Marginal Revolution has an interesting article: http://www.marginalrevolution.com/marginalrevolution/2008/03/a-million-years.html
They argue that we more or less know everything we wanted to know about markets and therefore the next big question is to ask what conditions cause the emergence of a more or less free market, therefore cultural anthropoligy, sociology etc. could become more important than economics. Hm. Interesting idea.
So do they admit that it is an a priori science then, that once all the axioms and their implications have been unfolded, that any further progress in economics is painstakingly slow? If so, that’s progress on their part. And I say this because it is precisely what such a position implies. Anyway, I don’t really disagree. I think aside from any important theoretical debates left, economists should be interested in seeing how free markets can come about, and how they may solve problems states cannot and never will be able to. They should also be focused on proselytizing those in these areas of study they want to reach out to. Michael Shermer’s book, The Mind of the Market, is a wonderful example of a book focusing on biological explanations for why markets work, for instance, inspired by Mises and even Rand.
I’ve been thinking about this myself, from a somewhat different perspective. If a global free market were ever to come about and remain unchallenged by governments and their intellectual camp followers, what practical use would an economist have? Economics would become a purely academic field, like History. Sort of a bittersweet thing, I think. But I suspect that I’ll have gotten my PhD, taught economics for a good portion of my life and been dead and buried long before any such global free market exists.
Even if something like that were to come about, economists would still be required to sustain an understanding of how markets work and why governments fail. It is important to realise that even in a free market, without sufficient real understanding of what’s going on, people could be once again manipulated into giving up their rights and freedoms to a state.
There would be far fewer roles for economists in such an economy, but I think there would still be some outside of academia. Economists may be useful for forecasting, particularly financial markets for investment (Toby Baxendale gave a talk about the role of an Austrian hedge fund - it’s on this site), but I suppose this would be limited because there would be no Austrian business cycle, as the source had been removed. Regardless, I still think it is likely that a good grasp of the logic of economics would be useful in finance at least. I imagine that’s what Frank Shostak thinks too.
What’s so sad about this is, despite the fact that nearly all of the axioms and their implications have been unfolded, few “distinguished” economists have even an elementary understanding of those axioms and their implications. It seems the future role (although I’d say it’s the dominant present one as well) of a “true” economist is purely a pedagogical role. But it would have to be a more active one. The war of ideas I suppose. And we’re the soldiers of sound economics (and it naturally follows that we’re also soldiers of freedom, unless we prefer starvation, death, misery, etc.).
The key is strategy. LvMI is most obviosly a wonderful one. But we need more Phd holders with an acute understainding of Ausrian Economics. Don’t get me wrong, I don’t think a Phd really means that you’re more intelligent than anyone else, but I think it’s a prerequisite for being effective in the war of ideas.
Well as far as I know they are more or less Hayekists so it wouldn’t be a big surprise if they agreed to one of the most fundamental ideas of the school of thought Hayek belonged to.
Depends on which level of the war of ideas we are talking about. In some levels having hte necessary skills to be a popular radio talk show host is enough. At other levels only a Nobel Prize makes the press recognize you. On yet other levels just have whatever it takes to write an interesting book. In the last 3 years one of the most fun I had with my pants on was reading The Redneck Manifesto from Jim Goad: http://www.amazon.com/Redneck-Manifesto-Hillbillies-Americas-Scapegoats/dp/0684838648/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1205272226&sr=8-1
He is wrong on many, many accounts but a hell of a fun to read. I guess he had more effect than Eric Voegelin, for example, who was a genius but has a knack for boring the reader to death.
I’m on my way there. Six more years, and I’ll be busily helping victims of the public school system unlearn the economic fallacies in which they will undoubtedly have been immersed.
I am as well. Hopefully only 4-5 more years.
What I’d like to put the emphasis on is what are the cultural prerequisites of a free market. Let’s try to figure it out together - why not?
I have a proposition. Let’s sort goods into three categories.
Solitary goods - goods we could produce and enjoy alone even if we lived on an island alone, given the necessary equipment, knowledge etc. When aren’t living alone we exchange these goods with others for mutual benefit - that’s the most typical form of the market.
Positive social goods. The satisfaction we derive from friendship, love, popularity, the good feeling of helping someone etc. These we could not enjoy living alone. Enjoying these goods, although not strictly and exchange (rather, sort of a, common creation and use of them) still works like a market as we can only enjoy these goods with others if they are willing to cooperate.
Negative social goods: satisfaction derived from supressing or harming someone out of envy, sadism, comparative status advantage etc. etc. Generally, the sort of things that are considered evil. These are generally only possible through coercion or fraud.
LvM said that in the absence of taxes, even tax men would be better off in the long run. But we have to add that ONLY if its’ the revenue they value in taxation. If it’s the enjoyment derived from ruining our day, showing who’s the boss etc. generally the negative social good, then they would NOT be better off.
Voluntary exchange is not possible between two individuals whose main motivation is seeking negative social goods because by it’s very definition they cannot be better of without making the other one worse off.
But if they also value other goods, mainly solitary ones they might make a “ceasefire” once in a while and exchange them. (This is what happened in my elementary school, many boys “feuded” like crazy but suspended it when a hard test was coming.)
Thus the possibility of market exchange is inversely proportional to the relative value the parties assign to negative social goods.
Then next point is to define culture. Say three people live on an island and they produce pineapple, coconuts and bananas. If all others equal two of them values a meal of bananas higher than a meal of coconuts or pineapples and one of them values a meal of bananas higher than pineapple but lower than coconuts we can say that in general they have a culture that tends to value bananas. I think this is what culture generally means.
Thus, the emergence and importance of markets is inversely porportional to the relative value the culture assigns to negative social goods.
In fact negative social goods tend to have sort of a negative market: revenge. People who were coerced or frauded often like to give it back. (Not always to the one they got it from…) Thus the same way markets tend to grow, the market of negative social goods (revenge) tends to be contagious…
(I also have a hunch that a culture of high time preference tends to cause a culture of coercion and revenge but cannot really prove it, it’s just a gut feeling.)
I’m originally from Hungary (living in the UK now) and thought a lot about why we aren’t really able to build a prospering economy. I’ve noticed a few behavioural patterns that might be the reason behind these. Then later on I realized there are similar patterns (usually, even much worse) in the Arab world, in Sicily, in South America, in Africa… almost everywhere where people are poorer than US/WestEU.
For example, in the Arab world:
http://www.unc.edu/depts/diplomat/AD_Issues/amdipl_17/articles/deatkine_arabs1.html
I’ll explain what I think about these patterns a later time, I think it’s a long enough post. But if you are interested in the cultural prerequisites of a market please read these articles, they are very enlightening.
More than that, markets don’t quite happen automatically, but because of the actions of market participants. Economists would still be valuable to businesses, especially financial institutions, to help with financial markets, exchanges, private currencies, wages, profits, business investments, etc., not to mention the possibilities of new market creations and improvements.
Economics is much more than just how governments interfere with markets.
Fundamentally all free market economics relies on respect for property. Far less attention than should be is given to the not inconsiderable influence of violence. If you try to make a quick list of the top 4 or 5 ways in which the market you live in is currently distorted (and not free) - you’ll almost certainly come up with a list of things that was put in place and is maintained by some threat of violence. Central banking and the fractional reserve banking systems, for example, only remain in place because they are backed by whoever has the greatest monopoly on violence in the particular country that the central bank operates (typically the government).
The same goes for tarrifs, trade barriers and price fixing. Sometimes these things can be held in place by a mafia or a collusion between gangs (at a local level) but almost without exception they are enforced in one way or another by violence. Socialist societies ensure market situations prevail that are in direct contradiction to the free market by way of their governments. Once again, effectively the threat or reality of violence is used to either confiscate wealth, fix prices, impose tarrifs, give subsidies or accord unnatural monopolies. If competition is the rock that non-free market entities break themselves upon then violence is the hammer that is constantly shattering the rock which is that free market.
So perhaps an interesting question is, why is there a natural tendancy towards a monopoly on violence in any particular region? If you could convince yourself that monopolies in other areas of society (e.g. banking, supermarkets, trains) were essentially put in place by government then how do you explain the fact that governments themselves hold the one ring that binds them - the overall monopoly that keeps all of these other monopolies in place? To an extent there is collusion between governments who agree not to attack one another and to support one another whenever they are faced with “rebellion”. However (and my history is shaky but here goes) even at a global level it seems to me that the majority of history has consisted of long periods in which one player has been dominant enough to control the global cartel on violence. History is awash with “Empires” that faced little or no competition in their particular corner of the world - where they held dibs on the right to theive from their citizens, accord monopolies and otherwise distort what might otherwise be a free market. Am I wrong here?
Would you mind reading what I wrote about negative social goods etc.?
Another idea: I find Hoppe’s insight, that crime is connected with high time preferences very interesting. High time preference tends to come from perceived uncertainity, the lack of stability, reliability. If high time preference tends to encourage criminal, coercive or fraudulent behaviour, that will of course rise the feeling of uncertainity of others: you never know when you get a knife in the back, so to speak. That will incentive you too to force or fraud. Thus hgh time preferences might create a negative spiral of force and fraud, even higher time preferences, even more force and fraud etc.
It might not be possible between two individuals of this nature but that doesn’t mean that it’s not possible in an economy that has people that value negative social goods. As an example (and I forget his name) that German canibal guy that put an add in the paper looking for someone to eat. Remarkably, he got a reply from someone that wanted to be eaten and they got together and did their thing (and even filmed it - which is about the most bizarre thing I’ve ever heard of).
However, more generally, I think you’ll find that the prerequisites for a free market are a culture/society that values the concepts of liberty (you can do what you want as long as it doesn’t infringe on someone elses right to do what they want - at that point you’ve got to resolve a dispte somehow) and property (which is typically one of the most important concepts used to resolve disputes between individuals). Common law in Britain during the early days of the British empire and the principles that were set in place by the founding father’s of the United States in it’s constitution are good examples of legal frameworks put in place by societies that emphasized individual freedom and property - it’s only a pity that the legal frameworks of both of these countries would be all but unrecognizable to the citizens that lived in those societies during their peak.
More or less I’d agree with you. Culture is basically defined by what the people in a society tend to value. Partly this is determined by values people learn from their role models (family, friends, teachers and tv stars) and partly I think this is both determined by and reflected in the legal framework of the country that they live in… which is why I mentioned the US constitution and British common law. People will modify their behavior a great deal in response to the legal framework that they operate in, just as they will modify their behavior a great deal according to how they think their peers will view their actions. This, I think, is what gives rise to the cultural values that inflence human behavior.
I don’t think there is any point in reinventing the wheel and trying to split actions into solitary, positive and negative social goods though. Exactly what actions should be permissable and shouldn’t be are complex questions that I think have been answered very comprehensively already (for the most part) and you could probably get the answers to those questions simply by studying the origins and development of english common law, which sought to discover a natural law that was the expression of what people wanted and how they should behave towards one another, rather than inventing and imposing any particular moral code (which is typically the goal of modern legislation).
Why not, indeed? Excellent thought. Miklos’s post highlights an essential starting point, one clearly aimed at achieving a true understanding of the problem under discussion. As he has demonstrated, we have to address, at the very beginning of our investigations, what the concept of a truly free society logically entails, before we can even begin to ask the question of what prevents free markets from emerging in society. Therefore, any effort to discover which core ideas or values (what Miklos has termed “cultural prerequisites”) would have to be present among members of a theoretically free society, would be a worthwhile effort, from my perspective.
I find Miklos’s description of the three fundamental goods types, “Solitary,” “Positive social,” and “Negative social” goods, to be helpful starting points for describing in purely formal-theoretical terms what kind of social reality is logically necessary for preventing free markets from emerging: the prevalence of those in society who are seeking “negative social goods.”
Amazing… Simply amazing.
In contrast to the above approach, some have put forth the idea that legal protection of private property is the conceptual basis of free markets. However, it may be helpful to consider that, regardless of what particular form a given society’s legal institutions or property relations may take, it remains the case that in every society, people must understand social others to be present. Those who wish to act socially will, of necessity, need to regard social others in one way or another. And how exactly they regard social others will be their basis for every social institution they aim at constructing. This means that how they regard social others is a question even more fundamental than the question of how, in particular, a given society’s institutions (even those of legal property relations) are arranged among its members. The question of precisely how legal property relations are, or should be, arranged among members of society, will always be determined by how those members of society regard one another. I believe Miklos is approaching this fundamental insight by illustrating what can be expected from any society comprised of members who predominantly value what he has termed “Negative social goods.” His conclusion seems to be that such members will not benefit from the advent of a free society to the extent that they truly hold “negative social goods” as a value, and that claims to the contrary, even by well-meaning property rights protection advocates, would be overlooking something important.
Naturally, such well-meaning property rights protection advocates are quite aware of the theoretical existence of those who hold “negative social goods” as a value, but tend to have a hard time taking due account of such individuals in the property rights theories they advance. For such advocates, the typical response to the theoretical existence of “negative social goods” seekers is to either claim that such individuals would be better served by an institution of legally protected private property (which is in no way established, given the known values of “negative social goods” seekers) or to impatiently brand these uncooperative individuals “criminals” and rush to advocate forcing them to conform to yet another set of positive legal/social institutions, only this time, erected under the supposed banner of “market liberty.” And then the familiar cycle of institutional stagnation begins anew.
It must be understood that there is no way to advance (nor utilize) any social theory without regarding social others in some way. And precisely how social others must be regarded when we understand them to be “criminals,” is as some kind of problem which social theorists will be trying to solve. From this perspective, the actions of social others can come to be understood as what prevents a free society from emerging. According to this view, then, to the extent that we want a free society, to this same extent must we embrace the belief in a need to restrict the actions of social others.
Any time the actions of social others are understood to be the problem with society, the obvious solution will be to restrict the actions of social others, for the good of society. But even if we believe we have good reasons for doing so, the fact remains that we can only proceed with an effort to restrict the actions of social others by embracing at least one “negative social good” as a value. In the process of doing this, we must, of necessity, contribute to whatever social outcome is logically inescapable for any society whose members pursue “negative social goods” as a value.
Accordingly, well-meaning property rights protection advocates have, whether knowingly or not, come to embrace an underlying principle of restriction based on how they have chosen to regard social others. By seeking to establish precisely when the restriction of others in society is warranted, property rights protection advocates have taken it as given that such restriction has an indispensable role to play in a free society. At that point, it can only be a matter of degree that separates competing political theories, since they will all agree on the need for resorting to such restriction, in principle.
In any event, the goal here is to illustrate that the question “What social consequences are logically necessitated by members of society seeking ‘negative social goods’ as a value?” is one which is extremely relevant to libertarian social theory. The question is especially relevant to those theorists who promote various property rights theories, and it should be not be avoided in the hopes of making any preferred property rights theory more appealing to its potential detractors.
Richard D.
Ok, I think I see where you’re coming from here and I finally think I can see a logical way to clarify the issues involved here.
At the heart of the matter, the natural state of affairs is exactly the one we find ourselves in today. Human society has tended, as a result of various different forces, to take exactly that shape which it has today - nothing more and nothing less. However, as economic creatures, humans are never happy with the existing state of affairs for very long. Almost as soon as one person or another has arrived at a satisfactory state of affairs his or her tastes or conditions change and they’re off changing it again.
Now by the time what we currently call humans came into existence we probably already had a fairly complex societal structure that we’d inherited from our biological forebearers but for the sake of simplicity, let’s imagine that the starting point was Anarchy. From that point I think we could all agree that many (even if not all) of the people in our hypothetical anarchic state would quickly have come to the conclusion that they could improve their circumstances by putting in place some restrictions on what other people could do.
The word restriction is important here since we need to know exactly what it entails. Even before we know exactly what activities the people concerned want to restrict, we must understand that in order to effect these “restrictions” they are going to need to get people to do something that they don’t want to do “naturally” (that is, in an anarchic state). Restriction then, is basically just a form of coercion. By restriction you could basically read law and by coercion you could basically read enforcement.
So, any societal restriction that you want to place on human’s natural behavior must be enforced in order to be meaningful. The “society” that wants to enforce these restrictions must necessarily not be unanimous as to whether these restrictions should always be enforced, since otherwise it wouldn’t make any sense to have these restrictions and thus be enforcing them in the first place. Therefore, “society” (i.e. that subgroup of the total population that wants to enforce these restrictions) must have the power to enforce these restrictions and unless they have a stranglehold on some resources that the rest of the population really wants (and thus can enforce their restrictions by way of “trade”) then the only way to enforce their restrictions is going to be by way of violence - they’re going to need to have more firepower than the people they want to restrict basically.
Now coming back to what is required for a “free market”, I think what most of the folks in this forum mean by a free market is typically some variation of two sets of basic principles:
Liberty - by which I mean the general notion that you can do whatever you want as long as it doesn’t impact anyone else’s right to do the same.
Respect for property rights
Principally I think respect for property rights is the most fundamental assumed “just” societal restriction required in order for the free market to exist, and this is most obviously (of the two principals above) very much a restriction. In a “free” or anarchic state people can do whatever is physically possible… if they can physically hold a baseball bat and whack bobby over the head before nicking his wallet then, well, it’s up to them whether they do that or not. And indeed in our current state this remains entirely possible. However a moderatley wise man in our current state would do well to recognize that although physically whacking bobby over the head might not present any fundamental problems, the current “society” that we live in has certain laws/restrictions in place that such an action will likely, if perceived, be responded to by “society” (i.e. the guys with the biggest slice of all the guns - your local monopoly on power… most likely your government but that depends on where you live - in Sicily it might be your local mob bosses - having never been to Sicily I wouldn’t know).
Now, respect for property rights comes in various different forms from weak to strong. The official laws of most modern governments respect property rights to a greater or lesser degree depending on who you are, when any incursion on those rights occurred and by whom and according to the nature of the property itself (if Bear Sterns looses 20 billions dollars of the public’s money in the US the repercussions for the directors of Bear Sterns will likely be much less severe than if you or I had whacked bobby over the head for the 20 in his back pocket)… and this is pretty much the gripe of the majority of those of us here in this forum. What we’d like is absolute respect for property rights no matter who you are, where you are or what kind of property it is - and that means principally that we want our money to be protected from our own governments… which has it’s own problems since they’re the guys doing the enforcing.
Coming back to Miklos’ argument, the question he was asking is what would we need to do in order to bring about such a situation? What is necessary in order that we can live in a society that has a “free market”? I think after reading through the above it becomes clear that depending on society’s enforcers to ensure property rights are respected has some fundamental weaknesses. Firstly these guys will never be as powerful as the gods and their laws are not like the laws of nature - they won’t always be respected or enforced. Moreover, we don’t have any effective means of protecting ourselves from the enforcers themselves. As such, although societal enforcement of property rights are certainly a step in the right direction I think more fundamentally you need an inherent cultural respect for property to be present in the members of the society that you live in. If the individuals themselves respect property rights more then enforcement is less often necessary. Finally, and this is one the founding fathers of the US realized, I think your citizens need to be aware of the above argument - they need to realize that the biggest threat to their property rights is posed not by their neighbor but by their own government, since fundamentally it is only the vigillence of a society’s people against the wrong doings of it’s government which will be able to protect these people from it’s government.
Social consequences? The immediate consequences of me whacking you over the head are that you get hit. That may benefit me (if I then take your wallet) to your detriment. However I think it’s extremely difficult to know of calculate the benifts/losses of such actions as some aggregate to society as a whole for the simple reason that it’s impossible to incorporate any notion of prices into this calculation.
In the same way that it’s impossible to calculate “socially optimum” values for goods in a market, in the absense of prices, it is impossible to calculate an “optimum” set of restrictions to place on people’s behavior. There is no way for any person or groups of people in society to know what the ultimate value for a good is or to know how much people would/could/should pay for something without actually letting them go ahead and pay for it (thus demonstrating a price that they were willing to pay for that thing in one particular set of ever changing circumstances).
This same reasoning that applies to the subjective value of goods in a market can be applied the the subjective value that indivuduals might place on the existence and enforcement of various restrictions on their behavior. There’s no way of possibly knowing the aggregate value that society would place on any particular restriction, short of letting them pay for it… so perhaps the only way we’d ever know the answer to this question is by privatising law enforcement and indeed law itself.
Although privatising law enforcement might not be too difficult, privatising law itself would present some major technical challenges. Perhaps one way would be to have various different law enforcement bodies which were run as corporations. The public could voluntarily invest nothing or as much as they liked in each of these enforcement bodies according to their own preferences (and could obviously invest in more than one if they chose to). The benefit that they would get would not be in the form of dividends of course but in the application of the values of that particular corporate body… I guess these would be kind of competitive governments who’s votes were actual dollars - if you wanted to vote for that government you had to give them real dollars (that being your one “vote” at that particular moment and you could vote whenever you wanted) and they’d then be able to use those dollars. Essentially we’re talking about a hybrid between private police/security and civil war here though since these guys would no doubt end up fighting with one another. Perhaps one way around that would be to have them each constrained to geographical regions and let them buy/sell regions from one another (if they wanted to expand/contract their sphere of influence) and allow the free movement of people between these geographic regions so that people could vote with their feet as well as with their dollars (providing they could afford the real estate in the region where they wanted to live).
There are various differences between this quickly made up as I’m typing “hypothetical form of government” and our existing governments. Firstly our existing governments do not have any price system but (rightly or wrongly) instead accord one vote per person. As such, the value that individuals place on particular laws and law enforcement is not integrated with and bares no relation to the relative importance that they place on carrots and cheese (or other economic goods). Secondly, the borders of our existing states are for the most part closed and I can’t, as a New Zealander, freely go live in the United States. Nor can someone from the United States freely go live in France… As such, it’s very difficult to vote with our feet in our current system. Thirdly, governments very very rarely ever buy/sell land to one another. Typically if they want land they take it by force (e.g. Israel). So essentially what you’d need for a free market of “societal values” is some way to enforce international restrictions on the actions of different private governments. There again, you’re going to end up with exactly the same philosophical problems as you have when considering individual property rights. Who is going to do the enforcing? What are they going to enforce? How are we going to pursuade them (if we think that’s what we want) to refrain from physical violence (how can we get Israel to buy Gaza from Palestine rather than obtaining it via military land grabs)?
All of this makes for interesting intellectual sport but I wonder how many of the above ideas are actually of any practical consequence…
Richard,
I’ll write a bit more about it in the near future but in the next few days I have more urgent things to do in the evenings - be back soon. (Generally these more urgent things are rescuing my savings which are in GBP, which I’m sure will bomb even worse than the dollar: the same economic mistakes, but the difference is that half of the world has it in their best interest to rescuethe dollar which isn’t true about the £ …)