Commerce As Communication

Check out this article by Adam Gurri... A Critical Defense of Commerce.  As usual it starts with a relevant renaissance painting.  Why the renaissance?  Out of curiosity I searched Google images for "renaissance painting market".   I like the paintings... but maybe because I love markets.

I like Gurri's defense of commerce... because I love markets?  

If we think of his article as a market, then it has quite a few products that I'd like to buy.  Unfortunately, his market is missing the one product that I'm most interested in purchasing... commerce as communication. 

Not too long ago I had an epiphany.  I realized that spending is nonverbal communication.  When we spend our money, we inform others about the intensity of our preferences.  The transmission of information is the definition of communication.  So spending is certainly communication... and it's certainly not verbal communication... which leaves... nonverbal communication.

All my life I've known about spending money... and for pretty much the same amount of time I've also known about nonverbal communication.  So why in the world did I only just recently realize that spending money is nonverbal communication?  

Talk about overlooking the obvious.  

Ok, so Gurri's defense of commerce is entirely missing commerce as communication.  This raises a few really interesting questions...  

1. Is commerce as communication an important aspect of commerce?
2. If it is, should it be used in defense of commerce?
3. If it should, what's the best way to do so?  

Before I try my best to answer these questions, I'd like to say something useful and self-aware about my dynamic with Gurri.  From my perspective, usually it's reasonably constructive.  But then it seems like he invariably takes advantage of his freedom to bravely run away... aka "exit".  So perhaps there's something a bit dysfunctional about our relationship.  Which is unfortunate because I think he's a really intelligent guy who genuinely cares about liberty and writes about it far better than I could ever hope to.

Einstein's definition of insanity is doing the same thing over and over but expecting a different outcome.  Here are most of my previous interactions with Gurri...

• The Democratic Definition Of "Love" - 13 March 2016
• Persuading Puppets Is Pointless - 15 March 2016
• Markets maximize the exchange of information by maximizing the rationality of persuasion - 17 March 2016
• The Freedom To Easily Exit From Absurd Traditions - 16 April 2016
• Adam Gurri's Defense Of Liberty - 3 August 2016
• The Most Important Test For Humans, Robots And Others - 5 August 2016

Am I insane for trying again?  Well, from my perspective, each attempt was somewhat different.  Plus, as Heraclitus observed... no man steps in the same river twice.  Gurri and I really aren't the same guys that we were in 2016!  Heh.  

In any case, it's not like this is a private e-mail to Gurri.  This is a public blog entry.  So if you are not Gurri... then it's entirely possible that you'll appreciate the value of this information and put it to good use... even if he does not.  My eggs aren't all in one basket.  

Let's get this intellectual party started...

Is commerce as communication an important aspect of commerce?

Well yeah.  Spending money is a sacrifice.  It genuinely matters just how much we're truly willing to sacrifice for things.  As I already pointed out to Gurri, willingness to sacrifice is a central theme in the Bible.

In the beginning of the Bible there’s the story of Cain and Abel. Cain sacrificed some fruit, veggies and grains to God. Abel, on the other hand, sacrificed a lamb to God. Abel was willing to make a bigger sacrifice. From this God divined that Abel felt much deeper gratitude for God’s blessings than Cain did.

A little later on in the Bible, Abraham was willing to sacrifice his only son Isaac to God.  Abraham was willing to make a huge sacrifice.  His willingness to pay (WTP) such a steep price effectively transmitted information about the incredible intensity of his preference for God.  

In the new testament we see the culmination of the idea of sacrifice as communication when God sacrifices his only son in order to save the world.  His WTP effectively transmitted information about the incredible intensity of preference... aka "Love"... for the world.  

Imagine if we replaced the economic definition of "Love" (sacrifice) with the democratic definition of "Love" (voting)... "For God so loved the world that he voted for it..."  This would transmit barely any information about the intensity of God's preference for the world.  We'd be largely ignorant about God's true love for the world.  

For anybody who is interested in a coherent Biblical story... things are a bit tricky.  For sure, we really aren’t mind-readers. However, King Solomon believed that God was a mind-reader… “for thou, even thou only, knowest the hearts of all the children of men.” Clearly this would make sacrifice an entirely unnecessary way for humans to communicate with God.  

The Judeo-Christian religion doesn't have a monopoly on sacrifice as communication between God and man.  Here's a passage from John Holbo's book Reason and Persuasion...

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Socrates: You could have been much more concise, Euthyphro, if you wanted to, by answering the main part of my question.  You're not exactly dying to teach me - that much is clear.  You were just on the point of doing so, but you turned aside.  If you had given the answer, I would already be well versed in holiness, thanks to you.  But as it is, the lover of inquiry must chase after his beloved, wherever he may lead him.  Once more then: what do you say that the holy is, or holiness?  Don't you say it's a kind of science of sacrifice and prayer?

Euthyphro: I do.

Socrates: To sacrifice is to give a gift to the gods; to pray is to ask them for something?

Euthyphro:  Definitely, Socrates.

Socrates: Then holiness must be a science of begging from the gods and giving to them, on this account.

Euthyphro: You have grasped my meaning perfectly, Socrates.

Socrates: That is because I want so badly to take in your wisdom that I concentrate my whole intellect upon it, lest a word of yours fall to the ground.  But tell me, what is this service to the gods?  You say it is to beg from them and give to them?

Euthyphro: I do

Socrates: And to ask correctly would be to ask them to give us the things we need?

Euthyphro: What else?

Socrates: And to give correctly is to give them in return what they need from us?  For it would hardly represent skill in giving to offer a gift that is not needed in the least.

Euthyphro: True, Socrates

Socrates: Holiness will then be a sort of art for bartering between gods and men?

Euthyphro: Bartering, yes - if you prefer to call it that.

*****************************

We know what we need.  But it's essential that others also know what we need.

It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. — Abraham Maslow, Toward a Psychology of Being

'Let our herds be so numerous that they cannot be housed; let children so abound that the care of them shall overcome their parents - as shall be seen by their burned hands; let our heads ever strike against brass pots innumerable hanging from our roofs; let the rats form their nests of shreds of scarlet cloth and silk; let all the kites in the country be seen in the trees of our village, from beasts being killed there every day.' - Edward Burnett Tylor, Primitive culture

Words can clearly be used to transmit information about our needs.  However, the problem with words is that they are cheap.  If we want others to truly believe that our needs are genuinely worth taking care of then it's necessary that we substantiate our words with sacrifice.  Sacrifice is solid evidence... it proves that our desire has depth...   

"Old-women's Grandson," ran the words of a Crow Indian's prayer to the Morning Star, "I give you this joint [of my finger], give me something good in exchange...I am poor, give me a good horse. I want to strike one of the enemy and I want to marry a good-natured woman. I want a tent of my own to live." "During the period of my visits to the Crow (1907-1916)," wrote Professor Lowie, to whom we owe the recording of this pitiful prayer, "I saw few old men with left hands intact." - Joseph Campbell, Primitive Mythology

In all cases, if you're going to make a sacrifice to a God, it's entirely reasonable to expect a blessing of greater value in return.  A sacrifice with a less valuable return is a bad deal.  A sacrifice without any return is a total waste.  

Let's switch from considering trade between humans and Gods to considering trade between humans. 

By far the most important depiction of commerce as communication is Adam Smith's Invisible Hand (IH).  Unfortunately most people really think that the IH is simply about the benefits of being selfish.   They are incredibly wrong...

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

In a nutshell, the IH is the decentralized process by which people use their own money to identify, quantify and encourage beneficial behavior.  Because again, nobody is a mind-reader.  Society's limited resources can't be efficiently allocated if we don't know the true intensity of people's specific preferences.  

Fast forward to 1944...

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. - Ludwig von Mises, Omnipotent Government

In 1945 Friedrich Hayek's essay The Use of Knowledge in Society was published...

We must look at the price system as such a mechanism for communicating information if we want to understand its real function—a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.

In 1954 Paul Samuelson's paper The Pure Theory of Public Expenditure was published...

But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Lindahl, now it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has, etc.

Accurate signals are just as important for public goods as they are for private goods.  But because of the very nature of public goods, it's possible to benefit from them without paying for them.  The standard solution to the free-rider problem is compulsory taxation.  However, simply forcing people to pay taxes does not create accurate signals for public goods.  

In 1963 James Buchanan had the incredible epiphany that people could use their taxes to honestly communicate the true intensity of their preferences for public goods...

Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his "true" preferences for public goods. - James M. Buchanan, The Economics of Earmarked Taxes

If you subscribe to Netflix anyways, then you might as well use your fees to accurately communicate the true intensity of your preference for nature documentaries.  Except, Netflix subscribers obviously don't have the freedom to use their fees to communicate the intensity of their preferences for specific content.  The same is true of people who "subscribe" to the government... aka "taxpayers".  Why don't subscribers have this freedom?

In 1981 Murray Rothbard's essay The Myth of Neutral Taxation was published...

The charity serves the purposes of the donors, and these purposes are in turn to help the poor. But it is the donors who are consuming, the donors who are demonstrating their preference for sacrificing a lesser benefit (the use of their money elsewhere) for a greater (giving money to the charity to help the poor). It is the donors whose production decisions guide the actions of the charity.

Donors use their donations to inform the decisions of non-profits.

Rothbard failed to appreciate that taxpayers could use their taxes to inform the decisions of government.  Evidently he overlooked Buchanan's 1963 paper.  If Buchanan's insight had been applied to academic papers, then subscribers would have used their fees to communicate the importance of specific papers, and logically they would have been willing to sacrifice a considerable amount of fees to Buchanan's paper.  Then it would have been very unlikely that Rothbard and others would have overlooked Buchanan's valuable paper.

Humans (and their Gods) really aren't the only ones who use sacrifice to communicate the intensity of their preferences...

Today’s Mandeville is the renowned biologist Thomas D. Seeley, who was part of a team which discovered that colonies of honey bees look for new pollen sources to harvest by sending out scouts who search for the most attractive places. When the scouts return to the hive, they perform complicated dances in front of their comrades. The duration and intensity of these dances vary: bees who have found more attractive sources of pollen dance longer and more excitedly to signal the value of their location. The other bees will fly to the locations that are signified as most attractive and then return and do their own dances if they concur. Eventually a consensus is reached, and the colony concentrates on the new food source. — Rory Sutherland and Glen Weyl, Humans are doing democracy wrong. Bees are doing it right

Obviously bees can’t spend money… but they can spend something that’s precious to them… their calories. So WTP is just as relevant for bees as it is for humans.

What about ants?

In Experiment 1 colonies distributed a greater proportion of their foragers towards the higher quality resource. This behaviour supports work by Sumpter and Beekman (2003) on M. pharaonis and is typical of this mass-recruiting species (Jackson et al. 2004; Jackson and Châline 2007; Evison et al. 2012b). The stronger allocation of workers to higher quality feeders is most likely due to a greater pheromone trail laying intensity by ants coming from these feeders (Jackson and Châline 2007) leading to faster exploitation of the higher quality food source via positive feedback influencing the decision by nestmates to lay pheromone trail (Sumpter and Beekman 2003; von Thienen et al. 2014). A greater disparity in quality should create greater disparity in foraging effort between two food sources, a simple behaviour that is integral to colony survival (Stroeymeyt et al. 2010), and this is indeed what we found (Fig. 2). — R. I’Anson Price, C. Grüter, W. O. H Hughes, S. E. F. Evison, Symmetry breaking in mass-recruiting ants: extent of foraging biases depends on resource quality

It takes precious calories to produce pheromones… so an ant’s willingness to spend their pheromones is the equivalent of a human’s willingness to spend their money.

Is it a coincidence that WTP is integral to ants, bees, humans and Gods?

With numerous widely dispersed and incredibly diverse individuals in complex and changing environments… commerce as communication is necessary to help minimize the chances that valuable things will be overlooked.

From ants to bees to Gods to Socrates to Abraham to Smith to Mises to Hayek to Samuelson to Buchanan to Rothbard... it should be abundantly clear that commerce as communication is an incredibly important aspect of commerce.

Should commerce as communication be used in defense of commerce?

Well yeah.  I don't think it's truly possible for people to fully understand and appreciate the incredible necessity and benefit of commerce if they don't clearly see it as communication.   

What's the best way to use commerce as communication in defense of commerce?

The best way to use commerce as communication in defense of commerce is to use commerce to bring commerce as communication to everybody's attention.

It will be pretty easy to bring this blog entry to Gurri's attention.  I'll simply go on Twitter, create a tweet with a link to this entry and mention Gurri in the tweet.  Voila!  He'll receive a notification and see my tweet.  Maybe he'll say to himself, "Oh no, not this guy again!" and ignore the link.  But if he does click on the link then he'll see this blog entry.

Perhaps he'll appreciate that I sacrificed a decent amount of time to create this entry.  However, this really won't adequately inform him of the true intensity of my preference for commerce as communication.

And yeah, I could definitely paypal Gurri $100 dollars.  Sacrificing $100 dollars would better inform him of my love for commerce as communication.  But would it better inform others?  Well...I could publicly announce my sacrifice to Gurri.  However, there is a better way.

Gurri has a brand new website... LiberalCurrents (LC).  It's so shiny and pretty.  Most importantly, it has that new website smell.  I know for a fact that Gurri loves the smell of new websites because creating new websites is his favorite thing.

On the LC homepage you'll see renaissance paintings and links to articles on the website.  But you know what I'd really love to see on the LC homepage?  I'd love to see a link to this blog entry!  I'd also love to see a link to Smith's Wealth of Nations and a link to Hayek's Use of Knowledge in Society and a link to Buchanan's Economics of Earmarked Taxes and and and... it's actually a pretty long list.

I created a Google sheet with a preliminary list and wrote some code to embed it on this page.  Gurri could easily embed the code for this list into LC's homepage or into some other prominent page.

The most important question is... how should the list be ordered???   The list of links should be ordered by their value.  In order to determine their value we can make donations to LC and use our donations to communicate the intensity of our preferences for specific links.  We'd be using commerce as communication in order to bring commerce as communication to everybody's attention. 

Also, we'd be helping to minimize the chances that people interested in liberty will overlook valuable information.  So it will be just like our very own Twitter... if the founder of Twitter hadn't overlooked Smith's Wealth Of Nations and Buchanan's Economics Of Earmarked Taxes.

We'll prioritize how we spend our limited money in order to help each other prioritize how we spend our limited time.

It might seem like information overload is a relatively new phenomenon.  But there's always been far more information than time to process it all.  It's only natural that our attention is drawn to the sacrifices that other people are willing to make.  In this regard, it definitely makes sense that the Bible managed to capture so many people's attention.

If we want to direct people's attention to commerce as communication... then we gotta make some sacrifices.  We can make donations to the LC and use our donations to determine the order of liberty links.

There are certainly a few logistical issues... such as... how does Gurri valuate links?  Clearly he can't simply take money out of his pocket and put it right back in!  So he'd have to figure out who to donate money to in order to communicate the intensity of his preferences for specific links.

As far as precedent is concerned... it shouldn't come as a surprise that it's pretty meager.

Based on my suggestion, a few months back my friend gave her 4th grade students the opportunity to use their donations to reveal the intensity of their preferences for their favorite books.

More recently, donors to the Libertarian Party were given the opportunity to use their donations to reveal the intensity of their preferences for their favorite potential themes.

In both cases the lists were ordered by the IH.  However, in the first case the IH was a lot smaller.

In the private sector, the IH determines the order of countless things... from frivolous things (ie gummy bears) to serious things (ie computers).  So it really shouldn't be necessary to make the case for using the IH to order a list of liberty links.  Then again, as far as I know, there are only two lists in the world that are ordered by the IH!  Therefore, commerce is certainly in need of a really strong defense.

It would be an incredibly powerful defense of commerce if Gurri used the LiberalCurrents website to allow the IH to order a list of liberty links.  Plus, the name of the website is certainly appropriate!  We'd all guide, and be guided by, the constantly changing currents of liberalism.

Yes, change is the basic law of nature. But the changes wrought by the passage of time affects individuals and institutions in different ways. According to Darwin’s Origin of Species, it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. Applying this theoretical concept to us as individuals, we can state that the civilization that is able to survive is the one that is able to adapt to the changing physical, social, political, moral, and spiritual environment in which it finds itself. — Leon C. Megginson

Correctly and rapidly adjusting/adapting to constantly changing circumstances/conditions depends on accurate and efficient communication.  This is why commerce as communication is so incredibly important.

A Scrap Of Pragmatarian History

Inspired by David Friedman's post... A Scrap of Libertarian History... I decided to share a scrap of anarcho-capitalist, libertarian and pragmatarian history.

Seven years ago I was still pretty much a libertarian.  When I happened to check out the Wikipedia page for Libertarianism... I was really not happy with what I saw.  Here's what I wrote on the Talk page...

Strongly agree! "others striving for complete abolition of the state" Holy crap! Don't say "others" say..."one guy who wrote a book". It's completely ignorant to even mention it at all, especially in the first paragraph. Libertarianism is based on the simple concept that the freedom to swing your fist ends where somebody else's nose begins. If you punch somebody in the nose...then what? If you can get away with it then you have anarchism but if you're punished then you have libertarianism. Obviously you need some form of government in order to enforce that rule. The first paragraph was so completely off base and misleading that I replaced it with a quick substitute in the meantime. 97.93.109.174 (talk) —Preceding undated comment added 22:46, 15 July 2010 (UTC).

What did I know about anarcho-capitalism?  Not much!  But I was sure that anarcho-anything really did not sit well with me and I endeavored to try and fix the page on libertarianism.  Of course the an-caps weren't really happy with my efforts to kick them off the page.

One of the an-caps went to my talk page and tried to school me...

*******************************

Libertarianism is based on the simple concept that the freedom to swing your fist ends where somebody else's nose begins. If you punch somebody in the nose...then what? If you can get away with it then you have anarchism but if you're punished then you have libertarianism. Obviously you need some form of government in order to enforce that rule.

'Obviously'? Have you studied the issue? For a thousand years, then, ancient Celtic Ireland had no State or anything like it. As the leading authority on ancient Irish law has written: “There was no legislature, no bailiffs, no police, no public enforcement of justice.... There was no trace of State-administered justice.”[Joseph R. Pedea] For a New Liberty: A Libertarian Manifesto, Rothbard

For reference...see http://www.DownsizingGovernment.org/ Notice the website name? It's not called AbolishingGovernment.org

There are many billion websites on the internet. For example, http://www.abolishgovernment.com/

Wow. I just looked through some of the discussion on this page...you should be nominated for sainthood. Are you an elementary school teacher? Or do you work with the mentally challenged?

Is this civilized discussion?

...if we were any good at collective action the anarchists wouldn't be peeing all over our page.

'Peeing'? And what is 'our' page? You say you used 'your' because you call yourself a Libertarian. How do you know that others (your 'antagonists') don't? And wouldn't this 'bias' the page?

Anarchism...murder, mayham, rape, pillage, plunder, etc.

Have you studied the issue? How can you claim this? Common Sense may mislead! I suggest, and hope, that you will read more about Anarchism, specially why the proponents say it will work. In particular, if individuals have right to defend themselves, all that you name will (probably) not happen. Check this: http://flag.blackened.net/ Concerning Libertarianism, [Don B.] Kates makes another intriguing point: that a society where peaceful citizens are armed is far more likely to be one where Good Samaritans who voluntarily go to the aid of victims of crime will flourish. But take away people’s guns, and the public—disastrously for the victims—will tend to leave the matter to the police. Before New York State outlawed handguns, Good Samaritan instances were far more widespread than now. And, in a recent survey of Good Samaritan cases no less than 81% of the Samaritans were owners of guns. If we wish to encourage a society where citizens come to the aid of neighbors in distress, we must not strip them of the actual power to do something about crime. Surely, it is the height of absurdity to disarm the peaceful public and then, as is quite common, to denounce them for “apathy” for failing to rush to the rescue of victims of criminal assault. (from the Rothbard's book named earlier)

Wait...I thought our secret plan was to copy ...

This in not 'your' page.

Do us all a favor and focus your energies on editing the page on Anarchism.

Talk only for yourself, not us all.

You are an Anarchist vandalizing a page on modern Libertarianism.

The use of 'vandalizing' is bad. At least she is civil, while you are raging with some holy anger. Besides, see the next comment (here).

You and others have been completely reasonable with her for a really really long time but the line has to be drawn somewhere.

Are you trying to frighten her? And a logical error: if the behavior is 'reasonable', how is it wrong?
I suggest two things here (which you are free to not accept): form an opinion only after studying the issues, and be civilized in talking.

—Preceding unsigned comment added by N6n (talk • contribs) 05:04, 23 July 2010 (UTC)

• Celtic Ireland? Talk about regressive. Give everybody guns and we'll be living in a spaghetti western where justice is administered by a posse. In the Army I carried big guns around all the time and it's not nearly as fun as it sounds. Self-actualization should not be dependent on how well you shoot.
• Rothbard holds an extreme point of view that should not be given any weight on the page on Libertarianism.
• Yes, there are a billion websites on the internet and the problem with you and CarolMooreDC is that both of you would give equal weight to both of those websites. However, only one of those websites is run by the fifth most influential think tank in the world.
• No, I wasn't trying to frighten her. And the logical error was yours for not realizing whose behavior I was calling "reasonable".
• I understand both sides of the issue and have shared my thoughts in a civilized manner in this section... Talk:Libertarianism#Common_Ground 
• --97.93.109.174 (talk) 21:39, 23 July 2010 (UTC)

Hello, I suppose guns were not restricted when the US gained independence. Anyway, the outlaws heed no gun-control laws, so, in effect, only the law-abiding people are deprived of guns. Do you know that 80% of the murders committed on the street go unpunished? [1] Perhaps lesser stranger-crimes will happen if the would-be criminal would expect a potential victim to be armed. (And I've heard that the 'Western' is a myth, the real life was not like what the Hollywood portraits.)
Anyway, gun-control is just one issue. What about the ever-expanding bureaucracy (for example, the IRS), wars half-way around the world, unchecked printing of paper-money, huge public debt, government spying, etc. If it looks possible to live without a government, we ought to look into it. N6n (talk) 12:34, 24 July 2010 (UTC)

Libertarianism is of course against gun control...so you're preaching to the choir. However, I lived in Afghanistan for a year and tribalism is the natural consequence of Rothbard's idea of completely getting rid of the state. Tribal warfare is inevitable because the grass is always greener on the other side. A state has to exist with enough power to enforce laws and protect people from the largest and strongest organizations and countries. So at a very minimum you need an army, police, courts and prisons. --97.93.109.174 (talk) 21:56, 25 July 2010 (UTC)


I agree with all your points about Afghanistan. But what is true for A. is not necessarily true for the US. Karl Popper's Open Society v. tribalism distinction is useful here. People in A. are loyal and subservient to their tribe, as far as my understanding goes. This is no basic for a republic, let alone anarchy. Change in consciousness does not happen overnight, the West has had 500 years of Enlightenment, give A. a couple of centuries too!

Rothbard's society will (probably) not be a return to tribalism. The powerful will not seize power, for there will be no power to seize. If you are concerned about couple of powerful people uniting and then forcing everyone else to serve their will, consider that (i)this will be very difficult (as free people will not agree to become subservient overnight), and that (ii)what stops the oligarchs in democracy(nothing, in my opinion).

And an earlier point: you said that Rothbard "holds an extreme point of view" and thus should not be given weight. Is being an "extremist" wrong per se? Quoting William Lloyd Garrison “Gradualism in theory is perpetuity in practice.” And allow me to point once again that you have not studied how such a society is supposed to work.

Are such stable and consistent law codes possible, with only competing judges to develop and apply them, and without government or legislature? Not only are they possible, but over the years the best and most successful parts of our legal system were developed precisely in this manner. Legislatures, as well as kings, have been capricious, invasive, and inconsistent. They have only introduced anomalies and despotism into the legal system. In fact, the government is no more qualified to develop and apply law than it is to provide any other service; and just as religion has been separated from the State, and the economy can be separated from the State, so can every other State function, including police, courts, and the law itself! 

As indicated above, for example, the entire law merchant was developed, not by the State or in State courts, but by private merchant courts. It was only much later that government took over mercantile law from its development in merchants’ courts. The same occurred with admiralty law, the entire structure of the law of the sea, shipping, salvages, etc. Here again, the State was not interested, and its jurisdiction did not apply to the high seas; so the shippers themselves took on the task of not only applying, but working out the whole structure of admiralty law in their own private courts. Again, it was only later that the government appropriated admiralty law into its own courts. 

Finally, the major body of Anglo-Saxon law, the justly celebrated common law, was developed over the centuries by competing judges applying time-honored principles rather than the shifting decrees of the State. These principles were not decided upon arbitrarily by any king or legislature; they grew up over centuries by applying rational—and very often libertarian—principles to the cases before them. The idea of following precedent was developed, not as a blind service to the past, but because all the judges of the past had made their decisions in applying the generally accepted common law principles to specific cases and problems. For it was universally held that the judge did not make law (as he often does today); the judge’s task, his expertise, was in finding the law in accepted common law principles, and then applying that law to specific cases or to new technological or institutional conditions. The glory of the centuries-long development of the common law is testimony to their success. [Rothbard, For a New Liberty: A Libertarian Manifesto]

N6n (talk) 03:37, 26 July 2010 (UTC)

The United States is composed of an incredibly diverse group of people. We have different races, different levels of education and wealth, different religions, different political views...we all coexist in relative stability not in spite of the state...but because of the state. Take away the state and people will reorganize themselves into tribes...or communities...that will invariably disagree over resources/ideology and conflict will ensue. Then what? Will one community pay for conflict resolution or will they pay for additional mercenaries to attack the other community? If a court consisting of volunteers finds one side in violation of the non-aggression axiom will a posse of volunteers saddle up to administer justice?

That Rothbard was willing to push the theoretical button that would have instantly eliminated the state is a testament to how fanatical he was. Is being "extremist" wrong? Well...that's not really the question. The question is whether his fanaticism has any relevance to modern Libertarianism...and the answer to that is a resounding no. He was an anarcho-capitalist who trusted that incentives exist for the private sector to provide every single public good. --97.93.109.174 (talk) 11:40, 26 July 2010 (UTC)

The critical idea here is that aligning yourself in such groups is “bad for business”. Businessmen are known to “betray” their countries by doing illegal business with their “enemies”, even during wars. (a notorious example: Rothschilds funding both British and French governments during the Napoleonic wars.) Besides, why what you envision does not play out on the inter-national level? Business! Rothbard says on a similar problem:

But what of personal, rather than strictly economic, “discrimination” by the landlord? Suppose, for example, that the landlord is a great admirer of six-foot Swedish-Americans, and decides to rent his apartments only to families of such a group. In the free society it would be fully in his right to do so, but he would clearly suffer a large monetary loss as a result. For this means that he would have to turn away tenant after tenant in an endless quest for very tall Swedish-Americans. While this may he considered an extreme example, the effect is exactly the same, though differing in degree, for any sort of personal discrimination in the marketplace. If, for example, the landlord dislikes redheads and determines not to rent his apartments to them, he will suffer losses, although not as severely as in the first example. In any case, anytime anyone practices such “discrimination” in the free market, he must bear the costs, either of losing profits or of losing services as a consumer. If a consumer decides to boycott goods sold by people he does not like, whether the dislike is justified or not, he then will go without goods or services which he otherwise would have purchased.[For a New Liberty] 

This would need that people care more for their profits than for building utopian societies. But that is so, and is it not what capitalism is most denounced about? It is businessmen (i.e., people as businessmen) that keep the rulers madness into check.

For a 'vision' of how things will proceed if the State collapses without preparation (the hypothetical button), check a novel by J. Neil Schulman-- Alongside Night. http://www.alongsidenight.net/ —Preceding unsigned comment added by N6n (talk • contribs) 13:26, 26 July 2010 (UTC)


How can you honestly support a model where everybody's behavior is determined by whether something was bad for business? Yes, if that were the case then maybe a stateless society might work. In our current society though, people are like kids that recognize the need for adult supervision. We elect representatives to look out for our best interests. The fundamental flaw in Rothbard's vision was he that totally assumed that just because he views the state as coercive...so must everybody else. They don't...they see it as a division of labor that allows them to worry about other things. They see it as the product of 500 years of "Enlightenment". For them taxes are not robbery...taxes are payment for the public goods and services that they use on a daily basis. Taking away the state would be tantamount to tyranny of the very very very small minority.

Before you can contemplate alternative structures to society...it's essential that you have a firm grasp on how and why our current structure works. A good starting place is the book Democracy in America by Alexis de Tocqueville. --97.93.109.174 (talk) 21:22, 26 July 2010 (UTC)

(i) Everything determined by "business": I don't say that everything will be kosher with a stateless society, but we only have to worry whether it will be better. Please read the third and fourth paragraph here: [2] (summary of Karl Popper's views on Open Society v. tribalism)

(ii) people are like kids that recognize the need for adult supervision: This description will fit most people I know too. But my primary responsibility is to myself.

(iii) they see it as a division of labor that allows them to worry about other things: Why stop here, clothes and shoes are also essential. Why should government not manufacture them? (if it can be shown that the market can take care of law and order) Imagine the argument a couple of centuries back (everywhere), or even now in fully tribal societies. Who would believe that clothes can be taken care of by the market, or that the market can supply a rich (and abundant) variety of goods. Wouldn't competing merchants cause chaos? Some rich merchant would buy all bales of cotton/milk produced, and nobody will have clothes in the winter!

(iv) For them taxes are not robbery...taxes are payment for the public goods and services that they use on a daily basis: This is wrong. All this a monarch would also claim. Besides, Rothbard [Ethics of Liberty]:

It would be an instructive exercise for the skeptical reader to try to frame a definition of taxation which does not also include theft. Like the robber, the State demands money at the equivalent of gunpoint; if the taxpayer refuses to pay his assets are seized by force, and if he should resist such depredation, he will be arrested or shot if he should continue to resist. It is true that State apologists maintain that taxation is "really" voluntary; one simple but instructive refutation of this claim is to ponder what would happen if the government were to abolish taxation, and to confine itself to simple requests for voluntary contributions.Does anyone really believe that anything comparable to the current vast revenues of the State would continue to pour into its coffers? It is likely that even those theorists who claim that punishment never deters action would balk at such a claim. 

(v) tyranny of the very very very small minority: Stateless society is the end of the road for decreasing State power. Voluntary exchange directly between people, the market, now manages to take care of much of societal needs. I think that a Stateless society, if possible, will be good. But, even if it isn't possible, it is well to keep that as an ideal. Read Thoreau's essay Civil Disobedience if you wish.

(vi) I will read the de Tocqueville book. N6n (talk) 04:14, 27 July 2010 (UTC)

When Rothbard claims that the state is a robber...how come so few people agree? Robbery is a pretty straightforward concept. How come there hasn't been a second American Revolution? The answer is simply that now we have representation. We elect representatives to decide how much taxes we should pay and what our taxes should be spent on...so it's absurd to claim that we are robbing ourselves.

Every society needs leaders. In Rothbard's society some people would want to log Yellowstone while others would want to turn it into a national park. Each group would have their own leaders so how would the dispute be settled? The Libertarian law wouldn't be relevant because it's entirely based on the non-aggression axiom.

Did you read the Open Society vs Tribalism document in its entirety? This passage by Burke was included. It's pretty decent as long as you notice the "not"s.

Society is indeed a contract. Subordinate contracts for objects of mere occasional interest may be dissolved at pleasure---but the state ought not to be considered as nothing better than a partnership agreement in a trade of pepper and coffee, calico or tobacco, or some other such low concern, to be taken up for a little temporary interest, and to be dissolved by the fancy of the parties. It is to be looked on with other reverence; because it is not a partnership in things subservient only to the gross animal existence of a temporary and perishable nature. It is a partnership in all science; a partnership in all art; a partnership in every virtue, and in all perfection. As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born

Pure individualism or self-interest might result in Yellowstone being logged and/or developed...but part of the value of a government is in its ability to make decisions that won't screw over future generations. So rather than trying to get rid of the state...the goal should be improving the "partnership" aspect of the state. --97.93.109.174 (talk) 12:05, 27 July 2010 (UTC)


On what basis does the government decide what is best for future generations? It doesn't have a code external to the society itself--its values are the societal values. (Pure) Capitalism advocates would claim that if not for government restrictions(which facilitates monopoly, btw), the market would be fluid enough to make sure that societal wishes are followed. So, e.g., if the people of US do not want Yellowstone to be logged, they will show this by making decisions on the market which will affect the parties involved. (e.g., increase in entry cost to the National Park) The owner of Yellowstone would base his/her decision simply on whether using it as a recreational ground/ecological sanctuary is more profitable than logging it. This profit includes the owner's intangible but quantifiable moral values. (e.g., people paying more for green products.) Ludwig von Mises argues all this convincingly. I will post relevant quotes here when I next come across them. But right now, I have access to one from Rothbard:

This sort of argumentation reflects a general double standard of morality that is always applied to State rulers but not to anyone else. No one, for example, is surprised or horrified to learn that businessmen are seeking higher profits. No one is horrified if workers leave lower-paying for higher-paying jobs. All this is considered proper and normal behavior. ... What gives the gentlemen of the State apparatus their superior moral patina? [For a New Liberty]

Who decides how much Oil to produce? Why hasn't Oil been exhausted till now? Those supporting laissez faire claim that all that is good is due to autonomous-agents, and all that is bad is due to government's interference.

how come so few people agree: This is not at all difficult to explain. How about Noam Chomsky's Manufacturing Consent. Rothbard [FaNL] has something relevant:

On the one hand, the stations, since they receive the licenses gratis, do not have to pay for the use of the scarce airwaves, as they would on the free market. And so these stations receive a huge subsidy, which they are eager to maintain. But on the other hand, the federal government, as the licensor of the airwaves, asserts the right and the power to regulate the stations minutely and continuously. Thus, over the head of each station is the club of the threat of nonrenewal, or even suspension, of its license. In consequence, the idea of freedom of speech in radio and television is no more than a mockery. Every station is grievously restricted, and forced to fashion its programming to the dictates of the Federal Communications Commission. So every station must have “balanced” programming, broadcast a certain amount of “public service” announcements, grant equal time to every political candidate for the same office and to expressions of political opinion, censor “controversial” lyrics in the records it plays, etc. For many years, no station was allowed to broadcast any editorial opinion at all; now, every opinion must be balanced by “responsible” editorial rebuttals.

Just to clarify, I won't press the hypothetical button. I first need to be sure that a Stateless society would be better (which I am not).
N6n (talk) 13:36, 27 July 2010 (UTC)

Pure individualism or self-interest might result in Yellowstone being logged and/or developed...but part of the value of a government is in its ability to make decisions that won't screw over future generations. (However) From Human Action, von Mises:

Carried through consistently, the right of property would entitle the proprietor to claim all the advantages which the good’s employment may generate on the one hand and would burden him with all the disadvantages resulting from its employment on the other hand. Then the proprietor alone would be fully responsible for the outcome. In dealing with his property he would take into account all the expected results of his action, those considered favorable as well as those considered unfavorable. But if some of the consequences of his action are outside of the sphere of the benefits he is entitled to reap and of the drawbacks that are put to his debit, he will not bother in his planning about all the effects of his action. He will disregard those benefits which do not increase his own satisfaction and those costs which do not burden him. His conduct will deviate from the line which it would have followed if the laws were better adjusted to the economic objectives of private ownership. He will embark upon certain projects only because the laws release him from responsibility for some of the costs incurred. He will abstain from other projects merely because the laws prevent him from harvesting all the advantages derivable. ... 

The extreme instance is provided by the case of no-man’s property referred to above.[9] If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns—lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil—do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing they do not shrink from methods preventing the repopulation of the hunting and fishing grounds. In the early days of human civilization, when soil of a quality not inferior to that of the utilized pieces was still abundant, people did not find any fault with such predatory methods. When their effects appeared in a decrease in the net returns, the ploughman abandoned his farm and moved to another place. It was only when a country was more densely settled and unoccupied first class land was no longer available for appropriation, that people began to consider such predatory methods wasteful. At that time they consolidated the institution of private property in land. They started with arable land and then, step by step, included pastures, forests, and fisheries. The newly settled colonial countries overseas, especially the vast spaces of the United States, whose marvelous agricultural potentialities were almost untouched when the first colonists from Europe arrived, passed through the same stages. Until the last decades of the nineteenth century there was always a geographic zone open to newcomers—the frontier. Neither the existence of the frontier nor its passing was peculiar to America. What characterizes American conditions is the fact that at the time the frontier disappeared ideological and institutional factors impeded the adjustment of the methods of land utilization to the change in the data. 

In the central and western areas of continental Europe, where the institution of private property and been rigidly established for many centuries, things were different. There was no question of soil erosion of formerly cultivated land. There was no problem of forest devastation in spite of the fact that the domestic forests had been for ages the only source of lumber for construction and mining and of fuel for heating and for the foundries and furnaces, the potteries and the glass factories. The owners of the forests were impelled to conservation by their own selfish interests. In the most densely inhabited and industrialized areas up to a few years ago between a fifth and a third of the surface was still covered by first-class forests managed according to the methods of scientific forestry. [10] 

Footnote [10]: Late in the eighteenth century European governments began to enact laws aiming at forest conservation. However, it would be a serious blunder to ascribe to these laws any role in the conservation of the forests. Before the middle of the nineteenth century there was no administrative apparatus available for their enforcement. Besides the governments of Austria and Prussia, to say nothing of those of the smaller German states, virtually lacked the power to enforce to such laws against the aristocratic lords. No civil servant before 1914 would have been bold enough to rouse the anger of a Bohemian or Silesian magnate or a German mediatized standesheer. These princes and counts were spontaneously committed to forest conservation because they felt perfectly safe in the possession of their property and were eager to preserve unabated the source of their revenues and the market price of their estates.

N6n (talk) 15:32, 27 July 2010 (UTC)


You seem to be confusing anarchy with lawlessness and violence. Common, but wrong.

ANY society - democratic, communist, fascist, anarchy, religious dicatorship, monarchy, feudal, dictatorship, whatever, has to have the vast majority of its citizens respect the rights of others. Tian has pointed out that the vast majority of us do not bomb federal buildings out of fear of beign caught - we refrain from doing so just because we recognize that killing others and destroying property is wrong and we don't do so. Fear of getting caught is a very minor secondary concern if we even consider it at all.

Any society - ANY SOCIETY - that loses this is gone. It can't survive. This includes a society with no government. Most likely there will be a period of chaos followed by a dictatorship. Something like this happened when the Nazis took over Weimar Germany.

If we went into a period of no government - aka anarchy - with the vast majority of citizens respecting the lives and property of others, it would work. Mechanisms would be developed to deal with the few who needed dealing with.

If we did not have this and a significant portion of the population killed, stole and destroyed just because they thought they could get away with it, anarchy would not work. Neither would any other system.
http://dwrighsr.tripod.com/heinlein/RatAnarch/Quotes_AFH.html N6n (talk) 07:09, 5 August 2010 (UTC)


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That was my first interaction with an ancap.  It was fairly substantial.  I remember thinking that if I genuinely wanted to defeat his arguments... then I had better do some homework.

I read quite a bit of Rothbard's work and certainly was not at all impressed with his moral "taxation is theft" argument.  However, in other parts there was more than a hint of the Invisible Hand.

It was only later on when I read these two papers that Rothbard had written...

Toward a Reconstruction of Utility and Welfare Economics
The Myth of Neutral Taxation

... that I really appreciated that he had correctly diagnosed the fundamental problem with government... the massive scarcity of individual (earner) valuation.  It's just a shame that most of his devout followers focus more on his moral arguments than on his economic arguments.

David Friedman is also an anarcho-capitalist.  He's great because all his arguments are entirely economic in nature.

See also: Concentrated Benefits and Dispersed Costs, House of Cards And Wikipedia

Superstar Theory: J.K. Rowling vs Elizabeth Warren

A couple days ago, in this thread... Epiphytes and Economics... I posted a reply that was all about Sherwin Rosen's Superstar Theory (ST).  Yesterday, Paul Krugman wrote a blog entry that was also all about ST... Jenny Lind, Taylor Swift, and Me.  Coincidence?

Surely it's a coincidence.  It's extremely unlikely that Krugman reads my blog.  If it was at all likely then I might be tempted to guess that he learned about my thread from this recent entry... Who Are You?  

It's a fun coincidence though because it gives you the wonderful and exciting opportunity to compare our economic perspectives on the same theory!  

I'll share my comment with you here.  But first it might help to share the comment that I was replying to...

I googled Elizabeth Warren. Prospect for U.S. president in 2016?  I live in Canada and had no idea who she was. - Beer w/Straw

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If people could choose where their taxes go... we'd create a lot more value by allowing Canadians to spend their taxes in America's public sector and vice versa.

In other words, we create more value by expanding, rather than shrinking, people's pool of potential trading partners. If you liked what Elizabeth Warren was doing for the public more than you liked what any Canadian was doing for the public... then you should be able to give her your taxes.

It should be pretty straightforward that we'd destroy, rather than create, a lot more value by preventing non British people from trading with J.K. Rowling.

If Elizabeth Warren is truly the J.K. Rowling of the common good... then we'd create a lot of value by allowing people all over the world to give her their taxes.

In the absence of global public market... then how in the world would we be able to tell whether Elizabeth Warren truly was the J.K. Rowling of the common good?

Not sure if irony is the right word, but creating a global public market would increase income inequality nearly as much as creating a global private market does. If only Brits could give their money to J.K. Rowling then there wouldn't be as much disparity in income. As J.K Rowling's pool of potential trading partners is expanded... there's a corresponding increase in income inequality.

If we created a global public market... then if Warren was truly as big a rockstar as Rowling... then Warren, a liberal, would receive far money than any other congressperson. Perhaps then she might appreciate that income inequality wasn't the problem. A significant disparity in income simply reflects the fact that a few people are exceptionally good at creating value for others.

We want these exceptionally good value creators to be massively rewarded. Huge rewards create bright value signals which attracts the best and brightest people in the world.

So if we want cancer and poverty to be cured sooner rather than later... then we need to create a global public market.

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What do you think?  Whose perspective do you prefer?

Honestly I'm a little confused regarding what it is that Krugman is trying to say about ST's relevance to music.  It kinda seems like he's saying that it's not very relevant.  That can't be right though.

How big a superstar would the Korean pop singer Psy be if his music/videos were only accessible to people in Korea?  Would he be 1/2 the superstar he is now?  Or 1/10th the superstar?  Or 1/100th the superstar?  Would Snoop Dog have jumped at the opportunity to collaborate with him?  Prolly not.

It's easy to see how much Psy benefits by having his pool of potential trading partners as large as it currently is.  Now he's making music videos with Snoop Dog!  Not to mention the fact that he's earned millions of dollars.

Unfortunately, it's not easy to see all the benefit that Psy has provided for the people that he's traded with.  This is because Psy's benefit is concentrated and tangible while his trading partners' benefit is dispersed and intangible.

If it was easy to see consumer benefit then I wouldn't be here having to explain that giving people the freedom to shop in the public sector would greatly expand our pool of potential trading partners which would greatly increase total benefit.  Pragmatarianism would have been implemented long before I was even born.

How in the world can we make it easier for people to "see" total consumer benefit?  Here's one attempt...

Is total consumer benefit greater than, or less than, or equal to Psy's benefit?

The basic theory is that you only trade when you have the expectation that what you gain will be greater than what you have to give up.  If what you expect to gain has less value than what you have to give up... then you wouldn't want to trade because if you did then you would suffer a loss.  If what you expect to gain has the same exact value to you as what you have to give up... then there's no point in making the trade.

For example... if the amount of benefit you expect to gain from seeing Psy live in concert has the same exact value to you as the opportunity cost of the ticket... then why bother buying the ticket?

We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Ludwig von Mises, Human Action

When people buy a ticket to see Psy in concert... they aren't eager to substitute their current state of affairs for an equally acceptable state of affairs.  So when somebody does buy a ticket to see Psy it's because they are hoping to improve their circumstances as much as possible.

Of course we all know that reality doesn't always live up to expectations.  When this happens we tend not to keep it a secret.  Same thing when reality exceeds our expectations.  This means that persistent exchange generally indicates the persistence of mutual benefit.
  
It should be clear that we would decrease total benefit by preventing Koreans from trading with the rest of the world.  Just like we would decrease total benefit by preventing Americans and Canadians from trading.  Just like we would decrease total benefit by preventing Americans and Brits from trading.

These things aren't clear though.  Because if they were... then people would understand that we destroy a lot of benefit by preventing consumers from trading with producers in the public sector.

Right now it's a fact that Krugman isn't helping to clarify the value of allowing consumers to trade with Elizabeth Warren as easily as they can trade with J.K. Rowling or Psy.  This fact seems to indicate that he doesn't "see" consumer benefit.  Why doesn't he see it?

If we can imagine pragmatarianism gaining momentum, then when would be the optimal time for Krugman to address it?  If he addresses it now then he would be risking too much.  But if he addresses it too late... then he would risk losing all his credibility/relevance.

Follower Redistribution

There are five search results for "Follower Redistribution" but 485,000 search results for "Wealth Redistribution".

Comment on: valuation dilemmas

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Hi, how's it going? I have a blog too...but you're a much better writer than I am. My blog only has 10 followers... :(   Noah Smith's blog, on the other hand, has 660 followers. It's follower inequality...and I'm all about follower redistribution. You too?

Ok, the socialist calculation debate. I like the part where you've been reading quite a bit about it. Unfortunately, you haven't grasped it.

Shopping is the process by which consumers communicate their preferences and circumstances to producers. If producers were omniscient...then we wouldn't need to waste our time shopping. But producers are not omniscient. Nobody is omniscient. You had absolutely no idea that I was going to spend any amount of time on this product of yours.  Just like I have no idea how much time you're going to spend on this product of mine.

Maybe you'll simply delete my reply? Maybe it won't match your preferences like your blog entry matched my preferences?

You know who really matches my preferences? Bastiat. I really love that guy. He destroyed Keynes before Keynes was even born...

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes."

If your blog entry was the equivalent of a ditch being dug and then filled in over and over again...then I'm pretty sure I wouldn't have spent any of my limited time replying to it. I would have just assumed that you were insane.  Just like if some guy offered to dig up and replace my lawn each week.

The market works because you're not going to spend your money/time on nonsensical uses of society's limited resources.  Shopping is a vetting/vouching group effort.

Command economies fail because...

A. it's assumed that "life condition" surveys will provide enough information to ensure that society's limited resources are put to their most valuable uses.

B. it's assumed that incentives don't matter. Effort does not need to be tied to reward. The kids will make the same effort whether they are looking for Easter Eggs or poop.

Mises got consumer sovereignty (dollar voting) right...but he got prices wrong. It can't be about prices because if it was...then I'd have no idea how much of my time to spend replying to your blog entry. There's no price tag on your blog entry...yet here I am spending my time.

Every war since the 1920s was a consequence of Mises fetishizing prices. If he had made more effort to expand the relevance of consumer sovereignty...then he would have grasped that the only thing wrong with government is the visible hand.

Eliminating the visible hand would be as simple as allowing people to shop for themselves in the public sector. Their valuations would be far more truthful than any sort of cheap talk surveys...

As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. - Geoffrey Brennan, Loren Lomasky

When it comes to spending their own money...war is nonsensical to the vast majority of people. Unfortunately, wars will continue as long as people like you fail to understand the problem with a top down approach. So here I am. Gambling my own resources on a long shot.

Libertarian Economics

Here's a list I compiled of important libertarian economic concepts. Feedback on this list would be appreciated. Do you know of any other passages which more effectively/efficiently convey any of these concepts? Are there any important concepts that I have not included?

Scarcity...

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell

Opportunity cost...

The concept of opportunity cost (or alternative cost) expresses the basic relationship between scarcity and choice. If no object or activity that is valued by anyone is scarce, all demands for all persons and in all periods can be satisfied. There is no need to choose among separately valued options; there is no need for social coordination processes that will effectively determine which demands have priority. In this fantasized setting without scarcity, there are no opportunities or alternatives that are missed, forgone, or sacrificed. - James M. Buchanan

Human action...

We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Mises, The Prerequisites of Human Action

Demonstrated preference...

The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis. - Rothbard, Toward a Reconstruction of Utility and Welfare Economics

Incentives matter...

Difficulties and hardships are often but an incentive to exertion: what is fatal to it, is the belief that it will not be suffered to produce its fruits. - J.S. Mill

The Invisible Hand...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith

Fallibilism...

It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. - Hayek

Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat

Consequences of failure...

For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power. - Mary L. G. Theroux

Supply and Demand...

The instruments of intervention became the tools with which to apply government knowledge. Resources were directed and allocated by the state, by political and bureaucratic decision making, rather than by the elemental forces of supply and demand - forces shaped by the knowledge of those in the marketplace. - Daniel Yergin, Joseph Stanislaw

Partial knowledge...

It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Hayek, The Use of Knowledge in Society

It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life, or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The essence of the situation is action according to opinion, of greater or less foundation and value, neither entire ignorance nor complete and perfect information, but partial knowledge. - Frank Knight, Risk, Uncertainty, and Profit

Other people's money...

There are four ways to spend money. You can spend your own money on yourself. When you do that, why you really watch out for what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well then, I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it costs, and I'm not concerned about what I get. And that's government. And that's close to 40 percent of our national income. - Milton Friedman, The 4 Ways to Spend Money

Unintended consequences...

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil. - Bastiat, The Seen vs the Unseen

Individual foresight...

The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. An ice-cream factory in New York may mean wealth to its owner; the same ice-cream factory in Greenland would scarcely be a resource. - Lachmann, The Market Economy and the Distribution of Wealth

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. - Bastiat, Justice and Fraternity

There is no need to prove that each individual is the only competent judge of this most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He alone has an experience which is all the more reliable since it is limited to a single object. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want. - Turgot

Entrepreneurship...

Entrepreneurship is necessary in economic development, therefore, for the quite pedestrian purpose of ensuring a tendency towards the adoption of the socially advantageous long-term capital-using opportunities available. So far from being a kind of exogenous push given to the economy, entrepreneurial innovation is the grasping of opportunities that have somehow escaped notice. - Kirzner, Entrepreneurship & the Market Approach to Development

Heterogeneous activity...

So far as this is the case, it is evident that government, by excluding or even by superseding individual agency, either substitutes a less qualified instrumentality for one better qualified, or at any rate substitutes its own mode of accomplishing the work, for all the variety of modes which would be tried by a number of equally qualified persons aiming at the same end; a competition by many degrees more propitious to the progress of improvement than any uniformity of system. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

Market redistribution...

These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on “social” grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called “the circulation of elites.” Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Lachmann, The Market Economy and the Distribution of Wealth

Creative destructionism...

As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism

The interests of consumers...

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat, Abundance and Scarcity

Dollar voting...

The capitalist society is a democracy in which every penny represents a ballot paper. - Mises

Foot voting...

The second broad principle is that government power must be dispersed. If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does, be it in sewage disposal, or zoning, or schools, I can move to another local community, and though few may take this step, the mere possibility acts as a check. If I do not like what Washington imposes, I have few alternatives in this world of jealous nations. - Milton Friedman, Capitalism and Freedom

Moral value...

Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value. We are neither entitled to be unselfish at someone else's expense nor is there any merit in being unselfish if we have no choice. The members of a society who in all respects are made to do the good thing have no title to praise. - Hayek

Dispersed Costs and Concentrated Benefits

My comment over at Troy Camplin's blog entry on Traffic, Economics, and Constructal Law ended up exceeding the maximum quantity of characters allowed for a comment.  Rather than making the effort to try and say more with less words...I'm just going to post my comment here...

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"I still continue to see the cost-benefit pattern of traffic as more closely resembling democracy than the market."

On the freeway you have the freedom to act according to your individual foresight/insight.  The same could hardly be said about the public sector.  If I foresee a problem with Iran then I don't have the freedom to shift my own taxes to the Dept of Defense.  If I foresee a problem with global warming then I don't have the freedom to shift my own taxes to the EPA.

On the freeway if I foresee a problem with a drunk driver...then I...and everybody else...have the freedom to switch lanes in order to try and give the drunk driver as wide a berth as possible.  We also have the freedom to report them to the police...and many people will do so... because the very large majority of us want to get home as quickly but safely as possible.

The freeway gives us the freedom to use our means to try and achieve our diverse ends...the same could hardly be said of the government.  On the freeway...I have the freedom to put my car where my individual foresight/insight says it should go.  In the public sector...I do not have the freedom to put my taxes where my individual foresight/insight says they should go.

The market works because people have the freedom to put their own money where their mouths/minds/hearts are.  The people with the most accurate individual foresight/insight will benefit the most people.  As a direct result...they will have the most resources to allocate.  They earned the resources at their disposal by benefiting others.  In our society these people are taxpayers.

The public sector fails because it takes a large portion of the resources from 150 million of our most resourceful/insightful citizens and allows these resources to be spent by 538 congresspeople with significantly less resourcefulness/foresight.  If 538 people truly had the insight/foresight/resourcefulness to earn more than $3.5 trillion dollars then they wouldn't have to resort to taking this money from taxpayers.  Taxpayers, who would have to pay taxes anyways, would simply see the benefit in giving all their taxes to congress.  

Mises' "human action" describes behavior on a freeway...

We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care.

...and it definitely does not describe our ability to act in the public sector.  What describes our public sector is the mass destruction of individual foresight/insight...

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. - Bastiat, Justice and Fraternity

How cars are distributed on a freeway is the result of the incorporation of each person's individual foresight/insight.  The same cannot be said about how taxes are distributed in the public sector.  And we already know the result...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith