Thread by @juvoni

Economics & Freedom are inseparable.

Institutions peek into & manage the fate of your life & it gets harder to see how these powers operate & how decisions are made that affect us.

A few books shed light.

The incentive to understand economics is the desire to be free. 🧵 1/46

2/ To see why things are the way they are, Follow the incentives.

3/ A Principal provides the resources, the Agent arranges the resources & acts on behalf of the principal. Incentive problems arise when a principal wants to delegate a task to the agent.

4/ Every problem in society has some economic origin & because of this, the government tries to control the engines of the economy & thus ends up causing more problems for society & its people.

5/ Markets are the most robust way to organize economies because they utilize local knowledge & advantages, are quick to adapt to change, & allow for competition, reputation & failure to drive improvements of the system through the natural order & churn of its participants.

6/ Markets/Institutions depend on cooperation & trust.

The possibility of a continued/infinite game in the life of a human breaks the prisoner's dilemma & makes cooperation the best strategy for survival because humans & society remember the past, so status & reputation compound

7/ The key problem is distortion through media, politics & crony capitalism that has eroded trust and led us to believe a deceptive story in which the people are agents instead of the principal.

In any case, where the people are not a principal they are not free.

8/ Governments & Corporations want to simplify reality and fit it into their own administrative & logistical categories, discarding individual uniqueness & local knowledge that is often critical to managing the complexities of social life and the natural environment.

9/ Economics is the study of how individuals, groups, markets/institutions, create, exchange, & use goods & services, how decisions are made on getting access to them, & the consequences of those actions.

10/ Economics is more of an art than science & breaks down as you go beyond local.

The scale from micro to macro goes from rational to bull-shit.

11/ When an economy is under government control, politicians decide who gets the goods which are produced, as well as how the resources are to be used.

12/ In free markets, Price is the primary guideline in how products can be accessed.

The price reflects the scarcity, availability of the resources, is information, incentive, & the projected value of a product.

Wealth is more than money, it is autonomy & independence; freedom.

13/ Free Markets are also at risk in the Age of Leverage & Technology.

Network effects can make it a rational decision, not to participant in new markets, but the largest markets & networks.

This is anti-competitive & makes society more fragile & the big gets bigger.

14/ A dysfunctional market fails to allocate resources efficiently & equitably where it is no longer rational, fair, or wise to participate in that market.

If you have the rewards, you must also get some of the risks, not let others pay the price of your mistakes.

15/ A functional government is like a benevolent referee protecting the integrity of the game and making sure it's safe, fair, efficient & equitable for everyone to participate in improving the market outcomes for everyone.

16/ If you've played sports before, you know there's nothing more infuriating than an incompetent referee who can take away your points & make you lose the game you've worked so hard to compete in.

If the game is rigged other players & systems have an incentive to cheat/extract.

17/ Economic Efficiency means that what is owned and contributed to by members of society gets the maximum benefits from scarce resources.

Economic Equity is when economic prosperity is distributed fairly among the members of society.

18/ What gives a local community its power is Mētis, local practical knowledge & intuition unique to the culture/geography of a region, collectively not centrally organized. The wisdom of the people that can't be formulated/codified no matter how much governments try to replicate

19/ We need a smarter, focused & accountable government, that is more locally empowered with skin in the game and through that, it will be shaped to the size of the problem relative to its effectiveness.

A government should reduce harm & prevent societal ruin, not cause it.

20/ Governments can't provide equality of outcome, they can improve the environment that leads to better outcomes by being agents for the people.

Being in the business of money has made the government lose purpose, focus & its ability to cooperate with the people.

21/ Issuers of money were limited by physical materials as money was a promise w/ its value fixed to materials, like gold.

Governments needed more money due to extraordinary times: wars, depressions, social programs, the standard broke to allow more printing.

22/ With the rise of Banking, Financing & Markets governments, corporations & other institutions are able to store, borrow, sell & raise money from the public increasing trade, investment & wealth.

Although the funnel of who gets access to the money began to narrow over time.

23/ More Paper money did allow for more global trade, an increase in investment, and an incentive to spend more throughout the economy.

Undisciplined printing of currency in excess can inflate the money supply, & reduce the value of the existing currency.

24/ Savers & Consumers are penalized by the system and financier/investors are rewarded by the inflation of price when value remains the same.

The flow of money favors owners & investors over wage earners. The Cantillon Effect is where those closest to money get the most of it.

25/ The financing of the world led to financial engineering which masked and pushed risks onto the public and eventually led to more turbulent business cycles and complex global dependencies.

26/ Economic shocks made people indebted to the government & the government indebted to itself. The world became more complex, interconnected & sensitive. Wars were had & alliances were made.

Globalization advanced the spread of the division of labor.

27/ The nation-state still kept a monopoly on violence domestically so it could act as the primary protector of its citizens. Sovereign Nations were also welfare states.

28/ Times of crisis are the opportunity when people are willing to exchange freedom for comfort & that's when the state aims to enact its plan on the people.

29/ State-initiated Social Engineering
- Administrative Ordering of Nature & Society.
- Pseudo-rational design/implementation of state-approved scientific/tech methods of social order.
- Use of force to implement/uphold its methods.
- A society that lacks the capacity to resist.

30/ A Nation & Corporation can both be seen as sovereign & may have goals of maintaining its size & influence on people. A nation has citizens and a corporation has users.

31/ A Nation & Corporation favor centralization & aim to make their subjects less opaque and more legible, turning unstructured data, into structured data. Wars of old were fought over oil, future wars will be fought over data.

32/ The premodern state was blind to the details about its subjects, their wealth, their landholdings & yields, their location, their very identity. It lacked a detailed map of its terrain and its people.

33/ The process to make society more legible began hundreds of yrs ago w/ the creation of permanent last names, population censuses, language standardization, urban planning, transportation organization etc. to make complex local processes more standard for centralized recording.

34/ Bureaucracies & Bureaucracates do the monitoring, decision making, permission gate-keeping & allocating of resources while being separated from the consequences of their actions.

The Risks of this behavior compound & our outsourced onto the people.

35/ Politicians tend to stop at the first stage of their policy, but to understand the effects, you need to think through all the cascading consequences of the policy.

System Thinking to see the connections & feedback loops & Second-Order Thinking to simulate its effects.

36/ The incentives that drive economic thinking orient towards the long term and logical. The incentives that drive Political thinking orient towards is short term and emotional.

37/ Our emotions allow for the necessary Irrational Commitment & Cooperation with each other and Morality is a form of social technology that allows these values to spread across tribes to act as checks & balances even tho we prefer to favor our own kin & friends.

38/ Institutions & Politicians often take advantage of our altruism by selling us false hope and enforce cooperation & the risk of losing the promised hope, while defecting, and falling back on persuasion or violence.

39/ In the Information Age it's difficult for governments to use violence to extort capital from its citizens. In parallel, the benefits we gain from them go down. They will continue to see a decrease in tax revenue, while their past/current liabilities grow & become unfunded.

40/ The Sovereign Individual is part of a trend & transition of economic freedom from the state to industry to the individual.

The Industrial Revolution (Religion → Nation-State) and Information Revolution (Nation-State → Sovereign Individual).

41/ The internet economy is larger than any individual country's economy.

42/ The Sovereign Individuals of the information economy will be masters of leverage & personal power not dependent on the government through specialized skills, code, media, sales across entrepreneurship, and investment.

43/ Sovereign Individuals have a tremendous influence on the perception of the livability of a city, state, and soon country because they are independent of Government or Corporation & seen as free people.

44/ Economics is a theory of choice & it's unintended consequences. The consequences should be tied to the chooser.

Incentives motivate our choices & have cost & tradeoffs that need to be made that have an outcome & an opportunity to receive benefits.

45/ To learn to see the consequences, we need to stop amusing ourselves to death, w/ entertainment & drama.

We need to support the open exchange of ideas

We need to not be distracted by the trivial & focus on valuable problems

We need to demand better of our elected officials.

To be sovereign is to have personal power & be in control of your own fate.

Even nobler is using one's freedom to speak up for truth & dispel myths by sharing earned knowledge.

Even Freedom has a cost, but a Soul can't be priced.

46/end

Thanks to @balajis , @tylercowen , @naval , @EpsilonTheory whose words promoted my search for answers.