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  • Stephan Livera 7:30 AM on October 25, 2014 Permalink | Reply
    Tags: , ,   

    Close, yet far 

    So with the recent ‘burqa ban’ politics here in Australia, I saw progressive-leaning people comment along the lines that: “Well you see, this new law isn’t really about security of the Parliament, it’s really about pandering to the anti-Islam voterbase”. I think they’re right to make this argument, but they’re wrong to not trace out the true corollary of this thinking.

    Yes, it is correct to ridicule Tony Abbott for only now caring about security, and to point out that he is really just pandering to a certain voter base. But then these people should equally go on to realise that all politicians do this. All politicians pander to their voter base rather than do things that are genuinely in the interest of society. A good example from the reversed point of view might be a politician who makes protectionist proclamations about how he/she wants to ‘protect jobs in the country’, when economic reality would make this far too costly. The theory of comparative advantage indicates that each individual should focus on the job in which their relative inferiority of productive ability is least, and in doing so – the overall ability of society to produce goods/services is increased.

    Being protectionist also runs counter to what the experts (economists in this case) overwhelmingly agree: that free trade is on the whole beneficial. I’m not even cherry picking and only selecting free market economists here, there are prominent economists who hail from the left/progressive side of politics e.g. Krugman – who have stated that if there were an Economist’s Creed, that it would contain support for the theory of comparative advantage and free trade.

    From Michael Huemer’s excellent paper, In Praise of Passivity:

    What about the political leaders and campaign donors who, as I have suggested, really can influence public policy–do they have strong incentives to acquire political knowledge? Yes and no. They have strong incentives to find out which policies are in their interests to promote. A politician may have strong motives to discover which positions are popular among voters and campaign contributors. But this is quite a different matter from discovering which policies are truly best.

    The progressives who correctly point out that Tony Abbott is just pandering to the anti-Islam crowd should take their reasoning the whole way. This is not just an argument against conservatives, it is an argument against democracy itself.

  • Stephan Livera 7:30 AM on October 23, 2014 Permalink | Reply
    Tags: , salon   

    Why it’s great that Salon are writing hit pieces about libertarians and a bunch of other sites (e.g. Slate) have lately been busy writing a lot of inaccurate hit pieces against libertarians. I’ve noted that some libertarians get amped up and annoyed by this misrepresentation of libertarian positions. Among the various accusations include:

    • That libertarianism is a cult – Because “There’s nothing cultish at all about allegiance to the state, with its flags, its songs, its mass murders, its little children saluting and paying homage to pictures of their dear leaders on the wall, etc.” – Tom Woods
    • That libertarians don’t care about the poor – Even though it’s actually the state that is indebting the poor, facilitating wars, continually devaluing the money, and creating a debt culture via easy credit.
    • That libertarians are ignorant of reality – Even though for thousands of years we’ve had some combination of county commissioners, emperors, kings, mayors, politicians and generals. Even though from 1900-2000 an estimated 262 million people were killed by governments.
    • That libertarians are being utopian – Despite the best efforts of public choice economists to point out that actually – it’s pro-government individuals who are overwhelmingly being utopian in their assessment of the capacity of government to act without bureaucrats or politicians self-interest at heart.

    I think some of the paragraphs in these Salon/Slate/other essays have literally been written to misrepresent libertarianism in the worst possible light. Ad hominem, accusations of being a cult, you name it, it’s all there. I’ve seen many fellow libertarians express exasperation about this – I think in an odd way, this is actually a reason to be happy. Libertarians have been ignored for a very long time, and it is only now that people even know what a libertarian is. Even though the views of libertarians are being ridiculously misrepresented in these hit pieces, I think more and more people will be curious to learn what libertarianism is truly about. They will eventually either go and read some libertarian material for themselves, or discuss it with someone who is more knowledgeable about libertarian theory.

    See how rappers start feuds with each other just before they release new albums? They get a free publicity boost. Libertarians could likewise piggyback off some of the free publicity provided by these anti-freedom articles. The continual attacks against libertarians are an indicator that libertarianism is becoming too big to ignore.

  • Stephan Livera 7:30 AM on October 21, 2014 Permalink | Reply
    Tags: , The Australian Greens   

    “Corporate education would be biased” 

    While I don’t identify with Christopher Pyne, the Liberal Party or the right wing (libertarianism is not left or right wing, it is anti-political authority), this is good stimulus to discuss anyway. Let’s say you’re concerned that private company provided education would be unfairly biased towards that company or would not teach appropriate values. The Australian Greens facebook page posted “Fries with your French? A slurpee with your science? McDonalds in an Australian school? No way, Minister Pyne! Do you agree that this is a BAD idea?” along with this image:


    The Greens campaign page states:

    “Dear Mr Abbott: We don’t want our kids learning nutrition from fast food companies. Or being taught about climate change by big polluters.”

    I don’t want kids learning about the necessity of government from government.

    I don’t want kids learning that they should reject the entry of people with valuable labour purely because they were born into a different area of the world. The borders are arbitrary anyway.

    I don’t want kids learning economics that teaches them that money has to be centrally managed by the state. Especially where this monetary system impoverishes poor people and savers – to enrich borrowers, the politically connected and people who are already asset rich.

    I don’t want kids learning that just because they won an election, that means they should now be allowed to forcibly confiscate the wealth of other people and direct it towards causes the other people disagree with, even where it is not reasonably clear that the government program brings net benefit.

    I don’t want kids learning that putting on a police/military uniform gives them powers that normal people don’t have. I don’t want them believing things like: “I don’t make the law, I just enforce it. Therefore I’m not responsible for my actions. I’m just a tool of the thing called law and that makes it so I have rights that other people don’t have, so I don’t have to feel bad about physically assaulting non-violent people, because the ‘law’ says its okay”.

    Governments are biased towards their ‘own side’ when they teach history and so on, so it’s not like government solves this problem of bias. Remember, voters, politicians and bureaucrats are also biased in self-serving ways.

    Surely allowing parents the choice in where they send their child is a reasonable way to resolve this possibility of bias? Parents should freely choose which school to send their children. This is preferable to decisions made by politicians or bureaucrats who generally don’t understand the specific circumstances of the family or child.

    Absent state intervention in education, it is likely we would see low cost, higher quality education provided to everybody. We’d probably see some mix of online/computer delivery of courses, blended with live instruction. To see examples contrasting private schooling against government schooling, see my posts tagged education.

    • tiffany267 8:23 PM on October 22, 2014 Permalink | Reply

      I feel the same way. I look back at high school textbooks with disappointment, seeing how POTUS and SCOTUS are glorified in every era as historical heroes. As stupid as it sounds today, I naively believed that the 20th century’s civil rights struggles were all peacefully won through the benevolent cooperation of the federal government, and this movement would progressively grow to protect the rights and civil liberties of all disfranchised citizens of the U.S.

      Oh and Columbus “discovered America”.

      Textbooks make no mention of how the feds have spied on civilians since WWII. Textbooks do not condemn the feds hiring Nazis to help engineer chemical weapons.

      Maybe that’s why statists are so concerned about corporate “bias” in education?


      • Stephan Livera 9:46 PM on October 22, 2014 Permalink | Reply

        I don’t think pro-government people are concerned about corporate bias because of any intentional desire for pro-government teaching. I think they’re just really underweighting the possibility of pro-government bias.

        I think a lot of it is unintentional or self-censoring, not any kind of ‘intentional’ conspiracies or anything like that.


  • Stephan Livera 7:30 AM on October 19, 2014 Permalink | Reply
    Tags: , giving back   

    “Businesses should ‘give back to the community'” 

    The typical ‘middle of the road’ person’s political views are not necessarily against the efforts of private businesses, but I notice there is a common idea that there should be constraints imposed or other social pressures placed on businesses to “give back to the community”.

    I think this is a slightly misguided idea, and the reason for this is – it fundamentally misunderstands the value that businesses and entrepreneurs create in a free market. In an unhampered capitalist market, businesses are not taking from the community in the first place! They voluntarily purchase or produce scarce resources, and use those resources towards certain ends that are valued by consumers. Their efforts make these goods and services more easily available to everybody, and the effect is that prices go down over time.

    Why don’t we observe this trend right now? The trend is being hindered because we don’t have fully free markets, and we don’t use truly free market money. Instead, government regulation, taxation, and fiat money all act to deny this.

    Don Boudreaux sums up very eloquently in his post, Profiteering at Cafe Hayek. You should read the whole post to also see the story he spells out to explain the problem with challenging ‘profiteering’. In my opinion, here is the key takeaway:

    It’s important to realize that by far the greatest benefit that successful business people contribute to society is not whatever benefits flow through their charitable giving.  Those benefits are often real; they are also often detriments rather than benefits.  But it’s in entrepreneurs’ and businesses’ creation of – and in their efforts to make affordable – valuable goods and services for consumers that successful entrepreneurs, business people, and investors contribute most to society.

    In other words, the value that they provide is not from their charity, but from their value creation activity. Wealth creation is not zero sum, it is positive sum. In being able to access a product that you could not otherwise access, or being able to get that product cheaper than you otherwise could have, you have benefited from value creation.

  • Stephan Livera 7:30 AM on October 17, 2014 Permalink | Reply
    Tags: , ,   

    Capitalism helps the poor by making all sorts of things much cheaper than they used to be. Innovations brought about by capitalists seeking profit can vastly improve access to new technology and services by bringing the cost down. If you think capitalism leaves the poor behind, you couldn’t be further from the truth.


  • Stephan Livera 7:30 AM on October 15, 2014 Permalink | Reply
    Tags: compulsory superannuation, , , , , super   

    “But compulsory super is necessary to stop you paying even more for government pensions in the future” 

    I’ve previously posted arguments about why compulsory superannuation is unjust and inefficient given the government cronyism that goes on with superannuation regulations, financial advisers, and so on. The most common argument in response runs along the lines of: “But if the government didn’t compulsorily siphon your money away for you, people are stupid and don’t think about the long term, so therefore they won’t save for their retirement and otherwise you’ll end up having to pay very high taxes as a result of government pensions for these people”. There are problems with this argument.

    First, the government itself is a massive public goods problem or “commons” in the tragedy of the commons. Individual voters have little incentive to become politically informed as it costs them too much for too little gain (the probability of any individual changing the outcome of an election is miniscule). Politicians do not have an incentive to do what is best for society, they have an incentive to promote policies that are in their own interests. Politicians care about 1. Getting elected and 2. Getting re-elected, and they are typically elected on 3 or 4 year cycles. Any incentive they might have to care about the long run debt problems of the state, are easily overridden by their desire to kick the can (push the problem on for a future politician to deal with) so that they can pander to the current voting population.

    Second, this style of argument is presupposing that the governments of the world are wise and prudent with taxpayer money. This is not definitely not true. The governments of the world are in huge debt, and the problem is getting worse, not better.

    See IMF paper: Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten

    “The magnitude of the overall debt problem facing advanced economies today is difficult to overstate. The current central government debt in advanced economies is approaching a two-century high-water mark,”

    Or article in the Telegraph from 02 Jan 2014, IMF paper warns of ‘savings tax’ and mass write-offs as West’s debt hits 200-year high on some of the measures now required as a result of this massive debt:

    Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies. … The policy is essentially a confiscation of savings, partly achieved by pushing up inflation while rigging the system to stop markets taking evasive action.

    Or the pictures from this article by Chris Tell at Capitalist Exploits. Note how the bubbles climbed up rapidly from 1990 to 2012, indicating more and more public debt.



    If you are going to make an argument along the lines that: Individuals can’t be trusted to do their own retirement savings, because the government will do a better job managing it for them (therefore forcible confiscation is just, and more efficient) – You better be very confident that the government actually is good at managing money. The evidence does not agree with this position, and in fact, the evidence goes strongly against this position.

    Not only are governments routinely terrible at keeping their debt levels in check, interventions they perform (such as the creation of this overarching fiat money system) cause cultural consequences amongst private individuals. Fiat money, central banking, legal tender laws, capital gains tax laws and other regulations all act to push people into using a continually devaluing fiat money, and taking on more debt than they would have otherwise. I run through some of these arguments in posts tagged: Cultural consequences of fiat. So it’s not just public debt, but private debt that the government has caused and exacerbated.

    As alternatives to government central banking and government mandated superannuation, consider that absent the state, there would be other mechanisms geared towards easing the transition to retirement. Examples include Life insurance, private giving / mutual aid societies. Also consider that absent government intervention, the cost of living would be going down over time as a result of secular deflation, not up as a result of fiat money inflation.

    Am I arguing that absent the state, all individuals would perfectly save for their own retirement? No, I’m only arguing that having the state intervene (fiat money overarching system, compulsory superannuation) makes the outcome worse than it would have otherwise been.

  • Stephan Livera 7:45 PM on October 14, 2014 Permalink | Reply
    Tags: , progress, science   

    Science is important, but we also need entrepreneurs 

    Science is definitely an important thing, but without the discipline of the free market, the actual benefits of science would remain denied to us.

    Theory: Entrepreneurs Make Science Work

    For science to improve our lives, it has to be part of them first. A scientific breakthrough in a laboratory, however technologically revolutionary, does not immediately benefit most people. In fact, the majority of scientific results are simply consumption goods for researchers and the institutions they work for. Universities and other publicly funded organizations, operating outside of most market forces, don’t usually produce lasting value in the marketplace. It’s only when entrepreneurs spread breakthroughs through the market that they begin to change lives for the better.

    In other words, if we are going to be serious about scientific progress, we have to realize it goes hand in hand with entrepreneurial progress. When barriers to entry are eliminated and individual sovereignty rules the market, entrepreneurs can increase welfare using whatever scientific means are at hand. What’s more, their success in turn encourages the production of more and better research.

    Real world example: Samsung Accelerates Wi-Fi Speeds BBC

    Samsung claims to have found a way to make wi-fi data travel five times faster than it does currently.

    Samsung said it was planning to include the technology in TVs, medical devices, phones and smart home appliances.

    How many times have you heard progressives talk about the importance of government funded science e.g. CSIRO helping make Wi-Fi? Well, point out to them that entrepreneurs (ideally working within a free market), are also very important in the sense that they enable us to enjoy the benefits.

  • Stephan Livera 7:30 AM on October 13, 2014 Permalink | Reply
    Tags: , ,   

    Capitalism helps the poor 

    When people point to the riches of the 1% while others are living on food stamps and then make sarcastic arguments of the form: “Yay, capitalism works again”, I think these people are casting the blame in the wrong direction. Again and again, I see people blaming capitalism when really they are more accurately lamenting that we live in a world of scarcity. Do we have the ability to not live in a world of scarcity? Clearly not.

    So the more accurate question then is: of the social systems we can reasonably select from (perfection is not an option for us), which one does better than the others at raising people out of poverty? Which one does a better job at feeding the poor? Which ones does a better job at improving human quality of life?

    Which system is able to create new innovations that start out costing a lot of resources to make – but then rapidly brings the cost down?

    Which system gives poor people today, access to inventions that even the richest people two or three generations ago could not access?

    IMG_5478269145340So if you’re one of those misguided people arguing against capitalism, please stop – you’re doing it wrong.

    Now many people seem to labour under the delusion that it is possible to take the ‘best of both worlds’ by having capitalism combined with politics/the state. But politics ends up reducing the ability of entrepreneurs and innovators to do their jobs – so you’re still doing it wrong. Give entrepreneurs the maximum freedom to try and solve problems within a framework of private property rights, as this is the best way to enable prosperity.

    Or you can create one massive public goods problem (the state), and watch everybody try to control that, and use the state to push their costs onto everybody else. You’ll see a neverending ratcheting up of state involvement in more and more aspects of people’s private lives and property. Then you’ll just end up with socialised ownership, central planning, failure and famine.

  • Stephan Livera 7:30 AM on October 11, 2014 Permalink | Reply
    Tags: , obsolete, , zero marginal productivity, ZMP   

    Humans (probably) do still apply 

    Every now and then the “human labour will become obsolescent because of machines and technology” theme comes up, and I wanted to outline a few of the relevant arguments. Some people advance the theory in a more ‘doomsday’ way than others, and some people use this theory as a way to justify UBI (Universal Basic Income) or other variants of more-government. Among economists I’ve seen, they refer to this as Zero Marginal Productivity (ZMP).

    The most prominent recent example showing the ZMP hypothesis would be the YouTube video, Humans Need Not Apply by CGP Grey. The video is fascinating, though I think it’s a little overblown and hyperbolic at points.

    It looks like economists are split on this issue, even among the more free market leaning economists: Cowen, Kling, Caplan, Henderson, Boudreaux, and Eli Dourado.

    Theory of comparative advantage

    I think Don Boudreaux over at Cafe Hayek has the correct intuition about this idea. The ZMP hypothesis does not jive well with the theory of comparative advantage:

    Even the lowest-skilled worker is capable of producing something of value.  And the value of using that low-skilled worker to produce that something, rather than using some other means  (i.e., a higher-skilled worker or a machine) to produce that something, rises the greater is the comparative advantage of those other means at producing something else.

    So in other words, just because machines can do some/many things more productively than humans can – does not necessarily mean humans will go out of a job, it just means humans become relatively cheaper at doing those things they can do.

    Substitution versus complementary

    The idea here being that if you’re a low skilled worker, your job may be entirely substituted away by machines/technology. But if you’re a worker in a field that requires higher skill, or perhaps if your job requires some combination of technical skill and fluid intelligence, all this new technology will increase the value you can create. The trick is, we aren’t so good at identifying cases where this happens due to the ‘invisible hand’ of the market. This concept is mentioned in a recent EconTalk podcast episode: David Autor on the Future of Work and Polanyi’s Paradox. See David Autor’s paper here.

    In the podcast Russ Roberts and David Autor comment that new technology and machinery will enable complements between human labour and machines/computers in ways we could never imagine. Another good point here is that machines don’t ‘own’ anything and so any increased productivity gained as a result of their use is not profit going to machines, it is increased surplus going to humans. Remember, when other people become more productive, we also benefit.

    As industries get disrupted there will be jobs that go obsolete, and new jobs created elsewhere. Granted, the effects of this changed income distribution will not be even. Some people make an argument in favour of forcible government redistribution (e.g. UBI) because the disruptive effects of this technology won’t be evenly felt. Some people even go so far as to suggest that if left unchecked, it will create a dystopic future where those who own capital machinery/tech will be rich, and those who don’t own any productive capital will be poor and live a hard life. I really disagree with this specific vision, because the transition will take place over time – it won’t be instant. This will allow people to retrain or refocus their skills, and there may be new ways for them to use general skills or knowledge that they already have (the ‘complementary’ idea above). I think this type of UBI argument is a backdoor appeal ‘necessitating’ more government.

    Besides, the net effect of all these new technologies will be to make goods and services cheaper. If the new capital/tech becomes really cheap, then surely poor people could just buy themselves some productive capital equipment and enrich themselves in this way. There’s also every possibility that we’ll use machinery or technology to augment our capabilities e.g. Exoskeletons, genetics, nanotechnology. See this example of an exoskeleton enabling a worker to become much ‘stronger’ and productive in ways that were not previously possible.


    What do we do and where do we go from here? 

    I think labour market deregulation is essential, for reasons Isaac mentions in Keep Them Down, Keep Them Dependent. Nominal wages might fall, but real wages would rise. Reducing labour market friction would encourage employers to take a chance on new hires, rather than be overly cautious as a result of labour regulations.

    Better education is required, to make sure that people are able to be productive in the more technologically advanced future. That said, I obviously disagree that this education has to be granted by the government, nor could the government effectively ‘pick winners’ in terms of directing students into the optimal fields. Governments (central planners) lack local knowledge, and there are big public choice problems (e.g. unicorn government thinking). For this reason, we should have more free market delivered education. This will help us use the price mechanism to ‘guide’ the next generation of students into studying fields that humanity actually desires, as well as guide people to retrain when technology obsoletes their current job. This would be vastly preferable to the alternative, which is politically determining what skills people learn.

    I’m not 100% certain that the ZMP hypothesis won’t eventuate, but I’m reasonably optimistic that it won’t work out that way. I think the most likely scenario is that technological advancement will lead to less work and more abundance.

    Image: New Scientist, Daewoo

  • Stephan Livera 7:30 AM on October 9, 2014 Permalink | Reply
    Tags: , crypto-anarchism,   

    Freedom is coming 

    I think governments of the world will eventually become obsolete. This may seem like a controversial or radical opinion now, but I think it will be the outcome of increasing use of technology and capital accumulation to perform all the services that people currently feel that “only a government could provide”. No violent revolution is necessary, a peaceful movement to create a new society within the shell of the old one is all that’s required.

    Mattheus Von Guttenberg in Crypto-Anarchists and Cryptoanarchists:

    Once consumers start chatting over lines that are end-to-end encrypted by default, dragnet surveillance is over. Once consumers start browsing the Internet through I2P or TOR, Internet espionage is over. Once consumers start using Bitcoin in their purchases, debt payment, remittances, savings, and investment assets, the monetary circus of inflating fiat currencies is over. Without control of money and information, the State itself withers. It cannot tax what it cannot surveil.

    So while ideologically committed Crypto-Anarchists will write the code and provide the zealotry, ‘cryptoanarchists’ will simply use the product without even knowing or caring about the underlying ideology. Call it agorism by another name.

    When people decide to eschew state racketeering taxi licence companies in favour of Uber, they’re being agorist. When people choose to use the sharing economy to find a place to stay e.g. Airbnb, they’re being agorist. When people store their value in non-state money, they’re voting with their feet against predatory and warmongering governments.

    Why would they have incentive to do this? Because it’s cheaper, and because it’s more easily available. Because freedom.

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