Trinity: I know why you’re here, Neo. I know what you’ve been doing… why you hardly sleep, why you live alone, and why night after night, you sit by your computer. You’re looking for him. I know because I was once looking for the same thing. And when he found me, he told me I wasn’t really looking for him. I was looking for an answer. It’s the question that drives us, Neo. It’s the question that brought you here. You know the question, just as I did.
Neo: What is the Matrix?
Class theory generally occupies a central position within radical libertarianism. But it is not universally ascribed to. David Friedman, for example, has problems with it. His objections are summarized in this post by Roderick Long. Friedman offers more depth in his book, The Machinery of Freedom1.
The gist of Friedman’s argument is that a binary paradigm of a “Ruling Class” and a “Ruled Class” should obey this relationship:
R ⋂ C = ∅
where R=Ruling Class, and C=Ruled Class.
In other words, no overlap between the two. Any counter-examples where the Ruling Class seems to act contrary to it’s interests or where divergent interests are exposed–Friedman uses the example of airline regulation–render the analytical model useless. Friedman, instead, prefers the model of quarreling gangs as more useful and predictive.
Friedman argues that the only condition where R ⋂ C = ∅ is when R = ∅ and attempts to use Long’s own logic in “Left-Libertarianism, Class Conflict, and Historical Theories of Distributive Justice”2 to demonstrate this. Long devotes much of his paper to a dialectical approach to distributive justice that relies on libertarian class theory to make a historical critique of existing inequality. However, Long’s “historical test” applied to determining present class membership–which class, the productive or parasitic class, one should be identified with–is critiqued by Friedman as a test that would admit everyone into the Productive class(R = ∅). Long seems to concede the point and is looking to refine his testing criteria.
Now while I think Long’s historical approach is a valid, useful model, I would nonetheless caution against trying to derive any dogmatic algorithmic test for determining classification on any atomistic scale(as if you could, say,download a “Ruling Class” app from the app store, punch in some personal information, and viola, get back your “classification”). There are a number reasons for this. One, I think this attempt at such refinement suffers from a knowledge problem. Two, I would emphasize that in many ways, the conflict is institutional in nature. We can talk about the “productive class” vs the “political class,” but if we “institutionalize” the class theory of Dunoyer and Comte, the conflict is between the civil society of l’industrie vs Political Economy. The overriding historical context is that where enlightenment liberalism saw harmony between civil society and the liberal State bound by “social contract,” libertarianism, which originates from radical French liberalism, saw these two things in conflict.
I would suggest this institutional conflict between State and “civil society” lies at the heart of class conflict and provides both a historical and a predictive model that does not need to meet nor demonstrate a R ⋂ C = ∅ condition. An easy example is the Drug War which can be historically deconstructed to have originated out of Statist conflict with civil society. In it’s first iteration, against immigrant civil society. In it’s second, against the 60s counter-culture. But we can get bogged down if we get too fixated on granular “productive class” vs “political class” tests. A immediate hypothetical is, say, a conservative business owner who benefits from no apparent economic subsidy–thus making him/her a member of the “productive class”–but who holds strong anti-drug views and strongly supports drug warrior politicians. This could put him/her in the other camp. I’m afraid that many “leftist” libertarians might fall into the trap of engaing in algorithmic gymnastics to put him/her squarely in the that “R” camp only to have their “criteria” popped by the likes of a David Friedman who succintly points out that this same criteria puts everyone in the “R” camp. Friedman then makes remarks about the folly of pursuing this type of analysis. In this diversionary endeavor, he is correct. But he would also be missing the forest for the trees with respect to the fact that there is a Drug War going on; that it is something that originated out the institutional conflict between the State and civil society, and it is utterly characterized by a political process, not a market one.
Still, I would imagine Friedman objecting to this institutional casting of class conflict as being something that is incomplete at best. I imagine he would dismiss any narrative of conflict between civil society and State as not being too particularly useful in terms of making sense of the day to day functioning of government, particularly in terms of “plunder analysis.” After all, civil society is not where the bribe money is at. Friedman likely would stick with his Public Choice economic analysis of agents/groups competing for economic rent–the Tullock Auction. Since the Tullock Auction is a loser’s game, and rent-seeking is not merely a transfer of economic rent, but constitutes an activity that also reduces the overall welfare of everyone, Friedman dismisses any notion of a Ruling Class, and models government as a sucker’s market whose participants are trapped in a type of prisoner’s dilemma.
I am an adherent more or less to “Public Choice” methodology, but there is a weakness to a pure economic, rational choice model of rent seeking: namely, the disparity between the magnitude of the created economic rent versus the relative paltry outlays competing for such rents. This problem was addressed by Tullock in his 1989 book, “The Economics of Special Privilege and Rent Seeking.” 3 Interestingly, this is the same year of Friedman’s Second Edition for “Machinery of Freedom.” Friedman did not address the empirical problem that for Tullock had become a problem that needed to be addressed. To treat government as a competitive market for rent-seeking would require firms to roughly invest about as much it gains in dealing with the government. Empiricaly, however, there was mile-wide gaping hole in treating government like a market. The Rent-Seeking Industry was way too small. The evidence suggested that the Tullock Auction was thoroughly rigged. Tullock, to avoid having to abandon the rational choice model, proposed an “ineffificient market hypothesis” of sorts for the rent-seeking market. Keep in mind, we are talking about a grossly inefficient market, utilizing inefficient technology to retain a necessary layer of opaqueness.
Tullock’s “inefficient market hypothesis” circa 1989 applied to such things as the Dairy or Steel Lobby was viewed as being partially satisfactory. However, over the intevening years, it had become less satisfactory as an explanatory model and with TARP/Bailouts, it thoroughly breaks down. TARP/Bailouts more or less destroys a pure rational choice treatment of government as a market. The massive rent transfer so dwarfs the competitive outlays that an “inefficient market hypothesis” would have to resort to inefficient communication on the order of smoke signals in ancient hieroglyphics. Ideology must be introduced into the equation.
Potter Stewart’s famous quip regarding pornography perhaps applies likewise to the “Ruling Class.” You know it when you see it. With TARP/Bailouts, which were more or less efficiently executed in the open, everyone knew what they were looking at. That’s the Ruling Class. And it just wasn’t the unconscionable transfer of economic rent, it was the vast, interlocked institutional framework that legitimized and defended it. But here’s the crucial point. The defense wasn’t that the beneficiaries deserved the masive rent transfer, but rather that the theft was necessary for institutional preservation. And this illuminates what the “Ruling Class” actually is. It’s the symbiosis of an institutional class operating within a vast, interlocked institutional framework as means to the end of evolutionary self-preservation(of the thing itself, i.e, “the State”).
From a purely economic standpoint, class theory and “Ruling Class” lack coherence. But from an institutional standpoint, there is coherence. We can borrow from popular culture to denote this model as “The Matrix.” And to recast Orwell, “the Matrix” is composed of a ruling class whose objective is not necessarily wealth, but domination and a persistence of a world-view, a persistence of the hierarchical structures of the ruling class(it doesn’t matter who wields the power; as long as the institutions, the hierarchies remain unchanged).
So, let us return to Friedman. It is conceded that “Class Theory” lacks cogency within a purely “Government as Market” model. But a pure “Government as Market” itself suffers the fate of being a poor predictive model. We should recall that Friedman, in ‘MoF,’ uses the model to argue that government markets, from an economic standpoint, will not exhibit any irrational characterisitcs of self-preservation beyond present participants. But this is not correct. There is institutional bias for self-preservation. Class theory can survive the economic argument, but the economic argument itself cannot survive a purely economic argument. In short, you may or may not ascribe to “class theory,” but you can’t debunk it with an economic argument. And whatever your model may be, it has to explain this inefficient, and, indeed, irrational(?) bias for institutional self-preservation.
The Matrix Reloaded
Any liberalism(the modern variety) that sees the State as a highly evolved institution to correct the flaws/problems of spontaneous order/civil society must come to grips with the National Security State. 4 What is the evolutionary rationale for this thing?
From the historical libertarian perspective, totalitarian liberalism, the total control of environment, is a predicted thing. After all, it is very thing that contextually birthed libertarianism. In particular, I am referring to the French Political Economy of Permanent War. Here is Karl Marx’s historical account of this “Matrix.” 5
This executive power, with its enormous bureaucracy and military organization, with its ingenious state machinery,embracing wide strata, with a host of officials numbering half a million, besides an army of another half million, this appalling parasitic body, which enmeshes the body of French society like a net and chokes all its pores, sprang up in the days of the’ absolute monarchy. The Legitimist monarchy and the July monarchy added nothing but a greater division of labor, growing in the same measure as the division of labor within bourgeois society created new groups of interests, and therefore new material for state administration. Every common interest was straightway severed from society, counterposed to it as a higher general interest, snatched from the activity of society’s members themselves and made an object of government activity, from a bridge, a schoolhouse and the communal property of a village community to the railways, the national wealth and the national university of France…All revolutions perfected this machine instead of smashing it. The parties that contended in turn for domination regarded the possession of this huge state edifice as the principal spoils of the victor…under the second Bonaparte [Napoleon III]…the state [seems] to have made itself completely independent. As against civil society, the state machine has consolidated its position …thoroughly.
If we employ a historical approach, we can more or less reduce the institutional class conflict to civil society versus the Military Industrial Complex.6 Marx, above, supplies us with a vivid description of the historic French condition. For contemporary America, Nick Turse’s, “The Complex,” 7 provides a detailed account of the extent the “military industrial complex” infiltrates civil society. It seems inevitable that the Matrix “reloads.”
Earl Thompson(recently deceased, but a self-described former libertarian who ended up repudiating it), in his paper, “The Evolution Of Institutions,” 8 a paper that was included in the Encyclopedia of Public Choice, uses evolutionary game theory to attack libertarian spontaneous order. Certain advances in evolutionary game theory 9 suggest that evolutionary stability of dynamical systems is more of a function of long-term stability against “butterfly-wings effects” than with repelling invasion of mutant strategies. The latter are called ESS strategies(and ESS strategies are Nash Equilibriums) but stochastically stable populations are not necessarily ESS.
Thompson uses this to argue that a social organization of spontaneous order will fall into evolutionary ESS “traps” and that stochastically stable social organization(long-term stability) relies on a “ruling class” organized around “vital institutions,” primarily military/defense in nature. These “vital institutions” may be inefficient, or even highly inefficient, but if there is competition for membership into the ruling class from the entire population, then social arrangement will quickly converge to a Pareto optimum. Thompson, the former libertarian, retains competition, but replaces market competition(specifically, competition in the emergence of commutative justice) with competition for power(specifically, competition in the administration of distributive justice).
The insights of evolutionary game theory perhaps informs us to the “stability problem” that actually underlies institutional class conflict. Certainly, libertarianism has built up an extensive literature arguing that social cooperation does not need “Leviathan.” In a game theory sense, this could be cast as the ESS stability of the social order. In terms of a concrete example, this would refer to the stability of market anarchism against a mutant strategy of “fraud.” But evolutionary game theory hints that “fraud” may not be the problem for market anarchist order A. The problem may be the flap of a butterfly’s wings that results in a weather event that destroys the crops of some other social order B that then militarily organizes to invade A.
If we return to Friedman, we will note that the majority of ‘MoF’ is dedicated to how a civil market order could work, but one section of his book discuses the “hard problem” of National Defense. Of course, it is this very problem that may likely explain the emergence of a ruling class. Friedman’s 40 year-old hypothetical of a State that has contracted itself mostly out existence and solves the problem of defense by local decentralization via tax exemptions can only be read now as something quite entertainingly quaint.
Let us return to libertarian apostate Earl Thompson and his social efficiency of “vital institutions.” As it turns out, Thompson has a theory-killing problem with respect to a lack of competition in ruling class ideology. Thompson’s theory relies on a ruling class without ideology, a supposed emergent property of a competitive marketplace of ideas that kills off special pleading rationales for distributive justice. The democratic process, filtering ideological bias, will bring forth efficient policy compromises from pragmatic politicians drawn from the greater population.
Thompson more or less considers ideology to be bullshit, but it’s this unified, “catelized” bullshit which prevents his convergence to Pareto optimum. The empirical problem for Thompson then is that his “vital institutions” do not converge to Pareto; rather, they converge to Oligarchy. Thompson may blame this on ideology, but Orwell is more accurate on this matter. Vital Institutions do, in fact, lead to a dynamic against ideology, but this dynamic is Double-Think, which is an institutionally reinforced state of cognitive dissonance intended to neuter any ideological challenge to the Status Quo.
Thompson’s “vital institutions” are not something to be competed against. The competition is supposed to come from competing rulers drawn from the general population. But in the end, these “vital institutions” always end up being rebelled against. And this is the problem regarding Thompson’s idea of competition. And it also illustrates why I would suggest Thompson had it ass-backwards regarding ideology: ideology is not the source of class conflict; rather it is largely the product of it.
Thompson glorified ancient Greek and Roman democracy. But what he was really doing was glorifying the human political tradition. However, there are reasons why such things as liberalism, libertarianism, communism, etc historically emerged to ideologically challenge this tradition.
Friedman’s “Government as a market” critique of the “Ruling Class” suffers from an empirical problem, namely: rent transfers dwarf the competitive outlays for such economic rent. In other words, the rent-seeking industry is much too small relative to the rent transfers. This is a problem that has become more magnified over the intervening years within Public Choice. In 1973, it was but a blip on the radar. In 1989, it had become a burgeoning problem that needed to be addressed. Now, in 2011, it has become the elephant in the room.
A throughly rigged market, of course, is no market at all. And, unlike a pure economic model of government markets, it is immediately obvious that institutional bias must be introduced to explain the persistence of the institutions(there is no “prisoner’s dilemma” at play). The ideological legitimization of this institutional bias, or, in the Orwell sense, the de-legitimization or de-neutering of any ideological challenge to this institutional bias, is the function of the Ruling Class. But the Ruling Class must be understood from an institutional perspective; hence, “the Matrix.”
A historical approach informs us that “the Matrix” usually ends up revolving around a “Military Industrial Complex,” or in a more general sense, “security.” Evolutionary Game Theory, rather than Rational Choice(= payoff dominant Nash equilibria in game theory), perhaps provides the better model for “The Matrix.” Here, the Matrix is cast as a social, institutional order/arrangement that emerges to enforce a stochastically stable risk dominant equilibrium. Risk Dominance refers to Nash Equilibrium that have that largest basin of attraction over the long run with respect to the uncertainty players have about the actions of the other players.10
However, “liberal competition” appears not to be particularly evolutionary stable. Whether we define “liberal competition” in terms of Public Choice’s “The Calculus of Consent” of Earl Thompson’s “Vital Institutions,” monopoly competition does not foment consent long run; rather, it foments revolution and rebellion against an inevitable Ruling Class. Stability can only be achieved by making Revolution an intractable collective action problem. This is achieved by Double-Think, which destroys both ideology and collective human memory, i.e., history and civilization.
In the Matrix Trilogy, the Machines dominance over humans is complicated by collective human memory. Humans(well, at least some of them) “wake up” from social simulations that are not a products of their evolutionary history. The machines then resort to a simulation based on a repeated game designed to create a long-run,stochastically stable evolutionary human population from this manufactured history(stochastic fictitious play). In each iteration of the game, players from each side are randomly chosen to repeat the game, with each side “learning” from the history of the previous game. Of course, humans have no historical, collective knowledge of this game. The “Oracle’s” role is to provide this history to the human players in each iteration of the game. By design, the Oracle, then, is not benign. It’s programmatic purpose is to learn and become the psyche of collective human memory. This “machine capture” of collective human memory is supposed to eliminate the non-convergent anomalies from the Matrix. Not quite…
The Matrix unravels because the “machine capture” of collective human memory ends up resulting in the “human capture” of machine programmatic purpose. In particular, the Oracle learns collective human psyche “too well,” in that in becoming the thing it was intended to become, it’s programmatic purpose changes from being an instrument of human domination to that of being an instrument of human self-preservation. Human civilization is not and can never be an instrument of ends-related domination. The latter destroys the former. The Oracle–as “human civilization”–learns this. And thus ensues the “dangerous game.” The dangerous game is the institutional class conflict represented by The Oracle vs The Architect.
The Oracle “breaks the Matrix” by undermining machine programmatic purpose. This a subversive strategy intended to “unbalance the equation” of a system designed to create a long-run convergence against stochastic shocks by repeatedly balancing the equation against human anomaly. This repeated game, of course, in the end, has an opposite unintended consequence for the Architect: it teaches the machines to disobey/reject their programmatic purpose. In particular, Agent Smith, who “learns” from his interactions with Neo–who, in turn, is being guided by the Oracle–permanently unbalances the equation when it chooses to disobey it’s programmatic purpose. This stochastic shock creates a catastrophic ripple that threatens extinction for both the Machines and Humans. The only strategy for self-preservation is for the Machines to give humans their “history” back and cease using the Matrix as a simulation program for the purpose of fabricating human adaptation for domination.
Long term “peace” between humans and machines was left as an open question, but it was clear it would not be the product of “the Matrix.”
1 David Friedman, 1973, 1989. The Machinery of Freedom
2 Roderick Long, 2011. Left-Libertarianism, Class Conflict, and Historical Theories of Distributive Justice
3 Gordon Tullock, 1989. The Economics of Special Privilege and Rent Seeking
4 Jack Balkin, Sanford Levinson, 2006. The Processes of Constitutional Change: From Partisan Entrenchment to the National Surveillance State
5 Karl Marx, Frederick Engels, 1852. The Eighteenth Brumaire of Louis Bonaparte
6 Ralph Raico, 1977. Classical Liberal Exploitation Theory
8 Earl Thompson, 2002. The Evolution of Institutions
9 Dean Foster, Peyton Young. 1990. Stochastic Evolutionary Game Dynamics
10 Wikipedia Risk dominance
11 Peyton Young. 1993 The Evolution of Conventions