Sunday, December 29, 2013

"Quota Prices: Indicators of Comparative Advantage in Supply Managed Industries

Friday, December 27, 2013

Skeniranje mozga

Komentar Novog Sindikata Zdravstva Srbije na moj tekst o radu na crno glasio je ovako: "Рајшићу, време ти је за скенер мозга. Потражи стручну помоћ, човече..."

Ovo je klasična matrica diskvalifikovanja neistomišljenika korištena kroz istoriju. Inkvizicija je "istjerivala đavola" iz onih koji se nisu slagali sa ondašnjim crkvenim dogmama. U bivšem SSSR-u su ljudi koji nisu vjerovali u komunizam slani na "psihijatrijsko liječenje". U bivšoj Jugoslaviji su politički neistomišljenici slani na Goli otok na društevno-političko "osviješćivanje."

Prednost ove taktike je da se nečije neslaganje sa određenom idelogijom objašnjava kao duševni ili fiziološki poremećaj--jer kako drugačije objasniti nečije neslaganje sa apsolutnom istinom? Ovim sistemom se implicira da disident do svojih zaključaka nije došao racionalnom analizom i zato racionalna diskusija s njim nema smisla. On je bolestan i jedini način da ga vratimo na "pravi" put je da ga tretiramo kao bolesnika. A tu je ponekad i sila opravdana jer sve je to za njegovo dobro, samo on to još ne razumije. 

Dragi članovi Novog Sindikata Zdravstva Srbije, moram da vas razočaram. Još uvijek sam fizički van dometa vaših skenera mozga i medicinskih aparata za popravljanje duha i karaktera. Moraćete ipak da upotrijebite racionalne argumente ako želite da me uvjerite u svoju svijetlu misiju za oslobođenje ugnjetavanih od tiranije ugnjetavača.

Thursday, December 26, 2013

One of the thousands of reasons why I prefer crony capitalism over crony socialism

There is a logical fallacy that is often used in debates over the desirability of different social systems--the Nirvana fallacy. It has nothing to do with the 1990s band from Seattle (or Aberdeen, to be more accurate), and everything to do with inappropriate comparisons. The Nirvana fallacy is when one compares an idealized version of social system X with the existing version of social system Y to argue that X is better than Y. For example, comparing an idealized version of socialism with the existing version of capitalism would be an example of the Nirvana fallacy. Similarly, comparing an idealized version of capitalism with the version of socialism that existed in the former Eastern Bloc would be an example of the Nirvana fallacy.

I will avoid the Nirvana fallacy by comparing one particular aspect of life in two actual social systems, which I call crony socialism and crony capitalism. Crony socialism is what existed in my homeland, the former Yugoslavia, up until the early 2000s, and crony capitalism is what exists in most of the western world today.

The particular aspect of life I will be comparing is buying shoes for a teenager.

Buying shoes for a teenager in crony socialism

In the 1990s, I was a teenager living in what is now Serbia, and what was then the FR Yugoslavia. As clothes are an important aspect the life of a teenager, I, like most of my friends, was making a statement by wearing particular items of clothing. One of the statements most of us wanted to make is that we were not poor. So, we would strive to buy items of clothing that had a price tag in the range of $50 to $200. This may not look like much in the western world, but keep in mind that the average monthly wage at the time in Yugoslavia was about $150.

The strategy I would take to persuade my parents to let me buy shoes that cost about $150 was to lie. I would tell them that the price is about $70, while I would make up the rest. How did I make up the rest? Well, by saving, but not by the kind of saving you might have  in mind.

Every day, I would get an equivalent of $1 to buy lunch at school. I rationed this money in the following way. The first day, I would by lunch. The second day I would buy cigarettes (yes, I smoked as a teenager); and the third day, I would keep the $1 and save it. If you repeat this for about 200 days, you get nearly $70 in "savings". Then, if you add these $70 with the $70 or so you get from your parents, you have enough for the pair of shoes you wanted.

Buying shoes for a teenager in crony capitalism

In crony capitalism, or the system that exists in the western world today, buying shoes is much simpler--If you are a teenager, you go to your parents, they give you about $100 for a pair of shoes, and you buy the damn shoes.

Reflecting back, I prefer this arrangement over the one I described above. I would prefer it if I was a teenager and I surely prefer it as a parent.

Tuesday, December 24, 2013

How to stop the mechanism of war?

Previous sections:
1. The mechanism of war: Introduction
2. The mechanism of war: The components
3. The mechanism of war: Starting the hell's engine

It is difficult, but not impossible, to halt the mechanism of war. Here I refer to stopping the mechanism before mass conflicts commence. Once massive clashes begin, it is almost inevitable that that conflicts will last until one of the opposing sides is completely ruined. When they enter into a period of mass conflicts, people on both sides are firmly convinced that the opposing side wants to destroy them, and that belief is strengthened with each new conflict.

As politicians and marginal types see an opportunity to achieve their life goals through war, they will not be interested in stopping the mechanism in its initial phase. That’s the stage when marginal types are not held accountable for crimes committed against members of other social groups (religious, ethnic, etc.) In that initial phase the producers have not yet begun believing that the producers in other ethnic or religious groups were willing to commit such, ethnically or religiously oriented crimes.

Once the producers begin to commit crimes, and justify them as necessary defense measures, it is too late for stopping the mechanism of war because each new act of violence keeps strengthening the belief that there is no difference between the producers and the marginal types on “their” side. Therefore, the only period when the mechanism of war can be stopped is in the initial stage when the producers within each ethnic or religious group still see the difference between marginal types and a producers of other ethnic or religious groups.

How to implement this? First, it is necessary to understand the structure of the mechanism of war, that is, it is necessary that the producers understand the psychological profile of marginal types and the politicians. The producers need to be aware of the incentives that these two segments of society have for initiating and maintaining a violent conflict. Once the conditions are right, these two groups will play their roles in the mechanism of war. However, the producers should always keep in mind that, without the support of the producers, politicians and marginal types are powerless.

However, just being aware of the politicians’ and the marginal types’ incentive structure is not enough. The hard part for the producers is actually acting to withhold their support for local politicians and marginal types. People have a natural tendency to be afraid of "foreign" groups of people and that fear has an evolutionary background. It is not easy to overcome this fear, but it is not impossible. As with other human destructive fears, one should use reason to fight and overcome the fear of “others”.

We have made the first step in this fight if we understand the structure of the mechanism of war. It is clear that the producers in "other" ethnic or religious group would decide to use violence only when they believe that they will be attacked by “our” producers. We understand that the producers want violence only when they believe that this is the only way to prevent violence against them. We also realize that first crimes are committed by the marginal types, not producers. The purpose of these crimes is to confuse the producers so as to induce them to believe that the marginal types in “other” ethnic or religious group are in no way different from the producers within those groups.

The next step is that the producers calmly assess the costs and benefits of not responding to the provocations by the marginal types. This calculation should take into account the fact that, in most wars, the producers on both sides lose a lot. Many lose their entire property, and there is almost no family that doesn’t lose a member in a war. With it come all the traumas that a war brings. It is hard to describe these costs, but anyone who has experienced long-term violence and fear for his own life and the lives of his or her loved ones will understand what I am trying to describe here.

On the other hand, refusing to participate in an armed conflict brings with it the risk of being attacked by the marginal types. This option also brings fear and uncertainty. But, there are several reasons why the marginal types cannot just keep terrorizing the producers. First, if the politicians see that the producers are not taking the bait and not starting to participate in the conflict, they have to use legal means against marginal types. A politician that tolerates uncontrolled behavior of marginal types for a prolonged period of time and does not maintain the rule of law (whatever law that may be) has no political future. Politicians know this, and that’s why their goal is to get the producers involved in organized violence initiated by the marginal types as soon as possible. However, if the producers refuse to get involved, an organized conflict will not occur.

On the other hand, if politicians do not establish the rule of law, then a breakdown of the state ensues. The story of the collapse of the state is interesting, but it would take too long to deal with that issue now. Those who are interested can read more about it here.

So, to stop the mechanism of war, it is necessary that the majority of producers on both (or all, if there are more than two) sides realize early on that, by engaging in a war, they would lose more than they would gain. Since the current tendency is that the producers fail to see through the game played by the marginal types and the politicians, we need to work to ensure that at least future generations of producers are more immune to this game. This is a difficult but not an unachievable task. For starters, it is enough that those who understand how the mechanism of war works and how it can be stopped transfer their knowledge to others. The most important thing is to transfer this knowledge to children and encourage them to think critically, outside the pattern imposed by the state education system. The education system is always tailored by the politicians, and we can be sure that our children will not learn about the mechanism of war in those schools.

This series of thematically related texts is my contribution to stopping the mechanism of some future wars. I am sure that my efforts will not stop here.

The mechanism of war: Starting hell's engine

Previous sections:
1. The mechanism of war: Introduction
2. The mechanism of war: the components

Participation in a war is a matter of choice. A person will turn to war only when he or she thinks that this is the best option, compared to all the options that are available.

Since the politicians and the marginal types often see conflict and violence as appealing ways to achieve their goals, one can easily see why those two groups would likely engage in a war if a good opportunity arises.

But, long-term and large-scale conflicts cannot occur without the participation of the most numerous category – the producers. We know that the producers don’t not like conflict. They want to, if at all possible, avoid conflicts because conflicts can destroy the productive, family way of life that the producers are building.

On the other hand, we know from experience that producers not only participated in the war in the former Yugoslavia, but they were the most numerous group in that war. This war was, for the most part, a war of producers of one nationality against producers of other nationalities.

This is at first sight contrary to my initial assumption that the producers don’t like conflict and therefore don’t want to attack other people. If we asked people on each of the warring sides why they were participating in that war, we would hear the same answer - that this side only defends itself from others. If "our" side sometimes attacks, it is only to prevent the otherwise inevitable attacks of "their" side.

From this destructive and violent scenario, it is hard to recognize those original peaceful and productive producers. How did this transformation occur?

To understand the process of transforming the producers from peaceful cooperators into paranoid warriors, we must go back to the first phase of the war. This is the stage where the politicians, for whatever reason, decide that a violent conflict between their supporters could strengthen and deepen the politicians’ authority. In the case of the former Yugoslavia, that suitable moment came in the late 1980s, when it became clear that the Yugoslav economy was in a downward trajectory and that, as such, could not withstand the increased pressures of the IMF for repaying old debts that Tito's regime used in the process of industrialization of the fifties, sixties and seventies.

This seemed to be a suitable moment for political authorities of some republics (i.e., federal units, provinces) to combine economic reforms with the desire of a large number of people within those republics for achieving the statehood of the republics. Deteriorating economic conditions in the country served as a motive for the ever increasing number of accusations that the republic X was "robbed of its money" by the republic Y or Z. Quite frequently, one could hear from top political positions the inflammatory rhetoric that "things cannot continue this way anymore" or that "accounts have to be settled" or that "we want to take what’s our own".

Such rhetoric from the highest political positions was the first signal for the marginal types that the highest political authorities, on each of the opposing sides, might look the other way if any acts of violence occured. Marginal types understood this as their chance to be noticed, recognized, respected, a chance that someone finally takes them seriously.

The first abductions, tortures and murders in 1991 in the multi-ethnic parts of Croatia were the first tests by which the marginal types tried to sense the sentiment of the current political elite, on both sides. On either of the sides, there was no categorical condemnation of these, still sporadic crimes. I’ll avoid mentioning any names because the names in this story are irrelevant. The mechanism is what’s important.

Even then, many producers have recognized that these crimes were committed by the marginal types, not by working and peaceful people. Most producers still did not see the seeds of war in these crimes because they were not seen as an expression of ethnic intolerance, but as an expression of inhumanity of the marginal types. One could often hear the producers saying that those first crimes were not committed by a Serb or a Croat, but by a nonhuman, a criminal. Also one could hear producers saying that if someone had been harassed or killed, the cause of the attack was not the nationality of that person, but the fact that the attackers were criminals and nonhumans.

Thus, most of the producers, on both sides, still believed that they were not threatened by the producers of other nationalities. Therefore, for most producers, the cost of achieving the political goals of their leaders through war was at that point too high. So, most producers thought that avoiding conflicts with the marginal types of the other nationality was a better option.

But, once the marginal types felt they would not be punished for crimes, they did not stop. Harassment, abductions and killings continued. Over time, errors and misinformation in the mostly verbal information transmission process accumulated. It became less clear whether someone was killed because he or she was a Serb, Croat or Muslim or because he or she simply crossed paths with an unaccomplished, frustrated marginal type. It also became less clear in the minds of the producers whether someone committed a terrible crime because he or she was an inhuman marginal type or because he or she was a Serb or a Croat.

This uncertainty produced two powerful emotions in producers: fear and disdain - fear for the safety of their own families and disdain for "them". In the minds of the producers, “they” are no longer just marginal types but more and more, “they” include the producers of other nationalities. The distinction between marginal types and producers is blurred and the main distinction becomes between the people of ‘their” nationality and people of “our” nationality. “They" hate "us" and are ready to use any means against “us”, just like they abducted and and maybe killed my acquaintance or family member. This is how producers on both ethnic sides are now starting to think.

This process leads to the subjective experience of falling costs of participating in a violent conflict in relation to avoiding the conflict. Producers could lose everything in a violent conflict, but they are also increasingly getting the impression that avoiding the conflict could cause them to lose everything as well. The marginal types, encouraged by the political elites on both sides, are now starting to ask the producers of their nationality to choose sides. If you are not with “us”, then you must be with ”them”. There is no third option. This too increases the cost to the producers of further delaying their participation in the conflict.

At that point, many producers are willing to spend the night hidden in their yards to prevent the attack on themselves, their families or neighbors. After this, there is only a small step to becoming a watchmen with an AK-47 rifle, which was conveniently supplied by the political leadership of each ethnic side through their marginal types. With a rifle in his hands, the producer has become a warrior. He is being lead and organized by the marginal types, who are now boasting that they were "the first to take guns in their hands." Even now, with a rifle in his hands, the producer still sees his military commander as a marginal type and a bum, but agrees to submit to this bum's command because the producer thinks that this is now a necessary step in protecting his family.

Now, on each of the warring sides, there are producers filled with fear and contempt. And when they attack, and when they destroy and kill, in their minds, they are defending themselves. Each new attack is only an answer to a previous attack of "the other side". Every new atrocity, in their minds, is necessary to prevent future atrocities of "the other side ". The mechanism has been started, and it will stop only when at least one side is completely destroyed.

Next section: How to stop the mechanism of war?

Sunday, December 22, 2013

First issue of Journal of Prices & Markets

It is with great pleasure that I inform you all that the debut issue of the Journal of Prices and Markets has just been published.
Ludwig von Mises Institute of Canada
Introducing The Journal of Prices & Marketspublished by the Ludwig von Mises Institute of Canada, a journal that seeks to improve the understanding of the role of markets in the economy. Submissions should seek to shed light on contemporary issues while being grounded in a praxeological reasoning. Prices & Markets welcomes submissions from a variety of fields such as politics, sociology, and psychology, where ever they can bring relevance to economic and financial questions.
Prices & Markets is a journal for those interested in how the application of economic principles can enlighten practical affairs. It stimulates debate on economic and social problems by disseminating complex issues in a widely accessible format. It takes as its starting point the good economics does not have to be complex economics.
The Journal welcomes submissions from a variety of fields such as politics, sociology, and psychology, wherever they can bring relevance to economic and financial questions.
Papers and panels cover a wide range of fields that impact on the Austrian paradigm, including: monetary theory; international trade; money and banking; methodology; history of thought; economic history; business cycles; geography; interventionism; literature; political philosophy; philosophy of science; society, culture, and religion; business regulation; environmental political economy; and history and theory of war.
Book Reviews


Friday, December 20, 2013

The mechanism of war: the components

Previous section: The mechanism of war: Introduction

War is a complex phenomenon. Because it is a complex phenomenon, we need to define and describe its basic components. Each of these basic components has a specific function. While it is possible to split each of the components into more sub-components, we need to note only three main categories in order to understand the functioning of the mechanism of war. I call these categories (1) producers, (2) politicians and (3) marginal types. Each of them is defined by its most important motivating or driving force (i.e., its objective).

The producers are generally the largest category. This category consists of people that many of us refer to as "ordinary" people. Those are people like my neighbor, who is a mechanic, my cousin, who is a truck driver, my friend, a baker, and of course, my wife, who helps people with substance abuse problems. The producers are people who build their lives and identities around their families and their property. They produce goods and services needed by other members of society. This means that the producers are not only the "ordinary" people. The producers also include scientists, artists, athletes and other people who focus on production and voluntary exchange of goods and services for the sake of building up their property and improving the lives of their families.

The producers don’t like conflict. For them, conflict is a waste of valuable time and resources that could be used for improving one’s household. A producer avoids trivial conflicts. Larger conflicts pose a risk of losing one’s family and property. A producer would engage in a conflict only when he thinks that not-engaging in this conflict would have disastrous consequences for his family and property.

Politicians are a numerically smaller category than the producers, although sometimes their number may increase enormously. A politician’s life purpose and the primary motivating force is to rule other people. Some politicians believe that this is their ultimate moral duty. They believe that, without them, people would get lost in the uncharted area of misery and immorality. Such politicians usually emerge at the top of the political pyramid of power in society. Those less "creative" and less guided by the idea of themselves as the saviors of society, reach middle and lower positions in the pyramid of power.

Regardless of the underlying motives, all politicians have one thing in common--they want to rule. The stronger their power is, the more fulfilled and rewarded they feel. Since the power of any politician is based on how many people strongly believe that he is the one who should rule them, a politician is focused on convincing people that he is that right one. He is focused on convincing people that the best thing for them is to channel their life energy in the way he advises them.

When it comes to conflicts, a politician likes conflict if it could be used to strengthen his rule--to persuade other people that he is just the right leader they need. Thus, unlike the producers, for politicians, conflict is not something to be avoided. For politicians, conflict is only one way to come to the realization of their life goals. Moreover, a politician's argument for why he should be in power even in peace time is based on the theory that the producers need him to discourage potential aggressors through diplomacy and through building up the military base of the country. So, for politicians, conflict is life.

The third category of parts in the mechanism of war are the marginal types. As the name suggests, these are the people who are on the sidelines of society. Marginal types are the least productive members of society. Since they are unproductive, they often don’t like to engage in production activities, so they indulge in intrigue, deceit, and petty crime. They are not skilled enough for larger crimes. That’s the politicians’ “job”.

The marginal types usually don’t start a family, and if they do start one, these families are often dysfunctional and quickly fall apart because of the nature of the marginal types. They don't know how, or simply don't want to, create harmonious, productive relationships with other people.

Marginal types are generally unfulfilled people. They are either not sufficiently productive or they lack other preferences that are necessary for them to become producers. At the same time, they are not sophisticated enough to become politicians. They would like to be noticed, recognized and respected by other people, but they simply do not have the capacity to gain that respect the "right" way.

For a marginal type, conflict does not have a large cost because his life is in such a condition that he has nothing to lose. He either has no family or that family is in the state of disintegration, and his property is negligible because of his unproductivity or it is on shaky grounds because of his criminal lifestyle. Moreover, conflict is one of the ways in which a marginal type may try to be noticed by other people and to gain their respect. You will often hear a marginal type boasting about being on bad terms with someone. That’s a form of self-affirmation. Being on bad terms with someone shows that you matter; you can't be ignored. So, just as for politicians, conflict is of particular importance for the marginal types as a way of achieving their life goals.

Of course, like any description of a complex mechanism, this division into three basic groups of people that make up the components of the mechanism of war has in itself elements of generalization. One could define subgroups within each of these three groups, and each subgroup could be divided into sub-subgroups and so on. Also, one could describe a gradation (i.e., gradual transition from one group to another) where some individuals have the elements of two or all three groups. But, in the same way that a description of the molecular composition of the piston, crankshaft and the cylinder in a petrol engine does not substantially contribute to the explanation of how this engine operates, further detailing in this case contributes little to better elucidating the mechanism of war. So, I'll stop at this level of detail and go on to describe the interconnectedness of the basic three components of the mechanism.

Next section: The mechanism of war: Starting the hell's engine

Thursday, December 19, 2013

The mechanism of war: Introduction

War is a terrible thing. Almost everyone agrees about that. Also, almost everyone agrees that most people in a war, on both sides, lose. Maybe we don’t all agree that most people lose more than they gain in all wars. To remove the possibility of quarreling about this at the outset, for those who think that there are some wars in which the majority of people on one of the warring sides gains more than it loses, this article refers to those wars in which the majority, on both sides, loses more than it gains.

Now we need to define "loss" and "gain". Since both loss and gain are phenomena that take place primarily in our mind, gains and losses are subjective in nature. Therefore, they cannot be measured by objective methods. For some people, it would not be too much to lose property, health, and even family members and friends for the sake of a "higher" goal. Some call this higher goal freedom, statehood or dignity. This list can be quite long, and it is irrelevant which term is used for that "higher" goal. The point is that sometimes people believe that some higher end justifies all the sacrifices that are necessary to achieve it.

Is the war in the former Yugoslavia one of those wars in which most people, on at least one (winning) side, believe that the losses in the war were less than the gains, and how would we measure losses and gains if they exist only in the minds of people and not in some objective form? Of course, I will use my subjective assessment of the reaction to the war in the former Yugoslav republics, now, twenty years later. The places I have in mind are Croatia, Bosnia and Herzegovina, and Serbia, since I don’t think that what happened in Slovenia could be characterized as a war.

It seems to me that most Kosovars still believe that the war has brought to them more than it took away. On the other hand, my assessment is that most people in Croatia, Bosnia, and Serbia now think that the war took away from them more than it brought to them. If you don’t agree with that, then this is a good moment to stop reading this article because everything I will write from now on will be based on that assumption. I'll try to explain how a war that was later believed to be a mistake by most of those who were involved in it can happen in the first place. How can otherwise peaceful people like you and I be moved to commit horrible mass destructions of other people?

In the next section: The mechanism of war: the components

Saturday, December 14, 2013

An assessment of Hoppe's argumentation ethics that Hoppeans would understand better

I became somewhat of a regular reader of the BHL blog recently. I think their stuff is interesting, but I also think they could improve their persuasiveness to their target audience (and I am assuming I am not misidentifying their target audience). Most of that audience does not have formal training in legal theory. Even I, who have some formal training in lots of things, found the BHL critique of Hoppe's argumentation ethics confusing. That's why I'll try to provide a translation in terms that are more understandable to those to whom this critique was addressed. Again, since the critique itself was confusing to me, what I am going to provide here may not be an exact translation but rather a different critique altogether. In any case, here we go.

Hoppe's paragraph that the BHLs quote is this:

It must be considered the ultimate defeat for an ethical proposal if one can demonstrate that its content is logically incompatible with the proponent’s claim that its validity be ascertain- able by argumentative means. To demonstrate any such incompatibility would amount to an impossibility proof; and such proof would constitute the most deadly smash possible in the realm of intellectual inquiry … Such property right in one’s own body must be said to be justified a priori. For anyone who would try to justify any norm whatsoever would already have to presuppose an exclusive right to control over his body as a valid norm simply in order to say ‘I propose such and such’. And anyone disputing such right, then, would become caught up in a practical contradiction, since arguing so would already implicitly have to accept the very norm which he was disputing.

My interpretation of this paragraph is as follows. The fact that you try to argue with someone, lets call him Jim, implies that you recognize his exclusive ownership over his body. Also, you need to have exclusive ownership over your own body in order to be able to argue anything. So, if Jim says: "I have the right to say that the sky is red," and I try to argue that Jim does not have the right to say that, Hoppe would claim I am engaging in a practical  contradiction because I am, in fact, respecting Jim's right to say the sky is red, since I decided to argue and not to physically attack Jim.

The problem with this logic is two fold. First, it conflates the ability to perform an action with the right to perform an action. Second it conflates the choice to not attack someone physically with the obligation to not attack someone physically. Just because Jim has the ability to say the sky is red, this does not mean he has the right to say that. Just because I chose not to attack him physically when he said the sky is red, does not mean I am fulfilling an obligation to respect his right to say the sky is red.

Suppose Jim actually did not have the right to say the sky is red, but, instead of cuffing him and locking him up, I decided to try to explain to him that he did not have the right to say what he said. He may have been confused. In this case, my generosity was misinterpreted as a recognition of Jim's supposed right. Thus, no practical contradiction occurred in this case.

Suppose now, instead, that Jim did have the right to say the sky is red, and I knew that he did have that right. However, for some reason, I don't like it when he says the sky is red. I may try to attack Jim physically in order to stop him from saying the sky is red. However, this may carry risks I don't want to bear. In that case, I might try to fool Jim into believing he does not have the right to say what he said. Thus, I may argue with Jim about his right to say the sky is red, and if I am skillful enough, I may succeed. Again, I am not committing any practical contradiction. My choice of a strategy to shut Jim up was misinterpreted as my respecting Jim's right to say the sky is red.

We could come up with other scenarios as well, but I think this is enough to illustrate the message.

Tuesday, December 10, 2013

Let's give the non-aggression principle some credit

Jason Brennan provides an excellent explanation why some libertarians are mistaken when using the non-aggression principle (NAP) as an argument against non-libertarian ethical theories. This is an important point and it is worth repeating to those who tend to forget it. However, we need to be careful when disqualifying the NAP as a justification for libertarianism not to disqualify its proper place within the libertarian theory. That special place refers to the operational properties of the NAP within the libertarian theory.

While it is true, as Brennan demonstrates, that the NAP could be incorporated into other theories of property rights, this principle is fully operational only within the libertarian theory. Why? Because, unlike in the utilitarian, pragmatic, or legal positivist theories of rights, where rights are defined as bundles of permissible actions, rights within the utilitarian theory are defined as an absolute jurisdiction over a certain area of space or over an object for a specified period of time. If we take as given that a person, say Jim, owns a house and a plot of land around that house, within the libertarian theory of rights, this ownership is defined as an absolute jurisdiction over the space limited by the boundaries of Jim's plot of land (we may define this space to a certain height as well). As long as Jim uses the property within this defined space in a way that no physical objects interfere with someone else's (say, Janis's) space (we are assuming that both Jim and Janis are rightful owners of their properties), Jim is operating within his property rights.

The NAP is an operational concept in the sense that it is a label we put on a situation in which Jim would place a physical object into the space under Janis's jurisdiction without Janis's consent. This label says that Jim's action has violated Janis's absolute jurisdiction over her property. Thus, Jim's action is unjust, and we call it aggression. Jim should not aggress because this action violates the principle of Janis's absolute jurisdiction over a defined area. Again, remember we are assuming we have already solved the problem of justifying Jim's and Janis's ownership over their respective areas of space. Their just ownership is used as a basis for labeling certain physical interferences as aggression.

The NAP could be applied outside of the libertarian theory of rights. So, we could use some other theory to justify ownership and then label certain actions as aggression. For example, we might use the utilitarian theory to justify taxation, and then label tax evasion as aggression against tax recipients, who would be the rightful owners of those taxes. However, while the NAP could be applied outside of the libertarian theory, it cannot be consistently applied and be operational. The reason for this is the way in which rights are defined within non-libertarian theories of rights--they are defined as bundles of permissible actions.

We can illustrate this with an example. This example is from an area of law where the distinction between the libertarian and non-libertarian theories of rights is particularly illuminating--environmental law.

Say Jim is a farmer, and Janis is the Minister of the Environment. Janis has the authority to determine which actions Jim has the right to perform and which actions he does not have the right to perform. For example Janis may demand that Jim applies fertilizer between April 1st and April 15th, or she may demand that Jim applies fertilizer by injecting it at a certain depth under the soil surface, or she may demand that Jim does not apply fertilizer during rainfall or snowmelt. We are assuming that Janis is fully justified in making these demands.

What happens if Jim does not obey Janis's demands. Since Janis is fully justified in expecting her demands to be fulfilled, Jim has committed an unjust act. But, can we say that Jim has committed an act of aggression against Janis's property? Although Janis has the right to determine how Jim is going to use his tractor, fertilizer and land, Janis does not own those objects. She has some jurisdiction over them, but not ownership in the sense in which the libertarian theory defines ownership.

Jim might have disobeyed the orders made by Janis, but it would be meaningless to say that Jim has committed aggression against Janis's orders or demands. What we know is that he has not committed aggression against Janis's property, and we cannot use the NAP to label Jim's action as unjust. Although we cannot use the NAP to label Jim's action as unjust, we can still say it is unjust because Jim has disobeyed his moral obligations to Janis.

I used this example to illustrate the proper operational place of the NAP within the libertarian theory, and how this operational place cannot be always replicated in other theories of rights. In fact, my experience in environmental law indicates that instances in which this operational place of the NAP could be replicated within non-libertarian theories is quite small relative to those in which it cannot.

Sunday, December 8, 2013

Brief economics of the bleeding heart - "conventional" libertarian divide

Bleeding heart libertarianism is a term that, to some, may sound like an oxymoron. However, according to the members of the blog BHL (Bleeding Heart Libertarians), this is not at all the case. They argue that it is, in fact, not only possible, but unavoidable that, if one cares about the poor, or other "marginalized" groups, one should be a libertarian. This is where bleeding heart libertarians essentially agree with "conventional" libertarians--that liberty brings prosperity and justice. However, where bleeding heart libertarians depart from the conventional libertarian narrative is in their view of the value of liberty relative to other moral goals people may have (i.e., helping marginalized groups, like the poor).

Bleeding heart libertarians argue that most people consider liberty (as defined by "conventional", say, Rothbardian libertarians) to be only one of the desirable human moral goals. This implies that, if faced with a situation in which one would have to choose between liberty and all other moral ends, most people would be willing to trade off some of their desire for freedom for the sake of keeping or increasing the attained level of other moral ends.

The next step bleeding heart libertarians make is to say that they, like most other people, don't always place freedom at the top of their moral value scale. So, when it comes to valuing freedom relative to other human moral ends, bleeding heart libertarians don't want to change people's preferences. they take people's preferences as given. The twist they introduce is the argument that, even for an average Joe, who is willing to trade off some of his desire for freedom for the sake of attaining other human moral ends (like helping the poor), the best possible world is the one in which liberty is maximized. Why?

The reason why even an average Joe would, if he understood economics properly, choose a world in which freedom is maximized is that the technical relationship between attaining freedom and attaining other important human ends is such that there is no trade off between freedom and the other moral ends average Joe cares about. According to this view, more freedom leads to a better attainment of the other moral ends average Joe cares about.

This view has some important implications. First, to persuade people that libertarianism is the way to go, one does not need to change people's preferences for freedom. Instead, one should try to explain to people why more freedom leads to a better attainment of the other moral ends people hold as important. Thus, the emphasis here is on using economic science to determine whether the claim about the technical relationship between freedom and the attainment of other human ends is true.

Is it really true that more freedom leads to a better attainment of other important human ends, including those moral ones, like helping the poor? From what I have learned about the functioning of economic systems so far, I would venture to say that this claim is generally true in most situations. However, claiming that more freedom leads to a better attainment of other important human ends in all situations would be, at best a stretch, and a vacuous generalization at worst.

The other implication is that, if it turns out that bleeding heart libertarians, "conventional" libertarians, and I were wrong about the technical relationship between freedom and the attainment of other important human ends, then an average Joe would not prefer a world in which freedom is maximized, and bleeding heart libertarians would not advocate such a world. They would advocate a world in which some level of freedom is attained, but not the maximum level of freedom. If, in fact, the attainment of more freedom was possible only at the expense of not achieving some of the other important human ends, then an average Joe would want to give up some of his desire for freedom for the sake of attaining other important human ends.

This, in my view, is the crux of the disagreement between bleeding heart libertarians and "conventional" libertarians. "Conventional" libertarians argue that liberty should be the highest human value even if that meant giving up some of other important human ends. Thus, "conventional" libertarians are making an argument that human preferences for freedom should have a specific form--a form in which one is not willing to give up any of his desire for freedom even when this is for the sake of achieving some other human ends. On the other hand, bleeding heart libertarians are arguing that, regardless of our preferences for freedom, once we understood the relationship between the attainment of freedom and other human ends, we would choose a world in which freedom is maximized.

Since bleeding heart libertarians take human preferences as given, and "conventional" libertarians argue that human preferences for freedom should take a specific form, there is no common ground for debate between "conventional" libertarians and bleeding heart libertarians. While they agree on the nature of the technical relationship between the attainment of freedom and other important human ends, their disagreement on the proper shape of human preferences for freedom remains, and it will remain until one or the other group modifies its preferences for human moral ends.

Thursday, November 21, 2013

An open letter to my landlord

Dear EIWO Canadian executive,

Unfortunately, it has become necessary that I express my and my family’s displeasure with the way your company has been treating us as customers. Our recent interactions with the management indicated that your company puts negligible importance on the past six years of our business partnership. Although we have been paying rent every month for the past six years without any issues, your staff assumed that the best way to communicate a late payment for the previous month is an N4 eviction notice. The N4 notice states in large bold and underlined font that “this is a legal notice that could lead to you being evicted from your home.” This eviction notice was accompanied by a letter that “asks that in the future you (meaning my wife and I) make more of an effort to have your (our) rent paid on time.”

I wonder why your staff immediately took as their task to judge the amount of effort I put in my daily activities. Your staff incorrectly assumed that my lack of effort was the cause for the late payment. Is it not possible that I put extraordinary effort in making my payment on time but still failed? You would, I hope, agree that there are situations in which, despite people’s extraordinary efforts, they still fail to achieve their goals. You would also, I hope, agree that some people can be quite successful in many activities while putting minimal effort in them. By judging my personal choices and by giving advice on how much effort I should put in achieving my daily ends, your staff is crossing the boundaries of tasteful and respectful conduct.

However, since this is only a symptom of a more serious underlying problem, l will put your employee’s imprecise and, in my view, arrogant language aside. Let me, instead, express my complete understanding for the way I was approached as your tenant. Given the current regulatory environment in Ontario, it is in fact, rational that a landlord provides low quality service to his/her tenants. Why? Because under the current regulatory system, a landlord has minimal to no benefits from providing high quality service. In fact, a landlord may even achieve financial gains by providing low quality service. Ontario is one of the most legislated and bureaucratic regions in the world for tenant-landlord relationship management. Under this regulatory system, landlords are subject to the rent stabilization program and to a plethora of other requirements. This program has at least three main consequences: (1) it reduces the revenue that the landlord has on disposal for providing quality service; (2) it creates excess demand for rental units; (3) it provides incentives for landlords to evict tenants with a longer tenancy history.

The rent stabilization regulations prevent landlords from increasing the rent from year to year by more than a certain percentage. That percentage for the 2014 rent relative to 2013 is 0.8%, which is a fraction of the general inflation rate for this year. Rent restrictions applied over a longer period of time suppress rents below the level that would be established on the market in the absence of this regulation. As a consequence, there is a higher quantity of apartments for rent demanded—there is excess demand. Because of this excess demand, landlords have little incentive to make their current tenants happy with their housing service. In a market with excess demand, it is relatively easy to find a new tenant in a short period of time. In addition, under the current regulation, the starting rent of a new tenant is not linked with the amount of rent paid by the previous tenant. This means that, compared to the rent paid by the previous tenant, the rent of the new tenant can be increased by more than the maximum allowable percentage for old tenants. Under these conditions, I, as a tenant with a longer renting history in this building, may become a liability rather than an asset for your company if the company can collect more revenue by putting a new tenant in the apartment I am currently using. It may be beneficial for your company that I get dissatisfied with the quality of service and thus choose to leave.

This can explain my recent experiences after our previous superintendent and her father, who were by nature people that value providing high quality service, resigned. The current superintendent has inadequate communication skills, and she possesses neither the technical skills nor the mental stability of an effective property manager. Just as an example, it took my family three days of phone calls and somewhat frustrating conversations until a water leak from the apartment above was properly addressed. Even now, as I write this letter, one of the building's exit door locks is broken, and it has been broken for four days now. The door can’t be opened, and this is a serious fire hazard. All this contributes to my and other tenants’ low satisfaction with the quality of service. However, it may well be in the best interest of your company to keep the level of service low. Your company may be better off with this low quality superintendent if your goal is to increase tenant turnover rates. There is certainly evidence in this building in the last several years that tenants have decided to purchase a house or an apartment elsewhere earlier than they would have otherwise decided. These tenants have been replaced by new tenants that tend to leave after a year or so.

This is the real subsidy we pay for those who persuaded our government that we should all pay lower rents--hours and days of frustration over issues that would not exist if rents were allowed to adjust to the level we are willing to pay. My time has a higher value in activities other than worrying that I don't miss the rent deadline or designing communication techniques that my superintendent is capable of understanding. I would rather pay higher rent and have some flexibility when I deposit my rent cheque then to receive letters threatening I will be evicted in two weeks. This scare tactic is an attempt to lower the value of my time spent not worrying about the deadline. Removing rent controls would be a win-win situation for your company and for my family. You would earn extra income, we would get the respect we think we deserve from you.

It is clear that under the current incentive structure, which is in most part a consequence of the regulatory environment, being kind or respectful to your tenants has no obvious financial advantages for your company. Unlike other, less regulated businesses that need to attract their customers by providing service that is better than the competitions’, the rental housing industry in Ontario is not facing this incentive. An act of kindness or respect would be a personal favour toward your tenants, not something you do to ensure better financial viability of your business.

I accept the reality that your staff is not willing to provide this favour to me and my family and treat us with the respect we think we deserve. However, it is puzzling to me why your staff expect us to do your company favours. One of your property managers suggested my wife and I can avoid these N4 eviction notices if we deposit post-dated cheques or if we set up an automatic withdrawal account in our bank. But, the only thing we are obligated under law is to submit our payment by 11:59 pm on the first day of each month. Relative to our legal obligation, the two options your staff suggested are clearly favours that we would be doing to your company. Favours need to be earned, and according to my judgment, your company has not earned any favours from me or from my family.

I also think we will stop doing you the favours we did in the past when we omitted to mention a number of errors committed by your staff. For example, due to the poor judgment of your staff, my family had to spend more than a year living next door to a violent drug addict with serious psychological issues. It was clear to me from the first day of his tenancy that something was seriously wrong with this individual, and it is beyond me how your staff was not capable of noticing this. Your staff tried to pressure my family into supplying a written complaint to make your job of evicting this individual easier. Your employee should have been aware that, since I have two small children, such a complaint would put my family in danger of this highly unpredictable individual, who eventually triggered several police interventions. It is not my job to fix the errors your employees have made. I have omitted to mention this and a number of other instances of unprofessionalism shown by your staff, and I did this because I wanted to do them a favour by forgiving them their blunders. This will stop now. It should be made public that your staff has made a number of poor judgments at this location. I have no reason to believe that these poor judgments will stop any time soon.

It is unfortunate that we are facing this situation, but, maybe our experience and experiences of other Ontarians can be used to illustrate the fact that the current tenancy laws do not promote conflict resolution and peaceful cooperation, as laws are intended to do, and as I teach my students. Instead, these laws create incentives for lack of mutual respect, which fosters distrust and hostility, quite the opposite of what good laws are supposed to do.


Predrag Rajsic

Sunday, November 10, 2013

Embrace your greed

Last night, we went to a Serbian folklore festival where our daughter performed. These folklore festivals are quite common in North America, and their format is similar across locations. First there are about three hours of performance by dance groups, followed by some sort of a lottery. However, instead using the admission tickets as lottery coupons, separate lottery tickets are sold during the show. As a consequence, participating in the lottery is optional.

So, the lady selling those lottery tickets comes to me, and I tell her we won't buy any because we probably won't stay until the draw. She replied that I should buy tickets anyway because the point of the lottery is not to win a prize but to help financially the host folklore society. I said to her that, if that's the only point, she doesn't even need to give those thickets to people. She can just take their money. She turned around and left.

If she waited a bit more, she would have had the opportunity to hear me explain to her that she is presenting me with a false dichotomy, as if there are only two possible reasons one would want to participate in the lottery: either to win a prize or to provide a charitable contribution. So, according to this dichotomy, the choice is between greed and compassion. Then it turns out I chose greed over compassion. Of course, people generally don't want to be seen as being greedy, and she is targeting this emotional response.

However, as I said earlier, she is presenting us with a false dichotomy. The dichotomy is false because there may be other reasons why people would want to participate in the lottery. For example, I participate to have fun. For me, neither the prize nor giving a charitable contribution are the primary motivating factors. So, if I'm not having fun, the lottery ticket is not worth its price. Since I see no fun in buying a ticket and then driving home before the draw, I don't buy any tickets.

I am not sure if the ticket lady understands this, but I'm guessing she does. It is simply in her self-interest to attempt this emotional manipulation stunt. She knows I have already decided I won't stay until the lottery. So, playing the fun card wouldn't work. She knows I already decided that I would forego fun for the sake of coming home earlier. The only thing left is to see if I would try to avoid being labeled greedy.

This marketing strategy is completely understandable. Like all of us, charitable organizations are guided by self-interest. They look to advance their objectives in the most effective way. They are as "greedy" as any one of the rest of us. And this is not a bad thing.

Sunday, October 27, 2013

We are all a priorists

A priorism is somewhat of a dirty term these days. It is often equated with dogmatism or with intolerance toward empirical research. This is unfortunate because we are all a priorists. The a priorist nature of any scientific discipline, or for that matter, of any knowledge acquisition technique, is embedded in the nature of human communication of knowledge.

The extent to which one human can explain anything to another human is limited by the number of words in the language that these two individuals understand equally. To define the meaning of a word, one must use other words. Then, one may need to define the meaning of every word in this definition using yet other words. To avoid circular definitions, these words must not include the words that we were trying to define initially. If you continue this process, you must conclude that all definitions must be based on a set of words that are assumed to be equally understood by both individuals. The smaller the number of these words that are equally understood, the less one individual can explain to another.

The implication is that the claim that we understand something is based on the assumption that we understand a given set of words. This means that expanding our understanding of the world will require expanding the number of words we assume a priori to be understood.

To illustrate this, let us start with the word square. If we say that a square is a geometrical shape, we are assuming that the meanings of words is, geometrical, and shape are already understood. If they are not understood, we need to define them in terms of other words that are understood. We may define is as a present tense of be. Here, it is either assumed that the words present, tense, of and be are understood, or we need to define them in terms of other words that are understood. You can see that if we are ever to define or explain anything, there needs to be a point at which we stop explaining the meaning of words in terms of other words. At this point, we reach what we may call the ultimate givens, words whose meaning is assumed to be understood a priori (or prior to any knowledge).  

This tells us that we all need the belief that some ideas are understood without any explanation. Their meaning is assumed to be given to us. It is thus inappropriate to claim that, for example, economists who are a priorists are somehow fundamentally different from other economists or from other scientists. It is just that a priorists are more transparent about the methodological nature of their knowledge.

Sunday, October 20, 2013

Voluntary Slavery a la Coase

Ronald Coase is famous for his analysis of the role of transaction costs for the emergence of institutions. He explained the emergence of a firm as an institutional adaptation to high costs of coordinating production activities within the market process.

For example, if the production of a Honda Civic was organized exclusively through market transactions, each production activity would have to be performed by an independent individual producer. In such a world, I might be earning my living by buying the Honda civic exhaust manifold on the market, drilling the holes for the screws, and selling it on the market to the person that will connect the manifold to the cylinder of the engine.

The cost of coordinating my actions with the actions of other producers of Honda Civic parts would have to be lower than the cost of coordinating the production activities through administrative decisions within a non-market organization. Part compatibility, sizes, material quality, timing of production and other features of the production process would have to be successfully coordinated within the market. In the end, the last person in the production process would buy an almost finished Honda Civic from the second last person, and this last person would add the last screw, or the last sticker, or whatever the last part would be. This last person would then sell this car to a retailer or to a consumer.

You probably see that this is an unlikely scenario. The number of activities that would need take place for market participants to coordinate the production of a Honda Civic would be overwhelming. It simply makes more sense to get together and organize production as a group, a team. The name we usually give to this team is the firm.

Thus, in a world where the coordination of production activities in the above described example would be so hard to achieve, that it would be nearly impossible to produce a car by independent market participants, people found another way. They coordinate the production activities not through market transactions but through administrative decisions made by managers within a firm. The managers make sure that the part I am making will fit with the part the person on the assembly line next to me is finishing. We obey the orders of the manager and the job gets done.

However, there are limits to a firm. When coordinating production through administrative decisions becomes more costly than coordinating actions through market transactions, firms turn to outsourcing. They may buy some parts from another firm. For example, most car manufacturers buy some generic screws from other firms rather than producing the screws in house.

Notice, however, that the limits of a firm also include how far a firm can go in using administrative decisions in coordinating labour activities. Firm employees have lives outside of the firm. The firm needs to enter into a market transaction with the potential employees and offer them a satisfactory monetary compensation for their services. This means that coordinating production activities through market transactions with labourers is less costly than coordinating production by managing all of the employees' activities 24 hours a day. This implies that employees and employers expect higher payoffs in a scenario in which employees are free to invest their wages in their own capital resources as opposed to their employer providing all capital resources for them. In this sense, freedom is an institution that reduces transaction costs relative to complete employer control over the employees' life.

On the other hand, in a world in which coordinating production through direct command and control is more cost effective, compared to coordination through market transactions, we may expect the development of an institution that resembles slavery. Slaves would live on the property of their employer and all of their activities would be directed by the employer.  Notice that "slavery" in this case is voluntary. What is implied is that people don't dislike being told what to do all the time, or, at least, that their dislike is not sufficient to overturn the benefits of higher productivity resulting from being told what to do all the time. In other words, voluntary "slavery" may be the most efficient social arrangement in some cases.

Friday, October 18, 2013

Tomo, ne diraj mi daljinski; baci svoj ako ti smeta

Predsednik Srbije, govoreći o, "lošim" navikama stanovništva. (RTS, 16. 10. 2013. godine) kaže:

“U Srbiji ima sve manje ručnih radova: žene gledaju serije, više ne heklaju, ne štrikaju. Ja to moram da kažem, jer sam rođen i odrastao u kući u kojoj je sve bilo drugačije. Svako je ponešto radio. Svako se nečim zanimao. Ili je bar čitao, ako nije nešto radio. Ja danas odem kod nekih prijatelja kojima se ništa ne desi ceo dan. Koji ne promene ništa u svom životu ceo dan. Nego – daljinski. Trebalo bi ukinuti daljinske. Pa bar da prošeta do televizora. Da mora da škljocne, kao što smo nekada.”

Ove izjave odišu supremacizmom baziranom na nekoherentnoj teoriji objektivne vrijednosti. Tomislav Nikolić tvrdi da on zna šta su prave vrijednosti. Vrijednosti koje vi i ja smatramo dobrima, u stvari nisu dobre jer vi niste Tomislav Nikolić. Iako je Tomislav Nikolić ljudsko biće kao vi i ja, on ipak misli da on bolje zna nego vi sami kako biste vi trebali provoditi svoje vrijeme.

A kako to Toma da zna da li je meni bolje da gledam TV ili da čitam knjigu? Da li je bolje da čitam knjigu ili da odem da diskutujem sa komšijom o Dostojevskom? Da li je bolje da odem kod komšije da odigramo partiju šaha ili je bolje da uzorem njivu? Da li je bolje da gledam špansku seriju ili da čitam knjigu koja me ne zanima? Da li je bolje da čitam knjigu koja me ne zanima ili da uzorem njivu koju planiram sutra da uzorem jer sam danas odlučio da se odmorim? Da li je bolje da se danas odmorim ili da se sutra odmaram? Da li da se odmaram tri sata dnevno ili pola sata dnevno? Da li da se odmaram uz seriju koja me zanima ili uz knjigu koja me umara? Da li da sijem pšenicu ili da prodam njivu?

Sve to, i mnogo više, naš Toma zna sa apsolutnom sigurnošću Boga oca tako da, kad nam on naredi da ostavimo daljinski, mi možemo biti sigurni da je to za naše dobro.

Ne samo da zna najbolji način korišćenja vašeg vremena, on zna i koje tehnologije treba da koristimo a koje ne treba da koristimo. Daljinski upravljač je jedna od tehnologija za koje Toma misli da ne treba da je koristimo jer bi tako bili primorani da ustanemo i prebacimo kanal. Time bismo sebi obezbijedili više fizičke aktivnosti.

Ali, Toma nam nije rekao dokle bi išao ovom logikom i koji bi kriterijum koristio da odredi koje tehnologije su dobrodošle a koje nisu. Zanima me da li bi Toma zabranio upotrebu motora s unutrašnjim sagorijevanjem jer bi tako veći broj ljudi na posao išao pješke. Ako ne bi išao ovako daleko sa svojim principom eliminacije tehnologija koje štede naše vrijeme i fizički napor, koliko daleko bi išao? Zašto je daljinski upravljač dugačiji, recimo, od aprata za pranje suđa? Bez aparata za pranje suđa, morali bismo suđe prati ručno, a to je dobra fizička vježba za održavanje psihofožičkog zdravlja. Hajde da zabranimo televizore koji imaju digitano podešavanje kanala televizorima koji imaju anlogno podešavanje pa moramo da okrećemo dugme na televizoru dok nam se ne pojavi "čista slika". Tako ćemo duže vremena provesti stojeći, a to je dobro za održavanje stabilne muskulature nogu i leđa.

Ali, sva ova pitanja nisu ni približno teška koliko je sljedeće pitanje teško. Tomo, a šta ako moja supruga voli da hekla dok gleda seriju? Da li onda serija može da prođe tvoj test "pravih" vrijednosti?