The Political is about to disrupt the crypto-currency scene -or at least they say so.

According to this Financial Times report, Bitcoin is at the verge of a critical decision.

The implications of the chosen terms (“existential crisis,” “decisive leadership,” “political flaw”) are not casual. It looks like the market that crypto-currency had carried from the beginning contain the germ of its own destruction. As in an Escher’s drawing, Bitcoin has unraveled its political strand and its whole existence is, now, dependent upon a moment of decision of the sovereign: the assembly of miners. The decisionist narrative would be fulfilled if the political decision had to be taken by acclamatio instead of voting.

Nevertheless, the decision by acclamation would be still possible: the ones who want “Bitcoin Core” might follow one direction and the other ones, who choose “Bitcoin Unlimited,” might follow their own way. After all, no existential crisis can be solved by voting.

So, which is inside of which? Is the market framed in a system depending upon a political decision of the sovereign? Or does every decision need to be taken inside a spontaneous framework of rules?

We are used to praising Bitcoin for its independence from any political factor: Bitcoin supply depends on a set of rules which allows the public to form expectations about its value with a high degree of probability of proving to be correct.

Taken in isolation, Bitcoin emulates the market. Nevertheless, being independent of political institutions is not enough for being “the market.” The attractiveness of Bitcoin is that it operates in an open system of competition of currencies. In this system, there are many other crypto-currencies, and there might be several variances of Bitcoins as well –in esse or in posse.

Imagine, for example, that Bitcoin effectively splits into Bitcoin Core and Bitcoin Unlimited. Which of the two will prevail over the other? It does not matter. What really matters is that there will be several variances of currencies in competition. The factors that determine the selection of the prevailing currency depends upon a higher level of abstraction that impose an absolute limit to our knowledge.

So, is Bitcoin in an existential crisis? Does a political decision need to be made? Maybe.

But that does not imply that “The Political” will take over the reins of the crypto-currency market. Moreover, opposite political decisions are the linkages which the spontaneous selection process -in this case, of currencies- is made of. In this sense, “Bitcoin Core” and “Bitcoin Unlimited” are attributes of a competitive system and the final prevalence of one variance among other alternatives will not be the result of a deliberate decision but of an abstract process of evolution.

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Lunchtime Links

  1. Trophy-taking and dismemberment as warfare strategies [pdf]
  2. optimally vague contracts and the law [pdf]
  3. Germanic and Carthaginian republicanism
  4. traditional resurgence in tropical Africa [pdf]
  5. crisis bureaucracy: homeland security and the political design of legal mandates [pdf]

Lunchtime Links

  1. violence among foragers [pdf]
  2. building legal order in ancient Athens [pdf]
  3. why Congo persists [pdf]
  4. toward an old new paradigm in American international relations [pdf]

Does business success make a good statesmen?

Gary Becker made the distinction between two types of on-the-job training: general and specific. The former consist of the skills of wide applicability, which enable the worker to perform satisfactorily different kinds of jobs: to keep one’s commitments, to arrive on time to work, to avoid disturbing behavior, etc.. All of them are moral traits that raise the productivity of the worker whichever his occupation would be. On the other hand, specific on-the-job training only concerns the peculiarities of a given job: to know how many spoons of sugar your boss likes for his coffee or which of your employees is better qualified to deal with the public. The knowledge provided by the on-the-job training is incorporated to the worker, it travels with him when he moves from one company to another. Therefore, while the general on-the-job training increases the worker productivity in every other job he gets, he makes a poor profit from the specific one.

Of course, it is relative to each profession and industry whether the on-the-job training is general or specific. For example, a psychiatrist who works for a general hospital gets specific training about the concrete dynamics of its internal organization. If he later moves to a position in another hospital, his experience dealing with the internal politics of such institutions will count as general on-the-job training. If he then goes freelance instead, that experience will be of little use for his career. Nevertheless, even though the said psychiatrist switches from working for a big general hospital to working on his own, he will carry with him a valuable general on-the-job training: how to look after his patients, how to deal with their relatives, etc.

So, to what extent will on-the-job training gained by a successful businessman enable him to be a good statesman? In the same degree that a successful lawyer, a successful sportsman, a successful writer is enabled to be one. Every successful person carries with him a set of personal traits that are very useful in almost every field of human experience: self confidence, work ethics, constancy, and so on. If you lack any of them, you could hardly be a good politician, so as you rarely could achieve anything in any other field. But these qualities are the typical examples of general on-the-job training and what we are inquiring here is whether the specific on-the-job training of a successful businessman could enable him with a relative advantage to be a better politician -or at least have a better chance of being a good one.

The problem is that there is no such a thing as an a priori successful businessman. We can state that a doctor, an engineer, or a biologist need to have certain qualifications to be a competent professional. But the performance of a businessman depends on a multiplicity of variables that prevents us from elucidating which traits would lead him to success.

Medicine, physics, and biology deal with “simple phenomena”. The limits to the knowledge of such disciplines are relative to the development of the investigations in such fields (see F. A. Hayek, “The Theory of Complex Phenomena”). The more those professionals study, the more they work, the better trained they will be.

On the other hand, the law and the market economy are cases of “complex phenomena” (see F. A. Hayek, Law, Legislation and Liberty). Since the limits to the knowledge of such phenomena are absolute, a discovery process of trial and error applied to concrete cases is the only way to weather such uncertainty. The judge states the solution the law provides to a concrete controversy, but the lawmaker is enabled to state what the law says only in general and abstract terms. In the same sense, the personal strategy of a businessman is successful only under certain circumstances.

So, how does the market economy survive to its own complexity? The market does not need wise businessmen, but lots of purposeful ones, eager to thrive following their stubborn vision of the business. Most of them will be wrong about their perception of the market and subsequently will fail. A few others will prosper, since their plans meet -perhaps by chance- the changing demands of the market. Thus, the personal traits that led a successful businessman to prosperity were not universal, but the right ones for the specific time he carried out his plans.

Having said that, would a purposeful and stubborn politician a good choice for government? After all, Niccolo Macchiavelli had pointed out that initiative was the main virtue of the prince. Then, a good statesman would be the one who handles successfully the changing opportunities of life and politics. Notwithstanding, The Prince was -as Quentin Skinner showed- a parody: opportunistic behaviour is no good to the accomplishment of public duties and the protection of civil liberties.

Nevertheless, there is still a convincing argument for the businessman as a prospect of statesman. If he has to deal with the system of checks and balances -the Congress and the Courts-, the law will act as the selection process of the market. Every time a decision based on expediency collides with fundamental liberties, the latter must withstand the former. A sort of natural selection of political decisions.

Quite obvious, but not so trite. For a stubborn and purposeful politician not to become a menace to individual and public liberties, his initiative must not venture into constitutional design. No bypasses, no exceptions, not even reforms to the legal restraints to the public authority must be allowed, even in the name of emergency. Especially for most of the emergencies often brought about by measures based on expediency.

BC’s weekend reads

  1. Generals and Political Interventions in American History
  2. they neglect to take account of the experiences of postcolonial states that form the vast majority of members of the international system. “
  3. The U.S. Hasn’t ‘Pulled Back’ from the Middle East At All
  4. No special sharia rules in American courts for Muslims’ wrongful-death recovery
  5. Is Gary Johnson a True Libertarian? American libertarianism has a purge problem
  6. Identity politics and the perils of zero-sum thinking

What sort of “Meritocracy” would a libertarian endorse, if he had to?

The first attempt to answer this question should say: “none.” Notwithstanding that this is the correct approach, we can’t help but feel uneasy about it. Libertarians have had to deal with this uncomfortable truth for so long. In respect to my own personal experience, I remember where I was when I read, for the first time, “Equality, Value, and Merit,” the title of Chapter 6 in Friedrich A Hayek’s The Constitution of Liberty. I was attending a weekly reading group about that book, and we were gathered in a cafê in Buenos Aires. The number of attendees was enough to find every kind of reader you could expect (and not expect) to meet in such a group:

  • There was the one who had already studied and condensed each chapter and then was re-reading and re-assessing the whole book; the one who did his “homework” without any effort;
  • the one who the embarrassment of failing to accomplish the reading requirements for the meeting overcame the pleasure of any type of procrastination (i.e. me, mostly because I was one of the promoters);
  • and the one who gave to the group the enthusiasm to last for six months in a row and finish the whole book. The latter, in this case, was a truly “natural Libertarian,” the one who had the pure Libertarian position for each subject by not showing an excessive regard for what Hayek was actually saying.

I remember that I arrived to the “Equality, Value, and Merit” meeting with a feeling of uncertainty. Hayek argued that there is no merit to acknowledging in a market process, none of any sort, a just compensation for the value of one’s apportation – a value whose magnitude depends on the relative scarcity of the marginal product. The reader who always accomplished his reading duties without any effort shared my sentiment of awe. Almost the whole meeting was conducted by our companion who was reading the book for a second – or perhaps third – time. In effect, Hayek left no place to meritocracy, since it is impossible to decide democratically among any scale of merit (remember Kenneth Arrow’s theorem on the impossibility of democracy, cited later on the third volume of Law, Legislation and Liberty), so retributions based on value enable the system to adapt spontaneously to the changes in the environment with more efficiency. The explanation was a bit of an unpopular one, but accurate. Not without reluctance, almost all of us accepted it. All of us but one: our true spontaneous Libertarian. She would under no condition surrender her convictions on the merit of the retributions that the market process assesses spontaneously to each one in accordance to the marginal value of their activity. While we acknowledged no merit to the results of the market process, she was prone to endorsing a moral value to the blinded results of the allocation of goods adjusted to the changes in their relative scarcities.

Many years after our debate took place, I am now starting to acknowledge that there might be a particle of truth in the statements of our natural Libertarian and, what is most outstanding, that these statements could be deducted from other chapters of the same book (The Constitution of Liberty), particularly the one which concerns on the definition of liberty (“Liberty and Liberties”). I said a particle of truth, not the whole truth, but at least that particle which is needed to start an intellectual quest.

In The Constitution of Liberty, written in 1960, Hayek made a quick outline of the different notions of liberty that were popular at that moment in time. Positive liberty, negative liberty, inner liberty, individual liberty, freedom from, freedom to, and freedom of were some of the categories mentioned. He made it clear that an in-depth discussion of each notion was not his main aim, but instead that was trying to make a quick account of them in order to give a conceptual frame to the one of his choice: a variant of the individual negative liberty defined as “the absence of arbitrary coercion.”

Slavery is the subjection to the will of another person, without boundaries of any kind. A slave could be subject to a good master who allows him to keep a normal life, but he could lose all of his freedom on a whim of his master at any time. On the other hand, the boundaries to the freedom of a free man are imposed by abstract and general laws and by contracts and the judicial decisions based on those contracts. The ordinary experience of a man enables him to discover principles and patterns of what would be regarded by others as just conduct, and to form in such way expectatives on how a given conflict could be solved. This concept of individual liberty as an absence of arbitrary coercion stated by Hayek in 1960 finds a strong resemblance today in the notion of liberty as an “absence of domination” by contemporary republican authors such as Quentin Skinner, Philip Pettit and, here in Argentina, Andrés Rosler.

The outcome of such a system is that every individual is enabled with a set of possible actions to be taken at his sole will, which we call an “individual sphere of autonomy.” In principle, these spheres are delimited by general and abstract laws and any controversy on the limits between two of them will be solved by an impartial court whose decision will be based on principles expressed by these norms. These judicial decisions would be in accordance to the patterns of just conduct that everyone had previously formed by ordinary experience, so they will prove correct the expectatives of most people and then will be regarded as non-arbitrary.

Of course, we could find that some judicial decisions would be taken by equity or that some administrative decisions would be based on expediency. But such a system could stand some exceptions, most of them aimed to solve an unexpected situation. Some of these new “precedents” are compatible with the principles which inform the existing laws and then their formulation will be a sort of “discovery” of new norms that until that moment were “implicit” in such a normative system. A criterion to distinguish the discovery of new norms from a decision based on expediency might be that the universalisation of the former brings about stability to the system; it makes the law work as a negative feedback system while the universalisation of the latter would only cause an increasing process of disorder.

Friedrich Hayek developed his theory of law – savagely summarised in the previous paragraphs – in Law, Legislation and Liberty and it provides us with an accurate modelization of how it would work a legal system that could not be experienced as “arbitrary” by the individual. In Hayek’s legal model, the fulfillment of the law would imply the respect of individual freedom as the absence of arbitrary coercion, since all boundaries to one’s will are previously known or reasonably expected and, then, our individual plans are conceived and accomplished regarding such limits.

After such a long digression we may come back to our initial enquiry: if a Libertarian had to “do meritocracy,” what sort of meritocracy would it be? The usual answer is, as we noted above, “none.” But I suspect that the wrong statements of some intuitive Libertarians carry within them a kernel of truth: the assignment of functions and subsequent retributions are expected not to be arbitrary, because even the changing value of the marginal products implies (1) some sort of predictability, (2) an impersonal process, and (3) a learning feedback system that fosters increasingly correct pattern predictions.

If we state that liberty is one, be it political, economic or social, we cannot use a definition of liberty in the political realm and another notion of it in the economic one. The “none answer” implies just plain individual negative liberty (absence of coercion) in political economy issues, while our definition of individual liberty is “absence of arbitrary coercion,” and this should be applied to the definition of economic liberty as well.

Therefore, I dare to state that a non-arbitrary distribution of functions and its subsequent remunerations should be a central problem to economic liberty, if we define it as “absence of arbitrary coercion.” Since our spheres of individual autonomy are delimited by a system of norms of just conduct, general and abstract, which distinguish arbitrary from just coercion, the economic liberty is expected to be found in such a framework.

Usually, the legal framework of a free market is regarded to be a neutral one: general and abstract rules, whose source could be the legislation sanctioned by an assembly of deputies of the people and notable citizens or the customs acknowledged as mandatory by the judiciary courts. In any case, general and abstract rules that are not conceived by a single will but have the impartiality of a plurality of legislators or juries. In this sense, “absence of arbitrary coercion” is identified with “absence of coercion by discretionary powers of the state.” Nevertheless, we consider that this is not enough: we should be conceptually endowed to do an evaluative judgement about the outcome of such economic system. We need to determine if the result of a neutral legal framework produces a non-arbitrary distribution of functions and retributions.

A neutral legal framework works like a peaceful, predictable, and secure Lockean Civil Society – i.e. the opposite of a Lockean Civil Society. Since we accept that legal norms express rules of just conduct whose obedience brings about a rightful delimitation of each individual sphere of autonomy, the remaining normative conflicts will be related to moral and social norms. But these normative conflicts will not occur among competitive orders, such as legal order against moral order or against social order, since we acknowledge the preeminence of the rule of law over any other source of obligations. Modernity relegates moral and social norms to the inner of each individual sphere of autonomy or, at most, to conflicts among different individuals which will never escalate and balloon into physical violence. That means that morals and social customs will not bring about an alternative order to society, but that they will enable the individual with an order to rule the inner aspects of his personality and a limited scope of his interactions with other individuals. These sets of moral and social rules will not integrate the formal institutions – to use the categories coined by Douglass North – but will be embodied in “packs of precepts of life” that we usually name “virtues” (a term cherished by the republicans mentioned above and by libertarian authors such as Deirdre McCloskey.)

These “virtues” are expected to contribute to the fulfilment of most individual plans in a system of inner stability. What we regard as good and wrong are a set of received values accrued after generations of trial and error processes. “Being honest,” for example, might be considered as a pack of precepts of life which successfully spread all over the members of the society structured by a neutral legal framework. The unit of evolution is neither the society nor even the individuals, but the “virtues” that are spread among the individuals that compounds that society.

At this stage, we must admit that what we regard as “neutral” is just an analytical category that means a set of fixed elements that work as a framework for other elements which change their respective relative positions. This framework is what Hayek named “order” (we can find in his Sensory Order the most accurate definitions of this concept: more than one). These notions allow us to do a clear distinction between the concepts of “evolution” and “change.” Change occurs among the relative positions of different elements given a stable framework – a Hayekian “order” – while “evolution” – in our terms – is related to a modification in the framework where the ordinary events occur. In the words of Douglass North, “evolution” is an incremental change in opposition to a disruptive change – or revolution. Notwithstanding this use of the terminology at hand, only Hayekian orders “evolve,” while their elements (or events) simply “change” their relative positions.

Nevertheless, to use an Arthur Schopenhauer image, events are the eyes of the blind machine which is the spontaneous order. Given a certain abstract order, the population with some types of virtues extended among the individuals will prevail over other ones. For example, Max Weber, in his Protestant Ethic, showed how the habits of frugality, self-confidence, hard work, and so on, were once considered by most people as eccentric but eventually took over whole communities and changed the meaning of good and evil in a process that ended up in an “iron cage of liberty”: the dissolution of the transcendent values that had previously given a religious sense to those habits into a neutral framework of standard moral duties immanent to the social system.

Another classical book that illustrate a process of “natural selection” of virtues might be The Prince by Nicoló Machiavelli: from the very beginning, the author warns us that a different set of virtues would be needed to be develop in a Republic and that he treated that matter in another book, The Discourses on the First Decades of Titus Livius. The Prince, instead, is focused on determining which virtues is a Prince to be enabled with in order to survive in a realm where no one has the sense to be bound by any moral or legal obligation, i.e.: in a set of non-cooperative games. The whole book can be read as a succession of mental experiments about which virtue could make the Prince survive over his competitors. In Richard Dawkins terms, the ones which are competing are the virtues, and the politicians who struggle with each other are the “vehicles” of those virtues. A very well-known example shows how the population of the ones who seek to be feared at the risk of being hated will displace the population of the ones who seek to be loved at the risk of being scorned. To put this another way: in the “ethical pool” the trait “seek to be feared” will outshine the trait “seek to be loved.” Finally, at the last paragraph of the book, the very virtue of the Prince rules supreme among the other ones: the initiative.

Besides the fact that The Prince – as Quentin Skinner pointed out – should be regarded as a satire (but see Barry here and here for a contrary account) , the emergence of the virtue of the initiative as the inner quality of a political leader of a non-republican system scraps any moral sense of the term “virtue.” Virtues are a compound of personality traits that conditions the agent’s decisions from the inner. But certain virtues depend on the legal framework to spread over the “ethical pool.” As we have said, the virtues that will prevail in an authoritarian regime will be different from those which flourish in a republic. The “republican virtues” described by Machiavelli in his Discourse on the Decades can only proliferate among people within a given set of procedural rules. A similar distinction was made later by David Hume: “natural virtues,” such as empathy, can emerge at any given circumstances, as they are embodied in human nature, but artificial virtues such as “justice” will depend upon a determinate legal framework.

Virtues will erode or shore up a formal institutional framework by incremental change (D. North), yet this will occur only as a response to the change in the environment (virtues as the eyes of the blind machine of the spontaneous order). For example, Gutenberg’s press discovery allowed the evangelical movement to gain force since anyone could then start to count with a Bible. Within the Evangelical movement took place a Puritan one, which at its turn changed the sense of morality in the people for whom it took place. This resulted, for example, in the anti-slavery political movement in certain states of the US or cities of the UK such as Bristol, even at a price of high economic cost.

Nevertheless, while spontaneous changes in virtues lead to incremental political and legal change, a disruptive change of the latter could bring about a dramatic shift in uses and customs of the people involved. This need not to be a violent revolution, since democratic institutions are enabled to issue the required laws to make a significant change for the good – or for the bad – in the said virtues to spread among the society. Sound money is a condition for the virtue of frugality to appear, for example. On the other hand, the Adam Ferguson’s book When Money Dies shows how the people change their main traits due to the phenomenon of hyperinflation.

Since virtues are – in the definition stated here – a mere pack of ethical traits that condition the individuals who are their vehicles from the inner, allowing them to survive and pass their virtues to the next generation of individuals, on what basis should we endorse some virtues over other ones? Our theory cannot provide us with a normative answer by itself, since it leads us to the conclusion that what we regard as good and evil comes from a process of blind evolution. As we have said, a learned libertarian would not endorse a meritocracy of any kind.

However, the complex order compounded by the legal framework and the moral and social virtues extended in society might be “neutral” for each individual involved in such society, but the legal framework will not be neutral to the moral and social virtues that are spread in that society. Different types of frameworks will deliver different sets of virtues to be spread. An authoritarian regime will deliver the set or virtues described by Machiavelli in The Prince, while a republic will spread the virtues of The Discourse on the Decades of Titus Livius. Moreover, the difference between the former and the latter is found in the proportion of decisions taken on the basis of expediency and the ones taken on the basis of principles. The whole message of Hayek’s Road to Serfdom might be exemplified in the transition from a system of public decisions based on principles (i.e.: a republic), to a system of public decisions based on expediency. Each system will deliver a different set of “virtues.”

Thus, we are now in a better position to answer the question “what sort of meritocracy would a libertarian would endorse, if he had to?” A natural libertarian will expect that the distribution of functions and retributions will correlate with the virtues most expected to be found in a legal and political system in which most decisions are taken on the basis of general and abstract principles. Such a system of norms and values will be experienced by the individual as “non arbitrary” and then the ideal of negative individual liberty as “absence of arbitrary coercion” will be achieved, not only in the political realm, but also in the economic and social ones.

In a “Keynesian turn,” we could point out that a system whose decisions are taken purely on the basis of principles is an “especial case” and that we usually find mostly the opposite. In most constitutional systems the “macroeconomic policy” is not a matter subject to the courts and we have to acknowledge that the spreading of some virtues over other ones are more conditioned by monetary or tariff policies than by a neutral legal framework. Nevertheless, this reality is not a reason to disregard the value of the virtues that would arise should those policies be neutral (i.e. not being policies at all, but legal norms). Moreover, these objections just pointed out are good reasons to claim for a republican system of liberties as a fairer system.

To summarize: natural libertarians are not so wrong when they aim to achieve a special kind of meritocracy – the one in which the functions and retributions would correlate with the virtues spread in a society where liberty as absence of arbitrary coercion is respected. In such a system, most political decisions will be taken on the basis of general and abstract principles. After all, the dissatisfaction manifested by a natural libertarian when most of the wealth of a society goes to the rent seekers is rooted in a well founded claim for a “free and virtuous society.”

Group Privileges No, Detriments Yes

The concept of “privilege” has become common in political discourse, while the term “detriment” is seldom used. One incurs a detriment, and is detrimented, when one is harmed, offended, displeased, or disadvantaged, unrelated to merit. One obtains a privilege, and is privileged, when a person or group is advantaged, benefitted, pleased, or favored relative to other groups, when the gain is unrelated to merit.

Some socialists emphasize “white privilege.” Suppose a white man is able to walk down a street without being harassed, while a black man will be stopped and questioned by the police. The socialist will say that the white man is privileged in being free of harassment. But actually, the ability of an innocent person to walk without being stopped and frisked is a natural right, not a special favor. The black man has suffered a violation of his natural rights, a detriment not suffered by the white man.

The socialist will also claim that there is “male privilege.” Suppose a man can walk down the street in peace, while a woman walking down the same street will be whistled at, aggressively approached, and may even be physically attacked. Does the man have a privilege? No, one has a natural right to be free of aggression. The woman suffers a violation of her rights, a detriment.

Women suffer many detriments because of social custom and culture, rather than governmental law. Wives tend to do more household work, even when they are working for wages as many hours as the husband. In some fields of work, men have more prestige and authority, unrelated to merit. The culture is not so much giving males privileges as it imposes on women various detriments.

Some detriments are mandated by law. In most places in the US, men are free to remove their shirts, while a bare-breasted woman would get arrested. The men do not have a privilege; the women have a legal detriment.

Female detriments can become tragic in cultures where male children are preferred. A boy is not privileged by not being aborted or killed. Rather, the girls suffer a lethal detriment. In my judgment, more progress can be made to stop this anti-female bias by calling it a detriment rather than saying the boys are privileged. Boys as well as girls have a right to not be murdered.

Female detriments have been lethal in India, where rape and violence has made headlines. But there is substantial rape in the US and throughout the world, which clearly makes being female a detriment in much of the world.

The trouble with saying there is a male privilege is that men do not feel privileged by not being attacked or disfavored. It should be normal to be left in peace, and to be respected. By identifying the problem as a detriment, we can then raise more awareness and support for remedies. We can also then better deal with the real privileges, favors to those who get subsidies from government because of political clout.

The language of privilege versus detriments influences policy. “Privilege” implies special favors that should be removed. “Detriment” implies harms and disadvantages that should be stopped. For the problem of infanticide, for example, it is not that privileged boys should be killed in an equal ratio, but that girls should not be murdered for being female.

Let’s speak less of racial and gender privilege, and more of detriments!