Mark, over on CARPE DIEM quotes Mises, who said:
The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!
And to which he recieves a number of interesting comments, but one that deserves an answer:
“Aren’t some rules necessary? Aren’t some goals the proper purpose of government?”
Of course, rules of the market are necessary. The purpose of government is to administer markets. Without markets there is nothing to defend, so defense is a subset of market activity. Without markets there is nothing to redistribute, so redistribution is a subset of market activity. Without contracts and property there are not disputes to resolve so the judiciary is a subset of market activity. Without types of property to register, to codify, and to determine the properties of, there is no reason to legislate. Government, in the sense that we have a military force, we make and adjudicate laws, and redistribute some income, is unnecessary without a market. In fact, there is only one form of government: a government that administers a market. All abuses of government are abuses of the definitions of property for the purpose of reverse redistribution from the common to the authority by use of force.
Government itself is a MARKET ACTIVITY. Otherwise it is just organized theft or fraud. In this sense, I am not sure that redistribution is a government activity, or if it should be separated from market governance. This is, actually, the underlying problem with our form of government: it is based on the city-state history of europe, and the simplicity of those states. Parliaments took over from kings. Multi-houses took over to balance power. But we did not develop houses for separate purposes. Instead, they all must agree on solutions that can be universally proposed, rather than each devoted to proposals limited to their scope of knowledge and influence.
In three different pieces today I’ve tried to convey the idea that the market and property in themselves are institutions that were created by ‘regulation’. This does not mean that we have full power over the market, it means that the market is a deliberate institution, not an invisible hand, that has been paid for. And by following the chain of causation we can both understand it’s costs, and understand it’s limits, and in understanding it’s limits, understand how and when to increase regulation of the market: we can increase it along with the abstractions that are traded in it. Because all forms of property are defined by different ‘properties’. Life, real property (land), Improvements (immovable property), several property (movable property), opportunities, commitments, abstractions (patents and trademarks), and cooperative tools (morals and ethics), and to some degree metaphysical abstractions such as funding the implied costs hidden in our social conventions. If we can ACT on it, then it is a function of trade, exchange, cost and cooperation. Property is just a subset of market activities that require physical resources. However, the majority of trade is made in lower cost people’s actions and people’s forgone opportunity to act.
In fact, civilization’s institutions are built almost entirely out of the cost of forgone opportunity. The minority of our costs go to institutions like buildings and monuments and roads and bridges. The majority of social costs go to forgone opportunity, the respect for property, ad the maintenance and definition of different kinds of property, and the institutions we use to register and account for property of all kinds, from Cars, and Houses to Marriages and Trademarks.
If you grasp this concept of the forgone opportunity economy, libertarianism as it is currently constructed by the Jewish arm of the movement (Rothbard and Friedman) fails for ethical, economic, and rational reasons, while the Christian arm of the movement (classical liberals and Hayekians) fail because of their failure to articulate their movement in something other than historical analogy and post-religoius moralism. Despite being right (in both senses of the term) they cannot articulate why they are so. And the problem is worse for conservatives who rely on unarticulated habits so old they have been reduced to sentiments and invective. I don’t make those errors. I’m trying to give conservatives a language for competing with socialists, who have been developing a form of articulated argument for a century and a half, despite achieving massive murder and destruction.
But back to the current state of affairs: I think socialists are just moving gradually, at the extremes via incrementalism. they are able to make these incremental violations by taking advantage of the limited ability of human memories to sense change in time, and they can do so because we have not institutionalized the government such that we can isolate market legislation from redistributive legislation. This is effectively the corruptive influence on our government.
I refer to this form of corruption as ‘pooling’. That is, institutions cannot have mixed purposes without MIXING those purposes.
The socialist movement has abandoned it’s pursuit of control over the means of production as technique for achieving redistribution and focuses instead on direct partial redistribution wherever they can find an opportunity.
But they have not abandoned Ponzi schemes that confuse insurance, which is a probabilistic cost, with redistribution, which is a certain cost. Social security was a probabilistic insurance scheme when few people lived to collect it. But it’s a certain cost today.
Nor have they abandoned totalitarian administration of scarcities like health care and retirement income, nor addressed that the scarcity of these services (not commodities, but services which require people, which cannot be solved by increases in production, only that increases in production in one commodity industry can drive down the quality of people in another service industry.
I do not think that the influence of, or driving force of the left’s ambition of social status equality versus freedom from poverty is adequately discussed in the literature. Since tomorrows luxuries become today’s commodities, poverty is constantly redefined, and status redefined, and redeveloped on a constant basis. Status is their objective, not redistribution alone.
Nor do we sufficiently discuss the fact that people do NOT integrate, do not acculturate but hunker down in their own communities. And where they do integrate, it’s a status ambition by the middle classes, and not integration so much as cooperation. In fact, the general shift has been away from ‘becoming an american’ to living in the ‘american empire’ under the ‘american code of laws’, while retaining one’s cultural identity. This is, in many ways, a strategy for attainment of social status.
Nor do we discuss the EFFORT required of those to whom we redistribute money on the maintenance of their property and our institutions – and their lack of effort expenditure even when they are property holders.
Since American exceptionalism is likely to have passed it’s prime – the world has adopted western political, economic, and production technologies in what will (for IQ, geographic, and cultural reasons) likely be a permanent global labor class, which will put permanent economic pressure on our middle and lower classes – we will not be able to assume a world of infinite inter-temporal redistribution based on the assumption of growth any longer.
If we can reinstitute mandatory savings instead of inter-temporal redistribution, and temporal redistribution into savings rather than consumption, we can probably correct most of the errors that socialists have burdened us with, and put the “saving-sensitiblty” back into the cultural vernacular.
Redistributing earnings into savings is a form of reallocation that is both logical and moral in a society that employs fiat money borrowed against the future efforts of the working classes.
But monetary redistribution is one thing. Risk redistribution is another. Inter-temporal monetary and risk redistribution are something else altogether because they are incalculable. (Taleb/Mandelbrot/Hakey/Mises).
Conservatives and libertarians on the other hand, must understand that the market itself (not trade, but the market) as well as the institutions of property and contract and objective truth, are all forms of regulation.
Markets as we understand them are distortions of human behavior. Even the competitive benefits of the market are obtained by the efforts of people to circumvent the market converted to good use. Western civilization differs from other civilizations by it’s consistent application of the gladiatorial rules to market exchanges – they are presumed to be fair. And by fair we mean, that one can only win if the other wins as well.
There are limits to the fairness of market activity: if one attempts to circumvent the market’s purpose for existence (prosperity) and the reason markets were created (to take advantage of trade routes conquests) and whom they were created by (the fraternal order of soldiers, which is our cultural source of individual responsibility), then the activity is not a market activity and instead is either Fraud or Theft. Not morally, but materially. Because the market is PAID for via foregone opportunities to commit fraud or theft. These are material costs. So there is no such thing as a ‘free market’. We pay to create it by foregone opportunity. It exists because we register these costs of foregone opportunity as rules of the market. And a market can only exists where trade routes are paid for and sanctioned by a division of labor’s specialists at holding land and trade routes: the risk taking soldiers.
George Soros and Goldman Sachs circumvented the market, and privatized wins while socializing losses. This is not a market activity. France nationalized the Rothschild’s, and it’s a miracle that England did not nationalize Soros’ money because it privatized wins and socialized losses.
The purpose of markets is not to replace the military class with the banking class. It’s to make the banking class, the military class, the merchant class, the clerical class, the craftsman class and the laboring class all benefit by increased division of labor and knowledge that leads to increasing production (Yield per man hour) and decreasing prices.
Socialists do not want to ENTER the market because they are afraid to lose – they are stuck in a world of trade rather than markets. This is their fundamental problem. The market is a Circus: a Gladitorium. It is a boxing ring. It is gambling. It is risk. The rewards of the market come from RISK – not TRADE but RISK. It is this market speculation that constantly leads to wins for the spectators.
The difference between conservatives and liberals, between conservatives and socialists, is in the difference between the Market, risk and opportunity economy, and the Trade and craftsman economy – progressives are regressive Luddites just as was Marx: seeking to return to the trade economy rather than the market economy. To some degree liberals are the equivalent of color blind. They do not see that the benefits that they live upon are the result of material risk taking. Conservatives do. And it is convenient for them not to see it
Liberals like Krugman are simply buried under silly cultural mythos that they mask as economic doctrine – confusing preference and cultural bias with market truth. Krugman’s only objective is to undermine the western white military hierarchy and replace it with the debt slavery of politicized bankers.
Libertarians (Rothbardians) are simply buried under the silly cultural mythos that they mask as economic doctrine – confusing the practicality of a RELIGION that favors only one minority class, without understanding the opportunity and forgone opportunity costs, as well as material defense coasts to both capture land, maintain trade routes, and establish and police the rules of the market.
LIbertarians (Hayekians) have not produced a synthetic strategy for implementing calculative (rational and calculable) institutions that can replace the political institution of legislative debate (non-rational and incalculable). Although they are probably the most sensible group in the economic sphere. This is a solvable problem some of us are working on diligently.
Libertarians (Friedman Monetarists) have been proven wrong by current events, as was Keynes, for exactly the reasons Hayek demonstrated. They are too close the the science to see it’s costs – and too happy to have others pay for the tragic cost of their experiments.
As Godel demonstrated and as Taleb says, there are a class of problems impervious to statistical analysis. Numbers and models are an extension of our senses. They are not descriptions of future courses of events.
But rationality goes out the window under universal egalitarian democracy rather than meritocratic republicanism: as others have said here, progressives have engineered a dependent class, the inverse of the historical politically dependent classes, and that dependent class is accumulating political power slowly but constantly. And what they do not achieve by dependence they achieve by immigration.
So, I see no reason to celebrate until we develop a Post- Conservative, Post-Classical Liberal, Post-Libertarian, Post-AnarchoCapitalist solution. That solution must achieve calculative temporal redistribution, savings rather than intertemporal ponzi schemes, and increase the complexity of government (market making) such that we have institutions that cannot pool their interests in order to change the government’s job from market making, to market exploiting. This is the great myth of left liberalism and right libertarianism: that the market simply ‘exists’ because of an invisible hand. Trade exists. A market of risk tolerance that allows the concentration of capital does not exist without the force of violence to prevent violence, and to compensate and punish for fraud. And only silly libertarians think so.
The anarcho capitalist libertarians have developed this philosophical structure, but emphasize free trade (and personal property as a means of achieving a class based exit from the influence of political institutions) rather than the wholesale reformation of those institutions so that they do not have to escape those institutions. For the anarcho capitalists to correct their system, requires they integrate the forgone opportunity economy into their articulation of the explicit economy. And in doing so this would force them to realize that their principle of non-violence is simply a silly religious dictum, and a false starting point for any theory of market activity to give their ‘class’ power in society. Rather than understanding that their class must share power in society in order to create the very markets that they depend upon.
My position is that we cannot fix those institutions without crisis or violence. But perhaps, the threat of violence can achieve the crisis which will allow the reformation of the institutions for the protection of all.
This strategy would put the republic back into place, while realizing that a republic of farmers is a republic of equals, and a republic of an advanced industrialized society competing in globalized economy requires that we have a more complex political system than the farmer-system we inherited from the classical liberals who were our founders.
All we can know for certain is that the socialist method is, and always will be, a failure, given any significant period of time, and the calculative libertarian method will always be a success given any significant period of time.