Over Thanksgiving week, instead of spending time with my family over a turkey dinner and Hawaiian roles (my favourite), I drove out to a nearby Christian camp to help counsel 3rd-4th grade boys for a five day family camp. On one of the evening sessions, we hosted a massive game rotation; two counselors were assigned per station to explain, run, and monitor each game. After a given time, an alarm would sound and the children would be sent rushing to another station.
A friend and I were assigned to the game Transformation.
The game Transformation is nothing more than a slightly more complicated game of Rock-Paper-Scissors (or, as my children called it, “Rock-Paper-Scissors-Shoe”, though I though ‘shoot’ would have been better word choice) where roughly* each win granted you a promotion and each loss a demotion.
Everyone begins the game as an egg, if you win you are promoted to the next level – an egg to a chicken, a chicken to a dinosaur, a dinosaur to a super hero. However, if you lose, you are demoted one level – a super hero to a dinosaur, a dinosaur to a chicken, a chicken to an egg. The object of the game was to become a superhero before the alarm sounded.
*Note: I had said “roughly there is a promotion and demotion” because superheros cannot be promoted any further and eggs cannot be demoted any further.
First Rendition of the Game:
After the alarm sounded, I was in-charge of explaining the game to the first wave of twelve children. I did so fairly quickly and without any hitches. However, we ended a bit earlier than I expected with roughly half the children as superheros and roughly half the children remaining as eggs.
I thought this was a perfect opportunity to ask the children how they enjoyed the game. So I asked one of the superheros and he told me there was a problem, “If I challenge an egg, I can only lose and he can only win.” He had already understood a loophole in the system that was found at the upper and lower bounds. He continued by telling me his secret tactic which was that he would only challenge other superheros so as to knock them down. And, if you think about it, that’s actually an incredibly smart decision by a 3rd or 4th grader. Why challenge an egg that has zero change of loss when you can challenge a superhero that has the same odds as yourself, of course with the added bonus of knocking him down if you win.
Identifying the Problem:
The problem that needed to be solved was this: how do I incentivize superheros competing with the eggs?
My first realization was this problem was encapsulated by two consideration. First, the game needed to have a reason to compete. We needed the children to desire to challenge each other so as to improve their position – so everyone being winners was out of the question. And second, any alterations to the game had to be as minor as possible. If the game became needlessly complicated, I would either loose the attention of the children in my explanation or simply make more loop holes they could exploit – so making special rules for each promotion was also out of the question.
This resulted in a two-part alteration.
First, the game needed to cease being capped. In the prior game, I had noticed that even when there were cross-class challenges, the promotion at the expense of another player (a demotion) was the least of our concerns. Inside of a capped system, there are only a limited number of possible promotions – there were not only going to be superheros but there had to be eggs. Therefore, there was no way that everyone could become superheros. So I decided I would open the cap at the top end of the promotion hierarchy (a positive incentive) instead of opening the cap at the bottom end of the system (a negative incentive).
When a child asked me, “What happens when I’m a super hero and win?” Instead of responding, “You stay a superhero” I was able to say, “You become a super-super hero. And if you win after that, a super-super-super hero,” and so on and so forth. This meant that superheros still had something to gain by working with eggs, while eggs, as before, were still incentivized to work with superheros.
And second, there was an additional component added to the game called Empire. Once a sufficient number of children hit the minimum of “superhero” status, or once the game hit an equilibrium where the ratio of superheros to eggs hit a rough standstill, the game would fundamentally change. The change was simple. Wins would now not result in promotions but in team expansions, where the loser to a challenge would join the team of the winner (if a team lost to another team, that entire team would join the winning team). This would go on until there was a single, massive team which would indicate a single, massive winner (namely, the captain of that team).
Second Rendition of the Game:
After the alarm had rung and the children sent to the next game, my friend was responsible for explaining the game to our second set of twelve children. This gave me ample time to watch the dynamics of the game and see if the second group would fall into the same demeanor as the first – they did. After the bell had rung, the children dismissed to their next game, and the third wave of children arrived, I decided to implement my alterations. And they were quite effective.
Instead of almost half of the children remaining as eggs without challengers and the superheros resorting to knocking each other down, the super heroes were trying to challenge as many kids as possible with the hopes of bettering their own rank.
By the end of the first round, we had only a single egg remaining! Not only that, but the single egg was a child who didn’t want to play the game. Of course, there were a few super-super-super-super heroes… And they were exclusively better than the ol’ regular super hero.
The Pearl inside the Game: Free Markets equals Free Mobility
Now many of my readers will be thinking, “Is he really going to try to tell us how to run an economy by watching just a few rounds of a children’s game?” Yes and no. Bare with me on the limitations of sample size and allow us to focus on principles involved.
Many of the popular social justice warriors, or those who crusade for economic equality, often begin with the same mistakes as we did in the first rendition above. The assumption is that the game, or in this case the market, is fixed by some force of scarcity – the schoolyard sandbox has only a fixed amount of sand. If this were true, then the social justice warrior would have a legitimate claim in arguing that wealthy people only become wealthy at the expense of everyone else, or that superheros only become superheros by ensuring the eggs don’t become chickens.
Not only is this not true, it also stifles maximum competition and kills all the fun (as we noticed in the game). The people who “make it” try to keep it for themselves and those who remain at the bottom try to claw their way out by offering extra-game favors (or illegal favors in the case of economics).
If we remove the assumption that the sandbox is never going anywhere, if we remove the policies that attempt to make our false assumptions into a reality, we often experience the same effects as we did in the second rendition of our children’s game – everyone not only competes, but everyone becomes better off for it. The superheros, or the wealthy, are no longer penalized for working with the eggs, but instead incentivized, by their own success, to work alongside the eggs.
When we form free market policies, instead of capped market policies, we experience the competition and fun that comes along with it.We experience the possibility of unlimited upward movement that is incentivized by personal success.
Objection 1: But don’t the superheros only work with the eggs as long as they benefit from them?
No. Every time a superhero wanted to challenge an egg, he ran the risk of a demotion. However, that risk was outweighed by his own possibility of success. So, in many cases, it cost the superhero to challenge an egg, thus the benefit for the egg.
Objection2: But everyone in life doesn’t begin as an egg.
Well, this is true more or less. As mammals we don’t begin as eggs… or at least in the out of body eggs we were imagining during the game. But everyone is ensure equal protection under the rules of the game. You had the freedom to challenge whomever you wanted (the right to voluntary contract), you had the right to benefit from you own decisions (the right to private property and ownership of means of production), and everyone was held accountable for their respective wins and losses (the right to the rule of law).
Now you may be remembering about that single child that stayed an egg. Yes, in every economy, or children’s game, when you’re given the freedom to succeed, you are also given the freedom to fail. Some people have argued that the top percent and the bottom poor stay poor for their entire lives, I would encourage you to do your research. It is true that the statistics representing those two classes stay relatively fixed, but the people who possess those categories do not. If we were to track an person’s income through time, as we would track a baseball player’s batting average, we would discover that roughly 3% of the United States population remains poor over an 8 year span, and almost 4% of the nation’s wealthy stay wealthy.
So it is true. There will be roughly 7% of a free market economy that will stay fixed, but the question would be, “What other economy produces better results?”
Objection 3: No, you still don’t get it, we all don’t begin as eggs!
Okay, okay. You’re absolutely right. People are born into different families, with different abilities (physical, charm, intellectual, etc..), with different economic availability (both within a single economy and across the world), with different historical context (within one period or many) and so on and so forth. The real question that arises isn’t “What do we do about them?”, but, “What can we do about them?”
And often, to answer that question, we must become more metaphysical than most metaphysicians (or metaphysicists for those who care) by not only entering into the realm of counter-factuals but holding people morally responsible for them.
Let me put it another way through affirmative action policies. Affirmative action policies begin by arguing, “Black people have suffered some harm from the United States’ involvement in slavery.” (For the sake of momentary simplicity, we will ignore any African’s who immigrated after American slavery.) They then have to hypothesize what those people’s lives today “would have been like given slavery hadn’t happened.” They have to hypothesize a counter-factual timeline that not only spans 150 or so years, but also holds the beneficiaries (For the sake of momentary simplicity, we will ignore any Europeans who immigrated after American slavery.) morally responsible. Once that has been established, then begins the process of exacting the moral recompense of those who are alive today.
Most of the challenges against this sort of hypothesizing is that we have no idea what history would have been like if slavery hadn’t taken place in the United States. Could the black population in the United States have been better off? Sure! Could they have been worse off? Absolutely! Could they have never come to the United States at all? Perhaps.
It is at this point that most people ditch the counter-factual timeline and argue from some innate moral principle. We must institute affirmative action policies because “that’s what good people do.” At what cost are you willing to institute those policies? At the cost of creating procedural injustice for everyone else? At the cost of being immoral or unjust?
When we begin to compare Free Market policies with the alternatives, we begin to notice that the Free Market attempts to address the problems we currently struggle against. And, for what it is worth, we are much better at solving the problems in our street today than in a village 150 years ago. Free Market policies are the policies of the greatest trade-offs.
Question 1: What is a free market system?
I’m glad you asked, but you’ll have to wait for the next blog post, creatively entitled, “What is a Free Market?” For now, however, there are two central foundations: private property (economic foundation) and rule of law (legal foundation).