Tuesday, 5 September 2017

The Salty Cereal Fallacy

I probably have just about enough faith in humanity to believe that the hardline extremists of either political persuasion (left or right) will never gain enough traction to be highly influential. There is enough contemporary evidence to show that the majority see socialism and extreme nationalism as being fringe crackpot viewpoints comparable to the foolishness of astrology and Scientology.

I'm actually more perturbed by the centrists at the moment - the ones that are surreptitiously promoting a third way that looks to conflate the so-called best parts of socialism and the so-called best parts of capitalism. This is more of a concern because it falls foul of what I call the 'salty cereal fallacy', to which I will now introduce you.

Here's how it works. Those on the side of the market and human prosperity understand that cereal can be positively supplemented with fruit, nuts, raisins, or even a sprinkling of sugar in moderation. Socialists, on the other hand, are under the mistaken impression that adding salt to cereal will make it better - sometimes confusing salt with sugar, and sometimes believing that salt will actually improve the flavour of cereal.

Now it's easy for those on the side of the market and human prosperity to win the salt vs. sugar (fruit, nuts, etc) argument - so as a consequence, some on the left are now trying a centrist compromise. That is, cereal will be improved with a bit of sugar and some fruit, but it will be even tastier if we balance it out with some salt too.

To those who understand the qualities of eating cereal, this is an obvious fallacy. Losing the argument to put nothing but salt on your cereal doesn't mean that you can improve sugary cereal by adding sprinkling just a little salt on it - that's not how it works.

To take the analogy further - salt is, of course, good for many things - it brings out the flavour in savoury foods, and its hypertonic nature helps preserve food by inhibiting bacterial growth and stifling pathogens. In the analogy, cereal represents the financial economy and savoury foods represent the social economy - where the salt of socialism is bad for the former and good for the latter. As long as people get the benefits of sugar and salt right, and apply them to the right meals, things are ok.

I have some practical advice on how this can be achieved - it is built on understanding an important distinction between the market economy and the socio-personal economy. The principal distinction between the two is that the market economy has exchanges that are precisely recorded in terms of cash exchanged or increases/decreases in 1s and 0s on banks' computers, and the socio-personal economy has exchanges that are less-precisely recorded in terms of voluntary transactions for the good of one another.

The difference between their operations is notable too. In the financial economy the demand almost always exceeds the supply (of a limited range of labour, goods and services), because suppliers maintain their status differential (principally income) by increasing their prices or their supplies (or a combination of both), and endeavour to become top of the supplier tree by out-competing their competitors.  

Conversely, in the case of a socio-personal economy, the supply (of a nigh-on unbounded range of actions) almost always exceeds the demand, and suppliers who care enough about others maintain their status differential (primarily their character and reputation) by trying to summon up new ways to be a better citizen in society. Of course, a financial economy has a necessary social economy woven into it, because it’s hard to be successful in business without good character and reputation.

The salt of socialism is well suited to savoury foods, such as those instances in society where humans do nice things for one another in a non-contractual sense (such as inviting friends round for dinner). The sugar of the market economy is well suited to sweet foods, such as those instances where a financial transaction occurs that makes buyer and seller better off.

But interfering in those flavours by using salt or sugar inappropriately makes the meal worse not better. Just as it would be harmful and improper to offer friends financial payment for a meal they'd cooked for you by invitation, it is similarly harmful and improper to interfere with socialist principles in the complex price system that bootstraps our market economy.