Thursday, October 07, 2010

Caveman Thinking and Our Protectionist Instinct

Economic Paul Rubin writing in today's Wall Street Journal explains why our "caveman heritage" makes us resistant to clear thinking about international trade:

"There are two aspects of our evolved psychology that help explain beliefs about trade. First, humans tend towards zero-sum thinking. That is, we do not intuitively understand the possibilities of economic growth or the benefits of trade in achieving it.

Our ancestors lived in a static world with little intertribal trade and virtually no technological advance. That is the world our minds understand. This doesn't mean that we can't grasp the crucial concept that trade benefits both parties to a transaction—but it does mean that we must learn it.

Positive-sum thinking doesn't come naturally. By analogy, we learn to speak with no teaching, but we must be taught to read. Understanding the mutual benefits of exchange is like reading, not speech.

Second, we evolved in a hostile world. Our ancestors engaged in constant conflict with neighbors, much like present-day chimpanzees. We developed strong in-group and out-group instincts, and for many aspects of behavior we still have such feelings.

These feelings are benign when applied to something like rooting for local sports teams, but are more harmful when applied to international trade. They are most harmful when they generate actual warfare. Yet the metaphor of a "trade war" shows how close to the surface harmful instincts are.

These two sets of beliefs interact to explain our natural (mis)understanding of trade. We believe that the number of jobs is fixed (a result of zero-sum thinking) and that as a result of trade these jobs go to foreigners, whom in a deep sense we view as enemies. Both beliefs are incorrect, but both are natural. And in many cases politicians are only too eager to capitalize on these beliefs to be re-elected.

One of the great triumphs of modern economics is the reduction in tariffs and other barriers to the free international flow of goods. Enough voters have been convinced of the benefits of free trade that it has generally been a winning political position, and those running on protectionist platforms do not do well in contemporary America. It would be a disaster if the current economic malaise reversed this situation."

73 Comments:

At 10/07/2010 4:23 PM, Blogger Ironman said...

Oh, come now. Cavemen love free trade!

 
At 10/07/2010 6:39 PM, Blogger Buddy R Pacifico said...

Why are so many skeptical of global trade on this 10th anniversary of China's ascension to the WTO? "It's so simple even a caveman would understand." From 6-15-2010 Manufacturing and Technology News:

"Bill Clinton, the country's most ardent booster of opening trade with China, looks especially imprudent 10 years later. During a press conference on March 29, 2000, Clinton said that granting China permanent normal trade relations (PNTR), which allowed China to gain entry into the WTO, would be a great deal for America. "We do nothing," Clinton said. "They have to lower tariffs. They open up telecommunications for investment. They allow us to sell cars made in America in China at much lower tariffs. They allow us to put our own distributorships there. They allow us to put our own parts there. We don't have to transfer technology or do joint manufacturing in China any more. This a hundred-to-nothing deal for America when it comes to the economic consequences."

There has not been one U.S. telecommunications deal allowed by China. Technology transfer and joint manufacturing are the norm for foreign concerns. American cars in China are in name-plate only.

 
At 10/07/2010 7:35 PM, Blogger Varun said...

It seems you are being too utilitarian on Trade-with-China issue.
http://www.conservapedia.com/Utilitarianism
http://www.conservapedia.com/Utility_monster

 
At 10/07/2010 7:36 PM, Blogger morganovich said...

buddy-

and those policies hurt chinese consumers enormously. they pay higher prices and have less selection of products.

ultimately, we as individuals don't care about national GDP, we care about our own well being.

it's easy to increase standards of living through industrialization, but in an industrialized country (which china is not) it gets increasingly difficult without trade and the rise of an open information economy which the chinese system makes impossible.

if a car dealer is willing to sell you a cheap car, why do you care what he's willing to buy with the money?

 
At 10/07/2010 8:06 PM, Blogger bix1951 said...

getting down to cases
sometimes it makes more sense to do it yourself
sometimes it makes more sense to call the plumber
each case requires judgment
but having someone order you to do it in a particular way....?

 
At 10/07/2010 8:31 PM, Blogger Sean said...

Everything in this article is true: it's just incomplete. It leaves out the whole discussion of the interaction of trade and employment in the case where full employment doesn't exist. There is an argument even there for free trade, but it presupposes that it is right an proper for an individual to take full responsibility for his own employment even when large blocks of people put great effort into making sure that large existing industries are biased against that individual's participation. Even Milton Friedman, when sufficiently pressed by Jagdish Bhagwati in "Free to Choose", would admit that foreign protectionism could hurt America: he just thought that free trade was still the optimal response.
I could be wrong, but I believe he did so because he did *not* fully understand the groupthink behind caveman psychology.

 
At 10/07/2010 11:00 PM, Blogger Ron H. said...

"...but it presupposes that it is right an proper for an individual to take full responsibility for his own employment even when large blocks of people put great effort into making sure that large existing industries are biased against that individual's participation."

If not the individual, then who should be responsible for his employment?

 
At 10/07/2010 11:13 PM, Blogger Sean said...

Ron H.,

f not the individual, then who should be responsible for his employment?

The individual always takes primary responsibility, of course. But other countries' governments have their peoples backs, consider the effect on jobs of trade treaties when weighing their value. Why should our government not?
Why are items like anti-dumping laws inadvisable? Why should we not make noises at the protectionist actions of other governments if that can reduce the artificial competitive pressure on American job-seekers without (further) distorting the market?

 
At 10/08/2010 2:34 AM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 10/08/2010 3:57 AM, Blogger Ron H. said...

"Why should we not make noises at the protectionist actions of other governments if that can reduce the artificial competitive pressure on American job-seekers without (further) distorting the market?"

Well, those competitive pressures are hardly artificial, they are very real. They just aren't what we like to call free market pressures.

Noises are fine, but what actual actions do you believe could be taken if in fact it's believed that American workers are being harmed that wouldn't further distort the market?

Keep in mind that while a particular group of American workers who are easily identifiable and likely very vocal may be harmed, another group, perhaps consumers could be benefiting from protectionist actions of other governments. Would your actions have overall, a positive effect?

 
At 10/08/2010 7:51 AM, Blogger juandos said...

"...but it presupposes that it is right an proper for an individual to take full responsibility for his own employment even when large blocks of people put great effort into making sure that large existing industries are biased against that individual's participation"...

Oh! Oh! I smell a conspiracy theory here Sean...

Industry and trade don't exist so people can have jobs...

Its all about making a profit for the partners (shareholders) and owners...

Employment could be described as a side effect of people wanting to make a profit and needing the resources of qualified workers and their talents in pursuit of profits...

 
At 10/08/2010 8:14 AM, Blogger Sean said...

Ron H.,

Would your actions have overall, a positive effect?
That's the tough question, isn't it? That's the one I think we should hear more about.

 
At 10/08/2010 8:33 AM, Blogger Sean said...

juandos,

Employment could be described as a side effect of people wanting to make a profit and needing the resources of qualified workers and their talents in pursuit of profits...
You could think of things that way, and businesses are entitled to. I don't think we the people have to accept that view if it's not to our benefit.

 
At 10/08/2010 11:48 AM, Blogger Ron H. said...

"That's the tough question, isn't it? That's the one I think we should hear more about."

I take it then, that you don't have an answer.

I am always hard pressed to understand how my paying more for something can be a good thing, as I then have less to spend somewhere else. I'm certainly not better off in that case.

Those who feel strongly about protecting certain jobs are welcome to pay more for things to accomplish that end, and if there are enough people who feel strongly about it willing to spend their own money to that end, then the jobs may be saved. Putting their money where their mouth is, so to speak. But to ask government to "Do something!" so that all of us must pay is just wrong. IMO the benefit to a few is outweighed by the harm to the many.

"You could think of things that way, and businesses are entitled to. I don't think we the people have to accept that view if it's not to our benefit."

'We the people' is not some single entity with a unified interest and a single voice, but 300+ million individuals in this country with our own individual interests which may even conflict. Groups of us may pursue a common goal by forming a business to further that goal. There is no dichotomy of 'business' vs 'the people'.

There may be government vs the people, however, and when businesses enlist the force of government to further a particular interest there can be government + business vs the people.

 
At 10/08/2010 1:04 PM, Blogger juandos said...

Hey Sean this comment by Ron H is I think a very good description of 'crony capitalism': "There may be government vs the people, however, and when businesses enlist the force of government to further a particular interest there can be government + business vs the people"...

"I don't think we the people have to accept that view if it's not to our benefit"...

Absolutely!!

 
At 10/09/2010 10:36 AM, Blogger morganovich said...

ron-

to expand on your insight:

if jelly is cheaper because of currency manipulation, consumers have more money left for bread and peanut butter and those 2 industries grow as a result while at the same time, consumers get to eat more sandwiches and are better off.

such gains almost always exceed the loss to jelly makers.

the logic of these "currency manipulator" arguments seems to imply that we should get angry any time a store has a sale or decides to cut prices and make up for lower margins with higher volume.

when safeway has a sale, you don't say "poor albertsons", you go stock up on steaks.

 
At 10/09/2010 11:29 AM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 10/09/2010 11:33 AM, Blogger Ron H. said...

morganovich

Thanks for the expansion, and I like your example. Yum!

Besides, those who are angry, should be angry with us, the consumers, not Safeway. We are always 'Free To Choose' to pay more at Albertsons to protect those jobs. If we don't, then the jobs lost are because of OUR actions.

A similar attitude blames our high national debt on the fact that others are willing to buy it.

 
At 10/09/2010 11:37 AM, Blogger Sean said...

Ron H.,

I take it then, that you don't have an answer.
Not categorically. I can think of cases where fighting fire with fire does a lot of harm, and cases where it helps significantly. I don't have a good set of rules to separate which is likely to occur.

I am always hard pressed to understand how my paying more for something can be a good thing
Or how saving an investment could be better than spending? There are plenty of cases to be made, but there's always an element of risk. That's why there is a strong moral argument that no one should be able to make that determination but you. Unfortunately, a lot of the good libertarian solutions I can imagine for problems that government currently attempts to solve have no real historical record, so pragmatism and idealism lead in different directions.


There is no dichotomy of 'business' vs 'the people'.
That is actually not true. An organization bound to maximizing profit wherever it can be found, including rent-seeking and arbitrage, has strong incentives to create negative externalities... and then bribe government not to notice. But if there's no government, those incentives don't weaken. History strongly supports this understanding.

There may be government vs the people, however,
That is correct. It is our responsibility to keep government in check, or we get what we deserve.

 
At 10/09/2010 2:24 PM, Blogger Ron H. said...

Sean:

"Not categorically."

Good. Then we agree that you don't have an answer.

Ron said: "I am always hard pressed to understand how my paying more for something can be a good thing..."

Sean said: "Or how saving an investment could be better than spending?"

Whoa! Did you notice that change of subject right there? I sure did, but I will address the new subject anyway.

Actually, saving and spending are the same thing only one is deferred. I would have to vote for the savings as some portion of earnings being better than that same portion of consumption. Otherwise, our lives can never improve.

Although consumption is the ultimate goal, an amount of deferred consumption allows us to create capital that can be used to make our lives better.

An example: Let's say I catch fish all day every day with my hands to make a living. As long as I consume all the fish every day, my life will never improve. I know there must be a better way, and I have an idea for a net that would allow me to catch more fish, but if I stop catching fish to make it, I won't have anything to eat. I must either eat a little less each day or work longer hours so I can set aside enough fish to eat while I make the net.

How do you like it so far, Sean?

Alternatively I could pay someone else my saved up fish to stop fishing long enough to make the net for me, or I could loan someone who has a good idea my saved up fish so they could stop fishing long enough to make a net. These days we call this last arrangement a bank.

Or, I might just decide that I liked making nets better than I liked fishing, and start spending all my time making nets & trading them for fish, which would require others to defer some amount of consumption to buy my nets.

In any case, no significantly better standard of living is possible without some amount of savings.

 
At 10/09/2010 2:40 PM, Blogger Sean said...

Ron H.,

Sorry if I wasn't clear. My point wasn't that saving didn't make sense. My point was that, in a very roundabout way, paying more than cost for a service can be an investment. You're likely to denounce this as nonsense, so I tried to approach the question Socratically. But I guess that didn't work, either.

 
At 10/09/2010 4:52 PM, Blogger Ron H. said...

"That is actually not true. An organization bound to maximizing profit wherever it can be found, including rent-seeking and arbitrage, has strong incentives to create negative externalities... and then bribe government not to notice.
But if there's no government, those incentives don't weaken. History strongly supports this understanding.
"

you are describing business + government vs people.

I'm hard pressed to find an example either currently or historically where business is able to legally force anyone to do anything without the help of government. Can you provide some?

 
At 10/09/2010 5:46 PM, Blogger Ron H. said...

Sean:

"Sorry if I wasn't clear. My point wasn't that saving didn't make sense. My point was that, in a very roundabout way, paying more than cost for a service can be an investment."

Well no, it wasn't clear, at least not to me. If I knew what your principles were I would be better able to interpret your writing.

Perhaps you could clarify what you meant by "paying more than cost for a service" and for that matter, "saving an investment" in the context of protectionist sentiment.

"Unfortunately, a lot of the good libertarian solutions I can imagine for problems that government currently attempts to solve have no real historical record, so pragmatism and idealism lead in different directions."

You are right. There is very little historical record until recently, but you may find that those countries with freer markets and less government tend to provide a better experience for their people than those with highly controlled markets and large government. Hopefully you aren't referring to inequality of outcomes as a problem government currently attempts to solve.

In fact the reason Austrian School economics isn't popular with those in government is that only a tiny role for government is called for, whereas Keynesian economics requires massive manipulation of markets, which is understandably wildly popular with those in power.

 
At 10/10/2010 11:29 AM, Blogger Sean said...

Ron H.,

If I knew what your principles were I would be better able to interpret your writing.
Fair enough. I believe in doing a dispassionate and critical analysis on what's going on in the real world, then making your choice among the options you've identified based on a cost-benefit analysis according to what you value (in my case, the best outcome is the greatest happiness for the most people without requiring unwilling sacrifice of what God has given an individual). I spend most of my time in analysis because so many people sorely neglect that stage.

Perhaps you could clarify what you meant by "paying more than cost for a service" and for that matter, "saving an investment" in the context of protectionist sentiment.
Any protectionism causes you to pay more for a good or service than you might otherwise. Some of that money is wasted, and some might be considered an investment in local capability. Sometimes that investment does pay off: most multinational corps are the beneficiaries of some such investment. Samsung, Nintendo, Kia, Sony, IBM, GE., Microsoft, and the conglomeration we refer to as "Hollywood" are some examples. But in the general case, it's reasonable to expect that the extra cost is wasted or simply transferred. If you were smart enough, you'd be able to use such techniques to level the playing field rather than pick favorites. That is a big if.

Hopefully you aren't referring to inequality of outcomes as a problem government currently attempts to solve.
Not as a goal in itself, but... inequality of opportunity is a problem worth addressing. The level of inequality of outcomes does provide some information about the level of inequality of opportunity.

Austrian School economics isn't popular with those in government ... whereas Keynesian economics requires massive manipulation of markets, which is understandably wildly popular with those in power.
Absolutely true. Also attractive is the idea that you can actually solve problems rather than wait for them to go away.

 
At 10/10/2010 4:17 PM, Blogger Ron H. said...

"...then making your choice among the options you've identified based on a cost-benefit analysis according to what you value"

This is an excellent idea when you do it for yourself, but it's doubtful you can correctly make such choices for others.

"(in my case, the best outcome is the greatest happiness for the most people without requiring unwilling sacrifice of what God has given an individual)"

Perhaps that is best achieved by allowing each individual to decide for themselves what is in their best interest. I doubt that you or I or anyone else can know what optimizes happiness for everyone.

"I spend most of my time in analysis because so many people sorely neglect that stage."

Good idea, but what you see as neglect may just be recognition by others that they have done much of this same work before, and don't need to repeat all of it, but only work on what they see as new or different.

If you apply cost benefit analysis to tariffs I think you will find that the "happiness" of the few is outweighed by the "unwilling sacrifice" of the many.

"Any protectionism causes you to pay more for a good or service than you might otherwise. Some of that money is wasted..."

Not wasted, but certainly spent in ways I would not choose to spend it, and perhaps not spent in ways that optimize happiness as is your stated ideal. Keep in mind that money I spend due to a tariff is money I don't spend somewhere else. The overall effect can't be exactly known, but is likely negative.

"...and some might be considered an investment in local capability."

Not an "investment" I choose to make. Those who want to can "invest" their own resources, and those who stand to benefit should certainly do so, but don't force everyone to do it.

"But in the general case, it's reasonable to expect that the extra cost is wasted or simply transferred. If you were smart enough, you'd be able to use such techniques to level the playing field rather than pick favorites. That is a big if."

But none of us ARE smart enough. And, that's such a big IF, I contend that it's impossible. The problem is, for the most part, imperfect or incomplete knowledge.

As to that overused and fairly meaningless phrase "leveling the playing field"; it's never been level & likely never will be. Actions taken can sometimes make matters worse. There are natural and comparative advantages that we shouldn't try to eliminate.

"Also attractive is the idea that you can actually solve problems rather than wait for them to go away."

Oh boy! Talk about having no real historical record! The only record Keynesian notions of government stimulus has, is that of not working. They didn't work during the Great Depression, and they aren't working now. I'm familiar with several common responses to that assertion and I will list them. I'm hoping you have something new to add, otherwise you can save yourself time by just selecting the response number(s) you prefer:

1. Keynes theories weren't / aren't being applied correctly.

2. The stimulus wasn't big enough.

3. Think of how bad things would be without it.

4. We're not sure how this works in these times of unprecedented national debt.

5. Jobs saved and created. (I admit this is not purely Keynes)

Sean, I think your basic premise is flawed. If I'm not mistaken, you believe that some group of really smart people with good intentions can somehow determine what is best for all of us. This hasn't proven to be true anywhere it has been tried. I defy you to show an example of central planning providing a better outcome than individuals making their own choices.

I would recommend you move "Conflict of Visions" by Thomas Sowell to next in line on your reading list. :-)

 
At 10/11/2010 10:48 AM, Blogger Hydra said...

you are describing business + government vs people.

===============================

Total Costs = Production(Business) Costs + External Costs + Government Costs


Looking at it as business + government vs people is the wrong view.


Each of us has an investment or other interest in business and governemtne and externalities. Setting up a busness vs govt thing is a false dichotomy when what we should all be looking for is lowest Total Cost, recognizing the trade offs this implies.

 
At 10/11/2010 9:39 PM, Blogger Sean said...

Ron H.,

but it's doubtful you can correctly make such choices for others.
I don't planning on making choices for others. I think making choices with others based on learning from the past is reasonable, if it can be achieved. I realize that government doesn't necessarily fit that description, and that's where I keep working on my worldview: how to achieve action by consensus, not coercion.


Good idea, but what you see as neglect may just be recognition by others that they have done much of this same work before
Excellent point. This is a risk engendered by poking around in a n area without formal training. My frustration is that the level of public discussion on these topics, especially in the news, tends to be abysmal.

But none of us ARE smart enough. And, that's such a big IF, I contend that it's impossible.
I don't buy it. I work every day with systems too complicated for one person to understand in total, and yet new processors come out every year. We should not try to run people's lives for them, but I see no reason at all to think we can't learn and describe large classes of problems and solutions that groups and individuals encounter, to inform choices made by groups and individuals.

I'm familiar with several common responses to that assertion...
The stimulus was not big enough to counteract opposing monetary policy, but it did have some effect. I know it's sacrilege here, but some of the diagrams Krugman has shown illustrate that unless I've been taken for a ride. That doesn't mean the multiplier is big enough to make stimulus worth doing, but I think the record shows that spending money does stimulate the economy to some degree, even in the most recent recession.

Sean, I think your basic premise is flawed. If I'm not mistaken, you believe that some group of really smart people with good intentions can somehow determine what is best for all of us.
No, I don't think so. Say rather, I believe in Science, game theory, and planning. Look at the road layout of Phoenix vs. Boston: the former is clearly superior because it involved planning rather than simple organic growth (although in some things, organic growth is preferred). I don't believe there's necessarily a contradiction between planning and personal freedom or that planning has to be a top-down thing. But for some things, if you participate in shared planning, you get better results than if you don't. I see that all the time at work: groups that don't understand planning or teamwork end up doing a lot of wasted work.

 
At 10/12/2010 3:35 AM, Blogger Ron H. said...

"I think making choices with others based on learning from the past is reasonable, if it can be achieved. I realize that government doesn't necessarily fit that description, and that's where I keep working on my worldview: how to achieve action by consensus, not coercion."

I think you are asking too much of human nature. Humans are just too flawed. I think we all instinctively understand a natural right to life, liberty, and property for ourselves, but the very fact that we must establish some form of government to protect those rights tells us that everyone doesn't agree. Consensus in a group of 325 million people is just too much to ask for.

"This is a risk engendered by poking around in a n area without formal training."

Actually, formal training can sometimes be an impediment. "Teacher, leave those kids alone!"

"I don't buy it. I work every day with systems too complicated for one person to understand in total, and yet new processors come out every year."

You can't compare society to a business which is managed completely top down, has a very narrow focus, and has a single goal of maximizing profit for the owners. Your individual well being isn't the goal. Providing the "greatest happiness for the most people without requiring unwilling sacrifice" has no place there.

Speaking of cooperative effort, in case you haven't seen this lately, here's Friedman's excellent story of The Pencil.

"The stimulus was not big enough..."

Ahh! That would be answer # 2. That is indeed Krugman's mantra.
Others think he is just wrong wrong wrong. You really have to ask where the money will come from when we are already in so much debt, and while government spending does cause some economic activity, when the spending stops the activity stops. Not many are fooled by it.

It's my opinion, he stopped being a serious economist some time ago, and is now just a political hack.

I began to think that when he commented on the destruction of the World Trade Ctr. on 9/11 as not all bad, as it had created a lot of construction work.

"Look at the road layout of Phoenix vs. Boston: the former is clearly superior because it involved planning rather than simple organic growth."

Did you really mean that to read that way? You haven't explained the benefits of the planning, only that Phoenix is superior because it involved planning. And what damage is done by Boston's lack of planning?

 
At 10/14/2010 8:37 AM, Blogger VangelV said...

American cars in China are in name-plate only.

Ford and GM profits from China will help fund UAW pensions in Detroit. Without their Chinese operations both companies would be in major trouble and heading towards bankruptcy, taking many American jobs with them.

 
At 10/14/2010 8:40 AM, Blogger VangelV said...

it's easy to increase standards of living through industrialization, but in an industrialized country (which china is not) it gets increasingly difficult without trade and the rise of an open information economy which the chinese system makes impossible.

I think that you need to go to China and look around. The country is a lot different than you imagine it to be.

if a car dealer is willing to sell you a cheap car, why do you care what he's willing to buy with the money?

Once our money goes to another party the decision is no longer ours to decide what happens with it. When I buy bread from my local baker I do not sit around wondering what she will do with it.

 
At 10/14/2010 8:51 AM, Blogger VangelV said...

It leaves out the whole discussion of the interaction of trade and employment in the case where full employment doesn't exist.

It makes no difference. The people who can make a product cheaper should be producing it so that those buying it can minimize their expenditures. We could grow jackfruit or durian in hothouses but it would be foolish for anyone to suggest that it makes sense to to so even if we can create jobs because we consume more resources in the production process. A society does not become richer by wasting resources; it becomes richer by accumulating savings that permit it to accumulate wealth-creating capital.

There is an argument even there for free trade, but it presupposes that it is right and proper for an individual to take full responsibility for his own employment even when large blocks of people put great effort into making sure that large existing industries are biased against that individual's participation.


It is always right and proper for the indiviudal to take responsibility for his own employment. Jobs are created by individuals and when there is no incentive for them to do so, as is the case when government regulations and taxation policies make it difficult to make a reasonable return, you have to go out and do the best you can, even if that means creating your own job by filling a need better than domestic or foreign companies.

Even Milton Friedman, when sufficiently pressed by Jagdish Bhagwati in "Free to Choose", would admit that foreign protectionism could hurt America: he just thought that free trade was still the optimal response.

That is the point. It is the best response possible.

I could be wrong, but I believe he did so because he did *not* fully understand the groupthink behind caveman psychology.

You probably are wrong. Even though he was a statist and wrong on monetary theory Milton was a very smart man.

 
At 10/14/2010 11:25 AM, Blogger Sean said...

Ron H.,

Sorry for the delay... work has been time intensive lately. :)

I think you are asking too much of human nature. Humans are just too flawed.
Life is optimism. :)

Consensus in a group of 325 million people is just too much to ask for.
Perhaps, but then the question is how to gain consensus in smaller but still meaningful groups. Without that, we will always be subject to tyranny of the majority or tyranny of a group of elites. Pseudo anarchism is not an answer: nature abhors a vacuum [of power].

You can't compare society to a business which is managed completely top down, has a very narrow focus, and has a single goal of maximizing profit for the owners. Your individual well being isn't the goal.
There exist goals with wide enough consensus to get a large group behind that are not motivated by profit. Non-profits fill that space, but can you imagine a successful non-profit organization dedicated to building highways?

here's Friedman's excellent story of The Pencil.
An excellent example of the good a market can perform. The market is fantastic at building anything that can be done in an incremental fashion, less so at things that require heavy investments up front and that have long-term returns or where public goods are involved.

It's my opinion, he stopped being a serious economist some time ago, and is now just a political hack.
A common opinion with some basis in fact. But he's not an Ayn Rand character: he didn't suddenly become stupid because he strayed to the "dark side". Conservatives ignore him because they disagree with them. I don't find that wise.


began to think that when he commented on the destruction of the World Trade Ctr. on 9/11 as not all bad, as it had created a lot of construction work.
Everyone's inclined to be an idiot sometimes. I think I understand the intellectual and personal motivation here. The fact that this was in incredibly poor taste don't make him a monster.

And what damage is done by Boston's lack of planning?
You clearly haven't driven in both cities! East cost cities gre organically in the days of horse and buggies, while many of the younger cities further west were built in the age of cars. California, Arizona, and Oregon also built roads and planned zoning specifically for the purpose of balanced growth and better transportation. It worked: west coast cities are built on easy-to-navigate grids with wide roads. I found it easier to find homes close to work and shopping in broad open areas. East coast cities like Boston have narrow and curved roads, poorly planned intersections and traffic lights, and it can take a long time to get from point A to point B. Where I live now, I see many of free-for-all intersections that tempt accident while handling a fraction of the traffic I see when living in Phoenix. Now, some cities in the West Coast are flooded by traffic anyway, but their layout and ability to handle traffic scaled much better with growth than in the East.

 
At 10/14/2010 11:36 AM, Blogger Sean said...

VangeIV,

It makes no difference.
I think what you really mean here is you don't care, and you have a solid rationale for not caring. My perspective is that it is in fact a solid rationalization: it works to some degree, but I think we could do better. My ideas and yours on the basis of rights are a keystone in that disagreement.

you have to go out and do the best you can, even if that means creating your own job by filling a need better than domestic or foreign companies.
Obviously, that's the way things work. I'm just not convinced we couldn't do a little better on the margins by policing protectionist abuses.

That is the point. It is the best response possible.
It is absolutely the best response possible without buying into the premise that you can coerce good behavior out of multiple parties by principled retaliation to a few instances of bad behavior.

 
At 10/14/2010 1:51 PM, Blogger VangelV said...

Life is optimism. :)

Perhaps but optimism better be rooted in reality that accounts for human nature as it is, not as it should be. As Machiavelli pointed out, the dustbin of history is full of people who did what should instead of what they must.

Perhaps, but then the question is how to gain consensus in smaller but still meaningful groups. Without that, we will always be subject to tyranny of the majority or tyranny of a group of elites. Pseudo anarchism is not an answer: nature abhors a vacuum [of power].

You don't need consensus because individuals should be free to form voluntary associations as they wish. The trick is to limit the ability of individuals to initiate force against others. (Even when those individuals get voted in and call themselves the government.)

There exist goals with wide enough consensus to get a large group behind that are not motivated by profit. Non-profits fill that space, but can you imagine a successful non-profit organization dedicated to building highways?

Profit is not evil. It is necessary to determine whether an activity should take place or not in the economic sphere.

An excellent example of the good a market can perform. The market is fantastic at building anything that can be done in an incremental fashion, less so at things that require heavy investments up front and that have long-term returns or where public goods are involved.

Many of the materials that go into the making of Reed's pencil require heavy up front investments in higher order processes. (A great deal of my own money is invested in such activities.) There is no evidence that the government is any better at investing than the private sector. In fact, the opposite is true. Public money is spent based on political rather than economic considerations, which is why government should be kept out of the infrastructure business.

A common opinion with some basis in fact. But he's not an Ayn Rand character: he didn't suddenly become stupid because he strayed to the "dark side". Conservatives ignore him because they disagree with them. I don't find that wise.

Krugman is a hack. His writing is full of contradictions and he keeps ignoring his poor record when he tries to provide advice about what should happen next.

Everyone's inclined to be an idiot sometimes. I think I understand the intellectual and personal motivation here. The fact that this was in incredibly poor taste don't make him a monster.

It is bad economics, not poor taste that makes him a total idiot. And he is a monster because he is suggesting that one way out of this financial mess than the Fed created is to make the military-industrial complex rich as we send young men and women to fight foreign wars. He is not only the voice of stupidity but of evil as well.

 
At 10/14/2010 2:09 PM, Blogger VangelV said...

I think what you really mean here is you don't care, and you have a solid rationale for not caring.

No, I mean that it is not my business how you spend your money.

My perspective is that it is in fact a solid rationalization: it works to some degree, but I think we could do better. My ideas and yours on the basis of rights are a keystone in that disagreement.

You are confused into thinking that you have the right to tell other people what they should do with their money. Once you buy a product from a seller the money is no loner yours. If you don't like the seller then don't buy from him in the first place.

Obviously, that's the way things work. I'm just not convinced we couldn't do a little better on the margins by policing protectionist abuses.

The abuse charges can fly both ways. From what I see the Fed is monetizing debt and trying to drive down the purchasing power of the USD in order to bail out the financial system by inflating its balance sheet and devaluing its liabilities. The efforts in Congress are certainly not designed to protect manufacturing jobs because the big loss began in the 1940s and the trend cannot be stopped unless the US becomes a source of cheap labour for the rest of the world. Congress is actually targeting the big banks and brokers, who need to see their mortgage paper and other derivatives go up in nominal price to avoid an all out collapse. While savers would be hurt, most people are net debtors so Congress believes that there is a political incentive to inflate as much as possible.

It is absolutely the best response possible without buying into the premise that you can coerce good behavior out of multiple parties by principled retaliation to a few instances of bad behavior.

Good behaviour cannot be coerced. You cannot obtain virtue by force no matter how much you try to pretend otherwise.

 
At 10/14/2010 2:28 PM, Blogger Sean said...

VangeIV,

My apologies in advance: time constraints still apply. :)

Good behaviour cannot be coerced. You cannot obtain virtue by force no matter how much you try to pretend otherwise.
Excellent! Get rid of the courts and close the jails, then. :)

Perhaps but optimism better be rooted in reality that accounts for human nature as it is, not as it should be.
I find that perspective ironic coming from someone with your beliefs on rights and government. :) The whole "natural rights" argument as well as your stance against government are prescriptive in basis, not descriptive.

The abuse charges can fly both ways.
Agreed on the whole paragraph.

It is bad economics, not poor taste that makes him a total idiot.
Don't confuse idiocy with right and wrong. Intelligence refers to mental capacity, not the results of its application. You complain about his record rightly. What you lose sight of is that surveys have show the predictive record of economists in general to be just really awful, conservative darlings not excluded.

You are confused into thinking that you have the right to tell other people what they should do with their money.
As I said, our different understandings of rights and their basis are in fact crucial to the discussion. There is much we agree on in how people should treat each other in the common case despite any appearances to the contrary, but there are important differences in extreme cases.
Again, on the margin, I'm happy to see any voluntary organization successfully replace a service performed by government.

 
At 10/14/2010 2:43 PM, Blogger VangelV said...

Excellent! Get rid of the courts and close the jails, then. :)

You are avoiding the point. You are not being good if you are forced to behave in a certain way by someone else. When you use Bill's money to build a new hip-hop stage neither you nor Bill are being good. You are a thief and Bill is a victim.

I find that perspective ironic coming from someone with your beliefs on rights and government. :) The whole "natural rights" argument as well as your stance against government are prescriptive in basis, not descriptive.

Let us be clear. The concept of natural rights does not force anyone to do anything. It simply says that you have no right to initiate force or engage in fraud against others. It is you who justifies the use of fraud to fund good intentions that usually come to a bad end.

The difference between us is a matter of principle. I believe in non-aggression against others while you believe that the state should be free to aggress as it wishes to because you have no rights other than those granted to you by the state.

Don't confuse idiocy with right and wrong. Intelligence refers to mental capacity, not the results of its application. You complain about his record rightly. What you lose sight of is that surveys have show the predictive record of economists in general to be just really awful, conservative darlings not excluded.

Most 'conservative darlings' are mouthpieces for the state and are no different than the economists who push leftist ideology. They are political activists that hide behind a veil of deceit. The economists I have time for are those that were able to predict and explain the Great Depression, the various housing, and stock bubbles, and have been very consistent all along the way. Almost all of them are from the Austrian School, which Krugman has been unwilling to debate because he has been wrong all along the way while the Austrians have been right.

As I said, our different understandings of rights and their basis are in fact crucial to the discussion. There is much we agree on in how people should treat each other in the common case despite any appearances to the contrary, but there are important differences in extreme cases.

You justify aggression against the individual in the name of some politically determined goal and ignore human nature. I do not. That is the basis of our disagreement.

Again, on the margin, I'm happy to see any voluntary organization successfully replace a service performed by government.

Yet you justify giving government monopoly power over all kinds of 'public' services without question.

 
At 10/14/2010 3:12 PM, Blogger Sean said...

VangeIV,

You are avoiding the point.
I am not. You changed the point from getting results to virtue.

It simply says that you have no right to initiate force or engage in fraud against others. It is you who justifies the use of fraud to fund good intentions that usually come to a bad end.
My prescriptive view is that physical aggression is morally justified only in defense of one's life or the life of a third party. Fraud is not justified because honor and honesty are the base of any civilization. The must be if rights are established by contract.

My descriptive view is that these things happen and we have to figure out how to live in a world where they do. Personal freedom is a good we are all given, that we only trade way at a high cost, but in reality we tend to trade away some of our freedom and accept government because we don't see a better alternative. Its legitimacy derives form that. At heart, I am a pragmatist, trying to get an optimal result in an imperfect world.
The belief that no one can take away your property is nothing but a common desire for how we wish the world to be. But even the concept of "property", the basics of which a two-year old can understand, is actually pretty complicated in its entirety. Your concept of property is like Newtonian Physics: a pretty good approximation for how things work unless you look really closely.

Yet you justify giving government monopoly power over all kinds of 'public' services without question.
Without question? Hardly. I require themselves to justify their existence constantly. But my disapproval doesn't negate their existence.

 
At 10/14/2010 4:02 PM, Blogger VangelV said...

I am not. You changed the point from getting results to virtue.

But you are not getting any positive results that justify the damage done by the coercion. The welfare programs did not improve the standard of living of the poor. There are more poor today than ever before because the government run programs institutionalized poverty while the private programs that were replaced were getting people to help themselves become self sufficient. Using taxes to fund wars in Europe, Korea, Vietnam, or Iraq was not a good idea and caused more harm than good.

Most programs have unintended consequences that the planners did not think of and the Sovietization of the US has not worked.

My prescriptive view is that physical aggression is morally justified only in defense of one's life or the life of a third party. Fraud is not justified because honor and honesty are the base of any civilization. The must be if rights are established by contract.

Then why do you support taxes? They are physical aggression against individuals and are often used to harm the lives of others. And rights are natural, not established by contract. (Read the Declaration.)

My descriptive view is that these things happen and we have to figure out how to live in a world where they do. Personal freedom is a good we are all given, that we only trade way at a high cost, but in reality we tend to trade away some of our freedom and accept government because we don't see a better alternative. Its legitimacy derives form that. At heart, I am a pragmatist, trying to get an optimal result in an imperfect world.

There you go again. You believe that people are not free; that freedom is given by the government which we must obey because you don't think that there is a better alternative. I would not call that pragmatism.

The belief that no one can take away your property is nothing but a common desire for how we wish the world to be. But even the concept of "property", the basics of which a two-year old can understand, is actually pretty complicated in its entirety. Your concept of property is like Newtonian Physics: a pretty good approximation for how things work unless you look really closely.

I never claimed that nobody could take my property away. I believe that nobody should be allowed to 'legally' take your property away. If it can be taken away than it isn't your property to begin with. You are just a serf who is allowed to use something until the master says otherwise. I prefer a system in which individuals are free to develop private institutions that would allow them to protect their property rights.

Without question? Hardly. I require themselves to justify their existence constantly. But my disapproval doesn't negate their existence.

You are a mouthpiece for statism and against liberty for 'practical' reasons.

 
At 10/14/2010 4:32 PM, Blogger Sean said...

VangeIV,


Using taxes to fund wars in Europe, Korea, Vietnam, or Iraq was not a good idea and caused more harm than good.
Agreed.

And rights are natural, not established by contract. (Read the Declaration.)
The founders couldn't be right about everything.


You believe that people are not free; that freedom is given by the government
Why argue if you won't listen? I said "Personal freedom is a good we are all given, that we only trade way at a high cost". Personal freedom is natural: it's not a "right". It's a property of human nature... that people may choose to trade away out of pragmatism... or not.

I believe that nobody should be allowed to 'legally' take your property away.
And if there's no government "stealing" your money to establish the concept of "legal" then you're stuck with "moral". And how does something becomes yours? Does anyone in the US really own land "morally" if Native Americans had a prior claim? Property is a term descriptive of control.

I prefer a system in which individuals are free to develop private institutions that would allow them to protect their property rights.
Sure. Build those institutions and make government obsolete. It's the same argument you'd get about jobs or any business venture: build it and we'll talk.

You are a mouthpiece for statism and against liberty for 'practical' reasons.
I talk about living in reality. You talk about ideals that make you feel good about your place in the world.

 
At 10/14/2010 8:45 PM, Blogger VangelV said...

The founders couldn't be right about everything.

Correct. But they were right about rights. Any other interpretation justifies authoritarianism as legitimate.

Why argue if you won't listen? I said "Personal freedom is a good we are all given, that we only trade way at a high cost".


But some of us choose not to trade our freedom. Just because you have no problem with serfdom it does not mean that it should be imposed on others.

Personal freedom is natural: it's not a "right". It's a property of human nature... that people may choose to trade away out of pragmatism... or not.

You are always free to trade your freedom away. What you do not have the right is to force that others do.

And if there's no government "stealing" your money to establish the concept of "legal" then you're stuck with "moral". And how does something becomes yours?

Originally by adding value to the unclaimed commons. After that by trading with others who have property. I guess that they never taught Locke in your school.

Does anyone in the US really own land "morally" if Native Americans had a prior claim?

Yes. Much of the land in the eastern states was purchased from the natives. Other land was not owned by anyone because there was no homesteading. Just as you can lose land that you used to own if you do not work it and maintain it for a number of years so can anyone else. Settlers who found unused lands and worked them gained legal title by adverse possession.

Of course, some land was taken by the federal government by the use of force. That land or the equivalent value of similar land should be given back to the tribes from which it was stolen. The tribal members can figure out how it is to be divided. Once the land is given back the transfer of money to the tribes should be stopped and the natives should be allowed to follow their own destiny. There is certainly enough value in the mineral rights to make natives quite well off and they should be able to find partners that would allow them to monetize those rights even as they retain surface use. Tribes could also make deals with private forestry companies or create their own to take advantage of the timber rights. Without federal interference they could also develop fishing and gaming industries that bring cash from clients. The way I see it there would be a win/win scenario. The natives who had their land stolen from them would get back the equivalent amount of federal land of equivalent value. They would get use of the mineral and timber rights and would be able to develop industries free from federal or state meddling. Taxpayers would see reduced spending as money currently going to natives would be greatly reduced and finally eliminated. The new ventures would bring money into local economies and both natives and non-natives would benefit.

 
At 10/14/2010 9:10 PM, Blogger VangelV said...

Sure. Build those institutions and make government obsolete. It's the same argument you'd get about jobs or any business venture: build it and we'll talk.

Those institutions existed long before the government nationalized them. We used Common Law for centuries and did very well with it. We had mutual societies to provide a type of social security. We had various charities to provide health care, food, and other assistance to the poor. We had private roads, bridges, mass transport, etc. We certainly do not need a government run the Post Office, trains, buses, ports, airports, etc., because government has failed in each endeavor. It has lost money even though it has a monopoly on the delivery of first class mail. It has run Amtrak into the ground. Municipal transportation systems have been run at huge losses. Airports are badly run and the air traffic control system is antiquated. Security is poor, inefficient, and rude. Incompetence is tolerated and there is no incentive to perform. Federal satellites show temperature readings of 400F yet federal bureaucrats fail to notice the sensor degradation. Temperature and precipitation data is in terrible shape yet the people who are supposed to ensure its integrity have had to depend on outsiders to catch obvious errors. Police forces break into innocent people's homes and kill citizens without cause. Houses are torn down as property is confiscated and given to private developers who promise to put it to better use but fail to do anything with it.

It seems that you suffer from ignorance of your own history and have no idea how things were done before government grew too large and squeezed out private companies and voluntary associations who provided services to the public.

 
At 10/15/2010 7:19 AM, Blogger Sean said...

VangeIV,

But some of us choose not to trade our freedom.
That's fine, don't.

What you do not have the right is to force that others do.
It's not inappropriate in principle for a society to ask something of its members. It is inappropriate for society not to allow members to opt out of that society so as to avoid those costs and benefits.


I guess that they never taught Locke in your school.
Not in High School. They only mentioned Locke and Hobbs in passing in my philosophy colloquium in college, and I burned my few electives on literature and computer science.

Yes. Much of the land in the eastern states was purchased from the natives...
I don't know if that's practical or not, but I'm impressed than you've actually given it much thought.

Those institutions existed long before the government nationalized them.
First, the government does not actually make it illegal to be a competitor in many of those industries. The post office competes with Fed Ex, UPS, DHL, etc. In some cases, your complaint of government monopoly is inconsistent in a practical sense (although not in a moral one) with complaints against garden variety monopolies.

As far as government incompetence goes in agencies like Amtrak, sure. Haven't I said I'm happy to be rid of some of these said services?

We had mutual societies to provide a type of social security.
Now, those I haven't heard much about, and would be curious to hear more of.

We had various charities to provide health care, food, and other assistance to the poor.
We still do, and they're still needed, actually.

We had private roads, bridges, mass transport, etc.
On a mass scale, really? Not in a long, long time, and we have a lot more trade now. There's a lot of room for improvement in roads, but they actually do a reasonable job.
But who could get a hold of enough land to build a significant road now without eminent domain?

It seems that you suffer from ignorance of your own history
Almost by definition: I'm an engineer. We live in a specialized society: it's hard enough to keep up in the knowledge required to be productive. :) But I try, and I remember what I hear.

grew too large and squeezed out private companies and voluntary associations who provided services to the public.
Ah, the big bad monopolies you have so much sympathy for breaking up.

 
At 10/15/2010 10:28 AM, Blogger Sean said...

VangeIV,

Police forces break into innocent people's homes and kill citizens without cause. Houses are torn down as property is confiscated and given to private developers who promise to put it to better use but fail to do anything with it.
These are tragedies no one could support. The only question in my mind is whether private forces to enforce law would be better or worse. I'm skeptical they would do better for the same reason that local politics tends to be even more corrupt than federal politics.

 
At 10/15/2010 3:43 PM, Blogger Ron H. said...

Sean, I see I'm late getting back to this party, and most of my arguments have been argued. Just a few coments then:

First, on that idiot Krugman: Didn't you invoke him earlier in support of your contention that government stimulus has been insufficient? Then later you agree that his record is dismal?

As to his World Trade Center comment, ignoring the poor taste for a moment, can you say "broken window fallacy"? I would never expect to hear such a comment from an economist, but it doesn't surprise me coming from a political hack.

You mentioned non-profits. Do you mean 'benevolent' when you say that? Some may be benevolent & some may not. Non-profit is merely a way of organizing for tax reporting purposes that allows much activity to go unreported as long as all revenue is spent, thereby leaving no profit. This can even result in some of the high executive pay complained about on another thread on this blog.

Some info on mutual aid societies here and here.

"It is inappropriate for society not to allow members to opt out of that society so as to avoid those costs and benefits."

Am I reading this correctly? How do you reconcile this idea with forcing me to pay taxes? Do you mean that I must physically move away to opt out? You aren't confusing society with state, are you? Please read that Chodorov book soon. :-)

"I'm happy to see any voluntary organization successfully replace a service performed by government."

I think it has been the other way around. What used to be voluntary services have been institutionalized by government, and it is now harder to spend time and resources on voluntary services that you are already being forced to pay for by government.

"These are tragedies no one could support."

No one? Swat team procedures haven't changed as a result of innocent deaths, and the SCOTUS agreed with the city in "City of New London vs Kelo". That makes it 'legal', but not legitimate. Government taking private property to give to another private owner is just wrong. There's no "maximum benefit for the most people" argument possible here.

The only question in my mind is whether private forces to enforce law would be better or worse. I'm skeptical they would do better for the same reason that local politics tends to be even more corrupt than federal politics.

I think you have answered your own question here. A private police force would be directly answerable to its customers, the people who paid it, not some corrupt local politician.

On a larger scale, remember that common defense in the US was once handled by volunteer militias - of the people - instead of standing armies. This illustrates another of your unalienable rights to self defense through keeping and bearing arms.

 
At 10/15/2010 4:22 PM, Blogger Sean said...

Ron H.,

Then later you agree that his record is dismal?
My point is that an imperfect record is not a fatal flaw in an economist.


I would never expect to hear such a comment from an economist, but it doesn't surprise me coming from a political hack.
Ah, I see what you mean. Yep.

You mentioned non-profits. Do you mean 'benevolent' when you say that?
Yes, good correction.

I think it has been the other way around.
That's been the general trend, but it's not been completely one-sided. Think tech outsourcing, etc. Anyway, I do agree government should be smaller.

A private police force would be directly answerable to its customers, the people who paid it, not some corrupt local politician.
That's what I'm worried about. Mercenaries don't have the best reputations over the course of history for following procedure or acting with restraint. Which would you trust more? The US military or the artifice formerly known as Blackwater?

On a larger scale, remember that common defense in the US was once handled by volunteer militias - of the people - instead of standing armies
They also pretty consistently got their heads handed to them by professional forces in any given engagement. The fact that America won the Revolutionary is just astounding: I'm told it was a very fickle thing brought about by the immense dedication of patriots and a lot of luck. Now put guys with assault rifles against a real military and see what happens.
Look at the kill ratios in American and Israeli engagements against guerrilla forces: the guerrillas frighten us because they keep coming, not because they fight "efficiently". And we actually make an effort not to kill the innocent, even if we're arguably not very good at avoiding such casualties. But if you even fought a force that just didn't care, you'd get massacred.
A militia works just fine as long as it doesn't actually face a serious threat. But then, maybe your argument is nobody hates us enough to come after us?

 
At 10/15/2010 9:14 PM, Blogger Ron H. said...

"The fact that America won the Revolutionary is just astounding: I'm told it was a very fickle thing brought about by the immense dedication of patriots and a lot of luck."

Yes, an incredible coincidence of circumstances including the fact that the British were busy dealing with the French not only in North America, but in other parts of the world. They were stretched pretty thin.


"Now put guys with assault rifles against a real military and see what happens."

Do you mean like in Vietnam against the Vietcong, or Afghanistan, or recently in Iraq?

Our massive military might is ill equipped to deal with guerrilla forces. Something the British had trouble with during the Revolution also.

US military, or Blackwater: That's a tough call. Obviously Blackwater behaved badly in Iraq. I'm not sure any large military or security force is a good thing. Smaller private security and police forces work quite well for groups and businesses.

Incidentally, since the US military is all volunteer, I have no problem calling them mercenaries. They just happen to be government employees.

 
At 10/15/2010 10:57 PM, Blogger VangelV said...

That's fine, don't.

But that is not possible when a majority of people (like you) sell their freedom and impose stupid rules on the rest of us. You have no problem with the government's monopoly on the initiation of force, ability to wage war any time it feels like it, or the power to put up barriers to economic and social activities but some of us do.

It's not inappropriate in principle for a society to ask something of its members.

It can ask. But it should not be able to force.

It is inappropriate for society not to allow members to opt out of that society so as to avoid those costs and benefits.

You are confusing society with government. Society is made up of many voluntary associations that only provide direct benefits to their specific members. You do not have to opt out just because you choose not to pay for various 'services' that government provides via monopoly power.

Not in High School. They only mentioned Locke and Hobbs in passing in my philosophy colloquium in college, and I burned my few electives on literature and computer science.

That is your loss. As an engineer I did not have political philosophy courses but I liked what I read in high school so I sat in on a few courses and listened to many great lecturers, including a few very prominent Straussians who were very illuminating for those that actually listened. After I worked in China I was turned onto the Austrian School, which further illuminated the teachings of Bloom, Pangle, Orwin, and the rest. You accept the arguments of the Straussians. I prefer those of the Austrians and the Founding Fathers.

I don't know if that's practical or not, but I'm impressed than you've actually given it much thought.

I covered this in history class and have had many debates on the subject.

First, the government does not actually make it illegal to be a competitor in many of those industries. The post office competes with Fed Ex, UPS, DHL, etc. In some cases, your complaint of government monopoly is inconsistent in a practical sense (although not in a moral one) with complaints against garden variety monopolies.

Try again. The Post Office has a monopoly on the delivery of first class mail. UPS, Fed Ex, DHL, and other services are not allowed to compete in the same business. If they were given 'permission' to do compete the US Post Office would be out of business by now.

And there are no garden variety monopolies. If a commercial company gains a dominant position it can only keep it by convincing customers to buy from it as it improves the quality of the product and keeps costs as low as possible. On the other hand, government granted monopolies don't have to care about what their customers prefer because competition is not permitted.

 
At 10/15/2010 11:31 PM, Blogger VangelV said...

Now, those I haven't heard much about,

How can that be possible? Didn't you ever take history?

...and would be curious to hear more of.

Here is a good start.

Or here.

And another.

On a mass scale, really? Not in a long, long time, and we have a lot more trade now. There's a lot of room for improvement in roads, but they actually do a reasonable job.

But who could get a hold of enough land to build a significant road now without eminent domain?


The book cited above, The Voluntary City, deals with the subject.

Here is something a lot more radical but very valid.

A perfect example is the US railroad system. The government subsidized railroads to move goods and people across the United States. They failed. At the same time James J. Hill built the Great Northern Railroad by purchasing land, negotiating rights of way with native tribes, and selecting the route that would allow the most efficient operations. At the time everyone thought as you do now; that it was not possible for a private individual or company to engage in such a costly and complex venture and to coordinate the steps necessary to build the railway. They were wrong because as long as there was a market, one man figured out how do service it.

The same story has been repeated many times over and over again. If you are interested you might want to look at the history of Scranton, Pennsylvania when you get the time. Or read more of Beito's papers and books.

Almost by definition: I'm an engineer. We live in a specialized society: it's hard enough to keep up in the knowledge required to be productive. :) But I try, and I remember what I hear.

But that is the problem. I found out very long ago that much of what we hear and most of what we are taught is not necessarily true. That is why you need to do your own work, as I have been doing.

Ah, the big bad monopolies you have so much sympathy for breaking up.

I do not see any big bad monopolies other than those that exist as government protectorates.

 
At 10/15/2010 11:51 PM, Blogger VangelV said...

That's what I'm worried about. Mercenaries don't have the best reputations over the course of history for following procedure or acting with restraint. Which would you trust more? The US military or the artifice formerly known as Blackwater?

You are thinking the wrong way. The US has far more private security guards than it has municipal, state or federal policemen. They guard malls, apartment buildings, warehouses, and all kinds of private (as well as public) facilities. If they misbehave their employers fire them and pay any damages from their acts.

Blackwater is very different because it does most of its work for governments and usually enjoys the same immunity as the armed forces do.

 
At 10/18/2010 8:28 AM, Blogger Sean said...

VangeIV,

That is why you need to do your own work, as I have been doing.
And there's where the "I retired at 41" bit probably helps a lot.

 
At 10/18/2010 8:35 AM, Blogger Sean said...

VangeIV,

You do not have to opt out just because you choose not to pay for various 'services' that government provides via monopoly power.
Yes, but you don't have to live in the U.S. and accept its control over anything. Your citizenship is optional. In terms of its willingness to apply force, it's different from other organizations, but in most ways the difference is merely scale.
Of course, I don't normally make this argument except against those that don't believe in business monopolies or breaking them up.

 
At 10/18/2010 8:46 AM, Blogger Sean said...

VangeIV,

They guard malls, apartment buildings, warehouses, and all kinds of private (as well as public) facilities. If they misbehave their employers fire them and pay any damages from their acts.
That works fine as long as by "misbehaving" they haven't hurt anyone. Then you are back to needing the authority for long-term handling of miscreants, where you want the oversight to be as broad as possible. That's where the brilliance of the American form of government comes in: broad oversight. It takes a lot of time and work to really corrupt it.

 
At 10/18/2010 1:26 PM, Blogger Sean said...

VangeIV,


I do not see any big bad monopolies other than those that exist as government protectorates.

And if I take out the word "bad"?

 
At 10/18/2010 1:45 PM, Blogger VangelV said...

Yes, but you don't have to live in the U.S. and accept its control over anything.

If you are born in the US you have the rights that were written in the Constitution. And while I still see it as a useless paper that did more harm than good as it allowed the enemies of freedom to gain control of people it still offers a huge amount of protection from the federal government's desire to limit your freedom.

Your citizenship is optional.

Really? Have you seen what the government does to people who want to renounce it?

In terms of its willingness to apply force, it's different from other organizations, but in most ways the difference is merely scale.

No. Other organizations cannot initiate force against anyone. Only the government has a monopoly on the initiation of force without recourse from the victims.

Of course, I don't normally make this argument except against those that don't believe in business monopolies or breaking them up.

Which monopolies would these be? If you look around you it is clear that the only monopolies that can limit consumer choice and harm the consumer are those that are granted status by government decree. Give us examples please.

 
At 10/18/2010 1:48 PM, Blogger VangelV said...

And if I take out the word "bad"?

You get the same thing. Free markets are not kind to monopoly positions because any time a company becomes very profitable competitors spring up to take away its market share. And if it fights them off by making products better and cheaper than it has earned its status by convincing consumers not to use the services of inferior competitors. There is nothing wrong with that.

 
At 10/18/2010 3:06 PM, Blogger Sean said...

VangeIV,

Really? Have you seen what the government does to people who want to renounce it?
Nothing, as long as you're not trespassing on their land. :)

 
At 10/18/2010 3:12 PM, Blogger Sean said...

VangeIV,

Which monopolies would these be? If you look around you it is clear that the only monopolies that can limit consumer choice and harm the consumer are those that are granted status by government decree.
A lot my examples are hearsay in the sense I haven't research them thoroughly, but utility companies are the classic examples: water, sewer, electric, etc. What I've heard is that they have been partially nationalized as a response to the fact that they exist an natural monopolies.
I work at Intel: part of a duopoly in the processor industry. Without fear of the US government, AMD would have been crushed like a bug already, making it a monopoly because the $4B cost of making a fab makes it awfully hard for new competitors to enter the market, and going fabless is not yet a competitive performance alternative in the industry.

 
At 10/18/2010 3:17 PM, Blogger Sean said...

VangeIV,

No. Other organizations cannot initiate force against anyone. Only the government has a monopoly on the initiation of force without recourse from the victims
My wording was poor. I meant to say the difference between government and other monopolies was the ability to apply force. Take away government and that distinction isn't solved in favor of the new arrangement: it simply disappears.

I'd like to see an example of a competitive "free" society of the type you idealize. The fact that some society somewhere didn't have a government solution for a given problem doesn't mean that society was competitive in that aspect.

If I ever saw sucha free society, I probably would back a lot of your preferred alternatives, but in the absence of that, your form of libertarianism seems to be just a dream.

 
At 10/18/2010 10:04 PM, Blogger VangelV said...

Nothing, as long as you're not trespassing on their land. :)

Talk to a tax attorney some time. You will find that you are misinformed.

A lot my examples are hearsay in the sense I haven't research them thoroughly, but utility companies are the classic examples: water, sewer, electric, etc. What I've heard is that they have been partially nationalized as a response to the fact that they exist an natural monopolies.

These are all cases where the government has created monopolies, usually out of a competitive environment.

I work at Intel: part of a duopoly in the processor industry. Without fear of the US government, AMD would have been crushed like a bug already, making it a monopoly because the $4B cost of making a fab makes it awfully hard for new competitors to enter the market, and going fabless is not yet a competitive performance alternative in the industry.

Actually, if AMD were crushed and Intel took advantage by increasing prices other competitors would spring up to take market share. While I agree that $4B fab costs make it difficult keep in mind that those facilities can also hurt the established players once there is a breakthrough that makes that investment worthless. An outdated facility may have a carried book value on the books but it has no real economic value.

As I said, it is easy to argue against market based monopolies but not very easy to give real world examples where they have existed for long or have hurt consumers. Carnegie and Rockefeller took a huge percentage of the market and had what you might call a near monopoly position in a free market. Did they hurt consumers? No. They got their position by squeezing costs and passing them on to customers.

And before you give me the 'what about competitors' line let me point out that the free market is all about convincing consumers to reward you while they ignore your competition. The market is not all that good for producers. While some do very well and become rich, the biggest gains go to the consumers.

 
At 10/18/2010 10:20 PM, Blogger VangelV said...

My wording was poor. I meant to say the difference between government and other monopolies was the ability to apply force. Take away government and that distinction isn't solved in favor of the new arrangement: it simply disappears.

Actually, without the ability to apply force government protected monopolies would go bankrupt because they could not compete.

I'd like to see an example of a competitive "free" society of the type you idealize. The fact that some society somewhere didn't have a government solution for a given problem doesn't mean that society was competitive in that aspect.

Look to Hong Kong. It had a very limited government that spent little and did not meddle much. The colony transformed from a little resource-deficient island that was the home to many poor people to a trading powerhouse that created huge amounts of wealth and has a higher GDP per capita that most European countries.

Singapore has a similar story. While the government meddles on the social engineering side it has permitted competition on the economic side and does not protect domestic industries as we do. It also went from a resource-deficient mosquito infested swamp full of poor fishermen to one of the wealthiest economies (per capita) in the world.

If I ever saw sucha free society, I probably would back a lot of your preferred alternatives, but in the absence of that, your form of libertarianism seems to be just a dream.

But it isn't just a dream. Even in Servile States that have leaned towards social democratic principles it is very possible for an intelligent individual to live free. The trick is to offset the economic burden added by the state in the form of high taxes by taking full advantage of the predatory nature of the state itself. That way you can pay your taxes freely and happily but still come out ahead of where you would be if you had to earn a living in a free market environment. You do not feel any guilt for taking advantage because the system was created and supported by the very serfs that are being hurt as they help you get richer through perfectly voluntary transactions that are free of fraud. It is hard to feel pity for most because they are getting exactly what they voted for.

 
At 10/18/2010 11:03 PM, Blogger Sean said...

VangeIV,

Talk to a tax attorney some time. You will find that you are misinformed.
So if you move to Mexico, they'll come after you?
I just get the sense that you already have freedom of choice: it's just that you don't like your options.

Singapore has a similar story. While the government meddles on the social engineering side it has permitted competition on the economic side and does not protect domestic industries as we do.
My information on these Asian tigers is deficient: I'll have to pump my Dad for information on what these places are like. Still, my impression was that, while more economically free than the US, they differ from your vision in important ways. And remember, I'm for an economically freer environment than we have, just not to quite the extreme you support. And personal freedom, which I find even more important, I have heard at least places like Singapore are a bit lacking in. Or am I wrong?



You do not feel any guilt for taking advantage because the system was created and supported by the very serfs that are being hurt as they help you get richer through perfectly voluntary transactions that are free of fraud.
You have a rather interesting view of morality and how things work. Are human rights inviolable or not? If they are, that doesn't sound moral because you're taking advantage of the innocent along with the guilty. If they're not, then there must be some other basis for morality: either contract (as I argued and which might justify such an attitude) or something else like a brand of utilitarianism.

 
At 10/20/2010 9:01 AM, Blogger VangelV said...

So if you move to Mexico, they'll come after you?
I just get the sense that you already have freedom of choice: it's just that you don't like your options.


Yes they do go after you. The US wants its share of any earnings that you have so it does not take kindly when you give up your citizenship. Of course, if you are in the part of the population that is a net recipient of taxes you will be free to go and free to give up your citizenship. The restrictions only apply to the productive class that earns a great deal.

My information on these Asian tigers is deficient: I'll have to pump my Dad for information on what these places are like. Still, my impression was that, while more economically free than the US, they differ from your vision in important ways. And remember, I'm for an economically freer environment than we have, just not to quite the extreme you support. And personal freedom, which I find even more important, I have heard at least places like Singapore are a bit lacking in. Or am I wrong?

Singapore certainly has some very strong restrictions on drugs and does not look kindly to those that steal or commit property crimes. If you want to vandalize you would certainly be better off in the US. If you are a Muslim who minds his own business and wishes to be left alone you are probably better off in Singapore.

Of course, you live in a country that regulates the water flow in your shower head, the size of the tank on your toilet, and the temperature of your hot water tank so the part about how free you are is somewhat exaggerated.

 
At 10/20/2010 9:07 AM, Blogger VangelV said...

You have a rather interesting view of morality and how things work.

Not at all. My morality is simple. Do not initiate force. Keep your word and do not engage in fraud.

Are human rights inviolable or not?

Rights are negative. That means that society has no moral authority to impose obligations on some for the benefit of others. All it has to do is stop some individuals from violating the rights of others.

If they are, that doesn't sound moral because you're taking advantage of the innocent along with the guilty.

Not at all. If you are an idiot lefty who wants to short coal stocks because they are evil and you expect the government to impose severe restrictions on the use of coal I do not harm you when I buy the stocks when I consider them attractively valued. The fact that they go up and you lose your money is your problem that is self inflicted and has nothing to do with me.

If they're not, then there must be some other basis for morality: either contract (as I argued and which might justify such an attitude) or something else like a brand of utilitarianism.

As I said, morality is simple. Do not initiate force against others. Do not commit fraud. Keep your word. It is not moral to impose obligations on some people for the benefit of others. That is what the Servile State does and is not compatible with what we think of as morality.

 
At 10/20/2010 9:58 AM, Blogger Sean said...

VangeIV,

As I said, morality is simple. Do not initiate force against others. Do not commit fraud. Keep your word.
A very good first approximation. But if you view morality as a heuristic for moral outcomes, there are cases where I believe this fails.


The fact that they go up and you lose your money is your problem that is self inflicted and has nothing to do with me.
Ah, ok. Your wording on "taking advantage of the system" was vague, so I wasn't sure what you meant.

It is not moral to impose obligations on some people for the benefit of others.
In the main, I agree. I just think that there are cases where its better to optimize for your own good and the good of others rather than yourself, so voluntary collectives can be useful. I agree with the objection that government isn't totally voluntary, and so isn't completely moral. I only accept it until we can replace it with a better set of alternatives. In the meantime, I'd be satisfied with less government rather than aiming for none. Since your examples fit the mold of less government rather than none, I have no major disagreement with them.

If you are a Muslim who minds his own business and wishes to be left alone you are probably better off in Singapore.
But as I'm not a muslim, that might not be a very good option.

Of course, you live in a country that regulates the water flow in your shower head, the size of the tank on your toilet, and the temperature of your hot water tank so the part about how free you are is somewhat exaggerated.
Point taken. The costs of those restrictions are largely borne by others, so I don't feel them directly. But yes, we would be better off without such restrictions in a number of ways.

 
At 10/20/2010 3:34 PM, Blogger VangelV said...

A very good first approximation. But if you view morality as a heuristic for moral outcomes, there are cases where I believe this fails.

Where does it fail again? In what circumstances is it wrong to live by the principles that it is wrong to initiate force against others, that one should keep one's promises, or that one should not engage in fraud?

In the main, I agree. I just think that there are cases where its better to optimize for your own good and the good of others rather than yourself, so voluntary collectives can be useful.

You are assuming that you know how to optimize your own good or that of others. While I am willing to entertain arguments about optimizing your own good I cannot see how you can provide an argument about optimizing, 'the good of others.'

That having been said, you should be free to join any voluntary collective that you choose. If you feel better living in a commune and trying to look after the needs of others all the power to you. I would only have a problem if that commune tried to impose obligations on those that want no part of it.

I agree with the objection that government isn't totally voluntary, and so isn't completely moral. I only accept it until we can replace it with a better set of alternatives.

There is always a better alternative simply by shrinking the power of government and removing its power to initiate force against others or to meddle in voluntary social or economic transactions.

In the meantime, I'd be satisfied with less government rather than aiming for none.

That would be a good start. Let us get rid of 95% of government workers and let the market compete for 'services' currently monopolized by governments.

Since your examples fit the mold of less government rather than none, I have no major disagreement with them.

I actually believe that the only logical argument is for an entirely voluntary state. My sentiments are with people like Stringham, Friedman, Rothbard, and Block who have made great cases for such an arrangement.

But as I'm not a muslim, that might not be a very good option.

You are missing my point. While Singapore is intrusive in a number of ways, it is much freer in many ways than the US is.

Point taken. The costs of those restrictions are largely borne by others, so I don't feel them directly. But yes, we would be better off without such restrictions in a number of ways.

I think that you are missing my point. You do have all those regulatory costs imposed on you every time you go to the store and buy a product.

 
At 10/20/2010 5:32 PM, Blogger VangelV said...

I agree with the objection that government isn't totally voluntary, and so isn't completely moral. I only accept it until we can replace it with a better set of alternatives.

A friend just sent me the following link about events that may be happening in the US at the moment.

I particularly liked the zerohedge quote:

In a very real sense, Bernanke is throwing Granny and Grandpa down the stairs - on purpose. He is literally threatening those at the lower end of the economic strata, along with all who are retired, with starvation and death, and in a just nation where the rule of law controlled instead of being abused by the kleptocrats he would be facing charges of Seditious Conspiracy, as his policies will inevitably lead to the destruction of our republic.

While I do not subscribe to the theories yet, it is clear that there we could be looking at tax revolts just as there were in the 1930s. A good hedge would be very prudent at this time.

 
At 10/21/2010 8:21 AM, Blogger Sean said...

VangeIV,


In what circumstances is it wrong to live by the principles that it is wrong to initiate force against others, that one should keep one's promises, or that one should not engage in fraud?
To start with: in defense of a third-party, in case of a threat to your life of a nature other than direct force, or in response to duress or fraud that threatens your freedom or livelihood.

You are missing my point. While Singapore is intrusive in a number of ways, it is much freer in many ways than the US is.
I don't think I am, actually. :)

While I am willing to entertain arguments about optimizing your own good I cannot see how you can provide an argument about optimizing, 'the good of others.'
In the broadest sense, this is impossible. However, there are specific goods it makes sense to optimize. Corporations are based on maximizing profit. Churches and municipal organizations are built to maximize other goods. And yes, such organizations should not impose restrictions on non-members.

I actually believe that the only logical argument is for an entirely voluntary state.
I'd prefer that if it could be arranged, but I think you'd find it wouldn't work except in the sense that already exists: you can currently pick any country to live in from that ones that will take you, and whatever government exists there, you've just signed the EULA for by moving in.

You do have all those regulatory costs imposed on you every time you go to the store and buy a product.
You missed my point: what you say is true, but when I go to the store, I don't usually notice.

While I do not subscribe to the theories yet, it is clear that there we could be looking at tax revolts just as there were in the 1930s.
Hmmm. I guess it's not a good idea to underestimate the danger of a crowd looking for someone to blame. I'm curious what you'd figure to be a good hedge: any well-globalized corps?

I think we've reached the point of knowing where we agree and disagree on the points in question. I'd like smaller, smarter, voluntary government, but will grudgingly accept current government as a better alternative than none. And you'd prefer smaller government on the way to none. You buy the idea of natural rights: I find them remarkably useful constructs derived from human understanding of how to interact peacefully, but the idea that they are inviolable constructs derived from nature seems just goofy. You haven't accepted my counterexamples your positions, and I see yours as valid only in the sense that they mean we have too much government and not enough freedom now. It seems like we'll probably not make much progress on those positions, but it's always a pleasure to debate someone intelligent and well-read.

 
At 10/21/2010 9:09 AM, Blogger Sean said...

VangeIV,

Actually, I'll make a correction. I said "but the idea that they are inviolable constructs derived from nature seems just goofy.".
That's not quite right: I guess I was channeling my dad there. It's not goofy, it just seems like a stretch, especially given my belief that you could concoct a bad situation where there was no way out without being a little morally creative.

 
At 10/21/2010 1:13 PM, Blogger VangelV said...

To start with: in defense of a third-party, in case of a threat to your life of a nature other than direct force, or in response to duress or fraud that threatens your freedom or livelihood.

You did not read carefully enough. I have never argued against the use of force. I argue that it is wrong to initiate force. Obviously if someone else does initiate force then we are free to respond to that force. If someone attacks my neighbour I have every right to defend him against those that initiated force against him.

In the broadest sense, this is impossible. However, there are specific goods it makes sense to optimize.

This is getting very dubious. The fact is that you can't optimize returns for everyone in society and every attempt to provide public goods is corrupted by the political proces.

Corporations are based on maximizing profit.

Yes they are. They usually use their own funds to do so.

Churches and municipal organizations are built to maximize other goods.

The flags are going up here. Nobody forces me to donate to a church. If I do then the church can use the funds as it sees fit. Municipal organizations are not funded in the same way. They use money extorted from taxpayers, not donations to pursue programs that benefit narrow sectors of society.

And yes, such organizations should not impose restrictions on non-members.

But in the case of most municipal organizations they do by putting out their hands and getting your taxes to fund their projects.

I'd prefer that if it could be arranged, but I think you'd find it wouldn't work except in the sense that already exists: you can currently pick any country to live in from that ones that will take you, and whatever government exists there, you've just signed the EULA for by moving in.

Look around you. We have many organziations that we choose to belong to. You are protected from car accidents even though you do not use the same insurance as I use. You belong to a different health club than I do. You have membership in a different golf club. You go to a different church. All these are voluntary arrangements that allow us to use services that we would otherwise not have. None of them require government involvement in any way.

 
At 10/21/2010 1:23 PM, Blogger VangelV said...

You missed my point: what you say is true, but when I go to the store, I don't usually notice.

You may not notice that you are ingesting low levels of poison until it is too late but you will still die from it.

Hmmm. I guess it's not a good idea to underestimate the danger of a crowd looking for someone to blame.

You may rethink this a bit. It is one thing to have a mob looking for someone to blame but another thing for a mob to be revolting against a tyrant. I wonder how long it will be till government employees start being strung up or shot by angry individuals who are fed up with being ignored by their political 'representatives.'

I'm curious what you'd figure to be a good hedge: any well-globalized corps?

Have some of your investments in a trust account that holds some precious metals and is outside of the United State. You may want to wait until there is a panic among the latecomers and you see the price of gold and silver go down 10-20% or so and pick up shares in something like the Central Fund of Canada or some of the funds that Sprott offers.

I'd like smaller, smarter, voluntary government, but will grudgingly accept current government as a better alternative than none.

You accept serfdom because you are afraid of a smaller government or a voluntary society?

 
At 10/21/2010 2:12 PM, Blogger VangelV said...

Actually, I'll make a correction. I said "but the idea that they are inviolable constructs derived from nature seems just goofy.".

That's not quite right: I guess I was channeling my dad there. It's not goofy, it just seems like a stretch, especially given my belief that you could concoct a bad situation where there was no way out without being a little morally creative.


Here is your problem. If you accept the belief that you have no rights other than those that are granted to you then you accept the fact that the state has every right to oblige one class of people to work for another and that slavery is morally acceptable.

On the other hand, if you believe that you own your own body then logic will ultimately lead you to conclude that no individual should be able to impose obligations on you. And if you come to that conclusion then you have to also conclude that no group of men should be able to impose obligations on you even if they voted on it and they decided to call themselves the government.

 
At 10/21/2010 2:32 PM, Blogger Sean said...

VangeIV,

You accept serfdom because you are afraid of a smaller government or a voluntary society?
It's closer to the truth to say I must accept serfdom because I don't own the resources to survive independently, so I have to rent them by means of trading my time and energy for them, and following the rules of the owner of the house.
Whether that owner is a business or an individual or a government, that fact remains. It's better for me for that owner to be someone I can influence without force.

 

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