The Wire: The Sixth Season

Of course, HBO’s “The Wire” only lasted 5 seasons, but David Simon’s post romp as public intellectual to the chattering opinion classes suggests a sixth season: how a paunchy middle class white dude pimped the stories of the Baltimore city streets to a life of wealth, fame and self-appointed status as a de facto translator of black America to the progressive vanguard.

But rest assured, what Simon is saying now—government is just “us” and it’s failings are to be blamed on lack of institutional trust fueled by the evil designs of libertarianism–is not what he said on The Wire.

Granted, what he is saying now may make him the toast of the town on social media and the Washington cocktail circuit, but that jive bullshit would have never been green lighted for television, much less becoming a cult cultural phenomenon, even to the point that it’s sociological lessons are now taught for university course credit. Of course, without the fame of The Wire, no one would care to toast Simon on Twitter or in the halls of the Roosevelt Institute, and he would be just another obscure casualty of a Baltimore Sun layoff.

Then again, perhaps a 6th season of The Wire would be redundant. After all, its lesson would be the same as the first five. Institutions serve themselves and the people who work within them invariably serve the institutions. The Wire’s terminal conclusion was that life simply goes on.

The Madisonian Trifecta

Michael Hayden claims the enterprise of US Government surveillance has attained the status of the Madisonian Trifecta. Hmmm, sounds like a bad Robert Ludlum novel, or perhaps it’s just another name for The Firm.

The Rule of Law

Of course, anyone with a modicum of computer science/IT skill knew the the FBI hacked the Silk Road Box at the application layer to obtain its IP layer address. And anyone with a modicum of political science knowledge would have easily been able to predict that these methods–which are in stark violation of the heuristic operability of the internet–would be gerrymandered into permissible legal status. The science of the rule of law is its rational pattern…

The Hayekian Knowledge Problem

FYI: It’s been hacked. Libertarian economic apologetics rooted in the 20th century socialist calculation debate…well, how quaint.

A Picture is Worth a Thousand Arguments

Regarding the I,Spy argument I made back in 2012:

http://arstechnica.com/tech-policy/2014/05/photos-of-an-nsa-upgrade-factory-show-cisco-router-getting-implant/

Quod Erat Demonstrandum

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.

The Incontrovertible Firm

“How Disclosed NSA Programs Protect Americans, and Why Disclosure Aids Our Adversaries”

The official title of the recent and rare public US House Select Committee on Intelligence oversight hearing of the NSA

For the past three years, I have used this blog as a forum(to an admittedly limited readership) to rail against the security state. A particular gripe has been that while the admission of the thing has always been acknowledged the violation it constituted nonetheless usually remained outside the purview of consideration.¹ At best, the violation may have been treated as a secondary or tertiary one. But this dereliction(of intellectual method) can no longer stand. The past two weeks, Edward Snowden, a NSA contractor, has now verifiably leaked what has hitherto been the elephant in the room: the totalitarian US surveillance enterprise.

And make no mistake, it is an enterprise. I call it The Firm, borrowing heavily from Anthony de Jasay’s heterodoxical method of Rational Choice that treats the State as a type of unitary actor². But the Firm encompasses more than the what is traditionally thought to mean by the State. It stretches across an integrated nexus of political economy, media, academia, ingraining itself into every institution of civil society. As I have previously stated, the Firm is a rational choice casting of libertarian class theory.

The key insight of LCT–in contradistinction to liberal social contract theory–is that the State and civil society are in conflict. Liberalism holds that the State is an artificial construct to secure civil societal ends. However, practice has demonstrated that the State instead serves to subvert societal institutions, using them as “natural hosts” to effectuate an artificial process of political economy. Borrowing from Bastiat, we might depict this a the transformation of law as an instrument of justice(specifically, as the correction of injustice) to one of a perpetuation of injustice(plunder). The division of class then refers to those who depend on this perpetuation of injustice(or benefit from it) vs those who do not³.

In the jargon of rational choice, we would cast LCT as the “incentive-incompatibility problem” of collective choice to abide by the “unanimity” of the so-called social contact. In plain terms, this simply means that “constitutions” are not rational constraints against the rule-making power or authority of the State. If we dispense with this myth, then we can begin to actually examine the actual rational pattern of collective choice. What we often find is a hierarchical organization pattern serving as a de-facto decision-making rule. In public choice, a decision-making rule is the type of collective action method that imposes the decision-making costs(the price we pay for civilization) for participation in organized society. For Buchanan and Tullock, the only legitimate decision-making rule is unanimity⁴. In practice, this means super-majoritarian constitutional rules and amendments are the only legitimate decision-making rules.

In the original “Calculus of Consent,” side payments create marketable property rights in voting which often mitigate the external and decision-making costs of legislative action. However, later developments in the theory by Tullock advanced the idea of “rent-seeking” and the all pay auction at the methodological core of treating government/politics like a market. This rent-seeking game, however, can be very wasteful–in theory, infinitely wasteful. So, following Oliver Williamson’s treatment of The Firm–firms are DROs that arise as institutional mechanisms to mitigate wasteful bargaining costs–firms arise in political competition as means to fray the wasteful costs of the Tullock rent-seeking game⁵. This introduces the Firm as potential method of collective action. If we can identify high external costs of a firm’s rule making that nonetheless remain impervious to correction or reform, then we can explain this by treating these costs as decision-making costs. This would then gives us the Firm as a decision-making rule. And the Firm as a decision-making rule gives us “the State as its own Agency.”

Empirically, a firm can be demonstrated via a rent-seeking condition of rents >> outlays within a given market sector(of political economy). However, to show the Firm is not sufficient to show a decision-making rule.⁶ For this, we have to demonstrate external costs of the Firm equate to decision-making costs. A clear way to demonstrate this is to show a rule which overrides one derived from a legitimate decision-making rule. Put differently, showing enforcement of a firm’s rule that is blatantly unconstitutional is sufficient to show that firm as a decision-making rule.

For example, the public choice method excludes a statement such as “total surveillance is the price we must pay for the security to participate in organized society” because total surveillance overrides a number of rules derived from a legitimate decision-making rule, the unanimity of the bill of rights. To treat these costs as external costs is contra the public choice method because these costs are, in fact, decision-making ones. Now public choice per se certainly does not exclude legislative actions from imposing decision-making costs(if the decision-making rule is a simple majority system, then this is to be expected), but the standard method encounters an agency problem in explaining how decision-making costs are passed off as external costs to thwart a decision-making rule rooted in unanimity. Particularly, if this agency exhibits a concerted, coordinated organization pattern that encompasses military and intelligence organs, congressional leaders, the Dept. of Justice, media and journalistic organs, tech, telecommunication and defense industry sectors, political science academia and the like, etc. The agency problem is further compounded by an apparent legality established by secret courts, the public disclosure of such carrying a penalty of “aiding the enemy” and espionage. This is a vexing problem for standard public choice theory because there is a manifest agency afoot that appears to equate the public to “the enemy.”

The NSA as a Decision-Making Rule

Now let us return to Edward Snowden. What Snowden actually discovered amounted to a NSA/Intel decision-making rule. However, Snowden’s documentation trove, when fully revealed, will elucidate just how much of these rules are actually oriented around enforcing a 21st century mercantilist political economy rooted in data analytics(which I have dubbed “The Fifth Monopoly”). The so-called “liberty vs security trade-off debate” is a phony one. The decision-making cost is not this:

total surveillance is the price we must pay for the security to participate in organized society

Rather, it is this:

total surveillance is the price we must pay for the operational security of American dominance and control of the global political economy of data analytics

The latter is a decision-making cost that can only be implemented by decision-making rule such as the NSA. If we go by Russ Tice, a noted NSA whistleblower from the Bush tenure, the NSA, for all intents and purposes, is now the agency of the US government. This would put the US as a full-blown secret intelligence State.

Conclusion

The method of The Firm is an anathema to the traditional classical liberal schools of Chicago and Virginia because of the inversion of Milton Friedman’s famous relationship regarding capitalism and freedom. Capitalism is a necessary(though not sufficient) condition for political freedom. The Firm, however, employs a method that predicts a rent-seeking pattern that will eventually produce a decision-making rule that will displace legitimate decision-making rules rooted in unanimity. The Firm’s succinct relationship motto: Capitalism is a sufficient(though not necessary) condition to destroy liberal political freedom.

Still, one may ask how can capitalism result in a totalitarian regime of social control? Perhaps this short answer: when you stop being the customer and instead become the product itself. But “why” is not really the pertinent question here. Rather, the pertinent question is “why not”? From “incentive-incompatibility problem” of collective choice outlined above, there is no reliable “why not” constraint.

¹ for the most part, radical libertarianism excluded

² The Firm differs a bit from de Jasay’s account in that the former is squarely rooted in public choice, which is a narrower subset of rational choice. But the conclusions derived from each are more or less identical.

³IMHO, Class Theory is only a coherent methodological tool when it is institutionalized, i.e., classes are cast in institutional terms. In this sense we would say there are a class of institutions, or an institutional arrangement, that is entirely dependent on an artificial process of political economy, without which, it would disappear literally overnight.

⁴ Unanimity is required because of the potentially high external costs of collective action. By definition, an external cost is that cost to a party who did not choose to incur that cost. Unanimity ensures the cost is thus a decision-making one and not an external one. In other words, unanimity ensures “consent.”

⁵ Theoretically, Firms are a difficult thing to explain. But empirically, they obviously exist and are a fundamental organizational unit of market rent-seeking. It is simply not plausible to acknowledge them in free-market competition but deny them in political competition. Its not a defensible position(that is, there is no rational argument that necessarily explains them away in political competition, particularly given the difficulty of a rational argument to begin with to explain their existence in a free market). Legal distinctions/arguments are a red herring.In political competition they may not take the form of a de jure entity, but they are nonetheless, a de facto one.

⁶ Tullock himself had wrestled with the apparent persistence of Firms in (political) rent-seeking and succeeded in partially explaining them away by resorting to intellectual gymnastics vis-a-vis the efficiency of the rent-seeking technology. However, the persistent of firms would only be treated as an anomaly, and its attendent costs viewed primarily as external. The anomaly perhaps existentially threatened the validity of public choice as a method, but the threat was not viewed as something that extended to liberal democracy itself.

Julian Assange’s Call to Cryptographic Arms

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 cypherpunk 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.

I, Spy

I saw this recent CEI production of Leonard Read’s “I,Pencil” posted at Coordination Problem. CEI dubbed this production a modern makeover of the famous essay, but I just sort of shrugged it off with a feeling of “how quaint.” Frankly, I don’t think I’ve used a pencil in 15 years(and it’s only on relatively rare occasions that I use a pen–for financial transactions). A more modern analog would substitute the smart phone for the pencil. And the essay itself would be a bit different in composition from the original, evidenced by a new apropos entitlement: “I, Spy.” I, Spy wouldn’t just document the spontaneous order of the production of our piece of electronics, the smart phone, it would also document the planned order of the massive intelligence complex that uses your phone–after you have purchased it for your ends– for its own ends.¹

It occurred to me that “I,Spy” could perhaps shed some light on this current “Capitalism vs Free Market” debate that is taking place in the libertarian blogosphere. Unfortunately, the “laissez-faire” position isn’t quite getting through to many of our esteemed libertarian scholars. I keep reading that the “left-libertarian” position is guilty of methodological and rhetorical errors regarding state and market. Unfortunately, many, but not all, left-libertarians are undercutting the argument by trying to rationalize a moral preference, which is something you really can’t do in a social theory. The argument then becomes misplaced, shifting to a debate about what degree of hierarchy is “rational.” But the rationality of hierarchy is a function of the rent-seeking social context. And this is where the “dialectics” should kick in, understanding that what is rational in one context is not necessarily rational in another. But I think this type of debate is a distraction to the actual topic at hand.

The laissez faire position should be more or less silent on hierarchy. By this, I mean it is not a method primarily geared toward deconstructing market hierarchy vs statist hierarchy. More generally, it is not a method to validate a specific moral preference. Instead, it starts with human agency. Today, that means 3 billion plus agents and 3 billion plus moral preferences. Unlike religious and philosophical eschatology that views history as progressing toward some goal–and hence, human agency as merely an end product of something that humans actually do not control–the laissez-faire position holds to no such singular goal. Its social theory of advancing civilization is merely one of 3 billion plus moral ends coordinating to expand (and satisfy) human wants and desires.

A common critique of libertarianism is that it reduces life to the market. But I think how strange: a critique of reducing human life to human agency. That’s typically the critique of the cleric. And I would answer: by all means, let us reduce human life to the moral preference of those who deem themselves fit to define proper human agency for all us–and in some, cases, to those who simply deny it altogether. I think not. But my response carries an explicit premise that “the market” is indeed an expression of human agency. That is, the ends of market exchange serve the ends of those who make the exchange. There is no exogenous agency whose ends are furthered other than the exchanging agents. If there is such an agency that you can use market agent’s means as means for its own ends(with the two ends more or less conflicting), then I have essentially have no argument against the cleric. None.

So let us return to “I,Spy,” the modern analog to “I,Pencil.” I, Spy gives us not only the “spontaneous market order of production” but also the planned order of surveillance. When you buy your smart phone, your phone is also being used by a massive intelligence complex for its own ends(for spying, tracking, recording, data analytics)—to be potentially used against you. This introduces a rather glaring incentive-incompatibility agency problem into market exchange. It’s a sufficient problem to destroy the entire social theory of market exchange agency. The classical libertarian method(i.e, “class theory,” which I would equate to the left-libertarian method) in addition will predict that this incentive-incompatibility agency problem will be subjected to relentless rent-seeking.

Now I already can anticipate the counter-objections. (1) interested parties can circumvent the spying by adopting evasive techniques such as encryption. And there are firms who will provide these services. True, but the problem is that encryption is not a sufficient condition for circumvention. Indeed, there will come a time, if not already, when the act of circumvention fires up the red flags for increased surveillance. The problem is that encryption as a means of circumvention can be circumvented itself by a broader scope of data-analytics.² You can’t encrypt your entire life. And cracking your circumvention will be a prime area of relentless rent-seeking.

(2) things like advertising and data-analytics in a free market could potentially introduce the same type of incentive-incompatibility agency problems. No doubt. And I can’t prove that this same problem would be overcome or highly mitigated against/counter-acted. Of course, you can’t prove either that it wouldn’t be. But the State gives us the certainty of this problem.

“I, Spy” provides a pretty clear demonstration of the dichotomy between laissez-faire and capitalism. People like Steve Horwitz will look at the regulating agency regarding the spontaneous production side and say we only have a little bit of statism. The likes of David Gordon will look at the price setting agency and conclude– if it is not a monopoly–that we have an instance of capitalism. But what they fail to look at is the incentive-incompatibility agency problem of the planned order. This is what I deem their serious methodological and rhetorical errors regarding state and market. The root of this error is the perpetuation of viewing state actors through a microeconomic lens. The incentive-incompatibility agency problem of State Agency, however, resembles something more along the lines of a firm. In plain terms, this means you can model State agency as something that views human agency as a threat. Hence our distinction between laissez-faire and capitalism can be stated thusly: one is a means for advancing civilization while the other a means for social control. Two very different evolutionary endpoints.

Frankly, I don’t think it is even a matter of debate, any more than “sticking your hand in a fire will result in it being burned” should be a point of debate. If you want to test it, just simply challenge the planned order. In this sense, there is no need to ask Steven Horwitz or David Gordon whether or not there is a firm. Ask Julian Assange…

¹ The smart phone is the real world analog of Orwell’s screens

² Data analytics can be thought of as an applied exercise in graph theory, whereby the data analysis attempts to reveal patterns in the data in order to construct a graph object. A graph is simply a collection of vertices and connecting edges. If you can relate a sufficient number of unencrypted edges to an encrypted edge, you can likely determine the general subject matter of the encrypted edge without having to decipher it into a clear text communication. This for example, is why you can only think of something like Bitcoin as pseudo-anonymous and not truly anonymous.

Classical Libertarian vs Classical Liberal

From “The Law,” Frederic Bastiat on the origins of the “welfare state.”

Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter—by peaceful or revolutionary means—into the making of laws. According to their degree of enlightenment, these plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.

Woe to the nation when this latter purpose prevails among the mass victims of lawful plunder when they, in turn, seize the power to make laws!

Until that happens, the few practice lawful plunder upon the many, a common practice where the right to participate in the making of law is limited to a few persons. But then, participation in the making of law becomes universal. And then, men seek to balance their conflicting interests by universal plunder. Instead of rooting out the injustices found in society, they make these injustices general. As soon as the plundered classes gain political power, they establish a system of reprisals against other classes. They do not abolish legal plunder. (This objective would demand more enlightenment than they possess.) Instead, they emulate their evil predecessors by participating in this legal plunder, even though it is against their own interests.
It is as if it were necessary, before a reign of justice appears, for everyone to suffer a cruel retribution—some for their evilness, and some for their lack of understanding.

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.

What are the consequences of such a perversion? It would require volumes to describe them all. Thus we must content ourselves with pointing out the most striking.

In the first place, it erases from everyone’s conscience the distinction between justice and injustice.

No society can exist unless the laws are respected to a certain degree. The safest way to make laws respected is to make them respectable. When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law. These two evils are of equal consequence, and it would be difficult for a person to choose between them. The nature of law is to maintain justice. This is so much the case that, in the minds of the people, law and justice are one and the same thing. There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are “just” because law makes them so. Thus, in order to make plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it. Slavery, restrictions, and monopoly find defenders not only among those who profit from them but also among those who suffer from them.

If you suggest a doubt as to the morality of these institutions, it is boldly said that “You are a dangerous innovator, a utopian, a theorist, a subversive; you would shatter the foundation upon which society rests.”

If you lecture upon morality or upon political science, there will be found official organizations petitioning the government in this vein of thought: “That science no longer be taught exclusively from the point of view of free trade (of liberty, of property, and of justice) as has been the case until now, but also, in the future, science is to be especially taught from the viewpoint of the facts and laws that regulate French industry (facts and laws which are contrary to liberty, to property, and to justice). That, in government-endowed teaching positions, the professor rigorously refrain from endangering in the slightest degree the respect due to the laws now in force.”

Thus, if there exists a law which sanctions slavery or monopoly, oppression or robbery, in any form whatever, it must not even be mentioned. For how can it be mentioned without damaging the respect which it inspires? Still further, morality and political economy must be taught from the point of view of this law; from the supposition that it must be a just law merely because it is a law.

Another effect of this tragic perversion of the law is that it gives an exaggerated importance to political passions and conflicts, and to politics in general.

I could prove this assertion in a thousand ways. But, by way of illustration, I shall limit myself to a subject that has lately occupied the minds of everyone: universal suffrage.

The followers of Rousseau’s school of thought—who consider themselves far advanced, but whom I consider twenty centuries behind the times—will not agree with me on this. But universal suffrage—using the word in its strictest sense—is not one of those sacred dogmas which it is a crime to examine or doubt. In fact, serious objections may be made to universal suffrage.

In the first place, the word universal conceals a gross fallacy. For example, there are 36 million people in France. Thus, to make the right of suffrage universal, there should be 36 million voters. But the most extended system permits only 9 million people to vote. Three persons out of four are excluded. And more than this, they are excluded by the fourth. This fourth person advances the principle of incapacity as his reason for excluding the others.

Universal suffrage means, then, universal suffrage for those who are capable. But there remains this question of fact: Who is capable? Are minors, females, insane persons, and persons who have committed certain major crimes the only ones to be determined incapable?

A closer examination of the subject shows us the motive which causes the right of suffrage to be based upon the supposition of incapacity. The motive is that the elector or voter does not exercise this right for himself alone, but for everybody.

The most extended elective system and the most restricted elective system are alike in this respect. They differ only in respect to what constitutes incapacity. It is not a difference of principle, but merely a difference of degree.

If, as the republicans of our present-day Greek and Roman schools of thought pretend, the right of suffrage arrives with one’s birth, it would be an injustice for adults to prevent women and children from voting. Why are they prevented? Because they are presumed to be incapable. And why is incapacity a motive for exclusion? Because it is not the voter alone who suffers the consequences of his vote; because each vote touches and affects everyone in the entire community; because the people in the community have a right to demand some safeguards concerning the acts upon which their welfare and existence depend.

I know what might be said in answer to this; what the objections might be. But this is not the place to exhaust a controversy of this nature. I wish merely to observe here that this controversy over universal suffrage (as well as most other political questions) which agitates, excites, and overthrows nations, would lose nearly all of its importance if the law had always been what it ought to be.

In fact, if law were restricted to protecting all persons, all liberties, and all properties; if law were nothing more than the organized combination of the individual’s right to self defense; if law were the obstacle, the check, the punisher of all oppression and plunder—is it likely that we citizens would then argue much about the extent of the franchise?

Under these circumstances, is it likely that the extent of the right to vote would endanger that supreme good, the public peace? Is it likely that the excluded classes would refuse to peaceably await the coming of their right to vote? Is it likely that those who had the right to vote would jealously defend their privilege?

If the law were confined to its proper functions, everyone’s interest in the law would be the same. Is it not clear that, under these circumstances, those who voted could not inconvenience those who did not vote?

But on the other hand, imagine that this fatal principle has been introduced: Under the pretense of organization, regulation, protection, or encouragement, the law takes property from one person and gives it to another; the law takes the wealth of all and gives it to a few—whether farmers, manufacturers, shipowners, artists, or comedians. Under these circumstances, then certainly every class will aspire to grasp the law, and logically so.

The excluded classes will furiously demand their right to vote—and will overthrow society rather than not to obtain it. Even beggars and vagabonds will then prove to you that they also have an incontestable title to vote. They will say to you:

“We cannot buy wine, tobacco, or salt without paying the tax. And a part of the tax that we pay is given by law— in privileges and subsidies—to men who are richer than we are. Others use the law to raise the prices of bread, meat, iron, or cloth. Thus, since everyone else uses the law for his own profit, we also would like to use the law for our own profit. We demand from the law the right to relief, which is the poor man’s plunder. To obtain this right, we also should be voters and legislators in order that we may organize Beggary on a grand scale for our own class, as you have organized Protection on a grand scale for your class. Now don’t tell us beggars that you will act for us, and then toss us, as Mr. Mimerel proposes, 600,000 francs to keep us quiet, like throwing us a bone to gnaw. We have other claims. And anyway, we wish to bargain for ourselves as other classes have bargained for themselves!”

And what can you say to answer that argument!

In short, the welfare state, as it it is traditionally thought of today, is a symptom of legal plunder.

Charles Rowley, the “Dean of Public Choice, commenting from his blog on the recent presidential election.

American exceptionalism was driven from the earliest years of colonialism through the first 150 years of the Republic by large white male majorities, many enthused by the Protestant work ethic. From the 1920s on, female white voters, of the same European stock, swelled the ranks of such voters. Not all such voters, of course, were enthused by American exceptionalism. However, save for the FDR and the Lyndon Johnson years, those white voters, supplemented by others, proved sufficient to uphold the exceptionalism ideal.

This is no longer the case. On November 6, 2012, Mitt Romney secured 60 per cent of the aggregate white vote – men and women combined. He secured 73 per cent of the white male vote. In 1980 that would have carried him easily into the White House. In 2012, given poor support from so-called minorities – 5 per cent among blacks and 15 per cent among Hispanics – the Electoral College proved to be out of reach. The white population in the United States is sliding towards minority status, as European immigration relatively declines and as birth rates among the black, Hispanic and Asian communities far exceed those among whites.

As the state itself grows, under such impulses, so welfare dependency expands. The relationship is symbiotic. That has been the hidden and enormously successful objective of progressive politics since FDR took office in 1932. By 2016, with Obamacare by then controlling one-sixth of the U.S. economy, the impulse will be irreversible.

It is no surprise that sub-populations that live significantly off the welfare state vote for candidates and parties that promise to sustain and to extend that welfare state. As food stamps expand from 31 per cent to 43 per cent of the population, as occurred during Obama’s first term, and as the Clinton-Gingrich welfare reforms are rolled back by presidential edicts, as occurred in 2012, so the social market economy digs down ever – deeper roots.

The Democratic Party makes one major error in quietly gloating over this transformation. Social market economics is not the monopoly jurisdiction of any single party. By 2014, the Republican Party will have adjusted to political reality. Mitt Romney was its last shot in support of American exceptionalism. Both parties henceforth will become social democratic in nature. And American exceptionalism will be a historical relic.

In short, the welfare state–in this instance one driven by non-white demographic changes–is the root of legal plunder. That’s how Mr. Rowley answers Bastiat.

My response to the likes of Mr. Rowley is that the “classical liberal” model can perhaps plausibly explain one side of the equation–the rise of welfare subsistence transfer payments. But it fails miserably at explaining other things. For example, I don’t think single black mothers, stoner hippes and hispanic immigration explain a banking oligarchy, a vast, encompassing military-intelligence complex and burgeoning prison complex that makes its coin by imprisoning this said welfare underclass.

The classical libertarian position, however, can explain both things. In this sense it is a science of political economy. Unfortunately, Mr. Rowley’s position is a moral preference masquerading as a science.

Further, I would also refer to the excellent scholarship of Thaddeus Russell to undercut Rowley’s moral preference regarding the implicit superiority of white protestant work ethic culture. And I would reference the work of the classical French libertarians regarding the very definition of civilization. Civilization, one that is advancing, is marked by an increasing satisfaction of increased human wants and desires. Unfortunately, Mr. Rowley seems to share the conservative position that views civilization as a form of vice.

Finally, this business of “American Exceptionalism” that Rowley refers to. Exceptionalism literally means “exception to the rule.” In our context, this can mean either one of two things. One, the historical exception of American Legal Jurisprudence from the corrupting influence of rent-seeking on the monopoly provision of law. In other words, the actual existence of a “rule of law” immune(or relatively immune) from political rent-seeking. Or two, the very definition of immorality: exempting yourself from the moral rules that you enforce on(or expect from) others. In other words, lawlessness. The classical libertarian position views American Exceptionalism as the national morality that legitimizes and glorifies legal plunder.

Libertarianism and “classical liberalism” are not the same things…