No Coercion

 Veeeerrrrrry interesting:

Myth of Consensus Explodes: APS Opens Global Warming Debate

More evidence for a lack of consensus on climate change. As I’ve said before, even if we were significantly affecting the climate in some way, it’s such a complex system that we have no clue what affects various proposed policies might actually have. And since such policies are typically estimated to impoverish humanity to the tune of trillions and trillions of dollars and necessarily require the initiation of force against individuals, there is absolutely no way–no way–to morally justify any action by government to ‘fix’ the climate (I should specify–the government should take no positive action; the government most certainly should take the negative action of immediately abandoning all publicly owned property and ceasing all taxation, regulation, and other coercion, which would not only do wonders to help the environment but would allow economic growth and productivity on an unimaginable scale).

If you enjoyed this post, make sure you subscribe to my RSS feed!

On a forum somewhere in the far reaches of cyberspace, someone commented to me that in a “purely capitalist society,” there would be greed, exploitation, and few in control of the many.

I have an irrepressible need to correct such disturbing misunderstandings. I know that the vast majority of people who hold such views are closed off to conflicting information, but I also know that occasionally someone is open to new ways of looking at things, and some of them might stumble upon my lowly blog.

So while I’m mostly preaching to the choir, here’s my response to that all-too-common assertion that capitalism results in greed, exploitation, and the few controlling the many:

Actually, there is greed in every possible system because that’s part of human nature. Furthermore, I would submit that greed is not bad–it’s the aspect of our nature that involves striving for ever greater happiness, and that can only be good. Can people do horrible things because of their greed? Certainly. And we see this most clearly in places like North Korea, Cuba, Venezuela, and the former Soviet Union–those greedless eutopias where an elite group has gained control of the means of production as communism demands. We see the greed of those in power, who kill and enslave any who dare challenge them. We see neighbor turning on neighbor in the hopes of gaining favor with the ruling class and getting an extra share of the artificially restricted production of the economy. Of course, all this happens in the United States but to a lesser degree (so far). In a free society greed leads to ever increasing economic production and ever higher standards of living–that is, it increases happiness.

As for exploitation, that is what the government and other coercive entities do. In a “purely capitalist society,” human interaction is based on voluntary choices, not government decrees. Oddly, in today’s world what many people think of as exploitation (i.e. children and poor people working for $2/day in facilities of questionable structural integrity) is actually an example of a willing buyer (employer) and willing seller (employee) coming together in a mutually beneficial transaction (after all, if it didn’t make both parties better off, it wouldn’t happen). And what most people see as the government “sticking up for the poor exploited worker” (i.e. minimum wage laws, workplace safety rules, etc) are actually examples of true exploitation, because a group of people are using violence to get a better deal for themselves than peaceful voluntary action would provide–just because they use the government to enact their violence doesn’t make it any less wrong. So from a moral standpoint, it’s employers who are being exploited by workers through the anonymous vehicle of government. Not to mention the fact that artificial restrictions on wages and labor conditions, while giving a small number of workers a better deal, result in a loss of wealth-creating opportunity for the employers and a great number of potential workers who now will not be employed, to the point that society as a whole is made worse off.

And the few in charge of the many? That’s what you have in socialist and communist countries–not capitalist ones. In a truly free, capitalist society, there’s no government to lock entire classes of people into poverty and submission like we have today (even in the US). As an example, governments in so-called ‘civilized’ societies employ a vast array of professional license requirements for everything from doctors, nurses, and lawyers to plumbers, cab drivers, and hairdressers. The government actually uses physical violence (police power) to prevent someone who’s only marketable skill may be ferrying people around by car or doing someone’s hair from opening up their own business working out of their garage. And by the same token, it prevents lower-income people from patronizing those potential businesses and thus saving money and working their way out of poverty. This is not civilized–it’s barbaric. Capitalism actually facilitates the rapid movement of people up (and down) the economic ladder according to how well they provide value to others. Power only really comes into play when a coercive entity (the government) is involved. Outside of the very uncapitalist concept of coercion, power has no meaning.

So those are my very brief thoughts on a subject I could go on about forever. Now let me hear yours.

If you enjoyed this post, make sure you subscribe to my RSS feed!

A reader has asked me about the libertarian answer to insider trading. This is indeed a tough one at first glance. How exactly can a society without a monopoly public government prevent the ‘dangers’ people associate with insider trading?

First, it’s necessary to point out that insider trading does not involve the initiation of force against someone, so it shouldn’t be illegal even under a minimal state. Insider trading laws are designed to prevent corporate insiders from profiting from non-public information obtained in the performance of their fiduciary duties to the corporation. At worst, this could result in a civil suit (if the insider violated an agreement with the corporation), but not a criminal charge levied by government prosecutors. If profiting from non-public information should be illegal in one instance, why not in all? Shouldn’t everyone who’s ever gotten a job because they knew the right person be prosecuted? Should someone be thrown in jail because they work in the kitchen of a less than sanitary restaurant and wisely avoid eating the food there?

And even if insider trading in some instance resulted in the loss of stock value for other shareholders, there’s nothing inherently wrong with that. There is no such thing as the right to the value of something. You don’t have the right to a particular value of your home, and you likewise don’t have the right to a particular value of stocks you own. Value is determined by the interaction of a multitude of individuals and their economic decisions. To claim a right to the value of something is to claim the right to control the decisions of all those other people. This simple reductio ad absurdum shows that there is no right to value, only to actual property.

Insider trading prohibitions have to do with information and its use. Information is not inherently owed to anyone. Information has value. It takes effort to acquire information. Some people and firms specialize in acquiring information. They can charge others for access to that information, either on a case by case basis, or by monthly subscription, or some other arrangement. Some information requires more effort to acquire and would thus command a higher price in an open market. In a completely free society, it’s likely that businesses and organizations would emerge to collect and disseminate information about insider trading. Today we already have things like Consumer Reports–people pay money to get the scoop on various goods and services. The Wall Street Journal already publishes insider trading information on a weekly basis.

More to the point, as Milton Friedman and other economists have argued, insider trading is actually a good thing. Corporate executives unloading the stock of their own company sends a signal to anyone paying attention that all is not well with that company, and it does so much faster and more completely than any process resulting from government mandates and restrictions.

There is no rational basis for the prohibition of insider trading. It stems, as many have observed, from envy–from a deep socialistic impulse in many people to prevent others from being wealthier than themselves. I give great strategic credit to the socialists that they’ve succeeded over the past century in their propaganda efforts to convince so many Americans that there’s actually something bad and ‘un-American’ about insider trading. If only the defenders of freedom and prosperity were so strategically adept in this ‘battle for the hearts and minds’ of America!

As always, I welcome any reader comments or suggestions for future blog posts. I want to write about the issues you’re interested in–so send me your thoughts!

If you enjoyed this post, make sure you subscribe to my RSS feed!

Raise your hand if you’re sick of these politicians and their juvenile tirades against “business.” I know it’s the campaign season and all, but come on! And while I especially cringe when I hear the parasitic rants that the Democrats are so fond of, the formerly pro-economic-freedom Republicans are (with the exception of Ron Paul and sometimes Giuliani) getting in on the action, too. Of course, all these officials are constantly egged on and encouraged in this nonsense by a disturbingly large fraction of the American people, who whine incessantly about all the terrible profits being made by the evil corporations and how there should be minimum and maximum wages, and trade restrictions, and consumer “safety” rules, and progressive taxation, and all manner of other measures that should be taken by the “noble” politicians in an effort to curb the “excesses” of businesses and stand up for the “common good.”

I think what the American people need is a healthy reminder of the actual nature of both business and politics. Following are a couple of appropriate quotes that can help put things in perspective.

From Ayn Rand’s Capitalism: The Unknown Ideal:

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined—not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need—but by the law of supply and demand. The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values—better products or services, at a lower price—than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote—by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to leave the public voiceless and disfranchised.

Now let me define the difference between economic power and political power: economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.

And here’s a great letter that Don Boudreaux at Cafe Hayek sent to USA Today back during the Christmas season:

Even more predictable than the post-Thanksgiving appearance of shopping-mall Santas is the inability of pundits at this time of year to say or to write “commercialism” without prefixing to it the word “crass” - as we encounter in your pages today in Tom Krattenmaker’s “The real meaning of Christmas.”

I challenge this notion.  Commerce is peaceful. It involves sellers working hard and taking risks to bring to market goods and services that consumers want to buy.  No one forces anyone to do anything; all is voluntary.

What truly is crass is politics - that sorry spectacle of power-seeking ego-maniacs who, when not pronouncing platitudes, are promising to help group A by picking the pockets of group B.  While commerce is honest, politics is duplicitous.  While commerce is peaceful, politics inevitably pits citizen against citizen.  Far more enlightened and ethical behavior is on display during any one day in a shopping mall than the most intrepid observer will find in a century on Pennsylvania Avenue.

And yes, I do realize there are businesses out there doing some really sketchy things that violate the voluntary and value-based nature of commerce. But every single one of those instances is a result of the government getting involved and lending some of its power to those offending businesses. Isn’t it ironic that the people complaining about abuses by businesses are always calling for giving the government more power over business, thus resulting in ever-increasing instances of businesses choosing what seems the most rational course of action and using that government power to their advantage?

What say you, fair readers?

If you enjoyed this post, make sure you subscribe to my RSS feed!

We all learn in Econ 101 that there’s nothing inherently beneficial about buying locally produced goods. That’s not to say that you can’t derive happiness from supporting local growers or that you can’t prefer the taste of a local strawberry to one from the side of the country, but those are just personal preferences that have nothing to do with the actual economics of localization. Nevertheless, there’s a growing trend toward buying local among those who consider themselves environmentally and socially conscious.

Over at Coyote Blog, Warren Meyer talks about some of the significant reasons NOT to push for localization of markets: Sustainability Through Poverty. I especially like his first point:

It doesn’t work.  The total energy used for transport, say of food products, is a small percentage of the total energy used in the total production process.  The energy transportation budget is generally smaller than efficiency gains from scale or from optimizing location.  For example, a wheat farm in Arizona on 50 acres is going to use a lot more energy (and water, and fertilizer, and manpower) than a wheat farm on a thousand acres in North Dakota.

To elaborate on that a little, I would say that people who think they’re “reducing their carbon footprint” by buying local are most likely mistaken. If, as Warren points out above, more energy is used to produce food in a nearby location that’s less suited to such production than another place far away, you’re actually causing MORE carbon dioxide to be released into the atmosphere when you buy local. Increased use of energy is reflected in higher prices. So it probably makes more sense to buy whatever is cheapest if you want to cut back on your carbon dioxide contribution. Just something to think about.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Don Boudreaux over at Cafe Hayek has a nice little bit about legalizing organ sales, with which I wholeheartedly agree:

Voters no doubt do feel repugnance at commerce in such things. But one question is: how much? When voters are asked to cast a ballot about such things, they do so largely free of charge — that is, they get to express their opinions on the cheap, without any obligation to reflect seriously upon the issue before them. I wonder how likely it is that any randomly chosen voter would let repugnance prevent him from buying a kidney if such commerce were necessary to save the life of his child or his wife or one of his parents?

How insane is it that our supposedly free country, because of voters’ irrational emotions, bans the sale of things that could save so many lives? Besides, what happens when you ban something that the market demands? It simply creates a dangerous black market and greatly increases the price of that particular good.

Just more evidence that democracy, to the extent that a mere 51% of voters can vote away our rights and empower a totalitarian political elite, is a truly flawed and dangerous system. Democracy is just totalitarianism in which the all-powerful dictators are ‘chosen’ by a certain portion of the population.

If you enjoyed this post, make sure you subscribe to my RSS feed!

A reader has requested that I share any Austrian analyses of the current credit crunch that I’ve run across (for those of you wondering why Arnold Schwarzenegger has anything to do with the financial markets, I’m referring of course to the Austrian School of economics as developed by Mises, Hayek, Rothbard, and certain other libertarian thinkers).

Now, I’m not well-versed enough in finance to be able to comment on the technical details of the following pieces, but I can summarize them as follows: the current problems in the financial markets and the overall economy are the result of deviations from the free market by a meddling government. The mandated use of fiat money, credit injections (money out of thin air) by the Fed, and other anti-market measures, rather than smoothing out boom-bust cycles of the free market as their proponents claim, have in fact been causing the cycles and making the resulting recessions more severe and prolonged than anything a truly free market would produce. The market is naturally self-correcting, but the Fed and other central banks around the world have been wreaking havoc on the market processes that would otherwise be making us prosperous with only minimal business cycles.

Enjoy!

The Worst Recession in 25 years?

The Shaking Tower of Debt

The Specter of Stagflation

Greenspan Absolves Himself

The Party is Over - Again

And here’s a good reading list for the Austrian view of finance and central banking in general: Readings for the Crisis

If anyone has any expertise in this field (Jimmy), or even if you don’t, feel free to discuss these items in the comments–you can even include your own links to good resources.

If you enjoyed this post, make sure you subscribe to my RSS feed!