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Do you listen to EconTalk? Michael Munger (famous econ prof) has what he calls the "Munger test", which is, does this proposal/statement about business/governme

Do you listen to EconTalk? Michael Munger (famous econ prof) has what he calls the "Munger test", which is, does this proposal/statement about business/government/academia/etc. presuppose ideal human beings to carry it out, or the venal, petty, real people we know?

mhb 11y ago
He named the argument for free market capitalism vs. socialism after himself? Wow.
- SpaceCadetJones 11y ago
  I'm not sure what you mean. Could you explain?
  - khedoros 11y ago
    It's based on the idea that capitalism works because it harnesses greedy self-interest, while a pure communist state would fail because there's no direct connection between doing extra work and getting extra benefit. Capitalist farmer grows 10% more food; they make higher income from the sale of their crops. Communist farmer grows 10% more food; the farmer doesn't see extra benefit. Why bother to do the extra work? The ideal person might answer "For the greater benefit of my fellow countrymen". A realistic person might answer "Come to think of it, I wonder how little work I can do before I actually see concrete negative consequences".
    - st3v3r 11y ago
      Problem is, those arguments always assume the people are doing things fairly. In many instances, instead of extra work, it's cutting corners.
      - alphapapa 11y ago
        No, it doesn't assume that. Competition incentivizes independent agents to compete, and customers evaluate who offers the best goods and services, serving their own self-interests.
- nickff 11y ago
  It's actually a simple public choice-based test; there is no single argument for capitalism and against socialism (, there are many).
- kbutler 11y ago
  That's the "invisible hand" - different concept. Invisible hand: two people following their own greed by engaging in a non-coerced, knowledgable exchange, produce a surplus benefit, in which both individuals are better off. Munger test applied to the idea of the invisible hand: Does it work for greedy people? yes. If one party won't be better off as a result of the exchange, they won't participate. Munger test applied to the idea of increasing revenue by increasing tax rates on the ultra-wealthy: Does it work for greedy people? Not linearly, because they'll have a great incentive to find ways to restructure or shelter their income from the increased taxes.

mhb 11y ago

He named the argument for free market capitalism vs. socialism after himself? Wow.

SpaceCadetJones 11y ago
I'm not sure what you mean. Could you explain?
- khedoros 11y ago
  It's based on the idea that capitalism works because it harnesses greedy self-interest, while a pure communist state would fail because there's no direct connection between doing extra work and getting extra benefit. Capitalist farmer grows 10% more food; they make higher income from the sale of their crops. Communist farmer grows 10% more food; the farmer doesn't see extra benefit. Why bother to do the extra work? The ideal person might answer "For the greater benefit of my fellow countrymen". A realistic person might answer "Come to think of it, I wonder how little work I can do before I actually see concrete negative consequences".
  - st3v3r 11y ago
    Problem is, those arguments always assume the people are doing things fairly. In many instances, instead of extra work, it's cutting corners.
    - alphapapa 11y ago
      No, it doesn't assume that. Competition incentivizes independent agents to compete, and customers evaluate who offers the best goods and services, serving their own self-interests.
nickff 11y ago
It's actually a simple public choice-based test; there is no single argument for capitalism and against socialism (, there are many).
kbutler 11y ago
That's the "invisible hand" - different concept. Invisible hand: two people following their own greed by engaging in a non-coerced, knowledgable exchange, produce a surplus benefit, in which both individuals are better off. Munger test applied to the idea of the invisible hand: Does it work for greedy people? yes. If one party won't be better off as a result of the exchange, they won't participate. Munger test applied to the idea of increasing revenue by increasing tax rates on the ultra-wealthy: Does it work for greedy people? Not linearly, because they'll have a great incentive to find ways to restructure or shelter their income from the increased taxes.