Often among those who call themselves "progressives" or statists in general (although not all progressives are statists and vice-versa), there's this idea that democracy is good. They usually favor democracy because of ideas like "equality" and "power to the people". Of course, I can't think of a single system occurring in nature that actually has "equality" (almost all naturally occurring systems have some form of a hierarchy). In other words, equality really doesn't exist--it's a mythical idea among human beings. Obviously, people have different skill sets and different capabilities, so this idea of everyone being equal at everything or the same in a system is not only dumb, but destructive and counter-productive to society at large.
Now, let's go to this idea of "power to the people" as if it's some virtue. This begs the question: do we actually want the public as a whole getting what they ask for all the time? Personally, I think that's one of the dumbest ideas I've ever heard. Winston Churchill is quoted as saying that the best argument against democracy is a five minute conversation with the average voter. Even to this day, that quote obviously holds. For lack of a better word, the average person on the street is an idiot when it comes to policy. They should have absolutely no role in determining FEDERAL policy. If they did have a role in determining policy, they'd simply choose the side that benefits them the most, even if there's massive externalities or the policy harms a particular group of minorities or, worst of all, future generations. Basically, we can think of the average person as a typical 7 year old. Is it a good idea to give most 7 year old kids everything they want and ask for? What if all he wants to do is watch TV and eat sugar? Obviously, it doesn't take a rocket scientist to figure out that giving the kid everything he/she wants is poor parenting and will make him/her worse off in the longer run. Similarly, I bring forth one of the key principles of government:
The people should not be given what they want almost all the time (on a federal level)! I'd actually argue that the people should never get what they want and have virtually no say in what they want at a national level (although local politics can be however you want to set it up as).
So this brings us to the next aspect of somewhat democratic institutions: what is the role of democracy in government and how should we limit it?
The role of democratic institutions should be to remove bad leaders. In other words, the only purpose of democracy should be to oust tyrants--nothing more. Any role of democracy beyond removing tyrants is destructive as it actually gives the average voter far too much power to decide policy.
What should the hallmark of our society be if we don't want it to be equality?
The hallmark of our society should be a society based on FREEDOM! This brings us to the next questions:
1. What am I defining as a free society?
2. Why freedom?
1. Definition of a Free Society
I'm defining a free society as one where the centralized government's main focus is on preserving the idea that anyone can do as they please as long as they don't interfere with anyone else's ability to do as they please. The main (and virtually only) role of a centralized government in a free society is for purposes of war, national defense, and to prevent environmental degradation (note that the costs of environmental degradation are borne by the young and the unborn while the benefits are taken right away). Usually, some statist/socialist will respond by saying that if we have no government, we'll turn our country into Somalia. Of course, I'm not arguing for no government or no governmental interference; I'm arguing for localized government whereby most problems are dealt with by state and local governments.
2. Why Freedom?
Why do I find it more robust for state and local governments to make most decisions while banning the federal government from making such decisions? The reasoning is rather simple, but I will start by making a simple assumption.
Assumption: We do not know what will happen beforehand, regardless of what social science theories say. This implies we do not know what the "correct" policies are to current problems. The only thing we really know is that we know/understand very little, which means that uncertainty is the key situation that we need to deal with.
Since uncertainty is the key factor we need to deal with, we basically need a system that strengthens from uncertainty, disorder, and randomness. For the finance guys/options traders, it means that we need our political system to be long volatility. For the layman, it means we need a system that benefits and strengthens from volatility.
So what we need is a system that tries a whole bunch of different things in a whole bunch of different places. In other words, you need massive amounts of experimentation on a very small, localized scale. That way, we can figure out what doesn't work quickly and effectively with minimal damage since the costs stay localized. Whatever works will stick and other states will adopt the policies, whatever doesn't work fails immediately and the costs stay minimal. In the American political system, this concept is known as the laboratories of democracy. As I've mentioned in a previous post (see the example in red on the linked post), the decentralization of decision making to state and local governments drastically reduces the risk of ruin. The only scenario for which the federal government should be involved is in war.
Notice how I've crusaded against the idea of equality earlier in this post. Each and every person is different with different skill sets and capabilities. It makes no sense for everyone to be equal or the same and doing so would be a complete waste of their individual abilities and skill sets. What you need is a system that provides each and every single person the optionality to maximize the particular skill sets and capabilities that they have. Obviously, most people cannot and will not be able maximize their abilities if you point a gun to everyone's head, tell them what to do, and tell them how to live their lives. The very idea of freedom and the concept of a free society provides different people the optionality to take advantage of whatever comes their way.
Those against freedom would argue the point about what if something goes wrong or people who are free make mistakes. It's okay for people and individuals to make mistakes as long as the costs of their actions are localized. In other words, a simple skin in the game principle where those who take actions would suffer the consequences of their actions would suffice. In a free society, you are free to act as you please, but you are not free from the consequences of your actions.
There is very little in the world that's as antifragile as freedom. The more you try to suppress the idea, the less likely it is to happen--particularly with an educated populace that's been drilled with this idea. Those that are free will not die and submit willingly. They will fight tooth and nail for their freedom because once you get a taste of freedom, you simply will not let up. In other words, freedom (and a free society) are long volatility.
Some would argue: what if certain states or local governments take up policies that are authoritarian, autocratic? In this scenario, people will simply vote with their feet. They will leave places that rule with an iron fist towards places that do not rule with an iron fist. In other words, if certain states or local governments take up dumb policies, people will simply move elsewhere.
I had a long winded reply to a few points written out, which was subsequently erased when I logged into my acct, so I will just summarize my main points briefly. Let me preface this with an admission of my libertarian/rothbardian beliefs and agreement with your central thesis.
ReplyDelete"In other words, equality really doesn't exist--it's a mythical idea among human beings"
If equality doesn't exist because it's a mythical idea among human beings, why doesn't that apply when we talk about Property Rights or the Non-Agression Principle? Those are abstract human concepts, so your desire for one but not the other seems arbitrary. (I'm assuming you are in favor of the two, being someone in favor of liberty)
"the only purpose of democracy should be to oust tyrants--nothing more."
I'm unconvinced that a real "tyrant", with significant authoritarian control, would voluntarily leave due to a democratic vote by the majority. Hitler was democratically elected, and I don't see democracy being any assurance of freedom from oppression.
"We do not know what will happen beforehand, regardless of what social science theories say"
I disagree. If you take this to the logical extreme, than you can justify nearly any policy including things like state controlled means of production (socialism), theocracies, etc, etc... The study of human action is a well developed social science (praxeology) and needs to be understood, rather than relying on empirical studies and observations, as they can be terribly complex and confusing, leading to false conclusions.
"So what we need is a system that tries a whole bunch of different things in a whole bunch of different places"
This is a clear description of free-markets and competition at work, but this only works on the assumption that you have certain liberties and rights guaranteed to individuals, e.g. property rights, functioning court systems, etc. Additionally, it should be our goal to eliminate the state's involvement in "a whole bunch of things" because they inevitably make it a monopolistic enterprise in the process!
"Some would argue: what if certain states or local governments take up policies that are authoritarian, autocratic?"
Would this not be the purpose of a document or Constitution which restricts the power of gov't? Our constitution is a document which expressly states that powers not granted to it are prohibited and guarantees our basic freedoms such as religion, arms and the press. You have to assume that a constitution like that would be in place and functioning before you allow, even local gov'ts, from enacting policies.
Let me know what you think, as well as any rebuttals!
There's a difference between equality and equality in front of the law. Every natural system (self-organizing, fractal-based structure) has a hierarchy. Not everyone can have an equal say in everything and humans naturally gravitate towards leaders.
Delete"I disagree."
So you do know what's going to happen beforehand? I'm making a risk-based argument. Large scale centralized systems blow apart from one mistake. Bottom up systems (ex. markets) get stronger from mistakes. One's fragile (centralized systems, statism, etc.); the other is antifragile.
Basically, I'm saying markets work because we don't know what's going to happen while statism/socialism fails because it relies on knowing what's going to happen.
"This is a clear description of free-markets and competition at work, but this only works on the assumption that you have certain liberties and rights guaranteed to individuals, e.g. property rights, functioning court systems, etc. Additionally, it should be our goal to eliminate the state's involvement in "a whole bunch of things" because they inevitably make it a monopolistic enterprise in the process!"
Agreed.
"Our constitution is a document which expressly states that powers not granted to it are prohibited and guarantees our basic freedoms such as religion, arms and the press"
Agreed, but there are policies that aren't prohibited by the Constitution (primarily related to economic policy). I'm speaking about those.
I don't think highly of praxeology because I think it's trying to deal with complex systems via a proof methodology. That being said, I basically agree with the angle you're coming from. We need to start with balance sheets; not theorizing.
"I'm unconvinced that a real "tyrant", with significant authoritarian control, would voluntarily leave due to a democratic vote by the majority. Hitler was democratically elected, and I don't see democracy being any assurance of freedom from oppression. "
DeleteI agree with the first part. This is why checks and balances are so important.
With regards to political systems (or economic systems for that matter); it's important to align the incentives properly. Centralized governments were designed for war and war happens, so I do think that sometimes centralization is necessary, but only for purposes of war.
What democracy does is that it can help prevent leaders from winning by oppressing people because oppressors get voted out. Will that sole mechanism work? Of course not. We need other things.
NO ONE can be trusted with holding power, regardless of who they are. We need strict limits on preventing power from going into a few hands. Letting people have the ability to get rid of people via elections is one mechanism to do so. Is it the only one and can a political system work as the only one? I don't think so.
"There's a difference between equality and equality in front of the law."
ReplyDeleteThat's a famous quote from Hayek, who himself was a student of praxeology. I agree with your theme but disagree with how you want to enact it. If you're idea was to be followed, and "We do not know what will happen beforehand", then you can justify anything arbitrarily and have to relent to waiting to see the outcomes. Any Authoritarian type could easily say, "Well you can't forsee the outcome of wealth redistribution, so lets try it and see!" My position is you can forsee the outcomes of socialism or authoritarianism, and the empirical evidence just solidifies the theory.
"I'm making a risk-based argument."
Yes, the risk and damage is mitigated when bad things happen at a small scale, I am not denying the fact that centralized gov't should be limited because of this, but it is not the sole reason why we should not enact poor policies. The reason we should not enact poor policies, e.g. min wage, socialized medicine, etc... is based on sound economic theory, not on empirical studies done (however the empirical evidence certainly supports the Austrian view).
"Basically, I'm saying markets work because we don't know what's going to happen while statism/socialism fails because it relies on knowing what's going to happen."
In a certain sense, you're right. Markets work because entrepreneurs are motivated by profit to compete with one another for a market share. We don't know what type of firm will succeed and who will succeed, similar to a game of chance, as Hayek puts it. But that's a predictable outcome of free markets, and it is well understood by praxeological theory. We KNOW that market competition makes the world better. We also KNOW that monopolistic enterprises, the State, makes the world worse. We do not need empirical evidence to support this because we understand 'Human Action'.
"but there are policies that aren't prohibited by the Constitution (primarily related to economic policy). I'm speaking about those."
The Federal gov't is prohibited from engaging in ANY activities not EXPRESSLY delegated to it by the constitution. If it doesn't say it can do it, then it cannot do it. It doesn't have to prohibit the federal gov't from doing something, it implies the prohibition of things (drug laws, for example) based on not giving them the authority in the first place.
"Centralized governments were designed for war and war happens, so I do think that sometimes centralization is necessary, but only for purposes of war."
If I accept this to be true, you can justify nearly any terrible economic policy in the name of fighting a war. And sure enough, we have become a country in a constant state of war, which has allowed the Statists to justify... nearly everything!
"NO ONE can be trusted with holding power, regardless of who they are. We need strict limits on preventing power from going into a few hands. "
Agreed. Unfortunately, there has not been a system that man has devised to date that has prevented it. I am a staunch believer in the Constitution but it has clearly not been enough to prevent the growth of the State. Any suggestions?
Unfortunately, guns matter as does geography. Economic systems codevelop with geopolitical systems. That's one of the reasons why I started this blog.
DeleteIf you've got the guns and the money while the other guys don't, you can run them over and take everything they have. This is why central banks were created (to fund wars/imperial expansions). I'm of the belief that humans are inherently tribalistic in the sense that, when push comes to shove, you end up doing things with a particular group of people. If you don't include the impact of weaponry, you can't really talk about economic systems.
We may not like it and it may not work the way we want it to work, but the world doesn't work the way we want it to. It works like this across every scale; this is (IMO) one of the reasons why hierarchies develop. It's much easier to change the way we operate to the world than it is to change the world to the way we think it should operate. The latter is useless and probably self-destructive.
This is also why I don't like praxeology. I start off by viewing an economy as an ecosystem that codevelops with everything around it. Then, I develop models by using balance sheets and accounting.
In the world we live in, guns and natural resources matter. Arable land and the location of arable land matters. People need to eat, which means that if people don't live near arable land, you must transport it from point A to point B. If you don't, you don't hold power for very long, which means that you've gotta maintain those connections at all costs even if you have to hold a gun to someone's head to do so. Is this the way the world "should" work? Quite frankly, that's a useless question and I don't care.
You may think that I'm powerful so I can do whatever I want, but if you want to continue to hold power, you have very few choices.
This is true in the case of trade as well. Trade does make people and places economically better off (at least in the short run), but for the trade to be sustained, you need to maintain those trade routes and make sure no one steals your shit. If you live next to a neighbor you don't like, you've been trading with him, and you go to war with him tomorrow, your economy immediately enters a depression. Now, we may say that the fact that we trade with him limits the possibility of war (which is true), but that lower possibility results in a higher impact event. In other words, you're dealing with risk on the left tail that a nation simply can't take.
Basically, guns matter and they're a complete gamechanger.
How can you develop "develop models by using balance sheets and accounting" if you don't have any intelligible way of understanding what the "models" mean? That's essentially equivalent to saying, you don't believe in a scientific theory, but you believe in experiments to develop your understanding of science... How can you conduct experiments that mean anything if you do not have a theory about why what happens is happening??
DeleteI think you have a very misconstrued idea of what praxeology is. It does not seek to change human behavior. It seeks to understand and describe it.
Trying to understand and describe human behavior is a waste of time. Again, almost all human behavior is forced by constraints. It's better to look at those constraints than it is to try to understand and describe something there's no reason to understand and describe.
DeleteI'm not interested in scientific theory. I'm interested in ways to deal with uncertainty and risk. Most "scientific theory" (outside of the mathematical sciences) does a terrible job of dealing with uncertainty and risk.
This blog is not about science and theory; it's much more about uncertainty and risk. We develop models to try to give us an idea of how these systems behave, but the models are built on certain assumptions. It's important to remember all models are wrong, but some models are useful.
I sincerely doubt any usefulness of your "models", especially if you have no theory about why a model behaves one way or another. You express serious confusions about the scientific method, which is a basis of your desire to deal with uncertainty and risk. Let me direct you to an introductory book (which was on the first page of google) on the topic, "Social Theories of Risk and Uncertainty: An Introduction," I'm sure it will be of use.
DeleteI quote from the description of the text, "[This book] Identifies why theorizing on risk is necessary..."
Let's talk about Iceland as example. The first thing about Iceland is that it's an island and it's cold. That may not seem like much, but those constraints are extremely important--much more important that some social science theory on how Iceland should run its economy. What we've done is build a model for Iceland whether you realize it or not.
DeleteI've written posts where I've done this for China, Japan, and Europe.
Theorizing on risk has a terrible track record. Risk lies in dealing with things we don't understand. Risk management is about designing systems that can deal with what we do not understand. Think about it this way: how many good traders start off by developing a theory? Theories aren't necessary (and usually counter-productive) in risk management.
Dealing with risk is pretty simple: it's about negating the impact of the left tail. It's simple, but not easy. Actually, this is how religion developed.
I doubt the usefulness of my models as well. That's one of the reasons I created this blog. We'll find out their usefulness soon enough. So far, some of them have shown to be useful, like on commodity prices and international imbalances, but we will see.
Delete"It's important to remember all models are wrong, but some models are useful."
DeleteThis quote is from George E. P. Box who was a great statistician. Another quote from Box, "One important idea is that science is a means whereby learning is achieved, not by mere theoretical speculation on the one hand, nor by the undirected accumulation of practical facts on the other, but rather by a motivated iteration between theory and practice. "
So what you are proposing is the 'undirected accumulation of practical facts' to develop models with no theory, considering you claim theories aren't necessary, I am not sure how you can see this to be the correct way to think about anything, let alone risk.
Definition of theory, "a system of ideas intended to explain something"
Using your example, Iceland is an island and it is cold. Thus, your THEORY is that their economy will be different (industries, modes of transportation, etc) than say, a land-locked country which is warm. You are totally contradicting yourself and don't even realize it.
I'm not doing science here. There's no scientific method. What I'm doing is probability. Probability is not a science; it's an art. This blog is closer to art than it is to science.
Delete"Thus, your THEORY is that their economy will be different (industries, modes of transportation, etc) than say, a land-locked country which is warm."
Is it a theory to say that Iceland is an island and it's cold? How is that theoretical at all?
I made no assumptions about the economy of Iceland and said absolutely nothing about it. I merely stated two facts about the country. In fact, Icleand's economy could be very similar to a land-locked country that's warm; there's no reason why not (they're both insulated and development costs could be high for both). The comment you made about Iceland's economy is the next step that depends on another set of assumptions (that would be adding to the model). There's no contradiction here.
"considering you claim theories aren't necessary"
Find me one good trader who actually uses theories? As I said, risk isn't about facts or what we know. RISK IS ABOUT WHAT WE DON'T KNOW!!!!! "Practical facts" don't tell us anything about risk because risk isn't about practical facts. It's about uncertainty.
I'm not concerned about what we know. I'm concerned about constraints and what we don't know. I'm more interested in wisdom than knowledge.
"I'm not doing science here."
DeleteClearly... Good luck then
Definition for reference,
ReplyDelete"Praxeology is the deductive study of human action based on the fact that humans engage in purposeful behavior, as opposed to reflexive behavior like sneezing and inanimate behavior."