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The more things change...

For Constance McMillen:

Constance McMillen is the young woman whose Mississippi high school shut down their prom rather than let her attend with her female date. A group of parents set up a private prom and then diverted McMillen to a fake prom. This was a dick move, to be sure. The school officials were totally wrong in the first place, but it looks like the villains in the recent episode were the parents and McMillen's classmates. The school board is not responsible for what private parties do outside of their reach. I'm not sure what the HRC hopes to gain by this campaign, although for a show of solidarity with McMillen it'll be valuable.

Basically, McMillen should shake the dust of that town off her feet and move into somewhere civilized.


Video of U.S. Military gunning down civilians

WARNING! This video shows people, including children, being gunned down by the U.S. Military. You might just want to read the summary.

Via Antiwar.com.

This is why I don't clap for soldiers at the airport.


The Hayek Project

I don't normally plug causes, but Jeffrey Friedman's Critical Review Foundation is one of the most important in contemporary academic libertarianism/classical liberalism. Here is an email I received from Jeff announcing the launch of a new project:

Dear Friends of the Critical Review Foundation,

The financial crisis has rubbed my nose in the cluelessness of economists about human ignorance. That, of course, is something that Austrian economists have long screamed about, but it takes immersion in economic literature to really see how bad it is.

And it is nearly as bad in political science, where objective interests and subjective "values" are usually taken to be the moving forces of politics, which leaves out the role of ideas, theories, ideologies, and the errors they may cause.

So I decided to start The Hayek Project, www.hayekproject.org, a website that will identify the Critical Review Foundation with Hayek while furthering our scholarly mission, which is directly in line with Hayek's life work: the promotion of awareness of social complexity, hence human ignorance, hence error in human behavior. It is a rich research agenda, since ignorance and error are so central to the human condition--and since complexity is so central to the modern condition.

The Project website will try to bring together writings that contribute to Hayek's own scholarly project, defined as drawing the attention of social scientists to the role of ideas (including ideas about a complex society that may be erroneous). Should we be so lucky as to be able to afford it, the Project will also promote scholarship along these lines by making research grants. Some day....

Jeff
----------------------
Jeffrey Friedman
Visiting Scholar, Dept. of Government, U. of Texas, Austin
Max Weber Fellow, Inst. for Advancement of the Social Sciences, Boston U.
Editor, Critical Review
www.criticalreview.com

In related news, my friend Dain Fitzgerald has begun a series of interviews with those who have published in Critical Review, probing the implications of these writings. The first interview, with Slavisa Tasic, can be accessed here.

Slavisa's article, "The Illusion of Regulatory Competence," was published in vol. 21, no. 4 ("The Age of Uncertainty"). Slavisa's article is right down the "ignorance and error" alley, and should become one of our most cited ever.


Change of Heart

I've been reading a lot of Paul Krugman's columns lately. At first I was skeptical of his ideas, but his inexorable, patient logic slowly wore away my resistance.

In our nation's pathetic state of financial inequality, some people have private yachts while others don't have the necessities of life. Attempts to fix this have time and again been thwarted by corporations and their plutocrat masters. We need change. We need to vote for people that are going to get things done.

There's no easy way to say this so I'll just come out with it: I'm switching to the Democratic Party. And I whole-heartedly support President Obama in his attempts to bring us vital economic reforms. We need to save the world from corporations before it is too late. This will be my last post at the DR, but you can still read new content from me at my new blog at the the Daily Kos.

Edit: That was a joke, of course. I would still prefer to live in a country that is not going bankrupt.


Four Scenarios to Test Your Business

First article from the AnCap Entrepreneur Network:
 
 

A useful planning exercise is to consider the Strengths, Weaknesses, Opportunities, and Threats related to your business. Your SWOT Analysis depends, of course, on how you estimate the broader business environment will develop.

So let's consider four scenarios for the future of the United States economy. The scenarios make some very different assumptions, yet I believe each incorporates themes drawn from anarcho-capitalist literature. The idea is not to try to guess which scenario is the most likely, but to consider different ways to position our businesses so we can adapt. How will your market be affected? Your financing? Your suppliers or personnel? Will your production methods be able to fulfill your orders? Can your business scale up or down as required to meet customer demand? Will you be able to openly promote your product or service without being a target for extortion?

The market is not monolithic, but highly varied. Your local business environment will be different from any broad description of the "US economy", and during this exercise, you should consider what those differences could be. Given the relative size and reach of the US economy throughout the world, it will likely affect you, even if you are on a different continent.
 

Hyperinflation

In this scenario, the federal government has extracted all the taxes it can from the economy without risking riots and large scale non-compliance. It has borrowed as much as the bond market can bear; buyers don't believe that the government will be able to extract enough future wealth from its tax base to pay off its loans. The only means for finding the dollars necessary to meet government promises is for the Federal Reserve to create money out of nothing. The new dollars are distributed as the government sees fit and the recipients use these to bid up prices for the limited goods and services in the economy.

At first, new or existing suppliers work overtime to increase production to chase the higher prices. But soon, all suppliers hit the physical limit of what they can produce, and are bidding against each other for whatever factors of production they need. Still, the government is issuing huge payouts in an attempt to command the economy to do the impossible. If it were a monolithic entity, "government" might recognize what is happening and perhaps act intelligently and decisively to correct the problem. But despite its rhetoric, government is nothing more than a collection of individuals, each with their own agendas and spheres of influence. The political game gets more ruthless as each power broker tries to grab more before the whole system collapses.

As the realization sets in that the economy is at capacity, and that many projects underway will never reach the stage that generates revenue, various actors scramble for more newly created money to outbid competing buyers in a zero-sum game for control. Prices begin to rise significantly; market participants lose faith in the ability of fiat money to hold any value over time. They trade whatever dollars people will take for hard assets, and cautiously save these, waiting for sanity to return to the market. Production is lowered, unrest increases, and government feels ever more pressure to either outbid in the market, or directly seize by force, the resources necessary to gain control. In a matter of months, the situation spirals out of control, ending with complete loss in faith of the currency.

How can faith be restored in any fiat currency at this stage? Will people who have never touched a gold coin accept it in trade for their goods? Will people be willing to run hospitals, generate power, and deliver train- and truck-loads of goods without knowing how they will get paid? How can they manage their companies productively if even the pricing structure has broken down?

If doctors are dedicated enough to work in their communities without pay and survive from donations of food, how long will they have the supplies and support services to continue? How effective can they be when each day batteries, perishable medicine, office supplies, vehicle parts, or communications could be missing?

As lenders see the prospect loom large of being repaid in worthless currency, how drastic will they be in repossessing equipment or foreclosing on properties? How much political pressure will they bring to bear to have contracts unilaterally rewritten to suit them? How secure can property titles be in such a world?

What happens to local police who don't get paid? Will even honest police understand what is happening? How will they deal with housebreakings, repossessions, the collection of outstanding fines, family violence from mounting stress, lesser police gone rogue or simply run away--when the number of cases that used to occur in a year are now happening weekly? What about the rest of the bureaucracy that supports government? Will each DMV clerk or health inspector try to support themselves by bribes? When murders are going unsolved, what are the chances of getting caught for petty corruption?

In short, this scenario presents a rapid disruption to existing institutions. New organizations can be introduced to fill the gap, but they will be judged quickly and harshly if they are not perceived to be effective. Not only Austrian Economists, but every school of thought that predicts a cataclysm will be claiming vindication and proposing bold new solutions. People will find it difficult to separate the wheat from the chaff, and will settle for solutions that feel familiar, even if flawed. It will not be a time of tolerance and exploration. There is a danger that people will accept any authoritarian that can make the trains run on time.
 

Ron Paul for President

The second scenario considers what unfolds when a libertarian reformer takes the reins of government. Simultaneously aware of the urgency of avoiding hyperinflation, of the folly of introducing solutions by decree, and of the political backlash that awaits anyone closing down entire departments of government immediately, the reformer has little room to maneuver.

Ending foreign interventions would yield the largest boost for the economy--it simultaneously improves both sides of the ledger by saving hundreds of billions of dollars per year and yielding improved trade relations in return. But it would require huge amounts of political capital to disrupt the military-industrial-aid complex that infiltrates every corner of society: not just military contractors, but politicians, media companies, banking, education, energy companies, and telecommunications. It is not enough to win the presidency; the reformer must be accompanied by legislators that dismantle major portions of the State. The obvious source of the reformer's political capital would be popular support, but could this be achieved in time for the 2012 election cycle? Could the current monetary system survive until the presidential elections in 2016? If this minefield proves too difficult to navigate, will Liberty be discredited as a solution?

Domestically, the wisest course for the reformer may be to open all government functions to competition. As private and home schools now compete with federally subsidized government schools, and express delivery services compete with the US Postal Service, the government may grant permission to establish private monetary systems or pharmaceutical testing. If so, the market could begin immediately and openly to serve the demand for these goods and services without waiting for government departments to be dismantled. But, politically and legislatively, government monopolies would have to be dismantled department by department. Can competing businesses afford to wait until they are given permission to start their venture?

The Federal Reserve may take concrete action to restore faith in the dollar. Certainly, holders of US Treasury Bills will bring whatever pressure they can bear to maintain the purchasing power of future Federal Reserve Notes. Interest rates could rise significantly for an extended period, say between 10%-20% for several years as they did in the US during the 1980s. A rescued (and less malleable) dollar would put pressure on the federal government to return significant tax revenue to bond holders--perhaps by cutting spending, perhaps by increasing taxes, perhaps both.

Suppose the reformer manages to bring us back from the brink of monetary disaster, make significant cuts to government spending, and introduce new government enforced checks and balances on the growth of government. What will happen when he leaves office? Will individuals who believe they have been set free by their ruler change their minds when the next ruler tells them otherwise? Will they be satisfied with the freedoms they are allowed, or will they demand others and inspire a government backlash? Will the market have developed its own checks and balances on coercive government? Will the gains in individual wealth and productivity make coercive control of markets impossible? Or will central planning creep again into every transaction, bleeding value from the market and using it to build yet another empire?
 

The Road to Serfdom

While the previous two scenarios were driven by sudden events, these next two are gradual. This one supposes that we endure a long, steady decline of freedom and prosperity.

What if the US experiences economic stagnation for years, as in the Great Depression or Japan's "Lost Decade" of the 1990s? Each year brings more government Keynesian plans; whatever wealth is created in the voluntary economy that could be used for growth is transferred instead to inefficient, politically-connected organizations via "stimulus" plans. Some analysts predict disaster with each new bailout, but they underestimate the initial wealth and resilience of society. As another wound is inflicted, somehow the host limps on, using up every last bit of reserves to find another way to compensate as parasites suck the life from him.

As new ideas emerge, they are censored. As political reformers step forward, they are jailed. Before new businesses can open, they must wait months for licenses, worker approval by government labor boards, and connection to municipal services. Older people see options closing down; the young are never introduced to the ideas that could save them. The "brain drain" and "capital flight" by which individuals once escaped the State have been stopped by border patrols and currency restrictions. Prices become more meaningless each day as they are set by coordinating committees instead of negotiated by individuals.

How can we preserve wealth and knowledge under these circumstances? What tools can we prepare now, when communication is still possible, which could help us escape from this death spiral? How have pockets of resistance communicated and sustained themselves under totalitarian regimes in other places and times? If the best hope for survival is escape, what services will develop to help people realize this hope? What will the escapees be able to offer in return? Where will they escape to?
 

Stumbling Toward Utopia

This scenario is more optimistic. It posits that a free society emerges as if of its own accord, molded into shape by the invisible hand.

Although each human has their own unique flaws and perspective, they seek out those who help them most effectively fulfill their goals. They may hold ideologies that are radically different, but over time a trend dominates showing people avoid those who abuse them and deal with those who cooperate with them. Decision making genuinely is distributed at the individual level in the world, and this natural sovereignty of individuals, over centuries and millennia, reveals that central control by a separate ruling class of humans is an unworkable fiction.

Suppose, for the most part, we are good people trapped in a bad system. That when we realize where our authoritarian institutions have brought us, some of us--not all, but enough of us--decide not to act as cogs in a machine, but as human beings: teachers who refuse to indoctrinate children to submit to authority; judges who set free a youth rather than ruin her future; Guardsmen who do not follow orders to disarm their neighbors.

As we accumulate wealth, each individual becomes further empowered. As more people have access to the knowledge of the world's cultures, past and present--as they adapt the best inventions to serve their own goals--as they communicate ever more widely and precisely--they use this power to entrench individual sovereignty. The world becomes a tangled mesh of billions of actors negotiating how to meet their own ends; so complex that no nano-sized eavesdropping device, no supercomputer, no authoritarian ideology, no weapon of mass destruction can coerce it under control. The cost/benefit ratio for violence grows ridiculously large. It is only the rare criminal that risks losing the opportunity to trade with a globally diverse selection of suppliers to instead attack nothing but well-protected targets.

How could we connect with this urge to become more than boxes on an organizational chart? How can we insulate our customers from the State, so they not only imagine life without it, but look forward to it? How will our suppliers insulate us? Is our business flexible enough to do things on our customers' terms, rather than the way things always have been done? Can we offer people a richer life, full of possibilities denied by the institutions they were trained to take for granted? Are we prepared to operate in a hyper-competitive world where we either meet our customer's unique need or refer her to someone who can?
 

Conclusions

Anarcho-capitalist entrepreneurs, by definition, recognize that their direct impact on the world extends no further than control over their life, liberty, and property, and cooperation with others who freely associate with them. They introduce change into the world by arranging factors of production into new, unproven ventures and offer these to the market to accept or reject. They are not so ambitious to imagine that they can control the weather, or interest rates, or command the people of the world how to think.

For this reason, we need to consider how our ventures will adapt when they meet with the larger forces of nature outside our control. We can construct a few scenarios to anticipate how society might develop, but this exercise is only to help us better plan our ventures. When events unfold, they will be a combination of these scenarios, perhaps similar to one for awhile until some exogenous event suddenly makes another dominant. Perhaps different scenarios develop in different regions, or in different market sectors, before they interact in some larger area. It is impossible for any one human mind to contain the wonderfully complex and subtle ways events will play out in the real world. Your venture should be ready to adapt to the various ways the market could shift.

As an agent of change, the ancap entrepreneur views existing institutions not as fixed structures defining acceptable thoughts and actions, but as human inventions; chosen perhaps unconsciously, but chosen nonetheless, by individuals one at a time. The ancap entrepreneur can search for principles of human culture, and use these to offer better ways for us to interact with each other.


Samuelson on Obama's budget

The mainstream media is picking up on the dangerousness of the debt situation. Robert Samuelson in WaPo:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody's Investors Service -- the bond rating agency -- published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama's health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.

Let's be clear. A "budget crisis" is not some minor accounting exercise. It's a wrenching political, social and economic upheaval. Large deficits and rising debt -- the accumulation of past deficits -- spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.


Birth of a libertarian – but not an anarchist

New study shows that, contrary to my recollection, kids don’t resist all rules. They generally go along with rules related to safety, morality and even social norms. However, kids in a wide range of cultures develop a sense of autonomy (about friends, clothes, etc.) and resist rules that they perceive as infringing on that autonomy.


Who (other than people with book-learnin') saw this coming?

Waxman and Stupak are surprised about the results of their precious bill:

March 27 (Bloomberg) -- Representative Henry Waxman called the chief executive officers of AT&T Inc., Verizon Communications Inc., Caterpillar Inc. and Deere & Co. to provide evidence to support costs the companies plan to book related to the new health-care law.

Waxman of California, chairman of the House Energy and Commerce Committee, and subcommittee Chairman Bart Stupak of Michigan released letters they wrote to the executives, saying their plans to record expenses against earnings as a result of the law contradict other estimates. The lawmakers requested the executives appear at hearing Stupak plans on April 21.

Steve Horwitz pointing out what apparently is not obvious to these clowns:

It never occurs to Waxman, Stupak, et. al. that there might be a set of economic laws out there that not even the mighty power of Congress and King Obama can bend to their wishes. If their law "said" coverage would expand and costs would come down, then only the evil designs of greedy people could be frustrating that result.

It's hard for me to tell if Waxman and Stupak et al. really thought this would work, full of fatal conceit as they are, or if they knew it wouldn't (but would enrich the powers that back them) and are just grandstanding. I'm willing to believe that they didn't really know, but in that case, stop meddling with things you don't understand.


On von Mises and human motivation

Forgive me if I've posted this here before; I can't remember.

Shamelessly ripping off Mark’s comment:

Being able to imagine a world better than the one we live in is not a bug, its a feature. Its how we take the world we are born into and start to adapt it to the one we want.

We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care.

--Ludwig von Mises, Human Action, p. 13

Just make sure you don't fall into a trap of despair. Von Mises' next paragraph shows the problem with this:


But to make a man act, uneasiness and the image of a more satisfactory state alone are not sufficient. A third condition is required: the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness. In the absence of this condition no action is feasible. Man must yield to the inevitable. He must submit to destiny.

Intriguing – these statements seem to mesh well with my understanding of contemporary psyc research.

Regarding the first von Mises paragraph above: If we were content, would we stop acting? Apparently. If you give a rodent a button that delivers a dose of dopamine on demand, the rodent will just push the button endlessly – ignoring all other things, such as sex, food or even sleep – until it dies.

Regarding the second paragraph: Harvard psyc prof Daniel Gilbert (author of Stumbling on Happiness) conducts research on “affective forecasting” – that is, our ability to predict how we will feel in the future if we do X rather than Y. In a nutshell, humans seem to be systemically LOUSY at this. Our minds are filled with ideas about how great our lives will be if we could just get that job, or how devastated we would be if we lost a limb. Yet the bulk of research suggests that people have a natural “set point” of happiness, and we tend to regress to that point. Certain phenomena do correlate with improved affect – having religious faith, avoiding poverty, having a marriage and social networks (but not having kids!). But most things we worry about have little long-term consequence to our happiness.

So why would humans have this curious systemic “defect”? It suggests that there’s something adaptive about being wrong. What could that be? One hypothesis is that the adaptive feature is motivation. By having an exaggerated sense about the potential risks and rewards of future events, we become more motivated to shape those events.

This has some curious implications for libertarianism:

1) People, left to their own devices, will make choices that predictably will make them less happy than they could be. In other words, you can seek to maximize freedom or maximize happiness, but not both.

2) The more discontent people are, the more adamantly they will seek change – regardless of whether the change they demand has any relationship to their discontentment. This creates problems for small government advocates because, especially during emergencies, the public will clamor for their leaders to “Do something!” even if the something is weakly correlated with the emergency. Sometimes the “something” will be to shrink government. But more often, it’s the opposite. And a humble acknowledgement that there’s little to be done and patient restraint would be the best policy – that’s never an option.

Arguably some of the New Deal programs were popular not because they did much to mitigate the effects of the Great Depression, but because they LOOKED like they were doing something about the effects of the Great Depression. Roosevelt riding around, visiting the Hoover Dam and CCC projects, created a great narrative, and he was a great narrator.

Similarly, during the OPEC oil embargo and the resulting stagflation, the public kicked out every president that came along, and voted against the Reagan-led Republican Party during Reagan’s first mid-term, in a perennial mood of “throw the bums out.” Only after OPEC collapsed and the economy revived after the 1982 midterms did the public begin electing presidents for two terms again.

The public threw George HW Bush out of office when the economy turned bad at the end of his first (and only ) term. Gore lost to W when the economy dipped. And W nearly became the first wartime president to get kicked out of office. I suspect W was spared his father’s fate only through the felicitous/strategic choice to begin a war in Iraq – a place that, unlike Afghanistan, would have targets to destroy, terrain to capture, and periodic symbols of progress.

With a terrible economy, I expect Democrats will lose seats in 2010 (unless Obama starts a new war to rally around?). But assuming the economy revives by 2012, Obama will be claiming that all his stimulus spending has made the difference. Accurate or not, it’s a narrative. Republicans will argue that they actually should be given credit for improving the economy because … they restrained Obama from making things worse? Not much of a narrative, even if true.

The public clamored for change, and change occurred. Much like Reagan got the benefit of the economy’s revival when OPEC collapsed, I expect Obama will get credit for the economy’s revival in 2012. And the public will be reaffirmed in its belief that political leaders can actually mange the economy.

3. Von Mises and Gibert seem to point to a common conclusion: happiness is maladaptive. The individual that is most likely to pass on genes to the next generation is the discontented, and therefore active, individual.

Query: So what? Does the fact that something is adaptive make it virtuous? Consider the rodent on the dopamine drip. Lacking external constraints, it has freedom to refrain from pushing the dopamine button. Yet it chooses that option. It seems to be maximizing its utility. Should we not all emulate the rodent?

Seems like an icky outcome. Yet I don’t see why I could feel that way unless I value something more highly than the freedom of the individual to choose how to live his own life. The fact that I would reject that kind of life suggests I believe people have some kind of duty higher than the duty to pursue their own choices. I’m still struggling with this.


Great Moments in Amateur Blogging

But a human can only be human, in part and in whole, no more or less in the depths of "inhumanity", and always. The depraved man appalls us not only for his deeds but for his irrefutable demonstration of humanity's potential for evil; it must then follow that he demonstrates for each of us our own capacity for evil, because we cannot escape the bond that is our shared humanity. With each transgression the evil expand the Devil's realm, as surely as the the great establish the uppermost boundaries of human achievement. Every iteration of a man is an argument on behalf of and proving itself; lives committed to malice, lives sacrificed selflessly or stupidly, "madmen", lives "wasted" to sloth or obsession; all are competing models of man. No man can escape the assertion that is his life; he lives as he would have everyone live. Each life is the proposition: "this is Man."

- Dennis Dale