RedStateEclectic

Debtor-Prison Nation

Here’s an interesting, brief article written by Frank Ryan, published on The American Thinker.

Great Britain's tax rate at one point in time exceeded 70%, and as such, Great Britain experienced a great "brain drain."  Many of those citizens came to the United States.

The United States is likely to experience a similar brain drain and economic malaise if the fiscal policies of the past and present go unchecked.

The solution to the problem of creating a devastating paradox of a debtor-prison nation is to uphold the principles of our Constitution in Article 1, Sections 7 and 8 and limit the growth of the federal government.

The Repeal of the 17^th Amendment, while not likely initially, would begin the process of limiting federal government growth.

The 17^th Amendment to the Constitution diminished the rights of the states by allowing for the popular vote for the U. S. Senate, such that the stage became set to have the federal government begin to assume a role for which it was not originally intended.  This creates an environment in which states may have their financial solvency threatened by the actions of other states when the federal government becomes the lender of last resort to the insolvent states.

When a nation has such extensive debt, as in the United States, that it restricts its options for creating and fostering economic growth or prosperity for future generations, it is likely that the nation will cease to flourish as it has in our past.  Opportunities to escape to other states may be for naught if the problems are national in scope.

A significant, prolonged, and sustained economic malaise will likely occur with our current debt burden and unfunded obligations.

Only disciplined, controlled reduction in out-of-control public-sector spending will reverse this trend...which started in the 1930s.  Keynes, you opened a can of worms!

It seems to me that among the people I talk to, they either “get” the problem of our national debt, or they’re blissfully oblivious. 

LLE

Alchian On Politics

Armen A. Alchian (1914-2013), RIP. The great economist and versatile scholar, who died this morning, has inspired my way of thinking about politics momentously.

Writes Armen Alchian in The Collected Works of Armen A. Alchian, Volume 2, in Economic Laws and Political Legislation, p.604:

To change the move toward socialism, we must change the ability of various forms of competition to be successful. I know of no way to reduce the prospective enhancement from greater political power-seeking, but I do know ways to reduce the rewards to market-oriented capitalist competition. Political power is dominant in being able to set the rules of the game to reduce the rewards to capitalist-type successful competitors. It is rule maker, umpire, and player ... But I have been unable to discern equivalently powerful ways for economic power to reduce the rewards to competitors for political power! Each capitalist may buy off a politician, but that only enhances the rewards to political power.

There are disagreements and competing ends among human beings that cannot be removed by voluntary market transactions.

Von Mises despises anarchism and praises the state. An anarcho-capitalist despises the state and praises anarchism.

I would like to meet someone who could demonstrate to me how a market product, how transacting in free markets can overcome the antagonism between the classical liberal von Mises and his anarchist opponent. Even if it were possible to offer political systems - like classical liberalism or anarchism - as vendable products, you cannot buy both, "the liberal state" and "anarchism".

You will have to resolve or, more generally, manage the differences on another plane. You need politics to sort these things out. And politics inexorably develops structures of maximal power, the most effective form of which being the state.

However, it is not a foregone conclusion at all that organising (structures of maximal) power is of necessity and uni-dimensionally destructive or otherwise evil.

To argue otherwise is tantamount to claiming that the development of humankind is an unmitigated descent into infernal conditions. After all, the technologies of power have advanced tremendously since Genghis Khan complained that an empire cannot be ruled from the back of a horse - implying that he could do a good job either at fighting and conquering or at ruling, but he could not do both properly. Since Genghis Khan's days, we have managed to organise power so as to dramatically improve levels of peaceableness, wealth, and welfare.

These attainments required us to act as political animals, as shapers and tamers of power and its most effective instrument: the state.

The consequences of the state are prismatic and ambivalent, like those of other tools with infinite uses. No one would say, a knife is evil just because a knife can be used quite improperly. And would it be sensible to suggest that human life is naturally and in any case evil, just because it can be a way of engendering as well as suffering evil?

By contrast, the absence of a dominant power results in disoriented and vehement struggles for preeminence. Hence empirically, anarchy is a highly violent state that sooner or later gives way to a more peaceful one, i.e. a more efficient structure of preeminent power.

On the scale of historic time, anarchy is a brief episode of violent anomie. As an operable societal model, it is quite simply an impossibility. It is too destructive to survive.

The theory of anarchism, in whose perspective state power is a monolith of evil, precludes itself from analysing structures of maximal power as part of the universe of evolutionary adaptations that are summarised in the term human progress.

Characteristically, anarchist theory seeks to immunise itself against empirical challenge by claiming to be rooted in an imperturbable foundation of self-evident premises.

Prosperity and Violence (2/3)

Just wed: monarchy and commerce, toward the end of the medieval period, that is.

In Prosperity and Violence (1/3), we have explained that the private provision of societal coercion in kinship-based agrarian societies was trapped within an insurmountable trade-off between peace and prosperity. If you achieved the former, you could not have the latter; and of course, without peace there can be no prosperity either.

In the present sequel, we trace

[...] the change from the private provision of violence, based on kin and community, to the public provision of coercion, based upon the monarchy and the state. The rise of the towns [in the medieval period] produced an increase in incomes and the new wealth incited increased conflict. Specialists in the use of violence needed revenues to fight their wars; and those who prevailed were those who allied their political force with the economic fortunes of the towns. (p.51)

In the process, a new political and economic order emerged:

[O]ne based on capital and complex economic organizations, one in which prosperity profitably coexisted with peace, and one in which coercion was used not for predation but rather to enhance the productive use of society's resources. (p.51)

Importantly:

The rise of urban centers closely intertwined with the rise of rural prosperity [...] As the population of the urban centers rose, so too did the demand for agricultural products [...] To secure food, the urban population [...] had to trade for it, thus strengthening the role of markets in rural society. The growth of cities therefore fostered the commercialization of agriculture. (p. 52/53)

The increase in profits from agriculture permitted investments in more specialised and more efficient methods and personnel and other improvements, including greater security and enhanced military prowess thanks to a widened base of indentured retainers that were obligated to fight when called upon.

The growth of the economy of northwestern Europe was thus accompanied ny the militarization of households.

The private provision of violence was costly. Only those who stood to lose much possessed an incentive to provide it. (p. 54)

This meant that

[...] the political and the economic elite became one in the rural areas, with households that were rich also becoming the households that dominated militarily the hinterlands of northwestern Europe. (p. 54)

It is worth repeating:

Feudalism was based on the private provision of coercion; it involved the militarization of the rural household. (p.56)

The economic boom brought about by intensified urbanisation and the attendant commercialisation of agriculture put the old economic and political system under fatal stress:

Prosperity spread inland along the river systems, up the Rhine and southward into France, and across the Channel to incorporate London, East Anglia, and the southern counties of England. But along with that prosperity came violence, privately provided by elite kin groups and households, with the support of their liveried retainers.

In the course of this violence, some kin groups did better than others. Those that prevailed formed ruling lineages and provided kings. Central to the emergence of these monarchies - and central, therefore, to the emergence of the [centralised, national] state - was the alliance between militarized lineages and the new economic order. Driven by necessity, fighting lineages allied with the cities, using them as a source of finance with which to suppress and seduce elites in the countryside, and so transforming the political structure of Europe. (p.56)

Continued in Prosperity and Violence (3/3).

Prosperity and Violence - (1/3)

 

I remember my parents telling me that when we travelled in South Africa (in the 1960s), they had to make sure that the [native black] driver could stay with us, at friends or in the hotel or in some other safe place, as otherwise he was likely to get severely harmed or even killed by members of other tribes. This post may provide an explanation why my parents had to take such precautions.

Also, I hope it will give pause to those who think that it follows immediately from the many defects of the state that the remedy lies in a romantic conception of anarchy, where the state has disappeared and peace services are exclusively provided by individuals and the market. In the sequel to this two-part-post "Prosperity and Violence", I am going to endeavour to show that

in the process of development, the nature of coercion alters. Rather than being privately provided, it instead becomes publicly provisioned. And rather than providing a means for engaging in costly acts of redistribution, it becomes a means for promoting the creation of wealth. (p.50) 

Below I try to reconstruct from excerpts some of the narrative - especially on the role of violence in societal development - contained in a great book of only 144 pages: "Prosperity and Violence" by Robert T. Bates. It offers an amazingly incisive and insightful comparison of the paths of development of rich Western societies, on one hand, and countries of the Third World, on the other.

Karl Polanyi refers to the transition from village to city, and from agriculture to industry as "the great transformation [...] (p.20)

As I shall show, kin relations provide insufficient assurance [...] to motivate the formation of the kinds of capital necessary for an industrial society. The assurance kinship provides, moreover, comes at a high cost. Analysis of these costs help us to understand why it is not societies governed by kinship, but rather societies governed by states, that secure the great transformation. (p.22)

Bates goes on to analyse two vital aspects of development:

 [...] the decision to form capital and the formation of institutions that render it rational to do so. (p.22)

He explains:

In agrarian societies, families organize production, consumption, and the accumulation of wealth [...] They also manage power. Not only daily life but also affairs of state flow through the networks spun by birth, marriage, and descent.(p.30)

However, people in pre-industrial societies

[...] cannot shed risk by transacting in markets. Instead, they must directly bear the costs of uncertainty; they must self-insure. Two of the most obvious ways in which they do so is by making "conservative" decisions and by "failing to specialize. (p.38)

That is:

[T]hey grow crops that while offering a smaller harvest, nonetheless offer one that is more certain [... They] remain subsistence producers. They are reluctant to plant pure stands of maize or wheat or to specialize in cash crops. [...] The costs in terms of the diminution of income yield, however, the benefit of increased security. It secures the the peace of mind  that comes from decreased risk in the face of a hostile nature. [...] That property rights inhere in families, rather than in individuals, renders families a means of insurance. [...] [M]embers [of the highly extended and geographically diversified family] can exercise the right to a share of the property of other relatives to ensure themselves against risk. [...] The dispersed location of the family estate yields a diversified portfolio of income-generating assets, thus reducing the level of risk. (p.41)

By the same token:

Just as families and kin groups self-insure against the risks of nature, so too do they self-insure against risks arising from the conduct of other human beings. Further constraining the economic performance of kinship societies is the nature of their political institutions. While offering a means for protecting property, the private provision of security by family and kin [...] also limits the accumulation of wealth. (p.42)

After all:

For deterrence to work, the threat of revenge must be credible. This system of governance requires, then, that men are warriors, capable of inflicting harm; it also requires that they be willing to retaliate, and be known to be willing to do so. (p.45)

There is a number of cultural practices that reinforce a sufficiently violent attitude:

In societies where families arm themselves and provide their own protection, military prowess lies embebbed in codes of honor, from which it derives credibility as a deterrent. (p.46)

Absent a reputation for being willing to fight, a person becomes vulnerable. Not only might his enemies view him as prey, but also his family and friends will scorn him, since their safety depends upon the support than can be expected from others. The incentives to fight thus run deep and once concord is lost, cycles of retaliation ensue. (p.47)

To be sure:

Private violence can work; it can produce peace, But the peace it produces is fragile. Once triggered, the system inflicts costs that mount over time: families span generations, and the wrongs of one generation cast a curse on the lives of those who succeed them.

To avoid the costs of private violence, people seek ways of insuring that retaliation will not be troggered. In so doing, they expose  another defect of the private provision of security: in the face of the costs of the system, people may seek to increase their welfare by choosing to live in poverty.

Students of village societies emphasize the fear of envy, Others describe how those who become wealthy are subject to accusations of witchcraft and sorcery, In such societies, egalitarianism becomes a strategy in which persons forgo consumption for the sake of peaceful relations with neighbours. To forestall predation, they may simply choose to live without goods worth stealing. In such a setting poverty becomes the price of peace. (p.47)

In conclusion:

As kinship societies expand, families inhabit diverse terrains; they trade and, better insured against the risks of nature, they secure economic gains. But the nature of their political institutions imposes important limitations upon their well-being.

The security they supply to the producers and accumulators of wealth is fragile. It lies imbedded [sic] in a culture of provocation. And should threats that support the peace have to be acted upon, then the system produces desolation and grief.

The political institutions of kinship societies impose a cruel trade-off; peace on the one hand and prosperity on the other. (p. 47/48)

Continued in Prosperity and Violence (2/3).

War Economy

It looks to me as if The Coyote is getting it right once again. This time on the question whether war "helps" the economy.

Though, I would slightly qualify his argument: if war is considered necessary, say, for reasons of self-defence, we are likely to be thereby inviting a planning regime that is strictly incommensurable with a free economy. The best you can do is to ponder if the "war economy" could be run more efficiently than it is, or not.

In fact, a "war economy" isn't really an economy. For it is simply an attempt to turn the economy proper into a single purpose project or organisation amenable to comprehensive planning. Not surprisingly it does perform a lot worse in terms of the criteria we would apply to measuring the effectiveness of a free economy. At best, it can give us the materially most effective way of attaining a specific objective - winning a war.

By contrast, the whole point and beauty of a free economy is to serve as a facilitator for as many goals as its participants may desire to attain - none of which goal commanding per se a higher rank of validity than any other.

See also Liberty - The All-Purpose Order.

One of the reasons that people often believe that war "improves" the economy is that they are looking at the wrong metrics. They look at unemployment and observe that it falls.  They look at capacity utilization and observe that it rises. They look at GDP and see that it rises.

But these are the wrong metrics. What we care about is if people are better off: Can they buy the things they want? Are they wealthier?

These outcomes are hard to measure, so we use unemployment and GDP and capacity utilization as proxies for people's economic well-being. And in most times, these metrics are reasonably correlated with well-being. That is because in a free economy individuals and their choices guide the flow of resources, which are dedicated to improving what people consider to be their own well-being. More resources, more well-being.

But in war time, all this gets changed. Government intervenes with a very heavy hand to shift a vast amount of the resources from satisfying people's well-being to blowing other people up. [...]

What we find is that in war time, unemployment is down, but in part because young people have been drafted (a form of servitude) to fight and die.  Are they better off so employed?  Those who are left find themselves with jobs in factories with admittedly high capacity utilization, but building things that make no one better off (and many people worse off).  GDP skyrockets as government goes deeply in debt to pay for bombs and rockets and tanks.  This debt builds nothing for the future -- future generations are left with debt and no wealth to show for it, like taking out a mortgage to buy a house and then having the house burn down uninsured.  This is no more economically useful than borrowing money and then burning it.  In fact, burning it would have been better, economically, as each dollar we borrowed in WWII had a "multiplier" effect in that it destroyed another dollar of European or Asian civilian infrastructure.

Sure, during WWII, everyone in the US had a job, but with war-time restrictions and rationing, these employed people couldn't buy anything.  Forget the metrics - in their daily lives Americans lived poorer, giving up driving and even basic staples.  This was the same condition Soviet citizens found themselves facing in the 1970s -- they all had jobs, but they could not find anything to buy.  Do we consider them to have been well off? [...]

The entire post.

How Much Destructiveness Can Man Afford?

Were man what 'greenish correctness' makes him out to be, a net destroyer of resources, our species would have become extinct a long time ago. In actual fact, man is a massive net creator of resources, as I explain here:

[T]ake berries, which you may call "resources provided by nature", much liked by hunters-and-gatherers. The berries have no way (a) to appreciate that they might be liked by human beings nor do they have the ability, of their own accord, to make themselves (b) useful to human beings. What Zimmermann and later Simon call a resource is brought into existence when humans do (a) and (b) for the berries and other resource candidates. While there may be natural phenomena that do us a welcome service - consider the warmth and light provided by the sun - we cannot survive by passive enjoyment of those resources. In fact, the human mind has to figure out in a given situation if it is wise to move into the sun or, to the contrary, if one should move into the shadow. Moving into the shadow is already an act of creating a natural resource, i.e. recognising something as potentially useful for the satisfaction of a human need AND utilising this potential successfully. Hence, the most important final conclusion: man is a net resource producer, quite naturally, rather than a destroyer of resources, including natural resources.

As analogous, there is a limit to the extent to which men can behave in destructive ways among one another.

This is why the state evolves, and why it evolves in such a way as to have a limited potential for destructiveness and as well as a large potential for constructive functions. As an ambivalent instrument capable of destruction as well as support of socially useful outcomes, the state, at least on the level of man's history, must produce a positive net margin of constructive outcomes over destructive ones.

As small human groups grow larger, owing to productivity increases from sedentary agriculture, and larger groups increasingly trump smaller groups, a new destabilising factor gains in prominence.

Small groups are capable of providing vital public goods by way of voluntary contribution by their members, being structured to monitor and avoid free riding as well as offering advantageous cost-benefit ratios for the individual that induce individuals to participate in the provision of public goods.

Larger groups lose that capacity, the more so the larger they become. They get caught in impasses of the Prisoner's dilemma type and minefields of multiple game theoretic equilibria. Groups survive and prevail who evolve Structures of Maximal Power (SMP) effective enough to enforce generally binding rules that make cooperation feasible in larger units: the state makes its appearance. In future posts, I shall have more to say about the ideas roughly outlined in this last paragraph.

What Noble Savage?

An interesting question:

How violent, vicious, and morally detestable has mankind been during the (early) course of history?

As to what human beings will or will not do in that regard, I suspect two decisive criteria will always be part of the reckoning: (i) the ratio of costs to benefits, and (ii) technical (non-)feasibility, especially the (non-)existence of a material basis for a particular type of action.

Moral assessments will tend to develop in the wake of acts decided upon according to (i) and (ii).

For this reason, my guess is that there must have been violence and viciousness within and among even the small pre-neolithic tribes of hunters-and-gatherers, while slavery was not yet profitable for lack of a surplus requisite to organise exploitation (conquest, captivity-management, per capita productivity etc). This changed when sedentary agriculture increased productivity in such measure that a division of labour and with it specialists in the exercise of violence and power could be economically sustained.

I have always believed that subject to (i) and (ii) above, the natural trend for mankind is to evolve Structures of Maximal Power (SMP), as I term them, i.e. efficient forms of coercion, which is why the state has come about and will not go away. Inevitable gravitation toward SMP is also the reason why violence and viciousness have a prehistory dating back long before the emergence of the state:

Recent studies have confirmed that mortality from violence is very common in small-scale societies today and in the past. Almost one-third of such people die in raids and fights, and the death rate is twice as high among men as among women. This is a far higher death rate than experienced even in countries worst hit by World War II. Thomas Hobbes's "war of each against all" looks more accurate for humanity in a state of nature than Jean-Jacques Rousseau's "noble savage," though anthropologists today prefer to see a continuum between these extremes.

Read the entire brief post.

Iceland

Image credit.

I hope, in the near future, I will be able to look more closely at recent and ongoing events in Iceland. For starters, listen to this fellow:

 

The source.

Putting Parameters on Our Utopias

In recent posts and comments, I have endeavoured to advise against the inclination of many fellow-libertarians to effectively stop the process of building a positive theory of the state as a result of adopting a largely normative theory that systematically selects aspects of the state considered undesirable at the expense of a(n unbiased) comprehensive picture of the state-society-nexus.

These recent comments can be read as a homage to James M. Buchanan, a classical liberal, to whose sober and incisive mind the state has been equally important and worthy of in-depth study (i) as a condition of liberty and (ii) as her antagonist.

My initial encounter with Buchanan was effected by reading his What Should Economists Do? - a paper that made him stand out vis-à-vis most of the economists I had hitherto studied. Exchange, not choice, he argues, not maximization, not allocation, is the most fundamental subject-matter of economics.

I still have the book with my tremulous underlining and lots of scrawly comments, some by pencil, some by ball-pen. Here is a passage I somehow felt urged to underscore with particular ardency, apparently first using pencil and then ball-pen:

Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships.

Watch here Buchanan interview Hayek.

See also my Public Choice and Thinking Government Failure - James Buchanan, Father of Public Choice Turns 90.

Political Scarcity

The second lesson of economics(-overgeneralising libertarians) is to ignore the second lesson of politics: there is no end to political scarcity (see below). By the way, I do not know libertarianism.org and have not checked its website yet. I just like the Sowell quote, which is excellent in its own right, and a great opportunity to bend it in the direction of my own agenda. 

Below I offer two slightly overlapping comments that I left at askblog.

The briefest possible abstract: libertarians tend to make themselves politically scarce as they fail to appreciate the phenomenon of "political scarcity".

Now, what in the world does that term mean?

The first is inspired by The Task of Persuasion:

I have the highest regard for Bob Higgs. However, this does not prevent me from disagreeing with him on a range of fundamental issues. Let me offer this hypothesis: His advice “to make moral arguments” is really an appeal to dogma, the especially unsatisfactory Rothbardian variant of “natural rights”. Unfortunately, modern libertarianism ignores the classical liberals, most notably David Hume, who (quoting me from a comment made at Cafe Hayek)

” … has paved the way toward a differentiated incentive-structure-analysis of government, by discovering that “rights are not deriv’d from nature but from artifice.”

I should add: once you challenge the dogma that “rights … are deriv’d from nature” you unblock the path that leads to an analysis of what “deriv’d by artifice” means. That’s the moment when you start to look at the world as it is, and you discover politics and the state, however much you may dislike them, are decisive parts of the process that churns out rights, good and bad.

Yes, Mr. Boudreaux, modern libertarians are well advised go back to David Hume, so as not to go astray by concentrating exclusively on the defects of government / the state, which is the result of the moral dogma of ‘natural rights’.”

What strength is libertarianism expected to gain if it refrains from politics and refuses to engage in the struggle to form the nature of the state? Out of dogmatic moral vanity; attracting those content to mope rather than to act, protect and further freedom in a naturally messy world.

There may be good reasons to disdain politics, the state and democracy, but you should have a sound and well-developed theory of the state, politics and democracy before you go advertising this contempt as your sole default position. Libertarians do not have such theories – how would they if the said phenomena are being prejudged self-evidently to be uniformly evil.

It seems to me that my fellow-libertarians have a strong tendency to avoid the hardest part of liberty. Making it happen in a world that will never be free of politics and state structures.

http://cafehayek.com/2013/01/quotation-of-the-day-510.html

The second comment is inspired by The Three Axes of Drug Prohibition:

“… I find [x] so compelling that I have difficulty seeing any merit in looking at the issue from the point of view of [y] …”

Not that I necessarily disagree with your statement; however, for my present purposes, I find it striking for other reasons than an urge to concur or object.

As a libertarian, I am unhappy with what seems to me a tendency amongst my political friends to ignore those parts of (ultimately political) reality that are so messy and probably impossible to tidy up (within a reasonably foreseeable future, or ever) that the option of facing this fundamental impasse is (half-consciously) deleted from the range of possibilities, as it threatens to blur the clear cut contours, the neat standard of liberty.

As a consequence, I have recently focused my attention on the question why markets are incapable of supplanting certain forms of interaction characteristic of the political realm. One of the most basic reasons why, is contained in the type of proposition quoted above.

Human beings create constantly what Riker (“Liberalism vs. Populism”) calls “moral or political scarcity”: a need to take decisions for which (especially general, multitudinous) support is scarce compared to attaining the objective without encountering appreciable friction.

Your quoted conclusion represents a cognitive pattern that fosters a state of mind prepared to deal with “political scarcity” by coercion. (I hasten to add that I do not mean to imply that you are championing coercion.) The coercion-triggering cognitive pattern may be generated cynically and viciously, unwisely and unnecessarily; and it may be owing to reasons and motives that can be rectified or improved; however, irrespective of the quality of our character, morals or reasoning, there are also many occasions where we seem to have advanced to a vantage point of personally persuasive insight so clear cut and and immune to valid refutation that coercion appears an appropriate means of dealing with “political scarcity”.

At any rate, my concern is a clearer perception of the reasons why markets cannot be expected to take care of everything, and that we are compelled to deal with much of the residual by organising or forcing consent that does not exist naturally.

For some, the lesson may be: if something cannot be handled by the market, this does not automatically represent market failure. For others, the lesson may be: Do not expect the market to handle more than it possibly can, in all its beauty and power.

My worry, of course, is not that markets may be less powerful than I thought; I am far more concerned that libertarians are insufficiently prepared to expose their convictions to the inevitably corrosive effects of real politics and statesmanship.

As politics cannot be abolished, the best we can do is to cultivate, to humanely refine it; and considering the heritage of classical liberalism, libertarians should have a comparative advantage at it.

See also Liberty - Always a Political Attempt, States and Societies Transform and Constitute One Another, Why the State Persists, More Thoughts on the State, and Prelude Concerning the State.