no third solution

Blogging about liberty, anarchy, economics and politics

Comments on Comments #8

March 5th, 2008

I’m back.

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At the Liberty Papers, Brad Warbiany asks about the likelihood of an-cap models disintegrating into mini-feudalism, and whether there is any reason to believe that private security firms wouldn’t behave towards one another the way that drug cartels and mafiosos behave towards one another, at present.

The obvious response, as I see it, is “so fucking what if it does!” Isn’t that what we’ve already got, right now? The State is essentially the same as a mafia, writ large.

The longer answer is, probably not:

These criminal organizations trade largely in the black market, which is itself a creation of legislative fiat. The dark side of this, is that government has reduced or eliminated the incentive for peaceful adjudication of disputes. (More on incentives, below) If A defaults on a $1000 coke debt to B, B has no legal recourse against A. He might steal his valuables or his car, or he might try to “make an example” of A, and injure or kill him, to create a disincentive for others to default in a similar manner.

The “turf war” question is a little more cloudy, but I still think it’s rooted in government. When an organization B sets up in A’sestablished turf, it threatens A’s already precarious profitability, which is determined essentially by A’s ability to monopolize a particular geographic area, and circumvent and/or infiltrate the law-enforcement’s attempts to shut it down. B threatens A’s profitability by undercutting prices, by becoming potential informants, by disrupting the normal flow of contraband, etc.

There are tremendous risks involved in illicit trading, and a network must be created through which an organization hopes to thwart or circumvent some of these risks. Staking out a “home turf” is one means of minimizing the risk involved: if the organization has sufficient knowledge, control, and oversight of a particular locale, they are more likely to notice any anomalies, like mysterious cars on stakeouts, newcomers who threaten the stability of their model, and so on. The racket of “protection from rival gangs” is not so much about protection, but about control and intimidation of the subjects, who learn not to interfere with the criminal enterprise’s operations.

Right now, these gangs need an effective monopoly in order to operate profitably. Moreover, the state creates strong disincentives for honest men to enter the drug trade, because they can make as much (or more) in some other line of work. So the system is set up in such a manner as to funnel the moderately intelligent, but not-so-savory individuals into a market which can only be maintained through an extra-legal monopoly, which can only be protected (like any monopoly) with violence.

CVS and Rite-Aid pharmacies are often on adjacent corners, selling practically the same items. I’ve never seen a gun battle between them. Coca-cola and Pepsi don’t have showdowns, and neither do we see Ronald McDonald and the Burger King facing off in a duel. Get rid of the monopolistic model, and you’ll likely eliminate the violence.

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In the latest edition of the Carnival, Logan Flatt questions my characterization of his post:

However, I am puzzled. Because my article talks about the way things are (a.k.a. reality) and doesn’t strongly advocate one extreme or the other my article is “Spam”? That doesn’t seem to be a balanced stance given that reality reflects a blend of both market and government. One can readily understand that my article implies that government is causing the market more harm than good, and therefore, less government and more market is better. I prefer subtlety over a sledgehammer. Practical? Yes. Spam? No.

Let me qualify my characterization: When I say “spam,” I don’t mean that your article is crap, just that it doesn’t meet the established criteria which are readily available to anyone who consciously chooses to submit to the carnival. What I mean is that the article appears to have been submitted without consideration for the subject matter or rules of the carnival in question.

I agree that your article certainly reflects reality, and I praise your analysis as spot-on. But your entry clearly is in opposition to the spirit of this carnival’s rules: your blogpost had nothing to do with anarchy.

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Shaun says, of his blog:

The main stance of the Rebirth of Freedom Foundation is certainly a market-anarchy approach. =)

My apologies, Shaun. I’ve never visited the RoF before, but I’ll add it to my list of blogs to check out in the future.

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I asked why Nextel hasn’t gone out of business yet, and I have at least one sympathetic reader. Andrea says,

OMG I hate Sprint/Nextel with a passion. Just ask Brad how much I bitch about that company. I used to have a blackberry but I got rid of it because it was the size of a brick and I constantly got made fun of. Brad’s brother used to hold a chair ottoman up to his head and say “hello?”

Hilarious. I am also using a 4-year old phone, because Nextel is the only company which doesn’t offer (nominally) free phones to their contractees, also, the rest of my family uses it, so it’s convenient. But the conveniences is more and more becoming a pain in the ass.

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In #7, Angelica comments:

And I love my big gubmint healthcare (I live in Taiwan) and social safety nets are OK by me..

Angie, the problem with big gubmint healthcare is primarily that it’s provided at the point of a fucking gun. Oh, and it’s metaphysically impossible!

Angelica, who was irate over a recent ban on street vendors selling bacon-wrapped hot-dogs in California, has not shed her statist robes! She dodged most of my questions, but she did respond with a tale of really big restaurant rats. Even still, she is halfway there:

I suppose in theory there could be some third-party inspection firm who can certify the sanitary condition of restaurants. But in practice, this have not happened.

But still so far away!

I have a simple rule of thumb for when government intervention is necessary — is it a pressing need that is not met by the market? In this case, the name of the market failure is asymmetrical information. With street food, those who indulge are under no illusion as to the risks they are taking and thus there is less asymmetrical information and less of a case for intervention.

Oh, and David. If you are ever in Taipei, swing by and I’ll see that you get a beer on the house.

Thanks for the invite, Angelica — Asia is on my long list of places to visit sometime in my life, but the travel expense and the requisite time away from work is, at this point in my life, too much. Chile and Peru are ahead of Asia on the list, because there, I’d be able to go snowboarding in July, and anything that breaks up the 8- or 9-month hiatus I take every year merits serious consideration.

The assymetrical knowledge problem exists wherever and whenever one agent knows more about the circumstances than the other agent could realistically obtain. To be frank, there is no more informational assymetry in dealing with a Restarauteur than a street vendor. One’s assessment of the risk involved in those respective circumstances may vary, but that doesn’t mean that the information is any less asymmetrical in one or the other of them.

I like to go back to the source of the “pressing need, not met by the market.” Some people used to say that lighthouses were just such a pressing need. Some people argue that fire protection is a pressing need. Those people were wrong. And there is no “pressing need” to eat food prepared at a restaurant, and I might also add that the presence of brick and mortar should not, to a reasonable person, preclude the risks associated with eating food one has not procured and/or prepared oneself.

As far as inspections are concerned: local newspapers and television news crews routinely “investigate” local restaurants and expose the filthiest among them. There are many examples of private certifications, e.g., Good Housekeeping’s “Seal of Approval,” Underwriter’s Laboratories, J.D. Power and Associates customer satisfaction ratings, Consumer Reports, A.M. Best ratings, etc. Hell, a private company certifies (annually) the structural integrity of the Ambassador Bridge, which is itself a privately owned enterprise and the largest land border crossing in terms of commerce, between the U.S. and Canada. That, Angie, is a pressing need.

But there is no private firm which rates the quality of food-service estabilshments, as Angelica deftly notes. Why not? In many western countries, there does exist a regulatory authority governing food-service establishments. As long as such authorities exist by mandate, and are publicly funded, it is probably not possible to profitably operate a restaurant rating company, because the largest competitor has nearly unlimited access to capital, and is backed by the force of law which requires restaurants to “subscribe” to its services..

And of course, there’s word-of-mouth. Government regulation in the U.S. didn’t prevent me from getting violently food-sick two years ago. I ate dinner on Saturday, woke up violently ill early Sunday morning, and missed work on Monday and Tuesday. There will always be accidents and oversights. I don’t eat there anymore, and neither do my friends. A few more incidents like that could be serious trouble. Any restaurant which continually sickens its customers will find itself in quick financial distress. Eventually, the incentive to “cut corners” will be destroyed by the disincentive to go bankrupt. Until that time, caveat emptor. Of course, you could always ask to see the kitchen — any restaurant owner worth his salt should be willing to show you his kitchen during business hours. I’d be leery of any who refused. If you’re mildly concerned, listen to the word-of-mouth and recommendations. If you’re scared, cook your own food, have friends over for dinner instead of going out.

The lesson here is that just because the market doesn’t provide a particular service, we shouldn’t take that to mean that the market can’t provide that service. This is the empty rhetoric of the State, which generally crowds out private initiative, and then points to the lack of private initiative as justification for more taxation, regulation, and legislation.

Protesting Gold

January 21st, 2008

Gold is a real good being (nearly) universally desired as a thing of beauty in the arts and in jewelery or other ornamentations, as a conductor of electrical currents, an industrial metal with various uses, and so on. It is not consumed, destroyed, or corroded by the elements. Gold is an economic good, plain and simple. And it has historically been accepted as a medium of exchange and a store of value, which qualities make it is one of the most non-specific goods, since as a medium of exchange, it can be used at some stage in the production of everything else.

“But,” you protest, “Gold is hard to come by! It must be mined from deep within the earth, and at no small expense.”

As the old adage goes, sometimes you have to spend money in order to make money.

I maintain that the production of gold is the production of wealth just as the production of an automobile or a keg of beer or an airplane flight or a hot lunch or a double-cappuccino is the production of wealth, in spite of the fact that manufacturers, brewers, airlines, restaurants, and coffee shops fail the market test all the time! One of the entrepreneur’s distinguishing characteristics is the willingness to bear more risk than the average man. As some people will lose money on their respective speculations, likewise, some prospectors will not find a new lode; do not allow yourself to be fooled by the red herring of entrepreneurial error.

We do not cry over the restaurant which just went out of business. We do not say that society has become poorer when it shuts its doors for good. Like other failed business ventures, it created value for the suppliers, the laborers who created the supplies, the employees who worked there, and the patrons who dined there — if only for a short time. It simply didn’t create enough value to satisfy the opportunity costs of those who ventured money on it. When the venture fails, its holdings will be sold at residual value. The discounting of non-homogeneous capital goods, fixtures, equipment and the like, permits someone else to acquire them at a discount, effectively freeing up labor and capital to be put towards a more productive (and hence, wealth-enhancing) use. The only person who has lost money is the entrepreneur who failed in his attempt to satisfy the market. The restaurant was not a “waste of money,” it was an entrepreneurial error.

And so would be a gold mine which yields insufficient quantities of ore.

Because gold is a good, it can be said that, so long as people continue to desire it, the production of gold (i.e., allocating scarce resources towards its location, extraction, and refinement) is therefore the production of wealth.

Catching Up Around the ‘Sphere

January 16th, 2008

I’ve been absent for a few days, so I suppose it’s time to catch up.

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Mitt Romney is celebrating a victory by wide margin here in Michigan. His television ads so far have been pandering to the UAW and automotive base, traditionally safe haven for the Dems. (Sidebar: Does anyone else think that it’s funny that Romney grew up in Michigan, which State is shaped like a mitten? Mitt. Mitten. Get it?) Among other things, he’s been promising “investment” by which he really means “subsidy,” and peddling all sorts of nationalist economic mercantilism.

The son of a former car-company chief, Romney pledged billions in Washington aid to bolster automakers. And his anti-Washington, pro-change message resonated with Republicans in the state whose economic fortunes have declined along with the auto industry.

Pledging “billions.” Where do you think that money is going to come from, Mitt? Well, it can come from taxes, or it can come from the printing press. I thought Republicans were supposed to be for free markets and low taxes. Apparently, not when an election is on the line. Republican he is not. CoyoteBlog is certainly not the only one who ponders these things…

I propose that the amount of bullshit people are willing to believe is proportional to how badly they want it to be true.

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Speaking of the “i” word…

The Washington Post continues to propogate the myth that inflation is not a monetary phenomenon. The pace of inflation has increased some 50% over fiscal year 2006. The market anticipates another rate cut by the FED, so apparently Bernanke remains committed to the FED’s policy of using inflation to combat inflation.

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The USDA is urging a ban on cloneburgers, even while the FDA has determined they are safe to eat. I endorse cloneburgers, previous post here.

Part of the problem, according to the Washington Post, is foreign trade, where other countries are reluctant to purchase genetically altered florae and faunae from the U.S. I say fuck them if they don’t want it. More cloneburgers for the rest of us. Or clone-veggieburgers. We shouldn’t be prohibited from purchasing and consuming consistently tasty clones simply because some eurotrash is skeptical. The French love their peasant farmers more than the U.S. loves its agribusiness. Tell them to get off their collective derrieres and actually produce something for a change…

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Via FSK’s shared items, I came across this Bryan Angliss, who clearly doesn’t know how to think. He honestly argues that without the government, the national highway system would “end up being controlled by a single monopolistic corporation, and that’s functionally equivalent to the government that already owns the highways.”

There is simply no basis in historical fact or in theory, for assuming that roads would end up being monopolized. American history, is full of examples of private highways around the turn of the 19th century, many of which earned small or modest returns. Bonus points for recognizing that the government is equivalent to the “single monopolistic corporation.”

…However: Several demerits for failing to recognize that monopolies have historically not existed without the sanction and privilege granted to them by governments. Further demerits for ostensibly understanding that “monopolies are bad,” but failing to apply that line of reasoning in a consistent manner. (i.e., if monopolies are bad, and government is functionally equivalent to a monopoly, what does that say about government?) Even more demerits for citing sports venues and mass-transit as examples of “public goods.” These are probably two of the absolute worst examples of a public good, but Angliss suggests that,

[T]he economic benefits of a major sports franchise and mass transit will boost the entire region’s growth, reduce pollution throughout the region, etc, so fairness requires that everyone who will benefit should help pay the costs..

Where to begin… By this logic, a department store or a restaurant or a movie theater is a public good, because it will boost the entire region’s growth.

I don’t even want to waste the time explaining that “public financing” of major sports stadiums (operated by billionaires who own billion-dollar franchise teams) essentially amounts to public subsidization of their wealth and largesse, and allows them to earn a far higher return than they otherwise would. Public sports venues routinely employ minimum-wage workers, commission-based hawkers, and volunteer organizations to perform the lion’s share of the vending and services. “Public” police are conscripted for crowd control, and “public” thoroughfares are congested on game days. Furthermore, Angliss’ argument is essentially Bastiat’s fallacy of the broken window, noticing only what is “seen” and ignoring what is “not seen,” that is, he essentially assumes that if the money is not spent on the sporting venue and its complimentary goods and services, the money will not be spent on anything, anywhere. This is demonstrably not true, and even if it were true, it doesn’t mean the money disappears. It would become “savings,” which is what people are able to do when they’re not taxed to the hilt. And “savings” encourages investment, in spite of Keynes.

I could go through the same sort of step-by-step with public transit, but I’d rather not.

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At The Liberty Papers, Doug Mataconis comments on the Supreme Court’s refusal to grant terminally ill patients the ability to use experimental treatment.

This reminded me of something I’ve thought for quite some time. When the “right to die” issue is brought up, sometimes people make an argument that goes something like this: “We shouldn’t play God with human lives.”

It’s facially hypocritical to argue that “We shouldn’t play God” by permitting people to end their own lives. Preventing someone from exercising the right to die is essentially forcing them to remain alive, which amounts to no less than playing God. There are no two ways about this. If it’s wrong to “play God,” by helping people die, it’s just as wrong to keep them alive.

We “play God” when we perform quadruple bypass surgeries, when infants are born months premature and they are incubated by thousands of dollars of technology, when we grow flowers in a greenhouse during the winter months, and so on. I submit, that there is nothing wrong with “playing God.”

If you want to argue against a person’s right to end his or her own life, you’ll need a stronger case than that.

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The CoyoteBlog complains about an Oregon law which requires an attendant to fill up your gas tank.

I ran into the same emasculating regulation while I was in Oregon snowboarding back in late May, 2007. What a fucking nightmare – since I was running late for an AM flight back to Detroit, I did the same thing: gassed up my rental car. Then, the clerk was there in seconds. He said something to the effect of, “I’m supposed to do that for you.”

Listen brah, in Michigan, we pump our own gas. I don’t have time to wait for your rent-seeking ass.