Thursday, February 26, 2009

Don't talk about that!

A father tries to explain to his two young children that they will have to foot the bill for their daddy's generation's spending. Hearing this, the girl responds that their money belongs to them. The boy adds they don't have any money to spend at all.

These two objections show that even a kindergarten class is likely to have a better grasp on reality than our Dear Leader(s).

(hat tip to

Comic: the common good

Politicians never grow tired of promising to further the "common good" or the "general welfare" in case they are being elected. However, there is no such thing as a "common good". My good may not be your good, so what is our common good? Indeed, what is the common good of millions of individual actors with different hopes, plans and resources? "Common good" or "national interest" means the well-being of politically connected insiders.

There's no other way to sustainably improve your own situation than to do it yourself - by acting in your own rational self-interest.

(source: CartoonStock)

Darryl Worley and misguided patriotism

In the early days of the Iraq War, one song touched many Americans very deeply and was able to remain on Number One for several weeks. Outside the US, it has received little to no attention, but it's a very honest emotional testimony to the mix of patriotism, desperation, hatred and belligerence that caused so many US citizens to support a war that they would later recognize to be one giant mistake. We're talking, of course, about Darryl Worley's "Have You Forgotten?".

I hear people saying we don't need this war
But, I say there's some things worth fighting for
What about our freedom and this piece of ground
We didn't get to keep 'em by backing down
Applied to the Iraq War, one confuses a fight for freedom (which is necessarily a fight against aggression, but the Iraq War was, per definition, an act of aggression itself) and for the safety of one's common perimeter (Iraq was at no time a threat to the safety of the US, at least no such estimates have come to my attention) with an act of violence. Fighting for freedom doesn't entail bombing innocent civilians. No threat to American freedom originated from these unfortunate Iraqi people.

Additionally, a revolution against an oppressive monarch ("not backing down") is not quite the same as clusterbombing a foreign nation. Worley should've considered this possibility before cheering for war.

Some say this country's just out looking for a fight
Well, after 9/11 man I'd have to say that's right
A national trauma cured with the lives of peaceful, innocent civilians? That's sick.

I've been there with the soldiers
Who've gone away to war
And you can bet that they remember
Just what they're fighting for
The sad thing is, while many of these soldiers do believe they fight for freedom, they're (not quite falsely) seen as an occupying force by a good number of natives and are being used to justify all kinds of tyrannical measures at home in the meantime.

The entire Iraq War should have never begun. Too many lives have already been lost due to it. There's no point in pretending that it "must be won", we can't let any more individuals die to fulfill a never clearly defined objective. It must end now. Every delay will cause new hurt and tragedy.

Wednesday, February 25, 2009

Snake Oil Stimulus

Another good job by our fellow progressive comrades at ThePeoplesCube.

Are you insane?

According to some ivory tower prisoners at Harvard Law (sic) School, you could be if you share the opinions expressed on this blog.

As the Cato Institute reports, a conference will be held to analyze the "free market mindset", creating ample opportunity for leading "social scientists and legal scholars" to express their nicely worded aversion for the system of production and exchange that has probably enabled most of them to be in the lofty position they occupy today. Maybe we're just narcissistic egoists, out-of-control Randroids, maybe we lacked attention in our childhood and now we're megalomaniacs. Who knows?

In an age that treats compromise as a virtue, principled opposition to evil is easily categorized as an insanity. That shouldn't stop us from being stubborn and insisting on our rights to life, liberty and property, no matter how many "scholars" disagree.

(hat tip to Ars Libertatis)

Obama's economic agenda is fallacious

President Obama delivered his first speech to a joint session of Congress yesterday. By employing a lot of platitudes and unwittingly painting a dreadfully wrong picture of what his plans will achieve, he tried to win the hearts of the nation once again. Let's have a closer look at his visions:

Obama said it's time to act boldly not just to revive the economy, but "to build a new foundation for lasting prosperity."
The only sustainable foundation for lasting prosperity is capital accumulation. Saving. Deferred consumption. Obama's stimulus plan entails quite the opposite, deficit spending and inflation. That may be the foundation for a new economic bubble, but it's far from being a foundation for prosperity.

"While the cost of action will be great, I can assure you that the cost of inaction will be far greater," he said.
This view implies that only government can take (and therefore must take) action or an already bad situation is bound to get even worse. Obama apparently doesn't believe in the power of emergence and grassroots operations, but rather trusts his own wits instead of letting the combined abilities and ideas of millions of individuals work out a solution. Such a stance requires quite a lot of self-confidence - Hayek coined it "presumption of knowledge".

Obama said his administration already has identified $2 trillion in government spending cuts that can be made over the next decade.
A surprisingly positive remark. Let's hope that "can" is not just a euphemism for "should be, but won't".

Obama predicted that because of the recovery plan, the United States will double its supply of renewable energy in the next three years. [...] Obama also pledged a "historic commitment" to health care and said the recovery plan could lead to a cure for cancer. He also promised the "largest investment ever" in preventive care. [...]
I don't even know how to call this. His first claim about a doubling output at least sticks to classic central planners' rhetoric, but holding out the prospect of a "cure to cancer" is one step beyond that. How can you promise a scientific breakthrough as a politician? Does he really think that throwing money after a project is all it takes? Amazing.

"Slowly, but surely, confidence will return, and our economy will recover," he said, asking Congress to join him in "doing whatever proves necessary because we cannot consign our nation to an open-ended recession."
The unfortunate aspect is that he's trying to imitate or even surpass Roosevelt in his "stimulus spending", thereby dramatically increasing the likelihood of an "open-ended recession". As I said above, dreadfully wrong expectations.

Obama promised to reform the regulatory system to "ensure that a crisis of this magnitude never happens again."
By ignoring the origins of the crisis, the existence of a central banking system, two state-backed mortgage corporations and a number of laws prohibiting banks from discriminating against customers with a low degree of creditworthiness, and instead opting for the popular, but misguided view of an "out-of-control market system", Obama is bound to aggravate the crisis and to sow the seeds for a new economic bust.

"A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future," Obama said.
This quote scares me. Obama seems to hold the view that giving money to the wealthy does not lead to any kind of investment. While it was certainly bad-mannered to grant tax cuts to the rich, but not to the poor, any new private sector money creates more prosperity and opportunity than wasteful and misdirected government spending. Is a tax cut some sort of "gift" to Obama? Do we need to stop giving gifts when times get tough and instead "save" money by giving it to government? The idea makes me shudder.

Even more disturbing is the response of his alleged political "opponents":
Louisiana Gov. Bobby Jindal, who delivered the Republican response to Obama, blasted the Democrats' stimulus plan, saying, "while some of the projects in the bill make sense, their legislation is larded with wasteful spending."
No principled opposition to stimulus packages. No defense of free markets or individual decision-making. No, just an admonishment for being "too wasteful". Another reminder that working within the two-party-system might be a giant waste of time if your goal is to promote liberty, though Governor Jindal found stronger words to express his support for a bottom-up grassroots society in his YouTube response. So we shouldn't judge too soon.

In conclusion, Obama's attitude resembles the confidence of a central planner when it comes to controlling the lives of millions of individuals. His distaste for private investment and his obsession with politically correct spending are frightening. The lack of a principled opposition should be clarion call for action to all friends of liberty.

Tuesday, February 24, 2009

A shining example of individual liberty

Being able to walk into a police station while openly carrying your personal defense tools. No hierarchy between policemen and customers: both are armed, both have their reasons. No embarassing questions, no paperwork, no panic, just respectful business between two equally free men.

As Heinlein said, "An armed society is a polite society". If you don't believe it, go and find out in New Hampshire.

(hat tip to Opponent)

Minimum wage laws are counterproductive

For several reasons:

1) A wage determines the value of work performed. This value cannot be changed by fiat because it depends on how much customers are willing to pay for it. If we assume that a certain type of labor only generates a profit of 4 dollars per hour, then an employer can only pay a wage of 4 dollars per hour at the maximum to avoid a loss. If the worker were in an entrepreneurial position, he couldn't charge more than 4 dollars per hour for his work either or else he wouldn't find willing customers. A law that prohibits him from earning less than 5 dollars per hour would not increase his income, but most likely cost his job.

2) There's no "positive upwards spiral" created by minimum wage laws. Some proponents argue that more revenue earned by underprivileged workers will cause more money to circulate in an economy and in the end, everyone is supposed to be better off. If that were possible, we shouldn't stop at 8 dollars per hour, but enact laws that allow everyone to earn a gazillion dollars per hour at the minimum. That may sound insane, but it's merely the logical conclusion of the "positive upwards spiral" argument.

In reality, a finite amount of money chases an equally finite amount of goods and services. Prices for these goods and services need to be set according to supply and demand or else calculational chaos (such as we've been witnessing in the Soviet Union) will ensue. A minimum wage of one million dollars would totally destroy the division of labor. A minimum wage of 8 dollars doesn't do as much damage, but has exactly the same effects on a smaller scale.

3) Empirical evidence indicating that minimum wages and increased employment correlate is negligible. Minimum wage laws are one factor in an economy that influences the demand for labor. If other factors outweigh the damage done by minimum wage laws, there can be increased employment despite of, not because of minimum wage laws. One should not confuse correlation with causation.

Thus, while minimum wage laws may, on first glance, seem like a good idea to protect unskilled workers from bad living conditions, in reality all they do is create barriers for the poor, disturb the division of labor and decrease overall wealth and opportunity.

Monday, February 23, 2009

How to treat a recession V

In previous recession articles, I referred to recessions as a result of "vast shifts in customer preference" that cause temporary economic inconveniences which are inevitable in a period of comparatively large transitions. While being correct in the most general terms, this is, of course, a bit misleading since it leaves out of the picture why exactly these preference shifts started occuring in the first place. It could be that people all of a sudden decided to change their preferences, but that's unlikely on such a scale. The real culprit, at least in this recent case, seems to be central banking and centrally managed interest rates.

Let's start from scratch. Our current crisis originated in the housing market. A lot of people were unable to repay their mortgages and had their homes foreclosed; house prices started dropping since an increasing number of foreclosed homes were now up for sale. This created another problem: a number of homeowners used their homes as a "source of revenue", they hoped on ever-increasing homes prices and maxed out their mortgages whenever the speculative price of their home had risen. Now that house prices started dropping, their securities started melting away and other expensive consumer goods that had been leased with the expectation of ever-increasing housing prices had to be returned, thus decreasing demand and prices in these industries as well. Ensuing layoffs in affected sectors of the economy soon started spreading and recessionary tendencies became visible.

In other words, a good amount of people had been living well above their means for quite some time. How did this happen? Why did these people get a mortgage in the first place if their solvency was that unstable?

On a free market, credit is a finite good. The availability of credit is expressed by interest rates. If little to no savings (the foundation for sound credit) exist, interest rates are high: that way, scarce credit is directed to very profitable endeavors only that are able to generate enough revenue to pay back the considerable interest. As savings become more abundant, more credit can be given out for less interest and less profitable enterprises can make use of this tool as well. The least profitable enterprise is consumption. Consumption generates no monetary profit per definition because funds are being consumed instead of being invested. Thus, credit-financed consumption by a few (basically, what the United States had been doing in the last few years) is only sustainable to some extent in a society with an enormous savings rate (in case of the United States, the thrifty lender was mainly China).

A central bank with centrally managed interest rates shuts off this market-based process of interest rate creation. Interest rates are set by fiat ("according to leading economists' market estimates"). Because central planners are unable to imitate the effectiveness of a real market, central banking also has a political objective, namely to transform the "is" condition of the market into an "ought to" condition of what politicians would like to see. Wanna "spur consumption"? Just lower interest rates! Needless to say, this creates a lot of problems down the road once political planning collides with reality. To pick up our example of United States consumption, years of low interest and low personal savings rates created a vast debt bubble that popped once one of the most debt-laden sectors of the economy, the housing market, had started to crumble - in other words, once it had become obvious that the amount of debt circulating was not backed by a sufficient amount of savings or productivity, that there simply was a lack of funds that could not be compensated by an increase in debt because there was way too much of it already.

Saving money constitutes deferred consumption. Think of money as bricks. It's your decision whether you want to use all your bricks right now to build houses for yourself or put them into a bank to gain interest and to allow others to build houses with them. If a brick bank promises to loan out more bricks than it can reasonably expect to get in due time, any constructions that have already begun based on brick loans from this particular bank will eventually come to a halt. If the brick money system itself is based on not lending out bricks according to how many bricks are there, but according to how many bricks should be there or how many bricks a wise, but economically ignorant wizard estimates to be there, then all houses that have been planned based on this system will face a lack of bricks rather soon.

And then, to finally make the point I wanted to get to, you'll see these miraculous "vast shifts in customer preference" that I'd been talking about all along. When people realize there ain't enough bricks, they'll change plans and opt for alternative solutions. This will necessarily interfere with the schemes of those who had been calculating with central bank brick numbers, but ultimately, either there are enough bricks or not. If not, there's no point in pretending anything else. It will only delay recovery.

Now, recessions are not always the fault of central banks, but these banks notably increase the likelihood of far-reaching malinvestments. They are most likely to be blamed for our most recent recession. Accordingly, I considered it worthwhile to point out that "vast shifts in customer preference" do not need to be the result of "free market animal spirits", but can also be caused by the actions of state institutions.

Comic: market regulation

Market regulations impose costs on businesses. Since most regulators have no experiences with the kind of business they are supposed to regulate, the results can be expected to be tedious and expensive while at the same time creating a legal minefield. Worse even, since the cost of compliance does not scale with business size, huge corporations gain big advantages over their smaller competitors. That's why big business is generally in favor of regulation; you'll find their lobbyists near most regulatory committees.

Regulations do not help "tame the market". They glue together the legs of small and swift competitors so that corporate giants can easily crush them.

(source: Cartoonstock)

Sunday, February 22, 2009

Sunday Best - Feb 22nd 2009

1) All-time best: Libertarian Anarchism: Responses to Ten Objections by Roderick T. Long
A classic of libertarian theory by one of its most famous academic proponents, Dr. Roderick T. Long.

2) Best news-related: Battling the Threat of Famine with One Hand Tied -- Thanks Again Greenpeace and FOE by Ronald Bailey
While crops worldwide are being infected with a dangerous rust, adaption to this new situation becomes increasingly difficult due to the political minefield of genetic engineering. Demonizing technology will hardly improve global living standards - and it's a play with fire (or, more appropriately, "a pending disaster in global agriculture") in this particular case.

3) Best debate: Most Libertarian Country on the Mises Institute boards
A discussion on the freest place on earth that turned into an argument over secular statism. Quite thought-provoking.

Saturday, February 21, 2009

Solutions to anthropogenic global warming: The Carbon Badge

We're coming across a number of quality seals in our everyday lives. Some commend the product for its superior quality, others for the company's worker-friendly atmosphere, others for the humane treatment of any animals involved in the production process. In an age of climate concern, companies could show their efforts to reduce greenhouse gas emissions by putting a special quality seal on their products that we will refer to as The Carbon Badge (TCB).

TCBs will be issued by separate companies which specialize in analyzing the carbon output of other businesses. To get permission to use the seal on their products, companies would have to subject themselves to the rigorous scrutiny of TCB employees who have been trained to look twice on an official carbon balance sheet before accepting it and who would be allowed to check any corner or record of the aspiring company for evidence of fraudulent carbon claims. After successfully verifying the carbon benevolence of a company, "TCB Inc." would contractually allow them to use their seal on any company-related product and probably promote willing companies on their website or in TCB-friendly magazines and papers. That way, climate-conscious customers could discriminate against companies who refuse to take action against climate change and support industrial efforts to cut back on greenhouse gases.

But what if, say, Big Oil sets up a TCB-issuance company to promote their products with a phony seal? Markets will figure out which seals to take seriously and which not. An oil company that sets up a rigged seal and puts it on its products would soon be discovered by environmental activists and pilloried in their publications. Any general news outlet that has a reputation of editorial independence to lose will likely cover the topic as well as soon as the details reach the general market. Another approach would be customer guidance booklets which promote trustworthy seals so that customers can specifically look for them. After some time, those seals with the best customer/market feedback would become general knowledge and people would be able to recognize brand names or specific signs on first glance.

How about companies which put a trustworthy TCB seal on their product without permission? That would constitute fraud. If a product is supposed to contain apple juice, but you smell root beer after opening it, you're free to sue the producer and inform customer information agencies. Entrepreneurs who chose to act like that would soon lose credibility, maybe even their good credit ratings (after all, a fraud lawsuit may result in a hefty amount of trial fees and smart-money obligations).

What if people just don't care enough about climate change to notice any carbon badges? In that scenario, we'd be even worse off with a state solution. Since a majority of voters wouldn't care about climate change and likely oppose any related political measure that burdens them with extra costs and toils, we can expect politicians to drop the issue. Worse even, they might fund scientists to disprove anthropogenic climate change theory, thereby decreasing the chances of concerned AGW activists to get the message through. If a sufficient number of people worry about AGW, we shouldn't settle for an unsatisfying, wasteful and slow state solution, but instead harness the power of the market to tackle the issue.

Friday, February 20, 2009

Comic: farm subsidies

Farm subsidies are supported by most factions of the mainstream political spectrum for one reason: nobody wants to be guilty of "letting family farms perish". Subsidies are supposed to level the playing field and guarantee a basic income for those who pursue this traditional and hard way of life.

However, getting your hands on a state subsidy is an arcane and complicated task. Those who barely make ends meet by plowing their fields and harvesting their crops don't have time to get into this shady business and lack funds to hire a lawyer or tax consultant to handle it for them. Thus, agricultural subsidies flow mostly to big producers who thereby gain another advantage over their smaller competitors. Big agribusiness has the means to effectively siphon off subsidies. Family farms don't; they just want to honestly grow crops.

Farm subsidies are not a blessing to the family farm. They're another nail in its coffin.

(source: The Public Choice Capitalist)

Thursday, February 19, 2009

We're all spendthrifts now

Who would've thought? Federal government spending has been increasing almost exponentially over the last few decades. However, sometimes a graph is necessary to show how bad things actually are:

Two details are especially intriguing:
1) In 1971, President Nixon went off the Bretton Woods system which was the last vestige of the former gold standard. In this system, foreign countries used the US dollar as a reserve currency while the dollar itself was bound to a a gold exchange rate. That way, there was a last, albeit weak obligation to fiscal sanity left which prevented governments (especially the US government) from printing money and spending madly. Unsurprisingly, once this had been abolished, spending went through the roof almost immediately.
2) The graph ends in 2003. Iraq War, bailout and stimulus package would've lengthened the axis of ordinates quite a bit.

(source: Political Class Dismissed)

Europe's in trouble, says Gary North

Normally, I would've put this article in my "Sunday Best" category. It sure deserves to be called "best news-related article". However, its implications are too important to wait for Sunday.

Gary North writes about a Daily Telegraph article which, before being edited, said that a secret EU report available to DT editors warned about the magnitude of toxic assets on the balance sheets of European banks. They may amount up to 16,3 trillion pounds which is about 18,4 trillion euros. Failure to bail out these lending institutions with a comparable sum may lead to bank failures and ensuing bank runs. A breakdown of major European banks would basically collapse the European economy which is just as dependent on credit as any other. Plus, if people lose their savings, there's nothing left to spend or invest.

Worse even, since the European community consists of countries with vastly different debt conditions and financial credibility, a uniform solution is highly unlikely to be found if such a great sum had to be scraped up. For example, while investors may still have a lot of trust left in Germany's stability, they may refuse to lend to Italy. But since both Germany and Italy are part of the Euro monetary union, Germans would have to tolerate massive inflation by the European Central Bank to make up for a lack of creditor confidence in Italy. How long will they be willing to take that?
In my view, the European public still has faith that the governments and the central banks will successfully intervene to restore commercial banks. But if the original article was correct, that 44% of bank balance sheets have disappeared, then the public is living in la-la land. The entire structure of Europe's capital markets is at risk. Or, I should say, what remains of the capital markets is at risk.
Reality is an unforgiving mistress. If the public refuses to acknowledge the severity of a problem, it will not disappear. It will come back in an even worse fashion. If European banks have lost nearly half of their balance sheet, I honestly don't know what's going to happen. It could be everything from an exceptionally long and severe depression to a complete breakdown of civilization, but in any case, you bet it won't be pretty.

The validity of the cited Daily Telegraph article has not been verified as of yet, but I wouldn't take that as a relief. Try to imagine what's going to happen when welfare checks stop coming in because governments are out of credit and a vast number of people lose their savings. You can't picture it? Neither can I.

Brace yourselves, we may be in for a rough ride.

Wednesday, February 18, 2009

The Frederal Reserve

Cute Kirby analogy to the nature of central banking. Another good job by confederalsocialist.

Sacred pieces of paper

In the 18th and 19th century, constitutionalism was a popular political philosophy. Annoyed by despotic acts of their monarchic rulers, people figured that written limitations on a king's power would stop him from abusing his position too much. Thus, instead of demanding the abolition of monarchic rule, the popular sentiment was that a constitution could be introduced to keep the balance between liberty and power.

Classical liberals and contemporary constitutionalists cling to this idea. Believing in the necessity of a state, they argue that a liberty-oriented constitution jealously guarded by a liberty-loving population can guarantee the sustainability of a minarchist state (sometimes denigratingly referred to as a "night watchman state") and enable liberty in a statist framework.

However, there are several major concerns worth considering. First, if people need to have a libertarian attitude to keep a constitution alive, we might as well not have one; for a libertarian people will demand sufficient restrictions on state action by itself, whereas a non-libertarian populace cannot be stopped by a piece of paper anyway. That's the main problem with a constitution; as George W. Bush so beautifully put it, a constitution is "just a goddamned piece of paper". It may be a revered piece of paper that everyone pretends to worship, but at the end of the day, it is subject to the political whims of a time, not the other way round. There is no magic involved here, only paper and ink.

Furthermore, constitutions tend to give legitimacy to bad actions. In the absence of a constitution, a king's taxation powers were considered a legal gray area. Even though nobody had signed a contract with the king, it was expected that he should fulfill his part of the protection racket arrangement - or else his claims for tax money would become null and void. With an active constitution mandating taxation powers to government, there is still no contract signed (except for an obscure 'social contract'), but states which do not fulfill their duty of protecting citizens can point to the constitution for continued tax claims - after all, if a constitution has no legitimacy, they say, you don't have any rights whatsoever. Either you pay according to the constitution or you lose your constitutional rights. Thereby, natural rights that predated the drafting of a constitution become mere legislation bound to your compliance with state violence.

And even then, it is by no means secure that these constitutional rights will forever be upheld. After all, a constitution is subject to interpretation by states and their courts. With incremental distortions or conflations of certain articles, their actual meaning can be easily eroded and transformed into a pro-state position. Consider, for example, the Second Amendment. It states quite clearly that every individual has a right to keep and bear arms. After decades of distortion and creative interpretation of punctuation and semantics, we are now on the brink of a Supreme Court judgment that defines this Amendment as granting arms rights to state militias only. That way, the original intent of the Amendment, another balance of power by allowing ordinary citizens to guard themselves against tyranny, has been destroyed completely.

Finally, who says that constitutions have to be libertarian? Some contemporary constitutions seem to have almost completely abandoned the idea of limiting state powers and instead function as a regulatory element that promises welfare and affirmative action to its subjects while already infringing upon real rights in the respective articles. You don't believe me? Check out the German Grundgesetz:
Article 2, (1):
Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law.

Article 3, (3):
No person shall be favoured or disfavoured because of sex, parentage, race, language, homeland and origin, faith, or religious or political opinions. No person shall be disfavoured because of disability.

Article 5, (1):
Every person shall have the right freely to express and disseminate his opinions in speech, writing and pictures [...]
These rights shall find their limits in the provisions of general laws, in provisions for the protection of young persons, and in the right to personal honour.

Article 7, (1):
The entire school system shall be under the supervision of the state.
The right to establish private schools shall be guaranteed. Private schools that serve as alternatives to state schools shall require the approval of the state and shall be subject to the laws of the Länder.

Article 14, (2):
Property entails obligations. Its use shall also serve the public good.
And so on. Americans tend to think of constitutions as limits to state power, and while that was indeed the original intent behind them, it's not necessarily the only purpose of a constitution anymore today.

In closing, we have to admit that pieces of paper do not effectively keep a state in check. Sometimes, they even aid it in growing. Libertarians should seek for more appropriate tools to preserve liberty.

Tuesday, February 17, 2009

Comic: the value of knowledge

Schools are respected institutions because people believe they teach valuable knowledge to our children. However, the value of knowledge is subjective. While schools do communicate a lot of information, it is questionable whether a student will find any use in knowing these at all. Quite often, students will pursue enjoyable activities they can put to direct use much more productively and successfully than what they are forced to do at school. Still, these private activities tend to be considered less important than random school knowledge. That's a bad incentive structure which may delay the accumulation of worthwhile knowledge far too long.

(source: xkcd)

Monday, February 16, 2009

Comic: capitalists and competition

It is a common belief that big business is the driving force behind free trade and free market ideology. Not too rarely, that's wrong. Large corporations tend to lobby for state regulation of the market and protectionist tariffs to secure their established position and keep their own profits high due to a lack of competitors. That's why free markets do not equal the enslavement of mankind by capitalists, but much rather liberate humanity from the shackles that some businessmen want to impose on it.

(source: Cartoonstock)

How to treat a recession IV

We often hear claims for tax cuts by free market advocates in times of a recession. Generally, they are right: cutting taxes allows people to control a greater share of their resources, thus making production according to public demand, not government fiat more profitable and thereby increasing the likelihood of an economy that actually satisfies people's demands.

But there's a catch: cutting taxes only works if government spending is cut by the same amount or more at the same time. Otherwise, it'll be merely make-believe: while you may have some more dollars in your wallet, your government will already be engaged in deficit spending or monetary inflation to keep up with the cost of burdensome state programs.

The current recession seems to be a prime example of this schizophrenic mentality: in order to reach a "compromise", supposed free marketeers and those who put their trust in government agree to cut taxes, but increase spending ("stimulate the economy") at the same time. That's like eating your cake and having it, too. You can only spend money once: either for private sector needs and wants or for state purposes. If both compete for a finite amount of goods and services, prices will go up and your tax cuts will essentially vanish.

Not only is this a very dishonest method of trying to buy as many political sympathies as possible, but it's more of the same "let our grandchildren pay" mentality. At some point in time, debt incurred by a state will have to be paid back: either by taxing every bit of surplus wealth out of those who are still producing, a sure-fire way to economic collapse. Or by madly inflating the currency, another quick road to economic turmoil through hyperinflation. Or by pleading with creditors to forgive debts which they will only do for a good amount of political favors - which means that the bosses you can still vote on will be subject to the decisions of another layer of creditor functionaries - so you'll be even more screwed.

In conclusion, be careful whose tax cut plan you support. Paying less is only reasonable if less is being spent as well. Otherwise, nothing fundamental changes about the unsustainable attitude of spending until the cows come home.

Sunday, February 15, 2009

Sunday Best - Feb 15th 2009

1) All-time best: Schelling Points by khydraa
An analysis of why the state is still seen as a moral and sound entity despite its obvious systematic and ethical flaws. Also contains some interesting historical evidence for the claims made. An enlightening read for anyone wondering why the state is so effective at, well, governing people.

2) Best news-related: National Healthcare FAIL: Japan by David Z
A sickening case of socialized medicine failing to help those who are really in need. It's just an empirical observation, of course, but proves the libertarian point that socialization of certain sectors of the economy does by no means guarantee that they will be available to you should you have to depend on them.

3) Best debate: Does free will exist? on the Anti-State boards
Maybe it's because I have been pondering on the issue myself for quite some time now, but I found these exchanges very helpful and instructive. One should not be so quick to accept and promote the idea of "free will", even if one is advocating freedom in general.

Saturday, February 14, 2009

Implications of the Myers-Briggs Type Indicator

I've come across a very interesting personality characterization method today. It is called the Myers-Briggs Type Indicator and attempts to categorize your personality according to four factors: social attitude (Extraversion / Intraversion), perceiving functions (Sensing / Intuition), judging functions (Thinking / Feeling) and lifestyle preferences (Judgment / Perception).

Social attitude describes the way you interact with others: either openly or shyly (very generally spoken, as will be the case for all other factors). Perceiving functions are the way you process information: either by trusting unfiltered, tangible data collected by your senses or by abstractly analyzing what happens around you. Judging functions delineate how you evaluate gathered information: either by comparing them to general concepts in your mind or by weighing them with situational environments and events. Lifestyle preferences characterize which set of abilities, perceiving or judging, you like to use and to show to others.

You can take a personality test based on this model here. To find out what your results could translate into in real-life, look here. Wikipedia has a section on the frequency of all 16 Myers-Briggs personality groups within the United States population.

I decided to give it a shot and my result was INTJ - Introverted Intuitive Thinking Judging. I found astonishing similarities between the type decription on and my own perception of myself:
The INTJ's interest in dealing with the world is to make decisions, express judgments, and put everything that they encounter into an understandable and rational system. Consequently, they are quick to express judgments. Often they have very evolved intuitions, and are convinced that they are right about things.

They dislike messiness and inefficiency, and anything that is muddled or unclear. They value clarity and efficiency, and will put enormous amounts of energy and time into consolidating their insights into structured patterns.

INTJs need to remember to express themselves sufficiently, so as to avoid difficulties with people misunderstandings. In the absence of properly developing their communication abilities, they may become abrupt and short with people, and isolationists.
Interestingly, I see a similar behavioral pattern on libertarian message boards quite a lot. The majority of users demand rigorous intellectual honesty in debates and get annoyed and angry fairly easily once a counterpart seems to be avoiding this duty. You'll encounter long-lasting debates on details of a philosophy in which users with adverse views will valiantly defend their own position over many pages, even if it's just a minor detail among details - logic and stringency are to be preserved. And of course, there'll be countless debates about semantics for the purpose of being right because one feels right. I expect this to be more generally the case among those with a contrarian point of view or a very specific research interest. I wouldn't be surprised if a good number of professed and philosophically sound libertarians scored somewhere around INTJ.

Another intriguing aspect are attitudes towards morality, duty and authority among the more common personality types (INTJ is the third rarest personality, according to Wikipedia). For example, take a look at ISFJ, the most widespread character type:
They value security and kindness, and respect traditions and laws. They tend to believe that existing systems are there because they work.

The ISFJ has a difficult time saying "no" when asked to do something, and may become over-burdened. In such cases, the ISFJ does not usually express their difficulties to others, because they intensely dislike conflict, and because they tend to place other people's needs over their own.

ISFJs need positive feedback from others. In the absence of positive feedback, or in the face of criticism, the ISFJ gets discouraged, and may even become depressed.
In other words, ISFJ types fit best into a highly regulating statist society. They have faith in existing institutions, they do not tend to question the good motive of those working within them, they will not complain too much about overbearing taxation or presumptuous legislation (they can't say no!) and they're unlikely to adopt unpopular (anti-state) views because they need positive feedback from others - who are probably going to be pro-state in a statist society. That doesn't mean this personality type is somehow "bad" - only that it can easily be abused in a statist environment when there's no consciousness for the potential of abuse among ISFJers.

The second most common personality type is ESFJ. ESFJers are closely related to ISFJ persons, they just tend to be a little bit more outspoken. See what's prevalent among them:
They need approval from others to feel good about themselves. They are hurt by indifference and don't understand unkindness. They are very giving people, who get a lot of their personal satisfaction from the happiness of others. They want to be appreciated for who they are, and what they give.
They may have a strong moral code, but it is defined by the community that they live in, rather than by any strongly felt internal values.

In such cases, the ESFJ most often genuinely believes in the integrity of their skewed value system. They have no internal understanding of values to set them straight. In weighing their values against our society, they find plenty of support for whatever moral transgression they wish to justify. This type of ESFJ is a dangerous person indeed.

ESFJs respect and believe in the laws and rules of authority, and believe that others should do so as well.
ESFJ types seem to be prone to all kinds of indoctrination. If a person holding a high public office tried to explain to me that printing money equals generating wealth, I'd most likely call shenanigans. ESFJ types might reconsider their own position instead of questioning the view of public authority. Given state power, they may also be more reckless in using it since they tend to lack a correction mechanism for bad ethical standards. Plus, they believe in existing institutions as well, making them wary of any revolutionary thought. Basically, they seem to be the more active counterpart to the ISFJ type.

Finally, let's examine ISTJ personalities, the third most common type of person:
They are "good citizens" who can be depended on to do the right thing for their families and communities.

ISTJs tend to believe in laws and traditions, and expect the same from others. They're not comfortable with breaking laws or going against the rules. If they are able to see a good reason for stepping outside of the established mode of doing things, the ISTJ will support that effort. However, ISTJs more often tend to believe that things should be done according to procedures and plans. If an ISTJ has not developed their Intuitive side sufficiently, they may become overly obsessed with structure, and insist on doing everything "by the book".
Another kind of person that can be horribly abused under the wrong kind of guidance. Again, I'd like to point out that there's no intrinsically "bad" or "weak" element in these personalities; however, understanding that about one third of the US population shares a common inclination towards manipulation by "society" might help us see through some of the mechanisms that exist around us and whose function we understand on a theoretical level, but can't comprehend practically. How is it that obvious contradictions in state theory are often ignored? Why do so many people seem to blindly follow authority? This might give us some hints.

It may also explain why libertarians had only limited success in communicating their ideas despite an unmatched theoretical framework. Many people just don't seem to be into abstract cloud-castles even if they appear superior to currently existing systems and institutions. Understanding the personality of our target group should help to adapt our strategies.

There's a lot more to it, but I'll leave it at that. However, I strongly encourage you to research this topic. It sure caught my attention once I got the fundamentals.

Comic: socialized medicine

Price controls, government cost calculations and the loss of customer sovereignty will lead to shortages, bad quality and less innovation. That's true for cars as it is for medicine.

(source: First Friday Collective)

Friday, February 13, 2009

Weapon control in a free society

When there are no laws regarding weapon control, what's to stop a madman from collecting WMDs and threatening his neighbors with it? Wouldn't a free society need some kind of controlling mechanism to prevent scenarios like these from happening?

Yes, it would. And that's how it could be handled:

Assume you're walking down the street and a man holding a knife runs towards you, screaming wildly. You knock him down and he starts complaining that he didn't want you any harm, he was merely rehearsing for a drama play. Was your defense reaction justified? Yes, most certainly.

Now assume this man was rehearsing on an empty football field. Nobody was threatened by his actions, so there's nothing wrong with it. Nobody minds him doing so.

Let's further assume that a man living in the desert without any neighbors in a 50-mile perimeter sets up a rocket launcher in his yard to defend himself and his property against marauders. Would anyone mind? Probably not. However, if someone decided to install a rocket launcher on his balcony in a crowded city, this might lead to trouble with neighbors; just like building a toxic waste dump in a family-friendly suburb will cause conflicts.

It's become clear that the ownership and usage of different kinds of weapons has different effects in different circumstances. As long as you're living a recluse life, you're free to drive a tank and set up missile launchers on your lawn. Since you were there first, any future neighbors will have to tolerate this behavior or stay away. However, threatening the security and well-being of your already existing neighbors with potentially harmful gadgets will be a controversial issue in a private property society.

How will this be resolved? Individually, either by reaching a compromise or using arbitration services/free market courts to settle the matter. You may choose to ignore a court ruling and keep your Stalin's organ on your balcony, but you're bound to face pretty harsh consequences once this information reaches the general market (I need to do an article on free market arbitration in the future to elaborate on this).

The state is completely useless in solving this problem. States produce codified law that is supposed to apply to all possible situations involving a particular matter. But as we've just shown, gun control in a free society is a case-by-case matter, something that cannot be codified, but must be weighed anew in every single instance. You'd need states that encompass only two pieces of property to adequately address this issue within the framework of a state, an obviously ludicrous proposal. A free market will be able to eliminate problems individually, thus creating much more maneuvering room for possible solutions.

But what about our WMD collector? He's dangerous even if he's chosen the path of the hermit. Basically, once it becomes known that he's bunkering highly dangerous substances, insurance and defense providers will find it profitable to eliminate the threat before it escalates and severe damage is done. Several approaches could be taken to do this; negotiating with the collector or breaking into his cellar to neutralize all WMDs (remember, hoarding WMDs counts as an act of aggression, so counter-force is allowed) are two of them. Killing the hermit would be a both morally and economically terrible decision; morally for his right to life and liberty, economically for compensation charges of potential relatives and for possible harm done by the hermit while defending himself. If you think states could solve problems of this kind more appropriately, think again: Waco and Ruby Ridge.

Now, there may be good reasons to own WMDs. Research purposes are one. But think of owning WMDs in the context of our rehearsing actor. If you behave irresponsibly (for example, by putting WMDs into canning jars in your cellar), you constitute a threat to your fellow men. They will feel an urgent need to eliminate this threat. Claiming that you're "just a WMD collector" is like claiming that you simply wanted to rehearse when you seemed to assault a random pedestrian.

Lastly, I recommend this paper by Walter Block for further reading. My ideas are based on his research, so I have to give him credit for this article - without him, it may not exist today.

Guns and crime on YouTube

I decided to create read versions of the articles that have the biggest potential of becoming popular. So, this is my first attempt. As I said in the comments section, please excuse my accent and breathing.

How to treat a recession III

When everything else fails, there's still the printing press - even though today's money creation happens mostly within the digital realm. Anyhow, politicians praise inflationary policies in recessions as a means to achieve three things:

1) Generating funds to finance stimulus packages without taxation
2) Creating incentives to spend money now due to expected future inflation
3) Preventing falling prices

As for the first part, that's pretty easily refuted. There's no such thing as a free lunch. Even though you don't have to tax at gunpoint in this case, the effects of inflation will be the same as taxing a comparable amount of money. Your dollars lose purchasing power, thus they're worth less - you're likely to need more of them to buy the same amount of goods and services. It may not be as obvious, but it still happens and there's no categorical difference between governmental inflation and taxation. It's merely semantics.

The second point rests on the fallacious view that "consumption drives the economy". If you can stimulate aggregate demand, that'll increase aggregate supply and everything's supposed to be fine again. But an economy exists to satisfy wants and needs. The fact that vast shifts in the structure of production are occuring (with the accompanying recessionary inconveniences) shows there is a vast discrepancy between what is being produced and what is being demanded. Artificially changing these demand patterns by threat of inflation does no good to the general welfare - it's like offering someone a childhood painting of yours for 50 dollars or else he will get shot. Considering his options, your counterpart will probably go for your painting - not because he demands this particular good, but because the only alternative you grant is much worse. Actual demands are not going to be satisfied. It's a charade.

Falling prices and deflation are among the biggest scare stories around. According to some, they will lead us into a downwards spiral that'll only end once we hit rock bottom. However, prices and wages need to drop if necessary adaptions to vast changes in customer demands are to be performed. If nobody wants to build a house anymore at current market rates, what's the use in upholding wages of construction crews? If jewelry is too expensive for the majority of previous customers, why should you keep prices up? It's a clinging to a previous state of affairs that may have been more beneficial to some individual market participants, but turned out to be unsustainable. Trying to freeze the economy in this boom period to prevent a supposed downwards spiral will only hinder essential corrections and prolong the recession.

In short, printing money does not increase wealth. As simple as that sounds, it's a pretty tough story to sell in Washington, D.C..

Thursday, February 12, 2009

Solutions to anthropogenic global warming: insurance providers II

I received criticism concerning one of my points in the previous article. The argument boils down to that:
How are carbon-conscious insurance providers going to get enough funds to pay for additional damages caused by climate change if they offer cheap rates to anyone driving a hybrid? It's an unsustainable business model. Only government, with its monopoly on force, can effectively curb high carbon outputs by taxing the hell out of it or outright banning it!
The objection is valid. There's a contradiction between needing more money to pay for higher damages and lowering rates at the same time. This creates another bad incentive, an enticement to avoid any customers within the mid- to high-risk regions such as areas close to the sea, a river or a potentially expanding desert. If we limit ourselves to the level of single insurance companies, the dilemma can hardly be resolved.

However, insurance companies also enter agreements with reinsurers. Reinsurers make sure damages on a really big scale that ordinary insurance companies cannot pay will be paid. Most details are similar to a deal between an insurance company and a customer: the higher your risk group, the higher your rate. Let's assume you're running a reinsurance company for medical services (quite unlikely, but still). You're insuring two insurers: the "Healthy Athletes' Pooling Group" and the "Obese Smokers' Insurance Corporation". You'll charge an extra fee for the latter company for picking its customers from a high-risk group.

The problem with carbon-based insurance calculation is that your carbon footprint does not necessarily increase your personal damage risk. Just because you fly your private jet for fun doesn't mean your house will be hit by a meteor, but maybe you increase risks for someone living on the coast or near a river. Why wouldn't insurance companies simply charge higher rates for those who live in a high-risk region, you ask? Well, if only symptoms and not root causes of a problem are being addressed, it's bound to get worse. If insurance companies decide to dump all those who live near a coast to let their homes be swallowed by the sea, then suddenly you'll have a new high-risk group in the former heartland due to a shift in sea levels. You could try to make living in a high-risk region unattractive by charging insane rates, but that'll only shrink your overall customer base. If climate change is real, nobody will be able to run from it. Far-sighted businessmen will recognize this fact and invest accordingly.

So, if insurance companies refuse to implement any kind of carbon footprint in their premium calculations because the effects of climate change are unlikely to affect their customers, reinsurers will remind them of their duties. Reinsurers have huge incentives to minimize risks due to their global obligations. Insurance companies which primarily insure carbon bigfoots will then have to pay higher premiums to their reinsurer, thus creating an incentive to join the carbon-conscious calculation style. Low-output insurers will have lower premiums, thereby being able to both cut rates and still have enough funds to compensate for any new damages thanks to reinsurers backing them. When everyone has become a low-output case, then, according to AGW theory, we should see a decline in additional climate-based damages so that lower rates for everyone appear sustainable.

But what if insurance companies simply refuse to do business with reinsurers that demand carbon-based premium calculations? Two things should be considered:

1) Even in low-risk regions, accidents occur. That's why you want to have a reinsurer. Insurance companies that refuse to deal with reinsurers due to a reluctance towards carbon-conscious premium calculations will lower their credibility since they follow a reckless risk-pooling policy and face bankruptcy in case of any major events. In short, they're walking on a tight rope.

2) What happens if you own a notoriously polluting factory that poisons the village next to it and decide to hide in your mansion on a hill to avoid the rage of the villagefolk? Right, at some point in time, they'll ring your doorbell with forks and torches in their hands. Those who try to hide from their climate responsibility will be faced with a similar scenario. Public ostracism and discrimination against those insurers which try to opt out will ensue. At some point, it may become profitable to give up the isolationism.

Finally, it should be said that insurance companies are by no means the only way to combat harmful climate change. They're an interesting economic aspect of the struggle against this common enemy within a free society, but not the sole cornerstone of all endeavors to prevent bad environmental changes. Thus, even if there's risks involved in the insurance approach, it doesn't need to be perfect since it can be complemented by other actions of free men in a free society.

Solutions to anthropogenic global warming: insurance providers

[cross-posted in a slightly different fashion at the Mises Institute Forums]

If climate change is man-made, really dangerous and will cause massive damage, this will burden insurance companies a lot. They somehow need to collect more money to pay for the new damages. What's to stop them from using your "carbon footprint" in their premium calculations? After all, people who fly a lot, drive big SUVs and have energy-guzzling homes contribute more to man-made climate change than your average tree-hugger, and coal-fired power plants are much more of a threat than photovoltaic cells on a roof.

My first concern was competition. If one company raises rates for carbon bigfoots, others could simply woo them away by offering lower rates. However, these insurers also need to collect money for an increasingly damaging environment due to a changing climate. The only other way to get this done is by raising rates for everyone equally. Carbon-conscious individuals would then have an incentive to switch to those insurance providers who respect their efforts to contribute less GHGs, plus people who do not really care about climate change per se would have an incentive to pursue a more eco-friendly lifestyle. Temporarily, this would put a strain on both business models: climate-conscious companies would primarily get low-output individuals with lower rates whereas climate-indifferent insurers would mostly get "gas hogs" whose numbers would likely be dwindling due to newly created economic incentives. With the emergence of more and more sophisticated carbon-neutral technology, there would be an incentive for an increasingly large margin of carbon bigfoots to switch to a low-output behavior, thus creating an incentive to join carbon-conscious insurers. Those companies who do not reward low-output behavior would quickly see their customer base shrink. As more and more people decide to "go green", positive effects on climate development should become visible if the theory of AGW really holds water. The profit motive alone caused a shift to carbon-neutral ways of life in this case.

Of course, social pressure could also play a role in switching to a more carbon-conscious calculation and life-style. But I left it out of the picture for a lack of deductive power.

Insurance companies are already adapting to expected changes concerning the global environment. The Munich Re Group, one of the world's largest reinsurers, for example says:

Munich Re regards climate change as a major issue and, as co-founder of the Munich Climate Insurance Initiative, is devising appropriate insurance based tools. The project targets those countries and regions which are worst affected.

Now you may ask yourself, what's the difference between a carbon tax that decreases demand for carbon-intensive products and carbon-based insurance rates that do exactly the same? If government collects the money, it may go anywhere without notice. Instead of helping the victims of climate change, this carbon tax money may as well be used to build tanks to invade some foreign nation. Insurance companies also redistribute money in a sense, but it must flow directly to those in need without too much wasteful bureaucracy or the insurer will quickly face bankruptcy due to a lack of customers. Financial punishment for carbon bigfoots by insurers would not only be a purely market-based, but also much more efficient and just solution than letting government do the job.

Plus, there'd always be the possibility of opting out. If you don't like paying more for your gas-guzzler, feel free to quit, but live with the consequences. Individuals who chose to do so would probably face many obstacles in their daily lives and even ruin should a major accident ever occur in their lives which, again, creates an incentive to participate in this "carbon scheme" instead of rebelling and denying.

Just in case climate change is merely a giant money-making scheme, this solution will also help. If there's no additional damage done by climate change and insurers just use it as a scare tactic to siphon off money, just one competitor who doesn't will suffice to lure off customers who don't like to pay more for nothing. If climate change is damaging, but human activity doesn't cause it, low rates for carbon-conscious individuals will not be sustainable. Everyone will have to pay more then, regardless of their carbon footprint.

The welfare state's tipping point

Libertarians have never grown tired to criticize the welfare state, and rightly so. Instead of helping the poor to get out of poverty, the incentive structure behind the welfare state tends to lock them in a state of poverty to create additional needs for all kinds of welfare programs that will, in turn, generate funding for those presiding them. It's not that the welfare state is some enlightened institution designed to eliminate poverty - it's just another government scheme to keep its subjects pacified while at the same time creating a pretext for massive increases in taxation, obscure redistribution practices (keep in mind, most redistribution happens from bottom to top, not the other way round) and lots of tenured employment down the road.

The good news is: this cannot go on forever. Since there is no material incentive to actually decrease poverty for those who are "working against it" (if there was no more poverty, they'd all lose their jobs) and governments tend to be expanding, the amount of money spent on welfare programs tends to increase. This makes honest work increasingly unattractive due to punitive taxation and non-wage labor costs. The ranks of net welfare beneficiaries tend to increase, thus creating a vicious circle.

Government ponzi schemes such as Social Security or Medicare are even more sinister - since an individual is forced to pay money into the system for those who currently receive benefits out of it, there is an expectation for future reimbursement; however, this expectation rests on the willingness of future generations to also participate in the system, in other words, today's confidence in Social Security rests on the firm belief that there will be enough willing payers in the future. If you need 1+x persons to finance 1 retiree - and make no mistake, you need much more than one payer per retiree -, every family needs to raise at least 2+x children. Looking at world fertility rates, quite a leap of faith is required to hold on to this belief in the western hemisphere - starting with 2,05 children per woman in the United States, it goes all downhill from there to 1,23 kids in Poland.

Which means that while western countries are struggling to hold population levels, their inhabitants cling to a retirement system that is based on rabbit-style fertility rates. Combine that with the many disincentives the general welfare state creates when it comes to honest work, and you'll hear the demographic time bomb tick. Tick-tack.

Western politicians are naturally hostile to accepting these facts. Their incentive is to keep the system going until their term is over so they can benefit from generous Congressional pensions. Besides, talking about abolishing the welfare state is fiercely unpopular; "welfare reform", the desperate gluing-together of an inherently broken system that's falling apart everywhere until the respective politician is able to retire, is the politically correct choice.

However, this will not change reality. Reality is that at some point in time, redistribution, government ponzi schemes and high taxes/inflation/deficit spending will destroy western civilization. Literally. If there is noone left to produce and nobody willing to trade, society falls back to primitive living standards. It's likely that before total destruction occurs, the welfare system will break apart - however, this will cause unimaginable suffering among those who are really dependent on it and disillusioned hatred among the many free riders. Not a pleasant prospect.

It may be too late already to ensure a smooth abolition of the welfare state, but the only chance for preventing absolute mayhem is to start the gradual end of the welfare state now. First, all citizens need to be able to opt out of the system with a clear warning that if they stay in, they will probably lose everything they pay into it. Those who are dependent on the system (e.g., the elderly and the sick) need to be taken care of by diverting tax funds away from less useful projects. At the same time, welfare bureaucracy needs to be cut drastically so there is no influential group left to lobby for budget increases. That's what can theoretically be done within the state framework.

Should this process not be enacted - and that's the most probable scenario -, our best option is to find a safe spot to watch the welfare time bomb go off. It won't be pretty, but all we could do was warn ahead of time.

Monday, February 9, 2009

Liberty Comics

Check out these two continuing comic stories by Big Head Press: Escape From Terra and Odysseus The Rebel.

EFT is about two tax agents from Earth who are sent out to another world to establish a taxation system, but find that it's a free market anarchist society not quite impressed by their plans. Odysseus The Rebel tells the story of Odysseus from quite a libertarian point a view.

Also take a look at Scott Bieser's blog, he's one of the painters and a fellow libertarian thinker.

Sunday, February 8, 2009

Guns and crime

A hot topic, especially in debates with liberals, is the question of gun ownership. Liberals tend to be hostile towards gun ownership for practical reasons. A higher amount of guns in circulation, they argue, leads to an increased amount of gun violence; this additional gun violence is completely disproportionate compared to the amount of violence prevented by using a gun, and thus, guns are bad tools that ought to be banned.

Most often, these debates are settled by reciting different kinds of statistics that are meant to reaffirm the respective party's position. I don't intend to do this. I want to resolve the gun issue by employing praxeology and economics.

First of all, we must constitute that a person who intends to commit a crime does not care too much about the legitimacy of her actions. Whether or not guns are outlawed only matters to her in the sense that punishment may increase for getting caught, but also that the likelihood of an armed victim massively decreases. The advantages a criminal is able to gain over the victim make the increased punishment for owning a gun pale in significance.

Guns are great levelers. In a state of nature, superior physical force is an unsurmountable advantage in a fight between two individuals. As arms technology developed, these physical inequalities tended to matter less and less. A Roman gladius still required dexterity and some amount of bodily strength to be wielded. A musket is quite a hassle to load. Modern handguns can be used by anyone with three functioning fingers. Modern handguns are a blessing to the weak and downtrodden. Thus the old saying, "God created all men. Sam Colt made them equal."

When guns are outlawed, only outlaws will have guns. Outlaws will have a huge advantage over those who are barred by law to arm themselves. In fact, due to the effectiveness of contemporary firearms technology, even naturally strong individuals will then fall prey to anyone bold enough to purchase a firearm on the black market.

Since the probability of being victimized by a crime is low (and even then, the damage done is likely to be insignificant as well), non-criminals do not have an economic incentive to enter the black market and risk punishment by purchasing a potentially bad-quality, high-price firearm. Criminals, on the other hand, have an almost guaranteed success rate of 100% to victimize someone by employing firearm force in an area with an active universal gun ban. There's next to nothing that can match the power of an aggressively used firearm, except for a defensively drawn firearm. Accordingly, we can say that the economic incentive structure in a society with an active universal gun ban will lead to armed criminals and unarmed victims.

As soon as defensively used firearms enter the picture, the cost associated with the operational risk of committing a crime increases massively. Breaking into someone's house may result in getting shot or being threatened with a firearm and delivered to protection services later on. Robbing someone on the street may result in the victim drawing a firearm and therefore making it too dangerous to proceed (since the cost may be the robber's life), plus the possibility of being delivered to protection services due to a lack of escape possibilities. The same pattern can be applied to rape, kidnapping, murder or any other crime involving interpersonal contact.

Without a universal gun ban, the cost of owning a firearm decreases massively. Not only will they be cheaper and of better quality due to open competition, but there's no risk in owning them since it is perfectly legal to do so. This will set the threshold low enough for a certain margin of individuals to become gun owners. Once it becomes common market information that gun ownership is not a rarity, even non-gun-owners benefit as free riders: since a criminal cannot be sure whether you own a gun or not, but has to calculate the possibility due to the existence of gun owners in society, you're safer than you were before for, all else equal, you're now less likely to be assaulted.

Guns are force equalizers. Powerful as they are, it is irresponsible to deny ordinary citizens the option to own and use them. Doing that will only strengthen the position of criminals. We can assume that, ceteris paribus, an armed society will deter criminals more effectively than a non-armed one.

Sunday Best - Feb 08th 2009

I decided to add a new feature to my blog: the Sunday Best. Every Sunday, I'll post a reading recommendation in three categories:

1) All-time best article
2) Best news-related story
3) Most inspiring debate

Today, the winners are as follows:

1) All-time best: The Hunt Brothers' Silver Corner by FSK
I've yet to see anyone describe the events surrounding the attempted cornering of the silver market by the Hunt family in the 1970s that accurately. Almost a Shakespeare play. Very well-informed documentation of the events that happened, a must-read.

2) Best news-related: The Federal Reserve's Self-Imposed Dilemma by Gary North
An excellent description of the catch-22 the Federal Reserve has maneuvred itself into lately. You'll recognize the direness of the situation once you understand the mechanisms behind it. Definitely worth a look.

3) Best debate: Microsecession as a strategy and the prospects for a new Hanseatic League by Stranger on the Mises Institute boards
It's been going for one and a half months now and discusses the idea of tiny libertarian micro-societies either splitting off from existing state territories or being founded on uninhabitated islands to function as a regional trading centre and a model project for libertarians to point to. Is that the right approach? You decide.

Saturday, February 7, 2009

Anarchy is Emergent

Excellent point about the grassroots, bottom-up, market-based nature of human society and the artificiality of state governance.

I'd recommend you subscribe to confederalsocialist's channel. He's WisdomOfTheAcorn whom I endorsed in a previous post. Smart guy!

How to treat a recession II

Some more water's been going down the Mississippi since my last post. I decided it was time to get into the business again. Starting with a few minor design changes, I intend to contribute content more regularly now and offer some additional features to complement my random thoughts on supposedly important topics. Let's get back to work!

Now that a new high-priest in chief has been sworn into office, I figured it'd be a kind gesture to provide some more advice concerning the treatment of a recession. We'll examine public works programs today.

There is a widespread belief that one of the purposes of "the economy" is to provide jobs. This is false. The purpose of economic transacation is to satisfy needs and wants. The reason why the first cavemen engaged in trade with each other was precisely the effectiveness of the division of labor when it comes to satisfying diverse needs and wants. One caveman would hunt deer whereas the other one would collect berries. The two could then engage in voluntary exchange, improve their diet and increase their survivability - or just have more pleasure eating. In any case, they'd be better off than their non-trading caveman friends.

Of course, in the process of satisfying wants and needs, work opportunities are created. A few years down the road, the berry-trading cavemen may have been able to hire other neanderthals to collect more berries for him and get paid in, say, deer meat. The example isn't all too significant since it lacks a common currency and the job is not really an advance from scratch for the one performing it, but still. We now have employment. Meaningful employment. If our neanderthal would carve beautiful wooden dolls, that'd be great, but useless in the absence of demand for beautiful wooden dolls. There's no point in forcing the berry entrepreneur to give deer meat to the doll carver in order for the carver to continue his business, but that's exactly what public works programs are all about.

Instead of pursuing meaningful and profitable employment on the market, people are incentivized by the state to engage in random activity subsidized by tax money. The activity may not appear to be random since it benefits someone, but it remains a subsidy at best, for if the job was profitable, there'd be no need for the state to provide it. Thus, public works programs not only extract labor from the market to use it in unproductive endeavors, but force productive workers to finance this madness. That way, the real function of markets - the satisfaction of needs and wants - is impaired from two sides at the same time.

Public works programs do not support, but hinder economic recovery. The idea should've been discarded long ago.