Policies are compulsion by a small set of people that coerce a large set of people to act in ways the large set of people would not voluntarily choose. The word "policy" is a euphemism that presumes to authorize force, threat of force, or fraud, which is to say, "compulsion."
Here are a few thoughts about the policy implications of your theory:
1. How would anyone know that an asset is underpriced, and if it were underpriced, how much it is underpriced, since no actual prices can be negotiated and no trades can be made between hypothetical future persons and actual persons alive today?
2. How would anyone know how "heavily" to invest in the future, aside from voluntary choices to save?
3. How would anyone know the appropriate tax rate on current consumption to bring about dynamic efficiency?
4. I favor eliminating all policies that override voluntary interactions, including policies the encourage current consumption.
The notion that a nonexistent, hypothetical person that might exist in the future could and should have some say about the choices of a real, actual person who does exist in the present is perplexing. Since the hypothetical future person does not exist, how could any actual person know anything at all about the hypothetical person's preferences?
My only assumption about people in the future is they prefer more consumption to less. A standard econ assumption.
We will know dynamic efficiency has been achieved when all profitable investment opportunities have been exhausted, i.e., rates of return are hovering around zero. We can rely on market prices for that.
I wouldn't get too caught up in the policy implications. The post is mostly claims that follow from standard econ if we take to its logical conclusion. We can disagree about the best way to respond.
I disagree. We will know nothing about the minds of future people by profitable investments being made today by real alive people. Rates of return hovering around zero would be evidence of manipulation of markets by governments, since people definitely have positive rates of time preference, as you say.
How do voluntary exchanges between real, alive people tell us anything about the minds of hypothetical, nonexistent people? Please answer that question directly, if you can.
Saying something is "standard econ" is not impressive. Standard econ is full of ambiguity, illdefined terms (like "better off" and "worse off" in the "standard" expression of Pareto efficiency). The whole proposition of Pareto efficiency is ill defined; it assumes free lunches, like your government operative with a zero rate of time preferences.
I am puzzled about how a self-professed conservative sees a path to government operatives dictating policies that must be enforced by force, threat of force, or fraud, and then proposes that we not get too caught up in the policy implications. I submit that you policy implications are not logical implications of standard economic theory. They are implications of assuming information no human has, because the information does not exist, because no hypothetical future mind exists.
A main point of the post is that rates of return won't fall to zero because people have positive time preference. Hence, under lassaiz faire conditions, markets fail and it would take some additional action to achieve efficient outcomes.
These are all positive statements about the world, so my political orientation doesn't really have anything to do with it, though it informs my policy views.
I don't believe a central bank can achieve zero interest rates long-term if that's inconsistent with the population's preference. But government, or someone else, investing more could lower the interest rate.
I'm not sure I fully understand your question. Positive time preference leads to the empirical result that wealth is not maximized. Hence, people in the future could be made better off if we consumed less and saved more until there were no more investment opportunities left. That would leave more resources for them. I'm not assuming anything different than I would be if I said giving someone an apple today makes them better off than if they didn't have the apple.
Your definition of market failure (A market failure occurs when there are unexploited gains from trade, making a Pareto improvement possible, meaning someone can be made better off without making anyone else worse off.) is perplexing. To claim a market has failed by assuming some impossible transaction has not occurred between real live people and hypothetical nonexistent future people is incomprehensible for me.
Your have made some positive statements. The problem is for me that some of them cannot possibly be true positive statements. I have no concern about your political orientation, but I am curious about how you seem to believe that government operatives can implement so-called Pareto optimal outcomes that involve nonexistent hypothetical future humans.
A claim that some dynamic efficient growth outcome is available by intervention of government operatives does not pass go, since no government operative can know the utility functions of people who are alive today, much less nonexistent hypothetical people of the future.
Your proposition that "Positive time preference leads to the empirical result that wealth is not maximized") is incomprehensible to me. If real live people voluntarily save and invest, how can we presume that their wealth is not maximized. If you say the wealth of future nonexistent hypothetical humans has been ignored, hence, the market fails to take advantage of a free lunch, I am mystified.
Giving someone an apple today might make some persons "better off" (whatever you mean by that ill-defined term), but doing so will not create greater utility for someone who does not like apples. Every choice that an individual live person makes is efficient, as judged by that person. Judgements of another person about the action are irrelevant, if we use well defined meanings for the term "efficiency." Observations about the judgements of nonexistent hypothetical future people are even more irrelevant, if irrelevancy can be said to have degrees.
The term "market failure" is a bit loaded but that's the terminology economists use for better or worse. The point is potential Pareto improvements are left on the table. Your claim that individual choices are efficient is not correct, due to time preference. I am not saying people in the present would bear no costs if they were to behave efficiently, only that the gains outweigh those costs.
How would someone know that Pareto improvements are left on the table? My claim that individual choice are efficient better be correct, because if its not, then your argument is self defeating, because it depends on logic and rationality, just like my claim.
How do you know the gains outweigh those costs? How could you, since you cannot know the minds even of the living, never mind the hypothetical future humans.
Policies are compulsion by a small set of people that coerce a large set of people to act in ways the large set of people would not voluntarily choose. The word "policy" is a euphemism that presumes to authorize force, threat of force, or fraud, which is to say, "compulsion."
Here are a few thoughts about the policy implications of your theory:
1. How would anyone know that an asset is underpriced, and if it were underpriced, how much it is underpriced, since no actual prices can be negotiated and no trades can be made between hypothetical future persons and actual persons alive today?
2. How would anyone know how "heavily" to invest in the future, aside from voluntary choices to save?
3. How would anyone know the appropriate tax rate on current consumption to bring about dynamic efficiency?
4. I favor eliminating all policies that override voluntary interactions, including policies the encourage current consumption.
The notion that a nonexistent, hypothetical person that might exist in the future could and should have some say about the choices of a real, actual person who does exist in the present is perplexing. Since the hypothetical future person does not exist, how could any actual person know anything at all about the hypothetical person's preferences?
My only assumption about people in the future is they prefer more consumption to less. A standard econ assumption.
We will know dynamic efficiency has been achieved when all profitable investment opportunities have been exhausted, i.e., rates of return are hovering around zero. We can rely on market prices for that.
I wouldn't get too caught up in the policy implications. The post is mostly claims that follow from standard econ if we take to its logical conclusion. We can disagree about the best way to respond.
I disagree. We will know nothing about the minds of future people by profitable investments being made today by real alive people. Rates of return hovering around zero would be evidence of manipulation of markets by governments, since people definitely have positive rates of time preference, as you say.
How do voluntary exchanges between real, alive people tell us anything about the minds of hypothetical, nonexistent people? Please answer that question directly, if you can.
Saying something is "standard econ" is not impressive. Standard econ is full of ambiguity, illdefined terms (like "better off" and "worse off" in the "standard" expression of Pareto efficiency). The whole proposition of Pareto efficiency is ill defined; it assumes free lunches, like your government operative with a zero rate of time preferences.
I am puzzled about how a self-professed conservative sees a path to government operatives dictating policies that must be enforced by force, threat of force, or fraud, and then proposes that we not get too caught up in the policy implications. I submit that you policy implications are not logical implications of standard economic theory. They are implications of assuming information no human has, because the information does not exist, because no hypothetical future mind exists.
A main point of the post is that rates of return won't fall to zero because people have positive time preference. Hence, under lassaiz faire conditions, markets fail and it would take some additional action to achieve efficient outcomes.
These are all positive statements about the world, so my political orientation doesn't really have anything to do with it, though it informs my policy views.
I don't believe a central bank can achieve zero interest rates long-term if that's inconsistent with the population's preference. But government, or someone else, investing more could lower the interest rate.
I'm not sure I fully understand your question. Positive time preference leads to the empirical result that wealth is not maximized. Hence, people in the future could be made better off if we consumed less and saved more until there were no more investment opportunities left. That would leave more resources for them. I'm not assuming anything different than I would be if I said giving someone an apple today makes them better off than if they didn't have the apple.
Your definition of market failure (A market failure occurs when there are unexploited gains from trade, making a Pareto improvement possible, meaning someone can be made better off without making anyone else worse off.) is perplexing. To claim a market has failed by assuming some impossible transaction has not occurred between real live people and hypothetical nonexistent future people is incomprehensible for me.
Your have made some positive statements. The problem is for me that some of them cannot possibly be true positive statements. I have no concern about your political orientation, but I am curious about how you seem to believe that government operatives can implement so-called Pareto optimal outcomes that involve nonexistent hypothetical future humans.
A claim that some dynamic efficient growth outcome is available by intervention of government operatives does not pass go, since no government operative can know the utility functions of people who are alive today, much less nonexistent hypothetical people of the future.
Your proposition that "Positive time preference leads to the empirical result that wealth is not maximized") is incomprehensible to me. If real live people voluntarily save and invest, how can we presume that their wealth is not maximized. If you say the wealth of future nonexistent hypothetical humans has been ignored, hence, the market fails to take advantage of a free lunch, I am mystified.
Giving someone an apple today might make some persons "better off" (whatever you mean by that ill-defined term), but doing so will not create greater utility for someone who does not like apples. Every choice that an individual live person makes is efficient, as judged by that person. Judgements of another person about the action are irrelevant, if we use well defined meanings for the term "efficiency." Observations about the judgements of nonexistent hypothetical future people are even more irrelevant, if irrelevancy can be said to have degrees.
The term "market failure" is a bit loaded but that's the terminology economists use for better or worse. The point is potential Pareto improvements are left on the table. Your claim that individual choices are efficient is not correct, due to time preference. I am not saying people in the present would bear no costs if they were to behave efficiently, only that the gains outweigh those costs.
How would someone know that Pareto improvements are left on the table? My claim that individual choice are efficient better be correct, because if its not, then your argument is self defeating, because it depends on logic and rationality, just like my claim.
How do you know the gains outweigh those costs? How could you, since you cannot know the minds even of the living, never mind the hypothetical future humans.