12 posts from April 2008

In this splendid article by Hans Hoppe, recently featured at LRC, you will find an intellectual biography of the irrepressible Murray N. Rothbard.

Dr. Hoppe explicates why Rothbard upholds the mainstream tradition of Austrianism, "is the latest and most comprehensive system-builder within Austrian economics," and, also, that Rothbard is "the latest and most systematically political economist." He explains Rothbard's insights into diminishing marginal utility, that markets and private property are the sine qua non to satisfy the so-called Pareto-criterion (versus any form of socialism, including "limited" government socialism), the un-economic efficiency and un-justice of the State, monopoly theory, money, self-ownership and property theory, and history.

Further Reading: Man, Economy, and Liberty: Essays in Honor of Murray N. Rothbard (1986) and Murray N. Rothbard: In Memoriam (1995) contain essays by JoAnn Rothbard, Margit von Mises, W. Block, T. DiLorenzo, S. Francis, D. Gordon, P. Gottfried, G. North, R. Paul, J. Raimondo, J. Sobran, et alii. You can download the e-texts (pdf format), respectfully, here and here.

I.

One of the purposes of a book like Defending the Undefendable by Walter Block is to apply radical libertarianism into the more "extreme" scenarios of life. By doing this it makes libertarianism all the more powerful because if man can apply libertarianism to "hard" cases all the more true will it apply to the "easy" cases.

This is what makes Dr. Block call libertarianism "beautiful," like the beauty one hears from listening to a Mozart symphony or the beauty a mathematician sees in a complex mathematical proof. Libertarianism is a bracing and rigorous theory in political philosophy and justice (ethics). It attempts to build a concretized theory based on solid axiomatic-grounds bringing out a consistent and whole system deducing self-ownership, property, liberty, and justice.

Even under the most extreme and direr scenarios does liberty provide a path to peaceful relationships and future economic advancement, if only men have the wisdom to see it. We just need strong citadels of liberty, escaping from the traps of the statists of the left and right.

II.

Like a past Paleo Blog entry, I would like to apply libertarianism to  "extreme" lifeboat cases. A reader asked me what I thought about the following case. So let me please share some of my own thoughts on it.

Imagine a man became shipwrecked and landed on a very small island in the middle of nowhere, with no hope of rescue for the foreseeable future. Two men live at this island. Say it is a given that they homesteaded the entire island. One man owns half the island on one side and the other man owns the other half on the other side. They are "isolationists" and want no contact with the outside world.

The two islanders agree that this unlucky shipwrecked man can stay with them respectively, but want to impose (literally) brutal laws and rules on him. Is there a limit to how far they could go? And, if so, what are those limits?

Before I directly address the issue I would like to preface my response and relate this thought experiment to the "real world" of complex societies filled with many people, write a little about "implied" or "implicit" contracts, and then move directly into the thought experiment and apply some economic-utilitarian analysis.

III.

When I first thought about this thought experiment I was thinking about how this fits into the bigger picture of the "real world," and how someone might try to (falsely) discredit libertarianism. However, the truth of the matter is, as I see it, that this kind of thought experiment in reality is not apposite to the real world and normal situations. It has virtually no practicability and applying it to the real world would misunderstand general societal tendencies in a free and complex division of labor.

Envisage, if you will, that tomorrow a brutal idea (such as, cutting off body parts as a requisite to be a citizen of a nation) was adopted by the majority of Americans, excluding you the reader and myself, living under a State. A statist society could not solve this problem, especially a democratic one, if it occurred anymore than if such immoral and stupid ideas took hold in a free society. But a free one has less chance of this occurring and less chance that one (you and me) will be pushed into this idea or association rule simply because it is a free society and has no monopoly in law making. Thus no matter how bad it could get in a free society it will only be worse in an un-free one.

Tomorrow they might also, say, decide that interaction with other households in any division of labor is "evil" and stop doing it. But is it likely? The answer is no. In regards to this, most of the population would die out. (I'll side-note here that the farcicality of protectionist ideology should be clear.)

And with this kind of thought experiment we must keep in mind that today, in a statist world, there are plenty of places you would not want to be stranded at. Would you, or the shipwrecked gentleman, want to be stranded at certain places in Africa with little to no hope of escape? My guess would be no. In addition, there would probably be fear for one's life, not to mention some theoretical or hypothetical immoral association rule.

IV.

Now the more interesting thing about this whole topic----and which might be forgotten or overlooked in the ethics of private property----is implied or implicit contracts. It has nothing to do with this thought experiment per se, but I think it is worth exploring quickly.

Pretend that I own an airplane and invite you on it. Up in the air I say I do not want you there anymore and ask you to leave. You obviously cannot, not without jumping out to your death. My reasoning is that I own it and have a right to push you out. But do I?

The answer is I do not have any such "right" in a case like this. This is because implied contracts exist, so to speak. It is implied that I will not physically aggress against you (or your privately owned property, besides your physical body) on my property. If you enter someone's home, it is implied that he will not take out a gun and kill you. That would most obviously be murder. Likewise for the airplane: It was implied that when I invited you that I would not do such a thing. That is to say, an implied contract existed for not being kicked out in midair. (The only way that kicking you out would be possible is if I told you in advance that I might do this and, I venture, had you sign a notarized paper in writing for any future judge to see.)

Okay, on to the original thought experiment.

V.

We must first recognize that an entire island, even a moderately small one, would most likely have "virgin" land. The islanders could claim to own everything, but if they did not actually homestead everything they do not. And, clearly, just walking through virgin land is no real ownership claim! The islanders could not apply any private rules or laws to land like that. It seems to me that the chance they owned all of it combined would be low. The only way to own land and have the ability to apply private rules and laws----like rules a man can apply to his own legitimately, privately owned house----is to the land that was actually homesteaded into private ownership. (See Murray Rothbard's Ethics of Liberty on homesteading.)

Since it is a given that they do, then my answer would be that if the shipwrecked gentleman is on their legitimately owned land they do have a right to impose all the rules and laws that they like----even insane, immoral, and stupid ones. But this does not mean that their law can implement slavery as it is strictly and technically defined. (Hence any owner cannot force a guest to stay on their property or anything of this nature. That kind of rule/law is incompatible with making contracts in the first place.) So this truly is a very bad luck case---what can I say?

However, even in a case like this there are natural forces that will tend for this not to happen.

VI.

In a horrible situation like this I would suggest that the gentleman see if he can "pay off" the inhabitants in some way. That is, the guest can agree to work for them to avoid dumbfounded laws and rules. Or he can just tell them that they should drop their dumb rules and cooperate in a small division of labor, for their mutual benefit. After all, it is the division of labor that is our friend----including in this case, because even under conditions of hostility between peoples can self-interest alone mend fences in a division of labor of social cooperation.

From a utilitarian perspective in terms of economics and private law, the two inhabitants, for sheer self-interest, would not want to put too many rules or private laws on the man because that would lower his productive capabilities to produce things. (How wealthy can they be all alone!? Not very! They could use all the help they can get.) Therefore even if you consider the man a servant (or even a fake quasi "slave"), the islander owners, if they had any interest in their own wealth and if they had any intelligence, would not want to be brutal to him. They would want him productive because this would benefit them more than if he was unproductive. In a symmetric way the same is true for the gentleman. He wants to be less imposed on and to benefit from a mini-division of labor. This is not only true for the "short term" but is also true, and even more so, for the "long term."

Furthermore in a case like this the gentleman would probably be better off----minus the fact that capital wealth will be no doubt much lower and other considerations of this nature----in terms of the rules and laws that would likely (on average) be imposed on some private island than those imposed (on average) in public law by some State. This is because the State does not have these peaceful and non-intrusive incentives. Being a slave to the State would bring less and less incentive to impose fewer laws. The State could afford imposing lots of intrusive and anti-capitalist laws----spreading them out and collectivizing them, so to speak----on lots of people without too much adverse consequences to them qua State rulers directly. This is most profoundly true with a democratic government. The incentive with this type of State is to loot as much as you can get away with. Capital (i.e., long-term) value of "its" citizens, in a manner of speaking, would not exist. A temporary elected ruler, unlike a hereditary king, would have the incentive to loot what he can loot now in the present because he might not get a chance to do so in the future. The more they flail the public, the better for them and their buddies. Just as importantly, he cannot sell what he extracts from the public and he cannot sell any of the operations of the State to the open, free market. As a result, even the functions of the State will be overcapitalized, grossly inefficient, and as operations themselves abusive to private citizens. Opening the State up would make it so that if something is not looted now someone else might loot. As it turns man into a political animal we truly see a Hobbesian world.

H.L. Mencken:

“The Gettysburg speech was at once the shortest and the most famous oration in American history...the highest emotion reduced to a few poetical phrases. Lincoln himself never even remotely approached it. It is genuinely stupendous. But let us not forget that it is poetry, not logic; beauty, not sense. Think of the argument in it. Put it into the cold words of everyday. The doctrine is simply this: that the Union soldiers who died at Gettysburg sacrificed their lives to the cause of self-determination – that government of the people, by the people, for the people, should not perish from the earth. It is difficult to imagine anything more untrue. The Union soldiers in the battle actually fought against self-determination; it was the Confederates who fought for the right of their people to govern themselves.”

Read Mr. Sobran's Lincoln and His Legacy

See Also the King Lincoln Archive at LRC

Gustave de Molinari (1819-1912)

Molinari was a French-Belgian economist who in 1849 proposed in a paper, "The Production of Security," that security be out of the hands of monopolistic governments and into the hands of voluntary consumers on the free market. His reasoning was that (1) labor and trade should be free to competition in order to minimize costs to consumers, whereas monopolies [in the traditional, coercive sense of restricted entry] do the opposite, and (2) that consumer interests should win over producers.

These two principles, he wrote, are the most well-established truths in the social science. And that following these principles leads one to see that security, like all other goods and services, should be left on the free market. Molinari went on to say that "Either his is logical and true or else the principles on which economic science is based are invalid."

Conventional Wisdom: Goods that are Public

One way to avoid the above conclusions is to declare that security is a public good and is not compatible with capitalism and its advantageous position in contrast to socialism's monopolistic, economic inadequacies.

Public Goods: Are said to have distinctive characteristics that make them impossible or difficult to produce on the free market and accordingly must be provided by the State. This is because the benefits of these goods cannot be limited to those that directly pay for them, unlike private goods.

Ambiguity is the first problem with public goods theory. Just what qualifies a good as public and not private is subject to debate. Many of the goods that are normally referred to as public have just as many people who would say otherwise. What goods are and are not public is highly disputed.

Is it a Private or Public Good?

Here are some examples from Hoppe...

• Home Garden: Neighbors benefit from it without contributing.
• Street Performer: Those not giving money can benefit.
• Deodorant: Those around benefit without contributing.
• Developing a Nice Personality: (ditto)
• Home Improvement
  

All fit as being called public. Does this then mean they must be nationalized or socialized? They all appear to fit the parameters of public goods but are nonetheless produced on the market as private goods.

What is more; all labeled public goods have at one time or another and to one extent or another been produced privately: e.g., mail, roads, lighthouses, police, detectives, arbitrators, charity, and so on.

The Public Nature of a Good

--- Can be "Good" or "Bad"
--- Is Not a Fixed Constant

• A public good can not only have "positive" but "negative" results on people. E.g., the neighbors might think the home garden is unattractive.
• The "positive" and "negative" value of a given public good can be different with different people.
• This evaluation of "positive" or "negative" can change.
  
• Technology can change a good. E.g., cable television works fine as a private good.
• Changes in law can do likewise. E.g., lighthouses can easily be private if parts of the ocean were opened to homesteading (private ownership). Lighthouses could then effortlessly exclude nonpayers.
  

Goods becoming Public: Subjective Evaluations

All goods, even very "private" ones away from other non-owners, can be seen as something public as long as one person sees it that way.

The viewing of a good as public or private can change through time based on the "changing values and evaluations, and with changes in the composition of the population."

Furthermore, this viewing is only of degree. As can be seen there is no actual "clear-cut dichotomy between private and public goods."

How is Something Viewed as a Good (private or public)?

• A person must view something scarce as having some subjective value to be owned.
• Otherwise the thing in question would not be considered a good.
• There is no "physico-chemical" test.
• Hence: "goods are goods only in the eyes of the beholder."
• There is thus no objective test to say something is a public good or a private good.
  

A Private Good Becoming a Public Good (and back again):

In a like manner, any private good can become a public good once someone subjectively values it as such. This public good can furthermore change back into a private good. It could also change once again into a public good. And so on. The perception of a public good, too, can change between being seen as a positive or a negative. Different men can perceive it in different ways.

So it seems clear that because of this it is not possible to truly classify a good as intrinsically one of the two. Just as man's value of goods is subjective, and value cannot be intrinsically inherent in goods, objective distinctions between public versus private goods is illusory.

Logically following a public goods theory would require asking everyone what their own subjective evaluations were. Everyone would have to be asked if they saw the given good as a public one and if so whether or not it was a positive one relative to them. This would be the only way to classify all goods as either public or private.

This information would determine who profits from each and every good----viz., if a good in question profits, in addition to those that directly pay for it, those who do not directly pay it----and then what goods are to be private and what goods are to be public. ("And," notes Hoppe, "how could one know if they were telling the truth?!")

Doing this would also require constantly monitoring the public because the public's evaluations of goods can change. Every action in regards to production would require permission in the attempt to determine the public-ness or private-ness of every good, but society would literally die out if such futile attempts were actually made.

State Production of "Public Goods"

For the sake of argument assume that there is an objective way of determining if a good is public or private. [Perhaps every good has a label on it.] But why should the State produce these goods rather than the private sector?

Again, it is said that public goods either would not be produced at all or would be produced little because there would be men who would profit from them without paying for them, and that therefore they should be produced by the State. These goods "are evidently desirable, but would not be produced otherwise."

There are two problems: (1) ethical and (2) utilitarian

(1) The only way to reach the conclusion that these goods should be produced is to move beyond the field of economic theory and into ethics. These economists "must smuggle a norm into [their] chain of reasoning."

Public good theory just makes the jump without a theory of ethics. By their own standards and writings they have "no authority whatsoever."

So they take a leap into this norm: If a good that would have some kind of positive impact on people would not be produced in adequate quantity, then aggression is allowed to force people to produce them. Pushing this to its logical and ultimate conclusion would be this: "everyone can aggress against everyone else whenever he feels like it."

But could this norm be justified in argumentation? The answer seems to be a clear no.

(2) It is a fact of existence that there is scarcity. Production of X must be produced at the price of the possible alternatives that exist (i.e., there are opportunity costs). It may well be that consumers value "private" goods more than "public," but the only possible way to find out is to let consumers go after what they value more highly in a free market.

X good that is valued lower to Y is valued as such because they value it lower. A public that valued so-called "public goods" would produce them on the market to the extent that they wanted them. It is the only objective test that exists. The public good theorists must use this test and this test will force them into adopting the view that all goods be private. And as previous examinations have shown, goods produced privately have all the advantage of the market versus those that are not.

Hoppe then moves into the final topic, the production of security.

Liberty Demands Anarcho-Capitalism

Minarchists believe there needs to be a "common body of law" before the market can come into being. Hoppe replies that this is true but it does not follow that there needs to be a monopolist in charge.

Language is also something presumed on the market, but it does not follow that a monopolist, like the State, be in command of it. Instead it is a spontaneous feature of the market and can be explained by self-interest, i.e., it is in the interest of men to have a common language to reap its awards.

Law does not seem to be different. A division of labor, which is in the self-interest of man, requires "common rules of conduct." And the basis of this law is aprioristically linked in man's action and argumentation. [There is nothing mysterious or out-of-the-blue about it.]

[In replace of classical liberalism, libertarianism offers a consistent, coherent, and non-contradictive defense of liberty. It pushes it to the logical and ultimate conclusion.]

Classical liberalism, with Ludwig von Mises being the "foremost representative in this century," was a political philosophy based on the natural rights of private property. At the same time, however, it advocated that private property be protected by a monopolistic, and thus coercive, agent that by its very nature violates private property rights in the name of supposedly protecting them.

But, writes Hoppe: "Either the principles of the natural property theory are valid, in which case the state as a privileged monopolist is immoral, or business built on and around aggression—the use of force and of noncontractual means of acquiring resources—is valid, in which case one must toss out the first theory."

Logic and morality forces us to adopt a political philosophy of libertarianism, with its foremost representative being Murray N. Rothbard.

The Free Market Production of Security

• A libertarian society would consist of freely competing agents who would be in the business of security (defense and arbitration).
• There is no way to say a priori how it would exactly work. Anymore, says Hoppe, than how hamburgers would be produced "if up to this point hamburgers had been produced exclusively by the state."
• Meaning one cannot describe the exact structure, number of agents, the relative size of this industry versus others, the sorts and differences between the agents, etc.
• This is amplified by the fact of change and its relationship to such an industry: change in demands of different consumers, technology, prices outside the industry that affect the industry indirectly, etc.
• Even so, given that a demand exists much can be said about the overall industry.
  

The Economics of Security Production

• Security, as a good, must compete with all others on the market. I.e., what is spent on security cannot be spent on something else.
• It is not a homogeneous good.
• There are "numerous components and aspects" to it.
• Its supply has marginal units.
• Men value security differently, both in regards to security by itself and different components and aspects thereof.
• These differences can arise from the different personalities, past histories in regards to (in)security, the location they live, etc.
  

The Problems of State Production

The State collects its revenue via taxation and therefore the amount of funding to the ends of security is not determined by consumers on the open, free market. Instead all funding is independent of them. Not only is the overall amount arbitrary and independent of consumers but so is each component and aspect of it.

The State will not be able to answer these questions without answering them arbitrarily...

• How much to produce overall.
• How much to produce for each subclass of security.
• Where (what location) it spends or puts its resources.
• To whom.
• To what specific subclasses should it fund.
  

Overall, the State will not know how much to produce, how much to produce of the various different subclasses of security; where it should put its security, how much, to whom, and what kind of security exactly.

To quote Hoppe: "Do we need one policeman and one judge, or 100,000 of each? Should they be paid $100 a month, or $10,000? Should the policemen, however many we might have, spend more time patrolling the streets, chasing robbers, recovering stolen loot, or spying on participants in victimless crimes, such as prostitution, drug use, or smuggling? And should the judges spend more time and energy hearing divorce cases, traffic violations, cases of shoplifting, murder, or antitrust cases?"

He goes on: "Clearly all of these questions must be answered somehow because as long as there is scarcity and we do not live in the Garden of Eden, the time and money spent on one thing cannot be spent on another."

Results of State Management

Because there is no profit-and-loss, management will not be in terms of actual consumer demands, and there will necessarily be misallocations of these scarce resources and hence waste.

State production and management (again, since there is no voluntary relationship and no profit-and-loss) will be done on "what they like" and not consumers. They will be increasingly intent on doing easier work and lazing about than not. [Compare this to a free system: Producers would be dependent on consumers financially.] And with their power they can be more abusive and brutal. They would likely put more effort into victimless crimes than hard crime, unlike consumers since consumers generally would want to spend their own money on crime that can directly affect them.

When it comes to hard crime (robbery, murder, rape, ..) there will also be problems. Statist judges are independent of consumers and their wants. [Again, remember, no one can fire them and there is no competition.] The judicial process will be slow in the allocation of services: there is no price signals to allocate economically and efficiently for the consumers.

There is no "service contract" that is "laid down in unambiguous terms what procedure the consumer can expect to set in motion in a specific situation." Rules and procedures are thus in the air. They can arbitrarily change, without one knowing it as it would be known if there were market contracts. This creates uncertainty. [And, by the way, makes the expensive and overly inflated lawyer more important.]

Perversely, any disputes between a State court and a citizen are not handed to an independent third party arbitrator but are assigned to another State court working under the same umbrella.

The production factors of security cannot be sold, and capital value will lessen and overutilization will result. Accordingly police stations and courts will be in relatively poor shape.

All of this will occur because they are not left to the market and competition. The solution is hence to be found there.

The Free Market Solution to Faulty State Management

No "perfect" solution exists, of course. "But," Hoppe writes, "in terms of consumer evaluations the situation would improve to the extent that the nature of man would allow..."

All security agents, in a free and competitive market, could only legally obtain income from voluntarily paying customers. These relationships, one could fairly predict, would most likely be contractual ones where customers pay their agent each month.

The private property ethic in a free market would require and push agents to define their contracts to their customers clearly and unambiguously. There would as a result be no void that is produced under statist conditions.

Because these private agents are dependent (not independent) on customers there would be an improvement over the attitude of the providers, the quality (and consequently speed) of the services, and the lowering of the costs to security operations.

They would be subject to profit-and-loss.

The goal of increasing income could only be done by either improving services or lowering prices for consumers----again, unlike socialist enterprises.

A private agent that failed in providing for such demands would, in the long run, be put out of business.

Agents would also have to work within the below reality....

Given the diversity of man, private agents would have to provide for a diverse crowd of different wants and needs. Consequently, there would not be a single or uniform "security packet," but a "multitude of service packages [that] would appear on the market."

These packages would have to account for the fact that the following kinds of things require different levels and kinds of security...

• Different occupations.
• Different "risk-taking behaviors."
• Different things need various levels and kinds of protection and insurance.
  
• Different locations and different time constraints.
• Etc.
  

Every single consumer would count to the operation of a given agent, no matter how small his single impact.

Market-based security would make it not possible for this industry to increase its position vis-à-vis other industries without consumers at large placing more value on security. Therefore, there would not be overproduction (or under).

Insurance would also appear, since they want (safe) property to ensure. Insurance agents in protection would pool people's risks. In a competitive free market it would not be possible, unlike a statist market, for these pools to engage in any kind of redistributive measure between those insured because consumers would see such unfair policy and competition would punish these insurance companies for being inefficient and uneconomic.

The Possibility of Outlaw Agents --- First, a Quick Look

Firstly, historical evidence seems to suggest otherwise.

Hoppe: "Systems of competing courts have existed at various places, such as in ancient Ireland or at the time of the Hanseatic league, before the arrival of the modern state, and as far as we know they worked well."

The Ancient West in America had private police and, despite what is seen at the movie theater, a relatively low crime rate (per capita) compared to today.

[For example, see these essays: "The American Experiment in Anarcho-Capitalism" by Terry Anderson & P.J. Hill and "Property Rights in Celtic Irish Law" by Joseph R. Peden.

And listen to this mp3 Hoppe lecture on pre-state feudalism.]

Another reason that it seems unlikely that an outlaw agent would become some kind of normal happening is if you look at the international anarchy that today exists. Commerce commences successfully without a single world monopoly State.

Plenty of private security is around right now: "private investigators, insurance detectives, and private arbitrators. Regarding their work, the impression seems to confirm the thesis that they are more, not less [efficient] ... than their public counterparts."

And, finally, a deductive analysis leads one to see that a competitive system would actually have a greater incentive for a stable society of order and law. (More on this soon.)

Resolving Disputes in Anarcho-Capitalism

Man A and man B get into some kind of conflict...

They could belong to the same company. In this case there is no conceptual difference than what we have today. They could also belong to different companies. It is possible that both companies would agree with a single verdict. But what if they disagree?

Statists often reply that the companies would just start killing each other, or something like this. Now any reflection shows that a default reaction of killing each other is silly. It would be both very costly and very risky. This would make it unlikely.

Since a company that grew to a good size depends on a large clientele, stability and order would be a key feature to it to have gotten to where it has gotten.

More importantly is the fact that if a battle occurred between companies X and Y, they both would require continued voluntary support from their customers. Even one person who withdraws, because he does not believe a battle is necessary, would put economic pressure on the given company to seek another solution.

---Contrast this with the State: In war, with a State, no one can drop out and stop paying taxes. Would war be more likely or less without this ability to tax? The answer seems clearly less. [Imagine if people could stop paying their taxes for the Iraq occupation! Let's see how long this imperial occupation would last under that possibility.]---

This economic pressure would obviously multiply many times over with a larger number of withdraws. It is because of this fact (because of this possibility) that any company would have to be cautious when engaging in any kind of violent action.

If the majority of the given population wants peace, then this is what will be reflected in the companies. Each company, for mere self-interest alone [and thus there is no need to trust in human goodness and incorruptibility, like we do with the State], will thrive to work out in its contracts with its customers how such cases would be resolved.

What would develop then would be independent third party arbitration services.

These services would arise by agreement between different defense companies and their respected customers. With this would come economic pressure to find the most "universally acceptable" law.

• Arbitrators would be fully dependent on continued financial support between (disagreeing) defense companies. These companies, supported by their customers, would only go to arbitrators who carried out their jobs in the best way possible.
• Economic pressure would therefore exist for arbitrators to find "solutions to the problems handed over to them which, this time not with respect to the procedural aspect of law, but its content, [which] would be acceptable to all of the clients of the firms involved in a given case as a fair and just solution."
• If they did not do this, they would lose clients to other arbitrators in the future and would ultimately go out of business. Ones that grew and found a large set of followers (so to speak) would be the ones that performed their job as it was indeed to be performed.
  

But, still, Would Not "Anarchy" and War Break Out?

I.e., could a defense firm, supported by its voluntarily paying customers, become an outlaw organization?

• Obviously it is possible.
• But any order, statist or not, needs public support for it to continue to be what it is.
• E.g., given public opinion it is today unlikely that a fully "Russian-style" socialism could be implemented in the U.S. [Or, say: Is it likely that given public opinion that the 50 states of the U.S. will develop their own armies and start bombing each other?]
• So the question must be put into this context: given the current public opinion is it likely to see large outlaw organizations develop?
• The answer is: It depends on the population. Are they more socialist (meaning bloodthirsty warmongers) or not?
• But given the opinion would a free society be better off or not?
  

Hoppe: "Thus, the first reply to those challenging the idea of a private market for security would have to be: what about you? What would your reaction be? Does your fear of outlaw companies mean that you would then go out and engage in trade with a security producer that aggressed against other people and their property, and would you continue supporting it if it did?"

• In a free society there would be a "change in the cost-benefit structure" when making decisions.
• Under a statist system it was considered legal to participate and finance State aggression.
• Under a free system it would be considered illegal.
• It would thus be more expensive, under a free system, than before in participating in and financing an agent that became an outlaw aggressor.
• Hence the number of individuals, with any given frame of mind (and even those who would generally be inclined to support State aggression and war making), would increase towards directing their participating and financing into legal, peaceful agents.
• And, hence, the number of individuals who would direct towards exploitation would fall.
  

The push on the market would thus be a push for stability, order, and peace, as long as the majority of the public valued those things in the given nation.

Those benefiting from the older, statist, order would lose. They might still have an interest in a system of aggression. But it seems unlikely that they would have the upper-hand to the rest of the public and their defense companies. On the other hand, if they did win, then a State would be back again.

In any case, says Hoppe, even if there were just too many in the public that valued a society based on coercion and aggression, society would still enjoy, for a period of time, a system of unheard of economic prosperity.

“On Resisting Evil” was one of Rothbard's article contributions in September 1993's Rothbard-Rockwell Report. He wrote that we, as libertarians, paleolibertarians and paleoconservatives, must never abandon the fight for liberty.

For something wildly different, Mr. McCarthy at The American Conservative Blog linked to a talk by the late Russell Kirk on ghosts and ghost stories. You can download it and listen to it at your pleasure here [mp3].

In "A Cautionary Note on the Ghostly Tale," which is said to be the preface or afterword to many of his ghostly books, Kirk explains the purpose of his ghostly writings, beyond, for all intents and purposes, the joy of writing them as an end in themselves.

Kirk wrote:

“What I have attempted, rather, are experiments in the moral imagination. Readers will encounter elements of parable and fable. Gerald Heard said to me once that the good ghost story must have for its kernel some clear premise about the character of human existence----some theological premise, if you will. Literary naturalism is not the only path to apprehension of reality. All important literature has some ethical ends; and the tale of the preternatural----as written by George Macdonald, C.S. Lewis, Charles Williams, and other masters----can be an instrument for the recovery of moral order.”

He went on

“For symbol and allegory, the shadow-world is a better realm than the mechanized empire of science-fiction. The story of the supernatural or the mystical can disclose aspects of human conduct and human longing to which the positivistic psychologist has blinded himself.”

[Excerpted from The Essential Russell Kirk: Selected Essays, edited by George A. Panichas. In passing, this is a good book to have in your collection, despite Kirk's anti-libertarian raving.]

From what I found in my search, Amazon.com sells two ghost story related books by Kirk. The first, Ancestral Shadows: An Anthology of Ghostly Tales and the second is Old House of Fear.

Amongst those two works, Wikipedia briefly describes and lists his fictional writings.

--------------
Post Scriptum: First Principles posted an essay on Russell Kirk----and particularly Kirk's view of George Orwell----by John Rodden.

Forget about Adam Smith, the modern day infatuation with the man, and many of his confused and daft economic views (for example, his confusion over the so-called "paradox of value"). Instead the real tradition of superior economic thought goes back a little further to the thirteenth to mid-seventeenth centuries, working from the tradition of St. Thomas Aquinas. It is the work of the Late Scholastics. Some have called them the founders of economic science. Even the first "Austrians," or the pre-Austrians.

These theologians had a remarkably grounded understanding of private property, free markets and liberty, which might be surprising to you given the horrible economic views that plague religion circles today.

Recently, to learn more about them and their thoughts, I added Alejandro A. Chafuen's Faith and Liberty: The Economic Thought of the Late Scholastics to my private Liberty library. It is a superb and succinct book.

Unlike Adam Smith and his group the Late Scholastics never got confused over the nature of value and prices. Because of this there was no confusion over why diamonds have a higher price than water. Water is more important for life, but no one is confronted with the choice of picking between all the water in the world versus all the diamonds. A man in that circumstance, who cared to live, would obviously value the water more highly. But in daily life man is confronted with "distinct" unit quantities. Water is in great abundance; diamonds are not. A man who owns a great deal of water will value additional quantities of water less and less because he can only put those additional unit quantities to less and less valued uses. They thus understood the principle of diminishing marginal utility, and also subjective value.

Money was another area they wrote about. They saw that the "worth" of money depends on its quantity relative to all other goods and services. That money, as a common medium of exchange, makes calculation possible. What is the preferable money based on? Gold. And what is inflation, caused by government? A tax.

Neither were they confused, as many are today, on what makes a "just price" and a "just wage": the voluntary interactions of persons on the free market. They understood the rationality of the pricing system, including in regards to why prices go up in times of trouble. As a result they would never have been fooled by the nonsensical modern day cries against "price gouging."

Of course they had a great concern for the poor, but it was for this reason that they understood the importance of the market place. It is a shame that they are not more known and that so many Catholics, not to mention Christians in general, have left this particular tradition behind to replace it with various socialist ideologies. It is the reason this book should be read far and wide.

Parenthetically, for those interested, a good book to read along with Faith and Liberty is The Church and the Market: A Catholic Defense of the Free Economy by Thomas E. Woods, Jr. Everyone, even non-Catholics, could benefit. It is a good standalone introduction to Austrian economics. I would especially recommend it to traditional conservatives who are skeptical of capitalism and the free market.

Articles to Read:

• "Juan de Mariana & the Influence of the Spanish Scholastics" by Jesús Huerta de Soto
• "Catholicism, Protestantism, and Capitalism" by Murray Rothbard
• "Morality and Economic Law" by Thomas Woods
  
• "Catholics and Capitalism" by Woods
• "Economics and Profit: A Final Word" by Woods
  

Reviews/Overviews of Faith and Liberty:

• "Faith and Liberty" by Woods
• "Christianity's Free-Market Tradition" by Stephen Carson
• "Profits vs Society: Must We Choose?" by Carson

Dr. Paul Gottfried, author of After Liberalism, Conservative in America and several other books, has written an article that has gained online attention on the future (or lack thereof) of paleoconservatism and "post-paleoism" as a movement. Check it out.

His Taki's Magazine Article:
“A Paleo Epitaph”

Some Responses:

• "After Paleoconservatism" by Daniel Larison
• "Right From the Beginning" by Richard Spencer
• "Paleocon Dilemma" by Daniel McCarthy (links will take you to a couple of other TAC entries on the subject)
  

His Follow-Up: “Responding to My Respondents”

Capitalism versus Socialism:

1. The allocation of the means of production can be calculated rationally, in terms of consumer demands.
2. Quality of output will tend to arrive at the highest level, in terms of consumer demand, a given population quality at whatever height and resources allocated as a given.
3. Capitalism itself can only "guarantee that the value of production factors is efficiently conserved over time," again, in terms of the above.
   

Allocation under Capitalism

• A capitalist business uses its resources to produce consumer goods.
• It does this with the expectation that the costs to produce the good will turn in a profit from the sales being greater than or equal to the costs used in the production.
• If it does not expect this, then it will either use its resources to produce a different amount of said goods or use it to produce different goods.
  

• There is an "objective criterion for deciding" if allocation choices were good or bad. There is a test---a test that happens constantly---ex post.
• This is done through bookkeeping: Profit-and-loss exists not only for the total operation of a given business but in addition for subunits, if market prices exist for those subunits.
• A business that fails the test will either, in the short or long term, be out of the market completely or will lessen in size.
• A business that succeeds will stay on the market or might even grow.
  

Capitalism ensures a rational allocation by pushing failing business out of the market and redirecting allocation to greater and more rational uses of resources.

It is, writes Hoppe, "a never-ending process of directing and redirecting factors of production" from "less value-productive lines of production into lines which are valued more highly by the consumer."

Allocation under Socialism

• Income can be obtained by noncontractual means, i.e., coercion.
• As such it can fundamentally avoid losses and be sure never to go 'out of business.'
• It can "determine unilaterally whether or not, to what extent, and for what length of time to subsidize its own productive operations." The competition or lack thereof, and if or if not any competition is allowed to overtake it, is also unilaterally up to the State.
• Meaning: Socialism is independent of the profit-and-loss test.
• Allocation will, hence, be arbitrary: staying in business no longer means the requirement to adjust and readjust allocation to meet consumer demands.
  

"Arbitrary" does not mean void of any systematic movement: Instead it means allocation is determined democratically or autocratically. But it does mean arbitrary from consumers who buy and sell...

(Note: The following are NOT definitive reasons. The definitive reason is that prices do not----cannot----exist. The following just helps to show that socialistic attempts at resource allocation are brimming with problems.)

Capitalism vs. Socialism: Allocation in the Temporal Dimension

Capitalism is continuous with men buying and selling and not-buying and not-selling (which continuously moves the allocation of resources as described above).

Socialism is intermittent---slow, not adaptive.

Capitalism vs. Socialism: Choices and Competition

Capitalism allows competing businesses and, as a result, many choices for consumers.

Socialism leads, in political competition, to "all-or-nothing." There is little to no choice.

Capitalism vs. Socialism: Agents and Reliability

Capitalism helps ensures reliability when buying a product because consumers can bind or hold the store to it.

Socialism leads to purchasing things through a political agent (a politician) "whom [one] cannot bind" and therefore greater unreliability.

Socialism will also lead to unreliability because a political agent's vote for X might be canceled by other political agents.

[To quote Mises:

The market is a democracy in which every penny gives a right to vote. It is true that the various individuals have not the same power to vote. The richer man casts more ballots than the poorer fellow. But to be rich and to earn a higher income is, in the market economy, already the outcome of a previous election. The only means to acquire wealth and to preserve it, in a market economy not adulterated by government-made privileges and restrictions, is to serve the consumers in the best and cheapest way. Capitalists and landowners who fail in this regard suffer losses. If they do not change their procedure, they lose their wealth and become poor. It is consumers who make poor people rich and rich people poor. It is the consumers who fix the wages of a movie star and an opera singer at a higher level than those of a welder or an accountant.

Every individual is free to disagree with the outcome of an election campaign or of the market process. But in a democracy he has no other means to alter things than persuasion. If a man were to say: "I do not like the mayor elected by majority vote; therefore I ask the government to replace him by the man I prefer," one would hardly call him a democrat. But if the same claims are raised with regard to the market, most people are too dull to discover the dictatorial aspirations involved.

]

Capitalism vs. Socialism: Morality and Democratic Ideology

Capitalism recognizes the right of exclusivity over private property rights, requires peaceful relationships versus violent, and protects the sovereignty of consumers. In terms of property distribution, it is inegalitarian whereas any form of "votes" is unequal (and accordingly so, since men are not in any sense of the term equal drones).

Socialism does not recognize such. It therefore grants people the "right" to say how other people run their property without having anything to do with it. It creates "legal instability." (And legal instability can only result in less capital formation.)

[Remember: For trade to even take place between two people there first must be an understanding of property rights. Trading cannot take place if this were not the case.

To quote Rothbard this time:

Man is born naked into the world, and needing to use his mind to learn how to take the resources given him by nature, and to transform them (for example, by investment in "capital") into shapes and forms and places where the resources can be used for the satisfaction of his wants and the advancement of his standard of living. The only way by which man can do this is by the use of his mind and energy to transform resources ("production") and to exchange these products for products created by others. Man has found that, through the process of voluntary, mutual exchange, the productivity and hence the living standards of all participants in exchange may increase enormously. The only "natural" course for man to survive and to attain wealth, therefore, is by using his mind and energy to engage in the production-and-exchange process. He does this, first, by finding natural resources, and then by transforming them (by "mixing his labor" with them, as Locke puts it), to make them his individual property, and then by exchanging this property for the similarly obtained property of others. The social path dictated by the requirements of man's nature, therefore, is the path of "property rights" and the "free market" of gift or exchange of such rights. Through this path, men have learned how to avoid the "jungle" methods of fighting over scarce resources so that A can only acquire them at the expense of B and, instead, to multiply those resources enormously in peaceful and harmonious production and exchange.

]

Misallocation: The general result will be misallocation, democracy or not, because there are no prices and no price accounting, which only exist when factors of production are privately owned.

Production Quality under Capitalism

• A free market enterprise can only stay in business or expand its business if it can sell a product to consumers at a price and a quantity that is equal to or greater than the costs involved in production.
• Their demand depends on relative quality, price, and infinite other criteria.
• Thus a business must care, to remain on the market, about its image of quality and price with consumers.
  

• Since a genuine capitalist business depends on voluntary relationships, the "standard of quality" is not "arbitrarily defined ... by an alleged expert or committee of experts." Instead quality can only be judged in the minds of consumers and their subjective preferences and desires.
  

• This does not mean, obviously, that 'bad' quality stuff will not enter the market. After all, the test is ex post. And under any economic system first products will always start lower in quality.
  
• But it is the ex post test that will force businesses to constantly keep the quality up, in terms of consumer demands and evaluations, otherwise they will drop out of the market.
  

[I suppose the fear from some is that there needs to be an agency, especially as it relates to medicine, and the market would supposedly not provide anything like that to ensure safe products. This is a big assumption that is backed-up with nothing. The existence of private insurance belies that assumption. There is also demand that there be safety. So the question must then move to a comparison between a statist-monopolistic operation versus a private-competitive one.]

Production Quality under Socialism

• As examined above, allocation under socialism is independent of the pricing mechanism. It is the reverse of capitalism.
• Therefore, its income will be independent of meeting consumer quality demands.
• Quality will be less.
  

Assuming state employees are of equal mentality (which, as Hoppe notes, is a generous assumption) compared to private employees in terms of how much interest and un-interest they have in working and in terms of how much interest they place in increasing or decreasing their respected incomes, the quality of state employees' products must be less, in respect to consumer evaluations, because their income is "less dependent on product quality."

"Accordingly," writes Hoppe, "they will tend to devote relatively less effort to producing quality products and more of their time and effort would go into doing what they, but not necessarily the consumer, happen to like."

Even if we assume that state employees were "superhumans," the result would not be different; if we just have these superhumans enter the free market, the result would be that the private working superhumans would produce relatively higher quality stuff than those working in the State.

Overutilization and Underutilization under Capitalism

• The market place of capitalism avoids overutilization and underutilization for all market-based allocations over time. (Consequently, capitalism is the means for true conservation of resources.)
• An owner of a business owns (1) production factors of his operation and (2) the output of that production, i.e., the products.
• Overall income is dependent on both: (1) production factors have a value and can be sold on the market and (2) income from the sales of the products.
• Capitalists therefore have an incentive "to maximize their income in both of these dimensions."
  

• All actions will have an impact on both dimensions and so decisions must take this into account.
  

• Income derived from production that results from sales must take into account that the factors of production, because they are not free goods and as such scarce and finite, will lessen in value.
• Meaning: Capitalists, if they want to be successful in business, will attempt to produce so that the marginal costs of production are less than the marginal revenue product. (I.e., the loss of value in resources is less than the value of the output of the last product.)
  

If a producer fails in this, then total income will lower. Capitalism therefore rewards success in this and punishes failure. It ensures that products produced are of higher values than what is depleted. It pushes for allocations and reallocations that works towards properly "conserving or consuming a given stock of capital."

Overutilization and Underutilization under Socialism

• Severity, notes Hoppe, will be especially true for democratic States. [Taboo: Monarchies are economically superior.]
• Controllers of a socialist enterprise depend on income that (1) comes from sales.
• Income cannot be derived from selling the factors of production.
• Because income is only dependent on (1) the incentive to preserve capital stock atrophies. No prices exist in capital.
  

• The incentive then must be to enlarge income from sales, despite loss of capital value.
  

• A given state enterprise and, particularly, its managers could not gain from preserving capital. Instead their income incentive would be just the contrary.
• Because if actions were directed at capital by somehow enacting a policy of conservation, the net income would be reduced. If they did not do such, then the managers would benefit by income being higher.
  

Again, assuming state bureaucrats are of equal mentality compared to ordinary persons it follows that there will be overutilization under socialism opposed to capitalism's rewarding and punishing making private firms tending towards conservation.

It follows from all of this, i.e., misallocation, diminishment of product quality and overutilization of resources, that socialism will by necessity result in declining living standards and impoverishment compared to capitalism.

The "Problem" of Monopolies under Capitalism

Despite the above, it is then claimed that capitalism leads to monopolies and that these monopolies lead to impoverishment and so forth. (The second problem, it is claimed, is that socialism is required to produce "public goods." This will be dealt with in next chapter.)

[As Murray Rothbard describes it, there are three possible definitions of a monopoly: (1) a single seller of a good or service, (2) a beneficiary of a government privilege, or (3) a seller that can sell at "monopoly prices."

The problem with the first is that anyone and everyone can be defined as a monopolist. Indeed, with this definition everyone is one. Any business defined as a natural monopoly due to its location or whatnot is fallacious because the narrower you look everything must be defined as a monopolist, or you must accept that this is not a valid way to define a monopolist and that no market businesses are monopolies. The problem with the third is that there is no actual rational way to determine if a seller is selling at a "monopoly price" instead of a "comparative one." (More on this below.) Only the second one makes sense and can be defined as a monopoly.

Furthermore, State laws are vacuous in definition. There is no clear definition in the law. This will only result in uncertainty and less business activity.]

{A} Historical Evidence: No Actual Evidence of Monopolization under Capitalism

Increased "monopolization" has gone with increased regulations and statist interventionism, contradicting the claim by socialists that an "unhampered market system" would lead in that direction.

Comparing and Contrasting...
Period I: 1867 to WWI was a relatively freer, capitalist time.
Period II: After WWII a relatively regulated, socialist time.

The first period had less "development toward monopolization and concentration" and had "a constant trend towards more severe competition with continually falling prices."

This trend was completely turned around with increasing interventionism.

Hoppe quotes G. Kolko whom he calls a "left-winger and thus certainly a trustworthy witness, at least for critics from the left":

There was during this [first] period a dominant trend toward growing competition. Competition was unacceptable to many key business and financial leaders, and the merger movement was to a large extent a reflection of voluntary, unsuccessful business effects to bring irresistible trends under control...As new competitors sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could [control and stabilize] the economy...Ironically, contrary to the consensus of historians, it was not the existence of monopoly which caused the government to intervene in the economy, but the lack of it.

[A verity of sources can be recommended. How Capitalism Saved America by Thomas J. DiLorenzo is a favorite of mine. It expands on the historical angle to this topic.]

{B} The Illogic of the Market Development of Monopolies

Defining monopolization as a precise factor of production taken off the market and owned by a single owner, who refuses to sell, is contradictive to market incentives and operations.

This "restraint of trade" results in no market prices. Now the owner can no longer calculate the costs of "withholding it from the market." Any monopolist does not know if he is maximizing his own profits or not.

Only if he "offer[s] the monopolized production factors on the market continually" will he know. Critics, since they implicitly admit that their assumptions of criticism are based on wealth maximization, will have to admit this. Paradoxically a "monopolist" wanting to maximize wealth will have a continual interest in dropping his monopoly and putting his production factors in the market.

This incentive will increase as monopolization increases because economic calculation will become less and less possible. A businessman in this position would have increasing difficultly in operations and knowledge "regarding future competing goods and services by the consumers in future markets." And the chance that outsiders will have better ways (more profitable ways) "of employing monopolized factors" will increase with increased monopolization. These outsiders will have a greater chance to see these other possibilities because they are in the market, versus a monopolist who will become increasingly outside the pricing system.

Thus: For self-interest alone will any "monopoly" want to sell his production factors to other producers. The monopoly argument against capitalism falls apart.

{C} Theoretically Existing Monopolies: Under Free Markets, Can Pose No Threat

Even if we ignore {B}, ignore the contradictions of the development of monopolies in capitalism, and imagine that they happened it still would not be a problem.

Hoppe in the book does this by doing a thought experiment, taking the issue to the extreme to then dispel the myth of a problem: pretend that "one super-monopolist ... provides all the goods and services available on the market, and ... is the sole employer of everyone."

If this was done without aggression (otherwise we could call it a State), what does this mean?

• It is perfectly and rightfully in the position that it is in. There are no claims against it by anyone.
  
• Anyone can still, if they wish, boycott it at any time.
• The workforce is voluntary.
• The earnings a man makes can be spent on anything he wants.
• This income could be spent on consumption or could be saved. He could, with others if he wants, use the money to fund his own enterprise.
  

Given this the super-monopolist must believe that it cannot make any more income by selling (even part of) its production factors. And, given this, it would mean that no one else in the workforce could see any advantage of buying those factors or starting their own enterprise.

Thus: There is no case against it. No one sees a better way. It exists because this was the best way to serve consumers.

{D} Monopoly Prices vs. Competitive Prices: Illusory

Lastly, and once again ignoring the above (for the critics, that is), critics will move to the idea that a test of "restriction of production" can determine if the prices from a given business have been developed competitively or monopolistically.

The trouble is that this is not possible. Any production can be seen both ways. Maximizing income requires producers to decide how much of the goods in question to produce. They will always attempt to set the quantity level higher than "which demand would become elastic which would lower returns." Production will be geared where the amount of goods times the price, minus the total costs, reaches a maximum. Restricti