Historical Inflation Wave: From Spain to the Middle East

So I was contemplating the decline of the Ottoman Empire. Not ordinarily a thing one contemplates, but I'm taking a class on contemporary Middle East history, and I discovered a rather interesting theory. The influx of gold and silver from American through Spain (as they thoroughly looted the civilizations discovered there) resulted in an immense price rise throughout Europe. However, this price rise was not immediate and uniform, but proceeded, as it does, as the money moved through the economy of Europe. The following is just a speculative model, but it makes sense to me.

The Spanish government would have first tapped local market, and the influx of new money would have risen prices there. Merchants, recognizing the price differences between Spain and other places, would have taken to importing goods into Spain in order to profit from these price differences. Buy low in France, England, Germany, Italy, or wherever, and sell high in Spain. As a result, the areas from which the imports came would have developed export industries to take advantage of this opportunity, while Spain, though temporarily benefiting, would have developed a dependency on these imports.

The result would have been that the second tier of nations would now have well developed export industries, enabling them to profit from trade not only with Spain, but also each other once Spain's money ran out, more throughly. However, they would have also had higher prices than the next set of neighbors, which would have included the Austro-Hungarian Empire, the Ottoman Empire, and, with improved navigation, India, China, the American colonies, and the rest of the world. While having good export industries of their own, they would now be able to import other things they needed from these third tier countries... while Spain, now lacking either a price advantage or export industries, would go into a decline from which it would never fully recover.

The third tier, being pretty much the rest of the world, would have ended up developing some level of exports to the second tier countries, but would not have the opportunity to export their own increased price level to a fourth tier, there being no fourth tier. So rather than an outflow stimulating the development of exports, followed by an inflow as they stimulate someone else's exports, they would mostly just experience the outflow, but find that their newly earned money doesn't buy as much as it did when merchants brought it in.

Spain founded an empire on this flow, but became dependent on it when the money ran out. England, France, Germany, and the United States founded industrial economies on it to absorb currency from Spain, and then spent it out to the third tier, developing a balance of both export industries and import dependencies. The final tier would mostly just experience asymmetrical exports, but not have the opportunity to benefit from similarly asymmetrical imports. The inflater, Spain, was destroyed by this wave. The final absorber was similarly damaged.

At present, the United States is increasingly dependent on imports, without developing similar levels of exports (and going further and further into debt), all based on a globally dominant inflationary currency. Will the US go the way of Spain? Will US importers, such as China, Japan, Korea, India, and such go the way of England and the United States? Is the Third World even more screwed than they already are?

National ID

A big topic in small government circles, of late, is the current efforts in Washington DC to establish a national ID card. Such groups (such as Downsize DC) are generally opposed to this effort, for a variety of reasons. I, too, am opposed, though perhaps not for the same reasons.

Simply put, I fear large databases, particularly when participants have no choice but to make their lives dependent on these databases. I've done a lot of information processing over the years, and I've seen bad databases. I've seen databases filled with bad information. I've seen databases damaged by system transitions. I've seen databases with fields filled with information that had nothing to do with those fields because previous data-entry technicians didn't understand the purpose of those fields... or maybe they didn't care. These databases were so bad they were routinely ignored by the people who had to deal with them in some cases, and made people's work harder in other cases.

But at least these databases could be scrapped if necessary, only had to be dealt with internally, and, if sufficiently bad, could cease to exist when the company unwisely attempting to rely on them went out of business. The pressures of business competition ensured that databases improve or die.

Not so with a government program. Governments are no more infallible than private enterprises, and more susceptible to the long-term accumulation of non mission-critical (and sometimes outright malicious) side interests. (I specify "long term" since there are plenty of bad actors in private enterprise, but that the competitive environment limits the damage they can do and the length of time they can remain in a position of power if that power is abused.) Private actors can be replaced by their competitors. Government programs generally only improve if there is a sufficient amount of the right kind of political interest in them, and even then there are times when an institution becomes impervious to reform (generally the longer it remains in existence). Even the best intentioned, best implemented programs can become institutionalized in the long run, and replacing government programs is generally more problematic than replacing a private supplier.

To put it in more emotional terms, YOU could end up with bad personal information in the national database, resulting in a more difficult time seeking employment, applying for credit, or even simply verifying your own identity if biometrics become part of the process, but your information gets corrupted... with your only recourse being the sending of a form that ensures that in thirty days or more your entry MIGHT be fixed. On the flipside, YOU could end up having to rely on a bad database that is, thanks to taxpayer funding, the only game in town (or at least the only affordable one), for your own identity verification needs.

With the current system, there is, at least, some variety between individual states in how this problem is handled. Though they don't compete with each other directly, they do provide examples of good and bad ways to handle this issue, which can be imitated or avoided, as the case may be. If it gets handled truly horribly, at least the damage is contained.

Now, none of this is to say I am against the idea of a national level identification verification service; governments are hardly only group who have use for such a service. Pretty much any potential employer will ask for an ID card, and some even go so far as to issue their own card to their employees. Merchants properly ask for identification when accepting a check or a credit card. Banks want to make sure that the person attempting to withdraw money or apply for a loan is who he says he is. With all the business that is conducted across state lines, I could easily see a national level ID, valid no matter where you go, being quite useful.

But if there is to be a national identification system, there should be competition. No one institution should be given a state supported monopoly over this. It wouldn't even be necessary to do so; the majority of the value of an ID card would be network value, thus in any given market the tendency would be toward a single, main supplier of this particular service.

I say "any given market" because markets are not discrete units. The entire world is tied together in a "global market", the particular needs of a given nation result in many "national markets". Transportation costs mean that, for some goods, the "regional market" is more important than the national or global one, and that "regional market" probably isn't bounded by national borders. Then there are services, which typically, though not always, cater to a "local market." For minority populations united by particular interest but not necessarily by geography, there are "niche markets." This preponderance of possible markets ensures that no matter how strongly a particular industry tends toward a natural monopoly, that monopoly will never been complete, since nobody can ever please everybody all the time.

In identification, there is, obviously, a general need for an efficient way of establishing, to a reasonable degree of certainty, certainty about an individual's identity, with various information about their qualifications and abilities (driver licensing, security clearances, criminal record, etc.). Precisely what is meant by "reasonable degree of certainty", "efficient", and "necessary information" is up to interpretation, and it is along precisely those lines that different "markets" would be established.

The national market probably isn't huge at this time. Regional markets may be larger. The result of that could be at least two companies operating in a given area: a national company and a regional company. Some regional demand could transcend national boundaries; for example, an effective identification institution serving the American Southwest and northern Mexico could possibly prove useful. Then there's the fact that, for some applications, a greater degree of security or scrutiny (in a word, certainty) is needed than is provided by the larger companies; another company could arise to serve this niche market. A particular segment of the population may be, for reasons of tradition, religion, or whatever reason, leery about the practices of most companies; a special company that can establish identity to a reasonable degree of certainty without offending their sensibilities could serve such a niche. Whatever the need, somebody would be capable of meeting it, once it could be identified.

If any of these companies fail their market, whether through poor database administration, lax identity policies, insecure (easily forged or altered) documentation, or whatever reason, there is always the possibility that a group presently operating outside that market could expand into an ill served market. If a niche market arises that isn't yet accounted for, a multitude of companies could expand their operations, or a new company could arise. All this mutability comes from the optional nature of any form of ID verification: people would be free to refuse to utilize a particular company to verify either their own ID or those of others. Going completely without probably isn't an option for most people in this age, but even that option could be permissible, if not terribly viable for the one that chooses it.

Contrast that to a single, overarching monopoly institution, a central standard and a central implementation. Politicians establish it in exchange for votes and the money necessary to get votes. If the initial implementation is bad, participants may be able to amass sufficient capital to get it revised or revoked, but once it is running smoothly, it will continue running. It is not performance dependent, except to that degree necessary to remain politically viable (which is much less difficult than retaining customers). It is tax funded, so that even if alternatives are permitted, they are financially inviable. It can afford to ignore any niche that lacks a sufficiently powerful political voice, and it cannot be displaced if it fails its mission unless the failure is so spectacular as to attract political attention. By the time that happens, the damage has been done, and in the meantime there are no alternative institutions that can cover for them (by successfully taking their business) either until they get their act back together, or permanently.

Here, I find it necessary to address the reason the political establishment at large is seriously attempting to implement a change: Terrorism. While the proposed (and passed but not yet adopted) changes have been being proposed for many years, now, it is the new public awareness of the terrorist problem that has made these changes politically convenient. The issue, so far as I understand it, is the fear that the current ID regime is insufficient to keep potential terrorists out of sensitive areas, like airplanes, manufacturing facilities, nuclear plants, and so on.

So, okay, maybe airports and airlines need to reconsider their policies regarding who they allow onto their facilities. Perhaps an ID verification system, national in scope, is needed to verify the background of potential passengers. Such a system need only cover those who choose to fly, which is definitely not 100% of the population, and possibly not even 50%. This does not justify a single, central program that aims to cover 100% of the population, and a program designed to cover this specific need likely does not even require taxpayer funds to operate, and probably not even to establish.

Fred Foldvary Says It Better

Fred Foldvary ties together the Geolibertarian position far better than I. I found his August 3 contribution to progress.org especially good.

High Fructose Corn Syrup

I just came across this article about some recent work revealing potential problems with high fructose corn syrup. It seems consumption of HFCS, ubiquitous as a sweetener in packaged foods, has been linked with things like obesity, diabetes, and such. But in addition to this, apparently the process used to produce the stuff results in mercury contamination, as well. All in all, not a good thing.

How long, I wonder, until someone starts a campaign saying the Government should do something about HFCS? Maybe a ban, or a tax, or some other measure designed to reduce the amount of the stuff that gets used. Before such a thing is even considered, hopefully people will remember that the relative prices of high fructose corn syrup, and plain old sugar, is not a natural relationship. Sugar is rendered artifically expensive by import quotas (limiting how much sugar can be imported and therefore providing higher prices for domestic producers), while corn syrup is rendered less expensive through corn subsidies. Actually... I've noticed a recent trend toward greater use of regular sugar as a sweetener (always well advertised, such as Pepsi Throwback), which I suspect may have something to do with rising corn prices associated with corn ethanol fuel requirements.

Thus, solving America's "obesity epidemic" may well be as simple as eliminating a few subsidies and import quotas. Certainly reduction of government should be the first solution tried, if only to reduce the chance of multiple conflicting programs wasting resources and accomplishing nothing.

Governor Schwarzenegger: Baby Geoist?

Over at progress.org, I discovered a reference to a letter California Governor Schwarzenegger sent to the California Assembly Bill 32, which would, among other things, create a greenhouse gas cap-and-trade system for the State of California. Among the options mentioned are both the free distribution and the auctioning of emissions rights. And it looks like the main purpose of the letter is to promote the idea of auctioning those rights and then distributing the money back to the people.

This is a tiny step toward a more fully geo-libertarian policy. For the right to the limited capacity of the atmosphere to absorb pollution qualifies as a form of Rent, in the classical sense; and distributing that rent, rather than spending it centrally, is specifically geo-libertarian in nature. Does Governor Schwarzenegger know this? Could this be the beginning of a more general trend in favor of geo-libertarian ideas?

All in all, I am very much in favor of this policy.

Restraining Presidential Warmaking

Here's an idea I had the other day. The problem is that, despite the fact that the constitution lodges the power to declare war in Congress, the President's status as commander-in-chief of the armed forces, combined with the existence of a standing army, enables the President to prosecute wars, particularly small ones, without orders to do so from Congress. At present, the only way to deal with this is impeachment: Congress would have to impeach the president to stop him from commanding the armed forces to commit acts of war.

An additional protection could be added. Congress could pass a bill, perhaps an addendum to the War Powers Act, perhaps something else, doing three things. First, it would explicitly reaffirm the Constitutional arrangement: Congress declares War, and any acts of war outside such a declaration is illegal. Secondly, it would approve and encourage the refusal of deployment and combat orders not sanctioned by Congress by military personnel, and declare that persons being court marshaled for refusing orders on these grounds have a right to have their case heard in a civilian court.

California IOUs

So the budget problem in California has gotten bad enough that instead of paying their suppliers and contractors with Federal Reserve Notes (aka US Dollars), they're paying some with IOUs. This is the result of a system that makes it very difficult for the legislature to raise taxes, alongside a initiative system that makes it very easy for "citizens" (actually groups with enough money to circulate and advertise the petitions necessary to get initiatives on the ballot) to force spending. Like that isn't going to result in a problem?

But what I'm wondering about is this: are IOUs technically the same thing as "Bills of Credit", which are forbidden to the States under Article 1, Section 10 of the US Constition? Would anyone care if they were?

The Constitution is not a living document. It is quite dead, in my opinion.

Market Dynamics of Police Protection

I wrote this a few years ago. I'm not really sure why I never posted it.

The Flaw in Anarcho-capitalism

Go here for a really long definition of anarcho-capitalism. Go here for articles from the point of view of anarcho-capitalists.

It has often been said, and I believe, that there can be no monopoly in any industry where government does not create it. Even in products with a network component to their value (those products that become more valuable to the individual consumer when more people use it, like telephone systems and computer operating systems), the constant flux in technology and habits will inevitably wear away at any particular company's market share. AT&T had a monopoly, but only because telecom regulation made it prohibitively difficult for competitors to enter their market. Microsoft seemed to have a monopoly at one time, but challengers to that monopoly crop up every day--we're not far from a Linux distro that can be used by the average person, for example.

It is also recognized that every product and service in a free market is going to have the highest quality and lowest cost any human system can give it. Anything that turns a significant profit is going to attract more labor and investment, the effort of outsiders to that industry to claim a part of those profits. Rising supply meets the demand, prices fall, profits fall, untill some other industry becomes "too" profitable, and everybody who can rushes to meet the need there. Provided there are no artificial barriers to entry into the market for a particular product or service (like requiring government-issued licences to practice everything from law and medicine to hair-styling and pest-control), prices and services must ultimately be reasonable. (You want to know why health-care is so costly? Look no further than the government's entry-fee of fifty-thousand dollars or so for the practice of medicine, and their exclusion of any form of medicine that does not meet current political needs.)

The anarcho-capitalist suggests that police protection would benefit from the same dynamics every other service does in a free market. Current policing is wasteful, inefficient, and corrupt. The belief is that if there was NO entity with an exclusive monopoly on police protection, things would be significantly better. If a particular security organization became corrupt, they would simply loose customers; taxation would not continue to fuel an ineffective and corrupt institution, since there would be no taxation. Thus, police protection would be subject to the same mechanism of economic choice every other service is subject to, which would be good, right? Unfortunately, I belive, so long as men are sinners, such a situation will never exist, not for any length of time. The market dynamics of the use of force and the threat of such use are fundamentally different from every other product and service.

When one produces, when one labors to change one form of matter to one that is useful, one has a number of choices as to what to do with this piece of property: it can be used for immediate personal gain, or it can be exchanged for the fruit of another's labor. For example, a farmer might spend the year ploughing, planting, watering, and finally, harvesting. A subsistance farmer consumes the whole of his produce, and does his own house-building, tool-making, and such besides. A more prosperous farmer specializes in farming, acquiring better tools, using better methods for a particular subset of crops, and then exchanges the produce (which is greater than a farmer who had to spend time and energy on other tasks) for the produce of others: the wheat farmer exchanges wheat for apples with the orchard owner; wheat for beef from the cattle herdsman; wheat for plough maintenance from the blacksmith; wheat for bread from the baker, who bought his flour from the miller, who bought the wheat from the wheat farmer. As wealth increases, that wheat farmer starts to produce so much wheat that he can exchange it for music and arts, research in the art of wheat-growing, or anything else he might desire.

The use of force is no different in that it can be used for immediate satisfaction of desires or in trade with another; however, it is here that the similarities end, because, unlike the subsistance farmer, we perceive a significant moral difference between the use of force for immediate satisfaction of desires, and the use of force in trade.

The use of force for immediate satisfaction of needs and wants is what we call crime. The burgler breaks windows, enters a house, and takes what he wants. The raider sweeps down on the countryside in the company of his fellows and steals the produce of the farmer. The mugger knocks a man down and takes his wallet. The angry man kills the one who "made him angry." The zealot murders in the name of his god (though this might be described as an exchange, between the murderer and the "god"). Standing against them are the "subsistance-fighters" who raise their own weapons in defense of their own property.

Such people are the reason police protection is required. The idea of the anarcho-capitalist is that the second group, those who professionally use violence for money, but only when violence is warrented by the initial violence of the other party. I would argue, however, that in addition to that particularly professional form of violence-on-the-market, there would be a proliferation of many corms.

First, you'd have your basic thief. Whether there would be more or less of those than there currently are, I don't really know. It is possible that, more lucrative occupations existing due to the absence of taxes and regulations, there would be fewer. More effective police services migh reduce their numbers in areas inhabited by people who can afford more effective police services. I don't know, but I suspect that, given the considerably more dangerous nature of petty crime, and more lucrative nature of other kinds of violence, petty crime would, at worse, be no more common than it presently is.

Then you'd have the armed citizen type. These would own and be practiced in the use of a weapon, but have as their primary occupation something else, using said weapons only in self-defense. Among these would be people who, when angry or drunk, would also use their weapons, but I suspect such people would be weeded out in all but the ares of lowest population density. People who do this might shoot someone, but they tend to get shot themselves, far more often than the average person--particularly when the average person is not prevented from carrying their own weapon by a police force. The lower population-density areas I refer to are such places as the high seas, rural areas, etc.

Then you'd have private police organzations. In exchange for money, they would do the job of defending people's lives and property, generally only of those who could afford to pay. Of course, mercenaries would come in many other forms, as well.

A local olive oil distributor could hire men to intimidate competitors out of the market. A rancher could hire men to protect "his" property--which just happened to be on the OTHER guys ranch a few days ago. An investor could include violent men as part of his attempt to buy someone else out of their business. And finally, a police protection organization could attempt to use their capacity to do violence to force competitors out of an area they claim. The question is, which form would be the most profitable to both provider and customer, and thus predominate?

Let us examine the situation where money is the only concern. The doers of violence can be grouped into three basic types:

a = those who use force solely for direct acquisition of property (thugs)
b = those who provide police protection for a price, and who will take "no" for an answer.
c = those who provide police protection for a price, the payment of which is enforced coercively, competitors being excluded coericively.

We must consider the amount of police protection required by a client, and that amount differs by which type they choose. If they choose the police group "b", they are going to need an amount of protection equal to "a + c", since the group that won't take no for an answer will also be attacking. If they take the protection of group "c", the amount of protection they'll be paying will be equal only to "a", since group "b", as a matter of principle, will not attack. Thus, model c wil predominate, since it will be the most profitable model for both the customer and the provider.

The wildcard in this analysis, of course, is the vast body of armed citizenry. If a community is inhabited by people who are violently opposed to allowing anyone to FORCE them to accept police services, anyone who tried, or even seemed to be trying, might end up strung up by a lynch mob. This assumes, however, that either the capacity to use force is relatively evenly distributed (and it generally isnt in a specialized economy, any more than the ability to produce food or build houses is), or that enough of the people at large are willing to die for a matter of principle, since it would be bloody work for a lynch mob to take down a bunch of well-armed gangsters.

Many anarcho-capitalists wisely focus on education, rather than political action. The State is group c, writ large, the result of natural economic forces. The only thing that will shut down model c is if people generally stop trying to use force for personal economic gain--if group "a" goes away on their own. So long as men are sinners, there will always be government in some form. The only question is the scale.

The Right to Land, The Right to Exist

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Land, Labor and Capital. Freedom. The relationship between the three main factors of production and the ideal of property determine what kind of society we live in. One institution produces a condition of slavery; another allows freedom. Each of these factors are different from the others; none is a "subcategory" of the other. As such, the rules of property are, and rightly ought to be, different with regard to these things.

I think any civilized person can agree that there is a proper limitation to the degree to which "labor" may be considered property. To say that a free man "owns" his labor is just another way of saying that a free man may choose what to do with his time and his abilities. "Labor" just happens to be a subset of those choices that is relevant from an exclusively economic standpoint. To say that a man has no right to purchase another man's claim to his own labor is only to say that a man may not sell himself into slavery. Two people can come to an agreement that one will labor on another's behalf in exchange for something the other can provide, but this condition is by necessity limited, whether that limitation be the six year limitation to the period during which an Israelite under the Law of Moses may hold another Israelite in a condition of slavery, or our own society's notion of "at-will" employment, wherein either party to the transaction may cease unilaterally at any time, for any reason.

Labor is a choice, not a "commodity." A free man is free to keep the fruits of his choices or dispose of them as he sees fit. A free man is also required to suffer the consequences of bad choices. For the most part, this is how our society treats labor, at least outside the tax code. People are not "owned" as objects are.

Capital is nothing more that the fruits of earlier labor which are applied to the efforts of future labor. As such, it (initially) belongs to the laborer that created it as surely as anything else. Any transfer of ownership in capital goods should be regarded as final as any transfer in ownership of any inanimate objects. Capital is a subset of material goods in general, distinct from consumer goods only in the use to which they are put. The very same object can be considered capital in one use, and a consumer good in another use.

For example, a drill press in a machine shop is a capital good. A drill press in some dude's garage for his personal use is a consumer good. Bread on the shelf at the store, waiting to be sold, is a capital good. Bread in the pantry, awaiting consumption, is a consumer good. A truck that is used to haul equipment from site to site is a capital good. A truck of the very same model used to haul camping gear into the mountains for a family camping trip, or for mud bogging, or for a trip to Disneyland, or the grocery store, is a consumer good.

It should be apparent that making the distinction between a capital good and a consumer good is an arbitrary process, a matter of subjective perception and not objective fact. Thus, capital goods are (outside the tax code) and ought to be be considered "property" in the same sense as consumer goods. And I think we can all agree that freedom requires ownership in consumer goods; thus, it also requires ownership in capital goods. Unlike a human being, inanimate objects are not "free" in a free society... though the individual is free to produce, purchase, sell, and/or own any kind of object.

Then there is land, the economic category being more properly expressed as "a legal claim to a monopoly over the use of a particular area of physical space." The relationship between the individual, physical space, and the law is of tantamount importance to the issue of individual freedom. Consider the ways in which one may be considered "unfree". One such condition is slavery, in which one person is legally owned by another, and thus required to obey his commands. But another unfree person is the prisoner, whose chief duty is to remain in a particular place, and not to go anywhere else unless he gets permission from someone else.

I will give a ridiculous example. Suppose you are a small landowner, the only such person in a region owned mostly by a large landowner. There are no roads leading from your plot of land to a place outside it. Assuming land ownership is considered absolute (and it is so to an increasing degree in our society), to legally travel from your island to another place you must acquire permission from the big landowner to travel across his land. He may legally demand whatever he wishes in exchange for this permission, or refuse outright.

I doubt there are any but "free market fundamentalists" (by which I mean people who have an unthinking devotion to the status-quo minus government) who would believe a society in such a state to be a free society. Increasing the number of owners can reduce the price of access to land by putting owners in a position where they can be underbid by other owners; however a society in which all land is owned by individuals is still a society in which many, if not all, human activities... even existence itself... occurs only with the permission of one's "betters."

For what is the fate of the landless in such a society? Suppose all the land is owned by someone, and nobody agrees to allow a particular individual access to their land. What is their option, to float through the air, or leap into the sea? We all occupy physical space, and a right to exist necessarily implies a right to occupy physical space.

And this isn't some nebulous threat that doesn't exist in reality. There have been many, many societies in which a few have owned most of the land, while a significant plurality, if not a majority, of the population lived under conditions that closely match that of slavery, even if they were technically not "owned" individually by the great landowners.

The question I want to ask is, where does the right to individual ownership of land come from? Because I can tell you where the fact of individual ownership comes from: conquest. Every land deed in existence today was purchased from someone who purchased it from someone who purchased it from someone, along a chain of buying and selling, until you reach the first person who received title from the government of the State... whether that person was a feudal lord who received his grant from his king in exchange for service, or a speculator who received it from a congress in exchange for money. That person or entity got the "right" to dispense of the land as they saw fit through conquest: the violent subjugation, or even expulsion, of the previous inhabitants.

If the police found your property in the hands of a person who purchased it from a fence, you would want it returned to you, correct? And if people are not pursuing claims to goods stolen generations ago, it is only because, ultimately, capital and consumer goods can be replaced; the reward is not worth the effort.

But land cannot be replaced. Land cannot be produced; land cannot be destroyed. It's utility for certain purposes can be improved through effort, and its utility for certain purposes can be reduced through negligence or destructive action, but physical space does not increase. A population alienated from the land can only migrate to progressively less valuable lands until all the lands are taken... and then they must secure permission from others even to exist.

The right to live requires access to land. Freedom of movement and travel require access to land.

This is not to say that individual monopolies over the use of land are unjust. There are many modes of production which require this to a certain degree. Farming conflicts with herding (lest the animals eat the crops before they can be harvested). Foundries and grocery stores really don't mix.

"Cost Push Inflation"

Something people like to talk about is things like rising oil prices "causing" "inflation". The idea is that there are certain commodities which are used in nearly every productive process, and as a result movements in the price of this commodity can influence the prices of just about every other commodity. Petroleum provides both the energy for many, many productive processes, the vast majority of the energy for transportation of products, and the raw materials for everything from the fertilizer used in growing the food to the plastics they are stored in. Because a rise in the price of oil causes a rise in the price of everything else (debatable, but I don't need to go there this time), it follows that The State is justified in engaging in collective action to keep these prices down. Or, another side goes, the prices being left as they are, a certain amount of the higher prices, inconveniencing people as they do, should be collected for the benefit of the state. Right?

I am, of course, referring to subsidies to the oil industry (up to and including war on the industry's behalf) on the one hand, and special taxation of the industry on the other. In addition, I am playing devils advocate here, for the sake of another argument. Certainly, subsidization of the oil industry (or any other) to bring prices down doesn't make sense because the money still has to come from somewhere; ie. taxes. In addition, seeking to reduce the profitability of a commodity will discourage the development of new sources of that commodity, keeping prices up in the long run. However, there is one other thing, an entire category, one of the factors of production, the price of which drives all other prices even more surely than the price of petroleum, but which is not subject to the same market dynamics of petroleum.

I am referring to land. Access to physical space is necessary for existence itself, let alone to the productive processes that support existence. Thus, the costs involved in occupying this physical space must be accounted for in the costs of production. This is true whether you're dealing with a business that is paying rent to an owner, a mortgage to a financial institution, the costs of physical security in a land where the State does not assume this burden, or even if the business owner is also the landowner and is simply paying out market norms for all the other factors, while keeping the surplus (including the rent) for himself. And even if one has found a way to make a living in a place neither tethered to ownable land nor threatened by criminal violence, one is only making use of marginal land... and if it is profitable, this land will not be marginal for long, as others move to imitate.

As an economy grows, the price of a given unit of land relative to the price of a unit of just about anything else grows. For while increasing economic efficiency enables people to get more out of smaller and smaller quantities of any given input, including land , the result is larger available quantities of every other input... but not land. One can squeeze more and more productivity out of a given area of land, which is good for those who own the land, since they can claim an ever larger quantity of goods and services in exchange for the use of their land.

And this increasing cost of access to land must ultimately come out in the prices of goods and services for production to be profitable. These price increases, furthermore, enter the cost of production at a multitude of points.

The minimum price of labor must account for land prices increases, since they affect the price of living space. This minimum price is also affected by food prices, which are affected by rising land prices. The price of everything the laborer must use is affected by land prices. This doesn't necessarily mean all these prices are rising in an absolute sense, but compare what prices are when efficiency increases are opposed by rises in land prices to what they could be if the cost of physical space were somehow magically removed, and you get an idea what I'm talking about here.

Then there's the price of capital goods: machines, facilities, goods on the shelf. All of those who produced these had to pay for access to land; therefore rising land prices affect the prices of these thigns, as well. And the inputs that went into producing the capital goods ALSO were impacted by rising land prices in the previous cycle.

All of this is in addition to the compensation for the landholder for permitting the land to be used by one individual rather than another. Clearly, land prices (or actually, the rental value of land, which impacts, but does not exclusively determine, the purchase prices of land titles) affect prices economy-wide to a degree equal to or greater than the price of oil. IF you happen to believe that goods with this degre of influence over other prices (like oil) fall under the purview of government regulation, taxation, and subsidy (and I admit, I do not share that belief, but work with me here), certainly land falls into this category.

When does this fact become most obvious? When domsetic producers are displaced by producers located in developing regions, the land in which has lower rental values due to things like a lower or less educated population, more frequent violence, less capital development, and overall factors that produced a lower historical degree of interest in developing in those lands. This will not last forever, since this disequlibrium of rental values will eventually stabilize... which is to say, eventually, developing country will become developed country, and what was once marginal land will be pulled into production.

Attempting to legislate rental values down would be foolish, since it is those prices that ensure that land, when it changes hands, goes into the hands of those most capable of making use of it. All you would end up doing is pushing rents into a black market. Because land, by definition, cannot be created, an attempt to stimulate production of land (increase supply) through subsidies is clearly not going to succeed. However, this same fact makes taxation of landholdings unable to reduce the availability of land; thus, unlike special oil taxes, land taxes cannot discourage future production.

For those of you who do not think this is enough to justify regulation and taxation, I will attempt, once again, to present the moral argument next week.

A Better Pledge for America

Huh, I left this in my drafts folder so long I don't even remember how I came up with it. I was having some kind of a dream, and I think the scenario arose from it that someone in authority was trying to force someone in their charge to recite the Pledge of Allegiance. I awoke with a fragmentary version of what was said instead, which after spending a few days working over it in my head, this is what I came up with:

I pledge myself to no idol,
of cloth or wood or stone.
I pledge myself in war no more,
than I must to defend my own.

I pledge myself to no empire,
of land or air or sea.
I pledge myself to God alone, and
His handmaiden, Liberty.

On God: Why I Believe

Something I always struggle to put into words is why I believe in the existence of but one God. I wasn't raised to believe in Him. At a superficial level, I actually tend to prefer to think as an atheist. I'm definitely a great big sinner by the standards of many religious creeds. But believe I do, and I think, at this moments, I may actually have the words. Hopefully I can get them down before they fly from my mind yet again.

Suppose you were an engineer, and you came across a functioning device of unknown origin. You spent many years studying this device, seeing how all the parts go together, determining the principles by which it operates. However, the one thing you could not get a look at no matter how hard you tried was the power source. The device was clearly self propelling, but the power by which it operates was, for whatever reason, hidden from view. You'd diagrammed the entire thing, but at the heart of the diagram was an empty spot simply labeled "phlebotinum device". No other configuration seemed workable, and any other model you could come up with required a lot of arbitrary adjustments to even function, a bit like the Ptolomeic model of the solar system. In a situation like this, it would be foolish to debate the semantics of what the device should be called, or the existence of the device.

For me, the field is moral philosophy. No, I am not formally trained, but the majority of my life has been spent musing on the subject, whether I believed in God's existence at the time or not. To me, one of the primary functions of scientific thinking is to discover the order in a seemingly chaotic mixture of facts. And so far as I could tell, notions of right and wrong were only questions of seeming, and could not be justified according to any ultimate principle or structure of thought. Ultimately, right and wrong were purely matters of either futile and circular reasonings, or assertion.

And nobody asserts that more than the more traditional, less thoughtful believers... but ironically, the time I spent trying my best to be as religious as possible, attending church and reordering my thoughts to account for His existence, brought a spark of order to all these chaotic musings. For though in the short term, submission to a written code and a social order (so far as I was able... I've never been good at submitting to social order) brought me a brief reprieve from my own crisis of morality, in the long term, the "God" principle became the "phlebotinum device" at the core of my own moral structure.

(Note that I recognize that this "God principle" is not God himself, but rather a memetic structure that fits into the only consistent memetic structure I have ever run across. I do not worship this principle; that would be idolatrous. Indeed, I do not ordinarily worship, unless my wonder at the brief flashes of insight this principle enables me to have counts. I say this not to brag, but more as a confession.)

What is this structure? Hopefully I can elaborate on this further in future entries, but there are a few platitudes that I regard as being more true than false, that point to the existence of some benevolant guiding force.

For example, "leave the rest up to God," or "Matters beyond that will attend themselves." It is, I believe, a fact that there are limits to individual responsibility. One simply does not have the power to order the entire world around him... but there are so many who drive themselves to the grave attempting to do so. Worry worry worry... but it isn't even necessary. For the world is not a dark place with potential enemies around every corner... unless you have made those enemies yourself. One CAN focus his attention on that which is within one's own power without worring about sudden unexpected disaster... and be more effective at life as a result. For though sudden unexpected disaster does strike from time to time, worrying about it accomplishes nothing. And afer a natural disaster, or "act of god", the key to moving on is acceptance of the situation, "trusting God", not howling at the arbitrary and senseless nature of the universe.

What is the engine that enables "matters" to "attend themselves"? One can suppose an inherent benevolance of humankind... this is not, in my opinion, a reasonable supposition. One can throw up his hands and simply say "I don't know." I don't know either, but the first phrase I quoted suggests something that is true...

What is the mind that guides the "invidible hand" that guides the distribution of resources? How are the species that survive amid extinctions on the one hand, and the social and moral systems that continue to the present day, selected? Is the chain of cause and effect infinite, with no original cause? Or is there a "base" cause from which all effects arise... and what is that "first cause"? What is the equation behind the fractal pattern that seems to emerge in such disparate places in nature? And why does it always seem to function, at the macro level, better than any human planner?

What is it that made Jews and Jewishness indestructable? What is it about the cult of YHWH that was so compelling it spawned two world religions, and numerous other ofshoots? What was it that drove Jesus to knowingly and willingly approach the cross? Which is less reasonable: to entertain the notion that the old prophets may have known something (or someone) we do not, or to valiantly squeeze one's eyes from even the possibility (whatever you think of the old religions) that the ordering of the universe has a conscious intent behind it?

To me, human morality simply does not make sense without a "God principle" at the center.

Something To Read

I enjoyed Robert P. Murphy's recent article refuting some objections against Austrian Business Cycle Theory. Just thought I'd bring that up.

Iraq: Why Leaving Slowly Isn't Enough

A subject that came up recently was Why I Didn't Vote in 2008, and my answer was Obama Wasn't Going To Leave Quickly Enough. But pressed with the question, what's so great about leaving quickly, Leaving The Iraqis Out To Dry, I found myself unable to answer. While cleaning up after dinner, I found myself musing on the subject, and I think I have an answer.

I'd forgotten, since it'd been a moot point for some time now, but originally, the Iraq (totally not a) War was not, for me, about America vs. The Terrorists, or America vs. the Islamist Extremists, or America vs. The Insurgents, or any form of America vs. Those Guys Over There. I was well aware that nobody in Iraq had anything to do with the 9/11 attacks (or at least, nobody that anybody knew of). So far as I was concerned, America had nothing to do with anything going on in Iraq. Regardless of whoever else was involved across the seas (in this case, the enemy of my enemy is definitely not my friend, nor does he need to be), the Iraq War (sic) was to me about a coalition of military suppliers, oil companies, Iraqi exiles, others who thought they might gain from the conflict, and a few genuinely deluded souls, vs. the American People, and our Constitution.

It is my understanding that military officers, congressmen, and the President himself swear an oath to defend the Constitution against all enemies, "foreign or domestic." My opinion: exiles seeking to embroil this nation in their own conflict? Foreign enemies. Big business interests seeking the same end for their own purposes? Domestic enemies. I was well aware that the "conflict" part of the Iraq "War" would end during the next administration, regardless of who won the election. The only question was, would it happen quickly enough to burn those who were reaping an advantage from the fight? Would it be a victory over the enemies of the Constitution, both Foreign and Domestic? Because that's what the election of 2008 was about, for me.

A quick and total withdrawal from Iraq would have hurt the balance sheets of the military supply companies reaping American tax dollars, by bringing a swift end to the practice. For the big oil companies, dreams of securing advantageous contracts with a compliant Iraqi government established with other people's money would have quickly gone up in smoke. The exiles who lobbied to have us fight their enemies for them would have suddenly found that their "allies" had signed a separate peace... their own plans foiled.

And what of the Iraqi People, who had to go through military invasion and occupation, all for naught? The people whose hearts bleed fat the thought are often the very same people for whom there is an acceptable level of "collateral damage" (that is, the destruction of the lives and livelihoods of noncombatants) to be had in war. So lets just call it that: the fate of the Iraqis after we "leave them hanging" or whatever is "collateral damage"... with a difference: neither I, nor anyone else involved in our side of the conflict are the ones pulling triggers and pushing buttons, if indeed the nightmare scenarios painted by some supporters of the "slow withdrawal" are, in fact, the actual result.

Musings on Moral Equality

I have at the tip of my mind a series of essays on how the ideal of moral equality can be described in terms of the proper relationships of individuals and communities to the general categories of labor, land, and capital. The problem I am having is the verbalization of the reasoning behind the concept itself: Why should people be regarded as being morally equal?

At first, I wonder if it's even necessary. For me, the ideal that all people have equal moral rights to things like freedom, even existence, is self evident. It's axiomatic. It's not something I question, and as is the case with all people, my natural presumption is that everybody shares this axiom, and that disagreement is a matter of the interpretation of the logical consequences of this axiom.

But this isn't the case, because a lot of people, quite possibly a majority, seem to have a tiered system whereby some people matter more than others not only in practice, but in reality. At the top is the self. Just below it is a circle of immediate family and close friends. Next comes one's extended family and peer group. Below that comes the primary identity group, whether it national, religious, racial, class based, or otherwise. There may be a series of secondary identity groups below that, but, at the very bottom, come the "unpersons."

Certainly, one cannot get away from the reality of distance, that one is only capable of carrying out responsibility to a limited number of people. But I see, in the voraciousness with which large numbers of people are able to literally cry out for the blood of people they've never met and who have not been proven to have done any harm, a moral relativism. "We" do not only know one another better, "We" are not only more able to both to help and to judge one another, "We" matter more than "they." "We" have a right to rob, oppress, or even kill anyone we perceive as a threat, so long as they aren't one of "Us." "Our" existence takes priority over "theirs." The standard of proof, if even necessary, is lower for convicting "them" of wrongdoing; and on the flip side we should stand united against any of "their" accusations against our own.

Thus, a nobleman has the right to harass, rob, or even kill a peasant, simply because he is not a fellow noble... but woe to the peasant who strikes his better! Master may beat his slave mercilessly, deprive him of food, or take any other measures he feels appropriate... but a slave who so much as glares at his master may be struck dead on the spot. Native may abuse, torment, con, or even murder foreigner at will... but a foreigner who so much as grumbles against his treatment has overstepped his bounds. Any from the conqueror's people may do what they will to the natives, and at worst will be transferred back to the homeland for "rehabilitation", but if a native too slow to obey his conqueror's orders he may be justifiably shot, in "self defense." And if my brother strikes you, it was justified... no investigation is needed. However, if you strike my brother, that demands retribution!

Certainly, some people place some identity group above themselves in their moral hierarchy: family, nation, religious organization, or what have you. Such people can potentially dehumanize to a greater degree, since such a hierarchy requires that they submit their own will to that of the group... meaning that if their group is at odds with another, the individual member has no choice but to respond with hostility to individuals of the other group!

My general moral hierarchy has but one or two tiers. One contains the mass of humanity... all of them, regardless of nation, race, creed, or even possibly occupation... and within this, men are judged by their actions, not their origins. The only other possible tier is one above, the one in which God resides, with authority over all men individually and directly.

Certainly, there are structures of authority within that second tier, but those grants of authority are always exchanges in which both seek and deserve advantage; one is not "above" the other, but rather simply has something different to offer than the other. Laborers exchange their efforts for access to resources and knowledge they otherwise would not have. Laymen exchange their deference and resources for the wisdom of his priest of pastor. Soldiers submit to their commanding officers in exchange for a better chance of surviving, or at least not dying in vain. Children submit to their parents in exchange for sustenance, guidance, and the approval all children desire from their parents. Husbands and wives submit to one another in exchange for the various things one can obtain only from the other.

However, in any relationship, both sides have the right to terminate the relationship if they believe they are being cheated or abused. Note that the following are not necessarily established rights in our society, but rather things I believe flow naturally from the notion of the moral equality of humankind. The laborer can quit his job and seek another, while his boss may fire him. Laymen can stop listening to their clergymen, and a clergyman may step down from serving an ungrateful congregation. Soldiers, should they believe their commander unfit for leadership, can decline to serve further; the commander can likewise refuse the service of any he regards as unfit for duty. The child, though he must rely upon his own abilities for sustenance in such a case, is under no moral compulsion to return to his parents should he decide to leave; likewise, though despicable to consider, I can see no profit in attempting to force a parent that lacks a natural paternal instinct to support a despised child. And husbands and wives, though they should make every effort to continue the relationship for the sake of any children that might be involved, ought to have the right to unilateral separation.

This is my question to my readers: do you regard moral equality as an acceptable axiom (even if you don't think I've correctly applied it in the preceding paragraph)? Or is it really okay to judge men more or less favorably depending upon their social distance from yourself? Figuratively speaking, if your brother wronged another, would you protect him from the consequences? If another acted against your brother, would you consider that in itself a wrong, without investigating what your brother may have done to provoke that response? Is it truly acceptable that US contractors, when found guilty of crimes, are simply transferred back to America, while an Iraqi or Afghani that is too slow to obey orders barked by soldiers can be shot on site often with little consequences? Is it okay that a policeman need only claim he was "scared" to get away with shooting a dog, let alone a man, but that the average person is often denied even the right to carry a weapon... and that regardless of the outcome, a policeman may not generally be prosecuted for his crimes, but only "disciplined"?

I am actively requesting feedback on this one. Is moral equality axiomatic for you? Do you have a deeper reasoning for it? Or do you regard moral equality as a falsehood? What do you propose in its place? Why?

Gold: Theoretical Nexus between Austrian and Geoist Economics

Lately, I've been paying a lot of attention to the work of Dr. Michael Hudson, whom I discovered via his many interviews on Guns and Butter, a radio show I used to listen to regularly via KFCF. (It's a shame my newly local WPFW doesn't carry that show.) A theory that is somewhat new to me that I've encountered via his work concerns taxation as the source of money value. Initially odious to a libertarian thinker like myself, some thought about the role gold typically plays has lead me to believe there might be some truth to the notion.

I wish I could point you to a definitive page outlining this theory. I'm pretty sure it's at least related to the Fiscal Theory of Price Level (the wikipedia article could use some development, but it's the best introductory link I could find, the others being equation-heavy and highly technical papers from various Federal Reserve Banks). But the basic idea I'm so recently exposed to is that money derives its value from the demand for it created by its acceptance to satisfy tax liabilities.

This contrasts with the theory I'm most accustomed to, which is a simple question of supply and demand with its utility being a question of its durability, divisibility, and scarcity, and general acceptance in payment for other goods. Durability: How long can it be stored before it degrades? Divisibility: Can I make change? Scarcity: How much value can I store in how little space? Acceptance: Will anybody care that I have this? Gold fits all four of these. It doesn't generally oxidize, nor does it shatter, you can divide it down to tiny grains without reducing its "goldness" one bit, it is rare enough that one could potentially buy, for example, a car, for an amount of gold that could be carried in a small sack. So then the question arises: where does its initial demand come from? Why would anybody want gold?

The answer is obvious: the stuff looks good, and unlike other things that look like gold but aren't, it will continue to look good pretty well indefinitely. It makes an excellent decoration. There is always somebody who is willing to accept it in payment. The question then becomes: who? And in payment for what?

The short answer is "the rich", the richer the person is, the more gold they are (were?) likely to make use of, relative to their use of everything else. A middle class person might hold a few important pieces of jewelry (such as a wedding band), but a rich person might have many otherwise common items either constructred from or plated with gold. In other words, he'll use more. But who is likely to be rich?

These days, we like to focus on the successful entrepreneur: the Bill Gates' of the world. And yes, it is true that the richest tend to be those whose efforts have produced new tools, products, processes, and so on. But this has not always been the case historically, and even today, below the super rich "new money" types you have "old money", who largely collect their wealth in the form of rents.

"Rent" is nothing more than money received for access to an opportunity or good in excess of the resources actually needed to enable access to it in the first place. Land is the primary example, the cost of making it available being the cost of securing exclusive access (basically the protection of capital improvements against thieves, vandals, etc.), and economic rent being the amount actually received in exchange for access minus that cost. Those who are in the business of collecting rents will tend to be richer than those who pay them, and those who are rich by other means will tend to "invest" their newly earned wealth in rent collecting opportunities (adding their descendants to the existing aristocracy).

We now have a reason gold is always acceptable in payment for goods: it is always acceptable in payment for rent, due to the fact that the rent collectors are also the ones who have the most use for gold other than as a medium of exchange. If the gold supply becomes excessive (as can happen after a large discovery), the rent-collecting class will tend to absorb the excess in the form of luxary goods. This, then, ensures that there is always a demand for gold, making it acceptable at nearly all levels of society as a medium of exchange. You can't eat gold, but you can pay rent with it.

If one considers rent to be a "tax" of sorts (and I do), then what you have is gold satisfying the "tax value" theory of money value (or whatever its called), and it does so naturally, without the intervention of legislative declaration, monetary "policy", or even a functioning government.

Oil Supply: Is War the Answer?

I recently read a fictional scenario in which two countries were engaged in a war over disputed territory... which had oil under it. This border had been disputed for years, and in the latest round of border skirmishes, one had seized the oil territory from the other. This region was a major exporter to the US up until this point, and as a result of the conflict, the price of oil had risen 30% or so. It was part of a survey, and was followed up with a lot of questions about my opinion as to whether the US should send troops, why, the aftermath of a conflict, etc. It got me thinking.

My first thought is this: oil prices are rising? Oh noes. Big fucking deal. Yeah, it cuts into our standard of living... but violence for raising or maintaining a standard of living has another name when done at the individual level: theft. Its their dispute, the dispute is probably the result of an incorrectly drawn colonial border (and colonial borders cannot but be incorrectly drawn), and so probably the two sides need to figure out where exactly it should be, if anywhere. Such matters are often decided via warfare, unfortunately, and the US sending troops is not going to help them with that question, in the long run.

But what about the oil? Wouldn't the world be better off if this oil were available? And when an oil rich region is in a state of perpetual conflict, wouldn't it be better if someone brought an end to that conflict, making this resource available for extraction? I'm going to analyze the probable effects of leaving the conflict alone.

First, the higher prices remain at that level in the short term, and no signals are sent that the supply from this region is going to resume at any point in the near future. This higher price does curtail consumption, potentially impacting the standards of living of everybody dependent on oil, but it also stimulates production. First off, the potential profits of resuming production in the war torn region can tempt both governments to working out some arrangement by which production can resume. If not, they miss an opportunity, which is taken by others.

These others include other oil producing regions that are inhabited by people that do not engage in warfare every decade or so. In the short term, they reap greater profits due to the higher price. In the long term, these profits make available and/or attract additional capital into oil production. The result: the war torn region no longer has as great an opportunity for profits in oil production. Peace is rewarded; war is penalized; the market is the mechanism by which this occurs.... naturally.

Additionally, in that same long term period, it isn't oil that is needed specifically, but energy generally. The higher price of oil results in profits not only for oil producers, but for energy producers of all sorts. This would stimulate investment in non-oil energy sources, such as coal, solar, biomass, hydroelectric and wind, and possibly things most of us haven't even imagined yet.

Thus, the end result of non-intervention:

1. More oil produced in peaceful regions.
2. Less oil revenues available to the belligerents in question, and thus reduced capacity for violence.
3. More energy from non-oil sources.

All of this, not from expensive government programs, but from our government refraining from action. Thus, we have a #4:

4. Less loss of life for US soldiers, lower taxes, lower public debt, a better national reputation, etc.

Honestly, I count only positives in this scenario, and absolutely no negatives, not in the "common good" sense, at any rate. There are certainly people who lose out in this scenario, and I can even accept a demand that the attacking side reimburse those among our fellow citizens who had property destroyed in the conflict (oil rigs, wells, etc.).

Applied Liberty Theory: The Morality of Land Property

This is just the most recent post in a thread I've been participating in at the forums on mises.org. It began with a discussion about "Scandinavian Socialism" and how, in many respects, they actually have a freer market than we do here in the United States. (The consensus seems to be that they allow considerably greater freedom... but also have very, very high taxes.) But there was one person who pointed this out, declaring that "social democracy" isn't anticapitalistic, but just a different approach to the same free market principle. Others attacked him, basically painting him red.

I decided to point out that many of the results a statist "liberal" (in the American sense) decries is potentially not the result of natural market functions, but rather various programs designed to redistribute wealth from producers to various representatives of the State, including an inflationary currency, tax fueled subsidies and politically favored contracting, a public debt which funnels tax dollars to those who are able to finance the government... and I even threw in a bit about unjust land distribution, which threw off one of the readers. I expanded on the other three, and dimissed that fourth bit, and, well, you can see the remainder below.

wilderness:

DASawyer:

(except the economic rent part, which I just threw in to see if anyone bit).

See, you threw that in and you cloud the whole perspective of what you're trying to say.

Actually, it doesn't really cloud it at all, except to the extent that the idea it rests upon an idea alien to most libertarians (actually, people in general) and even threatening to absolute believers in property rights... when misunderstood, that is. But when it comes to the concerns of more lefty-types (who are more concerned with ends than means), it is another area in which the failure to adopt the princples of liberty results in the very situation egalitarian statists decry.

So far as I can see, Libertarians accept the "homestead" model of property in land. If someone is already using it, and another's activities negatively impacts that use, that is a violation. However, if another's use does not impact that homesteaded prior use, it is not a violation. Thus, in a rural setting, the fact that a farmer has corn in the field does not preclude a hunter from shooting deer in it (so long as he doesn't damage the stalks). The fact that a vinter has grapes in the vineyard does not preclude a man walking through the rows to get to the other side. The fact that a man has a little ribbon of land he paved over and calls a "private road" does not preclude the chicken from crossing it... assuming the chicken does not disrupt the flow of traffic on his way to the other side.

However, property in land in this country does NOT operate under this model. Our land "property" is establishhed not by homesteading, but rather from the extension of the State's claim to absolute dominion. This is the case whether you have a king parceling it out to his most trusted vassals in exchange for service, or a republican executive parceling it out to the highest bidder, regardless of whether that highest bidder actually intends to occupy it... or even to land which is parceled out on the basis on a "homestead act"; even if it is an attempt to most closely approximate a natural right to land, it stil rests upon the principle that the source of claims is not the right of the individual, but rather the dominion of the State. The State's claim rests not on homesteading, but on conquest.

The result is that you have a society that has those who, by virtue of their service to the state (or more likely their compensation of others who served at some point in the distant past), collect economic rent from those who have not. It is difficult to see, since the distribution of land "titles" in our society is a wide continuum, defying anything like "class analysis". Additionally the common use of the word "rent" refers not to a division of wealth tied to land, but rather to any payment for temporary use of any kind of property... confusing the issue in the mind of the layman. But is is real, and a means by which those more favored by the state collect wealth they did not produce from those who did... another fashion in which the State messes with the distribution of wealth for its own benefit, contributing to precisely the conditions that the statist "liberal" seeks to solve via the power of the state.

Consumer Time Preference Part Two

Last week I described the nature of consumer time preference in terms of a primitive economy. Today I shall discuss how consumer time preference is regulated in a more fully developed economy.

The key feature of a highly developed economy is the specialization of labor: nobody does everything himself, but rather does one thing very well, in exchange for everyone else doing their one thing very well. A well developed financial sector allows the division of one more economic function: waiting.

For that's what a saver does on behalf of a borrower: he waits, so the borrower doesn't have to. He can forgo leisure and consumption now for the sake of a better tomorrow, without knowing the exact details of how that future comes about. All he needs to know is how much another will pay him for the use of his savings today, and whether that potential borrower is trustworthy.

A civilization which has a higher time preference will have more borrowers than savers. This will result in a high interest rate, rewarding the few people who have a lower time preference, and ensuring that the extra resources made available by savers go only to the most potentially productive borrowers, limiting the impact of that overall high time preference upon the overall standard of living.

A civilization with a lower time preference will tend to have more savers than borrowers, resulting in a lower interest rate. The more effective the entrepreneurs that arise in that society, the higher the interest rate will be... but if the opportunities for innovation are more limited, the interest rate will fall, telling savers that it may be time to spend. Their time preference being low, they are more likely to spend that money on things like education... thus potentially increasing future innovations.

Thus, an unregulated interest rate does precisely what needs to be done: it shapes consumer time preference, rewarding those with lower time preference when overall time preference is high, and signaling when its time for people to take the cause of progress into their own hands.

"Consumer Time Preference"

The three words above sound like some forebodingly complex economic term... but what it means is really quite simple. An individuals "time preference" simply refers to how patient one is, whether one is willing to wait through hard work to reach a better result, or whether one is impatient and demands pleasure and leisure NOW, and damn the future. The later is an attitude many commentators decry about Americans in general. In economic jargon, the level of "consumer time preference" in America is very high.

What does this means? Imagine some kind of small community, living on a temperete island with about a hundred people, cut off from the world. Their future prospects are very dependent upon the level of "consumer time preference" found within the community. If they spend spring and summer just taking what food is available from the local environment, eating and wasting it all, saving nothing for later, when winter comes, there will be no food (or at least, not any food that doesn't come without extreme hardship). They will starve to death. If, however, they work a little harder, consume a little less, storing up preserved foods, when winter comes, they will have more and better to eat.

Even if the island is tropical, their future prospects are still dependent upon time preference. If they work to create a store of goods to draw upon, tools and structures to make living easier and more pleasant, in exchange for hard work earlier, they will have a more pleasant life later. If all they do is lounge about on the beach, eating what comes their way, they'll just have to suffer through the gaps in the food supply, and won't have good shelter against the occasional tropical storm. Time preference is important.

What is true of the small, aboriginal community (which can only advance beyond the aboriginal state by thinking beyond a single year), is also true of a civilized, industrial community. If people are willing to wait for the larger, more efficient factory, their future quality of life will be better, with consumer goods made more efficiently (and thus consumers paying lower prices and able to buy more of everything). If they're not, prices remain high.

It's worse is if a generation arises which has a lower aggregate consumer time preference than the previous one. Such a generation might neglect the maintenance of the large factory (prefering to be lazy and just let things fall apart than maintaining a high standard of quality) and actually reverse the community's standard of living. An industrial community has much farther to fall than an aboriginal one: they can spend considerable time consuming their capital structure before their standard of living falls as a result. An aboriginal community that neglects its minimal capital structure feels hardship rather quickly, a much swifter correction.

(A good way to imagine this at a very low level is to envision how one keeps his house. A clean, organized house is both more pleasant, and easier to navigate. Its easier to find things. It's less likely to have actual sanitation issues. It is evidence of a low time preference: the inhabitants are willing to spend their time now so they might enjoy the benefits of a clean house in the future. A high time preference person would rather goof around now and deal with the consequences later, even if it means he spends more time overall looking for things. Anyone who sees the way I keep my living space can see that, personally, I am a very high time preference kind of guy.)

Is consumer time preference something that can be shaped? Can a community which displays a low time preference be made to change for the better? Or is it purely random, or even static? Can it be measured? If it can be changed, I would imagine the method would involve some sort of encouragement or reward for those who have low time preferences (and thus are building the community up), perhaps some sort of penalty for those whose high time preference potentially erodes the community.

This is long enough for one entry, so I'll continue next week, with the shape of an institution that does, in fact, reward low time preference and offer a measure of a community's overall time preference.