Negative Externalities and Government

Statist thinking is lazy thinking. The solution to everything: have the government do it. Libertarian thinking is much more difficult (which is probably why few people do it). First, assume anarchy. Then, figure out what institutional arrangements will emerge to replace the state apparatus.

For example, when faced with the issue of pollution as a negative externality, too many immediately assume the government should solve the problem. Ignoring all the problems of governments as the main polluters in the history of the world and of corruption, let us look at what may be a better solution even if we assume the government is able to do what is good for the sake of doing good.

FIrst, you have to face the fact that there is a problem with externalities because of the fact of the subjectivity of values. The same amount of pollution will have a high negative externality for one, a low negative externality for another, and a positive externality for yet another. If a certain amount of pollution bother you more than it bothers me, by all means, feel free to sue -- but don't sue on my behalf, or pretend that you are doing me a favor when I could care less. When you do that, you are attempting to impose your values on me.

There is a perfectly reasonable solution that has nothing to do with government imposing its values on everyone. I do not think the government is the only answer, or the best answer, to solve the problem. It is possible to solve the problem of negative externalities through the use of lawsuits. If you have a person who is convinced that your pollution is imposing on his property rights, then he can certainly sue for damages -- and he should get those damages. I am against government restrictions on lawsuits precisely because they (purposefully?) undermine this process. The role of lawsuits is to reduce negative externamities and to create a real cost on errors. The only laws you have to have in place for this system to work are those protecting property rights and making the initiation of force and fraud illegal. With those in place, and a legal system that respects equality under the law, and you have the solution to negative externalities without having a bunch of do-gooders more interested in power than actually doing good foisting their values on everyone else. You may not be able to completely do away with the incursion of others' values on yourself and others, but you can certainly minimize it by getting government out of the business of imposing values and replacing it with the above system.

Two Projects Down

I have just finished the final draft of my paper "Getting to the Hayekian Network" and the first draft of "The Far From Equilibrium City," each for different editions of Advances in Austrian Economics. I have enough time to read the first one a few more times, and enough time to read the second one once, before I send them out, but the hard work on each is done!

Now I just have to work on my paper on theatres as institutions in overlapping spontaneous orders for a Fund for the Study of Spontaneous Orders conference, a paper on education as a spontaneous order for a FSSO colloquium, and a paper on Sophocles' Antigone for a conference on free markets and education. And in my spare time, I'm also writing a play. "President Faust," anyone?

Poetry Contest Winner

Congratulations to the winner of the Austrian Economics and Literature poetry contest, Stephanie Herman, for her poem "Ode to the Labor Theory of Value".

Poetry Contest Error

I made an error in my email address on the poetry contest. It should have been:

zatavu1@aol.com

Since it is likely others have tried and failed with that email address, I am extending the contest until Saturday, July 9 (just to make it the end of the week).

Today is My Birthday

Happy Birthday to Me! :-)

Free day! Discuss what you want!

And as a present for me, get 5 of your friends to come read the blog!

Steve Horwitz on Excellence

Here is an excellent piece by Steve Horwitz on excellence.

One of the claims I have actually heard against the market is that it doesn't reward excellence. As Horwitz observes, this is simply not true. In the market it is up to the individual to discover his or her own excellence, whether they are born with it or need to develop it -- or, more likely, both. Outside of the market, you have to rely on others to discover and help you develop your excellence. Such top-down discovery methods are going to overlook the vast majority of people and their talents.

Why were there so many more poets during and after the Renaissance than before? It was because the Guttenberg press democratized publishing and, thus, writing. Prior to the Renaissance, you had to have a patron to be able to write poetry. Copies had to be made by scribes, which was a time-consuming, costly process. All of this had to be supported by rich patrons. But once the printing press was invented, more and more people could write and get their works copied at much lower costs. Thus, the number of poets blossomed. Sure, the number of scribes decreased dramatically. But which would you prefer: a culture full of great scribes, or a culture full of great poets? It is clear which the market chose. Creative talent was chosen over mechanical skill. Calligraphy now mostly survives as a hobby and a craft.

Of course, Horwitz makes a point that it is not just the artists (or great sports figures) who demonstrate excellence. A gardener who takes pride in the fact that the grass is even across the lawn and the edges are trimmed to perfection demonstrates excellence -- and will likely be rewarded for it. A trucker who drives safely and gets everything he ships there on time or early demonstrates excellence. A teacher who gets her students to learn and does not destroy the love for learning of those who came in loving to learn, and who teaches those who don't care about learning to love to learn demonstrates excellence. It is the market which rewards excellence. We hear complaints about teachers and not short order cooks precisely because if the later consistently do a horrible job, they will get fired, while in our government-controlled schools, nothing bad will happen at all. Thus, excellence is not rewarded, but undermined. The results are predictable.

Stephen Metcalf, Idiot

Apparently this gross example of misinformation is all over the blogosphere. Others have done their jobs of pointing out the endless factual errors. I am going to focus, rather, on this statement:

When I think with my own brain and look with my own eyes, it's obvious to me that some combination of civil rights, democratic institutions, educational capital, social trust, consumer choice, and economic opportunity make me free.

What libertarian would disagree with this statement. The question is, do these things arise in a libertarian world or from government? Were civil rights imposed from above, or won from the bottom-up against government-imposed laws restricting women and minorities? Were democratic institutions handed down to us from the monarchs they replaced, or did they emerge from the bottom-up, as a new spontaneous order form of government? Is educational capital granted by government, or earned by individuals who decide whether or not they want to learn? Is social trust created through more policing and the creation of orderly neighborhoods by government planners, or do they emerge as Jane Jacobs described, spontaneously in complex neighborhoods that emerged naturally, without government interference in the growth process? Is consumer choice dictated by government, or created through market competition? Does government create economic opportunity by taxing companies and interfering in pricing and production, or does the free market create economic opportunity?

Government creates monopoly, thus undermining both economic opportunity and consumer choice. Government subsidizes companies, thus undermining economic opportunity and consumer choice. Government creates barriers to entry in a variety of ways, thus undermining economic opportunity and consumer choice. If he wants these things, he should support the free market, meaning libertarianism. If he wants social trust, he will help us get rid of the laws that undermine it. If he wants to increase educational capital, then he will work to ensure people are getting a real education rather than supporting a system that creates an education bubble that will burst, wreck havoc, and which undermines true learning. If he wants democratic institutions and civil rights, he will work to get rid of those laws that undermine and violate them. But I suspect he doesn't want to do any of that. Which means, he doesn't actually want any of those things. They are slogans to him, and nothing more.

Metcalf is an idiot.

Space vs. Time Morality II

Robin Hanson has more on space vs. time morality. He suggests that "far" = "abstract." Of course, one can come up with all sorts of utopian solutions in the abstract -- and commit all sorts of mass murders to realize those utopias, once conceived. This may suggest that there are tragic consequences to attempting to impose one's temporal morals on spatial reality. Such a tragic connection would not have surprised time philosopher J.T. Fraser, who believed that tragic art was the art form that most embodied time in its complex fullness. Nor, do I suspect, this would have surprised another proponent of tragic art: Nietzsche.

The More, the Merrier (and Wealthier)

Bryan Caplan has an interesting post on network products. A network product is one that improves simply because more people use it. He gives the examples of phones and Facebook, both of which improve the more people there are who use it. He points out that

Economists (and people generally) underestimate true economic growth for all expanding network products. When you measure the quality of network products, you can't simply look at them in isolation. You have to measure what you can do with them.

He finally concludes that "Quantity Is Quality."

But wait, a spontaneous order is also a network. Shouldn't any network have this effect? May it not be the case that free markets improve in quality when they expand in size, whether it be through population growth or by more people being included in the market economy? May it not also be the case that the market economy can in fact do more precisely because they expand in size? In other words, for the market economy as a whole, quantity is quality.

How might this help us understand the nature of the market economy as a spontaneous order? Or at least help us understand why and how the market economy necessarily improves life for everyone the more people are involved in it?

The Resurrection of a Saleman

I cannot tell you how long it has been since I have seen door to door salesmen. I haven't seen any almost all my adult life, and I have lived in this house I am living in for over 4 years now, and this Spring was the first I have seen any.

Today I had a meat salesman come by (all overpriced, but made reasonable when the price was cut by half and some chicken tenders thrown in), and recently I had a man try to sell us on a different home security system (we kept our original one after we got an upgrade from them, since the monthly price was cheaper with the one we had). We sometimes get different electric companies come by as well.

It seems strange that door to door salesmen have reappeared on the scene. Is this a reflection of the economic situation? If people won't go out to buy anything, the companies will start coming to us? It is an interesting reversion to an older way of selling. I would be curious to hear what others think, if they have experienced anything like this too, and what this may say about the economic conditions.

Did Detroit Die Because of Population Growth?

I am reading The Spatial Economy by Fujita, Krugman, and Venables, and they point out that a country's population growth can result in a city becoming depopulated. That seems counterintuitive, but it actually makes sense if you understand what is going on.

In a low population country, it makes sense for manufacturing to be in a single city. Make everything there and ship it out to the rest of the country. But as the population increases and becomes denser, it makes sense to distribute your companies around the country, since shipping costs are thus made cheaper.

Consider Detroit. It made sense to make all the cars in Detroit because of increasing returns and because it was close to the rust belt, where iron and steel was being made. However, as the population increased, it made more and more sense to build factories elsewhere. This, in combination with competition from foreign car makers (who eventually began making their cars in the U.S. as well), redistributed auto manufacturing from Detroit through the rest of the country (and world). Thus, Detroit became depopulated as the main jobs disappeared.

In other words, simple population increase can explain the depopulation of Detroit. You cannot hold the economy still. And many things contribute to patterns of manufacturing.

Space, Time, Morality

Robin Hanson and Katja Grace propose an extremely interesting idea that I will have to spend a great deal more time thinking about. Read it, then consider:

Do you subscribe to time morality or space morality?

What about space-time morality?

I'm In Disequilibrium

an equilibrium situation is one in which individual plans are fully coordinated. Each plan can be successfully executed. Means are exactly matched to ends. (Peter Lewin, Capital In Disequilibrium)

If this is the definition of equilibrium (which he derives from Hayek's definition), then I have never once found myself in a situation one could define as equilibrium.

The Atavists – A Didactic Poem

The Atavists – A Didactic Poem

You think you are so radical
When you’re in fact inert
Your positives are negatives
And you’ll one day revert

To what you have rebelled against
Conservative you are
Embracing childhood protection
So you won’t reach too far

Nor feel the pressure to achieve
While others reach the peak
Their energy creating more
Then you could ever seek

You say you break things to make bonds
Among your fellow men
But bonds are broken everywhere
Your selfish hands have been

You play at being radical
But when the time has come
To make the world a better place
You’re deaf and blind and dumb

Nietzsche and Good Economics

Here is a very good piece on Nietzsche and Good Economics. The author uses Nietzsche as Nietzsche intended he be used, using the methods Nietzsche himself used -- though an expansion of and proper use of his metaphors. The criticism of the few places Nietzsche actually discussed economics is apt -- but Nietzsche was a better economist when he wasn't trying to be an economist.

Free Books

National Academies Press has just put its entire catalog online for free. Three cheers for free knowledge!

Shame, Honor, and the Spontaneous Orders

Not long ago I wrote on guilt as increasing social cooperation. Well, to this we can include shame and honor. The research discovered that "the threat of shame and promise of honour each increased cooperation by as much as 50 per cent." Frederick Turner pointed out in The Culture of Hope that shame-avoidance is a signature of leftist thinking. These same leftists embrace the individualism developed by the Continental European philosophers that leads to collectivism rather than the true individualism of the Scottish Enlightenment philosophers that sees people as deeply social. Shame and honor are both downplayed by the left -- more, shame is considered a great evil by them. Of course, if shame contributes so social cooperation, then undermining shame results in a reduction in social cooperation. As social cooperation decreases, one begins to need someone to step in to increase such cooperation. The answer for the left is, of course, the government. Which is convenient, since they have since contributed to undermining social cooperation through their helping to eliminate shame from society.

Of course, cooperation is necessary for free markets to work as well. Shame, guilt, and honor all contribute to the conditions necessary for spontaneous orders to emerge, such as free markets, non-profits, and culture. Turner equates shame with beauty. Considering my connection between beauty and spontaneous orders, I am increasingly convinced he is correct.

The Trees of Life

There are two things that are deeply destructive: 1) conservative elements that resist change (among these I would include those Marxists who object to capitalism because the change of capitalism means that new things displace old things), and 2) progressive elements that discount the past and want change for the sake of change. Both are destructive. If you want to destroy an economy and a culture, either one of these will do. Stagnation or cancer -- the result is the same: death.

Capitalism is creative destruction. That results in ever-increasing wealth as new ways to do things displace old ways. Less expensive, more efficient ways replace more expensive, less efficient ways. Entire industries have their workforces shrunk until 1-2% of the population is all that is needed for, say, agriculture (which feeds the other 98-99%) -- an industry that once took up practically everyone's time. Thus goes manufacturing as well, replaced by service and creative workers. And automation will one day replace the service people. There may soon be a day when you can check into a hotel without bothering with the hotel front desk clerk. Just find your name, sip your card, and get your keys. All that will be needed will be a manager. Don't think that will happen? How often do you bother with a bank clerk rather than go to an ATM machine?

The healthiest cultures are those that are what one may term a progressive natural classical culture. Frederick Turner proposes such in his books Natural Classicism, Beauty, The Culture of Hope, and Natural Religion. Such a culture exists in tension between the evolutionary past and classical art and the future, making it new. Progressive art is lost -- it's nothing anybody wants to experience. A conservative classicism is covering territory already covered. Natural classicism is rooted in our evolved psyches, yet bringing in the contemporary world, investigating who we are in our changing social situation. Such art stands on the edge of the known world, deeply rooted in it, while simultaneously setting out to discover strange new worlds and undiscovered countries. More, true natural classicism is also deeply cosmopolitan. Like capitalism, it finds creative inspiration in diversity.

Both a healthy economy and a healthy culture are spontaneous orders. They exhibit bottom-up emergence and order, are nudged through top-down immanent criticism (which is very, very different from top-down control or regulation), and grow naturally and healthily from their roots. They can be destroyed by either cutting off the growing stems, where the leaves are, taking in the light, or by cutting off the nourishing root.

Ectodermal Cells

While showering this morning, the temperature went up suddenly. I hate it when that happens because my skin is particularly sensitive to high temperatures. I can't stand taking a very hot shower (or eating very hot food). While adjusting the temperature down, I began thinking about the relationship between skin cells and neurons -- both are derived from the ectoderm. Might skin cells participate a bit more in the sense of touch than just being a place where sensory neurons end/begin? Even a slight electric potential might contribute to the sense of touch. The sensory outreach of the body would thus be greater than we have thought. How far-fetched is this? Well, glial cells have been shown to have more than mere support functions, actually participating in electrical transmission. What might it mean if the skin is part of the sensory order? Or is it just that my neurons are particularly sensitive? That I wouldn't doubt.

I will note that it is interesting, too, that our language for emotions tends to be the same as our language for touch. We have "feelings," we are "hurt" and "wounded." We are de-"press"-ed and im-"press"-ed. Coincident?

Music Is Education

As part of my contribution to Music Together Dallas, I wrote a piece titled Music Is Education.