Investment in a non-optimizing society

[nancylebov]

From memory: I was talking with womzilla about my notion that a non-optimizing society would work better than what we've got now, and he asked me how it would be possible to raise money.

I think that one's solvable: you'd have to say something like "we have good people and good products, and this new project will produce a solid rate of return" or "we have good people and a good history and this new project is risky but plausibly worth it" instead of saying "here's a chance to rejoice in the defeat of your enemies the best thing ever".

I have a notion that a non-optimizing economy would have more emphasis on bonds and dividends rather than on stock trading, but that's just a guess.

Comments

[chickenfeet2003.livejournal.com]

I think people invest in ventures for all kinds of reasons besides straightforward financial ROI. People invest in restaurants or vineyards not expecting a huge return. In arts ventures for all kinds of reasons and so on.

[nancylebov.livejournal.com]

I don't think we have a totally optimizing society, and perhaps I should have made that clearer.

[chickenfeet2003.livejournal.com]

I'm sure we don't. What concerns me most about the "markets solve everything" crowd is that they live under the delusion that all economic activity takes place in rational, perfect markets. Which is total crap.

[nancylebov.livejournal.com]

Got it. It was a stored rant.

[avram]

Not quite sure which section of "the 'markets solve everything' crowd" you're talking about, but the sane and intelligent market-oriented economists are perfectly open about the fact that people have a variety of motivations, and that not everybody's motivations will make sense to everybody else.

And I don't think I've ever spoken with or read anything by anyone who actually believed that "all economic activity takes place in rational, perfect markets". Even the most extreme anarcho-capitalists will readily admit (and complain about) that we do not currently live in an anarcho-capitalist society.

[chickenfeet2003.livejournal.com]

I wasn't thinking of academic economists but rather of politicians, think tanks etc. They may not actually believe that all markets are perfect and rational but they behave as if they did. I think the economists too take some of the blame. Many of them continue to plug deregulated markets even in situations where it is obvious that a deregulated market will not operate anything like a perfect market (healthcare comes to mind).

[avram]

An actual deregulated healthcare market would be very, very different from what we have now. It would include a much wider variety of healthcare practitioners, for one thing, including practitioners who aren't full doctors, but who specialize in treating some common problem. Midwives, for example, but imagine there was (say) the equivalent of a midwife who just set and treated broken bones.

Kevin Carson wrote a post about free-market health care for The Art of the Possible a few weeks back. He talks about how much of the current health care system is supported and constrained by state-backed monopolies that favor big corporations and the AMA.

He also mentions something called "lodge practice": In the late 19th and early 20th centuries, working-class people would organize fraternal societies for mutual aid, and one of the things these societies would do is hire doctors to treat the members. It was sort of bottom-up group insurance plan, but run by the people who were actually using it. A typical visit to a doctor in those days cost a dollar or two -- a day's wages for a low-class worker. That same dollar or two bought a year's worth of coverage through a lodge.

In both Britain and the US, the medical establishment collaborated with the government to end lodge practice.

[chickenfeet2003.livejournal.com]

Point taken. I guess what I was saying is that the "free marketers" don't intend at all to end the monopoly of MDs or any of the other barriers to true competition. real deregulation might indeed open up interesting possibilities but that's not what I see, say, the Fraser Institute advocating. They think 'for profit' hospital corporations selling their services in the Canadian market would drastically improve healthcare. I'm skeptical.

[avram]

I was chewing over your first paragraph on the way back from the supermarket, and I realized that I have no idea what it means.

By which I mean: I can't assign any meaning to the words "optimizing society" and "non-optimizing society" that implies that people in the latter would have any difficulties raising money.

[nancylebov.livejournal.com]

Thanks for trying. It's flattering that you assumed I had something definite in mind.

It would have been clearer if I'd called it single-factor optimization. For businesses, the single factor tends to be money. For governments, it tends to be power.

My idea about the relationship between single-factor optimization (I hope there's a better phrase for it) and raising money is that we've currently got an idea about maximizing shareholder value as the best promise for raising money.

[avram]

Well, if you're talking about single-factor optimization at the level of whole nations, you're probably talking about economic centralization, which is what Mises and Friedman and Hayek have spent the past century or so warning against.

Lower-level optimization is a foundation stone of civilization. We more commonly refer to it as division of labor.

While all businesses seek to make money, they don't all follow the same tactics. Take personal computers -- we've got an astonishing variety of models, all optimized for different things. But all the manufacturers (except the One Laptop Per Child Association) are still seeking to make a profit.

[nancylebov.livejournal.com]

Seeking to make a profit isn't the same thing as seeking to make the largest possible profit.

[avram]

Meaning what, exactly?

Most publicly-owned companies seek to maximize their stock value, but that doesn't mean they all follow identical business tactics. Apple and Microsoft are both publicly traded, and yet they have very different business models.

[nancylebov.livejournal.com]

One of my friends has suggested that "optimizing" is very much the wrong word for trying to maximize a single factor.

I don't think I made it sufficiently clear that, in any case, I was poking around in an area where I had something more like a vague dissatisfaction and a notion rather than fully formed ideas.

Probably off-subject, but this is an interesting angle on Wealth, Fame, Virtue, and Fun as reasons for a business, and the need to keep them in balance.