no third solution

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Scrip Currency is a Recipe for Disaster

July 9th, 2008

John Robb of Global Guerrillas wants to see more people and communities using scrip.

Although I’m generally supportive of people who don’t want to use FRNs for the bulk of their transactions, I’m sincerely skeptical about the viability of local scrip currencies. Some of the finder details, according to Robb, are as follows:

1. Allow community members to use it to pay all or part of their tax liabilities to local governments. This instantly establishes a market for the currency. Also, pay local government employees a portion of their wages in scrip.
2. Deflate the value of the scrip (optimally, one percent per month) to promote immediate use rather than hoarding.
3. To the extent possible, connect scrip to local production rather than retail. Locally produced food (farmer’s markets), energy (via local microgrids), products (personal fabs), and labor/services. Further, work with local banks to establish checking accounts for scrip and to enable conversions hard currencies (at a slight discount).

Presumably, the municipality would have to spend scrip locally, and I’m sure there would be a provision that would force merchants to accept it at some rate other than that which they would freely accept. The second point is an unabashed attack on people’s ability to save for the future. Finally, we are supposed to regulate whereand how transactions thus denominated can be facilitated.

Let’s rephrase the building blocks of scrip:

1. Force people to use scrip.
2. Destroy people’s ability to save for the future.
3. Tell businesses (banks, retailers, producers) how the scrip is to be used.

Sounds like a fine recipe for economic disaster, if you ask me. Robb suggests that local scrip should depreciate people’s savings on the order of 12% annually. This is about on par with what the Federal Reserve is doing to the Greenback; excuse me for not understanding how depreciating scrip is a step in the right direction.

Now, Silvio Gesell came to mind immediately, so I’m not at all surprised to see that Robb references our pal Mr. Gesell here, and here.Gesell argues that:

Money, which is to replace barter, should secure, accelerate and cheapen the exchange of goods.

If security, acceleration and cheapening of the exchange of goods can be achieved by means of a form of money which cannot be harmed by moth and rust and which besides, can be conveniently hoarded, then let us, by all means, have such money. But if this form of money diminishes the security, rapidity and cheapness of the exchange of goods, we say: Away with it!.

I’ll add Gesell, whose ideas I’m familiar with (although I haven’t read his works) to my ever-growing list of things to read, although at the onset I should qualify that I’m not particularly optimistic about what I might find. Mises’ regression theorem tells us in a nutshell that money originates from free exchange and is settled upon voluntarily among the market participants. A scheme like Gesell’s can only be implemented by violent suppression of free exchange.

Now, Gesell probably wasn’t a metallurgist, but he should’ve known that gold doesn’t corrode, and can’t be eaten by moths. Especially in a modern context, the cost of storage and security is low, and transfers can be made securely, instantly, and electronically. Furthermore, throughout the ages, in addition to merely accelerating and cheapening the exchange of goods (i.e., eliminating the double-coincidence of wants), one of the prime functions of money has been to store value. Gesell, and our friend here seek to eliminate money’s value-storing capabilities by foisting upon us some sort of quasi-money that for a number of reasons, few people would voluntarily accept.

Now, it seems that Robb wants to foster community, and believe me, I’m all in favor of fostering community, neighborliness, mutual aid, etc. I just don’t think that you can effectively accomplish “community” by forcing people to be dependent upon the collective and removing their individual ability to sustain themselves, their friends, and their families. If you can’t save for the future, you are forced by nature to depend on others—this isn’t community, its socialism. There is a difference.

Community is always voluntary.Inherent in Gesell’s plan (and Robb’s depreciating scrip) is the notion that consumption now is somehow superior to consumption at any subsequent point in time. Savings, sometimes referred to in the pejorative as “hoarding” (e.g., by Keynesians especially) is always directed towards anticipated future consumption, is to be admonished, while immediate consumption is to be lauded.  How anyone can reach the conclusion that a certain and precise ratio of savings to consumption is optimal at all times, and in all places, and for all individuals, is beyond me.

Any effort to regulate the natural rate of time preference is bound to fail; and any measure which relies on forcing people to do something they wouldn’t otherwise do, is patently immoral.

Comments on Comments #20

July 9th, 2008

Jeff Molby left a comment on {P = 0:n } The Game is Rigged:

You neglected to factor in the non-pecuniary benefit of gambling. Many people are simply entertained by the thrill. Those people, ignorant of their zero probability, still receive the entertainment value that they expected.

The “thrill” of gambling is predicated upon a non-zero chance at actually winning. Even the most degenerate of gamblers ultimately wants to win money. If you told someone, in advance, that they could not possibly win the game, even this degenerate would be hesitant to recognize any “thrill” in that sort of wager.

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Tony, whose post inspired {P = 0:n } The Game is Rigged, appreciated my insights. He says lots of people are simply outraged because the State is involved. Pretty much every libertarian agrees; OK, that’s boring.

Tony wanted to spark a discussion of why it’s outrageous, which he did. He’s also provided a follow-up post. Glad to have the discussion, Tony!

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Mike Gogulski left a comment on {P = 0:n } The Game is Rigged:

Mmmmhmmm. Even so, I still maintain that lotteries are a tax on people who are bad at math.

LOL! Lotteries certainly take advantage of people who are bad at math, but they’re not taxes, since nobody has to play them, or else. This is made clear by lotteries which aren’t run by the State, like 50-50 charity raffles and the like. The basic idea behind the 50/50 raffle is that by offering to split the donations by lottery drawing, a charitable organization will net greater proceeds than had it simply asked for charitable donations. Let me qualify: I have no idea whether this argument is mathematically sound, but people must presume this to be the case, otherwise they would just ask for donations.

An individual may very well enter this sort of lottery because he’s bad at math, but even people who know the mathematics of expected values and probabilities may be inclined to contribute money to charitable causes when there exists some probability (even a mathematically poor one) that they might also benefit. I’d wager (again, no pun intended) that practically nobody who buys lottery tickets does so because the proceeds fund the State schools; they buy lotto tickets because they’re mathematically dumb, and they think the might get rich. To the contrary, I’d bet that in the case of 50/50 charity raffles, most people are primarily giving to the cause, where the opportunity of winning creates a small, additional incentive.

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I’ve never been fond of the Pigou tax, as advocated by some libertarians as an appopriate tax, but aside from the whole Taxation is Theft argument, I’ve never quite been able to explain why. Sure, you can look to Coase and say, well, if the market can’t provide for these things, then we should surmise that property rights aren’t well-defined, or that the law is a ass. I’m sure both conditions hold in many instances.Referencing Coase’s seminal paper, “The Problem of Social Cost”, and also Hayek’s analysis of the Knowledge Problem, Ed Lopez at the Division of Labour blog gives his nutshell rejection of Pigou taxes

The knowledge of which things are good or bad, in which circumstances of time and place, and to what dollar amount, are beyond the reach of anyone including policymakers; but even absent the knowledge problem, the incentive problem ensures that the enacted policies would be diverted by compromise from what little we do happen to know of the public interest.

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Responding to people (e.g., Statists on the Mises.org boards) who say things like “government is a necessary evil,” and “government has done some good things for us,” John at Blagnet.net comments:

I have an idea: Let’s try one country or one state without a monopolistic government, and one with, and I can live in one and you in t’other, and we’ll just agree to trade but not bother each other outside of that.

Oh, what? Your moral code doesn’t work that way? You can force me to submit to your State and your morality, but I can’t do the same to you—I can’t even refrain from adhering to yours and leave you alone? Yeah, excuse me for not acting surprised at the fact that such an amoral and antisocial code of interpersonal relations has created most of the death, misery, and poverty the human race has ever known.

Right on. This is not the exception, this is the rule: the greatest threat to man throughout the ages has always been government.

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It’s great to theorize, but a long time ago, all the “unowned” wilderness has been appropriated by governments who fraudulently claim to own them.

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In The Voting Scam, Revisited, FSK notes a common objection to tax resistance, a lot of people say things like:

If I have to pay taxes, then so should everyone else.

They clearly don’t want to pay taxes which is evidenced by the condescension. Some people love to pay taxes, or at least they rationalize it well enough.  The rest of the people, well, they don’t want to pay, but don’t really understand why.  But most people are simply off-the-mark; they are all missing the point: taxation is theft.

Why do they presume to have to pay taxes, too? If they are happy paying them, then they should be satisfied in that. If not, then they shouldn’t try to extend the reach of misery unto others. Almost everyone who complains about taxes is complaining about their own burden, and not generally about some inequity in the system. Unless you’re above the 50th percentile, you have no right to complain about the inequity in the system, unless you’re working as an advocate for those who do.

If you do some research and look through court transcripts (I think I remember reading about Irwin Schiff) you’ll see an interesting pattern: the attorneys for the IRS routinely tell the jury that the defendant has cheated them (as individual taxpayers), in effect poisoning the well with this very same argument.  They also repeatedly deny attempts to leverage certain defenses on the grounds that such defenses are frivolous.  Some of them are, (i.e., it’s probably ridiculous to plead the 5th in a civil case, or is it?  food for though…)

Of course, the determination of frivolousity is made by the accusers, who are trying to collect the tax in the first place.

But there’s no conflict of interest.  Greater good.  And stuff.

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In Reader Mail # 58, referencing my post, No Quarter: An Argument Against War Taxes, FSK points out a number of omissions on my part (e.g., the 16th Amendment was never ratified, taxation is a form of involuntary servitued, 5th amendment right not to be compelled to incriminate oneself, etc.). All of these are lumped under the umbrella of “frivolous” defenses, according to the IRS. I didn’t want to re-invent the wheel. I saw nothing on the IRS site pertaining to the Third Amendment.

He also makes some comments about jury trials:

Trial by jury, as currently implemented, provides no protection to individual rights. Suppose you’re lucky and 1-2 competent people make it onto the jury. In that case, if the jury is hung 10-2 or 11-1, you’ll just be the victim in a brand new trial! Above, I gave an example where a juror who was attempting nullification was kicked off a jury, after the jury had begun deliberating!

It’s interesting that I never really considered the problem of a hung-jury. We say we have a justice system where you’re innocent until proven guilty, but if the jury is hung, the State ultimately gets as many mulligans as it wants. If you have to have a unanimous verdict of “not guilty” in order to be determined not guilty, then you weren’t really “innocent until proven guilty” in the first place. The State failed to convince 12 people (a statistically insignificant minority, in any event) that you were guilty beyond a reasonable doubt. You also failed to convince them of your innocence, but arguably that burden of proof is not yours to bear.

Now, because you didn’t prove something that (ostensibly) you weren’t required to prove, the State gets another at-bat.

How’s that for ridiculous?

Citing Spooner, again, FSK notes:

[Spooner] also made an interesting point that bankruptcy law is irrelevant. When you borrow money, you should always pledge tangible property as collateral. In this manner, there is always a 1st mortgage, 2nd mortgage, 3rd mortgage, etc. In the event of insolvency, the 1st mortgage is paid in full, then the 2nd, etc. If there’s only enough money after the property sale to partially pay off the 2nd mortgage, then the 2nd mortgage is partially paid off and the 3rd mortgage is worthless.

I’ll discuss this in greater detail in a forthcoming post called “What is a Loan?”

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By way of Two–Four, I got involved with a heated discussion at Samizdata on the importance of the 2008 election.  When the issue of abstention was brought up, Billy Beck was accused of running and hiding in a dark room somewhere.  He responded in full force:

I’m living in what’s left of the sunshine, sir. Every single day. And I do not submit anything about it to your opinion, a commie’s opinion, or anyone else’s. Sneer all you want, and go submit my rights to a vote all you want, but bear this in mind: I would never do that to you.

I would never do that to you.  That’s the key takeaway, folks.  I would never do that to you.  Yet you insist on doing it, to me.

John W. (TSgt, USAF Ret.), was the least of my concerns, he said, in ALL CAPS:

IF YOU DON NOT VOTE, YOU HAVE NO RIGHT TO GRIPE ABOUT THE KIND OF GOVERNMENT YOU GET!

Really?  Because it seems to me, that the primary cause for “the government I get” is other people.  Concurring with “M” whos calls John’s statement “[a] completely banal platitude”, I continued:

…Those of us who abstain on principle have every right to complain. Only when you vote, and you participate in the mockery of justice by which men profess to auction off the rights of others in a popularity contest, do you forfeit your right to complain about the government you get. You, sir voter, are the one who deserves whatever government you receive.

The rest of us, on the other hand, well, it doesn’t much matter whether we vote or not, because nobody is about to give us our damn freedom, no matter how few (or many) of us there really are.

Another commenter, trevalyan, follows me with:

They don’t seem to want to let us go, however. Which is odd, because I’m quite sure people would be willing to buy a large stake of government land, in exchange for the government’s promise to leave the inhabitants in peace. No one really wonders why it won’t happen.

Count me among that large number of people. Of course, (setting aside the moral question of why one should be obliged to purchase his own freedom) you can’t buy Allodial title from the State, because permitting secession would destroy the state’s unique monopoly and erode its power.

If you peruse the commentary at Samizdata, you’ll find that there is another State-apologist who claims to be of “anarchist/libertarian/individualist” ideology.  I discount that assertion as mere patronization, and I’ll soon summarize our discussion (if you could call it that; honestly, you’d think a little mutual respect would be in order, but apparently not).

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So that’s that, for now.  A couple topics that I need to follow-up on: What is a Loan, and a re-cap of the Samizdata “debate”.  I’ll try to get some posts (pre) published before I head out of town for the weekend; whether they’ll be on these topics has yet to be determined.

I just checked my Dashboard, and I have something like 30 posts in the draft stage.  Probably 20 of those will ultimately be deleted.

If you like my posts, submit them to other sites; I’d love to get a piece published on strike-the-root or something like that.  I appreciate all the publicity (which is to say, very little) I can get.  I don’t charge for my posts, and I won’t sue you for posting, referring, or aggregating them elsewhere; but I’d prefer it if you link back to the original.

The Effects of Minimum Wage Hikes

July 1st, 2008

Yesterday night I was grocery shopping at the local Meijer. When I went to check out, it dawned on me that they had replaced about a dozen more cashiers with self-scan registers. I will spare you another tirade about the so-far-imperfect technology: it’s nice to be able to check out without waiting in line for the two cashiers on duty at 10pm, but it’s a pain in the ass when the register gives you an error after every item. Even when there is nobody else in line, and I only have one or two items, I’m still not convinced that these machines are saving me time.

But I’m fairly convinced that these machines are saving Meijer stockholders a boat-load of wage expenses. Installing a dozen more U-Scan registers was probably a substantial initial capital outlay, but it’s also eliminating a number of low-wage employment opportunities. Because the minimum wage is in the midst of a 40% hike, which came as no surprise to anyone, a number of people who were making $10 an hour (plus incidental benefits, taxes, etc.) scanning groceries are now unemployed (or about to be unemployed) and watching a machine scan groceries that they can no longer afford to buy without welfare assistance. When the wages due to labor are held artificially high, a few lucky employees are able to reap the benefits, but the rest of them are out of luck as labor-substitutes like capital equipment are made artificially more attractive from a profit-and-loss POV.

no third solution

Blogging about liberty, anarchy, economics and politics