Our world consists of many coupled evolving systems, including systems of competing species, nations, political parties, firms, cultures, charities, and even academics.
I think what you describe as a bug, many people would consider a feature.
Capitalism is an awesome force and can generate some very bad negative externalities if left unchecked. (Child labor, pollution, etc.) Regulation is society's way of curbing those negative externalities. It can't do that if capitalism is allowed to push regulatory oversight around to its whims.
Of course regulation unchecked can venture in strange directions and create negative externalities of its own. The weaponization of environmental laws by NIMBYs everywhere is a prime example.
Children have never been a paying venture, parents always spend more on them than they receive https://www.econlib.org/archives/2009/10/was_having_kids.html If the problem was parents taking kids' money, the solution has long been in "Coogan accounts" (after child actor Jackie Coogan) rather than banning.
One could say externalities can only exist in the presence of regulation. The pollution 'problem of the commons' only exists because the property rights of the polluted lake haven't been assigned, therefore nobody is responsible
Suppose a town collectively owns a lake that's polluted by runoff from a factory located on a separate territory, what is their recourse? Paying off the factory or cleaning it up themselves? Seems like an externality.
I think the idea is to solve it with tort law: Whomever owns the lake can sue the company for damages. Thus instead of imposing a uniform regulation that may not make sense in every case, you evaluate damages on a case by case basis.
This is puts a lot of faith (and burden) on the legal system. And there are some resources (like air quality or biodiversity) where "ownership" is so diffuse that it could be hard to mount a legal action.
This is why I would prefer governments to regulate through insurance coverage requirements, especially requirements substantial enough to drive actuarial innovation.
If the risk is actually really low, premiums and compliance burdens will also be low. If the risk is high, then insurers tend to create adaptive requirements to minimize their risk. As someone who deals with policies for multi-unit buildings, I can say that it's been the insurers who have driven the most meaningful risk reduction projects we've funded.
On the other hand, actuarily sound insurance that is also adequate to cover losses can be deeply unpopular. Look at what has happened with auto or flood or (in California) fire insurance.
California home insurance is divorced from being actuarially accurate. California requires insurance providers to socialize the excess fire risk among all policyholders. This causes rates to skyrocket everywhere in the state because it reduces the insurance premium incentive to build in fire-safe areas.
Regulation, like any system, tends to excess in the absence of a feedback mechanism. Switzerland is a useful counter example of a European country that isn't turbowrecked by massive government or ponzi schemes. All levels of government have a strong feedback mechanism: the people are sovereign, can override their governments and are also heavily armed. The result is the federation is shaped as you might an actual federation to be shaped, large local governments with broad competencies, medium-sized cantonal governments with a slightly broader but still local scope, and a smaller federal government in charge of running embassies, the army and building railway tracks and motorways.
Of course it's not perfect but it's comparably far better than Switzerland's immediate neighbors. By having a Damocles sword hanging over the head of most levels of government, some would say things move slowly. However, the tradeoff is that government generally prioritizes actual local needs over ideological vanities and is strongly dissuaded from pursuing self-reinforcing increases in power.
The US began with a power distribution much like you describe for Switzerland: Powerful states and a relatively weak federal government.
It was the 16th Amendment in 1913 that fundamentally changed it: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
Thus began a quick and irreversible slide into federal taxation and federal authority. It's notable that Switzerland was able to avoid that fate.
On the other hand, without the sixteeth amendment, the US would probably not have been able to fight and win the World and Cold wars. Hence the "selection" argument that Robin is getting at.
Military spending is only 13% of the federal budget so defense spending doesn't justify the shift to collecting most taxes at the federal level. Federal tax mostly pays for social insurance programs like Medicare and Social Security that could just as easily have been state-level programs.
For prosecuting wars and other short term federal needs, Congress could have passed temporary federal income taxes like it did during the Civil War.
If we could go back in time and play out an alternate history, one where the 16th amendment didn't pass would be fascinating. (Its author, Nelson Aldrich, actually wanted it to die – it was a bluff that failed.) It completely remade the country politically.
During World War II, the federal government spent about 210% of tax collections on defense. That is why I say that without the income tax, we would not have been able to fight and win that war.
There is some research that shows that having *predictable* rules can be more valuable than having "fair"/"good" rules. So unpredictable adaptive system can at times to be less advantageous than a predictable rigid one.
It's simple rent-seeking. Easier to capture the government with your profits than doing the necessary work to find another bottle with lightning. As for local Marxists, why work when you can get into government admin?
At this point the concept of a regulating state is a pattern-matching hangover from previous times when they would be the most visible source of power. Now that the binding chains of geography loosen, we would have to come up with a newer bunch of subsystems that can be called a state. Feel like the "Network State" concept is a good first attempt I can think of - https://thenetworkstate.com/preamble .
Unfortunately many regulating entities hold beliefs that are self fulfilling - for e.g. if you think the world is zero-sum in terms of nation-states, you impose more tariffs and that end up indeed making the world more zero-sum than before. I think that is even true of most other (non-economic) coupled evolving systems - if there is a system that acts as if its broad "beliefs" are true, it ends up taking an action that makes its beliefs truer than not. Kind of like a spreading cancer. Really great paper by Michel Levin on this biology and economics connection here - https://www.preprints.org/manuscript/202604.0056 .
Why not excess regulation? I have two strong reasons that trump everything in this write up.
1) an excess of regulation is by definition bad(excess means too much, by definition bad). But this is purely semantic. Why not *more* regulation, which might be optimal?
2) people in power tend to be egocentric and psychopathic and make the bottom of the heirachirs they run profoundly miserable, like the leader who brings back a surplus of kills but eats it all and only gives it to his friends.
Whether or not you can take power from the powerful is a separate philosophical question but if you're asking about whether those in power would have more or less, the answer is less. More power to those who are smaller, things get fixed better, essentially. Freedom is the property that has transformed human civilization in good directions, generally speaking. Constraint has largely come from a bad posture, bad intentions, masked as a narrative that can be summed as "we have to break a few eggs to protect the tribe" and the tribe survives anyway so it's a self fulfilling prophecy and creates negative feedback loops while bones are thrown as scraps to the masses. Enjoy that iPhone in Mordor though.
Do you mean like, all regulations individually? Or the cumulative effect of the total body of regulation? I feel like it is not hard to find counterexamples regarding the former.
Right, which is why I am arguing against regulation. The powerful already have freedom, in the form of power. More power for the powerful has diminishing returns. Giving the person with no power more freedom is incredible, AND it helps the elites because now he can better contribute to capitalism. This is why the wealthy and elite are fundamentally retarded as a function of the same greed and megalomania that made them rich and elite to begin with.
I love all the unstated premises. Capitalism is a strong adapter? It's adaptive for whom, and at whose expense?
Also, lol at the idea that the coercive state is the captor of capitalism and not the enforcement arm of it. What a wild world Hanson lives in, I'd love to visit it.
Our world consists of many coupled evolving systems: firms, markets, states, prisons, police, charities, families. We usually rank these systems by their adaptation power, how fast each can search out and adopt more profitable arrangements. By that measure capitalism is a fearsome adapter, restlessly reorganizing land, labor, and life to cut costs and raise returns.
But adaptation always raises a question we are trained not to ask: adaptive toward what, and for whom? A system can be exquisitely fit at one task while being catastrophic at another. A fire is well adapted to spreading. We do not therefore conclude that more fire is better.
Capitalism's special fitness is at producing surplus, including surplus people. Every round of cost-cutting that makes the strong adapter stronger also discards workers, hollows out towns, and abandons whole populations whose labor is no longer needed at a price the market will pay. This is not a malfunction. It is the system working as designed. Some call the result organized abandonment, the deliberate withdrawal of care and investment from the places and people a profitable economy has finished using.
Here is the part the efficiency story leaves out. Discarded populations are not quietly reabsorbed. They have to be managed. And so the same societies that celebrate capitalism as the strong free adapter build an enormous second system to contain what the first one throws away: police, courts, cages. We are told these are opposed forces, that the carceral state, like regulation, is a weak slow adapter clumsily interfering with the vital economy. I think this gets the coupling backwards. The cage is not capitalism's captor. It is capitalism's janitor.
Trace the selection pressure and the genealogy is plain. In the United States the through-line runs from slavery to the Black Codes to convict leasing to the police precinct, each form selected for the same function: to control and extract value from racialized labor, and to discipline those for whom the market has no use. What looks like an excess of punishment is the strong adapter offloading its costs onto a system built to absorb them, and onto the bodies least able to refuse.
So why do we suppress the obvious alternatives? Because, as with regulation, debate is framed so that only two options appear on the menu: the market, or the state that polices the market's wreckage. The third thing, people meeting one another's needs directly through mutual aid, shared care, and accountability that does not require a cage, is ruled out in advance as utopian, or even reclassified as disorder. Foragers who pooled risk and tended their wounded would recognize it instantly. We have been trained to call it naive.
And that's my view of the status of punishment today. The cage is not a weak system taming a strong one. It is one half of a single coupled machine whose other half is the market, and whose joint output is a managed supply of disposable life. Excess punishment is not a bug in an otherwise free economy. It is the price of pretending the economy is free.
The interesting question, then, is not how to make the punishing system more efficient. It is what becomes possible once we stop feeding it, and build for ourselves the care it was invented to make us forget we could provide.
In cloud computing, there are two options of growing your compute infrastructure (your scaling strategy).
First is "horizontal scaling", second is "vertical scaling".
Horizontal scaling requires that to increase the capacity of your infrastructure, you simply keep a single machine but increase the resources it has i.e a larger disk space, faster cpu, larger RAM.
Essentially, horizontal scaling is about making a single machine stronger, in attempt to satisfy the growing compute workloads.
---
Vertical scaling is about having multiple small machines with equal compute resources such that workloads run on a cluster of several fully fledged computers and not a single machine.
So if I need more compute and want to grow my cloud infrastructure, I just add another small machine to my cluster.
---
The advantage of horizontal scaling, is that its cheaper & easier run. The disadvantage is that if your machine breaks down, your whole system fails (since everything is in one machine)
The advantage of vertical scaling, is that even if several machines fail, your workload will still remain operational. The con is that it's more complicated & expensive to operate.
---
So how is this related to regulation & humans?
One of the biggest challenges among humans is how to scale governance.
An autocracy, or heavy government regulation can be thought of as horizontal scaling.
Concentrate as much resources, tools and power into a single entity as you can. If we need something done, we do it fast & efficiently (a la China). But if such a system encounters a failure, everything collapses in concordance (Soviet Union).
---
Vertically scaled systems would be "hayekian capital markets", and to some extent the "US federal system".
Services are provided by many independent businesses. if 100 separate bakeries provide bread, and 30 go under, we still have 70 that can provide bread.
if 3 US states pass a detrimental law, the entire country doesn't die from the cancer. 47 states remain exempt from it.
Theses vertically scaled governance systems are however more expensive and complicated (maybe even impossible?) to manage.
---
So, "Why Excess Regulation?"
Humans were mostly living in small tribes of say, less than 1,000.
1,000 people can be governed by a single tribal leader with all political resources vested in him.
What we did was naively scale the model of a single tribal leader into a large bulky government that constantly needs new laws to cope with its growing complexities of millions and billions of people i.e scaled horizontally.
So, in a nutshell: regulation drives cultural uniformity which aids in the national unity necessary to win wars. You correctly point out that this is anachronistic, but it's also not obvious that this was ever a big effect of regulation. What examples were you thinking of?
The essence of politics is that people like telling other people what to do. Also, people don't like being told what to do.
I think what you describe as a bug, many people would consider a feature.
Capitalism is an awesome force and can generate some very bad negative externalities if left unchecked. (Child labor, pollution, etc.) Regulation is society's way of curbing those negative externalities. It can't do that if capitalism is allowed to push regulatory oversight around to its whims.
Of course regulation unchecked can venture in strange directions and create negative externalities of its own. The weaponization of environmental laws by NIMBYs everywhere is a prime example.
Pollution is an externality, child labor is not. Most regulations aren't really about internalizing externalities.
To the extent that the benefits of child labor accrue to the parents and not the children, I would absolutely describe it as an externiality.
Children have never been a paying venture, parents always spend more on them than they receive https://www.econlib.org/archives/2009/10/was_having_kids.html If the problem was parents taking kids' money, the solution has long been in "Coogan accounts" (after child actor Jackie Coogan) rather than banning.
One could say externalities can only exist in the presence of regulation. The pollution 'problem of the commons' only exists because the property rights of the polluted lake haven't been assigned, therefore nobody is responsible
Suppose a town collectively owns a lake that's polluted by runoff from a factory located on a separate territory, what is their recourse? Paying off the factory or cleaning it up themselves? Seems like an externality.
I think the idea is to solve it with tort law: Whomever owns the lake can sue the company for damages. Thus instead of imposing a uniform regulation that may not make sense in every case, you evaluate damages on a case by case basis.
This is puts a lot of faith (and burden) on the legal system. And there are some resources (like air quality or biodiversity) where "ownership" is so diffuse that it could be hard to mount a legal action.
This is why I would prefer governments to regulate through insurance coverage requirements, especially requirements substantial enough to drive actuarial innovation.
If the risk is actually really low, premiums and compliance burdens will also be low. If the risk is high, then insurers tend to create adaptive requirements to minimize their risk. As someone who deals with policies for multi-unit buildings, I can say that it's been the insurers who have driven the most meaningful risk reduction projects we've funded.
On the other hand, actuarily sound insurance that is also adequate to cover losses can be deeply unpopular. Look at what has happened with auto or flood or (in California) fire insurance.
California home insurance is divorced from being actuarially accurate. California requires insurance providers to socialize the excess fire risk among all policyholders. This causes rates to skyrocket everywhere in the state because it reduces the insurance premium incentive to build in fire-safe areas.
Yes, this is my point exactly. We are in this situation because the alternative would be unpopular.
Regulation, like any system, tends to excess in the absence of a feedback mechanism. Switzerland is a useful counter example of a European country that isn't turbowrecked by massive government or ponzi schemes. All levels of government have a strong feedback mechanism: the people are sovereign, can override their governments and are also heavily armed. The result is the federation is shaped as you might an actual federation to be shaped, large local governments with broad competencies, medium-sized cantonal governments with a slightly broader but still local scope, and a smaller federal government in charge of running embassies, the army and building railway tracks and motorways.
Of course it's not perfect but it's comparably far better than Switzerland's immediate neighbors. By having a Damocles sword hanging over the head of most levels of government, some would say things move slowly. However, the tradeoff is that government generally prioritizes actual local needs over ideological vanities and is strongly dissuaded from pursuing self-reinforcing increases in power.
The US began with a power distribution much like you describe for Switzerland: Powerful states and a relatively weak federal government.
It was the 16th Amendment in 1913 that fundamentally changed it: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
Thus began a quick and irreversible slide into federal taxation and federal authority. It's notable that Switzerland was able to avoid that fate.
On the other hand, without the sixteeth amendment, the US would probably not have been able to fight and win the World and Cold wars. Hence the "selection" argument that Robin is getting at.
Military spending is only 13% of the federal budget so defense spending doesn't justify the shift to collecting most taxes at the federal level. Federal tax mostly pays for social insurance programs like Medicare and Social Security that could just as easily have been state-level programs.
For prosecuting wars and other short term federal needs, Congress could have passed temporary federal income taxes like it did during the Civil War.
If we could go back in time and play out an alternate history, one where the 16th amendment didn't pass would be fascinating. (Its author, Nelson Aldrich, actually wanted it to die – it was a bluff that failed.) It completely remade the country politically.
During World War II, the federal government spent about 210% of tax collections on defense. That is why I say that without the income tax, we would not have been able to fight and win that war.
There is some research that shows that having *predictable* rules can be more valuable than having "fair"/"good" rules. So unpredictable adaptive system can at times to be less advantageous than a predictable rigid one.
It's simple rent-seeking. Easier to capture the government with your profits than doing the necessary work to find another bottle with lightning. As for local Marxists, why work when you can get into government admin?
At this point the concept of a regulating state is a pattern-matching hangover from previous times when they would be the most visible source of power. Now that the binding chains of geography loosen, we would have to come up with a newer bunch of subsystems that can be called a state. Feel like the "Network State" concept is a good first attempt I can think of - https://thenetworkstate.com/preamble .
Unfortunately many regulating entities hold beliefs that are self fulfilling - for e.g. if you think the world is zero-sum in terms of nation-states, you impose more tariffs and that end up indeed making the world more zero-sum than before. I think that is even true of most other (non-economic) coupled evolving systems - if there is a system that acts as if its broad "beliefs" are true, it ends up taking an action that makes its beliefs truer than not. Kind of like a spreading cancer. Really great paper by Michel Levin on this biology and economics connection here - https://www.preprints.org/manuscript/202604.0056 .
Why not excess regulation? I have two strong reasons that trump everything in this write up.
1) an excess of regulation is by definition bad(excess means too much, by definition bad). But this is purely semantic. Why not *more* regulation, which might be optimal?
2) people in power tend to be egocentric and psychopathic and make the bottom of the heirachirs they run profoundly miserable, like the leader who brings back a surplus of kills but eats it all and only gives it to his friends.
Whether or not you can take power from the powerful is a separate philosophical question but if you're asking about whether those in power would have more or less, the answer is less. More power to those who are smaller, things get fixed better, essentially. Freedom is the property that has transformed human civilization in good directions, generally speaking. Constraint has largely come from a bad posture, bad intentions, masked as a narrative that can be summed as "we have to break a few eggs to protect the tribe" and the tribe survives anyway so it's a self fulfilling prophecy and creates negative feedback loops while bones are thrown as scraps to the masses. Enjoy that iPhone in Mordor though.
I'm skeptical that regulation helps people at the bottom of hierarchies, compared to those at the top.
Do you mean like, all regulations individually? Or the cumulative effect of the total body of regulation? I feel like it is not hard to find counterexamples regarding the former.
Right, which is why I am arguing against regulation. The powerful already have freedom, in the form of power. More power for the powerful has diminishing returns. Giving the person with no power more freedom is incredible, AND it helps the elites because now he can better contribute to capitalism. This is why the wealthy and elite are fundamentally retarded as a function of the same greed and megalomania that made them rich and elite to begin with.
I love all the unstated premises. Capitalism is a strong adapter? It's adaptive for whom, and at whose expense?
Also, lol at the idea that the coercive state is the captor of capitalism and not the enforcement arm of it. What a wild world Hanson lives in, I'd love to visit it.
Why Excess Punishment?
Our world consists of many coupled evolving systems: firms, markets, states, prisons, police, charities, families. We usually rank these systems by their adaptation power, how fast each can search out and adopt more profitable arrangements. By that measure capitalism is a fearsome adapter, restlessly reorganizing land, labor, and life to cut costs and raise returns.
But adaptation always raises a question we are trained not to ask: adaptive toward what, and for whom? A system can be exquisitely fit at one task while being catastrophic at another. A fire is well adapted to spreading. We do not therefore conclude that more fire is better.
Capitalism's special fitness is at producing surplus, including surplus people. Every round of cost-cutting that makes the strong adapter stronger also discards workers, hollows out towns, and abandons whole populations whose labor is no longer needed at a price the market will pay. This is not a malfunction. It is the system working as designed. Some call the result organized abandonment, the deliberate withdrawal of care and investment from the places and people a profitable economy has finished using.
Here is the part the efficiency story leaves out. Discarded populations are not quietly reabsorbed. They have to be managed. And so the same societies that celebrate capitalism as the strong free adapter build an enormous second system to contain what the first one throws away: police, courts, cages. We are told these are opposed forces, that the carceral state, like regulation, is a weak slow adapter clumsily interfering with the vital economy. I think this gets the coupling backwards. The cage is not capitalism's captor. It is capitalism's janitor.
Trace the selection pressure and the genealogy is plain. In the United States the through-line runs from slavery to the Black Codes to convict leasing to the police precinct, each form selected for the same function: to control and extract value from racialized labor, and to discipline those for whom the market has no use. What looks like an excess of punishment is the strong adapter offloading its costs onto a system built to absorb them, and onto the bodies least able to refuse.
So why do we suppress the obvious alternatives? Because, as with regulation, debate is framed so that only two options appear on the menu: the market, or the state that polices the market's wreckage. The third thing, people meeting one another's needs directly through mutual aid, shared care, and accountability that does not require a cage, is ruled out in advance as utopian, or even reclassified as disorder. Foragers who pooled risk and tended their wounded would recognize it instantly. We have been trained to call it naive.
And that's my view of the status of punishment today. The cage is not a weak system taming a strong one. It is one half of a single coupled machine whose other half is the market, and whose joint output is a managed supply of disposable life. Excess punishment is not a bug in an otherwise free economy. It is the price of pretending the economy is free.
The interesting question, then, is not how to make the punishing system more efficient. It is what becomes possible once we stop feeding it, and build for ourselves the care it was invented to make us forget we could provide.
I know you are told that regulation is protecting you from bad capitalism, but mostly that isn't true.
And I know you are told that regulation is restraining your valiant hero Capitalism, but it is in fact its enforcement arm.
It's incredible to me how much Hanson would agree with Mariame Kaba tbh, which is why the conclusions he comes to are so funny to me
Can we have less of these AI comments please?
Robin seemed to engage with it
In cloud computing, there are two options of growing your compute infrastructure (your scaling strategy).
First is "horizontal scaling", second is "vertical scaling".
Horizontal scaling requires that to increase the capacity of your infrastructure, you simply keep a single machine but increase the resources it has i.e a larger disk space, faster cpu, larger RAM.
Essentially, horizontal scaling is about making a single machine stronger, in attempt to satisfy the growing compute workloads.
---
Vertical scaling is about having multiple small machines with equal compute resources such that workloads run on a cluster of several fully fledged computers and not a single machine.
So if I need more compute and want to grow my cloud infrastructure, I just add another small machine to my cluster.
---
The advantage of horizontal scaling, is that its cheaper & easier run. The disadvantage is that if your machine breaks down, your whole system fails (since everything is in one machine)
The advantage of vertical scaling, is that even if several machines fail, your workload will still remain operational. The con is that it's more complicated & expensive to operate.
---
So how is this related to regulation & humans?
One of the biggest challenges among humans is how to scale governance.
An autocracy, or heavy government regulation can be thought of as horizontal scaling.
Concentrate as much resources, tools and power into a single entity as you can. If we need something done, we do it fast & efficiently (a la China). But if such a system encounters a failure, everything collapses in concordance (Soviet Union).
---
Vertically scaled systems would be "hayekian capital markets", and to some extent the "US federal system".
Services are provided by many independent businesses. if 100 separate bakeries provide bread, and 30 go under, we still have 70 that can provide bread.
if 3 US states pass a detrimental law, the entire country doesn't die from the cancer. 47 states remain exempt from it.
Theses vertically scaled governance systems are however more expensive and complicated (maybe even impossible?) to manage.
---
So, "Why Excess Regulation?"
Humans were mostly living in small tribes of say, less than 1,000.
1,000 people can be governed by a single tribal leader with all political resources vested in him.
What we did was naively scale the model of a single tribal leader into a large bulky government that constantly needs new laws to cope with its growing complexities of millions and billions of people i.e scaled horizontally.
So, in a nutshell: regulation drives cultural uniformity which aids in the national unity necessary to win wars. You correctly point out that this is anachronistic, but it's also not obvious that this was ever a big effect of regulation. What examples were you thinking of?
https://www.overcomingbias.com/p/schools-are-for-warhtml