Pluralistic Coefficiency of Markets

Enlightened self-interest is a term that essentially refers to distribution of risk and liability.

Even absolute monarchs realize they cannot rule without limiting risk and controlling liability.

The easiest way to limit risk and control liability, without the enlightened self-discipline (self-determination) of a free-market pluralism, is to consolidate. King George, for example, prior to the American Revolution, commanded all products from the colonies be shipped directly to England for distribution. This consolidation (centralization) of power not only set the price of tea for consumption, but whatever the King decided the labor was worth to produce it. A "tea party" ensued, and the rest is history.

The King was unreasonably sure of his risk and liability being as absolute as his royal classification. He thought for sure he could control the risk and liability to him by consolidation of the value into his divine authority to govern without consent.

He found out it is a free market afterall (accumulation and distribution of a gamma-risk ontology) and the result of resisting the natural distribution of risk and liability is conflict (accumulation and distribution of a retributive-value ontology).

(The ontology refers to risk and liability that cannot be eliminated or reduced. It can only be managed and/or avoided. The probability it will occur has a coefficiency of 1.)

The probability of risk is coefficiently constant. It is more visible (measureable) if it is allowed to accumulate. It is also possible to then structure a regime of incentives that legitimize the distribution of risk into a probable liability correlative to its accumulation, actuated by the "level of probable risk."

An economy of scale, for example, affords a low level of probable risk. The risk "maker" (actuator of the risk) is not the risk taker. Anyone that tries to compete with the economy of scale is "taking" a big risk. The risk is not likely to be taken (a negative incentive that results in an adverse selection). Thus, the low probable risk, and the level of risk, accumulated and distributed, is coefficiently conserved.

Recent health care legislation, for example, is being sold as an economy-of-scale efficiency. The pluralistic coefficiency is largely reduced to an adverse selection for both insurers and consumers to "spread the risk."

Actually, the risk is being accumulated in a non-pluralistic manner to be managed in a too-big-to-fail capacity.

Insurers will consolidate even more than they already are to absorb the rising cost of health care providers, whose prices are in support, and the increased cost of mandatory coverage. The entire system, both public and private, is a too-big-to-fail economy of scale. It is a non-plurlistic organizational modeling that verifiably consolidates risk into an extreme detriment (transforming a small, beneficially weak force into a big, detrimentally strong force) with minimal accountability of process. It is the problem, not the solution.

Rather than focusing on consolidation as a model that progresses us toward efficiency, let us look at the differential much like our founders did toward a practical coefficiency.

The American Revolution combined and mitigated the positive and negative effects of elitist and pluralist models with a representative form of government. Free-market economics would provide the larger pluralistic aspect to the ultimate and arbitrary power of public authority (the gamma risk).

Without a fully empowered free-market pluralism and, therefore, limited government with a strict constitutional construction, as Jeffersonians argued, the Hamiltonian model of political economy would result in a tyranny from the private sector relying on a false pluralistic legitimacy in which bankers rig the system to favor accumulation and privilege (like we have now). Distribution of power would "determine" from the top down, not the bottom up. Self-determination would be the "privilege" (a coefficient) of accumulated wealth and power and not a pluralistic pursuit endowed by a constitutional constant (a natural right) with "liberty and justice for all" (legitimate distribution of risk and liability).

Jefferson's prescient critique of the Hamiltonian model should sound very familiar. Now, as it was then, the wealthy elite claim that supporting a stable aristocracy in priority, from the top down (like bailing out Wall Street), is the right thing to do. It is the right-wing moral imperative that always trumps the "moral hazards" (adverse structural incentives) of welfare whether it be for the rich or the poor. By this logic, however, it is only a hazard for the non-elite, categorically defined by measure (the coefficient constant) of income.

The moral hazard refers to what economists call, the hierarchy of incentives. It essentially refers to the distribution of risk and liability that is the power structure. The distribution of power is euphemistically referred to as incentives. The structuring of these incentives suggests an ontology that if defied creates a moral hazard, with the inference being, of course, that the hierarchy is naturally moral and adherence is categorically imperative. The "given" structure is then neither immoral or a hazard. It is also not surprising, then, that economic predictions are often full of surprises and uninetended consequences of an exculpatory, ontological import.

If, for example, by means of a cyclical crisis, people find the value of their debt to be more than their assets (like we have now), the differential then has an adverse incentive. Having a declining income enslaved to a rising value of debt has a non-productive incentive, contrary to the value of the moral imperative with a coefficiency of economic expansion.

Also consider that a recessionary trend is inherently non-productive. The incentive to be highly productive results in overproduction and a cyclical, recessionary trend. Unemployment is not especially productive and does not fit a coefficiency of economic expansion. The hierarchy of incentives does, however, fit a structural model that supports prices and resists employment--the opposite of a pluralistic coefficiency.

While Hamiltonians are quick to argue the non-productive incentive (the moral hazard) of taxation, they argue the productive incentive a recessionary trend has because it readjusts costs and forms capital for reinvestment which is the fuel for economic growth (the trickle-down coefficiency). With the affect on income being the same as taxation, the effect of cyclical trending is nevertheless considered to have a positive value that fits the hierarchy of incentives (the elitist model of power).

The differential between the effect of taxation and the effect of the business cycle is actually complementary. According to the Hamiltonian model, the elite buy the debt and the non-elite pay it. The power structure is thereby stable (conserved) and the debt is secure (its value coefficiently conserved with the enduring value of a categorical, moral imperative).

The coefficient of the Hamiltonian model is to secure the debt. According to Hamilton, the trickle-down economic model of finance (like bailing out too-big-to-fail banks in priority) is the formula necessary to build and maintain the wealth of a nation: the formation of capital to be trickled down to the non-elite mass of "The People" just enough to keep them productive while, at the same time, exercising the cyclical means of accumulative crises to consolidate their wealth to pay the debt in the future.

Thomas Jefferson strongly opposed Hamilton's top-down model for structuring power (the hierarchy of incentives).

Since non-elits struggling to achieve the category of elite status is, supposedly, what productively expands the pie into a surplus (the declining rate of profit), it is morally imperative not to eliminate the incentive with a distributive justice imposed by government authority (the gamma risk).

Diminishing the capacity for gaining a surplus and gaining capital diminishes the general welfare according to Hamilton and the Federalists. The limit of government is where that capacity (that power) is diminished by government action, and according to Jeffersonians where the power of government begins to keep the pluralistic coefficiency of markets fully operational in priority.

Both camps fully recognized the power of pluralism. Hamiltonians knew it is an effective means of diffusing risk and limiting liability to the actuators rather than distributing it as an indivisible public good with exclusively divisible benefits to be trickled down.

Hamiltonians knew a government that ensures pluralism in priority would prevent the emergence of a power elite, what they then, and now, consider to be a moral hazard.

America's founders recognized the pluralistic coefficiency of markets. Hamiltonians and Jeffersonians alike recognized the reliability of free markets to deliver a legitimate liability of risk.

The founders recognized, as King George found out, that it is a free market afterall. It is a truth "self evident" in complement with enumeration of our natural rights--coefficient constants with a re-liable measure of risk and liability.

For Hamiltonians, the risk of liability is to be a reliably limited coefficient with a strong force (the more wealth accumulated, the stronger the force). For Jeffersonians, the risk of liability is reliably unlimited (continuously retested) with an inherently weak-force distribution.

The pluralistic model of power keeps the risk in constant application so that it cannot accumulate into a crisis proportion.

The elitist model of power constantly surpluses risk so that it can be applied in what appears to be an ontological proportion of crises that effectively limits the liability.

Constantly avoiding the liability accumulates risk. It is then surplused and managed into cyclical crises with an exculpatory ontology described as legitimately undirected (self-determined) market mechanics--a fraud that Jeffersonians knew would perpetrate if consolidation, rather than pluralism, was allowed to become the coefficiency of markets and, consequently, the structure of power.

The re-liable coefficient constant of pluralism is considered by Jeffersonians to be the primary function of a representative form of government. Legitimacy of power is constantly re-tested so that the liability of the elite is not limited to a set of philosophical principles with the absolute power (the legitimacy) of moral obligation like avoiding the moral hazards (the hierarchy of incentives that makes it right to bail out what is too big to fail in zero sum).

For Hamiltonians, surplusing the value of the risk (consolidation of value that allows for taking "big" risks) is the moral obligation of the power elite. Consolidation of power is the test, and the re-test in the public domain of representative government is coronation of that power.

Validation of power is exactly what Jeffersonians expect to prevent by ensuring the empirical power of pluralistic processes both economic and political with an easily verifiable coefficiency.