Land of the free?

Willful ignorance is the ability to be both cognizant of a fact while simultaneously ignoring it. This affords one the ability to derive some measure of comfort from pretending to live in a world where such a fact is not extant. For example, a child may know deep down there is no Santa Claus but derives more psychic comfort in pretending that there is. Any belief system that makes testable claims is susceptible to objective scrutiny and when that scrutiny undermines the belief, willful ignorance typically ensues in order to preserve the comfort of that belief. While the world has many religions, there is one belief system that transcends them all. Nearly every member of our species adheres to it (insofar as it seems to be woven into our DNA). It is known as tribalism or its more common variant, patriotism. This is the belief that ones own arbitrarily defined group is superior to all other arbitrarily defined groups. One can even stack their tribes and believe each is the best (best city, best county, best state, best country). Now while there may be no way to prove or disprove ones estimation of their group’s “greatness” sometimes the patriot will make a testable claim, such as, “America stands for freedom and independence” or “America is the freest country in the world.” The latter is easily disproven by reviewing any of the various indices of freedom (the US ranks very poorly at around 25th). But even if the US is not quite the freest it is still believed by the patriot that America is a “free” country; that we fought the Revolutionary War in order to gain our “freedom”. A close examination of the actual history shows that it was not a war of independence for the peoples of the United States but rather a war of independence for the governments of those states from Great Britain. The individual remained just as ruled after the war as before, all that changed was the accent of the ruler. But the myth persists, that America is all about freedom of the individual against tyrannical governments and that our military fights to preserve “our freedom”. This is where the willful ignorance comes in to play. Let us examine the evidence that puts the lie to that notion of “our freedom.”

Would a free country enact laws restricting the non-violent behavior of its citizens? Would a free country throw people in a cage because they exchanged an unapproved good or service for money? Would a free country throw people in a cage if the exchange were approved but the exchange did not conform to some third party’s idea of the proper conditions for the exchange? Would a free country throw people in a cage because they did not get permission from someone to work for themselves or others? To wit, a recent article in the Morgan County Citizen (3/3/16, pg. 1) or Lake Oconee News (3/10/16) concerning a lake homeowner who faces JAIL TIME for renting out her home for short-term vacations. The horror! Yes, certainly, let’s JAIL this MONSTER who clearly represents an imminent threat to public safety. The point is not “did she do it?” the point is “how can such a law even exist in a supposedly free country?” America the land of the free? North Korea would be proud.

Laws prohibiting or regulating human actions are in an absolute sense anathema to the supposed principles this country was founded on: freedom. If a transaction is voluntary and there is no fraud involved then it can’t be “wrong” in a civic sense. You might morally frown upon some activities but you have no more right to impose your morals on others than they have to impose theirs on you. If you wish to live exclusively among those sharing your exact moral code, then follow the Amish example and set up your own private communities. The public sphere does not become a private sphere just because you happen reside within it. Repeat after me: if violence (or the threat thereof) is the only way society can change the behavior of non-violent actors then there is something wrong with society.

March 15 / 2016

Trade Balance

Last week’s article touched on seen benefits and unseen harms wrought by political intervention into people’s lives. This week we pivot to a somewhat new corollary of that principle, that of imagined harm. This is harm that can’t exist but because of a fundamental ignorance one has an expectation that it will occur. Ignorance of economics leads to a broad range of bad predictions and decisions and even businessmen (e.g. Donald Trump, Warren Buffet, etc) are not immune to such ignorance. Despite Trump’s repeated protestations that “we” (America) are “losing” because of the presence of trade deficits with some countries (notably Mexico and China) there is simply no cause for concern. The current trade deficit between the US and Mexico is $58 billion. That means that Americans purchased $294 billion in goods from Mexico but Mexicans purchased “only” 236 billion in US goods.  In Trump’s mind (and many others) this constitutes a loss. Well if that is so I guess I had better stop buying my groceries from Publix – my family’s trade deficit with Publix is thousands of dollars every year! Yes, I would be much better off if I grew all my own food, than my trade deficit with Publix would be zero. Do you see how ridiculous this sounds now? So to solve a trade deficit Americans should pay even more for the goods they want? This is supposed to somehow compel the Mexican government to coerce its citizens into buying more US goods? How can any government make its people buy more from a particular country? Countries are not monolithic entities; they are composed of individuals.

Trade is not a zero sum game where one side “wins” and the other side “loses”. Both sides gain or profit from any trade in the sense that if either party did not value the thing they got more than the thing they gave up they would not have engaged in the trade. Trump and his ilk view trade like a game of Monopoly because they fall for the fallacy of anthropomorphizing countries into single actors and then distill all trade down to a single good: money. So in his mind the US gave Mexico $294 and Mexico gave the US $236 – as though they were just swapping currency and nothing else. Yes, that would be a loss, but that is not at all what is going on. It is an absurd distillation of the transactions of millions of individual actors into a meaningless aggregate. To get a clearer picture of what is going we need to disaggregate these numbers. Let’s imagine that Joseph buys $10 worth of goods from José. Joseph now has a $10 item and José has a $10 bill. Who lost here? No one. Trump would view this as a $10 trade deficit. But a deficit implies some sort of debt obligation, that something is owed, but nothing is owed, both sides swapped value for value. Now imagine that José buys $7 worth of goods from Joseph. Joseph now has $3 in goods and $7 cash, or $10 of value. José now has $3 in cash and $7 in goods, again, $10 in value.

Indeed all trade follows the rules of double entry accounting. Mexico’s cash account goes up while their goods account goes down: in balance. The US’s goods account goes up while their cash account goes down: in balance. Claiming a trade deficit exists is the equivalent of looking at only one side of a standard accounting balance sheet and claiming it is not balanced because one refuses to look at the other side of the sheet.

To the extent that jobs and industry are moving out of the US and that this harms in the short term those that lose their jobs perhaps it would be more appropriate to not lay blame at the feet of those business moving away but rather ask the origin of the incentives they are responding to (regulations, unionization, taxes anyone?)

Trading Places

A basic economic principle is the necessity of accounting for both the seen and the unseen (first elucidated by the great French economist Frédéric Bastiat). It provides a basis for understanding how politicians perennially cast themselves in the role of Santa Claus whilst picking our pockets. We are a willing audience to the magician who dazzles us with (for example) public works project (the seen benefit) while remaining unaware of the unseen harms unfolding (those things not done, created, or attempted due to diversion of resources into the political projects). The principal works for any intervention into people’s lives. For example, sanctions or trade embargos are often put in place in order to influence the actions of the leaders of another country. Although there is not a single historical precedent for this ever working, it remains the most popular passive-aggressive tool in the arsenal of the state. The language used to speak of such embargos employs the ruse of anthropomorphization (“America” cuts off trade to “Iran”) in order to hide the underlying reality that rather than the target country being harmed it is the individuals that constitute that country that are harmed. See, it’s not millions of people being made to suffer; it’s just a nebulous non-human “country”. Those who engage in these practices of course understand the reality of weighing human suffering and misery against the greater good of their desired ends. Indeed it was Madeline Albright’s admission that the deaths of approximately half a million Iraqi children during the 1990s sanctions against Iraq were “worth it” in order to achieve their goals (this remark was specifically cited by Osama Bin Laden as one of the many reasons behind the 9/11 attacks).

But that is just the seen harm. There is also an unseen harm levied against US citizens and businesses who are barred from trading with the country embargoed (for example, Iran). Iranians want to buy US made goods. US businesses want to sell those goods. We have a willing buyer and a willing seller being prevented from engaging in trade because of a belligerent busy-body-bully in the middle. Those lost sales for US businesses will not be made up somewhere else – they are simply gone. These missed opportunities lead to more unseen harms – lost jobs, or rather jobs that would have been created but never were.

To the extent US businesses have foreign competitors in countries lacking an embargo against Iran then it is our own government that is pushing sales into the arms of their competitors. Brilliant. Some might say that this loss in sales to US companies is “worth it”, that it is their patriotic duty to suffer through such lost sales in order to help our country battle the existential threat we face from a country… that has never threatened us nor attacked any other country in over two-hundred years. Well that is certainly easy to say when you’re not the one cruising past potential income you are barred from touching. Ask yourself, would you willingly skip annual bonuses if your government told you it would help influence Iran? Yeah, I didn’t think so. And apparently Boeing doesn’t think so either   – this politically well-connected company managed to get itself on a short list of companies exempt from the current trade embargo with Iran. How convenient. Apparently the expediency of pleasing big donors trumps the so-called “national interest” that applies to everyone else. Justice for all indeed.

Fighting against 1984

The State is getting nervous. Technology has a way of disrupting institutional power. The Guttenberg printing press liberated the flow of knowledge from the former stranglehold of the Church and its scribes. Today the digital realm of the Internet is effecting a similar change with self-publishing upon the old-world monopoly of the print-publishing house. Travel agents are virtually a thing of the past. Bitcoin is beginning to threaten the monopoly the banks and the government have over the flow of money. Encryption of our digital lives (personal electronic devices) is now threatening the power and relevance of the State. Encryption means we can manage our own security; we don’t need some nebulous State apparatus to keep us safe and secure. Nearly everything that is important to us (photos, messages, financials, medical info, etc.) is locked away securely in our digital treasure chest.

But the State will have none of that. They demand the key to that treasure chest. Both New York and California legislatures have introduced bills banning the sale of smartphones that do not offer some sort of encryption “back door”. How dare these companies make a product that is impervious to the prying eyes of the State! This is a direct threat to their unlimited power to intrude into our lives.

Not to be outdone, the Federal government is getting in on the back-door game. A federal judge recently ordered Apple to assist the FBI in unlocking the iPhone of one of the San Bernardino shooters. Apple is openly defying this order. The primary problem is that were Apple to comply with the order there is nothing to prevent the technique used from falling into the hands of truly “bad guys” who could then threaten the privacy and security of every iPhone user. It’s like the government asking scientists to build the atomic bomb “just this once, to stop the bad guys”. Once knowledge is out there it cannot be contained.

But even worse, the government’s use of an act from 1789 (the All Writ Act) to compel Apple to help them sets a dangerous precedent. It is not the case that Apple has in its possession information that it is being asked to hand over (which it has always done in the past when presented with a warrant). Instead Apple is being forced to help the FBI, drafted as it were, unlock this device. Insert picture of government agent holding loaded gun to Tim Cook’s head and saying “help us, please” and you’ll get the picture.

Yes, but you say the FBI is trying to stop future terror events, so anything to prevent a loss of life is worth it. Ok, well that cuts both ways. If Apple helps the FBI on what grounds could it refuse to help the government of China, Russia or perhaps even a threatening mob boss? After all, they know that since Apple helped the FBI then it is indeed possible to unlock these things. Is the standard of behavior to be: Apple helps any “legitimate” state actor, except when they are bad, because of course everyone knows who the goods guys and bad guys are.

To be clear, this is not Apple’s property. They are a third party being asked to do the government’s bidding. If they complied it would set the awful precedent that the companies we do business with can be secretly dragooned into the employ of the State in order to spy on and monitor us without our knowledge. Don’t think that can happen? Well, the government already has a terrible track record of abusing its surveillance power. It took Edward Snowden blowing the whistle to show us how the NSA was spying on everyone in contravention of the Patriot Act. In fact Samsung just recently warned its customers that its voice recognition could be used by third party vendors to listen to conversations so they advised caution about what you say in front of it. Now imagine Samsung receives a request from the FBI to “help” them monitor everyone so they can ensure “our safety”. Nah… I’m sure that would never happen. Thank you Apple for fighting for us. Your actions today may well ensure that our future “won’t be like 1984.”

February 23 / 2016

Lost in Translation

Politicians are by and large disingenuous peddlers of envy, fear, and blame. Once having convinced their customer (the voter) to swallow that message they then proceed to sell them the cure: hope. And naturally they are the only ones that can turn that hope into a reality. The formula is simple: You: Things are not as I would like them to be in my life or I’m afraid of what the future will bring, Politician: This is not your fault, it is caused by [insert despised group du jour], you are not in control of your life, they are. You: Wow, I feel so much better now knowing that I’m actually a victim and bear no responsibility for my life, finally someone has given me hope that things will improve. The Politician: Yes they will improve, but I need you to help me make that happen for you, only I can save you from those that are keeping you down. If you grant me unlimited authority over your life not only will I fix your problems but I will presume such a grant of authority entitles me to force others who happen to live near you to succumb to our will.
The most successful candidate is the one who effectively deliver that formulaic message. To be clear, one can be elected without following this approach. But as soon as someone sets up this model, they are virtually guaranteed to come out on top. Witness both Trump and Sanders, two politicians who are deftly employing this message. Trump peddles fear of “aliens” coming here to steal our jobs lower our wages and put people out of work. His message is rooted in the idea that basically anyone who is not American is causing America to not be “great” anymore but he’ll fix that and make American great again. Yes, because tariffs, price controls, embargoes and all manner of trade protectionism have worked so well in the past at improving the American economy (Smoot-Hawley Tariff anyone?) Price controls do nothing but enrich the few at the expense of the many.
And Sanders – he lays the blame for every societal ill at the doorstep of the evil 1%, or 5%, or 10% who are of course causing everyone else to be poor by hoarding all the money. Even though the math doesn’t work, he continues to insist that if only we raise taxes and make them pay “their fair share” that will fix everything. He decries high tuition rates and insists “free” tuition will fix that problem – ignoring the fact that tuition rates have increased at a rate 5x the rate of inflation over a time frame exactly mirroring when the federal government increased its support of higher education through grants and loans. Colleges increased tuition in the wake of a wave of “free” government money. What do you imagine will happen to tuition when a tidal wave of money enters the system? No, I’m sure no one will raise tuition if Bernie’s plan went into effect.
In the final analysis Trump and Sanders and everyone else are all the same. Their messages may differ in substance on a few minor points, but the structure of the message is uniform. They all propose to initiate violence against those that disagree with them (since if they agreed they would of course willingly do what was asked) in order to force them to comply with their ideas. Both sides obfuscate the violence behind a curtain of euphemisms. When you see words like “should”, “impose”, “must”, and “ask” uttered by a politician simply substitute those words for the phrase “send men with guns to threaten them until [they do as we desire]”.
So here’s a Bernie quote, “We’re going to impose a tax on Wall Street speculation” becomes “We’re going to send men with guns to threaten traders to hand over money if they engage in Wall Street speculation.” And Trump “[For] every car … that comes across the border, we’re going to charge you a 35-percent tax” becomes “[For] every car… that comes across the border, we’re going to send men with guns to force you to hand over money otherwise other men with guns won’t allow the cars to cross this imaginary line in the dirt.”
They are all the same. Anyone who supports the State as a means to improving their position in society vis-a-vis politicians supports the idea that violence or the threat of violence against peaceful people who disagree with us is a legitimate way to accomplish social or political goals. Oh wait, that’s also the definition of terrorism.

Constructive comments are welcomed to this paper or at gregmorin.com. Follow me at @gregtmorin

February 17 / 2016
Author Greg Morin
Comments 1 Comment

Called to serve?

Top military leaders this past week called for expanding the Selective Service System (the registration wing of the currently idle, but easily re-activated, draft) to include women. Their narrative is that it is simply a matter of fairness. Women currently serve in all branches of the military just as capably as men, so at face value there really is no practical reason to continue excluding them from registration. The fact that this is being brought up now may be entirely innocuous; it was bound to happen sooner or later. Or, it could be an omen that signals this country is setting down a path of expanding, not contracting, its role of interfering in the affairs of foreign nations. An expanding global empire after all requires an expanding police force to maintain order. After more than ten long years of endless warfare our currently all volunteer armed forces is thinning out as they are stretched like an ever expanding net around a globe that refuses to be tamed by American hegemony.

The principled position regarding the SSS and the draft for which it stands is that it is an abhorrent violation of the rights of the individual. It treats our sons and (soon) daughters as mere chattel to be deployed by the state for whatever capricious whim those in power decide will benefit them and their cronies – all the while cloaking such moves under the flag of “patriotism”. Some try to claim it is one’s “civic duty” to serve if called upon by their country but that is but a smokescreen; all civic duties are forms of slavery, differing only in degree but not kind from the more familiar chattel slavery (lack of consent is at the heart of the evilness of slavery). Attempts to legitimizing slavery by calling it something noble is a ploy worthy of the Devil but not honest men. We may recoil in horror at stories of armed guerrillas in some far off country kidnapping young men and boys in order to dragoon them into service for their cause – but, in substance, it is no different than a draft into the armed forces of a modern state. A young person, against their will, is forced to take up arms and murder other human beings (or assist in that murder), and if they do not then they are put to death or imprisoned for decades by their own supposed “countrymen.”

Currently the draft is “inactive”, however the law is still on the books and it can be re-activated at a moment’s notice. For those without children between the ages of 18-26 this may not register on your political radar, but believe me, for those of us with children in this age group (like myself) it is cold comfort that it is inactive when we see that our next President will likely be one of the warmongers Trump, Cruz, or Clinton.

Some have argued it is actually beneficial to have an active draft in place, as it makes politicians more cautious about sending the sons (or daughters) of their constituents off to die. However I think Vietnam put the lie to that argument. President Johnson was all to happy to send 58,000 young men to their death in an utterly pointless conflict that had zero bearing on US security. Now consider that conflicts in Libya, Yemen, Syria and Iraq also have had zero relevance to US security and we see that politicians will never tire of wasting American lives and treasure in fruitless endeavors. All the more reason to completely end the draft and the SSS once and for all. Women should not welcome this kind of equality.

If the US mainland were actually threatened or attacked the problem would not be getting recruits, it would be organizing the overwhelming number trying to join the fight. By and large most feel the instinct to defend what is theirs; after 9/11 recruitment levels sored. Declining numbers in the volunteer armed forces is not an indication of declining patriotism. Rather it is voting by deed, and this vote loudly proclaims the American population does not view with much seriousness the shrill warnings from the ruling class that danger threatens us on every front. Particularly when those fronts are 8,000 miles away.

February 08 / 2016

Waterworld

By now many of you are likely aware of the contaminated water fiasco in Flint, Michigan that has apparently resulted in 77 cases of Legionnaire’s disease (and 10 deaths). It is indeed a tragedy of shattered trust. It is also darkly humorous to witness the acolytes of Statism (i.e. the faith that The State can protect us from all harms and correct all wrongs) are apoplectically flummoxed as to how such a thing could happen: “But, but, the state is supposed to protect us from the depredations of cost cutting profiteers!” The state is supposedly there to protect the weakest among us – so how ironic that those most harmed by this incident is the predominantly poor population of Flint. How could such a thing have happened? The problem is structural. Private ownership weeds out failure; public ownership protects it.

Now one might argue that since there are thousands of municipal water systems across the country that operate without any problems this is simply a fluke, an outlier and is not indicative of any sort of problem with government run water systems. That is a dangerous premise. It’s like arguing that one doesn’t need a seat belt because they’ve never been in an accident. The problem is not that random groups of people do not know how to provide clean water. The problem is that humans are imperfect and eventually a perfect storm of errors will accumulate until a calamity results. This can happen in both public and private entities. It is the response to the calamitous event that distinguishes public from private entities.

First, private entities already have a natural incentive to prevent such events from occurring because the owners and the insurers are financially on the hook for problems. Problems are costly to fix and often results in expensive lawsuits, so prevention is the best medicine. Public entities have no such negative feedback. No one is financially liable. Everybody plays a part in creating the mess, but no one is actually responsible. Worst case someone might lose their job or the town is fined by the EPA (that is, ironically the taxpayers – the customers so harmed – end up being financially on the hook!) Oh well. Losing your job is not nearly the disincentive to preventing harm as would be losing hundreds of thousands if not millions of your own dollars.

Secondly, if something does still occur despite best efforts to prevent it, private entities have a natural incentive to fix it quickly as possible in order to contain the potential financial damage. It is the very greed that so many on the left decry that actually aligns the incentives of the owners with those of the customer. Keeping your customers happy, safe, and healthy is beneficial to the bottom line – otherwise you get sued or lose customers. But as we have seen in the Flint case, the response of the ruling class is more akin to a Three Stooges skit, with each part of that system poking the other one in the blame game – all too busy fighting with each other in order to avoid responsibility than focused on actually fixing the problem.

Lastly, no matter what happens, the public system remains in place. The public can’t “fire” them, they can’t choose another provider. They have no choice but to continue buying a product from a provider that has proven to be unreliable. No is allowed to come in and compete with them (that would be illegal). In many cases you can’t even legally dig your own well – you are obligated to buy from the local utility. With a private system one has options. You can put in your own well. A competitor could come in and “steal” customers – or perhaps the old company is sued into bankruptcy and completely new ownership takes over.

In closing I would ask you to imagine the following: Imagine that the standard in this country was that all water was provided by private entities. Now imagine that the same thing that happened in Flint happened but with a private provider. Would there not be an instant outcry and demand that the government take these systems over, or that they must be regulated for safety? Now realize that the reality today is the exact opposite. And what do we hear? Cries to “privatize” our water systems in order to allow market forces to naturally regulate the delivery safe water? No, instead we get self-righteous politicians (Clinton et.al.) trying to frame this event as some sort of partisan one-ups-man ship that endeavors to prove that the only reason this happened is evil Republicans hate “poor black people”. Well I guess they must hate themselves since it was their own city council (composed of Democrats) who signed off on the plan that ultimately led to the problem.

The closing irony here is that despite long being accused of selfishness and greed, it is the private market that has come (quickly) to the rescue in Flint. Walmart, Coca-Cola, and others have provided (for free) bottled water to the residents.  Why are they doing this? Perhaps they genuinely want to help. Or perhaps they see it as a grand PR opportunity to earn some loyal customers. Even if the latter it doesn’t matter – if “greed” compels people to help their fellow man, then I say bring on the greed!

February 02 / 2016

Market Failure: Revenge of the Commons?

If you missed last week’s article be sure to read it here, however, a synopsis of the article’s thesis is that “market failure” is impossible. Markets are closed systems and as such anything internal to the system affects the entire system. A market can no more “fail” than a pot of water exposed to a flame will fail to boil. Apropos the pot of water example: if a pot of water does not boil after 5-seconds of exposure to a lighter we do not say “ah-ha, physics has failed, here is proof that flames cannot boil water!” No, we realize that if sufficient heat is applied, it will boil (thermodynamics) but that the process takes time (kinetics). Failure of something to occur instantly or even within our own lifetime does not equate to “failure”. Markets regulate themselves; perhaps not as fast as some would like, but it occurs nevertheless. As the saying goes: you can have it fast, cheap, or good: pick any two. With state regulation of the market you only get one: fast, at the expense of it being both expensive (inefficient) and poor (ineffective). Natural market regulation is both good (effective) and cheap (efficient), but tends to be slow, which many find frustrating. This gradual process thus provides a framework of excuses for state intervention to speed things up. These people fail to see the thermodynamic forest for the kinetically slow-growing trees.

At first glance it might appear the pot example is not illustrative of a closed market system. The pot is exposed to the surrounding air, which can transfer the heat away. So we must clearly demarcate the borders of the system under discussion; let us say the pot and flame are in an insulated box. Everything outside is irrelevant to what occurs in the box.

So, we define the market as that system containing everything that is (apparently) part of the market. However, the counterargument here would be that things outside of the market system, unlike the pot and flame, do effect what is in the system. That is, the “commons” outside of the market (into which things may be dumped or extracted) apparently play a role. To the extent such commons are artificial in nature (“public” spaces) and thus through state coercion the market’s efforts to allocate and economize those resources via private property are frustrated, we cannot say then that any abuse of such spaces is a market failure. The state itself is setting up the very situation that opens them up to abuse. The state is not part of the market. The market is peaceful voluntary trade where both parties “win”; the state is violent involuntary trade where one side wins and one side loses.

However, there are natural common areas (the oceans and the sky) that are not amenable to conventional private property demarcations (e.g. fences) – although technology is slowly changing that reality. These would appear to be areas outside of the closed market (private) systems and thus immune to feedback from the market even though the market may benefit from them. For markets separated by a commons but connected through other means, the feedback occurs at the border with the commons and this information is transmitted via the other connection just as though they directly bordered each other.

But, let us consider the more difficult example of two isolated markets, not in communication, separated by a commons. We will consider the ocean (although the sky works equally well). Imagine that you live on the coast and fish for a living. Far across the ocean another settlement pollutes the water. Eventually that pollution reaches your shore and affects your fishing productivity. You have no idea where it is coming from (non-point source pollution), all you know is that it is a new cost you did not have before. Since you do not know the source you only have once choice: to clean up/remove the pollution at the bordering point to where you customarily fish.

Is the fact that you have to devote resources to cleaning this up a market failure? No. Why not? Well imagine that if instead of it being some far away people polluting the water it was some natural event (volcano, mudslide, etc.). Your actions would be no different (cleaning the water) yet you would not say the market has failed just because Nature foisted additional hurdles at you. If the effect is the same, the cause is irrelevant if you have no way of knowing or influencing the cause.

Now lets say you do find out who is polluting and ask them to stop but they refuse. You do not trade with them so feedback cannot occur that way. You now have two choices that prompt me to pose this question: Is it morally justified to attack and kill them until they submit to your will if continuing to remove the pollution yourself may also solve the problem? One option involves the ending of human life; the other option is a mere inconvenience. Which would you choose? If you answer yes to the former then I suggest you reflect on how the state has warped your sense of reality such that it is considered morally acceptable to initiate violent actions against others in order to resolve non-violent conflict. Now consider that all state actions rest on a bedrock of threatening violence against those that will not bend to its will, no matter how trivial the concern. History does not judge kindly those who initiate aggression to force others to do their bidding

Market Failure is not an option, it’s not even possible

Proponents of state intervention in markets (managed markets) unfailingly assert the legitimacy of their stance by pointing to “market failure.” Yes, yes, they admit, markets are great at delivering goods and services to people, but, sometimes they inexplicably fail and this consequently requires men with guns (the state) to “fix” them. To put it simply, market failure is a myth. There is a failure however, not of the market, but of their own ability to comprehend the complexities of a natural system whose chaos is brought to order through feedback.

Appeals for regulation by some central authority are predicated on the ideal of “fairness” in ensuring that all who use some resource pay for such use. In other words, if one perceives even the possibility of “free riding” with regard to some economic good then this is all the excuse needed to bring in men with guns to ensure all pay their “fair share.” Free riding is the quintessential example of market failure. Now, as they say, time to bust that myth.

Now rather than choose an example that would be quite easily dismantled as embodying free rider potential (roads, courts, police, fire protection, etc.) I shall choose what is perceived as the most difficult of all: the environment. For this example we shall use the ever-popular environmental whipping boy, carbon dioxide. The output of CO2, it is said, does not factor in the costs of the damage wrought by this “pollutant.” That is, the externality is not internalized in the cost of the product. In fact the truth is exactly the opposite. To see this let’s consider an economy of two actors, Y & Z. Y produces product y and Z produces z and they trade with each other. Now let’s imagine Y can increase his output if he dumps his waste onto Z’s property. Y can now produce more of y, but Z must now devote time and resources to cleaning up the mess (or perhaps it makes him tired or ill) and thus the output of z declines. Y can now only obtain that smaller fraction of z output when trading. Obtaining less for the same cost is equivalent to a greater cost for the same amount. In other words the apparently externalized cost that Y foisted on Z must necessarily be internalized back to Y by virtue of how his actions affect other actors in the economy. No regulation is needed; it is inherent to the system that for every action there is an equal and complementary reaction.

So now extending this metaphorical example to the real world let us assume for the sake of argument that all the doomsayer prophesies of the climate alarmists are true. Is it not obvious that all these bad consequences would negatively impact economic productivity? So all things being equal, if one sells a barrel of oil for $50 that $50 will now only buy the equivalent of say $40 worth of goods (that is, $40 of goods will cost $50, a de facto market “tax” that precisely mirrors the level of damage as reflected in the decreased output). If the damage predicted by the alarmists is real, then it can’t not have this negative effect. In other words, if everything becomes more expensive because there is less of it, then necessarily less will be consumed, including energy derived from CO2. If the damage is real, this natural negative feedback loop will self-correct the problem as profit seeking people strive to innovate their way to greater production. If the damage is not real, then no correction was necessary.

Ironically, carbon taxes, long touted as a “market” approach to solving this issue would do nothing whatsoever. Energy consumption is relatively inelastic and thus higher prices (taxes) for energy would force prices down in other sectors to compensate. Indeed carbon taxes are already touted as revenue neutral (through lower taxes elsewhere or rebates). The only thing that one might superficially assume could work would be a flat consumption tax on all goods. But even if you could impose a 50% sales tax on the entire economy it would ultimately have no effect on consumption at all. If the money is simply removed from the economy, then deflation takes over and all prices drop. That is, output has not declined, only the money supply. The same amount of goods still trade but with fewer dollars. But, if instead the government spends the money, other than productive losses due to government waste, the supply and demand for goods, including energy still won’t change. With natural market feedback the external cost is internalized as reduced supply; with an artificial system (taxes) supply is unaffected, only the identities of those doing the demanding changes.

The market system needs no overseer or committee to function. It is not “targeted”, the entire economy would be affected as if with a fever until the profit motive drives the innovators and entrepreneurs to shed the burden of the internalized costs of decreased output. To say that markets suffer failure is the intellectual equivalent of denouncing a fever as a failure of the immune system.

Market Justice

The standoff between ranchers and the federal government at a U.S. Fish and Wildlife Service building in Harney County, Oregon can be distilled down to one core issue: property rights. The Hammond’s land abuts Federal lands and due to their past less than neighborly management practices (setting containment fires that got out of hand) their neighbors (the Feds) believed they had the right to throw their neighbor (the Hammonds) in a cage for one year. Which they did. Then they decided to give it a different name (terrorism) and throw them in a cage for another 4 years. That’s when the Hammonds objected and said enough is enough. Just imagine if your next-door neighbor could lock you up in a cage at their whim for any perceived transgression. That would surely be quite frustrating and dare I say terrorizing? To know that any minor misstep could result in your freedom and liberties being ripped away from you is indeed terror inducing. Welcome to the world of the American Indian.

The federal government has been terrorizing the American Indian for the past 200 years. They’ve had a lot of practice. They’ve become quite adept at it. The modern western rancher is simply the latest recipient of this unilateral wielding of overwhelming violent force.  So to the ranchers I say this: your ownership and the related benefits of your land and abutting federal lands is the result of prior violence by the Federal government on behalf of your ancestors or predecessors. The Feds stole it from the Indians and made it available at a fraction of its value to millions of homesteaders. That is not homesteading, that is theft and redistribution.

While it is true that the Federal government has wrought numerous distortions into the fabric of society and the economy and some have benefited while others have been harmed, these past transgressions are so complex, intertwined and convoluted as to make it impossible to untie such a Gordian knot and make amends. But, presently the Federal government owns approximately 28% of the land in the United States – the vast majority of having belonged to one Indian tribe or another.  There is no chain of a multitude of prior owners; there is a direct link of ownership of Indians->Federal Government. In virtually all cases the transfer was illegitimately obtained through acts of violence. If the current presidential administration is so concerned with righting past wrongs and the redistribution of wealth then it should immediately hand over all property rights in federally owned lands to those tribes (still in existence) with the strongest past territorial claim.

Such a transfer would instantly transform many of the impoverished Indian reservations, who rely on a constant influx of Federal money to maintain their citizenry, into powerhouses of wealth. A $1 billion lotto jackpot pales in comparison to a $1 trillion jackpot! In other words the land would be taken from “public” use to “private” use. The new private owners could do with the land as they see fit relative to all economically demanded uses coming from the market. That is, those uses that people most want to see would have the most money behind them and enable the highest bid to prevail. People vote for what they want with their dollars and those with the most votes wins. Some tribes might maintain their land as a natural preserve. Some might sell portions to farmers, ranchers or those wishing to develop them commercially. Some might buy the land and build high rises, new factories, or wind farms. Others (like the Sierra Club) might buy land and create their own “private” nature reserve, where they, and not the federal government, is in control of its (seeing as how the Feds often allow mining or logging in “protected” regions).

In short, in one fell swoop a big chunk of the past wrongs against the American Indian could be rectified (nothing of course could ever undo all the damage) while simultaneously releasing nearly 1/3 of the land mass of this country into the most efficient system the world has ever known for optimizing the use of scarce and rivalrous resources: the market.

January 12 / 2016
Author Greg Morin
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