Rothbard on the Myth of Social Efficiency

Several weeks ago Sheldon Richman posted this quote from Rothbard as an answer to those who justify enclosures, old and new, on the grounds that the gentleman farmers of the 18th century or the agribusiness plantations of the contemporary Third World make "more efficient" use of the land:

"[I]ndividual ends are bound to conflict, and therefore any additive concept of social efficiency is meaningless. . . . Efficiency . . . can only be meaningful relative to a given goal. But if ends clash, the opposing group will favor maximum inefficiency in pursuit of the disliked goal. Efficiency, therefore, can never serve as a utilitarian touchstone for law or for public policy. . . . [C]osts, as Austrians have pointed out for a century, are subjective to the individual, and therefore can neither be measured quantitatively nor, a fortiori, can they be added or compared among individuals. But if costs, like utilities, are subjective, nonadditive, and noncomparable, then of course any concept of social costs, including transaction costs, becomes meaningless." ("The Myth of Efficiency," in Time, Uncertainty, and Disequilibrium, Mario Rizzo, ed.)

As I argued in my post on "The So-Called Green Revolution," the most "efficient" agricultural techniques for a piece of land depend on who owns it and his goals in farming it. The techniques of large-scale commercial farming, with heavy mechanization and intensive use of chemicals and GMOs, are "more efficient" for those who happen to have huge tracts of land and heavily subsidized irrigation and other inputs, and are producing for export markets or the cities. For the peasant who farms a small tract of land and whose objective is to feed himself and his family as self-sufficiently as possible, the most efficient techniques will more likely involve careful stewardship of the soil and the use of drought-hardy locally improved varieties of seed. To say that the robbers make "more efficient" use of the land begs the question of whose ends should prevail: the robbers or the robbed?

Gatto on Corporate Liberalism at Microsoft

From the future is unwritten (hat tip to Mike West).

That great "progressive" Bill Gates, like all "progressives," is a great friend of "public" education. He's especially fond of government $$ for higher education. What that translates to in practice is the taxpayers underwriting the cost of training scientific-technical labor-power, and ideally overproducing it so that it's nice and cheap. James O'Connor had the number of "progressives" like Gates a long time ago. But two hundred years before O'Connor, Adam Smith observed that the main function of a state-subsidized liberal arts education was to produce an oversupply of knowledge workers and keep down their pay.

John Taylor Gatto. "The Richest Man in the World Has Some Advice for Us about College . . ."

On February 28 of this year, Bill Gates of Microsoft, told a gathering of the 50 American state governors that the United States has reached a competitive crisis which we were losing. This could best be combated by making college prep the sole function of secondary schooling, college prep for everyone, and college, too.

Those who couldn’t afford it should be subsidized by the states. In Erving Goffman’s chilling locution, college was to become a “Total Institution,” controlling all work in the economy....

In his monumental history of civilizations, Arnold Toynbee said that institutionally forced schooling was always about creating a mass of clerks for the prevailing bureaucracy. Not educated people who can think for themselves, but clerks – parts of a social machine. In your heart, you knew that, with or without Toynbee, didn’t you?...

China has mastered the techniques of the West and has gone far beyond them. It employs the ruthless logic of financial capitalism with a discipline it would be impossible to achieve in the soft-hearted management systems of the United States and Canada.

They don’t make things better than we do, but they do make them just as good and cheaper, by a factor of from six to thirty. It is fanciful to say, as Mr. Gates did, that if we just have more schooling, we’ll be okay. In the next 10 years, China and India, et al., will release ten million well-trained engineers in excess of domestic needs on the world’s skilled labor markets.

These men and women will bid for work against your own techie sons and daughters.

At sixteen cents or so on the dollar, the effect on wages will be a catastrophe for this important segment of middle-class life. Mr. Gates didn’t bother to tell his audience that Microsoft has already opened large colleges in China and India to train young people in those nations to its own specifications.

That puts a new spin on his appeal for universal college training doesn’t it? Perhaps you believe the corporate policy of Microsoft will prefer to continue to pay high wages when a stream of its own foreign graduates becomes available....

Saturation schooling, kindergarten through college, was a leadership response to the demands of a centralized corporate economy that replaced American/Canadian entrepreneurialism between 1880 and 1920.

What corporatism required was two things: A laboring mass – including a professional laboring mass of doctors, lawyers, engineers, architects and schoolteachers – who did what they were told without question, and a citizenry in name only, one which defined itself by non-stop consumption, one which believed that choosing between options offered by management was what democracy was all about.

Lockstep schooling, driven by standardized testing, testing not to measure learning but obedience, was the mechanism used to drive out imagination and courage....

Whatever education is, one thing is certain: It doesn’t take place locked in seats following the commands of total strangers, your obedience measured regularly by short answer tests. And it’s education we need to meet the future, not schooling....

We have the most efficient management in the world at a very high price: Mutilating the public imagination, vesting it in a handful of corporations. School was the factory producing incomplete human beings who were easy to manage. It worked for a century to produce national riches and a citizenry increasingly poor in spirit.

Contextual Libertarianism and Class Theory

Since these issues have featured so prominently in recent discussions, I've excerpted this full passage dealing with them from Chapter Nine of Studies in Mutualist Political Economy.

* * *

A specific policy proposal must be evaluated, not only in terms of its intrinsic libertarianism but, in the context of the overall system of power, how it promotes or hinders the class interests that predominate in that system. We must, as Chris Sciabarra put it in his description of Marx’s dialectical method, "grasp the nature of a part by viewing it systemically--that is, as an extension of the system within which it is embedded."(28) Individual parts receive their character from the whole of which they are a part.

Arthur Silber, working from Sciabarra’s principle of contextual libertarianism, explains the approach quite well:

....there are two basic methods of thinking that we can often see in the way people approach any given issue. One is what we might call a contextual approach: people who use this method look at any particular issue in the overall context in which it arises, or the system in which it is embedded….

The other fundamental approach is to focus on the basic principles involved, but with scant (or no) attention paid to the overall context in which the principles are being analyzed. In this manner, this approach treats principles like Plato's Forms....

….[M]any libertarians espouse this "atomist" view of society. For them, it is as if the society in which one lives is completely irrelevant to an analysis of any problem at all. For them, all one must understand are the fundamental political principles involved. For them, that is the entirety of the discussion....

To sum up, then: we can see two very different methods of approaching any problem. We have a method which focuses on contextual, systemic concerns, and always keeps those issues in mind when analyzing any problem and proposing solutions to it. And we also have a method which focuses almost exclusively on principles, but employs principles in the manner of Plato's Forms, unconnected and unmoored to a specific context or culture. As I said, my solution is to employ both methods, separately and together, constantly going back and forth -- and to endeavor never to forget either.(29)

The enemy of the state must start with a strategic picture of his own. It is not enough to oppose any and all statism, as such, without any conception of how particular examples of statism fit into the overall system of power. Each concrete example of statism must be grasped in its relation to the system of power as a whole, and the way in which the nature of the part is characterized by the whole to which it belongs. That is, we must examine the ways in which it functions together with other elements of the system, both coercive and market, to promote the interests of the class controlling the state.

In forming this strategic picture, we must use class analysis to identify the key interests and groups at the heart of the system of power. As Sciabarra points out, at first glance Rothbard‘s view of the state might seem to superficially resemble interest group liberalism: although the state is the organized political means, it serves the exploitative interests of whatever collection of political factions happen to seize control of it at any given time. This picture of how the state works does not require any organic relation between the various interest groups controlling the state at any time, or between them and the state. The state might be controlled by a disparate array of interest groups, ranging from licensed professionals, rent-seeking corporations, family farmers, regulated utilities, and labor unions; the only thing they might have in common is the fact that they happen to be currently the best at weaseling their way into the state.

What Roderick Long calls "statocratic" class theory (a class theory that emphasizes the state component of the ruling class at the expense of its plutocratic elements) tends toward this kind of understanding. A good example is the class theory of Adam Smith and his followers:

By its nature…, a powerful state attracts special interests who will try to direct its activities, and whichever achieves the most sway… will constitute a ruling class.(30)

Long pointed to David Friedman as an even more extreme example of this tendency:

It seems more reasonable to suppose that there is no ruling class, that we are ruled, rather, by a myriad of quarrelling gangs, constantly engaged in stealing from each other to the great impoverishment of their own members as well as the rest of us.(31)

But on closer inspection, Rothbard did not see the state as being controlled by a random collection of interest groups. Rather, it was controlled by

a primary group that has achieved a position of structural hegemony, a group central to class consolidation and crisis in contemporary political economy. Rothbard’s approach to this problem is, in fact, highly dialectical in its comprehension of the historical, political, economic, and social dynamics of class.(32)

And as we saw in Chapter Four, this "structural hegemony" did not arise in the twentieth or even the late nineteenth century; it was built into capitalism ever since the landed classes and merchant oligarchs created it by a revolution from above, five hundred years ago.

The state is not a neutral, free-standing force that is colonized fortuitously by random assortments of economic interests. It is by nature the instrument of the ruling class--or, as the Marxists say, its executive committee. In some class societies, like the bureaucratic collectivist societies of the old Soviet bloc, some portion of the state apparatus itself is the ruling class. In state capitalist societies like the United States, the ruling class is the plutocracy (along with subordinate New Class elements). This is not in any way to assert that economic exploitation or class domination can arise outside of the state; only that the ruling class is the active party that acts through the state.

Notes

28. Chris Matthew Sciabarra, Total Freedom: Toward a Dialectical Libertarianism (University Park, Penn.: The Pennsylvania State University Press, 2000) 88.
29. Arthur Silber, "In Praise of Contextual Libertarianism," The Light of Reason, November 2, 2003 http://coldfury.com/reason/comments.php?id=P1229_0_1_0_C Captured August 21, 2004.
30. Roderick T. Long, "Toward a Libertarian Theory of Class," Social Philosophy & Policy 15:2 (1998) 313.
31. From The Machinery of Freedom, qt. in Ibid. 327.
32. Ibid. 287.

"A Step in the Right Direction": Followup

While the provocative discussion was going on in the comments to my previous post, Sheldon Richman has raised some important questions in a series of posts of his own. In an initial post, he cited Roderick Long's view of the CPE favorably, and added:

The French law letting employers fire young workers without cause during their first two years on the job is a freeing of "the market" only on the surface. France is a cartellized and concentrated economy thanks to heavy goverment intervention on behalf of the country's elite. Whether we call it state capitalism or state socialism is a mere detail. Thus giving the beneficiaries of state privilege a bit more leeway in firing employees hardly constitutes freeing the market. Why is there no talk in France of removing the myriad deep restrictions on free competition? That is what would really give workers bargaining power.

In a follow-up, he wrote:

If I were a young would-be worker in France, knowing what I know now about economics, ethics, and politics, would I be protesting the law that permits employers to fire young workers without cause during their first two years on the job? Absolutely not. (Just as I do not oppose repeal of minimum-wage laws in the U.S.) But I would be pointing out that this legal change doesn't begin to scratch the surface of the deeply entrenched French corporate state, which benefits an elite at the expense of everyone else. In other words, libertarians shouldn't hope that the new French law is repealed, but neither should we think this is a significant liberalization of the French economy.

Seemingly having second thoughts, he distanced himself somewhat from Roderick Long's position on the importance of priorities in scaling back the state:

Thus I differ somewhat from Roderick Long's position here, in which he argues that in the current (corporate-state) context, removal of the firing restriction does not constitute a move toward liberty. This is not obvious to me. The order in which government restrictions are removed may be relevant to the justice of, or libertarian position on, any particular removal, but it is by no means easily determined what that order should be. I don't see the French case as one in which things are grossly out of order. As Mark Brady has pointed out, the restriction on firing has hurt people other than the privileged elite, so its removal will help others than that elite. Long's example of deregulating the S&Ls while the taxpayers were still on the hook for losses through deposit insurance is a much more clear-cut case where order mattered.

Finally, in a third post, Sheldon writes in response to my last post:

Kevin, you write, "But the decision of what aspects of statism to dismantle first should be guided by an overall strategy of dismantling state capitalism as a system." This assumes we will control the agenda for dismantling. But we won't. Rothbard may have supported the French students in 1968, but he also said often that we should take anything we can get when it comes to peeling back state power. Rather than opposing the CPE, the anti-corporativists should use it to emphasize the need to really dismantle the corporate state. If CPE is junked, I don't expect to see attention turned to the overall system; things will just go on as they were. Hard as I try, I don't really see the strategic vision here.

One thing I'd like to drag into this discussion is Chris Sciabarra's dialectical libertarianism. It's dangerous to consider any piecemeal "market reform" purely in terms of whether it's good in principle, in and of itself. Any such policy initiative should be considered in the context of the whole system of which it is a part, and whether it tends to weaken or strengthen that system. We must, as he put it in Total Freedom,

grasp the nature of a part by viewing it systemically--that is, as an extension of the system within which it is embedded.

Arthur Silber, in a post on the old (regrettably defunct) Light of Reason blog [but reposted here], elaborated:

....there are two basic methods of thinking that we can often see in the way people approach any given issue. One is what we might call a contextual approach: people who use this method look at any particular issue in the overall context in which it arises, or the system in which it is embedded….

The other fundamental approach is to focus on the basic principles involved, but with scant (or no) attention paid to the overall context in which the principles are being analyzed. In this manner, this approach treats principles like Plato's Forms....

….[M]any libertarians espouse this "atomist" view of society. For them, it is as if the society in which one lives is completely irrelevant to an analysis of any problem at all. For them, all one must understand are the fundamental political principles involved. For them, that is the entirety of the discussion....

To sum up, then: we can see two very different methods of approaching any problem. We have a method which focuses on contextual, systemic concerns, and always keeps those issues in mind when analyzing any problem and proposing solutions to it. And we also have a method which focuses almost exclusively on principles, but employs principles in the manner of Plato's Forms, unconnected and unmoored to a specific context or culture. As I said, my solution is to employ both methods, separately and together, constantly going back and forth -- and to endeavor never to forget either.

So I don't agree with Rothbard that we should simply accept whatever introduction of market elements the state capitalist ruling class offers, based on its own priorities.

As I argued in the comments to the post below, we may not control the agenda in the sense of directing the dismantling process from inside the state. But at any given time, we have a great deal of latitude on what kind of ad hoc coalition to form to pressure the state from outside, and what areas of state involvement we should focus on dismantling. The groups we choose to align ourselves with, and the priorities we focus on in pressuring the state, can make a great deal of difference.

My own preference would be along the lines of a tactical alliance with the Greens and liberals to radically scale back corporate welfare, eliminate all differential tax benefits (with overall cuts to make it revenue neutral), and restore traditional common law remedies against pollutors. Another winner would be a broad-based coalition to cut the income tax by increasing the personal exemption, as an alternative both to the GOP's across the board approach or the Democrats' preference for targeted, social engineering tax credits. Such campaigns, if handled competently and associated with an effective propaganda campaign, might put overwhelming pressure on the state. And it would be a move toward genuine free market reform based on our own left-libertarian priorities, rather than taking crumbs from off the table of the Catoids and ASI.

In any case, as I understood it, Brad Spangler's letter was not so much about supporting repeal of CPE, or even whether CPE was good or bad in itself, as about diverting the debate toward dismantling the state in ways that will be most helpful to the producing classes. That means focusing like a laser beam on the central structural supports of state capitalism, rather than letting the likes of Reagan, Thatcher and Pinochet incorporate selective "market reforms" into a leaner and meaner state capitalist system. Sheldon himself suggests as much in his second post:

Libertarians can be of help by pointing out what ought to be the target of protest in France: the myriad privileges that constitute the corporate state.

And Brad seems to bear out this interpretation in his comments to Sheldon's third post:

The letter is not an attempt to influence state policy. Any reform attempts will have those dissatisfied with its results. The agorist revolutionary option -- self-liberation through going counter-economic and the incremental weakening of the state thereby until it eventually collapses -- avoids the ethical dilemnas of reformism. I would say that there is no contradiction with your opinion of the CPE as a reform (an expression of the natural urge to weigh some reforms as better or worse than others) and recognizing frustration among the French populace, the better to point out the revolutionary option to them.

As I said in the comment thread to "A Step in the Right Direction," the CPE is already, in large part, a moot point. The purpose of Brad Spangler's letter of support is to direct the French students' attention back to the man behind the curtain. Educating them on the phony nature of such "free market" stunts as CPE, and the statist agenda of which it is a part, is more about the future than the past. Most importantly, the goal should be to direct their future efforts to engaging the state on ground of their own choosing rather than fighting on ground chosen by the corporate enemy.

A Step in the Right Direction

In the comments to my last post, Stefan remarked:

Your "solidarity" sounds suspicious. In a free-market workers can be fired at any time, or can quit anytime. You derisively refer to the CPE as a "free market reform", but that's exactly what it is: A tiny free-market reform in a sea of statism. That you express support, however muted, for these masses of statist student protesters is very telling.

Well, I guess it's "telling" in the sense that it tells Stefan whatever he was looking to be told. But when you start with a sea of state capitalism, and you let the state capitalist ruling class decide on the basis of their own strategic priorities what tiny areas of free market reform to introduce, guess what you get? A state capitalist system that selectively harnesses more free market elements, the more effectively to serve state capitalist interests (see Chris Tame's view of Thatcherism, in a post below, as a more efficient form of corporatism):

Where others saw a rolling back of the state, he saw in privatisation only a more rational - and thus a more efficient - type of statist control. "These new markets are never free," he once said, "and they are always dominated by the ruling class."

Brad Spangler got a similar objection on the comment thread to his original post. Julius Blumfield wrote:

“but representative of perhaps the worst possible choice of priorities”

What do priorities have to do with it? I don’t understand why libertarians would oppose an increase in liberty. Very odd. Please explain!

In response, Brad referred him to my post. Blumfield didn't find it convincing:

I don’t see that he answers the objection at all. If the reform is a step in the right direction (which it plainly is) it is perverse for libertarians to oppose it. Would you oppose a liberalisation of drug laws (such as for example the recent partial decriminalisation of cannabis possession in the UK) because it takes place within an overall statist framework? Surely not. So why is this any different? I can’t help but suspect that your opposition is grounded more in some misplaced sense of solidarity with leftists, than on principle.

I agree with him that I didn't do an adequate job of making my objections explicit. I was implicitly assuming the principle Brad states in another comment:

By begging the state to establish your liberty for you piece-meal, it brings liberty into disrepute as the state inevitably does so in such a manner as to benefit state allies.

Now, I'm not opposed to "reformism," in the sense of a gradualist strategy of rolling back and abolishing the state. But the decision of what aspects of statism to dismantle first should be guided by an overall strategy of dismantling state capitalism as a system. That means we go first after the central structural supports of privilege, that enable the corporate-state ruling class to derive profit by political means, and go last after palliative measures that make such corporatist exploitation humanly tolerable for the non-privileged. As Thomas L. Knapp said, that means dismantling welfare from the top down and cutting taxes from the bottom up. If we allow the state capitalist ruling class and their pet "free market" think tanks to set the priorities of what to go after first, and welcome every incremental reduction as a "step in the right direction," we're allowing the free market to be adopted in a way that only makes statist exploitation more efficient. The best comparison I can think of is the Romans welcoming the withdrawal of the Punic center at Cannae as "a step in the right direction."

As Marshall said in Gibbon v. Ogden, the state's decision of what not to regulate or tax is just as important as its decision of what to regulate or tax. The two go together in a single strategic framework. The state capitalists adopt whatever combination of statism and markets best promotes their (statist) objectives.

In other words, priorities have everything to do with it.

Addendum. As freeman mentioned in the comments, Roderick Long also got into the fray by explaining (in the thread on Brad's petition at Wally Conger's blog) why priorities do matter.

Whether something counts as a reduction of restrictions on liberty depends on the context. Remember when Reagan "deregulated" the Savings & Loans -- such deregulation could be a good thing under many circumstances, but given that he didn't remove federal deposit insurance, "deregulation" amounted in that context to an increase of aggression against the taxpayers, licensing the S&Ls to takes greater risks with taxpayers' money.

So in this case: when government passes laws giving group A unjust privileges over group B, and then passes another law giving B some protection against A, then repealing the second law without repealing the first amounts to increasing A's unjust privilege over B. Of course a free society would have neither the first nor the second law, but repealing them in the wrong order can actually decrease rather than increase liberty.

He elaborated on the theme in an entry at Liberty & Power:

Of course in a free market there would be no legal restrictions (except those contractually agreed to) on an employer’s right to fire an employee. But from the fact that there would be no X in a free society, it doesn’t follow that absolutely any situation will be moved in the direction of freedom simply by removing X. (Compare: from the fact that a healthy person wouldn’t have a pacemaker, it doesn’t follow that the health of anyone who has a pacemaker would be improved by its removal.)...

[I]n general a removal of restrictions on an entity doesn’t count as a move toward liberty if the entity is still a substantial recipient of government privilege or subsidy. For the more that an entity benefits from government intervention, the closer it comes to being an arm of the State – in which case lifting restrictions on it is, to that extent, lifting restrictions on the State.

(Also: here, from a couple of years ago, is a Roderick Long post on Rothbard's reaction to the French student uprising in 1968.)

Finally, Dain suggested that there might be another twist to the CPE issue: if it is a new law, and not simply the repeal of existing law, does it simply eliminate existing legal guarantees of job security; or does it create a positive right to terminate employees at will, preempting existing contractual obligations to the contrary?

In Solidarity With the Students and Workers of France

An open letter from Brad Spangler, in solidarity with demonstrators against the CPE in France:

Students and Workers of France,

Professor Roderick Long once wrote:

“When Marx called the French government ‘a joint-stock company for the exploitation of France’s national wealth’ on behalf of the bourgeois elite and at the expense of production and commerce (’Class Struggles in France’), he was only echoing what libertarians had been saying for decades.”

France and all other nation-states remain so today. You and we live in a world where freedom and economic opportunity exist only at the sufferance of a political class that allows us only some small amount of them for sake of their own convenience and take the rest from us by force and coercion for sake of their own parasitism.

Under such circumstances, state-sponsored market liberalization is a cruel joke. The legislation you protest and rebel against seeks only to increase the latitude given your overseers, while maintaining the overall restrictions on your own liberty that, if abolished, would empower you to seek your own prosperity. We believe you and we would be very good at that, mixing both cooperation and peaceful competition, if we were not slaves.

For those reasons, the signers of this letter offer their solidarity to you and present themselves as a sample of a small tendency known as the Movement of the Libertarian Left (MLL), advocates of revolutionary market anarchism or “agorism”.

It is not the place of others to tell you how to wage your own revolution against tyranny. We have some suggestions, though — a version of dual power strategy called “counter-economics”. We humbly recommend MLL founder Samuel Edward Konkin III’s small book on agorism, counter-economics, and revolution “The New Libertarian Manifesto” in hopes you may find it useful or inspirational. It is available free online at:
http://agorism.info/NewLibertarianManifesto.pdf http://agorism.info/NewLibertarianManifesto.pdf

Signed,
The Movement of the Libertarian Left
Agora! Anarchy! Action!

Brad Spangler
Diane Warth
Thomas L. Knapp
Adem Kupi
Wally Conger
J. Freeman Smith
[Kevin Carson]

I direct your attention especially to the passage calling "state-sponsored market liberalization" a "cruel joke," intended only "to increase the latitude given your overseers..." The context of that remark, the legislation against which the French are rioting, is the CPE, a new law which allows employers to fire workers under 26 during a two-year trial period, without giving cause. As Brad says, it's something no free market anarchist would object to in principle.

The French are fighting mad about it, though, and with good reason. The overall economic environment in France is so thoroughly statist that they quite reasonably expect no tangible benefit from this one small so-called market reform — and quite probably a fair amount of pain.

That phrase "to increase the latitude given your overseers" says it all. Start with a massively corporatist framework. Then tinker around the edges of the system to give more discretion to the usual suspects: landlords, employers, etc. And finally, call it "free market reform." You know, the kind they like at ASI. Benjamin Tucker had something to say about that kind of "free market reformer," over a century ago:

[Herbert Spencer] is making a wholesale onslaught on Socialism as the incarnation of the doctrine of State omnipotence carried to its highest power. And I am not sure he is quite honest in this. I begin to be a little suspicious of him. It seems as if he had forgotten the teachings of his earlier writings, and had become a champion of the capitalistic class... amid his multitudinous illustrations... of the evils of legislation, he in every instance cites some law passed ostensibly at least to protect labor, alleviating suffering, or promote the people's welfare. But never once does he call attention to the far more deadly and deep-seated evils growing out of the innumerable laws creating privilege and sustaining monopoly (Liberty, May 17, 1884).

If you want to sign the letter, just go to Brad's original post and leave your name in the comments.

Chris Tame on Thatcherism

In one of his last emails to the Libertarian Alliance Forum yahoogroup, Chris Tame ridiculed what he called the Dilbert-style "managerialist" culture of the typical large corporation: a product, he said, of limited liability and the divorce of ownership from control--not of the free market.

In his obituary for The Independent, Sean Gabb describes the jaundiced eye Chris took toward the Thatcher revolution:

He settled in London at a time of great and continuing political excitement. High inflation, rising unemployment, unsustainable levels of taxation and state control, had raised doubts over the legitimacy of the mixed-economy/ welfare-state settlement of the 1940s and of the political and social order that presided over it. Allied with trade-union bosses, a generation of radicalised students was plotting to replace the old order with some socialist utopia. They were resisted by various conservative and free market policy institutes, all more or less funded by big business....

Chris Tame saw through the optimism of the late 1970s and early Thatcher years. Where others saw a rolling back of the state, he saw in privatisation only a more rational - and thus a more efficient - type of statist control. "These new markets are never free," he once said, "and they are always dominated by the ruling class." He believed that the second half of the 20th century had seen a collapse of the moral and social and intellectual foundations of English liberty, and that there was no short-term strategy for its restoration. British libertarianism was not in the same position as socialism in 1945. It was in the same position as socialism in 1845.

Therefore, it was necessary to work a step at a time towards some future intellectual hegemony.

If It's Got a "Y" in It, It's Wal-Mart Day at Mises.Org

Freeman, Libertarian Critter's gone so far into the enemy camp, he's started numbering his anti-Wal-Mart posts now. In No. 4 of that series, he links to an interesting exchange at Mises.Org. Lawrence Vance baldly asserted, in a recent column:

Wal-Mart has never caused any firm to go out of business. Wal-Mart can't close down any store but one of its own. It is the customers who no longer do business with a company or shop at a particular store who put that company out of business or closed that store.

Roderick Long responded in the comments:

Well, yes and no. It's not as though Wal-mart is a pure market firm, operating with no government patronage. For one thing, Wal-mart often gets the land for its stores by eminent domain. Since land obtained by eminent domain is generally land obtained below the market price (i.e., below the price at which the owner would have sold voluntarily -- otherwise eminent domain wouldn't have been needed), Wal-mart's operating costs are lower than they would have been without government help.

So, sure, customers voluntarily choose to shop at Wal-mart because of its lower prices; but those lower prices have been made possible, in part, by theft -- so it's not exactly fair competition. If I got to steal my means of production I could offer lower prices too. (And eminent domain is only one of the many ways in which big corporations are aided by state violence.)

And if Wal-mart first uses government intervention to help it defeat its competitors, and then takes advantage of the absence of such competitors in order to offer employees lower salaries than they could if the competitors hadn't been wiped out, then Wal-mart's low salaries are not exactly a pure market phenomenon either.

To be sure, Wal-mart's success isn't due solely to state patronage; there's been genuine entrepreneurial skill involved too. Still, Wal-mart's success is rather tainted.

Another commenter acknowledged that their ED abuse was unfortunate, but suggested their innovative distribution model would surely result in lower prices with or without ED. Long responded, again:

Wal-mart's efficient "distribution model" is also subsidized by the fact that the highways are tax-funded, no? Federal funding for highways means (ceteris paribus) that businesses relying more heavily on long-distance shipping have a state-funded advantage over those who don't.

High-speed, high-throughput wholesale distribution models, including their latest "just in time" progeny, came into existence only after the U.S. government created a centralized, dependable, high-volume transportation system on a continental scale. Without the government-subsidized railroad system, there wouldn't have been any regional or national mass wholesalers, no large factories serving national markets, no mass retail chains after the turn of the twentieth century. This connection between subsidized transportation and large-scale distribution was only heightened by the post-WWI automobile-highway complex, and by the civil aviation system (created almost entirely with government money and government land seizure). So Wal-Mart's distribution system is piggybacked on one of the most mind-bogglingly huge social engineering projects in human history--by a revolution from above.

Now in fairness, I don't think Wal-Mart can be said to be any more guilty of collusion with the state than its big-box competitors. Wal-Mart surely does, as Roderick says, display some "entrepreneurial skill." But its skill is in how much more efficient it is than its competitors in exploiting an ecological niche created by state capitalism.

Of course, I've already beaten this dead horse until it could be used for dog food, with no further processing. But here's something new under the sun. This story comes from "JB," an anonymous small manufacturer in Wisconsin, who in the process of talking shop on a sales trip, wound up comparing notes on Wal-Mart with reps from a would-be Wal-Mart vendor (the Simplicity lawnmower manufacturer) :

According to the VP in our meeting, WalMart was all set to go with a specific model of Simplicity lawnmower. On the day they went to see the buyer in Bentovnille to get the final p.o. and go over a few minor changes to the graphics, the buyer suddenly let the VP (and owner and a few others that flew down)know that in order for the purchase to go through Simplicity would have to "cheapen-up" many of the parts, but not change the name or model number in comparison to what was sold at their "mom and pop"/other dealers.

So, in a nutshell, the buyer wanted to undercut all other vendors (which is understandable) not with volume, but with DECEPTION.

I have heard so many stories like this from so many different manufacturers, that I have a hard time seeing myself using WalMart as a vendor in the future. To me, this IS "the market" working - it won't start with consumers, it will start with vendors such as myself depriving WalMart of selection due to their behavior - if WalMart responds to the concerns, they will stay in business, if they don't, they will be Kmart in 30 years.

Yep, that's right. Apparently one way to have "always low prices--always" is to slap a fraudulent label on a cheap knockoff with substandard parts, and sell it as a brand name item with the same model number and everything. Uh, by the way, in a free market, even in a free market anarchy with voluntary court systems, this kind of thing doesn't fall under the ordinary rules of caveat emptor. It's called FRAUD. And under the rules of any free market legal order deserving of the name, it would result in the civil equivalent of the offendor getting his scrotum nailed to the wall.

Chris R. Tame, R.I.P.

We are losing giants of the libertarian movement. Two years ago, we got the sad news that Samuel Edward Konkin III (SEK3) of the Movement of the Libertarian Left had died unexpectedly. Now Dr. Chris R. Tame has lost his fight against a virulent form of bone cancer, diagnosed only last Summer.

From the announcement by Mario Huet on Libertarian Alliance Forum:

It is with the greatest regret that I must announce the death this afternoon of Dr Chris R Tame, founder and President of the Libertarian Alliance.

His end was peaceful. With him to the end were Helen Evans and Petica Evans, and Sean Gabb.

Sean will make a longer announcement in due course.

Greatest regret, indeed. Aside from his monumental influence on the libertarian movement in the UK (of which you can learn more from this recorded tribute if you've got broadband), Chris had an immense personal influence on many of us. I will never forget his kindness in publishing so much of my work through the Libertarian Alliance, and the constructive criticism and encouragement I received.

In recent weeks, the LA Forum email list has been awash with tributes from people whose first real encounter with libertarianism was meeting Chris in the Alternative Bookshop back in the '80s, with Elvis blaring in the background. One such encounter, by science fiction writer Ken MacLeod, helped influence his unique blend of post-Trotskyism, free market liberalism, and cyberpunk (see here for his account of it).

Chris was an enemy of corporatism in all its ugly forms, and an Objectivist who tirelessly battled Randroid twits from the ARI and the Objectivist Center.

He will be greatly missed by many, and his work will be missed by the world.

But the work of the Libertarian Alliance, among his greatest concerns in his last days, will continue.

Libertarian Property and the Dubai Ports

Brad Spangler discusses a neglected aspect of the Dubai Ports brouhaha:

In this particular case, we’re not even really talking about private property, but public property. The Dubai Ports deal, you see, involves the buyout of a foreign (British) company already operating these ports by another foreign company (owned by the UAE government). We’re talking about a change of operators, rather than owners. The purported (legal) owners on paper of each of these ports, as I understand it, are the various municipal governments they are located in. We don’t have to bother considering whether or not each company is or isn’t “private property” because what concerns people about this deal is the role of port operator at these ports. Who fulfills that role and why? Who decides it?

What we have in this case, for those with eyes to see and minds to perceive, is an example of the problems that arise from confusing “public property” with “government property”....

The city governments in those cities pretend to own those ports. In reality, the rightful owners are the residents of each of the port cities, the workers who work there and the companies who do business there — but that last only to the extent those companies are not aligned with the interests of the state, which is somewhat rare.

It is through this usurpation of the peoples property rights in those ports that the question of whether the Dubai ports deal is good or bad management of the ports has been removed from the people and placed in the hands of government, which in addition to not being ethically eligible to make such decisions is not competent to do so either.

The real solution to this problem, and future repetitions of it, is for the people to organize to assert their joint ownership of the property in question independent of any government.

Alternative arrangements might be to treat the ports as common property, or to place them in possession of joint stock companies owned by some combination of the residents, the workers, and the companies operating through them. Brad prefers the latter. I myself can see a combination of the ideas, treating the port itself as common property of the local residents, like a town square or a right of way, with the residents contracting the operation of the port to some form of stakeholder cooperative (with joint representation by the port workers' syndicate, the shipping companies, and locals).

A Free For All on Drug Patents: Or, Ron Bailey's Principled Libertarianism

In the comment thread to a post by Ron Bailey at Reason Hit&Run (to his credit, actually a criticism of a drug company for abusing IP), quasibill gets off a couple of good ones:

...much R&D investment is spent on finding ways to create new patentable technology, as opposed to finding new technology that is actually more useful.

* * * *

Patents, when you boil them down, are nothing more than a licensing scheme, which seeks to subsidize the profits of a particular group at the expense of another group.

Bailey responds:

[That's] OK as far as it goes, but as I've argued before patents are more than that:

Abraham Lincoln once described patents as "adding the fuel of interest to the fire of genius." What many people forget about patents is that they are a disclosure mechanism. The monopoly is granted on the grounds that the inventor tell us exactly how he makes his product. This disclosure mechanism removes us from the old economically stagnant world of trade secrets in which inventors could only make money if they told no one how they did something. This allows other people to use those insights to invent other products. Patents are not perfect, but they have worked pretty well.

To which quasibill, in turn, responds:

Not to argue from authority here, but have you ever read a patent? I have, and have spent many days and months working to re-create what they describe, often fruitlessly. This disclosure element is often vastly overrated, especially in pharmaceuticals, where teams of patent attorneys write descriptions that conclude lots of language like "through a mechanism well known to those schooled in the art" - which is a bald-faced lie, and I can point to several court cases where we proved it was.

Further, this disclosure aspect could be handled in the free-market - those who think it would be useful, could pay for it, and sign non-disclosure, non-compete agreements. And that way, they'd actually get useful disclosure, and not the crap that currently gets drafted into patents by patent attorneys who have a good idea just how far they need to go.

As for the great Trade Secret Menace, quasibill points out that it's not that easy in practice:

First, no competent doctor would ever prescribe a medicine that he knows nothing about. Second, reverse engineering, as you note, is always possible. Give me a small lab with a GC/MS and a LC/PDA and I could probably reverse engineer any pharmaceutical on the market. And I'm not even very good at either method anymore.

No, it would quickly become cost and income prohibitive for pharmaceutical companies to engage in massive secrecy.

And, I might add, the Uruguay Round actually brings government into the business of protecting trade secrets, as well. So under current IP law, patents and trade secrets are not so much either/or as the best of all possible worlds, from the corporate standpoint.

Quasibill also restates what is essentially F.M. Scherer's argument that innovation is driven by competition, with or without IP:

Why do auto companies spend millions of dollars in new vehicle design each year? Why does Sony put out new models of TV each year? Yup. You guessed it. Competition drives innovation, just like it would in pharmaceuticals. You build brand, and as I've noted before, your vision of "just copying" a pharmaceutical and marketing it is so simplistic so as to make it akin to saying playing Risk is like being President. It takes time to reverse engineer (and money). It takes time to formulate. And it takes knowledge to get the formulations right. If a generic puts out a crappy copy, it'll be obvious fairly quickly, and given the possible consequences, will likely be out of business real quick (liability is the least of its problems - reputation or brand would be of the utmost importance in such a market).

Furthermore, as I noted, there is already a lot of charities devoted to finding a cure for X. Why is that? Because pharmaceutical companies don't fund R&D for cures, as a general rule. No profit margins there, as opposed to treatments. Furthermore, the patent system encourages them to engage in otherwise pointless R&D and marketing. Case in point, 2nd gen beta blockers, which were generally no more effective than 1st gen. Yet the pharmas aggressively marketed them based on preliminary, flawed, biased studies because they were still on patent, vs. the 1st gens that weren't.

And (if you'll pardon one last quote from quasibill), his inside description of Big Pharma, with its bureaucratic fat, sounds an awful lot like the internal culture of a military contractor operating on the cost-plus system:

Have you ever been to a Merck campus (yes, they are campuses, not buildings or sites)? If you look at the structure of the business, the first thing that strikes you is that it looks like Detroit, circa 1980. And there's only one reason for that - government protection of their profit margin. A good friend of mine works there - makes over 100G a year in a union job, where he gets written up if he does too MUCH work. And yet while Detroit has suffered and is still paying for employing such a business model, Pharma's been posting huge profits. Why's that?

By the way: it's no surprise that Lincoln, for whom Henry Clay was the "beau ideal of a statesman," would say something like what Bailey quoted above. In announcing his first Congressional campaign, Lincoln set forth a Whig platform ("like the widow's dance, short and sweet") of a national bank, high protective tariffs, and internal improvements. As I say, I'm not at all surprised that a Henry Clay Whig, who saw the promotion of commercial activity as such (rather than free markets) as a positive good, would put forth utilitarian arguments for state intervention to promote profit. It's a little odd coming from a professed libertarian, though.

Charles Johnson of RadGeek had this to say, in the context of a similar thread at Samizdat, about such utilitarian views of state intervention:

My interest here isn’t to ajudicate the dispute. Maybe patent monopolies accelerate new drug production; maybe they stifle it; maybe they don’t affect it at all. The usual moral and economic arguments against intellectual property apply regardless of what effects patents happen to have on the velocity of pharma R&D. What I do intend to do is once again ridicule self-proclaimed free marketeers who throw it all overboard to indulge in the crudest forms of corporate protectionist argument when it comes to so-called intellectual property....

The horrors we face are numerous. Pharmaceutical companies may have to re-evaluate their business plans. If people can’t make a profit on in-house research and development for new drugs, then drug research will have to be done, God forbid, out of house or by not-for-profit organizations!...

Because, of course, the world owes a living to people "producing information," and what better way to ensure that than by "allocating" them proprietary control over my mind and my copying equipment?

Perhaps not coincidentally, Bailey thinks it's a good thing we're spending ever increasing amounts of GDP on health care.

Because we have higher incomes, we demand more gold-plated medical services (private rooms with telephones and cable television) even if they don't cure us. However, if we think we're spending too much on health care, then as we grow ever wealthier, we could choose to spend the $4 trillion in 2015 on fripperies like bigger houses, nicer cars, or cooler gadgets.

The one thing we can't spend it on is cheaper health care, because the government patent system that Bailey loves so much outlaws competition in the supply of so much of it. (And as for the "higher incomes" that "we" allegedly have, Bailey must have a mouse in his pocket. Average hourly pay for nonsupervisory production workers hasn't gotten any higher in thirty years. But I'm glad those CEOs have the burden of choosing between bigger McMansions and more gold-plated medical services.)

The title of his piece suggests that if we think healthcare prices are too high, we should consume less of them. But there's a term for a market in which the seller sets the price without competition, and the only restraint on him is the consumer's choice of how much to buy at that price: monopoly.

His defense of the amount of money spent on health care in terms of its value to us is rather lame. A lot of things are valuable to us, but when the supplier of them is able to price them according to how badly we want them, you know something fishy is going on. My life is valuable to me, and in certain hypothetical circumstances I'd pay a lot of money to keep it. But when somebody says "Your money or your life," you can be pretty sure there is a gun involved. In this case, the gun is the patent system and the licensing cartels.

In another post along the same lines (appropriately titled "Drug Companies Don't Get Enough Money"), Bailey quotes with approval a study by Tomas Philipson and Anupam Jena, which assesses the value to consumers of the benefits of life-saving drugs, and compares them to the profits of drug companies. They argue, on the basis of this consumer surplus, that perhaps there should be "better incentives to innovators." Bailey concludes:

Something to think about the next time you hear a politician demagoguing against "Big Pharma."

Commenter jbd responded:

Ron, I think this is a misguided way to look at the issue. Many products generate massive "consumer surplus"--benfit to their purchasers vastly in excess of their cost--because competition among suppliers drives the cost down to near the cost of production, rather than up to the level of benefit to the purchasers. That's one of the beauties of capitalism. Innovative drugs evade some of this downward pressure for a time through government patent laws. At least some patent protection is certainly warranted to spur innovation, but comparing the return to suppliers with the surplus to purchasers tells you little about whether there are sufficient incentives for the suppliers. The real issue is how much above a "normal rate of return" the suppliers make, and for how long, and whether that is enough to recoup the costs and risks of development. The amount of "consumer surplus" seems to me to have nothing to do with it. Or is a shot of penicillin worth $1 million? In some circumstances, after all, that shot could save your life.

Bailey used the same argument for at least the third time in yet another post:

Ahem. Prices are not based on costs; they are based on what people are willing to pay for something. Think of it this way.Your parents probably paid less than $25,000 for their first house. Fortunately, let's say they bought in Chevy Chase, Maryland and stayed there all their lives. Now the average home price is $600,000. If one only took inflation from 1960 into account, the house would only be worth $160,000. Unfortunately, your parents were run over by a Presidential motorcade. As their heir, would you be willing to sell their house for the equivalent of what they paid for it? Would that be fair to you?

As jbd commented above, and as I commented on this post, prices in the short run may reflect what people are willing to pay for something; but if market entry is free and supply is elastic, the supply will increase until what the marginal buyer is willing to pay just covers cost of production. The market price system is a homeostatic mechanism: it operates on feedback. Whenever a price deviates from its "normal" value (cost of production, when supply is elastic), the feedback process pushes it back toward the normal value. And the example of the house is particularly tone-deaf, because land is not a good in elastic supply. Since the supply is fixed, increased demand operates the same way on it as in a collectibles market: it drives the price up. This unique inelasticity of land supply, the basis of the classical theory of rent, is why so many economists, from the early classical liberals to Milton Friedman, considered land rent to be the least harmful object of taxation.

Finally, in yet another twist to all this mess, it turns out Bailey is soft on government funding of R&D. In the comment thread to "Drug Companies Don't Get Enough Money," Cal Ulmann points out:

The federal government also pays for a significant portion that may have led to the drug's discovery[;] that does not seem to be taken into account from the quoted parts of the article.

Bailey responds with this utterly astounding (at least for a "libertarian") remark:

It might well also be the case, that government is significantly underinvesting in drug research.

To back this up, he quotes from another of his articles:

"Government-supported research gets you to the 20-yard line," explains Duke's Grabowski. "Biotech companies get you to the 50-yard line and [the big pharmaceutical companies] take you the rest of the way to the goal line. By and large, government labs don't do any drug development. The real originator of 90 percent of prescription drugs is private industry. It has never been demonstrated that government labs can take the initiative all the way" to drug-store shelves.

George Whitesides, a distinguished professor of biochemistry at Harvard University, similarly appreciates the role of often-government-funded research labs at universities in the early stages of drug development. But he stresses that "pure" research rarely translates into usable products. "The U.S. is the only country in the world that has a system for transmitting science efficiently into new technologies," he argues. That system includes research universities that produce a lot of basic science and get a lot of government money. In turn, startup companies take that lab science and develop it further. "Startups take 50 percent of the risk out of a product by taking it up to clinical trials," explains Whitesides. "Industry has an acute sense of what the problems are that need addressing." Without private industry to mine the insights of university researchers, taxpayers would have paid for a lot of top-notch scientific papers, but few if any medicines.

So according to Bailey, the beauty of the "free market" system is that, instead of industry being directly owned and managed by the state, there are nominally "private" corporations to collect all that corporate welfare and tell the government what's best to spend the money on. In other words, the kind of economic fascism, or corporatism, described by Brad Spangler:

...one robber (the literal apparatus of government) keeps you covered with a pistol while the second (representing State-allied corporations) just holds the bag that you have to drop your wristwatch, wallet and car keys in. To say that your interaction with the bagman was a “voluntary transaction” is an absurdity. Such nonsense should be condemned by all libertarians. Both gunman and bagman together are the true State.

In the past, Bailey has also advocated mandatory health insurance. Isn't that a sweet deal? The government's patent system sets an artificial price floor on health care, and then the government's mandatory coverage system requires you to buy it at the seller's price. Again, it's the kind of "private enterprise" you find the ASI wonks advocating a lot of the time: nominally private firms operating in a statist framework that guarantees their profit. What's that word I used? Oh, yeah--fascism.

What Bailey advocates sounds less like free market libertarianism, than Jerry Pournelle-style "libertarian" technofascism: a government of engineer-kings channelling a giant chunk of GDP to whiz-bang R&D, government-subsidized nuclear reactors on every block, government-funded space elevators, government orbital lasers to enforce the Pax, etc.

Bailey has gotten hot under the collar more than once in response to past suggestions by Hit and Run commenters that he's a "shill" for the biotech, agribusiness, or drug industries. His outrage is probably genuine. I doubt there's any quid pro quo involved. This is more like an example of the old cliche: it's hard for a prostitute to make a living with all the amateurs giving it away free. Or as s.m. koppelman put it:

All right, so you're not a shill. You might just be someone who sometimes likes to root for drug makers like other people root for a baseball team, or you may simply subscribe to a political and economic philiosophy that says regulation's bad unless it isn't. What I can say, though, is that considering drug patents self-evidently good and drug price controls self-evidently bad is a combination of positions congruent with those of a shill. ;)

Unplugged

I've written in the past about how a move toward local subsistence, gift and barter economies, although it might mean a significant increase in quality of life for many, would also likely involve a steep decline in GDP.

Matthew Claxton of Little Iguanodon, something of a science fiction author in his own right, sends me a link to this beautiful story, in the form of the transcript from a video newscast in the year 2030.

Anchor: Touting their movement as a combination of the economic theories of Mahatma Gandhi and the political science of Buckminster Fuller the Unplugged have now reduced the GDP of the United States of America by 20% over their 15 year programme.

The lifestyle is explained in an interview with an Unplugger named Jack Huston:

Jack: Well, first we've got to cover briefly how Unplugging works. The core of the theory is that we can all live off the interest generated by our savings, or the profits from our investments, if we possess enough capital - and generations of Capitalists have dreamed of "getting off at the top" - making enough money to cash out of the workplace and live as they like for the rest of their lives.

Presenter: But what does that have to do with living in a housing pod in the middle of Oregon?

Jack: Well, it comes down to the nature of capital. Wealth stored as dollars was essentially a share in America's national economy - a credit note backed by the US Government. But Buckminster Fuller showed us that wealth-as-money was a specialized subset of Wealth - the ability to sustain life.

To "get off at the top" requires millions and millions of dollars of stored wealth. Exactly how much depends on your lifestyle and rate of return, but it's a lot of money, and it's volatile depending on economic conditions. A crash can wipe out your capital base and leave you helpless, because all you had was shares in a machine.

So we Unpluggers found a new way to unplug: an independent life-support infrastructure and financial archtecture - a society within society - which allowed anybody who wanted to "buy out" to "buy out at the bottom" rather than "buying out at the top."

If you are willing to live as an Unplugger does, your cost to buy out is only around three months of wages for a factory worker, the price of a used car. You never need to "work" again, although there are plenty of life support activities to keep you busy, and a lot of basic research and science to do. Unplugging is not an off-the-shelf solution, it's a research career!

Presenter: So tell us about your house over here? It l