Economic Solutions For Preventing Market Failures

Note: I will add more sections to this file when I feel that I have more solid ideas that are worth publishing. This file is just a place for me to gather miscellaneous thoughts that I have on economics that don’t fit in other files.

1. The Patent / Proof / Innovation Bounty Systems

The Case Against Patents - PolyMatter.

How to Fix the Broken Patent System - PolyMatter.

A portion of the government revenue would be set aside to provide monetary awards and official recognition to anybody who manages to create a major innovation and document it. The branch of government that is responsible for describing problems to be solved for monetary rewards and distributing the rewards to the winners would also provide rewards for people who solve major mathematical and/or scientific problems. Currently, there are no monetary rewards for completing many unsolved mathematical problems, but providing rewards would incentivize more people to attempt completing them.

2. Market Failures

2.1. Philosophy Of Planned Obsolescence

The Problem of Planned Obsolescence - Veritasium

Wikipedia: The Phoebus Cartel

Planned Obsolescence is a result of a mismatch between a provider’s and a receiver’s values. It is most often between a corporation’s values and consumer values, although it can take place in other forms too. The only obsolescence that should be supported is technological obsolescence (e.g. replacing CRT monitors with LCD monitors).

Taxing natural resources could discourage many forms of planned obsolescence, by making cheaper products that degrade the planet’s resources more expensive, so that people buy them less, venders sell them less, and thus conserving more resources in favor of materials that are less taxing on the Earth’s resources (that may otherwise be more expensive without natural resource taxation). Planned obsolescence in phones and computers is a huge problem, considering that they require non-recyclable alloys of rare metals, which are running out. This could make the digital revolution collapse in a generation.

With design and styling, there is no “best”, there is only “different”. When it comes to planned obsolescence, there is no “best”, there are only differences in fashion and design.

2.1.1. Forms of Planned Obsolescence

  • The most common form is when corporations intentionally produce inferior products that need to be replaced in the future. We’ve covered this.
  • Some medical professionals may give their patients less effective treatments so that they will have to keep coming back and paying more money to get their problems fixed is similar to the phenomenon that is planned obsolescence.
    • For example, many doctors recommend freezing warts instead of rubbing a banana peel on the warts (which is extremely cheap and far more effective). This is an example of the planned obsolescence phenomenon, generalized to things beyond just products, like services.
    • As another example, some dentists over-treat their patients and will fill areas with fillings if they notice something that is the slightest bit off even if it doesn’t really need to be filled, since they get more money ever time they replace a cavity with a filling.
  • The equivalence of Planned Obsolescence in the public sector is when politicians don’t solve a problem once and for all, because if the problem doesn’t exist anymore, then people might/probably/will stop voting for said politicians. But for as long as the problem continues to exist in some form, people are incentivized to vote for politicians who they think will do something about it (even if they actually don’t).
  • When workers demand that their jobs not be automated or replaced with something/someone more efficient, that should be considered a form of this more generalized Planned Obsolescence that I’m thinking about, where if a more efficient solution was provided, the less efficient solutions would no longer be needed anymore.
    • Consider how Milton Friedman gave the example of some shovel diggers who asked/lobbied to keep their jobs instead of getting it replaced by a much more efficient machine, and it was pointed out that giving them all spoons to dig with instead would create even more jobs, if the goal was to just create jobs.
      • With this being said, the argument that laws preventing planned obsolescence would destroy jobs is a terrible argument for defending planned obsolescence. Our goal should be to produce the greatest amount of wealth possible, not to preserve jobs.

2.1.2. Right to Repair

The iFixit self-repair manifesto.

The right-to-repair is enormously important for preventing planned obsolescence in many cases, and it is best guaranteed by government regulations.

The Real Reason McDonalds Ice Cream Machines Are Always Broken is an excellent example of where corporate cronyism, market failures, and a type of planned obsolescence have gone too far. It’s also a perfect problem to be resolved by government, if we wish to increase economic efficiency and solve a game theoretic problem that will leave society worse off as a whole if nothing is done to fix it.

2.2. Fixing Socially-Induced Market Failures

The popular misguided perceptions that city rankings and college rankings are useful for choosing which schools to attend are both examples of socially-induced market failures. These are both useful examples of behavioral economics.

Companies with critical mass (e.g. Facebook, Twitter, Discord, Reddit, etc) have overwhelming advantages over startup competitors. Even if it’s possible for people to create open-source alternatives to rival these companies, it is often the case that nobody will use them if nobody else uses them since those companies have already achieved the necessary critical mass.

2.3. Monopolies

Cornering the Market

Sometimes you get something because you want to use it. Sometimes you get something because you want to stop someone else from using it. Even if you yourself have no use for it.

Article: Musk Proposed Hyperloop to Stop California High-Speed Rail.

Preventing monopolies often has conflicts of interest within the government.

3. My Critique of UBI

3.1. LVT Would Eliminate The Need For COLAs

If UBI is funded without LVT, it would have to vary depending on location, and production will plummet, among other problems.

COLA: Cost-of-Living Adjustment

LVT would eliminate the question whether UBI would increase rent or not. It is a proven economic theorem that Land Value Taxes cannot be passed onto the tenants. LVT would not punish landlords for building more housing, so the end result is that rents go down since property taxes are eliminated. Rents would decrease even further as the supply of housing increases since landlords would be incentivized to build more housing, since they could build as much housing as they like without worrying about increasing tax rates.

Since Land Value Tax would decrease the cost of rent, the cost of living would vary less by location because housing would become more affordable regardless of whether it’s a city or a rural area. This means that it wouldn’t be as necessary to provide differing UBIs depending on the recipient’s place of residence and the associated COLAs.

UBI would offer people more liquidity to move out of a high-rent area into a lower-rent area since it costs money to move from one place to another, especially if they’re living paycheck to paycheck and would have to take a few days off work in order to move all their belongings into a low-rent area. In theory, UBI would eliminate the need for them to take out a loan in order to afford to move out of their high-rent apartments and what not.

3.2. NRT Doesn’t Harm Production, Unlike Other Taxes

Funding UBI with NRT would also reduce the decrease in production that UBI would cause, since natural resources taxes do not punish people for doing labor.

If UBI is ever going to work, then it needs to be funded by Natural Resources Tax, and there needs to be Population Control in place, lest it will only accelerate the collapse of modern civilization.

UBI would reduce the disincentive for welfare recipients to work, but it would create a much broader disincentive to work. There are many people who would choose not to work, or choose to work less, if they received a free basic income.

This is true, but the people who do choose to work less would tend to be the less productive and least hard-working people in the society, so a UBI might discourage production less than we would think.

3.3. Invalid Criticisms Against NRT-Funded UBI With EPC

A UBI for say, $1000/month would have to come from somewhere, either from taxation or money printing. The person who imagined that he would be $1000 richer might find himself $1000 poorer in actual spending power.

  • If UBI is funded by Natural Resource Tax, the GDP of the economy won’t be reduced by taxes since NRT doesn’t tax production.
    • However, UBI would still make the economy less productive because it would reduce the incentive for all individuals to work.
  • Inflation is unlikely since no new money would be printed to fund the UBI.

Different UBIs would be needed to adjust for different costs of living at different locations.

  • Georgism would make living in cities more affordable by encouraging landlords to build more (dense) housing. They wouldn’t have to pay property taxes, and NRT couldn’t be passed onto the tenants, so a Georgist UBI faces less consequences that a non-Georgist UBI faces.
    • The cost of living varies greatly by location, so a UBI in Manhattan may not be the same as a UBI received in the rural Western states.
    • When Georgism makes housing more affordable in both cities and rural areas, there is much less of a need to provide differing UBIs depending on the recipient’s place of residence.
  • If a reproductive license and tax are required to have children, society would need less welfare in general, and this would leave one less thing for UBI to potentially exacerbate or fail to fix.

3.4. UBI In A World That Has Passed Peak Idea Production

Proponents of UBI claim that people would be more free to pursue creative and intellectual endeavors if they were able to work less, but this ignores how we may have already surpassed Peak Idea Production: Why We Are Running Out Of Good Ideas. Since there is probably only a finite amount of new ideas that can be conceived in this world, this is a good point for arguing that UBI wouldn’t do much to improve society.

3.5. Possibly Better Alternatives To UBI

If there is a surplus of government revenue after all NRT is collected, then we may need to find better ways to spend the excess revenue than UBI.

  • The most basic functions of government: law enforcement, court system, military, border patrol, coast guard, foreign affairs, fire departments, emergency services, etc
  • Hard infrastructure: roads, railways, bridges, tunnels, water supply, sewers, electrical grids, and telecommunications (including Internet connectivity and broadband access).
  • Soft infrastructure: educational programs, official statistics, parks and recreational facilities, etc.
  • K-12 Education?
  • Single-Payer Healthcare?
  • Singapore’s Welfare System, plus some amount of LBD?
  • Laborers’ Bonus Dividend (LBD)?: Laborers who work are paid NRT by the government for working. A percentage of the worker’s salary (as determined by the government) is paid in addition to whatever the worker is paid by the employer.

3.5.1. Laborers’ Bonus Dividend (LBD)

  • Laborer’s Bonus Dividend: Laborers who work are paid NRT by the government for working.
  • This would have all the benefits of Natural Resources Tax (no land speculation, more efficient land usage, no taxation on production, affordable housing, reduced pollution, no land monopolies, reduced wealth inequality, etc),
  • Not only that, but it also wouldn’t suffer the drawbacks of UBI (decreased incentive to work, decreased production, weakened male-female pair bond, weakened parent-child relationships, etc.
  • Since workers wouldn’t pay any income taxes, they would be incentivized to work more.
  • However, since workers also would receive money from the NRT-funded LBD just by the virtue of working, this might cancel out the benefits of abolishing income taxes, since workers would have to work less to make a living and save for retirement.
    • People will work more if they get paid more, since getting paid more provides an increased incentive to work. However, for people doing FIRE (Financial Independence, Retire Early), most of them will only work up to a certain point once they have reached their target savings and investment. If they reach their targeted savings amount after working fewer hours under LBD instead of however many more hours that they would work without LBD, then they would work less overall.
      • However, it should also be considered that earning more money for the same amount of work would enable them to live less frugally and more lavishly during the years that they are working, which would partially counter-balance the lower amount of work that they would be doing due to receiving an LBD.
      • Additionally, even if LBD enables FIRE-movement laborers to retire earlier, those laborers would have to save up some additional money for the additional retirement years that they will be able to have, which would also partially counter-balance the fewer working hours made possible by LBD.
    • In a country where over 50% of employees live paycheck-to-paycheck, LBD would definitely increase those workers’ disposable incomes, reverse declining fertility rates, and allow the workers to retire earlier. This is far better than what we have now, and the other negative consequences of our Anti-Georgist economic system.
  • On the bright side, since there would be a significantly reduced welfare state, and the NRT revenue would not be paid to people who don’t work, LBD would not subsidize people who don’t want to work at all.

Last Modified: 2023 November 11, 12:27

Author: Zero Contradictions