(this is rehash of a comment I made on the original post, feel free to delete if not allowed)
I'm still surprised none of these comments have mentioned:
1. Difficulty of value capture (free rider problems, diffuse gains, etc.)
2. Market inefficiencies/failures
Market solutions are well known to _not_ work in these circumstances! Charities / government would be better here. Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons.
Well, I must be meeting more than my fair share of the crazy libertarians, because the existence of market failures is something I routinely have to argue about with people.
what do you mean by genuine? Do you have something in mind that's a fake market failure?
ETA: for something to be a market failure, it's not necessary for vast quantities of value being lost, or the market to fail at providing any basic form of the good.
Yes. Most "market failures" are fake market failures, because the problem can be traced back to government intervention. In fact I'm only aware of one genuine theoretical market failure; not sure it ever happens in the real world.
Ok, you're probably talking about things like "healthcare", which is not at all what I had in mind. Politics is the mindkiller, etc.
The prime example for me are those where the complexity of the product is really high, and purchases happen infrequently. This can happen with products that by their very nature are actually a bundle of things.
Take a product that has a lot of features or subcomponents, such as a laptop. Out of the millions of possible ways to assemble a laptop, each manufacturar has maybe a dozen, at most a couple of dozen models on sale at any given time. So you routinely end up buying the laptop on which you can install linux without fuss even though you hate the keyboard, or you get an incredibly bad screen with uneven color on the top-end model you paid $3k for. The thing you actually want is simply unavailable, or it's really hard to identify it.
These individual points of failure could all be addressed, but consumers can only send the faintest possible signal: buying or not buying the entire bundled thing. In theory, that's enough for the market to trend towards equilibrium. In practice, not so much. On the consumer side, even though there are many, many review sites, the cost of thoroughly informing yourself is really high. There are also sneaky practices like enshitification, where companies constantly try to sneak lower quality stuff past you, making the cost of being informed even higher, and which can remove entire product lines that you used to like from consideration.
Staying with the example of laptops, Thinkpads used to be really sturdy machines with consistently high build quality. People loved them and paid a premium for precisely this reason. But even though there was perfect product/market fit, now in 2024 I cannot buy such a 2010's style laptop anymore! Some folks even go hunting for used machines from that era, because even with all the supposed advances in computing power, the old boxes are still better for them. What would you call this, if not a market failure?
I call this "government intervention in the market."
Here's the thing: To identify a market failure, you can't, except in a 100% pure free market that has been operating for decades, say "this bad thing is happening in the market, therefore it's a market failure." Instead, you have to ask *why* this is happening. Markets are supposed to fix such problems, so why is it happening in this case? The answer, in essentially every case, is "insufficient competition." If there were more laptop manufacturers, then, in order to compete, they would have to hunt for ever smaller market segments, until the point where it was not currently profitable to meet a particular preference.
In this case, it's especially tricky, because there are in fact a whole bunch of laptop manufacturers! Why has no one siezed this profit opportunity? Is it unprofitable to manufacture laptops like this nowadays? If so, why? Does IBM have a patent on that kind of laptop design, so that no one else can now make them (copyrights and patents are the cause of *many* so-called "market failures").
Also, it's kind of weird to call this a "market failure" when the product existed 10 years ago. The fundamental nature of capitalism didn't change in ten years, so what did change?
So you have a general way to never change your mind about X, by crediting X for every good thing and putting blame for every bad thing on something else. Congrats, I suppose?
All market failures can be traced back to government intervention, because the market only exists thanks to the government preventing thieves, brigands, and fraudsters from operating with total impunity.
Market for lemons, or if you want an example of a non-car lemon, translation.
1. Neither companies nor substantial numbers of consumers of media the company produces actually know what the quality of translations are
2. This results in good translations getting substantially underpriced. Good translations tend to be the result of specific auteurs pushing very hard for them, and not the result of market forces. Blue Archive's English translation for example, suffered a precipitous decline in quality after the head localizer died.
3. We are currently seeing a huge premature push into AI generated translations, when the quality is sufficiently low that translators end up spending about as much time
proofreading the translations as opposed to coming up translations itself
4. Attempts by the audience to independently audit translations is just really really bad. Basically everyone who participates in the discourse do not understand both languages, and use extremely bad proxies like "is this line social justice adjacent" or "if you did a find and replace if every word in this sentence with it's English equivalents, does that resemble the actual line"
I guess you could say that "this is the best that could be done" or "if people wanted better translations they would pay for them" but if your very criterion for success is the market itself well... I would say dictators sure work out well if you use the dictators to grade themselves.
Price theory doesn't drive highest quality for lowest price, AFAIK there was and are no attempts at fostering translation skills (outside of maybe Square Enix). Labor practices in translation end up having lots more price pressure downwards and absolutely no quality floor (for example, the translator is often not even allowed to contact the creator via email, game scripts are often sent out of order in excel instead of usable script files).
I think this is a strong example because it is both theoretically predicted by economists as well as empirically observed to not work well for precisely the reasons given by theory.
This can be lumped into a very large category of "incomplete information" problems. So the question is, why has the market not provided sufficient information to judge what is good and what is not? Are people unwilling to pay for that information?
Information is one of the things where market failures abound. If it’s easy to verify true information but hard to generate it, then there can be a market. But when it’s hard to verify, then the problem of incomplete information recurs in the market for information itself.
Information can also be intrinsically hard to verify, e.g., a used car's engine problems appear sporadically, only revealing themselves after 100's of km, or during winter, whatever. When the cost of acquiring information about a particular used car exceeds the value of that car, there can be no information market.
the easiest argument against you is three card monte. The information you need is not there; you can't tell if he is cheating and he may not stick around long enough or cheat harshly enough to build enough reputation. Con men in general survive by understanding how hard it is to maintain information parity.
we have government because you need a hundred men to stop one man; it is too easy to do evil and incredibly hard to prevent it.
You're saying a specific game publisher is publishing particularly poor quality language translation versions of it's games.
Yet there are other game publishers who publish games with higher quality translations.
But you're able to purchase games from many publishers, with varying quality of translations.
This is a market success. You can vote with your dollars.
Market failure is when there is no alternative solution to poor quality. Such as a few years ago, California DMV had serious computer outages. I scheduled an appointment, visited the office and couldn't complete a driver's license renewal. Returning several days later, computer systems down again. Returning several weeks later before I had success. This is a market failure, no alternative solution.
It depends on how you define translation.For example Wizard People, Dear Reader (https://en.wikipedia.org/wiki/Wizard_People,_Dear_Reader) is in some sense this is an English Translation of the original Harry Potter Movie or https://en.wikipedia.org/wiki/What%27s_Up,_Tiger_Lily%3F. In these cases you can have a good translation that is not faithful to the original text. These cases are relatively obvious to spot because the tone is shifted so much from the original but if you are reading a translation of a new Chinese novel how do you know whether the meaning is preserved or imagine if you are trying to read an American novel that is translated into Chinese and need to consider if the text has been changed by censors.
This is slightly misguided I think for the following reasons:
1. Sometimes a game gets its popularity in Japan for certain nuances in character or play writing, and ends up with a significantly smaller following here where reviews don't mention those positive points of writing by at all.
2. Media is not completely substitutable. Having a good translation for a bad game and having a good translation for a good game will be very, very different, yet I'm pretty sure details of how well each of them sell has more to do with the base game rather than the quality of the translation, even IF counterfactually the customers are willing to pay in game launch delay time for a better translation if they had that option.
3. I was talking about the *market for competent translators* not the *market for translations*. It's not clear to me that Blue Archive NA can pay more money for an editor as good as the one who died, even if they did increase the salary and paid more in search costs.
4. The level at which I made my examples was not game companies but specific translators. Publisher names often do not give you a great correlation with translation quality, because sometimes that information isn't even made publically available.
Yeah, someone has set us up, The Bomb ... Engrish translations often go south.
To me, in my little mind, there could be a great market solution. Open up translations to say five or ten groups. Each one provides their translation as an options pack. Say the budget on a game is $100. (flexible adjustments here) Set aside $2 for the translations. Each team submits their translation. Users buy the game, say the after the first 100 uses of the game, the payment is set. Every user gets a random starting translation, with the option to change translations any time. If my translation is crappy, and the average is two plays with my translation, I get 2% of $2 for every English Language game pack. If your translation is great, and you get 80% of the plays, then you get 80% of $2 for every English language pack, you're rewarded, I get—deservedly—slapped down.
I'm sure there's a whole lotta translation contracts let out because: "Three semesters of language English High School training, my child has." Unlike my 30 year old friend who spent his childhood in Japan, and from about 15 on in the US. That's the guy you want owning your game translation.
Or the blogger I used to follow Gaijin Smash, he grew up in the US, became a JET English language teacher in Japan, stayed on, 20 years later, he's on Reddit I think he still works as a translator for web pages and such.
In 2013, I was considering buying a used 2004-2008 Jaguar XJ8. These are wonderful cars that were obscenely underpriced, because most used Jaguars are unreliable, but this particular model was designed and made under Ford and is pretty good. (I eventually bought one for $15K.)
I read hundreds of reviews of this model of car, and also the 1999-2003 model, also made by Ford. The most-frequent reason people gave for not buying a Jaguar XJ8 was that its cup holder is too small. This is a small plastic insert that the factor could replace with a larger one for a cost per car of, at most, $1, with minimal redesign (and no redesign at all on the 1999-2003 model, which had lots of empty space on the console.)
There were 14 years of reviews full of people saying they passed over this $100,000 car because its cup holder was too small. I don't know if Jaguar ever fixed the problem. That's a market failure.
No, it is not. Indeed it is a market success. Those people passed by an unsatisfactory product and purchased a superior one, giving their money to a company that gave them what they wanted and not to the one that would not.
I was just rewriting my answer, anticipating that reply, but you were too fast, so I'll say it here: I'll agree that this doesn't constitute a "true market failure", but the fact that a major manufacturer ignored their most-frequent customer demand, which could have been satisfied at miniscule cost, shows that this major manufacturer was not making any effort to find out what its potential customers wanted. They were not reading their reviews. This shows that the economic pressure of competition does not, in fact, force all manufacturers to work hard to give their customers what they want, which is required for the theory that there are no market failures.
A better counter-argument may be that Jaguar had a monopoly on the market for $100,000 luxury sedans. Mercedes-Benz is almost a competitor, but it hasn't got the same panache.
You realize that automobile manufacturing is highly regulated by the government, right? When's the last time you heard of a startup auto manufacturer? Tesla, right? And they've had to invest billions to break into the market. This market is a classic example of government intervention limiting competition.
>"...which could have been satisfied at miniscule cost..."
While the per-part price may have been minuscule, the total cost might not. The value* of all the managerial & engineering labor to change the supply chain, redesign surrounding parts, and any analysis/testing** that entailed could have exceeded, in expectation, the additional profit to be earned from making the change.
Even if that was the source of the decision but an incorrect conclusion, that would still not constitute a market failure.
*including opportunity cost of what those employees would be pulled away from doing
**my background is in aerospace, not automotive, but many of my former coworkers had come to the former from the latter. In aerospace, there can be very costly safety testing to comply with regulatory requirements for even small changes, but probably less so in automotive. But, especially for a luxury brand, there is a lot of effort to minimize noise, vibration, & harshness (NVH) which is very complex & time-consuming to model, let alone adjust designs to correct; perhaps if they had swapped out the part, your anecdote would be about people who didn't buy the car because the cup holder rattled.
People making irrational decisions isn't a market failure. To boot, It's not clear to me that they are irrational in this example: making modifications post-purchase is a pretty big line to cross, for a variety of reasons. It often doesn't work out as great as it looks on paper.
ETA: just saw your sibling reply, I do agree it hints at a possible market failure on the manufacturing side, if such companies remain in business long-term. See also my example with laptops, another complex, bundled product with similar failure modes.
Oh? People did not want to buy cigarettes, but were forced to? Or are you complaining that they're too expensive?
> Contaminated food
Stores regularly sell contaminated food? It's just out on the shelves constantly, and people have little choice but to buy it?
> The Corvair
What's wrong with the Corvair? Do you mean the Edsel?
>Tenement Fires
The rent was cheap. If they had been willing and able to pay more, there was more fireproof housing available. Just as lumberjacks get paid more as a risk premium, tenement renters choose to accept higher risk in order to get cheaper rent.
We've changed that, so that all apartments are high-quality and expensive, and so now we have thousands of people living on the street. Much better, right?
>The Opiod Crisis
Wait, seriously? "Government outlawed this thing, causing a massive crisis; that's a failure of the market!"
>Global Warming
Externalities are not market failures. That's a different category of bad thing. Socialist countries have terrible environmental records, so this is an *industrialization* problem, not a *market* problem.
The problem with cigarettes and contaminated food is if they are not clearly labeled as harmful, therefore the customers would need to do their own research first. Science (actual science) is expensive.
Perhaps in 2024 is seems obvious that cigarettes are harmful, but it wasn't always this way, actually there was a lot of marketing to convince people the opposite way. (Famously, the slogan "correlation is not causation" was made popular as a part of campaign saying that even after the public noticed that smokers often get lung cancer, they shouldn't make quick conclusions from this fact.)
Also, before governments started regulating this, poisoning food was a common business practice. (Yes, this sounds insane in 2024.) When there is a poisonous ingredient that resembles the good one but is cheaper, maximizing the profit = finding the dosage that will not kill your customers immediately, but over sufficiently long time that it is not obvious to the public what caused it.
In theory, a sufficiently rich customer could finance their own lab full of scientists analyzing all the food he wants to eat. (And would need to trust the expertise of the scientists.) The poor people would simply keep dying of poisoning. It think our current ways are preferable to that.
> The problem with cigarettes and contaminated food is if they are not clearly labeled as harmful, therefore the customers would need to do their own research first. Science (actual science) is expensive.
Wait, are you saying that absent government labeling laws, individuals would have to conduct their own scientific research to determine what is and isn’t safe?
> Also, before governments started regulating this, poisoning food was a common business practice. (Yes, this sounds insane in 2024.)
Yes, it’s insane, and I find it extremely difficult to believe. The only similar instance I know was government deliberately putting poison in products people consumed.
What you’re saying isn’t *theoretically* impossible, but…you know what? Let’s say it happened. How did government fix it? Did they wake up one day and say, “lets make all food safe, and test every product for every possible hazard?” No, somebody—somebody *not* the government, almost certainly—found out this was happening. They then publicized it. Then there was a public outcry. Then the legislature passed laws to try to prevent this sort of thing from happening.
Well, what if the legislature had *not* acted? Nothing would have changed, right? People would have continued to buy products from companies now known to put poison in their products; companies *not* doing that would continue to quietly sell their products, going out of business because theirs were more expensive; and people would have continued dying as before.
> In theory, a sufficiently rich customer could finance their own lab full of scientists analyzing all the food he wants to eat. (And would need to trust the expertise of the scientists.) The poor people would simply keep dying of poisoning. It think our current ways are preferable to that.
Don’t you think that that rich person would conclude he could get even richer by selling this information to people?
I would say the lack of reasonably priced private insurance for things like losing your job or accidents (and I'm sure many other potential insurance types).
The failure is that it's extremely difficult for companies to control adverse selection and information assymetry - with the results that for low risk individuals it's just not worth taking out the insurance even though it would hypothetically be valuable to them at actuarially fair rates.
This can be and sometimes is mitigated with compulsory insurance schemes.
I’m quite confident that my current job is secure with only a small chance of losing it.
However I don’t buy insurance against that, I’ve seen a quote and it seems to me overpriced for my own situation (though maybe I’m overconfident!)
The market has failed to provide me with a service at a price I’m willing to pay even though I think it could exist (hypothetically with perfect information) This seems like a market failure because my government could step in and provide an alternative program where everyone is covered and contributes, personally costing me less than the private insurance.
Just to develop this further, I think it’s a market failure because an alternative distribution mechanism for providing the service could deliver superior results (IMO)
Stipulating perfect information doesn't work, I think; sure, lots of things become possible with perfect information, or zero transaction costs, or no bad behavior. But that doesn't make their non-existence market failures, I don't think. However, I don't think that's fatal to your argument. This is an interesting question, that I'm trying to wrap my head around.
Every day, some stocks in the stock market have huge swings in their stock price, either high or low. Often, this is because of some news that came out, such as door panels falling off of airplanes, but it often also is not. When it isn't, is this not a market failure, either before or after? After all, the stock price is supposed to be the estimated net present value of the share of the company after, say, to ten years. Daily fluctuations ought to be pretty minimal.
This actually isn't a market failure, because a stock price is actually a *prediction* of stock prices and, under Aumann's agreement theorem honest disagreements on a continuous value should look like a random walk, because if it looked like any other shape, you could use that prediction to buy+sell stocks for profit until it once again resembles a random walk! (Or, equivalently, if you could predict the shape of your update, you may as well make the update immediately)
Hmmm: Government bailouts for banks due to subprime mortgages and credit default swaps? That sounds like a failure to me, based on the fantasy premise that markets and governments are somehow separate entities. That premise has always struck me as mere convenience to make markets easier to analyze. Similar to assuming all investors are rational. And that investing is not gambling.
Discussions of "free market" should always include government. Every penny the government collects and spends ends up in your "free market".
Otherwise is it not like having a theory of rivers and streams that ignores climate?
Sounds like you're just using a different definition than everyone else, in which case your claim that there are no market failures is devoid of content until you provide a different definition.
“Market failures” and “externalities” are usually considered separately, in my experience. I mean, are crimes market failures? Fraud? Courts are needed even in the freest market; every libertarian grants that, though some believe free-market courts would arise if government courts did not exist.
But if you insist that externalities are market failures, fine; I grant the entire category. I never claimed that there were no market failures, just that pretty much every claim of a (I suppose I must now add “non-externality”) market failure turns out not to be. But *nobody* has good answers to externalities.
Charities and governments have plenty of their own market failures. Just because some version of a thing should exist in principle doesn’t guarantee that any specific instance of it in reality does what it says on the can. That’s why analysis like GiveWell’s is helpful to identify charities that are actually likely to be the most effective. No similar analysis is easy to find on for-profit companies and their social impact, but it would be pretty cool.
I suspect you're misunderstanding the idea of "capitalism vs. charity." It isn't about how to best help particular people, but about the net (pun not intended) effects of different courses of action. It would certainly be hard to claim that there's some market solution that would help particular sub-Saharan Africans dollar for dollar as much as giving them money or malaria prevention material. Rather, the suggestion - correct, or not - is that the net positive effects globally of spending a dollar "on capitalism" exceed those of spending it directly on charity.
> It would certainly be hard to claim that there's some market solution that would help particular sub-Saharan Africans dollar for dollar as much as giving them money or malaria prevention material.
I'm sorry, what? Perhaps I'm misunderstanding you, but this seems very wrong to me. For instance, if there was a market solution that allowed people to purchase malaria prevention material at a price that was affordable to them, that would be more effective than any charity campaign at making their lives better.
I wasn't saying that it wouldn't be great *if* there were market solutions to poverty in sub-Saharan Africa. I was saying that I don't think that idea that Scott was debating (capitalism beats charity) depended on the existence of such readily implementable and scalable options for sub-Saharan Africa. Rather, it was referring to the net effects of capitalism on global wellbeing. That's why Scott's study was of the net effects of Instacart, and the value that it creates, not some businesses operating in sub-Saharan Africa.
That's why the objection in the comment to which I responded seemed unfounded. That comment noted that capitalism isn't perfect, and that there are instances within a capitalist system in which charity could directly address needs (caused by failures of capitalism, or otherwise). I noted that Scott's point wasn't to focus on "instances;" particular people, groups, or circumstances and wondering how to best help them. Rather, he was focused on the total net impact per dollar of different expenditures, and whether expenditures on "capitalism" would beat expenditures on charity.
As to how effective capitalism would be in improving sub-Saharan Africa, I think, and Scott agrees, that capitalism is great and it creates prosperity. If we could push a button to make the Democratic Republic of Congo much more capitalistic, that would be great, and save lots of lives. If pushing the button cost $X, even if X were very high, it would still probably pay to push the button, rather than spending the money sending them malaria nets. But there's no such button. And there's no obviously reliable scalable way to improve the state of capitalism or the economy within the actual DRC that exists in the real world, the way there's a reliable, scalable, relatively inexpensive way to save lives through net distribution there.
>"Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons."
The minarchist justification for government existence is the provision of public (id est, non-rivalrous & non-excludable) goods; that doesn't extrapolate to charities.
I understood that. I read the quoted section as assuming that the same justification for the existence of government is also justification for the existence of charities, which would not seem to hold.
I see. I think the argument here is, There are some good things that markets can’t provide. Charity helps fill that gap.
Sure, you can say that there’s a “market for charity,” but that’s like a market for fraud insurance; if markets were solving the problem effectively to begin with, the market wouldn’t be necessary.
I'm only arguing that the case for charity cannot be derived from the case for government, not that there is no case for charity; I often find that interlocutors presume, given the prevalence of bad-faith argumentation on the internet, limited points such as this are a Trojan Horse for something larger.
This is a weird thing to say. You see this on Reddit all the time too. "Giving permission" to delete your post to someone who already has permission to delete your post, in case it breaks the rules... which if it did they would already feel free to delete it. I guess it's a form of preemptive coping that lessens the blow if your post actually does end up getting removed, because you're the one that sanctioned it?
That seems an uncharitable reading. Deleting posts has potential to create bad feelings, even if it is justified. This is a "no hard feelings" message.
What you call near mode in section 1 would typically be called acting "on the margin" by an economist. I think that's often a good mindset to have, and in the context of EA it mostly makes sense. But capitalism's contribution is systemic in essence and thus sort of undefined on the margin, which makes it really hard to answer your challenge sensibly.
Furthermore, as we've seen with the SBF fallout, someone's actions are marginal until they suddenly aren't. I contend that this is a possible failure mode of EA in its current form.
Could it be that what is stopping growth is, for example, working age adults dying for want of clean water.
If no company can capture the value of getting people clean water, or proactively educating or vaccinating them then maybe to only way these growth inducing measures will be funded is via charity
I don't think something in the real world can be undefined on the margin. There's a counterfactual world in which you contribute $X to Y capitalist charity or company, and there's a counterfactual world in which you don't, the difference in outcome between those two worlds is the margin. The systemic nature of capitalism makes it extremely hard to predict/estimate/measure this difference, but it certainly exists with the exact same coherence that any other margin does.
Contributing to a capitalist charity is a very different thing from "capitalism's contribution" as I called it.
When you take some action on the margin, the baked-in assumption is that you're not disturbing the system from its equilibrium. if removing capitalism (however this would be defined exactly) fundamentally alters the system such that it's not in equilibrium anymore, your calculation fails.
I don't see how that's a baked-in assumption. If you take some action on the margin and that action is enough to push it over the edge and disturb the system from its equilibrium then that's a humongous marginal impact. I agree that formulas and models that do happen to have the assumption that the system won't radically change will fail if the system does radically change, but that doesn't make it undefined.
Additionally, the actions in question here are not "should we get rid of capitalism and replace it with EA?" which would make some radical change, but "Scott has some money he wants to contribute to a good cause, he can either donate it to EA, or contribute it to capitalism in some way, which one will cause more good?", neither of which is going to mess with the systemic equilibrium because Scott is not a trillionaire, and capitalism is still going to exist and be in some sort of equilibrium in either scenario.
"The company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. ... I think you could still argue that investing directly in the company has more effect."
Also: "So if your alternative was to give the money to a profitable and successful company in the Third World...."
Can you clarify if you mean "invest directly" versus "give the money" as 2 diff things?
(Maybe I'm being dense here).
If AKW is capital constrained, then an investment of $1 million in exchange for TK% equity (fair market value) is interesting. They'd probably take the $ only if it could be productively deployed as growth.
If AKW is simply given $1 million, however, isn't the most likely scenario they do a one-time distribution to the owners?
Yes, the problem is that AKW is almost certainly not a sustainable company without their contacts from the west. So, in the end, they are providing a fake service that will end when the charity ends.
"My wife, Magatte Wade, is working to bring Prospera to Africa because of this."
I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
Bringing Prospera to Africa. Bringing. Prospera. to Africa.
Some of Africa? All of Africa? Which parts of Africa? That pie is so stuffed with plums to be pulled out, it's gargantuan enough for Godzilla to have as an amuse-bouche.
As a child in the 60s/70s, I sort of remember hearing about Kenya as being a shining hope for a modern African nation with an industrialised economy and thriving urban centres. Now some of the citizens are doing this.:
I hope Prospera en Afrique is fully stocked up with replacement electrical parts! And they're careful about where they buy their cooking oil!
"The most successful example is the Dubai International Financial Centre, where a common law legal system was placed in a 110 acre zone within UAE sharia law. It led to Dubai becoming a top global financial center in twenty years."
Yes, because Dubai is definitely in the top ten of places that spring to my mind when considering "Where seems like a good place to live?" and global financial centres are not often rather.... shady.
> I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
That's what I like about you, @Deiseach: you're always so understated and reserved in your reactions ! :-) And yeah, I'm definitely stealing "lapidary elegance" for my future use. Along with "Godzilla's amuse-bouche".
That said though, to be fair, people steal electrical equipment here in America too, sometimes. Opportunistic copper recycling used to be a burgeoning industry in some places (and perhaps it still is, I don't know).
UAE is just Qatar with better marketing. Same ‘hive of scum and villainy’-based economy, similarly outright evil foreign policy (mostly in East Africa). In Europe every succesful fraud, drug trader or other criminal eventually moves to Dubai to enjoy their ill-gotten gains.
From my perspective, we are going to hit a wall as far as capitalism goes. We don’t have infinite resources ( unless something drastically changes and we find new planet). I believe it’s important to acknowledge that not an entire population can be “productive” in the way capitalism defines it. We will always have people who need help and support, and I’m okay with that. As someone who works in public health, we’re also seeing significant impacts to human health due to increased cheap agricultural practices. We’re getting cheap chickens, but also seeing significant disease outbreaks that impact the environment and our health. I believe it takes a balance of both.
The best work capitalism does isn't "Exploit more resources", but "Exploit existing resources more efficiently". We produce far more produce, using far less inputs (measured by current economic value), today, than we did a century ago. In particular, US food production has skyrocketed even as the total land area of farms (the most economically valuable input) has decreased.
If we can hack it, industrial production of lab-grown meat should, in theory, be cheaper than factory farming. We haven't hacked it yet, but once we do, we get more chicken meat for the same resource investment. Capitalism, in and of itself, doesn't create this situation - human ingenuity does - but what capitalism does, systemically, is promote this option. People buy the lab-grown meat because it's cheaper, and those still engaging in factory farming are pushed out of the marketplace.
We often think of evolution as "mutation", but evolution is actually selection - destruction. Capitalism, likewise, is not the process of getting better - it is the process of eliminating the worse alternatives once better options arise. It is an evolutionary force, a selective force, whose role in the process is destruction of the worst, rather than creation of the best. And just as evolution can continue without mutation by simply slowly eliminating the worst genes or combinations of genes, slowly moving towards an ideal of what currently exists - so too can capitalism can continue long after we've run out of improvements to make, simply by slowly eliminating the less efficient options.
(In the future, some of the most valuable plots of land will be what are currently landfills - which are basically giant piles of all the resources which are most valuable to us, as evidenced by the fact that we used them in the first place to be discarded. Currently we throw things away because it is more economically efficient to process new materials than to process these materials - but as resources become increasingly scarce, and/or energy becomes increasingly cheap, this will begin to reverse itself, until we're mining up our old garbage to repurpose.)
And it is entirely possible for (almost) everybody to be productive - the issue is that, as a society, we've implemented effective minimum productivity levels: Minimum wages, as the central example, but not actually the only one. (Anything that increases the effective cost of employing somebody also increases the minimum viable productivity a person can be employed at.) There are lots of tasks currently performed by machines that "unproductive" human beings could do, and given that we're committed as a society to keeping them alive, it is somewhat absurd to say, as a society, that they aren't allowed to engage in this labor because it doesn't meet the threshold of self-sustainability - and then we justify forbidding people to be less productive than is necessary to sustain themselves by accusing those who would employ them for "exploitation". So, we have machines that peel oranges. Why, as a society, have we decided that it is better to spend capital and energy peeling oranges, than it is to allow people to do it? Because our expectation is that a person's wages are sufficient to support them and a family. So, instead, we give them the money to support them and any family they might have (because it would be cruel to do otherwise), and then forbid them from doing the work they could be doing.
While all of this is completely true, I wish to add that I expect us to be mining resources from space long before we run out of them on Earth (very, very long, in fact, as capitalism keeps finding more resources, and more efficient use of resources, on Earth), so the real problems won't hit until ten trillion years from now, when we're all huddled around the last few black holes, eking out every joule possible.
Words like 'best' and 'worst' are highly misleading. Cigarettes are hardly 'the best' way to get a little bump of your mood. That was known for quite a long time before anything was done about it because the companies involved made bank and bought laws.
Capitalism is happy, downright elated, to thrive on externalized costs. That's the simplest way to increase internal 'efficiencies' and profit. Don't mistake this for 'good.'
Tobacco was relatively recently discovered to contain a novel reversible-MAOI which is being researched as a treatment for depression; reversible-MAOIs, if we can get them, would be a huge deal for low-side-effect depression treatment. (And the discovery has led to the research of other reversible MAOIs). So if the research pans out, and it works as well as it is expected to work with the side effect profile it is expected to have, cigarettes will, in a sense, have been the best way to get a bump in your mood.
And capitalism is the internalization of costs; complaining that capitalism is bad because it doesn't successfully internalize -all- costs is, basically, complaining that capitalism isn't sufficiently capitalistic. Every other economic framework, and every deviation from pure capitalism, revolves around externalizing costs. Welfare is an externalized cost; are you for or against welfare? Nationalizing industry is externalizing a cost. Serfdom is externalizing a cost. "From each according to his ability, to each according to his need" is a massive externalization of costs. If you're against externalizing costs, you should be massively pro-capitalism, and to the extent that you move towards internalizing costs, you are moving to a purer form of capitalism.
It's no mystery to anybody that "capitalists" hate capitalism; healthy competition means you can't just sit back and rake in rents, you have to work to keep your place in the Red Queen's Race. Of course they seek to cripple capitalism wherever they can.
> We produce far more produce, using far less inputs (measured by current economic value), today, than we did a century ago.
This is due to technological improvement, not capitalism per se. There's nothing stopping a non-market economy from producing the exact same amount with the exact same inputs.
> by accusing those who would employ them for "exploitation"
Sorry, that's not "accusing" people of exploitation, you're describing an actual exploitative and dystopian scenario. You can't just toss in "accusing" and make the facts go away.
> This is due to technological improvement, not capitalism per se. There's nothing stopping a non-market economy from producing the exact same amount with the exact same inputs.
There is - incentives. Incentives in capitalism run towards minimizing costs; incentives in other frameworks are generally aligned differently, often in ways that increase costs.
> Sorry, that's not "accusing" people of exploitation, you're describing an actual exploitative and dystopian scenario. You can't just toss in "accusing" and make the facts go away.
You confuse opinion for facts.
I prefer a society where somebody on social support (welfare) (who has no employment options in our society), can, if they so choose, get a job peeling oranges for a dollar an hour. This doesn't seem exploitative or dystopian to me - the alternative, in which we effectively forbid them from any productive labor at all, is the society which seems dystopian.
If somebody cannot be sufficiently productive to support themselves, we as a society, put them on social support. Why is it then necessary to forbid them from being productive -at all-? Because they might undercut the wages and take away "jobs" from steel and oil?
> There is - incentives. Incentives in capitalism run towards minimizing costs; incentives in other frameworks are generally aligned differently, often in ways that increase costs.
That's just not true, though. That _could_ be true, but there's no particular reason to expect it to be so.
> can, if they so choose, get a job peeling oranges for a dollar an hour.
The problem is that will rapidly cease to be a choice. You're - like all libertarians - ignoring differential power dynamics in your analysis.
> That's just not true, though. That _could_ be true, but there's no particular reason to expect it to be so.
There are very good reasons to expect it to be so - such good reasons that the relentless drive towards minimizing costs is often raised as a -criticism- of capitalism. Indeed, you raised it yourself, in the context of externalities.
> The problem is that will rapidly cease to be a choice. You're - like all libertarians - ignoring differential power dynamics in your analysis.
I am not, I am simply not arguing the much broader case for a UBI paired with the elimination of most labor laws, most particularly the minimum wage, as a mechanism for balancing power dynamics. We can talk about ways to balance the power dynamics in play, but that's not actually the subject I was addressing, which is the specific problem that people who -can- be productive in our society -are not allowed to be-, simply because they aren't productive enough. This is its own power dynamics problem! You're ignoring the fact that you (the collective, not individual) are using your own power to manipulate the conditions of employment to your own benefit, at the expense of those with less power.
The profit of industry is, in the end, a proportion of costs - if factory owners could collude to raise the wages of employees in their industry by 10%, they would, because they can then collect their 10% on -those- wages as well. Minimum wage laws do not impose their costs on the employer, who in fact profits thereby - they impose their costs on the consumer and the marginal worker, forbidden from working because they cannot be sufficiently productive.
Also, and this is slightly rude, so my apologies, but I think you know you are incorrect on the "small picture" of the specific subject, and are jumping to a "big picture", and using my failure to address "big picture" concerns as a failure with my "small picture" argument. We can talk about the "big picture" concerns, but please don't assume I don't have "big picture" arguments simply because they haven't been raised yet.
> You're - like all libertarians - ignoring differential power dynamics in your analysis.
Not to derail the amazing job Thrgnskald is doing, but I've heard this criticism many times, and the people making it never seem to be able to back it up. So please explain why it would rapidly cease to be a choice.
Many social-safety-net benefits are conditional on low income and/or the recipient accepting any job offered to them, theoretically in order to keep a limited budget focused on those who need it most. This would mean that, even if someone in such a position would really prefer to do something other than peel oranges all day long, refusing such a job offer effectively costs them far more than the nominal wage - they'd no longer qualify for various benefit programs, thus losing access to e.g. housing and lifesaving medical care. The usual term is "poverty trap."
The other thing is that capitalism tends toward more flexibility. If a business needs to be done somewhat differently because of climate or knowledge or local materials, there are more incentives for adaptation.
There's no "right" hill to die on - I take my victories where I can get them.
I think minimum wage, in particular, is in a culturally vulnerable state right now, as a lot of its traditional supporters are currently expecting massive technological unemployment, and are seeking to solve that problem through something like a UBI - and I expect us to get one. But once we're committed to having a UBI, I think a lot of the core arguments for having a minimum wage, in particular, disappear.
Not only do the arguments for having a minimum wage disappear - but it becomes a low-cost compromise that the "social welfare" side can make with the "free market" side as an incentive to switch to a UBI over the existing means-tested welfare framework. Since the power dynamics the "social welfare" side are concerned about are largely alleviated with a UBI, they can offer the elimination of large swathes of labor laws which currently exist to balance those power dynamics.
That is - I think this is a fight that can be won in the near future. Taking my victories where I can get them, this looks like exactly the right fight to be having.
That's a cart-before-the-horse approach, though. Get UBI (and a land value tax to pay for it) lined up first, then the current minimum wage will likely as not become irrelevant overnight, as the supply of desperate gig workers vanishes and menial entry-level positions start needing to offer better pay just to attract any qualified applicants at all. Of course, that same foreseeable shift in power dynamics makes it clear who'd be lining up to oppose such a change.
A simple look at the UN website Our World In Data will show you how everything is getting better. The greatest threat to humanity continues to be the machinations of top down control freaks such as the old school communists, and the WEF.
Why is charity separated from capitalism in the first place? Satisfying your altruistic desires is part of the marketplace. Capitalism would suggest that you should choose the amount and where to give according to your individual desires.
Right. This is all for Scott to figure out what to desire, the equivalent to the average person making a spreadsheet of cars to decide which one to buy. In this case, the cars are some capitalist enterprise and some charitable enterprise, even if the charity exists in a capitalist setting.
That would make sense if his altruistic desires were exogenous, and could be treated as *his* desires. But he cares about satisfying someone *else’s* desires, even if he is wrong about what those desires are.
All charity could be converted to capitalism, if you required the recipients to say "thank you" in a Zoom call, and then -- technically -- you wouldn't be *donating* money to them, but you would be *buying* their thank-you's. Which is capitalism, therefore good! Now no one can object against curing malaria or building wells on philosophical grounds.
You write: "Let’s say they hire Amalgamated Kenyan Wells. Then the money ends up in Amalgamated Kenyan Wells, presumably a profitable and successful company in the Third World, and this is no worse than donating to the company directly."
The historical pattern is that Amalgamated Wells is really good at getting contracts. At building wells, not so much. Meanwhile the We-Dig-It company is good at building wells. Amalgamated Wells notices, and gets the government to pass a bunch of laws or create a lot of new regulations, the purpose of which is to make it impossible for We-Dig-It to eat their lunch. We-Dig-It goes out of business. Capitalism fails to ignite, again.
That situation is called 'Regulatory Capture' . We see it when Regulatory agencies pass laws that limit upstart competition. Same as when the first AI companies tried to get the government to regulate upstart competition.
>Velveteen protests that I haven’t proven this and don’t even have a model showing it’s a sane order-of-magnitude estimate. I accept this. I don’t think anyone has proven the opposite either. I’m going entirely off total guesses. It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses.
Look, I'm a radical capitalist compared to the normal population (though I guess not in here). But anyone can see how the burden of proof here lies in the side with the galaxy brained take of: "no, no. spending money directly on the thing you want is stupid and inefficient. Just spend on other stuff and magically it will turn into charity."
Sometimes the galaxy brain take is right! I'm confused and don't have a strong opinion either way. My bias/priors is that actually capitalism is awesome so that makes me not reject it outright.
But come on. We need those studies to prove investing in "capitalism" is actually better.
"It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses."
Can't we easily calculate this by looking at GDP/capita forecasts in countries where EA charities are doing the most interventions? If you save a person in Ethiopia today, we have reasonably good forecasts on the total economic value that person will likely produce during their lifetimes. Do that and then compare it to expected S&P500 returns.
I.e. for Ethiopia we have the following numbers:
- Current GDP/capita: $1,000
- Average inflation-adjusted GDP/capita growth rate: 3%
- Assuming we save a child today and assuming compounding GDP growth, they will produce $141k of economic value between the ages of 18 and 60.
For the S&P500, assuming a growth rate of 10% that same $1,000 will result in $304k of value, beating the output of the person saves in Ethiopia by a factor of 2.
The 10% figure for the S&P isn't inflation adjusted but the assumed gdp growth rate is.
Gdp also doesn't include non market/ non government activity. If the child we save will probably do some ( a lot?) of valuable things that won't show up in gdp; raising children, producing things they consume directly, doing things in the barter economy.
My guess would be the less developed the country the less reliable gdp per capita is for an individuals expected output.
GDP/capita is an average measure, charity aims for the margin; IOW, that's at best an upper bound on returns to donation, and the higher the Gini coefficient the larger a haircut you'd need to apply.
I think the answer to VelveteenAmbush's objection is essential empirical. "If you feed poor people, you will just create more starving poor people" is one of those ideas that sounds like it could be true but mercifully isn't. The evidence is pretty clear that fertility rates drop as mortality drops, which is why most countries on earth have <2 fertility rates at this point. I think the argument is that if people are confident their children will survive to adulthood, they consciously choose to have fewer of them.
I think that’s definitely true when you actually raise people’s standards of living. But when you give them possibly sporadic sustanance, the best strategy would seem to be to have bunches of kids and hope some of them survive.
I think a stable source of clean water counts as raising people's standards of living.
The other thought I've had re: Velveteen is that we live in a somewhat different world than in the past where a very bright kid born in a poor village has a shot of going to university and eventually contributing to global knowledge and economic productivity. I don't know what % of people the clean water saves have such a fate but I think it's not ridiculously low.
The proposition in question is "If you feed poor people, you will just create more starving poor people." I'm not sure what that has to do with a stable water supply.
Fair enough. I was referring to the clean water charity Scott/EA people like, which is the original thing Velveteen was objecting to. I shouldn't have brought in food.
We do live in just such a world. We have lived in it for so long, in fact, that universities* have sucked out most bright kids that had accumulated in poor villages during the many centuries when social mobility was lower and the value added of intelligence was much lower than it is today. This phenomenon is even visible in GWAS studies, see https://www.nature.com/articles/s41562-019-0757-5
* I use "universities" as a synecdoche for the subworld of global knowledge and high economic productivity
This study is very interesting and it's cool they can see this effect, but the data is from Great Britain. We don't know how much smart people have been depleted from say, Indian villages.
Scott brought up the interesting example a while back that Germany killed all its schizophrenics and still has the same amount of schizophrenics as everywhere else because these traits are so multifactorial. I think you'd need a lot of generations of pulling smart kids out if Indian villages before the remaining villages are all dumb.
Frequently, yes, because drops in mortality are typically associated with societal and technological changes that reduce the marginal utility of a child. But if your country has undergone profound technological advancement while still having a high need for more people due to the constant threat of invasion from a sea of surrounding barbarian hordes, your fertility rate looks a bit different.
Mortality clearly isn't the independent variable here. So unless feeding poor people produces a long-lasting change in the society, it's unlikely to make anything better long-term.
Africa's growth rate (3.7% in '23, not an outlier) appears to be higher than the standard rate of developed economies
Comparing preventing malaria in someone who will then have a lifetime of input to an also growing economy versus going on an extra vacation appears to be clearly well defined in the terms of the infinite future growth argument
This is a tough problem. I don’t have an analysis, but one company that seems to do a lot of good as a for-profit is Zipline. They deliver medical supplies via drone in Africa. They’re private, so not necessarily easy to invest in on the margin.
I was very much looking forward to this "highlights", and I am not disappointed. - Kinda sad, it seems so hard. - Is there a charity/company walking the poor parts of the world, testing people and offering the 0.1%-3% smartest infovores among them a wonderful deal - full board education and deployment/visa assistance (for a share of future earnings if commercial)? Should there be one? (I am still thinking about the girl young Scott met in Cambodia in 2008). https://web.archive.org/web/20131230133858/http://squid314.livejournal.com/2008/04/28/
"It is relatively easy for me to ignore the plight of poor foreigners, as long as I assume they're dumb (and I start with the assumption that most people, foreign or otherwise, are). But smart people are for me what Americans are for those America-first people; I can bring myself to not care about a lot of people, but I can't bring myself to not care about them. They matter to me, in the way that everyone should matter to me but can't because I don't have enough emotional resources. In fact, all day I found myself worrying about her, and hoping she manages to get out of the selling-postcards-at-Angkor-Wat business and to a decent school at some point, even though I haven't spared a thought all day for any of the multiple-amputees I've seen wandering around. Not sure how I feel about that."
So I'm confused by the whole discussion. Scott, you're a libertarian. Did it occur to you to, I dunno, get involved in libertarian activism, or at least check out what libertarian advocacy groups were out there?
This has been my beef against EA from day 1. As you say, no charity can ever have the long-term impact that more capitalism can have. So libertarian activism (whether it calls itself "libertarian" or not) seems like the most effective way to make a positive difference in the world.
Donate to Libertarian, or libertarian-leaning, candidates. Donate to Students for Liberty. They do a lot of good work. Or The Advocates for Self-Government. Or the Foundation for Economic Education. Or the International Society for Individual Liberty. I would add the Libertarian Party, but they're a mess right now—check back in a year or two. But how about Libertarian Parties in *other* countries? Or State LPs?
Perhaps none of these really fit your flavor of libertarianism (likely ISIL does not, for sure). But then maybe the Reason Foundation? Cato? Cato's probably the most effective, and most inoffensive option. Even if none of these fit, there's almost certainly something out there that does. And if not, I will personally work with you to help create it.
You seem to want something measurable, where you can have some notion of how much good your money is doing. And that's a good question! Attempting to find an answer to that question would take a lot of work, but before anyone even tries, you've got to acknowledge that this category is something that might work for you.
Honestly this whole thing sounds like a question for Bryan Caplan, or maybe Robin Hanson. Or anybody at Econlib.
Oh, I *definitely* would not. What they teach about libertarianism in Econ grad school, if it's mentioned at all, is crap. Whereas the quiz is by an old and respected libertarian organization.
According to this quiz, there is no such thing as "liberal" either. It is labeled "progressive".
Interestingly, I got scores of 70 for personal issues and 100 for economic ones. It is too brief of a survey for it to really mean much, but it does match with my own insights into myself. These scores put me in the "libertarian" label, though I question the methodology, since it looks very difficult to score as "conservative", with which I would self-identify, as I would need a score of less than 50 for personal issues for that classification.
>According to this quiz, there is no such thing as "liberal" either. It is labeled "progressive".
Yes. It used to say "liberal," but I presume libertarians objected to that, as they are the true liberals.
> It is too brief of a survey for it to really mean much,
I disagree. Of course, it doesn't tease out much nuance *within* categories, but it assigns categories themselves very nicely.
>It looks very difficult to score as "conservative", with which I would self-identify, as I would need a score of less than 50 for personal issues for that classification.
I think conservatives have become much more liberal on most of these issues in the last two decades. Twenty years ago, conservatives would have answered "no" or "maybe" to most of these. But now, free speech is *right*-coded (except on Israel). So maybe the quiz needs updated. They do that occasionally.
In what ways would you say you are socially conservative rather than progressive/liberal?
You overstate the actual economics case substantially. Also an actual economist here. If you define libertarianism as a narrow role for government, limited to public goods, which is how most libertarians define it, nobody has 'thrown it in a dustbin'.
Correct me if I’m wrong, but aren’t most libertarians against the governmental provision of most public goods or elimination of public bads? For example, what percentage of libertarians would support a carbon tax?
I don't know about most, but libertarianism almost by definition is about a minimal state which focuses on public goods. I'm also surprised that for a PhD student in economics, you are talking about public 'bads' as though they were different from public goods.
As for a carbon tax - there can be very sensible reasons to oppose a carbon tax beyond dogmatic libertarianism. Even from a purely welfare maximizing perspective, it is not at all clear that carbon taxes are efficient in terms of inter temporal trade offs. Another is capacity of bureaucratic and political systems. And it is one of the tragedies of the economics profession that actual economists have not been as concerned about modes of government failure as they have about market failures. It skews discussions of market failures towards government remedies.
To say that libertarianism is almost by definition about a minimal state which focuses on public goods is pretty deceptive. What distinguishes libertarianism is the belief that the government shouldn’t provide most public goods with only limited exceptions such as defense. Libertarians believe that the free market can somehow solve most public goods problems or as you mentioned they have a deep suspicion of the government’s ability to effectively provide those goods. While the second point has some merit, you must admit that the extreme degree to which libertarians take this view is pretty fringe in academic economics.
I’m sorry my economic jargon is not up to your standard, but this has no bearing on the subject.
'While the second point has some merit, you must admit that the extreme degree to which libertarians take this view is pretty fringe in academic economics.'
As I said, this is a problem with academic economics, not libertarians! The world clearly shows far more instances of governments failing to provide public goods (even broadly defined) and failing to regulate properly than of markets failing. Economists have developed analytical frameworks for the latter but largely ignored the former. That's our fault, not that of those skeptical of government action!
Just because overall, total capitalism has brought more prosperity than total charity, that doesn't mean that the dollar for dollar impact of the former is greater than the latter. Imagine, for example, that my labor is worth $100 an hour, and I see someone drowning, such that I would lose an hour of my labor from saving him (let's say if I saved him I'd get all wet and need to go home to change my clothes). The cost of saving his life would thus be $100.
Thinking that overall capitalism has brought more good than charity wouldn't then necessitate insisting that it must be possible to save a life by spending $100 on capitalism.
Scott made the distinction himself between total impact and implementable dollar for dollar impact:
>I agree that overall capitalism has produced more good things than charity. But when I try to think at the margin, in Near Mode, I can’t make this argument hang together. Here’s my basic objection...
The sorts of Effective Altruist charities whose effectiveness Scott compares to "spending on capitalism" are designed to mimic the illustration above, in finding low hanging fruit that are tremendously valuable, yet easy to pick.
>Honestly this whole thing sounds like a question for Bryan Caplan
>If one does want to be a truly effective altruist, I suggest that his New Year resolution should be to promote free trade and commerce
The article doesn't really give a single example of how one can do that, or the roughest back of the envelope calculations on what the dollar for dollar impact of such charity would be. It just notes that freer international trade has made the world much richer. That's like saying that since medical advances have saved hundreds of millions of lives, that the greatest marginal impact of a dollar must be spending it on medical research. One obviously doesn't follow from the other. Oh well.
Okay, I'm not asserting that giving money to libertarian causes is certainly and unquestionably the best option, I'm expressing my bafflement that it wasn't even on the list. Once *on* the list, the various options need to be evaluated against each other. I mean, maybe libertarian advocacy groups have so little actual impact that doing almost anything else with your money would be more effective. I've certainly wondered that myself! In practice I don't think so, but it would take investigation and analysis to draw any conclusions.
Of course you're right in your point about the drowning victim, but it seems to me that barring that kind of very low-hanging fruit, if libertarian groups move the needle to *any* measureable degree, the long-term benefits of funding them should outweigh essentially anything else than preventing X-risk.
As for the Economists, I said "a question for" them, not "consult their existing work." I wonder if they've even considered this question (obviously Lemieux has, but as you say, he needs to go the extra step and ask about marginal utility for the various possibilities), and I'd be interested to hear their thoughts. Maybe Michael Huemer too.
The problem with spending money on "libertarian activism" is the same problem with political donations as an EA strategy in general: everybody is already spending loads of money on it, there's somebody spending money to accomplish exactly the opposite, so you're chasing increasingly small amounts of marginal utility as all the easy gains have been gotten and all the hard gains are countered by somebody else spending money to do exactly the opposite.
> There's a reason why stuff like water dispensers to save lives are going to developing countries with no market economy
This is such an obviously bizarre statement I am having a hard time processing its existence. Do people think Kenya or Uganda or Sierra Leone don't... Have markets??
What am I missing here? Why is this not a clearly ridiculous statement?
I get that in these circles, bringing up that colonialism has consequences is not something people like to do, but to claim that places with publicly-funded better infrastructure don't need charity to get that infrastructure because they "have a market economy" seems too obviously ridiculous.
I mean, don't wealthy "market economies" have those problems too, when their publicly funded infrastructure breaks down? Wasn't that the whole Flint, Michigan thing? "We need help re: clean water because our public infrastructure failed"? Does Flint have different "markets" than any other random place in Michigan, or America for that matter?
I am certainly no expert on sub-Saharan Africa, but from what I do know, I would definitely *not* say that these countries have “market economies.” Sure, they have *literal markets*; places one can buy and sell things, but “market economy” means much more than that it is possible to trade. It means that the economy, as a whole, is based on free market exchange, not primarily handouts, corruption, government-owned production, etc. In other words, as a proxy, it scores highly on the [Index of Economic Freedom](https://www.heritage.org/index/), which the named countries certainly do not.
Re Flint: Giving Flint more money before the problems surfaced may have helped. Or, more likely, they would have just spent the money on something else, and still cheaped out on their water system. Handing money to governments generally does not increase long-term welfare; it just entrenches existing problems. *Moving contries to more market-based economies* is what makes people’s lives better long-term.
On the other hand, Flint is really a rare problem. Despite my cynical statement above, most US governments handle basic infrastructure tolerably well. Not as well as markets would, but generally people don’t die from drinking the water, roads are passable, etc., unlike in many places in Africa. But even so, giving them more money is almost certainly not going to help, because in almost every case, the government in question could already have spent more on infrastructure, but didn’t because other projects are sexier and more likely to get them re-elected.
The zoomed out question is something like "the world has a lot of big problems that require smart people to solve, wouldn't it be good if we had the smartest of an extra billion people to help us solve them?" The zoomed in version is "if Jean in Burundi attends more school instead of being home with diarrhoea with his older sibling also home from school looking after him, how much does that add, including downstream effects like the effects on their kids, relative to the investment of the water dispenser?" I think it's really important.
I would love someone with a better sense of the numbers than me to make up some numbers here - or point me there if someone else has. My sense is that it's an incredibly good "investment" in terms of compounded value created per dollar spent.
A billion extra people with an average IQ of 70 will produce around 300 more people with an IQ >145, which is about the same as en extra 13k people with an average IQ of 115. If increasing the size of the cognitive elite is your goal, I'm guessing it would be a lot cheaper to get an extra 13k of Ashkenazim than an extra billion of Africans.
Where are you getting the average African IQ of 70 from? A quick search yields that this is possibly true with a standard western IQ test which doesn't take various cultural factors into account. And given poverty and IQ are so linked, we'd certainly see it rise greatly as the poverty diminishes, which is kind of the point. So it's not " given an average IQ in a population, here is the number above a certain point of the distribution" more like "how do we add IQ points?" Clearly make poor people less poor, given that it reliably raises IQ?
Say that you manage to make Africa 150% wealthier by pumping in aid money, all the way up to the Jamaican level, and that this brings IQs all the way up to the Jamaican level of 75. I don't think that this changes the conclusion regarding whether this is an efficient way of increasing the size of the cognitive elite.
If this is how it works, sure. I'm sceptical that this is how it works. You're talking about general rules and broad strokes. In my head, specific things like maternal and infant nutrition, education, other poverty related factors like stress, and exposure to lead all play a large role (leaving aside the way IQ is tested), and they are the things that will change as the region develops. It's less that if we unlock Africa, they're 70iq so who cares, more that unlocking Africa is synonymous with raising their capabilities to the point where it's indistinguishable from the rest of the world.
If we were talking about a specific, isolated place in Africa, I could entertain the idea that there are significant enough genetic differences that they couldn't be overcome easily. Given the genetic diversity of Africa, I don't think that's plausible.
I've seen it as a common belief* among people who take IQ seriously. I think it makes no sense-- a society where the average IQ is 70 wouldn't even have human language, I think.
*Maybe 76, a number which isn't suspiciously round.
It's an interesting question-- 10 year-olds are raised in a society developed by adults with an average IQ of 100, so I'm not sure we can extrapolate from them to a society where the adult average is 70.
I don't know why you assume that developing - let alone acquiring language requires a higher IQ.
It's important to realize, though, that people with low IQs function differently, based on their race. A Black with an IQ of 70 will be much more functional than a White with an IQ of 70. It's a mistake to project the characteristics of the latter on the former. The reason for this discrepancy, is that an IQ of 70 is part of the normal distribution for Blacks (e.g. in the US, it's just about 1 SD below the African American mean. The mean is probably lower in sub-Saharan Africa for a number of reasons, including the lack of European admixture). For Whites, however, such a low IQ is much more anomalous (2 SD below the mean) and more likely indicative of the sorts of systemic malfunction often associated with people of such low IQ. See e.g. this article: https://emilkirkegaard.dk/en/2022/10/african-iqs-and-mental-retardation/. The whole article is relevant, including:
>This one comes up a lot when we discuss the dire realities of the average intelligence levels seen in Sub-Saharan African countries: If the mean IQs are 70, wouldn’t that mean half the population is retarded? That can’t be right, something is wrong with the data.
>When people think of retarded people, they mostly have in mind someone who has ... some major genetic error, and who suffer a profound intellectual disability because of this. They usually suffer from some kind of syndrome, which is why it’s usually called syndromic retardation... that ... does not just make your intelligence very low, it also causes other behavioral defects ... The other class of people with very low IQs are people who are simply on the left tail of their normal distribution. They do not have any major genetic defects ... they were just unlucky with the dice throw of the normal genetic variation in intelligence
>Middle-class white children with IQs in the EMR [educationally mentally retarded] range generally appeared more retarded than the minority children who were in special classes
>Now we can see how this relates to the African intelligence scores. Africans in Africa do very poorly on intelligence tests, scoring about 70. But they behave relatively normally. They are not clearly retarded like the White children in special education classes, who often suffer from one syndrome or another.
If there are such differences, then the IQ tests in question are outside the domain they were optimized for, and correlations with lifetime economic productivity can no longer be safely assumed to hold.
If the "correlations with lifetime economic productivity" didn't hold this conversation wouldn't be happening because people in Africa could just buy their own mosquito nets and diarrhea medicine.
Perhaps an analogy might help. The estimated IQ of a dog is about 30. If a person had an IQ of 30 he likely couldn't even walk, but dogs walk just fine. You might say "IQ tests in question are outside the domain they were optimized for, and correlations with lifetime economic productivity can no longer be safely assumed to hold" and thus maybe dogs will one day develop capitalism and contribute to global economic growth, but you would be wrong.
As a sort of general thing, I've read widely enough about Africa, including some places where black people are washing their dirty laundry, and the problems always seem to be about corruption and violence rather than Africans being dull-witted.
The relationship between corruption and IQ is probably less clear, but of the 8 studies listed here (https://sci-hub.hkvisa.net/10.1016/j.intell.2011.11.004) looking at the relationship between national IQ and corruption, all found a negative correlation.
At that point I think that you've moved from paying people to have more babies. Now, maybe saving lives is actually the most efficient way to increase world population, but that isn't immediately obvious, and feels like a very different conversation.
If I understand what you meant, you're saying that by saving lives we ensure that more smart people enter the world, and thus that they work on important problems, and ultimately create "goodness" which compounds our investment.
This doesn't really seem like an argument for saving lives to me though. It could go two ways:
1) We could better utilize existing rich people by identifying them and then lavishing them with resources so that they don't die.
2) (what I was focusing on in my comment) We want to increase global population. But saving lives is only one way of doing this, so perhaps we should instead try to increase birth rates (which would increase global population, perhaps more efficiently).
Aha, thank you! I was seeing future flourishes as a downstream benefit rather than the main one. The main benefit is that 14 year old Jean from Burundi has a productive life rather than a short one.
Regarding 1, do you mean potentially rich people who don't have resources yet, or currently rich people who, with more resources, will be more productive?
Reducing suffering is the main thing for me, but it's not the point of the discussion here. I know there are considerations like comparing reducing some suffering now vs reducing more in the future.
Velveteen's entire line of argument seems to cash out in a fundamental value difference about how much more valuable (if at all) saving existing lives is to creating new valuable lives. I don't think the value of "awakening the dead matter of the cosmos"-blah-blah-blah is zero, per se, but it's just an aesthetically pleasing thing to do, not a moral imperative — so if anything *that* is the "consumption" path, which we should only get to if we've already fulfilled our moral duty to safeguard all existing lives and taking a good stab at fulfilling *their* preferences.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things."
Fair enough, but perhaps some of the confusion was driven by your chosen post title: "Does Capitalism Beat Charity?," which sure SOUNDS like a moral worth tournament.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things. I’m discussing the Near Mode situation where some specific person (eg you) has some specific amount of money (eg $1,000) and wants to use it to improve human welfare."
Thank you for this clarification. Maybe I'm an idiot, but this wasn't clear to me in the original post.
"This isn’t a gotcha or a rhetorical question, I think these could really change my mind."
In my model this decision comes down more to time discounting. What is the rate of return of an investment? How much do you discount future consumption (by poor charity recipients) compared to their immediate consumption? If you think that saving 1 person today and saving 1 person in 10 years are similarly valuable, then you should probably invest. If you think saving 11 people then is as valuable as saving 10 now, then you should compare the implied rate of discount to the rate of return of an investment.
Perhaps the most effective charity would be helping people more to economies that are in better condition. After all, giving poor people money can be effective, and one of the things poor people spend money on is emigrating, frequently as great risk.
Following the logic, it might be effective charity to finance illegal immigration.
I was thinking along similar lines. E.g. South Koreans are about 30 times more productive than North Koreans, so there are enormous gains to be made from moving people across that border. On the other hand, this seems like (a) something the market should be able to provide & (b) a charity that should be run and financed by successful migrants rather than by outsiders.
Trying to do that at scale would soon mean moving the border rather than the people, which is another way of saying "restarting the korean war." I suspect there are many messy, expensive reasons why this has not already been done.
Surely the conclusion here is to advocate for more *legal* immigration, rather than financing illegal immigration?
I happen to agree with you that mass migration is one of the best ways to improve people's lives (I'm an immigrant myself) but am skeptical of my marginal ability to influence others to that view Vs financing charities help people where they are (and I think illegal immigration has a disproportionately negative effect on people's views on immigration in general so don't think your tongue in cheek idea would be helpful even if doable).
Advocating for more legal immigration is a good idea, but it's a relatively long term solution if it works at all. Helping illegal immigration helps people now.
Seems to me that, in general, markets will roughly approximate the optimal solutions. But there are well-known market failure modes (information asymmetries, monopolies, and notably for this discussion, cases where some people’s utility is poorly measured by their monetary ability to pay) and in those cases, charity (or government regulation, or whatever) can be better. You stacked the deck by choosing the well-being of the worst off, which is one of the well-known market failures. (And an important one!)
> Seems to me that, in general, markets will roughly approximate the optimal solutions.
There's no reason to expect that. Markets will roughly approximate a steady state where investing in one thing versus another will yield roughly the same risk-adjusted return. That's not related to an "optimal solution", unless the problem you're optimizing for is "investing in anything should yield roughly the same (risk-adjusted) return".
If the problem you're optimizing for is "everyone lives a life of dignity", "everyone has enough to eat and a place to live", or anything other than "equal rates of return", markets will not optimize for those solutions.
“Rates of return” in first order terms is going to be composed of “life of dignity” and “enough to eat” and “place to live” and everything else people value.
One important problem is that these things won’t be mixed equally, because some people have more to pay for what they want than others do. But I don’t think it’s right to think “rates of return” are something fundamentally different - they’re just going to be an imperfectly mixed version of all the things that do matter.
I'm surprised that nobody seems to have suggested donations for basic scientific research (or for killer asteroid detection, pandemic security, etc.) as an alternative to donations meeting the immediate needs of poor people.
It's debatable which of these options would benefit humanity more in the long run, but at least they compare as apples to apples. "Don't spend anything and put your money in the stock market" seems like a category error, for the reasons Scott points out.
More and more I've come to think that the unit of importance are whole economies. If you want people to be better off in a sustainable way, giving to specific organizations, profit or non, isn't the best way to do that, unless someone has comprehensively assessed the local economy and concluded that certain specific types of organizations would be excellent starter seeds. It's equally possible, however, that such an assessment would conclude that no one type of organization is going to make any difference. that what people in that region really need is a plethora of economic infrastructure. Unfortunately, that probably isn't possible without the active and skilled cooperation of the local government, and in many areas, that's a problem (maybe *the* problem).
If the question must be restricted to "Doing the most good my money can buy", then the criteria of "good" seems so subjective that no objectively valid answer is available. I'm not going to donate a kidney to a compete stranger because I do not value the lives of complete strangers enough to do that (I'm just being brutally honest). I'm not donating a tenth of my income to charity because I'm not that well off, and I have a family to support, and that matters more to me. It seems to me that there is a dichotomy between systemic approaches to social problems that affect all of us (which we might expect some consensus on) and individual investment decisions which are as idiosyncratic as who your friends are or what you do for a living.
i also suspect that, to do the most good for other people, it's probably necessary to understand what *they** value and want. Do we know that, if we asked, the people receiving the malarial nets would choose to spend the money that way? To assume that we know best how money should be spent on other people seems to me like it's on the slope toward some sort of paternalism. I can't help thinking that some sort of two way communication is required, so that potential recipients can say what they want the money for and potential donors can decide if that's what they want their money to do.
So, to the question "What should I do with my $1000?" perhaps the best answer is "Accept applications from poor and needy people, and award it to the one with the best investment plan." Or maybe someone out there already does this?
> Now I’m really not sure how to think about this. I think the answer is something like - the company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. So I agree that there’s some aspect of supporting capitalism here - maybe even one that’s better than giving to the company directly because it forces the company to demonstrate usefulness - but I think you could still argue that investing directly in the company has more effect.
I was responding specifically to the version of the argument that says you can "donate to capitalism" by just buying whatever you want like a new car or a pair of expensive shoes. (I fully admit this is the weakest version of the arguments but I think it's still at least worth getting it out of the way). In this case the company also only retains a percentage equal to their profit margin and the rest goes to whatever good you want to consume so the only difference is whether you end up with a new car or new wells in africa.
I'm sorry, maybe I just have very different views from a lot of the people on this blog but VelveteenAmbush's comment just seems evil. We shouldn't bother saving the lives of people who are dependent or unproductive because wealth is the most important thing? I'm sorry but this is completely backwards. And the stuff about "awaken the cosmos" and "awaken the dead matter of the cosmos into flourishing sentience" is just utopian bullshit. But people always need a big utopian goal in the future to justify their evil in the present.
The solution for comparing these things is to calculate the economic value of a life to the person actually living it (which economists have already done and use routinely in safety vs cost tradeoffs). Then you can add on the externalities that more productive people create. But Velveteen just completely ignores the value of the lives in question
It's not a good idea to think of money as "going back into the system." Money isn't really a conserved good like energy. If you think of it that way there's a bunch of classic mistakes you make like, "Wal-Mart takes money out of the community". The better way to think about it is to imagine spending money as getting a bunch of people to spend their time doing something. Because that's actually what's happening.
Let's suppose we have a guy, Bob. Bob's good at making wells of all kinds and offers his services for those that need it. In June, Bob gets hired to make some oil wells in Texas. In July, a charity you gave money to hires Bob to make water wells in Kenya. In August, Bob makes some water wells in Saudi Arabia. If you hadn't given the charity money to get the wells done in Kenya, Bob would have made wells elsewhere. If charities were to start asking for wells all the time, Bob would get his friend, Alice, who just graduated, to help him make some more wells. If Bob hadn't had all this well-making demand, Alice would have done something else after graduation. Once the charities finish making the wells, Alice will probably go do something else, since Bob doesn't have as much work for her; she's not really as into wells as Bob. The charitable contribution you made didn't really add or subtract money to the economy: it redirected some labor. Specifically, it redirected Alice's labor. Or maybe the charitable money wouldn't have been big enough to redirect Alice, in which case it would redirect Bob: Bob might have worked a bit more and had a bit more money, in which case his spending of that money might further redirect other people's labor. There was also some redirection of materials, but materials are really just solidified labor: steel is labor to take iron out of the ground, mix it with carbon, and transport it to where it is needed. Sometimes, of course, the labor goes to waste: it is redirected into the creation of something useless, or bad. Sometimes people disagree about the value of its products. But that's it. There's nothing else to money except redirecting human action. Saved money is really just human action that you haven't yet decided to direct. Invested money is really money that you've given to someone else to direct human action with, in the hope that the resulting human action, and capacity for this new human action, is so valuable that lots of people will want to pay a lot more than it cost to set up to have that action repeated. Sometimes this is because the investment is into something that simply couldn't be done before, like cure a disease, or something nobody thought to do before, like your own Lorien Psychiatry. Or it might just be to do more of a thing that's known to be good: build another factory that makes stuff people like, or another store that sells food people like.
Thinking about it in this way will help your reasoning a lot, and will help you avoid mistakes like Michael Duggan's.
I like your clear description, and agree with your characterization of money. I just wonder what Eve is doing in this. Maybe directing Bob and Alice to build wells in Texas and Saudi Arabia, but to avoid Kenya?
walmart took money out of local economies by undercutting and destroying regional chain department stores and thereby reducing more local jobs than they gave. Amazon and streaming did similar for media stores imo. This reduced things like owning local real estate, founding local and regional headquarters, lessening support businesses like advertising and printing, and more.
i live in new england, and the sheer amount of retail that has disappeared in 40 years is staggering. What replaced it was a mix of healthcare ( predatory urgent care centers) and low quality chains like Dollar General which mimic walmart but on a tinier scale.
but also used bookstores died because of amazon, record/dvd stores died, and a large part of regional retail was killed by big centralized retail.
i think people here view the world a bit too much through theory sometimes.
No, this is exactly the kind of error I was warning against. When you say things like "reducing...local jobs" or "reduced...owning local real estate" you are measuring the wrong stuff. Consider that you can create a ton of local jobs by paying for ditches to be dug with shovels and then, later, to be filled back up. If you do the dig/fill in long cycles, you can also occupy a ton of local real estate with dug up ditches that are now waiting several months until they will be filled back up again. But this is obviously terrible! Now you might say, but that's an invented case it isn't real. Ok. If you want to climb Mt. Kilimanjaro in Tanzania, you will need to have your tent and luggage hauled up by porters who walk up the mountain, instead of having it go by car or something, and instead of there being buildings you can sleep in instead of a tent. There is I can tell you no savings environmentally: so thick are the climbers on Kilimanjaro that as soon as your tent is taken down, another, that very day, maybe that very hour, will be set up in its place. All of this is maintained by laws which forbid the construction of more permanent structures, or the usage of vehicles up the mountain. But in China you can go up Jade Dragon Snow Mountain, very nearly as high, on a cable car, to a permanent structure near the summit. Jade Dragon Snow employs many fewer people per climber than Kilimanjaro, but it is insane to argue Kilimanjaro is somehow better. Hauling baggage up and down a slope is no job for a human being. It should not be our goal as a species to employ a greater share of thinking people as beasts of burden, or for that matter, small retail stores of various kinds.
On to those stores. What happened before Walmart, Costco, big boxes and Amazon is that people required more labor to get their food, stuff and entertainment. Some of the labor was the consumer's labor: they needed to drive to the stores, often several different stores, find their stuff, wait in line, drive the stuff back from the store to their house. Some of the labor was the store workers: they had to stock, decorate, clean and otherwise maintain a large number of small stores. Prices of goods tended to be higher because more labor was involved in keeping all those small stores running.
What the big boxes, Amazon, Costco and Walmart did was to reduce the total amount of labor involved. Instead of the consumer going to a large number of small stores, they went to a small number of large stores; this was a big improvement because less time is spent driving around. The stores themselves were more efficient, in part because there were economies of scale (it's much more efficient to maintain and stock one big store than many small ones) and because these larger firms were just more efficient in general. In Amazon's case they don't go to a store at all: Amazon delivers it. It is far, far more efficient for a few trucks to visit the hundreds of people who want to buy today than hundreds of cars to go from houses to stores.
Because less labor was needed to ultimately deliver goods to people using the new store structure, fewer people were needed to staff the new stores than the old ones. Those people went and did other things when the old stores went away. Probably better things! Very few people I have met have look back with longing on time spent in retail. It is conceivable that some of those people never found work again, but given the overall employment rate, uh, probably not.
The only way money might have gone out of the community is that, over time, more people might have moved out to go somewhere else to work. I think the rate of this is really much lower than people suggest it is, but consider: if they did move, were those people really better off before? I realize that moving can be expensive and scary, but so is going out on a date: sometimes the things that make you better off, in the end, require some upfront discomfort.
Finally, to streaming. I will never go back. You can pry this remote from my cold, dead hands. I cannot improve upon Penny Arcade's description of the moviegoing experience: "It's terrible and I won't miss it. Peeling your shoes off the floor with each step, judgment from the snack counter, a small popcorn for ten thousand dollars, and the stranger next to me watching hard-core pornography on their phone, just so I can see a movie through someone's hair?...Sometimes you miss important parts of the movie because you have to pee." What we're going to go back to that hellscape in order to occupy teenagers with a shitty summer job? Because a bunch of old people are nostalgic for a world whose very real costs, particularly the costs borne by others, they are not cognizant of? No!
The important measure is the one that's been important since the dawn of humankind: what people have to spend their time on. Our goal as a species should be to give each man, woman and child as much time as we can to be free: to do what they want, to be happy. Amazon, Walmart, Netflix, Big Boxes and Videogames all work to reduce the amount of time people must spend out of necessity, and to increase the time that can be spent out of choice. This world that you remember was actually probably worse on the whole for you, and I don't think that you would go back if you fully considered the costs -- which is, again, the point I am making, that you have to think about things as allocation of labor and action in order to correctly evaluate those costs and benefits -- but even if somehow I am wrong and you really would like that world better, there are still countless others who really do not want to back to crappy retail jobs and spending more of their Sundays driving to stores and getting less for it. If we think in terms of "money leaving town" or "local jobs" or "local real estate" we miss all of those people and what they want. But those people are real and what they want matters.
I want to agree with Michael Druggan's point re: donating to charities being similar to "donating" to companies.
I run a nonprofit that works in west Africa. The donations we receive are used to deliver our programming, which entails paying local staff, purchasing materials, etc. All of the money we receive is "reinvested" into the economy in some way, whether through paying for salaries or material costs; none of it "disappears."
Scott, you contend that only the profit margin goes back into the economy; that doesn't seem right to me. Why are the salary costs paid to healthcare workers who work for a non-profit any less real than the salary costs paid to healthcare workers at a for-profit? For that matter, why are they any less real than the value paid to drivers for Instacart?
In my mind, Michael's right: whether it's Instacart or a nonprofit that builds wells, money is equally flowing through the orgs and being reinvested into the economy; the only difference is that in one case you have a product that's more socially useful.
There's a broader point here. In a capitalist economy, very little money "disappears"; rather, it's constantly being recycled into different forms of value. You get paid a salary, which you use to pay for groceries, which is used to pay the cashier and the farmworkers and banana PR people, who use it to buy food, etc. Sure, some of that money creates more or less surplus value -- my guess is that money invested into R&D is particularly useful -- but it all goes somewhere, even money "in" the bank; the only way to opt out of this system is to bury your money in a hole or something. This arg for capitalism over nonprofit thus seems moot to me, unless your real argument is that value is massively unevenly distributed amongst for-profits (i.e. way more in innovation, R&D, etc.), which I can see.
You are not accounting for opportunity cost. Let's say I have two options. One option is to pay a billion dollars to someone to dig a hole and fill it up. The other option is to pay someone to research and bring to market a more efficient generator. Per your description, both are equivalent!
Does anybody know how Zwi Mowshowitz thinks about this? I know he once wrote "Amazon is the best charity in the world" and that he does not identify as EA. If anybody can link to blog posts of his regarding the topic, I would be grateful!
I'm confused (my natural state of being). Isn't the dilemma you posit addressed by creating a foundation that invests the principal, grows over time, and donates some of its profits periodically to the charity? Doesn't that help the greatest number of people over time? Or invest in companies whose research will lead to helping millions or hundreds of millions of people, like the agricultural revolution of the 20th century that began with the discovery of how to synthesize ammonia and continued with the development of seeds that could greatly increase the yield of crops in a given area. Or have I missed something?
On pure aesthetics, I enjoyed VelveteenAmbush's comment immensely. Maybe sometimes we really do ventriloquise the geists, because I haven't heard a purer voice of capitalism in a long time.
Death, disease, gravity wells - skivers' loopholes. When that dead matter of the universe awakens, it, too, better show up for work.
> Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds, and how much you can get done with a 2,000-person labor force, then letting those 2,000 people die starts to feel like a giant economic waste
Even if we look at the places were people live on $1 a day, and suppose they only have 30 years of economically productive life because of all the wars and sickness, 30×365×$1 = $11k. If you can save their lives for let's say $5k per capita, if makes good sense even from a heartless economical perspective.
The question is, is there even demand for that labor? You can only produce so much useless crap before the developed world stops having enough time and money to buy it all. It seems like Asia is providing more than enough for the world, so why bother employing more workers in an environment that's less efficient than existing ones? Their lives simply have no value to the rest of the world.
> It's the "give a man to fish" vs. "teach a man to fish" principle. While I in no way wish to denigrate the value of saving lives with better water... once you do that, then what? You have people who are alive, and still in the same situation they were in before.
This is true under the assumption that they are going to stay in the same situation forever.
But if they are in a situation where they are growing the local economy, and it's just that today that they happen to have a problem with the water, building the wells gives them extra time. Perhaps 20 years later they will be able to build the wells using their own money, just like we do.
TY. I came to the comments wondering if anyone else sees this. I’ll go further: charity is pernicious. While it may be necessary at discrete times in certain circumstances (I do hand out money to street bums sometimes), creating dependency helps no one long term. All those charities become bureaucracies devoted to their own existence, which means you can’t really solve the problem or your mission ceases to exist. Also “capitalism” (what an ill defined term, almost useless) is actually necessary for the world to go round. Nobody will work to create something for others so that some central planning bureaucrat can swoop in and redistribute it. That bureaucrat’s very job is dependent on someone being productive, either by choice or force. Human nature anyone? People work to provide for themselves and their loved ones. Or is that a right wing conspiracy theory these days? Finally, from the bleacher seats, the whole EA discussion looks a lot like guilty rich people trying to feel better about their good fortune.
Basically, the question is, is the help helping the target grow their own abilities (in long term)?
But that's difficult to judge, even with companies. You may invest in a company, and then the company goes bankrupt.
Or maybe the company does okay for a while... and then the owner suddenly dies of malaria. Oops, we invested in capitalism, but we ignored the charity.
Okay, why didn't the local entrepreneur invest in anti-malaria charity. His own life was at stake! Because he also invested in capitalism, tried to grow his company first, hoping that if he gets big, he would be able to buy more anti-malaria nets.
(Sometimes charity is also a less efficient replacement for insurance.)
It seems optimistic to suggest that charities can't possibly work because they might solve their problems and become unnecessary. We are very far away from utopia. Even with maximally competent organizations and institutions, there are still going to be lots of problems that still need solving for our lifetimes. Running out of problems is not a serious concern.
As to whether charities cause dependence ie. decrease productivity in proportion to the amount given. That is an empirical question, you can't answer it with armchair reasoning. Luckily we have real world data, and at least for one (pretty popular) form - direct aid - it increases labor productivity, it doesn't decrease it: https://www.givedirectly.org/research-on-cash-transfers/
And finally, it is unclear to me what the relevance of central planning bureaucrats are. These are private charities, not government funded. They aren't run by governments and while some need to get permission from governments to operate, there isn't much interaction at all.
> Maybe you have an answer for this, but if it involves “Spend the rest of your life creating this hard-to-create institution from the ground up”, then I, personally, am not going to do this. I would prefer something more like a Bitcoin address I can send money to.
It's not going to work like that for any significant values of the product of (money donated) x (time you're doing it). If you want charity done properly, you will have to involve yourself personally. If you limit yourself to donating money, organizations you are donating to will quickly evolve into grifts. If you rely on existing social status management mechanisms to keep people you donate to honest, organizations you are donating your status-time to (i.e. attending and not attending lunches or inviting and not inviting people to your parties and making sure others know why) will evolve into vehicles for high status people to maintain their status and manage their taxes. Riis (1890) noted this about late XIX c NYC social housing: it was okay as long as their charitable investors kept up personal involvement, but quickly degenerated as soon as they checked out. This phenomenon is not specific to charity: nation and democracy also requires personal involvement (sometimes very onerous) to keep in shape, or its politics degenerates into a mass of grifts and vehicles for high status people to maintain their status and manage their taxes. The market economy escapes from this trap only because it reduces the value of goods and services exchanged to money, and you cannot reduce the value of people (which is what charity, nation and democracy all work with) to money. QED.
Thanks for the interesting discussion Scott. I'm not getting the whole capitalism vs. charity. When you give money to poor people they go and buy products or services with the money. So you are still getting both - you get capitalism and in addition you are getting charity by slightly redistributing wealth in the short term.
Yes, a few people have pointed this out before, and I really don’t understand how that’s not the obvious ending argument? You spend your money on an instacart order because you value convenience, i spend it on a bednet producer because I value malaria prevention. How are these different?
Are there any EA charities which instead of water wells or insect nets etc just creating more people to live in same difficult situation, select the high IQ individuals among the already alive ones and send them to good education schools and direct them to STEM? That would help the entirety of the world.
> whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor that you invested eighteen years building up. Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds,
FWIW most e.g., Malaria deaths are sub 5 years old, maybe even sub 2.
Just reinforcing this point, we talk about deaths a lot because that's very salient, but it really, really sucks to get malaria, even as a healthy adult who is unlikely to die from it. You are completely incapacitated for weeks of often debilitating pain and unpleasantness. If anything, I think we often *understate* how much suffering malaria causes and how big a deal preventing it is.
I'd observe that the arguments in favor of investing money to use for good later tend to overlook the fact that utility is sublinear in money and the world is getting richer over time.
Yes, the market gives a good estimate of the time value of money in terms of consumption today vs tomorrow but it doesn't take into account the sublinear nature of utility so we should expect investing to yield less utility than direct intervention.
I have recently started a research project to discover the formula for which charity currently provides the best value to the world. My bitcoin address is a4o0wh4tD1dyOuTh1nkthi$w45G0ingT0b3R3aL?
I don't think anyone is talking enough about the positive knock-on effects of charity in terms of setting the area up for capitalistic progress. Detractors of charity seem to completely ignore the fact that covering basic human needs in underdeveloped countries is exactly what’s needed to get the flywheel of development (read: capitalism, if you wish) working there. They view saving lives in subsaharan Africa as consumption, simply prolonging miserable lives. I’m not sure what other intervention they would prescribe to get a market economy and development going in such places, but data from GiveDirectly show that their grants are often used for things with positive knock-on effects like better nutrition (which improves IQ), school tuition, and starting businesses. If capitalism is the natural engine that brings people out of poverty, maybe jump-starting capitalism might require some institutional change, but I think it’s more likely that an influx of, well, capital is enough to get the capitalism ball rolling.
GiveDirectly aside, saving lives with water or malaria vaccines or vitamin A supplements will have major positive effects. There is an implicit (or sometimes explicit) Malthuian undertone in criticisms of human development charity, believing that saving the worst off lives will actually generate more strife and keep investment per person low. The good news is that Malthus was wrong even in these societies. Development data show that parents tend to have extra children to make up for child mortality to ensure that some remain alive to aid their elderly parents. Reducing child mortality actually reduces the total number of children per family in the long run as parents adapt their decision making, allowing them to invest more per child and set more up for long term success and socioeconomic mobility.
Further, each life saved from polluted water or malaria or vitamin A deficiency also avoids many other issues along the spectrum from near-misses to minor annoyances, all of which are factors that will make a life less productive and therefore less likely to lead to lasting change and economic advancement. The seeds of positive change exist in every community, held back by myriad hurdles, and removing even some of those hurdles will result in some people being able to economically specialize and advance; effective human development charity creates marginal capitalists as well as marginal lives saved.
Is the thing you’re talking about with Michael Druggan like the Multiplier Effect from the Circular Flow model?
Also if the well-making company’s profit is 10% wouldn’t most of the 90% not be going into the ground? All of the not-profit money had to be spent somewhere e.g. paying workers, paying local concrete makers, so the money then transfers to them and they can do things with it and so on and so on.
My shaky understanding of what I thought people thought is this ends up bottoming out in two concepts:
a) The Velocity of Money
b) The expansion/contraction of the money supply
Would appreciate anyone who feels like they have a better grasp of how these concepts connect chiming in.
> Suppose that eg the US government decided to give everyone free health care by taxing people and spending it on health care. It seems like this should have tradeoffs or hurt the economy somehow. But you could argue that the health care money just goes to doctors and nurses and so on, who would then spend it on normal economy stuff, so the non-health-care economy is just as big as always.
It is generally understood that there is an economic multiplier on government spending - that, far from having some kind of economic drawback, it helps the economy more than the amount of money being spent. https://www.investopedia.com/terms/m/multipliereffect.asp
So no, a program like that doesn't necessarily have (net negative) tradeoffs or hurt the economy somehow. I suppose it could be designed so poorly that it did, but it seems improbable.
To take that specific example, the current American healthcare system is so staggeringly inefficient, that you could fund universal healthcare for all for about half of total US healthcare spending (e.g. Canada does this - per capita health expenditure is about half of America's for a universal system), which would free up half of that money (which is currently being used unproductively on rent-seeking, overhead, etc.) for productive uses. Universal healthcare might be a potential government program with one of the highest multipliers, actually.
More broadly speaking, there are sectors of the economy where markets work well, and areas where they work poorly. Televisions and other discretionary consumer goods are delivered very well by markets. Things like healthcare, which are not discretionary, or natural monopolies like telecoms, roads, etc., are delivered very poorly by markets, and you can make the economy much more efficient and effective by nationalizing them.
Capitalism isn't some kind of cure-all answer to everything that always works best. Markets and capitalism are one tool in the economic toolbox, to be deployed where it makes sense.
I feel like this is maybe an obvious comment, so I am surprised it didn't come up. In a capitalista business, the business and investors capture at least part of the total return. As long as there are opportunities to create $X value by spending Y$, with x>y, the market correctly incentives this transaction to happen. They will borrow or raise money or reinvest profits and reap the rewards. So you should expect that giving some money to a business will generate about the market rate of return.
The main difference with charity is that this system does not work. AMF can't go to a bank and ask for however many millions and show that they will generate much more than that in returns, because they do not appropriate these returns, so they won't be able to pay back. Therefore, you should expect that great opportunities can continue to exist unexplored for quite a while.
Feels like I'm stating something kind of obvious, and there are certain subtleties and ways this can be not quite true, but I think this is approximately true and very relevant.
It would seem like Velveteen's idea would prevent Africa from ever developing at all. Developed countries just keep reinvesting in themselves. The gap between the efficacy of investment would either grow or stay the same (if there were diminishing returns, then we should have already started to see them, but apparently there aren't, because the poorer places are necessarily those where investment is slow, rather than places where wealth was destroyed or never invested in the past. This all seems very circular to me).
But the fastest growing places are actually very poor. There are very obviously diminishing returns here. That doesn't mean that you can invest just any random poor place--the slowest growing places are also poor (rich countries are in the middle). So if you can identify poor countries with high potential growth, like South Korea in 1950, then you can get a high rate of return *and* help very poor people.
A while ago, I mentioned that the reason I drifted away from most of the Less Wrong/Rationalist areas, but kept up with Scott, is because I had this deep down feeling that Scott would definitely want to model what would happen if you killed all the poor* (this would be useful and interesting information about the model, and possibly about the impact of various factors in the world), but no matter what the computer said Scott would never actually dream of killing all the poor or supporting it in any way. And I felt that many other Rationalists, faced with numbers and logic suggesting that killing all the poor would lead to greater economic growth, or a world full of happy people, or a single hyper-intelligent entity that consumes all matter and knows all, or whatever they have decided is the best possible outcome… many others in the community would endorse killing all the poor as the obviously rational choice, and work towards it as a goal.
I feel uncomfortably as if I am watching this play out, in some of the comments.
*This is, of course, a reference to the famous Mitchell and Webb sketch, which I think is often quoted by people who interpret it rather differently to me.
I don't think you need to be that worried. EA is still quite popular among the rationalist community, and these days everyone is worried about AI killing everyone, which they wouldn't care about if they didn't value humanity's existence. They're still human, for better or worse.
But even there, I think a chunk of Effective Altruists would be completely down with the logic that, for example, some lives are worth less than others, and even that some lives are worth less because they are less likely to bring about a tech utopia, for example. And this would inform the organisations that they would set up and fund, and the goals of those organisations.
I think that Scott, while fully capable of discussing these things logically and rationally because obviously, when it comes down to it rebels in every fibre of his being against the idea that some people are not worth saving or helping, or generally that decisions should be made by considering final ends to the exclusion of means.
>"...whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor..."
It really depends on *which* 18 year old. In the stereotypical EA-targeted regions, there are enough other problems that there's unlikely to be 50 additional years of life expectancy at age 18 even post-intervention, and what labor is gained is likely to be barely above subsistence (the baseline against which "productive" should be measured).
Taking VelveteenAmbush's argument to its logical extreme, the most effective charity goes around administering IQ and "grit" tests to everybody, and then taking away and intensively educating in STEM those who score over 145 IQ and high levels of grit. That would best help the long-run future of humanity.
For myself, though, I believe in moral equality and hyperbolic discounting. All souls are weighed in the same scales on the Day Of Judgement, and you can't get to the long run without helping people through the short run.
re: Velveteen - why do we say "consumption money" if money aren't burned, but keeping circulating in the economy?
What will a nursing home spend the money on to save lives? Doctors and equipment. Who does that benefit? Doctors, their families, companies that produce medical equipment, their employees, families of their employees, everyone who these families buy things from etc. A lot of these people are good people, some of them might also donate part of their income, furthering the effect of that initial donation.
Why don't we count this as a part of infinite-order effects? Are charities excluded from being part of the capitalism, while existing in a capitalist society?
Taking a look at the Copenhagen Consensus group's figures in the book "Best Things First" by Bjorn Lomborg I see that they propose that $40 billion of costs for the 12 best initiatives would deliver $1.1 trillion of economic benefits and save 4.2 million lives valued at $1 trillion, annually. The figures are based on peer reviewed articles by economists
Seeing that GiveWell rates it as costing about $5000 to save a life for their best charities I see this pencils out to a little under $10,000 per life. Accounting for the direct economic benefits it seems these are equal, if true. It seems like it would be a spectacular addition to human well being if the effect of the best charities could be roughly matched by a project at the tens of billions of dollars scale
I think an extremely high value use of time would be to promote to politicians that they seriously consider aligning their foreign aid to the top priorities that the Copenhagen Consensus group identifies
VelveteenAmbush's comment is 100% correct. That's the right way to frame the issue and the fact that Scott doesn't acknowledge that makes me think he's not arguing in good faith. His objections are terrible.
>at some point all of this has to bottom out in consumption
No it doesn't and I flat-out don't understand how anyone - much less someone as smart as our Beloved Leader - could say this with a straight face. Theoretical society X generates $1M of surplus every year. There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub. The only wealth that _must_, in principle, be consumed is the baseline required to keep everyone fed, houses warm, and car batteries charged. Any spending beyond that is discretionary. That will be true for as long as there are things to discover.
>If you donate to charity, you will create less numerical wealth, but it will go to people who need it more. Which matters more?
Investing in productive technological development matters more. How is this even a question? I mean, what do you want more of: physics breakthroughs than enable world-improving technology, or starving third world subsistence farmers? Invest in the thing you want more of. Again, why does this need to be explained?
>I think the diminishing marginal utility of money case makes it likely that they produce more utility-adjusted wealth.
This is wrong. Exponential growth will always swamp the utility-adjustment effect in the long run. That's because even though you adjust the utility of your charitable transfer upwards, it's one-time adjustment on a fixed amount of money. It doesn't compound. Or, at least, it doesn't compound as quickly as it would otherwise and optimizing for the rate of exponential growth will always dominate all other considerations. EVEN IF you optimize for number of lives saved you can trivially see the advantage of investment via the Robin Hanson argument: you can always save twice as many lives if you just wait 7 years and invest. Scott is just flat wrong here. Unless he's using an explicit moral discount rate on the value of a life, he's obviously, unarguably, mathematically-provably wrong.
Love Scott but this is honestly his worst take (well, other than "Categories Were Made for Man") in the 8 years I've been reading. I suspect it's because he's so emotionally invested in the EA/Rationality movement that he's unable to objectively evaluate good criticisms of the ideology. This fits the pattern of him having a logic-defying take on transgenderism while he was in a relationship with a nonbinary. His achilles heel is his need for acceptance from his social circle and his inability to tolerate conflict in that context.
>There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub.
Hang on! How do you spend on building things without that bottoming out in consumption? I build some infrastructure: I do that by paying people to provide me with materials and labour. Those people pay other people for other materials and labour, or spend their own money on consumption or investment. Invested money is spent on other projects, which again pay people for materials or labour, and around and around it goes with people spending the money paid to them, or investing it in ways that lead to other people spending money.
This is, of course, also part of the argument for why, if you want to help a community by giving them something, you should pay people in that community to make the thing you want to give them, rather than importing it from another community.
Or is it that you mean merely that ‘bottoming out’ implies the money stops its ‘journey’ and stops ‘growing’, effectively running out rather than going around and around prompting more production and growth? I took Scott as simply implying that money given to a charity would be spent by paying money to companies, organisations and individuals, so that you are stimulating just as much economic activity as if you had spent this money buying things yourself.
I agree the categories are a little fuzzy, but conceptually it's pretty simple. Say you have a bunch of seeds. You can eat them now or plant them. There's nothing preventing you from continuing to re-plant 100% of your crop every season (at least until you run out of land and minus the minimum required to keep you fed). There are thousands of individual examples like that and it basically just comes down to whether you spend your money on things that ultimately increase productivity.
Yes, I understand that. I thought that was clear in my reply? Although I would also say in your analogy that the seed is consumed at the point of planting, in such a way that it and the soil and so on produce plants that produce more seed. And you cannot continue this cycle planting 100% of everything, because you will die: you have to ‘spend’ some of the seeds on sustaining yourself and any other workers, as well as ‘spending’ some on fertiliser and so on, and ‘spending’ some planting in the soil to grow new plants (the investment).
Are you saying that you did, indeed, take Scott as making a comment implying increased productivity was not a thing, rather than him making a comment about investing in a charity that spends money having the same basic economic effect as spending that money yourself on the things that charity would spend money on?
>because you will die: you have to ‘spend’ some of the seeds on sustaining yourself
Yes, that's why I said "minus the minimum required to keep you fed". Do you accept that, even accounting for feeding yourself, buying fertilizer, and feeding your workers, that there will be leftover seeds that you can choose to either eat or re-plant?
>Are you saying that you did, indeed, take Scott as making a comment implying increased productivity was not a thing
I believe Scott fails to understand that maximizing ROI permanently increases productivity in ways that charitable giving does not. I believe Scott fails to understand the long-term implications of that difference. His specific claim that "everything has to bottom out in consumption" is inaccurate and symptomatic of his failure to understand those things.
> I believe Scott fails to understand that maximizing ROI permanently increases productivity in ways that charitable giving does not.
Given that the context is a discussion which is, effectively, about how to maximise return on investment where your return is not always intended to be money, I don’t think it’s likely that Scott has this misunderstanding. I think he just used informal and non-standard language to express his point.
>Given that the context is a discussion which is, effectively, about how to maximise return on investment where your return is not always intended to be money
I believe that's a characterization that betrays a misunderstanding of the issue. The point that VelveteenAmbush and I are making is that any supposed tradeoff is an illusion and that Scott fails to understand that "non-monetary returns" can, in fact, be economically quantified. Because of that error, Scott mistakenly believes he's making a rational tradeoff between economic and non-economic factors along an efficient frontier, when in fact his charitable contributions are a deadweight loss that gives him less of both. "Helping people" vs "economic growth" is a false dilemma. Economic growth IS the way to help people. Possibly the only way, certainly the best.
Scott uses informal language as a rhetorical device to preferentially engage high-level emotional judgements in his readers. This allows him to evade the analytical scrutiny which can demonstrate that he's advocating behavior that makes the world objectively worse. I believe he does this because he has an (understandable) social commitment to EA and doesn't want to lose status within the movement. Like all religious adherents, he bends his reasoning to accommodate his irrational beliefs. Kind of sad for an OG Rationalist, but I guess Moloch comes for us all in the end.
I subscribe to Peter Buffet’s view that the Charitable Industrial Complex is fundamentally flawed. It’s a self sustaining business that is responsible for supporting jobs of all kinds of Charity Aid workers rather than achieving permanent change. Therefore I’m solidly down on the social enterprise or social charitable community organisation model which are established to deliver services for the community for a profit reinvested back into the organisation. Call it social capitalism if you will. This means you avoid the idea of a donation and invest in an idea and can expect/demand performance.
Scott, I think your argument against Velveteen's argument is not very strong. I say this as someone inclined to agree with you but I think V's math makes more sense, even if it is uncomfortable. V's point about human capital is that if you want to make an argument about someone's life having compounding benefit to others, you have to be willing to quantify what they can and will do for others, which in the case of somebody very poor is almost always being severely undermined by the systems around them, usually by some kind of organized violence or tyranny. So yes, they might be able to stay alive and go to school for some single or double digit factor cheaper than someone in a rich country (though not more than that) but their impact on others' lives could be much less than an investment in making the things everyone depends on (including them) much cheaper and better. Even if you *only* care about the welfare of the poorest, pushing down the price of solar, smartphones, starlink, vaccines, watermakers (or filters for as long as that's even cheaper), ebikes, US/EU visas, flights, online classes, and so on could actually have a much bigger impact on the most oppressed than saving whatever number of lives you can would. (Not to mention the huge impact on the majority with average resource access.) One example: Industrial production of clothing reaches almost everyone in the world and is cheap enough to be accessible to everyone. Even in situations where people face unimaginable violence and oppression, they have clothes, because clothes are so cheap relative to the human need for clothes. Why can't investing in technical problem solving make the Internet that cheap? And food, and a house, and college? Once it does, the same horrific violence and oppression will probably fail to keep out those things too (or it will have a much harder time doing so.) Your instacart argument is somewhat persuasive in that some investments will yield somewhat useless products (though I'm not sure time savers like instacart are so useless because time saved compounds too) but you can build an investment strategy focused on big leaps or areas close to primary human needs and capabilities, mostly avoid this problem, and do well as an investor. (Just as you can choose not to invest in tobacco companies or gambling websites.) Ultimately I think political change to oppose violence and tyranny and build good institutions bring even bigger returns than charity or capitalism, but I agree they're harder to evaluate, especially when you are a non-participant with a day job in another field. I'm optimistic that retroactive funding with tradeable impact certificates could make evaluation less a problem when giving to efforts to end violence and oppression but it's a big problem now for sure. Lots of activism and political change is super speculative or snake oil.
Also, the argument that all investment comes back to consumption eventually is totally wrong. You can invest, spend all your gains on more investment, live modestly (or not) to the point where your consumption is a rounding error on your investment, and die. Conceivably every human alive could do this. Investment just means working on improving the way we do everything. It could be research, your work, anything. You are investing a lot of your surplus (free time) with your excellent writing!
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I will give it a try on your request 2 (an analysis with real numbers demonstrating that capitalist charities are more effective.) First of all, it is hard to be certain that an enterprise with fuzzy society-wide aims is working at all - a capitalist charity may be demonstrated to be succesfull on a narrow goal (such as changing the system of taxation or establishing a legal framework) but it is hard to demonstrate a causal link from a narrow aim to a clearly beneficial broad one, such as faster economic growth. This is usually impossible even ex-post with full and certain information on the narrow goal.
However, if we think that capitalist charities work at all, their potential benefits dwarf anything else. US GDP has been growing by about 2.2% in real terms for the last 20 years, with a standard deviation of quarterly growth of 5.54%. If a successfull charity manages to accelerate this growth by a statistically imperceptible 1/50th of standard deviation or 0.10% per annum, US GDP in 2034 will be 1.2% higher than on the current trajectory. This extra 1.2% is equivalent to $280Bn in todays money. If just 50% of this value add is captured for effective altruism, that gives $140Bn a year to spend on african children. At the current Givewell estimates of $4500 per life saved, this would be enough to save over 30,000,000 lives just in 2034, and more than 350,000,000 lives between 2024 and 2034. I am pretty sure this beats any other charitable projects.
Velveteen is obviously wrong because they fail to account for the value of the lives themselves. One QALY is probably worth ~$100,000 to the recipient (economic value of a life is around $8m, divided by 80 years for a full lifespan). If you can save 50 QALYs for $5000 (I haven't looked at Against Malaria Foundation's recent numbers but I'm assuming this is the ballpark), then that's 200*50=10,000 QALYs for $1m. So around a billion dollars of value over 50 years, not counting any value those individuals create for others. Clearly superior to the S&P 500 unless the positive externalities of the S&P 500 are very very very large compared to those of the charity.
Scott, why don't you go around distributing heroine to addicts?
All your reasons for not doing that apply doubly to charity to Africa or other poor countries. The worst an addict can do when given extra drugs can do is little. A country with access to graft can cause a huge war.
Is there anything here on "bridling" capitalism? Or Cipolla's idea of intelligence versus being a bandit? Smith's butcher brought value to us and benefited himself. Pharmacy Benefit Managers bring no value yet take billions in fees and kickbacks to put sometimes even more expensive therapies higher on formulary. Ticketmolestor is another example. They bring very little value and exploit the market place. I pay $400 for a concert ticket and $100 goes to my fave artist, $80 to Ticketmolestor and $220 to scalpers. How do we strengthen anti-trust and reward companies that add wealth and value and regulate PBMs, Ticketmolestor and their ilk out of existence?
(this is rehash of a comment I made on the original post, feel free to delete if not allowed)
I'm still surprised none of these comments have mentioned:
1. Difficulty of value capture (free rider problems, diffuse gains, etc.)
2. Market inefficiencies/failures
Market solutions are well known to _not_ work in these circumstances! Charities / government would be better here. Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons.
Well, I must be meeting more than my fair share of the crazy libertarians, because the existence of market failures is something I routinely have to argue about with people.
Alright, bring it on. What is an example of a genuine market failure?
what do you mean by genuine? Do you have something in mind that's a fake market failure?
ETA: for something to be a market failure, it's not necessary for vast quantities of value being lost, or the market to fail at providing any basic form of the good.
Yes. Most "market failures" are fake market failures, because the problem can be traced back to government intervention. In fact I'm only aware of one genuine theoretical market failure; not sure it ever happens in the real world.
Is that one genuine market failure the case of information asymmetry?
It is not.
All market failures occur in countries with governments , because all countries have government s.
Which has no bearing on what I said.
Ok, you're probably talking about things like "healthcare", which is not at all what I had in mind. Politics is the mindkiller, etc.
The prime example for me are those where the complexity of the product is really high, and purchases happen infrequently. This can happen with products that by their very nature are actually a bundle of things.
Take a product that has a lot of features or subcomponents, such as a laptop. Out of the millions of possible ways to assemble a laptop, each manufacturar has maybe a dozen, at most a couple of dozen models on sale at any given time. So you routinely end up buying the laptop on which you can install linux without fuss even though you hate the keyboard, or you get an incredibly bad screen with uneven color on the top-end model you paid $3k for. The thing you actually want is simply unavailable, or it's really hard to identify it.
These individual points of failure could all be addressed, but consumers can only send the faintest possible signal: buying or not buying the entire bundled thing. In theory, that's enough for the market to trend towards equilibrium. In practice, not so much. On the consumer side, even though there are many, many review sites, the cost of thoroughly informing yourself is really high. There are also sneaky practices like enshitification, where companies constantly try to sneak lower quality stuff past you, making the cost of being informed even higher, and which can remove entire product lines that you used to like from consideration.
Staying with the example of laptops, Thinkpads used to be really sturdy machines with consistently high build quality. People loved them and paid a premium for precisely this reason. But even though there was perfect product/market fit, now in 2024 I cannot buy such a 2010's style laptop anymore! Some folks even go hunting for used machines from that era, because even with all the supposed advances in computing power, the old boxes are still better for them. What would you call this, if not a market failure?
I call this "government intervention in the market."
Here's the thing: To identify a market failure, you can't, except in a 100% pure free market that has been operating for decades, say "this bad thing is happening in the market, therefore it's a market failure." Instead, you have to ask *why* this is happening. Markets are supposed to fix such problems, so why is it happening in this case? The answer, in essentially every case, is "insufficient competition." If there were more laptop manufacturers, then, in order to compete, they would have to hunt for ever smaller market segments, until the point where it was not currently profitable to meet a particular preference.
In this case, it's especially tricky, because there are in fact a whole bunch of laptop manufacturers! Why has no one siezed this profit opportunity? Is it unprofitable to manufacture laptops like this nowadays? If so, why? Does IBM have a patent on that kind of laptop design, so that no one else can now make them (copyrights and patents are the cause of *many* so-called "market failures").
Also, it's kind of weird to call this a "market failure" when the product existed 10 years ago. The fundamental nature of capitalism didn't change in ten years, so what did change?
So you have a general way to never change your mind about X, by crediting X for every good thing and putting blame for every bad thing on something else. Congrats, I suppose?
Nope!
Let's turn it around. How would I behave if I was actually correct, and how is that different from how I am behaving?
All market failures can be traced back to government intervention, because the market only exists thanks to the government preventing thieves, brigands, and fraudsters from operating with total impunity.
That's not government intervention in the marketplace.
Market for lemons, or if you want an example of a non-car lemon, translation.
1. Neither companies nor substantial numbers of consumers of media the company produces actually know what the quality of translations are
2. This results in good translations getting substantially underpriced. Good translations tend to be the result of specific auteurs pushing very hard for them, and not the result of market forces. Blue Archive's English translation for example, suffered a precipitous decline in quality after the head localizer died.
3. We are currently seeing a huge premature push into AI generated translations, when the quality is sufficiently low that translators end up spending about as much time
proofreading the translations as opposed to coming up translations itself
4. Attempts by the audience to independently audit translations is just really really bad. Basically everyone who participates in the discourse do not understand both languages, and use extremely bad proxies like "is this line social justice adjacent" or "if you did a find and replace if every word in this sentence with it's English equivalents, does that resemble the actual line"
I guess you could say that "this is the best that could be done" or "if people wanted better translations they would pay for them" but if your very criterion for success is the market itself well... I would say dictators sure work out well if you use the dictators to grade themselves.
Price theory doesn't drive highest quality for lowest price, AFAIK there was and are no attempts at fostering translation skills (outside of maybe Square Enix). Labor practices in translation end up having lots more price pressure downwards and absolutely no quality floor (for example, the translator is often not even allowed to contact the creator via email, game scripts are often sent out of order in excel instead of usable script files).
I think this is a strong example because it is both theoretically predicted by economists as well as empirically observed to not work well for precisely the reasons given by theory.
Very nice example!
This can be lumped into a very large category of "incomplete information" problems. So the question is, why has the market not provided sufficient information to judge what is good and what is not? Are people unwilling to pay for that information?
Information is one of the things where market failures abound. If it’s easy to verify true information but hard to generate it, then there can be a market. But when it’s hard to verify, then the problem of incomplete information recurs in the market for information itself.
But this has no necessity to be a market failure, because what you end up having is a market for trust.
Information can also be intrinsically hard to verify, e.g., a used car's engine problems appear sporadically, only revealing themselves after 100's of km, or during winter, whatever. When the cost of acquiring information about a particular used car exceeds the value of that car, there can be no information market.
the easiest argument against you is three card monte. The information you need is not there; you can't tell if he is cheating and he may not stick around long enough or cheat harshly enough to build enough reputation. Con men in general survive by understanding how hard it is to maintain information parity.
we have government because you need a hundred men to stop one man; it is too easy to do evil and incredibly hard to prevent it.
Why would you trust someone you had no reason to trust? Would you buy a car from someone you just met, made by a company you had never heard of?
You're saying a specific game publisher is publishing particularly poor quality language translation versions of it's games.
Yet there are other game publishers who publish games with higher quality translations.
But you're able to purchase games from many publishers, with varying quality of translations.
This is a market success. You can vote with your dollars.
Market failure is when there is no alternative solution to poor quality. Such as a few years ago, California DMV had serious computer outages. I scheduled an appointment, visited the office and couldn't complete a driver's license renewal. Returning several days later, computer systems down again. Returning several weeks later before I had success. This is a market failure, no alternative solution.
I mean, this is a *government* failure, not a market failure.
It depends on how you define translation.For example Wizard People, Dear Reader (https://en.wikipedia.org/wiki/Wizard_People,_Dear_Reader) is in some sense this is an English Translation of the original Harry Potter Movie or https://en.wikipedia.org/wiki/What%27s_Up,_Tiger_Lily%3F. In these cases you can have a good translation that is not faithful to the original text. These cases are relatively obvious to spot because the tone is shifted so much from the original but if you are reading a translation of a new Chinese novel how do you know whether the meaning is preserved or imagine if you are trying to read an American novel that is translated into Chinese and need to consider if the text has been changed by censors.
How much would you pay for this information?
This is slightly misguided I think for the following reasons:
1. Sometimes a game gets its popularity in Japan for certain nuances in character or play writing, and ends up with a significantly smaller following here where reviews don't mention those positive points of writing by at all.
2. Media is not completely substitutable. Having a good translation for a bad game and having a good translation for a good game will be very, very different, yet I'm pretty sure details of how well each of them sell has more to do with the base game rather than the quality of the translation, even IF counterfactually the customers are willing to pay in game launch delay time for a better translation if they had that option.
3. I was talking about the *market for competent translators* not the *market for translations*. It's not clear to me that Blue Archive NA can pay more money for an editor as good as the one who died, even if they did increase the salary and paid more in search costs.
4. The level at which I made my examples was not game companies but specific translators. Publisher names often do not give you a great correlation with translation quality, because sometimes that information isn't even made publically available.
Yeah, someone has set us up, The Bomb ... Engrish translations often go south.
To me, in my little mind, there could be a great market solution. Open up translations to say five or ten groups. Each one provides their translation as an options pack. Say the budget on a game is $100. (flexible adjustments here) Set aside $2 for the translations. Each team submits their translation. Users buy the game, say the after the first 100 uses of the game, the payment is set. Every user gets a random starting translation, with the option to change translations any time. If my translation is crappy, and the average is two plays with my translation, I get 2% of $2 for every English Language game pack. If your translation is great, and you get 80% of the plays, then you get 80% of $2 for every English language pack, you're rewarded, I get—deservedly—slapped down.
I'm sure there's a whole lotta translation contracts let out because: "Three semesters of language English High School training, my child has." Unlike my 30 year old friend who spent his childhood in Japan, and from about 15 on in the US. That's the guy you want owning your game translation.
Or the blogger I used to follow Gaijin Smash, he grew up in the US, became a JET English language teacher in Japan, stayed on, 20 years later, he's on Reddit I think he still works as a translator for web pages and such.
To me that would be a good free market solution.
In 2013, I was considering buying a used 2004-2008 Jaguar XJ8. These are wonderful cars that were obscenely underpriced, because most used Jaguars are unreliable, but this particular model was designed and made under Ford and is pretty good. (I eventually bought one for $15K.)
I read hundreds of reviews of this model of car, and also the 1999-2003 model, also made by Ford. The most-frequent reason people gave for not buying a Jaguar XJ8 was that its cup holder is too small. This is a small plastic insert that the factor could replace with a larger one for a cost per car of, at most, $1, with minimal redesign (and no redesign at all on the 1999-2003 model, which had lots of empty space on the console.)
There were 14 years of reviews full of people saying they passed over this $100,000 car because its cup holder was too small. I don't know if Jaguar ever fixed the problem. That's a market failure.
No, it is not. Indeed it is a market success. Those people passed by an unsatisfactory product and purchased a superior one, giving their money to a company that gave them what they wanted and not to the one that would not.
I was just rewriting my answer, anticipating that reply, but you were too fast, so I'll say it here: I'll agree that this doesn't constitute a "true market failure", but the fact that a major manufacturer ignored their most-frequent customer demand, which could have been satisfied at miniscule cost, shows that this major manufacturer was not making any effort to find out what its potential customers wanted. They were not reading their reviews. This shows that the economic pressure of competition does not, in fact, force all manufacturers to work hard to give their customers what they want, which is required for the theory that there are no market failures.
A better counter-argument may be that Jaguar had a monopoly on the market for $100,000 luxury sedans. Mercedes-Benz is almost a competitor, but it hasn't got the same panache.
You realize that automobile manufacturing is highly regulated by the government, right? When's the last time you heard of a startup auto manufacturer? Tesla, right? And they've had to invest billions to break into the market. This market is a classic example of government intervention limiting competition.
>"...which could have been satisfied at miniscule cost..."
While the per-part price may have been minuscule, the total cost might not. The value* of all the managerial & engineering labor to change the supply chain, redesign surrounding parts, and any analysis/testing** that entailed could have exceeded, in expectation, the additional profit to be earned from making the change.
Even if that was the source of the decision but an incorrect conclusion, that would still not constitute a market failure.
*including opportunity cost of what those employees would be pulled away from doing
**my background is in aerospace, not automotive, but many of my former coworkers had come to the former from the latter. In aerospace, there can be very costly safety testing to comply with regulatory requirements for even small changes, but probably less so in automotive. But, especially for a luxury brand, there is a lot of effort to minimize noise, vibration, & harshness (NVH) which is very complex & time-consuming to model, let alone adjust designs to correct; perhaps if they had swapped out the part, your anecdote would be about people who didn't buy the car because the cup holder rattled.
People making irrational decisions isn't a market failure. To boot, It's not clear to me that they are irrational in this example: making modifications post-purchase is a pretty big line to cross, for a variety of reasons. It often doesn't work out as great as it looks on paper.
ETA: just saw your sibling reply, I do agree it hints at a possible market failure on the manufacturing side, if such companies remain in business long-term. See also my example with laptops, another complex, bundled product with similar failure modes.
I can think of several:
*Cigarettes
*Contaminated food
*The Corvair
*Tenement Fires
*The Opiod Crisis
*Global Warming
And on. The list is not short.
> Cigarettes
Oh? People did not want to buy cigarettes, but were forced to? Or are you complaining that they're too expensive?
> Contaminated food
Stores regularly sell contaminated food? It's just out on the shelves constantly, and people have little choice but to buy it?
> The Corvair
What's wrong with the Corvair? Do you mean the Edsel?
>Tenement Fires
The rent was cheap. If they had been willing and able to pay more, there was more fireproof housing available. Just as lumberjacks get paid more as a risk premium, tenement renters choose to accept higher risk in order to get cheaper rent.
We've changed that, so that all apartments are high-quality and expensive, and so now we have thousands of people living on the street. Much better, right?
>The Opiod Crisis
Wait, seriously? "Government outlawed this thing, causing a massive crisis; that's a failure of the market!"
>Global Warming
Externalities are not market failures. That's a different category of bad thing. Socialist countries have terrible environmental records, so this is an *industrialization* problem, not a *market* problem.
The problem with cigarettes and contaminated food is if they are not clearly labeled as harmful, therefore the customers would need to do their own research first. Science (actual science) is expensive.
Perhaps in 2024 is seems obvious that cigarettes are harmful, but it wasn't always this way, actually there was a lot of marketing to convince people the opposite way. (Famously, the slogan "correlation is not causation" was made popular as a part of campaign saying that even after the public noticed that smokers often get lung cancer, they shouldn't make quick conclusions from this fact.)
Also, before governments started regulating this, poisoning food was a common business practice. (Yes, this sounds insane in 2024.) When there is a poisonous ingredient that resembles the good one but is cheaper, maximizing the profit = finding the dosage that will not kill your customers immediately, but over sufficiently long time that it is not obvious to the public what caused it.
In theory, a sufficiently rich customer could finance their own lab full of scientists analyzing all the food he wants to eat. (And would need to trust the expertise of the scientists.) The poor people would simply keep dying of poisoning. It think our current ways are preferable to that.
> The problem with cigarettes and contaminated food is if they are not clearly labeled as harmful, therefore the customers would need to do their own research first. Science (actual science) is expensive.
Wait, are you saying that absent government labeling laws, individuals would have to conduct their own scientific research to determine what is and isn’t safe?
> Also, before governments started regulating this, poisoning food was a common business practice. (Yes, this sounds insane in 2024.)
Yes, it’s insane, and I find it extremely difficult to believe. The only similar instance I know was government deliberately putting poison in products people consumed.
What you’re saying isn’t *theoretically* impossible, but…you know what? Let’s say it happened. How did government fix it? Did they wake up one day and say, “lets make all food safe, and test every product for every possible hazard?” No, somebody—somebody *not* the government, almost certainly—found out this was happening. They then publicized it. Then there was a public outcry. Then the legislature passed laws to try to prevent this sort of thing from happening.
Well, what if the legislature had *not* acted? Nothing would have changed, right? People would have continued to buy products from companies now known to put poison in their products; companies *not* doing that would continue to quietly sell their products, going out of business because theirs were more expensive; and people would have continued dying as before.
Do you find this story plausible?
> In theory, a sufficiently rich customer could finance their own lab full of scientists analyzing all the food he wants to eat. (And would need to trust the expertise of the scientists.) The poor people would simply keep dying of poisoning. It think our current ways are preferable to that.
Don’t you think that that rich person would conclude he could get even richer by selling this information to people?
People were calling cigarettes "coffin nails" pretty early, so they had some sort of a guess, it just wasn't a strong enough guess.
Oh, the *Corvair*! Nader. Gotcha. Well, turns out that's not a great example. "Ralph Nader's accusations were proven false by the 1972 National Highway Traffic Safety Administration safety commission report." https://en.wikipedia.org/wiki/Chevrolet_Corvair?wprov=sfti1#Legacy_and_reputation
I would say the lack of reasonably priced private insurance for things like losing your job or accidents (and I'm sure many other potential insurance types).
The failure is that it's extremely difficult for companies to control adverse selection and information assymetry - with the results that for low risk individuals it's just not worth taking out the insurance even though it would hypothetically be valuable to them at actuarially fair rates.
This can be and sometimes is mitigated with compulsory insurance schemes.
Actually, accident insurance exists and is quite cheap; it's called "AD&D."
The "losing your job" thing is more interesting. I concur with the existence of the issue; could you explain why you consider it a "market failure"?
I’m quite confident that my current job is secure with only a small chance of losing it.
However I don’t buy insurance against that, I’ve seen a quote and it seems to me overpriced for my own situation (though maybe I’m overconfident!)
The market has failed to provide me with a service at a price I’m willing to pay even though I think it could exist (hypothetically with perfect information) This seems like a market failure because my government could step in and provide an alternative program where everyone is covered and contributes, personally costing me less than the private insurance.
Just to develop this further, I think it’s a market failure because an alternative distribution mechanism for providing the service could deliver superior results (IMO)
Stipulating perfect information doesn't work, I think; sure, lots of things become possible with perfect information, or zero transaction costs, or no bad behavior. But that doesn't make their non-existence market failures, I don't think. However, I don't think that's fatal to your argument. This is an interesting question, that I'm trying to wrap my head around.
Every day, some stocks in the stock market have huge swings in their stock price, either high or low. Often, this is because of some news that came out, such as door panels falling off of airplanes, but it often also is not. When it isn't, is this not a market failure, either before or after? After all, the stock price is supposed to be the estimated net present value of the share of the company after, say, to ten years. Daily fluctuations ought to be pretty minimal.
This actually isn't a market failure, because a stock price is actually a *prediction* of stock prices and, under Aumann's agreement theorem honest disagreements on a continuous value should look like a random walk, because if it looked like any other shape, you could use that prediction to buy+sell stocks for profit until it once again resembles a random walk! (Or, equivalently, if you could predict the shape of your update, you may as well make the update immediately)
Nice.
Hmmm: Government bailouts for banks due to subprime mortgages and credit default swaps? That sounds like a failure to me, based on the fantasy premise that markets and governments are somehow separate entities. That premise has always struck me as mere convenience to make markets easier to analyze. Similar to assuming all investors are rational. And that investing is not gambling.
Discussions of "free market" should always include government. Every penny the government collects and spends ends up in your "free market".
Otherwise is it not like having a theory of rivers and streams that ignores climate?
I think your definition of "market failure" needs clarified. Why do we classify some things as market failures?
Pollution?
That's an externality, not a market failure. Those are different categories of bad thing.
(I have the same objection to the guy who was saying, "everything is a government failure, because there's nowhere without a government." Not useful.
Externalities are literally a type of market failure: https://en.wikipedia.org/wiki/Market_failure#Externalities
Sounds like you're just using a different definition than everyone else, in which case your claim that there are no market failures is devoid of content until you provide a different definition.
“Market failures” and “externalities” are usually considered separately, in my experience. I mean, are crimes market failures? Fraud? Courts are needed even in the freest market; every libertarian grants that, though some believe free-market courts would arise if government courts did not exist.
But if you insist that externalities are market failures, fine; I grant the entire category. I never claimed that there were no market failures, just that pretty much every claim of a (I suppose I must now add “non-externality”) market failure turns out not to be. But *nobody* has good answers to externalities.
Any negative externality generated by trade is a market failure, tautologically.
For more, see https://slatestarcodex.com/2017/02/22/repost-the-non-libertarian-faq/ and https://slatestarcodex.com/2014/07/30/meditations-on-moloch/
No. Externalities are in a different category.
Charities and governments have plenty of their own market failures. Just because some version of a thing should exist in principle doesn’t guarantee that any specific instance of it in reality does what it says on the can. That’s why analysis like GiveWell’s is helpful to identify charities that are actually likely to be the most effective. No similar analysis is easy to find on for-profit companies and their social impact, but it would be pretty cool.
I suspect you're misunderstanding the idea of "capitalism vs. charity." It isn't about how to best help particular people, but about the net (pun not intended) effects of different courses of action. It would certainly be hard to claim that there's some market solution that would help particular sub-Saharan Africans dollar for dollar as much as giving them money or malaria prevention material. Rather, the suggestion - correct, or not - is that the net positive effects globally of spending a dollar "on capitalism" exceed those of spending it directly on charity.
> It would certainly be hard to claim that there's some market solution that would help particular sub-Saharan Africans dollar for dollar as much as giving them money or malaria prevention material.
I'm sorry, what? Perhaps I'm misunderstanding you, but this seems very wrong to me. For instance, if there was a market solution that allowed people to purchase malaria prevention material at a price that was affordable to them, that would be more effective than any charity campaign at making their lives better.
I wasn't saying that it wouldn't be great *if* there were market solutions to poverty in sub-Saharan Africa. I was saying that I don't think that idea that Scott was debating (capitalism beats charity) depended on the existence of such readily implementable and scalable options for sub-Saharan Africa. Rather, it was referring to the net effects of capitalism on global wellbeing. That's why Scott's study was of the net effects of Instacart, and the value that it creates, not some businesses operating in sub-Saharan Africa.
That's why the objection in the comment to which I responded seemed unfounded. That comment noted that capitalism isn't perfect, and that there are instances within a capitalist system in which charity could directly address needs (caused by failures of capitalism, or otherwise). I noted that Scott's point wasn't to focus on "instances;" particular people, groups, or circumstances and wondering how to best help them. Rather, he was focused on the total net impact per dollar of different expenditures, and whether expenditures on "capitalism" would beat expenditures on charity.
As to how effective capitalism would be in improving sub-Saharan Africa, I think, and Scott agrees, that capitalism is great and it creates prosperity. If we could push a button to make the Democratic Republic of Congo much more capitalistic, that would be great, and save lots of lives. If pushing the button cost $X, even if X were very high, it would still probably pay to push the button, rather than spending the money sending them malaria nets. But there's no such button. And there's no obviously reliable scalable way to improve the state of capitalism or the economy within the actual DRC that exists in the real world, the way there's a reliable, scalable, relatively inexpensive way to save lives through net distribution there.
Oh! Apologies.
>"Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons."
The minarchist justification for government existence is the provision of public (id est, non-rivalrous & non-excludable) goods; that doesn't extrapolate to charities.
That's not what's being said here. The argument is for charities *existing,* not for charity to be handled by government.
I understood that. I read the quoted section as assuming that the same justification for the existence of government is also justification for the existence of charities, which would not seem to hold.
I see. I think the argument here is, There are some good things that markets can’t provide. Charity helps fill that gap.
Sure, you can say that there’s a “market for charity,” but that’s like a market for fraud insurance; if markets were solving the problem effectively to begin with, the market wouldn’t be necessary.
Almost certainly.
I'm only arguing that the case for charity cannot be derived from the case for government, not that there is no case for charity; I often find that interlocutors presume, given the prevalence of bad-faith argumentation on the internet, limited points such as this are a Trojan Horse for something larger.
"(feel free to delete if not allowed)"
This is a weird thing to say. You see this on Reddit all the time too. "Giving permission" to delete your post to someone who already has permission to delete your post, in case it breaks the rules... which if it did they would already feel free to delete it. I guess it's a form of preemptive coping that lessens the blow if your post actually does end up getting removed, because you're the one that sanctioned it?
That seems an uncharitable reading. Deleting posts has potential to create bad feelings, even if it is justified. This is a "no hard feelings" message.
What you call near mode in section 1 would typically be called acting "on the margin" by an economist. I think that's often a good mindset to have, and in the context of EA it mostly makes sense. But capitalism's contribution is systemic in essence and thus sort of undefined on the margin, which makes it really hard to answer your challenge sensibly.
Furthermore, as we've seen with the SBF fallout, someone's actions are marginal until they suddenly aren't. I contend that this is a possible failure mode of EA in its current form.
Could it be that what is stopping growth is, for example, working age adults dying for want of clean water.
If no company can capture the value of getting people clean water, or proactively educating or vaccinating them then maybe to only way these growth inducing measures will be funded is via charity
Seems highly unlikely since "the West" did have those problems and achieved growth notwithstanding.
The West largely achieved those goals through government intervention, so it’s hardly proof of capitalism succeeding.
Maybe not, and I did not say it was.
It is however proof that it can be done without charitable giving from richer countries.
I don't think something in the real world can be undefined on the margin. There's a counterfactual world in which you contribute $X to Y capitalist charity or company, and there's a counterfactual world in which you don't, the difference in outcome between those two worlds is the margin. The systemic nature of capitalism makes it extremely hard to predict/estimate/measure this difference, but it certainly exists with the exact same coherence that any other margin does.
Contributing to a capitalist charity is a very different thing from "capitalism's contribution" as I called it.
When you take some action on the margin, the baked-in assumption is that you're not disturbing the system from its equilibrium. if removing capitalism (however this would be defined exactly) fundamentally alters the system such that it's not in equilibrium anymore, your calculation fails.
I don't see how that's a baked-in assumption. If you take some action on the margin and that action is enough to push it over the edge and disturb the system from its equilibrium then that's a humongous marginal impact. I agree that formulas and models that do happen to have the assumption that the system won't radically change will fail if the system does radically change, but that doesn't make it undefined.
Additionally, the actions in question here are not "should we get rid of capitalism and replace it with EA?" which would make some radical change, but "Scott has some money he wants to contribute to a good cause, he can either donate it to EA, or contribute it to capitalism in some way, which one will cause more good?", neither of which is going to mess with the systemic equilibrium because Scott is not a trillionaire, and capitalism is still going to exist and be in some sort of equilibrium in either scenario.
You write:
"The company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. ... I think you could still argue that investing directly in the company has more effect."
Also: "So if your alternative was to give the money to a profitable and successful company in the Third World...."
Can you clarify if you mean "invest directly" versus "give the money" as 2 diff things?
(Maybe I'm being dense here).
If AKW is capital constrained, then an investment of $1 million in exchange for TK% equity (fair market value) is interesting. They'd probably take the $ only if it could be productively deployed as growth.
If AKW is simply given $1 million, however, isn't the most likely scenario they do a one-time distribution to the owners?
Yes, the problem is that AKW is almost certainly not a sustainable company without their contacts from the west. So, in the end, they are providing a fake service that will end when the charity ends.
"My wife, Magatte Wade, is working to bring Prospera to Africa because of this."
I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
Bringing Prospera to Africa. Bringing. Prospera. to Africa.
Some of Africa? All of Africa? Which parts of Africa? That pie is so stuffed with plums to be pulled out, it's gargantuan enough for Godzilla to have as an amuse-bouche.
As a child in the 60s/70s, I sort of remember hearing about Kenya as being a shining hope for a modern African nation with an industrialised economy and thriving urban centres. Now some of the citizens are doing this.:
https://www.kenyanews.go.ke/transformer-vandals-in-laikipia-put-on-notice/
I hope Prospera en Afrique is fully stocked up with replacement electrical parts! And they're careful about where they buy their cooking oil!
"The most successful example is the Dubai International Financial Centre, where a common law legal system was placed in a 110 acre zone within UAE sharia law. It led to Dubai becoming a top global financial center in twenty years."
Yes, because Dubai is definitely in the top ten of places that spring to my mind when considering "Where seems like a good place to live?" and global financial centres are not often rather.... shady.
> I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
That's what I like about you, @Deiseach: you're always so understated and reserved in your reactions ! :-) And yeah, I'm definitely stealing "lapidary elegance" for my future use. Along with "Godzilla's amuse-bouche".
That said though, to be fair, people steal electrical equipment here in America too, sometimes. Opportunistic copper recycling used to be a burgeoning industry in some places (and perhaps it still is, I don't know).
To quote a Twitter wit, @DirkvanderEst:
---
Using UAE as a positive counterexample ayfkm
UAE is just Qatar with better marketing. Same ‘hive of scum and villainy’-based economy, similarly outright evil foreign policy (mostly in East Africa). In Europe every succesful fraud, drug trader or other criminal eventually moves to Dubai to enjoy their ill-gotten gains.
Easy: Pick up Prospera, put it on a plane, fly to Africa. I'm sure this is 100% exactly what he meant.
>My biggest update is that I learned what Instacart’s business model actually is. Otherwise, not much, sorry.
Scott (and others), have you looked into Amazon Fresh? It's 5-10% cheaper than Instacart and IMO more reliable in terms of delivery times.
FWIW I tried it out for a bit, and it turned out to be on par with Instacart price-wise, but with a much smaller selection and longer wait times.
From my perspective, we are going to hit a wall as far as capitalism goes. We don’t have infinite resources ( unless something drastically changes and we find new planet). I believe it’s important to acknowledge that not an entire population can be “productive” in the way capitalism defines it. We will always have people who need help and support, and I’m okay with that. As someone who works in public health, we’re also seeing significant impacts to human health due to increased cheap agricultural practices. We’re getting cheap chickens, but also seeing significant disease outbreaks that impact the environment and our health. I believe it takes a balance of both.
The best work capitalism does isn't "Exploit more resources", but "Exploit existing resources more efficiently". We produce far more produce, using far less inputs (measured by current economic value), today, than we did a century ago. In particular, US food production has skyrocketed even as the total land area of farms (the most economically valuable input) has decreased.
If we can hack it, industrial production of lab-grown meat should, in theory, be cheaper than factory farming. We haven't hacked it yet, but once we do, we get more chicken meat for the same resource investment. Capitalism, in and of itself, doesn't create this situation - human ingenuity does - but what capitalism does, systemically, is promote this option. People buy the lab-grown meat because it's cheaper, and those still engaging in factory farming are pushed out of the marketplace.
We often think of evolution as "mutation", but evolution is actually selection - destruction. Capitalism, likewise, is not the process of getting better - it is the process of eliminating the worse alternatives once better options arise. It is an evolutionary force, a selective force, whose role in the process is destruction of the worst, rather than creation of the best. And just as evolution can continue without mutation by simply slowly eliminating the worst genes or combinations of genes, slowly moving towards an ideal of what currently exists - so too can capitalism can continue long after we've run out of improvements to make, simply by slowly eliminating the less efficient options.
(In the future, some of the most valuable plots of land will be what are currently landfills - which are basically giant piles of all the resources which are most valuable to us, as evidenced by the fact that we used them in the first place to be discarded. Currently we throw things away because it is more economically efficient to process new materials than to process these materials - but as resources become increasingly scarce, and/or energy becomes increasingly cheap, this will begin to reverse itself, until we're mining up our old garbage to repurpose.)
And it is entirely possible for (almost) everybody to be productive - the issue is that, as a society, we've implemented effective minimum productivity levels: Minimum wages, as the central example, but not actually the only one. (Anything that increases the effective cost of employing somebody also increases the minimum viable productivity a person can be employed at.) There are lots of tasks currently performed by machines that "unproductive" human beings could do, and given that we're committed as a society to keeping them alive, it is somewhat absurd to say, as a society, that they aren't allowed to engage in this labor because it doesn't meet the threshold of self-sustainability - and then we justify forbidding people to be less productive than is necessary to sustain themselves by accusing those who would employ them for "exploitation". So, we have machines that peel oranges. Why, as a society, have we decided that it is better to spend capital and energy peeling oranges, than it is to allow people to do it? Because our expectation is that a person's wages are sufficient to support them and a family. So, instead, we give them the money to support them and any family they might have (because it would be cruel to do otherwise), and then forbid them from doing the work they could be doing.
Beautiful.
While all of this is completely true, I wish to add that I expect us to be mining resources from space long before we run out of them on Earth (very, very long, in fact, as capitalism keeps finding more resources, and more efficient use of resources, on Earth), so the real problems won't hit until ten trillion years from now, when we're all huddled around the last few black holes, eking out every joule possible.
Words like 'best' and 'worst' are highly misleading. Cigarettes are hardly 'the best' way to get a little bump of your mood. That was known for quite a long time before anything was done about it because the companies involved made bank and bought laws.
Capitalism is happy, downright elated, to thrive on externalized costs. That's the simplest way to increase internal 'efficiencies' and profit. Don't mistake this for 'good.'
Tobacco was relatively recently discovered to contain a novel reversible-MAOI which is being researched as a treatment for depression; reversible-MAOIs, if we can get them, would be a huge deal for low-side-effect depression treatment. (And the discovery has led to the research of other reversible MAOIs). So if the research pans out, and it works as well as it is expected to work with the side effect profile it is expected to have, cigarettes will, in a sense, have been the best way to get a bump in your mood.
And capitalism is the internalization of costs; complaining that capitalism is bad because it doesn't successfully internalize -all- costs is, basically, complaining that capitalism isn't sufficiently capitalistic. Every other economic framework, and every deviation from pure capitalism, revolves around externalizing costs. Welfare is an externalized cost; are you for or against welfare? Nationalizing industry is externalizing a cost. Serfdom is externalizing a cost. "From each according to his ability, to each according to his need" is a massive externalization of costs. If you're against externalizing costs, you should be massively pro-capitalism, and to the extent that you move towards internalizing costs, you are moving to a purer form of capitalism.
It's no mystery to anybody that "capitalists" hate capitalism; healthy competition means you can't just sit back and rake in rents, you have to work to keep your place in the Red Queen's Race. Of course they seek to cripple capitalism wherever they can.
> We produce far more produce, using far less inputs (measured by current economic value), today, than we did a century ago.
This is due to technological improvement, not capitalism per se. There's nothing stopping a non-market economy from producing the exact same amount with the exact same inputs.
> by accusing those who would employ them for "exploitation"
Sorry, that's not "accusing" people of exploitation, you're describing an actual exploitative and dystopian scenario. You can't just toss in "accusing" and make the facts go away.
> This is due to technological improvement, not capitalism per se. There's nothing stopping a non-market economy from producing the exact same amount with the exact same inputs.
There is - incentives. Incentives in capitalism run towards minimizing costs; incentives in other frameworks are generally aligned differently, often in ways that increase costs.
> Sorry, that's not "accusing" people of exploitation, you're describing an actual exploitative and dystopian scenario. You can't just toss in "accusing" and make the facts go away.
You confuse opinion for facts.
I prefer a society where somebody on social support (welfare) (who has no employment options in our society), can, if they so choose, get a job peeling oranges for a dollar an hour. This doesn't seem exploitative or dystopian to me - the alternative, in which we effectively forbid them from any productive labor at all, is the society which seems dystopian.
If somebody cannot be sufficiently productive to support themselves, we as a society, put them on social support. Why is it then necessary to forbid them from being productive -at all-? Because they might undercut the wages and take away "jobs" from steel and oil?
> There is - incentives. Incentives in capitalism run towards minimizing costs; incentives in other frameworks are generally aligned differently, often in ways that increase costs.
That's just not true, though. That _could_ be true, but there's no particular reason to expect it to be so.
> can, if they so choose, get a job peeling oranges for a dollar an hour.
The problem is that will rapidly cease to be a choice. You're - like all libertarians - ignoring differential power dynamics in your analysis.
> That's just not true, though. That _could_ be true, but there's no particular reason to expect it to be so.
There are very good reasons to expect it to be so - such good reasons that the relentless drive towards minimizing costs is often raised as a -criticism- of capitalism. Indeed, you raised it yourself, in the context of externalities.
> The problem is that will rapidly cease to be a choice. You're - like all libertarians - ignoring differential power dynamics in your analysis.
I am not, I am simply not arguing the much broader case for a UBI paired with the elimination of most labor laws, most particularly the minimum wage, as a mechanism for balancing power dynamics. We can talk about ways to balance the power dynamics in play, but that's not actually the subject I was addressing, which is the specific problem that people who -can- be productive in our society -are not allowed to be-, simply because they aren't productive enough. This is its own power dynamics problem! You're ignoring the fact that you (the collective, not individual) are using your own power to manipulate the conditions of employment to your own benefit, at the expense of those with less power.
The profit of industry is, in the end, a proportion of costs - if factory owners could collude to raise the wages of employees in their industry by 10%, they would, because they can then collect their 10% on -those- wages as well. Minimum wage laws do not impose their costs on the employer, who in fact profits thereby - they impose their costs on the consumer and the marginal worker, forbidden from working because they cannot be sufficiently productive.
Also, and this is slightly rude, so my apologies, but I think you know you are incorrect on the "small picture" of the specific subject, and are jumping to a "big picture", and using my failure to address "big picture" concerns as a failure with my "small picture" argument. We can talk about the "big picture" concerns, but please don't assume I don't have "big picture" arguments simply because they haven't been raised yet.
> You're - like all libertarians - ignoring differential power dynamics in your analysis.
Not to derail the amazing job Thrgnskald is doing, but I've heard this criticism many times, and the people making it never seem to be able to back it up. So please explain why it would rapidly cease to be a choice.
Many social-safety-net benefits are conditional on low income and/or the recipient accepting any job offered to them, theoretically in order to keep a limited budget focused on those who need it most. This would mean that, even if someone in such a position would really prefer to do something other than peel oranges all day long, refusing such a job offer effectively costs them far more than the nominal wage - they'd no longer qualify for various benefit programs, thus losing access to e.g. housing and lifesaving medical care. The usual term is "poverty trap."
The other thing is that capitalism tends toward more flexibility. If a business needs to be done somewhat differently because of climate or knowledge or local materials, there are more incentives for adaptation.
If you're going to take a serious shot at improving lives by getting rid of some piece of obstructive regulation, "minimum wage" seems like the wrong hill to die on. https://terraformindustries.wordpress.com/2023/11/10/permitting-reform-or-death/
There's no "right" hill to die on - I take my victories where I can get them.
I think minimum wage, in particular, is in a culturally vulnerable state right now, as a lot of its traditional supporters are currently expecting massive technological unemployment, and are seeking to solve that problem through something like a UBI - and I expect us to get one. But once we're committed to having a UBI, I think a lot of the core arguments for having a minimum wage, in particular, disappear.
Not only do the arguments for having a minimum wage disappear - but it becomes a low-cost compromise that the "social welfare" side can make with the "free market" side as an incentive to switch to a UBI over the existing means-tested welfare framework. Since the power dynamics the "social welfare" side are concerned about are largely alleviated with a UBI, they can offer the elimination of large swathes of labor laws which currently exist to balance those power dynamics.
That is - I think this is a fight that can be won in the near future. Taking my victories where I can get them, this looks like exactly the right fight to be having.
That's a cart-before-the-horse approach, though. Get UBI (and a land value tax to pay for it) lined up first, then the current minimum wage will likely as not become irrelevant overnight, as the supply of desperate gig workers vanishes and menial entry-level positions start needing to offer better pay just to attract any qualified applicants at all. Of course, that same foreseeable shift in power dynamics makes it clear who'd be lining up to oppose such a change.
Exactly which materials have we ever exhausted?
A simple look at the UN website Our World In Data will show you how everything is getting better. The greatest threat to humanity continues to be the machinations of top down control freaks such as the old school communists, and the WEF.
I have always found common sense to be in short supply, with never a surplus. Common courtesy, too. And yet these are the COMMON ones.
Why is charity separated from capitalism in the first place? Satisfying your altruistic desires is part of the marketplace. Capitalism would suggest that you should choose the amount and where to give according to your individual desires.
Right. This is all for Scott to figure out what to desire, the equivalent to the average person making a spreadsheet of cars to decide which one to buy. In this case, the cars are some capitalist enterprise and some charitable enterprise, even if the charity exists in a capitalist setting.
That would make sense if his altruistic desires were exogenous, and could be treated as *his* desires. But he cares about satisfying someone *else’s* desires, even if he is wrong about what those desires are.
All charity could be converted to capitalism, if you required the recipients to say "thank you" in a Zoom call, and then -- technically -- you wouldn't be *donating* money to them, but you would be *buying* their thank-you's. Which is capitalism, therefore good! Now no one can object against curing malaria or building wells on philosophical grounds.
Cute, but the question is what are the relative long-term consequences of different types of actions, not what nominal category they fall into.
You write: "Let’s say they hire Amalgamated Kenyan Wells. Then the money ends up in Amalgamated Kenyan Wells, presumably a profitable and successful company in the Third World, and this is no worse than donating to the company directly."
The historical pattern is that Amalgamated Wells is really good at getting contracts. At building wells, not so much. Meanwhile the We-Dig-It company is good at building wells. Amalgamated Wells notices, and gets the government to pass a bunch of laws or create a lot of new regulations, the purpose of which is to make it impossible for We-Dig-It to eat their lunch. We-Dig-It goes out of business. Capitalism fails to ignite, again.
That situation is called 'Regulatory Capture' . We see it when Regulatory agencies pass laws that limit upstart competition. Same as when the first AI companies tried to get the government to regulate upstart competition.
>Velveteen protests that I haven’t proven this and don’t even have a model showing it’s a sane order-of-magnitude estimate. I accept this. I don’t think anyone has proven the opposite either. I’m going entirely off total guesses. It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses.
Look, I'm a radical capitalist compared to the normal population (though I guess not in here). But anyone can see how the burden of proof here lies in the side with the galaxy brained take of: "no, no. spending money directly on the thing you want is stupid and inefficient. Just spend on other stuff and magically it will turn into charity."
Sometimes the galaxy brain take is right! I'm confused and don't have a strong opinion either way. My bias/priors is that actually capitalism is awesome so that makes me not reject it outright.
But come on. We need those studies to prove investing in "capitalism" is actually better.
"It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses."
Can't we easily calculate this by looking at GDP/capita forecasts in countries where EA charities are doing the most interventions? If you save a person in Ethiopia today, we have reasonably good forecasts on the total economic value that person will likely produce during their lifetimes. Do that and then compare it to expected S&P500 returns.
I.e. for Ethiopia we have the following numbers:
- Current GDP/capita: $1,000
- Average inflation-adjusted GDP/capita growth rate: 3%
- Assuming we save a child today and assuming compounding GDP growth, they will produce $141k of economic value between the ages of 18 and 60.
For the S&P500, assuming a growth rate of 10% that same $1,000 will result in $304k of value, beating the output of the person saves in Ethiopia by a factor of 2.
This doesn't account for the "diminishing marginal utility of money case makes it likely that they produce more utility-adjusted wealth."
This isn't apples to apples
The 10% figure for the S&P isn't inflation adjusted but the assumed gdp growth rate is.
Gdp also doesn't include non market/ non government activity. If the child we save will probably do some ( a lot?) of valuable things that won't show up in gdp; raising children, producing things they consume directly, doing things in the barter economy.
My guess would be the less developed the country the less reliable gdp per capita is for an individuals expected output.
GDP/capita is an average measure, charity aims for the margin; IOW, that's at best an upper bound on returns to donation, and the higher the Gini coefficient the larger a haircut you'd need to apply.
I think the answer to VelveteenAmbush's objection is essential empirical. "If you feed poor people, you will just create more starving poor people" is one of those ideas that sounds like it could be true but mercifully isn't. The evidence is pretty clear that fertility rates drop as mortality drops, which is why most countries on earth have <2 fertility rates at this point. I think the argument is that if people are confident their children will survive to adulthood, they consciously choose to have fewer of them.
I think that’s definitely true when you actually raise people’s standards of living. But when you give them possibly sporadic sustanance, the best strategy would seem to be to have bunches of kids and hope some of them survive.
I think a stable source of clean water counts as raising people's standards of living.
The other thought I've had re: Velveteen is that we live in a somewhat different world than in the past where a very bright kid born in a poor village has a shot of going to university and eventually contributing to global knowledge and economic productivity. I don't know what % of people the clean water saves have such a fate but I think it's not ridiculously low.
The proposition in question is "If you feed poor people, you will just create more starving poor people." I'm not sure what that has to do with a stable water supply.
Fair enough. I was referring to the clean water charity Scott/EA people like, which is the original thing Velveteen was objecting to. I shouldn't have brought in food.
I guess I question how stable "stable water supply" is. What happens when the pump breaks down? Africa seems to have a way of taking charity dollars, absorbing them, then slowly letting things go back to how they were. https://x.com/kunley_drukpa/status/1709988710731690134?s=61&t=2pPGfcBynqKnXp1wqGzNxQ
We do live in just such a world. We have lived in it for so long, in fact, that universities* have sucked out most bright kids that had accumulated in poor villages during the many centuries when social mobility was lower and the value added of intelligence was much lower than it is today. This phenomenon is even visible in GWAS studies, see https://www.nature.com/articles/s41562-019-0757-5
* I use "universities" as a synecdoche for the subworld of global knowledge and high economic productivity
This study is very interesting and it's cool they can see this effect, but the data is from Great Britain. We don't know how much smart people have been depleted from say, Indian villages.
Scott brought up the interesting example a while back that Germany killed all its schizophrenics and still has the same amount of schizophrenics as everywhere else because these traits are so multifactorial. I think you'd need a lot of generations of pulling smart kids out if Indian villages before the remaining villages are all dumb.
How about "if you feed dumb people, you will just create more dumb people"?
It depends. Suppose some fraction of dumbness is a result of childhood malnutrition.
> fertility rates drop as mortality drops
Frequently, yes, because drops in mortality are typically associated with societal and technological changes that reduce the marginal utility of a child. But if your country has undergone profound technological advancement while still having a high need for more people due to the constant threat of invasion from a sea of surrounding barbarian hordes, your fertility rate looks a bit different.
https://www.macrotrends.net/countries/ISR/israel/birth-rate
https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=IL
Mortality clearly isn't the independent variable here. So unless feeding poor people produces a long-lasting change in the society, it's unlikely to make anything better long-term.
Its only not true if the next generation is better than the one you fund.
Africa's growth rate (3.7% in '23, not an outlier) appears to be higher than the standard rate of developed economies
Comparing preventing malaria in someone who will then have a lifetime of input to an also growing economy versus going on an extra vacation appears to be clearly well defined in the terms of the infinite future growth argument
This is a tough problem. I don’t have an analysis, but one company that seems to do a lot of good as a for-profit is Zipline. They deliver medical supplies via drone in Africa. They’re private, so not necessarily easy to invest in on the margin.
I was very much looking forward to this "highlights", and I am not disappointed. - Kinda sad, it seems so hard. - Is there a charity/company walking the poor parts of the world, testing people and offering the 0.1%-3% smartest infovores among them a wonderful deal - full board education and deployment/visa assistance (for a share of future earnings if commercial)? Should there be one? (I am still thinking about the girl young Scott met in Cambodia in 2008). https://web.archive.org/web/20131230133858/http://squid314.livejournal.com/2008/04/28/
"It is relatively easy for me to ignore the plight of poor foreigners, as long as I assume they're dumb (and I start with the assumption that most people, foreign or otherwise, are). But smart people are for me what Americans are for those America-first people; I can bring myself to not care about a lot of people, but I can't bring myself to not care about them. They matter to me, in the way that everyone should matter to me but can't because I don't have enough emotional resources. In fact, all day I found myself worrying about her, and hoping she manages to get out of the selling-postcards-at-Angkor-Wat business and to a decent school at some point, even though I haven't spared a thought all day for any of the multiple-amputees I've seen wandering around. Not sure how I feel about that."
So I'm confused by the whole discussion. Scott, you're a libertarian. Did it occur to you to, I dunno, get involved in libertarian activism, or at least check out what libertarian advocacy groups were out there?
This has been my beef against EA from day 1. As you say, no charity can ever have the long-term impact that more capitalism can have. So libertarian activism (whether it calls itself "libertarian" or not) seems like the most effective way to make a positive difference in the world.
Donate to Libertarian, or libertarian-leaning, candidates. Donate to Students for Liberty. They do a lot of good work. Or The Advocates for Self-Government. Or the Foundation for Economic Education. Or the International Society for Individual Liberty. I would add the Libertarian Party, but they're a mess right now—check back in a year or two. But how about Libertarian Parties in *other* countries? Or State LPs?
Perhaps none of these really fit your flavor of libertarianism (likely ISIL does not, for sure). But then maybe the Reason Foundation? Cato? Cato's probably the most effective, and most inoffensive option. Even if none of these fit, there's almost certainly something out there that does. And if not, I will personally work with you to help create it.
You seem to want something measurable, where you can have some notion of how much good your money is doing. And that's a good question! Attempting to find an answer to that question would take a lot of work, but before anyone even tries, you've got to acknowledge that this category is something that might work for you.
Honestly this whole thing sounds like a question for Bryan Caplan, or maybe Robin Hanson. Or anybody at Econlib.
Capitalism != libertarianism. The last thing we need is more libertarianism. Actual economics threw that in the dustbin a while ago.
I mean, sure, you can be a conservative who believes in capitalism, but I don't think Scott is a conservative.
I’m neither a libertarian nor a conservative yet I believe in capitalism and in fact am a PhD student of economics 🤷♂️
There is no such animal.
Here, take this quiz: https://theadvocates.org/quiz
I think your definition of capitalism might be too narrow
What are your results?
I think your definition of libertarianism might be too narrow
Between a PhD student of economics and some random online quiz, I'm marginally more inclined to trust the PhD student.
Oh, I *definitely* would not. What they teach about libertarianism in Econ grad school, if it's mentioned at all, is crap. Whereas the quiz is by an old and respected libertarian organization.
Easiest quiz ever lol
That's why it's called "The World's Smallest Political Quiz."
According to this quiz, there is no such thing as "liberal" either. It is labeled "progressive".
Interestingly, I got scores of 70 for personal issues and 100 for economic ones. It is too brief of a survey for it to really mean much, but it does match with my own insights into myself. These scores put me in the "libertarian" label, though I question the methodology, since it looks very difficult to score as "conservative", with which I would self-identify, as I would need a score of less than 50 for personal issues for that classification.
Yet it shows most people end up as Moderate.
>According to this quiz, there is no such thing as "liberal" either. It is labeled "progressive".
Yes. It used to say "liberal," but I presume libertarians objected to that, as they are the true liberals.
> It is too brief of a survey for it to really mean much,
I disagree. Of course, it doesn't tease out much nuance *within* categories, but it assigns categories themselves very nicely.
>It looks very difficult to score as "conservative", with which I would self-identify, as I would need a score of less than 50 for personal issues for that classification.
I think conservatives have become much more liberal on most of these issues in the last two decades. Twenty years ago, conservatives would have answered "no" or "maybe" to most of these. But now, free speech is *right*-coded (except on Israel). So maybe the quiz needs updated. They do that occasionally.
In what ways would you say you are socially conservative rather than progressive/liberal?
You overstate the actual economics case substantially. Also an actual economist here. If you define libertarianism as a narrow role for government, limited to public goods, which is how most libertarians define it, nobody has 'thrown it in a dustbin'.
Correct me if I’m wrong, but aren’t most libertarians against the governmental provision of most public goods or elimination of public bads? For example, what percentage of libertarians would support a carbon tax?
I don't know about most, but libertarianism almost by definition is about a minimal state which focuses on public goods. I'm also surprised that for a PhD student in economics, you are talking about public 'bads' as though they were different from public goods.
As for a carbon tax - there can be very sensible reasons to oppose a carbon tax beyond dogmatic libertarianism. Even from a purely welfare maximizing perspective, it is not at all clear that carbon taxes are efficient in terms of inter temporal trade offs. Another is capacity of bureaucratic and political systems. And it is one of the tragedies of the economics profession that actual economists have not been as concerned about modes of government failure as they have about market failures. It skews discussions of market failures towards government remedies.
To say that libertarianism is almost by definition about a minimal state which focuses on public goods is pretty deceptive. What distinguishes libertarianism is the belief that the government shouldn’t provide most public goods with only limited exceptions such as defense. Libertarians believe that the free market can somehow solve most public goods problems or as you mentioned they have a deep suspicion of the government’s ability to effectively provide those goods. While the second point has some merit, you must admit that the extreme degree to which libertarians take this view is pretty fringe in academic economics.
I’m sorry my economic jargon is not up to your standard, but this has no bearing on the subject.
'While the second point has some merit, you must admit that the extreme degree to which libertarians take this view is pretty fringe in academic economics.'
As I said, this is a problem with academic economics, not libertarians! The world clearly shows far more instances of governments failing to provide public goods (even broadly defined) and failing to regulate properly than of markets failing. Economists have developed analytical frameworks for the latter but largely ignored the former. That's our fault, not that of those skeptical of government action!
Just because overall, total capitalism has brought more prosperity than total charity, that doesn't mean that the dollar for dollar impact of the former is greater than the latter. Imagine, for example, that my labor is worth $100 an hour, and I see someone drowning, such that I would lose an hour of my labor from saving him (let's say if I saved him I'd get all wet and need to go home to change my clothes). The cost of saving his life would thus be $100.
Thinking that overall capitalism has brought more good than charity wouldn't then necessitate insisting that it must be possible to save a life by spending $100 on capitalism.
Scott made the distinction himself between total impact and implementable dollar for dollar impact:
>I agree that overall capitalism has produced more good things than charity. But when I try to think at the margin, in Near Mode, I can’t make this argument hang together. Here’s my basic objection...
The sorts of Effective Altruist charities whose effectiveness Scott compares to "spending on capitalism" are designed to mimic the illustration above, in finding low hanging fruit that are tremendously valuable, yet easy to pick.
>Honestly this whole thing sounds like a question for Bryan Caplan
Bryan Caplan is a fan of Effective Altruism. See e.g. https://betonit.substack.com/p/the-root-cause-of-ineffective-altruism, (and also https://betonit.substack.com/p/the-good-group). I don't think I've ever heard him suggest that money would be better spent on libertarian advocacy, much as he advocates for greater libertarianism.
>or maybe Robin Hanson
He seems less supportive, see: https://slatestarcodex.com/2013/04/05/investment-and-inefficient-charity/ which touches on capitalism vs. charity.
>Or anybody at Econlib.
Here's a recent article: https://www.econlib.org/effective-altruism-as-a-new-years-resolution/ that takes the position that:
>If one does want to be a truly effective altruist, I suggest that his New Year resolution should be to promote free trade and commerce
The article doesn't really give a single example of how one can do that, or the roughest back of the envelope calculations on what the dollar for dollar impact of such charity would be. It just notes that freer international trade has made the world much richer. That's like saying that since medical advances have saved hundreds of millions of lives, that the greatest marginal impact of a dollar must be spending it on medical research. One obviously doesn't follow from the other. Oh well.
Okay, I'm not asserting that giving money to libertarian causes is certainly and unquestionably the best option, I'm expressing my bafflement that it wasn't even on the list. Once *on* the list, the various options need to be evaluated against each other. I mean, maybe libertarian advocacy groups have so little actual impact that doing almost anything else with your money would be more effective. I've certainly wondered that myself! In practice I don't think so, but it would take investigation and analysis to draw any conclusions.
Of course you're right in your point about the drowning victim, but it seems to me that barring that kind of very low-hanging fruit, if libertarian groups move the needle to *any* measureable degree, the long-term benefits of funding them should outweigh essentially anything else than preventing X-risk.
As for the Economists, I said "a question for" them, not "consult their existing work." I wonder if they've even considered this question (obviously Lemieux has, but as you say, he needs to go the extra step and ask about marginal utility for the various possibilities), and I'd be interested to hear their thoughts. Maybe Michael Huemer too.
The problem with spending money on "libertarian activism" is the same problem with political donations as an EA strategy in general: everybody is already spending loads of money on it, there's somebody spending money to accomplish exactly the opposite, so you're chasing increasingly small amounts of marginal utility as all the easy gains have been gotten and all the hard gains are countered by somebody else spending money to do exactly the opposite.
> There's a reason why stuff like water dispensers to save lives are going to developing countries with no market economy
This is such an obviously bizarre statement I am having a hard time processing its existence. Do people think Kenya or Uganda or Sierra Leone don't... Have markets??
What am I missing here? Why is this not a clearly ridiculous statement?
I get that in these circles, bringing up that colonialism has consequences is not something people like to do, but to claim that places with publicly-funded better infrastructure don't need charity to get that infrastructure because they "have a market economy" seems too obviously ridiculous.
I mean, don't wealthy "market economies" have those problems too, when their publicly funded infrastructure breaks down? Wasn't that the whole Flint, Michigan thing? "We need help re: clean water because our public infrastructure failed"? Does Flint have different "markets" than any other random place in Michigan, or America for that matter?
I am certainly no expert on sub-Saharan Africa, but from what I do know, I would definitely *not* say that these countries have “market economies.” Sure, they have *literal markets*; places one can buy and sell things, but “market economy” means much more than that it is possible to trade. It means that the economy, as a whole, is based on free market exchange, not primarily handouts, corruption, government-owned production, etc. In other words, as a proxy, it scores highly on the [Index of Economic Freedom](https://www.heritage.org/index/), which the named countries certainly do not.
Re Flint: Giving Flint more money before the problems surfaced may have helped. Or, more likely, they would have just spent the money on something else, and still cheaped out on their water system. Handing money to governments generally does not increase long-term welfare; it just entrenches existing problems. *Moving contries to more market-based economies* is what makes people’s lives better long-term.
On the other hand, Flint is really a rare problem. Despite my cynical statement above, most US governments handle basic infrastructure tolerably well. Not as well as markets would, but generally people don’t die from drinking the water, roads are passable, etc., unlike in many places in Africa. But even so, giving them more money is almost certainly not going to help, because in almost every case, the government in question could already have spent more on infrastructure, but didn’t because other projects are sexier and more likely to get them re-elected.
There's nowhere with a market economy and no government. There are better and worse governments. Markets need government support.
That has what to do with anything I said?
The zoomed out question is something like "the world has a lot of big problems that require smart people to solve, wouldn't it be good if we had the smartest of an extra billion people to help us solve them?" The zoomed in version is "if Jean in Burundi attends more school instead of being home with diarrhoea with his older sibling also home from school looking after him, how much does that add, including downstream effects like the effects on their kids, relative to the investment of the water dispenser?" I think it's really important.
I would love someone with a better sense of the numbers than me to make up some numbers here - or point me there if someone else has. My sense is that it's an incredibly good "investment" in terms of compounded value created per dollar spent.
A billion extra people with an average IQ of 70 will produce around 300 more people with an IQ >145, which is about the same as en extra 13k people with an average IQ of 115. If increasing the size of the cognitive elite is your goal, I'm guessing it would be a lot cheaper to get an extra 13k of Ashkenazim than an extra billion of Africans.
Where are you getting the average African IQ of 70 from? A quick search yields that this is possibly true with a standard western IQ test which doesn't take various cultural factors into account. And given poverty and IQ are so linked, we'd certainly see it rise greatly as the poverty diminishes, which is kind of the point. So it's not " given an average IQ in a population, here is the number above a certain point of the distribution" more like "how do we add IQ points?" Clearly make poor people less poor, given that it reliably raises IQ?
Say that you manage to make Africa 150% wealthier by pumping in aid money, all the way up to the Jamaican level, and that this brings IQs all the way up to the Jamaican level of 75. I don't think that this changes the conclusion regarding whether this is an efficient way of increasing the size of the cognitive elite.
If this is how it works, sure. I'm sceptical that this is how it works. You're talking about general rules and broad strokes. In my head, specific things like maternal and infant nutrition, education, other poverty related factors like stress, and exposure to lead all play a large role (leaving aside the way IQ is tested), and they are the things that will change as the region develops. It's less that if we unlock Africa, they're 70iq so who cares, more that unlocking Africa is synonymous with raising their capabilities to the point where it's indistinguishable from the rest of the world.
If we were talking about a specific, isolated place in Africa, I could entertain the idea that there are significant enough genetic differences that they couldn't be overcome easily. Given the genetic diversity of Africa, I don't think that's plausible.
I've seen it as a common belief* among people who take IQ seriously. I think it makes no sense-- a society where the average IQ is 70 wouldn't even have human language, I think.
*Maybe 76, a number which isn't suspiciously round.
An IQ of 70 is said to correspond to a mental age of 10. The idea that a society of 10 year olds would not have human language strikes me as absurd.
It's an interesting question-- 10 year-olds are raised in a society developed by adults with an average IQ of 100, so I'm not sure we can extrapolate from them to a society where the adult average is 70.
I don't know why you assume that developing - let alone acquiring language requires a higher IQ.
It's important to realize, though, that people with low IQs function differently, based on their race. A Black with an IQ of 70 will be much more functional than a White with an IQ of 70. It's a mistake to project the characteristics of the latter on the former. The reason for this discrepancy, is that an IQ of 70 is part of the normal distribution for Blacks (e.g. in the US, it's just about 1 SD below the African American mean. The mean is probably lower in sub-Saharan Africa for a number of reasons, including the lack of European admixture). For Whites, however, such a low IQ is much more anomalous (2 SD below the mean) and more likely indicative of the sorts of systemic malfunction often associated with people of such low IQ. See e.g. this article: https://emilkirkegaard.dk/en/2022/10/african-iqs-and-mental-retardation/. The whole article is relevant, including:
>This one comes up a lot when we discuss the dire realities of the average intelligence levels seen in Sub-Saharan African countries: If the mean IQs are 70, wouldn’t that mean half the population is retarded? That can’t be right, something is wrong with the data.
>When people think of retarded people, they mostly have in mind someone who has ... some major genetic error, and who suffer a profound intellectual disability because of this. They usually suffer from some kind of syndrome, which is why it’s usually called syndromic retardation... that ... does not just make your intelligence very low, it also causes other behavioral defects ... The other class of people with very low IQs are people who are simply on the left tail of their normal distribution. They do not have any major genetic defects ... they were just unlucky with the dice throw of the normal genetic variation in intelligence
>Middle-class white children with IQs in the EMR [educationally mentally retarded] range generally appeared more retarded than the minority children who were in special classes
>Now we can see how this relates to the African intelligence scores. Africans in Africa do very poorly on intelligence tests, scoring about 70. But they behave relatively normally. They are not clearly retarded like the White children in special education classes, who often suffer from one syndrome or another.
If there are such differences, then the IQ tests in question are outside the domain they were optimized for, and correlations with lifetime economic productivity can no longer be safely assumed to hold.
Thanks. I think you're at least pointing in the direction of what's wrong with the argument.
If the "correlations with lifetime economic productivity" didn't hold this conversation wouldn't be happening because people in Africa could just buy their own mosquito nets and diarrhea medicine.
Perhaps an analogy might help. The estimated IQ of a dog is about 30. If a person had an IQ of 30 he likely couldn't even walk, but dogs walk just fine. You might say "IQ tests in question are outside the domain they were optimized for, and correlations with lifetime economic productivity can no longer be safely assumed to hold" and thus maybe dogs will one day develop capitalism and contribute to global economic growth, but you would be wrong.
As a sort of general thing, I've read widely enough about Africa, including some places where black people are washing their dirty laundry, and the problems always seem to be about corruption and violence rather than Africans being dull-witted.
Violence cannot be thought of as being unrelated to low intelligence. Intelligence and the risk of violent crime perpetration are negatively correlated, even within sibling pairs (https://twitter.com/cremieuxrecueil/status/1659285178584297474).
The relationship between corruption and IQ is probably less clear, but of the 8 studies listed here (https://sci-hub.hkvisa.net/10.1016/j.intell.2011.11.004) looking at the relationship between national IQ and corruption, all found a negative correlation.
At that point I think that you've moved from paying people to have more babies. Now, maybe saving lives is actually the most efficient way to increase world population, but that isn't immediately obvious, and feels like a very different conversation.
I don't understand what you mean. Would you mind rephrasing it?
If I understand what you meant, you're saying that by saving lives we ensure that more smart people enter the world, and thus that they work on important problems, and ultimately create "goodness" which compounds our investment.
This doesn't really seem like an argument for saving lives to me though. It could go two ways:
1) We could better utilize existing rich people by identifying them and then lavishing them with resources so that they don't die.
2) (what I was focusing on in my comment) We want to increase global population. But saving lives is only one way of doing this, so perhaps we should instead try to increase birth rates (which would increase global population, perhaps more efficiently).
Aha, thank you! I was seeing future flourishes as a downstream benefit rather than the main one. The main benefit is that 14 year old Jean from Burundi has a productive life rather than a short one.
Regarding 1, do you mean potentially rich people who don't have resources yet, or currently rich people who, with more resources, will be more productive?
Reducing suffering is the main thing for me, but it's not the point of the discussion here. I know there are considerations like comparing reducing some suffering now vs reducing more in the future.
Velveteen's entire line of argument seems to cash out in a fundamental value difference about how much more valuable (if at all) saving existing lives is to creating new valuable lives. I don't think the value of "awakening the dead matter of the cosmos"-blah-blah-blah is zero, per se, but it's just an aesthetically pleasing thing to do, not a moral imperative — so if anything *that* is the "consumption" path, which we should only get to if we've already fulfilled our moral duty to safeguard all existing lives and taking a good stab at fulfilling *their* preferences.
Velveteen IS one of those existing lives, and has clearly expressed preferences regarding all that cosmos stuff.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things."
Fair enough, but perhaps some of the confusion was driven by your chosen post title: "Does Capitalism Beat Charity?," which sure SOUNDS like a moral worth tournament.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things. I’m discussing the Near Mode situation where some specific person (eg you) has some specific amount of money (eg $1,000) and wants to use it to improve human welfare."
Thank you for this clarification. Maybe I'm an idiot, but this wasn't clear to me in the original post.
"This isn’t a gotcha or a rhetorical question, I think these could really change my mind."
In my model this decision comes down more to time discounting. What is the rate of return of an investment? How much do you discount future consumption (by poor charity recipients) compared to their immediate consumption? If you think that saving 1 person today and saving 1 person in 10 years are similarly valuable, then you should probably invest. If you think saving 11 people then is as valuable as saving 10 now, then you should compare the implied rate of discount to the rate of return of an investment.
Am I wildly off base?
Perhaps the most effective charity would be helping people more to economies that are in better condition. After all, giving poor people money can be effective, and one of the things poor people spend money on is emigrating, frequently as great risk.
Following the logic, it might be effective charity to finance illegal immigration.
I was thinking along similar lines. E.g. South Koreans are about 30 times more productive than North Koreans, so there are enormous gains to be made from moving people across that border. On the other hand, this seems like (a) something the market should be able to provide & (b) a charity that should be run and financed by successful migrants rather than by outsiders.
There are practical difficulties with getting people across that border.
More generally, EA tends toward the open and public, which means that it isn't going to support illegal charity.
Yeah, but your comment was explicitly about financing illegal immigration?
It could be about legal or illegal immigration. The point is to bring the people to the water rather than the water to the people.
Trying to do that at scale would soon mean moving the border rather than the people, which is another way of saying "restarting the korean war." I suspect there are many messy, expensive reasons why this has not already been done.
Surely the conclusion here is to advocate for more *legal* immigration, rather than financing illegal immigration?
I happen to agree with you that mass migration is one of the best ways to improve people's lives (I'm an immigrant myself) but am skeptical of my marginal ability to influence others to that view Vs financing charities help people where they are (and I think illegal immigration has a disproportionately negative effect on people's views on immigration in general so don't think your tongue in cheek idea would be helpful even if doable).
Advocating for more legal immigration is a good idea, but it's a relatively long term solution if it works at all. Helping illegal immigration helps people now.
Seems to me that, in general, markets will roughly approximate the optimal solutions. But there are well-known market failure modes (information asymmetries, monopolies, and notably for this discussion, cases where some people’s utility is poorly measured by their monetary ability to pay) and in those cases, charity (or government regulation, or whatever) can be better. You stacked the deck by choosing the well-being of the worst off, which is one of the well-known market failures. (And an important one!)
> Seems to me that, in general, markets will roughly approximate the optimal solutions.
There's no reason to expect that. Markets will roughly approximate a steady state where investing in one thing versus another will yield roughly the same risk-adjusted return. That's not related to an "optimal solution", unless the problem you're optimizing for is "investing in anything should yield roughly the same (risk-adjusted) return".
If the problem you're optimizing for is "everyone lives a life of dignity", "everyone has enough to eat and a place to live", or anything other than "equal rates of return", markets will not optimize for those solutions.
“Rates of return” in first order terms is going to be composed of “life of dignity” and “enough to eat” and “place to live” and everything else people value.
One important problem is that these things won’t be mixed equally, because some people have more to pay for what they want than others do. But I don’t think it’s right to think “rates of return” are something fundamentally different - they’re just going to be an imperfectly mixed version of all the things that do matter.
https://apple.news/A5ftZcPAPQuGQVnxepCpOLw
https://www.economist.com/special-report/2024/01/10/the-super-rich-are-trying-new-approaches-to-philanthropy#
Scott, you have execrable taste in hamburgers.
I was going to make a similar comment, something like, "Of all the choices when you're hungry, THAT is your choice?!"
Well it does have the word "Burger" in the name so.... I'm guessing he chose it for its nominative value.
I'm confused. It seems to me that Bob Frank and VelveteenAmbush were saying exactly the same thing.
I'm surprised that nobody seems to have suggested donations for basic scientific research (or for killer asteroid detection, pandemic security, etc.) as an alternative to donations meeting the immediate needs of poor people.
It's debatable which of these options would benefit humanity more in the long run, but at least they compare as apples to apples. "Don't spend anything and put your money in the stock market" seems like a category error, for the reasons Scott points out.
More and more I've come to think that the unit of importance are whole economies. If you want people to be better off in a sustainable way, giving to specific organizations, profit or non, isn't the best way to do that, unless someone has comprehensively assessed the local economy and concluded that certain specific types of organizations would be excellent starter seeds. It's equally possible, however, that such an assessment would conclude that no one type of organization is going to make any difference. that what people in that region really need is a plethora of economic infrastructure. Unfortunately, that probably isn't possible without the active and skilled cooperation of the local government, and in many areas, that's a problem (maybe *the* problem).
There are NGOs that focus on fighting corruption (for example: https://www.transparency.org/en/), but I know little about them or how effective per dollar they might be (this article casts some doubts on that: https://blogs.worldbank.org/governance/anticorruption-agencies-are-they-effective-reducing-corruption-risks).
If the question must be restricted to "Doing the most good my money can buy", then the criteria of "good" seems so subjective that no objectively valid answer is available. I'm not going to donate a kidney to a compete stranger because I do not value the lives of complete strangers enough to do that (I'm just being brutally honest). I'm not donating a tenth of my income to charity because I'm not that well off, and I have a family to support, and that matters more to me. It seems to me that there is a dichotomy between systemic approaches to social problems that affect all of us (which we might expect some consensus on) and individual investment decisions which are as idiosyncratic as who your friends are or what you do for a living.
i also suspect that, to do the most good for other people, it's probably necessary to understand what *they** value and want. Do we know that, if we asked, the people receiving the malarial nets would choose to spend the money that way? To assume that we know best how money should be spent on other people seems to me like it's on the slope toward some sort of paternalism. I can't help thinking that some sort of two way communication is required, so that potential recipients can say what they want the money for and potential donors can decide if that's what they want their money to do.
So, to the question "What should I do with my $1000?" perhaps the best answer is "Accept applications from poor and needy people, and award it to the one with the best investment plan." Or maybe someone out there already does this?
> Now I’m really not sure how to think about this. I think the answer is something like - the company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. So I agree that there’s some aspect of supporting capitalism here - maybe even one that’s better than giving to the company directly because it forces the company to demonstrate usefulness - but I think you could still argue that investing directly in the company has more effect.
I was responding specifically to the version of the argument that says you can "donate to capitalism" by just buying whatever you want like a new car or a pair of expensive shoes. (I fully admit this is the weakest version of the arguments but I think it's still at least worth getting it out of the way). In this case the company also only retains a percentage equal to their profit margin and the rest goes to whatever good you want to consume so the only difference is whether you end up with a new car or new wells in africa.
I'm sorry, maybe I just have very different views from a lot of the people on this blog but VelveteenAmbush's comment just seems evil. We shouldn't bother saving the lives of people who are dependent or unproductive because wealth is the most important thing? I'm sorry but this is completely backwards. And the stuff about "awaken the cosmos" and "awaken the dead matter of the cosmos into flourishing sentience" is just utopian bullshit. But people always need a big utopian goal in the future to justify their evil in the present.
My first thought was how much horrible crap to the entire world the companies in the S&P 500 have done to get those return.
The solution for comparing these things is to calculate the economic value of a life to the person actually living it (which economists have already done and use routinely in safety vs cost tradeoffs). Then you can add on the externalities that more productive people create. But Velveteen just completely ignores the value of the lives in question
Late to the party, but I’m very confused. It seems we are mixing up several very different goals:
1. Increasing global wealth
2. Reducing poverty
3. Saving lives
4. Spending money to serve humanity in a ratioanal way
If someone’s explicit goal is to increase global wealth because that will eventually reduce poverty, well, capitalism is the best game in town.
If your goal is to spend money on the most rationally-supported life improvement activities, well duh, EA is the right choice.
Oddly, neither of those seems directly concerned with “ending poverty” -- which I thought was the whole premise of this discussion.
Am I missing something?
It's not a good idea to think of money as "going back into the system." Money isn't really a conserved good like energy. If you think of it that way there's a bunch of classic mistakes you make like, "Wal-Mart takes money out of the community". The better way to think about it is to imagine spending money as getting a bunch of people to spend their time doing something. Because that's actually what's happening.
Let's suppose we have a guy, Bob. Bob's good at making wells of all kinds and offers his services for those that need it. In June, Bob gets hired to make some oil wells in Texas. In July, a charity you gave money to hires Bob to make water wells in Kenya. In August, Bob makes some water wells in Saudi Arabia. If you hadn't given the charity money to get the wells done in Kenya, Bob would have made wells elsewhere. If charities were to start asking for wells all the time, Bob would get his friend, Alice, who just graduated, to help him make some more wells. If Bob hadn't had all this well-making demand, Alice would have done something else after graduation. Once the charities finish making the wells, Alice will probably go do something else, since Bob doesn't have as much work for her; she's not really as into wells as Bob. The charitable contribution you made didn't really add or subtract money to the economy: it redirected some labor. Specifically, it redirected Alice's labor. Or maybe the charitable money wouldn't have been big enough to redirect Alice, in which case it would redirect Bob: Bob might have worked a bit more and had a bit more money, in which case his spending of that money might further redirect other people's labor. There was also some redirection of materials, but materials are really just solidified labor: steel is labor to take iron out of the ground, mix it with carbon, and transport it to where it is needed. Sometimes, of course, the labor goes to waste: it is redirected into the creation of something useless, or bad. Sometimes people disagree about the value of its products. But that's it. There's nothing else to money except redirecting human action. Saved money is really just human action that you haven't yet decided to direct. Invested money is really money that you've given to someone else to direct human action with, in the hope that the resulting human action, and capacity for this new human action, is so valuable that lots of people will want to pay a lot more than it cost to set up to have that action repeated. Sometimes this is because the investment is into something that simply couldn't be done before, like cure a disease, or something nobody thought to do before, like your own Lorien Psychiatry. Or it might just be to do more of a thing that's known to be good: build another factory that makes stuff people like, or another store that sells food people like.
Thinking about it in this way will help your reasoning a lot, and will help you avoid mistakes like Michael Duggan's.
I like your clear description, and agree with your characterization of money. I just wonder what Eve is doing in this. Maybe directing Bob and Alice to build wells in Texas and Saudi Arabia, but to avoid Kenya?
I assume Eve, among with Carol and Dan, are living it up on Alphabetrium with magnesium J and Water T.
walmart took money out of local economies by undercutting and destroying regional chain department stores and thereby reducing more local jobs than they gave. Amazon and streaming did similar for media stores imo. This reduced things like owning local real estate, founding local and regional headquarters, lessening support businesses like advertising and printing, and more.
i live in new england, and the sheer amount of retail that has disappeared in 40 years is staggering. What replaced it was a mix of healthcare ( predatory urgent care centers) and low quality chains like Dollar General which mimic walmart but on a tinier scale.
but also used bookstores died because of amazon, record/dvd stores died, and a large part of regional retail was killed by big centralized retail.
i think people here view the world a bit too much through theory sometimes.
No, this is exactly the kind of error I was warning against. When you say things like "reducing...local jobs" or "reduced...owning local real estate" you are measuring the wrong stuff. Consider that you can create a ton of local jobs by paying for ditches to be dug with shovels and then, later, to be filled back up. If you do the dig/fill in long cycles, you can also occupy a ton of local real estate with dug up ditches that are now waiting several months until they will be filled back up again. But this is obviously terrible! Now you might say, but that's an invented case it isn't real. Ok. If you want to climb Mt. Kilimanjaro in Tanzania, you will need to have your tent and luggage hauled up by porters who walk up the mountain, instead of having it go by car or something, and instead of there being buildings you can sleep in instead of a tent. There is I can tell you no savings environmentally: so thick are the climbers on Kilimanjaro that as soon as your tent is taken down, another, that very day, maybe that very hour, will be set up in its place. All of this is maintained by laws which forbid the construction of more permanent structures, or the usage of vehicles up the mountain. But in China you can go up Jade Dragon Snow Mountain, very nearly as high, on a cable car, to a permanent structure near the summit. Jade Dragon Snow employs many fewer people per climber than Kilimanjaro, but it is insane to argue Kilimanjaro is somehow better. Hauling baggage up and down a slope is no job for a human being. It should not be our goal as a species to employ a greater share of thinking people as beasts of burden, or for that matter, small retail stores of various kinds.
On to those stores. What happened before Walmart, Costco, big boxes and Amazon is that people required more labor to get their food, stuff and entertainment. Some of the labor was the consumer's labor: they needed to drive to the stores, often several different stores, find their stuff, wait in line, drive the stuff back from the store to their house. Some of the labor was the store workers: they had to stock, decorate, clean and otherwise maintain a large number of small stores. Prices of goods tended to be higher because more labor was involved in keeping all those small stores running.
What the big boxes, Amazon, Costco and Walmart did was to reduce the total amount of labor involved. Instead of the consumer going to a large number of small stores, they went to a small number of large stores; this was a big improvement because less time is spent driving around. The stores themselves were more efficient, in part because there were economies of scale (it's much more efficient to maintain and stock one big store than many small ones) and because these larger firms were just more efficient in general. In Amazon's case they don't go to a store at all: Amazon delivers it. It is far, far more efficient for a few trucks to visit the hundreds of people who want to buy today than hundreds of cars to go from houses to stores.
Because less labor was needed to ultimately deliver goods to people using the new store structure, fewer people were needed to staff the new stores than the old ones. Those people went and did other things when the old stores went away. Probably better things! Very few people I have met have look back with longing on time spent in retail. It is conceivable that some of those people never found work again, but given the overall employment rate, uh, probably not.
The only way money might have gone out of the community is that, over time, more people might have moved out to go somewhere else to work. I think the rate of this is really much lower than people suggest it is, but consider: if they did move, were those people really better off before? I realize that moving can be expensive and scary, but so is going out on a date: sometimes the things that make you better off, in the end, require some upfront discomfort.
Finally, to streaming. I will never go back. You can pry this remote from my cold, dead hands. I cannot improve upon Penny Arcade's description of the moviegoing experience: "It's terrible and I won't miss it. Peeling your shoes off the floor with each step, judgment from the snack counter, a small popcorn for ten thousand dollars, and the stranger next to me watching hard-core pornography on their phone, just so I can see a movie through someone's hair?...Sometimes you miss important parts of the movie because you have to pee." What we're going to go back to that hellscape in order to occupy teenagers with a shitty summer job? Because a bunch of old people are nostalgic for a world whose very real costs, particularly the costs borne by others, they are not cognizant of? No!
The important measure is the one that's been important since the dawn of humankind: what people have to spend their time on. Our goal as a species should be to give each man, woman and child as much time as we can to be free: to do what they want, to be happy. Amazon, Walmart, Netflix, Big Boxes and Videogames all work to reduce the amount of time people must spend out of necessity, and to increase the time that can be spent out of choice. This world that you remember was actually probably worse on the whole for you, and I don't think that you would go back if you fully considered the costs -- which is, again, the point I am making, that you have to think about things as allocation of labor and action in order to correctly evaluate those costs and benefits -- but even if somehow I am wrong and you really would like that world better, there are still countless others who really do not want to back to crappy retail jobs and spending more of their Sundays driving to stores and getting less for it. If we think in terms of "money leaving town" or "local jobs" or "local real estate" we miss all of those people and what they want. But those people are real and what they want matters.
I want to agree with Michael Druggan's point re: donating to charities being similar to "donating" to companies.
I run a nonprofit that works in west Africa. The donations we receive are used to deliver our programming, which entails paying local staff, purchasing materials, etc. All of the money we receive is "reinvested" into the economy in some way, whether through paying for salaries or material costs; none of it "disappears."
Scott, you contend that only the profit margin goes back into the economy; that doesn't seem right to me. Why are the salary costs paid to healthcare workers who work for a non-profit any less real than the salary costs paid to healthcare workers at a for-profit? For that matter, why are they any less real than the value paid to drivers for Instacart?
In my mind, Michael's right: whether it's Instacart or a nonprofit that builds wells, money is equally flowing through the orgs and being reinvested into the economy; the only difference is that in one case you have a product that's more socially useful.
There's a broader point here. In a capitalist economy, very little money "disappears"; rather, it's constantly being recycled into different forms of value. You get paid a salary, which you use to pay for groceries, which is used to pay the cashier and the farmworkers and banana PR people, who use it to buy food, etc. Sure, some of that money creates more or less surplus value -- my guess is that money invested into R&D is particularly useful -- but it all goes somewhere, even money "in" the bank; the only way to opt out of this system is to bury your money in a hole or something. This arg for capitalism over nonprofit thus seems moot to me, unless your real argument is that value is massively unevenly distributed amongst for-profits (i.e. way more in innovation, R&D, etc.), which I can see.
You are not accounting for opportunity cost. Let's say I have two options. One option is to pay a billion dollars to someone to dig a hole and fill it up. The other option is to pay someone to research and bring to market a more efficient generator. Per your description, both are equivalent!
Does anybody know how Zwi Mowshowitz thinks about this? I know he once wrote "Amazon is the best charity in the world" and that he does not identify as EA. If anybody can link to blog posts of his regarding the topic, I would be grateful!
I'm confused (my natural state of being). Isn't the dilemma you posit addressed by creating a foundation that invests the principal, grows over time, and donates some of its profits periodically to the charity? Doesn't that help the greatest number of people over time? Or invest in companies whose research will lead to helping millions or hundreds of millions of people, like the agricultural revolution of the 20th century that began with the discovery of how to synthesize ammonia and continued with the development of seeds that could greatly increase the yield of crops in a given area. Or have I missed something?
On pure aesthetics, I enjoyed VelveteenAmbush's comment immensely. Maybe sometimes we really do ventriloquise the geists, because I haven't heard a purer voice of capitalism in a long time.
Death, disease, gravity wells - skivers' loopholes. When that dead matter of the universe awakens, it, too, better show up for work.
> Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds, and how much you can get done with a 2,000-person labor force, then letting those 2,000 people die starts to feel like a giant economic waste
Even if we look at the places were people live on $1 a day, and suppose they only have 30 years of economically productive life because of all the wars and sickness, 30×365×$1 = $11k. If you can save their lives for let's say $5k per capita, if makes good sense even from a heartless economical perspective.
The question is, is there even demand for that labor? You can only produce so much useless crap before the developed world stops having enough time and money to buy it all. It seems like Asia is providing more than enough for the world, so why bother employing more workers in an environment that's less efficient than existing ones? Their lives simply have no value to the rest of the world.
> It's the "give a man to fish" vs. "teach a man to fish" principle. While I in no way wish to denigrate the value of saving lives with better water... once you do that, then what? You have people who are alive, and still in the same situation they were in before.
This is true under the assumption that they are going to stay in the same situation forever.
But if they are in a situation where they are growing the local economy, and it's just that today that they happen to have a problem with the water, building the wells gives them extra time. Perhaps 20 years later they will be able to build the wells using their own money, just like we do.
TY. I came to the comments wondering if anyone else sees this. I’ll go further: charity is pernicious. While it may be necessary at discrete times in certain circumstances (I do hand out money to street bums sometimes), creating dependency helps no one long term. All those charities become bureaucracies devoted to their own existence, which means you can’t really solve the problem or your mission ceases to exist. Also “capitalism” (what an ill defined term, almost useless) is actually necessary for the world to go round. Nobody will work to create something for others so that some central planning bureaucrat can swoop in and redistribute it. That bureaucrat’s very job is dependent on someone being productive, either by choice or force. Human nature anyone? People work to provide for themselves and their loved ones. Or is that a right wing conspiracy theory these days? Finally, from the bleacher seats, the whole EA discussion looks a lot like guilty rich people trying to feel better about their good fortune.
Basically, the question is, is the help helping the target grow their own abilities (in long term)?
But that's difficult to judge, even with companies. You may invest in a company, and then the company goes bankrupt.
Or maybe the company does okay for a while... and then the owner suddenly dies of malaria. Oops, we invested in capitalism, but we ignored the charity.
Okay, why didn't the local entrepreneur invest in anti-malaria charity. His own life was at stake! Because he also invested in capitalism, tried to grow his company first, hoping that if he gets big, he would be able to buy more anti-malaria nets.
(Sometimes charity is also a less efficient replacement for insurance.)
It seems optimistic to suggest that charities can't possibly work because they might solve their problems and become unnecessary. We are very far away from utopia. Even with maximally competent organizations and institutions, there are still going to be lots of problems that still need solving for our lifetimes. Running out of problems is not a serious concern.
As to whether charities cause dependence ie. decrease productivity in proportion to the amount given. That is an empirical question, you can't answer it with armchair reasoning. Luckily we have real world data, and at least for one (pretty popular) form - direct aid - it increases labor productivity, it doesn't decrease it: https://www.givedirectly.org/research-on-cash-transfers/
And finally, it is unclear to me what the relevance of central planning bureaucrats are. These are private charities, not government funded. They aren't run by governments and while some need to get permission from governments to operate, there isn't much interaction at all.
This seems like it would be easy to test? Look at places that got charity wells 20 years ago, see if they can afford one on their own by now.
> Maybe you have an answer for this, but if it involves “Spend the rest of your life creating this hard-to-create institution from the ground up”, then I, personally, am not going to do this. I would prefer something more like a Bitcoin address I can send money to.
It's not going to work like that for any significant values of the product of (money donated) x (time you're doing it). If you want charity done properly, you will have to involve yourself personally. If you limit yourself to donating money, organizations you are donating to will quickly evolve into grifts. If you rely on existing social status management mechanisms to keep people you donate to honest, organizations you are donating your status-time to (i.e. attending and not attending lunches or inviting and not inviting people to your parties and making sure others know why) will evolve into vehicles for high status people to maintain their status and manage their taxes. Riis (1890) noted this about late XIX c NYC social housing: it was okay as long as their charitable investors kept up personal involvement, but quickly degenerated as soon as they checked out. This phenomenon is not specific to charity: nation and democracy also requires personal involvement (sometimes very onerous) to keep in shape, or its politics degenerates into a mass of grifts and vehicles for high status people to maintain their status and manage their taxes. The market economy escapes from this trap only because it reduces the value of goods and services exchanged to money, and you cannot reduce the value of people (which is what charity, nation and democracy all work with) to money. QED.
Thanks for the interesting discussion Scott. I'm not getting the whole capitalism vs. charity. When you give money to poor people they go and buy products or services with the money. So you are still getting both - you get capitalism and in addition you are getting charity by slightly redistributing wealth in the short term.
Yes, a few people have pointed this out before, and I really don’t understand how that’s not the obvious ending argument? You spend your money on an instacart order because you value convenience, i spend it on a bednet producer because I value malaria prevention. How are these different?
Are there any EA charities which instead of water wells or insect nets etc just creating more people to live in same difficult situation, select the high IQ individuals among the already alive ones and send them to good education schools and direct them to STEM? That would help the entirety of the world.
> whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor that you invested eighteen years building up. Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds,
FWIW most e.g., Malaria deaths are sub 5 years old, maybe even sub 2.
Malaria also makes people sick again and again, so that affects productivity.
Just reinforcing this point, we talk about deaths a lot because that's very salient, but it really, really sucks to get malaria, even as a healthy adult who is unlikely to die from it. You are completely incapacitated for weeks of often debilitating pain and unpleasantness. If anything, I think we often *understate* how much suffering malaria causes and how big a deal preventing it is.
https://en.wikipedia.org/wiki/Mobile_technology_in_Africa
I'd observe that the arguments in favor of investing money to use for good later tend to overlook the fact that utility is sublinear in money and the world is getting richer over time.
Yes, the market gives a good estimate of the time value of money in terms of consumption today vs tomorrow but it doesn't take into account the sublinear nature of utility so we should expect investing to yield less utility than direct intervention.
Capital invested in the market doubles in about ten years. Do you believe that the utility of capital halves in less than that?
Consider the law of effect: https://winwenger.org/essays/winsights/part-12/
I have recently started a research project to discover the formula for which charity currently provides the best value to the world. My bitcoin address is a4o0wh4tD1dyOuTh1nkthi$w45G0ingT0b3R3aL?
I don't think anyone is talking enough about the positive knock-on effects of charity in terms of setting the area up for capitalistic progress. Detractors of charity seem to completely ignore the fact that covering basic human needs in underdeveloped countries is exactly what’s needed to get the flywheel of development (read: capitalism, if you wish) working there. They view saving lives in subsaharan Africa as consumption, simply prolonging miserable lives. I’m not sure what other intervention they would prescribe to get a market economy and development going in such places, but data from GiveDirectly show that their grants are often used for things with positive knock-on effects like better nutrition (which improves IQ), school tuition, and starting businesses. If capitalism is the natural engine that brings people out of poverty, maybe jump-starting capitalism might require some institutional change, but I think it’s more likely that an influx of, well, capital is enough to get the capitalism ball rolling.
GiveDirectly aside, saving lives with water or malaria vaccines or vitamin A supplements will have major positive effects. There is an implicit (or sometimes explicit) Malthuian undertone in criticisms of human development charity, believing that saving the worst off lives will actually generate more strife and keep investment per person low. The good news is that Malthus was wrong even in these societies. Development data show that parents tend to have extra children to make up for child mortality to ensure that some remain alive to aid their elderly parents. Reducing child mortality actually reduces the total number of children per family in the long run as parents adapt their decision making, allowing them to invest more per child and set more up for long term success and socioeconomic mobility.
Further, each life saved from polluted water or malaria or vitamin A deficiency also avoids many other issues along the spectrum from near-misses to minor annoyances, all of which are factors that will make a life less productive and therefore less likely to lead to lasting change and economic advancement. The seeds of positive change exist in every community, held back by myriad hurdles, and removing even some of those hurdles will result in some people being able to economically specialize and advance; effective human development charity creates marginal capitalists as well as marginal lives saved.
Is the thing you’re talking about with Michael Druggan like the Multiplier Effect from the Circular Flow model?
Also if the well-making company’s profit is 10% wouldn’t most of the 90% not be going into the ground? All of the not-profit money had to be spent somewhere e.g. paying workers, paying local concrete makers, so the money then transfers to them and they can do things with it and so on and so on.
My shaky understanding of what I thought people thought is this ends up bottoming out in two concepts:
a) The Velocity of Money
b) The expansion/contraction of the money supply
Would appreciate anyone who feels like they have a better grasp of how these concepts connect chiming in.
https://en.m.wikipedia.org/wiki/Fiscal_multiplier
https://www.investopedia.com/terms/circular-flow-of-income.asp
> Suppose that eg the US government decided to give everyone free health care by taxing people and spending it on health care. It seems like this should have tradeoffs or hurt the economy somehow. But you could argue that the health care money just goes to doctors and nurses and so on, who would then spend it on normal economy stuff, so the non-health-care economy is just as big as always.
It is generally understood that there is an economic multiplier on government spending - that, far from having some kind of economic drawback, it helps the economy more than the amount of money being spent. https://www.investopedia.com/terms/m/multipliereffect.asp
So no, a program like that doesn't necessarily have (net negative) tradeoffs or hurt the economy somehow. I suppose it could be designed so poorly that it did, but it seems improbable.
To take that specific example, the current American healthcare system is so staggeringly inefficient, that you could fund universal healthcare for all for about half of total US healthcare spending (e.g. Canada does this - per capita health expenditure is about half of America's for a universal system), which would free up half of that money (which is currently being used unproductively on rent-seeking, overhead, etc.) for productive uses. Universal healthcare might be a potential government program with one of the highest multipliers, actually.
More broadly speaking, there are sectors of the economy where markets work well, and areas where they work poorly. Televisions and other discretionary consumer goods are delivered very well by markets. Things like healthcare, which are not discretionary, or natural monopolies like telecoms, roads, etc., are delivered very poorly by markets, and you can make the economy much more efficient and effective by nationalizing them.
Capitalism isn't some kind of cure-all answer to everything that always works best. Markets and capitalism are one tool in the economic toolbox, to be deployed where it makes sense.
I feel like this is maybe an obvious comment, so I am surprised it didn't come up. In a capitalista business, the business and investors capture at least part of the total return. As long as there are opportunities to create $X value by spending Y$, with x>y, the market correctly incentives this transaction to happen. They will borrow or raise money or reinvest profits and reap the rewards. So you should expect that giving some money to a business will generate about the market rate of return.
The main difference with charity is that this system does not work. AMF can't go to a bank and ask for however many millions and show that they will generate much more than that in returns, because they do not appropriate these returns, so they won't be able to pay back. Therefore, you should expect that great opportunities can continue to exist unexplored for quite a while.
Feels like I'm stating something kind of obvious, and there are certain subtleties and ways this can be not quite true, but I think this is approximately true and very relevant.
It would seem like Velveteen's idea would prevent Africa from ever developing at all. Developed countries just keep reinvesting in themselves. The gap between the efficacy of investment would either grow or stay the same (if there were diminishing returns, then we should have already started to see them, but apparently there aren't, because the poorer places are necessarily those where investment is slow, rather than places where wealth was destroyed or never invested in the past. This all seems very circular to me).
But the fastest growing places are actually very poor. There are very obviously diminishing returns here. That doesn't mean that you can invest just any random poor place--the slowest growing places are also poor (rich countries are in the middle). So if you can identify poor countries with high potential growth, like South Korea in 1950, then you can get a high rate of return *and* help very poor people.
(Source for the U shape: I can't find a great primary source. https://dergipark.org.tr/tr/download/article-file/8402 mentions it, and you can sort of see it in https://ourworldindata.org/economic-growth-since-1950, although it's not great for this purpose since the average growth rate is distance above and to the left of the diagonal line, rather than being on the y-axis).
A while ago, I mentioned that the reason I drifted away from most of the Less Wrong/Rationalist areas, but kept up with Scott, is because I had this deep down feeling that Scott would definitely want to model what would happen if you killed all the poor* (this would be useful and interesting information about the model, and possibly about the impact of various factors in the world), but no matter what the computer said Scott would never actually dream of killing all the poor or supporting it in any way. And I felt that many other Rationalists, faced with numbers and logic suggesting that killing all the poor would lead to greater economic growth, or a world full of happy people, or a single hyper-intelligent entity that consumes all matter and knows all, or whatever they have decided is the best possible outcome… many others in the community would endorse killing all the poor as the obviously rational choice, and work towards it as a goal.
I feel uncomfortably as if I am watching this play out, in some of the comments.
*This is, of course, a reference to the famous Mitchell and Webb sketch, which I think is often quoted by people who interpret it rather differently to me.
Interesting. How would you characterize the difference in thinking?
I don't think you need to be that worried. EA is still quite popular among the rationalist community, and these days everyone is worried about AI killing everyone, which they wouldn't care about if they didn't value humanity's existence. They're still human, for better or worse.
But even there, I think a chunk of Effective Altruists would be completely down with the logic that, for example, some lives are worth less than others, and even that some lives are worth less because they are less likely to bring about a tech utopia, for example. And this would inform the organisations that they would set up and fund, and the goals of those organisations.
I think that Scott, while fully capable of discussing these things logically and rationally because obviously, when it comes down to it rebels in every fibre of his being against the idea that some people are not worth saving or helping, or generally that decisions should be made by considering final ends to the exclusion of means.
>"...whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor..."
It really depends on *which* 18 year old. In the stereotypical EA-targeted regions, there are enough other problems that there's unlikely to be 50 additional years of life expectancy at age 18 even post-intervention, and what labor is gained is likely to be barely above subsistence (the baseline against which "productive" should be measured).
Taking VelveteenAmbush's argument to its logical extreme, the most effective charity goes around administering IQ and "grit" tests to everybody, and then taking away and intensively educating in STEM those who score over 145 IQ and high levels of grit. That would best help the long-run future of humanity.
For myself, though, I believe in moral equality and hyperbolic discounting. All souls are weighed in the same scales on the Day Of Judgement, and you can't get to the long run without helping people through the short run.
IQ discussion aside, "the most effective charity is a highly selective school for gifted kids" is a pretty defensible position.
Should I use my twopence to feed the birds (or enable an old lady's consumption), or invest to build railroads in Africa? https://youtu.be/Hk23s4hh8M8?si=KAqtUJH32fOQJ7H_
re: Velveteen - why do we say "consumption money" if money aren't burned, but keeping circulating in the economy?
What will a nursing home spend the money on to save lives? Doctors and equipment. Who does that benefit? Doctors, their families, companies that produce medical equipment, their employees, families of their employees, everyone who these families buy things from etc. A lot of these people are good people, some of them might also donate part of their income, furthering the effect of that initial donation.
Why don't we count this as a part of infinite-order effects? Are charities excluded from being part of the capitalism, while existing in a capitalist society?
Taking a look at the Copenhagen Consensus group's figures in the book "Best Things First" by Bjorn Lomborg I see that they propose that $40 billion of costs for the 12 best initiatives would deliver $1.1 trillion of economic benefits and save 4.2 million lives valued at $1 trillion, annually. The figures are based on peer reviewed articles by economists
Seeing that GiveWell rates it as costing about $5000 to save a life for their best charities I see this pencils out to a little under $10,000 per life. Accounting for the direct economic benefits it seems these are equal, if true. It seems like it would be a spectacular addition to human well being if the effect of the best charities could be roughly matched by a project at the tens of billions of dollars scale
I think an extremely high value use of time would be to promote to politicians that they seriously consider aligning their foreign aid to the top priorities that the Copenhagen Consensus group identifies
VelveteenAmbush's comment is 100% correct. That's the right way to frame the issue and the fact that Scott doesn't acknowledge that makes me think he's not arguing in good faith. His objections are terrible.
>at some point all of this has to bottom out in consumption
No it doesn't and I flat-out don't understand how anyone - much less someone as smart as our Beloved Leader - could say this with a straight face. Theoretical society X generates $1M of surplus every year. There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub. The only wealth that _must_, in principle, be consumed is the baseline required to keep everyone fed, houses warm, and car batteries charged. Any spending beyond that is discretionary. That will be true for as long as there are things to discover.
>If you donate to charity, you will create less numerical wealth, but it will go to people who need it more. Which matters more?
Investing in productive technological development matters more. How is this even a question? I mean, what do you want more of: physics breakthroughs than enable world-improving technology, or starving third world subsistence farmers? Invest in the thing you want more of. Again, why does this need to be explained?
>I think the diminishing marginal utility of money case makes it likely that they produce more utility-adjusted wealth.
This is wrong. Exponential growth will always swamp the utility-adjustment effect in the long run. That's because even though you adjust the utility of your charitable transfer upwards, it's one-time adjustment on a fixed amount of money. It doesn't compound. Or, at least, it doesn't compound as quickly as it would otherwise and optimizing for the rate of exponential growth will always dominate all other considerations. EVEN IF you optimize for number of lives saved you can trivially see the advantage of investment via the Robin Hanson argument: you can always save twice as many lives if you just wait 7 years and invest. Scott is just flat wrong here. Unless he's using an explicit moral discount rate on the value of a life, he's obviously, unarguably, mathematically-provably wrong.
Love Scott but this is honestly his worst take (well, other than "Categories Were Made for Man") in the 8 years I've been reading. I suspect it's because he's so emotionally invested in the EA/Rationality movement that he's unable to objectively evaluate good criticisms of the ideology. This fits the pattern of him having a logic-defying take on transgenderism while he was in a relationship with a nonbinary. His achilles heel is his need for acceptance from his social circle and his inability to tolerate conflict in that context.
>There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub.
Hang on! How do you spend on building things without that bottoming out in consumption? I build some infrastructure: I do that by paying people to provide me with materials and labour. Those people pay other people for other materials and labour, or spend their own money on consumption or investment. Invested money is spent on other projects, which again pay people for materials or labour, and around and around it goes with people spending the money paid to them, or investing it in ways that lead to other people spending money.
This is, of course, also part of the argument for why, if you want to help a community by giving them something, you should pay people in that community to make the thing you want to give them, rather than importing it from another community.
Or is it that you mean merely that ‘bottoming out’ implies the money stops its ‘journey’ and stops ‘growing’, effectively running out rather than going around and around prompting more production and growth? I took Scott as simply implying that money given to a charity would be spent by paying money to companies, organisations and individuals, so that you are stimulating just as much economic activity as if you had spent this money buying things yourself.
I agree the categories are a little fuzzy, but conceptually it's pretty simple. Say you have a bunch of seeds. You can eat them now or plant them. There's nothing preventing you from continuing to re-plant 100% of your crop every season (at least until you run out of land and minus the minimum required to keep you fed). There are thousands of individual examples like that and it basically just comes down to whether you spend your money on things that ultimately increase productivity.
Yes, I understand that. I thought that was clear in my reply? Although I would also say in your analogy that the seed is consumed at the point of planting, in such a way that it and the soil and so on produce plants that produce more seed. And you cannot continue this cycle planting 100% of everything, because you will die: you have to ‘spend’ some of the seeds on sustaining yourself and any other workers, as well as ‘spending’ some on fertiliser and so on, and ‘spending’ some planting in the soil to grow new plants (the investment).
Are you saying that you did, indeed, take Scott as making a comment implying increased productivity was not a thing, rather than him making a comment about investing in a charity that spends money having the same basic economic effect as spending that money yourself on the things that charity would spend money on?
>because you will die: you have to ‘spend’ some of the seeds on sustaining yourself
Yes, that's why I said "minus the minimum required to keep you fed". Do you accept that, even accounting for feeding yourself, buying fertilizer, and feeding your workers, that there will be leftover seeds that you can choose to either eat or re-plant?
>Are you saying that you did, indeed, take Scott as making a comment implying increased productivity was not a thing
I believe Scott fails to understand that maximizing ROI permanently increases productivity in ways that charitable giving does not. I believe Scott fails to understand the long-term implications of that difference. His specific claim that "everything has to bottom out in consumption" is inaccurate and symptomatic of his failure to understand those things.
> I believe Scott fails to understand that maximizing ROI permanently increases productivity in ways that charitable giving does not.
Given that the context is a discussion which is, effectively, about how to maximise return on investment where your return is not always intended to be money, I don’t think it’s likely that Scott has this misunderstanding. I think he just used informal and non-standard language to express his point.
>Given that the context is a discussion which is, effectively, about how to maximise return on investment where your return is not always intended to be money
I believe that's a characterization that betrays a misunderstanding of the issue. The point that VelveteenAmbush and I are making is that any supposed tradeoff is an illusion and that Scott fails to understand that "non-monetary returns" can, in fact, be economically quantified. Because of that error, Scott mistakenly believes he's making a rational tradeoff between economic and non-economic factors along an efficient frontier, when in fact his charitable contributions are a deadweight loss that gives him less of both. "Helping people" vs "economic growth" is a false dilemma. Economic growth IS the way to help people. Possibly the only way, certainly the best.
Scott uses informal language as a rhetorical device to preferentially engage high-level emotional judgements in his readers. This allows him to evade the analytical scrutiny which can demonstrate that he's advocating behavior that makes the world objectively worse. I believe he does this because he has an (understandable) social commitment to EA and doesn't want to lose status within the movement. Like all religious adherents, he bends his reasoning to accommodate his irrational beliefs. Kind of sad for an OG Rationalist, but I guess Moloch comes for us all in the end.
I subscribe to Peter Buffet’s view that the Charitable Industrial Complex is fundamentally flawed. It’s a self sustaining business that is responsible for supporting jobs of all kinds of Charity Aid workers rather than achieving permanent change. Therefore I’m solidly down on the social enterprise or social charitable community organisation model which are established to deliver services for the community for a profit reinvested back into the organisation. Call it social capitalism if you will. This means you avoid the idea of a donation and invest in an idea and can expect/demand performance.
Scott, I think your argument against Velveteen's argument is not very strong. I say this as someone inclined to agree with you but I think V's math makes more sense, even if it is uncomfortable. V's point about human capital is that if you want to make an argument about someone's life having compounding benefit to others, you have to be willing to quantify what they can and will do for others, which in the case of somebody very poor is almost always being severely undermined by the systems around them, usually by some kind of organized violence or tyranny. So yes, they might be able to stay alive and go to school for some single or double digit factor cheaper than someone in a rich country (though not more than that) but their impact on others' lives could be much less than an investment in making the things everyone depends on (including them) much cheaper and better. Even if you *only* care about the welfare of the poorest, pushing down the price of solar, smartphones, starlink, vaccines, watermakers (or filters for as long as that's even cheaper), ebikes, US/EU visas, flights, online classes, and so on could actually have a much bigger impact on the most oppressed than saving whatever number of lives you can would. (Not to mention the huge impact on the majority with average resource access.) One example: Industrial production of clothing reaches almost everyone in the world and is cheap enough to be accessible to everyone. Even in situations where people face unimaginable violence and oppression, they have clothes, because clothes are so cheap relative to the human need for clothes. Why can't investing in technical problem solving make the Internet that cheap? And food, and a house, and college? Once it does, the same horrific violence and oppression will probably fail to keep out those things too (or it will have a much harder time doing so.) Your instacart argument is somewhat persuasive in that some investments will yield somewhat useless products (though I'm not sure time savers like instacart are so useless because time saved compounds too) but you can build an investment strategy focused on big leaps or areas close to primary human needs and capabilities, mostly avoid this problem, and do well as an investor. (Just as you can choose not to invest in tobacco companies or gambling websites.) Ultimately I think political change to oppose violence and tyranny and build good institutions bring even bigger returns than charity or capitalism, but I agree they're harder to evaluate, especially when you are a non-participant with a day job in another field. I'm optimistic that retroactive funding with tradeable impact certificates could make evaluation less a problem when giving to efforts to end violence and oppression but it's a big problem now for sure. Lots of activism and political change is super speculative or snake oil.
Also, the argument that all investment comes back to consumption eventually is totally wrong. You can invest, spend all your gains on more investment, live modestly (or not) to the point where your consumption is a rounding error on your investment, and die. Conceivably every human alive could do this. Investment just means working on improving the way we do everything. It could be research, your work, anything. You are investing a lot of your surplus (free time) with your excellent writing!
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If you talk about market failures, are you also obliged to discuss whether government or some other organization can do better?
I will give it a try on your request 2 (an analysis with real numbers demonstrating that capitalist charities are more effective.) First of all, it is hard to be certain that an enterprise with fuzzy society-wide aims is working at all - a capitalist charity may be demonstrated to be succesfull on a narrow goal (such as changing the system of taxation or establishing a legal framework) but it is hard to demonstrate a causal link from a narrow aim to a clearly beneficial broad one, such as faster economic growth. This is usually impossible even ex-post with full and certain information on the narrow goal.
However, if we think that capitalist charities work at all, their potential benefits dwarf anything else. US GDP has been growing by about 2.2% in real terms for the last 20 years, with a standard deviation of quarterly growth of 5.54%. If a successfull charity manages to accelerate this growth by a statistically imperceptible 1/50th of standard deviation or 0.10% per annum, US GDP in 2034 will be 1.2% higher than on the current trajectory. This extra 1.2% is equivalent to $280Bn in todays money. If just 50% of this value add is captured for effective altruism, that gives $140Bn a year to spend on african children. At the current Givewell estimates of $4500 per life saved, this would be enough to save over 30,000,000 lives just in 2034, and more than 350,000,000 lives between 2024 and 2034. I am pretty sure this beats any other charitable projects.
Velveteen is obviously wrong because they fail to account for the value of the lives themselves. One QALY is probably worth ~$100,000 to the recipient (economic value of a life is around $8m, divided by 80 years for a full lifespan). If you can save 50 QALYs for $5000 (I haven't looked at Against Malaria Foundation's recent numbers but I'm assuming this is the ballpark), then that's 200*50=10,000 QALYs for $1m. So around a billion dollars of value over 50 years, not counting any value those individuals create for others. Clearly superior to the S&P 500 unless the positive externalities of the S&P 500 are very very very large compared to those of the charity.
Scott, why don't you go around distributing heroine to addicts?
All your reasons for not doing that apply doubly to charity to Africa or other poor countries. The worst an addict can do when given extra drugs can do is little. A country with access to graft can cause a huge war.
No developed country benefited from removing selection pressures.
Is there anything here on "bridling" capitalism? Or Cipolla's idea of intelligence versus being a bandit? Smith's butcher brought value to us and benefited himself. Pharmacy Benefit Managers bring no value yet take billions in fees and kickbacks to put sometimes even more expensive therapies higher on formulary. Ticketmolestor is another example. They bring very little value and exploit the market place. I pay $400 for a concert ticket and $100 goes to my fave artist, $80 to Ticketmolestor and $220 to scalpers. How do we strengthen anti-trust and reward companies that add wealth and value and regulate PBMs, Ticketmolestor and their ilk out of existence?