This has been known literally for centuries. Its called the second fundamental theorem of welfare economics. I wrote about it in the "Soluctions to Sub-optimal Pareto Optimums" section of my article here: https://governology.wordpress.com/2016/09/04/the-role-of-gov...
You have a good point here. I agree that governments are not exempt from the game-theoretic rules that affect everything else. While they are an effective solution to coordination problems of society, they suffer from coordination problems of their own (I think that might be one of the reason governments tend to develop layered structures; it's like turtles all way down, but here we have governments all way up).
> But it's necessary to argue why, if the society cannot produce the flood control systems, why it should be expected to produce a government that will produce the flood control systems.
I think one of the arguments for this would be the fact that it actually happens - i.e. people left alone tend to form governments that then make flood control systems :).
From what you wrote in your previous comment I understand that you believe, that if one would sum up all the benefits and all the costs of government regulation, one would end up with a negative number. Have I undestood you correctly? If yes, could you elaborate on why you believe the effect is net negative and not net positive? I.e. what makes the costs bigger than benefits?
In theory, yes, MAD and Nash Equilibrium and all that.
In practice, people and government are irrational and make mistakes (most notably in 1983 when we almost destroyed the world due to a false alarm) -- and the cost of policing this theoretical balance of power costs a hell of a lot of resources that could be better spent doing more productive things.
If you treat the populace as a closed system, and the government as an external actor, then these actions increase total utility by preventing larger losses to the external actor.
That's a good example -- and another "coordination problem" at that, which is one of the types of problems where appropriate government action may be the most efficient solution.
Normal or abnormal it's worth thinking about about the conditions that make it arise and how to support that condition of more widely shared prosperity - otherwise I think we get stuck in a local optimization peak or worse imho.
I'd say this is more like government taking a local optimum from one time period, and casting it in stone. You can see the same thing happen with in the nuclear power industry, with light water reactors being given a regulatory blessing that made sense at one point.
People are rational actors at optimizing their own well-being, as they see it. That holds in all cases but it isn't very helpful to the politicians.
What breaks is trying to get people to optimize for some other factor by manipulating economic signals (e.g. with inflation). Once they know about the manipulation they'll compensate for it. Not 100%, not always even in the right direction, but enough to make the eventual outcome chaotic.
Yes but if a system consistently fails in response to external pressure then it’s not an equilibrium, which will almost certainly end up being bad for the people under that system as they are conquered, annexed etc.
That's an interesting idea for an agent-based-model and a study: Show how certain corporate policies would push towards short term local-optima (what's happening in the article) instead of more long term global optimum states.
This is not true. Rational actors acting in their own self interest does not always approach a global optimum. An external actor limiting choices can trivially lead to better outcomes, the prisoner's dilemma being an obvious example. The tragedy of the commons is another, where the government historically either intervened to maintain good behaviour, or intervened to enclose the commons, in either case limiting the options of rational players.
Turnover in a city can be argued to be good or bad. Turnover across a city is more clearly bad, but as a said it's still arguable. In any case, I believe you're not making a great case as your basic argument that limiting choices of rational actors can never lead to better outcomes is incorrect, and I think it would be a good idea to read/watch the material I linked or referred to in order to get a better idea of what I'm arguing and so you can directly try to refute the rebuttals of points I'm going to be making. It's going to be faster than relitigating most of this conversation up until that point.
It's both because it's good policy. I "want" insofar as I would expect any government to maximize our position via basic game theory. It's inevitable because those who maximize their position are going to be the dominant player over time.
> ideological conflict (competition between optimizations)
This is an important idea. Optimality shifts when the environment shifts, and some ideas which work well in one environment may end up working badly when the world changes.
Because the world is inevitably complex and stochastic, we need enough dynamism in society in order to continually adapt, and for that we need a system that permits competing ideas, as well mechanisms to limit the amplification of the effects of bad ideas (good democratic institutions do a decent job at the latter).
I think the idea is that we're in a local maximum for "how good is the current arrangement for society as a whole". Any small change to the arrangement is going to make things worse for one party or another, and probably even make things worse for society as a whole. But there's a chance that a bigger change could get us to an even higher maximum, where everyone is better off, both individually and on net.
It's hard because you can't just jump there, there will be some people or entities that are worse off during the transition. Also there are unintended consequences so things might not go as you expect.
Usually to (attempt to) make changes like this, it has to be a government doing it, because it's a coordination problem and you have to force people to look past their short-term self-interest for a little while.
That's why the article also talks about state coordination, of the sort most famously seen at the tail end of the (first) Great Depression and through the Second World War - the use of government power to construct a scheme of incentives whereby building a durable future becomes rational behavior.
Which, granted, is also probably a pipe dream, the way things have gone lately. But it wasn't always, nor need it always be henceforward.
It may actually break down well before that. There is probably something akin to the Laffer curve for the power of the central government. I.e. at a certain point, making the government more powerful will make the country poorer.
Interesting
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