Riding Coach Through Atlas Shrugged: Part 4 – Governor’s Ball

Pages 48 – 53

Chapter Summary – A group of industrialists sit around a shadowy table plotting the downfall of our favorite rugged individualist.

[Part 3]

I love how cliché this chapter is. Four figures sitting around a table, their faces shrouded in darkness as they scheme over the fate of the world, the sycophant politician sniveling his consent to their plans. This is one of those times where I am not quite sure if the fiction created the trope or the fiction is following the trope but it is okay either way, it is delightful to read.

We have at our table:

James Taggert: Who is far less whiny when not in the presence of his sister.

Orren Boyle: Our socialist-industrialist representative in the story.

Wesley Mouch: Our aforementioned politician, in the pay of Hank Rearden but in the pocket of Orren Boyle.

And finally -

Paul Larkin: The man at Rearden’s dinner party last chapter.

Essentially they spend the chapter plotting against Hank Rearden and promoting a philosophy of non-competition among businesses. From a historical standpoint this is essentially what happened with Hoover and the industrialists leading up to the great depression. A series of price and wage controls were set up that distorted normal market activity leading to the boom-and-bust cycle as described by Ludwig von Mises. As a side-note it is an interesting historical misconception that Hoover “did nothing” during the great depression. Hoover was arguably the most meddling president up to that point in regards to the economy except perhaps for Abraham Lincoln, but total economic warfare is hard to beat.

But to get back on track here, for what it lacks in literary creativity this chapter makes up for with pure economic and political insight that is delightful to read. The most illuminating part is a speech, or perhaps rant, by Orren Boyle that goes as follows, some of Taggert’s responses are edited out for brevity:

“Listen Jim…” He began heavily.

“Jim, you will agree, I’m sure, that there’s nothing more destructive than a monopoly.”

“Yes.” Said Taggart, “on the one hand. On the other, theres the blight of unbridled competition.”

“That’s true. That’s very true. The proper course is always, in my opinion, in the middle. So it is, I think, the duty of society to snip the extremes, now isn’t it.”

“Yes,” said Taggart, “it isn’t fair.”

“Most of us don’t own iron mines: How can we compete with a man who’s got a corner on God’s natural resources? Is it any wonder that he can always deliver steel, while we have to struggle and wait and lose our customers and go out of business? Is it in the public interest to let one man destroy an entire industry?”

“No,” said Taggart, “it isn’t.”

“It seems to me that the national policy ought to be aimed at the objective of giving everybody a chance at his fair share of iron ore, with a view towards the preservation of the industry as a whole. Don’t you think so?”

“I think so.”

This exchange is a fantastic summary of the process involved when the government gives special privileges to favored industries under the guise of regulation. Essentially Rearden is out-competing his fellow steel producers and since they cannot compete under market conditions they intend to compete politically by ham-stringing his business through the legal process.

This process has happened time and time again throughout history and the ironic part is that these actions have almost universally been heralded as “anti-business” when in fact it is the businesses itself that propose this regulation. The first anti-monopoly laws in America were lobbied for by the competitors of the successful oil, rail, and steel businesses which resulted in the *rise* in prices of those goods. It seemed the “natural” monopolies were pro-consumer while the regulation was pro-business.

There are also historical comparisons to be made to the great depression. The whole concept of “protecting an industry” at the expense of a single, productive, individual was the cornerstone of “Hoover-nomics” especially in the farm industry. The industrial revolution brought about a massive increase in farming productivity which naturally led to a decline in prices and a surplus of labor in that industry that came to a head during the “dirty thirties”.

The natural course of the market would be for inefficient firms in that industry to liquidate; with the entrepreneurs and workforce moving to other industries. This would cause a short period of transitional unemployment as workers moved into similar or growing industries while the more efficient firms and prospective entrepreneurs would buy the liquidated capital goods of the inefficient businesses at a discount.

Consumer goods prices would fall to equilibrium where only firms able to produce goods below that price would be able to maintain production. This would have the net effect of expanding the labor pool and be a net gain for society as new areas of production would be made available by the increases in productivity. Instead, Hoover organized industrial cartels that maintained price and wage controls over the entire economy propping up inefficient businesses that continued to waste and malinvest resources resulting in what we know today as the great depression.

To summarize, this chapter is a fantastic must read five page tour de force of economic insight.

Next chapter: More Dagny, more snark, and more family drama.

Riding Coach Through Atlas Shrugged Part 3: Hit The Switch

50th Anniversary Edition pages- 33-48

[Part 2]

Chapter Summary: We meet our industrialist protagonist, he makes some metal, is weirdly sentimental, and doesn’t understand basic human interaction.

This chapter is very important for a number of reasons. Several (presumably) important characters are introduced, the MacGuffin is introduced, and several elements of Rand’s writing style and her personality are revealed. Because of this final revelation I, for the first time, am going to start one of these reviews off with the negative.

Ayn Rand’s descriptions of characters and those characters’ reactions to others in the story are both highly questionable. The protagonists, so far, all have crippling social issues that are not only glossed over but indeed are celebrated; while the antagonists are universally whiny, sycophantic, card-carrying bad guys who talk with each other like Bond villains; but more about them in the next chapter.

Let me provide some examples of our pseudo-autistic heroes from previous chapters.

Eddie:

“But he still thought it self-evident that one had to do what was right; he had never learned how

people could want to do otherwise; he had learned only that they did. It still seemed simple and incomprehensible to him: simple that things should be right, and incomprehensible that they weren’t.”

While I can relate to his feeling, I think it is imperative that libertarians understand completely why people want to do the things we consider “wrong” and to do that we need to have a solid foundation of what is right or wrong. The latter belief is why I hold so strongly to natural-rights libertarianism rather than any subjective based ethical system such as rule-utilitarianism.

Once we have a strong ethical foundation to build our beliefs on we begin to understand why most people operate outside those beliefs in practice despite the fact that most people would agree to them in theory. How many people would openly advocate violence against person or property when stated in such clear terms? Very few would, which is why society functions. It is only when we hide violence in plain sight through the control of language and education that most people begin to agree with their necessity. Extortion becomes taxation. Kidnapping becomes imprisonment. Murder becomes war and fraud becomes inflation.

Dagny:

“[b]ecause she thought that such a feeling was not within the humanly possible”

“She had always avoided personal reactions, but she was forced to break her rule when she saw the expression on Taggart’s face.”

Another clear lack of empathy in regards to dissimilar belief systems as well as some more personal social awkwardness. I wish I knew why Dagny “avoided personal reactions”. Did Rand think that emotion was a weakness? I cannot wait to spend more time with Dagny because she seems like such an unnecessary enigma.

And finally we have our new character, Hank Rearden whose complete lack of empathy boggles my mind. Hank begins the chapter at his foundry as the first batch of Rearden metal is poured. He waxes sentimentally over his past, especially his status as a self-made man; however the real story begins to be told when he leaves his work and returns to his home where his family is having a dinner party; or rather, the end of a dinner party. This scene provides us with two important sets of information.

First, Rearden’s family resents him for his aloofness and his lack of understanding of their problems and second he resent his family for not empathizing with him.

Let’s start with the relationship with his brother.

Phillip Rearden is a man who “had not been able to decide on any specific ambition.” A fact that Hank is generally disgusted by, he believes that “[T]here was something wrong…with a man who did not seek gainful employment.” When we meet Phillip he is a representative of a charitable foundation called “The Friends of Global Progress”. This organization is in dire need of ten-thousand dollars in its quest for “free lectures on psychology, folk music, and co-operative farming”.

Phillip is distraught that he cannot convince enough people to donate to the cause and Hank, in an attempt to improve his brother’s morale, simply donates the needed sum of ten-thousand dollars. Hank is then surprised when Phillip rebuffs his generosity. Hank misses the entire point though; Phillip isn’t upset that that he doesn’t have the money. Phillip is upset that more people don’t believe in his cause, something libertarians should have some measure of empathy for. We have to ignore the fact that Rand chose a completely ridiculous organization for Phillip, the scope of that organization is irrelevant. It is the relationship between the brothers that is vital.

Hank’s reaction, on the other hand, is far more vitriolic. He resents the fact that Phillip is acting selflessly to the point of wanting to hit him. “He wanted to slap Phillip’s face. But an almost unendurable contempt made him close his eyes instead.” Who seems more reasonable in this situation? Our “hero” or the villain?

Here is where Rand either rejects or misunderstands praxeological reasoning. Phillip, though acting selflessly, is also acting selfishly. Mises said that every action is taken in order to remove a “certain uneasiness”; this uneasiness is what drives human action. Even the most selfless act is done for the benefit of the person acting. How often has someone who risks their life for another uttered the phrase “I just couldn’t live with myself if I hadn’t done such-and-such.” It all comes down to a question of subjective valuations. No two people’s values are identical and there is no way to compare or rate those values against one another. Despite Hank’s objection that he “would not impose his standards on Phillip…” that is exactly what he does at every turn.

Next we have Hank’s wife Lillian. Our first reference to Lillian is as follows:

“He touched the bracelet in his pocket. He had had it made from that first poured metal. It was for his wife. As he touched it he realized suddenly that he had thought of an abstraction called ‘his wife’ – not of the woman to whom he was married.”

I think it is very telling that the first we hear of Hank’s wife he isn’t even considering her as a person, barely even as an object. “An abstraction” that throughout the rest of the chapter is the only one who even remotely stands up for Hank, even though she seems to do it only out of duty and not love. Another case where I can relate more to the character portrayed as the villain than the hero.

Lillian ends the chapter by holding up the aforementioned bracelet Hank had given her and calls it “the chain he uses to hold us all in bondage.” This rings true on several levels. Hank supports his family out of duty to them and then gets upset when they cannot stand on their own. Hank is proud of having earned everything he has on his own but then doesn’t expect the same from his family. He wants them to support him in his endeavors but only pays lip service to theirs. They pursue senseless causes but he supports them financially at every turn.

At this point in the story Hank is a contradiction. He is attempting to live in two worlds and because of that is failing at both. His family is biting at his heels and he cannot see the political danger right in front of him which will be revealed in the next chapter.

P.S. I forgot about his mother. She is essentially a high-class snob. I don’t really have any sort of insight on her other than she is insufferable.

 

P.P.S.  I have been scarce as of late due to a recent promotion and an increased workload as well as a series of outrageous summer adventures.  Thanks to Brandon for not kicking me out yet.

Human Nature, War and Armed Conflict

The list of ongoing armed conflicts in the worlds is long ( see for example http://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts) and has been long for centuries. There are many websites and research institutes that keep track of their number, the parties involved, the main issues, et cetera. There are many different definitions of war and armed conflict. Here, wars are simply defined as armed conflicts with participation of one or more states whose sovereignty is internationally recognized, whereas armed conflicts do not require state involvement.  Armed conflicts have always been around in great numbers, often state-sponsored, for example the numerous and seemingly never ending conflicts in the Middle East, or recently in Northern Africa following the so-called Arab Spring. The recent collapse of Libya into civil war may serve as evidence.     

The number of interstate wars dramatically decreased after the end of the Cold war, giving stimulus to loads of academic papers about democratic or liberal peace. Yet this era might well be over, given the situation in the Ukraine, but also many explosive situations in North-East Asia and South-East Asia. 

Academic research resulted in a long and varied list of possible causes for wars and armed conflicts.  Think for example of geopolitical factors (land, borders), natural resources (oil, gas, mines), population related issues (minorities of other countries living in a particular area, people demanding  their own country), religious conflicts, the protection of one’s own people abroad, global political reasons (participation is war as a consequence of an alliance, or to preserve the balance of power), humanitarian reasons (genocide), et cetera. In contrast to popular belief, wars and conflicts are often multicausal, so there is not just a single but a number of reasons for their initiation and continuation.  

 War and conflict are the result of human action. Despite all the peace talks and agreements, treaties, other forms of international law, arbitration, the work of international organizations, and the pre-emptive actions by great powers in world politics, war and armed conflicts have never been eradicated. So it seems fair to assume this has something to do with human nature as well. Here the literature is much smaller, perhaps as a consequence of the dominant belief (at least in the Western world) in rational human beings capable to overcome war and armed conflict. As a matter of fact international relations as an academic discipline owes much of its origin to this idea. After the First World War many academic positions and departments were established, with the explicit aim to search for ways to prevent such disasters from happening again. Unsurprisingly, without much result.    

 The ‘human are guided by rationality thesis’ has been defended by many liberals in the American tradition (also known as social liberals or high liberals) and some libertarians as well. In fact most liberal IR theories are based on this idea. However, the idea that that human beings and conflict cannot be separated has been prominent in the writings of classical liberals such as Hume, Smith, Hayek and Mises, but also by Ayn Rand.  Interestingly, for this latter position there is now increasing evidence from other academic disciplines, such as psychology and neurosciences. For example the famous book Thinking Fast and Slow by Daniel Kahneman, or more specifically War and Human Nature by Stephen Peter Rosen, Thayer’s Darwin and International Relations, or Donelan’s Honor in Foreign Policy.

 While much more work needs to be done in this field, it is safe to conclude that liberals should not think about how to abolish war. Instead, the relevant question is how to deal and limit the inevitable occurrence and continuance of war and armed conflicts.

Despedida

Pois é, pessoal. Tenho que agradecer ao convite do Brandon, mas desde o início, com tanta coisa para fazer, eu sabia que não iria conseguir colaborar muito aqui. Deu no que deu: tenho que me despedir porque não quero manter um compromisso que não consigo cumprir. 

Boa sorte ao blog e, mais uma vez, obrigado!!

Great Review of Delacroix’s New Book

For answers as to why a young man might wish to emigrate, we must turn to History, which in France is neither remote nor distant. While Americans tend to regard anything before they were born as irrelevant, Biography and History are intertwined throughout Europe, but nowhere more intimately than in France. Delacroix, conceived in Nazi-occupied France, though in one counter-intuitive episode delivered to safety by a German soldier, his own life and that of the nation are bound together even more intimately than most. And so France, he writes, was gripped by three ‘great sadnesses’ as he was growing up.

This is from Peter Miller, a fellow sociologist and artist (and also the author of this piece here at NOL). Read the whole thing.

You can find Dr J’s book at amazon here, or on the sidebar of the blog.

More on the inherent conservatism of the Left

I’ve blogged about the reactionary nature of the Left before, and in 2012 I went so far as to write, in response to a Marxist historian’s essay on capitalism and gay identity, that:

Capitalism has brought about the [gay rights] movement’s flourishing, and the government is holding it back. This fact is true not just in the realm of gay identity, but in the realm of all other social, political, and economic aspects of as well. Leftists would also do well to remember that their movement, as it stands now, as it stood three decades ago, is, for all intents and purposes, one of conservatism, obstinate ignorance, and embarrassing causality.

Many others have noticed the reactionary nature of the hard Left as well (and don’t forget to read Rick’s thoughtful musings on the Left-Right divide), but it is always nice to come across writings that bolster one’s own argument. James Peron has more on “The Lament of the Conservative Left” in the Huffington Post. Riffing off of an article by the prominent socialist David Selbourne, Peron writes:

Note the disdain for individual social freedom as being “without regard to the interests of the social order as a whole.” Doesn’t that sound just like a religious conservative?

[...]

Socialism was not a “revolutionary” alternative to liberalism. It was a conservative reaction against it. Ludwig Mises said: “It was Liberalism that undermined the power of the classes that had for centuries been closely bound up with the Church. It transformed the world more than Christianity had ever done. It restored humanity to the world and to life. It awakened forces which shook the foundations of the inert traditionalism on which Church and creed rested.”

[...]

Socialism [...] grabbed the methods of conservatism, embracing state power as the means of planning permissable changes and preventing others. It embraced change to a limited degree, unlike conservatives, but wanted to direct it. Liberalism, to the socialist, meant unplanned change. It was this concept of an “invisible hand” that disturbed them. The socialist, in his heart, is a conservative, just one who wants some of what liberalism has to offer.

Indeed. Read the rest, and remember: “Liberalism” in much of the world means “classical liberalism” rather than the ideology of the Democrat Party in the United States.

Expanding the Liberty Canon: Rome and Carthage in the Histories of Polybius

This historically based exploration of writing on liberty now reaches the point where the Greek world has fallen under the domination of Rome, but even at this point we can see that the Greek language and heritage will continue to be important in a Roman dominated Mediterranean, particularly in the eastern parts, leaving the legacy of the Christian Gospels in Greek, the fifth and sixth century CE transformation of the eastern Roman Empire into a Greek Empire , still known to itself as Rome, but to us as Byzantium. In Polybius we see the beginning of a history of major writing in Greek within the Roman world, which continued through many areas of thought, producing major classics at least up until the philosophy of Plotinus in the third century CE.  The founding figure of the Byzantine system, the Emperor Justinian took Christian teachings to the extreme of closing the Academy of Athens in the sixth century,  and that is a convenient marker of the end of the greatness of ancient Greek writing and thought. Of course all such markers are arbitrary and the antique Greek tradition did not abruptly vanish at that moment, and the writing of the last Athenian philosophers had a very different context from that of original Athenian classicism and even more so from earlier Greek thought.

Polybius’ Histories may contain the last important work of political thought in ancient Greek, though such claims are always up for debate.  He was born in about 200  BCE in Megalopolis in the central part of the Peloponnesus, that is the southern land mass of mainland Greece. The Greek city states had previously lost full independence to the hegemony of Macedonia. Roman expansion provided both an alternative to Macedonian rule and subordination to a new hegemonic power. The Achaean League had allied Megalopolis and other southern Greek states at a time of renewed independence from  Macedonia.  However, the complications of continuing competition between the Greek city states, along with trying to play Macedonia and Rome off against each other, ended with absorption  into the Roman state system expanding outside of Italy.

These political complexities led to Polybius becoming one of the hostages taken to Rome to ensure the adherence of the Achaean League to an alliance. Polybius was an aristocratic politician and general who served the Roman need for hostages who would tie the elite to Rome.  Polybius could have left Rome long before his death, but became a friend of leading citizens and an admirer of the Republic, so stayed in Italy though maybe dying in southern France in 118 BCE.  He wrote various books, though all we have left is the Histories, and that is not complete. It is mainly concerned with the Punic Wars, that is the wars between Rome and Carthage, and is one of the main sources for that major event in antique history, which is more than just  a war. It was the triumph of one form of republic over another for hegemony in the Mediterranean world. In the end, the Carthaginian Republic was completely destroyed including the city of Carthage itself and Rome changed in nature from a  major power in Italy to the dominant power from Anatolia (the major landmass of what is now Turkey) to Spain, from central Europe to north Africa.

The transformation attracted the attention of later writers on liberty, who will appear in later posts. In particular, two great Enlightenment figures Giambattista Vico and Charles-Louis de Secondat, Baron de la Brède et Montesquieu were centrally concerned with the story as that of a triumph of republican liberty, that of Rome, mingled with a subsequent decline of liberty, and the loss of another model of republican liberty,  that of Carthage. The story and the political interpretations were well known over centuries to writers on liberty.

Polybius studied the Punic Wars in depth, using his friendship with the Roman general Scipio and a journey through the Alps where the great Carthaginian general Hannibal crossed into Italy.  Within that historical account, in Book VI Polybius embeds an account of the Roman constitutions, itself mingled with a discussion of the Roman military system.

Polybius concluded that Rome had the greatest of all constitutions known to him. His comparisons were with the Greek city states and with Carthage. He admired the Spartan constitution most out of the Greek constitutions, which may surprise many now. However, as a recent post on Aristotle points out, many Greek thinkers were suspicious of Athenian democracy as allowing a kind of mob rule over law and traditional restraints on power. The way Polybius supports that positions is to refer to the limited endurance of Athenian democracy, (defended by Pericles reported in Thucydides) compared with the more oligarchic, or aristocratic, Spartan republic.  Republic is a Latin originated word, which is very close in meaning to the Greek term for a city based on laws, which in modern English becomes polity, so when discussing Rome and Greece together, republic is a useful term.

The idea that Sparta was a better model for a modern republic than Athens, goes up to the Constitution of the United States. The Framers were conscious of the idea that the Athenian republic had failed, because it was too democratic, maybe too much based on the rule of the propertyless majority to be a republic. The United States did not have a citizen assembly like those of ancient Greece, but the Framers thought of the House of Representatives as an equivalent body, to be restrained by an aristocratic-oligarchic body, that is the Senate, along with a monarchical body, that is the President. Senators were nominated by state governments at that time, and the Electoral College to appoint the President was understood much more at that time as a vote for electors who would make up their own mind than as a embellishment in the direct election of the President.

It seems to me that this attempt to replicate ancient Sparta had broken down by the 1830s, or that is certainly what is suggested by Alexis de Tocqueville in Democracy in America (to be discussed in later post), who suggests that  America was already both  republic and a democracy on a modern rather than an ancient model. The continuing claim of some in the United States that the country is ‘a republic not a democracy’, therefore seems highly unsatisfactory to me, and I doubt that many  who use this slogan have thought about the Sparta above Athens message implied.

Anyway, Polybius’ arguments did influence the deliberations of the Framers, and even though I doubt those deliberations completely captured what a republic must be in a modern commercial society, his arguments are worthy of continuing consideration as thought about laws and institutions can work for liberty.

Polybius admired the way that Sparta balanced powers between different forces, so that though there was a citizen assembly, it largely deferred to a senatorial body, the Gerousia composed of aristocrats along with two other institutions: a monarchy made up of two kings from different royal families, who sat in the Gerousia; five ephors selected for one year, with the power to protect laws, customs, and institutions. This was underpinned by the famously extreme training of male citizens as soldiers, who maintained Spartan citizens as an aristocracy by force in relation to groups that were completely unfree, or who had legal rights, but no citizenship.

The Roman model seems to Polybius to be significantly similar to Sparta, and the differences are to the advantage of Rome, since not only has the Roman system already lasted centuries, but it has supported a far greater spread of military and political power than Sparta, which never extended its territory beyond the Peloponnesus. He sees the Roman system as embedded in the military system, and to a large degree sees military and political systems as embedded. Given the constant war and mobilisation of adult male citizens in the ancient world, this is unsurprising, particularly as citizenship rights and political systems were associated with what kind of military there was and which groups provided the most part. The Spartan system reflected the role of Hoplite infantry from the landowner-farmer class, while the Athenian system reflected the role of labourers employed to row naval ships. The Roman republic was a land military power, with different kinds of unit selected from all classes above slave, which fits with Polybius’ vision of republic as a mixed political system.

The Roman mix was a monarchical element of two consuls appointed for a year. The aristocratic-oligarchic element was the senate where the major landowners and state officials sat for life. The democratic element was the city assembly along with the tribunes appointed by that assembly.  As with the earlier Greek writers, Polybius associates democracy with the political participation of the propertyless, or nearly propertyless classes of labourers, small traders, and craftsmen.

We may now sympathise with the idea of a system that prevents anyone institution  or social groups dominating everything else, turning laws and administration into means of economic plunder. However, liberty advocates now may be less happy with Polybius’ advocacy of a vision of the virtue of citizens, in which military self-sacrifice is at the centre and commercial spirit is dismissed as corrupting. Polybius shares an attitude to be found in Aristotle and most antique writers (there may not be any clear exceptions at all) according to which wealth based on inherited landownership and state service is honourable, while wealth based on production and services for other peoples needs and wants is somehow disgraceful and immoral. This was part of antique suspicion of Athenian democracy which existed in a relatively commercial society, something else to be remembered by those inclined to oppose ‘republic’ to ‘democracy’. The suspicion of democracy and commerce extended to a suspicion of navies as a military instrument compared with land armies. The Romans were not as good sailors as the Carthaginians, because they were less active in trade and commerce. They built a navy against the Carthaginians as a duty and necessity, not by inclination.

Anyway, Polybius compensates for his faults with regard to his limited appreciation of virtue, and therefore of how liberty is exercised, does supply us with an alternative model to Rome, thoıugh it is  sadly lacking in detail. Polybius concedes the Carthage had a great republican constitution worthy of comparisons with Rome and Sparta, along with the other Greek cities. For Polybius, the Carthaginian constitution must be inferior to those of Rome and Sparta, because it was a society of commerce, sea trade, and a navy to protect those activities. We may think something different and look to Carthage as an important model, where the commercial capacity was so great Rome feared to allow the Carthaginian city and republic to exist even after victory in two major wars. There is less we can say about Carthage than Rome, but we know that is balanced a citizen assembly with a political and military aristocracy, and that the people prospered from a spirit of commercial liberty as well as political liberty.

Property rights and reclining seats

Every now and then a flight gets diverted because of trouble onboard. Sometimes, passengers are misbehaving and the decision is made to land and make them leave.

AP has reported that a flight was diverted because of a passenger quarrel over reclining seats. Apparently a passenger tried to recline their seat and the person behind made use of a Knee Defender, a device you can install to prevent the front seat from reclining.

Some time ago, Josh Barro wrote an article for the National Review applying the Coase Theorem to this sort of situation. According to Barro, the passenger behind could negotiate with the person who wants to recline their seat in order to buy them out of the idea.

According to the Coase Theorem, if you have low transaction costs, just clarify the property rights (in this case, the right to recline your seat) and those rights will be negotiated and end up with the person who cares the most about them.

The Theorem is somewhat morally agnostic in this sort of situation: it doesn’t matter very much who gets assigned the right, as long as it’s clear and respected (and for this very reason the Theorem isn’t completely agnostic either).

High transaction costs would have an impact on the initial allocation: passengers are reluctant to negotiate. For this reason, Donald Marron has commented on Barro’s idea, suggesting the ‘reclinee’ (i.e. the person behind the reclining seat) should initially carry the right to recline – this saves a round of negotiations in most cases, if we assume most people are bothered by reclined seats in front of them.

Commenting on the recent events, Barro’s article for the NYT responds to Marron and sticks to the low transaction costs view – he doesn’t think it’s that hard to negotiate with passengers.

There are some important issues that I haven’t seen addressed in this debate so far. To begin with, even though it’s not allowed to defend it as it sees fit because of security regulations (and this is perhaps a different debate), the airline owns the plane. The whole thing. Every seat. And that seems to  be clear enough.

Moreover, I don’t usually think about this detail when I buy a ticket, but it seems that non-reclinable seats (those in the back) are usually available for the same price as normal seats. If, instead, they’re clearly cheaper, then the implicit idea is that your flight ticket gives you the right to recline your seat, not least because you paid for it. The airline could make this clear, of course, in the small print, as a kind of contract clause. And those who want more space already pay for more space, even if they’re flying economy.

Now, of course there’s the issue of people having different sizes and not being very well served by the default space available. Some airlines offer more, some offer less space. I can’t help but think that if this variable is really important (and it seems to be), competition in the sector would make room for more diversity of services offered, and creative arrangements of passenger space onboard. This could drive the price of passenger space down. However, it’s a very heavily regulated market, so the situation isn’t ideal.

Then, there’s the issue of the Knee Defender. Of course, with no explicit rules, a passenger can get one and use it, probably annoying the person who wants to recline the seat. The airline can intervene and make it clear that the person paid for a seat that reclines. The airline could even have a special rule forbidding Knee Defenders onboard the flight. Just because it wants to, because it’s their plane.

In short: If you rent the airline seat for the flight, it can come with the right to recline it. If you own a Knee Defender, the airline could ask you to leave it behind (or keep it), or a passenger could buy it from you, so they can recline their seat.

Why go with the Coase Theorem at all? Maybe the good, old, less agnostic, property rights can do just fine in this sort of situation.

What Would A Political Union of the EU, the NAFTA States and Japan-South Korea Look Like?

I’ve known about the relative poverty of Western Europe compared to the United States for quite some time now, but it’s always nice to see this little tidbit get some love in the national and international press. Fraser Nelson, a journalist at the Spectator (in the UK) gives us the run-down on the numbers. According to Nelson, the UK is poorer than any US state save for Mississippi. Over at Forbes, Tim Worstall points out that the UK is actually poorer than Mississippi, too. Poor Mississippi!

Both men are calculating wealth with GDP (PPP) per capita, which is what I use as well. GDP (PPP) per capita means Gross Domestic Product (Purchasing Power Parity) per capita. Worstall explains how and why social scientists like using GDP (PPP) per capita to gauge a society’s standard of living:

Just to explain PPP for you. Prices vary across places. In the US food is generally cheaper than it is in Europe, medical care generally more expensive. So what we try to do with PPP is work out what exchange rates would need to be in order to make prices of all of these different things the same in the different places. It’s not an exact science, more of an art. But if what you’re trying to measure is living standards then it’s somewhere between useful and essential as a part of your workings.

It isn’t just the UK that is poorer than the poorest US state, either. Economist Mark Perry did these same calculations using 2010 data back in 2011 and pointed out that only Luxembourg and Norway would be in the Top 30 states were Western Europe and the United States to meld into one federal republic. The rest of Western Europe is on par with the living standards of the American South (which is considered to be the poor, culturally backwards region of the US). Be sure to check out Perry’s 2010 data and compare it to Worstall’s and Nelson’s 2013 data, too.

Careful readers will notice extremely small differences in the calculated purchasing power parity of all three authors (the IMF’s is also a little different), but each data gives us a similar approximation for standards of living in each country and each US state. Suffice it to say here a political union between the United States and the wealthy countries of Western Europe would significantly diminish the GDP (PPP) per capita of the US overall. A political merger with Japan, South Korea, and Mexico would also diminish the overall purchasing power parity of the average US citizen. Canada might (might) make the Top 40 for US states (somewhere between Michigan and Ohio – states of the Rust Belt).

Now, if I had my way, the calculation standards for non-US countries would be the same as they are for US states. That is to say, I think a better way of measuring standards of living would be to break up the countries I’ve mentioned and measure the GDP (PPP) per capita of the administrative units that operate just below the national governments of these states. So, for example, instead of measuring the GDP (PPP) per capita of the Netherlands, I’d measure the GDP (PPP) per capita of the 12 provinces that make up the Netherlands.

Then, in my libertarian utopia, the 50 US states would join together politically with the various administrative units of Western Europe, Canada, Mexico, Japan, and South Korea. Instead of 50 administrative units (the US states) there would be hundreds, maybe even thousands, of them. Talk about decentralization!

Given that a political (and therefore economic and social) merger between Western Europe, the NAFTA states, and Japan-South Korea would diminish my PPP, why should I support such a proposal?

Update 8/30: Some commentators on Facebook have been clamoring for a map, and I found a great website that has devoted lots of time to creating maps based solely on administrative units. The name of the site is Kelso’s Corner and they have a great blog post on the “Natural Earth Vector,” which is the project that maps out administrative units.

It doesn’t have detailed maps of the Anglo-Saxon world or Mexico (presumably because these are so well known), but I found a couple of great maps of Western Europe and Southeast Asia.

This is what the European Union would look like, politically, if it were to be more libertarian in nature.
This is a map of South and East Asia’s administrative units.

Imagine if all of these units were to send representatives and senators to Washington (or a new geographic equivalent): Decentralized political power and integrated markets and cultures would be the new norm for much of the world in a political system based on Madison’s federal republic. I reckon that, in a libertarian utopia, the world would look like this map and be united under Madison’s minarchist federal government:

All thanks goes to kelsocartography.com

I understand that my utopia is not much of a utopia (people will still die and there will be plenty of conflict), but I think this is actually a strength rather than a weakness.

What does the Obama administration hope to accomplish?

It is widely believed that the Obama administration will extend deferred action to include a significant portion of the United States illegal alien population following Labor Day. Some analysts are estimating that as many as five million illegal aliens will be provided some form of amnesty. I am skeptical this is the case, and believe it is more likely we will see smaller actions taken. The executive branch has a high degree of freedom when it comes to applying immigration law, but there are limits. The President’s actions thus far have been made with the goal of getting Congress to pass immigration reform, and any future actions are likely to follow that trend.

Let us consider for example the announcement of Deferred Action for Childhood Arrivals (DACA). DACA has provided temporary relief for half a million migrants in the form of work permits and legal presence. Perhaps more importantly it also strengthened a constituency that has a strong stake in seeing immigration reform passed by Congress. A cynic is tempted to say that the ultimate purpose of DACA was to create several thousand lobbyists.

Earlier this year the Obama administration also mused with the idea of extending the Military Accessions Vital to the National Interest (MAVNI) program to include those who had received DACA relief. The MAVNI program allows those who enter it an opportunity to earn US citizenship by serving in vital military roles. The actual perquisites to join the MAVNI program are high and it is doubtful more than a handful of DACA recipients will ever earn citizenship in this manner. As it is clear that this program is of little practical use, why did the administration bother with it at all? I suspect it was because it was hoping to win over support for immigration reform from military constituencies.

The administration has also proposed allowing spouses of certain legal migrants to acquire work authorization. Here too the idea is better in principle than actual practice, as only spouses of H-1B visa holders already in the process of gaining permanent residency are eligible. It is clear that the purpose of this proposal had more to do with gaining support among skilled migrants and their employers than it was about actually providing relief.

Opponents of increased immigration may consider the above actions to be instances of executive abuse, but they are all minor compared to what the Obama administration could do.

The Obama administration could, for example, lower the threshold necessary for a waiver of inadmissibility to be approved. A significant portion of the illegal alien population would be eligible to readjust their legal status either through their family connections to US citizens or by employer sponsorship, but they are barred from doing so because they have accrued unlawful presence. A waiver of inadmissibility is an existing process that pardons said unlawful presence, and it may suffice for the Obama administration to instruct US Citizenship and Immigration Services (USCIS) to be more generous when it decides whether to grant the waiver. Allowing illegal aliens to attain permanent residency and citizenship via this method would be a significant departure from past executive actions by providing long term relief.

The Obama administration has previously altered how the waiver of inadmissibility is granted by allowing it to be filed inside the United States instead of requiring applicants to do so in a consulate abroad. I am therefore skeptical that the administration is not aware of how relatively easy it would be to use the existing system to grant massive relief to the illegal alien population.

Furthermore I doubt the administration wishes to grant deferred action for a large portion of the illegal alien population as it may then find a decreased willingness to include a pathway to citizenship as a perquisite for immigration reform. Prior to DACA’s announcement there was broad support for passing a version of the Dream Act, but said support was lost as many saw DACA as being a de facto Dream Act. Few people know or care about the marginal differences between the two and many have perceived DACA as being sufficient. A large expansion of deferred action for the illegal alien population may, in the short term, provide them relief at the expense of making others perceive that there is no need for further action to help them. It may also lead to the current pro-immigration reform coalition to break apart and make it more difficult to increase the number of legal immigrants.

Liberalization of immigration law paradoxically makes it more difficult to find support for fully open borders. How much support would there be for open borders if all one had to do to legally enter a given country was sing the national anthem and pay for a ten dollar entrance visa? I suspect under such loose regulations the desire for open borders would be restricted to a handful of individuals interested in it on philosophical grounds.

The Obama administration cannot create any new pathways to citizenship for the United States’ illegal alien population. Nor can it create new pathways for legal immigration. It can however provide relief for the illegal alien population and ease the process for legal immigration. I doubt it will though, as its goal is to get Congress to pass comprehensive immigration reform with as few as possible executive orders.

PeterSellers

Idea for a story

I’m reading Radford’s “The Economic Organisation of a P.O.W. Camp” and I came up with an excellent premise for a Catch-22-esque story. Troops on one side of a war hear rumors that their enemy’s POW camps are comfortable and safe. Word spreads and military leaders get wind of this. In addition to propaganda, and other measures they spread rumors to enemy troops of their lavish prison facilities. This prompts an arms race of escalating promises of prisoners’ wellbeing. In order to make rumors credible they begin actually investing in prisoner camps. Soldiers continue to face squalid conditions so rationally get caught. Total hospitality ends the war.

 

Rational Ignorance, Fairy Dust and Pissing Away the Future: Libertarians are Selfish and Stupid

Brandon Christensen:

I’ve been workin’ on a farm out in Utah for the past couple of weeks, so blogging has been slow. I’m trying to save up some cash so I can head back west again. In the mean time, here is an old post I wrote that critiques some of the more juvenile foreign policy arguments of Republicans and Democrats.

Originally posted on FACTS MATTER:

Hello all,

I thought I’d take up Dr J’s invitation to write something for his blog. This post is largely inspired by the comments thread from his recent post on bombing Syria (for Syrians’ sake, of course) and his latest post on the supposed differences between conservatives and liberals. Ultimately, my goal is to show you how full of shit everybody that participates on this blog really is.

That won’t be hard to do.

Dr J makes the following, factually correct, observation about Leftists (“liberals”):

Conservatives are well informed about liberal programs because they cannot help but be. Few liberals however avoid being pathetically dependent on gross stereotypes of conservatism as a political doctrine. Few even know that it’s a political doctrine based on a well-defined moral stance.

If there is one thing that Leftists are known for, it is being rationally ignorant: the less you know about your opponent…

View original 1,255 more words

Expanding the Liberty Canon: Euripides’ Tragedy Ion

Euripides lived from about 480 BCE to 406 BCE. Though he is one of the three great figures of Athenian tragedy, along with Aeschylus and Sophocles, who have already been discussed, he may have been born outside Athens and died outside Athens.  This relatively mobile life is itself an issue at a time when identity with the city of one’s both and ancestors was  taken very seriously, and it was very difficult for anyone not born of parents of that city on both sides to become a citizen and participate in politics. It is an issue considered in the play considered here.

Euripides’ way of writing is distinct from that of Aeschylus and Sophocles, in that it is more discursive, with long prologues and characters speaking in short essays sometimes. There is less of the feeling than in Aeschylus and Sophocles of writing that is purely poetic and arises unreflectively from a world of myth, gods, and heroes. We should not think of Aeschylus and Sophocles as spontaneous poets of a mythical world view, there is a reflective designed element. Anyway, in Euripides we are likely to feel more part of a world of conscious reflection and debate on the limits of the customs and laws of the time. The mythical is not absent, but is more open to question. The writing style is more like an assembly of short essays joined by dramatic action, which is a slightly harsh way of distinguishing Euripides from the more continuous intense poetry of the other two great Attic tragedians.

More plays survive by Euripides than the other two writers of tragedies, and I hope to turn to some of those later in this series. For an entry in the Euripidean world, Ion is ideal form the point of view of questioning of the politics and religion of the time. The background to the play is that the God Apollo, also referred to as Phoebus, made the young woman Creusa pregnant.  She abandoned the resulting baby boy and believes him to have died. Apollo arranges for the boy to be raised as a servant at his temple in Delphi. The temple is connected with the Delphic Oracle, one of the major institutions of the ancient Greek world and one of the few things giving some unity to the great number of Greek states, along with the Olympic games. The oracles was a woman speaking in a riddling manner, whose words were interpreted  by priests. People came from all over the greek world to hear the prophecies and use them as advise. This include state representatives considering issues like war, so the Oracle has a political function, and may have been manipulated to serve political purposes.

Euripides does not engage directly with the political role of the  Oracle, but the story of Ion revolves around the mythical history of Athens and the early Greek states. Ion is the name of the boy abandoned by Creusa. Creausa comes to the temple with her husband Xuthus when Ion is a young man, with no idea of what has happened to him. Xuthus is a powerful man in Athens, who came from outside the city, but became an important citizen after helping the city to victory in war.

When Xuthus sees Ion at the temple, he is misled by a prophecy of Apollo into believing that Ion is his son, by a brief liaison at a festivity. He makes this belief clear to Ion and invites him to come to Athens as his son and heir, since he has had no children with Creusa. Ion has doubts about going to Athens because of the issue f excluding foreigners from public life, but is assured that that he will be able to speak in public debates. So we see an indication of how citizenship was seen in Athens in the time of the great tragedies, which is to say as participating in public affairs on the basis of a right and duty to speak one’s mind as far as it is directed to issues of the public good.

Creusa does not realise that Ion is her son and when he realises that Xuthus will take him up as his son and heir is angered that a stranger is taking over her family.  She plots to kill Ion with poison. This looming crime and its motives refers both to an ancient Greek tendency to see women as driven by uncontrolled dangerous passions, and to an expectation that the woman has some rights in the marriage and the family that should not be violated. When Ion discovers her murderous intentions, she flees to an alter where she cannot be killed without sacrilege, indicating the role that ideas of divine force and protection had in the  Greek understanding of law. Apollo sends Athena, the goddess associated with Athens, to prevent the sacrilegious murder by explaining that Ion is the son of Creusa and not Xuthus. Ion and Creusa are reconciled, but Xuthus is not informed of the truth. He is allowed to continue to believe that Ion is his biological son. The lie is excused with the suggestion that Ion is his son  by a gift of Apollo.

The play suggests that the interventions of the gods are full of deception and force, so casts some doubt on the perfection of the gods, and on divine justice. That is practice means casting doubt on the foundation of customs and laws, suggesting that they can be debated according to the rights of citizens in Athens that concern Ion. The idea of a city unified by common ancestry rather than residence and citizenship is questioned.

It is the mother who links Ion to Athens through descent and though she is portrayed as murderous, her son’s anger is no less demented and dangerous, so at least suggesting some sense that both men and women need to restrain their most destructive impulse.  she is allowed to known the truth and bears the burden of Apollo’s seduction, or even rape, and subsequent abandonment. It is the priestess of the temple who starts to lead Creusa towards the truth, which is fully explained by Athena.

Euripides expresses the need to question the grip of myth, archaic law, and ancestral custom if there is to be public truth and political justice. He shows some awareness that a community rests on the participation of women not just their subordination to men, even if he does not erectly challenge that subordination. He suggests that violent revenge must be constrained not just by the divine order, which also sets up cycles of revenge, but more by recognition of truth, rational discussion, and debate about the public good, with the possibility of integration of outsiders into a community of free debate about laws and the good of the city.

The California Solar Energy Property-Tax Exemption

California exempts solar energy equipment from its property tax. The exemption will last until 2025. The California Wind Energy Association has complained that this exemption puts solar energy at an artificial advantage relative to other renewables such as windmills. Biomass, the use of biological materials such as wood and leftover crops, is also at a relative disadvantage.

Rather than eliminate the solar tax exemption, the other energy industries should seek to eliminate the property tax on all energy capital goods. With this exemption, the government of California is recognizing that property taxes on capital goods – buildings, machines, equipment, inventory – impose costs that reduce production and innovation. Since this tax is toxic, the property tax should be removed from all improvements.

The best revenue neutral tax shift would be to increase the property-tax revenue from land value by the same amount as the reduction in the taxation of capital goods.

The other energy industry chiefs call the solar property-tax exemption a subsidy. We need to distinguish between absolute and relative subsidies. An absolute subsidy occurs when government provides grants to firms, or limits competition. A relative subsidy occurs when one firm or industry receives a greater subsidy than its competitors. All absolute subsidies are also relative subsidies, because they exist relative to the rest of the economy. But if the subsidy is not in funds or protection, but from lower rates on industry-destructive taxes, this is a relative but not an absolute subsidy.

Suppose that there are patients in a hospital suffering from continuous poisoning. The doctor stops poisoning one patient, and he recovers. But the other patients are still being poisoned. The other patients complain that it is not fair for one patient to be singled out for favored treatment. But the just remedy is not to resume poisoning the recovered patient, but to stop poisoning the others. The taxation of capital goods is economic poison, which the state recognizes would poison the solar energy industry they seek to promote. But why poison the other industries? The property tax should exempt all capital goods, all improvements.

A broader issue is the subsidies to energy. All forms of energy, except human muscles, are subsidized by the state and federal governments. Energy from oil and coal are implicitly subsidized by exempting them from the social costs of their environmental destruction. There is no economic need for any subsidies. But to obtain the true costs of energy, governments should also eliminate taxes not only on their capital goods but also on their incomes and sales. We cannot know whether renewable energy can stand on its own until we eliminate all the government interventions, including taxes, subsidies, and excessive regulations.

Since a radical restructuring of public finances is politically impossible today, a politically feasible reform would be to exempt all capital goods investments from the property tax. If this needs to be revenue-neutral, California could replace its cap-and-trade policy with levies on emissions. The relative subsidy to solar power is unfair to the other energy industries, but the real unfairness is the property tax on their investments.
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This article first appeared at http://www.progress.org/views/editorials/the-california-solar-energy-property-tax-exemption/

Spontaneous thoughts on a humble creed

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