Money and Progressive Resource Allocation

Procedure, while important, shouldn’t make us oblivious to priorities

by Derek McDaniel

I want to talk about “Progressive resource allocation”. In this case, what I am referring to, has nothing to do with political progressivism, except by coincidence. I am using the word “progressive” simply to describe a sequence of steps or priorities, a “progression”, if you will.

In weightlifting, there is a practice called “progressive overload”. This means gradually increasing the weights you are lifting, so that you can continue to build muscle. That is how I’m using the word “progressive” in this context. Beginners in a training program will want to start with the most basic exercises, and then add more specialized and challenging exercises over time. They can do this by adding weight or resistance, or with higher intensity or more difficult sequences. If you have an injury or a break from training, often you will have to start over at the beginning. A training progression is not something you go through once and forget about it, but something you always should have in mind, so your training stays grounded in the basics.

Resource distribution, in society, is controlled through property rights. Property rights are not a permanent or timeless endowment, but an ongoing privilege and responsibility. Property rights give a rights holder the power, authority, and responsibility to manage a set of resources. Thus, property is a collection of rights and responsibilities, and not just the disbursement of material objects. Property is as much about the relationship between the “rights holder” and society, as it is about a relationship between an owner and their possessions.

Presented this way, the basis for taxes and regulations becomes immediately clear. They are simply responsibilities that come hand in hand with the privileges granted to rights holders. If these are too strict, rights holders are needlessly restricted and burdened. If they are too lax, the rights holder can inflict harm on the rest of society, with or without knowledge of the deed.

So what is progressive resource allocation? It simply means to take care of the most basic and important resource issues first, before one worries about other things. For humans, our most important needs are shelter, food, water, and perhaps most important, human trust and connection. Often, when we talk about property rights, we are overly concerned with procedure, and fail to even recognize these priorities. Does it make sense to spend a lot of resources on entertainment when people can’t get basic health care or have a stable place to live? This problem becomes more complicated when you start asking “well, how do we decide whose
priorities matter?” That is not a simple thing. I want to present several factors, that I think we should look at. Readers may draw their own conclusions.

Factor 1: Proximity

You are leaving your apartment, and your elderly neighbor drops their bag of groceries next door. What should you do? I think the answer here is clear. There is an obvious need, and you are in a position to help. I think it’s important to respect that person’s autonomy, so you should probably ask if you can help, but I think most people would appreciate assistance in that situation.

Factor 2: Priority

You come home from work, and have a headache, you open your bottle of ibuprofen, and notice there are only a couple pills left. You remember your roommate has a fever though, so decide to offer them the last two pills first.

Factor 3: Personal Connection

You are at a baseball game, the atmosphere is exciting (I know, unusual for baseball), and you are fixated on the game. The pitcher sends a screaming fast pitch towards the batter, and with a loud crack, the batter hits the ball. Your eyes dart around looking for which direction the ball went, then you notice it seems to be going straight up, but also gradually growing larger. You realize the ball is headed right for you, and grab your brother’s mitt. You jump up and barely catch the ball. On the replay footage, you see there was a young girl right behind you, who would’ve caught the ball if you had missed. You don’t want to seem like a jerk, but at the same time, you worked hard to catch it. Your niece asks for the ball, so you give it to her instead. Now you’ll still get to see the ball when you visit your brother, but you’ll also be the guy who gave the home run ball to your niece. Even when things aren’t important, we still sometimes make a big deal of it.

Factor 4: Public Good

Who sweeps our streets, cares for parks, provisions utilities, and enforces law? We could rely on social norms to take care of these things, but it works better when we give people specific jobs and compensate them for their work.

Factor 5: Procedure

The first person who claims a piece of land owns it. You caught the home run ball fair and square, so it’s yours. You bought the bottle of ibuprofen, so your headache takes priority over your roommate’s fever. You don’t really know your neighbor, and plus you’re late for work, so they can worry about their groceries on their own.

When Stuff Fails

What happens in a bank run? What happens when there’s inflation? What happens in a recession, a consumer debt crisis, or an asset bubble? Basically, all these failures are examples of when our procedures break down and stop working. You can’t redeem everyone’s deposits in a bank, when the bank doesn’t have the cash to cover withdrawals. When consumers want to consume more resources than are available, they will bid up prices until someone decides to forego spending or simply can’t afford it. In a recession, there’s enough resources for everyone, but some people are excluded based on the fact that everyone wants to keep more resources for themselves, because they’re worried about scarcity.

All these issues, I believe, can be addressed by examining our priorities, and who can and should take responsibility for each respective issue. Individuals need to feed themselves, but we need some government oversight over food production, so incentives and influence in the marketplace don’t become malaligned or disproportionate. We need safe, clean food, and collective food security. This isn’t an issue we can solve alone without communication and collaboration, even though each of us will have our own roles and responsibilities in the process. Money is a tool that lets us represent these collective priorities.

Money is not just a tool for individual exchanges, but a mechanism for collective collaboration and control. Sometimes that mechanism works in our best interests, sometimes it doesn’t. But either way, our policies need to be conscientious of the machinery of money, and specifically, we need to use money to progressively allocate resources, starting with the most basic tasks and needs, and ending with the most challenging and ambitious projects.

A tax creates a duty on a rights holder, to serve common needs and support collective financial objectives. Taxes force rights holders to earn money, if they want to use resources. Taxes don’t provision money, they regulate it. This applies to both federal and local governments, as well as private commercial entities. All of these entities issue their own assets to finance their operations, but fiat currency issuers are unique because their assets are accepted as payment universally domestically.

We need to realize the accounting of resources is secondary to the actual management of said resources. We use accounting to help us better manage common and contested resources, but if push comes to shove, our ledgers won’t save us, and our actions will. Whenever established procedures stop serving our needs, we need to include other considerations in deciding how to use our resources.

Maybe public health care should be a higher priority than medical patent rights. Maybe food stamps should come before food service. Maybe citizens should get heard politically before bond holders. Some of these policy problems may not be in direct competition with each other, but I think it’s still important to have a progression of priorities, so our most important needs are met first. Our policies could be improved to better reflect principles of progressive resource allocation – which, in most instances, also happens to be very politically progressive.

Derek McDaniel is a programmer. He is interested in many things, especially in economics and mathematics. He can be reached over Twitter and Medium