The London Libertarian

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Commentary and debate on politics, economics and culture from a libertarian perspective. To Libertarian Alliance Website >


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Henderson on State Inefficiency

EconomicsPosted by Lee Waaks Wed, March 01, 2017 22:29:23

The following is a reply by David McDonagh to Robert Henderson's blog post "Public and private confusion (and, yes, there is an alternative)", in particular, section 15 on "Public service inefficiencies and politicians". It was edited by Lee Waaks.

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Robert Henderson believes that the state is inefficient owing to the irresponsible behaviour of politicians rather than to their access to taxation; and that it enables the state to rule, or govern, the people rather than to serve them, as firms set out to do. He believes that the politicians pass too many laws, or that they introduce other measures not requiring legislation, but that demand such action as the meeting of “targets”, which he thinks are simply beyond the state ever meeting. But the Libertarian Alliance [LA] case against the state is that it seeks to rule by flouting our liberty as well as using taxation to be indifferent to efficiency; but, out of the two, it is the flouting of liberty that is mainly illiberal.

There is no real incentive for politics to be efficient. The political projects even have incentives to be inefficient for if they make savings in their allowance, then they usually get less funds as a result the next financial year, so they need to spend what they have been granted every year to maintain their income. Therefore, they are rewarded to stay still and often punished by having less income for their departments for any economising. Firms, by contrast, gain funds for other things by economising. When firms fail to attract customers by serving them, they lose the money they might have earned from the customers. State projects are not automatically affected by any public neglect.

We are told that there are too many laws and he gives tax law as a prime example, as there is just too much of it for anyone to master; even the best experts know only a small part of the law relating to taxation. Many of the laws themselves are not very clear, leaving it open to cogent new innovations of interpretation that can show up bureaucrats at the Inland Revenue as incompetent or unreasonable, and that can be the case at the Customs and Excise Office too. The ordinary bureaucrats are not trained well enough to cope with the obscurely written laws as they stand, says Henderson, and he thinks this is why the state is inefficient. But the reality seems to be that the state (and politics) is fundamentally negative sum in nature and the authority to tax the public leads the state to rule rather than serve the public.

He believes the lack of consideration on the part of politicians in framing laws to be used practically is a problem and many neglected laws that should be repealed are simply left on the books. But those that are used need a great deal of common sense to enforce as literally written or they would not be practical, so they are only partly enforced.

Even then, the gaols are overcrowded owing to politicians being too careless in passing laws and those in charge of the Home Office calling for longer sentences. If they ensured gaol places beforehand, then what the politicians do might be more viable, or at least more acceptable to Henderson. But liberals will ponder that responsibility needs liberty to be fostered, so any time in gaol is highly likely to diminish responsibility, and thus social liberty; so liberals will look for a
limited use of gaol, if they allow any use at all. Weekends in gaol, with the offender remaining in his job during the week and paying for his weekend gaol stays, as well as for some compensation to the victim of his crime, is in the way of liberal thought on crime and punishment. This might allows prisons to pay for themselves or, at least, cost the general public way less. Remaining in work will also foster more responsibility in the offender.

I think Thomas Szasz was basically right in his myth of mental illness thesis. I have seen some criticism from LA members that there might be some mental illness, despite what Szasz said, but in hearing some of this criticism, especially in the talk on Szasz by David Ramsay Steele on YouTube, it did not seem to discount the fact that what Szasz said still seemed to apply to the overwhelming majority of those classified as mentally ill. The recent drive to care for those with mental illness by the political elite, over the last five years or so, is in the direction away from Szasz, and it looks like the sort of kindness that messes lives up. The earlier “care in the community” seemed to be, at least, going the right way. But Henderson seems to think that many should be locked up for life and he regrets that a few have found their way into gaol. But as Szasz repeatedly suggests in his books, that is where some of them were more fitted to than in the asylums.

Henderson gets the Community Charge, that its opponents called the Poll Tax, completely wrong. It was an attempt to foster active local government by making them responsible for the setting of the Community Charge and by competition between such areas to put it up or down as the voters saw fit. It was a long shot, as voters tend to forget to bother much at the voting polls to make an instrumental use of elections and they use them for voter loyalty instead.

Anyway, it was not given the coup de grace by a violent protest in Trafalgar Square, as we were told by Henderson; it fell only after Mrs Thatcher fell; and she fell mainly owing to her opposition to the EU, not owing to the attempt she made to foster an active local instrumental electoral system relating to the Community Charge. That was slowly settling down, after the opposition to it had been largely seen off. It took former MP Michael Heseltine about a week to think it might be good propaganda to repeal it, and then he was eulogised by many Tory MPs, who had forgotten all about it.

To truly cost the medical services in the UK, the National Health Service [NHS] would need to be privatised completely. Only then will the real anarchic price system price things. It is not practical to simulate the price system. That is to say there is no way that the state projects can get realistic prices to rival those set by the price system. Henderson errs badly if he imagines there was a time since 1948 when the NHS was trouble free. It never can deliver what it is supposed to deliver. It will always fall short of that.

Henderson imagines that schools in the UK are more than child minding centres. He believes that the educational aims have only recently been lost.



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Reply to Robert Henderson on Corporate Efficiency

EconomicsPosted by Lee Waaks Sun, February 26, 2017 19:06:58

The following is a reply by David McDonagh to a blog post by Robert Henderson. It has been edited by Lee Waaks.

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Firms do serve the public when they seek to get customers for what they produce. But maybe Robert Henderson means providing uneconomic services, like running empty buses on a regular and frequent timetable just in case a few might need them. The fact is that this sort of "public service" is clearly very wasteful. It means there is a need for taxation to subsidise it, or a high ticket price that most people might well shun. Such "services" are intrinsically inefficient, as few want the services currently provided.

We are told that a monopoly is needed to run an uneconomic "public service", but that is not right (though it might help a bit), as competition might otherwise remove some income by cherry-picking off the parts that might be economic. But the mere monopoly would not usually bale out the universal service as a whole even with a no cherry-picking; instead it is taxation that is vital to this wasteful activity. Contrary to Henderson's claim, a monopoly cannot ensure such universal services that are often bound to be uneconomic.

We are told that "no private company would ever provide a universal one-price service without massive public subsidy", but that is false, as we can see with the usual prices of commodities, for we pay the same price for most of them whether they are in Cornwall, Warwickshire or Antrim. Most wares sell at the same price throughout the UK. The mass urban sales do allow ordinary firms to charge the same price for the same goods in largely rural areas as they do in the big cities.

The Post Office cut the second post as it wanted to cut the subsidy. Ditto, it has put the last post earlier in the day. A monopoly might ease it, but it is taxation that alone allows it to exist.

It is not clear to me what Henderson imagines is the public service aspect of the BBC. Whatever he thinks it is, he says it would ebb if the licence fee were to go and the BBC went more, or completely, state free. It would become more like the other TV channels, he says, but it looks rather like them anyway, accept that its adverts do not interrupt the programmes, but they do look abundant enough between the programmes, even if they are not commercial.

Henderson sees, or he says he sees, a clash between profit and public service in providing things like the National Health Service (NHS), but the NHS deliberately flouts economic viability in that it attempts free access paid for by taxation. A private insurance policy also might provide free access, but only for those who took such a policy out by paying for it. Such a policy might well make a profit.

If work is subcontracted out then the main contractor usually needs to see it is done to the extent that would have been the case had it not been subcontracted out. Henderson wants to deny that normality.



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Reply to Robert Henderson on Efficiency

EconomicsPosted by Lee Waaks Sun, February 26, 2017 18:23:00

This post is a response by David McDonagh to Robert Henderson's blog post on efficiency. It was edited by Lee Waaks

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Robert Henderson asks "what do we mean by efficiency?" We need to note that there are at least two vitally different but germane meanings that we need to consider here: economic and technological efficiency. These two distinct meanings produce the interesting fact that they often clash. If we have to produce what might be technically efficient, but what we cannot really afford, then that is to be saddled with what is called a white elephant. A good example of a white elephant is Concorde, the supersonic jet aircraft. It was only viable with support from tax payers and even even then most could not afford to use it.

Society is organised by firms needing to make a profit. Profits are earned by gaining the patronage of customers by competition for their customers as against all other firms. The entrepreneur attempts to guess what the customers will buy. His costs will include wages, rent, interest on any loans and other costs relating to supplying the good or ware. Anything earned by the project over and above all the costs will then be the earnings of the entrepreneur as profit, but he also risks making a loss in this competitive quest. This is the small competitive section of the market economy where entrepreneurs rival each other and it is zero sum, insofar as the total amount of customers out there only have so much at any one time to spend. The rest of the market economy is co-operative and, like all trade, it is positive sum.

The state depends on successful economic activity on the market for taxation. No state can earn its own way for politics is negative sum, and thus wasteful, from an economic point of view. But nationalists ususally look at the state as a grand collective end or consumer good. Robert Henderson is clearly a nationalist rather than a liberal.

Profit shows that what the customers want has been successfully produced by the firms that make a profit. This is a way of rejecting most of what we technically might have done but is actually very uneconomic. The range of what is rejected as uneconomic is very wide and to go down any one of those wasteful uneconomic paths would be to enter a metaphorical crushing stampede of wasteful white elephants. Profit mainly allows us to dodge that stampede but the state is always there to tax the public in order to rescue some unprofitable projects, thereby saving the odd white elephant from the metaphorical stampeding herd. Profit is a good sign of successful economy in the mass urban society.

Henderson imagines the state gives public service but the reality is that it sets out to govern the public. Profit is feedback that the customers have been served but the state never truly serves. We are told that firms merely get lucky when they make a profit, but that such luck runs out. This account is very unrealistic. It is more likely that firms ebb not owing to bad luck, but due to all who wanted the good having already purchased it, with the result that not enough new customers prevent the firm from making a loss. The firm then either produces something else that some customers will patronise, or it ebbs away to go eventually defunct. By contrast, state projects like NATO rarely go defunct, but continue to draw taxpayers money and to look around for new ways to continue their wasteful spending.

There is no general boon that allows all firms to make a profit, but Henderson tends to imagine otherwise, and he believes there are periods when profits are easy to make. The reality is that at all times firms have to provide wares or services that customers will value more than the price the firm puts on the wares. They may always prefer to spend their money on other goods.

Henderson thinks some goods are so vital that it is hard not to make large profits regularly. He gives the banks as an example. But if things were left to the market in 2008, then a lot of banks would have been replaced by new banks. He pushes the dogma that monopoly is emerging, once again, but there has been no percentage increase in monopoly since about 1800. Growing monopoly is a mere myth rather than a growing problem. For example, we are told that the march of Tesco supermarket is relentless but then we might have said the same of Mac Fisheries
supermarket in the 1960s. Only Sainsbury's amongst the 1960s rivals among the then big supermarkets has made it into the 2010s. This will most likely be the case by the 2060s, too, but which one it will be is far from clear. Tesco has certainly had a lot of trouble in the last three years, so it may not survive far into the future.

What metaphorically "destroys" firms is not their rivals but the their lack of customers. Stores that do serve the customers well can continue indefinitely. The customers always have a superabundance of other things that they can buy with their money. They never lack lots of choice in the big city but they might in a small village because it might be more costly to drive beyond other than local stores. But the Internet cuts that cost somewhat even in a village in the last decade or so.

Firms pretending to be more successful than they are does not affect the public very much. Their ebbing is largely their own private affair.

Henderson thinks it is debatable whether profit is a good yardstick of efficiency in any case, but even if it true in some cases, he still believes it is not true in all cases. He believes universal public services need a lot of unprofitable work to be done. But in what sense are such things efficient in any sense whatsoever? He says the Post Office makes a loss on delivering posts to rural areas because it charges the same price as those posted within the city. But this means rural service is aided by taxation. However, universal prices can be achieved by the market (e.g. Mars bars) without state aid from taxation. In such cases, city buyers pay the costs of transportation to rural areas in order for firms to maintain a cheap universal price. We are told the state aids private firms by its Post Office prices because, they too, pay the universal price. But this is hyperbole, as firms can charge customers for delivery.

Henderson thinks that two criteria can replace profit as a sign of efficiency: "(1) is the service being delivered to all who need it? and (2) is the cost reasonable in comparison with equivalent operations in other countries?" But neither criteria indicate any economic efficiency whatsoever, as (1) allows no economy at all because it cuts out germane input from the needy; and (2) other nations are not likely to be efficient in state projects because they are bound to be wasteful, as all the state does is negative sum. Judging by his criteria, Henderson thinks the National Health Service (NHS) looks efficient. However, since 1970 the NHS has been a hospital closing programme and it is no more clear that the 1940s fad of nationalisation has done better there than elsewhere, such as the railways or in coal mining. People love the NHS only as they fear free trade in health care. But that is public fear and corruption rather than a sign of any actual economic efficiency. The NHS exists only owing to general taxation.







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Robert Henderson on Free Trade

PoliticsPosted by Lee Waaks Sun, February 26, 2017 17:11:57

The following is a response by David McDonagh to blog post by Robert Henderson on the Libertarian Alliance (not to be confused with this blog of the same name). Because Mr. McDonagh's response strictly follows the outline of Mr. Henderson's post, there is some repitition. The context of the reply can usually be gleaned from the comment, but it may be useful to read Mr. Henderson's post first. (Mr. McDonagh's response was casually edited by Lee Waaks.)
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The politically correct [PC] ideal of equality and democracy, like politics and the state itself, has never been popular with the masses; and they haply never will be either.

Free trade boosts all incomes by boosting greater output than we would otherwise have.

The Navigation Acts held progress back, as politics and the state always does.

Liberal ideas are hardly unquestioned but then Henderson seems to get nearly everything wrong about liberalism.

While the state exists, the market will never quite be free. The state needs to tax the market just to exist.

Adam Smith hardly needed his metaphor of the invisible hand for the division of labour, as, clearly, it gears self-interest to serve others by specialisation, or by learning a trade. Almost any job requires some expertise.

Socialists are just statist Tories. Fascists are also Tories. Bolsheviks are Russian Tories. Collectivists are Tories. Liberalism is anti-politics, so it is against democracy and the state.
The state is anti-social. Its aims usually tend to mess up society.

Henderson is not wise to call the liberals dishonest. I think he is very ignorant and thoughtless, but he is most likely not dishonest. He loves the state so much that he cannot credit that it is sincerely rejected by the liberals.

Monopoly is almost impossible to obtain, as it is not easy to stop new firms from entering any market. But the idea that the market ends in a monopoly is a long-standing folk dogma, and the main hope of Marxism, but the idea is way older than Karl Marx. However, monopoly did not increase in Marx’s lifetime, nor has it increased since his death.

Liberalism is about repealing laws not passing them; not on monopoly or on anything else.

Free markets are what emerge when the state has been totally rolled back to non-existence, or to anarchy. Liberals are against the state, not monopoly per se. Henderson loves the state so much that he doubts that there are some that hate it. But, yes, the state is the only institution that can enforce a monopoly, but that is not why the liberals reject it.

The market is not natural, but it is anarchic. It does not need the state.

The liberal idea of no state is not empty-headed. Politics is anti-social and negative sum, i.e. wasteful. It is what looks like support for what is wasteful that is nearer to being empty-headed but, presumably, it is down to mere ignorance.

The market fits humans as they are, though they prefer to be consumers rather than producers. But the state is at odds with humanity, as people do not like being bossed bout.

Protectionism is no more natural than is smuggling (black markets) that, nearly always, flout it.

No one owns markets. It is just where people freely trade with each other.

Lower prices are clearly better for the customer.

The mass urban society gives rise to potential jobs being infinite. A village often lacks jobs, but never does a big city. Employment becomes a function of pricing ourselves into work rather than there being a lack of jobs in the big city.
Society is polycentric, and it is never a whole. If you hear the bell toll, then it tolls for another person. Economic interest groups related to the factors of production are as mythical as the supposed inexorable movement of free trade to monopoly theorized by Marxism, and both are clearly bogus. The idea of the class struggle is about as unrealistically Romantic as one can get. There never was anything like it in the past, which is why E.P.Thompson's 1963 book, The Making of the English Working Class, mentioned not even one example of it in more than 900 pages of his book.

Liberals claim that any trader gains, in his own estimation, from trade. The liberals do not postulate society, as a person, or as a quasi-person, who gains from trade. Both the consumer and producer surplus resulting from any trade is subjective to each trader. Trade is a positive sum transaction.

Liberalism is anti-politics, not a recipe for a type of politics. The anarcho-liberals that make up most of the active Libertarian Alliance [LA] are never happy with any state activity; none whatsoever. But the alliance in the LA is with minimal statists, who do accept a vital need for the state.

Liability is going to be limited in any case. The 1862 Act just spared a bit to settle for what traders chose to risk. Having all at risk would not be much more actual liability, in most cases. Limiting what is put at risk, to what we freely want to put at risk is not, somehow, unfree in some way. To say that only a claim to all a person owns must be involved if ever one is to invest is not more free, or more honest, but just a sheer stupidity.

A free market is the market free of the state. Yes, that means no taxation, no state money, indeed, no politics whatsoever.

Henderson seems not to know that the LA is against the state. The active LA members hold that the state has no business at all but, indeed, that it is immoral. The LA most of all opposes taxation, which the LA has often called theft. But Henderson imagines the LA endorses taxation and that it is only really against monopoly (or something else). Liberals do not care much about monopoly as such, for most of them hold that the market can sort it out by new firms starting up to exploit the monopoly price that the big firms might charge. Liberals only essentially hate the state and taxation -- taxation because it aids the illiberal state activity.
Liberalism is not particularly fussed about monopoly, but we might still note that the daft dogma that competition leads to it is clearly false. It is clear that it is not easy to keep new firms out of most trades, especially if the big firms are charging high prices. Henderson believes roads are an exception, but they have substitutes like air, rail and sea travel. In any case, there can be efforts to buy up particular roads on the market.

No, there is haply not fewer firms in the car industry than there were 40 years ago. British firms have declined but Japanese firms have emerged since then. Chinese firms are now emerging.

No, free-trade liberals do not want a single market but only no states. The market will never be a whole and there will never be “a level playing field” (to cite a statist metaphor from sport), but liberals, as such, do not seem to care much about that. The economists recommended the statists to allow free trade to exploit comparative advantage, which thrives on inequality and any unequal advantage that we might find. However, the state cannot completely indulge free trade, as freedom needs to be trade free of the state, ipso facto.

The EU aims at being a super-state, not a free-trade area. It seeks power and influence in the world. It aims to be the number one state no less.
What classical liberal ever complains about dumping? I have seen no pristine liberal complain against cheap goods.

Henderson says free trade does not mean free immigration, as, logically speaking, trade is made for humans, rather than humans for trade. But free trade usually does tend to mean a free flow of immigration too.

Henderson claims we can exchange goods and services without allowing free immigration if society does not want to, but there is no such person called society. However, in a liberal society no one needs to accept immigrants, to give them jobs, lodgings, etc. if they do not wish to do so, as social liberty is liberty on both sides. Society cannot decide but any person can decide for himself.

Yes, taxation scotches free trade, as does any state.

Democracy is not liberal but an attempt to govern: voting is illiberal, gratuitous, coercion against others.

Henderson says that comparative advantage has little reality to it. But it is very clear that some parts of the world (e.g., South America) grow bananas, say, way more easily and more cheaply than can be grown at other places, say, Northern Europe. They expoit the uneven playing field. He believes that as this may change, so it does not matter, but that is not germane, not even one iota. Every person does what he does best at any one time. That the comparative advantage can change, in some cases, hardly means it is not important at any one time.

Higher tax regimes and higher welfare provision tend to lower real wages, but Henderson writes as if he thinks they can boost them. Only greater output can do that and the state hampers output by taxing it to pay for services that no one wants but the rulers think is vital to civilisation. So, for example, we have the spectacle of subsidised, often empty, buses circulating around UK towns and cities to maintain an alleged social service on a regular timetable.

As we have had the modern state since the rise of the modern market, we have never had completely free trade. Henderson believes it was reckless to go in for freer trade in the nineteenth century. He believes industrial dominance, primitive transport
levels, and the slow industrialisation of the USA and other European lands, allowed the UK to dodge the hazards. But after 1870, that was not the case any longer and the British market was then flooded with food and wool. Many states then went protectionist, but Britain failed to do so. It paid the price for this folly of freer trade, he argues, as the industrial predominance it had once enjoyed was soon lost. The UK's agricultural markets were destroyed and new industries (e.g., chemicals) soon arose that left the UK behind. In contrast, Henderson argues, the protectionist policy of the USA and Germany enabled both states to exceed the UK’s GNP. But there was no need for the UK to retain the lead in any industry. The fact that other places were catching up and then overtaking the UK boosted wages even in the UK. Henderson seems to think the object is for the UK to forever lead the world in this or that sector, but the objective of economic activity is to boost the standard of living, not to dominate the world. He overlooks that state protectionism is very wasteful and seems to think that there is a clash of interests on the world division of labour, but very little of the market is in competition. Firms compete for customers but most of the market, as Alfred Marshall pointed out in 1890, is the result of cooperation. Even the competition, he noted, was within a cooperative framework.
Bismarck seemed to overlook the wastefulness of protectionism and of politics in general.
What he thought was wrong is hardly anything to do with the truth. Trade is to do with firms, not nations; still less to do with the wasteful state. Trade aids both a producer and a consumer surplus, so both sides gain by trade but taxation is negative sum, so we all lose out, on the whole, from any political action; and maybe both sides do too; though the
politicians act as if they gain from what they do.

It was not protectionism that made the first industrial “revolution” but the flourishing of science, technology and business. Henderson overestimates bias to home trade and he writes as if the EU and the WTO aid free trade rather than hindering it, ipso facto, by their very existence. The idea that free trade needs to be mitigated is on par with the idea that economic growth or increased income needs to be mitigated. Henderson also overrates the British Empire in trade, even though he is explicitly cautious about that. He believes free trade was a risk in 1850 for Britain, and that it is for all nations now, but he
overlooks that it is the best way that firms can do well. Politics is wasteful, by contrast, but Henderson believes that the state is a boon. He tells of free trade as idiocy, but it is clearly politics that is perversely negative sum and thereby clearly wasteful idiocy.

It is not clear that Henderson fully understands free trade, let alone the history of it, but he loves the state and the state-imposed wasteful problem of defence, that he believes the nineteenth century liberals were careful about, but the truth is that the liberals hated warmongering. Liberals, like Richard Cobden, were out to stop the backward state courting war. But it is true that the pristine liberals of the LA are more against the state than the Manchester School ever was.

Henderson postulates that complete free trade today would be dangerous for the West. He believes no firm can compete with low wages around the world. But this wage gap with what they call the "Third World" was caused by the backward rejection of free trade after 1914 and after the war that ended in 1918. Why would the wage rates on the other side of the world affect most of the trade in Britain? Could it affect local plumbers, carpenters and the like? Most trade will remain local but given free trade, then international wages will soon even up around the world anyway owing to the export of capital.

We are told by Henderson that experience tells us that industrialisation is best achieved by protection but that is wasteful, ipso facto, as all politics is. He overlooks that, or, more likely, he has never yet quite realised it.

Henderson tells us “the most lethal ammunition to discharge at free traders is the fact that no country in the history of the world has industrialised successfully without very strong protectionist measures being in place”, but this is a mere fallacy of post hoc; ergo propter hoc and it overlooks the cost of such protectionism in every case. The point is a brutum fulmen. However, it haply is about the best any protectionist can do.
The spread of British capital overseas would have haply stopped the "Third World” from arising, thereby dodging the current problem of mass immigration to where the capital, and thus the higher wages, are to be had. Nationalist measures “distort” the world division of labour. Free trade (or freer trade) did/does aid economic development everywhere, including in pre-1913 Germany. Henderson should note that the protectionism imposed after 1914 created the main problem that seems to concern him today, viz. the existence of lower wages in the Third World that threaten to pull down wages in the First World. Athough an increase in world production would likely lead to higher real wages for the First World, his protectionist “solution” would not remove this problem, but rather prolong it. As previously mentioned, freer trade was evening up wages around the world before 1914.

Protectionism did not aid the UK to recover after 1931. Henderson fails to explain this beyond his aforementioned post hoc fallacy, as there is nothing to aid economic development in protectionism. It simply allows firms to be free from competition from abroad. As free trade is basic economics, there is no need to call it a "secular religion", as there is nothing whatsoever religious about it. Firms need to keep up to date with all other firms under free trade, but they can become stagnant with protectionism. There is always free trade within a nation, and as the EU was attempting to become a super-state (or a new nation), then there would be free trade within the nations it was attempting to make mere provinces.

Protectionism always taxes the economy. Henderson argues that free trade is not necessary for rapid economic growth; that state regulation of the domestic market and international trade is not a recipe for disaster; and that being a “free trader” when the rest of the world is not reciprocating is a mug’s game. But some liberty is vital to economic growth and politics taxes the public, so even when it dodges being a total disaster, the state never dodges imposing extra costs. Anyway, one-way free trade is fine as there is no need at all to respond to tariffs of others with those of your own, as that will only increase the dysfunctional politics. Contrary to Henderson, it is politics that is the mug’s game, as it is always negative sum. Trade, by contrast, is always economic, so it is always positive sum. Henderson imagines we do not know whether protectionism is dysfunctional or not, but it always costs extra taxation; thus, it is always uneconomic or negative sum. So we do know that it is wasteful.

Free trade is the same as the free market. In the colleges since about 1900, they have attempted to define laissez-faire as trade within the state's domain and free trade as between states, but this distinction is not very realistic because states do not trade, only firms and customers.

Governments are not the natural suppliers of health care; or, indeed, of any good.

Trade results in gains to the customer and producer immediately, not later. The gains may not be uniform but they are immediate surpluses to both traders. In what way do the later generations thereby lose out? As for politicians, they live off taxation, thus they make the public poorer to the extent that they tax them.

The fact that many lands are poor today is the result of the interruption of free trade by the 1914 war, which Henderson argues was a distortion of domestic trade. But this idea that domestic trade should be separate from the worldwide division of labour is an arbitrary idea. Free trade would soon iron out the Third World, such that there would be soon no longer a massive advantage in mass immigration to seek jobs elsewhere, though some competition in a more even world would continue. The capital would go to the workers rather than the workers emmigrating for better pay.

Most of the jobs out there need no skills. Former Prime Minister Tony Blair was utterly deluded with his “education, education, education” idea, viz. the popular idea that education was investment rather than being just sheer consumption, as it usually is. But increased output from successful new capital investment (including human capital -- but that is usually mustered by on the job learing rather than at college) means all wages are higher as a result of extra innovation that, if successful, increases total output.

Henderson believes that nitpicking over how exact are measurements of wealth might aid his case against liberalism. But the fact that the "poor" today are rich in absolute terms is clear no matter how useless the means of wealth measurement are.

Why does Henderson call council housing “social housing” when it is clear enough that it is very anti-social and, indeed, that it is a recipe for thugs? The popular press in the UK calls council housing "CHAVs", i.e. council house and violence.

What is called the welfare state is a public menace. That it has been rolled back a little bit since the 1960s is a social boon.
Why was unemployment so low till about 1970? It was obviously owing to the cleared labour market, but the media, falsely, held that to be a thing of the past in the 1970s and since. But we can always clear the labour market whenever the price, or the wage levels, are right. In the 1960s, the dole was taboo, as only a few workers, when exchanging jobs, would ever go there; it was a sign that a worker did not really want a job. By the
1970s, however, many thought that full-employment and the cleared labour market had naturally broken down, so from then on many accepted the need for the dole. The story put out by the media obfuscated the fact that only the dole allowed mass unemployment to ever be mustered in the mass urban society.

In absolute terms, it is easier than ever to support a family on a single wage today. But people want to do all the other things too. It is false that the mother does better for the family by taking a job. It is also false to say there is no choice involved. We do not need to conform to social norms.

A bigger state clearly needs to tax more.

Most people never did think much of state provision, falsely called social provision, although Henderson ignores the fact that it is anti-social. It is very clear that most in the UK are better off than in 1960, especially the poorest third, who are today fairly rich, with all the modern conveniences. In 1960, most households did not have running hot water, phones, or most other modern conveniences. The market, which needs to be free to some extent, and was so even within the late USSR, is alone responsible for progress since 1750. At no time has the state done other than impose a cost. Henderson does not seem to grasp that fact; he thinks it is something to do with elite ideology.

If people buy things then they usually want them more than they want the money they need to pay to obtain them.

People often fail to provide many things in computers and elsewhere.

Few things are truly necessities.

Brainwashing is a mere myth.

Henderson absurdly says people do not really want computers, but then he tells us why they want them. He says we all need computers today; so we want them as a means. As Thomas Hobbes said, we choose to do all we do, either as a means to an end, or as an end in itself.

Free trade ebbs power, so all lose power whenever trade gets freer. But then power is a certain evil and, as Lord Acton famously said, it tends to corrupt.

The poor are not subordinated to the rich on the market. The market lacks any power as, qua market, it is free.

I have never met anyone who loves equality and I tend to think that no one does. It is a silly, unexamined, school teacher dogma, worthy only of contempt.

The gains of trade are immediate; they do not trickle down.

No society is truly more than economic relationships. That is a mere misunderstanding of economics. Any desire for certainty will be for an aspect of the standard of living.
There has never been a working class. That is a myth of college sociology and politics departments. The Labour Party would win every election, hands down, if there were a UK working class interest, but rather than see the plain truth of very diverse economic interests, the backward academics hold those who voteTory are fooled in some way. But the workers are not the only ones who cannot see this purely imaginary proletarian economic class interests, for the sociologists cannot see it either.
People rarely notice where things are made.

It is no absurdity that free trade tends to crowd out war. Firms cannot afford to fight wars and the state can only afford to fight them owing to taxation.

Yes, the illiberal coercion of crass democracy is hostile to free trade, as it is an attempt at government, thus it is against liberty.

Henderson imagines democracy is a boon to the masses, but it never was. Nor was it ever popular. Protectionism is credited with this and that, but no explanation of how it does what he imagines it to do is attempted. Similarly, he gives no detailed charge against free trade apart from his fallacy of post hoc.

Similarly, he assumes a movement towards monopoly but he seems not to know this dogma was around before Marx was born in 1818 and it is not greater today than it was, say, in 1800.

The actual reality of things is that total output determines what wages can buy and, thus, their value.
Immigrants may destroy a nation by destroying the idea that it is a large family, thereby making many natives no longer feel they have a homeland. Nevertheless, immigrants do, boost output, which leads to rising real wages. The same is true for “exporting jobs”, which also boosts real wages. But Henderson thinks the value of wages are lowered thereby and he adds:

“Those whose jobs opportunities have been degraded have suffered a form of theft. Had mass immigration and the export of jobs been prevented, the wages for the jobs taken by immigrants would have been higher than they are when subjected to the additional competition of immigrant labour and the exported jobs would not have been exported, which in itself would have tightened the labour market. In societies of rising aspiration, this could result in jobs considered menial being better rewarded than those which enjoy high status under 'free trade' circumstances. It might be necessary to pay a sewage worker as much as a doctor. Doubtless many would throw their hands up at this. But there is no logic to such a response, because in a society with a large private enterprise component a wage is simply a response to the value the market puts on a job. Unskilled workers may not earn as much as the average doctor or lawyer at present, but skilled tradesmen such as plumbers and builders often do.”

But workers can only be paid from total output and that would be way lower in the set-up that Henderson imagines here. But it is true that supply and demand (i.e. free trade) tends to equalize wages and salaries. Free trade would end aristocracy rather than fostering it, as Henderson imagines. “Class” is just a bogus idea of the PC religion of Sociology. Anyone who talks class thereby talks crass stupidity. Democracy never did give the masses any control and the masses hate voting anyway. Participation is a waste of their time. It is boring at best and they want to be free of it. As the saying goes: “Committees take minutes but waste hours”.

Henderson repeatedly imagines that there is something social about the state, but the plain fact is that the state is intrinsically anti-social.

Democracy was an elite fashion, not something the masses ever wanted or needed; it thrived only on elite thoughtlessness. But Henderson tells us that, in fact, it was originally oligarchy, not true democracy. But then he absurdly adds that it nevertheless brought with it a lot of control by the masses. His contradiction is self-refuting. The true half of the contradiction is that it was oligarchy; the false half is the claim that democracy brought any real control by the masses.

The urge towards the EU was one for a successful warmongering super-state not a stand against democracy. It was for power and influence in the world. There is no effective democracy to oppose. Nor is it going to be more popular in the future, and ditto politics and religion. They never were popular but the acme of what little popularity they
ever had is, now, well in the past.

Henderson imagines this class interest of the elite is unconscious! It all arises from psychological and sociological forces; forces arising from PC religion, or from the anti-social sciences or the unnatural sciences.
A lot of wastage in any nation is owing to measures taken just in case of war, and the whole lot tend to foster war rather than to deter it. Free trade tends to crowd war out. But Henderson seems to welcome war. It is silly to call free trade a religion, but a bit less silly to call liberalism one, as it is a creed rather than mere phenomena. But state worship seems to have something nearer to the God worship of many religions, so religion is more to do with the immoral state.

Henderson is a fine one to write about the ignorance of others.

Smith was not quite right to say that the state was needed to do certain things. As the economist Milton Friedman said, anything the state can do the market can do better, but he overlooked that war was an exception.





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The FED is Trapped

Current AffairsPosted by Nico Metten Sun, September 20, 2015 12:51:34
The long anticipated 17th September final came. A lot of people thought that this would be the most important date of the year. The FED suggested that on this day they might final start raising rates from its 0-0.25% range by 25 basis points. And unfortunately, many people still take this committee of central planners seriously. They didn't raise, in case you wonder. And I doubt that they will be able to raise in the future.

The reality is that the FED is trapped. The keynesian claim that it is possible to print an economy to prosperity simply is not true, in other words it is a lie. This lie however is so sweet that many people just really want to believe it. But the difference between reality and the keynesian model is slowly getting so absurd that even the biggest dreamer cannot ignore it anymore. And so this Thursday was probably a big steps towards waking people up.

The fact is that the US government has to cook the books to even make it look like there is a mild recovery going on. The measure of inflation is constantly redefined, to make it look lower than it is. This is done for example by so called Hedonic Adjustments. If a product in the basket of goods that is suppose to measure inflation is getting more expensive, it is simply being replaced by another that has not gone up in price and that the government thinks is equally good. So if for example beef is in the basket and goes up in price, but chicken is not in the basket and does not go up, then beef is replaced by chicken in the basket. The idea is that consumers can then substitute chicken for beef and therefore do not experience inflation. So you better like chicken! A cheeky trick to get a lower inflation rate. And that is just one of them.

The unemployment rate is another important statistic that is manipulated. If someone hasn't found work in one year he is simply kicked out of the statistic as if he is no longer looking. That way the US now has an official unemployment rate of 5.1%. This, by historic standards is a really low rate that suggests that almost everyone who wants a job will find one. A good statistic to show how absurd this number is, is the labor participation rate, that means the rate of Americans in employment. That rate is at an almost historic low of 62.6%. How does that go together? The answer is that 5.1% unemployment is a fantasy.

Remarkable is that despite all the manipulation going on, the official growth of the US economy is only about 2% per year. That is of cause measured in GDP, which is a completely useless unit of measurement in itself. GDP does not measure the productivity of the economy. All it measures is the amount of money that is circulating. That means that if for example the government spends money, even borrowed money, it will show up as GDP growth, independent of how productive the money is spend. The government could employ people to dig ditches and others to fill them up again. The productivity of this work would obviously be negative, but GDP would still go up. GDP also goes up when unproductive asset prices like house prices go up. Amazingly, even though GDP can be manipulated, all the intervention by the government have not managed to get this statistic significantly up.

The FED is trapped. The interest rates in the US have been at 0% for over 80 month. In addition to that the FED has pumped over 3 trillion Dollars of printed money into the economy. And all that has done is to create official growth number of about two percent. The only effect it really had is the inflation of huge bubbles in bonds and equities. The reason for that is that the economy is simply at peak debt. Even at these low interest rates, people and companies cannot borrow more money, because they already have too much debt. The only people who can still borrow money are the financial sector who really gets this money for free and of course the government. Since they cannot kick start the economy again, the official line has been that as long as the stock market is OK, the rest of the economy cannot be too bad.

The trouble is that these bubbles are dependent on cheap money. In order to keep them inflated not only do interested rates have to stay as low as possible, they will soon have to start a new round of money printing. That is a problem, because in the long run, printing money will undermine the trust in the US Dollar. So far that has not happened, because the FED could make everyone believe that it has an exit strategy. Once the US economy is growing, it will hike rates again and buy back all the printed money.

But as I explained above, the US economy is very weak and based on debt. Therefore, if debt gets more expensive the rest of what looks like a productive economy will simply implode. If however they do not hike rates, then more and more people will realise that the exit strategy is not real. Therefore it will undermine the confidence in the Dollar. That way the US economy will also implode. So no matter what they do, it looks like that keynesianism has finally checkmate itself. With this month FED decision to rest rates at 0%, more and more people will realise that the economy is worse than it seems and that the FED is not really in control of the markets.

My guess is that they will not hike rates voluntarily. Eventually of course the market will force them to. There is a small possibility that they will raise rates by 25 basis point in the next few month, but even that is unlikely. The reason is that if they do raise rates, the economy will implode and they will immediately have to reverse the rise. That will make it look like they do not know what they are doing and undermine their credibility. And they cannot really raise rates without a really strong economy, because the US government is highly indebted too. That is the difference to 1981, when then FED chairman Paul Volcker raised rates to 20%. At that time the US government did not have a debt problem. Now they have one and if the economy implodes, tax revenues will go down and dept/GDP numbers will rise, making the debt situation of the government worse. If simultaneously interest rates go up, the government will quickly have to declare bankruptcy. And since the government has more guns than anyone else, they will get the policy that is best for them, that is low interest rates and lots of money printing. So hold on to your hats, there is an inflationary storm coming.

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John Gray on Hayek

Current AffairsPosted by David McDonagh Mon, August 24, 2015 20:40:09

On 30 July 2015 in The New Statesman John Gray wrote about “The Friedrich Hayek I knew and what he got right.” He has written many books since he publically announced that he was no longer a libertarian when he got to rather like New Labour in the 1990s. He has since become an admirer of James Lovelock, and so become keen on Green ideas. None of the books he has so far seem to be first rate. Many of them even seem incoherent and rather like rushed hack writing, but the author seemed to find his changes of mind rather productive.

Below, I criticise a recent New Statesman article of his where he, once more, has attempted to assess the liberal idea and why it was so inadequate. What seems to be truly inadequate is the account that Gray has given in his articles and books on pristine or classical liberalism. His latest account reviewed below is no better than what he said on the topic in his many books but seems, nevertheless, to be worthy of comment, as do Gray’s books.

Gray sees Hayek to be of the “New Right” of the 1980s but he called it classical liberalism at the time of his enthusiasm and that was the historic old left. Gray had been a Labourite earlier, which sprung from a tradition that owed a lot to the statist sea-change that began to emerge in the Liberal Party in the 1860s and had almost totally taken over by 1900, before which we might refer to that Party as still largely classical liberal as opposed to statist modern liberalism that was dominant amongst the leadership, as well as amongst the younger members, by the great free trade election victory in 1906, making it something of a swan-song for free trade; though the actual leader, Henry Campbell-Bannerman, was still mainly a pristine liberal. What revived in the 1970s was the pristine classical liberalism.

Gray says that many of those libertarians, called such to distinguish themselves from the statist modern liberals, said that Hayek only valued the state for three things: national defence, law and order and opera. So Hayek was an economist and philosopher that stood for a freer market, if not quite complete free; where freedom was simply freedom from the state. But he was not an anarchist, so Hayek did not see the state as an unnecessary evil. Like the early Tom Paine, Hayek saw it as a necessary evil. Most classical liberals were like that. With Locke, they realised that we could have civil society without the state but they thought that because of crime, the state could be a boon. So reluctantly, they thought that the state was a good thing but only owing to the problem of criminal activity being almost certain to emerge. Since the liberl revival that Gray joined, many have thought that the state is not so good at countering crime. The anarchist contingent is a significant part of the revival.

Gray feels that this pristine liberal paradigm came to power in 1979 but the reality is that it was the Conservative Party that came to power at that time and about half in that organisation did not like pristine liberalism one bit, and the people who liked it, like Mrs Thatcher and her mentor, Keith Joseph, they were flirting with it rather than seeing it as the main thing; but many both in the Conservative Party as well as in the mass media and the rival political parties rather feared they did take it as the main thing. However, pristine liberalism was a factor. It has remained one since.

Gray feels it is important that Hayek was an Austrian, despite him becoming a naturalised British subject. Hayek was born in Vienna, where opera was all-important, in 1899. His father was a medical doctor and his mother came from a wealthy family. Gray seems not to know that liberalism was in decline from about 1860, and that, thereafter, statism was the new fashion. The inter-war years would become nationalistic as a result, for, in practice, socialism was mere statism thus usually more nationalistic. Socialists do not always agree and protest quite the contrary but in 1914 quite a few such socialists, including Prince Peter Kropotkin, largely shed socialism to support the nation state they denied they had owed loyalty to for decades. This was a big shock to those who remained anti-nationalist but they were a minority.

Gray says that Hayek saw the civilisation he grew up in collapse, but it was the war that removed the form of state, and liberalism had been ebbing for over fifty years before 1918. Hayek’s homeland was on the losing side of the war but that is a bit different from a collapse, as Gray imagines, or at least says, as it was not owing to the sort of imaginary perennial fragility that he refers to; which is a major Tory idea and one that looks clearly false to me. I think the Whigs were right that society is far sturdier than the Tory meme has it, such that a great war, like the 1914 war, could cause it to collapse. War does change society but it is not likely to end it.

John Locke was right to hold that civil society was almost perennial being in place long before the rise of the state even if he errs, as David Hume made clear, on social contract theory. The usual respect we show others in society, that we peacefully pass them in the street, do not bother them if they do not bother us, form what the sociologist might call the norms of civil society, and those basic norms are not far off the liberal norms as well as being those of civil society. As Adam Smith said, there is a lot of ruining in a great society. It is not fragile.

Gray says he first became interested in Hayek in the early 1970s. It was owing to his interest in pre-1914 Vienna as much as in the rising paradigm of pristine liberalism in the 1970s UK, he says. He met Hayek at the end of the 1970s and asked him if he knew Karl Kraus, a famous journalist of Vienna before 1914. He was told that Hayek had seen him but that he did not really know Kraus.

Gray says that Hayek had independence of mind and this allowed him to face up to a lot of opposition and criticism including big changes of fashion. Gray feels the paradigm of Woodrow Wilson’s national self-determination imposed by the USA after the war on Europe was one that posed problems for Hayek for the rest of his life. He died in 1992. But he never could see how liberal values got on with tribalism, says Gray.

On the fall of Wilson, the USA, wisely, went back to political isolationism [with free trade, the liberal meme on international relations].

Hayek’s ideas on evolution and on the ideal liberal constitution were not germane to that main problem, Gray says. Hayek had dropped his early socialist ideas owing to the economic calculation argument [eca] put to him by Mises. This seemed to Hayek and many others to be an effective refutation of socialism so he ceased to be a socialist. He afterwards adopted liberalism, and Gray said he made it into a sort of scientism; this is most ironic as Hayek was a major critic of scientism, Gray openly admits. It was held by Hayek to be the inept attempt to apply science to the human world. It was an example of Hayek often called a mere pretence of knowledge when he was looking at the socialists. However, Gray’s account looks weak there, as it so often does elsewhere.

In what sense did Hayek lose the debate with Keynes? Did Keynes win it? Keynes rejected equilibrium but, as he was a coward, he did it by picking on Say’s Law, which few had heard of, and he gave an inadequate account of it, and Keynes also gave an inadequate account of the orthodox economists in general, calling them “the classsics”.

Ironically, John Hicks, who thought he was going over from Hayek to Keynes and who won the debate by a de facto rejection of both of them, had found fault with the fact that Hayek scotched the meme of a self-adjusting economy by ignoring it with an hypothetical lag owing to malinvestment that Hicks held was unrealistic. The Hicks version of Keynes, adopted by all the textbooks, had the meme that Keynes was out to dump at its heart viz. equilibrium. The equilibrium so obvious to Hicks that he never seems to have realised that Keynes was out to reject it, was, of course, just an account of self-adjustment by the market.

All this is lost on John Gray. It was enough for him that Keynes rather than Hayek or Hicks was the nominal victor. Gray has most likely not read Keynes’ 1936 book anyway. More oddly, it would seem that Hicks never did either.

Hayek was rejected as an economist after leaving the LSE [owing to irrelevant personal reasons, rather than to economics] as a result. At Chicago, he was allowed in only as a moral philosopher. A version of Keynesianism had won, Hicks version, but it was not anywhere near what Keynes had wanted. He wanted to reject market adjustment but Hicks largely retained that. Keynes had wanted it to be the rule that the market did not clear, as had Malthus tries to defend against Ricardo in the first decade of the nineteenth century but Hicks innovated a version that suggested that Keynes should have called his book The Special or Particular Theory rather than his actual title of The General Theory of Employment, Interest and Money (1936).

I see no sign that Hayek ever believed that he had lost a debate, intellectually, to either Keynes or to Hicks. Hayek saw the LSE go over to what was called Keynesianism, of course.

Hayek did go somewhat statist owing to emotional pressure, I suppose, but not ever did he become Hicksian or, still less, Keynesian. Keynes truly remained out on a limb as regards his hated equilibrium, that remained as strong as ever, even if a version of Keynes was adopted, and what was called Keynesianism was granted lots of rather incoherent lip service based on supposed rejection of the still largely unknown Say’s Law. Indeed, Keynes caricature of that was accepted completely by the 1950s.

But Hayek did recommend a safety net and it was the state’s safety net that alone caused the mass unemployment of the 1930s, not the supposed lag that malinvestment caused that somehow suspended Keynes hated equilibrium, as Hayek had held. The unemployed adjusted to the dole rather than to the market. We might say they joined the sinecure section of the state sector, only they did not, as in the late USSR, pretend to work. Indeed, the few who took a black market job pretended they were not working.

Hayek took the economic calculation argument [eca] from Mises but later found it in a few nineteenth century authors like Baggage, so Hayek made no pretensions to being “most original” in the knowledge finding function of the price system, as Gray has it. But Gray knows the eca, if not all its implications. However, he nevertheless is still silly enough to say it also applies to the free market.

Gray incoherently says:

“The trouble is that it also applies to unfettered market capitalism. No doubt markets transmit information in the way that Hayek claimed. But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes?”

The eca applies to unfettered market, says Gray, yet they do find viable prices as Hayek said too. That is “no” yet also “yes” too; or P&-P too. Gray is being quite absurd here.

Gray then asks how can the market self-adjust, unlike any other institution [is there a tacit “except the state” assumption there?] overlooking that the answer is by the ever adjusting price system. The market is dynamic as it is always adjusting by the price system.

History itself supports no supposition or thesis.

Panic obfuscates prices? How? Gray has adopted mere bluff from backward Keynes. There never was any irrational exuberance but there has been exuberance but it has not stopped the market from clearing. Why should it?

Yet Gray is content to say, to the backward readers of The New Statesman, founded by backward Keynes himself, that:

“History hardly supports the supposition. Moods of irrational exuberance and panic can, and often do, swamp the price-discovery functions of markets.

When considering how to overcome the Great Depression, Hayek opposed Keynes-style fiscal stimulus for the same reason he opposed monetary expansion of the sort later advocated by his friend the American economist Milton Friedman (1912-2006). In attempting to generate recovery by macroeconomic engineering, both monetarism and Keynesianism required a knowledge of the economy that no one could possess. Unlike monetarism – with which it has sometimes been confused – the Austrian school of economics that Hayek promoted insists that the quantity of money cannot be measured precisely, and that expanding the money supply cannot reflate the economy in a sustainable way.”

Friedman did adopt aspects of Keynes, as did Hicks, but they did not reject what Keynes detested: equilibrium. Gray continues:

“For Hayek, the causes of the Depression lay in earlier central bank policies of cheap money, which resulted in large-scale misallocation of capital. Because no central authority could grasp the shifting pattern of relative scarcities and prices, only the market could determine the right allocation. Accordingly, believing that misguided investments had to be liquidated, Hayek argued in the 1930s for policies that were more contractionary than those that were actually pursued. The task of government was to get out of the way and let the process of adjustment run its course.”

Quite, Hayek was right there but he thought a lag might be created but he erred there as the market is a non-stop process of adjustment; Gray says it yet he also wants to deny it too; again P&-P too.

Gray seems to see how the market adjusts but he still perversely wants, or he writes as if he wants, the state to stop it. Then he, rather stupidly, denies that the market even can adjust.

But he continues:

“If they had been adopted while the crash was under way, Hayek’s prescriptions would have made the Depression even worse than it proved to be – a fact he later admitted.”

He did not admit anything like that, which I can recall. New buyers would have come in and the readjustment would have been fairly rapid.

If Hayek thought the depression would have been worse, if not for the state, why did not Keynes win him over? Anyway, it seems that the state prevents rather than aids market readjustment and that stagnation is alien to it. As Gray says of Hayek:

“But he never accepted Keynes’s core insight that large-scale economic discoordination could be the result of the workings of the market itself. For him it was always government intervention that accounted for market disequilibrium. More sceptical as well as more radical in his turn of mind, Keynes questioned the self-regulating powers of the market. His work on the theory of probability disclosed insuperable gaps in our knowledge of the future; all investment was a gamble, and markets could not be relied on to allocate capital rightly.”

Questioning the market is fine but the price system is clear enough there as a self-adjustment process to fresh conditions, so any serious questioning might have led Keynes to realise that. It might also lead Gray to do so too. He continues:

“There were booms and busts long before the emergence of modern central banking. Left to its own devices, the free market can easily end up in a dead end like that of the 1930s.”

No, the market does not stagnate. The dole was needed for mass unemployment to muster in the mass urban economy, and it is true that Hayek did go statist enough to agree that the masses would need a safety net, the very thing that stops the market from clearing. Freedom or liberty means we all need to be responsible and for us all to have savings, that Keynes repeatedly made a very poor case against, for some savings are vital to tolerate the intrinsic self-adjustment of the market.

But Gray feels that Keynes knew more about markets than did Hayek, as Keynes was a practical and successful investor for his college. Indeed, he claims that Keynes was one of the most successful investors in the twentieth century! So he knew about the uncertainty of markets in a way that Hayek did not, says Gray. He was aware of how the misguided economic policies might upset society in a way that Hayek did not, for Hayek ignored all those hazards. Here Gray seems to have lapsed into imagining that it is Hayek advocating state control by political policy rather than Keynes.

Gray says that Hayek’s blindness on politics was all too clear when he advised Margaret Thatcher to cut the state sector, that Gray calls public services, and to cut inflation so that the state budget might be balanced. This was exactly as he had advised in the 1930s, says Gray. He told Gray, in private conversation, that Trade Union power might be broken if the state made cuts. Gray thought Hayek was indifferent to mass unemployment that then, in the 1980s, stood at over three million. Gray does not realise that cuts might get rid of mass unemployment, as he never seems to have seriously thought much about such problems. Instead, Gray said that cuts would increase unemployment. But it is only the dole, paid for by the state from taxation, which can do that.

Gray says:

“Fortunately Hayek never had any influence on Thatcher’s policies. (Her chief economic adviser in these years was Alan Walters, a Friedman-style monetarist.) Equally, and perhaps also happily, Thatcher had no understanding of Hayek’s ideas.”

Gray says she haply never read the stint at the end of The Constitution of Liberty (1960), where Hayek explains “Why I am not a Conservative” for he rejects because conservativism rejects progress, says Gray. “Unlike Hayek, Thatcher understood and accepted the political limits of market economics” Gray says, but Gray and Margaret Thatcher never saw how damaging the state was to society. The main fault with Hayek is that he too had too much tolerance for backward politics. Politics is perverse wastage that needs rolling back, or cutting out completely, by tax cuts and privatisation.

Liberalism went out of fashion around 1860 but Gray imagines it actually collapsed, a very Romantic idea that is utterly unrealistic, given the nature of civil society. War would not have set liberalism back so much had liberalism remained the fashion, but socialism/collectivism was, by then, the fashion. War did end the empire that Hayek grew up in but nor was that particularly liberal in itself: no empire ever, quite, can be. Civil society, that is the basis of liberty, is not one whit fragile and it is very stupid indeed to imagine that it is fragile. No wonder they called the Tory Party “the stupid party”. This idea that society is fragile is about as unrealistic as one can get about civil society. But Gray simply does not see the pounding the backward state hands over to society every single day, thus showing it to be very durable.

But Gray is right that Hayek badly over-rated the law. It never could be the basis of civil society as so many, with Hayek, imagine. Like the state itself, law is at the periphery of society. Nor can it really protect liberty from the state. Gray is right there. Indeed, statutory law is a tool of despotism and privilege. Liberalism is about repealing illiberal laws rather than establishing new statutory laws.

But liberal values, if fostered amongst the public, can see off war. Private property is a problem solver. The state, by contrast, is a trouble maker. So the less we have of the state, the better.

Why Gray imagines the political entity of the Austro-Hungarian Empire kept politics at bay is not one iota clear. Gray is right that the European Union is not going to aid liberalism as it is a warmongering pact, despite the pretense it has of being for peace. The EU is out to be top dog superstate, but it is taking its time. It is almost as slow as the progress towards full liberalism itself. But all societies, even the backward late USSR, had the liberal civil society in their practical everyday life. In any society most members respect the liberty of others. But also all allow the state to scotch liberty at will; that privilege granted to the backward wasteful state by the people is the main problem. They give up this liberty to form state privilege by suspending normal moral values in its favour. As Edmund Burke said: “The people never give up their liberties but under some delusion.” The delusion here is that the state is a boon. Even John Locke thought so.

Gray fails to reproduce Popper’s attack on Hayek and Michael Oakeshott saying that Hayek’s spontaneous order as “rubbish” is no explanation of its faults whatsoever but Gray says it is exact!

However, Gray witnesses civil society every day in which strangers in the mass urban society freely pass him in the street, which is done as part of what Hayek would say is a spontaneous order. My guess is that Gray has no case against civil society; nor any good case against liberalism.

The change of fashion away from liberalism towards socialism after 1860 seems to have been flimsy, though it was aided by some haziness amongst the liberals as well as some youthful charismatic dash as well as sheer ignorance amongst the rising statist liberals, like Joseph Chamberlain and Charles Dilke in the UK’s Liberal Party. The pristine liberals were aging and pragmatic anyway. That there was a generational difference greatly aided the change of fashion. Gray makes the quip that there is nothing liberal about the mafia, and that is quite right but that is also true of the state too, but despite Chamberlain’s talk of public service it was more like rule than service that the new man management and more state control of the new fashion was to embrace.

Gray has the idea that a mafia would arise spontaneously, even though he also wants to be sceptical about that meme from Hayek, to say it was exactly rubbish in fact. . However, the culture developed over a long process of real full privatisation, designed to shed government and all government policy rather than as a mere new way to further state policy by political use of the market, as that called privatisation has been since the 1980s, would result in security services that would have had lots of time to crowd out the mafia problem.

Herbert Spencer was right that there was a social movement towards liberalism before 1860 but he also saw the fashion change towards socialism later on too. He argued against socialism. But he ironically had a holistic meme that the socialists used to even a greater extent than they used Marx. Just look at almost any Jack London novel to see a socialist in love with Spencer. William Hurrell Mallock saw such faults in Spencer, who later admitted to Mallock that he was too collectivist, though he never met Mallock. But pristine liberalism lost out to the new fashion of statist liberalism; and to socialism generally. It revived a bit in the 1970s when Gray joined it. But Gray always did love pessimism.

Gray simply errs left right and centre in his rather silly ideas about alternative economic systems and choice. The USSR never was non-capitalist, for example. An increase of the state ownership is not an alternative economic system but the enlargement of a sort of quasi-dole or semi-dole; the rise of where, in the late USSR, they said the workers in the state sector pretended to work and the state pretended to pay them. Many thought that in the UK this was “mixed economy” but in reality it was just an over-taxed market economy that supplied some job security. The mixed economy is a mixed up idea. There is only the market economy. The state sector just means higher taxation.

Communism is a myth, not a real rival to the price system, and the late USSR did not even claim to be communist but rather it claimed to be socialist, that Lenin said, a few times, was state capitalism. It would be clearer to just call it capitalism. But it was anti-liberal. Gorbachev tried to reform it but Yeltsin got rid of it. No collapse in sight.

The idea that the Afghan war brought it down is an example of Gray’s inability to judge actual events. There is no choice of economic systems. It is either capitalism or capitalism. But we can always have a bit more of the wasteful state.

Of course, Hayek and Spencer had a lot in common as Gray said. They were both liberals.

Again, China was capitalist, if statist too, under Mao. Deng Xiaoping simply freed it up a bit. Pristine liberalism will free it up yet more.

Letting the banks go under would not have been all that bad from liberal point of view. The fresh banks that would have emerged to replace them would have most likely be in better shape today had the state allowed that to happen back in 2007, as Hayek might well have recommended.

Hayek erred on the fairness of the market. He thought it was wise to say it is unfair, but few people in the larger society have ever thought that. Most people think it is fair enough, but no end of fools in colleges think they know better; so do schoolteachers but not most students in the colleges or most pupils in the schools, even though they may be usually a silent majority. Hayek thought that the idea that the market was unfair had something to it, but it looks to be merely a perverse idea.

Gray, for all his silly cynicism and pessimism still has not realised how unpopular the college/mass media sacred cow or ideal of democracy has always been, and always will be. The “anarchic energies of global markets” clearly serve the public way better than democracy ever will.





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Debunking Hoppe on Immigration

PhilosophyPosted by Nico Metten Thu, July 23, 2015 13:32:00
Hans-Hermann Hoppe is known for his skepticism of open borders. He thinks that open borders are inconsistent with libertarian principals. Therefore, real libertarians have to oppose this policy, at least as long as the state exists. I think Hoppe is mistaken on the issue. His arguments seem deeply confused and I am going to show why. As he claims to be a libertarian and the state is basically illiberal, then in order to make a supporting statement of a very intrusive state policy like immigration, his argumentation just has to be very messy. There is no real case for the support of this policy. To show exactly how this works, let us look at two of his articles on immigration.

Recently, LewRockwell.com re-published two of such articles. The first was entitles “Free Immigration is Forced Integration” and the second “Immigration and Libertarianism”. Let us start with the first, “Free Immigration is Forced Integration”.

In this articles Hoppe tries to make essentially one argument. The argument is that “free” immigration violates the property rights of the locals and can therefore not be libertarian. To get to this conclusion, Hoppe needs to distract the reader with a number of argumentative tricks to make it look like, his conclusion follows from his premises.

Let us go through the article systematically. The article is divided into 7 parts. He starts by summarizing what he describes as “the classical argument for free immigration”. I am not sure if there is such a thing as “the classical argument”. There are definitely a number of different arguments in favour of open borders. Hoppe, in a side note even concedes this in the second part of the article. But he makes it incorrectly look like this is another route to dispute the open border claim by calling it a “first shortcoming” of the free immigration argument. No, what Hoppe calls “the classic argument” for free immigration, is merely the economic argument for it. But fair enough, it is an important argument and Hoppe, as far as I can tell summarizes it correctly. He also explicitly agrees with the idea that free immigration does not cause economic problems. He understands correctly that this would be an argument against free markets in general.

In the second part of the article, he then goes on to say that trying to criticise open borders by pointing out negative effects of the welfare state is also not persuasive. These are problems of the welfare state and not of open borders in and of itself. I think this is correct. If the welfare state or for that matter any other state policy leads to negative effects of freeing up markets, then libertarians should attack these policies and not the freeing up of markets. So far, Hoppe seems to make the case in favour of open borders. One thing that is important to note until this point is, how he uses the word 'free'. The word 'free' is used in the libertarian sense of “free from constrains”.

Now, from the third part of the article, Hoppe starts making the libertarian case against free immigration. His argument is that in an anarcho-capitalist society, everything worth owning is already owned. Therefore, there cannot be freedom of immigration. So the property prevents the freedom. Wait a minute, what? Why is property in contradiction with freedom? This is a strange argument coming from the founder of The Property and Freedom Society. But maybe they serve free alcohol there? But seriously, isn't the whole point of libertarianism that property and liberty are closely linked with each other? How can Hoppe make the argument that since we have property, there cannot be freedom. That sounds very confused to me. It should be clear that Hoppe at this point has started to use the word freedom in a non libertarian way, as in 'free of charge'. He argues that we have property, therefore immigration cannot be free of costs. In this sense of the word however, libertarianism is also in contradiction with free markets. A free market would be a market in which everyone can help themselves to everything they like, free of charge. That clearly is not libertarian. That is more a socialist way of using the word freedom. Libertarians explicitly stress that their idea of freedom is to be free from proactive impositions from others. Even more remarkable is that Hoppe just a few sentences earlier has used the word in exactly this libertarian meaning. And now he just changes the meaning of “free” without even telling the reader about it. One wonders why? Is he not smart enough to realise that he is using the word with the different meaning, or is he speculating that his audience won't be? I don't know the answer, but I know that at least one of the two needs to be true.

So let me make clear, what a libertarian like myself means when talking about “free immigration”, or for that matter immigration. Immigration is a collectivist term. It means the movement of people over some form of collectivist borders. These can be cultural borders or state borders. As such it is not always completely clear when to call the long term reallocation of a person to another location immigration and when he is just moving house. Simply moving house from Charles Street a few miles down the road to Summer Lane is usually not called immigration.

In today's statist world, immigration is usually understood to mean the long term reallocation of a person from one side of a state border to another. Free immigration therefore means that people who would like to make such a move are free from not interpersonal liberty maximising compatible restrains. The biggest of such restrains right now is state immigration controls. These come in the form of state issued passport controls at state borders and visa licensing systems that allow the state to control who is on its territory for how long and what reason.

I am not trying to argue about words. If Hoppe has a problem sticking to a consistent meaning of a word let us just argue about the meaning itself. Can we agree that the state is violating people's liberty with these types of policies or not? And can we therefore agree that these policies have to go unconditionally or not? Unfortunately, Hoppe seems to really believe that state immigration controls, to some degree are not in violation of liberty. However, as I argue above, the attack on open borders via redefining the word 'free' can hardly be taken seriously. So what other arguments does Hoppe have?

Although, not so fast. At first he seems to continue the article, explicitly rejecting state immigration controls as unnatural in part four. However, immediately after he has done so, he starts to develop a new way of arguing that current immigration is violating the liberty of people. Hoppe says that since we have a state, that state then employs policies like building roads that are not market results. This distorted market will also have a distorting effect on immigration. And this is what he calls forced integration, because we now have more roads than we would otherwise have and therefore the locals have to put up with more immigrants than they would normally get.

This is a really odd argument in many ways. To start with, he seems to contradict himself. In part two of the article, he argued that trying to argue against immigration with the welfare state would not be convincing, as this is a problem of the welfare state, which will have to go. But now he is applying the logic that he himself rejected earlier, to do just that. If immigration leads to problems with other state policies than libertarians need to argue against these policies instead of making themselves advocates of more statism.

But his argument is also not economically correct. Yes, the state is distorting the economy. But it is hard to tell what the exact market result would have been. How does Hoppe know, that we now have more streets then we would otherwise have? If we could figure that out without the market, then we would have a pretty good argument in favour of central planning. Maybe the opposite is the case. Maybe now, we have less roads than we would otherwise have. In that case the same argument would lead to the opposite conclusion of forced exclusion. As a scholar of Austrian economics, he should know that?

Next he argues that in today's world the government and not the market is fully in charge of admitting people. That however, seems simply wrong. Behind the state borders, especially domestic property is still mostly owned privately. So despite the fact that we have state borders, the control over who comes into the country is still to a large degree in the hands of the market of that country. Without anyone renting out or selling a property to the immigrant, the immigrant still has a problem. But there does not seem to be a shortage of people doing that and I cannot see why there would be a shortage without border controls. Quite to the contrary, with the freeing up of markets it is reasonable to assume that accommodation could become cheaper as productivity increases.

Hoppe however argues that immigration controls lead to forced integration and forced exclusion. I can see how immigration controls are forceful exclusions. If a property owner on the inside of the fence would like to invite someone, the government can prevent this. That is why it is not libertarian. I find it harder to see a case of forceful integration. If the government lets someone through the state border, the people inside the fence can still say no to the person. And if everyone does, then the person would have simply nowhere to go, even in today's worlds. In order for this to be forced integration, it would need to be the case that someone is invited by the government and the government gives that person an accommodation. This does not seem to happen very often. If it does however, it is indeed not libertarian. But then again, instead of establishing general border controls and a visa system, the way to deal with that would be to abolish these state programs too. In fact, in this case, border controls and visas are clearly of no importance, as this obviously happens with or without these policies in place as well. So Hoppe is simply wrong if he concludes that it is the immigration controls itself that lead to forced integration.

Up to this point in the articles Hoppe has failed completely to establish an argument in favour of libertarian state border controls. However, in the remaining three parts, his arguments actually get a lot worse. While up unit now, he at least tried to make it look like he was making a consistent argument, he completely loses this in what is coming. It is a mixture of wild speculation and false conclusions that is not concerned with principals or consistencies. Let us have a look at it.

In part five he argues that if we had an absolute monarch that owned the whole country, then we would get similar results to free market immigration. It is beyond me how he comes to this bizarre conclusion. I guess, his line of thoughts goes something like this: Libertarianism is about property. If we had a single ruler, then the country could be seen as property. Therefore this would produce similar results to free markets.

Just like in the case of the word 'free', Hoppe has probably confused himself with words. He calls both property and therefore it becomes the same thing. He does not seem to realise that a King owning a country has absolutely nothing to do with property as being advocated by liberty loving libertarians. To be fair, a lot of libertarians do not understand the link between liberty and property. They therefore cannot distinguish between liberty maximising and non liberty maximising property. They simply think liberty is property. And Hoppe's argument is probably a result of that confusion.

But at the very least, he should realise that it is very dangerous to even just approximate a head of state to a private property owner. This is an argument often done by statist who want to justify things like taxation and regulations. They will argue that really no one owns anything, everything is owned by the state and therefore the state can tell you what to do with it or even take it away from you.

He continues this strange argument into part six, where he approximates a democratic government as the owner of the country. But since this owner, is not a single person anymore, but a changing committee, it will produce very different immigration rules than a king, so he argues. Fair enough, but what does that have to do with libertarianism? The state simply should go out of the way. The problems of immigration that Hoppe correctly or not incorrectly describes in this part are not problems coming from open borders, but from other state policies. And as he himself argued in part two, that is not a good argument against open borders.

He also takes this ownership analogy way too far, as if the democratic state would directly allocate people into properties. The reality however is, that this rarely happens. Most of the residential properties in the US as well as all the other western countries are owned privately. The state in such an environment going out of the way is just a policy of liberty.

Finally in part seven, he comes to a conclusion. This is not a logical conclusion. His argumentation so far was all over the place. He uses words in different meanings as it suits him in every given sentence. He wildly speculates about results of all kinds of systems and presents the conclusions of his speculation as market results if he likes them. And he simply is not very bothered with contradicting himself. In one word, his argumentation is a big mess. And so he concludes not what has followed, but what he wanted to conclude all along; that as long as the state exists (and to his credit, he stresses that the state will have to go), libertarians need to support certain state immigration policies which Hoppe thinks are close to market results. This is nonsense and I cannot see that he has even come close so far to an argument that would justify such a conclusion on libertarians principals.

A similar mess is the second article, “Immigration and Libertariansm”. Here he repeats a lot of the arguments that we have already seen. However, he makes some new ones. But first he start by attacking “left-libertarians”. He suggests that those are not real libertarians. I can see some people who might be called left libertarians that really are not, like Noam Chomsky. However, Hoppe never explains who exactly he means by that. But from the article, it seems that if you believe that the state should get out of the way of immigration unconditionally, then you are a left libertarian as opposed to just a libertarian. Silly attempt of an ad hominem attack.

His new arguments are first, that one could see the state as a trustee of all its citizens (he seems obsessed with constructing arguments that present the government as legitimate property owners. He never talks about liberty, property is clearly all he knows). On the basis of this argument he then goes on to outline what he thinks a sensible immigration policy would be. By that he means, what he would like to see. It is not at all clear why his proposals should be the results of a trustee.

Seeing the state as a trustee of its citizens is of course absolute nonsense from a libertarian point of view. Again, this is exactly the kind of nonsense that statist are trying to sell us. The state is not a voluntary and therefore legitimate organisation that can legitimately make decisions on behave of its citizens.

Hoppe actually concedes that seeing the state as a trustee is not a good way of looking at it. But his reason for that is really strange. He does not reject the idea because it violates people's liberty, no. He think this is a bad analogy because we don't see the immigration policies that he thinks we should see, as Hoppe sees them as market results.

In reality, since the state cannot be seen as a trustee, any policy that comes out of the state restriction the free movement of people on the basis of private property has to be seen as illegitimate, no matter what these policies are. And Hoppe never comes up with an example of the state actually violating the property of domestic people by letting “foreigners” through the state gate. Sure there are plenty of other policies in place that do violate private property rights. But those are separate policies from immigration controls.

Policies like the welfare state, which he goes on to blame for some negative effects on immigration. The welfare state might or might not produce these effects, the case is actually a lot less clear than he might think. In any case, Libertarians are not advocating welfare, just open borders. And again, Hoppe himself rejected the argument of conflating the two in his other article, so why does he bring it up here?

At one point he actually not only concludes that immigration is bad for the welfare state, but that “a financial crisis of unparalleled magnitude would result”. This is really beneath Hoppe. There is not a shred of evidence that immigration is causing economic problems. If it did, it would be an argument against free markets in general. And as we have seen above, Hoppe knows this very well.

It is a bit difficult to make a clear conclusion from all of this. Why is Hoppe coming up with such a mess of an argumentation? Is he too stupid to realize what he is doing? He might be, but it is not the impression that I have of Hoppe. I think he knows what he is doing and he is doing it deliberately. It looks to me like that he knows that there is not a case for libertarian state border controls. But he really does not like the outcome of this particular free market policy. So he is deliberately creating a messy argumentation. That way he can suggest to the anti immigration crowd that they are ok rejecting immigration on libertarian grounds. And that crowd seems more than happy to ignore the mess and pick up the ball. On the other hand, if a critic comes along trying to suggest that he is not a libertarian, he will point to the sentences in which he says that he does not like the state and wants to get rid of it. But that does not change the fact that these sentences are in contradiction with lots of other things he writes. He is clearly trying to avoid that critics can easily pin him down. It is easy to pin someone down who has a good argument but is making little mistakes. Than a critic can point to the specific mistake. But if someone's arguments are all over the place, criticism becomes more difficult as it is difficult to find a starting point. It is also harder to totally dismantle the mess. And so he can create the illusion that, although he might have made a mistake or two, there still is a case for libertarian state border controls. This is nonsense, as I have shown.

I don't like what Hoppe is doing. He makes libertarianism look disingenuous. Libertarianism looks like statist conservatism, an ideology which, like all statist ideologies is only in favour of some freedom, but also has its favourite state programs. We do not have to trick people into Libertarianism. If we cannot argue honestly, this movement will fail.



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The Economics of Intolerance

EconomicsPosted by Nico Metten Thu, July 16, 2015 12:37:28
Libertarianism is advocating to maximize the liberty of individuals. The idea is that every person should have the right to be left alone as much as that is practically possible. Originally, I was under the impression that Libertarians must be people who have a lot of faith in human beings. That is because, one of the major arguments against liberty seems to be that a lot of people are simply not fit to make their own decisions in every aspect of their lives. They need to be forced or at least guided with some mild pressure to make the right choices. While libertarians will be quick to admit that people are not infallible and not all of them are decent, they nevertheless believe that even a superior elite group, or a single genius, cannot get the right personal choice better for the average or even below average person than the person can for themselves. They also believe that there are only a small amount of potential or real trouble makers. The vast majority of humans are basically good, trustworthy people. This to me, seems to be a very positive and optimistic view of humans.

Over the years however, I came to notice that libertarianism does seem to attract some people who are not particularity positive about humans in general. Their attraction to liberty seems to be two things. Firstly, they are attracted to the idea of liberty allowing them to reject others so they do not have to deal with a lot of humans that they do not like. In other words, it is the ability to dodge others, to be intolerant of those that they do not like, that is attracting some people to libertarian ideas. And secondly, they seem to have come up with the idea that economic forces will be an even stronger restrain on people's behavior than the state. In other words, they paint the picture of a libertarian society being mostly homogenous and conservative.

Their arguments never made much sense to me and I am going to explain why. I am going to argue that a libertarian society will most likely be very colorful and multicultural.

Let us start with the first argument that liberty is about the right to discriminate. It seems clear that we can only have absolute unrestricted liberty in a world of superabundance. But since we live in a world of scarcity, it is inevitable that our liberty will be limited by the liberty of others. What is the best way of maximizing the ability of people to be left alone in a world of scarcity? The libertarian answer to that is to grant people certain property rights. Only with these property rights, it seems possible to practically leave people alone at least to some degree. With property, I am at least able to do what I like with a small part of the real world, most importantly with my own body and life. Without property I would not be able to make any decision without asking all other people interested in the same property for permission first. Therefore, it seems correct to assume that property really does maximize liberty.

From this, the intolerance crowd will follow, “see, liberty is all about discrimination, therefore a libertarian society will see more of it”. Well, not so fast. Just because in principal you can do something, does not mean that it is always a good idea. Yes, it is absolutely true that liberty entails the right of people to exclude others from their property or business activity for very shallow reasons. But then liberty gives you the right to do all kinds of things. You could restrain from showering and being polite to other people. But from that does not follow that this is a good survival strategy. I would suspect that it is probably not.

People who stress the ability to intolerance through property overlook the fact that property is not absolute liberty. It is merely a strategy to maximize liberty in an otherwise scarce world. As such it also demands a lot of tolerance. While it is true that you can use your property in any way you like, it is part of the property deal that you absolutely respect other people to do the same with their property. That means that you can for example prohibit people from burning the Koran on your property, but you also must not interfere if your neighbor is doing something like that on his. This might not be an easy thing to do. Liberty therefore clearly demands tolerance from people.

Our well being as individuals very much depends on the cooperation of us with other humans on this planet. And the larger the amount of people we are cooperating with the better, in other words the larger the market in which we take part, the better off we are. This is causing a few problems to intolerant people. First, if you really do not want to be confronted with things that you find hard to tolerate, you will have to do more than just own a small piece of property. You will have to find a way to legitimately control your whole neighborhood. There are of course ways of doing that. But no matter how you do it, whether you are buying up all the properties in your neighborhood or join a gated community, the costs for this lifestyle will be higher than for people who are more relaxed about their neighbors. And the more intolerant you are, the further away from other people you will have to move, or the higher walls you will have to establish around you. This however drives up the costs to cooperate with others. This is the reason, why so many people are living in crowded cities. Having a large amount of diverse people around you, opens up a lot of possibilities. That means it is economically costly to pursue an intolerant lifestyle. Sure in a free market, everything will likely become cheaper as productivity rises. But the relative economic disadvantage compared to people who are tolerant remains.

And there is more economic disadvantage. Say you are running a company and you are a racist. In that case you are excluding a lot of potentially helpful people from your business. That should cause you disadvantages compared to a competition that is more open minded. There is a reason why racist societies force people to be intolerant by law. Left on their own, most people quickly start realizing that hatred is not a very attractive philosophy.

What about the claim that a libertarian society will likely see more conservative lifestyles. I don't find this completely convincing either. I think conservatives are right in one aspect. Cooperation on a free market demands responsibility. So some of the irresponsible behavior we see being produced by the welfare state will likely go away. On the other hand however, markets are known to produce a lot of wealth. And particularly creative people are doing well on free markets compared to rigid bureaucratic structures. If people are more wealthy they are less dependent on others approving of their lifestyle. In other words, free markets tent to benefit individualism.

This can be seen historically. For example, to my knowledge it was not so much feminism or the welfare state that made women independent from their husbands. It was the industrial revolution. Factory owners often paid for facilities where mothers could leave their children while at work. That way they had access to their labor, which was needed. Or mothers were earning enough to pay for child care themselves. So it was the wealth production of free markets that allowed women to break out of conservative family structures.

I cannot see much basis for the idea that liberty is about intolerance or that a libertarian society has to be conservative. This seems to be wishful thinking from some libertarians. If that is true, then the question arises, are they really libertarians or are they people who see libertarianism as a means to achieve very different ends? And if the latter is true, are they trustworthy to stick with liberty even if liberty appears to produce different results?

I think a good test to answer these questions is state immigration controls. Are libertarians willing to support getting the state out of the way of the free movement of people or not. It seems to me that people who are arguing in favor of state immigration controls give away that they really are more interested in their conservative/racist idea of a society than in liberty. And they seem to sense that it really needs the state to produce this result. If we get the state out of the way, we will likely see an increase in multiculturalism. The economic incentive of people to mix seems too large.

Since this is not a result that these libertarians expected, they are quick to proclaim that really this is all due to other state policies like non-discrimination legislature or the welfare state. But this is an odd argument in many ways. While these policies are indeed anti-libertarian and have to go, there does not seem to be much evidence that supports the idea that they have a big influence on immigration. At least no were near enough to support the idea that without them, we would not see a lot of movement of people from all over the world. And regardless of how many people will end up moving, it seems false to argue that the state cannot be rolled back unconditionally, as that would lead to problems. That argument can be used to prevent any rollback, as almost any abolition of a policy will cause some trouble for some people. So if this argument sticks, we will be stuck with the status quo forever. No, if the abolition of one policy causes problems with other policies in place, then we just need to abolish more state until the state is no more.

For all these reasons I personally remain skeptical of people who are interested in liberty because it promises them intolerance. Of course it is good when people are interested in libertarianism and want to call themselves libertarians. Any common ground is a basis for debate. However, I don't know how much I can trust them when it comes to the fight for liberty. I also don't believe this image of liberty is helpful to spread the message. We are sharing this planet with a lot of people. And we will have to find a way to live peacefully with them. Our standard of living is also very dependent on a maximum of collaboration with others. I therefore consider tolerance to be an important value. Intolerance simply does not seem to be a good survival strategy. But tolerance can be difficult. It needs to be learned. That will take some training. Telling people that it is perfectly fine to be intolerant is therefore not very helpful.


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