Summary

Market radicalism starts from a crisis of the liberal order: rising inequality, a falling labor share, market power, and missing markets. Markets are distributed computing and must be competitive, so the response is to understand, restructure, and improve markets at their roots – decentralize power + collective action rather than accept monopoly or stasis.

The program applies auctions and new market rules across property, politics, migration, corporate control, and data: COST balances investment efficiency with allocative efficiency; quadratic voting weights intensity without selling political decisions to the single highest bidder; VIP sponsors visas; limits on horizontal diversification protect competition; and data as labor restores value to ordinary humans as suppliers of data.

“The most significant problem of our time is rising inequality within wealthy countries”

“Eternal vigilance is the price of market competition”

“There is nothing safe about well-worn ideas and the greatest risk is stasis”

Key Takeaways

Notes

Preface

• Use of “capitalism” in this book = idealized historical version of markets
  • Protection of private property
  • Enforcing contracts
• Market radicalism: understand, restructure, improve markets at their roots
• Decentralize power + collective action
• Auctions = pure form of market
• Perpetual auctioning
• 1996 Vickrey Nobel prize

Intro: the crisis of the liberal order

• “The most significant problem of our time is rising inequality within wealthy countries”
• Drop in labor share of value
• Failure of neoliberalism → loss in public faith in economists
• Trump is the US’ first true populist president (no previous political background)
• Adam Smith: moral → market economy
• Markets must be competitive
  • Limit monopoly power: antitrust policies, labor unions
  • Enhance competition: social insurance, progressive taxation, free compulsory education
  • Limit tyranny of majority: checks and balances, protection of fundamental + minority rights
  • Int’l cooperation, liberal order: international institutions, free trade, human rights treaties
• Oversimplification:
  • Non-commodity
  • Friction
• Current issues:
  • Market power
  • Missing markets
• One person one vote → tyranny of the majority

1: Economy: property is monopoly (COST)

• Investment efficiency: investment in private property accrues to self
  • Also prevents tragedy of the commons
• 25%+ est. loss in GDP due to monopoly power of private property → inefficient allocation
  • Eg. train tracks purchase holdout
• Possible solution: gov’t owns all land, charges rent → social dividend
  • But no central planning (corruption)
• Problem: no incentive to invest in land
• Land + value + neighborhood values non-independent
• Success of large corporations → belief that socialism would prevail
• Markets disseminate information
  • Central planning = mass mid-allocation of resources
• The Vickrey Commons: constant auctioning (eg. programmatic ads)
• Allocative efficiency: continuously auction to highest bidder (solves monopoly)
• Tradeoff between ↑ 2 efficiencies
• Possible solution:
  • Use private property rights where investment incentives are more important
  • Use common property where allocative efficiency is more important
• Partial common ownership (PCO):
• Texas shootout auction: must purchase for average of two bid prices
  • Preserves right to invest
• Self-assessment systems
• Simple system:
  • Publicly declare value of property
  • And require selling at ask price
  • Must also pay tax on property declared value + turnover rate → penalizes monopoly power via high declared value
• Property = value of use + value of exclusion
• COST: system of ↑ (all the above)
• Rules:
  • Can group assets arbitrarily
  • Reasonable amount of transfer time
  • Buyer pays inspection cost
  • Low taxes for low turnover (very illiquid) items (eg. family heirlooms)
  • Tax only on equity (eg. not home mortgage)
  • Subsidy to offset repair from depreciation
  • Need to build tech + institutions to make easily navigable
• Signaling / adverse selection: advertise false high price through story
• Endowment effect: ↑ delta between buy and sell
• Naturally redistributes wealth
  • Would reduce return on capital by ~1/3
• Changes relationship to property
• Stated already have exempt items (eg. from bankruptcy)
• Renting cars, houses is a good thing (less attachment → dynamism)
• Conspicuous consumption fetishism
• Emphasizes use > ownership

2: Politics: quadratic voting (QV)

• Voice credits: the ability to save up voting power
  • According to a quadratic (400 → 20)
• Democracy is a history of attempts to limit majority rule
• Judicial opinion is basically “thinly veiled rule of the elite”
• Many economists believe prices determine efficient outcomes while voting does not (doesn’t weight)
• Markets for collective decisions
• “Selling political decisions to the single highest bidder… treats a public good like a private good” → terrible outcomes
• Auction = allocate according to cost their action will impose on others, NOT allocating to highest bidder
• Rationally, it should be quadratic*
• Solution:
  • Yearly “voice credits” budget per person that rolls over
  • Can spend quadratically
• Perfect balance between free rider and tyranny of the majority problem
• Still need laws + norms against:
  • Social pressure / collusion
  • Vote buying
  • Fraud
• Proof of efficacy: W → inverted U vote distribution (more plausible)
• ↑ also combats extremism, polarization

3: Int’l: uniting the world’s workers (VIP)

• History of migration, free trade, cross-country inequality*
• 1910s-20s: closed doors to immigration
• Post-WWII: embrace of free trade
• 3 pillars of ↑ economic system:
  • Int’l trade (GATT → WTO)
  • Monetary, macro stabilization (IMF)
  • Development finance (World Bank)
• ↑ EU → UN
• Liberalizing economies gone too far
• Labor / capitalists theory of global trade:
  • Labor in wealthy nations hurt
  • Capitalists in poor nations hurt
• Immigration imposes costs on most citizens
• Idea: set a quota and auction off rights to immigrate to the highest bidder
  • Dividend to public
• ↑ downside: doesn’t factor in social value (+/-) of migrant
• Can sponsor visas
• Large scale migration is a lot like women’s entry into the workforce
• Moral gain, path towards a more just int’l order

4: Radical corporate control

• Blackrock etc. (asset managers) control 20%+ of the US stock market
• Gilded age monopolistic trusts
• Red queen problem / arms race between monopolists and regulators
• ↑ modern day: lost track of how monopolies form
• Agency cost: owners of public companies don’t control - instead, it’s largely CEO and maybe BoD
  • Principal agent problem
• Portfolio theory: diversification
• Asset managers are modern day monopolistic trusts
• Can promote anti-competitive business practices
• Eg. R&D → lobbying
• Horizontal holdings ↑ by 600%+
• Monopsony
• Solution: prevent horizontal diversification - only verticals
  • Exceptions: small (<1%), passive
• Slippery slope: can’t sue the entire institutional investor / capitalist class
• Big tech acquisitions: “standing on the shoulders of dwarfs”
• “Eternal vigilance is the price of market competition”

5: Society: data as labor

• “[Big tech] exploit the lack of public understanding of AI to collect for free the data we all leave behind in our online interactions”
• Early internet attempted to incent data
• WWW lowered barriers to participation rather than presenting incentives and rewards for labor
• “Information wants to be free”
• Data → ad targeting
• Data, computation, algos (supervisors)
• Data / info / attention undervalued
• Job turnover + displacement
• “AI, as with factories, offers a critical role for ordinary humans as suppliers of data”
• “Fake unemployment”: valuable inputs of humans treated as byproducts of entertainment rather than socially valued work
• Google: data is plentiful, compute + algos are scarce
• Is data more like capital or labor?
• Techno-feudalism: provide service and take value of all upside from data
• Monopsony power of big tech (for data)
• Many downsides of data as labor
  • Eg. undermining perceived motives
  • Socially undesirable
• What is needed:
  • Collective bargaining
  • Quality certification
  • Career development
• ↑ labor union for data
• First step: start measuring
• Basically an alternative to UBI in the face of AI automation
• Eg. games → monetizable labor

Conclusion: going to the root

• Techno-optimists: optimistic about economic growth, pessimistic about job / social dislocation
• Intermediate measures*
• Arguments against:
  • Markets foster selfish individualists
  • Markets undermine trust
  • Reduce social solidarity
  • Focus on private > public
• “There is nothing safe about well-worn ideas and the greatest risk is stasis”

Epilogue: after markets

• “The market process may be considered as a computing device of the pre-electronic age”
• The main challenge of socialism is communication and computation
• Eg. modern pencil emerged organically from market relations
• “The market is just a set of rules enforced by the gov’t”
• Markets are distributed computing, parallel processing
• “Markets elegantly exploit distributed human computation”
• Must fix bugs, enabling more wealth and fairer distribution
• Upon ASI (more compute power than brain power), markets can switch from human to silicon computation
• “The role of AI in reshaping social organization has bizarrely received little attention”
• “Vast corporations - islands of centralized planning in the ocean of market economy - produce a significant amount of economic value by exploiting computational power”
• Recommendation engines for everything → more efficient / accurate markets
• If for everything, is it markets or centralized planning? Or something else?