markets Archives • Page 5 of 6 • Isaac Morehouse

Inequality vs. Favoritism

Inequality is inescapable and morally neutral. There is no virtue in trying to eradicate it, and it makes no sense to talk of reducing it.

My children were born unequal. They will remain unequal as they learn, achieve and acquire. Any efforts to make them equal do harm to all parties involved. Many people agree that I could never make them equal, but maybe I should try to make them more equal. Equality is not a more or less concept, it is either or.

3 is not equal to 2. Neither is 4 equal to 2. It is meaningless to call one more equal to 2 than the other. We could say that 3 is more equal to 2, because it is only one whole integer removed from 2. We could say 4 is more equal to 2 because it is divisible by 2, and only one even number removed. It is entirely dependent on our frame of reference. Equality between individuals is as impossible as equality between 2 and 3, and degrees of inequality are entirely subjective; a matter of perception, different for all observers and participants.

It is fruitless to attempt to lessen inequality or increase equality. In fact, it’s worse than fruitless, it is destructive. Not only does it produce arbitrary and unpredictable results which disillusion and demotivate the targets, it fuels strife, envy, and limiting one’s potential to the achievements of their perceived betters.

Still, there is something to the desire to create equality. I would be a terrible parent if I lavished gifts and affirmation, or insult and condemnation, on one child far more than the others. Not because it would make them more unequal; they are and will always be unequal. But because my deliberate action of applying the family rules, mores and norms selectively and unfairly would break trust and breed conflict. I would be engaging in favoritism, either negative or positive.

I will not try to clearly define favoritism, because I think putting it into words actually makes it less understandable than if we stick with our intuitive and tacit understanding of the term. It is not merely acting differently towards different people. If I speak Spanish to a Spanish speaking person and English to an English speaking person I am not acting uniformly towards them, but I am not showing favoritism. Interacting with my unequal children in ways that best resonate with their unique “language” is not favoritism either. Favoritism is when the spoken or unspoken rules of the house are not consistently applied.

If it is known that doing X chores will get you Y payment, or that treating Dad’s iPad carelessly will result in less access to the iPad, these norms must be applied in a uniform way. I may communicate the norms and remind my children of them in different ways based on their individuality and inequality, but if one kid gets paid more for the same work, or one gets access to the iPad despite throwing it against the wall and the others don’t, I’m engaging in favoritism that damages everyone.

Uniform application of the family norms will result in inequality, as is inevitable with unequal children. Some will get more chores done and earn more money. Some will have a hard time controlling emotions and end up throwing the iPad and losing access to it. Their nature and choices will produce unequal results. There is no evil in this. To aim at equality puts the focus on outcomes; the relative positions resulting from individual actions within an institutional context. This is a meaningless point of reference, and incredibly poisonous when chosen as the basis by which to judge institutions. It devolves into, “Anything that rubs me the wrong way, or anything you excel at must be curbed.” It’s a sentiment that coddles and nurtures our least civil and humane and most barbaric and short-sighted tendencies, usually in the name of the opposite. It is the uniformity of treatment in relation to the understood rules and norms that matters, not the inequality that results.

The attempt to make my children equal, or more equal, or even treat them equally is futile and destructive. It is enlightening and beneficial to keep an eye out for favoritism and uniform application of the rules. I have to check my tendency to selectively apply the mostly unspoken institutional arrangements of the family, and it’s healthy to audit myself in this way. But the minute I make equality the goal, confusion and frustration take hold, and the rules become more, not less, arbitrary.

Of course society is not a mirror of the family, but the lessons still apply. To seek equality, or more equality, or less inequality, is an unproductive pursuit, and typically a mask for other frustrations we’re trying to ameliorate where we want the moral sanction of our peers to do so. Drop it. Inequality is morally neutral and needn’t be resisted or defended. Focus on reliable and fair institutions that don’t systematize and reward favoritism, but make it harder and more costly.

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.

Want a Better World? Make a Profit

A few days ago, I noticed a post on Fast Company’s Co.Exist titled, “Is Working on Wall Street Actually the Most Ethical Career Choice?” The post is about a project called 80,000 hours that is trying to get people to think about how best to spend the average 80,000 hours they will be in a career.

Somewhat refreshingly, the project encourages people to consider going into high-income careers rather than the non-profit world. It describes the outsized impact you can have by funding several causes vs. working in one. But the premise remains: to do good, it’s nonprofits that provide the boots on the ground. You might have to bite the bullet and take a high-paying job so that you can support such efforts, but it’s very clear that aid and charitable organizations are what make the world a better place.

What’s so odd about this perspective is that all the evidence in world history reveals just the opposite. There has not been a single, massively transformative development driven by charity work. But millions upon millions have seen the end of poverty, disease and plague; we’ve seen lifespans extended, air and water cleaned, culture, art and beauty preserved and enhanced, and lives saved by profit-seeking enterprises.

Working for profit is, in a free-market, always a win for others. Profit is a signal. It reveals when value has been added to society, as measured by the subjective values of those in society. Resources are purchased for a price. That price is what the resources are valued at for their next best use. Profit-seekers then do something to the resources. They apply ideas, time, other resources and labor. What comes out the other end is sold. If consumers willingly pay a price high enough to cover the cost of inputs plus some, profit is made. What does that profit signify? It signifies value created. It shows how much more valuable the resources are after the transformation than before. It shows, in dollars, how much better off people are because of the enterprise.

Of course dollars are not a perfect measurement of value. And of course economic value is subjective and changing. But there is no perfect measurement, and there is none clearer, cleaner, or fairer. You can ask people what they value, but when they willingly trade their dollars for it, it speaks volumes. Any uncoerced exchange that generates profit should be hailed as a wonderful benefit to the world.

Sure, you can make a bunch of money so you can give lots away to causes you believe in. That’s a wonderful thing. It feels good. It can help some people in tangible ways that are fulfilling to be a part of. The truth is, whether you like it or not, you’re doing more good for the world by the activity that makes you the money (so long as it’s not subsidy, tax, or regulation supported) than by the activities you support in giving it away.

I highly recommend this excellent article by F.A. Harper on “The Greatest Economic Charity“.

Protect Us From ‘Consumer Protection’

Back in 2007, I wrote a short piece for the Mackinac Center that showed, through a hypothetical story, how occupational licensing laws come about. It was published in a few local newspapers, and elicited its fair share of responses – primarily because shortly after I wrote it interior designers, who I chose for my example, began lobbying for exactly the kind of thing I discussed. Good timing I guess.

I responded to several angry emails, and I recently rediscovered one of my responses. I probably would say a few things differently today, but I still thought it was a fun exchange and I was reminded of it after discussing a current effort afoot in Minnesota to require interior designers to be licensed. The idea is as stupid now as it was then, no matter what state it’s in.

Below is the original article, followed by the response letter and my reply. The names have been changed to protect the ~~innocent~~ interested.

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Article originally posted here.

Michigan ranks sixth in the nation when it comes to occupational licensing, with 116 different occupations requiring state approval, according to a recent Reason Foundation report.

Michigan even has a license for reptile catchers. You’d think with only one native venomous snake, the Massasauga Rattlesnake — and a relatively benign one at that — we might not need to rank so highly in this area of policy. Apparently not.

So, why do we have all of these licenses? Who comes up with them? Here’s a hypothetical example of how such policies come about:

A lawmaker meets with lobbyists representing an association of interior designers. The lobbyists say interior designers contribute $10 million annually to the state economy and provide more than 10,000 good paying jobs. Interior designers work hard to have a good reputation, say the lobbyists, but all of that is in danger. Rogue designers who are not members of the association have been undercutting prices and providing shoddy workmanship that damages all designers’ reputations. The lobbyists tell of one such designer who made a cheap shelving unit that collapsed, injuring the customer.

To remedy this, the association proposes requiring all interior designers to be registered with the state. They propose a course of study (provided by the association, to members only) and a test administered by a state panel of design experts (largely representatives of the association). Applicants must pay a $500 fee to cover the cost of the course, the test, the panel and all other related activities. Fee money would also be used to investigate and prosecute any unlicensed designers — including levying a $500 fine for first time offenders and $1,000 for repeats.

The lawmaker likes the idea of “protecting” his constituents and introduces a package of bills, mostly drafted by design association lawyers. The legislation passes the Legislature and is signed by the governor with little fanfare, as the association lines up members to testify in favor of it and the media reprints their supportive statements on this “consumer protection” package.

That’s the side of the story that is easy for everyone to see. Here’s another side:

Jane Citizen works 40-plus hours per week to sustain her family, and because of her interest in it, started her own interior design business. She has no formal training in design, and neither time nor money to pay for it. Her customers are happy, and her business has been steadily growing by word-of-mouth. Jane has never been a member of any design associations and doesn’t have time to attend conferences or read their publications, nor does she have extra cash to pay their dues.

The new “consumer protection” act goes into effect without Jane’s knowledge. She is soon approached on the job by a bureaucrat asking to see her registration. He informs her that she is violating the law and must pay a $500 fine and cease plying her trade immediately. She must become registered or face additional fines and/or legal action. Jane doesn’t have the extra $500, nor does she have the time to take the state-required course or the money to pay for it. She has unknowingly violated the law and must cease earning her living.

Lawmakers received short-lived but positive press for “protecting consumers.” But who was protected? Jane and those depending on her income were not protected by the new law. Her happy customers who lost her skills and competitive prices were not protected. The design association was the only party protected. They eliminated competitors who drove down prices. They protected their monopoly and damaged the marketplace.

Under such a law Jane and her willing customers are “protected” from an honest and mutually satisfactory transaction. Free exchange ceases to be a natural right protected by government; instead it becomes a privilege bestowed by government. No longer can market competition ensure the best services at the best price; instead a trade monopoly, using the force of government, ensures the highest price for their service. No longer do free people choose what constitutes a fair price, a fair wage and good design; instead a government panel decides for them.

The next time you hear about “consumer protection” legislation that requires yet more licensing, check to see who it really protects. When government uses force to create and protect industry monopolies for “public safety,” it subverts our natural rights. That’s more dangerous than a room full of collapsing shelves.

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Dear Mr. Morehouse,

I am writing in reference to your Thursday, December 13, 2007 article “Consumer protection often isn’t”. It seems to me you have on [sic] idea what a [sic] educated Interior Designer has to learn before they should be able to call themselves a professional. I have a Bachelor of Science Degree from Michigan State University and almost a second degree in Art History. All of these I paid for myself working two or three jobs while taking a full load of course. I have no sympathy for your Jane Citizen!

There are university extension classes and night sessions available. She obviously wants a free ride. Thank God she didn’t want to be a BRAIN SURGEON!!!! I believe you should visit two or three of the fifteen colleges or universities in our state with Interior Design programs before you ridicule a profession. May I suggest M.S.U., Wayne State, Eastern Michigan or Kendall. All have excellent programs. If the educational aspects of a profession do not concern you why haven’t you gone after Attorneys, Architects, Doctors, Plumbers, Etc? They are all licensees.

All Interior Designers want is the recognition of time spent getting the proper credentials for practicing their profession so they can serve their clients properly thus protecting their safety and welfare.

Mr. Doe

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Dear Mr. Doe,

Thank you for your comments on my article. It seems, however, that you have misunderstood its very simple point. I made no attempt to single out any one profession in occupational licensing (I could’ve used anything as an example), nor was I attempting to besmirch the hard work and training many interior designers go through.

I have no doubt that you have worked hard, and are very talented at your profession as a result; and I have absolutely no problem with occupational licensing or certification that is voluntary. What my article warned against is licensure by force. Whenever the state acts, it backs up its laws with force.

I do not believe anyone should be forced or threatened with the use of force for choosing to not get a certain amount of training in a profession. If Jane citizen wants to offer her services, that is her business. Consumers should be free to hire whomever they choose. I have no doubt that voluntary certifications would (and do in some professions) abound, and many consumers would choose only to hire those with a consumer report stamp of approval (for example). However, the choice should be up to the individual, not for the state to impose upon individuals by force.

All state-forced occupational licensing is in effect a barrier to entry for entry-level workers and a protection for well-entrenched industry lobbies. I have no doubt that your design skills can stand on their own in a free-market, and I do not believe you need the blunt force of government to coerce customers into hiring you over a less qualified competitor. I wish you had as much confidence.

Sincerely,

Isaac M. Morehouse

Review: Madmen, Intellectuals, and Academic Scribblers

Any book that uses an Oxford comma in the title is immediately in my good graces. Add the nicely designed cover, the slim size, and the intriguing topic, and Edward Lopez and Wayne Leighton would have had to commit heinous rhetorical or logical crimes to turn me off of their new book, Madmen, Intellectuals, and Academic Scribblers. Fortunately, they commit no such crimes but present a sweeping and readable examination of the forces that generate social change.

I have long been obsessed with the question of how to change the world. In my personal life, this question took me from humanitarian mission trips, to politics, to policy advocacy, to education, to developing educators, to raising support to develop educators. To borrow the old adage, I found I could do more in teaching a man to fish than giving a man a fish…then I took it further: Now I raise the capital to build the factories to make the rope to produce the nets to give the teachers to teach people to catch millions of fish.

This doesn’t mean I’ve discovered once for all the secret of changing the world; far from it. Every day my approach changes as I gain experience and learn new ideas. Madmen is, in many ways, a clear articulation of many of the ideas I’ve come to hold about social change. It details how Public Choice Theory reveals that governments have all the wrong incentives for positive change. It discusses the role of ideas, and how they are able to overcome the vested interests that Public Choice makes seem so insurmountable. It lays out Hayek’s description of social change coming from intellectuals, and spreading through the general public. But Madmen adds a new dimension, one I have not been able to integrate into my worldview until recently: the bottom-up role of culture, and the circumstance of time and place.

It is not only coherent, conscious ideology that determines what institutions will be tolerated, and therefore what incentives exist and what outcomes result. The conscious beliefs of individuals in society do play a major role, and are something we focus on perhaps because we feel capable of altering them through education and persuasion. But there is also a role for bottom-up, experiential, subconscious or tacit knowledge. The kind of knowledge that culture carries from generation to generation, passing on when it produces better outcomes.

Often no one is aware the valuable function of such cultural trends or norms. Economist Peter Leeson has done research on a variety of bizarre superstitions and practices embedded in various cultures; memes that seem to have no value. If you asked the members of that culture what the purpose was, they would likely provide an answer steeped in their religion or mythology. Yet time and again, the practices have proven efficient means of achieving desirable ends, at least compared with the known alternatives. Such cultural norms needn’t be recognized for what they are even by the people that benefit from them in order to have influence over institutions, incentives, and outcomes – good or bad.

I’ve come to believe that, when it comes to bringing about a better world, valuing freedom because we’ve experienced it and consider it normal is just as important as valuing freedom because it makes sense in the moral or utilitarian abstract. A generation that believes in the power of voluntary cooperation because they take part in it every day is no less valuable than one that reads libertarian theory.

Madmen integrates the top-down flow of ideas from intellectuals to the general public with the bottom up influence of learned cultural memes, and uses the combined forces to explain where the ideas come from that shape the institutions in which (as Public Choice reveals) incentives will lead to predictable outcomes. To create this integrated view of social change, Leighton and Lopez ask and answer three questions:

1. Why do democracies generate policies that are wasteful and unjust?

2. Why do failed policies persist over long periods, even when they are known to be socially wasteful and even when better alternatives exist?

3. Why do some wasteful policies get repealed (airline and telephone regulations) while others endure (sugar subsidies, tariffs)?

They offer answers in less than 200 pages, yet somehow manage to work in an expansive history of economic and political thought, beginning with the earliest philosophers and ending with the most current economists. This is an excellent tour of political economy as a discipline: what questions it asks, what personalities populate the field, and what competing and complimentary theories they present. There is enough detail to satisfy the wannabe economist in me, and enough colorful storytelling to sate my inner layman.

The book opens with a story of the shot-clock that saved basketball, and closes with a story of hybrid wheat that saved millions of lives. It is full of examples of social change, both good and bad, and the authors’ thoughts on why it happened when and how it did. If you are interested in how the world works from a ten thousand foot vantage point, I cannot recommend Madmen, Intellectuals, and Academic Scribblers enough.

How the World Will Change

(Originally posted here.)

When the world becomes free it will not be by the creation of new laws, or the removal of old, or new political leaders or any election result. It will not be because of a change in government, but because of a change in attitude toward government. It will not be because of legislation, but because of disregard for legislation.

Genuine change will come when the state is ignored, not reformed. It will come not when politicians are better, but when they are irrelevant.

When state-made law is no longer deemed necessary or important it will not be respected. When it is not respected it will not be enforced because it will not be enforceable.

This is how the world will change.

Evidence in the Face of Disbelief

The world can become free of the barbarous relic called the state. The state is a dangerous fiction whose power rests entirely on people’s belief in its necessity, or inevitability. Belief in the state is not insurmountable. It is not hard-wired into the human mind. It is not a given that a state must or will always exist. The state, like so many other superstitions now thought to be outrageous, inhumane and inefficient, can be left in the ash heap of history.

Many once laughed at the notion that an institution as old as humanity itself, the institution of slavery, would or could ever be removed. The prevailing wisdom for centuries, even among those who had discovered the moral repugnance of slavery, was that it was just a part of human nature. Reformers argued the best thing was to work for a more humane version of slavery.

Slavery was an institution that, however evil it may sometimes be and however utopians might imagine a more perfect world without it, was here to stay. Some embarked on efforts to improve the institution, to teach masters to be “good” to their slaves. Some setup rules and mores designed to limit the nastiest outcomes of the institution. But the institution itself was as unavoidable as scarcity and death.

The fatal flaw in this thinking is that slavery and government, unlike scarcity and death, are human institutions. They are, above all, mental constructs. Their physical manifestations are not physical realities humans simply encounter in nature, but realities we create, and humans only create by first imagining. An idea does not become an action unless the individual actor believes that the idea is worth acting on. To subjugate another human being, or to condone or allow the subjugation of one by another, one must first have the idea of subjugation and must believe that acting on it is preferable to ignoring or condemning it. Scarcity and natural death need no such human consent. The old saying about death and taxes turns out to be only half true.

If the state, like slavery, is the result of the ideas held by people it is not inevitable. Some day humanity could look back on the institution called the state with the same sense of shame and wonder that we now have about slavery. How could so many people – many of them good people – live their lives day in and day out surrounded by an institution so inhumane, so nakedly violent and demeaning? Did they really think it was necessary? Did they not understand how degrading it was? It will be hard to understand how so many humans thought the state was inevitable, tolerable and even good. As sure as slavery became a hated relic, so can the state.

How It Happens

When slavery ended it was not by changes in rules or laws or political leaders. Such changes often quickly follow changes in belief and mistakenly receive the credit, but they are never the cause. Slavery ended as people’s ideas about it changed. People began to believe it was not only an evil, but an unnecessary one. People began to believe it so evil that they were willing to tolerate the short-term sacrifices of ending it in order to reap the long-term improvement in the human condition.

The calculation of cost and benefit changed as people’s sense of morality trumped their sense of conservative institutional stability. The unknown outcome of ending slavery became an acceptable risk when considered against the known evil of the institution, which became an unacceptable reality.

Political Reform

Political reform can never bring about liberty. It can on rare occasion expand a bit of liberty for a few, but as long as that expansion occurs via political methods, it means bargaining that often takes away freedom in some other arena, or the long-term furtherance of trust in the state. The political game is about reshuffling and re-enforcing the necessity of the state.

The political game attracts great attention, and as such many suggest using it as a means of educating people about the power of liberty. Politics as education is only valuable in the long term to the extent that it educates people that politics is at bottom bad and government cannot ever be good. If it merely inspires people to advocate that the state do to things better, it is not, in the end, going to make society more free. It is disbelief in politics and in the state that leads to freedom.

The Chinese army fired on their fellow citizens in Tiananmen Square. This massacre was not caused by political leaders and generals saying, “Shoot”; but by men in the Chinese army deciding to shoot. It was not caused ultimately by bad leadership, but by a belief in the necessity of obeying orders. There will always be people with a will to power; a desire to control. Only when the rest don’t believe that power to be necessary and therefore do not obey does freedom reign.

Shift Focus

Humans want to solve problems in the most immediate and direct way possible. We want to know where the problem of restricted liberty begins. We discover the source in a gradual progression. First the focus is on people – the wrong political leaders. This quickly generalizes to political parties or groups, then to policies or laws, then to agencies and institutions, and finally to the state itself.

Here it seems we’re at the core of the problem: the state itself. Not any of the personalities or parties or bureaus or laws under its aegis. But a further shift in focus is required. The state is not the root of the problem. The real problem is not an institution, but an idea. It is the idea that government is necessary. That’s the culprit and final basis for every bad thing the state has ever done.

To a small degree, a shift in focus is happening now. A great many people don’t believe that a particular politician will solve the problems created by the state. An increasing number don’t believe one party is more likely than another to do so. It is more common to hear institutions or the incentives built into the system of government blamed. This is progress. It is, however, still rare to hear the existence of the state itself blamed, and rarer still to hear blame placed on the idea that a state is necessary.

The belief in its necessity gives rise to the state, which by definition is full of bad incentives that attract and nurture bad people in bad parties. To say the people, parties, or policies are the problem would be like blaming the sidewalk for breaking your leg after you walked off a tall building because you were ignorant of the staircase and elevator. Frustration with the sidewalk is useless and ignorant. The proper response would be to question the necessity of walking off the building; perhaps in so doing you would discover other less painful methods of achieving your goal and reaching the ground floor.

There is no form or arrangement of a state that can guarantee liberty. The answer is always peace, markets, and voluntarism. The ring of power cannot be wielded for good, but must be thrown into the fire before it uses good for evil.

Changing Lives and Changing Life

I do not wish to downplay the possible outcomes of attempts to reform the state. By such efforts lives can be changed. A court decision can save an individual or a whole neighborhood from being bulldozed by the state. The removal of a regulation can change the life of an entrepreneur and allow her to pursue her dream. These activities are analogous to disaster relief or soup kitchens; they can genuinely change lives and offer welcome relief. They can change lives, but they cannot change life.

Disasters will still come and go. The conditions that brought about hunger are not ameliorated with the appetite of the person receiving soup. The liberty-crushing actions of the state do not cease when it ceases to crush one neighborhood or regulate one industry for some period of time. The state will – must – continue to seek its own expansion, and it will push at every weak point it finds to do so, ensuring that an endless stream of lives will remain to be helped, but that the conditions of life itself will not be fundamentally altered. Treating disease is noble, but it is different than eradicating disease.

Changing lives is good and fulfilling work. But for those courageous enough to dream, changing life itself is bliss, and can only be done by undermining, not improving the state.

What to Do?

The only tactic worth pursuing is enlightenment. Enlightenment of self and of others, and both continuously. This does not mean telling people what to believe or what to do. It is more akin to discovery than education. A teacher may help you discover truth by providing information, but the discoverer has to have curiosity and openness. It is the discoverer himself who chooses to discover.

Become a free person, and your freedom will be a beacon to others who are searching. Create liberty in your own life, exchange ideas, be open to the power of human creativity. Free your own mind and you will begin to help others to free theirs not by telling them what to believe, but by demonstration and discussion.

The market does not produce new innovations and technologies because smart people tell others what to design; instead it is a constant dynamic give and take, show and tell, creation and imitation, trial and error, the greatest ongoing play of economic exchange.

The building of a free-society needn’t wait until the state is limited or absent; indeed the state will not wither until the free society is first built to replace it. The explosive power of ideas will destroy the foundations of the state as free people continue to live and breath those ideas and demonstrate the life, energy, fun, progress and fulfillment in freedom.

This does not mean everyone who wants liberty must do the same thing. Demonstrating and discussion the ideas of a free society is such a broad and evolutionary task that it opens endless doors. The differences we have in ability and interest lead to numerous efforts, and enlightenment leaves ample room for differentiation.

Our differences will manifest in which “others” we exchange with, and what methods and mediums we use. But it must be an exchange of ideas and the building of a free society. It cannot mean deceiving, cajoling, “nudging”, forcing, bribing, or dictating. These, in the end, will only lead to less freedom.

Liberty not inevitable, but it is possible. A state that does not trample liberty is not possible. So long as the state is deemed necessary it will exist, and the state will always grow beyond its originally desired limits. The state will prey upon society until it destroys it, and then destroys itself. But if the belief in the necessity of the state remains, the deposed state will soon be replaced by a new one and the process will begin again.

The only foundation that society can be built on without collapse is a belief in statelessness.

It must be belief. Consequential (practical) and deontological (moral) arguments against the state miss the point. People will accept an inefficient and immoral system if they believe it necessary. Once they find it unnecessary, they will abandon it and give moral or practical reasons for doing so, but the belief in the necessity of the state must go first.

Imagine Liberty

Ludwig von Mises described three preconditions to human action. An individual must have dissatisfaction with his current condition, a vision of something better, and a belief in the ability to achieve that vision.

Everyone has dissatisfaction with government. Almost no one has a vision of something better. People have visions of a differently structured “necessary evil”, but their lack of imagination makes them keep the modifier, “necessary”. The Proverb says that for lack of vision people perish.

If we open up our imagination there is abundant evidence of order without the state. Non-state norms and institutions produce the majority of the world we see around us. Historically, society precedes the state, and there is ample evidence of stateless solutions to problems we are taught to believe only the state can solve.

Beyond past or present evidence, an application of our knowledge of human potential can also help us envision what could be. Science fiction writers imagine unheard of technologies by looking at technological advances in the here and now. They extrapolate and predict where human ingenuity, if it continues on its present course, may go. The best social thinkers do the same with society.

Some advocates for liberty do have a vision of something better. They can imagine multifarious social arrangements without the state. But most still lack the third condition of human action; a belief in the ability to get there. After so many vein attempts at revolution and political activism it seems there is no answer. But in some ways, the second condition of action is the answer to the third. If enough people can imagine a better solution, they will cease to support an inferior one (even in the face of the unknown, if they believe it to hold promise) and cease to prohibit new experiments. People with imagination too small to envision an automobile may very well accept restrictions on road building. But people who can’t envision the specific manifestation of the automobile, but can imagine human progress and invention capable of surprising them will be reticent to restrict the construction of something with unknown promise.

This is why we needn’t all share the same, or even a very specific, vision of a stateless world. We must, however, be brave and broad-minded enough to see in human relations the potential of order without the state.

For those who can imagine such a world, the task is to open others up to the same possibility. Show them, intrigue them, inspire them. Where imagination is wanting, so is liberty.

When It Happens

Perhaps the beginning of the end of the state will be gradual. Maybe state efforts to restrict minor activities will be increasingly ignored. Bans on food and drink may be laughed at and become unenforceable. Perhaps it will slowly extend to ignoring bigger and bigger restrictions.
Perhaps it will start with a bang. The prohibition of drugs may simply come to an abrupt end, and sooner than anyone expects. Public schooling may suddenly become so little used and so uncompetitive in the face of educational innovation that it disappears.

It may happen without a big production. The visage of the state may not even die with its function. The royalty of England still exist, but they are longer relevant in regulating daily life. They exist as reflection or memory of what was once believed. Some Native American tribes perform rain dances not because they believe, as they once did, that they will bring rain, but as an homage to their past. The state may transform similarly. It may never “go away”, but it may cease to have meaning except as a tradition. Parades and pomp may remain while power over our lives withers.

Fast or slow, big or small, conscious or unconscious as it may be, the world will change. The state can be a relic of the past, harder to understand as time moves on, like slavery in America today. In so many ways the trend is well underway and we are already in a mostly stateless world, though it is little appreciated or understood. It may be a matter of merely realizing what is already true: the state is not, and never has been necessary.

Realistic and Radical

The dissolution of the state doesn’t rely on people to become better or morality to change, or for the next step in evolution. It is a fallacy that government is inevitable and necessary. It could wither away in no time. It is only a matter of us changing our beliefs, paradigms, and theories of world. It only requires that we realize that it is not necessary. I say only, but the power of imagination necessary to see that the state is not is no small thing. Opening our minds to this possibility is the greatest and most promising intellectual and practical adventure.

The Worst Protection

You feel safe in your neighborhood, but worry about the small chance of a break-in or act of vandalism. To protect yourself from these risks, you pay a security company to look after your house. It costs a little more than you’d like, but you determine it’s worth it.

They put an unarmed guard in front of your house at night, just to keep an eye out. It seems a bit unnecessary, but you rest easier knowing he might deter would be thieves. The guards start coming earlier and staying longer. It seems silly to have them there before sundown, but you ignore it. Soon, they’ve got someone there almost around the clock. Then they send you a bill with a new higher rate for their services. You suggest going back to night only guards, but they assure you this is necessary to protect you, and also tell you the neighborhood is getting a bit more dangerous. You pay.

The next week, not only do they have a guard around the clock, but he’s armed. Then there’s two or three patrolling at a time. Rates go up again. You’ve been hearing more stories about how dangerous the neighborhood is, so you pay. Before long, they have a constant cadre of armed guards patrolling not just your sidewalk, but the whole neighborhood. They start randomly knocking on your neighbors’ doors and searching their houses for anything they might use against you. They set up permanent stations throughout the area, manned 24/7. Guards constantly patrol and conduct random searches, without permission, and occasionally they cage or kill someone. They assure you; there was reason to believe these neighbors had it in for you. It’s a jungle out there. They raise their rates.

Some of your neighbors object. Some devise ways to protect from being searched or bullied. All become suspicious of you, and a little angry. After all, the guards are invoking your name when they do this. The more the neighbors resist or lash out at the guards, the more the company explains just how unsafe you are unless you purchase the latest upgrade. You do. They deploy more street walkers. They pre-emptively kill and cage more neighbors. It seems a fight breaks out every day. Bands of neighbors form for the sole purpose of combatting you and your security team. Their children grow up afraid of you and they hate you, and your children, for it.

The company says more is needed; threats can come from anywhere. Now guards are groping your guests and your children each day before they enter or exit your house. They search your house on occasion, just to be sure your conspiring neighbors don’t have an inside man. They treat you like a suspect on your own property. You pay the new fee with the only credit card you haven’t yet maxed out.

Every day you wake up scared of your neighbors, suspicious of your guests, leery of your own children, and irritated by the guards who may or may not rummage through your belongings. You juggle money around just to keep the lights on, meanwhile the guards roll around in tanks, thanks to your borrowed money. You remind yourself that they’re here to protect you from an increasingly dangerous neighborhood. It’s worth it. Sure, they could cut some costs, but it’s a struggle to convince them of anything, and it’s a little intimidating to try. Besides, what’s a few dollars overspent compared to the imminent danger you’d face if they scaled back too far?

One day it hits you: you’re not safer. You’re paying a lot of money, not to insure you against unlikely violence, but to stir it up. You’re paying to create enemies, not defend against vandalism. You’re paying to be treated not like a customer, but a criminal in your own home. You’ve been ripped off. You have fewer options when it comes to social circles, since you’ve made a lot of enemies. You can’t travel down certain streets, because there your name has become a byword. You’ve learned to fear your neighbors and you’re not really sure why, or what threat they pose except to the guards that harass them.

You fire the company and begin the long task of putting your life back together.

Unfortunately, it’s not that easy in the real world. You can’t fire those that provide supposed security. You have to pay, and you have to obey, or else. Don’t be mistaken: just because it’s done on a grander scale and wrapped in a lot of fuzzy feelings and national myths, doesn’t make it different from the neighborhood story above. States are supposed to provide protection; instead they poke people with sticks and incite them to violence.

The United States has enemies. I do not have enemies. There is no one in a far flung place in the world looking at a map and saying, “Here, on the Atlantic coast where the Cooper and Wando rivers come together. The people who have chosen to live on this bit of land are terrible. Let’s invade them. Let’s kill them.” Every international threat to me is a threat to me because I am associated, whether I like it or not, with the United States government.

Acts of terrorism and war are strategic acts. They are intended to pressure the state into changing its policies, or to make it pay for previous policies. Attackers know that the state ultimately responds to the views of its people and the interests that form around it. They attack civilians because they believe it creates impetus for the state to do what they want. We are the pawns in the game of states. We are at risk because we are seen as leverage with which to manipulate the political class.

The state is often defended as necessary to secure individuals against foreign aggression. Yet foreign aggression has no target if there is no state. The state does not make us safer, it makes us less safe. It kills in our name, with our money. It harasses us in our own country in the name of protecting us. It makes us suspicious of people we’d otherwise never know, or know only through Tweets or peaceful commercial interactions. It makes us hated.

The sooner we can forge an identity separate from the states that claim to protect us, the safer we will be. If the state is a kind of security provider, or insurance against international aggression, it’s the worst form of protection I can imagine. You wouldn’t stand for a company that marauded through the neighborhood in your name; you shouldn’t stand for a nation that does either.

Old, New, Borrowed, Blue

Old

An imaginative and captivating read, Screwtape Proposes a Toast was C.S. Lewis’s follow-up published in the Saturday Evening Post to his popular book, the Screwtape Letters. Screwtape is a fictitious correspondence between a senior and junior devil about how to damn men’s souls. In the follow-up, Lewis has poignant insights into the nature of modern society, and in particular the way in which equality and democracy can corrode all that is good and sturdy in humans.

The text is posted here. You can also read a PDF version of the original magazine publication here.

“Now, this useful phenomenon is in itself by no means new. Under the name of Envy it has been known to humans for thousands of years. But hitherto they always regarded it as the most odious, and also the most comical, of vices. Those who were aware of feeling it felt it with shame; those who were not gave it no quarter in others. The delightful novelty of the present situation is that you can sanction it — make it respectable and even laudable — by the incantatory use of the word democratic.”

New

Jeffrey Tucker absolutely nails it in this piece for The Freeman. Jeff is one of those guys that gets freedom on a real gut, rubber-meets-the-road level. He also gets it on an intellectual level. He can pull from a treasure trove of work done by great thinkers on why liberty trumps central control, and he can also pull from keen insights on every day life and apply it all to present ideas for living free, here and now, and fighting to free the future. Tucker talks first of the intellectual journey to anarchism, then the practical journey; the part that really transforms your outlook on life.

“[L]et me admit that my anarchism is probably more practical than ideological—which is the reverse of what it is for the most well-known anarchist thinkers in history. I see the orderliness of human volition and action all around me. I find it inspiring. It frees my mind to understand what is truly important in life. I can see reality for what it is. It is not some far-flung ideology that makes me long for a world without the State but rather the practical realities of the human struggle to make something of this world though our own efforts. Only human beings can overcome the great curse of scarcity the world has imposed on us. So far as I can tell, the State is, at best, the great annoyance that slows down the mighty project of building civilization.”

Borrowed

I borrowed this story from a friend’s Facebook feed. She rightly pointed out that this research has pretty significant implications for the social sciences and might alter the current direction of sociology, psychology, and behavioral economics. What I find interesting is how common-sensical the findings are. The fact that this work will shake up these disciplines reveals just how silly and prone to trendiness academia can be. I’m also willing to wager that, should this and similar work start a new trend in the social sciences towards more context-dependent theories, the pendulum will swing absurdly far and another counter-revolution will happen a few decades later reminding us that, yes, some elements of the human mind are universal. The paper posits, in short, that institutions matter, a lot. They shape our worldview and affect everything from how our brain processes spacial relations, to our sense of fairness.

“The potential implications of the unexpected results were quickly apparent to Henrich. He knew that a vast amount of scholarly literature in the social sciences—particularly in economics and psychology—relied on the ultimatum game and similar experiments. At the heart of most of that research was the implicit assumption that the results revealed evolved psychological traits common to all humans, never mind that the test subjects were nearly always from the industrialized West. Henrich realized that if the Machiguenga results stood up, and if similar differences could be measured across other populations, this assumption of universality would have to be challenged.”

Blue

This excellent book review by Anthony Gregory is depressing, or “blue”, upon first reading, especially if you’re new to revisionism. The patriotic myths of war heroes and cunning statesmen are shattered, and with them a sense of American identity. It takes some time. You have to stand back and look at the facts and alternative narratives free from nationalistic impulse. Then you grasp that most history books are little more than propaganda favoring the powerful status quo. It hurts at first. With time, it is liberating. This book review is an excellent appetizer for this way of examining the past. Open your mind and give the revisionist view a try. Let it sink in before you reject it. See what happens. I’m willing to bet you’ll develop lingering suspicions about mainstream histories. That’s a good thing.

“The Founding Fathers are the first official heroes targeted, appropriate in both chronological terms and in considering the civic mythology of the United States. And so who were the true heroes? According to Russell, it was the rabble. John Adams, Alexander Hamilton, Sam Adams, John Jay and the rest of them looked upon the common American people, populating Philadelphia where they were holding their conspiratorial meetings, as “vicious,” “vile” and otherwise unsavory folk. “But what the Founding Fathers called corruption, depravity, viciousness, and vice, many of us would call freedom”

Conquering Time and Space with Facebook

It is obvious how Facebook allows conversations to take place regardless of the distance between participants. Conversational threads between multiple parties in locations spread across the globe happen with more ease and efficiency than any conference call. An element of this new conversational dynamic that is easy to overlook is the way Facebook conquers not just space, but time.

When you have a pint with someone and discuss matters of the day, sports, philosophy, or family, you’ve got the time allotted, and then you can mill it all over and process the implications of the conversation later. On the phone, you’ve got a a few seconds to reply to questions or to pose them. It would be awkward and disruptive to make your interlocutor wait for minutes or hours as you think over her comments before responding. Hanging up and calling back every few hours or days to complete the conversation in fragments is equally cumbersome. In many ways, time, rather than the flow of ideas, is in control of what gets covered. Facebook overcomes this constraint.

Online threads can begin anytime, and participants in the conversation can post immediately or hours, or days, or even weeks later. Everyone is notified, and everyone has the chance to let it sink in, go about the day’s business, and respond only when they have the time and their thoughts are clear. There are myriad conversation flowing at any given time, and you are free to enter and exit at will, around your schedule.

The ability to maintain relationships and social connections on your own schedule is incredibly freeing. It allows you to break your day into modules and specialize in particular activities when you are most capable of doing them well. I often lump all my social interactions for the day around lunchtime by browsing Facebook. I might be lying in bed that night when someone’s post pops into my head. I can post a comment immediately from my bedside smartphone, or wait until the next morning. The conversation’s not going anywhere.

The passive nature of Facebook, like email, is easy to manage and keep from being a disruption. But unlike email, Facebook has an open format where posts are directed at nobody in particular, so you can freely enter or exit the stream. It may seem like a recipe for shallow relationships and flighty social bonds, but I have not found this to be the case. Facebook is not replacing dinner with my family, or a phone call with my brother, or a funny text with a good friend; it is supplementing them. It opens entirely new groups of people to socialize and share ideas with; people who, if only phone or in-person meetings were available, I would realistically never have the ability to get to know. What’s really cool is that, if you so choose, you can form in-person relationships with these people at any time and much of the small talk is already out of the way. I can’t tell you the number of times I’ve met fellow travelers at events and been completely unsure whether we’d ever met in the flesh before, because we know each other so well from Facebook.

Your social life is in your own hands like never before. You are no longer bound to friendships of happenstance – who happens to move in next store, or share an office – but can build various overlapping social circles based on your genuine and dynamic interests. Of course you’ll still talk to the neighbor. But if they happen to be crazy or uninteresting, that’s not your only option. You’re free from the constraints of proximity. Neither are your forced to get all your catching up done during those difficult to schedule windows when both parties are free. You’re free from the constraints of time.

This new way to interact might seem like a fun little perk for your personal pleasure, but does it really have transformational power over society? Consider the efficiencies in knowledge capture and transmission and the ease and individual control with which social capital can be built and maintained. The freedom from time and place in the social arena has staggering implications if you ponder and let it sink in.

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.

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.

Tag: markets

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