Property Rights and Coercion: Institutional Philosophy

A Marxian philosopher who is dating my sister was nice enough to have her forward a Marx reader and a link to an interesting critique of "libertarian parables" (from Arnold Kling at Econlog) which "conflate" coercion by government with coercion by other individuals.

Based on a utilitarian framework, the blogger argues that these kinds of coercion are not the same:

A well-ordered society is governed by the rule of law. This means that there are institutional processes to govern certain classes of action. The outcome of a just institutional process -- whether it be a guilty verdict, or minimum wage legislation -- has a different normative status than the corresponding action of a neighbour who takes it upon himself to unilaterally impose his will on others.

This is a good argument. However, it doesn't resolve the problem, it just kicks it down the road. What is this "normative status?"

True, institutional coercion is different from unilateral coercion; but it may be better or it may be worse: this depends both on what the government coercion achieves and also on how you define "better" and "worse". The institutional takings by the Soviet government were not - I'd argue - better than unilateral theft: they were worse. I haven't proven this in any framework; I could show it with efficiency as the endpoint; I could also try to show it with morality as the endpoint or with the magnitude or quantity of coercion as the endpoint.

What is the difference between coercion by individuals and coercion by government? Is it the organized nature of the latter? Or the equality before the law? Is it a matter of "fairness"? Or is it an efficiency thing? If the framework is utilitarianism, it would be efficiency - however, then only efficient coercion should count for that, and for example, a minimum wage certainly isn't that.

But libertarians who cry "coercion" are usually not taking a utilitarian framework; they are usually arguing "natural rights." So, we need to determine the "ends" and then judge the "means" on that basis.

Organized coercion by government could be said to violate more rights, not fewer. If government consistently violates rights, then one could argue this is "better" in some sense; if fairness not coercion per se, is the measure. Then, of course, "fairness" must be defined.

On the other hand, if government only punishes theft by an individual, then coercion is minimized; while if government punishes individual coercion but then violates rights on its own, then quantity of coercion is increased. So, if quantity of coercion is the measure, government violation is also worse.

The blogger also argues that the freedom from coercion is not enough, because common property implies a freedom to use of said property, and property rights invade this freedom. Hence protection of property and freedom from the takings neglects the freedom of others - and hence in its own way is coercive:

Freedom to use common land and resources is restricted by private property rights, which replaces it with a (particular individual's) freedom to dispose of property, and exclude others from use of it.

This reminds me of that quote I blogged about last week:

If someone is starving in the minimal state, yet in a ‘no-ownership’ world they would have been in a more advantageous position, then they do, in fact, have rights to compensation against all property holders (although not against the state) under the principle of justice in rectification. The Lockean proviso, or rather its historical shadow, would have been violated.

It appears to me as a natural rights argument, not a utilitarian one.

In reality, whomever has made a claim to the property is the rightful owner, whose rights must be protected. If someone buys it (under private property institutions) then he owns it-- there is no "right" to "common property" if someone has purchased it. The only way to claim that "freedom to use" common property has been violated is to invoke natural rights. Otherwise it is just the institutional framework, which either protects private property or it doesn't.

The blogger also slips in a positive freedom based on outcome, which far exceeds the institutional framework setup:

(2) It neglects other kinds of constraints that can impede us, leading to an impoverished conception of "freedom" that fails to track what really matters to us (namely, capability). Negative liberty is fine as far as it goes, but it makes for a rather one-eyed approach to evaluating policy. A better maxim would be to seek to enable people to achieve their goals. Economists (like everyone else) should be concerned with opportunities, not merely interference.

Now he wants to give people a right to certain outcomes. This goes beyond any protection of rights or freedoms (natural or otherwise) and seeks to determine outcomes. However, the assumption, of course, is that government could even get the outcomes desired-- something which is clearly a huge jump. It also has nothing to do with freedom. It may have to do with "welfare" but is has nothing to do with "freedom." And welfare - well that comes with its own bag of worms.

Majority Rule in Media

More Trotsky as promised. This idea just strikes me as horrific. Can you imagine it?

Soviet America will have to find a new solution for the question of how the power of the press is to function in a socialist regime. It might be done on the basis of proportional representation for the votes in each soviet election.

Thus the right of each group of citizens to use the power of the press would depend on their numerical strength – the same principle being applied to the use of meeting halls, allotment of time on the air and so forth.

Thus the management and policy of publications would be decided not by individual checkbooks but by group ideas. This may take little account of numerically small but important groups, but it simply means that each new idea will be compelled, as throughout history, to prove its right to existence.

Today we have every niche market imaginable - from organic "fair trade" clothes pins to Kosher liver patties, to communist radio and anarchist newsletters; what would we have under a rule whereby only the popular media (and products) were delivered? This is one critical failure of socialist thinking. The market provides for the little guy; pure democracy (if it were possible under central planning) would not.

In Soviet America

The American soviet government will take firm possession of the commanding heights of your business system: the banks, the key industries and the transportation and communication systems. It will then give the farmers, the small tradespeople and businessmen a good long time to think things over and see how well the nationalized section of industry is working.

The commanding heights - the corporatist controls of the reigns - leading the United States, step my step toward socialism. Circa 1934, under the New Deal.

The most daring proposals of the Hoover commission on standardization and rationalization will seem childish compared to the new possibilities let loose by American communism.

Writing in 1934, Trotsky spoke of the "Hoover commission on standardization and rationalization" but this is not the official Hoover Commission, which was not enacted until 1947. He was writing during Roosevelt. I'm not sure what he was referring to but Hoover did talk about standardization and rationalization of the economy by business; he was influenced by Tugwell (who, by the way, is very interesting - I am reading him right now - and I will post on him soon).

Trotsky imagined much more than we had in terms of planning, but he saw the potential within the New Deal. Indeed, as a step along the way:

In the United States, through the science of publicity and advertising, you have means for winning the support of your middle class that were beyond the reach of the soviets of backward Russia with its vast majority of pauperized and illiterate peasants. ... Even the intensity and devotion of religious sentiment in America will not prove an obstacle to the revolution. If one assumes the perspective of soviets in America, none of the psychological brakes will prove firm enough to retard the pressure of the social crisis. This has been demonstrated more than once in history. Besides, it should not be forgotten that the Gospels themselves contain some pretty explosive aphorisms.

As I have argued! Or anyway, that religion is not so far from communist Utopian dreaming... one could say the same about a Utopian dream of anarchy too, of course. Of course, Trotsky argued that the NRA was not in place in order to deliver communism (I would not argue that it had those conscious intentions either, for the most part) but that it would contain the seeds of its own crawl toward communism-- as it corrected itself with further intervention.

The NRA aims not to destroy but to strengthen the foundations of American capitalism by overcoming your business difficulties. Not the Blue Eagle but the difficulties that the Blue Eagle is powerless to overcome will bring about communism in America.

He then speaks about the public mind:

The “radical” professors of your Brain Trust are not revolutionists: they are only frightened conservatives. Your president abhors “systems” and “generalities.” But a soviet government is the greatest of all possible systems, a gigantic generality in action.

The average man doesn’t like systems or generalities either. It is the task of your communist statesmen to make the system deliver the concrete goods that the average man desires: his food, cigars, amusements, his freedom to choose his own neckties, his own house and his own automobile. It will be easy to give him these comforts in Soviet America.

I'm not sure that we abhor generalities; but certainly people respond to these materialist incentives. Choosing one's own necktie is not the first thing I think of when I think of "Soviet America" though; nor one's own house and automobile.

And then he describes the role of the monetary system, which once communism emerges, will not be initially used to control the economy - at that point, it should be stable:

Your almighty dollar will play a principal part in making your new soviet system work. It is a great mistake to try to mix a “planned economy” with a “managed currency.” Your money must act as regulator with which to measure the success or failure of your planning.

Your “radical” professors are dead wrong in their devotion to “managed money.” It is an academic idea that could easily wreck your entire system of distribution and production. That is the great lesson to be derived from the Soviet Union, where bitter necessity has been converted into official virtue in the monetary realm.

There the lack of a stable gold ruble is one of the main causes of our many economic troubles and catastrophes. It is impossible to regulate wages, prices and quality of goods without a firm monetary system. An unstable ruble in a Soviet system is like having variable molds in a conveyor-belt factory. It won’t work.

Only when socialism succeeds in substituting administrative control for money will it be possible to abandon a stable gold currency. Then money will become ordinary paper slips, like trolley or theater tickets. As socialism advances, these slips will also disappear, and control over individual consumption – whether by money or administration – will no longer be necessary when there is more than enough of everything for everybody!

Through stable money will socialism slip into pure communism. Some intriguing ideas in Trotsky. I forgot how much I enjoy him. More Trotsky to come!

The Social Will

From the comparative physical impotency of man in his natural state, and from his inability to invent, make and use, unaided by his fellows, all the tools he needs to multiply his power of motion in the degree required for his safety and welfare, comes the social state, in which the tool is necessarily a social organ; social in its origin, social in its growth, social in its purpose, social in its incorporation of natural forces which of right belong to all; set in motion by human muscles, for the good of the social body, under the direction of the social will.

The common good, the will of the people, the drive of mankind. The people have spoken, it is an increase in social welfare, the "individuals as a whole" prefer it.

When we come together, are we stronger or weaker? Or rather, does collective purpose exist- and if so, when? Certainly "united we stand" in the short term can work; but just as clearly, imagining that we as a people have some aggregated preference is dangerous at best.

Rights and Action

Some political economists and other social philosophers, advocating statism of some sort or against it, argue mainly using economic arguments, while others argue from the perspective of "natural rights."

Both sides can get heated about which is the right argument or which is more fundamental. Both kinds of arguments have advocates who believe that it is clear that their preferred system is well defended by their preferred method of defense.

And then there are some interesting blends. What if you could throw Locke, Madison, Mill, Mises, some natural rights libertarians, some anarchists and some Marxists into a pot, shake it up, pour it into a beaker and distill, and get some crystallized insight?

As a starting point, consider the following:

If someone is starving in the minimal state, yet in a ‘no-ownership’ world they would have been in a more advantageous position, then they do, in fact, have rights to compensation against all property holders (although not against the state) under the principle of justice in rectification. The Lockean proviso, or rather its historical shadow, would have been violated.

A natural right to communism as against anarchy; what of the social welfare: could you calculate, using justice in rectification, to determine which society statically has more rights-utils from a social welfare perspective? A meaningless task, but for a rainy Sunday, it could be amusing.

And then this golden one:

The only manner in which man can act upon nature is by motion. In this respect John Stuart Mill observed: “Man moves a seed into the ground; he moves an axe through a tree; he moves a spark to fuel; he moves water into a boiler over a fire; the properties of matter do the rest.” In other words, “This one operation of putting things into fit places for being acted upon each other by their own internal forces is all that man does, or can do, with matter.”

This is a statement of fundamental import, and John Stuart Mill so highly valued it that he claimed the credit of having first made it. Yet, with the usual shortsightedness of political economists, bounded in their views by their narrow, middle-class environment, he utterly fails to draw from it the only possible conclusion, viz., the social character of machinery and the stupendous wrong done to man, a social being, by the private ownership of the mechanical organs of motion.

If you didn't catch it: that was a Marxist using Mises' law of action, via Mill to prove the truth of the Law of Value (Marx). Or wait, was he using the "natural rights" explanation for the inherent right of man to own the value of his labor... indeed, that is an example of Leeson's argument that all natural rights people are essentially able to come to whatever conclusion they want, because they can avoid all science and just assert that something is a right. Hence does he own the product of his labor, or does it own him?

Here are some thoughts on Madison.

Sorry. I am just having fun; some readings to get my mind off of serious stuff. Hope you enjoy them too.

Government Mediation and Wage Setting - in 2008

A lesser known provision of the Employee Free Choice Act, described beautifully here, would allow government to mediate contract disputes between labor and management if they don't come to agreement fast enough - 90 days. And if another 30 days of mediation doesn't produce, government can go ahead and fix wages as it sees fit.

If you think unions wouldn't welcome this, you haven't thought hard enough about their corporatist tendencies. And when companies complain? Subsidies to shut them up. Of course they would come with price controls, but that's OK. Then we just have full blown corporatism.

Here is the relevant section of the bill, with my emphasis:

(2) If after the expiration of the 90-day period beginning on the date on which bargaining is commenced, or such additional period as the parties may agree upon, the parties have failed to reach an agreement, either party may notify the Federal Mediation and Conciliation Service of the existence of a dispute and request mediation. Whenever such a request is received, it shall be the duty of the Service promptly to put itself in communication with the parties and to use its best efforts, by mediation and conciliation, to bring them to agreement.

(3) If after the expiration of the 30-day period beginning on the date on which the request for mediation is made under paragraph (2), or such additional period as the parties may agree upon, the Service is not able to bring the parties to agreement by conciliation, the Service shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the Service. The arbitration panel shall render a decision settling the dispute and such decision shall be binding upon the parties for a period of 2 years, unless amended during such period by written consent of the parties.

Lets sum up: if after 90 days the union doesn't want to give in to the company, the union may call in the government in the form of a Federal Mediation and Conciliation Service. They may then filibuster for another 30 days until that Service sets the wages, benefits, hours and so forth for them. The government shall render a decision binding upon the parties. It is binding initially for two years, at which point the process can begin again.

This effectively removes any market mechanism from any industry in which unions are able to entrench themselves. If unions gain power in a given industry (and they will find it easier without the secret ballot) they will be able to leverage government for their purpose. At that point, it will be simple to obtain compensation far exceeding the workers' worth; this will threaten to bankrupt firms so they will complain to government; government, wanting to please everybody, will offer subsidies and price controls; and we will have corporatism.

Note that once a union has taken hold at a firm, even if the union doesn't want mediation, the firm may, and so the firm can be the one to filibuster. Some firms, especially inefficient ones which are having a hard time competing, will decide that it would be better to have government step in - especially if they have a friend in congress. They may then set unrealistic demands and hold out for arbitration. This could provide an easy way to introduce new subsidies and regulations for corporations currently missing out.

Why the gloomy outlook? Perhaps government will simply arbitrate effectively between two parties, such that wages will reflect worth and no subsidies or controls will be necessary!

This might be possible if there were no rent-seeking by unions or firms or if politicians didn't or couldn't reward it. However, such behavior will be rewarded if reality is any guide.

So efficient firms with low cost and potentially low paid (perhaps unskilled) workers, if unionized, will be at the mercy of the union which can choose to filibuster until government steps in on its behalf; and inefficient firms can make wild demands of labor until government steps in, at which point it can wield its big corporate power and lobbying influence to extract subsidies from the taxpayer. If you don't think this would be a big step toward corporatism, you haven't been reading this blog enough!

Corporatism & Money

What is the role of monetary policy and the gold standard, with regard to government levers on the economy, and corporatism? There is certainly a grand role for it. I will post more on this later, but a few words (p.105) from Garet Garrett on inflationary money policy (speaking of a law of 1933):

The law reads: "That every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment in gold, or a particular kind of coin or currency, or in an amount of money of the United States measured thereby, is declared to be against public policy; and no such provision shall be contained in or made with respect to any obligation hereinafter incurred."

It follows, literally, that it is now unlawful in this country for a borrower, be it the Government, a corporation or a private person, to promise that the value of what is to be paid back shall equal the value of what was borrowed. The ostensible reason for this amazing prohibition is that the Government shall be free by fiat to fix the dollar at any value it may deem expedient; that it shall have the power to say of a 50-cent dollar, a 25-cent dollar or a 5-cent dollar , as it has already said of a 60-cent dollar, "This is the standard dollar and full legal tender in settlement of all obligations." It follows again, literally, that no one knows today what the value of the dollar will be tomorrow, or a month hence, or a year from now. The Government itself does not know. And that is now the state of the currency.

What a perspective. Do we know? We think we know because we think we know inflation, and we think we accurately predict it. But, as anyone who has looked into the CPI much knows, we don't really. Not even close.

Mises on Unions

From NRA Economic Planning (1937), Roos quotes the November 1934 issue of American Federationist which reads:

If you are a union member, your union can watch every increase in production and every technical improvement which reduces cost. Your officers will know when to drive for restoration of the 1929 wage level, and you need not stop with the 1929 level. Since you are now producing 7 per cent more than you produced in 1929, your wages should eventually be above 1929 by a proportionate amount.

But the assumption that labor should reap the full reward of higher productivity – producing 7 per cent more – and should demand it through collective bargaining is a mistake. As Mises eloquently explained, in Human Action (1949):

Present-day labor-union doctrine operates with a concept of productivity of labor that is designedly constructed to provide an alleged ethical justification for syndicalistic ventures. It defines productivity either as the total market value in terms of money that is added to the products by the … divided by the number of workers employed … they call the …[the] "increase in productivity of labor," and they pretend that it by rights belongs entirely to the workers…

One thousand men working with the traditional old-fashioned tools in small artisan shops somewhere in the backward countries of Asia produce over the same period of time, even when working much longer than forty hours weekly, many fewer than m pairs. Between the United States and Asia the difference in productivity computed according to the methods of the union doctrine is enormous … The superiority of the American plant is entirely caused by the superiority of its equipment and the prudence of its entrepreneurial conduct …

On the eve of the "Industrial Revolution," conditions in the West did not differ much from what they are today in the East. The radical change of conditions that bestowed on the masses of the West the present average standard of living (a high standard indeed when compared with precapitalistic or with Soviet conditions) was the effect of capital accumulation by saving and the wise investment of it by farsighted entrepreneurship. No technological improvement would have been possible if the additional capital goods required for the practical utilization of new inventions had not previously been made available by saving.

While the workers in their capacity as workers did not, and do not, contribute to the improvement of the apparatus of production, they are (in a market economy which is not sabotaged by government or union violence), both in their capacity as workers and in their capacity as consumers, the foremost beneficiaries of the ensuing betterment of conditions.

Mises wasn't being anti-labor, he was just laying out the facts. Roos explained the effect that this had on the economy and on standard of living for the average American:

Because of resulting higher costs of construction, the workers in other industries muse pay scandalously high prices for even the most modest homes. Similarly, in the almost completely unionized anthracite coal industry, the wage scales of 1934 were so high that price was prohibitive; the industry was prostrate and thousands of miners were on public relief.

Though, of course he would not need it, Mises had plenty of evidence to work with, and though we may forget our history, he was speaking of America at that time. We should not forget, especially as we inch back toward some of the more corporatist roots, as we expand union power once again.

The Morality of Government

This is another recycled post (see I'm good! No waste!) and though its a little different than the usual type of post I will be making, I think its important; if you want to judge government planning, you need to understand how we perceive government:

Somehow, maybe because we've lived so long in dictatorial governments of one kind or another- monarchies, empires, tribal rule, religious societies, etc-- we look to authority for morality. So, we end up trusting government's motives even when we should know better, and we see corruption as bad but legalized wrongs as okay, simply because they are legal.

Sometimes corruption is not what is actually immoral-- like under the Soviet Union, corruption could mean pay offs that allow people some freedom to move, to trade, to free their relatives from gulags. It might be unfair for some to be freed and not others but the corruption is at least saving some people. But it is very difficult for people to separate what is legal from what is right.

We often think, maybe unconsciously, that if something is legal, it is okay, it must be okay. It must be fair and right and moral. Or even if it is theoretically wrong, it isn't your fault - you are absolved of any sin. If the system is set up that way then you have no moral duty to go against it. Perhaps, in fact, your duty is to go along with it, to obey the law. And if something is against the law then it is wrong in some degree even just because it is breaking the law.

Because of this, we end up sustaining evil regimes and rules and institutions that we might otherwise break out of. It also explains why we inevitably expect government to fix any perceived problems seen in the market, rather than asking whether government could actually do something better than the private sector, we see a problem and say "this is a problem so government must fix it." So, the irrational faith in government is a serious problem, it distorts our world view and we don't even realize it. We have far too much faith in the moral authority of government, and hence its omniscience and omnipotence.

Here is an example. Someone, ostensibly a libertarian - the group least likely to trust government, seemingly least likely believe in the moral authority of government - was commenting on a blog post and made the following remark. With regard to why it is okay to accept government welfare he said this; I am paraphrasing: "You've already paid in to the program. The program already exists. It may be immoral but while it exists you may as well enjoy it. Heck, if there was a law that required all women who I wanted to have sex with to sleep with me, I'd be a busy man."

Now, it was an offhand remark which he probably hadn't thought through. And, he said that the program itself (welfare) might be immoral, so he was admitting that government can do wrong. However, he was essentially arguing that so long as the program or the law exists, it is morally okay to make use of it. Without necessarily realizing that he was saying so, this guy had just said "If government made rape legal, I would rape every woman I was attracted to."

The crazy thing is that he didn't realize it. The much more frightening thing is that nobody else seemed to either. The comment went by unnoticed. When I saw it, I pointed out the implications of what he'd said, and most people ignored my outrage. Then someone actually called me a PC nut-job and extremist and defended him. One person claimed that "if its legal, it can't be called rape!" Only one person agreed with me, but it wasn't a rigorous agreement, it was "I actually agree with that" as if it was a matter of opinion.

It isn't a matter of opinion. Just because government makes something legal doesn't change what it is- be it theft (legal under communism) or murder of a certain group (legal under Hitler) or slavery (legal once in America) or rape. It is the worse form of moral relativism to imagine otherwise, yet we are much more capable of it than we realize.

If one is oppressed and forced to engage in these immoral activities as happened under communism and under Hitler, they might be more easily forgiven, but we must still recognize that it is immoral and we must not think that we can happily engage in these activities without guilt simply because they were made legal - and that is what this guy was saying.

Until we can take responsibility for our own actions under any system, we will have a hard time fixing the system.
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I will add: maybe he thought it wouldn't be his crime (the rape) because the law made her have sex with him. So, government was raping her- he wasn't. Still, it is a strange sort of morality that makes it okay for him to oblige the government's sin and take part. And, slavery is no different - if the government makes it illegal for the slave to escape, does that negate the role of the slaveholder? Does that absolve him of any wrongdoing?