Traditions and Best Practices

I like J.C. Lester’s formulation of “traditions and habits” as “obvious opportunities and standard solutions to problems, which we might well find useful but may ultimately reject if something better occurs to us.” (Escape from Leviathan, 32)

This reminded me of what I wrote in my book:

The paradigm of a worker-capitalist-entrepreneur is an independent consultant who offers to his customers “solutions to their problems.”

He seeks to make his clients more efficient, reduce their costs, and raise their revenues. He is paid for results not for faithfulness.

Since the economy and technologies are perpetually in a flux, and both problems and the most efficient solutions to those problems change all the time, the consultant keeps himself abreast of all the new developments in his field.

For example, entrepreneurs and consultants who drive and lead the market do not merely implement “best practices” found within their occupations or adhere to “industry standards.” They discover new and better practices than the ones presently conceived by most market players, exceed the standards, and through those, outdo their competition.

Why Economics Ignores Charity

In a debate, [David] Friedman attempted to counter this analysis [that human desires need not be considered “simple”] as follows:

Suppose that consumers dislike the idea of consuming the services of low paid workers — tastes, after all, are neither rational or irrational. Further suppose that consumers have no low cost way of determining how much a particular worker, say a waiter in a restaurant, is being paid, so individual employers don’t have the option of paying their workers more in order to appeal to their customers’ preferences.

The minimum wage is increased. Customers now know that workers in various low skill industries are being paid more. So the demand for the output of those industries goes up. Employment goes up instead of down.

It doesn’t strike me as a very likely story, but it isn’t logically impossible and without knowing some facts about people’s tastes you can show it isn’t true.

That’s one example of my more general point. As long as you are completely agnostic about utility functions and production functions, neither of which is given by economic theory, any behavior can be explained by some assumption, possibly an implausible one, about what those functions are.

The particular example of the effects of minimum wages that Friedman uses is illegitimate. The reason is that economics presupposes that people neither hate nor love each other as perhaps some ends in themselves. Instead, each person considers every other person and by extension society as a whole to be a special tool that he can use to further his “self”-interest. In making use of other people, one (Smith) realizes two things. First, that human nature is distinct from the nature of rocks and machines. Second, that other people think of him in turn as their own tool and would not allow Smith to privilege himself in such a way that Smith can use them but they cannot similarly use Smith. E.g., this symmetry means that any exchange benefits not only Smith but the other exchanger, as well. Insofar as Smith derives pleasure from watching low paid workers get higher wages, he ceases to treat other people wholly as means to his own ends.

We can speculate why he holds such valuations. He might consider it a holy moral duty on the part of the employer to pay his workers more.

He might prefer greater equality.

He may be an advocate of a “living wage.”

But any answer will betray in him (in our case illusorily) a higher humanity in a manner of speaking in which other people are now more than merely some peculiar devices whose most efficient use is described by economic theory. In other words, economics is a science of social cooperation. But the cooperators are equal in status and indifferent to each other’s welfare. Friedman’s example violates this last assumption.

Let Smith give Jones a gift G. Smith agrees to let Jones allocate G according to Jones’ own values. Jones decides what to do with G. But why would Smith part with the item, unless Jones’ pleasure were in some way his own, unless Jones’ values were his, also? Only if Smith loved Jones. Love’s effects are union, mutual spiritual indwelling, or, in economics-speak, a merging of individual values scales. Jones is part of Smith.

When Smith loves, the beloved’s values are his, and vice versa if the love is requited. There is an intertwinement of wills. (Such a union obviously does not entail that property ought to be communized.)

It follows that if we allow love of friendship in economics, where people’s values are shared, then we have to ditch methodological individualism. And that is far more trouble than it is worth. Hence, the assumption. (SAtK, I, 14)

Liberty As Minimization of Imposed Costs

Lester’s main aim in his book is to defend the compatibility (of his understanding of liberty with welfare) thesis. The curious part is the somewhat strange definition of liberty in Lester’s book as minimization of “imposed costs.” In classical Rothbardian theory, liberty would prevail in the absence of injustices or upon minimization not of costs but of unjust costs or harms. On the other hand, welfare seems to be concerned with maximization of profits or the overall difference between benefits and costs, not with minimization of costs simply. I am not even fully sure how it can be meaningful to consider, let alone minimize, costs without considering benefits also.

Thus, the first objection to his definition Lester considers involves “genocide.” The idea is that a world devoid of humans entirely or a world with only a single man in it seems to have zero imposed costs. Crusoe on his island is absolutely free. “So if such liberty is literally to be taken as a goal to be maximized, then we need to aim at minimizing the population.” (62) Lester replies that both genocide and forced “prevention of the births of potential people… would seem to impose a still greater cost.” I agree; however, the problem remains. A large capitalist society produces a great deal of welfare but has considerable imposed costs, such as by every private property around me wherever I go which I must not take or trespass on. On the other hand, Adam upon expulsion from his Garden of Eden or Crusoe on the desert island were miserable paupers, but had no costs imposed on them at all. Hence over time higher welfare was purchased with lower liberty and vice versa. The growth and development of civilization then involved a trade-off of liberty in Lester’s sense for welfare. This seems to undermine his compatibility thesis.

Lester may reply that this thesis refers to immediate compatibility of liberty and welfare at any given time rather than over time and especially over the very long term. But this won’t work. For “welfare” is nothing fixed; nor is capitalism defined by any given amount of welfare. Rather, the essential feature of capitalism is everlasting progress, constant and rapid daily improvement in welfare. Yet it appears that this improvement must involve a diminution of liberty in Lester’s sense. He may again counter that maximum possible liberty at t1 facilitates maximum speed of economic development at t1, and the same is true for any other moment in time, even if liberty at later t2 will be smaller than liberty at earlier t1. But this seems to me to be unnecessarily conceding too much to the statist.

Businessman Smith who invents a new mousetrap imposes a cost on his competitor Jones who is still peddling inferior mousetraps. Regarding entrepreneurs only, one man’s gain is another man’s loss. On the whole, there is a net loss to society, since entrepreneurs expend time and effort, thereby imposing costs on themselves in addition to on others, in this imposed-costs zero-sum competition. So, preventing competition and freezing society into some evenly rotating economy would seem to minimize imposed costs and hence maximize liberty. Now of course, when benefits are also taken into account, we can see that the competition is in the interest of the whole society and the great mass of the consumers: entrepreneurs are recruited into the service of society, driving economic progress, through the cunning of the economists. Regarding welfare, it is good to have capitalism; regarding liberty in Lester’s sense, it is altogether bad.

Lester is aware of this argument but rejects it: “a business competitor does not impose a cost on us by winning away all our customers. We could never, non-contractually, own custom without imposing a cost on the customers, and so we merely lose the benefit of their custom rather than have a cost imposed on us.” (91) From the Rothbardian point of view, Smith does impose costs on Jones, but those are not unjust. Smith has a natural right to compete with Jones, and consumers have a right to choose whose mousetraps to buy. This answer is unavailable to Lester who insists rather that there is no harm done at all but merely withdrawal of benefits. Again, however, taking entrepreneurs as a subset of society, their huffing and puffing only redistributes income and wealth. One becomes a “winner” only by making other entrepreneurs (and workers nominally + temporarily) “losers.” Moreover, it’s true that the consumers by switching their demand to Smith’s mousetraps withhold benefits from Jones. But Smith himself by entering the competition imposes definite costs on Jones. Similarly, a woman choosing me instead of you for a lover, withholds benefits from you. But I, by attracting her, impose costs on you. My existence really is upsetting to you; you might even prefer that I drop dead.

As a result, the criterion of minimizing imposed costs in these two cases yields results opposite those of maximizing welfare, spelling a bit of trouble for Lester.

Not Feeling the Bern

Another objection to his own theory considered by Lester is “criticizing a religion”: “Salman Rushdie, a novelist, is supposed to have greatly offended many millions of Muslims by criticizing, or satirizing, their religion. Surely he has imposed a cost on Muslims, or why are they angry? Perhaps his presence is now so great a cost to so many Muslims that those offended have an imposed-cost-minimizing claim to take his life.” (66)

His first reply is that “people more or less control their emotional responses to mere opinions — especially in the long term. The angry Muslims more or less chose to react angrily.” Perhaps Lester is suggesting that it falls upon the Muslims properly to “curb” their anger. Now I don’t understand how this “solution” has much to do with libertarianism. Anybody can tell a guy who feels that a cost has been imposed on him to just up and stop feeling it. And if it is libertarian, doesn’t it prove too much? If a man is raping a woman, will libertarian justice be satisfied if he tells her to stop resisting, relax, and enjoy it? If the Mongol Horde is sacking a town, is it sufficient for an invading warrior to tell a peasant he is about to cut down, “Death comes to all; does it really matter whether you die now by my sword or 20 years from now from a heart attack?”; to quote the Bible, “You are a puff of smoke that appears briefly and then disappears” (Jm 4:14); or to advise him to adopt the motto in a Sophocles’ play, as rendered by Mises: “Not to be born is, beyond all question, the best; but when a man has once seen the light of day, this is next best, that speedily he should return to that place whence he came”? (HA, 621)

Once more, Lester foresees this objection. Yet his reply is decidedly odd: “No, because we cannot choose to be so indifferent to such personal, physical attacks (though some self-control is possible), and because they are direct — not accidental — impositions: to prevent them is only to defend oneself, or someone else, and not at all to initiate an imposition on the attackers.” He does not explain what he means by the distinction between “direct” and “accidental” cost imposition (perhaps “intentional” as vs. an innocent externality?), nor why the self-control to be exercised is a difference in kind here rather than in degree. Since he explicitly argues that he is not offering a “moral defense of voluntary communication,” he cannot use the moral distinction between unjust “initiating” aggressive force and permissible self-defense. Nor, finally, does he prove that the Muslims in this example have a duty to suppress their emotions.

Lester’s second argument is even less successful. He invites us to consider the long-term “general consequences” of outlawing or lynching people for free speech. “If generalized, this policy would mean that no one must express any opinion to anyone else which too many others might disvalue.” (67) I agree that these consequences would be “horrific,” but only in regard to welfare. I do not understand why they would be bad from the point of view of Lester-style liberty. If imposed costs are minimized when the Muslims kill Salman, they will still be minimized, and to an even greater extent, when a thousand other irate groups kill their own bogeymen whose opinions offend them. The difference between Lester’s and classical libertarian notion of liberty becomes greater when we move from considering a single act of speech repression to a general rule of it.

It may well be that Smith is part of group A which is offended by the ideas of Jones and so casually murders Jones. At the same time, Smith may himself offend some group B which promptly kills him. This society of easy mutual internecine slaughter where numerous factions kill each other indiscriminately is hardly the kind one would seriously consider living in. It’s a mess, a miserable war of all against all, and so is exceedingly unhappy. Yet it’s also a society where “imposed costs” seem to be at their lowest.

In general, it does not seem difficult to come up with counterexamples where “liberty” and welfare conflict, since there are situations where bearing higher costs can so much increase the benefits or revenues that the overall profit will be higher, as well. In this example, the low imposed costs can be increased (by slighting the Muslims’ murderous urges), yet welfare will increase much more when society is spared the “thought-police with extraordinary powers, and people informing on their neighbors.”

Lesterian Liberty vs. Welfare

Continuing the previous post, visualize the following scenario.

Muslims are starting a jihad and invading Europe to convert everyone to Islam at gunpoint. They are animated by burning zeal for their religion and are willing to pay great costs by risking defeat and death at the hands of the Christians.

To everyone’s surprise, the Christians turn out to be apathetic, shiftless, and pragmatic (which is how they actually are, anyway) and do not resist the invasion militarily. After a bit of vocal complaining, they submit and end up converting en masse.

The Muslims mercifully no longer face the unpleasant insolence of the non-Islamic Europe; the former Christians are upset but not overmuch and very little in the long term.

This invasion is a unique non-repeatable historical event, so no appeal to general consequences of a rule allowing invasions can be made.

Regardless now of welfare effects, is the jihad proved to be libertarian after all? Not according to Rothbard or any other reasonable person, but apparently yes according to Lesterian liberty: the imposed costs are at their lowest.

Re: Property Derived Non-Morally

Lester proves that liberty (in his sense) entails property via the following argument:

  1. Interpersonal liberty exists to the extent that people do not impose costs on each other.
  2. I make object X without imposing a cost on you.
  3. If I deny you the use of X, I merely deny you a benefit.
  4. If you use X against my wishes, you impose a cost on me.
  5. If liberty exists (how, or whether it ought to, is immaterial), then you do not use X against my wishes.
  6. What you do not use against my wishes I have control over.
  7. What I have control over I own in a de facto sense.
  8. If liberty exists then I own X. (78-9)

This argument is surely valid but seems rather trivial. To see that, let’s phrase the classical libertarian argument for private property in a similar way. If all people are just and do not, contrary to natural law, violate or interfere with my use of X, then I own X “in a de facto sense.” Rothbardian justice then, too, entails property.

But this is completely toothless. The classical argument has the merit of asserting that even if many people are unjust and commit violent crimes, libertarian private property still exists. This can be put counterfactually. Let Smith be a peaceful man who respects Jones’ “control” over X. It is an easy deduction from this that Jones owns X. However, even if Smith were wicked and stole X from Jones, not only would libertarian property rights still exist even then, but we would have to conclude that Smith’s conquest is unjust, that he is a possessor of stolen goods, and in no way a true owner of X. Smith is now by justice to be not only deprived of the spoils of his crime but punished, as well.

When Lester leaves the argument at mere “de facto” ownership, he risks being misinterpreted as defining ownership as “ability to defend one’s claim,” a sort of might makes right principle. What are we to think if Smith overpowers Jones and takes the control over X from him by force (or coercion)? If Jones from then on refuses or is unable to “use X against Smith’s wishes,” then will Smith now own it tout court? But that is clearly false according to not just Rothbardian natural law but anyone’s basic sense of justice. The argument can be salvaged by noticing that (8) is false (liberty exists, but Smith does not own X) because (2) is false: Smith obtained X by imposing a cost on Jones.

The classical arguments then prove that there would be property rights even in a somewhat unjust world; Lester’s argument does not show that there would be such rights in an illiberal world. Maybe it’s just as well for Lester’s intents and purposes.

Again, it seems plausible that an attempt to maximize Lesterian liberty entails respecting libertarian private property. Further, given the premise that liberty ought to exist, we can conclude that private property ought to be respected. Lester’s argument by explicit design omits this premise or its proof (from (5)). Perhaps this is consistent with his aim to demonstrate his compatibility (of liberty with welfare) thesis.

I’ll continue live blogging this book, but perhaps Lester wants to argue that libertarian private property is necessary for both liberty and welfare, thus strengthening his claim.

Counterexamples to Lesterian Liberty

1. In the jihad case, Rothbardian liberty correctly prohibits the conquest and Lesterian liberty permits it.

2. Lester considers promises and contracts. It’s hard to tell from this section how he differentiates these. I think he generally follows Rothbard in holding that promises are not legally enforceable but contracts are. Now Rothbard argues:

Suppose, for example, that A and B make an agreement, a “contract,” to get married in six months; or that A promises that, in six months’ time, A will give B a certain sum of money. If A breaks these agreements, he may perhaps be morally reprehensible, but he has not implicitly stolen the other person’s property, and therefore such a contract cannot be enforced. … Simple promises, therefore, are not properly enforceable contracts, because breaking them does not involve invasion of property or implicit theft. (EoL, 79)

Note Hobbes’ perspicuous distinction:

For if they be of the time to come, as tomorrow I will give, they are a sign I have not yet given, and consequently that my right is not transferred, but remain till I transfer it by some other act. But if the words be of the time present, or past, as, I have given, or do give to be delivered tomorrow, then this is my tomorrow’s right given away today. … There is a great difference in the signification of [the] words… between I will that this be thine tomorrow, and I will give it thee tomorrow… (quoted in EoL, 142)

But is this position consistent with Lester’s own theory of liberty? I think not, because the breaking of a promise is a definite imposed cost, just like a breach of contract. Lester affirms as much: “So breaking promises is almost always at least slightly illiberal. … It is libertarianly sufficient that such broken promises, as with deceptions, are compensated for to the extent of the imposed inconvenience we cause others by not keeping them.” (82) Does he mean, compensated according to libertarian law or general moral considerations? Regardless, I see no way for Lester to distinguish between mere promises and contracts in this sense, since costs are imposed in breaking either.

Here, on the contrary, Rothbardian liberty properly permits breaking promises, but Lesterian liberty forbids it.

3. Lester deconstructs the term “coercion,” arguing that it’s ill-defined: “plain ‘coercion’ is not necessarily an invasion of ‘liberty’ in the libertarian sense: boxers give prior consent to the possibility of coercion in the ring…” (72) Once again, how would his own theory evaluate a boxing match? The fighters clearly impose considerable costs on each other; in fact, they try intentionally to impose as much as possible. According to the liberty as minimization of imposed costs criterion, their actions are thoroughly unlibertarian.

But of course, when the benefits are also taken into account, we can see that welfare is well-served by the match. The boxers enjoy a chance of the prize money or the prestige of being a champion. All the other accouterments of a high-profile fight, such as the crowd’s fun, the revenue from sales of tickets and advertising, etc., contribute to the overall profit.

Attempting to lower or minimize the imposed costs would of course defeat the purpose. Lester’s idea of liberty again seems like a poor man’s utilitarianism. At the same time, Rothbard would surely permit the fight as contractually agreed to.

Thus, Rothbardian liberty is compatible with welfare in this case, but Lesterian liberty is not.

Theories of Punishment As Regards Proportionality

I have written a number of posts on the 4 theories of punishment and compared and contrasted them. In the order of decreasing sophistication, the theories are:

  1. Rehabilitation
  2. Retribution
  3. Deterrence
  4. Condemnation

Here is another way to think of these, with respect to proportionality.

For rehabilitation, fully proportionate punishment, i.e., “an eye for an eye,” is the upper limit. The idea again is to inflict the exact same type of pain on a dull but still basically decent or at least reformable person to cause him to realize exactly how he hurt his victim and be horrified by it. If less than proportionate punishment suffices to teach him this lesson, then rehabilitation, and justice on the whole, are well-served.

This type of punishment is an act of charity to the offender and an instance of fraternal correction.

Retribution is an act of fully “deflecting” an unjust attack back onto the criminal. The reaction is opposite and equal to the action; hence a proper retribution will observe perfect proportionality. Or we can say that order is restored when the criminal forsakes his rights to the exact same extent to which he violated his victim’s rights. Unlike rehabilitation, there is no need to hurt in the same way, only with the same amount of suffering.

This signifies not grace and love but personal nature: the criminal is treated according to natural morality but is still regarded as a person.

Deterrence is marked by the fact that some criminals will evade detection and punishment. Purely proportionate punishment will then fail adequately to deter. If 90% of criminals are uncaught, then the punishment to the unlucky 10% must be considerably more severe than a mere eye for an eye, in order to create sufficient threat to the potential future lawbreakers. Their calculations of the profitability of a crime should deter many of them despite a non-zero chance of getting away with the crime.

Thus, punishments to deter will tend to be more than proportionate.

This signifies impersonal nature; the criminal’s happiness is considered, but for all that, he is used as a mere tool for the sake of a separate social good.

Finally, for condemnation, the punishment is in a sense infinite and observes no proportionality at all with the crime. Hell would be the paradigmatic example; but humans can create their own hells, too, through sentences of execution or life imprisonment without possibility of parole. The idea here is that the criminal is totally depraved, and if released would continue his crime spree. He is permanently cut off from society as if a cancerous cell from a body and neutralized thereby.

This is an act of hatred by society of the offender.

Property Integrity vs. Value

Lester considers a puzzle by John Gray:

A family of fisher folk has since time immemorial trawled a given strip of coast. Now, because of industrial activity further along the coast, the catch which it had always brought in falls substantially. What are the fisher folk entitled to demand according to Lockean theory? (quoted on 133)

Now libertarians have long distinguished between the integrity and value of one’s property. If Smith is a farmer who grows wheat, and trains going along an adjacent railroad emit sparks that fly onto the farmer’s property, damaging the wheat, then upon certain conditions, the farmer is entitled to compensation. The farmer may have a right to physically undamaged crops against the railroad owner (and of course, perhaps the railroad owner has a right to use the farmer’s field as a sparks receptacle against the farmer). But if there is a drop in the demand for wheat, Smith has no right to any previous high value of his crops. Similarly, it makes no sense to curse God for bad weather that harmed the harvest. Smith cannot sue either the consumers or God.

In the case under consideration, the fisher folk likewise have no property right over the value of the fish. The difference between them and the farmer is that it is unclear according to classical libertarianism whether they even own (1) their fishing spots, (2) the expanse of water as a whole where fish was usually found, or (3) the fish (a) which they did not produce other than perhaps conserved by abstaining from imprudent overfishing and (b) which swim in and out of their “property” at their own pleasure.

There is no extensive libertarian theory of water rights, even though Walter Block, for example, has published a book called Water Capitalism: The Case for Privatizing Oceans, Rivers, Lakes, and Aquifers (which I have not read).

Yet Lester insists, apparently by calculating “imposed costs,” that “the industrial activity must cease and compensation be paid or, if the more productive company can afford it (unlike the new fisher folk), the original fisher folk have to be compensated to roughly the value of their continuing losses…” Is it libertarian “for the fisher folk to have the power of veto over the industrial activity”? (133-4) I am not sure, and I don’t know why Lester is sure.

Pareto vs. Interpersonal Utility Comparisons

Lester considers a choice between the Pareto criterion regarding institutional change and permitting interpersonal utility comparisons (IUCs) to make up for its defects:

By the Pareto criterion we cannot say that it is a welfare improvement to move from a society with rent control and a terrible accommodation shortage to one without rent control and a flourishing rented sector if even one tenant feels himself to be worse off. The Pareto criterion disallows the welfare evaluation of changes from any status quo in an existing society, including one with slavery, if even one person objects to the change — and there is usually a powerful lobby of special interests to object. (153)

Now there is an attempted fix for this. It may be permissible, an economist might argue, to initiate a change that harms some people if the winners will be able to compensate the losers by paying them money, so that overall, there are still some winners while the losers have been fully placated and are no worse off. Of course, the compensations are purely hypothetical and never actually take place. So, in practice, an appeal is made to IUCs.

Lester then claims that “we cannot help making some IUCs. We do it all the time. If we did not then we would never forgo any benefit to ourselves on the grounds that others would appreciate it more. We would never help people for their own sakes for we would only be sure that we were losing but not know whether others were gaining more, gaining at all, or even losing as well.” (154) This argument is revealing in that it presumes that we make IUCs when we consider others as ends in themselves. As I have already argued, this is fully equivalent to loving them as friends. Charity does make IUCs possible. But charity belongs not to natural but to Christian human life. It comes from God in the form of sanctifying grace. But economics is a social science that studies man in his natural state. It does not venture beyond pure nature into describing how a communion of saints united spiritually with interpersonal Christian love would work. As a result, economics considers men to be mutually disinterested and disallows IUCs at the outset.

(If there is merely natural love, of which Christian charity is an upgrade, then between complete strangers, whose cooperation economics describes, it is extremely weak and can be without much loss reduced to mere absence of hatred and fulfilling the precepts of libertarian justice. Disinterested benevolence, whether natural or grace-enhanced, has a wider scope, but has the whole society rather than any individual as its object.)

If both the Pareto option and IUCs are futile in welfare economics, then what is to be done? Let us admit that any reform presupposes the status quo. We indeed start wherever we start. But we can justify an institutional reform like abolition of rent controls by appealing not to “welfare” as such but to the speed (and acceleration, etc., if any) at which welfare increases with economic progress as time goes on. Through that, we do end up maximizing overall welfare from now until kingdom come.

Presumably everyone would want a quickly improving economy in general, even at the cost of less welfare right now. This is because no Smith faces a choice between 100% laissez-faire and 99.9% laissez-faire where he personally and only he is privileged. In such a case, Smith grows fat and happy, while the damage to the economy as a whole is negligible. Smith might not be willing to sacrifice his own ill-gotten gains for the sake of a trivial increase in the speed of economic growth. In reality, however, Smith must choose between 100% laissez-faire and perhaps 20% laissez-faire where numerous people, who may or may not include Smith, are viciously privileged. Former US presidential candidate Harry Browne proposed his Great Libertarian Offer, “Would you be willing to give up your favorite federal government program if it meant never having to pay income tax again?” That well sums up our actual choice which I think is rather easy.

I have shown that socialism can succeed only when it forces perfect economic stagnation, a world in which nothing new ever happens, as exemplified in actual practice by the socialism of the Cuban pattern. Almost every government intervention decreases the speed of overall economic development or even stops progress altogether. If we take the maximum possible rate of bettering ourselves as a society as the welfare desideratum, then a radical reform toward laissez-faire capitalism stands justified.