Archive for the ‘A Theory of the State’ Category

The Trouble with Anarchy

May 16, 2014 3 comments

I’ve been working on a more complicated monetary model that I thought I could turn around pretty quick but is ending up being trickier than I expected.  Hopefully that will be ready sometime in the near future.  But in order to keep this site from becoming a complete ghost-town in the meantime, I figured I would take on a decidedly different topic: anarcho-capitalism.

In short, anarcho-capitalism is a bad idea.  I recently came across this Robert (or is it Bob?) Murphy post in which he relates this sentiment  from some economics student.

When I first read about Murphy’s idea of a private defense system, I was a little skeptical because I did not understand it. But now that I do understand it, I could advocate (for) it. The idea of having a privatized defense system is really interesting. The fact that it would be through firms and not the government is interesting.

This made my heart cry.  So just in case there are any such students within the sound of my voice who are into things like individual liberty and non-aggression but are still on the fence between limited government and anarchy, allow me to take apart Murphy’s two posts on the subject piece-by-piece in an attempt to show that anarchy does not lead to liberty.  I will go about this in two stages (this is going to be a bit lengthy).  First I will point out the specific flaws in Murphy’s thinking.  Then I will try to explain how it all fits together and why limited government is the only answer.

Starting with But Wouldn’t Warlords Take Over.

Read more…

Breaking Bad

November 9, 2013 Leave a comment recently did a very short piece about the AMC show Breaking Bad of which I am a fan. One commenter said he (or she) was expecting something longer and as it turns out this is a subject I have put a lot of thought into so I figured I would step into the gap.

Part of what I liked about Breaking Bad was that it was secretly (perhaps unintentionally) a lesson about property rights.  When you really get down to it, on a fundamental level there is only one thing we need government to do.  All governments do this thing in some way and any entity that does this can be considered a government.  This is the establishment and enforcement of property rights.  Read more…

Taxes, the Constitution and the Slippery Slope

[Note: This was written several weeks ago but not published so it’s a little out of date.]

A modern-day “conservative” is basically a libertarian who doesn’t believe in slippery slopes.  Indeed, there is a widespread denial of the phenomenon which defies logic.  Nearly every time someone tries to point out that something the government wants to do may lead to undesirable consequences, they are met with an automatic dismissal–“oh what the slippery slope argument?” (rolls eyes)—as though practically every time someone has warned of a slippery slope, it hasn’t ended up being the case. (See “argument from intimidation.” )

The left has to whitewash the notion of a slippery slope because their entire movement is based on it.  It is all about getting people to go along with things that most of them wouldn’t want through subtle manipulation over a long time-period.  It’s right there in their name—“progressive.” For too long, conservatives have allowed the government to start down these slopes and then tried to steer the slide away from the collectivist disasters that they are designed to funnel us into.  But they are always one (and quite often several) steps ahead of us because they designed the slope in the first place so that whenever we try to steer around Scylla, there is an undetected Charybdis waiting to swallow us up.  Nowhere is this more apparent than in the healthcare debate.  I will get into the economics of healthcare next time but first we have to talk taxes.

There is a real divide in political ideology in the country but it is not between Democrats and Republicans or liberals and conservatives.  It is between people who think society should be socially engineered through force by a centralized authority and those who think it should not.  It’s true that most of the people on the “should not” side are also on the conservative/Republican side.  But how often do you hear a “conservative” pundit say they want “small government” and then in the next segment call for the government to do something to bring down gas prices, fight “speculators,” save children from their parents and engage in all sorts of other interventions designed to engineer society in a supposedly conservative way?


In order to have a government you need taxes.  In order to be free, you must have an absolute prohibition on the government (at least the Federal Government) using the tax code to socially engineer society.  Once you let go of the premise that social engineering is the proper purpose of government, and that the proper role of the individual is to try to influence the government to engineer it in the way that individual desires, then you become a libertarian (welcome aboard).  To most conservatives, this sounds great until they realize that giving up this notion means giving up your mortgage interest credit, your earned income credit, your continuing education credit, etc.

Of course, a libertarian tax code would also get rid of all the credits that you don’t use and offset this with lower rates (way lower rates if we also had a libertarian spending policy), so nearly everyone would be better off.  But strangely no congressman ever proposes a bill eliminating all tax credits and lowering rates.  Why is that?  Perhaps it’s because politicians like power and their power derives largely from their ability to divert money to specific segments of the public.  But I digress.

The Constitution

The founding fathers were libertarians.  In light of this, doesn’t it seem like they would have put something in the constitution prohibiting the Federal Government from using the tax code to target certain individuals and behaviors in order to socially engineer society?  Yes it does, and in fact they did just that.

“Representatives and direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers…”

-Article 1, Section 2, Clause 3

“No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.”

-Article 1, Section 9, Clause 4

So how is it that we just witnessed the Supreme Court uphold a bill which gives the Federal Government the power to force every individual to buy healthcare on the grounds that the penalty for not complying is actually a tax?  The answer, of course, is that we allowed progressives to undermine this important provision of the constitution a hundred years ago when we passed the 16th amendment.

You might recall when President Obama expressed his regret that the constitution was only a charter of negative rights saying what the government can’t do to you and not a charter of positive rights saying what the government must do on your behalf.  The response of conservative commentators was to shout “see, he wants to change the constitution from a charter of negative rights into a charter of positive rights!”  But this was a misdirection, as I pointed out a while back.

What we should have said is “wait a minute, it’s actually not either of those things, it is a charter of enumerated powers.  It says what the government may do on your behalf.”  This is a very important distinction. All of the debate over the healthcare law was centered on the commerce clause.  The question was posed: can the government force us to buy broccoli under the commerce clause?  The court avoided answering this question, and so far nobody is asking the same question with regard to the power to tax.  Can the government “tax” me if I don’t buy broccoli?  Of course, the answer is yes.  Whatever the government wants me to do, it can declare a tax against me if I fail to do it.  There is no longer anything which falls outside of the enumerated powers of the Federal Government.

So what is the point of the constitution then?  It stops the government from discriminating against me based on race, infringing on my freedom of speech, freedom of religion, right to bear arms, etc. The protections contained in the constitution have been reduced to only those protections which are specifically mentioned.  In other words, it has been transformed into a charter of negative rights.

The slippery slope

Imagine the response if, in 1913, you had stood up and said “if we allow this amendment, there will be nothing stopping the government from taking over the healthcare industry, or any other industry, and telling us what we have to buy, and how much we have to pay for it, because this will ultimately transform the constitution from a charter of enumerated powers into a charter of negative rights.”  But the reality is that this power to tax us however they see fit, does give them the power to do pretty-much anything they want to us.  (Speaking of slippery slopes, in 1913, the top rate was 7% and this was supposed to be temporary.  By 1918, it was 77% and in 1944, the top rate was 94% and the first bracket was 23%)

I’m not making a slippery slope argument in reference to the future. I am making it in reference to the past.  We have been sliding for a century, the whole process is right there in the history books.  There is no speculation involved, you just have to look around and notice that we are at the bottom of the hill.

It’s not enough to just blame Obama or Democrats or Chief Justice Roberts or the media for what is happening.  This is happening because Americans have lost touch with the moral and philosophical foundations of liberty.  If we hadn’t we would have stopped it in 1913 (along with a lot of other things that started in 1913).  Progressives actually don’t want liberty and they are purposely trying to undermine it.  Conservatives don’t want this, we have just been tricked into going along with it.  But the reason we fell for it is because we stopped being libertarians.

This government is a Hydra with so many heads nobody can count them.  There is always one head nuzzling up to you while six others are devouring your neighbor.  Then, when one suddenly comes for us, our reaction is to try to cut off the head, but even if we succeed in cutting it off, two more spring forth (repeal and replace?).  In the end, everyone gets eaten unless we actually slay the monster—unless we can look at the head nuzzling us, the head devouring us and the head claiming to be protecting us from the one that is devouring us and say “you all gotta go”–in short, unless we become libertarians again.

Morality and Government Part II

January 23, 2012 4 comments

There are two ways to think about government.  By far the most common is to think of government as a force over and above the citizens which has always just been there, which provides for them, which they are inherently bound and subject to, and which can be petitioned as one petitions God or a child petitions its parents for whatever they want by appealing to its morality.  This is a bad way to treat government and I’m sure my libertarian friends will agree.  The correct way of thinking about government, at least government among free people, is as a contracting problem.  Most people have trouble thinking of it this way because when they hear the word “contracting” they think of contracting in a legal sense.  This type of contracting requires a third-party enforcer (a government) to enforce the contract.  In the absence of a third-party enforcer, there is still the possibility for contracts but those contracts must be self-enforcing.  Consider some examples.

Contract 1: I come to you and ask for a loan.  You give me $100 today and I will give you $110 one year from today.  This contract is not self-enforcing because 1 year from now there is no incentive for me to pay you back.  I already got what I wanted out of it, why should I fulfill my end of the agreement?  If there is a third-party enforcer, it is in my interest to uphold the contract because if I don’t, then the enforcer will come and punish me.  But without a third-party enforcer, this contract will not be possible even if it would be mutually beneficial.

Contract 2: I am a farmer and you are a swineherd.  We agree that every autumn I will give you a portion of my crop and you will provide me with meat throughout the year.  This contract may be self-enforcing because the benefits to both parties are continuous.  This will be the case as long as the benefits to both of us from continuing the agreement are always greater than the benefits from breaking it.

The last post was intended to establish a framework for thinking about morality and ethics in the context of government.  The purpose of this post is to analyze the morality of a specific government action, namely taxation. [Editor: it actually goes a little beyond that…] In order to do this we must assume a few things.  Here’s the scenario we will consider: A group of people come together who want to form a libertarian government.  They believe it is immoral to initiate violence against another person.  So I aim to evaluate certain functions of government through this moral lens.  I’m not trying to argue that this morality is the one true correct morality but this post is intended for people who generally share my libertarian views. Read more…

Morality and Government

January 18, 2012 3 comments

This is a continuation of what I started in this post on morality and ethics.  The position I am disputing is that government shouldn’t tax because taxation is theft and theft is immoral.  Let me say up front, that a government which could accomplish its purpose without taxation would be ideal and I believe it’s possible that this could be achieved.  If we could start a government from scratch with people who all believed as Thomas and I do, we might be able to fund the government with only voluntary payments (to be fair this is exactly the scenario he was dealing with in his original post).  I won’t get into how that could be done but I’m not trying to prove that it’s impossible here. My issue is with the attitude that there is a universal morality which government must (or at least ought to) follow.  And if we have any interest in fixing this thing before it gets so bad that we have to rebuild a society out of the ashes, we can’t have that approach.  We are so far away from a national consensus that taxation is theft and should be outlawed altogether that if you adopt this position your only option is to wait for the collapse of society.   The real important thing is that the government be prevented from using taxation to redistribute wealth and manage its distribution.  This does not require a complete moratorium on taxation.

A government has no morals.  It has no morals because it is not a creature.  It is a tool created by people to perform some task.  Tools do not have morals.  A hammer can be used for building a house–a noble pursuit–or committing a murder–not so noble.  If I am making a hammer, I cannot imbue the hammer with a moral objection to murder.  There are however, some things I could do to make it more difficult to commit murder with my hammer.  I could remove the forks on the back or perhaps put a layer of foam rubber around the whole head except for the face.  If I really wanted to be sure, I could even cover most of the face leaving only a small hole in the foam rubber that would have to be lined up precisely with the nail on every strike in order to work.  These things, while making it more difficult for someone to use my hammer for murder would also make it less useful for building houses. Read more…


February 1, 2011 6 comments

Since I was a child I have been taught that democracy equals freedom.  But this is not the case.  Well at least it’s not the good kind of freedom.  To see what I mean let’s play the two codes game.  Consider two moral codes which both value “freedom” and despise “oppression.”  The difference is in what type of entity each code identifies as a candidate for freedom or oppression.  A holder of the first code believes the relevant entity is the individual and the holder of the second believes it is the collective.  You cannot simultaneously believe in individual freedom and collective freedom.  Here’s why.

If you take a free individual, his decision-making process is simple.  He looks at a situation, decides what he wants to do and then does it.   If you take a collection of individuals, the process is much more complicated.  The reason is that there is no way to aggregate preferences.   At least there is no way to aggregate preferences when you think of a collective as a collection of individuals.  If however, you consider the collective to be a monolithic being, then it becomes simple again.  You just ask it what it wants and then do that.  But how do you ask the collective to make a decision?  You have a vote of course.  And that’s democracy.  And as long as you only care about collective freedom you feel just fine about this because the collective always gets what it “wants.”  It’s free.

Of course if you care about individual freedom this just won’t do.  The reason is obvious.  This is tyranny of the majority.  If at any time, your life and or property can be disposed of by a majority of the other people in society you are not free.   This is problematic if you are not very popular.  But even if you are popular, you are bound to the whims of the masses at every turn and I think it is self-evident that the majority does not always make the right decision.  This, of course, is the view held by Bernays and the progressives which is why they devote so much energy to propaganda/public relations.  But it is also why they are such ardent advocates of democracy.  They believe the masses are idiots that they can convince to do whatever they want.  Of course not everyone is an idiot, but if you have democracy it’s ok, you only have to get 51% of them, the rest have no choice.

So progressives and I have one thing in common, we both don’t trust the masses to make the right decisions for society.  But we have different ways of dealing with it.  They want to vest as much power in the masses as possible (democracy) because they think they can manipulate them.  I don’t want to manipulate anyone, I just want to be free from the consequences of their potential idiocy.  To anyone who shares this desire, democracy is a terrible governing concept.

If you believe in collective freedom, then democracy equals freedom and all you would need to form the perfect union would be this:

“The government can do whatever it wants as long as it’s supported by a majority vote.”

If on the other hand you believe that government should be established for the purpose of protecting individual liberty then it is a much more delicate process.  It requires things like enumerated powers and a bill of rights.  These things exist to protect the individual from the masses.  These are the things which have been eroded by progressivism.  The perfect example is the case of income taxes I spoke about recently.  This allows the government to target certain people, and dispose of their property for the benefit of some other people.  Also we have the popular election of senators, socialized healthcare, etc.  And their justification for all these things is that it’s the will of “the people.”  As long as it’s what “the people” want, it’s ok. 

But it’s not my will.  I don’t want to be bound to a government-run healthcare monstrosity.  I happen to know that it’s a bad idea (in this case the majority seems to be on my side but they won’t be when it comes time to actually fix the healthcare system).  If we were left to our individual liberty, I could choose to participate in free market health insurance and the leftists could go voluntarily institute a collectivist healthcare collective.  The only difference would be that they couldn’t take money from those of us who think it’s a stupid idea in order to pay for it.  Then we could see which works best (even they know which one it would be that’s why they don’t do it this way) and make our own choices.  But progressives’ moral code holds that it is just to force anything on anyone as long as a majority of other people support it.  This makes it entirely incompatible with individual liberty, and that is why our founders did not establish a democracy.

I’m not very happy with this one but I have had writer’s block and I promised this one would be coming soon so I’m pushing it out, sorry.

A Model of the State (What Would a Dictator Do?)

July 28, 2010 2 comments

Let us begin with a model of dictatorship.  This follows from the basic story layed out in The Role of the State.  We begin with a dictator who has established control over some group of subjects.  The dictator incurs some cost in order to protect the property of his subjects.  This is assumed to be an increasing function of the amount of wealth created and will be denoted G(Y) where Y is total output.  So if the population is fixed and equal to N, then each individual (they are assumed to be identical) produces y=Y/N.  Also, the dictator decides what percentage of output to seize (tax) from his subjects.  Let this percentage be denoted by t.  This means he will receive income equal to tY.  The problem faced by the dictator will be to choose t in order to maximize his profit given by tY-G(Y).

In order to do this, the dictator will have to consider the maximization problem faced by his subjects.  The issue, in a nut shell, is that the higher the tax rate t, the less incentive there is for people to produce because they get to keep a smaller percentage of their output.  This can be seen easily by imagining that each member of the economy produces output according to the production function y=l where l is the quantity of labor an individual devotes to production.  Also let us assume that each member faces a cost of labor c(l) which is increasing and convex (increasing at an increasing rate).  The amount of output that a worker gets to keep will be (1-t)l-c(l). (For simplicity I am measuring the cost as the value of foregone leisure in terms of output, so in other words I am counting that as lost goods which means the proper way to interpret this is as the amount by which the workers wealth increases from their initial state where they have all leisure and no production goods.  This is somewhat simpler, and in my opinion no less accurate, than dealing with a worker with a utility function over consumption and leisure)  So the worker’s first order condition for the maximization of this expression will be


From this we can easily see that when t increases the marginal cost of labor will have to decrease which means he will produce less (since c”(l)>0).  Going forward let us assume that c(l)=l^2.  This will make the above equation


which means l and y will be given by


Plugging this into the dictator’s profit gives us


Now, to make is simpler, let’s let G(Y)=Y/5.  This means that the first order condition for the dictators maximization problem will be (notice that the Ns cancel out)


This will give us

t*=.3     y=.35   

The profit to workers will be .35(1-t)-.35^2=.1225.

The profit to the dictator will be .3(.35)N-.2(.35)N=.035N.

Now let’s imagine a government of some form which makes decisions in order to maximize the prosperity of its citizens rather than of the dictator.  In this case, the government will need to raise just enough money to pay the expense of protecting the economy’s output.  Mathematically, we can impose the constraint

tY=(1/5)Y              which implies t=1/5

In other words, we can just set the tax rate equal to the marginal cost of protection (if G( ) were not linear this would work out a little different).  In this case the problem for each individual worker will be to maximize


which gives the first order condition


so l* (and y*) will be .4 and the profit to workers will be .8(.4)-.4^2=.16.

There are two important things to notice here.  First is that this benevolent government makes citizens richer by transferring the profit formerly accrued by the dictator to them.  Second, this is more efficient.  This can be seen simply by noting that output increases when the dictator is removed (in this case from .3 to .4).  This also makes the citizens better off.  This happens because the dictator, in his attempt to capture as much wealth from the society as possible, damages the incentive to produce.  He will not destroy it entirely because this would also destroy his source of wealth, but he will do so to an extent which is inefficient.  It is in an attempt to acquire both of these benefits for the people, that men endeavor to establish free rule of law societies.  The rule of law allows men to get the benefits of secure property rights without surrendering to a dictator the ability to loot their property to whatever extent he desires.

Now with this in mind consider the Laffer curve.    This is a theoretical curve showing the total amount of tax collected as a function of the tax rate.  For low levels of the tax rate it is increasing and for high levels it is decreasing.  This was the argument used in the Reagan administration to justify lowering the tax rate.  The position of that paragon of small government conservatism was that the tax rate was so high that it was on the downward sloping section of the Laffer curve so we could actually get more revenue by lowering the tax rate.  And this is the same argument going on now.  In a brilliant sleight of hand, Democrats are now claiming that we need to raise taxes in order to reduce government deficits and Republicans are saying that we need to lower taxes to “stimulate the economy” in order to lower deficits.  The entire debate amounts to an argument of where the maximum point of the Laffer curve is.  In other words, what tax rate maximizes government revenue?  Or in still other words, what would be the appropriate tax rate for an absolute dictator to impose on the economy?

You see the argument made by the Reagan administration was not that the government had no right to confiscate your property to whatever extent it desires.  The argument was that the government could actually confiscate more of your property if it lowered the rate of confiscation.  This argument would have been no less compelling had it been made to Castro.  And this is the closest thing we’ve had to a small government republican administration in… I don’t know let’s say fifty years (Ike wasn’t that bad I guess…). 

So how did we get here?  We kept convincing ourselves that we could get more stuff from the government without paying for it.  Now we have such a massive government (and government debt) that the maximum amount they can possibly confiscate is barely enough to pay the expenses of that government (and actually it’s probably far short of that amount).  This lack of foresight on our part has not only allowed the argument to become “what would a dictator do?” but it has allowed them to have the argument in the name of “fiscal responsibility.”