Friday, August 31, 2012

10 Signs That Things Are Moving in the Direction of Liberty

1. The Seastead Revolution Begins to Take Shape (July 30, 2012) - The Seasteading Institute recently held a conference in San Francisco bringing together entrepreneurs, engineers, lawyers, investors, and others whose collective effort will be necessary to turn theory into practice. The group is offering the Poseidon Award for the first genuine seastead and hopes to award the prize within three years.

2. Black Market Entrepreneurs Matter to the World Economy (December 16, 2011) - The globe’s gray and black markets have grown during the international recession, adding jobs, increasing sales, and improving the lives of hundreds of millions. Half the workers of the world are part of them. By 2020, that will be up to two-thirds.

3. Self-Reported Gun Ownership in U.S. Is Highest Since 1993 (October 26, 2011) - Forty-seven percent of American adults currently report that they have a gun in their home or elsewhere on their property. This is up from 41% a year ago and is the highest Gallup has recorded since 1993.

4. Record-Low 26% in U.S. Favor Handgun Ban (October 26, 2011) - A record-low 26% of Americans favor a legal ban on the possession of handguns in the United States other than by police and other authorized people. When Gallup first asked Americans this question in 1959, 60% favored banning handguns. But since 1975, the majority of Americans have opposed such a measure, with opposition around 70% in recent years.

5. Record-High 50% of Americans Favor Legalizing Marijuana Use (October 17, 2011) - When Gallup first asked about legalizing marijuana, in 1969, 12% of Americans favored it, while 84% were opposed. Support remained in the mid-20s in Gallup measures from the late 1970s to the mid-1990s, but has crept up since, passing 30% in 2000 and 40% in 2009 before reaching the 50% level in this year's Oct. 6-9 annual Crime survey.

6. Americans Express Historic Negativity Toward U.S. Government (September 26, 2011) - Americans' sense that the federal government poses an immediate threat to individuals' rights and freedoms is at a new high, 49%, since Gallup began asking the question using this wording in 2003.

7. Americans Choose Gold as the Best Long-Term Investment (August 25, 2011) - Thirty-four percent of Americans say gold is the best long-term investment. Real estate (19%) and stocks (17%) are distant second choices. The proliferation and basic devaluation of paper currencies has people talking about gold as a currency and pricing it accordingly.

8. Home Schooling Grows In Popularity In America (March 16, 2011) - The ranks of home-schooled students swelled to more than 2 million last year, by some research estimates, compared with about 850,000 home schooled a decade ago.

9. Distrust in U.S. Media Edges Up to Record High (September 29, 2010) - For the fourth straight year, the majority of Americans say they have little or no trust in the mass media to report the news fully, accurately, and fairly. The 57% who now say this is a record high by one percentage point. These findings also further confirm a separate Gallup poll that found little confidence in newspapers and television specifically.

10. Federal Reserve at the Bottom of Agency Ratings (July 27, 2009) - Federal Reserve Board is the worst reviewed of nine agencies and departments rated in the July 10-12 Gallup Poll.

Monday, August 27, 2012

An Economic Argument for Free Will

Since entrepreneurial uncertainty is neither deterministic risk nor probabilistic risk nor true randomness, and since entrepreneurial profit is neither the wage of a risk manager nor a windfall gain, human choices the successful anticipation of which is the source of entrepreneurial profit can be neither determined nor random. Which means that they are neither quantitatively predictable nor unpredictable, but qualitatively and imprecisely predictable, the ineradicable residuum of predictive fuzziness in this context being the influence of free will.

Sunday, August 19, 2012

Weirdly Uncommon Uncontroversial Descriptions

I find it quite interesting that googling phrases such as "institutionalized coercion", "coercive governmental monopoly", "fiat money monopoly", "monetary central planning", "malinvestments", "credit-induced boom", and "voluntary society" turns up almost exclusively pages related to Austrian economics and/or libertarianism, even though, as far as I can tell, these are purely positive, value-free descriptions that encapsulate the essence of phenomena such as state power, anarchism, central banking, and the business cycle, thus not implying any usual normative attitude to these issues that one might expect on the part of the members of certain philosophies and schools of thought.

Two rather uncharitable interpretations suggest themselves in this context - either non-Austrian economists and non-libertarian philosophers are not interested in analyzing the phenomena in question, or they feel that describing them in a straightforward, transparent manner might expose some of what is likely to be their commonly or even intrinsically unlikeable and objectionable features. Be that as it may, it is hard for me to believe it is just a coincidence.

Saturday, August 11, 2012

The Non-Problem of Rogue Defense Agencies

Even in today's universally statized world, prudent individuals continue to patronize private protection agencies, hire bodyguards, and otherwise increase their personal security by the use of market means. The reason for them doing this is obvious - they know all too well that they cannot rely on the "protection services" provided by coercive governmental monopolies, which are not constrained by the profit-and-loss test and thus need not care about the quality and cost-efficiency of their operations.

But if coercive governmental monopolies need not care about the quality and cost-efficiency of their operations, and thus cannot be expected to effectively intervene if a given individual's personal security is threatened, then it must be concluded that as regards the relationship between themselves and their clients, private protection agencies operate under the conditions of practical anarchy. Hence, as the critics of a private law society would have it, they should be continually aggressing against one another, as well as against their so-called clients, eventually destroying what started out as a purely voluntary industry.

However, the very fact that the market for private protection exists, and has existed since times immemorial, proves beyond any doubt that no such financially ruinous intra-industry conflicts take place. There is, after all, no reason why they should, since the existence of the market in question hinges on the fact that, unlike extra-market entities such as territorial monopolies of force, private protection agencies can survive only if they manage to maintain their professional reputation, and this they can do only if they consistently refrain from engaging in acts of initiatory aggression.

Hence, the coexistence of territorial monopolies of force and private protection agencies demonstrates that the supposed problem of rogue defense agencies under anarcho-capitalism does not look genuinely problematic when examined at least a bit more closely.

Monday, August 6, 2012

10 Reasons Why Austrian Economics Is Better Than Mainstream Economics

1. Austrian economists make it their priority to make sure that the theorems they formulate are derived from self-evident axioms and constructed according to the proper rules of logical deduction. These considerations are at best of secondary importance to their mainstream colleagues.

2. Austrian economists make it their priority to make sure that the assumptions they base their theorems on are thoroughly realistic, i.e., corresponding to the state of the world as it is. Mainstream economists, on the other hand, admit that their hypotheses are based on deliberately false assumptions.

3. Austrian economists make it their priority to make sure that the theorems they formulate elucidate exact causal connections between economic phenomena, rather than deliberately assuming away their existence or importance by falling back on the physics-inspired notion of mutual determination.

4. The predictive track record of Austrian economists is incomparably superior to that of their mainstream counterparts (see, e.g., here and here).

5. The theorems and conclusions of Austrian economics are perfectly comprehensible to every intelligent layman, which cannot be said about the mathematical puzzles of mainstream economics.

6. In terms of their views on the method and aims of economic theorizing, Austrian economists have a much better claim than their mainstream colleagues to being the heirs and successors of the classical economists, such as Smith, Hume, Say, and Bastiat.

7. Austrian economists never tire of emphasizing the strictly value-free character of their discipline. Thus, unlike their mainstream counterparts, they never presume that the existence of any non-voluntary extra-market institution is justified, and, a fortiori, never make any "public policy recommendations" based on such presumptions. On the contrary, they confine their scholarly research to investigating the logical origins and outcomes of various economic processes and phenomena as they are, not as they would like them to be.

8. Identifying the concept of demonstrated preference as the keystone of economic analysis allows Austrian economists to avoid the twin pitfalls of behaviorism and psychologism, which their mainstream colleagues cannot navigate in any principled and methodologically robust manner.

9. Austrian economists reject academic and professional hyperspecialization in their discipline, thus stressing the holistic, integrated nature of the science of economics. In the words of F. A. Hayek, "the physicist who is only a physicist can still be a first-class physicist and a most valuable member of society. But nobody can be a great economist who is only an economist - and I am even tempted to add that the economist who is only an economist is likely to become a nuisance if not a positive danger".

10. Austrian economists cannot retreat into the safe haven of epistemological nihilism when the logic of their arguments turns out to be faulty. Mainstream economists, on the other hand, when the facts fail to correspond to their hypotheses, can always claim that "this time things are different", which is a straightforward implication of the fact that any given set of sufficiently complex empirical data is compatible with a number of mutually exclusive empirical (but not logical) interpretations.

Wednesday, August 1, 2012

Austrian Methodology: Neither Empiricist nor Anti-Empirical

My learned friend Eric wrote a sympathetic critique of the methodology of the Austrian School. Below is my attempt to address his points.

As Eric clearly understands the difference between establishing that a theory is logically true and establishing that it is empirically relevant, he should also understand that his critique does not apply to economic theory and its methodology as conceived by the Austrians. The Austrians never tire of stressing that economic theory is a tool to interpret the empirical reality and make it intelligible in terms of the categories of human action, not a replacement for the investigation of its empirical contingencies. This point is made forcefully and explicitly in, say, “Theory and History” and in “In Defense of Extreme Apriorism”.

Economic theory can provide a set of non-trivial, necessarily true statements regarding the logical structure of human action – nothing more and nothing less. It cannot and does not attempt to prove its relevance to any particular case rooted in the contingencies of the empirical world. The business of establishing such relevance belongs to other analytical tools, mental faculties, and areas of knowledge. An entrepreneur is in the business of making forward-looking judgments of relevance. A historian is in the business of making backward-looking judgments of relevance. But they both have to accept the logical (a priori) correctness of economic theory (or, for that matter, mathematical theory) if their judgments of relevance are not to be arbitrary leaps in the dark.

Having made the above general point, let me make a few further points relating to specific claims made by Eric in his two posts.

The fact that “we can certainly conceive of a world where humans are nothing more than mere animals, reacting on the basis of instinct alone” does not demonstrate that the action axiom is empirical. Eric is confusing two dimensions here – the metaphysical one (necessary vs contingent) and the epistemological one (a priori vs a posteriori). While he is right in saying that the applicability of the action axiom is not necessary (i.e., true in all possible worlds), he is wrong in suggesting that its truth is known a posteriori, unless he wants to define introspection as empirical in some broader sense which includes internal experiences (which is what Rothbard did). If we are to remain faithful to the Kantian/Misesian terminology, however, the action axiom must be thought of as a contingent a priori truth, similar to, say, the Cartesian cogito.

Also, the broad observational statements about the nature of economic agents and their condition in our world, such as the existence of scarcity, hetereogeneity of resources and skills, the existence of as yet unsatisfied preferences, etc., while certainly empirical in nature, are nonetheless not testable/falsifiable in the positivistic sense, since their truth is established by the mere perceptual contact with the empirical reality of our world, rather than by the experimental search for evidence for the previously formulated hypotheses (in fact, the formulation of any testable hypothesis presupposes the truth of these general observational statements). Hence, the fact that the Austrian economic theory relies on them to establish its relevance to empirical reality does not in any sense and in any degree commit it to the positivist programme of hypotheses testing.

Finally, towards the end of his second post Eric makes quite a strong, but rather unsubstantiated point that seems to be independent of his previous critical remarks. He says the following: “Simply because actors prefer what satisfies them more over what satisfies them less, does not mean that each unit of a good that they use will give them less satisfaction than the previous one. It is all the more outrageous to believe that such things as the time-preference theory of interest or Austrian business cycle theory follow logically from simply the principle of human action”. If what he says here is that the above implications and derivations need not hold in view of various potentially intervening thymological contingencies associated with the lack of preference constancy over time, the role of expectations coordination, etc., then he does not mount any logical argument against the Austrian economic theory and its methodology. If, on the other hand, his suggestion is that these implications and derivations need not hold even assuming the relevant thymological ceteris paribus conditions, then I think his claim is clearly wrong, but since it is not supported by any identifiable logical justification, it is difficult to determine what deductive mistake or misunderstanding led to it.

Action implies the preference for sooner over later (since the opposite preference would lead to permanent inaction), and the preference for sooner over later implies that sacrificing the consumption of a certain quantity of present goods can be meaningfully engaged in only in exchange for receiving a larger quantity of future goods (even if the latter are to be goods of a purely immaterial nature, such as the psychological satisfaction of offering one’s friend a gift of interest). Hence, the action axiom implies the time-preference theory of interest.

Action also implies the preference for higher ranked wants over lower ranked wants. Thus, the utilization of the second unit of a supply of equally serviceable means has to be associated with the satisfaction of a want that is ranked lower than the one for whose satisfaction the first unit of the supply in question was utilized. Given a sufficient degree of preference constancy over time, suggesting anything else would not make logical sense (it would imply either that satisfying lower ranked wants gives the agent as much utility as satisfying higher ranked wants, or, even more absurdly, that satisfying lower ranked wants gives the agent more utility than satisfying higher ranked wants). Hence, the action axiom implies the law of diminishing marginal utility.

The reason why the logic of the above chains of deduction does not convince Eric is nowhere to be found in his two posts.

[Reprinted from The Social Rationalist]