no third solution

Blogging about liberty, anarchy, economics and politics

Small-scale Production and Risk Management

August 4th, 2008

Earlier, I wrote about how  the term economies of scale is really a euphemism for special privileges and immunities.  I’d like to continue that train of thought, in a tangential way, here.

So, why have we become familiar with multinationals that dwarf the economies of many lesser-developed nations?  Governmens have a lot to do with it.  Most of the corporations with which we have become familiar are propped up in one or more ways by a government, either oppressing us, or poor brown people in another country whose plight most people can easily ignore.  It’s because of a million distortions, and exploitations, that many people wrongly believe that economies of scale can only be had by the biggest of the big.  They fail to account for that which is not seen.

Many Capitalists like to overemphasize the gains from trade, while dismissing the positive harm caused by their state-enforced cartels.

Realistically, it should be possible for people to collaborate effectively and acheive enough economies of scale to profit from the division of labor. Maybe a small group isn’t “efficient” in the traditional sense. I’ll grant that this is probably true. But what’s also true, is that a small group of people producing primarily for their own consumption in general is also never responsible for the evils attributed to what most people understand to be Capitalism.

Would a small group of people be able to churn out automobiles by the thousands? Maybe not, but maybe they don’t need a thousand gas-guzzling automobiles.  The only reason we pay tens of thousands of dollars a year for them now, is so we can use them to drive to jobs we probably don’t really enjoy, in order to make enough money to pay our taxes and have a little bit left over to buy shit that we don’t need. Almost all of our productivity is wasted by the State.

Someone at work sent an e-mail, she’s part of a local produce co-operative or something. She was offering fresh, organic produce on a “take as much as you want, and pay as much as you feel is appropriate” basis.  It doesn’t take a thousand of these people in a vertically integrated supply chain with state-of-the-art logistics management to accommodate their consumption.  Is she breaking the law?  I don’t know.  Sometimes it’s illegal to barter, and of course it’s always illegal not to report income.

We can take another example from the black-market, being a close approximation of agorism insofar as it exists side-by-side with, but outside the established rule of law. The biggest difference between a black marketeer and an agorist is ideological in nature.  But that’s another discussion entirely.

Probably 100 million people smoked some amount of pot last year. Less than a million of them got busted, and most of them only for mere possession.  Your chances of getting caught are less than 1%, and this takes into account the substantial risk involved with buying dope from people you don’t really know, and can’t presume to trust.  It should be possible for an individual, a small group of individuals, to put together a relatively sophisticated grow-operation to supply themselves with “illegal” drugs, provided the understand the nature of their precarious situation. It’s about managing risk.That’s where most people go wrong.

Risk on the black market is a transactional function. We can model risk simply as a function of the frequency and severity of transactions.  If you’re buying small amounts of illegal drugs very frequently, you might very well be taking on as much risk (or more) as someone else who buys in bulk, but less frequently.  The most effective way to mitigate risk is to stop importing other people’s exposures.

Most people who get in trouble because of drug laws or other prohibitions are caught because they’ve left their safety zone; and they’re operating on a scale the risks of which they’re not prepared to internalize.  They are either buying from someone who can’t manage risk, or they are incapable of managing their own, and they’re selling to anyone with a dime.

What I’m not saying is that in order to circumvent the system, you have to start peddling crystal meth. I’m also not saying that you need to become self-reliant. There’s no need to go stone-age.  What I am saying is that markets rule, and a community of people who know and trust one another may be able to provide a great many of life’s necessities.  What you need is a reliable network of known and trustworthy individuals, with whom to exchange value for value.

It doesn’t matter if you grow your own dope, or bake your own bread, or raise your own vegetables, for your own consumption, it is almost impossible to get caught as long as you don’t lose sight of the risks involved and how best to manage them. If you start selling it to acquaintances you hardly know, or strangers altogether, in order to profit or if you start buying it from those people when your irrigation system springs a leak and your crop fails, you’re significantly increasing your transactional risk exposure.

The fact that markets rule is handily proven by the existence of black markets which are able to circumvent (and in some cases, exploit) the government. The problem is risk. A drug-smuggler and a raw-milk purveyor face very similar risks.

no third solution

Blogging about liberty, anarchy, economics and politics