Polystate, part 2

Rick Weber Books, Law , , , , , , , ,

After much distraction I’m back to continue my review of Polystate: A Thought Experiment in Distributed Government (part 1 is here). But now that I think about it, this isn’t so much a review, as a book club (of one…) where I respond to the book.

In this section, ZW gets into the benefits of polystates. He starts with the benefit of choice. Someone born into North Korea is utterly screwed, but someone born into an unattractive anthrostate can simply leave when they reach the age of consent. The reverse is also true: someone may join an anthrostate that the rest of us see as distasteful. Want to join a cult? You’re free to. The thought of that possibility will certainly make your inner-paternalist squeamish, but remember that if you aren’t free to make mistakes, you simply aren’t free.

Another benefit I wouldn’t have thought of is that traditionally problematic systems of government have a higher chance of success when they are separated from geography. For example:

It may be that the failure of collectivization has not got to do with the individual so much as the aggregate. If 95% of people work poorly in a collectivized environment, any random collectivized farm will perform poorly. But it may be the case that 5% of people would excel in such an environment.

I would expect a communist to protest that geographic seclusion is necessary to create New Communist Man. How are people supposed to learn how to shed their egoism if they cannot help but see the vulgar bourgeoisie all around them? But that sword cuts both ways and shows a benefit of polystates ZW didn’t bring up: a child raised in a fascist anthrostate can see non-fascists and so make a more informed decision of whether to stick with fascism when they get older.

ZW sees the polystate as offering a sort of decentralized Tiebout competition. That covers the demand side (what benefits to provide to whom). Adding in the supply side (who will face what opportunity costs) raises the problem of economic calculation in socialism. But ZW takes it in a different direction, hypothesizing that sorting between anthrostates would lessen decision making costs due to more homogeneous populations.

Choice ensures we get more of what we want with less hassle but also provides the option of exit at low cost. Taking geography out of the equation means that there is a larger number of potential state-competitors, as well as more credible movement on the part of citizens.

He raises an interesting problem related to a recent post of mine:

[T]here may be a difference between good governance and governance which pleases one’s constituency… But, regardless of the philosophy of good government, there is an extent to which good governance must have to do with what voluntary citizens decide is good.

First off: No! Government and governance are two different things! But putting that aside, the big problem we face is how to not just aggregate preferences (a difficult problem in itself), but how to ensure that (or even determine if) our method of aggregation results in something good.

I think cable TV is pretty good at giving people what they want, but I also think that the product is overwhelmingly bad. It’s not a big deal with TV because there are so many alternative sources of entertainment and information (although cable news might have existential dangers). Similarly, I think government broadly gives people what they want (not peace and prosperity, but xenophobia, “doing something,” paternalism, and the like) but that’s not a good thing. The idea of the U.S. senate was to prevent people from having too much choice so that good institutions could be preserved. So could the degree of choice offered by polystates be to much? On the other hand, how could you determine an answer without incorporating the revealed preferences of the governed?

Finally, ZW gets into an especially meaty benefit of anthrostates: peace. It’s hard to start a war with a disbursed enemy (“semi-random geographic distribution), and hard to finance one when your citizens can switch to a more peaceful government. This could be especially important in avoiding territory disputes as humans explore and colonize space (for example, if resources on the moon become valuable enough to justify the expense of following Newt Gingrich up there).

That concludes Book 1 of Polystate, and that’s where I’ll stop for now. I’ll be picking through the book fairly slowly, so I recommend that you buy the book for yourself!

A thought on competition

Rick Weber Economics

“Start-ups, or market entries lead to new business development, whereas incumbent firms might be forced to dissolve by the increased competition of the new firms. More indirectly, the new businesses and the removal of older, perhaps less efficient businesses, might lead to improved competitiveness and economic growth.”

From van Praag and Versloot (2007).

The above quote is from a paper on entrepreneurship. Pretty much anyone who studies entrepreneurship has at least passing familiarity with some aspects of Austrian economics. The above quote struck me for showing the difference between the mainstream view of competition and the Austrian view. For Austrians competition is a process; you compete with rivals by offering better terms to potential trading partners. For mainstream economists competition is a state; when there are lots of market actors there is competition.

The first use of competition is Austrian: new firms out-compete old firms. The second is mainstream: getting rid of inefficient firms leads to “improved competitiveness.” They don’t write “entry of new firms force old firms to be more competitive,” but “a change in the makeup of the market results in more competition.”

I think a lot of mainstream, equilibrium based economics is really just short-hand for the complex processes Austrians think about. But I think people forget that it’s shorthand and that leads to thinking about the economy statically, like some thing with a certain arrangement that can probably be rearranged. The difference between the two concepts of competition is a reflection of this. A market with lots of different firms is probably competitive, but that’s no guarantee. We need to think about how long those firms have been doing what they’re doing, and that leads us to see how industries with few (or even one) firm may still face competition.

Ukraine

Jacques Delacroix Current Events , , ,

The Russian gangster state is about to take the Ukraine apart as I write.

This is not our fight, I think. There are no big American interests at stake. American lives are not endangered. As I write, there is not big humanitarian crisis (as there is in Syria, and continuing) either.

I hope we  mostly agree in this country that national borders are not sacred. We are not sworn to go to war to have them protected. If the Ukraine becomes two states  or if a part of it becomes incorporated into Russia, that’s alright with me. I hope it happens quickly and with little bloodletting.

The argument that we are on the side of Ukrainian democrats is not very convincing, right now. I just don’t know. I don’t think they know.

The main downside of this crisis, as I see it, is that President Obama was not able to keep his big mouth shut. He just gave another reason for political mafiosi, tin-pot dictators, savage tyrants, and pure fascist states such as Iran and North Korea to consider the US a paper tiger. That is very dangerous. It leads to gambling miscalculations, a la Saddam Hussein.

A Bit More on Ukraine

Brandon Christensen Comments, Current Events, Politics , , ,

Evgeniy’s plea for balance in the Russia-Ukraine conflict has produced, in my mind, an interesting dialogue on propaganda – both of the Western and of the Russian variety.

Let me come out and say with some conviction that I am not a supporter of the Putin regime. Nor do I believe much of the analysis that comes out of the Russian press. (This is because the vast majority of the Russian press is controlled by the state, and not because it is Russian or because it generally espouses pro-Russian sympathies.)

Evgeniy, for example, cites reports from the Russian press claiming that half a million people have fled Ukraine for Russia since the beginning of the year (when the demonstrations started). If half a million people fled from one place to another in a month, from anywhere in the world it would be headline news, but for some reason only Russian citizens have heard of this exodus? I don’t buy it.

Now, this number may be a misunderstanding based on a bad translation. In fact, I think this may be the case. My translation of Evgeniy’s comment states that the Russian press reports that “since the beginning of the year (January 2014) in Russia has resettled about 500,000 refugees from Ukraine.” Emphasis mine. Has this resettlement been ongoing since the end of the Cold War? However, judging by Evgeniy’s comment, it looks as if resettlement has only begun in January of this year, so if this is indeed the claim that the Russian press is making then it is obviously false.

Terry’s excerpted quote from the Daily Beast fares no better in the facts department, though, despite the Daily Beast being a private organization. The op-ed is an attempt to debunk “Putin’s Crimea Propaganda Machine” as if Putin has the power to control everything the Russian press publishes. State control of the media, especially in a country as large and diverse as Russia, does not mean that the bureaucratic process magically disappears. Bureaucracies and especially regulators are actors in their own right, and as such are beholden to certain constraints and processes that come with the way these institutions are organized.

So in the spirit of open inquiry and debate, there are a couple of facts I’ve gathered that I think are important to note.

  1. The President of Ukraine was ousted in a coup. He was elected by a very slim margin and accusations (from both sides) of voter fraud were rampant.
  2. The opposition that recently installed a new President therefore gave democracy the finger. This is not in itself a bad thing, but many Western observers tend to side with the pro-West faction as if it was democratic. It is not.
  3. The exiled President signed an agreement with the opposition last month guaranteeing early elections and more power to the legislature at the expense of the executive branch. This is as peaceful and as democratic as it gets, and the opposition gave, as I said, the finger to this agreement.
  4. The opposition has fascists in its cabinet. It has also installed Ukrainian Jews to high-ranking positions. The Muslim Tartars in Crimea stand to lose the most during Russia’s occupation.
  5. Ukrainians are sick of their government – right or left, pro or anti -and this has yet to be addressed by anyone other than Dr Foldvary as far as I can tell.
  6. No shots have been fired. Moscow has reiterated that it is in Crimea to protect its naval base and Russian citizens. I have a feeling that Russian troops will be back in Russia within the year. Crimea will get to keep its autonomous status within Ukraine, and Kiev will be forced to think twice before it attempts to impose its will on Crimea arbitrarily. This is a good thing, as it limits the size and scope of government.
  7. So far most, if not all, information about military activities have been coming from governments, not from the free press. This can only lead to more misunderstanding and more suspicion.
  8. War is the health of the state. In times like these, journalists should be criticizing their own governments rather than the governments of others. In the West, where the press remains relatively free, there is more criticism of government policies concerning foreign affairs than there is in Russia.

At the end of the day, I have to agree with Evgeniy’s plea for toleration and prudence: “Please do not judge this conflict only from one side.”

Towards a Free and Prosperous Ukraine

Fred Foldvary Liberty

The violence in Ukraine demonstrates once again the failure of centralized democracy. Whenever we see masses of people protesting and rallying in the city streets and squares, it shows that the structure of government has failed. The prime purpose of democracy is social peace. The mass demonstrations show that the people cannot express their views and make policy decisions through the formal channels of government, so they take to the streets.

When government fails, there is another path towards political change: civil disobedience. Rather than massing in the city square or taking control of government buildings, the protestors can stop obeying the government. They can stop paying taxes and stop obeying unjust rules. Civil disobedience is how India won independence and the US civil rights movement ended segregation. Today, protestors use social media to spread the message. Some activists will be put in prison, but there is not enough room to put half the population in jail.

The conflict in Ukraine originated in the 2010 election for president, in which the opposition accused the winner of fraud. The protests began in November 2013, when the president switched from making a trade agreement with the European Union in favor of a pact with Russia, which provided aid to the government of Ukraine.

The protests in Ukraine were intended to be peaceful, but mass protests often become an attractive nuisance for provocateurs. When a small minority of protesters start throwing rocks or fire bombs at the police, that becomes the signal for the police to use lethal force, and then the protestors return fire, and the result is violence and death. Peaceful civil disobedience is decentralized and does not provide such a venue for the chaos makers.

Ukraine is the largest country that is entirely in Europe. It was in the Russian Empire until the Bolshevik revolution of 1917, when it became an independent state. It soon became a republic within the USSR. The Soviet structure of councils and republics served to preserve the identity of Ukraine, which even had its own membership in the United Nations, and achieved independence with the break-up of the USSR in 1991.

Now, in February 2014, following the failure of government repression, the Ukrainian parliament has dismissed the president, restored the 2004 constitution, freed the previous prime minister, and appointed an acting president. The agreement between the government and the opposition was facilitated by the foreign ministers of France, Germany, Poland and a representative of the president of Russia.

The national anthem of the country is “Ukraine has not yet perished.” Millions of Ukrainians died during the years of forced collectivization under the Soviet Union, and more millions, including many Jews, were slaughtered during World War II, but the Ukrainian identity has persevered. Ukrainians now have a unique opportunity to reshape their future.

Some of the conflict in Ukraine comes from its ethnic mix. The westernmost part of the country was part of Poland prior to World War II, although that territory along other neighboring areas had been Ukrainian previously. In 1954, the Crimea was transferred from the Russian Republic to Ukraine. The eastern half of Ukraine is culturally Russian; the main religion is Eastern Orthodox. The western part is ethnically Ukrainian and Catholic, and the people of western cities such as Lviv identify with Europe. Ukraine needs to restructure its governance as well as its economy in order to achieve social peace and prosperity.

Ukraine has a centralized government, but also has 24 provinces, plus the nominally autonomous republic of the Crimea, and two city districts, Kiev and Sevastopol. The democracy of Ukraine can become more authentic by decentralizing the governance into a federation of its subdivisions. An association agreement with the European Union should reduce trade barriers, while the Ukraine should also pursue free trade with Russia and its other neighbors.

The economy of Ukraine suffers from its oppressive tax system. The new tax code adopted in 2011 has 18 national and 5 local taxes. The major taxes include corporate and personal income taxes, a value added tax, and excise taxes. But there is also an economy-friendly, though small, land tax, and royalty taxes on the extraction of natural resources. The current tax rate on corporate gross income is 16 percent. The value-added tax rate of 17 percent is imposed on the sale of goods, including imports. There is also a high social security tax of up to 49.7 percent.

Ukraine’s land tax is paid by the owners and users of land. The tax rates depend on the use of the land. For pastures, the rate is one-tenth percent of the land value, and for farms the rate is three-hundredths of a percent. There are also local real estate taxes per square meter of dwelling space with the tax rate from 1% to 2.7% of the monthly minimum wage.

The Ukranian tax system has been criticized for its complexity, its disincentives to labor and enterprise. and its inducement for tax evasion. Ukraine has the potential to become a great agricultural and industrial economy, but its tax and regulatory policies have been holding it back. The Fraser Institute’s index of economic freedom calculates Ukraine’s level at 6.16 on a range from zero to pure freedom at 10. Out of 152 economies, Ukraine ranks 126 in economic freedom, near the bottom among the countries of the world. The Heritage Foundation index also ranks Ukraine as “repressed,” especially low on investment freedom and freedom from corruption.

If Ukranians seek prosperity, they would be wise to eliminate all their taxes other than the land tax and also enact national and local pollution taxes. The land value tax should be uniform for all land, based on its current market price or rent when put to its best use, regardless of its current use. The elimination of the other taxes would stop tax evasion and liberate the underground economy.

Ukrainians should stop blindly copying the dysfunctional tax system of the European Union and adopt a modern 21st century public finance system suitable to the global economy and Ukraine’s position between Russia and the EU. They can avoid either joining the EU or a Russian-led Eurasian Union by legislating free trade with both regions. They should enact domestic free trade by avoiding the taxation of labor, enterprise, and produced wealth. With rising public revenue from land value, and with rising wages, Ukraine could reduce its social security taxes until the government either funds pensions from land rent or replace government pensions with private retirement accounts.

Land-value taxation would also promote a decentralization of governance and a reduction of corruption. The land of Ukraine is rich and can well support its public finance, and let Ukraine to not just avoid perishing, but to flourish.

Are small businesses entrepreneurial?

Rick Weber Economics, History, Liberty, Politics

Between 1958 and 1980 the number of businesses in the U.S. economy increased from 10.7 million to 16.8 million. But the relative economic importance of small business in the overall economy declined over this period. Between 1958 and 1977 the share of employment accounted for by firms with fewer than 500 employees decreased from 55.5 percent to 52.5 percent. Between 1958 and 1979 the share of business receipts obtained by companies with less than $5 million in receipts declined from 51.5 percent to 28.7 percent. Between 158 and 1977 the share of value added contributed by firms with 500 or fewer employees decreased from 57 percent to 52 percent. (Zoltán J. Ács, Bo Carlsson, and Charlie Karlsson 1999, 7)

That’s an enormous relative increase in the importance of big businesses. Consider that change in light of macroeconomic conditions and political thought at the time. It seems almost like the dark ages. I think it also shows an apparent correlation between business, government, and ideology. Since the mid ’70s, small businesses have gained importance in the U.S. economy while also leaving the dark ages of mid-20th century illiberalism.

From the Comments: Musings on the Ukraine Fiasco

Brandon Christensen Comments, Current Events, Politics , , , , ,

Riffing off of my post about the current crisis in Ukraine, Matthew writes:

Based on the track record of Russia vis a vis the West, I imagine the following scenario unfolding:

Russia (continues) to occupy the Crimea, while America and Europe (continue) to demand the withdrawal of Russian forces from the province. Putin, calculating that the West lacks the stomach for direct confrontation, refuses. Hysteria in the media and in government publications, which are ultimately the same thing, rises. A lack of direct conflict between Russian and Ukrainian forces, however, lends little credence to the mass panic broadcast over Western media. The furor dies down in time. Russian presence becomes normalized in the Crimea.

Or, the interim government, bolstered by further illicit monetary aid from America, pulls a Georgian move and attacks the Russian forces stationed in Crimea. Russian forces will quickly rout the Ukrainians sent against them, and most likely march towards Kiev – whether they take it or not will depend on the response of the international community, as with Georgia. Regardless of who instigated the violence, the Western media will blame Russia, and the war drums will grow louder. UN sanctions are unlikely, since Russia is a permanent member of the Security Council, but some form of economic punishment will occur. Russia will draw closer to China, Iran, and Syria. The status quo ante will be upended in no one’s favor: Ukraine will be in shambles, Russia and America will be set at odds.

Regardless of the above two scenarios, meanwhile, the Ukrainian economy is in free fall, and the IMF offers the dual poisons of austerity and liberalization to the interim government. Facing an intransigent Russia and the wolf-faced smile of the West, the interim government accepts the IMF’s offer. Like Russia before it, Ukraine is left even worse for wear by the rapid pace of economic liberalization, and is thus too weak to resist the Russian presence in Crimea. Thus, the West has succeeded in breaking off a chunk of post-Soviet Ukraine and bringing it into its influence, while Russia largely retains what it had beforehand: its Black Sea Fleet in Sevastopol, along with the de facto annexed province of Crimea. It is too early to tell, but perhaps the rest of Russified Ukraine will also join their brothers in Russified Crimea, and the state will break up along linguistic lines.

Who can tell what will occur? My money is on Russia, but maybe Obama will come up with some game winning stratagem (don’t snicker!).

Does anybody else care to make their predictions? You know where the ‘comments’ sections is!

О ситуации с Украиной и Россией

Evgenii Grigorev Current Events , ,

Являясь единственным автором постов в сообществе Notes On Liberty, который живет в России и может как-то “иначе” рассказать о текущей ситуации между двумя странами, хочу сделать небольшое заявление, которое, скорее всего, поддержит большая часть населения России. Я хочу обратиться ко всем авторам и читателям сообщества из других стран: будьте умнее ваших новостных лент и газет. Большинство ресурсов освещают ситуацию крайне односторонне – с той позиции, которая выгодна лишь одной стороне. “Правый сектор” (украинская неонацистская организация, которая сейчас имеет влияние в стране) рисует нас зверями и оккупантами, зарубежные газеты также поддерживают позицию нового правительства Украины, которое пришло к власти в результате переворота и пока что не может считаться легитимным. Сейчас против России ведется настоящая информационная война! Нам не нужна Украина, и нам не интересен и не нужен раскол этой страны, так как все мы “братья-славяне”. Совет Федерации России одобрил введение ограниченного контингента российских войск в Крым исключительно для защиты Черноморского Флота от возможных провокаций, а также для защиты русских граждан, проживающих в Крыму, так как в условиях нестабильности местные органы защиты вряд ли смогут в полной мере пресекать провокации анти-российских группировок. Еще раз повторю: фраза “совет федерации одобрил введение ограниченного контингента” по Российским законам означает лишь одно – у президента Российской Федерации теперь есть законное право на введение войск, НО не факт, что он им воспользуется. Разумеется, вооруженный конфликт никому не нужен, и нам в первую очередь. У нас всех есть друзья-украинцы, у многих на Украине живут родственники. Мы, по-правде, с недоумением относимся ко всем этим событиям, которые происходят сейчас.

Пожалуйста, не судите о конфликте лишь с одной стороны. Не знаю, какими новостными ресурсами вы пользуетесь там, CNN, BBC, Russia Today или чем-либо еще – потрудитесь разобраться в проблеме со всех сторон, потратьте свое время на всестороннее изучение вопроса, не удовлетворяйтесь первыми полученными результатами, которые скорее всего будут отражать позицию вашего президента или правительства.

Le nouveau racisme américain et l’impérialisme français

Jacques Delacroix Current Events, History, Law, Politics , , , , , ,

La tache est infinie d’eduquer les Francais pour leur faire jeter aux orties les cliches anti-Americains plus ou moins malveillants qu’ils trainent depuis soixante ans. Comme personne d’autre ne le fait, je me porte volontaire, de temps en temps, pour les aider a les remplacer par des cliches plus frais sur les Etats-Unis.

La Cour d’Appel qui correspond a la region de San Francisco vient de donner raison au directeur d’une ecole secondaire qui avait interdit a ses eleves le port ou l’affichage du drapeau …americain. Le tribunal a donne pour raison que ce drapeau risquait d’offenser les “Mexicains” de l’ecole.

Le debut de l’histoire remonte a Cinco de Mayo (en Espagnol dans le texte) de l’annee derniere. Il s’agit d’un fete officielle de l’Etat de Californie qui commemore une victoire militaire Mexicaine de 1862. C’est une fete qui passe inapercue presque partout au Mexique.

L’Etat de Californie l’a adoptee on ne sait plus trop pourquoi. Peut-etre que c’etait sous l’impulsion propre de la gauche cul-cul bien pensante locale aussi ignorante qu’avide demontrer sa sensibilite vis-a-vis des “minorites.” Peut-etre que cela a ete impose par un groupe de pression de Mexicano-Americains, raciste et fascisant qui se nomme lui-meme: “La Raza, ” “la Race.” (Ai-je meme l’imagination d’inventer de telles insanites?) En tous cas, selon mes sondages, forcement peu scientifiques mais tres frequents, le pourcentage d’Anglos capable de d’identifier les evenements ainsi commemores tourne autour de 0. Le pourcentage des jeunes d’origine hispanique monte jusqu’a 5. Il me faut ajouter pour etre honnete, qu’un 5% additionnel de ces derniers est en mesure d’affirmer: “Je ne sais pas ce que c’est mais je sais que ce n’est pas l’anniversaire de l’independance mexicaine.” En tous cas, cette commemoration a des effets positifs sur la consommation californienne de bieres mexicaines (d’ailleurs tres bonnes).

Et l’imperialisme francais alors, vous dites-vous? Et bien voila, en 1861, l’armee francaise du soi-disant Empereur Napoleon II (socialiste pour une bonne partie de sa carriere ploitique) a recu l’ordre d’aller attaquer la Prusse. Manque de chance, elle a tourne a doite au lieu d’a gauche. Elle s’est donc retrouvee au Mexique. De fil en aiguille, ell a fini par conquerir brievement tout le pays et a y installer un empereur fantome, un Autrichien obscur et palot. Ell profitait alors bien sur du fait que les Etat-Unis etaient eux-memes preocupes par le projet de s’entretuer pendant leur propre guerre civile. En attendant, au debut, les Mexicains de presidet Benito Juarez avaient bel et bien gagne contre le corps expeditionaire francais.

Pour en revenir a la Californie, le 5 Mai de l’annee derniere, dans une ecole sans importance d’une ville sans importance situee au sud de San Jose (Silicon Valley), des eleves d’origine mexicaine s’etaient presentes en class a portant des t-shirt figurant le drapeau mexicain. Des eleves Anglos avaient replique en enfilant des t-shirts a l ‘image du drapeau americain. Il y avait eu des bousculades entres eleves des deux groupes sans nulle doute echauffes par la presence de filles, aussi des deux groupes, en t-shirts sans dessins particuliers mais bien moulants.

La Cour d’Appel, en interdisant de fait de montrer le drapeau americain en Amerique a elle-meme fait la preuve d’une sorte de racisme, anti-blanc, cette fois-ci. En plus, elle a bien demontre son prejuge racial inconscient en identifiant comme “Mexicains” la categorie sociale que sa decision est censee proteger des bobos spirituels. Il est certain qu’elle voulait dire: “Americains d’origine mexicaine” car il n’y probablement pas ou que tres peu de “Mexicains” dans cette ecole. (N.B.: Toute personne nee aux Etats-Unis est citoyenne americaine, un point, c’est tout.)

PS Moi-meme, je suis tres satisfait de l’existence en Californie d’une forte emigration d’origine mexicaine (30% ou plus de la population de ‘Etat.) , y compris les sans-papiers. D’une part, se sont de gens faciles a aimer. D’autre part, ils apportent beacoup. Je crois meme bien que les enfants qu’ils font aujourd’hui supporteront la majeure partie du poids financier de la retraite Securite Social de mes propres enfants, vers 2045.

Constitutional Political Economy and Jeopardy

Rick Weber Current Events, Economics, Law

Arthur Chu, the “mad genius” of Jeopardy has continued his streak with the power of game theory! But apparently many viewers are upset. Chu is playing within the rules of the game, but he’s been accused of being unsportsman like. He responded:

‘Being unsportsmanlike is calling your opponents names or refusing to shake their hands. It shouldn’t apply to playing the game as hard as you can and trying to win as hard as you can, within the confines of the rules.

‘Not giving my opponents a chance to answer’, to me, is just like not giving your opponents the chance to shoot in basketball or not letting them get within range of the goal in soccer. It’s not ‘unsportsmanlike’, it’s playing defense,’

We know that rules affect how people compete and that in spectator sports that affects how fun it is to watch. So Chu’s success might mean that Alex Trebeck has to change the rules to give viewers what they want. If he does, this is what I would have to say:

 

Ukraine, Russia, the West and a Coasean Bargain?

Brandon Christensen Current Events, Politics , , , , , ,

Economist Tyler Cowen worries about the events in Ukraine:

For Russia, matters in Ukraine are close to an existential crisis, as Ukraine is intimately tied up with Russia’s sense of itself as presiding over a mini-empire of sorts.  Nor could an autocratic Russia tolerate a free and prosperous Ukraine, developing along the lines of Poland.  America cares about Ukraine less, and cares more about Syria and Iran, or at least cares about saving face in those latter venues.  Therefore there is a Coasean deal to be had between America and Russia, where Russia gets to partition part of Ukraine, create a buffer against Europeanization and democratization, keep the larger Ukraine unit weak, and also keep its Black Sea fleet.  In turn Russia would do something less than totally sabotage all American plans for Syria and Iran.  (Of course that is Coasean for the leaders, and not necessarily for the citizenries.)

The thing is…China.  What kind of signal would such a Coasean deal of partition send to China?

That is what I worry about.

I argee that there is a Coasean bargain to be had between the US and Russia in this case, but it’s not the one Dr Cowen sees. Let’s assume that the US does have more interest in the Middle East than it does in Russia’s backyard, but even with this assumption I don’t think it follows that the West will give up Ukraine for Syria and Iran.

The West has been down in the doldrums lately, it’s true, but there is still plenty of fight left in it and plenty of resources with which to do the fighting.

Really quickly: I know I’ve mentioned this before, but making two states out of one (“partitioning Ukraine”) will be a good deal for almost everybody involved (the minorities in Russian Ukraine will not fare so well). As it stands today, Ukraine is simply too big to be governed effectively. This is a problem with many, if not most, post-colonial states in Asia, Africa and Europe.

International recognition is something that would be observed by almost all sides (minorities in Russian Ukraine will not like it), which is one of the requirements I’ve pointed out that needs to be completed before secession (or partition) is undertaken in post–colonial states.

The other major requirement is that the new states are part of regional or international trading unions of some sort. The more the better, but any is a start. Russian Ukraine will be good to go, as it would be in Russia’s orbit, and the West could easily ensure that the Ukrainian Ukraine gets more attention than it now currently has. This is where the West should dig in its heels and fight: After partition. Ukrainian Ukraine will need to be drawn into the West’s economic orbit rather than offered up as a sacrificial lamb, and this definitely doable. This is the Coasean bargain, not Ukraine for Iran and Syria.

The China angle Dr Cowen brings up is also an interesting one. Beijing is authoritarian not stupid. Here is what conservative military leaders in Beijing probably see:

Ukraine might get no love from the EU or the US, but it is much weaker than Japan or South Korea or even Taiwan. So China could not take any of these states militarily without high costs, while Russia could conceivably take all of Ukraine without significant military losses (the political damage would be too much for Moscow, so it won’t happen; but it is a possible scenario).

Could there be a college bubble?

Rick Weber Current Events, Economics , , , ,

The essence of a bubble is that you can flip an asset one more time before the bubble bursts. Most people know it will burst, but as long as prices are still rising, we might be able to fleece one more sucker. But we have to get the timing right or we might be that sucker.

But what about college? I can’t sell my degree (and there are other things that Jon Lajoie can’t do with it, but that’s neither here nor there), so I can’t flip it. But I can get rents on it. I give up $100,000 to get a degree with a present value of $300,000, and I feel peachy-keen. That’s a recipe for increased demand leading to higher tuition, sure, but could there be a bubble?

Let’s start with equilibrium so we have a counterfactual. Basic supply and demand here: higher incomes for college grads increase demand, and increased demand increases prices. In equilibrium the marginal student’s value of the degree will be equal to or greater than the opportunity cost of getting the degree.The student’s value is the benefit of cool college parties, mind/horizon expansion, reduced expected unemployment in the future, and higher expected income. Their opportunity cost is tuition, loan interest, stress from doing homework, and time not spent working. The question of going to school is different for different students; some will enjoy college more, will get more out of it, will have an easier time of it, etc. And the financial return isn’t the only relevant variable. At this point I’m thinking that maybe the current market is actually pretty sensible… we can ask questions about the sustainability of subsidies, but given everything, it’s likely that the students going to school are making the right choice, as are the ones who don’t go. Mistakes will be made, but it isn’t necessarily the case that there are systemic, wide-spread mistakes.

Now let’s think about what it might mean for the bubble to burst. First off, there would have to be a bubble: too many people paying too much to be in school; too little incentive for any individual to change their behavior. Then all at once, there is a flood away from the market, and recent grads are left holding the bag. During the bubble, I can get financing for my degree and I can reasonably expect (even if I see that there’s a bubble) that I will come out ahead, as long as I jump ship soon enough. Let’s say that during the bubble, I pay $10k to get a degree and I earn an extra $1k per year (and lets also assume, for simplicity’s sake, that we don’t have to worry about discounted values… a bird in the hand is worth one in the bush). My behavior is rational as long as I expect to keep getting that extra grand for the next 10+ years. So our bubble has a weirder time dimension than, for example, a beanie baby bubble where I can buy and sell rapidly.

Also, our bubble requires that my income is inflated compared to it’s post-bubble level. That would certainly be the case for me as an academic; if that bubble bursts, my income will drop. Will that be true of someone getting a business degree? American employers are keen to hire people with degrees, and so there’s a de facto licensure system. The assumption is that if you don’t have a degree there must be something wrong with you. As long as everyone holds this assumption then all would/could-be students will have to get a degree. But if no degree means ‘idiot’, that doesn’t mean that degree means ‘genius.’ Employers could well figure out a better vetting procedure, and students could get sick of undergoing the opportunity cost of attending school. But if this is a gradual change, then ‘bubble’ doesn’t seem like the right word. Even if the change in hiring practices is instant, the change in the labor market won’t be. If every 30 year old has a degree and suddenly degrees become unimportant, companies won’t rush out to replace them with 20 year-olds. The supply of lightly-experienced, qualified workers won’t change in the short run unless there’s a reserve army of qualified but un-credentialed labor currently in limbo as baristas.

So is there a bubble? It certainly seems like enrollments don’t reflect underlying realities. It also seems like there are profit opportunities for entrepreneurs able to improve hiring procedures; placement services could vouch for a candidate’s abilities, employers could accept non-college interns and hire from that pool, would-be students could become self-employed. I think the market is far away from equilibrium. But I’m doubtful that re-equilibration will happen rapidly. There isn’t room to “burst” a bubble, so much as there is room to avoid wasting a lot of 18-24 year-olds’ time.

A review in n parts: Polystate, part 1

Rick Weber Books, Law , , , , , , ,

Zach Weinersmith of SMBC comics just published Polystate: A Thought Experiment in Distributed Government. I’ve started reading it and immediately needed to start commenting. Before I get into the review, let me say that SMBC comics is an excellent web comic that everyone should read.

The basic idea ZW introduces is the polystate, a system of government comprised of anthrostates. An anthrostate is “a set of laws and institutions that govern the behavior of individuals, but which do not govern a behavior within geographic borders.” It is essentially government that individuals get to choose in the same manner that they get to choose their insurance company; so to neighbors can live under a different set of laws and any disputes between them are a matter for their anthrostates to sort out. At this point you should be thinking: Nozick did it. The idea of a polystate is essentially Nozick’s Utopia of Utopias.

He contrasts poly/anthrostates with geostates, the geographically defined monopolies on the use of force we are used to today. Does it need to be thus?

Why should we suppose that a person who likes hot dogs, is familiar with a two-party electoral system, and believes Abraham Lincoln was a great man is necessarily someone who should live in a temperate climate in the Western hemisphere?… This is not to deny that history and culture and the choices of individuals matter, but rather to assert that many of the “essential” qualities of nationhood are not, in the long run, meaningful ones.

I’ll agree and disagree. These qualities are relevant to some sense of cultural identity, but are not essential for defining the boundaries of a state. This cultural identity is part of the environment of informal institutions, which are part of a broader polycentric order. This is the underpinning of law (the way Hayek characterized it) which is much broader than legislation.

ZW approaches the problem like a mathematician and sets himself up with a hard sell, by assuming there will be a huge need for technological advances to overcome transaction costs. His argument rests largely on technological possibility and is highly concerned with interaction at the anthrostate level.

A polystate would likely increase the complexity of business and legal transaction. In a world with only 200 or so geostates, most commerce is not interstate and even if it were, geometry tells us that the number of possible two-state transactions is given by n(n-1)/2.

Nobody thinks the distribution of such transactions is uniform, and in real life we see a large proportion of international transactions go through countries that specialize in trade. Hong Kong would surely have an anthrostate analog. In fact, there are historical antecedents. He foresees rules being designed at the polystate level to simplify interactions but, “whatever rules were put in place, the results would be too burdensome to exist without a large bureaucracy or some sort of computational way to arbitrate these many interactions.”

The basic flaw in ZW’s approach is that institutions and laws are provided from the state, and so technology is the answer to transaction costs problems. In fact, the issue is that ZW (though he’s not alone on this) wants a change in institutions that will require a new order to emerge. His book will help to peacefully guide the process of societal change towards that new order. Technology will surely play an important role as well.

That gets us through the first four chapters. I will continue with more tomorrow evening.

Conjugal Relations

Jacques Delacroix Liberty

My wife and I are discussing our investments. We don’t have investments because we belong to the hated 1% – wish we did – but because neither of us has a pension. She is annoyed because she does not understand some arcane point of finance.

Promise me you will die after me she blurts out. (She does not want to learn new, boring stuff.)

I don’t think so, I say, without missing a beat.

Selfish, self-centered, narcissistic, sexually ambivalent bastard, she throws out across the kitchen table!

The last charge holds no truth at all. I am a straightforward crude T and A guy. She is just doing her best to make me feel the horror of her hatred for me at that moment.

Yes, I know, men and women are almost exactly the same. That’s except when they are not. Would I ever think of calling her the same?

How about that coffee you promised me, I ask innocently?

I won’t prepare it because you refuse to promise that you will die even one second after me and you can put the coffee up your… (Note the illogicality.)

If you keep using this rude language, I threaten, I will put it on my blog.

You wouldn’t dare, she exclaims.

Done!

The socialist roots of Nazism (and the Left’s typical response)

Brandon Christensen History, Politics , ,

One of my constituents once complained to the Beeb [BBC] about a report on the repression of Mexico’s indigenous peoples, in which the government was labelled Right-wing. The governing party, he pointed out, was a member of the Socialist International and, again, the give-away was in its name: Institutional Revolutionary Party. The BBC’s response was priceless. Yes, it accepted that the party was socialist, “but what our correspondent was trying to get across was that it is authoritarian”.

Amazing! This is from Daniel Hannan writing in the Telegraph.