How people behave in markets is significantly influenced by not-markets. In the US the majority voted for alcohol to be illegal, and then people in the market adjusted their behavior accordingly. To blame Al Capone on the market is a big mistake.
In the US the majority has voted for politicians who want to increase home ownership. People in the market adjust their behavior accordingly. To blame the lending crises on the market is a big mistake.
Imagine that democracy is the dumbest thing. Is this difficult for you to imagine? If so, maybe this will help…
Mankind can hardly be too often reminded, that there was once a man named Socrates, between whom and the legal authorities and public opinion of his time, there took place a memorable collision. Born in an age and country abounding in individual greatness, this man has been handed down to us by those who best knew both him and the age, as the most virtuous man in it; while we know him as the head and prototype of all subsequent teachers of virtue, the source equally of the lofty inspiration of Plato and the judicious utilitarianism of Aristotle, " i maëstri di color che sanno ," the two headsprings of ethical as of all other philosophy. This acknowledged master of all the eminent thinkers who have since lived—whose fame, still growing after more than two thousand years, all but outweighs the whole remainder of the names which make his native city illustrious—was put to death by his countrymen, after a judicial conviction, for impiety and immorality. Impiety, in denying the gods recognised by the State; indeed his accuser asserted (see the Apologia ) that he believed in no gods at all. Immorality, in being, by his doctrines and instructions, a “corrupter of youth.” Of these charges the tribunal, there is every ground for believing, honestly found him guilty, and condemned the man who probably of all then born had deserved best of mankind, to be put to death as a criminal. - J.S. Mill, On Liberty
Socrates was murdered by democracy. The majority of voters decided that he was guilty and should be executed.
- democracy is the dumbest thing ever
- our government is based on democracy
Democracy is tyranny of the majority, and the majority really hasn’t read J.S. Mill or Adam Smith…
It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations
That passage describes how the Invisible Hand works.
X = the amount of benefit you derive from a person’s behavior
Y = the amount of money you spend on it
The disparity between X and Y is the single biggest cause of economic problems. We can’t expect beneficial behavior to be maximized when people essentially lie about the amount of benefit that they derive from each other’s behavior.
I see you planting flowers and picking up trash in a public park. Do I derive any benefit from your behavior? If not, then that’s that. But if so, then the amount of money I spend on your behavior should accurately reflect how beneficial it is to me. Except, the thing is, I get the benefit of your behavior whether or not I pay you. But when multiple people have the same mindset, then the park will be far less beautiful/beneficial than we truly want it to be.
Therefore taxes, fine, but this doesn’t somehow negate the necessity of knowing how much benefit I derive from your behavior of beautifying the park. And if too many people end up beautifying the park? Then they will receive less taxes, and they will seek out and find more beneficial behavior.