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  • Stephan Livera 4:23 PM on September 27, 2014 Permalink | Reply
    Tags: , Damon Linker, Iraq, ,   

    Damon Linker’s terrible, horrible, no good, very bad article 

    Damon Linker recently wrote a critique of libertarianism, apparently unaware that the majority of libertarians are anti foreign intervention. See his article: Libertarianism’s terrible, horrible, no good, very bad idea at The Week.com

    Ideas have consequences — and bad ideas have bad consequences.

    Yeah, bad ideas sure do have bad consequences. Deirdre McCloskey’s work shows that changing ideas and attitudes towards merchants (to become more positive) are what caused a massive improvement in human quality of life since the 1800’s. See her video here.

    Into this category I would place the extraordinarily influential libertarian idea of “spontaneous order.”

    Damon disparages the idea of spontaneous order, but he shows that he doesn’t understand what he’s talking about.

    Simply stated, the idea holds that when groups of individuals are left alone, without government oversight or regulation, they will spontaneously form a social and economic order that is superior in organization, efficiency, and the conveyance of information than an order arranged from the top down through centralized planning.

    It’s not just in the absence of governments, it’s even while living under governments and under government regulation. See Jeffrey Tucker’s post to understand Hayek’s insights a little better:

    Let’s say you set out to plan the world. “If we possess all the relevant information,” writes Hayek, “if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic.” We only need to plug in the right data into our calculus and issue orders. The problem is that this solution presumes the unsolvable problem has already been solved: gaining that information.

    So far it might appear as if Hayek is describing a world of disconnected chaos and uncoordinated randomness, a nihilistic social order of swirling unpredictability. That is not the world in which we live. Why not? Because of the existence of institutions like prices, mores, habits, signaling systems of culture and learning — of knowledge that we all possess, not always consciously but mostly inchoately. They are institutions which we ourselves have not created but they assist us to making the most of our lives. – Jeffrey Tucker, My Own Coming to Terms with Hayek

    Damon proceeds with:

    The fact is that aside from certain very rare cases (see below), it’s impossible to find human beings acting with perfect freedom outside of an already existing political order that shapes their decisions and determines to a considerable extent their behavior and range of possible choices.

    Firstly, notice how Damon has set up an impossibly high standard: perfect freedom, which never existed under the state either.

    Secondly, it’s almost as though he is entirely unaware of libertarian efforts at explaining historical examples of anarcho-capitalism and/or private law. See a huge list in my earlier post: “But we don’t have data on anarcho-capitalism”. Or see Anarchy Unbound by Peter Leeson, an outstanding book showing real world examples of self-governance through history, with an economic lens applied for analysis. Economic theory helps us to understand what’s going on, and what principles enable people to secure social cooperation. This is surprisingly true even in circumstances where you wouldn’t ordinarily believe that it is possible, such as where society is diverse or where groups are composed solely of “bad eggs” (pirates, gangs). I wrote a post about the book here: Anarchy works better than you think.

    President Obama got a lot of flack during his 2012 campaign for re-election for saying that wealthy business owners “didn’t build that” all by themselves, but his point was indisputable.

    Actually, it is disputable. Firstly, absent the state, we would see private entrepreneurs providing all sorts of services – it’s just not so easy to see this currently because the government (whether intentionally or not) blocks it. This can be through regulation, taking resources that could be used to do it (crowding out) or outright outlawing competition to entrench itself as the monopoly. The efforts of the private sector can also be denied via regime uncertainty as Robert Higgs writes about

    Secondly, see Don Boudreaux’s article, Government didn’t build that – essentially making the point that all sorts of infrastructure is privately built -“FedEx, privately built oil and gas pipelines, private schools, private insurance companies, privately built skyscrapers.” And yet you don’t see people running around saying that Amazon ‘owes’ its success to the existence of FedEx. Government provided infrastructure might be important (in the current world) – but the existence of government infrastructure is not responsible for business people’s successes. Besides, there’s also the equivalent opposite argument – government wouldn’t have anything to tax (steal) if it weren’t for productive members of society.

    How about the culture of general law-abidingness that we call the rule of law?

    How about The Myth of The Rule of Law by John Hasnas? “1) there is no such thing as a government of law and not people, 2) the belief that there is serves to maintain public support for society’s power structure, and 3) the establishment of a truly free society requires the abandonment of the myth of the rule of law.”

    The Federal Reserve’s regulation of the money supply?

    How about – The Federal Reserve is responsible for punishing savers at the expense of borrowers, causing the boom and bust cycle and helping the government fund warfare? I recommend Murray Rothbard’s What Has Government Done to Our Money? and Jörg Guido Hülsmann’s The Ethics of Money Production.

    An independent judiciary for the settlement of civil disputes? Law enforcement at local, state, and federal levels that fights violent crime, fraud, corruption, monopolistic business practices, and a host of other behaviors that would otherwise scuttle the working of markets?

    See The Machinery of Freedom: Illustrated Summary by David Friedman and The Market for Security | Robert P. Murphy to get an idea of how these might work in the free market. Oh yeah, and under free market provision of these things you actually have stronger recourse if there’s police brutality, see earlier post “Occasional Police Brutality is the price we pay for Law and Order”

    Now to the ridiculous foreign policy argument Damon makes:

    The order we see at work in the United States and in other advanced democracies is anything but spontaneous.

    But there is one situation where it’s possible to see genuine spontaneity in action: when an established political order is overthrown. Now it just so happens that within the past decade or so the United States has, in effect, run two experiments — one in Iraq, the other in Libya — to test whether the theory of spontaneous order works out as the libertarian tradition would predict.

    As the libertarian tradition would predict? Most libertarians are against foreign intervention to begin with! Often times, one intervention leads to even more negative consequences further down the line.

    The most moronic comment Damon makes here is to suggest that just because one political order is overthrown, that this somehow creates a perfect libertarian experiment. See the points Scott Horton makes on the Tom Woods show from around 10-13 minute mark, episode from September 19, 2014, The War on ISIS: Another Round of Idiocy:

    “We look back in hindsight: The only mission the Americans actually accomplished, the entire time that they were in Iraq, was to help the Iranian backed Shi’ite militias kick all the Sunnis out of Baghdad, and make it an 85% super majority Shi’ite city, ruled by the 60% majority Shi’ite Arab population of the country. It was a minority ruled Sunni Baathist dictatorship not a Sunni Islamist one, a Baathist one – meaning, Saddam was basically a communist in olive green with a beret and a clean shaven chin, but he was representing the Sunni minority tribes and all that, and lording it over the Shi’ite. And what bush did was he had the army and the marine corp change that. And make Baghdad a Shi’ite city. So what does that mean? It meant that the parties that Bush chose to put in power, to be the leaders of the Shi’ite community to take over the new government in Baghdad. By the time America left, they didn’t have one reason left to compromise with the Sunnis at all. We’d given them all of Baghdad, so from their point of view the Sunnis can rot in the sun. – Scott Horton

    Libertarians and other anti-war activists had been warning about this all along:

    “Well intentioned and well informed commentators have been warning this all along, Bob Dreyfuss, Justin Raimondo and others from 2003 on” – Scott Horton

    So rather than creating a perfect libertarian experiment, the United States ended up helping one side over another. Oops. Guess Damon missed that part.

    In both cases, spontaneity brought the opposite of order. It produced anarchy and civil war, mass death and human suffering.

    Did Iraq suddenly decide to become a libertarian or anarcho-capitalist nation? Clearly not. It was not spontaneity, but foreign intervention that actually turned a bad situation into an even worse one. The libertarian view is entirely consistent with this idea. See David Henderson’s An Economist’s Case for a Non-Interventionist Foreign Policy.

    Order doesn’t just happen, and it isn’t the product of individual freedom. It needs to be established, and it needs to be established first (sometimes by force), before individuals can be granted civic, economic, and social freedom.

    Not at all Damon. There are plenty of examples, such as Anarchy Unbound by Peter Leeson or the laundry list here.

    The libertarian prophets of “spontaneous order” get things exactly backward, sometimes with catastrophic real-world consequences. Which is why it’s a particularly bad idea.

    This was not spontaneous order. You know what’s a bad idea? Making dishonest representations about things you don’t understand.

     
    • Justin L. Oliver 7:01 PM on September 28, 2014 Permalink | Reply

      In addition to what you mentioned, I think Charles Johnson in his essay “Women and the Invisible Fist” talked about how spontaneous order can sometimes be malign, so it seems The Week writer set a false argument that libertarians believe spontaneous (read: emergent) order is necessarily superior to any formal organizing.

      Like

    • steve 1:15 AM on September 29, 2014 Permalink | Reply

      1) Leeson’s book was very disappointing. Doesn’t really demonstrate its claim. Your laundry list mostly just shows that for brief periods, until things get complicated or one party develops outsized influence compared with everyone else, what might pass for anarchy can work.

      2) McCloskey ignores everything else going on in the world to make her case. Horrible scholarship.

      However, you are absolutely correct that he misses the boat on foreign intervention. He clearly does not understand, or is just misrepresenting, libertarian thought.

      Like

      • Stephan Livera 7:16 AM on September 29, 2014 Permalink | Reply

        1) I disagree, I thought it was really good! But OK, I guess we disagree on that. As for the laundry list, how about the iceland examples? That lasted for hundreds of years, and the reason it failed was that it wasn’t ‘anarchist enough’

        2) So I take it you’re more of an ‘institutions of private property’ explain the human success kinda guy?

        Yeah, I think Damon’s central thrust (foreign intervention misrepresentation) is really where he messes up. Invading Iraq was not a libertarian thing to do, and intervening to help one group of people overpower another is not ‘permitting spontaneous order’.

        Cheers for commenting.

        Stephan

        Like

  • Stephan Livera 12:50 PM on September 26, 2014 Permalink | Reply
    Tags: , capitalism leaves the poor behind   

    “Capitalism leaves the poor behind” 

    This claim is laughable. In actual fact, free market competition amongst entrepreneurs brings the cost of goods and services down. We get more for less,and in many cases – even poor people today have access to comforts that rich men hundreds of years ago (or even decades ago) did not have.

    Take a look at the reduction in hard drive space costs for example. See Cost of Hard Drive Storage Space:

    • 1956 – IBM 5 megabyte Hard Drive cost US $50,000 at a cost per megabyte of $10,000
    • 2013 – Western Digital MyBook WDBACW0020H cost $109.99, at a cost per gigabyte of 6.33c

    Capitalism is a process to be supported. It’s not perfect, but it’s the most realistically implementable solution we’ve got. You can’t stop people from being (mostly) self-interested, but you can at least set up a structure that encourages people to serve other people in order to serve their own self-interest.

    It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest – Adam Smith

    If you want to help people, get the government out of the way, and give entrepreneurs freedom to solve problems.

     
  • Stephan Livera 7:30 AM on September 25, 2014 Permalink | Reply
    Tags: comparative advantage, , , George Reisman, , Thomas Piketty   

    Benefiting from the productivity of OTHER people 

    One really cool insight from economics is how we are able to benefit from the productivity of other people. Don Boudreaux has a great example here in Episode 4 of 5 – Comparative Advantage and the Tragedy of Tasmania:

    The really interesting part, is how when Ann’s productivity rises (see from about 5:15 in the video), Bob also benefits from this.

    Even though this isn’t a very complicated idea, many people fail to apply the lesson. People with the anti-capitalist mentality spectacularly fail to grasp this concept. Especially people who are forceful egalitarians, typically those from the left who continually rail against inequality.  See George Reisman’s rebuttal to Thomas Piketty, Piketty’s Capital: Wrong Theory / Destructive Program:

    Contra Piketty: The General Interest in the Inequality of Wealth and Income

    When it comes to the subject of economic inequality, Piketty lives in a world of 19thcentury novels. He has dozens of references to the novels of Jane Austen and Honoré de Balzac, in which the role of inherited wealth is prominent. He believes that the world of these novels is the world of capitalism, in contradiction of the fact that in the foremost capitalist country, the United States, the great fortunes of every generation have not been the product of inheritance but were earned by those who owned them.

    Piketty and the rest of the egalitarian movement know nothing of how great fortunes are acquired under capitalism, nor of their economic significance.

    Reisman demonstrates the wrong-headedness of the egalitarian approach:

    Indeed, the truth is that egalitarians view capital and capital goods as though they were consumers’ goods, that is, as goods whose benefit goes exclusively to their owners and that can be of benefit to those not fortunate enough to be their owners, only by virtue of the latter becoming their owners.

    George Reisman demonstrates how we are able to benefit from the productivity of others:

    The egalitarians do not recognize the simple truth that in a capitalist economy it is not necessary to own capital or capital goods in order to get their benefit. All that is necessary is that one be free to buy the products. Whoever buys gasoline or heating oil, for example, gets the benefit of oil refineries and pipelines. Whoever buys or rents an automobile gets the benefit of automobile factories and steel mills. Under capitalism and its production for the market, everyone gets the benefit of the capitals owned by others. He gets that benefit when he buys the products of those capitals.

    Reisman shows that it’s not just from buying those products that we benefit either:

    Moreover, closely related to this benefit of privately owned capital to the general buying public, is the fact that privately owned capital is the source of the demand for the labor of the average person. It is the source both of the supply of the goods that he buys and of the demand for the labor that he sells.

    Inequality is not a bad thing if it enables more people to live at a higher standard of living than otherwise possible. Hopefully you find this illuminating and you can now see how we actually benefit as a result of other people being more productive.

     
  • Stephan Livera 7:30 AM on September 24, 2014 Permalink | Reply
    Tags: , ,   

    “But we don’t have data on anarcho-capitalism” 

    This is a common view, but it’s not accurate. Yes it’s true that anarcho-capitalism has never existed in the form that libertarians today envision it, but there are still many historical examples of something similar. Even though anarcho-capitalism hasn’t existed before, we can still learn something from these examples.

    See Anarchy Unbound by Peter Leeson, an outstanding book showing real world examples of self-governance through history, with an economic lens applied for analysis. Economic theory helps us to understand what’s going on, and what principles enable people to secure social cooperation. This is surprisingly true even in circumstances where you wouldn’t ordinarily believe that it is possible, such as where society is diverse or where groups are composed solely of “bad eggs” (pirates, gangs). I wrote a post about the book here: Anarchy works better than you think.

    See a huge list by Daniel J. D’Amico here: Case Studies in Anarcho-Capitalism

    Here is a non-exhaustive list of case studies in anarcho-capitalism. I do not include case studies of ordinary goods like roads, firemen or lighthouses. This list covers laws, contract enforcement, and the protection of social order. If anyone knows of more publications please send them to me and I’ll try to keep the list up to date:
    Africa:
    Leeson, Peter T. (forthcoming) “Trading with Bandits” Journal of Law and Economics. available at: peterleeson.com
    The American Frontier:
    Anderson, Terry and P.J. Hill (1979). “An American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West,” Journal of Libertarian Studies. Vol. 3 No. 1 pp. 9 – 29. Available here
    Anderson, Terry and P.J. Hill (2004). The Not So Wild Wild West. Stanford, CA: Stanford University Press. For sale on Amazon.com.
    Benson, Bruce L. (1991). “An Evolutionary Contractarian View of Primitive Law: The Institutions and Incentives Arising under Customary Indian Law,” Review of Austrian Economics. Vol. 5 pp. 65 – 85. Available here.
    Amsterdam:
    Stringham, Edward (2003). “The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam,” Quarterly Review of Economics and Finance. Vol. 43 No. 2 pp. 321 – 344. Available at: sjsu.edu.
    China:
    Friedman, David (2006). “From Imperial China to Cyberspace: Contracting Without the State,” Journal of Law, Economics, and Policy. pp. 349 – 370. Available at: davidfriedman.com.
    England:
    Benson, Bruce L. (1998a). “Evolution of Commercial Law,” in P. Newman (editor) The New Palgrave Dictionary of Economics and the Law. London: Macmillan Press. For sale on Amazon.com.
    Benson, Bruce L. (1998b). “Law Merchant,” in P. Newman (editor) The New Palgrave Dictionary of Economics and the Law. London: Macmillan Press. For sale on Amazon.com.
    Benson, Bruce L. (1990). The Enterprise of Law, Justice without the State. San Francisco, CA: Pacific Research Institute for Public Policy, pp. 224 – 230. For sale on Amazon.com.
    Europe:
    Benson, Bruce (2002). “Justice without Government: The Merchant Courts of Medieval Europe and Their Modern Counterparts,” printed in Beito, Gordon and Tabarrok (editors) The Voluntary City: Choice, Community and Civil Society. Oakland, CA: The Independent Institute pp. 127 – 150. For sale on Amazon.com.
    Davies, Stephen (2002). “The Private Provision of Police during the Eighteenth and Nineteenth Centuries,” printed in Beito, Gordon and Tabarrok (editors) The Voluntary City: Choice, Community and Civil Society. Oakland, CA: The Independent Institute pp. 151 – 181. For sale on Amazon.com.
    Greif, Avner (1989). “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders,” Journal of Economic History, pp. 857 – 882. Available on JSTOR.
    Milgrom, Paul, Douglass North, and Barry Weingast (1990). “The Role of Institutions in the Revival of Trade: The Medieval Law Merchant, Private Judges, and the Champagnes Fairs,” Economics and Politics. pp. 1 – 23. Reprinted in Anarchy and the Law.
    Iceland:
    Friedman, David (1979). “Private Creation and Enforcement of Law – A Historical Case,” Journal of Legal Studies. pp. 399 – 415. Available at davidfriedman.com.
    Long, Roderick T. (1994). “The Decline and Fall of Private Law in Iceland,” Formulations. Available at: libertariannation.org.
    The Indus Valley:
    Thompson, Thomas J. (2006). “An Ancient Stateless Civilization: Bronze Age India and the State in History,” The Independent Review. Vol. 10 pp. 365 – 384. Available at Independent.org.
    Ireland:
    Peden, Joseph R. (1977) ” Property Rights in Celtic Irish Law,” Journal of Libertarian Studies. Vol. 1 No. 2 pp. 81 – 95. Available at http://www.mises.org.
    Mexico:
    Clay, Karen (1997). “Trade without Law: Private Order Institutions in Mexican California,” Journal of Law, Economics and Organizations. pp. 202 – 231. Available at Ideas.
    Scotland:
    Leeson, Peter T. (unpublished) “Laws of Lawlessness.” Available at peterleeson.com.
    Somalia:
    Coyne, Christopher J. (2006). “Reconstructing Weak and Failed States: Foreign Intervention and the Nirvana Fallacy,” Foreign Policy Analysis. Vol. 2 pp. 343 – 360. Available at ccoyne.com.
    Higgs, Robert (2004). Against Leviathan: Government Power and a Free Society. Oakland, CA: The Independent Institute. pp. 374 – 376. For sale on Amazon.com.
    Leeson, Peter T. (unpublished) “Better Off Stateless Somalia Before and After Government Collapse,” Available at: peterleeson.com.
    Powell, Benjamin, Ryan Ford and Alex Nowrasteh (unpublished). “Somalia After State Collapse: Chaos of Improvement?” Independent Institute Working Paper Number 64. Available at independent.org.

    Properal lists a few more here (duplicates removed):

    Ordered Anarchy: Evolution of the Decentralized Legal Order in the Icelandic Commonwealth by Birgir T. Runolfsson

    “Privatization, Viking Style: Model or Misfortune?” by Roderick T. Long

    Mark Stoval has a list here (duplicates removed):

    Historical Examples

    Medieval Iceland and the Absence of Government by Thomas Whiston
    The Mild, Mild West by John Tierney
    Pennsylvania’s Anarchist Experiment: 1681-1690 by Murray Rothbard added 6/16/11
    The Jurisprudence Of Polycentric Law by Tom W. Bell (includes Historical examples of polycentric legal systems) added 9/01/11
    Law Prior to the State (Polycentric Law) by Tom W. Bell added 9/01/11
    Customary Legal Systems with Voluntary Enforcement & The Rise of Authoritarian Law by Bruce L. Benson (from The Enterprise of Law) added 9/04/11
    The English Experience With Private Protection by Roderick T. Long added 9/28/11

    Or see YouTube of David Friedman’s talk, Law Enforcement Without the State.

    After seeing these examples, do I expect that you’ll become an anarcho-capitalist instantly? No, the aim is merely to neutralise the objection that “we don’t have data”. We do have data, you’ve just not been exposed to it yet.

     
  • Stephan Livera 7:30 AM on September 23, 2014 Permalink | Reply
    Tags: calculation problem, economic calculation problem, , ,   

    Why does socialism fail? We need prices 

    Socialism on any large scale will necessarily fail – to see the proper argument on this, read Economic Calculation in the Socialist Commonwealth by Ludwig von Mises. Here is a great shortened version of the argument by Hans-Hermann Hoppe:

    “If there is no private property in land and other production factors, then there can also be no market prices for them. Hence, economic calculation, i.e., the comparison, in light of current prices, of anticipated revenue, and expected cost expressed in terms of a common medium of exchange-money-(thus permitting cardinal accounting operations), is literally impossible. Therefore, socialism’s fatal error is the absence of private property in land and production factors, and, by implication, the absence of economic calculation.” (Hoppe 1996, p. 143)

    Or see this video:

     
  • Stephan Livera 7:30 AM on September 22, 2014 Permalink | Reply
    Tags: , , , , ,   

    Caricatures of libertarians: Regulation 

    Ignorant people are now sharing images like this on social media:

    10672221_822495994459795_5623669437712531893_nIt may be a light-hearted joke for some, but there are surely people who believe this is literally the sort of world that libertarianism would bring about. This topic has been done to death by libertarians, I even have posts covering this topic – but let’s try another way to think about it:

    First, we have been conditioned to think that “government makes it safe by imposing minimum safety standards”, but my worry is that people are misguided here. A better way to think of safety is that its a spectrum, not a binary safe/unsafe condition.

    Second, making things more safe necessarily costs more resources or more time. Imagine at one end on this spectrum, where things are (almost) perfectly safe – but cost an incredible amount of resources/time, which cannot be put into creating other things individuals desire. There is some point at which we as individuals have to make a tradeoff about what level of safety for what level of cost we are willing to bear, because there are other things that we also want. e.g. we might be able to have incredibly safe building standards, but this might come at the cost of resources needed to make food.

    Third, who is the person best placed to make the decision about cost trade offs? The individual or the central planner? Libertarians are pointing out that an individual knows his situation, risk tolerance, available resources, personal preferences, and local knowledge better than any central planner ever could. The lesson about local knowledge that Hayek taught us in his essay, The Use of Knowledge in Society is a very poorly understood one. I particularly like Jeffrey Tucker’s explanation of the lesson in his post here: My Own Coming to Terms With Hayek.

    Hayek is saying that not only do we as individuals lack the information to manage the social order but much of the information we use to manage our own lives is beyond the realm of scientific accessibility.

    It’s not just about planning an economy, but how civilisation works:

    Here, then, is the knowledge problem. It is about more than the ability to plan an economy. It is about the whole of our lives. It is about the ability to plan and direct the course of civilization. That capacity to manage the whole will always and everywhere elude our grasp. That’s a beautiful revelation because this insight reveals the truth about human freedom. Freedom is not just one way to organize society. It is the only way.

     
    • greattomato 1:19 PM on September 24, 2014 Permalink | Reply

      Had a dead end argument with a Marxist as regards this post… Like any dialectical nonsense, said Marxist was unable to move past semantics.

      Like

      • Stephan Livera 2:47 PM on September 24, 2014 Permalink | Reply

        Yeah I have definitely encountered that type of person! I think we just have to calmly and rationally represent the case as best we can, and hope that people eventually come around.

        On Wed, Sep 24, 2014 at 1:19 PM, Peace and Markets wrote:

        >

        Like

  • Stephan Livera 7:30 AM on September 21, 2014 Permalink | Reply
    Tags: deirdre mccloskey, ,   

    Money as a measure of people’s worth? 

    Recent status I saw talking about a page on student entrepreneurship being ‘disturbing':

    All the posts are about kids making thousands by starting their first business at 15 and why aren’t you doing it too? How young does our obsession with money as a measure of a person’s worth need to start?

    I think there are two different meanings to “a person’s worth” here:

    1. Spiritual sense – all people are equal
    2. Economic sense – There is no such thing as objective value, all value is subjectively perceived.

    So I view no sense in which ‘money is a measure of a persons worth’ being implied by capitalism – this is just an attempt to vilify people who are pro-free markets. Entrepreneurs use resources to combine factors of production in ways that create products or services other people want. Entrepreneurs are helping other people, and in this sense – they are creating wealth. This is not a thing to shun.

    Some of the work by Deirdre McCloskey shows one of the underlying reasons for the massive growth in human prosperity over the last few hundred years (as opposed to the thousands of years prior) was due to a shift in ideas and culture. The attitudes towards making money changed (it used to be dishonourable to make money) – and with this change, humanity experienced a vast improvement in quality of life. The people with an anti-capitalist mentality are killing the goose that laid the golden egg. See a nice essay series on this, The Debate: “Deirdre Mccloskey and economists’ ideas about ideas” (Free PDF here)

    Of course there was tinkering and invention long before the industrial revolution. Blacksmithing improved. So did sailing ships. Agricultural tools and practices advanced. But there wasn’t a great deal of market-driven innovation. There wasn’t the frenzied quest that marked much of the past two centuries to create entirely new products for sale to the general public. Premodern creativity seldom involved creative destruction. As odd as it sounds, creativity confined to improving known products, industries, and methods of production – creativity that creates without simultaneously destroying – isn’t sufficiently creative to create mass flourishing. Such undestructive creativity is too polite. It often saves labor (that is, “destroys” some jobs), yet it poses no significant threats to the status quo or to the familiar structures of everyday life. So this polite creativity, while it might never have received an honor subsidy, was never burdened with a dishonor tax.

    The dishonor tax was levied on merchants, those who dared to seek personal profit from impersonal exchange – from the art of (it was once mistakenly thought) duping one group of strangers to part with their money in exchange for goods produced by another group of strangers. How can that be honorable? But repeal the dishonor tax and watch out! Such exchange then occurs with greater and greater frequency. We get mass flourishing.  – page 6, Lead Essay by Don Boudreaux

     
  • Stephan Livera 7:30 AM on September 20, 2014 Permalink | Reply
    Tags: , apathy, confirmation bias, not caring,   

    Oh, so now you don’t care? 

    After I make a counter-argument or present some kind of evidence, a common trend I see is people dropping out of the discussion, claiming that they “don’t care”. There are two main variants:

    1. The active “don’t carer” – This person will proactively tell me they don’t care about the argument I made.
    2. The passive “don’t carer” – This is usually after I’ve presented some kind of evidence for a position I hold, this person will say they will look at it later because “they’re busy now”. They never do, or they don’t bother responding to me on whether they agree/disagree.

    Now it’s one thing to consistently not care, in which case the person would not advocate for or against state policies, they would disregard politics, and they would go peacefully about their life. There’s no issue with this kind of position – but this isn’t what’s going on. The “don’t carers” I speak of, are happy to advocate for various state policies, and are happy to post memes caricaturing libertarian positions on social media. We can only conclude that really, they do care enough about society outcomes if they’re advocating various state policies, or they do care enough to caricature libertarians – but not enough to honestly consider the argument. This is inconsistently not caring.

    Why does this happen? Most likely, it’s because of confirmation bias. We seek out information that confirms our world view, and when we receive evidence that goes against our world view, we tend to discount or discard that evidence.

    Is it the case that your political opinions affect only yourself? No, your belief in the state and your voting is causally part of the institutions that force your beliefs on other people. So surely it can’t be a defense that you just “prefer” it in the same way that person A can like vanilla and person B can like chocolate, where both can privately choose and consume whatever they want. Because in this case, person A is forcing his belief on other people. Now, to the possible objection that the libertarian is ‘forcing’ his viewpoint on other people, see my earlier post here: “But I want a society with taxation” – false equivalence.

    Could this same confirmation-bias criticism be applied to me? In a sense, yes – we’re all human and thus we’re all susceptible to bias. But I do genuinely make a good faith attempt to respond to every reasoned argument made against my position. I may not always get it right, but if someone presents an argument, I make an honest attempt to consider it. A high percentage of blog posts I write are in response to common objections. Anyway, the main reason it would be committing false equivalence to apply this argument to me – is that I rarely (if ever) say “I don’t care enough about your position to do further reading or even attempt to craft a response”.

    I think Michael Huemer does a great job in this short talk, The Irrationality of Politics:

    “Rationality is costly, in that it prevents us from believing whatever we want to believe.” – Michael Huemer

     
  • Stephan Livera 7:30 AM on September 19, 2014 Permalink | Reply
    Tags: , ,   

    Other forms of governance: Arbitration and Mediation 

    Distinguish between government, and governance. Examples of non-state governance are ways we can see a kind of private law at work. One good example is the use of arbitration and/or mediation. Note that prior to the law we use today, in order to do international trade – a system of “merchant law” aka Lex mercatoria evolved.

    Lex mercatoria (from the Latin for “merchant law”) is the body of commercial law used by merchants throughout Europe during the medieval period. It evolved similar to English common law as a system of custom and best practice, which was enforced through a system of merchant courts along the main trade routes. It functioned as the international law of commerce.

    I’ll quote a few sections from Part IV: Self-Governance as Superior to the State of Peter Leeson’s excellent book, Anarchy Unbound. See my review of his book here: Anarchy works better than you think. Peter points out how traders would manipulate their social distance, as a means of signalling, which facilitated intergroup exchange without a government:

    One way traders did so was by submitting voluntarily to the decisions of private merchant courts… These private courts adjudicated disagreements between medieval traders in light of the law merchant’s customary law.

    Even today, a great number of contracts between very large multinational corporations ranging down to small businesses will insert arbitration clauses into their agreements. This means they want to first attempt to resolve the dispute through negotiation, if this does not work, then the matter proceeds to mediation and/or arbitration – and only as a last resort, they use the state courts.

    Note the prominence of arbitration clauses:

    Today at least 90 percent of all international trade contracts contain arbitration clauses

    And it’s not just small amounts either:

    The amounts in dispute varied from $50,000 to more than $1 billion, with more than 60 percent of all disputes involving sums of money between $1 million and $1 billion

    Do they work?

    These arbitration associations often rely on evolved customary law that dictates how exchange disagreements are to be settled, and “arbitral awards are most generally promptly and willingly executed by business” (David 1985:357). Indeed, virtually “every research into the practice of international arbitration shows that by far the great majority of arbitration awards is fulfilled without the need for enforcement” (Bockstiegal 1984:49)

    Contrast how cheap and fast arbitration can be (less than $200 per party) with the extremely expensive and drawn out government court process. It makes sense that most companies really just want a quick resolution to the issue so they can get on with doing business.

    To be fair, nobody is arguing that arbitration is perfect or that it is all that we require – there are certainly downsides to the process and a free market/anarcho-capitalist society would likely use it as one of many governance mechanisms. But the real point here is: Don’t you think it’s interesting that all these companies choose to do arbitration first? Would you consider this prima facie evidence that self-governance works better than you think?

     
  • Stephan Livera 7:30 AM on September 18, 2014 Permalink | Reply
    Tags: , , ,   

    The difficulty of explaining libertarian solutions 

    It is difficult to show people why libertarian solutions can work because people are overwhelmingly used to centralised, top down solutions. Though not intentionally, their minds are closed off to the idea that good systems can be built without any top down ruler, or politicians and regulators. Often, good systems are not built from central planning, they are instead built through trial and error.

    The difficulty is in communicating how and why this will happen.  To a person unfamiliar with the work in this area e.g. Hayek’s local knowledge concept, – it will appear as though the libertarian is proposing to merely remove the current government program with no replacement at all, when in actual fact – entrepreneurs, private law and self-governance are very capable of coming up with solutions. We can point to prior examples of self-governance though, see my post about Peter Leeson’s book, Anarchy Unbound. It’s just not possible for us to predict exactly how they will turn out in practice.

    “First, persons in anarchy who must find private solutions to the obstacles that stand in the way of their ability to realise the gains from social cooperation are better at finding such solutions than you are. Thus the fact you (or other researchers) haven’t thought of a self-governing mechanism that can overcome some problem that anarchy presents doesn’t imply that self-governance is unable to do so” – page 224 Anarchy Unbound by Peter Leeson

    Just because we can’t spell out exactly how it will work, doesn’t mean it can’t be done.

    media-20140828

     
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