Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

Thursday, November 2, 2017

Quote: Mises on Socialist Control of Industry



Mises, Ludwig von. Socialism: An Economic and Sociological Analysis. Translated by J. Hakane. Liberty Fund, Inc. 1981. p. 187

Wednesday, July 23, 2014

TV Review: Shark Tank


So in an effort to confirm the stereotype of the heartless, money-grubbing libertarian, I thought I would review Shark Tank, which even I first hearing about it thought a caricature of markets and entrepreneurialism. What I found instead was a program which, despite its shtick about sharks and feeding frenzies, brings out many of the bits and bobs of business which get overlooked in theoretical explanations and lost in popular clichés. In fact, so many facets arise as the entrepreneurs pitch their plans to the panel of venture capitalists that despite the show's simple premise and static presentation, Shark Tank puts more than a little education on the table. Add to the mix the endless variations of pitches, from the kooky to the brilliant, and the energetic hosts, and you have a real show on your hands.

The hosts really are the heart of Shark Tank, but not because they're cantankerous or charming. They center the show because of their energy, and they bring energy to it because they're personally invested in the outcome. There is no producer underwriting their risks and they don't have the luxury of playing the whole scene for a laugh or for drama: they want their money. This simple investment strips the show of a lot of the artifice of which reality shows usually consist.

Each host also brings unique expertise to the table. Mr. Wonderful, aka Kevin O'Leary, plays up the dark-hearted capitalist angle and always cuts to the quick of the deal. He's the Blue Shark. He's fast but he wants his money to work for him. He can take big prey, but he'll also settle for a lot of little royalties that'll keep him full. On the spot he'll calculate all your finances and tell you how much you're worth and likely to make, and that his little nips are cheap. He's also vulnerable to parasites who try to mooch off of his initial offers.

FUBU founder Damon John, real estate mogul Barbara Corcoran, and Lori Greiner, Queen of QVC, seem among them to know every market. They can tell you who wants your product and what you need to do to put it in their hands. They're your Grey Reefs. They're good at gathering information and you can tell when they're ready to strike with an offer.

Robert Herjavec is the Mako in the tank, fast and smart. He has a huge advantage with his knowledge of technology that lets him pounce on deals while others are still trying to figure out how they work. Finally, billionaire Mark Cuban is the Tiger of the group. He's aggressive, plowing into existing deals with offers that throw everyone into confusion. Cuban also has the widest variety of expertise.

For all the bravado of the show, though, the sharks can be pretty conservative. They restrict themselves to their areas of expertise and don't throw themselves into businesses far afield from what they know. Likewise if they don't have enough information, they'll back off. Sharks manage risk, making an offer that'll balance protecting and increasing their investment. The sharks don't throw their money around because of the soft, touching, stories that tug at the heartstrings. They'll tell you that they like you, but that you don't have a business. They may admire you, but won't invest in your business. They may want your product, but don't see a larger market for it. The sharks ultimately want to make money, and that really just means putting resources where they are most useful, and therefore most valuable.

This process is often caricatured, but putting money where it is useful is simply putting it where it is most needed. Inventors and entrepreneurs think that people need their product but it is the sharks who take the risk to bring products to consumers. The sharks bridge inventors and consumers by means of capital, expertise, and connections. Without their knowledge and liquid resources, entrepreneurs would only have their limited experience and minuscule personal savings and debt to realize their projects. Of course the funding comes at a price, but there's a place in the chain of commerce, and food, for sharks, as there is for entrepreneurs.

And entrepreneurs can learn from watching the show. The chief question that comes up is whether there are any sales. It seems obvious, but how do you find out whether anyone wants your product? The sharks want numbers–sales and orders–but so often aspiring business owners talk about forecasts, how great the product is, and sounding very much like the present administration, that their main problem is advertising. People would love our product but they just don't know about it! No matter how wrong they are, the entrepreneurs can be quite persuasive. It's humbling to be taken in by a sales pitch and then, when I might have invested, see a shark cut the deal down to size, saying, "You're selling a product at $10 which costs you $4 to make and $3 to move on top of spending $2 to acquire the customer." On second thought...

When the sharks bite, though, things really get interesting. Do you go with the offer that takes the least money or which gives you the most control? Do you go with the shark who gives you the most money or who brings the more valuable expertise? Would you rather give up equity or royalty? These are all tough questions which quickly become confused in the heat of negotiations.

Another common confusion for contestants is that some of them have products, not businesses. Products come and go. They may be fads, they may become so ubiquitous that they disappear among knockoffs, or they may be bought up and folded into larger products or services. A business has to sustain itself with a plan to grow, adapt, and prosper. Aside from fundamentals, more details also come to the forefront in negotiations than most people would ever guess, even when selling a great product. For example,
  1. What size inventory do you need? How do you know?
  2. What's your demographic? How do you find and then appeal to them?
  3. What's your competition like? 
  4. What's to prevent someone from improving on your design?
  5. Not only how much money do you need, but when?
To all those variables add changing demands, new demographic groups, governmental regulations, and evolving competition. The sharks say this often, but besides money, navigating those waters is the expertise they bring to the table. We praise the entrepreneurs, but Shark Tank shows just how much work is left after the excitement of invention. At the same time, though, plenty of these hopeful contestants have labored for years and put all of their resources on the line for their products. Yes, some of them are kooks and others are spoiled, claiming a right to succeed simply because they tried, but many of these entrepreneurs are plain tough. The sharks might get them to success, but these people took those risky first steps, often alone. Simply out of respect and admiration the sharks often want to invest, but reluctantly conclude that the business isn't profitable.

That's a dirty word, profitable, but all it really measures is whether customers are willing to pay what it costs to put the product in their hands, a cost which includes rewarding those who do the work to get it there. This sense of profit as nexus of service, efficiency, and risk, a definition which is born out in every episode, isn't the premise on which the show is sold, though. Part of me likes the unapologetic, blatantly profit-seeking patina to the presentation of the show, because we too often judge how much others ought to make when we haven't taken their risks. On the other hand, I think a more nuanced definition might persuade people who react to profitable commerce with hives.

Presentation aside, Shark Tank is an entertaining show and even an educating one, especially for people who don't themselves take many fiscal risks. My favorite aspect, though, is that fact that after so many seasons with the same format, there is so much variety–and anyone who says it's the same thing over and over again would be a poor businessman. That variety is a testament to the struggles of business and the diversity of ingenuity with which Americans meet the challenge.

Friday, February 21, 2014

On Tipping


Not cows, of course. That's a cruel thing to do! I speak of tipping for services, especially at restaurants. It seems an ingenious system: part of the price of your experience is reserved for your judgment. You can decide just how good everything was and vote with your wallet. What could be wrong with such a system?

First, the gratuity is ostensibly for service, yet every aspect of the meal falls under the umbrella of service. In some cases tips are split among various staff, but it's inevitably the waiter who bears the burden for any mishaps in the meal, whether or not anything is his fault.

Second, the quantity of the tip seems to me invariably arbitrary. What is service worth? Why is 15-20% customary? First, the percentages are contingent on the prices of the foods, yet that has nothing to do with the quality of the service. Second, those percentages might not be the same in all markets at all times. Besides that, all gratuity is arbitrary, subject to the vicissitudes of the mood, temperament, expectation, and resources of the patron.

Most importantly, though, we have a problem of definitions. A gratuity is either: 1) a gift of money, over and above payment due for service or 2) a gift or reward. . . for services rendered. So is it for the service or is it a special thanks beyond the objective cost of the service? If it's over and above the cost, then the tips arbitrary quantity is not so relevant. If the tip is part of the service, then the variation is relevant. In such cases, our above two points work to the detriment of the server and the patron: the server may get less money than his service warrants, since his tip is going to supplement his wage, and the patron either gets worse service because with servers receiving less, the quality of the service goes down, or overpays. For example, if $15 of my $20 tip goes to what the waiter expects as his wage, then it's a more expensive meal which might not be worth so much to me were I to tip on top of that amount.

Obviously there's no non-arbitrary way of delineating what the server expects as his wage and what he makes in total. Surely he feels he deserves as much, if not more, than he receives. The server no doubt, though, is content with his average intake or he'd not keep the job. It is that average which I refer to as his "expected wage."

Now I'm not suggesting any chicanery is afoot, though that's possible. The employer considers as the server's wage what the employer can afford and when the server takes and keeps the job, the employer knows that's the right price. Now I'm not arguing the server salary is too low. Maybe it is and maybe it's not. The server is not entitled to have one job which gives him all the resources he needs. I'm arguing the two points above: that the gratuity system 1) makes the server's tip contingent on factors outside his control, and when used as part of the server's wage, the tip 2) obscures the cost of the service, affecting the quantity and efficacy of my payment as tip (which ought to be used to gauge customer satisfaction) and as wage. Together, servers often get less of the money they earn and the value of the service goes down for the patron.

It would seem easier for the patron and more consistent for the server, though, for the employer simply to raise the cost of the meal, making the tip a pure gratuity over the cost of the service. The employer would have do more to adjust all of his prices according to the demand for their establishment at the new rate and for the supply of servers, but that's business.

As a customer figuring a tip I feel like the task of calculating the cost of the service has been offloaded onto me. That cost should be part of the cost of the meal, if only because I can't know what the cost of service is. How can I? I don't run a restaurant. I know what I'm willing to pay, but that's a spectrum. They should offer a product at a definite price. If I don't like the product then I don't return and when that happens enough, the owner has to figure out what's right and wrong in his business.

Seems preferable to inviting this conversation after every meal.



Wednesday, February 19, 2014

Fear, Pity, and the "Used-to-Haves"


Aristotle famously argued (§ 1378 and 1452) that the impact of tragedy and oratory is very much contingent on the speaker's ability to arouse fear and pity in the audience. Who would think that a little bauble from the Huffington Post fulfills Aristotle's requirement. The poets and playwrights ought to be jealous. Alas for its humble author, the piece doesn't provoke the emotions how she intends. You see what was supposed to happen was simple: she writes about how terrible her life is and we feel pity. Then, of course, we wag our fingers at the usual suspects. Of course Aristotle could have told her (1386) that displays of the terrible often produce the opposite of pity, but nonetheless I'm feeling full of pity. Why?

Because no one deserves to be this foolish and it's a downright pitiable sight to see someone suffering who has absolutely no clue as to the causes of it. The world with all of its complexities seems to swarm around this woman who sees only her own unjust deprivation. What indignation she harbors that all is not the way things ought to be, as if all she had were secured by some omnipotent guarantor who has now been usurped by a cabal of corporate raiders. Of course it's a normal human reaction, as a certain philosopher observed, to assume that which has always been will continue to be, but letting a few years of luxury forecast the future demonstrates only that she' seen so little.

Conservatives and libertarians have overused the word entitlement, but no other word exemplifies her expectations. Because she works hard, because she has made a certain wage, because she has lived a certain way, she's entitled to further compensation, presumably in perpetuity. Never mind who actually needs her services, how often, and at what expense. Never mind that we only receive if we serve. We're supposed to empathize with her excruciating separation from bourgeois comforts to the point where we simply assent to the fact that what she possessed was not lost, but stolen. Yes, let us wag our fingers at those protean demons of deprivation, today the "Republican Congress" and "Corporate America!"

As an intellectual expression this is drivel ripe for ridicule. As intellectuals ourselves we want to reprehend the fool who has guzzled so desperately the PC Kool-Aide that she's stained with its cheap crimson glow. Nevertheless her utter lack of apprehension and comprehension of any facts or reason deprives us of any desire or reason to offer correction. We just sit and pity that evil, ignorance, which we fear for ourselves.

The author suffers genuinely I have no doubt, yet not from "The Great Theft," but from cupidity gorged on excess, incensed by privation, and rooted in ignorance. 'Tis true 'tis pity; And pity 'tis 'tis true.

Thursday, February 6, 2014

That Fair Wage


Fair. Oh what they've done to you, poor little word, treated so lovingly by The Bard,

Fair encounter / Of two most rare affections! (Prospero)

and by Keats,

Fair youth, beneath the trees, thou canst not leave (Ode on a Grecian Urn)

Chaucer,

Or if you'd rather, have me young and fair, (The Wife of Bath)

and Wodehouse,

Ever since their first meeting she had wanted a fair chance at those ankles (Piccadilly Jim)

For what crime are you so scurrilously appended to that stern word wage. Now the fair adjective sports a happy plethora of meanings: just, legal, ample, moderate, unobstructed, even, free from imperfection, clear, light, pleasing, and civil. Surely among these none fit the bill but just. When people clamor for a just wage they want a wage which is existing in justice. What could this mean in the absence of a philosophical system weighing virtue and distinguishing among proportion, rectification, reciprocity, and equity. (See V.5 of the Nichomachean Ethics.)

We can further chastise the sloppy use of fair, and their weaseling out the work of philosophy, but let us charitably presume well-intending simply mean that no one should unduly suffer by lack of essentials. What does this have to do with a wage? How can a wage be unjust? It's neither just nor unjust freely to exchange your services for any particular good. If you make the exchange, then it was valuable to you. Your wage is part of an exchange of services, not a measure of what you are worth or deserve as a person.

Similarly we may ask why a wage must be the sole means to security. Outside of a feudal economy of lords and serfs such socio-economic thinking is incredible. In a free economy and society in which no one is granted a legal monopoly, it's incumbent on the employer only to pay the agreed wage. In contrast, it may be incumbent upon everyone equally, if anyone, or perhaps especially family or friends or neighbors, to protect the weak from deathly lack. Yet why should the employer suffer the burden?

Of course the employer might not shoulder the burden but raise the cost of his goods if he hires the employee at the "fair wage" at all. In this case, the customers shoulder the burden of the employee. Why should they, purchasers of this particular good, support the employee? It's not self-evident, to say the least. In times past, friends, family, fraternal societies, and the like cared for the downtrodden. Professionals, such as doctors, treated the poor gratis as custom, not by bureaucratically managed legislative fiat.

It's curious, though, how often and many people are persuaded by the allure of the "fair wage." It just sounds so rosy. They don't seem to translate fair wage into more plain terms:

a demand from an employee to be paid a particular wage, regardless of how much he serves others, how well he does so, regardless of the demand in his locale and that demand over time, regardless of what other skills he might use more profitably, and regardless of, in fact, all variables save his own entitlement. Not quite so fair, by any of its meanings.

Tuesday, August 13, 2013

Economics 101 on the Daily Show: Hard Hat Zone


Everyone has had the experience of explaining something to someone who's just not getting it. Maybe your intended student is misinformed and trying to reconcile other information, maybe he's just a little slow, maybe he's having a bad day. So you try other examples and explanations and variations until you get through. It's when you really don't get through that things get interesting. Am I unclear? Have I not understood the matter myself? Your confusion takes a curious turn, though, when you start to see that your interlocutor is not engaging your arguments but deflecting them, and thus you realize that you're bashing your ahead against a wall.

With that in mind, Rand Paul must have some headache after his Daily Show interview with John Oliver last night. Now before moving on, I'd like to admit that I don't like the Comedy Central news shows. The clever tag-team of John Stewart and Steven Colbert occasionally make me chuckle and they've pulled some enlightenment from their hats, but the operating principle behind their shows seems to me clear and twofold. First, appeal to the vanity of the twenty-something would-be intelligentsia. It seems the majority of criticism which the hosts level is directed at supposed stupidity, and likewise most right opinion presented as obvious. Second, the shows are invidious hits against the political right. Not universally or unilaterally critical, but calculatedly critical hits for making the left wing seem, at worse, the lesser of two evils.

Senator Paul's 8/12 interview is a good example of these three phenomena of obtuseness, obsequiousness, and nefarious selectivity.



After some cute salutary remarks, (1:35) Oliver gets to the heart of the left's conception of the right's objections to the Affordable Care Act by characterizing Paul's objection as "religious." Such a description translates, to an irreligious demographic, as a fundamental invalidation of whatever principled explanation might be offered. Paul chooses to dodge the constitutionality and morality play and focus on policy, a wise turn because the CC audience will not likely be persuaded by principled opposition of this kind, but it will be receptive to arguments that the bill simply won't work.

Next, (2:21) Oliver suggests the fact that a certain number of Americans are uninsured self-evidently demonstrates market failure. Before noting the senator's remarks, we may ask why anything should be treated as self evident, let alone this. Healthcare, which is now a political totem and catch-all, is not an unquestionable good in all circumstances for everyone nor an end in itself. As such, why should a lack of it demonstrate any failure at all, let alone market failure? Paul proceeds with an economic counter-example culled from his firsthand experiences, a prudent choice, from which he segues into the process by which insulation from prices raises costs.

In response, Oliver resumes his religiously-oriented characterization by calling Paul a "disciple" for smaller government. He then asks whether healthcare is not something where government should step in, suggesting an affirmation. The question again invites an ideological response which would again confirm the religious set-up, but Paul declines again, offering not prudential but economic arguments. Oliver also chooses here to re-clothe his previous question. He says that business has had decades of opportunity to insure people, and it hasn't, which again implies that people without healthcare are being denied healthcare, a point which Paul easily contradicts.

After that exchange, Oliver suggests that the free market's predilection for profit is at odds with society's goal of stopping people from dying. First, note the puerile characterization, "stop people from dying," which should read "promote health." Second, notice how the statement implies contradiction simply by putting different things next to one another. What is this, Elysium? If Oliver had said what his statement is tantamount to he would have been the subject of humor, and what he said is the fatuous assertion that two things are different and contemporaneous, and the one I don't like is the causal problem. Why are different goals "often at odds?" Just because they're different? This isn't a remotely credible statement, but it's treated as self-evident. Again, Paul responds with an economic, empirical example, although I think it is generally unwise to cite for liberals the Soviet Union as an example of socialistic failure because they often see the USSR as having failed for totalitarian, not economic reasons.

You can all but see Oliver's mind flipping to what Tom Woods calls the 3x5 card of approved ideas: the greedy free market wants profits over people, the right is religious about everything, the free market has been tried and it failed, and everyone wants what the left wants.

It is of course worthy of note that man Oliver characterizes as a religious disciple is the one offering empirical examples and it is Oliver who's offering solipsisms. Meanwhile, we're supposed to infer from characterization of republican disagreement, called "contempt" for Obamacare, is counterbalanced by the rational, democratic support and passage of it.

Unfortunately, Oliver's closing, honest question on healthcare–how we will judge whether "Obamacare" (Oliver's choice of term) is successful–didn't make the cut. It is available on the CC website's page of full interviews, though. Paul responds again with economic predictions rooted in facts principles, and again Oliver doesn't contest them. On not one point was there an exchange. Oliver concludes that the two won't see eye to eye on the matter, but he hasn't actually made any arguments.

I'm not suggesting that Paul's positions are unassailable, only that Oliver's questions towed the usual lines and there was no fruitful exchange, the show's usual pitfalls. The hipster and bohemian fervor for these shows as honorable alternatives to the mainstream eludes me. They do just as poor a job of informing you, although they're chock full of marginally entertaining cheap shots and juvenilia. They're only must-see if you need your ego stroked.


I imagined for a moment that the producers of the show read this article and decided to rebut it, and that they'd do it first by quoting, "They do just as poor a job of informing you," and then cutting to the worst moments of Fox and MSNBC. Then they'd quote, "they're chock full of... juvenilia," and the host would pull his pants down, feign indignation, and the audience would laugh. Doesn't that seem disappointingly probably?

Wednesday, March 20, 2013

Gratitude and. . . Capitalism?


Few words these days come with as much baggage as the dreaded moniker capitalist. Synonymous for many with greedy bastard, most defenses of the free market begin with some attempt to reclaim the title. My association with the appellation is perhaps the least expected: gratitude. How can this be? Well, the answer is pretty simple.

I'm not a world-class chef, nor am I a barber. I also can't make furniture, or microprocessors. Nor can I repair arteries, engines, or bridges. Moreover, my mortal self will never live so long as to learn, let alone perfect, those crafts. Setting skills aside, then, I don't even own the materials to make any of the aforementioned. Not copper or lumber or oil or silicon or wool. Moreover, I don't even have the property on which to store or from which to extract the materials. As you might imagine, then, I'm pretty grateful to sit in a house, at a desk, typing at a computer.

"That's all well and good," you might say, "but what does that have to do with money? People could make those things anyway." True, true. Imagine this for me, though.

I ask my neighbor, a master woodworker, to make me a desk. I tell him that I want it quite large and ornately adorned. He agrees, but quotes me no price and goes ahead to make the desk. I come back a few weeks later to pick up my desk and learn he has spent the whole month working solely on my desk. How honored I am, and what a desk!  So honored that I offer him $100, all I can afford for it. What can he do? I have no more money, although he can refuse to sell it to me. Either way, he's lost not only the resources, but the opportunity to have covered costs and made a profit. Now here's my particular point here: he needs the profit to buy food and gas and pay his mortgage and so forth, and he needs to buy those things because he can't make them, and he can't make them because he's a carpenter. He's a carpenter because he's good at it, so he takes the risk of refining his skill in the hope that people prefer his expertise to their own, or to not having crafted wood products at all.

Yes, at all. Well who else is going to make the desks? The dentist, the lawyer, the cook, the classicist? Of course not, the carpenter does, in the hope that he can make enough money to buy the things he can't make for himself. I say hope because he might not be able to do anything else.

Now without setting a price for his material and labor, how will he know how to use his limited time and limited resources to make enough money to afford what he needs. The fancy desk which takes a month to make and earns him $100 doesn't buy him what he needs so that plan won't work, but maybe if he can make a simpler desk in three days and sell it for $150, it profits him. That equilibrium is his to find, his equation to balance.  It is his burden to figure out how to serve as many patrons as he can with his limited skills so that he can support himself. No one can force him to make a certain price, but no one can give him the formula for success either. So how does gratitude fit into all of this?

I'm grateful that so many people can balance that equation not only well enough to support themselves, but with such ferocious ingenuity that I can afford such a fine desk and dual-core marvel of a computer, amidst other wonders. The next time you bemoan the stupidity of mankind, and we all do in our haughty, self-satisfied moments, look around at the thousands of people doing things you can't do. Look at the curves of the keys on your keyboard or the stitching on your shirt. It's actually pretty humbling, especially when you consider the alternative: everyone doing everything ourselves, most of it badly. Out the window goes excellence because no one can specialize and get good at anything because we're busy doing a little of everything. So no more phones, cars, or computers. "Fine," say the aesthetes who reject such pedestrian concerns, and whom I ask: would you prefer that Mozart, DaVinci, and Shakespeare have spent more time farming?

That's not all the gratitude, though, because I'm also grateful whenever people want my own services. First, I'm grateful they've chosen me over other people offering the same work. Second, I'm honored they're bringing something I make or do into their lives. In fact, I'm no less honored that a man lets me teach him Latin than I would be if he hung a portrait I painted in his living room. Customers have taken a part of their lives, the time they spent working for the money they paid me, and trusted me to fill it. Wow. Lastly, I'm grateful they're supporting me. Without them, I'd be out of luck, and money. They are my patrons.

All of this gratitude also engenders two other emotions. The first is the humility which comes when you realize you cannot, in fact, do everyone else's job, and that even if you could, you could never do all of them at the same time. Even if you can do the job of the bag boy or cashier, you have your own job to do, remember? So out the window goes the contempt for so-called "menial" jobs.

The second feeling is respect, both for the people whose money you have taken, your patrons, and for those you patronize. The former support you with money and the later support you with goods. Remember the money is useless unless you exchange it for something you want for its own sake. So it's all support, then, and that realization is what makes some libertarians, in my experience, such jolly and gracious people. They don't feel entitled to certain profits or see exploitation around every corner, but rather they see the serendipitous confluence of interests in the free exchanges of free people. Now that's something to be grateful for, and something beautiful too.

Sunday, September 30, 2012

They Took Our Jobs!

They took our joooobs!
Tom Woods's remarks in a recent Mises Institute lecture brought to my mind the gaggle of grousing South Park denizens who, whenever anything threatens their income, complain that, "They took our jobs!" Regardless of the causes and their own actions, these citizens ascribe all guilt to some thieving tormentor who has robbed them of their God-given livelihood.

Never mind whether society actually needs their wares or crafts, whether they could have differently saved or invested, if they could have changed careers or locations, and so forth, these people cry, "They took our jobs!" The obvious implication is that someone must make up for their loss, and hence Tom Woods's perspicacious comments reminded me of their demands.

It is terrible to see your expectations and plans fall out beneath you, but that's only because your expectations and plans were at odds with everybody else's expectations and plans, and a market correction is precisely that, it is the realization of precisely this problem: that there has been this lack of coordination. So why should everyone else have to suffer to pay for the stimulus to make some people whole. Why would that be socially desirable for everyone? A market correction is the way individuals say through their buying and abstention from buying that the previous array of prices was too high and we want to see them lower. Who is the government or the federal reserve to second guess that?

And the people whose lost in the bust are going to be in the forefront, demanding stimulus to re-inflate a tire with a large hole it, but other individuals have interests too, and those interests do not necessarily lie in ensuring that some arbitrary asset once again reaches some arbitrary price level. [1]
What strikes me most about Woods's words is the word arbitrary. No good has a fixed value but rather, as Woods has said in tidy summary of the Austrian science of human action known as praxeology, "The very act of choice... implies cost." [2] So why should any given good have its price inflated higher than what customers will freely spend for it, or reduced to lower than what is worth to its owner? Why would any good be deemed special? Why would any group of workers buying or producing that good be deemed special? Besides, the value of the good is never fixed for either the producer or the consumer.

For the producer, the price might be lower when he has streamlined production or  it might rise with rising costs of materials or from the pressure of a wily competitor. For the consumer, his resources, needs, and wants can vary from time to time, thus his willingness to pay a given cost can vary. Customers and producers adjust to these fluctuating variables, supply and demand, in a free marketplace, buying and selling goods if and only if they think the exchange gives them what they want at that time.

If the iPad costs $500, some people will pay for one and some won't. If Apple profits from selling the device at $500, then that means the iPad is worth $500 to enough people with $500. Both parties win.  If Apple sells too few to profit, they must either charge more for it, or construct it with fewer resources so they can charge less and thus sell more of them. Where does government or Federal Reserve or any third party get the authority (legal or moral) or knowledge to tell Apple how much it costs to make an iPad (by way of telling them how many people to employ and/or how much to pay them or how many they can sell) or how much it should profit from the sale, or the consumer what the subjective value of the gizmo is to him?

Apple is but one example, but why should any industry, that is, the employees and entrepreneurs of any industry, be prioritized? Why ought the price of steel remain high to benefit steelworkers when efficiencies might make it cheaper to the benefit of people who purchase steel? In any of the following examples, why is one party more important than the other? How could any of the following statements be justified?
  • The price of automobiles must be kept high by means of bailouts enabling the company to employ more costly workers, to protect auto workers at the expense of those who buy automobiles. 
  • The price of grain must be kept high through subsidies, to protect farmers at the expense of those who buy food. 
  • The price of American goods must all be kept high by protective trade tariffs, to protect Americans who sell goods at the expense of Americans who buy goods. 
  • The price of houses must be kept high through stimuli to protect home owners, real estate salesmen, and construction workers, at the expense of those who want to buy houses or to rent. 
  • Companies must be bailed out to protect shareholders, at the expense of those who do not speculate with their savings. 
  • Why should spending be encouraged through low interest rates, at the expense of those who save?
To justify any such assertion is not only to plan the economy, but society.


[1] http://youtu.be/o2PVgcLhHEg?t=25m
[2] Woods, Thomas E. Jr. The Church and the Market. Lexington Books. 2005.

Tuesday, June 19, 2012

Leisure, Mangled


Originally a comment left at The Chronicle of Higher Education website for the article, In Praise of Leisure, by Robert Skidelsky and Edward Skidelsky

I can't say I'm persuaded, and not just because of the superabundance of quotes which the authors seem to think fill in the gaps of the argument, or the fact that this is a pale retread of select Plato and Aristotle without the context of their ethics, or the passive swipes at easy targets. Rather their inattention to the essential matter of definition is shockingly sloppy.

First, the authors define "leisure" as "activity without extrinsic end" and then as "spontaneous activity," and I pass over the latter on account of its senselessness (as written.) By "extrinsic" one could mean either "inessential" or "external." Now since they imply leisure is very important I suppose they mean "external," which, let us be honest, they should have written even though it does not sound fancy. (Or they should have qualified what the task was extrinsic to, since it is not extrinsic to the individual.)

Anyway, the authors go on to give examples of a teacher, a musician, and a scientist which are all inappropriate because as you say, sort of, it is the purpose (or lack thereof) that makes a leisure activity. They may be paid, the authors say, but because such people don't do it for the money, it is leisure. They chose these particular crafts because they are respectable and you essentially argue that such activities are by nature leisure activities (although they don't say why.) What they should have said was "anything chosen for its own sake" is a leisure activity, but that doesn't pander to the likely Chronicle readers, I suppose. Too, it could apply to any activity.

Fine, then, we have our definition of leisure. Why is it important? Frankly, that's what the article should have been about. Instead we get a lot of quotes to make us feel smart and elite. Oh, and who fits such a caricature of someone who values money in itself? Scrooge McDuck? Don't most people with money spend it on things? Why not argue that those things are wasteful? Because the authors don't want to offend their target audience by telling them that they should not spend on iPods and trips to the Caribbean and should instead take "stoic vacations" in their minds? Isn't such a rebuke sort of implied by their "limits" on money, since limiting money would limit people to what you think are the essential goods?

Second, the authors define capitalism (kinda sorta) as desiring wealth. Why? I know they want to demean mindless acquisitiveness but why call such "capitalism?" Capitalism has as often been defined as simply or essentially, "absolute property rights."

Speaking of rights, I would mention their "[il]liberality." They write that liberalism is not neutrality but specific values. Fair enough. They also implied (sneaky!) that, like Keynes, Berlin, and Trilling, that the state ought to "uphold civilization" otherwise the people with money will control public taste. Since they let this cat out of the bag. . . a few questions.

They use the word "guardians of capital" to set (just whom anyway?) as the "guardians of culture." Platonic guardians, I take it? So the elite should control, via the state, what is promoted? Or the people, because they elect the state? Would they argue that democracy chooses the good, or defines it? Better than oligarchy? Does money control taste? Does it change or promote it? Has it? Does it more than other means? Why? If so, doesn't that spell doom for a liberal society and property rights?

But wait the authors don't want to ban money, it's just that "the game should be subject to rules and limitations." So I guess they will indeed be the guardians. So just what brand of "liberalism" are they advocating? "State-guided liberty?"

Lastly, don't you think advocating the good life and living it joyfully will promote it better than ivory tower finger-wagging? Or developing a philosophy based on values? No, better to write a quasi-scholarly parade of quotations to sell your book in the hope that it competes with Michael Sandel's equally flatulent book which just beat theirs to press.

I'm willing to believe their book is better than this, but who would buy it after such a poor precis? I would rather re-read Josef Pieper's, "Leisure: The Basis of Culture," which beat their book to press by 64 years and deals systematically with actual concepts and philosophy.

Friday, April 15, 2011

The Politics of Leisure

It is curious the following pair of articles came across my desk in the same week, Terry Eagleton's encomium for Marx in The Chronicle of Higher Education and Wendy McElroy's reflection on values and economics at Mises Daily. I would certainly wager the authors are not in communication. While Eagleton's essay, a condensed version of his book sans the scholarship, I would assume, embraces more issues, both articles add an uncommon spin to the topic of economics: culture. Now your humble bloggers have discussed leisure and culture as well as economics but I thought this was a novel take. This pair of articles in particular yields a fruitful comparison.

In Praise of Marx, by Terry Eagleton
The Case for Frugality, by Wendy McElroy

First and foremost they both examine the concept of leisure in the light of economics, albeit from opposing economic camps. Both authors embrace the idea that leisure time is of value and both realize that some excess production is necessary to achieve excess time.  Both authors even admit the excess production can be spent on anything at the discretion of the individual: perhaps what pleases you is expensive and you must work more to afford it or perhaps you work less because you would rather have leisure time or what goods please you are inexpensive.

Yet Eagleton's position demands, since inequality is unacceptable, that the excess production be split to achieve equal leisure. While both embrace the value of leisure Eagleton in essence declares it a right. There being no legitimate and acceptable reasons for inequality, either of resources or ability, and because this condition of leisure does not naturally exist since people have to support themselves via work to create food, shelter, and so forth, some people have to provide it for others. He also seizes the moral authority to act and balance the inequality, adding, "We would no longer tolerate a situation in which the minority had leisure because the majority had labor."

Thus it becomes the case that an individual is not free to value and trade his labor, i.e. his finite time and life, since he must support others, others who define what the "minimum standard" of "leisure" is and distribute the resources to achieve it. He may have to work more than he wants to (and achieve less leisure, either of time or goods) because someone else cannot.

Eagleton clearly wants to present the spiritual, "enlightened," side of Marxism, i.e. Marxism as un-economic and essentially unconcerned with material goods. Yet lack of such considerations merely neglects the economic and moral effects of planned economies, it does not eliminate them. He says that people would be free how to spend their leisure without acknowledging the processes used to determine how much leisure he is allowed to keep in the first place (as well as the moral implications and economic ramifications.) His romantic view ignores the fundamental fact that central planning destroys the ability of an individual to ascertain the cost and result of a given activity. That individuals are free to act and act unpredictably further confounds any attempt at centralization. The gross and repeated failures of planned economies to react to change are usually glossed over as failures of implementation rather than of essence. Too critics often attempt to distinguish between planned economies and taxation, the latter being acceptable because merely redistributes and does not interfere with the economy, a false assertion.

Like Christopher Hitchens' "libertarian" argument for "free" health care, [1](that it makes you more free) the fatal flaw of this very similar article is its lack of attention to the fundamental paradoxes of socialism. As a pair the articles show that anyone can value culture and a leisurely, philosophical life.  Too they demonstrate that such leisure comes at a price. The question is "who pays it?" You or someone else? Eagleton's article has value insofar as it spurs the non-socialist to review an author often caricatured and scoffed at rather than studied. Such a love letter, though, however romantic and sincere, does not vindicate the ideology.


N.B. No doubt Eagleton's reference to Ludwig von Mises makes his apparently persuasive article, expertly tailored to appeal to a wide audience, more so by imbuing in it a semblance of equanimity and scholarly rigor. Readers should follow with Mises' "Socialism."

[1] http://www.aplvblog.com/2009/09/libertarian-case-for-free-health-care.html

Friday, April 8, 2011

A Telling Comment

Speaking at the National Archives in downtown Washington, D.C., esteemed documentary filmmaker Ken Burns commented today on the recent popular criticism of public funded broadcasting. Patrick Gavin reporting for Politico carries parts of the talk which I think would perk the ears of any libertarian, not so much because of any particular policy suggestions from the director but rather because of his choice of words. Let's take a quick look:
People can make arguments about the marketplace, but if your house is on fire at 3 a.m., you don't call the marketplace. When your road needs plowing, you don't call the marketplace. The marketplace doesn't have boots on the ground in Afghanistan. [1]
Any libertarian or advocate of a free market, I think, would be immediately taken aback by how Burns talks about a "marketplace" and what his choice of words seems to indicate. Unusually, he describes it as if it is a monolithic institution, that is, he conceives of it in essentially statist terms. He seems to be thinking, "I can call the government for help because it is a finite entity, but in contrast I cannot call 'the marketplace' because it is not." This suggests a fundamental view of his: that the basic unit of utility or agency in society is the individual but as some larger institution, most particularly the government. This may seem an extraordinary extrapolation but a lack of understanding of what a market is, the free association of people, leaves only a collectivist mindset. His reasoning forgets that all institutions are made of people. Regarding economics, they are people with particular skills: if they didn't work where they did they would work somewhere else with those same skills. Likewise, if there is a demand, someone with the skills to meet it will do so. And if there is no one with the skill, there is nothing the government can do about it. Only individuals can make the choice to invest in a particular skill.

Perhaps, you might say, the government organizes people, meaning it collects the money and pays the plow drivers because citizens, if left to their own choice, would not pay for them. Thus the government in this line of thinking "creates the demand." Well if there was no demand the people didn't really want it now did they? And if there is demand, well then you don't need the government now do you? You're not suggesting people be forced to pay for things they don't want, are you? Of course not.

So what is Burns really suggesting here? Does he think that the government, that central planning, is really the only way people can organize? Is he saying if the government didn't organize fire brigades and plows that we would all sit and freeze or flambé to death? That you can't learn a skill and offer it to people in exchange for something?

Burns' choice of words strongly suggests that to him a "marketplace" is not a market place of people offering their skills to others who need it and who will in turn trade what they have or do in return, but
a vague notion describing how people produce only inessential items. In fact he seems to mock "the marketplace" for not being a specific institution he can call on for help, as if the world isn't filled with people offering their skills to each other without government "guidance." A "free market" in this view is just a sort of foggy, fundamentalist, fantasy.

Referring to both the government and marketplace as institutions that produce things themselves instead of contrasting methods of organization of people, the actual agents and producers of society,  suggests a mindset not centered on the individual. No doubt Mr. Burns thinks that "the marketplace" can accomplish certain things, but the way he talks about it, as a failed or faux institution, reflects a fundamentally state-oriented view. At the very least his choice of words reflects someone who has not seriously thought about the economic implications of liberty.

-

[1] http://www.politico.com/click/stories/1104/ken_burns_blasts_pbs_critics.html

Friday, November 19, 2010

On MacIntyre on Capitalism

This essay is a sort of sibling to my previous one, Caution: Intellectual's At Work.

Philosophy in Plato's Apology certainly seems to be very political and indeed it is. There are ideas behind all actions and Socrates' teaching certainly had broad effects. (To make an enormous understatement.) Thus how we act and interact part of political philosophy.  Yet where is the line between political and personal? At what point does someone trying to live a good life become a busybody trying to reorient other people?

I was pondering those questions, and others, after I read this essay on Alasdair MacIntyre in Prospect. It was a curious read for me because I in many was have an Aristotelian outlook on life. So MacIntyre seems to also, and yet we were not as nearly in accord as I would have expected. Let me share some of my concerns.

"MacIntyre yearns for a single, shared view of the good life as opposed to modern pluralism’s assumption that there can be many competing views of how to live well." Is that not a little. . . unnerving to hear? In the other of this pair of essays I mentioned that the intellectual ought to be humbled by the philosophical endeavor and a little reluctant to start reordering society.The administration of justice, to Aristotle, was the principal order of society, not a consensus on how one ought to live.

Such is a problem with intellectuals, that they are so intelligent they don't see the bounds of what they can and ought to do. Likewise, they seek perfectly logical systems of belief, at the expense of whether something is likely to work and often in contrast to observation. Hence the extraordinarily immoderate ideas of many highly intelligent people. Such would not be so problematic if they did not lend their stamp of authority on highly dangerous figures and movements. Such is not to say consistency is not laudable, but that it may have a price. The author reports one of MacIntyre's ideas in a very Aristotelian phrase, "The telos for human beings is to generate a communal life with others." Of course living with others is natural, but it is too easy to misread this phrase as, "because one lives (and must live) with others that one lives only to live with others" which is rather off base. (This may be an awkward paraphrasing of MacIntyre, I suspect.)

Too, today the word modernity is invoked as a buzzword to summon up images of industrialization, pop music, and kids who don't read listening to iPods.  This sort of association is not unlike the association between the word "factory" and images of sooty stone buildings with Mr. Moneybags taking advantage of child labor. (Modern medicine, modern online libraries, and the like don't get much praise.) This cliché is wearing tenuously thin. If one has a particular idea to critique, do so.

Wearing thin with me also is the tendency of people to use the word capitalism without defining it. The word is usually used to mean something tantamount to "something bad involving money." It is used nine times in this essay and we have no remote, let alone satisfactory, definition of it. 

The economics he describes, or at least how it is presented, is also particularly confused.

Take the following example:
For workers are also consumers and capitalism requires consumers with the purchasing power to buy its products. So there is tension between the need to keep wages low and the need to keep consumption high. Capitalism has solved this dilemma, MacIntyre says, by bringing future consumption into the present by dramatic extensions of credit.
Not quite and not having defined capitalism, understanding this paragraph is problematic. How does capitalism require anything? You don't have to buy anything. If there is demand for something, someone might create the product to meet the demand. If not, the productive capacity will go to produce something else. I suppose in theory if you couldn't produce anything that anyone wanted, you could just support yourself farming. What MacIntyre is in fact against is mainstream Keynesian economics. This economics, now offered up as our saving grace by certain economic big wigs, relies on buying for the sake of buying just to get demand up. (An absurd notion since people don't buy just anything, they don't by globs of GDP by products they need.) The asset bubbles created by the government were created, in part, under the assumption that you could continuously engineer growth and have an everlasting rise in values. The government, not only "people behaving badly," created the easy credit which made taking risks (which at any other time would have been regulated and rendered impossible by a market) possible.

He continues,
This expansion of credit, he goes on, has been accompanied by a distribution of risk that exposed to ruin millions of people who were unaware of their exposure. So when capitalism once again overextended itself, massive credit was transformed into even more massive debt. . .
What imperative exactly is he implying here? First, that you have a responsibility to disclose something of the risk to the borrower. This sounds very nice, but how do you actually ensure someone understands something? They sign the paperwork, they nod. You could explain it perfectly clearly and still not be sure they knew what they were getting into. Second, he is implying that the borrower does not have the responsibility to figure this out for himself.

Moving on,

Not only does capitalism impose the costs of growth or lack of it on those least able to bear them, but much of that debt is unjust. And the “engineers of this debt,” who had already benefited disproportionately, “have been allowed to exempt themselves from the consequences of their delinquent actions.”
Indeed, but that only happens if you force people to pay back the debt of others. If the only people affected are the lender and the borrower, no one else is implicated. This is an issue of the "debt engineers" having corrupted the members of the government, i.e. the people with the monopoly on the law, and "persuaded" them to force citizens to pay back the debt.

Oddly, he proposes regulation but according to this article does not consider his proposals "regulation." Yet when he writes that, "since regulations merely 'have as their aim the prevention of further large-scale crises' he is in a sense correct because the regulations, like his own non-regulation regulations, seek to put managing the economy in to the hands of elites instead of allowing individuals to manage their own affairs and assess risk for themselves.

The question again, as we have discussed before, is where does discipline and order come from? MacIntyre properly faults the "capitalism" of the government-run sort, but would replace it with his non-regulation regulations. The distributist model discussed in the article is likewise statist by nature.  

Overall, the economic thinking in this essay is lamentably muddled. (As presented, the association between "money-trading" (another vague term) and inequality is so thin I can't even critique it.) In a way this is unsurprising, since as Jesus Huerta de Soto demonstrated in his essay, "Economic Thought in Ancient Greece" [1] philosophers seem unable or unwilling to consider economics as a separate discipline. They're also, though often admittedly, not concerned with liberty. What is not admitted is that in a free economy, one not managed by the government, you wouldn't have to fear the debasement of your money and you wouldn't have to engage in any kid of activity you don't want to.

Virtue in Aristotle is in fact a most complicated notion and discussing it also requires familiarity with his logical books. Discussing the political aspects requires familiarity with nearly of Aristotle. In Aristotle virtue is a complex of innate desire and conscious action, inducement and freedom, nature and cultivation. It is impossible to speak about it glibly and do it any justice.

Perhaps MacIntyre does not provide a legitimate critique of capitalism, but rather of capitalism as most people think of it, i.e. as an economy managed by the government. If so, his criticism may be well-placed.  It is laudable that MacIntyre attempts to acknowledge both the good and bad of, say, globalization, but I think his thinking would benefit from some more precise definitions. Of course it is possible MacIntyre is badly represented in this article, a potentiality I duly acknowledge. As presented in this article though, his cases are rather muddled.


[1] http://mises.org/daily/4707 and my response: http://apologiaproliterativita.blogspot.com/2010/09/response-to-economic-thought-in-ancient.html

See also:

Wednesday, September 15, 2010

A Response to "Economic Thought in Ancient Greece"

A Response to "Economic Thought in Ancient Greece" by Jesus Huerta de Soto.
Original article at the Mises Institute: http://mises.org/daily/4707

Precis of de Soto's article:

The intellectual odyssey that laid the foundations for Western civilization began in classical Greece. Unfortunately, Greek thinkers failed in their attempt to grasp the essential principles of the spontaneous market order.

This is a fine article and a very good look at the thought which separates 21st century economic thinking from that of the Classical world, the essence of which is the conception of spontaneous market order. Now I must as a Classicist admit I have more affection and respect for the parties in question, even when I [vociferously] disagree.

That said, there are a few points I would like to comment on. My intent is not to "correct" Mr. de Soto, but rather to expand upon various points of his since where Plato and Aristotle go awry, I believe they go awry in interesting and instructive ways. I have not been comprehensive here, but I hope I have provided some context and interesting questions.

N.B. This is a brief first and slightly off-the-cuff reaction to the article. I may add to or otherwise revise it in the near future, but I have posted it so soon toward the end of sharing it with more people by getting it out closer to the publication of the original article. Comments/corrections are still, of course, welcome.


Socrates

Now it is not hard to criticize Socrates and indeed his final self-defense did not endear him to the assembly. Nonetheless, and it seems odd to have to say this, but Socrates deserves some commendation. No matter how sympathetic you are to the charges of "corrupting the youth," the philosophizing and questioning Socrates was advocating were not yet in the air, let alone in the lifeblood of Western Civilization. Socrates was, really for the first time, widely presenting and disseminating it. Today we can pick up philosophy books, take classes, and freely and openly question just about anything. Now I do not only mean that we are free from compulsion or free from repression in the sense that we might be forcefully restrained from questioning. More important is that we know to question in the first place, and I think Socrates deserves a little credit for that.

As Socrates says in his defense, [I paraphrase] You bring me here for corrupting the youth. But who is more criminal: me, or you who pretend to be serious and to care for things which you never cared about at all?

Not all of the Greeks were amused, and in fact this summary from Wikipedia, intentionally or not, captures the hilarity of Aristophanes Clouds (Νεφέλαι):

Faced with legal action for non-payment of debts, Strepsiades, an elderly Athenian, enrolls his son in The Thinkery (the "Phrontisterion") so that he might learn the rhetorical skills necessary to defeat their creditors in court. The son thereby learns cynical disrespect for social mores and contempt for authority and he subsequently beats his father up during a domestic argument, in return for which Strepsiades sets The Thinkery on fire.

Aristophanes' description of the "Thinkery" or "Thinking Shop" (Clouds, 94)

ψυχῶν σοφῶν τοῦτ᾽ ἐστὶ φροντιστήριον.
ἐνταῦθ᾽ ἐνοικοῦσ᾽ ἄνδρες, οἳ τὸν οὐρανὸν
λέγοντες ἀναπείθουσιν ὡς ἔστιν πνιγεύς,
κἄστιν περὶ ἡμᾶς οὗτος, ἡμεῖς δ᾽ ἄνθρακες.
οὗτοι διδάσκουσ᾽, ἀργύριον ἤν τις διδῷ,
λέγοντα νικᾶν καὶ δίκαια κἄδικα.

Translation (Hickey) via Perseus Project:

This is a thinking-shop of wise spirits.
There dwell men who in speaking of the heavens
persuade people that it is an oven,
and that it encompasses us, and that we are the embers.
These men teach, if one give them money,
to conquer in speaking, right or wrong.

Socrates (up), Students (down), amidst studies. [1]


Of course it's all slightly less "funny" and more darkly ironic when you recall they did in fact poison him. Indeed Socrates mentions the unflattering and  false (he says) portrayal in his defense. [2] What was that line about being "remembered as the fools who killed Socrates?" Indeed.

Plato

Now clearly there is a lot in The Republic that. . . well, anyone would disagree with. I should point out Anders Mikkelsen' piece also at the Mises Institute, "The Politics of Plunder in Plato's Republic" [3] which offers the novel and interesting argument that "Plato's Republic is an exposition of the logical consequences of basing civic and personal life on injustice. It condemns political life based on institutionalized injustice — specifically theft and plunder." Let us then confine ourselves here to a few points.

de Soto writes

What is even worse is that Socrates's statolatry was so obsessive that it led him to confuse the positive law derived from the city-state with natural law. He believed people should obey all the positive laws derived from the state, even if they are contra naturam, and thus he laid the philosophical foundations for the legal positivism on which every tyranny to emerge after him in history would rest.
First, I don't know if "confusion" is the proper word. I believe the section in question is from the Crito (The Crito is quite short and the whole dialogue addresses this question.) Second, this is an excellent point I wish de Soto had delved into. Socrates' point seems particularly puzzling since he starts the dialogue by rebuking his old friend Criton for caring what other people think and then goes on to say one should obey unjust laws. I don't think one could argue the dialogue is very paternalistic and statist in tone. Most people would in fact find it off-putting. Socrates, having been convicted, imagines what the state would ask him if he tried to run away: [Translations, W.H.D. Rouse]

Tell me Socrates, what have you in mind to do? In trying to do this, can't you see that you are trying to destroy us, the Laws, and the whole state, as far as yo can do to it? Or do you think it possible that a city can exist and not be overturned, where sentence given has no force but is made null by private persons and destroyed. [Crito, 50b.]
Shortly later, the voice of the laws says, "you must either persuade [your country] or do what she commands; you must bear in quiet anything she bids you to bear" [Crito, 51b] Wow! That's certainly unambiguous and at the moment I can't imagine a more statist line. It reminds me of a quote from Theodore Roosevelt, "No man is above the law and no man is below it; nor do we ask any man's permission when we ask him to obey it. Obedience to the law is demanded as a right; not asked as a favor." Sort of makes you want to aim to misbehave, doesn't it?

Yet it would be dishonest to end the discussion here, as the voice of the laws goes on to make the case that Socrates, before he committed this crime, was a free resident of the city. That is, he could have left. Instead, he stayed and chose to be subject to the laws. This is in fact the third of the laws' three arguments, that the criminal does wrong against the state in three ways, 1) because the state is his parents, 2) because the state is his nurturer, and 3) because he was there voluntarily. Speaking of remaining in the city voluntarily, Socrates could have proposed banishment as his punishment. How does this affect his relationship to the laws and state? The situation is now more complicated: if Socrates liked Sparta so much and was free to leave, why didn't he? I don't find de Soto's encapsulation of Socrates' choice very enlightening, and not just because it is unflattering to the philosopher. It would seem worthwhile, though, to take all of Socrates' claims at face value; I think doing so would provide more interesting venues of explanation even if one disagrees.

It seems a perverse situation, perhaps it is just to follow unjust laws but unjust to carry out unjust laws? Is is not just to carry out any law, then? Clearly Socrates thought his situation was just here, and he was also concerned with justice (see the opening two books of the Republic, Republic (588b-592b,  (608c-end.)) I am not presently at liberty to discuss the sections in question as well as the remainder of the Apology, but my point is that it is more profitable to approach the apparent problem with Socrates' ideas by reducing them to the principles which generated them and not simply saying, "he said x which was wrong, y which was bad, et cetera.) Lastly regarding Plato, there is one seemingly very liberal quote I cannot verify or place:
Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.
I'm not at all sure where this quote comes from, whether it is from the main canon of Plato or if it was found as a quotation in another author. It would seem to reflect the Hamiltonian notion that the need for government (for Hamilton a particular type of government [4]) was needed because of man's nature, or at least the "bad" inclinations of some." We might broadly say that "the only need for government is because of criminals." That sounds paradoxical since if there is no law there is no illegality, though we are presumably discussing natural law here. Similarly, Plato says education would reduce the need for laws. (Then again, he would only educate the guardians. Aristotle finds understandable fault with this in Politics I.vi. 1264a.)

Anyway, perhaps this question was better posed by Aristotle,

"The law has the power to command obedience only by habit, so that a readiness to change laws quickly enfeebles them." So when does one change them then? "Do not change the laws lightly; what you gain may be outweighed by what you lose in obedience." [Politics, II.vii. 1269a]

Clearly to us there is some perhaps unpleasant deference to the state. Again, the state seems to exist for its own sake.Yet we must remember a principle which runs throughout all of Aristotle, that "the whole precedes the part." Thus the state which evolves from the community which evolves from the family is just as legitimate as the family and the pairing of man and woman, which is natural and just (according to Aristotle) because it is of necessity.


We might say that both Aristotle and Socrates seem to say order is more important than liberty, but to say so we would have to consider their definitions of liberty. No one is pro chaos, even if he is against a coercive monopoly of law. As de Soto's phrase spontaneous market order suggests, faith in markets is neither faith in chaos or disorder nor love of disorder, but rather faith in spontaneously arising order. As de Soto quite properly says, the grasping of the spontaneity is truly the issue in discussing "ancient economics."


Prejudices Against Usury

de Soto understandably finds fault with some of the philosopher's positions on usury and money-making. Like Tibor Machan in his article from a few weeks ago [5], I think also and generally finds the philosophers just do not enough value the necessity of making a living.

Aristotle says, "Men want to increase their money without limit because they are intent upon living only, not living well." [Politics, I.ix. 1258a] Yet we must recall the Aristotelian principle that "that which is done for its own sake," that which is an end itself is more valuable. One does not work because he loves working, though he may love what he does, but because it is necessary to support himself. Yet if he plays a musical instrument or studies or takes up a hobby, those things are ends in themselves, done for no other purpose. [Nichomachean Ethics, I.i. 1094a]

Wealth is thus of value, but one must not understand things only in terms of their monetary value. [Rhetoric, II.xiii. 1389b.] One could of course translate that into an axiom more obviously "economic" but Aristotle's point is rather obvious.

Wealth-getting is a natural part of managing a household. Yet some people "turn every quality or art into a means of getting wealth; this they conceive to be the end, and to the promotion of the end they think all things must contribute. [Politics I.ix. 1258a]

Aristotle's censure of usury seems to me to be sensible even if you do not share it. Money, to Aristotle, was simply a stand in for work. You converted your work into coin so you could more easily trade it. Without money you could only barter; if you needed eggs but only had wine to trade, and the man with the eggs didn't want your wine, then you couldn't get eggs. Usury, in contrast, generates more money without adding any new product. There is more coin but the coin is, in this thinking, detached; it does not represent anything. The Greek word for interest, τόκος (tokos) is the same as the word for offspring, meaning that the money is born from money. Yet the disconnection from something of apparent and obvious value makes earning money via usury seem like a cheat.

In Politics, I.ix. 1258b Aristotle says such "wealth-getting" concerns are not "unworthy of philosophy" but rather they are illiberal. For various discussions of Aristotle and "liberality" see Recommended Reading below.



Aristotle on Property


On the one hand Aristotle does say common property would destroy liberality, and (humorously) that, "man will not simply become everyone's friend if property is made common." Certain evils, Aristotle says too, arise from man's nature, like perjury and breaking contracts (See Shuchman in Recommended Reading below.) Aristotle says property should be private, "How immeasurably greater is the pleasure when a man feels a thing to be his own" [Politics, II.v. 1263a.] but that its use should be common. See Swanson in Recommended Reading.

Regarding land and property, I think it is difficult for us in the 21st century with all of our technology to appreciate what seemed plausible in the past. Aristotle and Plato both thought there was an ideal size for a city. Jefferson writing in 1816 describing his system of wards and republicanism wrote:
Were I to assign to [republicanism] a precise and definite idea, I would say, purely and imply, it means a government by its citizens in mass, acting directly and personally, according to rules established by the majority; and that every other government is more or less republican, in proportion as it has in its composition more  or less of this ingredient of the direct action of its citizens. Such a government is evidently restrained to very narrow limits of space and population. I doubt if it would be practicable beyond the extent of a New England township. The first shade from this pure element, which, like that of pure vital air, cannot sustain life of itself, would be where the powers of the government, being divided, should be exercised each by representatives chosen either pro hac vice, or for such short terms as should render secure the duty of expressing the will of their constituents. This I should consider as the nearest approach to a pure republic, which is practicable on a large scale of country or population. [6]
Conclusion

I hope I have pointed out some things of interest, built on some of de Soto's statements, and elucidated some of his quotations.

If I may make one point, though, it would be that the aims of Plato and Aristotle's states were not liberty. The greatest good for the state, for them, was predicated on the greatest good for man. The ideal state is what it is because of what the ideal man is. A liberal state does not pretend that it has a template for the ideal man or citizen, though clearly there is behavior incompatible with liberal-democratic-republican-capitalist society. As Plato says in Republic VIII 561-562, you will find many various "constitutions" to which you will be tempted in a democratic state. Risky indeed, but it beats "being ruled."

Similarly, though, we may ask: Is it legitimate to criticize these authors for making economic mistakes when they were not, properly speaking, considering economics? (i.e. The distinct discipline we know as Economics)



Notionally I appreciate this point but I wonder if the premise would permit fruitful inquiry: because Plato et al didn’t realize they weren’t writing about “economics” we can’t criticize them for being wrong about economics. It would seem not to if one considers economics an objective science. It would appear to be more productive  to take the statements of the philosophers in question in context because these “mistakes” of theirs were made for particular reasons, i.e. not having conceptions of “economics” and a spontaneous order, being consistent with principles stated elsewhere in their work, and working toward a different end. On the one hand we don’t want to pigeon-hole them into later conceptions, on the other we somehow must if we consider there to be a larger set of “true”/objective categories.

In addition to being more constructive and elucidating, perhaps such a discussion about “the why” of their “mistakes” would have tempered the tone of Prof. de Soto’s article and made certain people not bristle so much, particularly those inclined toward philosophizing. We must consider that Plato and Aristotle hold philosophizing itself in high esteem. For them, choosing to spend your free time reflecting on philosophy is a great good.


Overall, I think it is less useful to say, "Socrates, Plato, Aristotle et al" missed x, y, and z" or that "they were wrong about a, b, c et cetera" than to say, "Why wouldn't this have occurred to them?" and "Why did they think this was necessary?" For an important reason probably, and maybe a good one. How can we accomplish that goal by a different means?


[1] Plato attempts to reverse this caricature of Socrates (and philosophers) in Republic VII.529b-529c
[2] Plato. Apology of Socrates, 19c.
[3] Mikkelsen, Anders. The Politics of Plunder in Plato's Republic. http://mises.org/daily/4201
[4] Rosano, Michael J. Liberty, Nobility, Philanthropy, and Power in Alexander Hamilton's Conception of Human Nature. American Journal of Political Science, Vol. 47, No. 1 (Jan., 2003), pp. 61-74
[5] Machan, Tibor R. A Problem with Aristotle's Ethical Essentialism. http://mises.org/daily/4458
[6] Letter to John Taylor. Monticello, May 28, 1816, M.E., XV, 19. in Koch, Adrienne. The Philosophy of Thomas Jefferson. Columbia University Press, New York. 1957. p. 164


Recommended Reading

Long, Roderick T. Aristotle's Conception of Freedom. The Review of Metaphysics, Vol. 49, No. 4 (Jun., 1996), pp. 775-802


McGrade, A. S. Aristotle's Place in the History of Natural Rights. The Review of Metaphysics, Vol. 49, No. 4 (Jun., 1996), pp. 803-829


Mayhew, Robert. Aristotle on Property. The Review of Metaphysics.

Shuchman, Philip. Aristotle's Conception of Contract.  Journal of the History of Ideas, Vol. 23, No. 2 (Apr. - Jun., 1962), pp. 257-264


Swanson, Judith A. Aristotle on Liberality: Its Relation to Justice and Its Public and Private Practice. Polity, Vol. 27, No. 1 (Autumn, 1994), pp. 3-23

Younkins, Edward W. Aristotle, Human Flourishing, and the Limited State. http://www.quebecoislibre.org/031122-11.htm

Thursday, April 1, 2010

Three Modes of Perception of Economics

Economics, mit Humor

Three Modes of Perception:
The Liberal, The Conservative, The Libertarian

(click  images to enlarge)

I. The [Neo-] Liberal


II. The Conservative


III. The Libertarian


Tuesday, January 12, 2010

Smashing Myths and Restoring Sound Money

Lecture from the Mises Institute

Presented by Thomas E. Woods, Jr. at "Depression, Monetary Destruction, and the Path to Sound Money": the Mises Circle in Greenville, South Carolina, 3 October 2009. Sponsored by Atlantic Bullion and Coin, and Professional Planning of Easley, LLC



A selection from the lecture:

Problems with fiat money: It's hard to save for the future.
It's hard to save for the future under a fiat system where the government can create all this money. It was the case in the 19th century that to save for the future you could simply acquire precious metal coins. Just acquire them. Now of course you could invest them, that's true, but the point is you didn't have to. You didn't have to be a speculator. You didn't have to go into the stock market. You didn't have to say, "Where can I put my money so that it will at least hold onto its value?" You didn't have to worry about the because it held its value. When these metals served as money they held their value or increased their value over time and any graph you look at and any set of statistics you look at will bear this out.

Whereas today, only a fool would save for the future by piling up federal reserve notes. You would have to factor in a depreciation factor of at least three. So, in other words, it makes it harder to save because just to hold onto the purchasing power you have earned you have to become a speculator and most people, myself included, are not fit to be speculators. We don't belong in the stock market, we don't belong in some of these financial instruments. But we feel like we have to do that as a self-defense mechanism. And that was not the as under hard money.
 –

On the same topic, a story from Theodore Dalrymple in City Journal: Inflation's Moral Hazard

A Selection:
Yet this was a crude way of looking at things, as my father’s fate should have instructed me. He sold his business in the sixties, at the end of the period of price stability that had reigned throughout his life, for what then seemed a large amount of money. He was a man who, for both temperamental and ideological reasons, held a deep contempt for financial speculation and wheeling and dealing, with the result that he did nothing as inflation inexorably eroded his savings. He grew poorer and poorer through the remaining 30 years of his life, and might have sunk into poverty had he not moved into a house that I owned. And this after reaching a level of wealth that, relatively speaking, was greater than I shall probably ever know.

For a while, I was angry about what seemed my father’s improvidence and lack of foresight. As the current financial crisis has conclusively demonstrated, however, not everyone is blessed with foresight, not even those whose livelihood depends primarily on the claim of possessing it. My father was born of a generation that saw money as a store of value, a far from dishonorable notion—and one that, when it reflected reality, helped give a lot of people peace of mind. And as I reach the age when inflation might cause me some embarrassment, even hardship, my sympathy with my father’s plight has grown. I am no longer young enough to fight another day, economically speaking: the destruction of my wealth by inflation would be final. In an aging population, more and more people are in my position, which helps explain why an age of prosperity can be an age of anxiety, even without a financial crisis.

Wednesday, September 23, 2009

A Libertarian Case for “Free” Health Care?

Last month author, columnist, and intellectual-at-large Christopher Hitchens spoke about George Orwell and Hitchens’ new book, Why Orwell Matters, with Russ Roberts of the Library of Economics and Liberty. (A link to the audio recording of the interview is in the footnotes. [1]) It is always a pleasure to listen to Hitchens even though, perhaps especially, when I disagree with him. This interview is no different and I would like to draw attention to one argument Hitchens offered regarding the issue of health care insurance since I have not heard it from anyone else of late.

Long time member of the left, one might expect from Hitchens one of the typical arguments for “free” health care for all. Seemingly, he offers something different. Is he even more inclined today “to stress those issues of individual liberty,” as he said several years ago in a Reason interview? [2] Paraphrasing, Hitchens said: if you offered people health care and freed them from the burden of worrying, “if I lose my job and fall ill, I’ll be doomed,” you will be making them more free. It appears an interesting and novel argument in favor of the proposed “health care reform.” Amongst the many arguments offered in favor of the proposal in recent months this is interesting insofar as it appears to have a legitimate philosophical base. Who doesn’t want freedom? Freedom is great! America is founded on the notion of freedom, we should make people free!

We must first, though, define freedom before we can know whether or not we possess it. In this task I turn to the great author and scholar C.S. Lewis, whose indispensable book Studies in Words will assist us. The modern English free like the Ancient Greek eleutherios and Latin liber originally carried connotations of both autonomy and legal status. The words also contain both ethical and social connotations: that a man is both free insofar as he is not a slave and free insofar as he acts as befits one who is free (as slaves were thought inherently to be nosy, ungenerous, carry grudges, et cetera.) Additionally, the English free grew to be used in the sense of “enjoying the freedom of a city” and by extension, being a citizen of that city and enjoying the commensurate rights, namely the right to vote. With those notions in mind, we may examine the cultural meaning of free. Chief amongst these distinctions is there are certain occupations that befit the free man because he undertakes them for their own sake and not for utility. Even commercial work does not make one free in this sense, since it is done to contribute to some other end. Lewis adds, “Only he who is neither legally enslaved to a master nor economically enslaved by the struggle for subsistence, is likely to have, or to have the leisure for using, a piano or a library.” I believe this definition is most similar to what Hitchens means by “freedom.” If only we could free people of the fear they might not be able to support themselves, they will be able to do their jobs better, more joyfully, et cetera. These are variants of what I call “Star Trek Syndrome,” which is the supposition that if we removed from man his need to support himself, he would be free to devote his time to some worthy pursuit. Yet Hitchens’ idea still sounds credible, as no man living with the anguish of uncertainty can be happy.

Alas, there exist two flaws in this argument. The first is this: it assumes the government is a “rights bursar,” that it exists to (or even simply, may) create and grant freedom. This is an incorrect assumption, as our society, unlike those that heretofore defined free, is one founded upon the principle of natural rights. In a society in which social mobility is impossible, where one is either citizen or slave or lord or serf, where there is neither legal ability nor practical chance for improvement, freedom is essentially inherited. The connotations and prejudices contained in the ancient definitions are foreign to our definition of liberty. In our society, freedom is simply the ability to act uncoerced by force and it is considered distinct from prosperity or happiness. Our government exists but for one purpose, to guarantee our natural rights to life, liberty, and the pursuit of happiness. The government does not exist to invent additional rights and to grant them to the people, nor can it do these things. The Declaration of Independence and The Constitution of the United States of America contain acknowledgments that men are inherently, i.e. already, free. In the definitive biography of our third President, Dumas Malone summarized the Jeffersonian outlook:
Like so many of his ‘enlightened’ contemporaries, Jefferson believed that men had originally been in a state of nature; that they had then been free to order their own actions and to dispose of their own persons and property as they saw fit; that government was instituted among them in the first place by consent.” [3]
Thus the government’s purpose is to safeguard those freedoms, neither to add to nor subtract from them. This concept of natural rights represents a fundamentally different worldview from both its predecessors and successors.

A second flaw is this: who would provide these rights? If, as we have said, a man is born free, then he inherently has a right to his life and thus must be left free to use his mind to decide how best to support himself. The concept of making a man more free by alleviating him of the necessity of supporting himself is in contradiction with the above principle. In creating a legal responsibility for supporting a man, you in fact diminish everyone’s rights, enserfing both the poorer and richer parties to a distributive entity. The only way to “free” one group of people from the “burden” of supporting themselves is to have another group of people support them. The underlying assumption here is that it is not my job to support myself, but someone else’s, i.e. that I am entitled to my own freedom at the expense of someone else’s. Here we must differentiate between two concepts, freedom and prosperity. In the ancient definitions, the prosperous man is free. In our era, the free man is able to become prosperous. To impose the older definition on our society would be to mandate an average level of prosperity, i.e. the more prosperous must be brought down to average to raise those below average to the same point, that way everyone can be said to be prosperous, and thus free. The root of this conclusion is an egalitarian assumption: that equal opportunity must result in equal outcome. If we are all equal in ability, this argument goes, then it must be an unjust system or society that represses some. Without commenting on the truthfulness of this claim, I will say only that it is a concept alien to our foundational laws. It is an extra-legal belief which, of course, your are free to adopt and live by, but not free to impose on others.

If we exercise our memories (or hit the history books) we will recall this view is not new. Proposals for “additional” rights have been made before by many 20th century Progressives. In his 28th Fireside Chat on January 11, 1944 President Franklin Delano Roosevelt said, “Necessitous men are not free men." Clearly we see the old arguments and the new are one and the same. From the same speech: [4]

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all-- regardless of station, or race or creed.

Among these are:

The right to a useful and remunerative job in the industries, or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of farmers to raise and sell their products at a return which will give them and their families a decent living;

The right of every business man, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, and sickness, and accident and unemployment;

And finally, the right to a good education.

All of these rights spell security.
Aside from the problem of the authority by which those rights would be precisely (i.e. actually and usefully) defined and administered and the myriad problems of implementing them, author and philosopher Ayn Rand succinctly addressed the fundamental problem of these supposed rights in her 1963 essay, Man’s Rights, asking: “at whose expense?” [5] Is a nation in which some men work to provide these “rights” for others more or less free than one in which each works to support himself? Rand added, “A right does not include the material implementation of that right by other men; it includes only the freedom to earn that implementation by one’s own effort.” [5] One is free to pursue happiness, one is not owed happiness itself. In a time of great crisis, FDR asked Americans to sacrifice liberty for security. Americans have, at various points over the past 60 years taken that offer from various people, parties, presidents, congresses, et cetera. We accepted Social Security, which is now bankrupt. We accepted Medicare, which is now bankrupt. We accepted a government monopoly on education and national education standards, and school systems are in shambles. We incentivized home ownership and regulated our economy with disastrous consequences. All of these programs were supposed to make some people, the unfortunates, more free. All of these programs and more will have to be supported at the expense of some: are they more free or less free?

Today, amidst another crisis gladly not as great, our current president asks the same. Perhaps more of the poison is the cure? Yet FDR’s “rights” have indeed secured something: a government continually growing in size and power. Let us return to the understanding that freedom is the right to life, liberty, an the pursuit of happiness. Admittedly, these rights do not spell security. They spell liberty, which cannot be invented, bought, and doled out, only recognized, fought for, and preserved. What man, then, shall we call free? He, “whose life is lived for his own sake not for that of others.” [6]

[1] http://www.econtalk.org/archives/2009/08/hitchens_on_orw.html
[2] http://www.reason.com/news/show/28208.html
[3] Malone, Dumas. Jefferson the Virginian. Little, Brown and Company. Boston. 1948. p. 175
[4] http://www.presidency.ucsb.edu/ws/index.php?pid=16518
[5] Rand, Ayn. Man’s Rights. Signet. New York New York. 1961 (p. 113)
[6] Aristotle. Metaphysics 982b


Lewis, C.S. Studies in Words. Cambridge University Press. Cambridge, UK. 1960 (Ch. 5: “Free”)