Robert Reich’s arguments against “paid-what-you’re-worth” are a garble.

March 17, 2014
Robert Reich's arguments are curiously poor for a former cabinet member.

Robert Reich’s arguments are curiously poor for a former cabinet member.

Okay, so we’re comparing who to what, now?

Robert Reich is the former Secretary of Labor under Bill Clinton who has made waves on the internet with provocative YouTube videos assailing income inequality and other apparent economic problems in America. His arguments generally have ready responses among libertarians that, unsurprisingly, I find convincing. Reich’s latest exposé is against the economic theory that workers are generally “paid what their worth”. Libertarians use this argument to oppose to minimum wage laws. Because Robert Reich favors an increase in the legal minimum wage, he argues that the “paid-what-you’re-worth” theory of wages as a myth. Salon.com thought Reich’s exposé merited republication, but I was not so impressed. Entitling it, The “Paid-What-You’re-Worth” Myth, Robert Reich begins his exposé by stating the economic theory this way:

It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs.

According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form.

To libertarians, this is not a bare assumption. To libertarians, this is the expected result of a market process. Ph.D. economist Matt Zwolinski explains the process, also known as the Marginal Revenue Productivity Theory of Wages:

Well, first, it’s absolutely correct that capitalists want to exploit workers. they want to pay as low a wage as possible, and get as much work out of workers as possible, in order to maximize profit. but the fact that other capitalists also want to exploit workers in this way makes it difficult for any of them to do so. This is because competitive pressures force capitalist to pay workers close to the value of what those workers produce, whether they want to or not. If you tried to pay someone less than they’re worth, someone else will offer them more, because they can profit by doing so. Imagine you’re in an auction bidding against others for a dollar [symbolic of the value a worker might produce in some short amount of time ~eds]. Of course, you’d like to pay as little as possible for that dollar. But if someone else was bidding 60¢ for it, wouldn’t it be worth your while to bid 62¢? And wouldn’t someone else then bid 64¢, and so on? In a competitive market, that same process leads capitalists to pay workers close to the value of what they produce, not because they want to, but because they have to.

Sounds convincing to me. At least I can’t refute it on the spot. Let’s consider Robert Reich’s rebuttal. Ladies and gentlemen, Robert Reich:

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.

I see. So, rather than expose the flaws in a libertarian’s actual economic argument, our former Secretary of Labor instead tosses us a pure apples-to-oranges comparison. He wants us to compare the productivity and earnings of 1964′s auto workers to those of today’s retail workers. Well, I’m sorry, but in my tiny little libertarian brain, this comparison is completely opaque. Yes, I see that today’s Walmart workers are surrounded by digital gadgets that make them “quite” productive. Could Mr. Reich show us, perhaps a little more quantitatively, just how quitely the productivity of Walmart workers now approaches that of 1964′s auto workers? Maybe I’m dumb, but “quite” doesn’t quite draw a clear enough picture. Why not at least compare 1964′s apples to today’s apples by sticking with either auto workers or retail workers?

Well, let’s let Reich continue:

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.

Guess which company's business model the former secretary of labor prefers.

Guess which company’s business model the former secretary of labor prefers.

Hmm. So, aside from being in a completely different industry, with a completely different demand curve, and living in a completely different era, the real difference between the two is that, whereas GM workers a half-century ago had a strong union behind them, today’s Walmart workers do not. I see. Well, another difference that I think should not pass without mention is that, whereas GM is a complete failure of a company that would have gone under but for a massive government bailout, Walmart thrives as one of America’s most successful businesses. Of course governments throw favors at Walmart cronies in a variety of ways, so I’m not holding Walmart up as a paragon of free-market excellence, but let’s try to acknowledge some the recent failures of GM’s business model before lionizing unions for negotiating extravagant wage and benefits packages. A business that is not profitable can not employ people, and not all industries can always rely on governments to bail them out, nor should they.

I know Mr. Reich feels that he put together a decent case here, but just in case you found his anachronisms to be unconvincing, he continues:

If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.

All told, the Street paid out a whopping $26.7 billion in bonuses last year.

Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail.

Well, yes. Fair enough. Like GM’s auto workers, Wall Street’s bankers are also unworthy of a government bailout. The solution to the problem, of course, is for the government to stop making it rain on Wall Street with bailout money that it either borrowed or forcibly confiscated from taxpayers. Understand, though, that this has absolutely nothing to do with the minimum wage debate, where the pay-what-you’re-worth theory tends to surface.

As for the run-of-the-mill CEO who makes 300 times that of an average worker, Mr. Reich observes:

By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top.

The operators of facebook’s Being Classically Liberal page have rebutted this repeatedly and convincingly, in my opinion. Running a multi-billion dollar corporation is not as easy as these CEOs make it look. Balancing all of the factors takes a great skill that not many people have. CEOs’ decisions can generate either billions of dollars in wealth for consumers and shareholders alike, or billions of dollars in losses for the latter. Does the CEO who generates billions of dollars in wealth for others by soundly making difficult decisions not earn a multi-million-dollar paycheck? I think so. I do not find convincing Mr. Reich’s explanation that a CEO is little more than a multi-million-dollar figurehead—a veneer of machismo to parade before gullible investors. I think CEOs do more than that.

In conclusion, Mr. Reich offers a great case study in why I am still a libertarian after all these years. As a former Secretary of Labor, Mr. Reich is supposed to offer the best of the best arguments in favor of his preferred economic policy of higher minimum wages. In this case, as is typical, the best of the best arguments against a good libertarian idea consists of complete unresponsiveness, anachronistic apples-to-oranges comparisons, unhelpful caricatures, and the unrelated failures of other government interventions. Isn’t it about time for voters to listen more carefully to what libertarians are saying?


Peter Schiff and the Daily Show: The trouble is, graphs don’t win arguments.

February 1, 2014

Anyone can read the news to you; The Daily Show promises to feel the news at you.

I thought Jon Stewart was heroic when he took on Paul Begala and Tucker Carlson on Crossfire, exposing media theater and the uncomfortable truth that news organizations essentially take cues on integrity from Comedy Central. I bought it for a long time that Stewart’s The Daily Show was almost an acceptable substitute for cable news. Well, we all got a cold splash of reality last week, when Jon proved to us that his show is really is only comedy, and properly scheduled after puppets making crank phone calls.

Last week, the producers of The Daily Show defamed one of my intellectual heroes, Peter Schiff. Many libertarians criticized Schiff for walking into an obvious trap, but I can understand why Schiff took the bait. He personally appeared on the show in 2009 to speak with host Jon Stewart after having correctly predicted the 2007 financial meltdown. Stewart treated Schiff respectfully, and Schiff won the audience’s approval:

I imagine Schiff was expecting similar respect and thoughtfulness this time around. What he received instead was the following hatchet job, led by comedian Samantha Bee:

Read the rest of this entry »


Why I stuck with libertarianism — despite the kukubirds in the movement

December 29, 2013
The Libertarian Kukubird in its natural habitat.

The Libertarian Kukubird in its natural habitat.

Salon is back with another hit-piece on libertarianism, this time from a supposed reformed former libertarian and Ron Paul delegate, Edwin Lyngar, who fled the movement and became a liberal. Aside from being a Ron Paul delegate, his stated libertarian credentials are as follows:

I came by my own libertarian sensibilities honestly. I grew up in a mining town that produced gold, silver and copper; but above all, Battle Mountain, Nev. made libertarians. Raised on 40-acre square of brown sage brush and dead earth, we burned our own garbage and fired guns in the back yard.

He later fled the libertarian movement for the following stated reasons:

“Bring in the clowns,” [the smart, charismatic Ron Paul staffer] said, and smiled before I lost her in the mass of people [at the Republican Convention]. I will never forget that moment: Bring in the clowns. At the time, I considered myself a thoughtful person, yet I could hardly claim to be one if you judged me by the company I kept. The young lady knew something I had not yet learned: most of our supporters were totally fucking nuts. … From the ashes of the election rose the movement that pushed me from convinced libertarian into bunny-hugging liberal. The Tea Party monster forever tainted the words freedom and libertarian for me. The rise of the Tea Party made me want to puke, and my nausea is now a chronic condition.There are a lot of libertarians in the Tea Party, but there are also a lot of repugnant, religious nuts and intolerant racists. “Birthers” found a comfy home among 9-11 conspiracy people and other crackpots. After only a few months, I had absolutely no desire to ever be linked to this group of people.

Basically, Mr. Lyngar fled guilt by association. He added:

I began to think about real people, like my neighbors and people less lucky than me. Did I want those people to starve to death? I care about children, even poor ones. I love the National Park system. The best parts of the America I love are our communities. My libertarian friends might call me a fucking commie (they have) or a pussy, but extreme selfishness is just so isolating and cruel. Libertarianism is unnatural, and the size of the federal government is almost irrelevant. The real question is: what does society need and how do we pay for it?

So let me get this straight: Raised in libertarian Battle Mountain, Nevada, on a diet of sage brush and burnt garbage, Edwin Lyngar became a Ron Paul delegate to fulfill his libertarian vision on starving poor children to death. But intolerant Tea Party racists and kukubirds made him nauseous, and he had absolutely no desire ever to be linked with them. Thereafter, he began to “think about real people”. Upon some soul searching, he realized that he no longer wanted to starve poor children to death, and that he liked National Parks, too. That’s when he decided to become a liberal. Do I have that about right?

Well, this may come as a shock to Salon.com’s readership, but most libertarians, myself included, and even tea party kukubirds, don’t see themselves as wanting poor children to starve to death. To the contrary, we envision alternative means of making such necessities more affordable for all, including granting the public greater freedom to innovate, carry on businesses, and work. Of course, libertarians get trounced in most elections because most voters either don’t understand the libertarian alternatives, or they don’t believe that libertarian alternatives will actually make food more affordable, or they believe that trying the alternatives will be too risky. This is all understandable. Although grounded in what I believe to be sound economic principles, it is a leap into the unknown and untested, as far as most Americans living today can tell.

What’s not understandable is a self-styled former libertarian carrying on as if libertarians have offered no alternatives to the welfare state. I won’t go into the specifics of the libertarian vision of prosperity here. Suffice it to say that suggesting that libertarians simply want people to starve to death, or don’t care if they do, as if libertarians have no alternative ideas in mind for improving prosperity, is a shameless libel. If that’s how poorly Mr. Lyngar represented the liberty movement when he was in it, then, frankly, I’m relieved that he is now out of it, and I hope he stays out of it so long as he demonstrates such an inability to articulate the fundamentals of market economics.

Mr. Lyngar threw in this stuff about starving poor children almost as an afterthought. It seems to me that his priority was to rehabilitate his own image. He certainly devoted more bandwidth to distancing himself from kukubirds than he did to feeding hungry children. Fair enough. The libertarian movement has more than its fair share of kukubirds. I am concerned, at times, that I might be mistaken for one of them, but I stick with the movement anyway. I take that risk. I take those lumps. Why do I do it? I do it because I believe that the libertarian political philosophy is grounded in sound economic and moral principles, as articulated by the scholars at the Ludwig von Mises Institute, the Cato Institue, and by the thoughtful pundits at Reason.com, among other luminaries. That some racists and kukubirds have also associated themselves with the movement has no logical bearing on the soundness of its underlying economic principles. I posit that, like Mr. Lyngar, these unsavory characters probably joined the movement for reasons other than the sound economic principles on which it is based, such as the nurture of growing up around libertarians, or the inarticulate distrust that spawns conspiracy theories.

I will not abandon sound principles because others do not understand them. I will keep the courage of my convictions. I will not let the presence of kukubirds drive me from what I believe to be right. I will remain a libertarian until some non-libertarian demonstrates to me the alleged flaws of libertarian economic principles. As far as I can tell, Mr. Edwin Lyngar hasn’t bothered to try.

Image: Wonkette

Thoughts on Property Rights

November 10, 2013
Thinking about property rights.

Thinking about property rights.

In the midst of a fruitful conversation with a critic of libertarianism, the following question arose:

I have been trying to pin you down for some time now to speak more clearly on what rights there are, could you please elaborate on to whom those rights belong. The right to be left alone, perhaps. I would like to be left alone to breathe clean air, enjoy clean water, eat clean food for example. My rights in this regard seem to be subjugated under a corporate right to pollute the public’s air with carbon emissions and other pollutants, dump calamitous amounts of oil and other carcinogens on the public’s beaches and to contaminate our national food supply with artificially genetically modified organisms that are now in the wild and affecting other growers who do not wish or want to use the technology. Is there a right to profit at the expense of public goods? Does it supersede an individual’s right to enjoy those public goods?

In regards to GMO’s, it is Monsantos position that if sell their goods to one farmer and the pollen blows over to the next farmer’s land, they (Monsanto) assert that they have a right to put the second farmer out of business for patent infringement. This is not a hypothetical. Where do libertarian beliefs fall in a case like this? Should the second farmer have to do business with Monsanto because of a chance gust of wind?

As I feel the answers to these questions are too long to write in one sitting, I chose to type it out here where I have the option to save drafts.


Anyone who has diligently considered the writings and ideas of libertarians has probably already come across the term homesteading. For those who are not familiar with how libertarians use the term, I will describe that first the best that I can, and I will use the situation described in the second paragraph to make the point. I’ll set the patent question aside for now, and consider first the more traditional conflict of unwanted items blowing away from one person’s land and onto the land of another.

The basic principle of homesteading is that the first person who arrives on the scene to use a resource establishes an ownership right over it. This is similar to john Locke’s famous Labor Theory of Property, whereby one who mixes his labor with the land comes into ownership of the land. That ownership follows from labor does not necessarily follow logically, as the libertarian theorist Robert Nozick observed, but I believe most reasonable people would agree that those who work on unclaimed resources ought to retain the benefits of their labor. Traditionally, original land owners have erected boundaries around the areas they have appropriated through use, and excluded others from entering. Homesteading offers a more flexible alternative to rigid boundary lines in determining how the first user of one plot of land may also use surrounding land for some purposes. Murray Rothbard used the example of an airport, which emits sound beyond its geographic boundaries. The owners of the airport have homesteaded the surrounding land for the specific purposes of propagating sound waves and as a through-way for low flying aircraft, provided no prior resident comes forward to oppose these user. Those who later wish to move in next to the airport may do so, provided they acknowledge and accept the prior established use of the land.

The first in time principle should settle the dispute between the farmers. Imagine a farming town out in Farm Country called Frankentown. The farmers of Frankentown have all used GMO seeds from Monstanto for generations. Nobody has ever raised any objection. The farmers of Frankentown have all homesteaded their neighbors’ land for the limited purpose of blowing frankenpollen there. Suppose one of the farmers in the center of Frankentown sells his farm to the tight-jeaned and bespectacled Hipsterfarmer, who wants to start Frankentown’s first organic farm. I believe Hipsterfarmer should run into trouble, because the other farmers in Frankentown have homesteaded Hipsterfarmers land for the purpose of blowing frankenpollen all over it, that being the earlier established and accepted use of the land. Alternatively, imagine another farming town, across the river, called Organicsville. The farmers of Organicsville have all resisted using Monsanto’s GMO seeds because they are wary of heretofore undiscovered potential health and environmental effects. Organicsville is proudly GMO free by choice. Suppose one of the farmers of Organicsville sells his land to the wild-eyed, lab-coated mad scientist, Frankenfarmer, who wishes to try out his new experimental frankenseeds right in the heart of Organicsville. I believe Frankenfarmer should run into trouble, as his pollen blow-over would substantially interfere with his neighbor’s prior use of proudly growing GMO free crops. Frankenfarmer must either build himself some sort of biodome or build his farm elsewhere, as otherwise the blow-over of frankenpollen onto neighboring land would present a nuisance for which the neighboring organic farmers out to be entitled to relief.

In the situation offered in the question, an inquiry into the history of the use of each property should offer guidance. The earlier established and unchallenged use of the land should prevail. The later arriving farmer is not entitled to impose a restriction upon the earlier established farmer. Future uses should be allowed so long as they do not conflict with the prior use. Prior farmers are not entitled to relief of future nearby uses unless they can show a conflict. Now that I have described the rights and responsibilities of the farmers with regard to one another, I’ll discuss the Monsanto patent issue.

The libertarian community is split on the issue of intellectual property. Many libertarians would decide against Monsanto simply upon reading the word patent. I personally discourage the use of state power whenever possible, so I would scrutinize Monsanto’s patent claims very closely. Based on what little information is offered in the question, Monsanto’s claim seems frivolous to me, but I would like to read Monsanto’s complaint to understand the basis for its action. If Monsanto could perhaps establish that the new farmer moved adjacent to the farm that was using Monsanto seeds for the hidden purpose of receiving the benefits of Monsanto’s frankenpollen without paying for them, then Monsanto could potentially have a claim that the newer farmer intentionally pirated Monsanto’s technology. The claim seems far-fetched to me, and since I’m inclined to disfavor intellectual property claims anyway, I would presume that the invasion of frankenpollen upon the aggrieved farmer was an unwanted nuisance unless Monsanto established otherwise under a heavy burden of proof.


You would like to be left alone to breathe clean air. I believe that you have properly stated a legitimate claim. Unfortunately, 19th century American court judges began our national trend against vindicating these sorts of claims. I recall reading the following passage from the New York case Losee v. Buchanan, 51 N.Y. 476 (1873), in law school. In that case, a steam boiler at a paper mill exploded. Pieces of it flew onto a neighbor’s lawn and caused damage. I assume that the paper mill did not homestead the surrounding land for the purpose of receiving pieces of exploded machinery. This was not an established prior use of the land. Nevertheless, the court found for the defendant paper mill, reasoning as follows:

By becoming a member of civilized society, I am compelled to give up many of my natural rights, but I receive more than a compensation from the surrender by every other man of the same rights, and the security, advantage, and protection which the laws give me. So, too, the general rules that I may have the exclusive and undisturbed use and possession of my real estate as not to injure my neighbor, are much modified by the exigencies of the social state. We must have factories. machinery, dams, canals, and railroads. They are demanded by the manifold wants of mankind, and lay at the basis of all our civilization. If I have any of these on upon my lands, and they are not a nuisance, and are not so managed to become as such, I am not responsible for any damage they accidentally and unavoidably do my neighbor. He receives his compensation for such damages by the general good, in which he shares, and the right which he has to place the same things upon his lands. I may not place or keep a nuisance upon my land to the damage of my neighbor, and I have my compensation for the surrender of this right to use my own as I will by the similar restriction imposed upon my neighbor for my benefit. I hold my property subject to the risk that it may be unavoidably or accidentally injured by those who live near me; and as I move about the public highways and in all places where others may lawfully be, I take the risk of being accidentally injured in my person by them without fault on their part. Most of the rights of property, as well as of person, in the social state are not absolute but relative, and they must be so arranged and modified, not unnecessarily infringing upon natural rights, as upon the whole to promote the general welfare.

The bold portions here are the ones that I highlighted in my textbook. This is but one example of the public courts subjugating the property rights of individuals to the “right” of factory owners to create nuisances, so long as those nuisances might be described as either “accidental” or “unavoidable”. In For a New liberty, Murray Rothbard described how courts applied the same reasoning to air pollution, i.e. factory pollution is necessary for the “common good”. I recall hearing in one of the many lectures I’ve listened to over the years that homemakers used to take factory owners to court over the factory soot that would sully the laundry hanging on their lines, among other things. Before long, courts favored the factories over the homemakers. The courts based their decisions to allow pollution on appeals to the general welfare and the common good. Modern non-libertarians now use the same appeal to advocate for stricter government controls on businesses. The common good seems to be whatever the advocates of any policy say it is. Strict enforcement of individual property rights, on the other hand, is a more objective and predictable principle upon which to settle disputes. Property rights are established in the manner described above, with the earlier established use prevailing..

Libertarians would have enforced individual property rights in the case of the paper mill, in the case of the homemaker hanging laundry on the line, and in the case of your lungs. Courts should vindicate any claim you may have against any polluter and award you damages. The trend of the 19th century was for courts not to do so, thereby enabling the proliferation of pollution. The trend of the 20th century has been to promulgate regulations to prevent pollution, rather than return to enforcing property rights. I believe this is an example of one of the underlying tensions between libertarians and non-libertarians: Whereas libertarians would rather deter harmful conduct by vindicating claims retroactively in court, non-libertarians would prevent harm proactively with regulation. Both strategies have merit, but I believe non-libertarians consistently fail to acknowledge the high opportunity costs of regulation. Many businesses that would create many useful things for many people are either shut down or never start up on account of regulation, and the harm averted through regulation is often overstated. This is a great boon to wealthy corporations who enjoy the reduced competition when start-ups that can not afford to abide by the regulations are put out of business. The libertarian strategy would allow these start-ups to continue, to innovate their own solutions to the problems of nuisance and pollution, and hold them strictly accountable if harm results from their failure to do so.

I believe there are some few situations in which strict enforcement of property rights is impractical. If some few identifiable factories create a known pollution problem, bringing them to justice is relatively straightforward. On the other hand, when innumerable perpetrators each contribute tiny transgressions that aggregate into a larger problem, I recognize that bringing them each to their tiny individual justices presents a logistical problem where resources for administering justice are limited. Pollution from automobile exhaust is the prime example when it aggregates into smog and climate change. In the absence of a practical way to administer justice against all transgressors, I’m willing to consider other suggestions for reducing aggregated harm, provided the courtesy is returned to me when I request an honest confrontation of the economic effects of the suggestions.

The “cap and trade” issue arose in another thread. The first time I heard of this policy was in a Mises Institute podcast by the libertarian economics professor Walter Block. He advocated the policy as a market substitute. So long as the market fails, a market substitute should be the next best option. When the policy later came into public prominence, I was surprised to see opposition to it from conservatives and libertarians, but I probably should not have been. I know Ron Paul came out against it. As far as I’m concerned, “cap and trade” might be the best of a number of bad options, and I would tolerate that until innovators introduce better alternatives. I think libertarians generally prefer to deny what they consider to be “the global warming religion” rather than confront the thorny property rights question, which is unfortunate. I am not a climatologist, so I avoid opining on that subject. I believe instead that thoughtful libertarians who have not studied climatology should have a set of principles ready to apply in the case that the climate science on global warming is true, in addition to the case that it is false. In my observation, logistical problems arise in this special case of aggregation when attempting to enforce an otherwise noble and beneficial theory of property rights.

I think progressives err, however, by taking this principle of aggregated harm too far and using it to justify all manner of injurious interventions. I’ve spoken with progressives who believe that everything everybody does affects everybody else entirely, as if they had derived their political philosophy from the label of a bottle of Dr. Bronner’s Magic Soap. This is a mistake. I maintain that the vast majority of rights violations involve a limited number of identifiable perpetrators who should be brought to justice as individuals before the public should call upon government to impose a one-size-fits-all regulatory burden on all perpetrators and non-perpetrators alike.


You would like to be left alone to enjoy clean water, and have lamented the dumping of oil and carcinogens onto public beaches. I agree that pollution of waterways is unfortunate, but the problem as I see it is that the government, having decreed itself to be the owner of the rivers and oceans, has failed diligently to enforce its own self-granted property rights. The government should relinquish these rights to private parties who would better enforce them. Citizens will always demand to enjoy clean water. In the marketplace, businessmen should earn profits by servicing that need, and the businessmen who do will have a direct interest in diligently policing the waterways that they have put to that use. Their livelihoods will depend on it. The trouble with government ownership of the waterways is that, since the livelihoods of bureaucrats do not depend on the cleanliness of the waters they oversee, the bureaucrats have a lesser incentive to keep these waters enjoyable. In one famous incident, the government encouraged deep water off-shore drilling in the Gulf of Mexico, where underwater problems would be more difficult to solve, by offering discounted leases to oil prospectors to drill in these areas. The government oversaw regulation of the drilling,which many critics described as lax. The government limited oil company liability by law, almost as if the government was disinterested in enforcing its own self-granted property rights.

I believe this is not a shortcoming of any particular political party. I believe that electing more democrats or more greens will not solve this problem, although that might help. The best solution, from the libertarian point of view, would be to put these waters under the direct control of the people whose livelihoods directly rely on their being clean and enjoyable. The government’s arbitrary ideas about its own alleged property rights do not serve the people. The Supreme Court recently heard a dispute over the ownership of Montana’s rivers. Long ago, the federal government granted property rights over the “navigable” rivers to state governments. Where the federal government got this authority is beyond me, but that’s beside the point. The point is that the determination of ownership turned on whether the waters were navigable at the time of Montana’s entry into the union. This entailed, among other fanciful things, a review of the journals of Lewis and Clark for their assessments of the navigability of the waters. This arbitrary method for determining property rights is nothing short of madness, but it the sort of madness one should expect from a bureaucrats who assert ownership over the rivers without basis, and whose livelihoods do not directly depend on the rivers’ use and enjoyability. Libertarians would credit and respect the earliest established use of the rivers and disallow later conflicting uses. Regarding river pollution, I believe many of our more harmful toxins were developed after uses for the rivers have been established, and private owners of the rivers should have had greater standing and reason to challenge the harmful dumping of chemicals in them.


You would like to be left alone to eat clean, GMO-free food. This claim of right is not like the others, each of which involve some element of a commons or a public good. Air is an ever-moving resource, from which every living being draws, that defies capture and private ownership. Government has asserted ownership over waters and riverbeds and holds them in common allegedly for the public benefit. In no similar way, except perhaps to hunter-gatherers, is food a public good. Any food item that was grown by a farmer is the farmer’s private property until he sells it to another party. Only the farmer has standing to challenge the misconduct of another that has made his food unclean, although his customers may support him in this action. In most situations, however, I find that the farmers themselves have caused the alleged uncleanliness through practices common enough to be called “conventional”. Farmers who wish to deliver a higher quality, more pristine, more unconventional product should establish farms for that purpose, provided they do not impose upon earlier established uses of the land. Courts should enjoin later conflicting uses of neighboring lands would diminish the quality of these farmers’ crops. At no time, however, do end consumers enjoy a right to clean, GMO free food. Any such alleged right is subject to the willingness and ability of some farmer to produce the same. If no farmer produces the same, then consumers must either accept the conventional food products on offer or produce their own unconventional food (i.e. be the change they wish to see).


A final observation about the subject of externalities. You mentioned in a subsequent post:

Corporations, by law and tradition, are duty bound to derive profit regardless of costs to others. To this end, corporations must externalize all the possible costs of their operations onto others. In other words, they must, to the greatest extent possible, force upon others the payment of those costs they create, that they can discharge. Pollution of the environment is but one of these externalizable costs. Thus, if they can dispose of their waste products safely, but it is less expensive to the corporation to spew the wastes into the environment and harms others by depriving them of clean air, water or soil, they are duty bound to do so.

I am familiar with the rule of law, and I oppose it. I learned it in law school as the “business judgment rule” articulated in Dodge v. Ford Motor Company, 204 Mich. 459 (1919). In my opinion, the corporation should be duty bound only to be open, frank, and honest with shareholders with their future intentions for their businesses, and leave shareholders to decide whether to continue holding stock in the company in light of those intentions. Many shareholders might appreciate a move toward better corporate citizenship in spite of a reduction in profits. Many conscientious investors evaluate corporate citizenship when deciding whether to buy shares in the first place. I was once a member of Co-op America, now Green America, which assisted novice investors in doing just that through a process I believe they called green investing. So I oppose this rule of law that encourages the money über alles attitude in the conduct of business. As you have stated, and as I agree, other interests are at stake.

I believe the discussion above should have clarified the libertarian view on externalities and how courts ought to remedy claims of intrusion. Remember, however, that not every claim of injury or cost imposed on a neighbor deserves a remedy. Only valid claims deserve a remedy. As mentioned above, those first in time enjoy rights over later comers in the use of neighboring land. Also, if a new market entrant competes with an established business for customers, no violation of right occurs if the established business loses business. The established business enjoys rights over its property, but not over the minds of customers who might choose to patronize competitors.

Lastly, private businesses are not the only ones who impose externalities on others. Governments do it in spades, with one obvious example being the outcomes of elections. If a candidate wins an election by 55%, the election immediately imposes a four-year externality on the 45% of voters who would have preferred a different outcome. Prof. Tom DiLorenzo delivered a lecture called Economics of the Public Sector in which he described many political externalities that seem to go unaccounted for by those who recommend government solutions to private externalities. I highly recommend a listen.


There will always be questions, I’m sure, but I hope I have made some in-roads here to your understanding of how libertarians like myself apportion rights.


An Anti-capitalist-to-Reality Pocket Translator

September 14, 2013
Sister Teresa Forcades: to where does the road paved with good intentions lead?

Sister Teresa Forcades: to where does the road paved with good intentions lead?

A friend of mine shared this article with me on facebook:

Sister Teresa Forcades: Europe’s most radical nun

The article begins:

A Spanish nun has become one of Europe’s most influential left-wing public intellectuals. This year, thousands have joined her anti-capitalist movement, which campaigns for Catalan independence, the reversal of public spending cuts and nationalisation of banks and energy companies.

Where one sees the word “anti-capitalist”, a to-do list of pie-in-the-sky fantasies generally follows. This article provides about the best example I’ve seen in a long time. Sister Theresa’s goals are all well-intended, I’m sure, but evaluating them through even the thinnest lenses of economic clarity yield immediately unpleasant results.

According to the article, she drew up her 10 point plan “with economist Arcadi Oliveres”.  I’d like to learn more about this apparently anti-capitalist economist, but early Google searches turn up only Spanish language web sites. Perhaps he is the Richard D. Wolff of the Spanish-speaking world.

Here is Sister Teresa Forcades’s 10 point plan, with my Anti-capitalist-to-Reality translations:

• A government takeover of all banks and measures to curb financial speculation

Translation: Forcefully monopolize the banking industry. Applaud as the monopoly charges whatever interest it see fit. Create a new class of criminals called unlicensed usurers. Earning a profit by foregoing consumption and lending money without the government’s permission shall be a crime. Build police forces and penitentiaries as appropriate.

Create a new class of criminals called unlicensed investors. The act of buying now for the purpose of selling later at a profit shall be a crime, unless done with the government’s permission and to its specifications. Build police forces and penitentiaries as appropriate to imprison unlicensed investors.

• An end to job cuts, fairer wages and pensions, shorter working hours and payments to parents who stay at home

Translation: Firing or laying off an employee for any reason shall be a crime. Applaud as employment falls to near-zero, because employers will take far fewer chances when hiring people they may not lawfully fire or lay off. Build police forces and penitentiaries to warehouse the former employers who have fired or laid off workers..

‘Fair wages’, in the anti-capitalist lexicon, generally means ‘more wages than are currently being paid’. Cutting wages, or continuing to pay wages at the current amount, shall be a crime. Build police forces and penitentiaries to imprison employers who carry on their businesses but fail to increase wages to the arbitrary, ever-increasing, State-mandated minimum. Applaud as the forced increase in the price of labor causes a decrease in the demand for labor. Applaud as established, entrenched mega-corporations thrive and upstart competitors struggle to either launch or maintain their businesses.

Offering work in excess of a state approved number of hours per day shall be a crime. Those who either want or need more money must take a second job to acquire it, because employers who dare employ will avoid paying extra money for overtime. Applaud as workers pay higher travel costs.

Take more money from the people who leave their homes during the day and give it to the people who stay at home. Those who leave their homes during the day, acquire money, and attempt to bring all of that money back to their homes shall be criminals. Build police forces and penitentiaries as appropriate to house them.

• Decent housing for all, and an end to all foreclosures

Translation: Siphon resources from other worthy projects in the economy to build houses of State-mandated luxuriety for which no-one shall be responsible for paying. Applaud as practically everything else in the economy becomes impossible to afford. To refuse the State the use of one’s resources shall be a crime. Build police forces and penitentiaries as necessary to house those who refuse to forgo their other projects in furtherance of the State housing project.

• Genuine “participatory democracy” and steps to curb political corruption

 [I'm not quite sure what this means yet, so I'll pass on it.]

• A reversal of public spending cuts, and renationalisation of all public services

Translation: Siphon resources from other worthy projects in the economy so that the State may “serve the public” in its discretion, and without the inhibitions of cost accounting. Applaud as practically everything in the economy, including these services, becomes impossible to afford. To refuse to the State the use of one’s resources shall be a crime. Build police forces and penitentiaries as necessary to house those who refuse to forgo their other projects in furtherance of the services that the State, in its discretion, deems worthy of pursuit.

• An individual’s right to control their own body, including a woman’s right to decide over abortion.

Translation: Same meaning. This is a cognate.

• “Green” economic policies and the nationalisation of energy companies.

Translation: Criminalize all forms of energy that do not enjoy the license of the state. Applaud the Solyndra-style scandals as the State hand-picks “green” winners in what is left of the marketplace.

Forcefully monopolize the energy industry. Applaud as the monopoly charges whatever prices it see fit. Create a new class of criminals called unlicensed energy providers. Earning a profit by providing energy without the State’s permission shall be a crime. Build police forces and penitentiaries as appropriate.

• An end to xenophobia and repeal of immigration laws

Translation: Same meaning. This is a cognate.

• Placing public media under democratic control, including the internet

Translation: Repeal the First Amendment. The majority of voters is authorized to quash unpopular viewpoints. Pirate websites, radio stations, television stations, and newsletters shall be illegal. Build police forces and penitentiaries as necessary to imprison those who publish or broadcast them.

• International “solidarity”, leaving Nato, and the abolition of armed forces in a future free Catalonia

[I'm not quite sure what this means yet, so I'll pass on it.]

Perhaps as this pocket translator grows, I’ll make it a full feature of the blog…..

Image via Lrubiope, Wikimedia Commons


On George Selgin, Fractional Reserve Banking, and the Curious Sport of Insulting Austrian Economists

August 12, 2013
Don't make cats sad.

Don’t make cats sad.

Insulting Austrian economists is a popular sport among non-Austrian economists. Paul Krugman reigns as champion, with his latest feat of derogatory dexterity appearing in his column of July 16th, entitled The Paradox of Flexibility:

Well, Hazlitt has been wrong about everything for more than 80 years, and is still regarded as a guru. Bad ideas, it appears, are extremely robust in the face of contrary evidence.

Nice jab, Paul. Good one!

I was nonplussed this morning to witness George Selgin get in on the fun. Selgin is a self-styled former Austrian economist whom I understood as well regarded among the Austrian marketeers that I’ve heard speak. His lecture for the Austrians at the Ludwig von Mises Institute entitled The Private Supply of Money is one of my all time favorites from that outfit, so imagine my perverse interest when I happened upon a post of his entitled A Theory of Banking Made Out of Thin Air, which began thus:

Instances of self-styled Austrian economists bungling their banking theory seem almost as common these days as instances of theologians bungling their cosmology were six centuries ago.

Ouch, George! I didn’t know you could dish ‘em out like that!  Read the rest of this entry »


The Amazing Atheist: Capitalism doesn’t work because shoppers are too stupid.

July 4, 2013

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” ~ Murray Rothbard

The Amazing Atheist thinks he’s got this economics stuff figured out. The relevant part begins a minute in:

Mr. Atheist actually begins his account of market economics with uncommon accuracy. He describes hamburger/harmonica exchange well enough, at least to start:  Read the rest of this entry »


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