Tag: economics

Bitcoin – Because Everyone Has to Say Something

Whatever it is, whatever it will become, Bitcoin is pretty cool.

I’ve enjoyed watching it get a lot of attention, and draw attention to big ideas and questions like the role of money, decentralized orders, radical choice, polycentrism and the digital future.  It’s also a little depressing to read the flow of articles on Bitcoin coming from most journalistic outlets.  Not because they like or dislike Bitcoin, or because they describe it correctly or incorrectly, but because their grasp on the economics of money, from its origin to its uses and history, is shaky at best.

No one need be an expert on economics – especially the conceptually difficult arena of monetary economics – to write for a newspaper.  But when you are writing about money, and confidently, it behooves you to dig in and discover what this money is all about.  Rothbard’s famous quote applies here,

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Thankfully, none of this economic ignorance matters as it regards Bitcoin itself.  Bitcoin doesn’t care what journalists think.  The always quotable and insightful Jeff Tucker summed up why very nicely in a recent Facebook post,

“It’s so strange how this how thing is becoming some kind of fight between pro- or anti-BTC, as if this were some policy thing. It’s not. This is a market technology. It either works or it doesn’t. It’s like being for or against email, for or against online media, for or against Skype. I mean, if you don’t like it, don’t use it. Whether it succeeds or not is up to any intellectual; it’s up to the market.”

The downside of journalistic economic ignorance is that it may result in confused ideas among the public, and therefore create incentives for confused policy from lawmakers.  I’ve heard journalists claim that government guarantees are the best and only sign of a sound money, (because, you know, hyperinflation never happens) and that the core purpose of a currency is price stability (because, of course, markets have been traumatized when trying to adjust to the rapidly falling prices in, say, the tech industry).  It’s sad to see such silliness, but it’s also great to see discussion everywhere about what makes a currency.

It can be helpful to compare money to language.  Both are spontaneous orders.  Both are tools that facilitate exchanges between people.  Both are wholly dependent on the individuals involved for their value and evolution; yet neither can be controlled by any one person.  Try introducing a new language, or even a single new word to an existing language.  Not easy.  Yet anyone is free to try, and new words emerge constantly.  They stick around only so long as they are perceived as valuable ways to facilitate an exchange of ideas.  It doesn’t really matter what experts think makes for a good word or language.  It matters what actually takes root in the world – a world where people face trade-offs and try to get the most value for the least effort.

Bitcoin kind of reminds me (as an admitted computer ignoramus) of programming languages.  Computer programmers have developed and become conversant in all kinds of languages that mean almost nothing to me.  These emerged out of nowhere in a relatively short period of time.  Some lived, some died.  Today, they provide an incredibly valuable function that serves not just programmers, but all of us, even though almost none of us speak the language.  Perhaps Bitcoin could evolve similarly.

Even if never the dominant currency “above the table” so to speak, it may find a powerful place in behind the scenes markets among niche experts, just as programming languages do all around us.  Maybe you or your friend or your uncle will never own Bitcoins – none of you probably write computer code either – but perhaps the crypto currency will be busy at work facilitating exchanges among many market participants you interact with.

I don’t really know, and I’d rather spectate than speculate.  It’s pretty fun to watch, and it’s even better to hear the chatter about a lot of topics I never expected to see in the public conversation.  Money is a mysterious and complex thing.  It’s prudent in such matters to refrain from confident proclamations.  I’m as likely to buy-in to someone’s prediction of Bitcoin as I am their prediction of which words will fall in and out of use in the next ten years.

A Few Quotes

On politics and government

“Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters.” – C.S. Lewis

“I am really sorry to see my Countrymen trouble themselves about Politics. If Men were Wise the Most arbitrary Princes could not hurt them. If they are not Wise the Freest Government is compelled to be a Tyranny. Princes appear to me to be Fools. Houses of Commons & Houses of Lords appear to me to be fools, they seem to me to be something Else besides Human Life.” – William Blake

“Politics is a dirty business, a ruse, an ideological cul-de-sac, a vast looter of intellectual and financial resources, a lie that corrupts, a deceiver, a means of unleashing vast evil in the world of the most unexpected and undetected sort and the greatest diverter of human productivity ever concocted by those who do not believe in authentic social and economic progress.” – Jeffrey Tucker

“Sed quis custodiet ipsos custodes?” – Juvenal

On tyranny

“Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive.[…] those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth.” – C. S. Lewis

“The struggle for freedom is ultimately not resistance to autocrats or oligarchs but resistance to the despotism of public opinion.” – Ludwig von Mises

“As long as the public identifies order with law, it will believe that an orderly society is impossible without the law the state provides. And as long as the public believes this, it will continue to support the state almost without regard to how oppressive it may become.” – John Hasnas

“I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man” – Thomas Jefferson

On freedom

“And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.” – Frederic Bastiat

“Every man must have freedom, must have the scope to form, test, and act upon his own choices, for any sort of development of his own personality to take place. He must, in short, be free in order that he may be fully human.” – Murray Rothbard

“I freed thousands of slaves. I could have freed thousands more, if they had known they were slaves” – Harriet Tubman

“The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion” – Albert Camus

Generational Wealth: Hesiod versus Aristotle

Originally posted here.

It is a great irony that prosperity affords posterity the luxury of forgetting its origins. Though not a hard-and-fast rule of societal evolution, generations who grow up wealthy often lack respect for or understanding of the values and ideas that generated the very wealth from which they benefit.

There is an honesty, realism, and practical virtue often accompanying generations that have to endure difficult labor that is sometimes lost on later generations that inherit a comfortable material life. This is not a new phenomenon but is present throughout history. Compare, for example, the life and work of the ancient Greek poet Hesiod with that of the great philosopher Aristotle some 300 years later.

Hesiod lived sometime around 700 B.C. in the region of Boeotia, which he described in his Works and Days as a “cursed place, cruel in winter, hard in summer, never pleasant.” Though little is known about his life, he was apparently a shepherd who claimed to have been given the gift of song by the Muses one day while tending his flock. Regardless of the source, Hesiod’s poetry is full of colorful mythology, practical wisdom, and sound ethics. The ancient poet wrote at a time near the end of the Greek Dark Ages and at the beginning of the Archaic period. Greece was a highly decentralized region made up of mostly small, self-governing societies, and the merchant class was just beginning to emerge.

It is in this context that Hesiod gives advice to his wayward brother Perses in his Works and Days. The poem is a very practical treatise on the value of hard work, the need to cultivate strong personal character and to focus on one’s own welfare rather than the affairs of others. There is a strong individualism throughout Works, and even a foreshadowing of Bernard de Mandeville’sGrumbling Hive and Adam Smith’s invisible hand, as Hesiod describes the value of self-interest and the ability of envy and strife to motivate hard work and wealth creation.

Hesiod makes no apologies for the pursuit of wealth. Indeed, he sees the hard work required to obtain it as a way of becoming virtuous:

But the immortals decreed that man must sweat to attain virtue.

And

If you work, you will be dearer to immortals and mortals; they both loathe the indolent.

No shame in work but plenty of it in sloth.

If your work brings you wealth, you will be envied by the slothful,

because glory and excellence follow riches.

Whatever your lot, nothing will be as good as work.

Ancient Greeks must have heeded Hesiod’s advice. Three centuries later, Greece had grown in power and wealth, and from it began to flower some of the greatest contributions to classical and modern art, science, law, and philosophy. It was into this culture that Aristotle was born.

Aristotle was the son of a royal physician and a member of the aristocracy. He enjoyed an excellent education at Plato’s academy, which allowed him to direct all of his energy to philosophic and scientific inquiry. There is no doubt that the product of his genius was tremendously important to the advancement of the sciences and to the advancement of liberty. However, several passages in his Politics stand in sharp contrast to the views of his Greek predecessor, Hesiod, regarding the value of work, wealth, and individualism.

Compare the passage above on work as a means of obtaining virtue and wealth as a precursor to “glory and excellence” to Aristotle’s description of those fit for citizenship in his perfect state:

Now, since we are here speaking of the best form of government, and that under which the state will be most happy (and happiness, as has been already said, cannot exist without virtue), it clearly follows that in the state which is best governed the citizens who are absolutely and not merely relatively just men must not lead the life of mechanics or tradesmen, for such a life is ignoble and inimical to virtue. Neither must they be husbandmen, since leisure is necessary both for the development of virtue and the performance of political duties.

Aristotle’s aristocratic upbringing leads to an arrogant view of not only who should be a citizen or leader but also how a state should be governed in general. Hesiod’s focus is on the individual and how he might improve his own lot and leave others alone, while Aristotle is more concerned with selecting the best men to plan and rule the rest. Like Plato before him, Aristotle thought those fit to rule were educated men like himself — men who had sufficient leisure and could stay out of “unnatural” businesses like retail trade and moneymaking.

There is no doubt that — probably thanks to the intellectual lifestyle afforded him — Aristotle provided one of the best defenses for private property, and his work in logic and metaphysics remains unrivaled today. However, Aristotle’s political and economic thought leaves something to be desired by those who value free-market capitalism, the role of the entrepreneur, and the positive power of self-interest and individuality.

The main difference between these two men was their wealth and status. Hesiod, perhaps due to necessity, was a practical thinker. Extolling the virtues of hard work was not mere speculation; I doubt Hesiod could afford to look down his nose at labor. Aristotle, on the other hand, could afford to disparage trade and labor. The wealth of Greece provided opportunity for full-time teachers and thinkers to ponder anything they chose. Indeed, the power of wealth to fund such speculative philosophy is one of its greatest advantages, and as one who spends hours studying, I would not wish to return to a poor agrarian society. Still, such generational wealth carries with it a certain danger.

Anticapitalist theories share in common an inability to take human nature as it is. Rather than analyzing man as a complex creature who will always act to achieve what he perceives as good, anticapitalist theories tend to focus on what the theorist wishes man to be and often overlook the necessity of market exchange for human improvement. From the vantage of a moneyed aristocracy, it is easy to be “above” the hustle and bustle of the marketplace, and to pursue higher ideals than material prosperity — forgetting that such prosperity is what supports the hours of speculation.

I do not believe one must be poor to understand and appreciate capitalism, nor am I opposed to generational wealth or inheritances. It does seem, however, that there is a certain danger in living a life completely detached from market processes and the pursuit of wealth through production and trade. Far worse than a physically lazy trust-fund baby is a generation that has become intellectually lazy. With wealth comes the temptation to rebel against existing institutions and ideas — after all, you can afford to. While iconoclasm and courage to question the status quo are cherished virtues and much needed in defense of liberty, they are not ends in themselves. There is no heroism in revolting against the existing order if the existing order is better than the ideals for which the revolutionaries stand.

In our age of plenty where “higher learning” is ubiquitous, it is imperative that we remain realistic in our assessment of human nature and not forget that the basic principles that produced our prosperity still govern human action. Teaching future generations the theories of individual liberty and capitalist production is important; perhaps letting them experience the theories in practice is as well.

The Art of Science

A fascinating article in the Wall Street Journal this week claimed that great scientists needn’t be good at math.  E.O. Wilson argued that big ideas, not number crunching, are the source of major breakthroughs.  In other words, it’s the art of science, not the science, that inspires the game-changers.

I think there’s something here that applies beyond the physical sciences.  The social sciences, in particular economics, have been in a race of sorts to see who could mathematize fastest.  While complex modelling and statistical analysis can illuminate, they cannot generate.  Data is meaningless without a theoretical lens through which to interpret it.  Path-breaking work comes not from those with the best “hard” skills, but from those with the best paradigmatic innovations.  The best work seems to come from seeing the world differently, constructing theories from the new lens, then running some numbers to see how they look from the new vantage point.

This bit about seeing the world anew has never been more profoundly communicated to me than in a book by the novelist Arthur Koestler, The Act of Creation.  Koestler sets out to reveal general rules of creation that apply across media – from the creation of a joke, to a work of art, to a technological invention.  It is a stunningly informative and ponderous work.

Koestler describes worldviews as matrices of thought; well-worn knowledge and assumptions that we carry along with us and use as shortcuts for understanding our world.  The eureka moment – the burst of laughter in a joke, the flow in the making of a sculpture, the sudden insight that unlocks the innovation – comes when two separate matrices intersect.  Koestler calls this intersection “bisociation”, and sees it as a kind of relieving of tension as two paradigms moving in what appears to be unrelated directions suddenly converge.

A poignant example in the book is Archimedes’ discovery of how to measure the purity of gold in a crown.  Archimedes knew the weight per volume of gold vs. other metals, but he could not melt the crown down to figure out its volume.  The thought matrix relating to weights, volumes and metals was completely unrelated to Archimedes afternoon bathing.  Yet as he slipped into the tub and noticed the water level rise, matrices collided and the bath solved the measurement problem of the crown.  It was not new, fancy calculations that resulted in this breakthrough on determining purity in oddly shaped gold items.  Instead, it was a bisociation of existing knowledge on water displacement with that on metallic weight.

Not only is creation about seeing familiar facts in new ways, it’s about allowing oneself the time and mental play to do so.  Some of the greatest eureka moments have come upon waking from a dream, going on a long walk while the mind wanders, or taking an explicit break from the problem at hand.  It is true, the great innovators have been versed in the science of their craft.  But what separates creators from specialists is not better technical expertise, but new eyes that generate new ideas.

Think big.  Explore.  Don’t let a lack of mastery keep you from probing the mysteries that fascinate you.

Five Myths About NASA

Most people agree that government programs are wasteful, and many are unnecessary.  But even small government advocates have a soft spot for NASA.  It’s pointed to as an example of a worthwhile government program because, after all, not only does it have a really cool mission, but it’s also resulted in microwaves and memory foam!  These are valuable contributions that justify it’s value, even if space exploration itself hasn’t proven enough.

Not so fast.  Let’s put on our economist lenses and look a little closer to expose five common myths about the value of NASA:

Myth #1: It’s worth it.  This is a claim without a test.  Without a profit and loss model, how can anyone know the value of NASA inventions and spin-offs products compared to the cost of the program?  Why not let a voluntarily funded outfit do space exploration work and pay for it by selling usable discoveries they make in the process?  That would reveal the value of such inventions to consumers over and above the cost of research.

It’s impossible to judge the value of big expenditures absent a market.  Imagine a company that picked an ambitious effort, like digging the worlds largest, deepest pit, and continued to fund it to the tune of billions a year.  I’m sure some interesting and useful stuff would be found down there, and some new technologies would result from all the efforts to dig deeper.  But it’s hard to imagine these side benefits being sufficient to draw an entrepreneur into such a venture.

It’s not enough to simply point to cool gizmos as proof of the value of a program.

Myth #2: We’d never have a bunch of cool tech without NASA.  This is of course impossible to know.  But what we do know is that the existence of NASA attracts many great technological and scientific minds.  These are not minds that would otherwise be sitting idle.  They would likely be doing much the same thing – inventing, solving problems, and creating stuff.  Many of the spin-off technologies from NASA would certainly have come from other organizations.  Maybe even better things would have resulted.

It is also worth remembering that none of the NASA technologies were created in a vacuum.  Invention is an incremental and messy process, full of simultaneous discovery, back and forth modification, and adaptation.  Because NASA gets the credit for something doesn’t mean it emerged from the secret NASA chambers untouched by any other researchers in the world.  This was stuff that was being tinkered with the world over.  If it has commercial value, there’s a good chance it will be discovered and put to use.  Who has more incentive to do so; an organization that doesn’t need to make widespread use of its technologies to survive, or a business that does?

We can’t know what would and would not have been invented without NASA, but it seems pretty odd to grant the assumption that a government agency is more likely than a market institution to innovate.

Myth #3: It’s doesn’t cost that much.  Maybe $18 billion a year is not that much compared to all the other stuff taxpayers are being forced to pay for.  But the costs of NASA are not just monetary; there’s opportunity cost.  In high-tech areas with highly skilled workers, the opportunity cost is very high.  What else might those people be doing to create value for the world if they weren’t there?  What projects are not happening because NASA is?  Opportunity cost is a big deal.

Not only is NASA an attractive option for a lot of really smart people because it sounds cool, but the fact that every other industry has become so heavily regulated and restricted makes other options artificially less attractive.  We all lose as a result.

Myth #4: They can spend our money better than we can.  Economic value is subjective.  As such, it’s impossible to know whether someone is happier with how you spent their money for them than they would be if they spent it themselves.  The best proxy is behavior.  What people freely choose to do with their money reveals what they value most at the time of choosing.  The mere fact that government programs can’t get by asking for voluntary contributions reveals that people value the uses to which they would put their money more highly than what government does with it.

When people spend their own money not only do they put it to their highest valued use, but their actions affect prices, which in turn send signals to producers and entrepreneurs indicating what kind of stuff people want more of.  More effort goes into producing more and better of that stuff, which creates even more value.  As preferences shift, so do production patterns.  This is an important process with complex feedback mechanisms that help to continually create real value for individuals in society.

You can’t create progress for all by taking money from everyone and giving it to a small group with no requirement that they respond to the demands of the many.  If you try, not only do you rob people of short term value by taking away their first-best spending option, you mess with the signals and incentives in the system ensuring that less of what people value will be produced in the long run.

Myth #5: Those smart scientists will innovate rather than waste money.  This may come as a revelation, but scientists are people too.  People respond to incentives.  When your lifeblood is determined by the political process, you will cater to the demands of that process.  Public Choice reminds us that the political process results in irrational, uninformed, biased and downright silly decisions.  It rewards all the wrong things, and punishes all the right things.  NASA faces the same calculation, knowledge, moral hazard, and incentive problems every other bureaucracy faces.  Explore the boundaries of the laws of physics though they may, they cannot break the laws of economics.

Conclusion: Relax, I don’t hate space exploration and neither must you to oppose taxpayer funding for it.  You may counter these myths by saying, forget spin-offs, space exploration is so important it trumps any other consideration.  You may say, sure, non-government space exploration is happening now, but without NASA we wouldn’t have had it for the past 60 years.  If we didn’t put a guy on the moon back then, would that be such a loss?  Maybe all those resources could have produced better things in that time.  Maybe the demand for space exploration wasn’t high enough, or the costs not low enough, until recently.  Maybe NASA was crowding out other space exploration alternatives.  Who knows.  What we do know is that free people have proven, throughout all of history, to be far better at generating progress for humanity than government schemes and programs.

Five Assumptions About Fire Codes (why laws are less important than we think)

Originally posted here.

A friend and I were discussing the provision of fire services, and he made a comment in passing about how, thanks to government fire codes, fires have dramatically declined. It is true that fires have declined over the last 35 years (at least), but is it true that government fire codes are the reason?

There are at least five untested assumptions behind the idea that fire codes are the cause of a safer world.

Assumption 1: Cause and Effect

The most obvious assumption is that fire codes cause a reduction in fires. It is easy to see how unlikely this is when you perform a simple mental exercise: Imagine enacting US fire codes in, say, India. In India it is not uncommon for electricity to arc between two buildings or for people to pirate electricity by tapping in to an existing power line with a makeshift wire draped across the ground. Surely fire codes would prevent the dangerous electrical fires that sometimes result. The problem is, fire codes already exist in India, but nobody follows them. Why not? Because no one can afford to follow them.

Before government regulations can be broadly followed, they first have to be of limited consequence. Child labor laws only take effect once there are very few children in the work force, due to economic growth. It is well documented that OSHA regulations only came into effect after workplace accidents dramatically declined on their own. If you tried to impose the U.S. minimum wage on a very poor country, no one would follow it because if they did many would die for lack of work, income and food. You cannot wave a magic wand and demand that people take on major costs if the majority of people are not already able to bear the cost. Government regulations have a damaging effect to be sure, but it is primarily on people at the fringes of the economy—the poorest.

Government fire codes receive the credit for reducing fires, when in reality it is economic growth that makes people wealthy enough to spend money on safer construction. The codes come after the fact and claim the credit.

Assumption 2: Irrational Consumers

The idea that government fire codes reduce fires also assumes that, absent such codes, people would not protect themselves from fire. Are people so short-sighted that they would not think to protect their own property if the government didn’t force them to?

It is in everyone’s interest to protect their property from catastrophe like fire, and as such the vast majority of people do. Insurance is a common way to do so, but people also seek safe construction and other assurances against disaster. In fact, insurance companies have a tremendous incentive to only insure buildings with good fire prevention techniques in the first place (except when, as is not uncommon, the government interferes and prohibits insurers from placing stipulations on policies).

It can hardly be granted that people are too foolish to protect their own property from fire damage at all, so maybe it is assumed that people will merely protect their property at a minimum level and not “enough” without being forced to. But what is “enough?”

Assumption 3: Less Fire is Better

Fires are on the decline, and this is universally good, right? Not necessarily. Economist Steve Horwitz gives a question to his students that goes something like this: If a massive earthquake hit a city, what would be the economically optimal number of buildings destroyed? The answer: greater than zero.

How could that be? We all know destruction is not good for the economy (everyone, perhaps, except Paul Krugman). Consider that the cost of making the least valuable shanty in town entirely earthquake-proof is probably more than the value of the building itself. The same goes for fires. Not all structures are of equal value, and not all structures have equal risk of burning down. Because of this, it makes sense that people will have different risk preferences when it comes to protecting their property.

If I own a pole barn full of ice far away from any other buildings or woods, I am unlikely to invest in sophisticated fire prevention or suppression technology (unless compelled by the state), whereas a fancy condo owner in a downtown location is far more likely to pay for the best of the best. It’s easy to see how silly it would be to mandate that every single structure be built to withstand F5 tornadoes, category five hurricanes, massive floods and epic earthquakes. The same principle applies to lesser degrees of protection. For many structures, government fire codes are not worth it and the risk of a fire is lower than the cost of prevention. For others, government codes are not nearly sufficient and much more stringent precautions are in order.

The problem with government codes is that they are blunt and uniform and force everyone into the same mold, squelching innovation and disallowing the kind of marginal risk assessment that conserves resources. Not only are less valuable structures forced to overprotect, but often government codes are so widely accepted that more valuable structures are perceived to be sufficiently protected if they meet government standards, when in fact they may be better off with more.

Assumption 4: Irrational Politicians and All-knowing Bureaucrats

For fire codes to be the cause of enhanced safety it would require irrational political actors. Elected officials and bureaucrats would have to act not in their own rational self-interest, but on behalf of the public at large. To choose just the right amount of fire protection and just the right technologies to supply it requires not only a denial of potential individual profit (by cozy deals with some companies, etc.), but also a superhuman knowledge of what kind of construction everyone needs in every situation.

In reality we see that “rent-seeking” is prevalent everywhere the government intervenes—indeed, it could not be otherwise. How is a politician to choose the physical properties that must be present in caulk used between drywall and copper piping in a commercial building? Without the expertise they—or a wide array of public agencies—must rely on the information provided by competing companies. If it all sounds the same, do you think the company that donates to the right political campaigns might get an advantage? It is a fairy tale to imagine political actors wise and selfless enough to pick exactly the right amount and type of fire protection for every application. Every time they do pick, it reduces the options available to consumers and stunts the discovery procedures of the market in finding the best methods.

Assumption 5: The Government Did It

A final assumption is that the codes and norms of fire safety are, in fact, created by the government. In our discussion my friend mentioned government fire codes but also added a, “Thanks to UL.” UL is Underwriters Laboratory, a non-government organization that certifies goods for safety. They have built up quite a reputation in the marketplace and are highly trusted. (So much so that one professor has taken to chewing on UL certified power cords to prove how safe they are!)

It is often assumed that the order we see around us is the result of a government mandate—after all, mandates do exist for almost everything. But more often than people realize there are private entities and institutions doing the heavy lifting—UL is just one of them. There is a market demand for fire codes, and the market supply is far more complex, subtle, efficient and diverse than a government could ever be.

Conclusion

It is easy to assume government ought to get the credit for a great many life improvements. After all, government agents are constantly taking any opportunity to claim credit for everything under the sun, and to pass laws and regulations that demand certain improvements, whether or not they already exist. The existence of indecent exposure laws is not what keeps me from running naked through the shopping mall, and such laws shouldn’t be credited with my propriety. It’s naïve to assume that fire codes are the cause of a safer society, not merely a reflection of it.

Laws are less powerful than we think they are.

Environmental Protection is a Consumption Good

Originally posted here.

People love a clean, healthy, beautiful natural environment. The trouble is, not everyone can afford it. If you are lost in the woods on the brink of starvation, you are less likely to look at a frog and think, “I hope that species of frog survives” than “I wonder how much meat is on that frog.”

If you live in grinding third-world poverty, you may want a cleaner stream in the village, but you cannot afford to do anything about it while your children are malnourished. You may want a low-emission heater for your hut, but since you have neither the money nor the electricity, the fire pit will have to do for now. In a world of scarcity, there are tradeoffs. You cannot afford precious time, energy and resources beautifying your landscape and protecting “greenspaces” if you are fighting hunger and disease.

Environmental protection is a consumption good. Not only that, but it is further up on the hierarchy of human needs than goods like food and shelter that ensure your family’s survival. If a forest was experiencing a natural, healthy fire and a child was trapped in it, even a passionate environmentalist would not say, “Let it burn; the forest is more important than my daughter’s life.” Few would disagree that this is a normal and necessary ordering of human preferences.

Like all consumption goods, you cannot purchase more environmental protection until you can afford it, and you cannot afford it without economic growth. Economic growth, not legislation, is the key driver to improvements in environmental quality. There is a great deal of mythology that suggests passing laws is the key to a healthy earth. Similar to the myth that laws ended child labor in the United States, cause and effect have been reversed. Try banning child labor in the third world. Not only will many people die, but enforcement will be nearly impossible because so many people rely on it for survival. Try clamping down on pollution in the third world, and, again, lives are at stake and enforcement is not realistic. Only when a great majority of people can afford such laws and only when they are rich enough to spend time thinking of the welfare of others or the earth do such policy changes occur.

Policies that were tacked on to the tail end of naturally occurring trends typically get the credit for the change. Make no mistake; it is economic growth that has raised the American consciousness about environmental quality, and approval-seeking politicians have jumped on the bandwagon when it was convenient to do so — i.e., when most of their constituents could afford it.

The narrative above might suggest that as long as you’re rich enough to afford it, government efforts to protect the environment are OK. This is incorrect for two reasons. The first is that the process of government itself systematically produces special-interest favors, rent seeking, monopoly protections, and all manner of other policies that benefit small interests at the expense of the rest. The information and incentive problems in legislative and bureaucratic bodies make them consistently fail to achieve their own stated ends. (See work by Mark Pennington for excellent analysis on this topic, as well as Richard L. Stroup’s book Eco-nomics.)

The second problem with passing environmental legislation once you can afford to do so is that many people still cannot. Environmental protection measures — taxes on oil, land-use restrictions, emissions standards, ethanol subsidies, etc. — affect more than just the rich people who advocate them. They raise the price of basic survival goods — food, water, land — across the globe. The wealthy can deal with the higher prices; indeed as I’ve said many of them may be happy to purchase perceived environmental improvement for a few bucks more at the pump. The poor cannot. Many suffer and some die.

Environmentalists want to protect the environment because they have reached a point on their hierarchy of needs where a healthy wood is the next highest good. There are no poor environmentalists. This is all well and good until they attempt to force their preferences on others via legislation. In a market, the rich are free to act upon their preferences and purchase goods others cannot afford. They are also free to try to persuade poorer people that they should value luxury goods more than basic goods. But can you imagine a law that forced every citizen to purchase a luxury car? If those who valued the sight of roads full of beautiful cars lobbied to force everyone to drive luxury cars it would be considered outrageous discrimination against the poor. Why is environmental activism not seen in the same light?

(It bears mentioning that some environmentalists are motivated less by a clean earth for its own sake and more by an obligation to future generations. This does not fundamentally change the reality that environmental protection is a consumption good that can only be addressed after more basic needs are met. Who considers the life of future generations more important than the life of their currently living children? You don’t think five generations out until the current generation is secure enough to afford you the luxury.)

Everyone, including environmentalists, has needs more basic than a pristine environment. We don’t worry about the earth until our survival is secure. This is a natural ordering of needs. Yet environmentalists, after meeting their own basic needs, want to force the poor to reverse their preferences and put the earth before their own survival. I don’t think most environmentalists intend this, but it is the inevitable result of using the force of government to enact protection measures. This is neither desirable nor effective in the long run.

You may be able to do great harm to many of the world’s poor in exchange for some government attempt at environmental improvement (more likely to result in special-interest enrichment), but in the long run it is impossible to convince people to subjugate their survival to the perceived needs of their ecosystem. The real promise for environmental improvement is economic growth. Until people are wealthy enough to consider paying the cost of a cleaner environment, the fight to force their choices is inhumane and ultimately ineffective.

Environmentalists should seek the freedom that creates economic growth among the poor so they can afford to care about the earth. They should peacefully persuade those who can afford it to place a higher value on the environment relative to other nonessential goods. Economic growth and persuasion, not legislation, will make a greener world.

Voters are Liars

I recently heard a political commentator bemoan the results of surveys and elections.  He said the sad truth, whether libertarians wanted to hear it or not, is that Americans want big government.  They want handouts, high taxes, regulatory interference, and on and on.  They vote for people who talk about it.  They re-elect them when they deliver it.  On opinion surveys they favor entitlement programs and broad intervention.  I couldn’t help but laugh.

A person who studies only quarterbacks is likely to interpret an NFL game as the result of QB play.  A person who immerses themselves in politics is likely to interpret society as the result of political opinion and activity.  In the former case, there is at least plausible evidence that QB’s are a major factor.  In the latter, it is almost entirely an illusion that politics and political sentiment reveal the broader health of liberty.

Voters are liars.  They tell the truth about their opinion in the abstract, free from trade-offs and constraints, but this has little to no meaning when translated into the real world.  If I asked you to vote between a person who offered a better world, and one who offered a less bad world, and promised that your vote was guaranteed to not change the outcome either way, what would you do?  What could I conclude about your preferences from your vote?

If I polled you and asked whether or not you like the idea of someone giving you something for free, again promising that how you answered had no bearing on the real world, what would you say?  What could I learn from that about your values?

Voting and surveys are free ways to express a sentiment or indulge in a real or desired preference.  Not only that, the sentiments expressed are not about the real world.  Politics is a zero sum game, completely unlike nearly every other arena of life.  Imagine how different your preferences would be if everything were zero-sum like politics.  What if you had to choose once for all between brands of coffee, cars or clothing?  What if you could not go back, at least not for several years, and try another?  What if whatever a majority in your area voted on would be applied to everyone else?  Under this scenario we could poll people and ask which of three or four brands they prefer.  We’d get some data, but it would reveal nothing whatsoever about what people actually value if they were choosing in the non-zero-sum marketplace and bearing the full costs and benefits of their choices.

Back to society today.  Do people really favor less liberty and more government?  Elections and polls are a very poor measure.  Let’s not look at stated preferences about the artificial political world, but revealed preferences in the real world of win-wins, marginal decision making, internalized costs and benefits, and trade-offs.  If you examine the market, what would you say people are “voting” for?  Radically individualistic technology.  More and more choice.  Freedom from being lumped in with groups.  The ability to choose everything.  Private alternatives to government dominated services like transportation, information transmission, education, protection, rule-making  social norms and values, health maintenance, and on and on.

Don’t listen so much to what people say, look at what they reveal by their actions.  Nobody admits to loving Barry Manilow, but the guy sells a ton of records.  No one says they want to abolish public education, but they keep putting their resources into alternatives to it.

Frankly, I don’t care what people say in polls or who they vote for in the fairyland of politics.  What I see around me – the revealed preferences of billions of earth’s citizens – is a vote, indeed a mandate, for more freedom.

Redistribution and Time Travel: A Thought Experiment

A means of effective time travel has been invented. People can freely traverse time, travelling from the present to any point in the past and vice-versa. Access to time travel is pretty universal, and due to this, knowledge of conditions at all points in time is acute.

For those who believe there is a moral obligation on the part of the better-off to help the less well-off, and who believe in redistributive policies to do this, play along and consider the situation.

People in the present are outrageously wealthy compared to people in the past. Even the poorest Americans today have access to abundant clean water, hot and cold water, heated shelter, air conditioning, an overabundance of cheap, calorie-rich food, more clothing than they need, refrigeration, telephony, transport by internal-combustion engine, laundry facilities, bathing facilities, vaccinations, pharmaceuticals, emergency care, and on and on. These present poor are better off by almost any measure than even the wealthy a thousand years ago.

Do people in the present have an obligation to give some of their wealth to those in the past? Is there some minimum standard of living that we need to keep the ancients up to? Do the poor among the rich (present day poor Americans) have an obligation to the rich among the poor (the well-off a millennium ago)?

What kind of redistributive policies should be enacted? Would they work? What might some side-effects be? Is it required to fulfill a moral duty? Is it wrong for someone born in the present to enjoy the relative luxury and wealth they are inheriting from their era, by no merit on their part? Should they pay an inheritance tax to support people in the poorer past?

What about future generations. What if the future is also poorer; does the present owe them a chunk of our wealth? What would be the result of efforts to redistribute from the present to the future? What if the future was wealthier; do they owe the past a portion of their bounty? What would happen if resources flowed to us from the future, in order to ease our relatively lower condition?

Spanning all of human history, would we have a moral obligation to attempt to make all people across all eras more equal? Would we be obligated to narrow the gap between the caveman and the flying-car-owning future woman? How big could we let the gap be? Would narrowing it be possible? Would there be any side-effects of efforts to try?

What is the difference, morally and practically, between redistribution across time and that across space?

It’s Not Always About Scalability

In the business and startup world scalability is the word of the day.  Products that can be built once and used infinite times by infinite consumers are the ultimate prize.  The hype might cause us to overlook other valuable products and services.

The quest for scalability makes sense with software, online products and social media applications.  They can be built relatively cheaply, honed in beta mode, and then sold an infinite number of times at no additional production cost.  But it’s not true that scalability equals profitability, nor is it true that the inability to costlessly scale means lack of profitability.

There are countless examples of great products and services that are non-scalable, yet highly profitable.  Personal trainers, legal counsel, health care, home repair, tutoring, food production, etc., etc., are not scalable.  Sure, they realize some economies of scale as they grow, but each new customer means new inputs like labor, raw materials and time.  It’s also true that some of these like legal or health advice or general education can be produced once and shared infinitely at zero marginal cost online.  But that is not the same as a visit with a physician who gets to know your unique symptoms and gives a tailored recommendation.

In fact, most of the best things in life are not scalable.  I can’t produce quality time with the family, or a night out at a fancy restaurant with my wife once and reuse it over and over at zero cost.  There is no demerit in a product that is not scalable.  One of the great virtues of the things that are scalable is precisely that they free up so much time and so many resources that can then be devoted to things that are not scalable.

Modern technology opens a world of possibility and the ability to realize amazing returns on small investments due to scalability.  But don’t overlook the innovation, benefit, and profitability of non-scalable or less scalable products.

Creating Disequilibrium is Good

Originally posted here.

There is no denying that our economy is undergoing dramatic changes. That brings not just difficulty, but also opportunity for entrepreneurs. In fact, the “creative destruction” of the market is part of what drives economic growth.

Putting aside the causes of our current economic troubles (except to say free markets are not the culprit), we can’t forget that, though massive bubbles are not necessary, markets are by nature dynamic even in the most stable of times. This dynamism is not an evil to be avoided at all costs but the very thing that makes free economies so productive.

Classical economists often treated economic growth as a mechanistic operation that happened at a stable rate as a result of unchanging levels of investment and production — as if economies simply grew on their own as long as production was steady and inputs were not disrupted. The problem with this view is that, quite simply, the real world doesn’t work that way. In 1911, economist Joseph Schumpeter’s Theory of Economic Development radically changed this view, and his insights are still relevant today.

Schumpeter stressed the role of the entrepreneur in economic growth and argued that, far from a static maintenance of equilibrium in production, it was the entrepreneurial ability to causedisequilibrium that created wealth. The constant innovation of these economic actors shakes the economy up, breaking down old methods and building up newer and better ones.

It’s not just increases in production that create wealth but a radical reforming of the way production itself is done. Think Henry Ford’s assembly line. Such entrepreneurial innovations disrupt the unrealistic ideal of a stationary economy. They do destroy the old order — like the classic example of buggy makers losing their jobs when the automobile took hold — but they cause growth because what they create is more valuable than what they replace. Can you imagine halting the progress of the automobile in order to preserve buggy makers?

Schumpeter argued that the role of the entrepreneur was different from that of the inventor, manager, laborer, or capitalist. Entrepreneurs need not be wealthy or even especially intelligent. They may be all or some of these things, but that’s not what makes them entrepreneurs. Schumpeter said the entrepreneur was the person who creates new combinations in production.

The creation of a new good or service — a new way to produce the same good or service, a new market for the good or service, a new source of supply, a new organization of the industry — these are the entrepreneurial functions. Such innovation does not necessarily require new invention, just a different utilization of available knowledge and technology.

As Schumpeter said in a 1928 edition of the Economic Journal,

“[I]t is not the knowledge that matters, but the successful solution of the task … of putting an untried method into practice.”

The entrepreneur, by seeing and acting on different combinations of existing knowledge, products, and services, disrupts the economic order and creates growth. There is evidence of this “creative destruction” all around us: every year millions of jobs are created and destroyed, yet the overall long-term trend is continued economic growth.

The growth could not happen without both creation and destruction; it is the driver of growth, not a problem to be solved. If the economy were static — if jobs were never lost, prices never shifted up or down, investments never enjoyed large profits or major losses — we would not live in a stable utopia but a stagnant subsistence economy.

Don’t be afraid to disrupt the economy. Look for ways that things can be done differently — goods, services, and production methods that can be rearranged, new technologies that can be better used. Right now, as the economy reshuffles, there are more opportunities to generate change than ever — the kind of dynamic change that we need to grow out of this slump.

Don’t just sit there, create some disequilibrium!

Monopoly Is Everywhere; Monopoly Is Impossible

Concern over the power of “monopoly” is often given as justification for government intervention in the economy. It shouldn’t be. There is no logically consistent definition of monopoly that warrants interference in market. Furthermore, government efforts to disperse market power tend rather to concentrate it, particularly among those best at playing politics, rather than helping consumers.

What is this monopoly thing that is so feared?

Monopoly is often described as two-pronged: complete control over a unique resource, and the ability to be a “price maker”. (“Price maker” means to set the price you want to sell at rather than responding to market conditions and being a “price taker”). Once you define monopoly, you realize what a meaningless concept it is. One of the two prongs is inevitable; the other is impossible.

If monopoly means control over a unique resource that no competitors can sell, everything is a monopoly. Every single product is unique. I have a complete monopoly on the product “public appearances by Isaac Morehouse”. No one else can offer it. What kind of power does this give me?

Sadly, I cannot charge whatever I want for public appearances simply because I have a monopoly. I’ve tried, and so far no one has been willing to pay $50,000 for this unique good over which I have sole control. (Email me if you’re interested.) In other words, I (and everyone and everything else) satisfy the first prong of the definition of monopoly, but that doesn’t help me with the second prong. I’m not a price maker.

In fact, no one is a price maker. OK, I suppose anyone can make any price they want to, but in order to actually sell something – no matter how valuable – they’re constrained. Think of a product that you need badly and can’t really live modern life without. How about gasoline. Why doesn’t Exxon start charging $20, $100, $1 million per gallon at the pump? What would happen?

Life would change pretty dramatically for some people, maybe just at the margin for others, but almost no one would pay that price. Even if all the oil in the world were controlled by one company (a scenario almost impossible to imagine absent government intervention), they still would not be a price maker.

Even complete control over a resource that people really need does not a price maker make. The firm faces substitute goods as a very real form of competition. McDonald’s burgers are not competing only against Wendy’s burgers. They are competing against Subway’s subs, mom’s PB&J, or going without lunch altogether. Firms are held in check not just by substitute goods, but by potential competition. If gas is too costly, new or old technologies become more profitable. Bicycles and solar cars both take a chunk of consumers.

So the first prong of monopoly, control over a unique resource, is everywhere. The other prong, the ability to be a price-maker, is impossible. In reality, firms and consumers are constantly moving up and down to varying degrees on being price takers and makers. There is no complete maker or taker. The market is a process of discovery, and if we want the best outcomes, we need to worry about keeping the process free and unencumbered, rather than the particular distribution of resources among firms at any given snapshot in time.

Efforts to fight the myth of monopoly and make the market look more like make-believe “perfect competition” make things worse. They often result in the one kind of monopoly that is dangerous; the one maintained by force. Forced monopoly, or forced price floors or ceilings, or the breakup of firms or the prevention of mergers, or any other intervention creates artificial markets. They shift entrepreneurial activity away from innovation to serve consumers and towards efforts to ensure regulation benefits me and harms my competitors.

We’re all monopolists, yet none of us are price makers. Stop worrying about it.

The Myth of Self-Regulation

No business, product, service or industry can self-regulate. All must and will be regulated by some external entity. The question is who or what?

In a market, regulation is inescapable. Firms are regulated by wholesalers, retailers, capitalists, workers, packagers, shippers, competitors, consumers, shareholders and public opinion. These myriad regulators are exacting. They apply pressure from every angle, on every aspect of business. Get sloppy with your purchasing practices and wholesalers make better deals with your competitors. Overlook product safety and consumers and public opinion slap you down. Make frivolous expenditures and your source of capital and shareholders head for the hills. Drive too hard a bargain with employees and productivity declines or they leave you for another firm.

Firms have room for experimentation and risk-taking, but they have full responsibility to all of these market regulators for the outcome. No firm is a “price-maker” in a market. No firm is a compensation, safety, or policy-maker in the market either. All the parties to which they answer set the terms. Oh sure, firms can do what they want; unless they seek profit. Profit demands that they obey the regulators that fill the market across the whole production chain. It’s not easy.

Firms that have become successful and large tend to get tired of the constant regulation. They want a reprieve from the demands of stakeholders. To gain freedom from the regulating market, firms seek the comfort and stability of government regulation.

Government regulation is nothing like market regulation. It’s yoke is easy for the well-connected and deep pocketed, but often unbearable for the shoestring upstart. Market regulation is blind to size, wealth, political affiliation, slickness, religion or creed. Government regulation is built upon them.

Market regulation keeps an open invitation to anyone who wants to join the ranks of regulators; though promises no one their opinions will have a final say unless they prove worthy across the market. Government regulation is strictly closed off to anyone except those long-loyal to the party in power, and promises that the elite cadre of regulators’ opinion is final and binding. Market regulation is nimble, swift, constantly adapting, inescapable and unrelenting. Government regulation is ham-handed, slow, hidebound, avoided with a little craftiness, and backs off for a favored few with the right mix of political moves.

Market regulation is created and enforced by parties that stand to gain or lose by the actions of the regulated; parties who gain real-world expertise on the regulations effects. Government regulation is created and enforced by parties with no connection to the regulated actions or items, except the few politically connected firms that agitate for it. Market regulation draws on the dispersed knowledge of millions across the globe, from experts to anonymous users. Government regulation pretends a handful of elites can outthink the millions.

Market regulation seeks only the betterment of all market participants, regardless of which firms offer it. Government regulation seeks to destroy some firms for the benefit of others, regardless of what they offer market participants. Market regulation is by the many, for the many. Government regulation is by the few, for the few.

Self-regulation is not an option. The question is who’s a better regulator, markets or government?

There’s No Such Thing as a ‘Public-Private Partnership’

It’s long been a trend for local and state governments to create agencies and entities that are supposed to enhance commercial activity in their area.  There are myriad legal and logistical arrangements, but they all have some common features.  They’re all reliant on government in structure and law, they all use taxpayer funds to accomplish their projects, and they all love to use newspeak phrases like, “public-private partnership” to describe their activities.

An online dictionary definition of partnership is useful:

“A legal contract entered into by two or more persons in which each agrees to furnish a part of the capital and labor for a business enterprise, and by which each shares a fixed proportion of profits and losses.”

And,

“A relationship between individuals or groups that is characterized by mutual cooperation and responsibility, as for the achievement of a specified goal.”

Clearly, government economic meddling projects do not fit either of these definitions.  How can “the public” enter into a partnership?  How can “the public” share in profit or loss?  In reality, governments take money from people in their vicinity by force, then they give some of it to suits in an agency who give it to favored businesses and investors.  “The Public” never agrees to anything.  There is no mutual cooperation and certainly no responsibility or profit/loss sharing.

The absurdity of calling it a partnership can be illustrated with the following thought experiment.  Imagine your friend took some money from your wallet, deposited it in his checking account, kept most of it for himself and gave the rest to another guy to start a business.  No strings attached, just a gift of start-up capital.  Then your friend started publicly talking about how this was a partnership between you and startup guy.  After getting over your initial anger that he took your money and didn’t even consult with you before throwing it after some business venture, you try to consider the possible upsides of this unjust act.  You ask him if that means you will own shares in the company.  No.  Does it mean you get some percentage of any profit?  No.  Do you get an interest payment on your stolen and loaned money?  No.  He assures you it’s OK though, because neither are you on the hook for any losses (besides of course the loss of the money he already took, which you’ll never see again.)  In other words, this is nothing like a partnership.

What you get is money taken from you, spent on middle-men who are paid to give the rest to whatever business they want to.  You are not a partner, you are a victim.  Partnership implies consent.  Partnership implies shared benefit and responsibility   Partnership implies choice.  There is no such thing as a public-private partnership.

Institutions Can Improve Even If People Don’t

Originally posted here.

Airlines are loaded with passengers who surf the Internet while soaring through the air, chatting in real-time to anyone else on the globe, posting in social media, shopping, and downloading and reading books on a wide variety of readers. Such a scene would have astonished a person living 50 years ago, to say nothing of a person living 500 years ago.

How do we account for this? A person born five centuries ago is probably just as smart as someone born today. The raw material of the human brain has not changed much during this span of time. Yet people are today infinitely more capable of accomplishing almost any task imaginable than people in 1512.

The greatest navigator of centuries past would have found it a monumental task to leave from one destination and arrive at a precise latitude and longitude halfway across the globe, and it would have taken months. Today, a half-witted teenager can use Google Maps and modern transportation to accomplish the same feat in a single day.

The greatest communicators in the past were unlikely to reach 1 million people with their ideas in a lifetime. Today, the most-incoherent celebrities can reach millions in minutes on Twitter. Conversely, if the greatest scientists today were sent back in time, they would be able to achieve almost nothing absent computers and modern lab equipment.

A weak and feeble worker today can move more tons of earth than the strongest shovel-wielding excavator of the past. Given the inherited technological progress of humanity, even an average Joe can do amazing things with ease. It does not take a superior human to achieve superior results.

Economically speaking, the marginal productivity of workers increases with the capital and technology available to them.

But let’s broaden the point to issues of morality. How can we become better people — more peaceful, cooperative, and creative — in the same spirit in which we have become more effective and productive with better technology? We need better moral “capital” and moral “technology” that enables morally superior outcomes even without morally superior people.

The moral technology I am speaking of is social and political institutions. A person born today is no more or less likely to be moral than a person born 500 years ago, but they can be more or less likely to act morally based on the institutions around them.

Moral institutions change and evolve just like technology. They can reduce or expand not only the morality of individuals on the inside, but the harm or good caused by their actions on the outside. The most saintly person born into a world where slavery was the norm would have very limited ability to stop the practice, though she could abstain from participating in it at great personal cost.

A horrendously evil person born into a world where slavery is considered abhorrent would be unable to lord over slaves, without tremendous personal cost. It is entirely possible that many people living today have it in them to be on par with the worst slave masters in history — only the opportunity for their evil does not present itself, given the progress in this area of our social and political institutions.

This does not mean that individual choices are meaningless. Far from it. A moral person can always do good within their institutional framework, and a good framework can exponentially enhance the good one can do. Individual choices are vastly important.

But in order for the world to be free of oppression by states, for example, it does not require that every individual be an angel or that the average morality of the population be better than it currently is.

How can institutions improve if morality does not? Institutions are ultimately the result of our beliefs. Better beliefs will result in better institutions, but better beliefs do not require morally superior people any more than beliefs in a heliocentric solar system require more-intelligent people.

Many people believe the Earth revolves around the sun not because they are smarter than ancient peoples, but because they grew up in a world where that was accepted. Many people believe slavery is wrong not because they are morally superior to all people from ages past, but because they grew up in a world where slavery was condemned.

The broader social narrative creates the institution. But where does this narrative come from? Here’s where individuals come in again.

Progress typically begins with iconoclasts and radicals espousing and experimenting with ideas that challenge the status quo. This is true of technological, intellectual and moral progress. The few who advance these radical ideas attract small, but influential followers, and some minds are changed by argument alone. But the real change comes when discussion turns into demonstration.

When the Wright brothers got off the ground, when slavery ended in some countries and the economy did not collapse — these occasions did more to change the prevailing beliefs about manned flight and slavery than did the necessary intellectual work that preceded them.

People do not have to possess superpowers to learn and adapt. All humans do it. Learning even to reject foundational and dearly held beliefs is possible and frequent in history, especially because the change typically takes place over several generations, so that each generation has to learn to give up only a part of the cherished belief. When it is understood that a new belief will result in better outcomes, it can be adopted with relative speed and ease, sometimes without any conscious “a ha!” moment at all.

Neither technological nor institutional progress is inevitable. History is replete with times of retrogression and collapse. When there are no radicals challenging the status quo, innovating and demonstrating new and better beliefs, it is not long before the prevailing institutions stagnate or advocates of a romanticized past win the day and drag humanity backward.

Progress is not inevitable, but progress is entirely possible even with flawed humans like us. Our beliefs can change as we learn better ways of doing things, and with our beliefs will change our institutions. Better institutions — free institutions, rather than coercive ones — will result in a better world.

We ought to continue to discuss and demonstrate the fact that states — their oppressions, confiscations, impositions, kidnapping, counterfeiting, and war — are not necessary or beneficial. Better morality is always better, but if we change the prevailing narrative about states, we can live in a stateless world even without a saintly populace.

It is a false and arrogant belief that only angelic geniuses are capable of believing that statelessness is possible and desirable. If a bunch of idiots can live in a world of technological wonder, so too can a bunch of jerks live in a world of freedom.