A recurring theme of this blog is that politics can be rationally modeled. This view leads one to dispense with the oft repeated exasperations regarding irrational policies. A prime example would be the drug war. No the drug war is not insane. Nor irrational. Instead we treat it as something that can be rationally predicted. In the context of social and political science this means we attempt to ascribe a consistent rational method or choice to agency action to derive predictable patterns of behavior. Rationality in this context does not mean “a” should be preferred to “b” or “b” preferred to “a.” That is, rationality is not assigned to preferences. Instead it is assigned to the pattern. So what would be irrational is a pattern that, say, gives us “a” > “b” AND “b” > “a.”
The application of Rational Choice to the patterns of politics and government is usually credited to the Chicago and Virginia schools associated with classical liberalism. Both schools apply the model of methodological individualism to political and state actors that is similar in treatment to actors in the economic arena. In this sense, Rational Choice gives us no such thing as the State itself. A minor hetereodoxy is Bryan Caplan’s “Rational Irrationality” that shifts the agency responsible for patterns of government to the individual voter. Caplan’s motivation in part was to explain the failure of the standard treatment to reliably produce a rational pattern. But to accept Caplan’s method would be equivalent to saying there is no such thing as the politician or the bureaucrat.
Frankly, Rational Choice would offer an unreliable model of government if not for the possibility of a third alternative. This alternative says, by golly, there is such a thing as the State. If we assume the State1, then how then could we expect this thing to rationally behave(in the sense outlined above)? Anthony de Jasay should be credited as a pioneer in this third alternative. He gives a ready rational pattern of this thing, the State: a Firm that maximizes discretionary power.
It can’t be over-emphasized how much our third alternative is a radical departure from the standard treatment. We are dispensing with the methodological individualism of individual actors(like politicians, bureaucrats and lobbyists) usually assumed to be maximizing their own utility by a method entailing calculating the benefits against costs. Instead, the fundamental unit actor is The Firm. And our maximand quantity–the power to be used at one’s discretion–defies the usual neoclassical treatment of profit or Von Neumann utility.
If you are familiar with mathematical or computer science concepts, the third alternative more or less forces you to adopt an entirely different schema(meta constructs) to model(or make sense of) the patterns in the world. Hence, you avoid referring to such things as the banning of pressure cookers as irrational or stupid. No doubt, it would be stupid under the standard schema of neoclassical economics. But not under our alternative schema. Under this, it follows a rational and predictable pattern.
In de Jasay’s model, the discretionary power eventually dissipates into the “security of maintenance,” which means the use of power to simply stay in power. Writes de Jasay:
“Like the firm in the perfectly competitive industry that makes no profit, the state ultimately achieves only its own survival, and no one is satisfied by this relatively pointless result.”
I have dubbed this type of model by the shorthand name, “The Firm.” The extent of the departure of the political economy of The Firm from standard, neoclassical treatment requires an alternative vocabulary to adequately convey the schema at play. Things like “regulation” do not mean in The Firm what they mean in the neoclassical model. Public Choice concepts like “regulatory capture” are almost nonsensical when translated over to the model of The Firm. To see this, consider the neoclassical meaning of regulation: to internalize negative externalities so as to promote a regular functioning market. The public choice meaning of regulatory capture is to produce regulations that capture artificial rents by creating barriers of entry to competition. But the more appropos term when translating over to The Firm would be something like “docility,” which means something more along the lines of “yielding to submission.” Indeed, we can propose the following model translation:
regulation ————> docility
regulatory agencies —-> docility agencies
regulators ————> docilitators(we’re inventing a noun)
Under this language, the nonsensical nature of regulatory capture, translated to “docility capture,” becomes more readily apparent. It makes little sense. It seems to imply rent-seeking not as a power act but rather as an act of subservience. But nonetheless there is a rational pattern being hypothesized: any power accrued from rent-seeking docility rules will be dissipated via the “security of maintenance.” And there appears to be a bitter irony at play first noted by Orwell in his tract, “The Theory and Practice of Oligarchical Collectivism.” Oligarchical Collectivism produces a de facto peace. Following de Jasay, it may also produce a similar de facto end to the rent-seeking State.
Perhaps it would be instructive if we play a little language game with our model translation and apply it to this recent Reason article on Bitcoin authored by Jerry Brito, a senior fellow specializing in technology policy at Mercatus. Brito provides us with the classical rational choice defense for Bitcoin regulation. Ostensibly, he is treating the rationality of regulator in the standard way. This apparently leads him to formulate a dual struggle between an intransigent old guard of early adopters vs a dynamic new guard entrepreneurial class willing to bargain with regulators in order to launch a next gen Bitcoin application platform.
If the message wan’t clear enough, the Bitcoin Foundation—which helps organize Bitcoin’s development on the same model as the Linux Foundation—announced that it would be hiring a full time lawyer in Washington to represent the community’s interests. The thinking is that Bitcoin businesses and users are going to be regulated even if the protocol itself can’t be, so it’s time to engage the regulators and policy makers before they make any hasty moves.
This willingness to lobby and work with regulators, however, was not well received by many of the old guard. As one exasperated Foundation member tweeted, “I got into Bitcoin to improve this miserable planet and ESCAPE the iron grip of privileged moneyed interests, not JOIN THEM!”
But the fact is that Bitcoin is growing up. Its revolutionary potential is greater than most have yet understood. Entrepreneurs and venture capitalists are seeking to professionalize and legitimizing the network, and to do that regulators will have to understand and accept it.
It’s true that Bitcoin could continue to operate even if it was outlawed outright, but then it would only serve as an underworld currency, and its development would not doubt be hampered. The more subversive path may well be to let regulators create their rules for what at base is an uncontrollable system.
Translated into the model language of the Firm:
If the message wan’t clear enough, the Bitcoin Foundation—which originally organized Bitcoin’s development on the same model as the Linux Foundation—announced that it would now forego that model in favor of one predicated on hiring a full time lawyer in Washington to represent the Bitcoin Foundation’s interests. The thinking is that Bitcoin businesses and users are going to be docilely compliant even if the protocol itself can’t be, so it’s time to engage the docilitators before they make any hasty moves.
This willingness to be subservient to docilitators, however, was not well received by those who reject docile compliance. As one exasperated Foundation member tweeted, “I got into Bitcoin to improve this miserable planet and ESCAPE the iron grip of privileged moneyed interests, not JOIN THEM!”
But the fact is that Bitcoin needs to outgrow any revolutionary potential before it becomes widely understood. Thus Entrepreneurs and venture capitalists are seeking to create a professionally compliant network that can be easily understood and accepted by the docilitators.
It’s true that Bitcoin could continue to operate even if it was outlawed outright, but then it would only serve as an underworld currency, and its subservience would not doubt be hampered. The more subversive path, in contrast to the subservient one, may well be to let docilitators create their rules for what at base is an uncontrollable system.
Of course, the likes of Brito would read my translated version as satire. Fair enough. But I read his version as satire. The indisputable facts that even Brito would have to concede is that Bitcoin “regulation” has nothing at all to do with “regulation” and everything to do with compliance to an existing power authority. So what we have is a bargaining game between an open rent-seeking agency and an agency representing the maintenance and continuance of a power authority. But this type of bargaining is not actually in the standard rational choice/public choice literature. Remember, the standard treatment assume methodological individualism on the part of our regulators. There is no agency or agency representation of power on their end. Otherwise, we would be admitting the State or its agency thereof.
Interestingly, it would be well to point out that an agency like a “Bitcoin Community” is voided in the standard public choice literature, too. There are individual players, each competing for rents. Any coalition, at best, is temporary(straight from the bible of Public Choice, “The Calculus of Consent”). “Sticky” coalitions, to remain within the explanatory model of standard theory, can only persist by resorting to drastic inefficiencies/opaqueness in the rent-seeking technology(straight from the Encyclopedia of Public Choice)2. But this thing with Bitcoin is far too transparent. Rent-seeking coalitions do not host open forums as an evangelist platform. For someone like Gordon Tullock, this would be the monkey wrench of all monkey wrenches.
So, to be clear, what I am pointing out is that Jerry Brito’s commentary at Reason regarding Bitcoin has no substantiating theory of political economy. It is purely a language game relying on buzz words to convey a rational argument. Words like “new guard,” “old guard,” “dynamic entrepreneurial class,” and “revolutionary application platform” don’t mean a damn thing in and of themselves. If pressed, Brito will almost certainly reduce his argument to something like it is rational to be subservient in order to have a legal market for a potentially revolutionary platform. But that’s just a premise begging for a rational method to justify the conclusion. And Brito has no method. Instead the very premise plays into de Jasay’s rational method of the State as a firm. The conclusion from this method is simply the maintenance and continuation of State power.
Finally, I would be remiss not to point out the pessimistic implications de Jasay’s method for the prospects of anarchism. Unlike classical liberalism, anarchism/libertarianism typically does not dispense with the agency of the State as some sort of fiction. However, the “standard class model” usually views the raison d’être of this agency as means to procurement of artificial rents. The State is the means and the “rents,” and the power resulting thereof, are the ends. So if we have a political economy, in this case a digital economy, where the marginal cost of digital goods approaches zero, the State is viewed as some inevitable dying order because its enforcement agency is doomed to obsolescence.
However, if we have a rational method that seems inclined toward the State as both means and ends, and our maximand quantity of this thing turns out to be simply discretionary power, then the thing that is supposed to kill it poses the possibility of being its eternal fountain of youth. The obvious weakness of “the internet as liberator” is that it is not a “decentralized network.” Rather it is a small network that follows a power law distribution. The very property that allows it to be a distribution channel approaching a zero marginal cost of digital goods3 also allows it to be a perpetual channel for social control. Rather than undermining the State, revolutionary ideas in digital economy, to the extent that a rational method entails them to rent seek subservience, is the very thing that persists the modern liberal state. Revolutionary opportunities follow a rent-seeking pattern that dissipate into a security of maintenance.
We should be reminded that in Orwell’s version of things, Big Brother wins. de Jasay’s rational method of political economy gives us the equally sorry prospect of the Entrepreneur as Emmanuel Goldstein.
1 IMHO, the State as a Firm can actually be micro-economically derived by introducing frictional waste into rent-seeking.
2 The industry of rent-seeking does not refer to the industry itself, that is, to the actual production of the widget or service, but rather to the industry of seeking special privileges for the production of the widget or service. So inefficient rent-seeking technology does not mean the production of the widget or service is deliberately made inefficient; rather, it means the process by which special privileges can be obtained is deliberately made inefficient. This then can explain the barrier of entry to others competing for the special privileges. Remember, the constraint or boundary condition of the Standard Theory is that outlays >= rents.
3 The efficiency of the internet is a product of a great deal of centralized coordination of standards(manufacturing and protocol) up and down the stack. It is not a spontaneous order. The more accurate description would be an efficient Hayekian Hybrid Constructivist Order as a sort of unintentional consequence of “planned competition.” The neoclassical consequence is a major unbalancing of the equation between marginal cost and marginal labor. Zero marginal cost should imply an end to wage labor. But it is an entirely unjustified assumption to think that the n degrees of standardized informal compliance, and in some cases, formal compliance, would persist if everyone became their own firm. If not, there goes your small network and with it, this zero marginal cost manufacturing base. If you think interoperability between windows and mac, or even different versions of windows is a drain of your modern life, you might want to rethink the degree of connectedness you would have if we had an unplanned shift that equilibrated marginal cost to the marginal product of labor. The point being made here is that you can’t assume the small network in anarchist pronouncements of technological triumphalism. If we are to assume the persistence of the small network, a more rational conclusion might be the expropriation of this “Hayekian Constructionist Order” for a more dystopian end than typically envisioned.
Cryptome reviews Cypherpunks: Freedom and the Future of the Internet” here. The book essentially is a written compendium of an earlier RT Cyberpunk series that featured Assange, Jacob Appelbaum, Andy Müller-Maguhn and Jérémie Zimmermann, one that I had commented on previously.
The best insight from the book is that political economy is a sociological force, a shaper, if you will. And we now have a political economy rooted in totalitarian surveillance. Assange occupies the midpoint between the triumphalists and the pessimists, pivoting the tilt of the fulcrum around cryptography. There is an adoption of a more or less laissez-faire method of political economic analysis that approaches something that sees Capitalism not as the end-point fulfillment of human agency(wants and desires) but as contravening force against the very thing itself.
The introduction to the book, the “Call to Cryptographic Arms,” interestingly mirrors the concluding remarks of my previous post, “I,Spy.” The many writers who opine on the role of technology, internet and increasing freedom vis-a-vis the future of civilization are dead wrong. They are wrong because they are not challenging the status quo nor the enemy. As Assange writes: “No description of the world survives first contact with the enemy. And we have met the enemy.”
The cyberpunk perspective sheds immediate and crystal clear light on the current debates regarding capitalism and laissez-faire that are otherwise often obscured by conventional economic and political analytic frameworks(and I include conventional libertarian within these). Can there be just a “little bit of Statism” or is Capitalism a “good” first-order approximation to free human agency? Is the State merely an unfortunate nuisance that nonetheless can be routed around on our way to a technologically driven freer future? No. Assange pin-points the “ground zero” of our current condition: the merger of State and internet. The consequence reveals the ultimate stark divergence between free market and capitalism. Capitalism can rent-seek human agency itself as a threat.
Liberalism gives us the artificial state as a means of securing a human collective choice end, such as property(or primary goods in the more modern incantation), but the security of the thing results in the security apparatus viewing human ends as an existential threat to the security apparatus itself. This paradox is de Jasay’s rational choice incentive incompatibility problem staring you right in the face. Write’s Assange(essentially laying waste to classical liberalism):
First, recall that states are systems through which coercive force flows. Factions within a state may compete for support, leading to democratic surface phenomena, but the underpinnings of states are the systematic application, and avoidance, of violence. Land ownership, property, rents, dividends, taxation, court fines, censorship, copyrights and trademarks are all enforced by the threatened application of state violence.
Most of the time we are not even aware of how close to violence we are, because we all grant concessions to avoid it. Like sailors smelling the breeze, we rarely contemplate how our surface world is propped up from below by darkness.
In the new space of the internet what would be the mediator of coercive force?
Does it even make sense to ask this question? In this otherworldly space, this seemingly platonic realm of ideas and information flow, could there be a notion of coercive force? A force that could modify historical records, tap phones, separate people, transform complexity into rubble, and erect walls, like an occupying army?
The platonic nature of the internet, ideas and information flows, is debased by its physical origins. Its foundations are fiber optic cable lines stretching across the ocean floors, satellites spinning above our heads, computer servers housed in buildings in cities from New York to Nairobi. Like the soldier who slew Archimedes with a mere sword, so too could an armed militia take control of the peak development of Western civilization, our platonic realm.
The new world of the internet, abstracted from the old world of brute atoms, longed for independence. But states and their friends moved to control our new world — by controlling its physical underpinnings. The state, like an army around an oil well, or a customs agent extracting bribes at the border, would soon learn to leverage its control of physical space to gain control over our platonic realm. It would prevent the independence we had dreamed of, and then, squatting on fiber optic lines and around satellite ground stations, it would go on to mass intercept the information flow of our new world — it’s very essence even as every human, economic, and political relationship embraced it. The state would leech into the veins and arteries of our new societies, gobbling up every relationship expressed or communicated, every web page read, every message sent and every thought googled, and then store this knowledge, billions of interceptions a day, undreamed of power, in vast top secret warehouses, forever. It would go on to mine and mine again this treasure, the collective private intellectual output of humanity, with ever more sophisticated search and pattern finding algorithms, enriching the treasure and maximizing the power imbalance between interceptors and the world of interceptees. And then the state would reflect what it had learned back into the physical world, to start wars, to target drones, to manipulate UN committees and trade deals, and to do favors for its vast connected network of industries, insiders and cronies.
The traditional “property rights” of the liberal, democratic capitalist order are the means for a dystopian internet.
Unfortunately, cryptography is not a sufficient means to overcome the problem. Assange is correct that the laws of physics make encryption easy and decryption hard, but the mathematics of data analytics can circumvent this physical constraint. Data analytics is an exercise in graph analysis, not code cracking. Graph analysis is the process of revealing patterns in the data in order to construct graph objects, which are a collection of vertices and connecting edges. Regrettably, you cannot encrypt data patterns. And as we have learned this week, the US Government is massively engaged in graphical analysis of all internal data communications(which, of course, is what we said they were already doing). This is why, occasionally, we will read about the internal memos that leak out from whatever security agency acronym that those who are not sufficiently connected to the graph can rise to a level of suspicion. The robustness of the data analysis relies on a well-connected graph(the so-called diposition matrix is a special type of graph object that marks its nodes for termination). In this sense, the Cryptome reviewer’s advice to “protect yourself by keeping quiet, offline”(avoiding vanguard’s, however, would be good advice) may not be the best advice. The future of evasion is subterfuging the data pattern, which is why it will only be an available domain for the very few.
Cypherpunks: Freedom and the Future of the Internet would be a recommended prerequisite for reading or re-reading de Jasay’s classic “The State,” which, unfortunately proves to be much more relevant today than when it was originally published.
A Public Choice definition of “The Firm” is the agency that arises from the “incentive-incompatibility problem” of collective choice. This agency, however, is also an organ of political economy. The political economic construct of The Firm is what allows us to tie it to the classical concept of libertarian class theory(note: it is a mistake to try to relate the standard realm of public choice to the old French Laissez Faire model of political economy. To make this relation, you must more or less discard “methodological individualism” from the model of State actors. Hence, most, if not all, traditional public choice scholars will reject “The Firm” outright).
The positive model of “The Firm” allows us to make predictions. For one, the drug war will never peacefully end because the discretionary authority the drug war legitimizes is a core foundational component of The Firm. At best, any legalization efforts will simply result in a FDA, Bristol Myers Squibb, DEA triumvirate. In a real sense, the latter may actually provide the means for greater social control than outright illegality.
If the thing that “The Firm” maximizes is discretionary power or authority, then perhaps “The Matrix” is a better understood cultural descriptor than “The Firm.” However, the use of the term, “The Firm,” is illuminating because it reminds us that the agency in question is at its core a politically economic one. The Firm is the (protectionist) coordinated arena where the “competition” of capitalism takes place. It is the “market setter.”
As with “The Matrix,” it may be the case that the only way to fully understand “The Firm” is to see it for yourself. So below, I have posted a link from the recent WikiLeaks file dump. This is actually a publicly available document and not a secret one. But it is captured from the inner correspondence of the global intelligence firm, Stratfor.
The introduction says it all: engineering an efficient international enforcement paradigm of anti-money laundering measures that starts with terrorism and drugs but under a “one-size-fits-all” vein can be effortlessly extended to any unauthorized monetary exchange. The table of contents provides the staggering breadth and scope of The Firm’s coordination.
To those that say “there is no firm,” I say positive science is useless if we do not believe what we see with our own eyes. To those who say “if you don’t like it, leave,” I say it is clear that there is no escaping the jurisdiction of The Firm.
“Copyright bots” are a new “innovation” in data-analytics. The reliability of the data recognition(the content signature) by these distributed platforms, however, is still quite faulty. Wired recently published some of the embarrassing false positives generating by these platform censors which resulted in termination outages on high-profile content providers. Content that has recently been blocked included Michelle Obama’s speech on Youtube, NASA’s broadcast of the Curiosity Rover on Youtube and the Hugo Awards on UStream.
The more interesting point of the story was buried a bit: all major content platform providers are embedding these spy platforms into their infrastructure. This is not an actual legal requirement but it is following a law of political economy.
I browsed over to the website of one of the major players in this field. The tagline of the website reads: “Powering the Internet Video Economy.” The home page splash presentation trumpets the company’s partnership with Hollywood, Professional Sports, and China. I looked at its application platform, a platform, of course that’s patent pending(patenting the enforcement of patents and copyrights). The jargon reads “Rights Management, Content Filtering and Monetization, Business Analytics, Automatic Content Recognition, Search Recommendations.” In plain terms this means they are spying on you to both restrict access to unauthorized access to content and to monetize your viewing habits for “authorized content.” Frankly, why wouldn’t a censoring platform with access to your viewing habits take advantage of it to monetize your preferences to “legitimate” content providers. Its called Capitalism, right?
Content Identification and Data Signature Analysis is an “industry” in its infancy. There is plenty of innovation to be had in the pursuit of economic rents in this sector of political economy. But I would cite as an easy example of how technological innovation is not necessarily going to improve your life and make you more free. In fact, as in this case, its likely to make you substantially less free. This was a point I tried to make in my recent two-part “Internet Freedom” posts. And as I noted, the business of data analytics was at the heart of Peter Thiel’s recent critique of Google CEO Eric Schmidt.
Fine, you say. Just don’t watch your content online. No one is forcing you to log on to Google to watch content. But it won’t end there. Currently, all major online content providers are busy integrating content spyware into their infrastructure and platforms. But the same law of political economy driving this will steer a “spy regulatory platform” to the network provider layer, too.
Although it is not a major news or blogosphere focus, the “cybersecurity” executive order publicly contemplated by Barack Obama is quietly moving through The Firm’s channels for executive implementation. A legislative reinforcement will follow eventually. The law of political economy–rent-seeking– predicts the legislative addendum/follow-up to a CEO decree because of competing players(rent-seeking agency) fighting over the specific compliance (rules) regime of the contest.
The broad structure of the contest is defined by the top-level rule:
immunity from liability with respect to network traffic in exchange for compliance
Obama’s CEO Executive Decree will “legally” establish the broad stroke of the top level rule. Namely:
(i) the rule that network providers are, Ab initio, liable for the content payload of traffic over their network infrastructure(more specifically, liable for not filtering/blocking/counteracting “illegal/bad” traffic)
(ii) ex tempore immunity from all liability by following/implementing the rules of the compliance regime
The political economic competition in any “CyberSecurity Act” will be over the compliance rules for ex tempore immunity. Of course, any such “Bill” will be presented as ostensibly resolving the regulatory and legal burdens of network providers interfacing/info sharing with the extensive federal agency framework regarding “cyber attacks.” Every critical piece of infrastructure is plugged into the “public network” so we need a uniform, efficient regulatory framework to deal with the realities of the 21st century. It will even be presented with a “libertarian spin,” a pro-business slant, “reducing the regulatory burdens” on business.
Of course, the current reality of the 21st century is that the primary government agency responsible for coordinating cyber attacks is the United States government. The only agency actually capable of crippling the public network is the United States government.
The other pertinent reality of the 21st century is the inevitability of cloud computing. By “cloud computing,” I mean every computer resource imaginable delivered as a service. These resources include software, storage, platform, infrastructure, security and data. All tied together by a stack of interoperable APIs. It is in this environment where the contest over data analytics will play out. And you really can’t defect from this. More precisely, I would equate any attempt at defection as a “retreat to the woods.” Sans going “Jeremiah Johnson,” you will not be able to escape the data analytics of the cloud.
The ubiquity of cloud computing is inevitable because the internet is a small network. The cloud is much more efficient. A “free market” over a small network almost certainly delivers a cloud computing platform. Simply because that’s where the economic rents are. However, the data-analytics regime over the cloud is going to follow the structure of the rent-seeking contest. According to contest structure I outlined above, the contest will follow a rent-seeking compliance of the panopticon.
Obey the panopticon or starve. That’s not freedom…
Yesterday, the Roberts court affirmed the Obama defense of the so-called “Affordable Care Act.” To me, it is not a particularly surprising result. Two years ago, I noted that the Obama Admin’s principal argument relied on the classification of the mandate as a tax and that the legislation–all 2000 pages plus–was carefully crafted to categorize any penalty as an excise tax. As I wrote at the time, Obama–his “socialist” caricature notwithstanding–wasn’t arguing the case by making appeals to the Communist Manifesto. He was merely relying on past American constitutional precedent. He had “the firm’s” legal team carefully draft the new rules of the health care political economy to pass compliance strictly with the firm’s monopoly power to tax.
And it passed the compliance test. Indeed, John Roberts used this decision to affirm the role of his court to be the adjudicators of compliance and not the arbiters of constraint. Really, the judiciary is the only possible monkey wrench in a model of total government by political competition/rent-seeking. Yesterday, Roberts proclaimed that the role of the judiciary is not to save us from democracy, which, of course, means “the firm.”
We simply pose a simple question to Mr. Roberts: who wrote that 2000 page piece of legislation? Who could compose an entire model of political economy from the mere power to tax in a fully “compliant” manner. Justice ain’t that blind, sir….
Incredibly, there are some so-called libertarians who are hailing this decision as a bulwark against the future regulatory State because of some speculative nonsense that Roberts has now taken the “commerce clause” off the table. Sheeeeyyyyyytttttt. The regulatory state ultimately derives from the power to tax. The Firm more or less is the regulatory state. It is not going anywhere.
Let us dispense with the romance and the delusion. Politics is a rent-seeking game. Richard Posner and the Chicago School had it wrong. It is not a game where nothing is being redistributed, that is, where outlays = rents. Tullock and the Virginia School have the better model but resorted to a ridiculous “inefficient market hypothesis” to try to save liberalism in a public choice context when it became apparent that rents >> outlays. Tullock, himself, in explaining why he couldn’t convert to the libertarianism, more or less admitted that he simply preferred the blue pill to the red pill–he was too married to the institutionalism he was critiquing to defect.
If we accept that firms can arise in a “free market” of horizontal trading partners because a hierarchy of economic governance can sometimes prove to maximize economic rents relative to a regime of horizontal trading partners–as a consequence of the frictional costs of bargaining–we have to accept the reality of “firms” in political competition. It is indefensible to hold a position of firms as a consequence of economic rent-seeking in a free market but no firms as a consequence of rent-seeking in political competition. Yes, we can think of political parties as “firms,” but the actual firm is the State.
Today we know(or we should know) that Madisonian Democracy is a horribly flawed political concept. The idea that high institutional frictional costs constrain political competition/rent-seeking is just wrong. On the contrary, the high institutional transaction costs are what actually guarantee the emergence of “the Firm.” Equal competitive agents(“gangs”) fighting over rents in a highly frictional environment can be literally infinitely wasteful. To avoid this, you thus have a type of hierarchical, economic governance that emerges–the Firm.
John Roberts, “evil genius,” I think not. I think the evil geniuses are these libertarian think tanks and mags that keep propagandizing “proper role of government,” “limited government,” and demonstrate infinite capacity to find “silver linings” in libertarian-conservative fusionism. You doubt the “State as Firm?” Well, sometimes you just have to actually give a demonstration of the empirical reality. Below is just the “legislative component” of “the Firm.” Do you see any silver linings, any evidence of limited government, any evidence that it matters one fuck whether it is the monopoly power to tax or to “regulate” regarding the ends of our Firm?
The House Legislative Component of The Firm
The Senate Legislative Component of The Firm
In a previous post, I applied a consequential analysis of a “pro-life” moral rules regime–with respect to abortion– to infer abortion on demand was the only “defensible” libertarian position(note: a bit of subtlety, but decoration with the libertarian adjective intentionally limited the scope of AoD being the only defensible position within the libertarian sphere. I wouldn’t claim that AoD would be the only defensible moral position if the scope were broadened).
Frankly, it wasn’t that particularly difficult to debunk the “pro-life” libertarian position. You simply start with the examination of the moral claim that “you can’t protect liberty without protecting life.” Well, that’s a bullshit statement because you actually can’t enforce violations against life without first defining your moral constraints against liberty. There are two exceptions to this: pacifism and total violence. But pacifism isn’t enforceable–in the sense that the enforcement of its moral claims would itself be a violation–and total violence produces no enforceable claims(there is nothing to enforce).
Once we accept that there are moral constraints against moral claims of life(an obvious example would be “self-defense”) it is a straight-forward exercise to arrive at AoD as the only enforcement regime that is not burdened by ad-hoc pacifist obligations. If, on the other hand, we make allowances for such things as “the sanctity of life,” then we introduce ad-hoc pacifist obligations into the enforcement regime. With respect to modern Christian moral claims(Christianity is the typical moral foundation for “sanctity of life”), you will likely end up with an enforcement regime that places a burden of murder against any young female who does not carry any pregnancy to term while making an exception the size of a mountain for older women who have advanced beyond optimal childbearing years–in terms of the allowance for spontaneous abortions and “assisted reproduction technologies.”
It should be easy to see the regime consequences of enforcing these ad-hoc pacifist obligations: A Political Economy of Pregnancy Enforcement. This political economy certainly gives rise to “registration,” “inspection,” “direction,” “rule-of-law driven,” “enrollment,” “indoctrination,” “control,” etc….In other words, the enforcement regime has to be collectivized. Collectivization of an enforcement regime breeds an industry of political economy. This is axiomatic.
“Regime Consequences” regarding the enforcement consequences of moral obligations should be a staple of libertarian deconstruction. But this method is often dismissed because it perhaps smacks of “consequentialism,” which is generally a dirty word in libertarian circles. If consequentialism simply means that liberty is derived as the end product of a utilitarian calculation, then I’m in full agreement with hating that word. However, if we begin with a presumption of liberty and understand that reason only applies to means and not ends, then “consequentialism” is the only productive method available. Everything else is just bullshit.
The Regime Consequences of Enforcing the “Moral Obligations” of IP & Copyright
Let us understand why IP and Copyright have become a topic of bitter dispute. Today, a market process applied to the digitization of human ideas turns the latter effectively into a “public good.” By “market process” I simply mean a process of cooperative exchange that originates outside the State Regime of political economy. I mean it very much in the old French Liberal sense of “laissez faire.” By “Public Good,” I mean it literally in the neoclassical sense, that is a good that effectively is non-rivalrous and non-excludable. That Laissez-Faire is driving human knowledge to a status of a “public good” is short-circuiting quite a few moral foundations.
Particularly among the libertarians. A pertinent example would be the recent Stephen Kinsella vs J Neil Schulman debate. Kinsella, who has experience in the legal aspects of the IP/Copyright regime, has recognized that the enforcement obligations of IP/Copyright spells doom for any meaningful sense of liberty. Thus, he has been busy reformulating “Austrian” foundations in terms of an anti-IP slant. Schulman, of course, is not interested in any this. He remains steadfast to the Objectivist moral foundation which places Intellectual Property at the epicenter of property rights and human reason itself.
Schulman will take the moral claims derived from the Objectivist foundation to the logical endpoint: a denial of “identity” itself without the recognition by others of the intellectual product of human reason. To me, this is an example of the logical endpoint of Objectivism managing to bump into the rear-end of Charles Taylor and the communitarians. Taylor’s theory of recognition is noted for denying the possibility of agent identity outside of a group context; and the group can only achieve its own identity via the recognition and acceptance by other groups. The communitarians have always denied liberalism’s category of the State as artificial, insisting instead on the ancient view that regarded “the Polis”(the State) as a natural fabric of civil society. In the liberal era, the struggle against the re-unification of the Polis with civil society is the underlying basis of “libertarian class theory.” The means of this unification, of course, is political economy. The communitarian dream of reunification will be wrought on the back of political economy. And no better foundation for this political economy than Intellectual Property. What Rand deemed the essential component of human identity, the thing she warned “the collectivists” would attack, is actually the thing the collectivists will use to forever reunify the Polis as a natural fabric of human society.
The One Public Good the State Managed to Produce–by Accident–Defines the 21st Century Political Economy Battleground
Our Progressive worshippers of authority are always chirping about the State and “public goods.” Of course, other than “defense,” there are very few actual instances of “public goods,” and most of the progressive chirping is an exercise in conflation between “public works” and “public goods.” But as we well know,the simple exercise of digging a ditch eternally binds one to moral obligation to the regime under the banner cry of “but who will dig the ditches?!!!”
Now our progressive friends are usually quite fond of informing us that the government(usually a specific government, the US Government) “invented” the internet. Now this is silly because there is no such thing as “the internet” as a single entity that was invented by any single agency. But in another sense, it is a half-truth in that the cumulative evolution of the packet-switch, global wide-area network required a ton of standardization up and down the IP stack. This standardization was an intentional, self-conscious, directed process that involved quite of(albeit largely informal) public-private “joint cooperation.” It is actually the one example of Hayek’s “planning for competition.” However, given that Western governments at the time mostly treated Telcos as public utilities, there was simply no other alternative process available. But a clinching factor was the adoption of TCP/IP– tcp/ip being one particular implementation of the OSI model–by the US Military in the early 1980s. TCP/IP has its origins in DARPA, but TCP/IP supplanted other OSI implementations around the world simply because it was adopted by the world’s preeminent global military superpower. Not because it was a superior implementation.
So the accurate statement regarding the internet is not that the Government is responsible for the existence of packet-switched, WAN networking, but rather that it is largely responsible for our particular implementation of it. Specifically, we can certainly give attribution to the US Military for the fact of a global tcp/ip standard.
The end product of this high degree of standardization in our packet-switched, WAN network is more or less an efficient “small network,” meaning the number of segments between any two arbitrary nodes approaches a small number(e.g. the “six degrees of separation” concept). Now the “public good” is not actually the network itself but the low-entropy product it is transporting: namely the digital transcription/copy/representation of human knowledge. Human knowledge effectively has become a public good. To state the three reasons for this:
(1) the efficiency from a high degree of network standardization: the global small network
(2) the low entropy of human language
(3) the relentless progression of Moore’s Law
The State finally plays a role in producing a “public good” other than defense. But the role was restricted to the resolution of coordination problems(an informal but vital role in the coordination of standards) that enabled the provision of the good and did not encompass the actual provision of the good itself. That is, the process of standardization was intentional, but the end product, our public good of consumable digital knowledge(not at all dependent on the State), was not intended.1 As soon as the “public good” became apparent, State actors revved up the political competition in the artificial exclusion to this good. In a real sense, when the State began passing its Digital Copyright Acts to enforce artificial exclusion to this good, it became clear which political critique, libertarian vs progressive, had the more accurate model of the State. Unfortunately, a political economy in the artificial exclusion to a public good of human knowledge is the very thing that can bring all of human economic activity under the political umbrella of State agency. In libertarian class terms, it is total war.
Plutocracy vs Oligarchy
Plutocracy is rule by a political class that for its own ends(usually identified as wealth). But plutocracy is not a condition where the political classes are united. Oligarchy is the condition of plutocratic unity. Generally, the political classes, globally speaking, are not united. What would unite them would be these secretly negotiated trade deals for a uniform “legal” standard in enforcing artificial exclusion to digital copies of human knowledge. It’s just another example of the consequences of “trade” serving “moral ends” and the extent moral ends can expropriated by agency. The extent of the expropriation can be seen by comparing Bastiat’s statement concerning trade and peace with that of the WTO. “Peace through Trade” can have a doublethink meaning. George Orwell provided us with the Oligarchical Collectivist interpretation of peace. Peace can also be a product of oligarchical unity.
The final coup d’etat is the militarization of the administration of the network. Currently, the administration of the internet is largely civil. But the US government’s blatant attempts to trigger a militarization of the internet serves the ends of a militarized political economy of network administration. The civil administration of the network is then supplanted by a corrupt, compliance standards regime that will in large part be engaged in the monitoring and blockage of “unauthorized traffic.” And what do you think will compose 99.999999999% of this “unauthorized traffic.” Of course, IP and copyright violations.
In case you haven’t noticed, DHS is significantly involved in the enforcement of IP and Copyright. The synthesis of political competition in the public goods of security and human knowledge that results in an equilibrium outcome of oligarchical unity not only represents the apex of Authoritarian porn but promises to turn a potential instrument of human utopia into a dystopian instrument of the most efficient and awesome spying and control mechanism possibly imaginable.
To bring this discussion back to the moral claims of J Neil Schulman, I conclude thusly: I reject Schulman’s moral claim regarding IP and Copyright because my methodology informs me that the regime consequences of the enforcement of his moral claim is oligarchical collectivism. The question of whether or not IP and Copyright require the State for enforcement is irrelevant. The State is going to use the enforcement of artificial exclusion to human knowledge as the means for a totalitarian outcome. If your own personal identity requires others to recognize your IP legal status claim regarding your mental constructions, then you need a new moral foundation.
1 An interesting discussion is to consider if purely organic market processes could likewise evolve something similar to our current internet implementation. Often, the “internet” is mistakenly identified as a type of “decentralized” network. But that’s an incomplete characterization. The “decentralizing” characteristics are emergent properties of a large degree of centralized standardization(=resolution of coordination problems). The more accurate adjectives would be “small network” and “resiliency” in place of “decentralized.”
In any event, the question is interesting but irrelevant. It’s now a matter of “path dependency.” It’s in place; it works; it does not require any type of formal State central body to continue to work. The interesting question now is the extent the State corrupts it by introducing compliance–i.e., standards as a function of “planning against competition”–into the network.
Recently on Twitter, there was a common topic tweet “Libertarianismin4Words.” Well, I can sum it for you in 10 words, separating the Political from the Social:
Political: “The State is its own Agency”
Social: “Live and let Live”
Libertarianism has two century intellectual history behind it that more or less reduces to those 10 words above. But it’s a history that has engaged only a minority. We are reminded of this by the name of Roderick Long’s online library at the Molinari Institute: “A Heritage of Dissent.”
However, in recent times, particularly in the United States, there have been attempts to reposition libertarianism as a legitimizer of a “proper State.” Certainly, the libertarian-conservative fusionism would qualify. Academically, the rise of the Chicago School most assuredly qualifies. Measured in terms of recognition and public policy influence, one would have to categorically proclaim the program a great success. The Chicago School managed to capture the intellectual and public policy control of the American and International Financial System. For twenty years, Ayn Rand’s greatest disciple lorded over the international system of central banking. The Chicago School refashioned the Bretton Woods Global Agency into the Washington Consensus. Beginning with Jimmy Carter, a program of deregulation took shape that ended with the effective repeal of Glass–Steagall in 1999. Simply put, in terms of economic policy, the Chicago School, representing the “revival” of “classical liberal” economic thought, rose to a position of great if not dominating influence.
But as I write these words today, an examination of the actual regime consequences(you know the thing that actually matters) inform me that this revival, in terms of its policy results, has been an unmitigated disaster. What promised to be a rule of Augustus literally at the drop of the hat revealed itself to be the rule of Caligula. How can an ostensibly classical liberal policy regime result in (1) the greatest banking oligarchy in the history of human civilization (2) the application of political economy applied to the greatest spying apparatus ever assembled in human history, (3) an Executive branch more or less functioning as the CEO and Chairman of the Board for National Security State, Inc., unilaterally having declared itself exempt for any application of law to itself, and in broad daylight–as a demonstration point of its effectiveness as this CEO Agency-resurrected the pre-liberal legal notion of “outlaw.” Poof, like that, out in the open–and not buried secretly and denied publicly–is “due process,” the legal foundation(which in part rests on a presumption of liberty) of liberalism, gone. In short, how can a “classical liberal” economic regime underwrite an evisceration of legal/political due process?
Obviously, the regime consequences of this classical liberal economic program(at least the Chicago School version of it) expose the very serious methodological flaws that underlie it. The source of the flawed method really begins with the 6-word political summary of libertarianism above: “the State is its own Agency.” The Chicago School, particularly the 3rd generation iteration of it(“efficient market hypothesis”), more or less dismissed this agency, or at the very least, seriously underestimated it. So we are now living the consequences of a flawed methodology.
The consequences of the Chicago regime suggest a reexamination of Milton Friedman’s thesis famously espoused in “Capitalism and Freedom.” Capitalism is a necessary condition for liberalism but not a sufficient one. Friedman used the example of fascism to falsify the sufficiency condition of capitalism. But we can now empirically include the Chicago regime as a falsifying example, too. We are now confronted with the possibility that capitalism’s necessity condition is challenged by observable regime falsification(for any given regime Ri). This perhaps serves as a clue that capitalism is not the primary logical condition or proposition in relation to freedom. Instead, our primary condition is really agency. Capitalism, like the State, suffers from an agency problem. A deductive argument that liberalism is a sufficient condition for capitalism relies on an implicit premise concerning capitalism and agency that perhaps is not justified. At the very least, an explicit examination of the relationship between agency and capitalism is in order. In this sense, I would suggest the Friedman Statement:
~C –> ~ L , where C=Capitalism, L=Liberalism
is not really the fundamental statement to prove or falsify. Instead, I would suggest something more along the lines of this sufficiency Statement as the more relevant one:
CM —> Agency, where CM=Capitalism serving moral ends.
Now let us also be specific by what is meant by “Agency.” I would define it, in this context, as means(institutionally speaking) that becomes its own ends. This thus puts it in direct competition with human agency(which we can represent as civil society, market society, etc). This is what is meant by the Statement, the “State is its own Agency.”
This brings us to a John Tomasi’s recent book “Free Market Fairness,” a volume largely intended for an academic/professional audience. Tomasi makes no bones in his objective to have “bleeding heart libertarianism” become the new standard of definition of libertarianism, particularly in the academic community. Libertarianism then is redefined as a bridge between “classical” and “high” liberalism, the bridge itself constructed from the foundation of “Free Market Fairness” as a social justice standard. But in reading through parts of the book–and putting aside all the intricate philosophical composition contained therein–Tomasi’s argument more or less reduces to: (1) an “opportunity society” lies at the heart of political legitimization (2) capitalism/markets serve as the superior means for the “opportunity society.”
Now I suppose one could label Tomasi’s effort as a 2012 version of Friedman’s “Capitalism and Freedom”(published on the 50th anniversary of the latter). However, I think Tomasi’s book may have been more persuasive if it had been published, say, in 1994, at the apex of the Chicago reign. Friedman’s 1962 book presaged the coming era of classical liberal economics. Tomasi’s book, however, comes on the heels of its ruin and presages something quit a bit different.
The first seven paragraphs of this post discussed the problem of capitalism and agency. And to be clear, what is meant by “capitalism and agency” is State Capitalism. Tomasi gives us an offering that poses political legitimacy as the moral ends of markets just time for the inauguration of a particularly un-golden age of State Capitalism. The disconnect between capitalism and political freedom is our current condition. Our age of State Capitalism–intertwined in a million different knots with a political economy of State Security–promises to sever the remaining myth: the relationship between capitalism and opportunity, or the “opportunity society.” To be more precise, we are about to be given an object lesson that there is no logical relationship between Capitalism and Markets. The collapse of this paradigm, of course, is conveniently timed with the maturation of our State Security Apparatus. The reason you have a National Security State, of course, is largely because of a loss of legitimacy. Our era of State Capitalism will be marked by a general decline in popular sentiment regarding legitimacy. But our “bleeding heart libertarians” seek to reposition libertarianism as the legitimizing face of State Capitalism. You know the thing that served to hollow out your political freedom while reneging on its bribe of eternal economic growth. Now that’s quite a historical turn.
The Artificiality of Tomasi’s Model
(i) A straight-forward critique of Tomasi’s model would begin by noting that there isn’t any real reason for unanimity–or a bridge, so to speak–between “classical liberals” and “high liberals” regarding the composition of primary goods(or, in classical liberal language, “property bundle”). The liberal methodology allows for divergences in what the ends of the so-called contract should entail. The “bridge” between the two is in regards to the violations: e.g, the suppression of dissent, the infringement of due process, the forcing of the citizenry to accept one particular moral foundation, the abridgment of free speech, etc.
The Tomasi “Market Research Program” is simply not an important problem in political theory. The actual problem is when you have an Executive Branch unilaterally resurrecting the pre-liberal legal notion of outlaw and not a single pep from our so-called liberal political class. And when you point this out to our “bleeding heart libertarians,” they will point to “markets” as evidence there is no significant abridgment of liberty. The current problem that presents itself is the apparent extinction of the liberal species. In its place we find moral obligation pencil-pushers for the regime.
(ii) John Rawls is overrated as a political philosopher. He managed to divine three rather markedly different versions of normative political obligation. His first version, for which he is primarily known for, was built over the proverbial house of cards. What agents should deduce in the “originalist position” was a major point of dispute within “High Liberalism.” The degree of the thickness of “the veil of ignorance” was another point of major contention within High Liberalism. In short, Rawls couldn’t even win over the “high liberals” which is why he more or less abandoned the “Kantian” foundations of his Theory of Justice in favor of an “overlapping consensus” developed in his second book, “Political Liberalism.” The “overlapping consensus” would form the foundations of the “Public Reason” model. Of course, what Rawls would call Public Reason, I would call “the Culture War.”
In his last book, “Justice of Fairness,” Rawls did another 180. In his first book, the political economy was only a secondary consideration. The economic system, whether,say, Capitalism or Socialism, was an empirical plug-in of sorts. By this I mean the economic system was not part of the normative theory. It was a positive consideration. However, by his third book, the economic system had now become an essential component of his normative theory. His theory of justice now required a type of propertarian democracy. However, I would point out that a propertarian democracy is more or less what we’ve had the past twenty years. In the early to mid 90s the United States enacted welfare reform(the scaling back of welfare capitalism) and pursued the ends of the “ownership society,” particularly in terms of home ownership. We experienced the “classical liberal” version of propertarian democracy. And we now see the agency outcome, the regime consequences(e.g., banking oligarchy), of such a moral end. That’s “strike three” for Rawls.
(iii) The primary criticism of Tomasi remains rooted in his neglect of competing and expropriating agency in political theory. His contention that markets are justified because they serve a moral ends of political legitimization is an anathema to the libertarian tradition. His version of capitalism serving moral ends creates a mile-wide invitation to an agency problem.
In the good ole days, the “classical liberals” made the causal relationship between economic liberty and political liberty a foundational point. These days, with the relationship between Capitalism and political liberty essentially severed, our “bleeding heart libertarians” have stepped in to the void with a subtle shift: it is economic liberty itself, or more accurately the proper set of divinely deduced bundle of economic liberties, that serves the ends of political legitimization. To the extent that this effort succeeds in becoming the new face of “classical liberalism,” it marks the official classic liberal divorce of economic liberty from political liberty. The standard of legitimacy is no longer the liberal legal traditions. It is now simply the degree of “opportunity” afforded by the political economy. The “Market Democracy Research” program is simply an effort to rationalize away the agency problem from political economy.
If you are a political cynic and you take your theory seriously enough, you should expect this type of expropriation. After all, we are now entering the media age of the “western dissident.” The western dissident will mark a species of agents not willing to trade away their political liberties for an economic pot of porridge. We will be in definite need of a morally legitimacy to alienate that type of dissident agency as criminal.
Aschwin de Wolf recently posted a a couple of old reviews of Anthony de Jasay’s “The State”. de Jasay’s work is one of the few examples of the use of rational choice method to model the “total state” in liberal political theory. This approach is liable to get one branded a crank–as evidenced by the first review embedded at de Wolf’s site–but de Jasay is able to get away with it because he is independent of the academic establishment. The second review, penned by James Buchannan, takes de Jasay’s analysis more seriously. So much, in fact, that he suggests that a liberal model of refutation(of the total state model) should be a primary endeavor of the academic(liberal political philosophic) class.
de Jasay’s Model: The Assignment of Self-Interest Rationality to State Actors Extends to the Sphere of the Commitment Problem
A naive “first-order” rational choice analysis will argue the need for the State as means for a credible enforcement of commitments between rational, self-interested actors. A more realistic “second-order” analysis will also extend this same rational,self-interested agency to State actors. A second-order analysis is then concerned with examining the logic of an Agency that is endowed with the same properties of agency that supposedly necessitates its role of external Agency in the first place. In a sense, Thomas Hobbes, the pioneer of the liberal method, engaged in a “second-order” analysis to justify Leviathan. Hobbes did not exempt state actors from self-interested agency. Hence, the need for a state agency of “one”(the monarch as Leviathan) to prevent the “war of all against all” within the State agency itself(and between the State agency and its subjects). Later liberal philosophers, who had no interest in preserving the old order of the monarchies, would discount a second-order analysis of the State agency. Well, not entirely, of course. Standard liberal theory proposes the State agency bound by constitutional constraints and accountability to a democratic process. Breaches of these constraints are grounds for termination of political obligation.
de Jasay’s method in “The State” is to deconstruct the second-order commitment problem. Are “constitutional constraints and democratic accountability” credible mechanisms to enforce the commitment between the State and it’s subjects to ensure the ends of the State do not compete with the ends of its subjects? Alternatively, is there any credible enforcement of the commitment between the State and its subjects if we assign rational agency to both parties? In other words, who “enforces” the “social contract” if we assign rational, self-interested agency to both the State and its subjects? de Jasey argued that there is no credible enforcement of the second-order commitment problem. This condition leads to an inevitable “total state.”
One misconception I wish to clear up–and I’ve discussed this previously–is any explicit identification of Public Choice with libertarianism. Public Choice,as a discipline, is by and large unconcerned with the problem of political obligation vis a vis second-order commitment problems. The Public Choice method assigns rational agency to State actors and is a model of political failure. But this failure stops short of questioning political obligation. The model of failure is generally restricted to the problem of mapping democratic preference to public policy outcomes, particularly with respect to a policies of social welfare redistribution.
For example, naive neoclassical economics(which does not consider the second-order rationality of state actors) held that public policy redistribution was actually redistributing something. The cost of this redistribution was just a deadweight loss. Public Choice was saying something different: there is nothing being redistributed(in net rent terms). And it is a quite socially wasteful process. This is the argument that government intervention is socially wasteful. But it is not an argument that the failures of government intervention dissolve the social contract.
In the Buchannan review that I previously referenced, Buchannan is smart enough to realize that a model of political failure that relies on a method of second-order assignment of rationality to State actors not only takes out interventionist social welfare redistribution, it can also take out political obligation if the model is extended to the commitment problem. This is why Buchannan, who is obviously concerned with protecting the public choice method in the scope of liberalism, suggested the need of it to shore up its flanks against commitment problem attacks. Others, such as the first reviewer, would dismiss any extension of public choice to a second-order commitment problem, noting that the public choice method is a model of political competition that results in wasteful rent dissipation and not one that predicts a unitary rent redistributing actor.
The Empirical Collapse of the Traditional Models of Competitive Rent Dissipation
We should note that de Jasay’s book was published in the mid 1980s. The two reviews I have referenced were published during the same time period. At that time, the consensus model of the rent-seeking game was one of competitive entry among agents wasting real resources to transfer no rents. There were essentially two competing variants of this model. One we could loosely call the “Chicago” model. If we define a rent dissipation ratio, D=C/R, where C=total transaction costs of rent-seeking, R=total rent, then the “Chicago model” would be:
(i)In equilibrium, D =1. The rent-seeking game is one of free competitive entry among equal agents. Free entry will result in the cost of rent-seeking equaling the rent. In other words, full rent dissipation.
The other model would be the Virginia School(Tullock):
(i)In equilibrium, D > 1 is a possible solution set. The Tullock model is much more dependent on the returns of scale of rent-seeking technology. This “returns of scale” is parametrized as a mathematical exponent. If the value of this exponent exceeds the ratio (n/n-1), where n=the number of rent-seeking agents, then you will have over-dissipation of rents.
In the “Chicago model,” the amount of the social waste equals the rent. In the Tullock model, the social waste can exceed the “total rent,” depending on the returns of scale being captured by the rent-seeking technology.
However, by the late 1980s, Tullock began to tackle the empirical divergences from the classical theories: political competition was not fully dissipating exogenous rents. This was a serious problem that in the words of Charles Rowley threatened the entire public choice method(it actually only dooms the classical liberal model of it). Tullock attempted to reconcile facts with theory by proposing extreme and deliberate inefficiencies in the rent-seeking technology. However, in “Efficient Rent-Seeking: Chronicle of an Intellectual Quagmire,” Tullock conceded that the classic models of rent-seeking have no real equilibrium.
The liberal objection to the total state model, that its model of the State does not rationally follow from full dissipation of rents, no longer has any normative force.
A Radical Public Choice Model
A Public Choice Model extended to the the second-order commitment problem can give us a radically different model of Political Competition. We can loosely identify one such example as the “de Jasay Model.” In this model, the State behaves as a unitary actor in the sense of:
(i) D < 1. Political competition does not dissipate exogenous rents.
(ii) The ends of the State Agency are in competition with the ends of the State's subjects
(iii) democratic accountability is replaced with a churning of manufactured consent
(iv) the rational ends of the State Agency is the maximization of discretionary power
(i)-(iii) gives us a model of the State as a firm. The firm can be thought of as a form of economic governance(Oliver Williamson), a DRO. However, our Firm, which is in competition with its own citizens, is not really in the business of settling civil disputes. It is DRO organ for political competition. Our Firm, the State, is an agency for exogenous rents.
(iv) we have a firm but what does it seek to maximize? Utility, rents or wealth are not particularly explanatory nor predictive. de Jasay suggested the thing being maximized is “discretionary power.”
We thus pithily summarize our model:
The State as agency for exogenous rents whose ends are the maximization of discretionary power
The model can explain what we see with our own eyes: “how state and society interact to disappoint and render each other miserable.” It explains why even if 100% hate the State, the State can still persist. It explains why people like Henry Kissinger, a supposed crown prince of the ruling class, now has his dick fondled at the airports by the blue-collar plebes of the security apparatus. It explains why the supposed standard-bearer of “the first world economy” more and more resembles the wealth patterns of a third world country. It explains, as predicted, the burgeoning phenomenon of brain drain exit from the United States. It explains the otherwise utterly baffling and unexplainable phenomenon(in liberal political theory) of how an entire legislative and political class of the “world’s greatest democracy” serves as direct agency for the right-wing policy objectives of a foreign Apartheid State.
We can easily synthesize our Rational Choice model of the “Total State” with the classical libertarian class theory of the French liberals. The French Liberal treatment of class theory was tied to a political economy of a military industrial complex. It’s not difficult to see that political competition for exogenous rents in a political economy of a military industrial complex is likely to result in a maximization of discretionary power.
The Need, Nonetheless, for Dialectics
The one flaw with a pure Rational Choice model of the Total State is that is difficult to explain, say, how a professional liberal class embedded in the Political Economy of Napoleonic France was able to construct a coherent theory of its surroundings while a professional liberal/libertarian class in, say, the United States is utterly mired in incoherence.
Orwell’s dystopia depicted a context where the only ones given access to a coherent account of their surroundings(“The Theory and Practice of Oligarchical Collectivism”) were those guilty of thought crimes. The obvious interpretation here is that “thought crime” demonstrated your fitness to actually comprehend the truth, and that the greatest demonstration of the Eternity of State power(no possible challenge) was the demonstration that force was capable of converting coherent agents into lovers of “big brother”(before they were executed, of course). However, in our context, Nineteen Eighty Four is “block buster entertainment,” everyone is familiar with the “operations manual,” and the deconstruction of the language of control is part of the popular lexicon. It appears that the greatest demonstration of Eternity of State Power is the possibility of no challenge even with the possibility of full awareness.
The point I’m getting at is that (i) awareness or non-awareness of your condition of slavery, (ii) coherence or incoherence regarding the account of your condition do not necessarily appear to be subject to a rational method. I’m not sure this has a particularly optimistic interpretation.
Allow me to address a typical canard given sympathetic treatment by Arnold Kling. Namely, the conservative clap trap that utopianism is the “ideological and doctrinal foundation” for statism. This is a popular nonsense perpetuated by knucklehead conservative shock jocks who enrich themselves by selling “conservatism” as an antidote to secular, godless “liberalism” supposedly predicated on perfecting human nature. It’s bullshit.
The foundation of modern statism, in the historical liberal context, is monopoly enforcement of moral ends. This is why even the hypothetical “Lockean State” inevitably becomes totalitarian. In the enlightenment context, liberalism is an ends of property with liberty as means. But it is entirely rational to bypass “the means of liberty” to secure property as ends. This is the classic liberal flaw. The libertarian condition of class conflict is when you have the protective state(the constitutional agency) protecting property acquired via political means.
Statism, in the liberal political philosophic context, means the State becomes the total source of government. Unfortunately, it is rational for this to occur. It has nothing to do with “utopianism.” Conservatism, which is utterly predicated on the need to enforce moral ends, is nothing more than a transcendent legitimization of such political means.
Frankly, I find little practical philosophic difference between conservatism and progressivism. Both view the human impulse as a thing requiring Statist correction. They only differ, in the modern context, in terms of communitarian recognition. This is the basis of the American cultural war.
Libertarianism is often portrayed as “ideological” and “utopian.” I would readily concede that the libertarian critique of the State is ideological. This is the “class critique.” But the ideological critique is hardly utopian. Indeed, I can root it entirely in a positivist model of political competition. Libertarianism, however, as an alternative social theory, is not ideological. Socially, I only define a libertarian constraint, the “lockean proviso,” on a social order. This does mean that I place some degree of faith in the human impulse, or more formally, civil society. You could call this “utopian,” but I would respond that it’s probably a necessary hope conditioned by a current reality that demonstrates that people like Rush Limbaugh and Mark Levin get rich preaching a moral legitimacy of a total state–as means to prevent a total state.
So my social theory may be utopian, but, rest assured, it it not the foundation of the totalitarian state. That the totalitarian state is not predicated on a utopian foundation is the reason for my pessimism. To paraphrase a Robert Frost poem, for destruction, any ole ideological framework that legitimizes it is “also great, and will suffice.”