisely on the argument that the benefits are concentrated, but it "only" costs a tiny amount per taxpayer (i.e., the costs are distributed).

Yes, you cannot choose to whom to distribute your part of the costs with government. That would be equivalent to being able, in traffic, to decide that if you were caused to be slowed in traffic by the actions of others, that you were only going to allow blue cars to go faster. In traffic this is obviously impossible.

My one and only concern in this entire analysis is the way costs and benefits are concentrated and distributed. That is it. In traffic, benefits are concentrated on the driver making the decisions they do (otherwise they would not make the decision, since everyone is acting to try to maximize their own benefit), while costs are dispersed to those drivers who have to slow down because of your actions. It is because of the fact that costs are distributed and benefits are concentrated that traffic slows down at on/off ramps -- expecially at major highway intersections. People who are in the wrong lane, meaning they are going to accidentally exit, try to fix the problem by switching lanes, no matter the traffic conditions. The result is slowed traffic.

In this way, and only in this way, is traffic similar to government. The patterns of organization of both are created by the fact that costs are distributed and benefits are concentrated. It does not matter why or how or the fine details of the interactions. The one and only thing that matters for my analysis is the patterns of costs and benefits.

Thus, if I go to my Congressman and ask him for funding for my nonprofit and get it, I am concentrating benefits on me, and distributing benefits to you and others. The result is that I slow everyone else down -- I slow down the economy by removing money from the economy. This pattern is identical to the cost/benefit patterns of traffic. That is where the analogy begins and ends. Nothing else is relevant to the analysis.

Xerographica said...

Let's say that I'm cruising along going 70 in the fast lane. I spot you up ahead in my lane...but you're going 60. Who does that? Soon enough I'm stuck behind you. I'm bearing the cost of your decision to go 60 in the fast lane. But I still have a choice in the matter...I can stay in that lane and hope that you'll realize you're blocking the flow of traffic...or I can simply go around you.

If I go around you then I would certainly benefit and absolutely no cost would be passed onto you or anybody else. But would I be the only person who benefited from my smart move? Nope...because I successfully conquered an obstacle...and by doing so I did not contribute to the size/difficulty of the obstacle. Therefore, the benefit would be dispersed and I alone would bear the cost.

But that's not how the public sector works. I don't have the choice to go around PBS. Whether I like it or not my $.25 is stuck in this lane...when I'm absolutely certain that other lanes would be more profitable.

Troy Camplin said...

My analysis is not about choice. It's about costs and benefits.

Xerographica said...

"And all because people are responding to what will benefit us without considering the costs to others."

Is this how you drive? I know it's not how I drive. If I waited too long to get over for my exit...then rather than cut people off and risk an accident...I'll merely curse my lack of individual foresight and take the next exit. That's a concentrated cost and a dispersed benefit.

And when I do happen to witness one person cutting off another...99% of the time it was not intentional. It wasn't them ignoring the cost to was just a problem with the driver not having their side view mirrors facing their blind spots*.

The same cannot be said about congress. Congress intentionally makes taxpayers bear the costs of public goods that they do not want, need or value. If we want to change this...then we simply need to help people understand the value of having the freedom to put their own taxes where their mouths/hearts/minds are.

*If a cop is directly behind somebody...then they should pull that driver over if the cop can see the driver's face in the driver's side view mirror. Seeing what's directly behind you is not what your side view mirrors are's what your rear view mirror is for.

Troy Camplin said...

Whether or not that's "how you drive," that is in fact how you drive. The example you gave was a cost-benefit analysis. You decide that the cost *to yourself* is too high, so you decide to just exit and re-enter. But if you look and see that you have enough room, you will try to fix your mistake. Even if you have a few car lengths, that switch can cause people to brake. Even a quick tap can result in a chain reaction.

There are more courteous drivers, and less courteous drivers. They are all on the road. I have had people slow down to let me in, and I have had people speed up to prevent me from coming in.

For example, just the other day, I was trying to get onto 75 during extremely heavy traffic. There was enough room for me and the person behind me to enter smoothly, but there was really not much room. And things were hardly going to improve on the next onramp. The person behind me cut across the solid line and began to speed up, which would have resulted in my being unable to enter 75. I cannot imagine she did not know that that is exactly what would happen from her actions. I cut over anyway, causing her to have to slam on her brakes. Had she not been a jerk, no brakes would have had to have been slammed on, with the result of the traffic jam worsening.

I wrote the original piece based on my observation of what people were in fact doing on 75 as I was driving to work. I saw people switching lanes with no regard to the fact that they were slowing traffic behind them, all for their own benefit. I saw people in the "exit only" lane for a half mile before deciding they should get over. Etc. I saw people doing these things. It's not a matter of your or my being rude or polite drivers. It's a matter of there being a wide variety of drivers acting in their own self interest -- which may involve going slower, faster, or the same speed as the flow of traffic; which may involve makng mistakes; which may involve cutting people off, whether intentionally or unintentionally, knowingly or unknowingly.

These drivers are not equivalent to congressmen -- who are but a tiny minority of what constitutes a democratic government anyway. No, these drivers are equivalent to lobbyists. Lobbyists want benefits concentrated on them. If anyone asks for money from the government, the costs are dispersed and the benefits are distributed. Again, it is in this way and only this way that traffic is like democratic government. Only traffic is a physical manifestation of the fact that people are acting on the roads as they are precisely because benefits are concentrated (on them) and costs are distributed (to others) in exactly the same way that benefits are concentrated on lobbyists and costs are distributed to the taxpayers.

In fact, absolutely nothing would change with your prefered way of distributing tax money. You would still have concentrated benefits onto those programs the taxpayers wanted to send their money to and costs distributed to each of the taxpayers who are willing to support this or that program. It still created the same, identical cost-benefit patterns we see in traffic.

Xerographica said...

If there is sufficient room between me and the car ahead of me...then I do not break when somebody pulls in front of me...I simply take my foot off the gas to create the appropriate distance. This does create a chain reaction...that quickly diminishes in strength like the bounces of a dropped ball. Each car behind me has to adjust their distance less and less. But this "negative" reaction is completely offset by the "positive" reaction in the lane that lost a car.

For every action there is always an opposite and equal reaction. For every lane that gains a car there is a always a lane that loses a car. When the freeway gains more cars than it loses...traffic increases. Just like how my waist size increases when I consume more calories than I burn.

"In fact, absolutely nothing would change with your prefered way of distributing tax money."

If absolutely nothing would change then socialism is a viable concept. Except it isn't. It isn't because there is always a significant disparity between how any two individuals would spend their time/money. That disparity forms the basis of heterogeneous activity...which we can certainly observe on the freeway. Every person on the freeway is going to a completely different destination. I don't know where anybody else on the freeway is going...and it's impossible to know where everybody on the freeway is going. Trying to control where people go assumes we know better than they do where they should be going. That's why society is better off when we give people the freedom to try and get to their destinations. Just like society would be better off if we allowed taxpayers to choose which government organizations they gave their taxes to.

Our diversity is our greatest strength...which is why failing to apply this fundamental fact to the public sector is our Achilles Heel.

Troy Camplin said...

Again, all of this is true, but unless it is focused like a laser on cost/benefit distribution patterns, it's simply not relevant to my post.

The point is that when one is in heavy traffic, benefits are demonstrably more concentrated than dispersed and costs are more dispersed than concentrated. In this sense, it is identicial to how costs and benefits are distributed when government is involved in creating the cost/benefit distribution patterns, and highly dissimilar to how those patterns are created in a market economy. When our government provides FDIC insurance, they are allowing banks to concentrate benefits on themselves while distributing costs to taxpayers. This is another way of saying that profits are private, while costs are socialized. The same is true in traffic. Most of the benefits to a decision a driver makes are concentrated on the individual driver, while any costs that individual driver makes are distributed to other drivers. This is what causes traffic jams.

Again, if traffic had the same patterns as the market, any time you made an error, your car would be teleported back home. This is the only way that costs could be concentrated on you while benefits were distributed to everyone else. If one could in fact concentrate costs and distribute benefits in traffic the same way they are in the market economy, there would be no traffic jams at all. Traffic would actually flow better and better over time as those who make errors disapepar from the road, and everyone learned what they needed to do to avoid being teleported back home.

In other words, I have been trying to point out that insofar as government patterns of costs and benefits are very similar to traffic patterns of costs and benefits, government creates the economic equivalent of traffic jams. And necessarily so, precisely because the cost/benefit distribution patterns are the same.

Cost/benefit distribution patterns are the one and only thing I am interested in in this post. The details are completely irrelevant. The one and only thing that matters is cost/benefit distribution patterns.

Xerographica said...

"This is what causes traffic jams."

Again, traffic jams are caused when the freeway gains more cars than it loses.

"Again, if traffic had the same patterns as the market, any time you made an error, your car would be teleported back home."'d get in an accident...which, for most people, is way worse then merely being teleported back home.

"Traffic would actually flow better and better over time as those who make errors disapepar from the road, and everyone learned what they needed to do to avoid being teleported back home."

Traffic flows better when the freeway loses more cars than it gains. It has absolutely nothing to do with people making less mistakes.

"Cost/benefit distribution patterns are the one and only thing I am interested in in this post."

In my post on a taxpayer division of labor I share this short, simple yet highly effective youtube video which explains the problem with the government concentrating benefits and dispersing costs.

We both agree that it's a problem...yet we disagree on whether the same problem manifests itself on the freeway. I RSS subscribe to your blog so hopefully in the future you'll do a post on how we can solve the problem. I think debating solutions would probably be a better use of our time.

Troy Camplin said...

Yes, there is freedom of entry and exit.

If more and more people enter the economy, you get better and better flow/economic growth.

If you get more and more people trying to get government largess, you get slowed growth -- even stopped growth.

When more people "enter" to get government benefits than "exit", you get the economic equivalent of a traffic jam. Why? Benefits are concentrated and costs are distributed.

I have no interest in "solving" the problem with traffic in this piece. I was interested in making an analysis. I am interested, as a scientist, in understanding. Only by understanding, first, without any concern for any kind of "ought" does it then become possible to develop an "ought" that will actually work.

The point is to understand the world, not to change it. In fact, one cannot change the world; one can only make things fit teh natural flows of the world better or worse. And it is impossible to make things bit the flows better if you don't understand how things flow.

Xerographica said...

The government would work better with less lobbyists competing for benefits? That can't be right. Resources are efficiently allocated on the basis of partial information.

Bad: Nobody being allowed to push information to congress. Congress would solely rely on pulling information

Better: Lobbyists pushing information to congress and congress comparing it to the information they've pulled

Even Better: Lobbyists pushing information to congress AND to 150 million taxpayers who would compare it to the information they've pulled.

The point is to allow people to use their own resources to try and make the world a better place. That's how we make progress. Failure to make progress stems from failure to protect heterogeneous activity.

Troy Camplin said...

No, the government shouldn't be providing benefits at all. They should not be interfering in the economy at all. Their interactinos cause traffic jams in what would otherwise be an increasingly-smooth-running economy. Why? Because they concentrate benefits and distribute costs -- an analogy I can make because of my cost-benefit distribution pattern analysis in which I discover that traffic patterns more resemble government largess patterns than they do economic patterns.

Xerographica said...

The EPA doesn't concentrate benefits and distribute costs...congress does. Both, however, are part of the government. Therefore, the problem has absolutely nothing to do with EPA or lobbyists and everything to do with congress.

Troy Camplin said...

Sure it does. All regulation acts to concentrate benefits. In the case of the EPA it may also distribute benefits, but it is doing so by concentrating benefits for environmentalists, for "green" businesses, for established businesses by creating barriers to entry, etc.

Subsidies all concentrate benefits on those getting the subsidies, and distribute the costs to the taxpayers.

But even if you can find an exception or two, that does not at all in any way, shape, or form, negate the rule. Government involvement in the economy always, necessarily, concentrates benefits and distributes costs. It is what it does. That is a feature of the system.

Xerographica said...

When I was a kid growing up in Los Angeles I remember physical education classes would be cancelled because of the high levels of air pollution. That's a perfect example of dispersed costs and concentrated benefits...the kind of thing that the EPA fights to change and in many cases has successfully changed. I don't know if it was because of the EPA...but air pollution levels are drastically reduced here in LA.

The only problem with government is that your taxes fund the EPA regardless of your perspective on its overall benefit to society. If I believe that the EPA is beneficial...then I should bear the costs of giving them my own taxes. If the benefits are greater than the costs...then I'll continue to give them my taxes. But that's the definition of "profit".

Andrea Clark said...

"Again, traffic jams are caused when the freeway gains more cars than it loses." This misunderstanding of the point may have been cleared up with a picture. This video shows a ring of cars, the drivers of which were asked to drive at a constant speed. Little mistakes perpetuate behind the driver until traffic comes to a standstill.

Xerographica said...

Andrea Clark, according to Wikipedia... a bottleneck is "a phenomenon where the performance or capacity of an entire system is limited by a single or limited number of components or resources."

My behavior as a person pretty much consists of trying to identify and solve bottlenecks. If I can't concentrate because my stomach is growling...then I point at my stomach and say, "you're the weakest link!"

If I'm stuck in traffic...I point to my brain and say, "you're the weakest link for not figuring out how to work at home!" If I'm stuck behind a slow poke...I point to them and say, "you're the weakest link which is why I'm going to go around you!"

That's pretty much life in a nutshell...identifying and solving bottlenecks. The problem is that people don't understand the value of diversity when it comes to identifying and solving bottlenecks. They don't understand that 150 million taxpayers are far superior than 538 congresspeople at identifying and solving bottlenecks. That's the bottleneck that I see and struggle to solve.