No, a myriad of new silk roads will not rise up to replace the old one

The State’s war on Dark Net marketplaces will result in previously trusted marketplaces being replaced by riskier and less trustworthy ones. Honest people operating on a reasonable risk/reward calculation will increasingly abstain from using them. The likely consequence is that the confidence level of DarkNet c-to-b transactions will begin to resemble that of traditional c-to-b transactions, with the additional negative repercussions of being more riskier to the buyer than the traditional c-to-b model.

By now, I’m sure anyone reading this post is aware of the sentence handed down to Ross Ulbricht(aka,”Dread Pirate Roberts”). The purpose of this post is not to extend a commentary on the barbaric character of the sentence.1 That will be for another time. Instead, I want to counter the conventional postscript that concludes virtually every postmortem of the drug war.

“Just another example of an irrational,failed drug war. Take one down, fifteen will rise up to take its place…”

Nope. Not the case. Particularly, in this instance.

First, we should accurately report the full sentence Ulbricht received. It was life imprisonment and a 185 million dollar fine. The State rolled up money laundering charges in the conviction, in no small part because the United States government now “recognizes” bitcoin as a legitimate medium of exchange.2The financial penalty of bitcoin money laundering appears to be the total transactional value that can be pieced together through a forensic analysis of the public blockchain.

Secondly, public court documents and testimony regarding the fed purchases of product from the original silk road marketplace indicate an abnormal level of reliability in a c-to-b(consumer to business, or, if you prefer, user to dealer) drug transaction. Documents indicate you had about a 95% level of confidence that you were actually getting what you thought you were buying. Trust me, that level of confidence is not the norm in traditional c-to-b drug transactions. That’s the real story. The “reduction in violence” argument is not. Frankly, if you made the argument, it is a good indication that your only knowledge of the drug trade comes from watching tv/movies and reading state media sources.

Unfortunately, the effect of barbaric sentencing and draconian money laundering penalties will serve to introduce quite a bit of fraud into Dark Net drug marketplaces. Yes, knock one down, and perhaps fifteen will rise up to take its place. But the level of confidence of a c-to-b transaction confidence will begin to approach the traditional level and indeed may even fall below what you can expect on “the street.” In addition, the confidence level of “dealing with a narc,” on either side of the ledger(consumer or supplier), begins to exceed what you can expect “on the street.” So while there will be replacements, they won’t be exactly the same version as the previous ones.

Frankly, anyone who engages in a repeated pattern of buying or selling on Dark Net sites can only expect to be busted. You may as well just send out an email to the pigs for all intent and purposes. This is opposed to the traditional model where only the dealer following a repeated pattern faces a probable certainty of being prosecuted.

Bitcoin has its uses, but in terms of buying contraband, you are better off sticking to the old-fashioned human p2p network of your reasonably trusted inner/outer circle.

Unfortunately, that conclusion doesn’t exactly make for a “failed war on drugs,” now does it?

1 I’ve read many characterizations that described it as “tragic.” Its not tragic. Its barbaric.

2 Another demonstration why the dipshit “libertarians” at George Mason University campaigning for a “bitcoin regulatory regime” are mortal enemies of libertarianism. The argument that a “regulatory regime” carves out a “legitimate space” in a space that would otherwise be treated wholly as “criminal” actually introduces a far more punitive criminal sanction regime.”Legitimacy” allows the feds to wield the weapon of “money laundering.” And the blockchain is not anonymous. It is only pseudo-anonymous. The crime of operating a website can now carry the financial penalty of any applicable transactional value of the duly recorded transactions in the public blockchain.

What Is Free Trade?

Terms like “free trade” and “free markets” are ubiquitous spout from the lips of libertarians. Occasionally, it is helpful to review what these terms actually mean. “Free” specifically refers to free of any encumbering moral ends other than the ends of the exchanging agents. So it is a matter of liberty. Practically, it means no contravening authority standing between supply and demand. The only justice promised is one of mutual advantage.

Here is what “free” does not mean(in terms of a sufficiency condition): (i) efficiency (ii) self-regulation (3) un-regulation (4) de-regulation (5) perfect competition (5) pareto optimality (6) nihilism (7) justice ….

Yes, “free trade” is not even a sufficiency condition for mutual advantage in the sense that if we show “free trade” we necessarily show “mutual advantage.” Otherwise, there would be little need or demand for that thing called the law.

The point is that “free trade” presumes liberty but implies little beyond that other than an implicit(sometimes explicit) promised mutual advantage. We fashion “free trade” into a social theory(spontaneous order, invisible hand, etc) from experience and attempt to model this experience by economic analysis of rational (marginal)utility calculating agency. While I have no quibble with this per se, it remains important to be cognizant of the distinction between a social theory(predicated on a justice of mutual advantage) and methodology of economic modeling.1.

For example, the notion of “market failure” is in need of a curious bit of deconstruction. “Free Trade” presumes liberty but implies little beyond that. “Free Market Failure” is really a bit of a non sequitur. What we really have is “model failure.” This justifies all sorts of government regulatory intervention to enforce a model outcome. Of course, when we apply an economic analysis to the regulatory agency itself we end up with a predictive model error of correcting the original “model error.” This, of course, is termed “government failure, the distinction here being that the “regulatory agency” is actually promising everything.

Frankly, I think the above example demonstrates why laissez-faire doesn’t comport very well with the neoclassical economic method. That which treats “free trade” as a matter of liberty is always going to spit out model error by something that treats it instead as a regulatory model of a rational pattern.

The incongruity between liberty and regulatory efficiency can be profound. To see this, consider “comparative advantage.” We all should be familiar with how opportunity costs explain patterns of trade. Even if, say, A is superior in productive skill and efficiency to B for every produced item in a given economy, there are opportunity costs involved in A dividing time and labor to self-produce all items of our given economy. So rather than dividing the time up proportionately to produce everything, A specializes in those things which it does relatively best at(compared to what A does less best at, or earns less from), leaving an opportunity for B to produce the other things for trade exchange.2

No doubt opportunity costs explain trade patterns. But comparative advantage also implicitly suggests something else: namely, refusing to trade imposes external costs on trading partners. In our A-B model, if B refuses to trade with A, B imposes costs on A. Essentially, refusing to trade not only hurts yourself, but it also hurts others.

Now I won’t dispute the external costs implication of comparative advantage. However, I will dispute that these costs are a form of injustice, or more specifically, that these costs are something that need to be enforceably corrected(in the legal or regulatory sense). “Free Trade,” after all, must include the freedom not to trade. Otherwise, it is just another form of “freedom to obey.”

However, within the purview of neoclassical economics, “enforcing” Free Trade is entirely consistent with a regulatory model of a rational pattern.

This brings us to a consideration of these “Free Trade Agreements” such as TPP. The public arguments for these trade pacts–supported by many libertarians–essentially reduce to correcting the external costs implied by comparative advantage. The rationale is that despite any “flaws” these pacts are an improvement. An ancillary argument is that if the US doesn’t take the lead in forging these agreements, it opens the door for less savory countries(read: China, Russia) to forge something far less agreeable.

Frankly, these Free Trade Agreements demonstrate why sometimes it is better(perhaps always) to think like a philosopher and not like an economist. In lieu of thinking about the pareto efficiency of trade models, one perhaps may be better served contemplating the philosophical implications of a social theory that implies one bad actor playing a bad strategy forces everyone to play a bad strategy. Au contraire, “justice of mutual advantage.” More like a suicide pact.

Perhaps only after such consideration is it then profitable to dissect the problem from an economic point of view.

From a public choice perspective, these “free trade agreements” are essentially trading decison-making costs for external costs. Recall decision-making costs are “the price we pay for civilization.” These type of costs are imposed by a decision-making rule whose legitimacy–at least within the purview of liberal political theory–is delineated by some condition of unanimity.

A trade-pact is rent-seeking bargain. But the decison-making cost of this bargain results in a disclaimer that the price we pay for civilization–in this case, trade–is the loss of geo-political differentiation. In other words, unitary jurisdiction. Or more descriptive yet, oligarchical collectivism.

When the United States declares the entire planet a battlefield or issues talking points asserting global jurisdictional reach, it is not grandstanding on an explicit or implicit threat of military invasion. Instead, it is relying on a presumption of organs of a unitary political economy serving as an agency of enforcement. Wherever you are on this planet, there stands an authority between supply and demand that is hierarchically intertwined with the regulatory jurisdictional reach of any government. The price of dissent is that you do not trade. Or another way to put it: you can trade but there is nowhere to run.

A rent-seeking bargain that imposes decison-making costs is the negation of Milton Friedman’s famous aphorism regarding capitalism and freedom: showing freedom is sufficient for showing capitalism3. Friedman’s aphorism fails because capitalism as an economic treatment translates to a regulatory model of a rational pattern. And an economic analysis of this regulatory model suggests the potential for an intractable agency problem. If trade entails a decision-making cost attached to the enforcement of the regulatory model, then capitalism trumps “liberal trumps,” with the latter defenseless against an agency problem in our rent-seeking bargain.4

This agency problem is why I reject the notion of markets as any instrument of social justice, a la bleeding heart libertarianism. To treat it as such an instrument is to treat it as a regulatory model of a promised rational pattern. Enforcing the promise is what introduces the agency problem. Markets serving in the role of a type distributive justice may indeed by an observed pattern, but justice without an enforcement mechanism/agency is a trifle thing indeed. Distributive justice as an enforceable outcome is not a free market.

I conclusion, I am bit flummoxed at the extent many libertarians endorse “free market” as a regulatory model of a rational pattern. Whether cognizant of it or not, this endorsement more or less substitutes “free trade” with “conscription to the market.”5

Interestingly, the most recent cinematic work of the Wachowski brothers(actually now brother/sister since Lana now identifies as a trans-gender), Cloud Atlas(which is a cinematic adaptation of a novel and not an original screenplay) illustrates my point quite dramatically, demonstrating that if a picture is worth a thousand words, a good film is certainly worth a million.

In the futuristic corporate state, Neo Seoul6, fabricant AI subordinate themselves to indentured contractual servitude to the efficient functioning of consumer society. In exchange, the fabricants are promised a retirement nirvana(operating under their own agency with no wants) at the conclusion of their contractual obligation. The fabricants are indoctrinated into a religious catechism oriented around the sanctity of the consumer.

In reality, the fabricants are not given their promised nirvana. Instead they are duplicitously decommissioned and recycled as a cheap source of protein to newly “manufactured fabricants.” The underground rebellion to the corporate state places its hope in the emergence of “free will fabricants,” in the story dramatized by sonmi-451. When sonmi-451 is given the “liberty to read,” she rejects the present bargain of indentured servitude in exchange for a future payoff of agency. This is before she learns that the promised future is actually a sham. The immediate consequence of her decision, of course, is her own execution7.

Just as “unpluggable” perhaps conveys more immediate meaning than any lengthy tome against the standard liturgy of political obligation, to those who insist on intoning the free market as some type of regulatory model, whether it be efficiency, trade deals or social justice, perhaps the best response is simply: sonmi-4518

1 economics is certainly useful as a positive science in describing observed patterns but I find it often suffers from an Is-Ought problem in making unjustifiable prescriptive statements. I believe this view is substantiated by Tullock’s little-referenced work, “Efficient Rent-Seeking: Chronicle of an Intellectual Quagmire,” which establishes the apparent quagmire of prescriptive reasoning in economics. As I would say, Free Trade is little more than a statement about “free agency” or “free will” and not a logical condition for any model outcome.

2 Absolute advantage/superiority of A over B in everything is not real-world. It is merely an illustrative device to demonstrate how opportunity costs trump the historical notion of “absolute advantage” in explaining trade patterns.

3 Freedom is understood to mean in the “liberal” sense.

4 Richard Stallman’s classic parable, “The Right to Read,” is an excellent example of this point.

5 Free Trade is contingent upon a free agency or free will. However, this should be distinguished from the libertarian meaning of “free will” in metaphysics, which is contingent upon path independency(in determinism, similar to mechanics in physics, knowledge of initial conditions of a path is sufficient to know the path at any future state). The question of whether one has a choice in preferring A to B is an interesting one, but not germane to the discussion. Free will in our discussion is perhaps better interpreted as “free preference,” i.e., the liberty to act according to preference.

6 The ideological party of this corporate state is “unanimity.”

7 The Buddhist-Existentialist theme of the story is that we are a product of each other’s stands that ripple throughout time, so the future consequence of her decision is a better outcome down the line within “the cloud.”

8 451 is obviously a nod to Fahrenheit 451, specifically the auto-ignition point of paper books.

Roberts Affirms the Total State Model

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

Committee Chairperson Ranking Member
Agriculture Frank Lucas (R-OK) Collin C. Peterson (D-MN)
Conservation, Energy, and Forestry Glenn Thompson (R-PA) Tim Holden (D-PA)
Department Operations, Oversight, and Credit Jeff Fortenberry (R-NE) Marcia Fudge (D-OH)
General Farm Commodities and Risk Management Mike Conaway (R-TX) Leonard Boswell (D-IA)
Livestock, Dairy, and Poultry Tom Rooney (R-FL) Dennis Cardoza (D-CA)
Nutrition and Horticulture Jean Schmidt (R-OH) Joe Baca (D-CA)
Rural Development, Research, Biotechnology, and Foreign Agriculture Timothy V. Johnson (R-IL) Jim Costa (D-CA)
Appropriations Hal Rogers (R-KY) Norm Dicks (D-WA)
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Jack Kingston (R-GA) Sam Farr (D-CA)
Commerce, Justice, Science, and Related Agencies Frank Wolf (R-VA) Chaka Fattah (D-PA)
Defense Bill Young (R-FL) Norm Dicks (D-WA)
Energy and Water Development Rodney Frelinghuysen (R-NJ) Pete Visclosky (D-IN)
Financial Services and General Government Jo Ann Emerson (R-MO) José Serrano (D-NY)
Homeland Security Robert Aderholt (R-AL) David Price (D-NC)
Interior, Environment, and Related Agencies Mike Simpson (R-ID) Jim Moran (D-VA)
Labor, Health and Human Services, Education, and Related Agencies Denny Rehberg (R-MT) Rosa DeLauro (D-CT)
Legislative Branch Ander Crenshaw (R-FL) Mike Honda (D-CA)
Military Construction, Veterans Affairs, and Related Agencies John Culberson (R-TX) Sanford Bishop (D-GA)
State, Foreign Operations, and Related Programs Kay Granger (R-TX) Nita Lowey (D-NY)
Transportation, Housing and Urban Development, and Related Agencies Tom Latham (R-IA) John Olver (D-MA)
Armed Services Buck McKeon (R-CA) Adam Smith (D-WA)
Emerging Threats and Capabilities Mac Thornberry (R-TX) Jim Langevin, (D-RI)
Military Personnel Joe Wilson (R-SC) Susan Davis (D-CA)
Oversight and Investigations Rob Wittman (R-VA) Jim Cooper (D-TN)
Readiness Randy Forbes (R-VA) Madeleine Bordallo (D-GU)
Seapower and Projection Forces Todd Akin (R-MO) Mike McIntyre (D-NC)
Strategic Forces Mike Turner (R-OH) Loretta Sanchez (D-CA)
Tactical Air and Land Forces Roscoe Bartlett (R-MD) Silvestre Reyes (D-TX)
Budget Paul Ryan (R-WI) Chris Van Hollen (D-MD)
Education and the Workforce John Kline (R-MN) George Miller (D-CA)
Early Childhood, Elementary and Secondary Education Duncan D. Hunter (R-CA) Dale Kildee (D-MI)
Health, Employment, Labor, and Pensions Phil Roe (R-TN) Rob Andrews (D-NJ)
Higher Education and Workforce Training Virginia Foxx (R-NC) Ruben Hinojosa (D-TX)
Workforce Protections Tim Walberg (R-MI) Lynn Woolsey (D-CA)
Energy and Commerce Fred Upton (R-MI) Henry Waxman (D-CA)
Commerce, Manufacturing and Trade Mary Bono Mack (R-CA) G. K. Butterfield (D-NC)
Communications and Technology Greg Walden (R-OR) Anna Eshoo (D-CA)
Energy and Power Ed Whitfield (R-KY) Bobby Rush (D-IL)
Environment and the Economy John Shimkus (R-IL) Gene Green (D-TX)
Health Joe Pitts (R-PA) Frank Pallone (D-NJ)
Oversight and Investigations Cliff Stearns (R-FL) Diana DeGette (D-CO)
Ethics Jo Bonner (R-AL) Linda Sánchez (D-CA)
Financial Services Spencer Bachus (R-AL) Barney Frank (D-MA)
Capital Markets and Government-Sponsored Enterprises Scott Garrett (R-NJ) Maxine Waters (D-CA)
Domestic Monetary Policy and Technology Ron Paul (R-TX) William Clay, Jr. (D-MO)
Financial Institutions and Consumer Credit Shelley Moore Capito (R-WV) Carolyn B. Maloney (D-NY)
Insurance, Housing and Community Opportunity Judy Biggert (R-IL) Luis Gutierrez (D-IL)
International Monetary Policy and Trade Gary Miller (R-CA) Carolyn McCarthy (D-NY)
Oversight and Investigations Randy Neugebauer (R-TX) Michael Capuano (D-MA)
Foreign Affairs Ileana Ros-Lehtinen (R-FL) Howard Berman (D-CA)
Africa, Global Health, and Human Rights Chris Smith (R-NJ) Karen Bass (D-CA)
Asia and the Pacific Donald A. Manzullo (R-IL) Eni Faleomavaega (D-AS)
Europe and Eurasia Dan Burton (R-IN) Gregory Meeks (D-NY)
Middle East and South Asia Steve Chabot (R-OH) Gary Ackerman (D-NY)
Oversight and Investigations Dana Rohrabacher (R-CA) Russ Carnahan (D-MO)
Terrorism, Nonproliferation, and Trade Ed Royce (R-CA) Brad Sherman (D-CA)
Western Hemisphere Connie Mack IV (R-FL) Eliot Engel (D-NY)
Homeland Security Peter T. King (R-NY) Bennie Thompson (D-MS)
Border and Maritime Security Candice Miller (R-MI) Henry Cuellar (D-TX)
Counterterrorism and Intelligence Pat Meehan (R-PA) Jackie Speier (D-CA)
Cybersecurity, Infrastructure Protection, and Security Technologies Dan Lungren (R-CA) Yvette Clarke (D-NY)
Emergency Preparedness, Response, and Communications Gus Bilirakis (R-FL) Laura Richardson (D-CA)
Oversight, Investigations, and Management Michael McCaul (R-TX) William R. Keating (D-MA)
Transportation Security Mike D. Rogers (R-AL) Sheila Jackson Lee (D-TX)
House Administration Dan Lungren (R-CA) Bob Brady (D-PA)
Oversight Phil Gingrey (R-GA) Zoe Lofgren (D-CA)
Elections Gregg Harper (R-MS) Bob Brady (D-PA)
Judiciary Lamar S. Smith (R-TX) John Conyers (D-MI)
Courts, Commercial and Administrative Law Howard Coble (R-NC) Steve Cohen (D-TN)
Constitution Trent Franks (R-AZ) Jerrold Nadler (D-NY)
Intellectual Property, Competition, and the Internet Bob Goodlatte (R-VA) Mel Watt (D-NC)
Crime, Terrorism, and Homeland Security Jim Sensenbrenner (R-WI) Bobby Scott (D-VA)
Immigration Policy and Enforcement Elton Gallegly (R-CA) Zoe Lofgren (D-CA)
Natural Resources Doc Hastings (R-WA) Ed Markey (D-MA)
Energy and Mineral Resources Doug Lamborn (R-CO) Rush D. Holt (D-NJ)
Fisheries, Wildlife, Oceans and Insular Affairs John Fleming (R-LA) Gregorio Sablan (D-MP)
Indian and Alaska Native Affairs Don Young (R-AK) Ben R. Luján (D-NM)
National Parks, Forests and Public Lands Rob Bishop (R-UT) Raúl Grijalva (D-AZ)
Water and Power Tom McClintock (R-CA) Grace Napolitano (D-CA)
Oversight and Government Reform Darrell Issa (R-CA) Elijah Cummings (D-MD)
Federal Workforce, U.S. Postal Service and Labor Policy Dennis A. Ross (R-FL) Stephen Lynch (D-MA)
Government Organization, Efficiency and Financial Management Todd Platts (R-PA) Ed Towns (D-NY)
Health Care, District of Columbia, Census and the National Archives Trey Gowdy (R-SC) Danny K. Davis (D-IL)
National Security, Homeland Defense and Foreign Operations Jason Chaffetz (R-UT) John F. Tierney (D-MA)
Regulatory Affairs, Stimulus Oversight and Government Spending Jim Jordan (R-OH) Dennis Kucinich (D-OH)
TARP, Financial Services and Bailouts of Public and Private Programs Patrick McHenry (R-NC) Michael Quigley (D-IL)
Technology, Information Policy, Intergovernmental Relations and Procurement Reform James Lankford (R-OK) Gerry Connolly (D-VA)
Rules David Dreier (R-CA) Louise Slaughter (D-NY)
Legislative and Budget Process Pete Sessions (R-TX) Alcee Hastings (D-FL)
Rules and the Organization of the House Rich Nugent (R-FL) Jim McGovern (D-MA)
Science, Space and Technology Ralph Hall (R-TX) Eddie Bernice Johnson (D-TX)
Space and Aeronautics Steven Palazzo (R-MS) Jerry Costello (D-IL)
Technology and Innovation Ben Quayle (R-AZ) Donna Edwards (D-MD)
Research and Science Education Mo Brooks (R-AL) Dan Lipinski (D-IL)
Investigations and Oversight Paul Broun (R-GA) Donna Edwards (D-MD)
Energy and Environment Andy Harris (R-MD) Brad Miller (D-NC)
Small Business Sam Graves (R-MO) Nydia Velazquez (D-NY)
Agriculture, Energy and Trade Scott Tipton (R-CO) Mark Critz (D-PA)
Healthcare and Technology Renee Ellmers (R-NC) Cedric Richmond (D-LA)
Economic Growth, Tax and Capital Access Joe Walsh (R-IL) Kurt Schrader (D-OR)
Contracting and Workforce Mick Mulvaney (R-SC) Judy Chu (D-CA)
Investigations, Oversight and Regulations Mike Coffman (R-CO) Jason Altmire (D-PA)
Transportation and Infrastructure John Mica (R-FL) Nick Rahall (D-WV)
Aviation Thomas Petri (R-WI) Jerry Costello (D-IL)
Coast Guard and Maritime Transportation Frank LoBiondo (R-NJ) Rick Larsen (D-WA)
Economic Development, Public Buildings and Emergency Management Jeff Denham (R-CA) Eleanor Holmes Norton (D-DC)
Highways and Transit John J. Duncan, Jr. (R-TN) Peter DeFazio (D-OR)
Railroads, Pipelines, and Hazardous Materials Bill Shuster (R-PA) Corrine Brown (D-FL)
Water Resources and Environment Bob Gibbs (R-OH) Tim Bishop (D-NY)
Veterans’ Affairs Jeff Miller (R-FL) Bob Filner (D-CA)
Disability Assistance and Memorial Affairs Jon Runyan (R-NJ) Jerry McNerney (D-CA)
Economic Opportunity Marlin Stutzman (R-IN) Bruce Braley (D-IA)
Health Ann Marie Buerkle (R-NY) Mike Michaud (D-ME)
Oversight and Investigations Bill Johnson (R-OH) Joe Donnelly (D-IN)
Ways and Means Dave Camp (R-MI) Sander Levin (D-MI)
Health Wally Herger (R-CA) Pete Stark (D-CA)
Human Resources Geoff Davis (R-KY) Lloyd Doggett (D-TX)
Oversight Charles Boustany (R-LA) John Lewis (D-GA)
Select Revenue Measures Pat Tiberi (R-OH) Richard Neal (D-MA)
Social Security Sam Johnson (R-TX) Xavier Becerra (D-CA)
Trade Kevin Brady (R-TX) Jim McDermott (D-WA)

The Senate Legislative Component of The Firm

Committee Chairman Ranking Member
Agriculture, Nutrition and Forestry (5) Debbie Stabenow (D-MI) Pat Roberts (R-KS)
Commodities, Markets, Trade and Risk Management Ben Nelson (D-NE) Saxby Chambliss (R-GA)
Conservation, Forestry and Natural Resources Michael Bennet (D-CO) John Boozman (R-AR)
Jobs, Rural Economic Growth and Energy Innovation Sherrod Brown (D-OH) John Thune (R-SD)
Livestock, Dairy, Poultry, Marketing and Agriculture Security Kirsten Gillibrand (D-NY) Mike Johanns (R-NE)
Nutrition, Specialty Crops, Food and Agricultural Research Bob Casey (D-PA) Richard Lugar (R-IN)
Appropriations (12) Daniel Inouye (D-HI) Thad Cochran (R-MS)
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Herb Kohl (D-WI) Roy Blunt (R-MO)
Commerce, Justice, Science, and Related Agencies Barbara Mikulski (D-MD) Kay Bailey Hutchison (R-TX)
Defense Daniel Inouye (D-HI) Thad Cochran (R-MS)
Energy and Water Development Dianne Feinstein (D-CA) Lamar Alexander (R-TN)
Financial Services and General Government Richard Durbin (D-IL) Jerry Moran (R-KA)
Homeland Security Mary Landrieu (D-LA) Dan Coats (R-IN)
Interior, Environment, and Related Agencies Jack Reed (D-RI) Lisa Murkowski (R-AK)
Labor, Health and Human Services, Education, and Related Agencies Tom Harkin (D-IA) Richard Shelby (R-AL)
Legislative Branch Ben Nelson (D-NE) John Hoeven (R-ND)
Military Construction, Veterans Affairs, and Related Agencies Tim Johnson (D-SD) Mark Kirk (R-IL)
State, Foreign Operations, and Related Programs Patrick Leahy (D-VT) Lindsey Graham (R-SC)
Transportation, Housing and Urban Development, and Related Agencies Patty Murray (D-WA) Susan Collins (R-ME)
Armed Services (6) Carl Levin (D-MI) John McCain (R-AZ)
Airland Joe Lieberman (I-CT) Scott Brown (R-MA)
Emerging Threats and Capabilities Kay Hagan (D-NC) Rob Portman (R-OH)
Personnel Jim Webb (D-VA) Lindsey Graham (R-SC)
Readiness and Management Support Claire McCaskill (D-MO) Kelly Ayotte (R-NH)
SeaPower Jack Reed (D-RI) Roger Wicker (R-MS)
Strategic Forces Ben Nelson (D-NE) Jeff Sessions (R-AL)
Banking, Housing, and Urban Affairs (5) Tim Johnson (D-SD) Richard Shelby (R-AL)
Economic Policy Jon Tester (D-MT) David Vitter (R-LA)
Financial Institutions and Consumer Protection Sherrod Brown (D-OH) Bob Corker (R-TN)
Housing, Transportation, and Community Development Robert Menendez (D-NJ) Jim DeMint (R-SC)
Securities, Insurance, and Investment Jack Reed (D-RI) Mike Crapo (R-ID)
Security and International Trade and Finance Mark Warner (D-VA) Mike Johanns (R-NE)
Budget Kent Conrad (D-ND) Jeff Sessions (R-AL)
Commerce, Science and Transportation (7) Jay Rockefeller (D-WV) Kay Bailey Hutchison (R-TX)
Aviation Operations, Safety, and Security Maria Cantwell (D-WA) John Thune (R-SD)
Communications, Technology, and the Internet John Kerry (D-MA) Jim DeMint (R-SC)
Competitiveness, Innovation, and Export Promotion Amy Klobuchar (D-MN) Roy Blunt (R-MO)
Consumer Protection, Product Safety, and Insurance Mark Pryor (D-AR) Pat Toomey (R-PA)
Oceans, Atmosphere, Fisheries, and Coast Guard Mark Begich (D-AK) Olympia Snowe (R-ME)
Science and Space Bill Nelson (D-FL) John Boozman (R-AR)
Surface Transportation and Merchant Marine Infrastructure, Safety, and Security Frank Lautenberg (D-NJ) Roger Wicker (R-MS)
Energy and Natural Resources (4) Jeff Bingaman (D-NM) Lisa Murkowski (R-AK)
Energy Maria Cantwell (D-WA) Jim Risch (R-ID)
National Parks Mark Udall (D-CO) Richard Burr (R-NC)
Public Lands and Forests Ron Wyden (D-OR) John Barrasso (R-WY)
Water and Power Debbie Stabenow (D-MI) Mike Lee (R-UT)
Environment and Public Works (7) Barbara Boxer (D-CA) Jim Inhofe (R-OK)
Children’s Health and Environmental Responsibility Amy Klobuchar (D-MN) Lamar Alexander (R-TN)
Clean Air and Nuclear Safety Tom Carper (D-DE) John Barrasso (R-LA)
Green Jobs and the New Economy Bernie Sanders (I-VT) John Boozman (R-AR)
Oversight Sheldon Whitehouse (D-RI) Mike Johanns (R-NE)
Superfund, Toxics and Environmental Health Frank Lautenberg (D-NJ) Mike Crapo (R-ID)
Transportation and Infrastructure Max Baucus (D-MT) David Vitter (R-LA)
Water and Wildlife Ben Cardin (D-MD) Jeff Sessions (R-AL)
Finance (6) Max Baucus (D-MT) Orrin Hatch (R-UT)
Energy, Natural Resources, and Infrastructure Jeff Bingaman (D-NM) John Cornyn (R-TX)
Fiscal Responsibility and Economic Growth Bill Nelson (D-FL) Mike Crapo (R-ID)
Health Care Jay Rockefeller (D-WV) Chuck Grassley (R-IA)
International Trade, Customs, and Global Competitiveness Ron Wyden (D-OR) John Thune (R-SD)
Social Security, Pensions, and Family Policy Debbie Stabenow (D-MI) Tom Coburn (R-OK)
Taxation and IRS Oversight Kent Conrad (D-ND) Jon Kyl (R-AZ)
Foreign Relations (7) John Kerry (D-MA) Richard Lugar (R-IN)
Western Hemisphere, Peace Corps and Narcotics Affairs Robert Menendez (D-NJ) Marco Rubio (R-FL)
Near Eastern and South and Central Asian Affairs Bob Casey, Jr. (D-PA) Jim Risch (R-ID)
African Affairs Chris Coons (D-DE) Johnny Isakson (R-GA)
East Asian and Pacific Affairs Jim Webb (D-VA) James Inhofe (R-OK)
International Operations and Organizations, Human Rights, Democracy and Global Women’s Issues Barbara Boxer (D-CA) Jim DeMint (R-SC)
European Affairs Jeanne Shaheen (D-NH) John Barrasso (R-WY)
International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection Ben Cardin (D-MD) Bob Corker (R-TN)
Health, Education, Labor, and Pensions (3) Tom Harkin (D-IA) Mike Enzi (R-WY)
Subcommittee on Children and Families Patty Murray (D-WA) Richard Burr (R-NC)
Subcommittee on Employment and Workplace Safety Barbara Mikulski (D-MD) Johnny Isakson (R-GA)
Subcommittee on Primary Health and Aging Bernie Sanders (I-VT) Rand Paul (R-KY)
Homeland Security and Governmental Affairs (5) Joe Lieberman (ID-CT) Susan Collins (R-ME)
Contracting Oversight (Ad Hoc) Claire McCaskill (D-MO) Rob Portman (R-OH)
Disaster Recovery and Intergovernmental Affairs (Ad Hoc) Mark Pryor (D-AR) Rand Paul (R-KY)
Federal Financial Management, Government Information and International Security Thomas Carper (D-DE) Scott Brown (R-MA)
Investigations (Permanent) Carl Levin (D-MI) Tom Coburn (R-OK)
Oversight of Government Management, the Federal Workforce and the District of Columbia Daniel Akaka (D-HI) Ron Johnson (R-WI)
Judiciary (6) Patrick Leahy (D-VT) Chuck Grassley (R-IA)
Administrative Oversight and the Courts Amy Klobuchar (D-MN) Jeff Sessions (R-AL)
Antitrust, Competition Policy and Consumer Rights Herb Kohl (D-WI) Mike Lee (R-UT)
The Constitution, Civil Rights and Human Rights Dick Durbin (D-IL) Lindsey Graham (R-SC)
Crime and Terrorism Sheldon Whitehouse (D-RI) Jon Kyl (R-AZ)
Immigration, Refugees and Border Security Chuck Schumer (D-NY) John Cornyn (R-TX)
Privacy, Technology and the Law Al Franken (D-MN) Tom Coburn (R-OK)
Rules and Administration Chuck Schumer (D-NY) Lamar Alexander (R-TN)
Small Business and Entrepreneurship Mary Landrieu (D-LA) Olympia Snowe (R-ME)
Veterans’ Affairs Patty Murray (D-WA) Richard Burr (R-NC)

What Would Lysander Spooner Say?

Although I’m not a progressive, I nonetheless still generally enjoy the content published by Counterpunch. Counterpunch, after all, is in my blogroll. However, occasionally they will publish something that I find to be completely bullshit. The last time I made note of such an example involved a ridiculous screed by Pam Martens regarding the Free State project that more or less reduced to advocating police state tactics to get rid of the rift raft in her neighborhood. Now I’ve found another example with this article, Saving the Postal Service (and Union Jobs), that amounts to little more than a PSA from the Post Office.

Subtitled "What Would Ben Franklin Say," the piece is an exercise in the logical fallacy of special pleading that ostensibly makes the argument that monopoly postal rates are the price we pay for funding public union pension plans. Of course, that's not how the argument is actually presented. Instead its the typical clap trap that postal delivery is a public good and austerity measures pursued by the forces of privatization threaten not only public pensions but vital Saturday delivery for little old ladies out in the boondocks who will likely drop dead as a consequence. Besides, we are told, since 1970, the post office has not accepted a nickel of tax-payer monies. And the current postmaster Patrick Donahoe(Wilford Brimley has apparently retired) promises a new era of Gorbachev-esque market reforms for our monopoly provider.

Ordinarily, I probably would have let the article slide without comment except I was struck by the subtitled reference to Franklin, the conservative appeal to tradition–why, the horrors, the “historically significant” Ben Franklin post office on Market St is under siege–and the snide reference to Somalian anarchy. Well, that did it for me. If we are going to appeal to tradition then I would only remind our author, Jack A. Smith, that it was an American anarchist, Lysander Spooner, back in 1844, who demonstratively kicked the Post Office’s collective ass, operating his American Letter Mail Company though a maze of loopholes for 7 years until the Government finally shut it down for good. But by that time, however, Spooner’s company had managed to deliver the mail, without subsidy, for a postage rate of 3 cents. As such, Spooner is the rightful father of the 3 cent stamp. The State shut down Spooner but matched the postal rate–of course, with a tax subsidy. When the direct subsidies ended in 1970, that’s when the postal rates began their current ascent.

So, Mr. Smith, little old ladies in the boondocks would have received their medicines in the mail for 3 cents–without subsidy. Now, truth be told, the Post Office is not really that high on my shit list. Frankly, I appreciate the noise. After all, little old ladies are not the only one who get their drugs through the mail.

Social Forces and the Ideology of Wishful Thinking

Will Wilkinson and ED Kain team up for “social forces” argument against libertarianism. What exactly is this “social forces” argument? Distilled to its essence, it’s the contention that impersonal structural impediments create a redistribution problem. Now, in one sense, I’m in agreement; there is a redistribution problem, but–as I see it–it’s not exactly the same problem as identified by Wilkinson/Kain.

The Wilkinson/Kain interpretation, starting with Wilkinson:

(i) The Liberal vs Conservative debate over poverty/wealth

liberals tend to explain both poverty and wealth in terms of luck and the influence of social forces while conservatives tend to explain poverty and wealth in terms of effort and individual initiative

(ii) Libertarians side with the conservatives in this debate

What about libertarians? According to Jonathan Haidt and his colleagues, their patterns of moral sentiment and judgment make libertarians look a lot like liberals who care a great deal about liberty and not very much for suffering. Like liberals, libertarians don’t put very much emphasis on what Haidt calls the “binding foundations” of the moral sense–obedience to authority, in-group loyalty, and a sensitivity to moralized purity and disgust–which play a large role in conservative moral sentiment and judgment. This makes libertarians look like a lot like especially freedom-loving liberals with slightly hard hearts.

But, having lived most of my adult life among them, experience tells me that when it comes to the explanation of poverty and wealth libertarians are close cousins to conservatives. It’s my view that this shared sense of robust agency and individual responsibility for success and failure is the psychological linchpin of “fusionism”–that this commonality in disposition has made the long-time alliance between conservatives and libertarians possible, despite the fact that libertarians are almost identical to liberals in their unconcern for the conservative binding foundations.

(iii) There is a larger structural problem that counters a robust individual agency(although there is still room for some degree of individual agency)

my own drift from right-leaning libertarian to libertarian-leaning liberal has a lot to do with issues around the conditions for robust agency and the role of broad socio-economic forces in establishing those conditions, or not. I’ve come to accept, for example, that diffuse cultural forces, such as racism or sexism or nationalism or intergenerational poverty, can deprive an individual of her rightful liberty without any single person doing anything to violate her basic rights. This takes me a long way toward standard liberalism. But I find that my gut nevertheless leans right on issues of personal responsibility.

(iv) This structural problem is the root of the redistribution problem. The resolution to this problem demands both a degree of material and psychological assistance(within limits)

In plenty of circumstances in which people are suffering due to no fault of their own, I think they need both material assistance and the conviction that they can improve their lives if they really try.

Now Kain:

(i) Restate the premise of the liberal vs conservative debate over poverty. Affirm that libertarians take the conservative side.

Whereas libertarians and conservatives attribute success and failure to the personal strengths and flaws of individuals, liberals see a vast array of social forces, luck, and other things outside of the direct control of individuals as playing a more important role in the success or failure of individuals. Thus, for a liberal poverty is structural and for a libertarian or a conservative it is the result of human shortcomings.

(ii) Libertarian affirmation of the conservative position is an example of “vulgar libertarianism”

I find the libertarian rejection of structural and broad social forces shaping success and failure peculiar. For one thing, the most valuable insights of libertarianism are bound quite closely to the idea that special interests work with government to distort the playing field and protect certain interests and people and corporations over others. The free market creates a more level playing field, ideally, that allows for fewer distortions of power and more equality of opportunity.

And yet many libertarians only take that critique so far, and at the end of the day we find ourselves still with a discussion about winners and losers. It doesn’t make sense to craft a broad social critique of the state and its interactions with society and then turn around and pretend those factors play no role in the success or failure of you and me. This is what Kevin Carson describes as “vulgar libertarianism.”

(iii) Libertarians don’t take their theories seriously enough. Libertarianism demands that “social forces” be taken into account. So we reject the conservative “rugged individualist” interpretation and embrace the Wilkinson version of individual agency. In particular, we should be concerned about a safety net to account for market failure.

Fortunately, I don’t think that strain of thought exists in anywhere near so broad a constituency as the winners-vs-losers brand of rugged individualism does on the right. Most liberals, I believe, understand the importance of self-reliance, hard work, and making the crutches of the state as unnecessary as possible. Are there anti-growth, anti-market forces at work on the left? Of course there are. But these tend to have a very small influence over public policy.

Meanwhile, the goal of libertarian-leaning liberals everywhere should be making markets work for ordinary people. To do that you need to couple free markets with a strong, efficient safety net that rewards risk and hard work but doesn’t let people fall through the cracks. A market-based, bottom-up liberalism should still embrace the reality that market failure is both necessary and causes a great deal of pain. The role of the state is ameliorating that pain for ordinary workers – not bailing out or protecting the wealthy and well-connected.

Now, I’m occasionally accused of being at “definitional war” with political reality. This criticism pertains to my oft refusal to accept the “accepted” political categories. But there is good reason to refuse them. And,frankly, the Wilkinson/Kain interpretation of the redistribution problem demonstrates the peril of accepting them. That’s because the premise of the their argument, to begin with, is utterly bunk. Namely: that the conservative position regarding poverty/wealth/markets=rugged individualism, or more precisely, rejects any consideration of “social forces.”

I’ve composed many a post outlining the incongruence of philosophical conservatism with “free markets.”1 The raison d’etre of (modern) Conservatism proper, as outlined by Russell Kirk, for example, is a “republican” form of government to serve as a bulwark against the tide of change from “social forces.” Conservatism accepts the market, but not the “free market,” not in the libertarian sense. This should be clear from reading Kirk(indeed for the likes of Kirk, a free market is a threat to the necessary transcendence that must underlie a stable social order). Conservatives use the phrase “free market” but there is an implicit social context behind the conservative usage of that term. The market must exist within defined social limits and can only function properly within these defined limits. Indeed, if it goes outside these limits then it can be a social force for structural poverty–for example, in weakening the foundation of the traditional family.

Therefore, we actually find that both liberals and conservatives view poverty/wealth/markets, in terms of an individual agency problem, as a function of social context. 2

So, the initial premise of the Wilkinson/Kain interpretation that views left/right as “social context vs atomism” is not correct.

The Liberal vs Conservative debate over poverty/wealth =False Premise #1

Thus, obviously, if Premise #1 is not correct, then Premise #2 becomes problematic. Now one would have to show that libertarians are in agreement with conservatives over the necessary and proper social context for individual agency. But equivalence between conservatives and libertarians on this matter is demonstratively false. For example: the drug war, contractual arrangement between consenting adults(whether prostitution or “marriage” between same-sex adults, etc), immigrant labor.

Libertarians side with the conservatives =False Premise #2

So we have dispensed with the assumptions that (i) conservatism with respect to poverty/wealth/markets is atomistic and rugged individualist and (ii) that libertarianism is equivalent to the actual conservative view of individual agency and social context.

This leaves to address a dangling claim of sorts: Do hold libertarians hold atomistic and rugged individualist ideas often attributed to conservatives but not actually held by conservatives? That is, is libertarianism, in terms of it’s individualism, defined by an atomistic social analysis built over: “libertarians attribute success and failure to the personal strengths and flaws of individuals.”

I suppose one could appeal to Rand’s objectivist ethics to make this case, but even I would think that to be a vulgar reading of Rand. After all, Rand certainly didn’t invent the concept of the “American Dream.” When I think of libertarian social analysis, I tend to start with Charles Comte, Charles Dunoyer and Jean-Baptiste Say from the radical French liberal tradition.

There is an oft asked question concerning the origin of libertarianism. We can find the hint of the ideas historically embedded in virtually all cultures in one form or another, but certainly we would likely start with Étienne de La Boétie and the French Physiocratic tradition. But, as a social/political theory proper, it is the French Liberal tradition, specifically the social analysis that stems from liberal class theory, that serves as its modern origin.

To me, it is absurd to equate libertarian social analysis with late nite American Dream infomercials.

Libertarian Social analysis of poverty/wealth/markets is atomistic and rugged individualist =False Premise #3. Possible Notable Exceptions include: The biased sample of Will Wilkinson’s DC cocktail circuit and DC libertarian think tank employment.

Libertarian social analysis is fundamentally concerned with the social context of human individual agency. So much so, in fact, that the actual historical divisions in libertarianism, e.g., social vs individualist, are a direct function of bitter disputes regarding social context and human agency. Joseph Déjacque, for example, is famous(well at least famous in hard core libertarian circles) for accusing Pierre-Joseph Proudhon of being “liberal, but not libertarian.” This is a familiar charge that has been often repeated by “social anarchists” against “individualists,” calling them “liberals.” It is an accurate charge to the extent that individualists accept “liberal institutions” of civil society that includes such things as private property and markets. But the term liberal, in this context, is meant as a slur of sorts against an identity of the “petty bourgeoisie.” Carson’s use of the term “vulgar libertarianism” is actually a criticism of identifying the “petty bourgeoisie” with the constraints of American conservatism.

The point here is that libertarianism, as evidenced by it’s internal divisions, very much takes it’s social analysis foundations seriously. However,theses divisions are not indicative of weakness or wrongness of the theory. That is to say, “vulgar libertarianism” is no more of a problem for libertarianism than the problem of “petty bourgeoisie” is a problem for libertarianism.

Vulgar Libertarianism is a disqualifying factor exposing the relevant limits of libertarian social analysis =False Statement

At this point, what I have attempted to refute is the Wilkinson/Kain logical case against any libertarian objection to a Wilkinson/Kain moral claim for the necessity of some version of a redistributive state.

So Wilkinson’s appeal to racism and sexism, and Kain’s appeal to market failure, are not actually in the clear in terms of escaping a libertarian critique.

Wilkinson appears to have now adopted a progressive view of civil society, that is, a view that assigns a necessary role for the State to correct the oppressive tendencies of civil society. One of the important contributions of the historical deconstructive scholarship of Thaddeus Russell, particularly with respect to his work, “Renegade History of the United States,” is to punch serious holes in Wilkinson’s cultural impediment argument. Eternal vigilance often emanates from the bowels of civil society and not from the upper echelons of legislative chambers or Washington think tanks. No doubt that racism and sexism are components of a social structure impediment, but, more often than not, the State is an enforcer of the Status quo, and not liberating agents. You certainly not going to find “11 Freedoms That Drunks, Slackers, Prostitutes And Pirates Pioneered And The Founding Fathers Opposed” in the official state textbooks.

Kain’s mistakenly equates market failure with “winners and losers.” In the neoclassical sense, market failure may or not make the case for government agency, but this government agency has nothing to do with “redistribution.” In the classical sense, there is an economic analysis concerned with the flow of economic rents to factors of production, and the taxation of persistent economic rent in terms of certain factors(for example, land) serving as a basis for a “redistributive government agency.” In the classical liberal sense, the taxation of economic rent is the fiscal source of government.

Kain, like many others, totally turns economics(the study of political economy) on its head with an argument for a role of government agency to subsidize economic rent. This to me is obscene, and any moral argument to legitimize this serves as the moral foundation for plunder. This can be demonstrated.

For example, consider Rawls. One of the gripes I have about those who rely on Rawls–for example, Wilkinson–is that Rawls significantly modified his theory of Justice in his later years. The later Rawls was (i)public reason (ii) overlapping consensus and (iii) “propertarian democracy.” In a very real sense, the “social justice” rationale of government agency in the US in the 90s followed the later Rawls. The “welfare state” was reformed and an aggressive program to subsidize home ownership–as part of the ownership society– was kicked into high gear.

The results have been catastrophic. I contend that subsidizing economic rent is a grave error; but, in particular, I contend that subsidizing land and home ownership is an utterly disastrous policy(economic rent from land should be a primary fiscal source of any government agency; government agencies should not serve a moral objective to subsidize this). The extent the later Rawls viewed Property-owning democracy as guaranteeing a widespread bulwark against concentration of economic and financial power only demonstrates how wrong he was. A moral objective of a Property-owning democracy, enforced by government agency, has given us the greatest oligarchical concentration of financial power and control in human history.

This leads to the actual “redistribution problem.” How to reverse the concentrated economic power enabled and legitimized by moral claims of social and economic justice.

1 For example: No Bridge Between the Libertarian and Conservative Worldviews

2 A more accurate and thorough contemporary social analysis of “left/right” places the debate over individual agency within the context of communitarian recognition.

The Corporation as Social Contract

This is a follow up post to an earlier piece, Anarchism and The Firm. A re-summarization of that piece:

If we accept the institution of the market, then we must accept the concept of economic rent–if we wish to engage in economic reasoning. Markets will then have rent-seeking participants/actors1. Economic rent is simply earnings or income for use of a resource in excess of that resource’s opportunity costs. In a world of perfect competition equilibrium, there is no economic rent(or firms). But we don’t live in that world(that is, a world where every resource/asset is traded at opportunity cost). We have (i) economic inefficiencies or (ii) relatively inelastic supply curves for specialized labor2 or (iii) product heterogeneity and/or shifts in demand and supply curves3, etc,etc.

Competition in these types of economic rents is a good thing and improves the human condition, at least from an economic standpoint. A dynamic perspective views the entrepreneur as rent-seeking agent that both “creates quasi-rent” and dynamically enforces economic rent as quasi-rent, that is, long-term earnings for asset usage that approach opportunity cost.

Economic inefficiencies explain why we might expect “firms” in a complex economy. For one explanation of this, we can turn to the work of Oliver Williamson regarding the Firm. In a complex economy, you will end up with assets that are specific to one another that may have a trade value much greater than opportunity cost. If these assets are owned by different entities or agents, these mutually dependent trading partners, absent long-term contracts, will have substantial quasi-rents to bargain over in actual returns. This creates the following bargaining dynamic: (1) trading partners have an incentive to “haggle” to maximize their share of the available quasi-rents; this is a type of transaction cost (2) when it is difficult to switch trading partners, the defection state–that is, a failure in negotiations–represents large surplus losses.

The “Williamson Firm” then is a type of DRO, a form of economic governance that arises as means to minimize the bargaining costs of quasi-rents and the costs of defection.4,5

The “Williamson Firm” provides a plausible bargaining foundation for “the Firm” in a free market. A number of qualifiers, however.

(i) the “Williamson Firm” is not necessarily equivalent to the legal construct of the “Limited Liability Corporation”
(ii) the “Williamson Firm” would only be specific to certain economic sectors and would not be universal across all sectors. It arises out of the quasi-rents of asset specificity. Vertical integration is explained in terms of efficiency, and not “market power.”
(iii) The bounds of the “Williamson Firm” are an important consideration

To succinctly rephrase the qualifying remarks: If the Williamson framework is defined in terms of rent-seeking and adaptation, we should give important consideration to bounds of the firm, given that, in a sense, the vertical integration is explained by the inefficiency of completeness in contracting(for certain sectors). In short, the rent-seeking can very easily become a matter of contrived rents and not quasi-rents.

As I pointed out in my original piece, Stephan Kinsella’s claim of a contractual foundation of “shareholder limited liability,” which he implied had been substantiated by the likes of Robert Hessen, was not an accurate claim. Hessen actually denied the possibility of any strong contractual foundation of shareholder limited liability. Hessen instead appealed to the legal principle of respondeat superior backed by a claim of investor passivity.

My response was that in the absence of a strong contractual foundation, to avoid “the Corporation as Social Contract,” you had to provide an economic or bargaining rationale for the thing you are claiming. In particular, I was referring to limited liability in torts. There is no economic bargaining foundation for this legal protection aspect of the Firm.

I then noted that “investor passivity” was a myth, that it was actually a quite active institutional agent on its own. In fact, I identified this institutional agency as the foundation of “too big to fail.”

Interestingly, over the weekend, I read this summary post at Global Guerrillas that linked to this complexity analysis, The Network of Global Corporate Control, authored by a trio of theorists from Swiss Federal Institute of Technology in Zurich. The technical paper employs a complex graph analysis(a standard tool in complex network analysis) to model the global capitalist network, a network the researchers found to form a giant bow-tie arrangement knotted by a small, interconnected core of financial institutions.

For non-technical summary, refer to this informative New Scientist article.

What we empirically see is that the knot is controlled by a “super-entity” of 147 firms, almost all financial institutions. If you study the paper, what you will see, in plain startling form, is the empirical proof(or a highly compelling proof) that demonstrates the incompatibility of limited liability torts and investor passivity with the free market. Of course, we are defining the free market as a mechanism of competitive dissipation of economic rents. And we are reminded why we should never consider the free market as serving any moral ends–in this case, as means to an ends of a moral claim of ownership liability.

Complex network analysis has no need of conspiracy theories or “bad actors.” It simply models the complex order that emerges from the rules of the system. And what we find is not necessarily collusion of over economic rents, or a violation of the Williamson bound vertically for monopoly rents, but rather a complex entanglement-which violates the Williamson bound–naturally geared toward network preservation. In other words, not “public choice,” but “ruling class.”

What appears to have been empirically verified is the Corporation as Social Contract…

1 The term “rent-seeking” is usually reserved for contrived/artificial rents that are typically a product of government action. But we can generalize it to include profit seeking that includes quasi-rents. The generalization then includes the entrepreneur as a rent-seeking agent. Of course, competition in quasi-rents results in the dissipation of such rent.

2 Easy examples are highly skilled professional athletes, entertainers, or technical personnel. Most, if not all of their compensation(or income), is economic rent, meaning that they would earn much less in an alternative profession or endeavor.

3 Steve Jobs/Apple is an excellent example. Jobs perfected “taste” as a basis for product heterogeneity in consumer computing/electronics, allowing for Apple to enjoy the benefit of economic rent(in this case, profits above “normal profits). There is nothing wrong this type of economic rent-seeking, unless the rent-seeker also seeks to use the patent/copyright regime to prevent competition in product heterogeneity, which is the case with Jobs/Apple. Thus Steve Jobs attempted to use protectionism to protect Apple’s quasi-rent as permanent rent, thus disqualifying him as an “entrepreneurial ideal.” It’s amazing how many libertarians apparently miss the boat on this.

4 For a more detailed account, refer to the 2009 summary compiled by the Economic Sciences Prize Committee

5It is easy to see that the concept of economic rent is a primary dividing line between social anarchism and “free market anarchism.” Social anarchism holds hierarchy mechanisms of governance to be immoral whereas the “free market” variety, in its acceptance of economic rent, cannot make such blanket moral judgements regarding hierarchical forms of governance.