Free markets, governments, and space \ stacker news ~econ

12.2k sats \ 8 comments \ @Voldemort 15 Apr econ

I was listening to a podcast this morning that was discussing the feasibility of a human colony on the moon or mars. What I am interested in was not discussed in the podcast (at least through what I have listened to), so I won't go into too the details.

Scarcity and learning

Scarcity is the foundational requirement for the field of economics. A principles of economics course might describe economics as a social science that studies how individuals and societies make choices in the face of scarcity. Others might say it is the study of conflict. Foundational to conflict is scarcity. If people were not competing for scarce resources, there would be no competition and hence no conflict.

Throughout history it has been demonstrated that free markets lead to the best allocation of scarce resources. Best in the sense that free markets optimize some sort of measurement in terms of human well being or satisfaction (utility). In a free market I only make trades that benefit me, and therefore restrictions on my ability to make those trades is sub-optimal.

Of course, if I don't have all the correct information, I might make a trade that does not work out in the end. Asymmetric information can cause all sorts of issues in markets. Especially markets not cleared by prices (like matching markets). However, I can learn from this mistake and make a better decision next time.

Governments

Ignoring my personal political biases, I think at the very least it is true that the broader the population/geography that is being governed, the less powers the government ought to have. I have less issues with my local government taxing me to pay for things that I will use or my neighbors will use. I have more problems with my federal government taxing me to pay for a problem in California that exists because California passes bad policies. The varying levels of cost of living within the US makes the idea of a federal minimum wage almost nonsensical.

Space

In the three body problem series, I think in the second book, there is a situation in which a group of humans is faced with the notion that they will never be able to return to earth. Ignoring what the author posits as the solution, I believe in a situation in which each decision is potentially an existential decision, people will want to remove their burden of responsibility. This would lead to an authoritarian style of government. What's more, there are likely situations in which decisions need to come from one person.

Tying them together

A space colony is a situation in which people are faced with extreme scarcity. Realistically, we would rely on earth for supplies for a significant period of time. Let's call this the earth dependent time (EDT). However, without the ability to produce goods, can there be a free market during the EDT? I do believe there would be some sort of market where people will trade for goods. However, I don't think a purely free market is feasible. There is a fixed supply of goods that need to be rationed to a certain extent. Maybe something like salt will be traded to get out of a chore or for a better place to sleep, but I don't know how to think about the constraints in such a situation. There is no room for mistake in an existential situation. If I make the wrong decision, it could lead to the collapse of the colony.

The other element that makes this hard to solve is that weight of the outcomes imply each decision must be highly informed. The amount of time it would take to learn the downstream effects of each decision would be overly burdensome, further limiting the success of a mission on another planet. As such, one might imagine an authoritarian type figure giving people constraints in which they can trade so as to lessen this information gathering cost.

Questions

So I guess here are my questions - does a free market/libertarian style of government make sense in space when the mistake of one person could lead to the destruction of all?

If not, what at what point do they become optimal? Is it when the system is such that one person/one decision/one trade does not pose an existential threat to certain proportion of others?

Is it some sort of gray area where one person has sole decision making responsibility for specific things and others are up for a vote?

How does this apply to reality?

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100 sats \ 0 replies \ @elvismercury 16 Apr

Agree with others, this is an awesome thought experiment.

I have to go to the mines, but I really like how you've stepped back to a meta-perspective that is rarely explored: what are the un-surfaced assumptions under which we consider "free" markets [1] to be optimal in coordinating under scarcity? Or maybe the inverse: what assumptions underlie the belief, often unexamined, that other forms of collective action are bad?

It's not hard to construct a scenario, like a space station; or a nuclear submarine, or London under siege, where free exchange by free individuals is not the optimal policy for most intuitive definitions of 'optimal.'

[1] Scare quotes because what "free" even means in practice is widely misunderstood. See e.g., this book.

120 sats \ 3 replies \ @Undisciplined 15 Apr

I love these kinds of thought experiments.

You're talking about internal structure. From the outside, there would be nothing unlibertarian or anti-market about people signing contracts to live and work in a privately owned space colony.

I think the key point is that somebody (or group of somebodies) owns the physical building that makes up the initial colony. Like all property owners, they get to set the terms for acceptable uses of their property. Allowing or prohibiting market mechanisms is one of the choices the owner gets to make. It would be very similar to how firms have some internal market mechanisms, but largely don't because the transactions costs are too high.

If someone else wants to connect another colony, or building, then it would be up to those owners to work out the terms. Presumably, that would involve mutually reassuring each other that the connection won't catastrophically fail and kill everyone. It may also involve restrictions on allowing new parties to connect to the structure.

I suspect you're right in speculating that a few critical things would never be subjected to market or democratic feedback, while most aspects of day-to-day life would be fairly liberalized.

40 sats \ 2 replies \ @Voldemort OP 15 Apr

there would be nothing unlibertarian or anti-market about people signing contracts to live and work in a privately owned space colony.

That is a good point.

I suspect you're right in speculating that a few critical things would never be subjected to market or democratic feedback

I think my view is a little different than this. I think it is more so that nothing will be subject to market or democratic feedback until there is some threshold of level of production.

Just to make it easier to discuss, assume there are 10 goods that are required for survival. If we can only produce 9/10, the population will die off.

If there are two colonies, both colonies should produce their own supply of each in case the other has a catastrophic failure. Likewise for 3 and etc.

However, at some point, maybe when there are 100 colonies, each one produces some subset of the goods such that if any 50 colonies are destroyed the other 50 still have enough of each good. Maybe 10 of them will always produce all 10 goods as well.

I acknowledge this seems like an arbitrary thought experiment, but but consider how governments were formed throughout history.

People weren't worried about dying in space; rather they wanted protection from chaotic crime. Over a decade, a government might tax your supply of wheat more than criminals would steal from you, but criminals might steal too much in a single year and cause your family to starve.

Now, I ask myself, does this somehow apply to what happened in Israel over the weekend? Does this have any implications for political philosophy?

100 sats \ 1 reply \ @Undisciplined 15 Apr

What this has me thinking about is all the supply chain disruptions of the past few years. We're sort of living out a much lower stakes version of your thought experiment. I haven't seen a compelling treatment of how a market could maintain optimal redundancy in the overall system of trade.

Still, the gains from specialization are so great that I don't think colonies would generally operate in autarky. What makes more sense is that critical resources would be stored in enough quantity that if something disrupted the supply there would be plenty of time to ramp up domestic production.

That would probably have to be a non-market policy, though, since markets don't seem to operate that way on Earth. Although, perhaps it would be an insurance requirement.

50 sats \ 0 replies \ @Voldemort OP 17 Apr

What makes more sense is that critical resources would be stored in enough quantity that if something disrupted the supply there would be plenty of time to ramp up domestic production.

Yes! Excellent observation. Sadly, I had not thought of this. Specialization -> efficiency gains -> surplus.

0 sats \ 0 replies \ @DesertDave 16 Apr

I don't believe in space.

0 sats \ 0 replies \ @SUPERMAX 15 Apr

Great write up!

0 sats \ 0 replies \ @Coinsreporter 15 Apr

Why don't they tax our entire income? Why only a big portion? You're right, this also happens here in India with us. We pay income tax on federal levels, then we pay taxes on the things we use, then we also pay for the things we sell, direct taxes plus indirect taxes, our state governments also tax us on various counts. It seems as if we were playing 'taxes taxes'.