Tuesday, 30 October 2007

Anarchy is Not Chaos

After been asked what my political views are on Facebook I thought it would be a good time to air them. Just to make it clear the only question I will be answering will be what the least worst form of government we can have on earth is. I will not address how we should relate to the current government in existence; how we can move from the present state of affairs to a better one; or a general moral theory.


The basis of my political theory is the axiom of non-aggression- no one should aggress against the physical integrity of any person or their property; however for this to make any sense one needs a theory of property rights. The one I propose is a Neo-Lockean one: he owns himself since he is made in the image of God ; those previously unowned resources he appropriated by mixing his labour with them (the first comer principle or homesteading) and any goods that he voluntarily acquired, assuming the individual who traded it had title to that good i.e. the good has an unbroken chain of voluntary exchange back to its first appropriation. Just for clarity this refers to man's relationship to other men not to God since God ultimately owns everything. Further one needs a concept of what ownership implies. I will define it as the unilateral right to do what one wishes with his property unless it harms the physical integrity of someone else's property; if one does not have this then one cannot be said to own it. To clarify, ownership applies only to the physical properties of the good not their value- if I own a shop you can't burn it down but you can put me out of business by undercutting my prices.


If one rejects that one owns himself there are only two other possibilities of who owns him: someone else owns him or that everyone owns everyone else. Let us first take the latter- no-one could do anything without approval of everyone else, however in attempting to seek approval one must use his vocal chords which he cannot unilaterally do. Thus with this ethic no-one could do anything and everyone would die; hardly a moral ethical theory. The former ethic is slavery which implies the slave owner has the right to maim, dismember or even kill his slave since he is his property; again this seems vile to any right thinking man. Self ownership has it.


If one rejects the first comer principle one must accept the second or more principle. However to do so creates problems: firstly no-one would appropriate any resources since some else could legitimately take it out of his possession so the whole human race would starve; secondly even if he did appropriate some resources theft would be legitimate which would reduce man to perpetual warfare and a subsistence, at best, existence. So anything but the first comer principle legitimises theft and would destroy society. If one says that the worlds' resources are given to man in common then you run up against the same problem of everyone owning everyone else as in the above paragraph. Therefore the first comer principle is the only conceivable ethic.


Having ascertained that the only possible moral position (liberty) is self ownership, homesteading and none aggression let us look at what the State is: it is a territorial monopolist over arbitration and has the power to tax. By a monopolist I mean an individual or group which has legal privilege; other people are legally restricted from using their property in that way. As is obvious from this uncontroversial definition the State is in contradistinction to liberty since by being a monopolist it is saying that it owns you- having a State is a form of Slavery. It says you must go to them if you have a dispute between yourself and another man. Any talk of the State protecting property rights is nebulous since in its nature it is an expropriator- the State is a protection racket. It says unless you pay it tribute it will kick your door in and even kill you. Hardly a moral organisation. So the State must be abolished to have a moral political system.


Now having ascertained that private property anarchism, or free market anarchism, is the only moral form of political system what about the practical question: it would descend into chaos wouldn't it? If we have a two person society do we need a monopolist? Well no, most people say. If you say there are one thousand people they say yes. Following this logic a monopolist is always necessary, otherwise one would descend into Hobbesian chaos; thus a one world government is necessary otherwise, as at present, each state is in an anarchic relationship between each other and need a monopolist to hit them over the head. Let’s look at the incentives for the individual and the state: the former can only fund themselves by work and voluntary exchange and must bear the full costs of their actions. A state on the other hand can impose a monopoly price for justice and can shift the costs of their activities onto others via taxation. After looking at these incentives who would be the most responsible?


As is clear society wouldn't be chaotic but would be less violent than the current system. However how would a pure free market provide security and law. Before I attempt a brief answer, this is the same as asking how would a market produce shoes when the State has produced them for as long as anyone could remember. So in answering I can only give a tentative sketch.


Security is an easier question to answer. Currently most security is private: door locks, car alarms, security lights, shutters, bouncers, security guards and such like. And as the former provide many different forms of security so would the private security forces. You would pay a fee, as in everything else, to do many different functions you wished them to do- a daily foot patrol, car patrols and any other mix of services. Now, unlike a State police force, the private ones prime aim would be the return of the loot and compensation of the victim rather than the imprisoning of the offender at the cost of the victim. So if Joe Bloggs steals my TV then the prime aim of my security firm would be the return of my TV set. This is easy if I and Joe Bloggs are part of the same security force. But what if Joe Bloggs is part of another firm which disagrees that Joe stole my TV, wouldn't both firms just fight? Fighting is expensive and since both firms want to maintain their reputation and make a profit that is an unlikely course of events. More probable they would go to arbitration which leads into how a private legal system would work.


Under the private legal system both parties would have to agree to the judge, or judges, to arbitrate in the case. If he then convicts you and you don't like it and don't pay up this would render huge suspicion upon yourself, since a respected judge convicted you of a crime, and thus a lot of society would disassociate from you and not trade with you. Also the victor in the case could call upon a police force, as such, to enforce the judge’s decision. So come round and take your possessions and sell them to pay your debt.
But wouldn't those with most money win? If a judge got this reputation many plaintiffs or defendants would refuse, legitimately in the eyes of society, to be arbitrated by that judge.
Currently one has to pay a monopoly price for justice which is higher than what it would be under a free market and accounts for the bad service rendered by the monopolist.


So as I have shown a State is immoral and also unnecessary. For those interested in more detailed description of how a stateless would provide law and security read this chapter from Murray Rothbard's For a New Liberty. For some historical examples of a stateless societies see here: The Not so Wild Wild West and Mediaeval Iceland.

Monday, 8 October 2007

Don't Believe the Inflation Figures

Inflation figures are said to be a measure of the price level. However what is the price level? This is normally calculated using a weighted basket of goods and calculates the change in prices over a time period, normally a year. However there are numerous problems with this approach. Firstly it fails to take into account changes in quality of goods- when deriving the price level it calculates the change in price of a good over the year however no-one can actually objectively determine that the good bought in the second year was identical to that of the first. Since quality, in this context, can only really be defined as “those properties to which the buyers and would be buyers pay-heed” and since these properties are in constant flux, determined by individuals’ value judgements, one is essentially adding apples and oranges to create this statistical construct.

Secondly, since various goods play-varying importance in one’s existence, coefficients are needed to show the relative importance of various commodities which is of course are arbitrary since importance to each actor is subjective. The conventional method for this is to calculate how much one spends on a good to see its relative importance- so in low-income households the main expense would be mortgage, or rent, payments. However if the price of a good rose, such as butter, this would change the pattern of consumer spending since they would substitute it for other goods, such as margarine, changing the relative importance of each commodity based on their expenditure upon it. So any change in a good will change the individual’s expenditure pattern which is neglected by the computation of the price level.

Another problem with this weighting is that different people buy different things and thus have different “price levels” which the government statistics do not take account of; Murray Rothbard always complained that the prices of books kept increasing but it made no indentation on the price level. Astonishingly mortgage repayments are omitted from the CPI even though they constitute a large percentage of household expenditure. Further there are various statistical techniques to compute these averages: arithmetic mean, geometric mean, harmonic averages, median and such like. However there is no objective way of deciding which is a superior technique and thus any decision must again be arbitrary. Finally, as Mises points out, a “judicious housewife knows more about price changes as far as it affect her household than the statistical averages can” and she is no less scientific than the statisticians.

So how should we measure inflation? The older, and far more cogent, definition of inflation is the increase in the money supply. Suppose one had two goods in the economy A and B which both had prices of £5 each. Now if good A was to rise in price to £6 the price good B would have to fall to £4, assuming a constant money supply, which would yield an average price of £5. The only way prices in general can rise is if the money supply increases: suppose the money supply increased by £2 then the average price in the economy would rise by 20% to £6. Thus the prices rises are only a consequence of the increase of the money supply. It must though be stated at this point that prices in the real world do not increase, necessarily, at the same rate as the growth in the money supply since new money enters via a step process with different people receiving the new money at different times.

So instead of looking at the Price Level we should observe the M3 (a monetary aggregate) growth to see the true inflation rate and its wealth reducing consequences.