# If I had a trillion dollars…

May 29 JDN 2459729

(To the tune of “If I had a million dollars” by Barenaked Ladies; by the way, he does now)

[Inspired by the book How to Spend a Trillion Dollars]

If I had a trillion dollars… if I had a trillion dollars!

I’d buy everyone a house—and yes, I mean, every homeless American.

[500,000 homeless households * \$300,000 median home price = \$150 billion]

If I had a trillion dollars… if I had a trillion dollars!

I’d give to the extreme poor—and then there would be no extreme poor!

If I had a trillion dollars… if I had a trillion dollars!

I’d send people to Mars—hey, maybe we’d find some alien life!

If I had a trillion dollars… if I had a trillion dollars!

I’d build us a Moon base—haven’t you always wanted a Moon base?

[Estimated cost of a permanent Lunar base: \$35 billion. NASA is bad at forecasting cost, so let’s allow cost overruns to take us to \$100 billion.]

If I had a trillion dollars… if I had a trillion dollars!

I’d build a new particle accelerator—let’s finally figure out dark matter!

[Cost of planned new accelerator at CERN: \$24 billion. Let’s do 4 times bigger and make it \$100 billion.]

If I had a trillion dollars… if I had a trillion dollars!

I’d save the Amazon—pay all the ranchers to do something else!

[Brazil, where 90% of Amazon cattle ranching is, produces about 10 million tons of beef per year, which at an average price of \$5000 per ton is \$50 billion. So I could pay all the farmers two years of revenue to protect the Amazon instead of destroying it for \$100 billion.]

If I had a trillion dollars…

We wouldn’t have to drive anymore!

If I had a trillion dollars…

We’d build high-speed rail—it won’t cost more!

Hey wait, I could get it from a carbon tax!

If I had a trillion dollars… I’d save the world….

All of the above really could be done for under \$1 trillion. (Some of them would need to be repeated, so we could call it \$1 trillion per year.)

I, of course, do not, and will almost certainly never have, anything approaching \$1 trillion.

But here’s the thing: There are people who do.

Elon Musk and Jeff Bezos together have a staggering \$350 billion. That’s two people with enough money to end world hunger. And don’t give me that old excuse that it’s not in cash: UNICEF gladly accepts donations in stock. They could, right now, give their stocks to UNICEF and thereby end world hunger. They are choosing not to do that. In fact, the goodwill generated by giving, say, half their stocks to UNICEF might actually result in enough people buying into their companies that their stock prices would rise enough to make up the difference—thus costing them literally nothing.

The total net wealth of all the world’s billionaires is a mind-boggling \$12.7 trillion. That’s more than half a year of US GDP. Held by just over 2600 people—a small town.

The US government spends \$4 trillion in a normal year—and \$5 trillion the last couple of years due to the pandemic. Nearly \$1 trillion of that is military spending, which could be cut in half and still be the highest in the world. After seeing how pathetic Russia’s army actually is in battle (they paint Zs on their tanks because apparently their IFF system is useless!), are we really still scared of them? Do we really need eleven carrier battle groups?

Yes, the total cost of mitigating climate change is probably in the tens of trillions—but the cost of not mitigating climate change could be over \$100 trillion. And it’s not as if the world can’t come up with tens of trillions; we already do. World GDP is now over \$100 trillion per year; just 2% of that for 10 years is \$20 trillion.

Do these sound like good ideas to you? Would you want to do them? I think most people would want most of them. So now the question becomes: Why aren’t we doing them?

# Rethinking progressive taxation

Apr 17 JDN 2459687

There is an extremely common and quite bizarre result in the standard theory of taxation, which is that the optimal marginal tax rate for the highest incomes should be zero. Ever since that result came out, economists have basically divided into two camps.

The more left-leaning have said, “This is obviously wrong; so why is it wrong? What are we missing?”; the more right-leaning have said, “The model says so, so it must be right! Cut taxes on the rich!”

I probably don’t need to tell you that I’m very much in the first camp. But more recently I’ve come to realize that even the answers left-leaning economists have been giving for why this result is wrong are also missing something vital.

There have been papers explaining that “the zero top rate only applies at extreme incomes” (uh, \$50 billion sounds pretty extreme to me!) or “the optimal tax system can be U-shaped” (I don’t want U-shaped—we’re not supposed to be taxing the poor!)

And many economists still seem to find it reasonable to say that marginal tax rates should decline over some significant part of the distribution.

In my view, there are really two reasons why taxes should be progressive, and they are sufficiently general reasons that they should almost always override other considerations.

The first is diminishing marginal utility of wealth. The real value of a dollar is much less to someone who already has \$1 million than to someone who has only \$100. Thus, if we want to raise the most revenue while causing the least pain, we typically want to tax people who have a lot of money rather than people who have very little.

But the right-wing economists have an answer to this one, based on these fancy models: Yes, taking a given amount from the rich would be better (a lump-sum tax), but you can’t do that; you can only tax their income at a certain rate. (So far, that seems right. Lump-sum taxes are silly and economists talk about them too much.) But the rich are rich because they are more productive! If you tax them more, they will work less, and that will harm society as a whole due to their lost productivity.

This is the fundamental intuition behind the “top rate should be zero” result: The rich are so fantastically productive that it isn’t worth it to tax them. We simply can’t risk them working less.

But are the rich actually so fantastically productive? Are they really that smart? Do they really work that hard?

If Tony Stark were real, okay, don’t tax him. He is a one-man Singularity: He invented the perfect power source on his own, “in a cave, with a box of scraps!”; he created a true AI basically by himself; he single-handedly discovered a new stable island element and used it to make his already perfect power source even better.

But despite what his fanboys may tell you, Elon Musk is not Tony Stark. Tesla and SpaceX have done a lot of very good things, but in order to do they really didn’t need Elon Musk for much. Mainly, they needed his money. Give me \$270 billion and I could make companies that build electric cars and launch rockets into space too. (Indeed, I probably would—though I’d also set up some charitable foundations as well, more like what Bill Gates did with his similarly mind-boggling wealth.)

Don’t get me wrong; Elon Musk is a very intelligent man, and he works, if anything, obsessively. (He makes his employees work excessively too—and that’s a problem.) But if he were to suddenly die, as long as a reasonably competent CEO replaced him, Tesla and SpaceX would go on working more or less as they already do. The spectacular productivity of these companies is not due to Musk alone, but thousands of highly-skilled employees. These people would be productive if Musk had not existed, and they will continue to be productive once Musk is gone.

And they aren’t particularly rich. They aren’t poor either, mind you—a typical engineer at Tesla or SpaceX is quite well-paid, and rightly so. (Median salary at SpaceX is over \$115,000.) These people are brilliant, tremendously hard-working, and highly productive; and they get quite well-paid. But very few of these people are in the top 1%, and basically none of them will ever be billionaires—let alone the truly staggering wealth of a hectobillionaire like Musk himself.

How, then, does one become a billionaire? Not by being brilliant, hard-working, or productive—at least that is not sufficient, and the existence of, say, Donald Trump suggests that it is not necessary either. No, the really quintessential feature every billionaire has is remarkably simple and consistent across the board: They own a monopoly.

You can pretty much go down the list, finding what monopoly each billionaire owned: Bill Gates owned software patents on (what is still) the most widely-used OS and office suite in the world. J.K. Rowling owns copyrights on the most successful novels in history. Elon Musk owns technology patents on various innovations in energy storage and spaceflight technology—very few of which he himself invented, I might add. Andrew Carnegie owned the steel industry. John D. Rockefeller owned the oil industry. And so on.

I honestly can’t find any real exceptions: Basically every billionaire either owned a monopoly or inherited from ancestors who did. The closest things to exceptions are billionaire who did something even worse, like defrauding thousands of people, enslaving an indigenous population or running a nation with an iron fist. (And even then, Leopold II and Vladimir Putin both exerted a lot of monopoly power as part of their murderous tyranny.)

In other words, billionaire wealth is almost entirely rent. You don’t earn a billion dollars. You don’t get it by working. You get it by owning—and by using that ownership to exert monopoly power.

This means that taxing billionaire wealth wouldn’t incentivize them to work less; they already don’t work for their money. It would just incentivize them to fight less hard at extracting wealth from everyone else using their monopoly power—which hardly seems like a downside.

Since virtually all of the wealth at the top is simply rent, we have no reason not to tax it away. It isn’t genuine productivity at all; it’s just extracting wealth that other people produced.

Thus, my second, and ultimately most decisive reason for wanting strongly progressive taxes: rent-seeking. The very rich don’t actually deserve the vast majority of what they have, and we should take it back so that we can give it to people who really need and deserve it.

Now, there is a somewhat more charitable version of the view that high taxes even on the top 0.01% would hurt productivity, and it is worth addressing. That is based on the idea that entrepreneurship is valuable, and part of the incentive for becoming and entrepreneur is the chance at one day striking it fabulously rich, so taxing the fabulously rich might result in a world of fewer entrepreneurs.

This isn’t nearly as ridiculous as the idea that Elon Musk somehow works a million times as hard as the rest of us, but it’s still pretty easy to find flaws in it.

Suppose you were considering starting a business. Indeed, perhaps you already have considered it. What are your main deciding factors in whether or not you will?

Surely they do not include the difference between a 0.0001% chance of making \$200 billion and a 0.0001% chance of making \$50 billion. Indeed, that probably doesn’t factor in at all; you know you’ll almost certainly never get there, and even if you did, there’s basically no real difference in your way of life between \$50 billion and \$200 billion.

No, more likely they include things like this: (1) How likely are you to turn a profit at all? Even a profit of \$50,000 per year would probably be enough to be worth it, but how sure are you that you can manage that? (2) How much funding can you get to start it in the first place? Depending on what sort of business you’re hoping to found, it could be as little as thousands or as much as millions of dollars to get it set up, well before it starts taking in any revenue. And even a few thousand is a lot for most middle-class people to come up with in one chunk and be willing to risk losing.

This means that there is a very simple policy we could implement which would dramatically increase entrepreneurship while taxing only billionaires more, and it goes like this: Add an extra 1% marginal tax to capital gains for billionaires, and plow it into a fund that gives grants of \$10,000 to \$100,000 to promising new startups.

That 1% tax could raise several billion dollars a year—yes, really; US billionaires gained some \$2 trillion in capital gains last year, so we’d raise \$20 billion—and thereby fund many, many startups. Say the average grant is \$20,000 and the total revenue is \$20 billion; that’s one million new startups funded every single year. Every single year! Currently, about 4 million new businesses are founded each year in the US (leading the world by a wide margin); this could raise that to 5 million.

So don’t tell me this is about incentivizing entrepreneurship. We could do that far better than we currently do, with some very simple policy changes.

Meanwhile, the economics literature on optimal taxation seems to be completely missing the point. Most of it is still mired in the assumption that the rich are rich because they are productive, and thus terribly concerned about the “trade-off” between efficiency and equity involved in higher taxes. But when you realize that the vast, vast majority—easily 99.9%—of billionaire wealth is unearned rents, then it becomes obvious that this trade-off is an illusion. We can improve efficiency and equity simultaneously, by taking some of this ludicrous hoard of unearned wealth and putting it back into productive activities, or giving it to the people who need it most. The only people who will be harmed by this are billionaires themselves, and by diminishing marginal utility of wealth, they won’t be harmed very much.

Fortunately, the tide is turning, and more economists are starting to see the light. One of the best examples comes from Piketty, Saez, and Stantcheva in their paper on how CEO “pay for luck” (e.g. stock options) respond to top tax rates. There are a few other papers that touch on similar issues, such as Lockwood, Nathanson, and Weyl and Rothschild and Scheuer. But there’s clearly a lot of space left for new work to be done. The old results that told us not to raise taxes were wrong on a deep, fundamental level, and we need to replace them with something better.

# Could the Star Trek economy really work?

Jun 13 JDN 2459379

“The economics of the future are somewhat different”, Jean-Luc Picard explains to Lily Sloane in Star Trek: First Contact.

Captain Picard’s explanation is not very thorough, and all we have about the economic system of the Federation comes from similar short glimpes across the various Star Trek films and TV series. The best glimpses of what the Earth’s economy is like largely come from the Picard series in particular.

But I think we can safely conclude that all of the following are true:

1. Energy is extraordinarily abundant, with a single individual having access to an energy scale that would rival the energy production of entire nations at present. By E=mc2, simply being able to teleport a human being or materialize a hamburger from raw energy, as seems to be routine in Starfleet, would require something on the order of 10^17 joules, or about 28 billion kilowatt-hours. The total energy supply of the world economy today is about 6*10^20 joules, or 100 trillion kilowatt-hours.

2. There is broad-based prosperity, but not absolute equality. At the very least different people live differently, though it is unclear whether anyone actually has a better standard of living than anyone else. The Picard family still seems to own their family vineyard that has been passed down for generations, and since the population of Earth is given as about 9 billion (a plausible but perhaps slightly low figure for our long-run stable population equilibrium), its acreage is large enough that clearly not everyone on Earth can own that much land.

3. Most resources that we currently think of as scarce are not scarce any longer. Replicator technology allows for the instantaneous production of food, clothing, raw materials, even sophisticated electronics. There is no longer a “manufacturing sector” as such; there are just replicators and people who use or program them. Most likely, even new replicators are made by replicating parts in other replicators and then assembling them. There are a few resources which remain scarce, such as dilithium (somehow involved in generating these massive quantities of energy) and latinum (a bizarre substance that is prized by many other cultures yet for unexplained reasons cannot be viably produced in replicators). Essentially everything else that is scarce is inherently so, such as front-row seats at concerts, original paintings, officer commissions in Starfleet, or land in San Francisco.

4. Interplanetary and even interstellar trade is routine. Starships with warp capability are available to both civilian and government institutions, and imports and exports can be made to planets dozens or even hundreds of light-years away as quickly as we can currently traverse the oceans with a container ship.

5. Money as we know it does not exist. People are not paid wages or salaries for their work. There is still some ownership of personal property, and particular families (including the Picards) seem to own land; but there does not appear to be any private ownership of capital. For that matter there doesn’t even appear to be be much in the way of capital; we never see any factories. There is obviously housing, there is infrastructure such as roads, public transit, and presumably power plants (very, very powerful power plants, see 1!), but that may be all. Nearly all manufacturing seems to be done by replicators, and what can’t be done by replicators (e.g. building new starships) seems to be all orchestrated by state-owned enterprises such as Starfleet.

Could such an economy actually work? Let’s stipulate that we really do manage to achieve such an extraordinary energy scale, millions of times more than what we can currently produce. Even very cheap, widespread nuclear energy would not be enough to make this plausible; we would need at least abundant antimatter, and quite likely something even more exotic than this, like zero point energy. Along this comes some horrifying risks—imagine an accident at a zero-point power plant that tears a hole in the fabric of space next to a major city, or a fanatical terrorist with a handheld 20-megaton antimatter bomb. But let’s assume we’ve found ways to manage those risks as well.

Furthermore, let’s stipulate that it’s possible to build replicators and warp drives and teleporters and all the similarly advanced technology that the Federation has, much of which is so radically advanced we can’t even be sure that such a thing is possible.

What I really want to ask is whether it’s possible to sustain a functional economy at this scale without money. George Roddenberry clearly seemed to think so. I am less convinced.

First of all, I want to acknowledge that there have been human societies which did not use money, or even any clear notion of a barter system. In fact, most human cultures for most of our history as a species allocated resources based on collective tribal ownership and personal favors. Some of the best parts of Debt: The First 5000 Years are about these different ways of allocating resources, which actually came much more naturally to us than money.

But there seem to have been rather harsh constraints on what sort of standard of living could be maintained in such societies. There was essentially zero technological advancement for thousands of years in most hunter-gatherer cultures, and even the wealthiest people in most of those societies overall had worse health, shorter lifespans, and far, far less access to goods and services than people we would consider in poverty today.

Then again, perhaps money is only needed to catalyze technological advancement; perhaps once you’ve already got all the technology you need, you can take money away and return to a better way of life without greed or inequality. That seems to be what Star Trek is claiming: That once we can make a sandwich or a jacket or a phone or even a car at the push of a button, we won’t need to worry about paying people because everyone can just have whatever they need.

Yet whatever they need is quite different from whatever they want, and therein lies the problem. Yes, I believe that with even moderate technological advancement—the sort of thing I expect to see in the next 50 years, not the next 300—we will have sufficient productivity that we could provide for the basic needs of every human being on Earth. A roof over your head, food on your table, clothes to wear, a doctor and a dentist to see twice a year, emergency services, running water, electricity, even Internet access and public transit—these are things we could feasibly provide to literally everyone with only about two or three times our current level of GDP, which means only about 2% annual economic growth for the next 50 years. Indeed, we could already provide them for every person in First World countries, and it is quite frankly appalling that we fail to do so.

However, most of us in the First World already live a good deal better than that. We don’t have the most basic housing possible, we have nice houses we want to live in. We don’t take buses everywhere, we own our own cars. We don’t eat the cheapest food that would provide adequate nutrition, we eat a wide variety of foods; we order pizza and Chinese takeout, and even eat at fancy restaurants on occasion. It’s less clear that we could provide this standard of living to everyone on Earth—but if economic growth continues long enough, maybe we can.

Worse, most of us would like to live even better than we do. My car is several years old right now, and it runs on gasoline; I’d very much like to upgrade to a brand-new electric car. My apartment is nice enough, but it’s quite small; I’d like to move to a larger place that would give me more space not only for daily living, but also for storage and for entertaining guests. I work comfortable hours for decent pay at a white-collar job that can be done entirely remotely on mostly my own schedule, but I’d prefer to take some time off and live independently while I focus more on my own writing. I sometimes enjoy cooking, but often it can be a chore, and sometimes I wish I could just go eat out at a nice restaurant for dinner every night. I don’t make all these changes because I can’t afford to—that is, because I don’t have the money.

Perhaps most of us would feel no need to have a billion dollars. I don’t really know what \$100 billion actually gets you, as far as financial security, independence, or even consumption, that \$50 million wouldn’t already. You can have total financial freedom and security with a middle-class American lifestyle with net wealth of about \$2 million. If you want to also live in a mansion, drink Dom Perignon with every meal and drive a Lamborghini (which, quite frankly, I have no particular desire to do), you’ll need several million more—but even then you clearly don’t need \$1 billion, let alone \$100 billion. So there is indeed something pathological about wanting a billion dollars for yourself, and perhaps in the Federation they have mental health treatments for “wealth addiction” that prevent people from experiencing such pathological levels of greed.

Yet in fact, with the world as it stands, I would want a billion dollars. Not to own it. Not to let it sit and grow in some brokerage account. Not to simply be rich and be on the Forbes list. I couldn’t care less about those things. But with a billion dollars, I could donate enormous amounts to charities, saving thousands or even millions of lives. I could found my own institutions—research institutes, charitable foundations—and make my mark on the world. With \$100 billion, I could make a serious stab at colonizing Mars—as Elon Musk seems to be doing, but most other billionaires have no particular interest in.

And it begins to strain credulity to imagine a world of such spectacular abundance that everyone could have enough to do that.

This is why I always struggle to answer when people ask me things like “If money were not object, how would you live your life?”; if money were no object, I’d end world hunger, cure cancer, and colonize the Solar System. Money is always an object. What I think you meant to ask was something much less ambitious, like “What would you do if you had a million dollars?” But I might actually have a million dollars someday—most likely by saving and investing the proceeds of a six-figure job as an economist over many years. (Save \$2,000 per month for 20 years, growing it at 7% per year, and you’ll be over \$1 million. You can do your own calculations here.) I doubt I’ll ever have \$10 million, and I’m pretty sure I’ll never have \$1 billion.

To be fair, it seems that many of the grand ambitions I would want to achieve with billions of dollars already are achieved by 23rd century; world hunger has definitely been ended, cancer seems to have been largely cured, and we have absolutely colonized the Solar System (and well beyond). But that doesn’t mean that new grand ambitions wouldn’t arise, and indeed I think they would. What if I wanted to command my own fleet of starships? What if I wanted a whole habitable planet to conduct experiments on, perhaps creating my own artificial ecosystem? The human imagination is capable of quite grand ambitions, and it’s unlikely that we could ever satisfy all of them for everyone.

Some things are just inherently scarce. I already mentioned some earlier: Original paintings, front-row seats, officer commissions, and above all, land. There’s only so much land that people want to live on, especially because people generally want to live near other people (Internet access could conceivably reduce the pressure for this, but, uh, so far it really hasn’t, so why would we think it will in 300 years?). Even if it’s true that people can have essentially arbitrary amounts of food, clothing, or electronics, the fact remains that there’s only so much real estate in San Francisco.

It would certainly help to build taller buildings, and presumably they would, though most of the depictions don’t really seem to show that; where are the 10-kilometer-tall skyscrapers made of some exotic alloy or held up by structural integrity fields? (Are the forces of NIMBY still too powerful?) But can everyone really have a 1000-square-meter apartment in the center of downtown? Maybe if you build tall enough? But you do still need to decide who gets the penthouse.

It’s possible that all inherently-scarce resources could be allocated by some mechanism other than money. Some even should be: Starfleet officer commissions are presumably allocated by merit. (Indeed, Starfleet seems implausibly good at selecting supremely competent officers.) Others could be: Concert tickets could be offered by lottery, and maybe people wouldn’t care so much about being in the real front row when you can always simulate the front row at home in your holodeck. Original paintings could all be placed in museums available for public access—and the tickets, too, could be allocated by lottery or simply first-come, first-served. (Picard mentions the Smithsonian, so public-access museums clearly still exist.)

Then there’s the question of how you get everyone to work, if you’re not paying them. Some jobs people will do for fun, or satisfaction, or duty, or prestige; it’s plausible that people would join Starfleet for free (I’m pretty sure I would). But can we really expect all jobs to work that way? Has automation reached such an advanced level that there are no menial jobs? Sanitation? Plumbing? Gardening? Paramedics? Police? People still seem to pick grapes by hand in the Picard vineyards; do they all do it for the satisfaction of a job well done? What happens if one day everyone decides they don’t feel like picking grapes today?

I certainly agree that most menial jobs are underpaid—most people do them because they can’t get better jobs. But surely we don’t want to preserve that? Surely we don’t want some sort of caste system that allocates people to work as plumbers or garbage collectors based on their birth? I guess we could use merit-based aptitude testing; it’s clear that the vast majority of people really aren’t cut out for Starfleet (indeed, perhaps I’m not!), and maybe some people really would be happiest working as janitors. But it’s really not at all clear what such a labor allocation system would be like. I guess if automation has reached such an advanced level that all the really necessary work is done by machines and human beings can just choose to work as they please, maybe that could work; it definitely seems like a very difficult system to manage.

So I guess it’s not completely out of the question that we could find some appropriate mechanism to allocate all goods and services without ever using money. But then my question becomes: Why? What do you have against money?

I understand hating inequality—indeed I share that feeling. I, too, am outraged by the existence of hectobillionaires in a world where people still die of malaria and malnutrition. But having a money system, or even a broadly free-market capitalist economy, doesn’t inherently have to mean allowing this absurd and appalling level of inequality. We could simply impose high, progressive taxes, redistribute wealth, and provide a generous basic income. If per-capita GDP is something like 100 times its current level (as it appears to be in Star Trek), then the basic income could be \$1 million per year and still be entirely affordable.

That is, rather than trying to figure out how to design fair and efficient lotteries for tickets to concerts and museums, we could still charge for tickets, and just make sure that everyone has a million dollars a year in basic income. Instead of trying to find a way to convince people to clean bathrooms for free, we could just pay them to do it.

The taxes could even be so high at the upper brackets that they effectively impose a maximum income; say we have a 99% marginal rate above \$20 million per year. Then the income inequality would collapse to quite a low level: No one below \$1 million, essentially no one above \$20 million. We could tax wealth as well, ensuring that even if people save or get lucky on the stock market (if we even still have a stock market—maybe that is unnecessary after all), they still can’t become hectobillionaires. But by still letting people use money and allowing some inequality, we’d still get all the efficiency gains of having a market economy (minus whatever deadweight loss such a tax system imposed—which I in fact suspect would not be nearly as large as most economists fear).

In all, I guess I am prepared to say that, given the assumption of such great feats of technological advancement, it is probably possible to sustain such a prosperous economy without the use of money. But why bother, when it’s so much easier to just have progressive taxes and a basic income?

# Why is cryptocurrency popular?

May 30 JDN 2459365

At the time of writing, the price of most cryptocurrencies has crashed, likely due to a ban on conventional banks using cryptocurrency in China (though perhaps also due to Elon Musk personally refusing to accept Bitcoin at his businesses). But for all I know by the time this post goes live the price will surge again. Or maybe they’ll crash even further. Who knows? The prices of popular cryptocurrencies have been extremely volatile.

This post isn’t really about the fluctuations of cryptocurrency prices. It’s about something a bit deeper: Why are people willing to put money into cryptocurrencies at all?

The comparison is often made to fiat currency: “Bitcoin isn’t backed by anything, but neither is the US dollar.”

But the US dollar is backed by something: It’s backed by the US government. Yes, it’s not tradeable for gold at a fixed price, but so what? You can use it to pay taxes. The government requires it to be legal tender for all debts. There are certain guaranteed exchange rights built into the US dollar, which underpin the value that the dollar takes on in other exchanges. Moreover, the US Federal Reserve carefully manages the supply of US dollars so as to keep their value roughly constant.

Bitcoin does not have this (nor does Dogecoin, or Etherium, or any of the other hundreds of lesser-known cryptocurrencies). There is no central bank. There is no government making them legal tender for any debts at all, let alone all of them. Nobody collects taxes in Bitcoin.

And so, because its value is untethered, Bitcoin’s price rises and falls, often in huge jumps, more or less randomly. If you look all the way back to when it was introduced, Bitcoin does seem to have an overall upward price trend, but this honestly seems like a statistical inevitability: If you start out being worthless, the only way your price can change is upward. While some people have become quite rich by buying into Bitcoin early on, there’s no particular reason to think that it will rise in value from here on out.

Nor does Bitcoin have any intrinsic value. You can’t eat it, or build things out of it, or use it for scientific research. It won’t even entertain you (unless you have a very weird sense of entertainment). Bitcoin doesn’t even have “intrinsic value” the way gold does (which is honestly an abuse of the term, since gold isn’t actually especially useful): It isn’t innately scarce. It was made scarce by its design: Through the blockchain, a clever application of encryption technology, it was made difficult to generate new Bitcoins (called “mining”) in an exponentially increasing way. But the decision of what encryption algorithm to use was utterly arbitrary. Bitcoin mining could just as well have been made a thousand times easier or a thousand times harder. They seem to have hit a sweet spot where they made it just hard enough that it make Bitcoin seem scarce while still making it feel feasible to get.

We could actually make a cryptocurrency that does something useful, by tying its mining to a genuinely valuable pursuit, like analyzing scientific data or proving mathematical theorems. Perhaps I should suggest a partnership with Folding@Home to make FoldCoin, the crypto coin you mine by folding proteins. There are some technical details there that would be a bit tricky, but I think it would probably be feasible. And then at least all this computing power would accomplish something, and the money people make would be to compensate them for their contribution.

But Bitcoin is not useful. No institution exists to stabilize its value. It constantly rises and falls in price. Why do people buy it?

In a word, FOMO. The fear of missing out. People buy Bitcoin because they see that a handful of other people have become rich by buying and selling Bitcoin. Bitcoin symbolizes financial freedom: The chance to become financially secure without having to participate any longer in our (utterly broken) labor market.

In this, volatility is not a bug but a feature: A stable currency won’t change much in value, so you’d only buy into it because you plan on spending it. But an unstable currency, now, there you might manage to get lucky speculating on its value and get rich quick for nothing. Or, more likely, you’ll end up poorer. You really have no way of knowing.

That makes cryptocurrency fundamentally like gambling. A few people make a lot of money playing poker, too; but most people who play poker lose money. Indeed, those people who get rich are only able to get rich because other people lose money. The game is zero-sum—and likewise so is cryptocurrency.

Note that this is not how the stock market works, or at least not how it’s supposed to work (sometimes maybe). When you buy a stock, you are buying a share of the profits of a corporation—a real, actual corporation that produces and sells goods or services. You’re (ostensibly) supplying capital to fund the operations of that corporation, so that they might make and sell more goods in order to earn more profit, which they will then share with you.

Likewise when you buy a bond: You are lending money to an institution (usually a corporation or a government) that intends to use that money to do something—some real actual thing in the world, like building a factory or a bridge. They are willing to pay interest on that debt in order to get the money now rather than having to wait.

Initial Coin Offerings were supposed to be away to turn cryptocurrency into a genuine investment, but at least in their current virtually unregulated form, they are basically indistinguishable from a Ponzi scheme. Unless the value of the coin is somehow tied to actual ownership of the corporation or shares of its profits (the way stocks are), there’s nothing to ensure that the people who buy into the coin will actually receive anything in return for the capital they invest. There’s really very little stopping a startup from running an ICO, receiving a bunch of cash, and then absconding to the Cayman Islands. If they made it really obvious like that, maybe a lawsuit would succeed; but as long as they can create even the appearance of a good-faith investment—or even actually make their business profitable!—there’s nothing forcing them to pay a cent to the owners of their cryptocurrency.

The really frustrating thing for me about all this is that, sometimes, it works. There actually are now thousands of people who made decisions that by any objective standard were irrational and irresponsible, and then came out of it millionaires. It’s much like the lottery: Playing the lottery is clearly and objectively a bad idea, but every once in awhile it will work and make you massively better off.

It’s like I said in a post about a year ago: Glorifying superstars glorifies risk. When a handful of people can massively succeed by making a decision, that makes a lot of other people think that it was a good decision. But quite often, it wasn’t a good decision at all; they just got spectacularly lucky.

I can’t exactly say you shouldn’t buy any cryptocurrency. It probably has better odds than playing poker or blackjack, and it certainly has better odds than playing the lottery. But what I can say is this: It’s about odds. It’s gambling. It may be relatively smart gambling (poker and blackjack are certainly a better idea than roulette or slot machines), with relatively good odds—but it’s still gambling. It’s a zero-sum high-risk exchange of money that makes a few people rich and lots of other people poorer.

With that in mind, don’t put any money into cryptocurrency that you couldn’t afford to lose at a blackjack table. If you’re looking for something to seriously invest your savings in, the answer remains the same: Stocks. All the stocks.

I doubt this particular crash will be the end for cryptocurrency, but I do think it may be the beginning of the end. I think people are finally beginning to realize that cryptocurrencies are really not the spectacular innovation that they were hyped to be, but more like a high-tech iteration of the ancient art of the Ponzi scheme. Maybe blockchain technology will ultimately prove useful for something—hey, maybe we should actually try making FoldCoin. But the future of money remains much as it has been for quite some time: Fiat currency managed by central banks.

# Because ought implies can, can may imply ought

Mar21JDN 2459295

Is Internet access a fundamental human right?

At first glance, such a notion might seem preposterous: Internet access has only existed for less than 50 years, how could it be a fundamental human right like life and liberty, or food and water?

Let’s try another question then: Is healthcare a fundamental human right?

Surely if there is a vaccine for a terrible disease, and we could easily give it to you but refuse to do so, and you thereby contract the disease and suffer horribly, we have done something morally wrong. We have either violated your rights or violated our own obligations—perhaps both.

Yet that vaccine had to be invented, just as the Internet did; go back far enough into history and there were no vaccines, no antibiotics, even no anethestetics or antiseptics.

One strong, commonly shared intuition is that denying people such basic services is a violation of their fundamental rights. Another strong, commonly shared intuition is that fundamental rights should be universal, not contingent upon technological or economic development. Is there a way to reconcile these two conflicting intuitions? Or is one simply wrong?

One of the deepest principles in deontic logic is “ought implies can“: One cannot be morally obligated to do what one is incapable of doing.

Yet technology, by its nature, makes us capable of doing more. By technological advancement, our space of “can” has greatly expanded over time. And this means that our space of “ought” has similarly expanded.

For if the only thing holding us back from an obligation to do something (like save someone from a disease, or connect them instantaneously with all of human knowledge) was that we were incapable and ought implies can, well, then now that we can, we ought.

Advancements in technology do not merely give us the opportunity to help more people: They also give us the obligation to do so. As our capabilities expand, our duties also expand—perhaps not at the same rate, but they do expand all the same.

It may be that on some deeper level we could articulate the fundamental rights so that they would not change over time: Not a right to Internet access, but a right to equal access to knowledge; not a right to vaccination, but a right to a fair minimum standard of medicine. But the fact remains: How this right becomes expressed in action and policy will and must change over time. What was considered an adequate standard of healthcare in the Middle Ages would rightfully be considered barbaric and cruel today. And I am hopeful that what we now consider an adequate standard of healthcare will one day seem nearly as barbaric. (“Dialysis? What is this, the Dark Ages?”)

We live in a very special time in human history.

Our technological and economic growth for the past few generations has been breathtakingly fast, and we are the first generation in history to seriously be in a position to end world hunger. We have in fact been rapidly reducing global poverty, but we could do far more. And because we can, we should.

After decades of dashed hope, we are now truly on the verge of space colonization: Robots on Mars are now almost routine, fully-reusable spacecraft have now flown successful missions, and a low-Earth-orbit hotel is scheduled to be constructed by the end of the decade. Yet if current trends continue, the benefits of space colonization are likely to be highly concentrated among a handful of centibillionaires—like Elon Musk, who gained a staggering \$160 billion in wealth over the past year. We can do much better to share the rewards of space with the rest of the population—and therefore we must.

Artificial intelligence is also finally coming into its own, with GPT-3 now passing the weakest form of the Turing Test (though not the strongest form—you can still trip it up and see that it’s not really human if you are clever and careful). Many jobs have already been replaced by automation, but as AI improves, many more will be—not as soon as starry-eyed techno-optimists imagined, but sooner than most people realize. Thus far the benefits of automation have likewise been highly concentrated among the rich—we can fix that, and therefore we should.

Is there a fundamental human right to share in the benefits of space colonization and artificial intelligence? Two centuries ago the question wouldn’t have even made sense. Today, it may seem preposterous. Two centuries from now, it may seem preposterous to deny.

I’m sure almost everyone would agree that we are obliged to give our children food and water. Yet if we were in a desert, starving and dying of thirst, we would be unable to do so—and we cannot be obliged to do what we cannot do. Yet as soon as we find an oasis and we can give them water, we must.

Humanity has been starving in the desert for two hundred millennia. Now, at last, we have reached the oasis. It is our duty to share its waters fairly.

# The fable of the billionaires

May 31 JDN 2458999

There are great many distortions in real-world markets that cause them to deviate from the ideal of perfectly competitive free markets, and economists rightfully spend much of their time locating, analyzing, and mitigating such distortions.

But I think there is a general perception among economists, and perhaps among others as well, that if we could somehow make markets perfectly competitive and efficient, we’d be done; the world, or at least the market, would be just and fair and all would be good. And this perception is gravely mistaken. To make that clear to you, I offer a little fable.

Once upon a time, widgets were made by hand. One person, working for one eight-hour day, could make 100 widgets. Most people were employed making widgets full-time. The wage for making widgets was \$1 per widget.

Then, an inventor came up with a way to automate the production of widgets. For \$100 per day, the same cost to hire a worker to make 100 widgets, the machine could instead make 101 widgets.

Because it was 1% more efficient, businesses began adopting the new machine, and now made slightly more widgets than before. But some workers who had previously made widgets were laid off, while others saw their wages fall to only \$0.99 per widget.

If there were more widgets, but fewer people were getting paid less to make them, where did the extra wealth go? To the inventor, of course, who now owns 10% of all widget production and has billions of dollars.

Later, another inventor came up with an even better machine, which could make 102 widgets in a day. And that inventor became a billionare too, while more became unemployed and wages fell to \$0.98 per widget.

And then there was another inventor, and another, and another; and today the machines can make 200 widgets in a day and wages are only \$0.50 per widget. We now have twice as many widgets as we used to have, and hundreds of billionaires; yet only half as many people now work making widgets as once did, and those who remain make only half of what they once did.

Was this market inefficient or uncompetitive? Not at all! In fact it was quite efficient: It delivered the most widgets for the least cost every step of the way. And the first round of billionaires didn’t get enough power to keep the next round from innovating even better and also becoming billionaires. No one stole or cheated to get where they are; the billionaires really made it to the top by being brilliant innovators who made the world more efficient.

Indeed, by the standard measures of economic surplus, the world has gotten better with each new machine. GDP has gone up, wealth has gone up. Yet millions of people are out of work, and millions more are making pitifully low wages. Overall the nation seems to be worse off, even though all the numbers keep saying things are getting better.

There are some relatively simple solutions to this problem: We could tax those billionaires, and use the money to provide public goods to everyone else; and then the added wealth from doubling our quantity of widgets would benefit everyone and not just the inventors who made it happen. Would that reduce the incentives to innovate? A little, perhaps; but it’s hard to believe that most people who would be willing to invent something for \$1 billion wouldn’t be willing to do so for \$500 million or even for \$50 million. At some point that extra money really isn’t benefiting you all that much. And what’s the point of incentivizing innovation if it makes life worse for most of our population?

In the real world there are lots of other problems, of course. Corruption, regulatory capture, rent-seeking, collusion, and so on all make our markets less efficient than they could have been. But even if markets were efficient, it’s not clear that they would be fair or just, or that they would be making most people’s lives better.

Indeed, I’m not convinced that most billionaires really got where they are by being particularly innovative. I can appreciate the innovations made by Cisco and Microsoft, but what brilliant innovation underlies Facebook or Amazon? The Internet itself is a great innovation (largely created by DARPA and universities), but is using it to talk to people or sell things really such a great leap? Tesla and SpaceX are innovative, but they have largely been money pits for Elon Musk, who inherited a good chunk of his wealth and made most of the rest by owning shares in PayPal. Yet even if we suppose that all the billionaires got where they are by inventing things that made the economy more efficient, it’s still not clear that they deserve to keep that staggering wealth.

I think the fundamental problem is that we have mentally equated ‘value of marginal product’ with ‘what you rightfully earn’. But the former is dependent upon the rest of the market: Who you are competing with, what your customers want. You can work very hard and be very talented, but if you’re making something that people aren’t willing to pay for, you won’t make any money. And the fact that people won’t pay for something doesn’t mean it isn’t valuable: If you produce public goods, they could benefit many people a great deal but still not draw in profits. Conversely, the fact that something is profitable doesn’t necessarily make it valuable: It could just be a very effective method of rent-seeking.

I’m not saying we should do away with markets; they’re very useful, and they do have a lot of benefits. But we should acknowledge their limitations. We should be aware not only that real-world markets are not perfectly efficient, but also that even a perfectly efficient market wouldn’t make for the best possible world.

# Can we have property rights without violence?

Apr 23, JDN 2457867

Most likely, you have by now heard of the incident on a United Airlines flight, where a man was beaten and dragged out of a plane because the airline decided that they needed more seats than they had. In case you somehow missed all the news articles and memes, the Wikipedia page on the incident is actually fairly good.

There is a lot of gossip about the passenger’s history, which the flight crew couldn’t possibly have known and is therefore irrelevant. By far the best take I’ve seen on the ethical and legal implications of the incident can be found on Naked Capitalism, so if you do want to know more about it I highly recommend starting there. Probably the worst take I’ve read is on The Pilot Wife Life, but I suppose if you want a counterpoint there you go.

I really have little to add on this particular incident; instead my goal here is to contextualize it in a broader discussion of property rights in general.

Despite the fact that what United’s employees and contractors did was obviously unethical and very likely illegal, there are still a large number of people defending their actions. Aiming for a Woodman if not an Ironman, the most coherent defense I’ve heard offered goes something like this:

Yes, what United did in this particular case was excessive. But it’s a mistake to try to make this illegal, because any regulation that did so would necessarily impose upon fundamental property rights. United owns the airplane; they can set the rules for who is allowed to be on that airplane. And once they set those rules, they need to be able to enforce them. Sometimes, however distasteful it may be, that enforcement will require violence. But property rights are too important to give up. Would you want to live in a society where anyone could just barge into your home and you were not allowed to use force to remove them?

Understood in this context, United contractors calling airport security to get a man dragged off of a plane isn’t an isolated act of violence for no reason; it is part of a broader conflict between the protection of property rights and the reduction of violence. “Stand your ground” laws, IMF “structural adjustment” policies, even Trump’s wall against immigrants can be understood as part of this broader conflict.

One very far-left approach to resolving such a conflict—as taken by the Paste editorial “You’re not mad at United Airlines; you’re mad at America”—is to fall entirely on the side of nonviolence, and say essentially that any system which allows the use of violence to protect property rights is fundamentally corrupt and illegitimate.

I can see why such a view is tempting. It’s simple, for one thing, and that’s always appealing. But if you stop and think carefully about the consequences of this hardline stance, it becomes clear that such a system would be unsustainable. If we could truly never use violence ever to protect any property rights, that would mean that property law in general could no longer be enforced. People could in fact literally break into your home and steal your furniture, and you’d have no recourse, because the only way to stop them would involve either using violence yourself or calling the police, who would end up using violence. Property itself would lose all its meaning—and for those on the far-left who think that sounds like a good thing, I want you to imagine what the world would look like if the only things you could ever use were the ones you could physically hold onto, where you’d leave home never knowing whether your clothes or your food would still be there when you came back. A world without property sounds good if you are imagining that the insane riches of corrupt billionaires would collapse; but if you stop and think about coming home to no food and no furniture, perhaps it doesn’t sound so great. And while it does sound nice to have a world where no one is homeless because they can always find a place to sleep, that may seem less appealing if your home is the one that a dozen homeless people decide to squat in.

The Tragedy of the Commons would completely destroy any such economic system; the only way to sustain it would be either to produce such an enormous abundance of wealth that no amount of greed could ever overtake it, or, more likely, somehow re-engineer human brains so that greed no longer exists. I’m not aware of any fundamental limits on greed; as long as social status increases monotonically with wealth, there will be people who try to amass as much wealth as they possibly can, far beyond what any human being could ever actually consume, much less need. How do I know this? Because they already exist; we call them “billionaires”. A billionaire, essentially by definition, is a hoarder of wealth who owns more than any human being could consume. If someone happens upon a billion dollars and immediately donates most of it to charity (as J.K. Rowling did), they can escape such a categorization; and if they use the wealth to achieve grand visionary ambitions—and I mean real visions, not like Steve Jobs but like Elon Musk—perhaps they can as well. Saving the world from climate change and colonizing Mars are the sort of projects that really do take many billions of dollars to achieve. (Then again, shouldn’t our government be doing these things?) And if they just hold onto the wealth or reinvest it to make even more, a billionaire is nothing less than a hoarder, seeking gratification and status via ownership itself.

Indeed, I think the maximum amount of wealth one could ever really need is probably around \$10 million in today’s dollars; with that amount, even a very low-risk investment portfolio could supply enough income to live wherever you want, wear whatever you want, drive whatever you want, eat whatever you want, travel whenever you want. At even a 5% return, that’s \$500,000 per year to spend without ever working or depleting your savings. At 10%, you’d get a million dollars a year for sitting there and doing nothing. And yet there are people with one thousand times as much wealth as this.

But not all property is of this form. I was about to say “the vast majority” is not, but actually that’s not true; a large proportion of wealth is in fact in the form of capital hoarded by the rich. Indeed, about 50% of the world’s wealth is owned by the richest 1%. (To be fair, the world’s top 1% is a broader category than one might think; the top 1% in the world is about the top 5% in the US; based on census data, that puts the cutoff at about \$250,000 in net wealth.) But the majority of people have wealth in some form, and would stand to suffer if property rights were not enforced at all.

So we might be tempted to the other extreme, as the far-right seems to be, and say that any force is justified in the protection of fundamental property rights—that if vagrants step onto my land, I am well within my rights to get out my shotgun. (You know, hypothetically; not that I own a shotgun, or, for that matter, any land.) This seems to appeal especially to those who nostalgize the life on the frontier, “living off the land” (often losing family members to what now seem like trivial bacterial illnesses), “self-sufficient” (with generous government subsidies), in the “unspoiled wilderness” (from which the Army had forcibly removed Native Americans). Westerns have given us this sense that frontier life offers a kind of freedom and adventure that this urbane civilization lacks. And I suppose I am a fan of at least one Western, since one should probably count Firefly.

Yet of course this is madness; no civilization could survive if it really allowed people to just arbitrarily “defend” whatever property claims they decided to make. Indeed, it’s really just the flip side of the coin; as we’ve seen in Somalia (oh, by the way, we’re deploying troops there again), not protecting property and allowing universal violence to defend any perceived property largely amount to the same thing. If anything, the far-left fantasy seems more appealing; at least then we would not be subject to physical violence, and could call upon the authorities to protect us from that. In the far-right fantasy, we could accidentally step on what someone else claims to be his land and end up shot in the head.

So we need to have rules about who can use violence to defend what property and why. And that, of course, is complicated. We can start by having a government that defines property claims and places limits on their enforcement; but that still leaves the question of which sort of property claims and enforcement mechanisms the government should allow.

I think the principle should essentially be minimum force. We do need to protect property rights, yes; but if there is a way of doing so without committing violence, that’s the way we should do it. And if we do need to use violence, we should use as little as possible.

In theory we already do this: We have “rules of engagement” for the military and “codes of conduct” for police. But in practice, these rules are rarely enforced; they only get applied to really extreme violations, and sometimes not even then. The idea seems to be that enforcing strict rules on our soldiers and police officers constitutes disloyalty, even treason. We should “let them do their jobs”. This is the norm that must change. Those rules are their jobs. If they break those rules, they aren’t doing their jobs—they’re doing something else, something that endangers the safety and security of our society. The disloyalty is not in investigating and enforcing rules against police misconduct—the disloyalty is in police misconduct. If you want to be a cop but you’re not willing to follow the rules, you don’t actually want to be a cop—you want to be a bully with a gun and a badge.

And of course, one need not be a government agency in order to use excessive force. Many private corporations have security forces of their own, which frequently abuse and assault people. Most terrifying of all, there are whole corporations of “private military contractors”—let’s call them what they are: mercenaries—like Academi, formerly known as Blackwater. The whole reason these corporations even exist is to evade regulations on military conduct, and that is why they must be eliminated.

In the United case, there was obviously a nonviolent answer; all they had to do was offer to pay people to give up their seats, and bid up the price until enough people left. Someone would have left eventually; there clearly was a market-clearing price. That would have cost \$2,000, maybe \$5,000 at the most—a lot better than the \$255 million lost in United’s stock value as a result of the bad PR.

If a homeless person decides to squat in your house, yes, perhaps you’d be justified in calling the police to remove them. Clearly you’re under no obligation to provide them room and board indefinitely. But there may be better solutions: Is there a homeless shelter in the area? Could you give them a ride there, or at least bus fare?

When immigrants cross our borders, may we turn them away? Now, here’s one where I’m pretty strongly tempted to go all the way and say we have no right whatsoever to stop them. There are no requirements for being born into citizenship, after all—so on what grounds do we add requirements to acquire citizenship? Is there something in the water of the Great Lakes and the Mississippi River that, when you drink it for 18 years (processed by municipal water systems of course; what are we, barbarians?), automatically makes you into a patriotic American? Does one become more law-abiding, or less capable of cruelty or fanaticism, by being brought into the world on one side of an imaginary line in the sand? If there are going to be requirements for citizenship, shouldn’t they be applied to everyone, and not just people who were born in the wrong place?

Yes, when we have no other choice, we must be prepared to use violence to defend property—because otherwise, there’s no such thing as property. But more often than not, we use violence when we didn’t need to, or use much more violence than was actually necessary. The principle that violence can be justified in defense of property does not entail that any violence is always justified in defense of property.