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  • Stephan Livera 7:30 AM on October 31, 2014 Permalink | Reply
    Tags: , ,   

    “But they’d come here and bring their violence” 

    Another objection to the idea of open borders is this idea that “people from wartorn country XYZ have a violent culture and would bring their violence to our peaceful streets”. So presumably when coming to the more developed country, they would prefer to use violence than to simply trade for what they want. Interesting objection, but I think there’s a good answer to this.

    Let’s start with a more abstract and general idea: Other things being equal, you are less likely to do something if it costs you more to do it. An opportunity cost is what we bear when we have to forego the next best alternative. This was a great point I heard on the EconTalk podcast: Edward Lazear on Becker (relevant transcript pasted below)

    And so Gary (Becker) then reasoned that the opportunity cost of a child was the price of the mother’s time; and the price of the mother’s time is what she could be doing elsewhere. And that related to her wage rate. All right, so what does that tell you? Well, in the 20th century, what that says is that when women had the option to work, or when most women were working, as they are now, what you’d expect is that women with high wages have very high values of time, and as a result, it’s more costly for them to take time off and to have children, and so they tend to have fewer of them. If you go back to the 19th century, women were not working, and so this mechanism of high-priced women versus low-priced women was the reverse. The women whose time value was high in alternative activities, like working on a farm or doing household chores, was actually the low-priced woman, or the woman who was poor. And so we had the situation reversed in the 19th century. And so what Gary was able to do with this simple approach was to reconcile two facts. I’ll make one more point and then I’ll pause. Russ, I’m sorry I’m talking on here, but this is– Russ: Go ahead. This is great.Guest: This is one that gets me excited. One of the most important policy implications that came out of Gary’s work–and at this point it’s so obvious and so much of a given that people don’t even realize that it came from Gary’s economics of fertility. And that is that if you want to change population growth rates–let’s suppose we go to a developing country where population is growing at a very rapid rate–the implication of Gary’s work is that the best way to do that is to educate girls. And it has nothing to do with teaching them about birth control or other methods of abstinence or anything like that. What it has to do with is that if you educate girls, what you do is you raise the value of their time in the labor market, and as a consequence, women will then voluntarily choose to have fewer kids. And we see this all around the world, and virtually every international organization and NGO (Non-Government Organization) accepts this as a given. And that’s now an important component of fertility policy. If you want to change the fertility rates, you need to make sure that you educate girls.

    So by educating the women, their opportunity cost of having a child rose dramatically – they could now otherwise earn a lot more money in the labour market.

    Now let’s apply the lesson to this specific case. A person who comes from a poorer country to a more developed nation will be able to produce more value to the economy, because there is just so much more infrastructure, technology and capital accumulation. Remember, they don’t necessarily have to be better at producing things than the local workers – due to the theory of comparative advantage, they need only focus on the area in which their relative productive inferiority is least (as we all could choose to do). See earlier post: Benefiting from the productivity of other people. Think of it like this: Even lower skilled work is valuable to society, because it can free up the time of very highly skilled/productive people to focus on doing what they do best.

    So in this sense, their movement to a more developed nation dramatically raises their opportunity cost. They can now produce at a much greater rate, and they now have access to many more goods and services than they previously did. If they choose to be violent and risk being thrown in jail, they’d now have a lot more to lose. Much better to trade for what we want in the positive sum economic system of capitalism than to try and fight other people and risk losing access to modern day comforts.

    I think people are more likely to get aggressive and cause trouble when they have nothing to lose. Give them something to lose.

     
    • cardiffkook 5:36 AM on November 1, 2014 Permalink | Reply

      I agree that the likelihood of violence in general is lower here than there. However the violence is often local. The relevant issue to most people is the health of their community not just the utilitarian state of the human race.

      In other words, if we assume everyone is a utilitarian, then your argument would be convincing. Of course I have never met a real utilitarian before. They are either real scarce or non existent.

      I am not arguing against immigration. But I don’t think this argument will be convince anybody.

      Like

      • Stephan Livera 7:34 AM on November 1, 2014 Permalink | Reply

        I agree with your broad point about utilitarian reasoning (that most people don’t think like utilitarians), I think Mike Huemer makes a similar point here on using the common sense approach to defending libertarianism https://www.youtube.com/watch?v=vmCn2vP-DEo

        As for my standard approach, I lead with the ‘common sense’ approach, but then in order to deal with possible objections – we have to use economics and statistics and history to try and show why the objection doesn’t hold water. So this post isn’t really making the initial case for open borders, I think there are better ways to do that. This post is ‘objection handling’.

        Like

  • Stephan Livera 7:30 AM on October 29, 2014 Permalink | Reply  

    Typical ways the state wrecks good things 

    Entrepreneurs in the free market look for ways to serve consumer demands in more cost effective ways. See Texas kindergartner gets 3D printer Iron Man hand.

    A Texas kindergartner is feeling like Iron Man thanks to a new prosthetic hand that was created by a 3D printer…. KTRK-TV in Houston said a volunteer in North Carolina created the hand, which cost only $45. A new prosthetic would have been too expensive, about $40,000, and would have lasted only as long as Keith didn’t grow.

    So once again, free market capitalism helps the poor by dramatically lowering the cost of goods and services. Now, what are the typical ways the state will wreck and reduce the value of this sort of innovation? See this comment by nefreat:

    I really hope you’re right and I am optimistic about the future.. BUT I can foresee all the Lyft/Uber bullshit but 100x worse. Medical industry is a much bigger and influential lobby than taxis.

    • Is the person who printed the prosthesis a licensed dealer?
    • You’re going to need to register as an LLC and go through FDA’s approval process if you want to be licensed.
    • Does dealer have malpractice insurance in every state where one of these is sold?
    • How about routine audits for the 3D printers because now they are classified as medical devices. You wouldn’t want to have unsafe medical devices would you?
    • Better have some office space allocated specifically for auditors who are on-site 24/7
    • Is there some prosthetic patent being violated?
    • Does the owner of the 3D printer realize there’s a EULA about not manufacturing weapons or medical equipment and you’re in general compliance with the laws of the country you’re manufacturing in?
    • Do you have a cleanroom where the manufacture of said prosthesis is performed?

    I am sure you could think of many more… but this is the type of shit I am sure we’ll deal with in the future.

    These are just some examples of the ways the state actually creates a war of all against all. Not in a literal, physically fighting each other sense, but just in the sense that so many different interest groups will try to use the power of the state to ensure that they get their ‘cut’. Why do they do this? Because in a world with governments, it’s easier to do this than to honestly compete for it.

    Am I suggesting that none of the above bullet points are required services? Not at all, they might well be required – just not to the extent or to the scope that the state typically mandates they are.

    The problem is not that everyone in the government is inherently evil (I’m not making that kind of argument here) – the problem is that the existence of the government changes the way everybody plays the game. While a free market is not perfect, it is a reasonable ‘disciplinarian’ to keep people honest. Contrast this with the state, which encourages dishonesty.

     
  • Stephan Livera 7:30 AM on October 27, 2014 Permalink | Reply
    Tags: , ,   

    Private law and efficiency 

    David Friedman is one of my favourite anarcho-capitalism theorists because his approach is just so measured and reasonable sounding. If you’ve wondered how it is that people can come to any sort of consensus about what the law should be (absent the state), you should see his book chapter: Anarchy and Efficient Law.

    Here’s the basic sketch of how it would look:

    Imagine a society with no government. Individuals purchase law enforcement from private firms. Each such firm faces possible conflicts with other firms. Private policemen working for the enforcement agency that I employ may track down the burglar who stole my property only to discover, when they try to arrest him, that he too employs an enforcement agency.

    There are three ways in which such conflicts might be dealt with. The most obvious and least likely is direct violence-a mini-war between my agency, attempting to arrest the burglar, and his agency attempting to defend him from arrest. A somewhat more plausible scenario is negotiation. Since warfare is expensive, agencies might include in the contracts they offer their customers a provision under which they are not obliged to defend customers against legitimate punishment for their actual crimes. When a conflict occurred, it would then be up to the two agencies to determine whether the accused customer of one would or would not be deemed guilty and turned over to the other.

    A still more attractive and more likely solution is advance contracting between the agencies. Under this scenario, any two agencies that faced a significant probability of such clashes would agree on an arbitration agency to settle them-a private court. Implicit or explicit in their agreement would be the legal rules under which such disputes were to be settled.

    Under these circumstances, both law enforcement and law are private goods produced on a private market. Law enforcement is produced by enforcement agencies and sold directly to their customers. Law is produced by arbitration agencies and sold to the enforcement agencies, who resell it to their customers as one characteristic of the bundle of services they provide.

    Why does this system tend towards efficiency? David offers some interesting arguments:

    In practice, a number of features of the situation are likely to hold down those costs. In many cases, the optimal rules (ex ante , before an actual dispute has occurred) are the same for almost everyone. This is particularly likely to be the case if the bargaining is over symmetrical rules. My agreement to accept a court that operates under negligence rules makes me worse off when I am the plaintiff, but better off when I am the defendant. If negligence is a significantly more efficient rule, it is likely that most people will prefer it.

    A second reason is that I must pay for the advantages of a favorable legal rule not only in the process of negotiating it but also in the price of transactions with others who will be bound by it. Suppose, for example, I manage to get a “favorable” legal rule for conflicts between me and any attorneys I hire: if they advise against settling and I lose the case, I can sue them for malpractice with a good chance of winning. One consequence of that rule will be to raise the cost to me of hiring a lawyer. In this and in many other cases, a “favorable” legal rule, like a “favorable” term in a contract, must be paid for in every transaction it applies to, and if it is inefficient the price is likely to be more than it is worth.

    Though the system will not be perfectly efficient, there are reasons to expect more efficient law under anarchy than other forms of legal system.

     
  • 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 

    Salon.com 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:

    1376984_713039912119428_4859021116453728476_n

    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?

      Like

      • 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.

        Like

  • 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.

    BzKMQgPCYAAL3nO

     
  • 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.

    Debt-1990

    Debt-2012

    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 FEE.org

    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.

     
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