no third solution

Blogging about liberty, anarchy, economics and politics

Quick Hits

February 11th, 2008

Lawrence White recently wrote a paper (.pdf) debunking many of the myths alleging that a gold-standard economy is simply not feasible. I highly recommend the paper. At Marginal Revolution, (h/t: FSK), a blog I used to read but which became inundated with posts about Ethiopian cuisine and vacation pictures, Tyler Cowen responds:

My main worry with the gold standard is simply the pro-cyclicality of the money supply and for all its talk of money demand the paper doesn’t much address this concern. For instance would you really want a contracting money supply in today’s environment?

Perhaps I’m reading this a bit out of context, but to my knowledge, spanning about seven centuries for which we have reliable data, there has never been a global contraction in the supply of gold. Never. Fiat money of course, is a different story. If Cowen fears that a commodity-based currency would lend itself to contraction, I think he’s mistaken.

At Democracy Sucks, Stephan answers the critics who say, “there aren’t any real world examples of anarchy“:

“But I prefer democracy to anarchy”

It doesn’t matter what you prefer, since whether other people consent to it is not up to you. Nobody can own another person, so clearly its wrong to impose that choice on another person.

The free market is only a suggested (but highly probable) alternative to government, it doesn’t really matter what happens after government collapses, so long as self-ownership rights are respected. You can go and live in a socialist commune, you can go and start your own business, you can go off and live in the mountains. Just don’t impose democracy and governance on other people without their prior consent.

Could you claim adverse possession against the State? Of course, they’d want to contest your claim in a court of their choosing, and you would lose. But this defeat would ultimately demonstrate that the State claims to be the unequivocal owner of all land within the arbitrary confines of their imaginary borders, and that you, the alleged landowner, are really just a feudal tenant. I have been meaning to write a brief post about this for quite some time, although not related to adverse possession. Instead, it seems like one ought to be able to make a lump sum payment against all future property taxes, effectively creating a sovereign freehold. That property would never again be subject to taxation, unless a future owner chose to submit to government. This may not work terribly well in a subdivided area, but if you have rural property with your own well, and run a septic tank which is cleaned and maintained privately, you could probably generate enough power to maintain a pretty decent living on your own.

Vin Suprynowicz opines on the sad state of public education in America. George Washington, he says, was not a genius by any stretch of the imagination, yet he rose to command an army which defeated an empire, and presided over the freest nation ever governed.

There were no “school projects” gluing together pictures clipped out of magazines when Washington was 11. He immediately took up geometry, trigonometry, and surveying. Before he turned 18, Washington had been hired as the official surveyor for Culpepper County.

“For the next three years, Washington earned the equivalent of about $100,000 a year in today’s purchasing power,” Mr. Gatto, the former New York state Teacher of the Year, reports.

How much government-run schooling would a youth of today be told he needs before he could contemplate making $100,000 a year as a surveyor — a job which has not changed except to get substantially easier, what with hand-held computers, GPS scanners and laser range-finders? Sixteen years, at least — 18, more likely.

George Washington attended school for two years.

“We know he was no genius, yet he learned geometry, trigonometry, and surveying when he would have been a fifth or sixth grader in our era,” Gatto reminds us.

Vin argues that the current education system could never produce another George Washington, and he’s right.

You may have noticed a recent trend here, that I’m often saying something like, “I’ve been meaning to blog about such-and-such a topic for quite sometime.” I regret that I can’t post at will… Much of the time, I can only hack together some quick comments and references for the reader—like this post and others like it. I do try to hold myself to at least one or two quality, full-length posts a week. Sometimes it’s more than this, sometimes less.

Sometimes I start drafting what I think will be a relatively short and easy piece to write, and before too long, I’m off on several tangents, and exhausted. These posts usually develop into two or more separate posts. Often, it takes quite a while for a post to finally coalesce into something I deem worth of publishing.

Quick Hits

February 7th, 2008

Some people find my blog looking for “arguments against the flat tax.” My argument against the flat tax starts with the same basic premise that I use to argue against all taxes. Taxation is simply theft in disguise.

The extortion embodied in the nature of taxation is not lessened if the burden is shifted entirely to consumption goods, like a flat tax would have. If anything, the flat tax exposes taxation as a “permission to live” payment, since you literally can’t buy anything without paying an additional sum to the State.

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At Democracy Sucks, Stephan tells us why governments can’t be accepted as lawmakers.

It looks as though some people argue for the existence of a government to adjudicate between the people in their disputes. In reality, this is only part of what the government actually does. Not only does the government become the arbitrator and ultimate judge in matters between private individuals, it becomes the ultimate judge in disputes between itself and private individuals.

That’s one of the things I mentioned yesterday. Ayn Rand wrote an allegory to a famous Chess player many years ago, where she compared socialism to a Chess match, where your opponent’s pawns could become Queens or something like that. A more low-brow comparison would be in the Adam Sandler movie, Big Daddy, where his adopted son plays a game of cards called “I win.” No matter what he’s dealt, he wins, because that’s the name of the game. I don’t think this applies only to socialism, but to all forms of government: no matter how well-intentioned, an impartial arbitration is impossible if your opponent is the one who makes and interprets the rules.

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Just like the proverbial broken clock, every once in a while those clowns in the legislature get one right, but that shouldn’t be taken as an indication of benevolence, intelligence, or anything for that matter. For posterity’s sake, they have to at least present a semblance of justice. I think it is your duty to obey laws which are just, not because they decreed by government, but because they are just. One is likewise obligated to permit the disobedience of unjust laws, not merely because they are the product of illegitimate government, but because they are unjust.

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If it weren’t for inflationary policy, the long-term interest rates would be much lower than they are. Based on certain assumptions about the natural rate of interest, and the long-run annualized growth trends, we might see long-term debt obligations like mortgages at something like 3.5% or probably even lower. This is because we could expect money held in storage to appreciate an average of about 2% annually in the long-run due to mild deflationary pressures and a legitimate currency. So you can gain 2% purchasing power simply by not spending your money today, and waiting for the future. That’s the opportunity cost below which nobody would lend. Of course in addition to the pure rate, there would be premiums for risk and default, but arbitrage in a free market would keep them modest.

If you have a 30-year mortgage for $200k, you could be saving something like $500/month, or you could get a 15-year note for roughly the same monthly payment, saving yourself oodles of interest payments.

I’m going to write more on this particular topic in the future.

Unfree Markets, and Economic Collapse

January 25th, 2008

I’ve long maintained that we don’t have a “free market.” Not in the U.S., not elsewhere. Sure, some markets are comparatively “freer” than others, but the least-bad alternative is not necessarily good. Well, when mainstream financial publications like FT start denouncing the rise of corporatism…

How can it be that Merrill Lynch, Citigroup, Morgan Stanley, Bear Stearns, UBS and other big banks have been turning to foreign governments for financial lifelines with so little public controversy? Perhaps it is because the dangerous broader context of what is happening – the rise of “state capitalism” – is not sufficiently recognised….

Unlike the changes of the past [from feudalism to capitalism], this new trajectory does not represent progress.

Told you so.

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Not a big fan of George Soros, but analysis in the FT I believe is on par.

Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available.

Soros’ thesis is that the current “bust” phase is the culmination of a 60-year trend beginning with Bretton Woods. I am inclined to believe that increasing competition, and the spread of globalization has made economies more resilient and has diminished the recessionary bias, as firms lack market power, prices can’t rise like they had in years past. Of course, this does not mean that I don’t believe economic apocalypse is possible. It is. If there is indeed a 60-year mega-bubble, and intermediary cycles were not self-contained economic incidents, but instead a part of a broader picture, then eventually the bigger bubble has to burst.

no third solution

Blogging about liberty, anarchy, economics and politics