Tag: liberty

Why Corporations Don’t Support Freedom

There is a common assumption that advocacy of free-market ideas is funded in large part by big corporations.  As much as I wish the many great organizations and projects that are educating in liberty received financial support from large corporations, almost none of them do, and when they do it is in very small amounts when compared to the other things such firms support.

But why?  Businesses are constantly hampered and harassed by government regulation, taxation, and the uncertainty of the legal landscape one day to the next.  Don’t they stand to gain from laissez faire?  Well, yes, businesses stand to gain tremendously from market freedom.  Entrepreneurs, owners, employees, consumers, and every other market participant stands to gain.  Businesses of all sizes stand to gain, provided they can produce what consumers demand.

Aye, there’s the rub.

You see, while business stands to gain from free exchange, nobody knows which specific businesses will be most successful in a competitive environment.  Consumers are a tough bunch to please.  It takes a lot of work, and there’s a lot of uncertainty.  The creative destruction of the market is a little daunting to a businessperson who dwells on it for long.  It’s easier, for those who can afford it, to cozy up to the state and ensure that it’s restrictions and interventions hurt you a little less than they harm your competitors.  If you have resources enough and play your cards right, you might even be able to get policies that make you more profitable or put your competitors out of business entirely.

The result?  Bigger businesses tend to support state intervention, because they have the lawyers and money and can hire the guns of government.  It is entirely possible that some of these very businesses would fare better under economic freedom, but they don’t know for sure, so they go the somewhat safer route of state cronyism.  Smaller businesses typically aren’t organized enough and lack the resources to manipulate policy in their favor.  Worse still, the unimaginable number of new ventures that would have been created were it not for government impediments have no voice at all; we don’t even know who would have created them.

In short, freedom is good for business, but scary to businesses.

Rewrite the Present

Humans tend to have a “good ol’ days” bias.  We imagine the past as better than it was.  Over time, events and experiences in our own life that were dull or painful can become funny or wonderful as we recreate them in our memory.  Epochs long before our time are romanticized, like the idea of the noble savage or the simple pleasure of pastoral life.

This bias can be problematic.  We often critique the perceived failures and excesses of the present in comparison to a past that never was and is not possible.  Some hate the fact that most of us buy food from people we don’t know, grown by still others we’ve never met.  They hate it because they think it alienates us from what we eat in some way.  They imagine some past where they would be joyously working a small field to harvest beautiful ready to eat produce that they planted months before with their own hands, far from the grit and concrete of the city and all that shipping and packaging.  They don’t think clearly enough to see the constant festering blisters; the rotten, insect-ridden, small, and unreliable crops; the body odor of their family members sleeping in drafty homes with little privacy, and the unavailability of a varied diet, just to name a few oft forgotten realities.

In this case, a rosy bias towards the past makes us less able to effectively deal with real or perceived problems in the present.  The romance is employed to prove the need for the use of force to stop human progress.  It’s a version of the Nirvana Fallacy.

We could attempt, through mental discipline, to eradicate this tendency in ourselves.  We could look hard and deep at the real past, internalize how rough it was, smash the romantic memories and become hardened realists.  I think this is a bad solution.

The past is no longer a thing that exists.  It is a bundle of ideas we carry in our brains.  It is valuable only to the extent it enhances our present.  A realistic assessment of the trials and travails before can sometimes make the present better and provide valuable knowledge.  Just as often, it offers no value, but only makes us sad. An idealized and romantic past can bring a lot of joy and laughter that enhance our present.  The fact that we recreate the material facts of the past and store mostly the positive is probably a wonderful thing.  Recall the times you felt tremendous sadness, guilt or fear: Imagine carrying a realistic memory of all those compounded experiences around with you all the time.

More problematic than recreating the past is a failure to recreate the present.  The way you perceive life determines the quality of it.  If I think fondly on my childhood because I’m filtering it for the good, why not work on implementing a similar filter for the present?  It’s never possible to be perfectly accurate in our perceptions of the world; we will always have limits and bias in our worldview.  Why not cultivate that bias towards things that bring peace, freedom, and joy?  It’s a little more than making lemonade out of lemons.  It’s a conscious effort to learn from our brain’s natural filtering of the past and trying to implement it in the present.  It’s a discipline.  An optimistic outlook is no less accurate than a pessimistic outlook, but it is more fun.

A good place to start cultivating an optimistic (yet realistic) worldview is at Tough Minded Optimism.

In Praise of Weird

At the Students for Liberty International Conference over the weekend I heard and overheard several jokes and comments about how many weird participants were there. It was mostly good-hearted self-deprecation, but there was often a hint of concern. There was perhaps a subtle but sincere belief that, if libertarian ideas and the individuals and organizations at the event are to have an impact on the world, the oddballs need to be drowned out by normal people. I’m not so sure.

Of course any group that rallies around a particular interest or set of ideas will have it’s own vibe somewhat distinct from the “average” person in the world. (If you ever meet this average person, I’d be curious what he or she is like. I’ve searched for many years and have yet to meet them.) If insiders and outsiders alike view events like this as gatherings of assorted weirdos, that’s probably a sign of a vibrant, healthy, non-group-thinkish phenomenon. With libertarian ideas as the rallying point, all the better to have a broad swath of all that humanity has to offer in attire, personality, tastes and preferences; what a wonderful testament to the humane and universal character of the ideas.

If, on the other hand, there is a drive to get more conformity and less weirdness in order to look more like the mythical average person, such gatherings tend to end up either stale or cult-like. In the former case, a lot of social pressure to wear non-offensive clothing and behave in an average way can sap the energy and creative life out of groups of shared interests. I’ve seen churches like this. Everyone makes such a point to be normal – in part to prove to the world that believing what they do doesn’t make them strange, in part to prove it to themselves – that it’s like a bunch of Stepford wives. While it may make being a part of the group less risky, it doesn’t make it any more attractive to outsiders, and it certainly makes it more dull for insiders.

The latter and far worse result of the desire for normal is cult-like conformity. If nobody wants to be the weirdo who gives their “movement” a bad image by dressing out of fashion, everyone can end up wearing cute little matching suits. There are subcultures where everything down to facial hair is uniform. Not only is this creepy and off-putting to the outside world, but such pressure for aesthetic sameness seeps into the realm of the mind and grows into intellectual conformity, the death-knell of any social movement, especially one as radical and free as libertarianism.

The weirdness or non-weirdness of a group of people doesn’t seem to indicate much about their life and potential. It’s the sameness that does. If everyone is weird in the same way, you’ve got a closed off niche easily caricatured or ignored. If everyone is normal in the same way, you’ve got much the same thing. If you’ve got enough weirdos to make the normals feel surrounded by weirdos, and enough normals to make the weirdos feel like the minority they enjoy being, it’s probably a pretty exciting, interesting, dynamic and growing bunch united around some pretty powerful ideas.

I saw a lot of unusual looking and acting people at the event. They stood out because the majority of participants looked pretty normal and acted pretty sophisticated. I took both of these to be wonderful things, and I hope those commenting on the need for less weird were poking fun more than seriously hoping to change the culture and weed out the oddballs. The range of religions, styles, personalities, persuasions, motivations and behaviors in that room were a beautiful testament to the breadth, depth, and life of the ideas of freedom. Bring on the weird. May it never die.

Democracy is Not Our Savior

(Originally posted here, but I remain bewildered by the religious devotion to democracy, so I’m reposting.)

Imagine if your local grocer used mass voting to determine what to stock on the shelves. Everyone in a 30-mile radius of the store would get a ballot every few years, and you could vote on what items they should sell. Think long and hard about what people would vote for. Do you think this would result in better selection and quality than the current system of letting markets decide?

Voting is an incredibly inefficient mode of social organization. It rewards irrationality, selfishness, ignorance and greed. It makes peaceful coordination and cooperation incredibly difficult. It is divisive and hopelessly, systemically flawed. All the incentives are wrong. We should not see voting or democracy as a solution to social or political problems, but one of the primary causes.

Perhaps my example of voting on groceries is unfair. In most political systems we don’t vote on each and every issue. Instead, imagine that residents within 30 miles of the grocer don’t vote on the store’s stock and policies, but rather vote on who should manage the store. Let’s go a little further and say they vote on the manager, CFO, board members and a handful of other middle-management roles. What would be the result?

For starters, those seeking to hold management positions at the grocery store should forget about any skills except the skill of convincing all the voters to vote for them. Marketing themselves as better than the other would-be managers would be the only thing that would get them the job; not their expertise at running a store or their knowledge of stocking procedures, management or the industry. Would people’s votes provide better and clearer information about who should manage the store than the profits, losses, operations and happiness of employees? Of course not.

At first glance, voting may seem similar to a market. After all, when people buy or don’t buy from the grocer, it sends price signals telling management what shoppers value. It’s like a vote, with a crucial difference: It costs the buyer. Market exchanges reveal what people want when they face trade-offs. Voting reveals what people want when it’s “free.” Lots of people might vote for the store manager who promises not to import anything from other countries because it makes them feel good to support local farmers. These same people, when faced with higher priced and lower quality local food in the open market might very well choose to purchase imported produce. Voters support candidates who promise to restrict cheap imported goods, then on the way home from the polls they stop and buy cheap, imported goods. Voting irrationally is costless, while shopping that way hurts your pocketbook.

Voting also turns friends into enemies. I have neighbors that support different products and services and businesses than I do, but this doesn’t cause any tension in our relationships. But if we were forced to vote on which products, services and businesses were available to us, how much they should cost and who would pay for it, in a zero-sum election, you’d better believe tension would arise.

The fact that no grocery stores select products or managers by popular vote should clue us in to something: Democracy is a far worse way of coordinating and managing complex processes than markets.

It’s easy to see how disastrously inferior democracy is to the market in providing groceries. The provision of food is the most fundamental and important service to any society; if the market can handle food provision so much better than democratic processes, why not the provision of less fundamental services like health care, education, protection and all kinds of lesser services? In truth, the incentives built in to the democratic process create massive inefficiencies in all these government services, as well as allow for corruption and all manner of moral transgression.Government failure is an inescapable part of government.

In civil society, voting is a rarely used mechanism. We vote on inconsequential things like where to eat or what movie to see with a small group of indecisive friends. Voting is used in religious or civic organizations to select board members or decide on some major issues. Not only are these relatively small, homogenous groups, but they are groups of people who have voluntarily come together around a shared vision. They can also freely enter and exit; shopping for a church or denomination may sound off-putting, but the freedom to do so is crucial to the health of individuals and churches.

Even in these smaller, voluntary institutions, voting has important incentive and information problems that most organizations try to curb in some way. The more populous the group, the more complex the decision—and the more costly or important the outcome, the worse voting is as a coordinating mechanism. When you’re dealing with hundreds of millions of people and a cross-section of highly complex policies with life-and-death consequences and millions in potential gains or losses, voting becomes an absurd mechanism of coordination. Governments may try to supplement voting with all kinds of irritating and invasive data collection like censuses, but these do not solve the problem in any way—and can make it worse. Does your grocery store need to conduct a census to supplement the anonymous information you provide them with your purchasing behavior?

Most advocates of limited government understand why tyranny and central planning are dangerous. But too often they assume more or better democracy will improve things. We hear about turning backward countries around by making them more democratic. We hear about turning our own country around by convincing people to vote for better candidates or policies. None of these will ultimately address the problem. The grocery store that is managed by vote would not be much better off if the residents selected a “better” manager; the manager would face the same lack of vital information, and the voters and manager would face the same bad incentives.

The way to make the world a freer, better and more prosperous place is not to enhance and expand democracy or to elect better people through the democratic process. It is instead to reduce to a minimum the number of things decided through the democratic process, and to allow more peaceful and emergent institutions for social and economic coordination to take its place. This can only happen when enough people understand and believe in the power of peaceful, voluntary interactions over the power of coercive political methods.

A Citizen by Choice

This excellent post by Jeff Tucker over at Laissez Faire Books got me thinking about citizenship.  Per Jeff’s suggestion, I visited Tweetping.net and sat mesmerized as I watched communities grow across the globe, irrespective of arbitrary government borders.

Odd isn’t it; we’re born into citizenship of counties, states, and countries, which are little more than organized crime gangs with layers of bureaucracy, and we are supposed to feel allegiance to these.  Yet everywhere you turn, people are constantly joining myriad associations to get the benefits, both practical and sentimental, that state citizenship is supposed to confer.  States are an anachronism, and more so every day.  Exist costs and lack of alternatives have long been the primary reasons states maintain as many citizens as they do.  Technology is smashing both barriers.

Now you can exit the state and become the citizen of a place that meets your needs and provides a voluntary community far superior.  Most people today have overlapping citizenship in dozens of digital commercial and social jurisdictions.  You can join a better community from right where you are.  Technology has not (yet) provided a way to completely opt out of states, at least without significant risk of being pursued by armed agents, but it offers alternatives to services supposedly only states can provide, including intangible things like a sense of community.  This is exciting.

When states lose the power of patriotism we can see them more clearly for what they are: violent, inefficient and corrupt monopolizers who force us to use services of inferior quality and make us pay even if we don’t.  When state operatives have a harder time winning affection by appealing to the “us vs. them” mindset in citizens because citizens are a part of so many “us’s” and with stronger bonds than they have with the state, the edifice begins to crumble.

Far from being atomistic, critics of the state desire a world of strong and genuine social bonds.  They know the truest of such bonds are forged by cooperation not force; by choice not dictate; by mutual interest not lines on a map.  The more ties formed voluntarily, the weaker the chains of the state.

Some bureau somewhere considers me a citizen of Mount Pleasant, and South Carolina, and the United States.  They take some of my money because of it.  Whatever they need to tell themselves to feel better.  I consider myself a citizen of Amazon Prime, Facebook, Visa, The Institute for Humane Studies, my church, Netflix, Google, Twitter, LFBC, The Hartford Insurance, home school associations, etc. etc. and on and on.  I joined each of these entities to meet specific needs.  Some offer valuable services.  Some offer education.  Some offer security and protection.  Some offer comradery.  Some offer many things at once, while some offer only one.  I have different levels of love and loyalty for each, but all of them render something that terrifies states because they can never offer it: choice.

Without Narrative, Vision, and Imagination, the People Perish

I had a friend who assured me sometime around 2000 that the internet wasn’t going anywhere.  He was a smart guy, and even worked in the tech world.  Still, he couldn’t foresee any way the internet could grow large and fast enough to accommodate demand, especially because there was no reliable revenue model.  He predicted it would skyrocket in cost and be used only by big players with a lot of cash.

Today free internet at speeds then unimaginable with content beyond the wildest dreams of that time is ubiquitous.  But he was not a fool.  He just lacked imagination.  It’s possible that the relatively high level of expertise he had with the technology actually made him less able to see beyond its current applications.

We can laugh at predictions like this, but how often do we have small imaginations about our own present and future?  We tend to overvalue the status quo because we cannot think of any other way.  The world is replete with examples if we open our eyes.

At the very time my friend was struggling to see a way companies could offer internet access for free broadcast television and radio were already doing it and had been for decades using advertising as a revenue source.  His focus on what was immediately before him prevented him seeing what was all around him.

We suffer not only from inadequately appreciating the present and the possibilities of the future, but blindness to the past as a clue to what is possible.  I listened to a recent discussion over whether a coercive government monopoly was needed to provide firefighting services.  For nearly twenty minutes there was back and forth as the discussants struggled to think up a viable business plan absent tax funding.  If left to decide roles for the state, this group may have concluded firefighting had to be one, as the free market just couldn’t do it.  The problem with this conclusion (like that of economists who claimed the same for lighthouses) is that for the majority of history firefighting was privately provided.

In order to make the world a freer, better place we need a combination of three things: narrative, vision, and imagination.

Narrative is our story about the past.  If we don’t have enough facts or we interpret them through an incorrect theoretical lens, our narrative about what was will be incorrect.  If, for example, we persists in the false assumption that firefighting and lighthouses have never been privately provided, or the American West was a violent and disorderly place before governments took hold, we will be incapable of accurately seeing present and future possibilities.

Vision is how we see the present.  Do we see harmony and assume that legislation is the only thing keeping mayhem at bay?  Or do we see the beautiful and complex workings of spontaneous order? Our vision will determine how comfortable we are with freedom.  Through state-colored lenses we will live in fear of the chaos around the corner and be reticent to allow our fellow man liberty to experiment, try, fail, succeed and progress.  If our vision expands and we begin to see the way individuals cooperate and coordinate for mutual benefit absent central direction we will welcome and embrace freedom.

Imagination is what we believe about the future.  It determines what we think possible.  If we zoom in too close to the problem at hand we get stuck and fail to allow for the unknown.  We don’t have to know what will be, or even what precisely is possible.  We just have to be humble enough and learn from the patterns of past and present that all our assumptions are going to be blown to smithereens by human creativity.  Don’t try to resist it.  Expect it.

Only when we have the right narrative about the past, the vision to see the beauty of the present, and imagination enough to allow for the wonders of the future will we have the freedom to create it.

Strategies for Advancing Liberty

I just read an excellent article by Murray Rothbard (circa 1989) called, “Four Strategies for Libertarian Change“.  Strategies for social change have long fascinated me. (I ran a student colloquium on the topic when I was with the Mackinac Center’s Students for a Free Economy)

In the article Rothbard describes four approaches with four historical examples and discusses the pros and cons of each.  The piece is entertaining and well worth a read on its own, but coupled with the response by my current colleague Steve Davies (starting on page 13 of the linked article) it is especially savory.  Davies largely finds Rothbard on point but happily advances the discussion further.  He corrects a few of Rothbard’s historical characterizations (Rothbard’s histories are always engaging, but often portray events and figures as more libertarian than they probably were), and adds a dose of Public Choice realism. Most interesting to me, however, is the addition of other potential strategies.

Davies mentions the seldom attempted but often fantasized strategy of letting things get so bad they eventually get better (which I briefly address in this Liberty Magazine Reflection, “Story Time“), and wisely warns against it.  He mentions the possibility of violent revolution and rightly dismisses it out of hand.  He mentions the libertopian approach of a mass defection from current societal arrangements but, Seasteaders not withstanding, considers this highly impractical if not fundamentally flawed.

The final strategy that Prof. Davies mentions is to me the most promising and intriguing, and probably has the best track-record historically, though it often goes unnoticed.  That is the idea that existing coercive institutions can be toppled not primarily by direct attack, but by subterfuge.  Rather than convincing people they should give up the status quo, which means convincing them to drop the perceived security of the known and embrace an unknowable future, or overturning it by force or via an elite cadre, instead create the alternative.  Convince the world that non-coercive institutions and solutions to social problems are preferable by showing them.  If this is done well the act of formally removing state institutions becomes almost a foregone conclusion or a mere formality.

Though Hayek espoused a more ideas-based view of social change in The Intellectuals and Socialism, the Davies approach is quite Hayekian in that it is more of a spontaneous than a planned order.  That makes is somewhat unsatisfying to us as libertarian “elite” intellectuals.  It’s messy, slow, unpredictable, and nearly always lacks that single climactic moment when freedom defeats statism.

Illustrative of how unsatisfying it can be, consider that we may be witnessing an example of this approach unfolding before our eyes in mail delivery.  Public Choice realities being what they are, the likelihood of toppling the state postal monopoly with any amount of education, policy paper publication, or direct civil disobedience is very slim.  (Ask Lysander Spooner.)  These efforts are not futile and, as Davies points out, work to compliment and aid the undermining process, but ultimately they cannot win the day alone.

We’ve seen the Post Office’s monopoly weaken with the advent of UPS, FedEx, DHL, etc.  We’ve seen it’s importance wane with new technologies like email.  Sure, policy battles have played a part in this process, but the real impetus was self-interest on the part of parcel delivery entrepreneurs.

It is likely that the Post Office will die a slow death – or maybe never even completely disappear on paper – but one day we will be so used to other methods of delivering goods and information that we will forget it ever existed.  I would not be surprised to see the public education system undermined in the same way.

The beauty of this method is that it does not require the agents of change to themselves be libertarian, only self-interested entrepreneurs.  Libertarian ideas still play a key role, as do policy and legal efforts, activism and education, but the real change comes when the alternatives to state programs are implemented rather than just talked about as possibilities.

Now a little twist.  This approach can be very powerful on an individual level when combined with Rothbard’s first strategy, a sort of Taoist retreatism.  In order to make society a happier and freer place, it helps to make oneself happier and freer first.  (This is the nut of an argument I made against worrying about elections and reading the news.)  We ought to focus less on what makes us unhappy and thwarts our freedom, and more on how to be as free as possible as individuals.  Just like UPS undermines the Post Office, we can undermine our own oppressive mindsets and internal institutions by building up freer alternatives underneath them.

I do not mean to be cute or self-helpish.  I genuinely believe that a social movement led by unhappy or internally unfree people is doomed to failure.  Occasionally retreating from the things we wish to change in the world and realizing that true freedom is not contingent on other people not only improves our own quality of life, but makes us much more attractive to the freedom philosophy’s would-be converts.

First free yourself.  Then work towards societal freedom by creating competing solutions to those offered by the state.  Simple, right?

Interview on Capitalism, Freedom and the Future

An interview where I am asked some nice open-ended softballs on liberty, regulations, and the future.  The blog where the interview is posted is apparently supporting a particular politician, but I do not personally support or endorse any politicians, and the fact that the interview is posted to this blog should not be interpreted as support.

Oh, and I am referred to in the post as an “economist” and “Dr. Morehouse”, neither of which I am.  Full text of the interview below.

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Josiah Schmidt: Thank you for agreeing to talk with us, Dr. Morehouse!  Tell us how you came to hold such a liberty-oriented philosophy.

Isaac Morehouse: I grew up in a typical Midwestern conservative home and I was taught responsibility, hard work and initiative.  In high-school, my brother told me about this book he was reading called “Capitalism and Freedom” by Milton Friedman.  I liked the ideas in the book, since I was sort of predisposed towards free-markets.  As I began to read more I eventually (after a long road and lots of rabbit trails) realized that, at bottom, government is force, and everything it does is backed by force.  It made me realize that so many things I wanted done in the world–good things–should not be done by force, but peacefully and voluntarily.  Not only did it sit right with me from a moral standpoint, but I learned through studying economics that voluntary actions have better results than centrally planned attempts by government to make the world a better place.

Josiah Schmidt: How would you define capitalism, in short?

Isaac Morehouse: Technically, capitalism is simply an economic system where individuals own the “means of production”, rather than government.  In popular usage however, capitalism has come to mean a lot of different things, some of which I support (property rights, free-markets, etc.), some of with I do not (bailouts, subsidies, regulations against competition, etc.).  I’m careful how I use that word, since people give it different meanings.  To me, it means simply free-markets.

Josiah Schmidt: Why, fundamentally, does capitalism work?

Isaac Morehouse: Capitalism works because without private property and the right to reap the gains and losses of our own efforts there is little incentive to produce or to innovate.  Property and free-trade also allow prices to form, which provide some of the most valuable information on the planet such as where demand and scarcity are and where surpluses are.  Prices, which form spontaneously as a result of free-exchange, allow for the most impressive coordination in the history of man; billions of people and resources constantly adjust their individual behavior in a way that benefits society, not because they are trying to or would even know how if they were, but because they are responding to signals sent through the price system.  No “rational” system of central planning can even come close to replicating that.

Josiah Schmidt: Is it meaningful to advocate a “mixed economy” of capitalism and socialism?

Isaac Morehouse: No.  Any coercion in the peaceful, voluntary and spontaneously coordinating market reduces it’s efficiency, not to mention it’s a violation of individual rights.  An only partly “planned” economy may be degrees better than a fully socialist one, but a free economy is magnitudes better than both. [For more on “mixed” economies see this article.]

Josiah Schmidt: How does capitalism, as opposed to socialism, accept human nature as it is, accounting for the flaws and fallibility of man?

Isaac Morehouse: It avoids what F.A. Hayek called the “Fatal Conceit” by recognizing that no one has enough knowledge to know where to put all the resources in the world all the time.  It recognizes the dignity of each individual by allowing anyone to justly obtain and use property, but it recognizes the limits of each individual by not allowing any one person to control all others by force.  If people are corrupt, the last thing we want to do is give a small number of them monopoly control over the rest, which is what government is.

Josiah Schmidt: Do government “consumer protection” measures actually protect consumers?

Isaac Morehouse: What is called “consumer protection” is almost always a special privilege or protection for some politically favored business or industry over their competitors.  Since government hands out favors and makes regulations, instead of competing in the marketing place by trying to better serve customers, many businesses go to government and lobby for regulations that they can afford, but that will cripple their smaller competitors.  The result is higher priced products, fewer choices, less competition, corruption in government agencies, and often times less attention to safety by consumers and producers who believe the government will do the work for them.

Josiah Schmidt: What is one of the most egregious examples of “consumer protection” measures that actually harmed consumers, in your view?

Isaac Morehouse: Oh boy, there are so many.  It’s hard to say which is the most egregious, but certainly some very silly examples that really bug me are things like requiring decorators, hair stylists, yoga instructors or lemonade selling kids to get state licenses and pay fees just to offer their goods and services.  These examples all exists in at least some states, and in every instance the laws were passed at the behest of some industry lobby that didn’t like lower priced competition.  It’s very sad for the people who just want a chance making a living by offering their skills to consumers.  They aren’t forcing anyone to buy, yet government is forcing them not to sell.

Josiah Schmidt: What advice would you give to libertarians reading this interview?

Isaac Morehouse: Take heart.  It’s too easy to see all the violations of liberty around us and feel things are always getting worse.  If you keep the big picture in mind and study some world history you will see that, in so many ways, freedom has advanced tremendously and there is no reason it cannot continue to do so.  Don’t follow the news too closely or you’ll be angry all the time, and angry people are rarely good advocates of the ideas they believe in.  Be optimistic and never stop learning about and fighting for freedom.  It’s worth it.

Josiah Schmidt: Anything else you’d like to say to our readers?

Isaac Morehouse: Sometimes it helps to remember that really, liberty is all around us.  We often feel that it would require such a radical change in our everyday existence if government were not so invasive.  While I do not want to downplay the destructive effects of government meddling, it is instructive to stop and think about what really makes the world tick.  Why don’t people run through the shopping mall naked?  I’ll give you a hint: it is not because they are afraid of indecent exposure laws.  That may play some very small part, but it is primarily because they would be embarrassed.  They are afraid of the social consequences.  This is just one example of how society remains orderly without the use of force; without government mandates and rules and regulations.  In fact, nearly all of the order, cooperation and coordination we see around us is not the result of government edicts, but of the forces of spontaneous order that emerge in a voluntary society.  In many ways, government is less important than even libertarians think.  The message we need to send to our big-government friends is not that government is so bad (even though it often is), but that society voluntarily produces so much good that we don’t need to use the blunt instrument of government.

Josiah Schmidt: Very insightful thoughts.  Thanks again for taking the time out of your schedule to answer some of our questions.

Was Adam Smith Wrong?

Here’s an article I originally wrote for the Prometheus Institute.

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Disagreeing with a man whose face appears on the necktie of many a freedom-lover is perhaps dangerous, but sound reason can’t be sacrificed on the altar of great men – and Smith was a great man.

Indeed, Adam Smith, in his depiction of the division of labor in a pin factory and his timeless prose on the invisible hand and the self-interest of the butcher, offers some of the greatest explanations and defenses of capitalism ever written, even some 230 years later. I consider Smith a great thinker, and a hero of liberty. That doesn’t mean he was never wrong; particularly when it comes to the question of value.

Smith’s thoughts on the derivation of value in his Wealth of Nations laid the groundwork in this area for later thinkers like David Ricardo (another brilliant mind who was right about many other things) and eventually Karl Marx. In the case of the latter we have clearly seen how bad ideas can have horrific real-world consequences. As John Maynard Keynes famously remarked,

“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”

I might add too the bad ideas of otherwise good economists.

Smith essentially, though somewhat confusedly, argued that the value of any good was ultimately derived from the amount of labor it took to produce. Money or commodity prices reflected only the nominal but never the real value of a good. In this way he described the different prices of different goods as a simple formula:

“If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer.” (The Wealth of Nations, Book I, Chapter VI)

Smith elaborated further by describing other costs of producing a good, including the role of the entrepreneur and capitalist and the profits they require. Unlike Marx, Smith never denigrated the role of the capitalist or the profits they earned, but his conception of value resulting from the cost of production (ultimately labor) opened the door for the idea that anything charged or earned above the cost of real inputs is unnecessary; excellent fodder for anyone anxious to obtain power by appealing to an envious middle class.

The problem with Smith’s analysis is not that the cost of production has no link to the value or money price of a good – indeed, the two are closely connected. He merely had the relationship backwards.

In reality, prices reflect the money equivalent of the value a buyer places on a good. That is to say, an individual who wishes to have a good places an entirely subjective value upon that good as compared to other goods, and the difference is typically expressed in terms of money. If in Smith’s example no one cared for beavers, the cost of killing a beaver wouldn’t matter; the beaver would sell for little or nothing. There is no one value of a good, but each individual values each good differently, as compared to other goods. It is the same for Smith’s supposedly changeless measure of value, labor. An hour of the same kind of labor may be valued (or disdained) to different degrees by different people.

It is for this reason that price is merely the reflection of the amount of money an individual was willing to give up to obtain a given good in the most recent exchange.

However, Smith was correct in seeing a relationship between the cost of production and price: Once a producer or entrepreneur has an indicator of what someone was willing to pay for a good, he can speculate how much others will be willing to pay in the future. He may be incorrect, but he will start with an estimate based on past experience and hope to get an equal or higher price. It is the estimated price (which reflects the value others place on the good) that will dictate how much he can spend on production. If a producer expects a good to sell for $1, he will be willing to spend up to $0.99 to produce it. (This is obviously a simplification, as he may be willing to take short term loss if he expects long term gains, he may want more than a $0.01 profit, etc.) In other words, the amount of labor and other costs of production flow from the expected sale price of the good, not the other way around. No one will spend more to produce an item than they believe others will be willing to pay to buy it.

Smith correctly saw that the various costs which go into production must be paid by the sale price of the final good. What he failed to see is that the costs of production do not create the price of the final good or imbue it with some objective value, but that the subjective value that each consumer places on the good sends signals backwards to producers and tells them how much they can expend on production without suffering a loss.

That Smith saw the factors which go into the production of a good as the cause of the price, rather than the effect, may seem like a small error. But economics, like all attempts to study the behavior of human beings, is a subtle science which requires great attention to the correct logical progression of actions. A misunderstanding between cause and effect can be fatal.

A slight adjustment to the angle of a satellite signal can, when extrapolated over thousands of miles, result in a beam nowhere near its target location. Likewise, looking at an economic phenomenon, such as the price of a good, from an even slightly incorrect angle can result in consequences far greater than imagined when spread over time and by different minds in different cultures. I would never single-handedly blame Adam Smith for the horrors of socialism. But his backwards theory of value contributed, over time and space, to a set of ideas which laid the theoretical groundwork for socialism – a philosophy completely contrary to the views of Smith.

I still admire and respect Adam Smith as one of the world’s great minds and a positive force in the battle for liberty. His conclusions and prescriptions were correct, even though his methodology was sometimes flawed. However, the lessons to be gleaned are to never let admiration for a great mind blind you to areas in which they are in error; and that even correct conclusions, if based on incorrect reasoning, can be dangerous.

Aristotle on Mixed Economies

This is an article I wrote some time ago for the Ludwig von Mises Institute.

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A friend recently commented that he has found wisdom in moderation. He said it seems that truth and goodness are found not at the extremes, but at the place of balance between extremes. This can be very true.

As Aristotle wrote in his Nicomachean Ethics, “Virtue must have the quality of aiming at the intermediate.” In Aristotle’s examples, it is cowardice and recklessness that are the extremes, courage the middle ground. It is drunkenness and uptightness that are extremes, and moderate drinking the mean.

My friend went on from this concept to state that he believed in neither socialism nor capitalism, but in a mixed economy — or what he called a “messy middle ground.” There are two main problems with this conclusion.

The first is that statements like this in the abstract are meaningless. To construct a pretend spectrum, and place various actions and beliefs on it and then to choose the “middle” between them does not give meaning to that middle in and of itself. That is, without actual arguments and definitions regarding what that middle choice or belief is, it is simply a made up point on an imaginary spectrum on which other ideas are arbitrarily placed. Using this logic, I could claim that, since the mean is always good, green beans and omelets are both extremes and I prefer the middle ground.

Most often, those advocating an idea simply because it is in the “middle” of their mentally constructed spectrum do so because they lack any real arguments about the idea itself. For the idea of a middle ground or moderation to have any meaning, the extremes must first be defined and understood as opposite responses to a common problem, and must be placed on an ordinal value spectrum, such as a standard of basic morality that always holds falsehood as bad and truth as good.

The second problem with the conclusion that, since even Aristotle recognized moderation as the source of virtue, a mixed economy is better than capitalism or socialism is that it departs from the logic used in the earlier examples of courage and moderate drinking.

Courage and moderate drinking were the mean because either an excess or a deficiency was problematic. However, both courage and moderate drinking are extremes in another sense. Courage is a word that describes the good state of mind in the face of danger. There is no case in which courage itself is bad or not to be desired, since it is by definition the proper balance between cowardice and recklessness — you cannot have too much courage, nor too little, only too much fear or too little. There is either courage or noncourage (cowardice, recklessness), just as there is either truth or falsehood. In this sense it is an extreme.

Perhaps this sounds like a simple matter of definitional difference. There is, however, a fundamental difference here, meant to show that moderation is only good if it is moderating between two bad extremes and to a good mean, and not if it is moderating between a good and a bad. As Aristotle put it:

But not every action nor every passion admits of a mean; for some have names that already imply badness, e.g., spite, shamelessness, envy, and in the case of actions adultery, theft, murder; for all of these and suchlike things imply by their names that they are themselves bad, and not the excess or deficiencies of them. It is not possible, then, ever to be right with regard to them; one must always be wrong.

The midpoint between murder and nonmurder is not the good choice — nonmurder is. However, the moderation between not caring a lick about the actions of another and caring so much you would use violence to control them is a good middle ground — but this middle ground is not to be confused with socialism.

Socialism is a system where government uses force to tell people what decisions they can and cannot make. There may be degrees of freedom within different socialist systems, just as a prisoner may be treated better or worse by different wardens, but if you are not free, you are not free.

Capitalism is an economic system that allows people to make choices free from government intervention. All government intervention is backed by the threat of violence — if it were not, it would not be a government policy, but rather a voluntary recommendation, or a rule of a voluntary association. The fact that one cannot avoid taxation and obedience to a government without physical consequences proves that it is not a voluntary institution, but rather one backed by force.

Advocating a “mixed economy” or a middle ground between socialism and capitalism is nothing more than advocating a middle ground between threatening your neighbor with violence if he doesn’t do your will and not threatening him with violence. If he resists, it becomes the same as the “middle ground” between murdering and not murdering. In that sense, capitalism is an extreme, just as courage is an extreme against noncourage.

In another sense, there is a middle ground economically. The middle ground is between caring so much about the economic decisions people make that you would threaten them with murder to control them, and caring so little that you would allow them to harm themselves or others. By definition, you cannot escape the second extreme by application of the first. You cannot care about individuals by threatening them with violence. Such care must come peacefully and voluntarily: by persuasion, not force.

The middle ground in this case is not socialism — or control by threat of violence — but a capitalist system in which individuals voluntarily look out for one another, and peacefully persuade others to look out for themselves and others. Capitalism is not a virtue in the way that courage is a virtue; it is rather a framework that avoids the extreme of violent coercion. Avoiding the one extreme, as a capitalist system does, does not guarantee avoidance of the other extreme, just as not being reckless does not guarantee you will be courageous. But again, avoiding the extreme of neglecting others cannot be achieved by embracing the extreme of coercing them.

The true middle ground is to accept a capitalist system — i.e., avoid the extreme of coercion — and choose personally to care for and about others, and persuade them to do the same — i.e., avoid the extreme of neglect. Since caring for others is a highly subjective, individual concept, no form of coercive economic arrangement can bring it about; one can only allow it to occur.

In one sense capitalism is an extreme in that it is the opposite of coercion. In another sense, capitalism is simply a system that allows individuals to choose the middle ground between coercion and neglect. Socialism, on the other hand, is an extreme in both cases; it is the opposite of freedom and it is not a middle ground between coercion and neglect; it is itself coercion.

Attempting to find a middle ground between coercion and freedom is a bad idea.

Finding a middle ground between coercion and neglect is a good one.

Capitalism is the only system that allows for both of these. We should not stop advocating capitalism, nor should we stop caring about ourselves and others in peaceful, voluntary ways.

I find it no less disturbing when someone says both capitalism and socialism are extreme and they seek a middle ground than if someone were to say both love and cruelty were extreme, and they therefore seek a middle ground. Some vices or virtues are found in moderation; some are found in absoluteness. As Barry Goldwater famously said,

Extremism in the defense of liberty is no vice! — Moderation in the pursuit of justice is no virtue.

Capitalism is just. Socialism is unjust. There is no “messy middle.”

Christianity and Freedom

Is there a dichotomy between law and love?

After reading an article I wrote (Palm Sunday and Politics), a friend of mine told me he thought I espoused a sort of dualistic view of Christian life.  As if Christ came only to preach a spiritual transformation as something entirely separate from physical life.

Upon a rereading of the article, I can see how one might draw that conclusion.  That is not, however, what I meant to communicate.  Indeed, I view life as holistic, with all elements – spiritual, emotional, mental, physical – inextricably intertwined.  I view the Christian life as wholly transformative, of the spiritual life as well as the others listed above.  I do not see a dichotomy between the spiritual and physical life as far as my Christianity is concerned.

That said, there was a dualism expressed in the post.  It was not a dichotomy between the spiritual and physical life, but a dichotomy between peace and force – and by force I am referring to the initiation of physical violence, or the threat of it.

The things I believe as a Christian affect every aspect of my life.  My goals in life spring from my theistic view of the world and the resulting actions that view brings.  Things like caring for those in need, learning humility, showing love and offering freedom to others–these are goals because of my acceptance of the Kingdom Jesus preached.

These beliefs and duties are physical as much as anything else.  What they are not is violent.

To attempt to achieve these goals by initiating force against others is antithetical to the ends themselves.  Though physical force may be justified in some instances (such as self-defense, though Christ and many others refrained even from this and chose martyrdom), I do not see any way in which the initiation of violence can be seen as a moral way to advance the work of Christ.  When Jesus taught kindness to the poor, do you think he meant it by first doing violence to the rich or middle class?  When he taught righteousness, do you think he meant making others righteous on threat of fine or imprisonment?

I do not.

If we do not feel justified in using force to advance these goals individually, why should we feel justified doing it as a group, or hiring it out to others?

Everything government does is done by force.  If it’s a new law or regulation, it is backed by threat of fine, imprisonment, or (if you are persistent enough in resisting) force to the point of death.  If it is a welfare program, it is funded by tax dollars, which are not given voluntarily.  Try not paying your taxes long enough and you’ll find that indeed, force is what’s ultimately behind tax collection.  If it were not, funds would be collected by a voluntary association, not government.  Government has nothing to give but that which it first takes, and it takes by force or the threat of it.

If you’ve accepted the Christian life, it should indeed transform your entire being and all your actions.  Far from believing Christ’s example and words regarding righteousness or care for the poor to be merely spiritual commands, I see them as part of the holistic goal of His kingdom, and involving physical actions.  However, I do not see these ends as a justification for violent means.

To attempt to use government to achieve Christian goals is to, ultimately, use physical force.  This not only corrupts government, it corrupts the goals themselves and diminishes the true depth of the work of the Kingdom.  It reduces a life-transforming message delivered by loving believers into a program for political preferences pushed by a religious interest group.

Oh, and it just so happens that the way human nature works, peaceful and voluntary means of helping the poor and promoting moral behavior achieve unimaginably more than any force-backed government initiative ever can.  The genius of creation is manifest in economics – free individuals acting to prosper individually achieve more for their fellow man than mandatory efforts.  What is moral, it turns out, is also very efficient.

Christians should not only daily examine their hearts to see if their goals and actions are in line with the ultimate Truth; they should also ask themselves if the means they are using to accomplish those goals are righteous.  Sometimes a government program would be easier than doing the work of Christ ourselves, or organizing voluntary efforts.  Then again, Christ never said it would be easy.

Palm Sunday and Politics

When He approached Jerusalem, He saw the city and wept over it, saying, “If you had known in this day, even you, the things which make for peace! But now they have been hidden from your eyes.” Luke 19:41–42

As Jesus entered Jerusalem on Palm Sunday to shouts of, “Hosanna” and cloaks and palm branches thrown on the road before him, it seems it must have been a joyful experience. But instead of taking joy in the cheers of the people, Jesus wept over the city.

I’m no Biblical scholar or Jewish historian, but what little I’ve studied of the Bible and the history of the time suggests that the kind of savior the people expected was not the kind Jesus came to be. And for their misplaced hopes, he felt pain.

When Jesus came into the city that day the people gathered to see him and many began to think he may be the Messiah that had been promised the Jews for hundreds of years. They were under the control of the Roman Empire and its various local puppet governments. Understandably, when the Jews learned the promises of a savior and King in the line of their great king David, they expected a Messiah who would free them from Roman rule.

When Jesus entered the city they waved Palm Branches and shouted, “Hosanna.” History suggests these were significant, even dangerous political gestures. Hosanna was a Hebrew word that meant, “Save, now!” and had a very physical connotation. It was not at that time a cry of spiritual or abstract salvation, but a very real shout for physical salvation, which had specific meaning to a people under Roman rule. The Palm branch was a nationalistic symbol for the Jews, a symbol that had appeared on the last coins made when Israel was free. That is perhaps why the Pharisees told Jesus to “rebuke” his disciples – because to openly praise one they thought came to defy their rulers was politically dangerous.

As the crowd of people saw Jesus entering the city, they saw a political savior; one who might at last rise up and free them from the Romans, and they cheered His arrival. But He wept. He wept because they did not know, “The things which make for peace.” He had not come to free them primarily from political bondage.

Jesus did not intend to be a political figure. He seemed to largely ignore the Romans, and even saved His criticisms and rebukes not for the political leaders, but for the leaders of His own people; their spiritual leaders. When He taught righteousness it was never backed by force. When He told the rich man to give all he had to the poor the man walked away; Jesus did not force him to obey, but instead let him go. He refused to use earthly law to punish a prostitute by stoning; instead he told her, “Go and sin no more,” and left her free to decide. He did not come to spread his Kingdom with the tools of earthly kingdoms – force and coercion. He did not come to offer political freedom. He came to offer freedom from something much deeper.

To conflate the work of Christ with the work of worldly politics is to miss the meaning of His life, death, and resurrection. To claim that a Christian must vote for a specific policy or politician, that Christians must use government to enforce our morals – to prohibit bad behavior or to force good behavior – is to reduce the work of Christ to the work of a politician. He is not too weak or insignificant for political battles; political battles are too weak and insignificant for Him. The kind of freedom and righteousness He offers is far too great, too personal, to be advanced by physical force (which all politics boils down to); politics is beneath the spiritual life, not above it.

Physical freedom is a worthy goal. Defending oneself from violence and oppression is not immoral. But as a Christian, to use government to enforce the morality you believe in through law, backed up by the agents of the state, is to contradict Christ Himself.

It is that desire to look to Christ as a way to accomplish political goals that made Him weep as He entered Jerusalem. They looked for peace through a political savior; He knew the peace He brought was much deeper and could be had regardless of the physical conditions around them. Politics is force. Jesus’ entrance into Jerusalem that day had been prophesied by Zechariah, who described Him as, “Gentle.”

Let us emulate Him when we attempt to alter the world around us. Let us never forget that the freedom He brings transcends this world, and His peace cannot be attained or spread by force.

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Read the follow-up to this post, Christianity and Freedom.