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Minecraft Economics: How the Nether Update uses the Subjective Theory of Value

What is an emerald worth in Minecraft?

An emerald is the currency used in the popular game Minecraft for trading with NPCs called villagers and wandering traders. Emerald ore is an extremely rare resource in the sandbox world, yet every employed villager has quite a few to trade with the player. However, players have wondered how the emerald compares with real world currency. One YouTube Video by GameTheory tried to find this answer. First, they tried to convert it by comparing the USD cost of bread with the cost of bread in the game, but found that conversion does not translate to other goods. Next they used the labor theory of value to try to determine the USD to emerald conversion, but again came up with a nonsensical conversion. Finally, they tried to assume emeralds have an inherent value in real life and work backwards to determine the in-game USD cost. After using all of these methods, they come to the accurate conclusion that it's not really possible to convert emeralds i…

Why Socialism Leads to Totalitarianism and Vice Versa

Despite the horrific experience with Socialism across the world throughout the 20th century, the doctrine still maintains plenty of followers and has been growing especially since the Great Depression. "It wasn't real Socialism," they proclaim. While the Statist Socialists, most of whom call themselves "Democratic Socialists", contend that their system could work as long as they had the "right people" in power, the Anarchist variety tend to point to the historical instances as "State Capitalism", i.e. having nothing to do with their ideal system of societal organization. Only a small minority of acolytes tries to defend and justify the regimes that reigned terror over the Soviet Union, China, Cuba, Venezuela, Cambodia, North Korea, etc., but the self-proclaimed Socialists who denounce these don't seem to have much curiosity as to why all these experiments tend to end up with the same results.

It's important to remember that, in contrast to popular belief, theory cannot be separated from the practice; if the theory doesn't match with how objective reality operates, the theory is wrong or at the very least misleading, and out to be revised accordingly. As such, the historical cases of "Socialist experiments" ought to warrant an investigation into the theoretical reasons of the underlying mechanisms, although they could have been foreseen through deductive reasoning. Ludwig von Mises made a thorough investigation of this in 1922, and Claude Frédéric Bastiat before him in the mid-19th century, both of whom provided a great degree of clarity to why Socialism must fail based on its underlying theoretical foundations before it was laid out for all to see in the 20th century.
To illustrate this, let's begin by imagining a nation with a complete Anarcho-Communist system having somehow been instituted, without any central authority and where the culture is generally oriented towards charity and mutual aid. If this system maintained itself as such, one could possibly just as well have rather called it "Anarcho-Capitalist", as voluntary sharing is certainly not out of the question as a definitional matter in the latter system. Where the two systems diverge, however, the problems begin: (1) abolition of employment and (2) redistribution.

What many Socialists mean by the "abolition of private property" does not necessarily mean that no one is allowed to own anything (i.e. consumption goods, which they call "personal property"), but rather that you cannot hire anyone to work for wage labor. Even in a culture where such employment is viewed with scorn, however, this is bound to become a great inconvenience. Complete self-sufficiency is incredibly difficult and comes at a significant cost in comparison to outsourcing certain work for an agreed-upon price. For the same reason trade of goods and services is such a boon to its participants, trade of labor can also make matters significantly more convenient for those involved, incentivizing such an arrangement to be instituted. Thus, although it may be considered against the "rules" of the Anarcho-Communist society in question, there is a powerful incentive encouraging employment to be instituted, both from those seeking to outsource their work (employer) and those willing to trade their labor for wages (employee), and will occur if both parts consider the benefits to exceed the costs of social stigma and the like.

From there the Anarcho-Communist system faces a great dilemma: Either it has to centralize power, making it less "Anarchist", or become less "Communist" as a result of the employment structure being reinstituted. The Anarcho-Communist acolytes seeking to enforce the rules of their ideology may, it is argued, do so by "mob rule" through organized violence against those making such an agreement, but the multiple theoretical problems here include at the very least secrecy (the parts of the arrangement keeping quiet about it to avoid the social stigma) and scale (how many such arrangements are being instituted simultaneously). Given the unreliability of this strategy, the centralization of power into some sort of quasi-state is almost bound to occur to maintain the system based on the incentive structure involved. This is also what has to be done to solve the problem of how to implement any redistribution scheme, as voluntary donations alone, even in the most charitable society, would be insufficient if the true goal was the elimination of economic inequality.

The central authority thus takes on two main tasks: (1) enforcing against employment being instituted, and (2) organizing the redistribution scheme. The first of these may alone bring out the totalitarian instincts in the rulers at hand, as they would be the ones to decide how it would be enforced and what the punishment for it would be. How would they figure out whether and the extent to which such affairs occurred? How many "police" or "secret agents" would be placed out to do so? What about the cases where there is suspicion but not definite proof that it's going on? How severe would the punishment have to be to sufficiently discourage people from instituting such an arrangement? These are all important questions the Socialist rulers would have to find an answer to, and it appears that the inclination they're leaning towards is quite contrary to the characteristics of any relatively free society, at least as Westerners conceive of it.

Adding the layer of redistribution on top of this, this tendency appears even clearer. To enforce this, agents of the central authority must as a starting point be allocated to seize capital goods from the citizens, and the decision of whether the methodology of this is "by any means necessary" or not is again up to the whim of the rulers. When the redistribution scheme has been properly implemented and the State owns the capital goods, further problems will arise as a result of moral hazard. Under a system of "from each according to his ability, to each according to his needs," the reward is independent of the effort, and there is, therefore, no real reason to do any work. Depending on the work ethic of the society at hand, the duration the system will continue to operate at moderate levels may differ, but over time the discouragement eventually kicks properly in and people then put increasingly less of an effort into their labor. The result of this decrease of labor, of course, has to be a decline in productive output, meaning there's less to redistribute.

Here again, the Socialist rulers have to make the decision: Either centralize power further or the system will collapse on itself. If nobody wants to work and the system is to be maintained, people must be forced to work, and with the State as the only "legal" employer, politicians and bureaucrats are the ones to decide how much to work, what to work on, the punishment for refusing to work, etc. This is why work/concentration camps like gulags in the Soviet Union tend to arise under Socialist regimes; not because the wrong person is in office, but because any such ruler will come in a position where their system will collapse if they decide not to. It's not that a Socialist government that isn't totalitarian has figured out the key to success of how to make their system workable, but rather that it hasn't yet come to the stage where the circumstances incline it to become so. This is because of human nature, pure and simple, meaning the incentives that affect our actions based on the available costs and benefits of the means to achieve particular goals. Whether a devil or an angel, the Socialist ruler will, either way, become totalitarian, varying only by degree.

As a case in point of the tendency from Anarcho-Communism to either free-market Anarchism or totalitarian State Socialism, we may take a brief look at the prominent historical case of Anarchist Spain between 1936 and 1939. This is the major example the Anarcho-Communists seem to continually point to as evidence for their system, but when taking a closer look at the details of the history, we rather find that it supports the thesis I've laid out above. In his study on the issue, Bryan Caplan concluded that
The Spanish Anarchists demanded the abolition of all government in the name of human freedom; but once they had the power to do so, they both participated in and established governments which were no less oppressive than any other. [...] The experience of the Spanish Anarchists does not reveal any "third way"; to the contrary, their experience eloquently affirms that state-socialism and free-market anarchism are the two theoretical poles between which all actual societies lie.
Social engineering can only be conducted by forcing others to act against their interests, and as the State is the most convenient institution through which this can be done, the totalitarian instincts even of such a variety of self-proclaimed "Anarchists" may be strong enough to make them utilize it to achieve their grand objectives. With this in mind, one can begin to understand Mises' bold assertion that "Every socialist is a disguised dictator."

Given the significant power over individuals' decisions the central authority obtains under Socialism, it isn't difficult to recognize that other varieties of totalitarians would also be eager to take advantage of their tactics. It's often argued that the primary difference between Socialism and Fascism as economic systems is that under the former the State owns the majority of capital goods, whereas under the latter they are kept in private hands albeit still controlled by the State. It's well documented that this was the case in terms of the implementation of price controls and other heavy regulatory frameworks in Nazi Germany and Fascist Italy, but also in ancient times were similar regulations implemented over individuals' economic decisions. A study on the economic policies of the Roman Empire noted, for instance, that they "often responded to rising grain prices by banning exports, requiring grain merchants and farmers to sell their stocks of grains (thus lowering current prices), and they also imposed maximum price controls." The authors formulated the effects of this remarkably well: "Coercive government intervention in markets saved lives today and set the stage for even more starvation tomorrow." This passage is timeless and applies just as well to contemporary governments as with the Roman Empire.

The State cannot abolish the laws of economics. That's the uphill battle all central planners struggle with, whether they call themselves Socialists, Fascists, Nazis, or any other label. In trying to create the perfect world by eliminating the injustice they perceive in the world - poverty, inequality, and greed - they feel entitled to the right to socially engineer society to conform to their vision, and the power required to actualize this will necessarily corrupt them towards totalitarian tendencies. Even with the purest Anarcho-Communist society as a starting point, it will eventually turn in that direction in accordance with the underlying incentive structure, and the most prominent historical case of Anarchist Spain appears to provide some empirical evidence for the thesis presented of this tendency. Furthermore, totalitarians of other varieties will also be very eager to interfere with the decisions of the citizens they're in control of, and heavily restrict and mandate all sorts of economic activities. The commonality is collectivist central planning, which always ends up in disaster, not only because of the great inefficiency it leads to but also that the liberty of the individual is completely disregarded for a grander, more abstract whole - the vision of a perfect society - and we should all at this point know where that leads.

Written by Stefan M. Kløvning and republished with permission from his blog MisesRevived.


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