Nah, there is: One is comparatively objective, and thus at least capable of being approximated as a real world measure, the other is radically subjective, and NOT capable of being approximated as a real world measure. Unless, of course, you decide to assign preferences to people, rather than letting them have their own.

It’s fairly sensible to define “prosperity” as something you can measure, rather than something you can’t.

Good god! Stop the presses!

Yes, well Enron absolutely loved the idea, too. There would undoubtedly be prime opportunities for astute, politically-connected companies to make enormous sums of money (see Archer Daniels Midland and corn ethanol). That prospect does not warm the heart of free-market libertarians—quite the opposite.

I understand that emissions-rights trading is a more market oriented approach than direct regulation. But there are crucial differences between national vs global markets and SO2 vs CO2. SO2 emissions were not fundamental to nearly everything an economy does. Having to purchase rights to emit CO2 is not entirely unlike having to buy permits to breathe.

Some years ago I watched a documentary about a team of seismologists trying to predict an earthquake accurately enough for an evacuation. They were keenly aware they weren’t going to get to try, try, try again—a false alarm or two, and their credibility would be gone and nobody would heed another call to evacuate.

Similarly, I don’t think there are going to be a lot of chances for do-overs on global climate action, and there have been a number of not very good signs in the preliminary rounds. It seems to me that global warming activists should be very concerned about ‘public choice’ kinds of issues—how could this approach be exploited? How could that one? Rather than just trying to steamroll the opposition and get any sort of follow-on to Kyoto pushed through.

I don’t want to see an overheated planet, but nor do I want to see the global economy fubar’ed, and the latter is a more immediate prospect than the former.

The fact that they are being proposed by people in the environmental movement who aren’t in any wedded to market outcomes or the financial sector (many of whom originally wanted lots of regulation and intervention) ought to reassure these folks that we see a real problem and want to deal with it in the most effective way possible.

I can’t say I’m any more reassured by an unspecified overhaul of the tax system that would have prevented Brin and Page from becoming billionaires in the first place. Some detail would be useful—how would a tax system prevent a future Google from achieving an enormous market capitalization?

Most likely any such system would only prevent future entrepreneurs from becoming billionaires here—since there seems to be no shortage of nations that would be willing to be the home of the next Google.

Slocum, you’re overexcited. A reduction from billions to millions needn’t be a reduction of 99.9 percent, as you keep insisting. For example, a reduction from 2 billion to 900 million is a reduction of 55 percent. I don’t know exactly what the person who proposed “billions to millions” had in mind, but then, neither do you.

OK, Brin and Page are both worth about $20 billion, so reducing that to under $1 billion means a tax rate on the order of at least 95% (a rate that once inspired a George Harrison song).

As Slocum points out, global warming deniers seldom have any interest at all in climate per se.

That cuts both ways. Many on the left clearly see action on global warming as a way to force living patterns (density, mass-transit) and the global economy (the rich north subsidizing the poor south) in directions they’ve always favored, quite independent of climate change. How much is concern for climate and how much is enthusiasm for use of climate as a means of implementing leftist policies?

If global warming action proponents were really worried about global warming above all else, they’d propose actions in political/economic forms most palatable to their political opponents, wouldn’t they?

I’m a little put off by this. In your post you seem to be saying that we don’t have a very firm handle on how the economics of networks work. (You can see this in things like “On balance, it’s hard to say which way the net flow of benefits goes, and that’s pretty much par for the course with networks.”). But given the lack of understanding you don’t seem to be too worried about radically changing the entire incentive structure. That doesn’t seem wise.

Also, as slocum points out, you can’t just redistribute the money in Google without effectively nationalizing it, because nearly all of the money is in equity.

There’s two distinct fields that come under the “network economy” name, which is what Quiggen alludes to with his “two literatures” remark.

One of them derives from sociology (eg: social network analysis) and some branches of game theory (eg: “games on graphs”). Conceptually these approaches proceed in the following order: – assume individuals – assume (ranges of) behaviors (formalized as outputs in reactions to input, eg production decisions in response to inputs or game moves in response to other game moves) – assume some connection topology between members (eg: perhaps everyone is directly connected to everyone; perhaps, as in the real world, everyone is connected to everyone, but sometimes in circuitious paths—like 6 degrees of separation; perhaps, as in the real world, everyone is connected to everyone, but the overall structure resembles a hierarchical tree) – analyze, based on agent dynamics and network topology, how the individual nodes will behave, and attempt to reason about the characteristics of any “equilibrium” the network will converge to with time

This is almost precisely the opposite conceptual order from basic “normal” economics, which proceeds like so: – assume a very specific network topology (eg: everyone is directly connected to everyone)
-assume an effectively infinite set of nodes
-assume equilibrium
-assume actors with simple behaviors
-calculate actions taken by actors in that environment, and/or how that aggregate set of actors arrives at a new equilibrium

In the case of “everyone is directly connected to everyone” along with rational actors the two models mostly agree: – “everyone is connected to everyone” is ~ the same as perfect information – “everyone is connected to everyone directly” is ~ the same as zero transaction costs – “~infiinite set of nodes” is ~ infinitely deep markets

…but there’s the basic difference: “normal” economics is a field that starts with a big wooly-headed abstraction (the market), and proceeds from there down to the level of individual agents; the “network” economics (still in its infancy) starts from individual agents and their interconnections and attempts to proceed from there.

Why hasn’t “network” economics (in this vein) advanced sooner as a field of study? I’d argue for a handful of reasons: – the math is harder than that used in classical micro/macro ec (b/c you’re always dealing with a very large system of coupled differential equations, if you’re doing it right), and many of the mathematical tools weren’t well-developed until after 1950 – good empirical data wasn’t nearly as obtainable as it is today, and calculating social-network-analysis-related things like power and centrality were hard to do until after computers became mainstream – the results are less appealing to just about every ideology out there: whereas rent-seeking is a kind of ill-defined epithet in normal economics talk, it can be much more defined much more precisely in a network context (look for agents or groups of agents with (collective) chokeholds over connections between two otherwise-disconnected entities, and see how much they can extract); in this framework just about all “wealth creation” arises from rent-seeking…topology, not marginal utility, determines profitability. On the other hand, many of the left-aligned would see how little reason they have to believe their policy proposals would work, either. – there’s an incumbent effect: to use the social-network language makes it hard to talk with an economist, b/c you’re starting from opposite ends of the conceptual model; using the language of economics, though, makes it hard to convey the salient points without a ton of waffle words.

In a nutshell that is the sociology derived literature: in time it may develop into a real field in its own right, and it certainly—to me—starts from a more realistic starting point; it’s just a matter of waiting for better data sets, better analytic tools, and so forth makes it more than a very niche field.

The other literature on “network” economies is the study of network externalities and so on. Places where these “network” economies diverge from the basic, ec101 type of economies: – the value of a good depends heavily on other users of that good (a phone network with 0 users is worthless; a phone network everyone uses is worth quite a lot) – the good you’re buying isn’t so much a one-off consumable purchase (like a barrel of oil) but more an ongoing commitment to a particular pattern of behavior (i’m going to use software package X for a very long time after purchase) – consequently, the utility calculations of a given purchase depend very heavily on the action(s) past and present of everyone else in the world, and also on your past actions (thus “transitivity” is broken) – in particular, the calculation of marginal utility of purchasing X, if you are currenlty using Y instead, decomposes as a comparison between “marginal utility of Y” versus “cost of Y plus cost of stopping use of X, including converting old data, retraining, and a sundry host of opportunity costs”, which means that the maker of X can extract from its users an amount much greater than the naive marginal utility of X (the limit they can charge is ~ anything just under the cost of switching to Y).

Thus, in these environments you expect a lot of pathological behaviors compared to what you’d expect in “normal” economics: – the largest price a software package can go for is roughly the Net Present Value of switching to a competing package (effectively the “ransom cost”), not the marginal utility it offers; without the stickiness and switching costs it’d sell for an amount comparable to its marginal utility—and to win new customers it may sell near there—but existing customers “needing” to upgrage (b/c their older versions are not capable of reading files generated by the newer versions other customers have bought…) can be held up for much more than marginal utility. – tremendously high (nearly infinite) startup costs for rival providers of comparable (but not interoperable/compatible) products, b/c the value of a product is more in who else uses it and not in what it does (…what it does is only the bait to get the value-providing user base); thus instead of just having to worry about cost of capital and amount of capital, there’s a huge unknown factor in terms of being able to attract/lure away existing users.

And, these are the norms in any software/communications sector without some interoperability standard; they bear so little resemblance to the “revenue = marginal utility” view of market outcomes that, as Quiggen says, it’s hard to justify the entirety of the gains derived from “success” in these areas as somehow “earned” by those making the gains (in the same way that, to some people, it’s hard to call the “gains” made by buying-and-flipping land or domain names “earned” in the same way that gains made from operating a widget factory are “earned”).

Anyways, John’s new formulation draws on General Equilibrium theory. So in his imaginary world with a fair income distribution, all forward markets must exist for all commodities, including those whose delivery is contingent on the state of the world. And trade must be suspended at disequilibrium prices. This is a picture of no possible capitalist economy.

Besides, I would think John couldn’t object to lump-sum transfers and the invocation of the second welfare theorem.

I guess a lot of what John wants to say is packed into his usage of the word “earn”. Try substituting “make” in John’s post and see how it reads.

By the way, ownership of capital goods is not a contribution to production.

As Slocum points out, global warming deniers seldom have any interest at all in climate per se.

Your response to that fact depends on psychology, on your willingness to see yourself as a member of multiple social and economic networks rather than just one. If it’s about money, then money is money and it doesn’t matter how you got it as long as it’s legal. But why are there fewer Slocums in some countries than in others? Social democracy is not social bureaucracy it’s the massing of social networks that make the existence of such a bureaucracy socially acceptable.
I asked common sense questions I get nothing.