My initial reaction to Mattheus was to agree with him.
The more I think about it, though, I have a hard time talking about the government in these terms – not because there aren’t problems associated with government (I would be the last person to deny that), but because it confuses the definition of “externality” and that’s a very important concept that I’d prefer not to confuse.
An externality exists in a situation where some of the costs and benefits of a decision do not inform the decision making process because no rights adhere to those costs and benefits. The efficiency of that decision making process has no real bearing on whether something is an externality or not. We can imagine inefficient allocation mechanisms for goods with no particular externality (for example, monopolies or markets with considerable information asymmetries), and we can imagine efficient markets for a good that is potentially rife with externalities (such as gasoline).
So what is the situation with government? Well in liberal democracies government internalizes all costs and benefits. Everyone has standing in a liberal democracy and all preferences can legitimately inform the decision making process. If I am not a party to your transaction with the gas station, my disutility from your carbon usage can’t inform that transaction. But if I’m voting anything I am pissed off about or happy about is fair game. The problem with government, it seems to me, is that it’s not nearly as efficient in maximizing those benefits and minimizing those costs as the market is. This is why, of course, we like the market to make allocation decisions in the vast majority of cases. The government has loads of problems with it, but decisions that are systematically uninformed by subjective valuations of costs and benefits is not one of thoase problems.
So why do Mattheus and Don think it’s an externality? The more I think about it I’m not really sure. It seems like cargo cult economics to me. Externalities are all about people bearing costs that don’t seem like they should be bearing; externalities are a good way to get the attention of economists; ergo: let’s call the government a big negative externality!
I’m not so sure about this. Government internalizes all kinds of costs and benefits. That’s the whole point of classical liberal government, and that’s why it’s cited as a potential solution to externalities that pose particularly big problems. Is it inefficient and sometimes even abusive? Sure. But unless we’re talking about a case of substantial disenfranchisement, I’m not sure these problems have their source in externalities.
Posts
Def. a great topic for a Mises article (that is, a rebuttal would be). I'll let you know.
ReplyDelete"Everyone has standing in a liberal democracy and all preferences can legitimately inform the decision making process."
ReplyDeleteOr not. Really, there are very many reasons to contest this very and extremely naive view of "democracy."
"But unless we’re talking about a case of substantial disenfranchisement..."
This is where you start to qualify things. So what is substantial disenfranchisement exactly?
You may want to start your reading by looking at Lysander Spooner.
re: "Or not. Really, there are very many reasons to contest this very and extremely naive view of "democracy."
ReplyDeleteBefore you go around calling people naive, make sure you read my argument closely. I am arguing that democracy is not always efficient at optimization or that it efficiently uses information on these preferences. I am simply noting that all people have standing and all preferences have standing, which is not true in a market. Franchise rights are broader than property rights.
Whether the institution uses that information in an effective way depends on the institution. Clearly in all cases it's not going to be as efficient as the market and some cases will be considerably worse than others.
I think you also need to understand posts about things like externalities in the context of the economics of externalities, Gary.
ReplyDeleteWhen I talk about information informing decisions I am talking about agents acting or not acting on certain information. This can be effected by quality or access to information on their part, or by standing in a transaction.
This is a separate question entirely from how the information is used. Are parties price takers or do they face market supply or demand curves? Are they directly contracting or are they contracting through agents, etc.? What is the structure of the decision making process? Are we just naively assuming an auction or a vote, or do we think there may be a more complicated mechanism like search or matching, or Tiebout sorting. These factors all inform the efficiency of information use.
But that is a quite different matter from what information gets processed by the decision making mechanism (whatever that mechanism may be).
"I am simply noting that all people have standing and all preferences have standing, which is not true in a market."
ReplyDeleteMy preferences do not have standing in the U.S.
I think what you are doing is loading your idea onto a largish semi built out of a bunch of ideas regarding consent, etc. that a lot of people simply do not agree with.
All governments substantially disenfranchise largish portions of their population; they couldn't function if they didn't do that. This is why they have been, remain and will continue to be enemies of experimentation in human organization.
re: "My preferences do not have standing in the U.S."
ReplyDeleteI'm not sure you're aware of what I mean by "standing".
re: "I think what you are doing is loading your idea onto a largish semi built out of a bunch of ideas regarding consent, etc. that a lot of people simply do not agree with."
What does consent have to do with it? You may need to expand on this. Again - I think you are confusing the point of the efficiency of a decision making mechanism and the information inputs. The advantage of government is that it makes use of considerably more information than the market. The disadvantage of government is that it is inefficient in its use of that information. It's important to separate these two points, I think.
I am pretty sure you do not mean "standing to sue" or one's reputation. I'm fairly certain you are referring to one's role in the nation-state - the flawed theory of democracy being that we're all equal before the law, we all have the same rights, etc.
ReplyDeleteEnfranchisement assumes consent; without consent nothing the government does is legitimate.
Effeciency is a side issue to be frank.
Since you've never read Spooner, you probably just don't understand any of this.
ReplyDeleteNo, that's not what I mean by standing and this is why it's so hard to talk with you about this when you don't use these words the way economists do or understand any of the arguments.
ReplyDeleteSpooner has nothing to do with this - you only think it does because you are talking about a different issue than I am. Even if I were to stop talking about what I've chosen to talk about and instead take up the quite different issues that Spooner addressed, his point on consent is specious. Freedom is not conditional on consent because the ability to consent to something is itself conditional on your rights (you cannot consent to certain taxes for certain purposes - Spooner's standard for ethical taxation - without a prior right to the resources that the taxes are paid with). Spooner incorrectly supposes that "natural rights" exist to make the claims that he makes. He's arbitrarily resolving the very real chicken-and-egg problem by pulling "natural rights" out of thin air.
All of this is besides the point, though. Spooner doesn't speak to information inputs vs. efficiency in decision making. He doesn't speak to my point that liberal governments with broad franchises have considerably higher levels of information inputs, but lower levels of efficiency - and that these are two quite different issues.
Spooner doesn't speak to these questions and you apparently aren't interested in speaking to them either. If you'd rather talk about Spooner and your own thoughts on consent, you might want to visit Aaron Brown's recent post on him at Economic Thought. This post is about externalities.
You don't need to read Spooner extensively to know the argument, and you shouldn't mistake making an argument that is different from Spooner's with not understanding Spooner. You come across as extremely condescending when you say things like that.
ReplyDelete"Spooner incorrectly supposes that "natural rights" exist to make the claims that he makes."
ReplyDeleteNo, Spooner correctly assumes the existence of natural rights.
"He doesn't speak to my point that liberal governments with broad franchises have considerably higher levels of information inputs..."
Which is a bad thing actually. Government is the author of force; as such, the more it knows (the more legible a population) the greater the detriment.
re: "No, Spooner correctly assumes the existence of natural rights"
ReplyDeleteClearly you haven't read Kuehn, and therefore don't understand :)
I read Kuehn all that time.
ReplyDeleteBtw, your definition of 'externality' is slightly confusing:
ReplyDelete"An externality exists in a situation where some of the costs and benefits of a decision do not inform the decision making process because no rights adhere to those costs and benefits."
1. I don't know what you mean by "no rights adhere to those costs and benefits."
2. It sounds like you're saying any exchange conducted with imperfect information is an externality.
3. I've always defined an externality as a cost or a benefit bestowed upon a party not related to those which had originally made the exchange.
I was going to write a line by line response to some of your points, but I think now it is more appropriate to present my own understanding of the issue as opposed to fighting and nitpicking on your turf.
ReplyDeleteUnlike some libertarians, I do not argue there are no "externality issues." Even in a society with perfectly well defined property rights, there would still be situations where people derive benefits without paying, and incur disutility without being compensated. Having to deal with underpaid teachers is a situation where there is a disutility and I cannot sue for compensation. Likewise, you cannot demand payment for offering me cordial discourse. Only in cases where property rights have been violated is there recourse to compensation/payment via courts and such.
Now, there are certain equilibrating elements in our society that tend, if not to reduce negative externalities (heretofore referred to as "bad things"), to mitigate or arrange them in such a way as to reduce the total badness. Individuals do this on their own for the most part. Jerks and assholes earn a reputation for being obnoxious, and people learn to steer clear of them on their own will, mitigating the badness of their behavior. No institution is required. Likewise, the undesirable elements of certain neighbors can be mitigated by shallow research on the part of prospective home buyers.
Sometimes certain social authorities are helpful in shaping positive externalities ("good things"). The artworld, for instance, is in some form responsible for helping us see beauty and art in our lives, for giving us creativity, for enhancing our appreciation of aesthetics, etc. Religious institutions tend to promote good things as well, such as family values, fidelity, and honesty among other virtues. These good characteristics are helped by the existence of moral and religious institutions.
In all our disagreements, I've never asserted that the state is incapable of doing some good. Just as I have never argued that the artworld can't produce elitists and religious institutions can't produce sanctimonious people. Of course they can. But the bad effects from these institutions do not violate the principle of non-aggression and basic structures of private property.
My argument against the state acting to mitigate externality issues is not an argument against ANY institution mitigating externality issues. It's that no other institution violates the non-aggression principle. No other institution acquires the funds to enact its programs at gunpoint.
The externality issue with government is that by allowing the state to "fix" externalities, you invite the rampant use of aggressive force that is a necessary part of the state. You invite violates of man's individual rights.
I'm not refighting the tax as theft point.
ReplyDeleteAt some point, you will need to. The only reason I oppose the state as an externality-mitigating institution is because of rights (which I didn't really include).
I think you will follow my argument all the way to the end until we disagree on rights. It boils down to state finance.
Why does it always seem like my huge posts get deleted?
ReplyDelete"Enfranchisement assumes consent; without consent nothing the government does is legitimate."
ReplyDeleteNonsense; I did not ever consent to the vast majority of property ownership I find in the world around me: do you also want to contend that every property arrangement is illegitimate if not every person affected by it consented to it?
Gene,
ReplyDeleteIt is precisely because it is not your property that your consent is not required. As the government necessarily steals and destroys our property, it needs consent for any of its actions to be legitimate.
Gene,
ReplyDeleteThe difference of course is that I do not have to be affected by a particular property arrangement; I need not move next door to the slaughterhouse or the noisy neighbor or the neighbor who uses garish colors for their exterior paint. Indeed, as markets expand worldwide it becomes more and more difficult to claim that choice isn't the primary essence of what markets provide. That sort of opt out does not exist with government in any way; indeed, it does not even exist in the supposedly federal republic that is the U.S. With the government it is thumbs up or thumbs down; it is a binary issue and choice is squashed. What government is - even liberal government - is faux choice.
Mattheus - it does seem to be picking on you lately - I'm not sure why. Anyway, it's rescued.
ReplyDeleteOn your post - I agree of course with your first paragraph. Externalities are pervasive and there are lots of external costs and benefits that can't be paid for. Even further than that, though - if one did pay for them it would fundamentally change the nature of the external benefit. If I paid you to civily converse, that doesn't seem all that civil to me. It's not very civil to say "you must pay me to be civil to you". This is what I was getting at in my "culture as an externality" piece. Not only are these things externalities, but the beauty of the positive externality is actually distorted when you do try to pay for it or commercialize it. It's similar to the case of prostitution. You're paying for sex, but it's just not the same sort of sex and never could be.
Your self-regulation of these problems (shunning, avoiding, etc.) are norms of behavior that I think could be classified as institutional, and that's also akin to the private solutions I have in mind. We can, as a society, shun culture and mock people who seek out culture or we could seek out a higher-welfare equilibrium that respects culture.
re: "At some point, you will need to. The only reason I oppose the state as an externality-mitigating institution is because of rights (which I didn't really include)."
Well, no. I don't "need to". We've already been through that territory. You know I have no particular use for the non-aggression principle. You know I think all social life is coercive and coercion is only "coercion" according to a certain arrangement of property rights which are themselves coercive. So you know I think this assignment of who is and who isn't "the aggressor" is circular. And you know I think that liberty is the arrangement of these coercions in a way that minimizes the coercive nature of society, and that that point of minimization is not necessarily libertarian or anarcho-capitalist. You know I think all this. And I'll acknowledge your perspective, but I don't need to reargue it every time :) I know pretty much all your arguments and you know pretty much all my arguments, and we're only really obligated to rehash it when someone has a breakthrough - a new point, a change of heart, a new counter-argument. Or, of course, whenever we both want to talk about it again. But nothing has changed on that front for me, so I just focus on the externality point.
Jonathan -
ReplyDeleteI think your definition in point three is essentially the same as mine, isn't it? But yours seems to be a description of the product of an externality. But how does that sort of thing happen? If someone benefits from or is hurt by a transaction we would expect them to transact for it if they could, right? But if they transact for it, it's not an externality. So what is required for it to be an externality? (1.) the inability to transact for something, but (2.) a stake in the transaction. So I wouldn't disagree with your definition, but I would say that the fundamental point of an externality is that the knowledge and information that is processed by the price mechanism or any other decision making mechanism does not include information by these third parties (if it did, it wouldn't be an externality - information on those costs and benefits would be internalized).
Now - as for rights adhering to your stake in the transaction. This is largely the same point. If you had rights to dispute the costs imposed on you or if others had the right to charge you for the benefits they confer on you, then there wouldn't be an externality - again, these stakes would be internalized. All the externalities I can think of emerge from an incompleteness of property rights. When I get a vaccine it makes you safer from disease - but I can't demand that you compensate me for that benefit. When you drive a car you pollute my air - but I don't have a right to that air so I can't demand you compensate me for that.
Externalities boil down to rights to these costs and benefits, and when you don't have property rights to them you can't bargain for them in a market process.
The advantage of government is that everyone with franchise has an equal right to make choices and negotiate on the basis of any cost or benefit they experience. Government is the great internalizer. The problem is it's a blunt instrument and quite inefficient. So we ought to use it very selectively in addressing externalities.
Mattheus -
ReplyDeletere: "Gene - It is precisely because it is not your property that your consent is not required."
BUT THIS IS CIRCULAR! This is the problem with the way you always go back to property rights. Why is it not his property? Did he ever agree to it not being his property? Did he ever consent to the property rights regime that restrains him from making use of that property? No, of course not. Gene has an excellent post up on his blog about how weak "rights" are as a foundation for political philosophy. Your argument is always circular on this point.
Rights are an outcome of a political process, not just an input. I know everything is neater and tidier if we pretend that rights are given, but that doesn't make them given.
And this idea of "consent" is circular too. You can only consent to that which you have veto authority over. The very idea of "consent" is contingent on what rights you do and don't have. Again - you and Lysander Spooner can only go off on "consent" by relying on circular logic.
daniel,
ReplyDeleteIt isn't circular logic; it is an issue of presuppositions. I have my presuppositions, you have yours.
What is weak are the "non-rights" (we'll call them privileges) of moderns liberals/progressives; you can literally drive a freight train through the all swiss cheese balancing tests, etc. of these non-rights.
Well, I don't believe in 'rights', so I personally don't think that externalities boil down to 'rights'. I believe they boil down to the ability to defend oneself against a negative externality through market action. It's not the same as a 'right', because the ability can be developed over time in a market.
ReplyDeleteRights aren't circular or self-referential. Rights exist because it is impossible to argue the opposite. It is impossible to argue that you do not have private property that is intersubjectively known by argumentation. That's why Hoppe's analysis is so valuable. The argumentum au contrario is a contradiction.
ReplyDeleteJonathan -
ReplyDeleteYou don't believe in rights?
On what basis do you contract if not on the basis of rights?
I don't see how you can even think about economics without "believing" in rights.
Rights are neither circular nor self-referential. Rights exist because it is impossible to argue otherwise. All argumentation presupposes the existence of rights (presupposes that you legitimately own and control your brain, vocal cords, tongue, etc.). That's why Hoppe is so important in Austrian circles - among other advancements! It is precisely because the argumentum au contrario is a contradiction that rights must exist - and be known to exist intersubjectively.
ReplyDelete"All argumentation presupposes the existence of rights (presupposes that you legitimately own and control your brain, vocal cords, tongue, etc.)."
ReplyDeleteThis makes absolutely no sense to me. What it presupposes is that it's biological fact. Hoppe's argumentation ethics are completely nonsensical (I've argued this elsewhere, as well).
Daniel,
I contract on the basis that as societies advance it makes more sense to contract than the feud over what you're trying to accomplish. I don't believe in rights, because I believe that what are today called 'rights' are just byproducts of a social organization developed over thousands of years (i.e. the division of labor).
Jonathan -
ReplyDeleteIf you're just saying you think "rights" are just a product of society I'd agree with you 100%. But I don't see why that's any reason not to believe in them. I suppose we're just confusing our terms. I would say that you don't believe in "natural rights", but you certainly believe in rights. You can't trade what you don't have a claim to, and that claim is recognized and treated as a "right".
My marriage is just social convention and social recognition. There's nothing more to it than that. But I still "believe" it exists. It's still a real thing even if its just a product of society.
OK - I think we're actually fairly close on this, and both not in agreement with Mattheus on more fundamental/natural rights.
Ok, let's define what a 'right' is.
ReplyDeleteDo I have a right to property, or do I have the ability to own property. The word 'right' implies that it's not just an ability, but something that is yours just because.
I have always understood a "right" to be a "claim". It's not there "just because" necessarily (although some people think it is). It's created and recognized by society.
ReplyDeleteHaving a "property right" usually entails a claim to the freedom to (1.) sell or "alienate", (2.) utilize, and (3.) enjoy the proceeds of whatever it is you have a "right" to.
Of course when we move beyond property specifically, "rights" don't have all those qualities listed above - but it's still a legitimate, recognized claim to something.
Yea, I use the term 'property rights', as well, but only because I lack a better term (in fact, earlier today I thought that one day I would prob. think of a replacement term). 'Property rights' isn't used, I think, in the same way as a 'right to free speech', or a 'right to healthcare', 'or a right to X', because what's implied is different.
ReplyDeleteI guess you can say that property rights are derived from contract. But then contracts aren't derived from rights, rather vice versa.
What it presupposes is that it's biological fact
ReplyDeleteThen you haven't read Hoppe.
This would make sense given his work on refuting fractional-reserve monetary theory (which you also cling to).
Might I recommend Economics and Ethics of Private Property?
Jonathan -
ReplyDeleteWhy "but then contracts aren't derived from rights"? Can't they have co-evolved? This is what a deductive mindset risks - an inability to cope with the prospect of a coevolution of chicken-and-egg type phenomenon. People started acting as if they were entitled to defend others' title to certain property or behavior. As soon as they offered that defense the title they defended became legitimized and was used to make subsequent contracts, etc. etc. ad infinitum. Practice became an institution.
Mattheus -
re: "Then you haven't read Hoppe"
I've always been told to actually point out problems in the logic (usually I'm never explicitly told the logic of a praxeological claim, so that's tough), but I'm going to take this opportunity to point out the logical flaw in this sentence. It does not follow that jonathan has not read Hoppe. What follows is that either he has not read Hoppe OR he has read Hoppe and finds him unconvincing OR you have misunderstood Hoppe.
Mattheus,
ReplyDeleteI have read Hoppe. You missed my point. I didn't say that that's what Hoppe argues. I explicitly said that I think Hoppe's argument is absurd. I'm saying that the fact that you control yourself is biological fact, not some absurd claim on natural law.
I have no idea what fractional reserve banking has to do with argumentation ethics... but ok.
Daniel,
ReplyDelete"Can't they have co-evolved? This is what a deductive mindset risks - an inability to cope with the prospect of a coevolution of chicken-and-egg type phenomenon."
Again, this goes back to a sloppy definition of what a 'right' is. If we're talking about property rights then we're talking about legal rights, which presupposes the existence of a contract.
Daniel,
ReplyDeleteIt does not follow that jonathan has not read Hoppe. What follows is that either he has not read Hoppe OR he has read Hoppe and finds him unconvincing OR you have misunderstood Hoppe.
Yes, you're correct. It may actually be the case that he has read Hoppe and been unconvinced, or that I have misunderstood the praxeological starting point of Hoppe's argumentation ethics. The probability of either of these points is negligibly small. Hoppe is abundantly clear what his point is, and his argument is so powerful that I find it hard to believe someone could come to full terms with it and leave unconvinced.
So I made the guess that Jonathan has not extensively read Hoppe's theory.
Jon,
I explicitly said that I think Hoppe's argument is absurd.
Why is it absurd?
I'm saying that the fact that you control yourself is biological fact, not some absurd claim on natural law.
Hoppe doesn't argue for natural law. And he doesn't argue self-control isn't biological. This is why I think you haven't read him. Nowehere in Hoppe's articles (save for his ubiquitous references to Rothbard) does he support, argue, or defend natural law ethics. He defends a system of ethics that is argumentatively justified, and this happens to come close to Rothbard's own natural law ethics.
Hoppe is practicing praxeology. The necessary preconditions to argumentation and action.
re: "The probability of either of these points is negligibly small."
ReplyDeleteHA!
If it were small there would be far more Hoppeans in the world. I understand the temptation to have these "there's no way a reasonable person can reject this" impulses, but you'll learn it's a pretty ridiculous way to look at things. Hoppe looks convincing to you, but that's because there's a mountain of unstated priors that go into these sorts of things.
Mattheus,
ReplyDeleteFirst, see my post on Hoppe and property rights (you've seen it before): http://www.economicthought.net/2010/08/hoppe-on-property-rights/
Hoppe tries to develop an objective ethical system by inappropriately applying praxeology. He argues for 'natural law' in the sense that his system of ethics is a natural characteristic of our ability to argue.
"And he doesn't argue self-control isn't biological."
Not explicitly, but he claims that our self-ownership can be derived from the fact that we can argue. This is ridiculous. Our self-ownership is biological fact. You don't need the extra step.
But, there's no connection between the biological fact of self-ownership and an ethical system. Ethics is a philosophy that studies what's right and what's wrong. That we can argue doesn't make it wrong to own a slave, or to initiate force on another person.
He tries to apply praxeology, but the causality between self-ownership and right/wrong (or ethics and morality) is extremely underdeveloped.
Also, there was some discussion here: http://mises.org/daily/4641
ReplyDeleteAlso, from the Mises Wiki:
ReplyDelete"One criticism is that argumentation ethics conflates the ontological concept of control of one's self with the ethical concept of self-ownership. That is to say, just as someone has the ability to control one's self, that does not give rise to why another ought to refrain from physically interfering with that control. "
Daniel,
ReplyDeleteIf it were small there would be far more Hoppeans in the world.
Because everyone in the world has read Hoppe, right?
Jon,
He argues for 'natural law' in the sense that his system of ethics is a natural characteristic of our ability to argue.
No, he doesn't. Stop trying to make him a Rothbard 2.0.
His code of ethics isn't a system based on any "natural characteristics." It's the only system that can be justified argumentatively.
Let me make it simple:
Hoppe argues that self-ownership and private property are a priori true, because in arguing the negation, a person has to assume private control in using their body. Furthermore, any act of argument presupposes legitimate control simply due to the fact that, were it not the case, (and that we had to get everyone's permission) we simply could not argue.
This is entirely appropriate to Mises' claim that action axiom is synthetic a priori because any argument to negate the action axiom is self-defeating.
Hoppe's argument is praxeological, and NOT divine or ephemeral. He is not a Plato or a Rothbard. He looks at the necessary priors of argument (intersubjective categories of argumentation) and deduces from there. It is Kantian and Misesian what he does.
Our self-ownership is biological fact. You don't need the extra step.
It's a necessary step if you want to introduce normative ethics. Self-ownership (biologically speaking) means nothing if it isn't coupled with private property - which is exactly what he does.
That we can argue doesn't make it wrong to own a slave, or to initiate force on another person.
You're misunderstanding Hoppe again. He isn't suggesting that "arguing beings" must ascribe to a certain ethical code because they "can argue." He's saying it is contradictory and impossible to JUSTIFY initiations of force via argumentation.
If I saw a man murder someone right in front of me, I couldn't "flip through Hoppe's books" and say what happened was bad. But if the murderer came up to me and tried to argue and justify that what he did, his argument will a priori be contradictory. That's why Hoppe's argument isn't very popular. He doesn't tell you what's right or wrong - he tells you what can be justified and what cannot be.
Daniel,
ReplyDeletePost went MIA.
Sigh.. this always happens to me.