Another gem - game theory and democracy

This clipped article, People Power is a book review on a book which studies the formation of democracies. It perhaps elucidates my various thoughts on game theory and democracy, that I've gone on about from time to time (separately).

Invisible hands - the point

The net result of individuals selfishly pursuing self interest can make society "better". That is Adam Smith's economic tenet. In theory, greed should instead cause a lot of exploitative and abuse of power kind of behaviour. Economic structures such as competition policy, free trade, property law tend to lessen exploitative behaviour because it becomes less profitable. Dr Clam is theorising that because "voters" pursue selfish interests, the greater good can't be served. He also says that because we don't vote daily, the competitive pursuit of votes doesn't have a day to day influence on government policy. On both counts, my point is that economic and democratic process policies, have indirect effects far greater than the direct effects of any one mandate or another. These are somewhat measurable by experts, and many of the indirect effects are counter-intuitive.

Invisible hands - another try

The "invisible hand" concept I am trying to illucidate I believe can simplify complex topics. So I am stating some examples of how visible cause and effect is often countered and is weaker than the much less visible but stronger indirect cause and effects.

Unfair dismissal legislation - direct (visible hand) effect - Employer sacks or lays off staff whenever needed increasing unemployment rate.
Indirect (invisible hand) effect - Unfair dismissal legislation scares the bijeepers out of employers and they underemploy increasing unemployment rate. Careful studies show that the indirect effects have significantly more influence to the unemployment rate than the direct effects.

Unilaterally lowering trade barriers - direct effects - increase in imports, decrease in exports = worse balance of payments.

indirect effects - medium term self balancing of trade - cheaper and wider variety of goods to population. Increased scope of competition.

Supernanny style family analysis will become compulsory

Or at least it should. So many family problems that end up being family breakers or worse, can be nipped in the bud by a few weeks of analysis and training of the parents by experienced "nannies". The excerpts from the show seem extreme, but they are extremely common problems. Each family is a special case, and all parents have gaps in the understanding of the potential solutions. This is why watching the show isn't really enough. The three week program just has to be gone through for maximal society benefit.

Pod-sibling ebay link

Pod Sibling t-shirts available on THIS LINK.

My pod-sibling went to Earth and all I got was this lousy human host

I have managed to manufacture 30 of these in sizes M to XXL, and I will be posting them on ebay on THIS LINK. Some will be on auction, some at fixed price (maybe $15) any remaining will still be auctioned before Christmas (My guess is that the last ones may end up fetching the most)

The problem with invisible hand arguments

There is of course Adam Smith's invisible hand, but I believe in a rather larger number of them than the one associated with "greed is good" in relation to money. In the political sphere, if you translate money to votes one can imagine the invisible hand of democracy ensuring a country's well being, where even a well-meaning dictator, Pope or whatever cannot self-adjust to changing political, cultural and economic landscapes.
The real problem with promoting invisible hands as a "fact" as opposed to "unproven theory" is that, like black holes, dark matter and truthful politicians is that they are invisible. One can only look at the indirect effects and claim them as due to economic structure rather than direct visible action by a particular entity. Just as I grudgingly think that we should take the cosmologists word as to the existence of black holes because they are the experts; we should trust the economists when their studies show that lower awards, zero tariffs, less red tape etc. etc. are good for the country as a whole, and the compensation for those that may lose is cheaper than the cost of not making these changes.

The market is our guarantee

Do I really need a law to state that bread must be always available at every corner shop, that it be priced under $2.00 a loaf, and that it has to taste good? By rejecting bread (and sometimes all products from a particular shop) when a) It is more expensive than you’re willing to pay ; b) If they never seem to have the bread you want left or c) the bread is not nice in one way or another – we are acting as agents enforcing an implicit guarantee that we are getting acceptable value for money. * a statement saying that bread sellers should not overcharge is absolving ourselves of responsibility to keep them honest *
Why have a government agency to enforce bread standards when we are perfectly capable, as individual consumers, to in our own way dictate the standard by what we choose to buy. Poor quality, service or overpricing can still legally happen, but more efficiently adjusts to market pressure, than it could by direct mandates.
Similarly, do we need a law that states what hours you are allowed to work, that it must be at least a certain amount per hour, and that it should be fulfilling? All these criteria are important both for an employee and an employer, but by denying flexibility in the first two distorts the market mechanisms for all three. Different employees will have different priorities between remuneration, hours that can be worked and overall fulfilment in the job. Countries with price controls on bread end up having all bread at the same maximum allowed cost, not being readily available, and generally having dubious quality and no variety of choice. The free market in bread doesn’t necessarily make bread cheaper, but makes suppliers of bread compete to find breads that people will pay a high price for, while consumers will compete to find cheap but good quality breads.
A freer market in jobs will make employees and employers reputations much more important. Power will move from large unions and big companies to agencies, individuals, contractors, small employee groupings and nimble small businesses. The main difference to be seen will be a rise in the importance of job fulfilment over the letter of the industrial relations laws. The guarantees explicit in most awards are also guaranteeing that job fulfilment is a lower priority for employers than getting a reasonable fit in the costs and hours allowable.
Although large unions will lose a great deal of their power and influence, smaller unions and alternative worker groupings may actually have more clout by being able to favour certain employers over others for a range of tangible or intangible offerings.