25 June 2009

Capitalists, libertarians, and anarchists; oh my!

Thursday, June 25, 2009
Capitalists, libertarians, and anarchists; oh my!

I have been arguing with anarchists and libertarians lately.

I can not think of a good way to consolidate my arguments without the context of responding to something specific, so it occurred to me that, given how much I've already written, it would be simple to just use what I already have.

I feel that given how much influence these ideas have had on the direction the US has gone in over the past few decades, and that we are the most powerful nation on Earth, this topic is one of the most important social issues there is.

Because there is a lot, I am breaking it up into several pieces.

The first (actually the last chronologically, but the first I am posting) was a blog essay which an anarchist friend sent me a link to attacking democracy. (He mentioned the caveat of not supporting the market economy. I have already written before here about how a market economy will naturally arise in the absence of government regulation.)
While the arguments here are not necessarily universal among anarchists, libertarians, and capitalists, some of them are common, or are at least similar.

I don't have the responses here, but that's mainly because there really weren't any substantial responses, just general insults and links to other people's writing. If you are interested, you can read both the original essay and all of the comments here:

When I use the word “democracy”, I am using it literally. You do not vote “for someone” under democracy. What the author is making points against is a “republic”. Specifically the US version of republic (no one else has ever fought wars to “make the world safe for democracy”) In fact, what is really meant when politicians when they say that is making the world safe for free markets – the very thing the author is supporting – because open foreign markets (ie not regulated by each foreign countries government) means cheap labor and goods fo the US.
Further, democracy is a political system, not an economic system. The author treats the two as if they were interchangeable. They are not. The economy can be one of the things which government regulates.
Majority rule does not imply violence anymore than any decision making process does.
If you are in class, and you have a group project, and each person has a different idea of what to do it on, no student fears his classmate will attack him for his opinion. They may argue about it, but ultimately which ever idea is most popular will win out. There is no coercion or threat involved.
That is democracy.
Not everyone gets their way, but it is understood that it is a group project, and things have to be decided or else everyone is going to fail.
The argument that anything which applies to one circumstance must apply to every possible circumstance is stupid and i am reluctant to even respond to it, but for the sake of argument, I will anyway.
In order to say that riding a bike to the store is good, you must say riding it everywhere is good. It is not good to ride a bike from your bed to the living room, nor is it good to ride it from Oakland to Japan. Since it isn’t good in every imaginable scenario, it must not be good for anything at all.
Democracy isn’t about the majority getting to “outvote” any minority about everything, its about an equitable way to make society wide decisions that need to be made for the benefit of everyone which the free market simply will not provide. Things like roads, disaster relief, environmental protection, and health care. Our country is a great example of what happens when you trust health care to the free market. If police and fire services were not public, only the middle class and above would have fires put out or protection from attackers.
A free market society is far from a consensus society.
A free market society means the richer you are the more “votes” you get.
He suggests roads could be maintained privately. There is no model to support that idea. Existing toll roads take decades to pay for themselves (and, incidentally, the toll roads I have been on in Ohio were much worse maintained than average). Bridges never pay for themselves. No company would go into a market with so low a return when there are other options available.
He suggests also that all market interactions be based on contract.
Who enforces those contracts?
How do they enforce them when there is no public court or police?
If courts are private, what stops them from siding with whoever is paying their fees (as we see happen consistently with arbitration companies and which is the reason almost all corporations prefer to use them)
A minimum wage does not force employers to lay off workers.
They could just as easily cut hours of everyone equally. Better yet, the company could be worker owned, in which case they can divide up the amount of thier own labor which was diverted to the managers and owners who do not do any of the actual work yet make far more of the income.
For all the bitching Ford does about employee costs, its CEO made $21 million – in a year they had huge losses and needed government help. Meanwhile Toyota, which is doing far better, paid their CEO less than 1 million.
That 20 million would have gone a long way to paying union wages, health care benefits, or retooling factories to make more efficient cars.
And that is not counting the CFO, the assistant CEO, the president and vice of the board of directors, product managers, or any of dozens of top level manager with million plus annual compensation.
If a company can not afford to provide a living wage to its lowest paid workers, than it is expanding faster than it sustainably can, and it needs to stop.
The authors comments on rent control are ridiculous. He doesn’t bother to give any indication of where people who can’t afford market rates should live. That’s the basic problem with all libertarian theory. It gets around the immorality of it by claiming that anyone who can’t afford, say, the market rate for food or water, must have made bad choices so it is their own fault they are poor so fuck them.
In the real world the rich are rich due to inheritance, the middle class send their kids to private school and college, and poverty is inherited the same way. Under the free market (or anarchy) their is no provision for the poor, the elderly, the disabled, or the abandoned young. Individual charity alone does not have the resources to help these groups.
The solution to rent control is to outlaw all ownership of rental housing.
You should not be able to charge someone just to live on a space on the Earth. You should not be able to make money when you are not actually doing any work. If every rental were put on the market at once, buying a house would become affordable.
I believe land ownership other than the land you yourself live on, for the purpose of profit, is inherently immoral, as is any other way of generating money without producing something of value to society.
If you personally built the house (not put up investment money, but got out there with a hammer and nails) then charge whatever the market will bear. But buying something because you have the capital just to charge someone rent? You are not providing anything of value because the house was already there, and if you didn’t “own” it the same tenants could be living there for free.
If this guy wants to stop voting, great! That means my vote has just a little bit more weight.
[excerpt from a response to my comment] "Economics is a logical-deductive science and can’t be falsified by empirical data."


Theory separated from the real world is meaningless and useless.
Anything which is unfalsifiable by empirical data has a special word: “faith”.
Aristotle used logical-deductive reasoning, and made conclusions about gravity. Newton proved them false with empirical data. Aristotle was a brilliant person, and his theories may have been logical, but when reality differs from theory, real science discards the theory.
Something which is purely deductive is not science. A scientific theory has to be able to make real-world predictions given a set of circumstances, and when implementing those circumstances, the predictions observed.
While linguistically no rule may not inherently mean no rules, in the real world, with no one to make rules, no one to enforce them, and no consequences for breaking them, there can be no distinction. In the real world you will never have unanimous consensus on all rules. If you make rules by general (majority) consensus, then that is, by definition, democracy. If rules are followed voluntarily, then they are suggestions, not rules. Its funny that you should point to that article, since I made the same argument that the one here made: the free market and democracy are incompatible.
Many, perhaps even most, public goods can be provided by the market (although not equitably or universally). There are a few that could not. Public streets and sidewalks in a city in front of everyone’s house and business. The modern economy couldn’t function without them, and there is no practical way to toll every single block independently.
Another is the legal system. A arbitration company has no way to enforce the ruling. A private security force, without any police or law, would be indistinguishable from a mercenary force.
Really, I have a much simpler retort.
Four words:
Tragedy of the Commons
We live in a finite world. There is a finite rate of regeneration of renewable resources. A free market does not regulate its rate of consumption, nor does it take into account externalities.
A failure of intelligent long-term regulation will hasten humanities trail along the wake of the yeast in a beer barrel – drowning in the waste of our own gluttony.

[the person responds that I should read the work of Ludwig von Mises, and again claims that I must not understand economic theory]


Just because I disagree with it doesn’t mean I am unfamiliar with it.
I actually agree with much of what Mises says, and believe he makes valid points which many on all sides often fail to acknowledge.
I agree entirely with his position on government induced inflation and on patents, for example.
However, he does make some fundamental errors which invalidate some of his conclusions based on them.
Ch1, Acting Man, of Mises book begins with “Human action is necessarily always rational.”
This is demonstratively false.
The only irrefutable action axiom is that humans act. It can not be taken as axiom that humans act rationally in their own long term interests, particularly when the optimal outcome requires a level of individual sacrifice.
In game theory, many situations create an incentive for individuals acting in their own best interest to cause a worse outcome for the group as a whole (which of course includes the individual as well.)
For example: http://www.economist.com/sciencetechnology/displayStory.cfm?story_id=12202559
Even assuming individuals acted rationally in any individual moment, they neither take into account the effects of their individual choices aggregated over a large population nor the long-term effects. Because of this, even though as individuals we have the capacity for reason and the ability to make conscious choices, when allowed total freedom as a group we do in fact act the same as yeast.
The tragedy of the commons is a real phenomenon, which holds both in theory and in practice.
Pricing alone does not solve the problem, because it does not take externalties (such as pollution or a finite rate of resource regeneration) into account.
Then again, it is very easy to show that individuals do not even act rationally in the simpler terms of their own personal best interests either. Look at the success of casinos.
It goes far beyond gambling however:
Again, something which is purely logical-deductive is not science. It is philosophy at best, and faith at worst (since any deductions must be founded on assumptions about reality – in this case, the ultimate rationality of individual humans).
If you can find an example of law, local roads, or police being provided both efficiently and equitably purely by a market historically, or even describe a scenario in which it could even hypothetically arise, I would be very interested to read about it.
Now, aside from the dependence on individual rationality for faith in the free market, there are additional questions:
Mise does address externalites, for example injuries to employees
blaming them on market interference by governments which “allow” them to be unaccountable. However, he fails to explain who, in the absence of any government at all, would enforce labor standards, and how. If the problem is caused by a lack of regulation (or “deficient laws”), how would removing all regulations solve the problem? (Later Mises does implicitly acknowledge that this is neccesarily the role of government: “governments are [in a hypothetical ideal world] devoted exclusively to the task of protecting the individual’s life, health, and property against violent and fraudulent aggression.”
This then begs questions of the form and structure of said government.
In the same section he makes the exact sort of external valuation of commodities he objects to in the opening chapters (while also showing his own racism) in saying “Many of the richest deposits of various mineral substances are located in areas whose inhabitants are too ignorant, too inert, or too dull to take advantage of the riches nature has bestowed upon them.” This in the context of objecting to government intervention conquest of land/peoples, and claiming war is the result of protectionism.
Even were a government to allow free trade, the dull ignorant natives might still choose not to extract and sell a resource at any price – yet the other nation would still have desire for it, no less than if it were a protectionist policy which kept them from it.
In other words, if a population chooses, for whatever reason, not to utilize a natural resource, it is acceptable, or even ideal, for them to be taken by force by those who would utilize them.
On a similar issue, his solution to the tragedy of the commons is to privatize everything
Aside from the practical impossibility of privatizing extremely large public resources (the ocean, the atmosphere, a large river (anyone dumping or fishing in their “own” section of river affects everyone downstream of them ) there remains the question of how initial prices of commons are to be set, who they are paid to, and if there is no such entity then how the distribution is to occur.
Mises claims that unemployment (of the employable) would be zero in a purely free-market system
but offers no evidence, either theoretical or examples, to support it.
He suggests that the alternative to the gross inequalities inherent in capitalism is welfare.
I won’t argue the merits of welfare for the overall benefit of society here, but instead point out that regulations to ensure equality does not necessitate any form of welfare.
It is possible to eliminate (or at least reduce) inequalities simply by taking steps to level the playing field. A major omission is the issue of inheritance. People who inherent wealth do not earn said wealth by contributing something of value to humanity. They just get lucky in which parents they are born to. Similarly, education, living environment, etc are not in an infants control, and these factors incontrovertibly have a direct effect on the individuals access to the means of wealth generation later in life. This itself is an external privilege, no different from the caste system (which he says restricts the market)
“What those people who ask for equality have in mind is always an increase in their own power to consume. In endorsing the principle of equality as a political postulate nobody wants to share his own income with those who have less. When the American wage earner refers to equality, he means that the dividends of the stockholders should be given to him. He does not suggest a curtailment of his own for the benefit of those 95 per cent of the earth’s population whose income is lower than his.”
Actually, that IS what I suggest. The American middle class consumes far more than it’s share of world resources, at the expense of the rest of the world, (upheld only by having a military budget equal to the rest of the world combined).

“Many who are aware of the undesirable consequences of capital consumption are prone to believe that popular government is incompatible with sound financial policies. They fail to realize that not democracy as such is to be indicted, but the doctrines which aim at substituting the Santa Claus conception of government for the night watchman conception.” - Ludwig von Mises
“Even those who look upon the inequality of wealth and incomes as a deplorable thing, cannot deny that it makes for progressing capital accumulation. And it is additional capital accumulation alone that brings about technological improvement, rising wage rates, and a higher standard of living.”
I do not deny those. I question whether they are ends to themselves past the point where a society has obtained security in the basic necessities of life, and if they are in fact so desirable to be worth the trade off of gross (unearned) inequalities.
Realize that I accept that inequalities will exist due to differences in how hard a person works or how innovative they are.
It comes down, ultimately, to a moral issue.
And it was morality which the original blog entry was commenting on, not the method by which a society can most raise its average standard of living.
All this time we have been discussing only economics, while you ignored my points on democracy – as much the original focus as economics.
In my first comment I made a simple example: 3 or more people need to work together to get something done. If they don’t come to an agreement, there are negative consequences for everyone. It is not possible to have unanimity in every possible instance. If one or more people agree to go along with the majority consensus, that is democracy. It does not require coercion or threat of force.
This same situation, on the level of a society making large scale decisions, is all true democracy is.
It might be contrary to a maximization of wealth generation that a society collectively decides to enact an economically restrictive law. However, that is their choice.
In fact, in both the group and any true democracy, no one is forced to go along – however, if they do not, they can be ejected from the group because their association by other members is voluntary. As such, if someone objects to the laws of the US, they are free to move permanently to another country.

 Part 2 of 3: http://biodieselhauling.blogspot.com/2013/03/part-2-gas-tax-digression.html
Part 3 of 3: http://biodieselhauling.blogspot.com/2013/03/the-last-one-anarchists-this-time.html

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