Review of Literature and the Economics of Liberty

My The Freeman review of Literature and the Economics of Liberty is online!

Competing Our Way to Socialism

The Supreme Court is hearing testimony about the health insurance law that requires everyone to buy insurance. It would seem likely SCOTUS will strike the law down because it is completely unprecedented as federal law. However, other courts have upheld its constitutionality (may this be because most states require their residents to buy car insurance, meaning having a government require people to buy something is not entirely without precedent?), so it is hard to say what will happen.

But there are real consequences to the mandate being upheld. If SCOTUS upholds the mandate, the Congress can mandate people to buy anything (silly arguments that health insurance is a unique market notwithstanding -- all markets are unique). It is the consequences of that which nobody has really talked about, though.

One of the things the government has done is to offer its own health insurance as part of the law. Since the federal government can subsidize their insurance (with your tax money, of course), they can offer it cheaper than can private companies. Since the government is forcing everyone to buy insurance, this will be an attractive option.

More, since the government is forcing everyone to buy insurance, this will drive up insurance prices in the private industry. I know we have heard many argue that it will drive down prices, because the healthy, uninsured young will be paying in, thus subsidizing the older and sicker, but the fact is that prices are brought down by competition -- and insurance is having to compete against "nothing," which costs exactly $0. This keeps rates down. If you don't have to compete with "nothing," prices will go up.

As prices go up, the government-provided insurance will become even more attractive. Thus, more people will buy the government insurance, until we end up with everyone "choosing" a single-payer system. The federal government will have nationalized the entire industry by default.

It occurs to me that this may have been the plan all along. The American people will not put up with outright nationalization of an entire industry (we were wary of the government taking over GM and Chrysler, even with promises they were going to privatize them again once they were on their feet), but what if an industry were nationalized without anyone noticing? What if it were nationalized by people choosing the government option?

If SCOTUS upholds the mandate, there will then be a precedent for forcing the American people to buy something. As a result, you may rest assured that insurance won't be the last thing Congress forces us to buy. And you may equally rest assured that the government will be sure to provide their "cheaper" option for everyone to buy. The government could easily nationalize practically every industry this way, driving out competition with their lower prices, made lower through its own subsidies.

All in all, it's a rather brilliant, quite elegant idea. It's the only way our federal government could ever get the American people to agree to nationalize an industry -- by giving the appearance that the American people are voluntarily, individually choosing the government option, until there is nothing but that option left.

The Constructal Law

What connects network , chaos, bios, complexity, self-organization, and spontaneous order theory? The constructal law.

The constructal law describes how things flow. If you have slow and fast flow together, you get a branchy pattern (which looks like a tree, a river delta, lightning, lung bronchea, the brain's neural network, the neurons themselves, etc.) that facilitates both kinds of flows. The fast flows act as engines, the slow flows act as brakes. In a river, the water is the fast flow, the soil the slow flow. More, within the branchy pattern, the slow flows are short, the fast flows are long. Further, the slow flows are smooth, the fast flows are turbulent (herein comes the element of chaos theory). Slow, smooth, short streams flow into faster, more turbulent longer streams, which flow into faster, more turbulent, longer rivers. Areas flow into points, and points flow into areas. Roots flow into the trunk, the trunk flows into the limbs.

Further, the history of the evolution of flow is toward greater and greater freedom. This is true whether the flows are physical, biological, psychological, or social. This agrees with the work of J.T. Fraser and of Clare Graves. It agrees with my own ideas in Diaphysics. Little did I know I was always already writing about flows. The constructal law fills in the last little bit, clarifying why I have been obsessed with networks, chaos theory, bios theory, complexity, self-organization, and evolution. These are all about flows. Further, it explains why I am an Austrian economist -- it too is all about flows.

If you contribute to the improvement of flow, you are participating in the natural evolution of the universe. If you work to block flow, you are working against the natural evolution of the universe. But as with any other law of nature, you cannot violate it for long without consequences. Nature will have its way. You can either work with it and live a good life, or work against it and be crushed by it over time.

"Nature, to be commanded, must be obeyed." -- Francis Bacon

According to the constructal law, social orders are also nature. If you want to live in a good society, it must maps onto nature, being nature. Societies must be free to find their own improved flows. Damming a river won't improve its flow any more than restrictive regulations that act as barriers to entry improve the economy. The movement of water, the movement of people, the movement of ideas, the movement of money, the movement of goods -- all must be free to flow.

A Summary of the History of the Cosmological Evoluton of Complexity

Information gives rise to self-organization which gives rise to emergent properties. To have self-organization, you must have information communication, networks through which that information can flow, and paradoxical relations that create tensions which drive complex interactions.

1. Energy -- foundational information leading to self-organization and the emergence of structure

2. Quantum Physics
-- free particle-waves
-- atoms

3. Chemistry
-- fluid dynamics
-- solid-state
-- complex systems (interface of solid and fluid, giving rise to flows, networks, etc.)

4. Biology
-- monocellular (archaebacteria, eubacteria, eukaryotes)
-- polycellular
-- multicellular (combining features of monocellular and polycellular)
-- social (requiring interspecies and intraspecies communication)

5. Human Psychology/Sociology (Tier 1 in Gravesean psychology)
-- Tribal
-- Heroic
-- Authoritative
-- Entrepreneurial
-- Egalitarian

6. Metahuman Psychology/Sociology (Tier 2 in Gravesean psychology)
-- Integrative (view the world in an interdisciplinary way)
-- Holistic (view the world as fully integrated set of networks)
-- Transpersonal (begin to personally identify with the whole of creation)
-- ?
-- ?
-- ?

7. ?

etc.

As suggested, this evolution is an open ended process, with no given endpoint. However, we should be able to see patterns emerging. For example, each larger emergent process has a number of subprocesses that lead up to the next emergent process. As a level of complexity becomes "full," a new level of complexity emerges to create new environments in which to evolve.

Here I combine J.T. Fraser's umwelt theory of time with Clare Graves' psychosocial emergent complexity theory of mental/social evolution. Both thinkers argue paradox is what drives the emergence of new levels of complexity, with each new level of complexity creating its own paradoxes which then get "resolved" (but not really, as their maintenance is necessary to maintain the level of complexity supporting the one which resolves the paradoxes of that previous level) in the next level.

Political Evolution to Bleeding Heart Libertarianism

At a recent conference I attended, we were talking about people who were either conservatives or liberals and who later became libertarians. However, someone asked about whether or not there were a lot of “apostates” to the libertarian movement, and we were able to come up with several names of those who have moved to the left. I don’t want to name names (this isn’t a meeting of the Unlibertarian Activities Committee), but rather discuss the very phenomenon of moving from one ideology to another – and relate it to the idea of bleeding heart libertarianism. Specifically, I want to look at political ideology through the lens of Gravesean psychology.
Clare Graves, whose psychological theory was developed more by Don Beck and Christopher Cowan in their book Spiral Dynamics, advanced Piaget’s theory of psychological development into adult psychology. Graves noted that people seem to develop through different psychological levels – and that when a society has a large enough number of people with a given psychology, there is a change in society itself. His theory is that people’s psychological states change in response to changing social conditions, and that they alternate between individualist and collectivist world views as their psychologies become more complex. One can envision such a combination of alternation and increase as a spiral, which is why the theory is called “spiral dynamics.” Among the elements affected by one’s psychological level are epistemological beliefs (how one thinks people learn best), social ideology, political ideology, and economic ideology. As one can imagine, then, this affects one’s overall ideology, and how one’s ideologies evolve. First, though, let me summarize the theory.

Graves identifies two tiers of psychological development, with six levels in the first, and two (so far) in the second. Let us start with the first tier.

The first level is the one humans share with chimpanzees, and is described by Frans de Waal’s Chimpanzee Politics. The second level is the first truly human level. It is the tribal level where safety, security, nepotism, and paternalism are most important. The politics of this level involve kinship and lineage and constitute clan councils. The economics at this level is barter and mutual reciprocity, with the chief distributing everything according to need.

The third level is the heroic level, typified by all of the male characters in The Iliad. Power, action, egocentrism, and exploitation are important values to this level. The politics is typified by powerful people who rule by whim, and the economy is one of feudal distribution in which rich elites get richer off the work of those under them. However, if you have a society that is dominated by this psychology, you do have a political system emerge that is able to allow all the powerful, egocentric individuals to have a say: democracy. Indeed, this is why Athenian democracy arose, and why it had the features it had.

The fourth level is the authoritative level. The values promoted by this level include stability, having a purposeful life, Truth, Beauty, and Good and Evil, and absolutism. Good must be rewarded and evil punished, and the good are those who follow the rules and traditions of society. Doing one’s duty gives life meaning. They prefer governments with one party rule (monarchy), and believe economic benefits should go to those who work hard, are disciplined, and save their money. If this sounds like conservatism, that’s because it is. This is the source of the values of social conservatives, including religious fundamentalists (of any religion). Medieval Europe is an example of a society in which this psychological level is dominant.

The fifth level is the entrepreneurial level. Material success, autonomy, competition, and reason are central values. With the dominance of this psychological level, we saw the Age of Reason, the development of modern science, and the development of capitalism. Politics at this level becomes pluralistic, with checks and balances, strategic alliances, and bills of rights. The economic system supported is, as already noted, free market capitalism. Your average libertarian – and Objectivist – will find all of this quite familiar.

The sixth and final level of tier one is the egalitarian level. Egalitarians are communitarian and support equality of outcome, equal rights, human rights, social justice, and redistribution and reciprocity. They are relativistic, sociocentric, and want to get along and feel accepted by their peers (meaning, other people who think exactly like they do). They believe sharing and participating is much more important than competing. Their politics tend toward consensus-building social democracy, and their economics are socialist, or at the very least supporting of a welfare state and community-based distribution.

This wraps up the first tier of human psychological development. I will note several things about each level. First, each level is exclusionary of the others – thus the tribalism inherent in our foundations are realized at each level. However, in reality higher levels contain lower levels, though some may be more suppressed than others. Someone who is at the egalitarian level, yet has a strong element of the heroic level may express a great deal of concern with victims and oppressed groups. One moves from one level into the next when life conditions change. One cannot skip levels, meaning we go through them all, and society will always have representatives of older levels. Psychological changes drive social changes, which drive psychological changes. This accelerates the more densely and interconnected societies – and the world – become(s).

We can now also make sense of many of the political divisions we see in this country. Conservatives like Pat Buchanan are solidly authoritative conservatives. The typical American conservative is a social authoritative and economic entrepreneurial. The typical American liberal is an egalitarian with a great deal of residual entrepreneurial level. Many of the left-libertarians would also fall into the latter group, though the emphases may be different.

So where does that put bleeding heart libertarians? In fact, I haven’t gotten to them yet, because I haven’t talked about the second tier yet.

Second tier psychology is exponentially more complex than those that came before. Tribalist thinking is rejected, and all of the component psychological levels are recognized and more fully integrated. There are to date two levels which have emerged in the second tier: the Integrative and the Holistic levels.
For the integrative level, systemic processes, quality, responsibility, and information are central values. They believe the world order consists of different realities of different complexities (quantum physics to chemical to biological to psychological to social; different psychosocial levels). Politically, they tend to be pragmatic, supporting whatever will work for whatever a given psychological or social level needs. Economically, they tend to support free markets as the system which best benefits everyone, regardless of level.

Holistic thinkers value broad synthesis, renewal, experiences, and spiritual bonds. They view the world in holistic terms, seeing universal forces permeating life and society. The world is a cosmos, full of complex whole-Earth networks. There is a renewed concern for eternal truths, the good, the beautiful, and meaning – though these are more cosmological, more natural classical (to use a term coined by Frederick Turner). Knowledge is a very important value, and much emphasis is put on ensuring information is well-distributed.

I would argue that bleeding heart libertarians are most likely to fall into one of these two levels. There is a recognition by those in the second tier that free markets are transformative complex adaptive systems – spontaneous orders – which cannot be controlled and should not be meddled with too much, except on the margins. The world is best understood from an interdisciplinary perspective. More, the world is understood as nested sets of self-organizing networks. This means information must be able to be communicated as easily and broadly as possible. This attitude may explain the difference between libertarian supporters of intellectual property rights (the entrepreneurial level) and opponents of intellectual property rights (the integrative and holistic levels) – and explain why neither group can really persuade the other.

If we understand that people evolve psychologically through these levels, we can make sense of many social problems and many of our political and economic differences. For those in the first tier, people with less complex psychologies are evil, while those with more complex psychologies are incomprehensible. For those in the second tier, all levels need to be integrated and made more harmonious. When I see those who recognize themselves as bleeding heart libertarians discuss practically anything, I see them trying to integrate and make harmonious, to try to understand the opposition and explain in their terms why they are wrong – thus helping guide them “up the spiral.” If we know what it is we are doing, if we are more conscious of what we are doing, we can be more successful. That’s why I think it’s important we understand Clare Graves’ contribution to psychology. It will help us reach our goals.

On the Different Kinds of Human Interactions and the Economies to Which They Give Rise

In “Creating a Culture of Gift” in Conversations on Philanthropy, vol. II, Frederick Turner argues that there are four basic kinds of human economies: market, gift, political, and divine. Each of these has evolved over time, with the market economy evolving through various kinds of systems up through varieties of serfdom to mercantilism to capitalism, the political economy evolving from tribal structures to empires to monarchies to democratic republics, the divine economy evolving from polytheism to monotheism (and for some, to deism and atheism), and the gift economy evolving from intertribal giving to potlatch to alms-giving to philanthropy to the welfare state. That there is an evolution is no indication that the last thing to evolve is the best thing to evolve. Rather, the different stages reflect the different stages of psychosocial development discovered by Clare Graves (and whose research was pursued by Don Beck and Christopher Cowan in their book Spiral Dynamics).

Each of these economies also reflects a different kind of human interactions –with themselves, with others, and with things. Love for the gift economy; sacrifice for the divine economy; master-slave for the political economy; economic exchange for the market economy. The first three have historically been vertical in nature, but each of these three has become increasingly horizontal due, in no small part, to the inherently horizontal nature of economic exchange.

Take the gift economy, for example. In the gift economy, one pursues the true, the good, and/or the beautiful. One does so out of love. There can be love of oneself, love of another, or love of some object or process. Love makes you want to dedicate yourself to the object of one’s love. Of course, in an economy, what is at issue is exchange, meaning there needs to be another involved. There cannot be an economy of oneself. But I love my wife, and I love writing poetry and plays – thus is there an economy set up between my wife and I and between my creative writing and I. In the latter case, part of the purpose of creating art is to share it with others. The artist is bestowing a gift on humanity. So, too, the scientist who, out of love of knowledge, bestows a gift of knowledge on humanity through his discoveries. So, too, the ethicist who, out of love of virtue, bestows a gift of clarifying or expanding ethical principles on humanity. Each is a kind of philanthropist. And the philanthropist commonly understood too is doing what he does out of love of humanities – philanthropy literally means “love of man.”

The love one feels for one’s wife, parents, children, family and friends are all a sort of horizontal exchange – the love flows bidirectionally. Philanthropy, though, is typically unidirectional. There is the giver and the recipient. This creates a vertical exchange. With horizontal love, the point of love given is love received. With vertical love, however, the point is to develop a reputation. The scientist, to continue to work as a scientist, has to have a good reputation as a scientist. The same, too, for an artist. And would you donate to any philanthropic organization that did not have a good reputation? Of course not. Reputation is central to the gift economy. However, this is also its danger. Reputation-seeking can get out of control, as it did in the potlatches held by the Native Americans in the Northwest. In the potlatches, the more one gave, the stronger one’s reputation, and the more status one had. Indeed, one can see each of these economies as different kinds of status-seeking behavior. A result, though, was that chiefs would give away so much they would impoverish themselves just to have higher status. This of course was harmful to both themselves and their tribes’ well-being.

In the divine economy, the form of interaction is sacrifice. This is how we trade with the divine. Almost by definition, this is a vertical exchange. Most religious traditions, though, do see this as a mutual kind of exchange. We sacrifice to the divine in order to receive gifts from the divine. If you want God’s blessings, you have to tithe. The kinds of sacrifice have evolved over time, from human sacrifice to animal sacrifice to other kinds of property, including money. The story of Abraham being asked to sacrifice Isaac is a story of the replacement of human sacrifice with a combination of animal sacrifice and circumcision. The story of Jesus on the cross is a story of a one-time return to human sacrifice (or, technically, divine sacrifice) in order to replace animal sacrifice and circumcision with the sacrifice of nonliving material goods. Sacrifices are done to things one considers to be “higher” than oneself. Thus people sacrifice themselves to ideals, such as liberty or nationalism. Of course, those who sacrifice the most end up having the highest status. Thus the high status of Abraham and Jesus, or of people like Mother Theresa, Martin Luther King, Jr., etc. In the last two, their high status is also due to their participation in the gift economy, in their pursuit of the good.

In the political economy, the form of interaction is master-slave. Even elected officials have power positions over those who elected them (in many ways, the bureaucrats even more so), and that is a master-slave relationship. In Western Culture at the American Crossroads (2011), Pontynen and Miller summarize Hegel’s (Phenomenology of Mind, 1807) master and slave mentalities as “The master lives off the slave’s labor, but it is the slave who transforms reality vial labor. The master, who consumes, destroys, whereas the slave, in working, creates. He slave fears death at the hands of the master, and that fear of death results in creative production, which constitutes civilization” (197). This sums up the political economy quite well, no matter what form it takes. This also sums up the postmodernist view of all human interactions as power relations. If you have a power relation, you have a master-slave interaction. This is why everything in our postmodern age is politicized. For the postmodernist, everything is politics. This is also what drives the increasing centralization and government takeover of every aspect of life. If you believe everything is power relations, meaning every interaction is master-slave, then everything is always already politicized.

Finally, there is the market economy, in which economic exchange is how humans interact. All economic interactions are mutual, or else both parties would not agree to the exchange. As such, economic exchanges (facilitated by money), are the most radically egalitarian of any of these forms of interaction. There are scale free network effects in market exchange, though, such that those who engage in these forms of exchange the most accumulate the most money, in a rich-get-richer effect. However, just because the rich get richer, that does not mean the poor get poorer. Quite the contrary. Both parties in an economic exchange are better off, meaning the poor get richer too. The difference between a rich and a poor person in the market economy is the number of economic exchanges one has participated in. But money is always circulating, and both parties are better off for having engaged in economic exchange. The same cannot be said of other forms of exchange. One hopes the divine reciprocates; one has to be wealthy to give; in the master-slave relationship, money moves one way only, meaning the rich get richer while the poor get poorer.

It is important to understand these differences and distinctions, because muddling them has caused a lot of terrible problems in our world.

Marx (and other postmodernists) mistakenly believed the master-slave interaction to represent the market economy as well as the political economy, which is one reason Marx rejected the market as well as the political economy (he does call for political anarchy, after all), thinking both could be turned into some sort of rationally constructed gift economy. However, it is the market economy in which egalitarian relationships truly exist, not the gift economy. More, the “anarchy of production” Marx so hated was and is anything but – complex self-organization is the rule in/of the market. So it is not surprising Hegel’s dialectic results in the state as its endpoint – which is also why Nietzsche rejected Hegel’s teleology and argued the tensions never disappeared, as those tensions are what drives processes.

The politician asks us to sacrifice (divine economy) to help others (gift economy). But they never outright ask you to give them power over you (political economy), even though that is really what they want. At the same time, businesses and the rich (market economy) are often vilified by both left and right. As pointed out above, the divine, political, and gift economies are typically vertical relationships, while the market economy is a horizontal relationship. A politician wants to hide the power/master-slave interaction they desire to have behind the rhetoric and masks of the non-power-based vertical divine and gift economies. The gift economy is vertical to the extent that there is a giver and a recipient – the exchange is not mutually beneficent in the same way as is an economic exchange. However, gifts can be exchanged, so the giver-recipient hierarchy is reversible in a way divine and political exchange cannot be. I will note, though, that with increasing democratization, political exchange becomes increasingly horizontal.

Let us next look at some of the implications of these divisions.

We have divided human interactions into love, sacrifice, master-slave, and economic exchanges. Sex plus love is romance; sex plus sacrifice can still be found in various cults (in ancient times, the temple prostitutes); sex plus slavery to one’s desires is promiscuity (sex plus slavery is, well, sex slavery); sex plus economic exchange is prostitution. With love one aims to benefit the other; with economic exchange one benefits the other as one benefits oneself; with sacrifice one trades with the divine; with slavery, one benefits oneself at the expense of another.

Philanthropy is done out of love. Alms are given in divine sacrifice to help the poor. In government welfare programs, you have a combination of economic exchange (bureaucrats) and slavery (taxpayers), facilitated by legislators (masters) using the language of sacrifice. Elected officials do what they do to maintain power, and a power-relationship (vs. a love of economic relationship) is essentially a master-slave relationship.

If one paints out of love, one is an artist. Medieval churches are full of art made as sacrifice by the artists; the ancient Greek idea of being visited by the Muses makes artistic creation a divine exchange. Is one an artist if one paints due to compulsive behavior (to which one is a slave), or if one is forced by a government to include certain content and censor other content? Is one an artist if one paints only for money, but would immediately stop painting if the money stopped rolling in? We should not be surprised if the last two are so rare as to sound absurd. They indeed sound perverse to us. Why is this? It is because the arts are naturally part of the gift economy, perhaps even of the divine economy, and do not belong in the political or market economies (in regards to the latter, why then sell your paintings? – the patron pays to show appreciation, while the artist sells because, after all, one does have to have a place to live and to eat and to have the supplies to make more art!). The artist creates out of love of beauty; the scientist works out of love of truth; the ethicist works out of love of the good; the philanthropist works out of a love of any of these, or some combination of all three. To politicize these things is to pervert them. To turn them into economic changes is to (ironically) devalue them. But we can turn this around, too, as what ought to be part of the market economy is destroyed or devalued by politicization and/or trying to make it a part of the gift economy.

Each of these economies are based on different kinds of human interactions. These different economies – which can and do have different kinds of spontaneous orders within them – have different roles, different purposes. They are not entirely separable at times, but when we confuse them, or try to make everything part of one kind of economy, we create problems. It may be that we want to combine the gift economy with the political economy for certain things, such as in the creation of the welfare state. Or perhaps, doing so was a mistake. I think the arguments will be improved if we understand, in any case, these different kinds of human interactions, and the implications behind them and the consequences of them.