You are currently browsing the monthly archive for May, 2007.
Or so it would appear, given the links you can find under the heading “Liberty and Freedom” on the left sidebar:
We shouldn’t.
I came across this post by Stephanie Mehta on a blog associated with Fortune magazine about how copper may soon almost disappear from telecommunications infrastructure. From what I understand, the backbone of telecommunications uses fiber optics currently, with copper covering the “last mile” to the customer. But soon, fiber or other technologies may claim that last stretch as well. The post draws inspiration from Tom Evslin, a former VoIP entrepreneur.
What bugged me was the anxiety about whether rural residents will get left behind. Nothing wrong with that per se, but predictably Mehta and Evslin move on to support the use of taxpayer money to solve the problem, in particular a Vermont program that subsidizes rural infrastructure investment through government bonds. Read the rest of this entry »
Jeff sends a link to a Von Mises Institute article that puts a positive spin on IP infringement (piracy). It reminds me of arguments from David Levine and Michele Boldrin. The idea is that innovative companies and individuals derive a substantial advantage from being first movers or from being imitated (free advertising) without IP laws, so that these laws should be gotten rid of or at least companies should realize they have more to gain than to fear from imitation.
The argument that positive effects exist from being the inventor or creator of something and from having your idea imitated sounds reasonable, but of course the existence of positive effects doesn’t necessarily mean that they are sufficient to bring us to the socially optimal state of affairs. Based on conversations I had last quarter with Prof. Jaques Lawarree, with whom I had Industrial Organization, I got the sense that the (tenuous) consensus among economists is that the current IP regime in the US is pretty good (for the US) but certainly could be better — a bit too restrictive, especially with copyright.
P.S.: A neat, somewhat recent paper of Lawarree’s.
The reason a lot of libertarians object, in general, to government action, is because they view those actions as fundamentally coercive. The power of governments to tax or otherwise expropriate must always ultimately be backed up by force. I take a somewhat different view: while current governments are non-voluntary (coercive), government very much like many western governments is potentially voluntary. I think that the protection of private property rights can be used as the excludable good used to get people to voluntarily pay taxes for collective goods and generally participate in government. For this argument, I will assume that I believe in private property rights as ‘natural rights.’
A lot of the goods that government provides are collective goods, meaning they can’t really be denied to anyone, and if people have a choice whether to contribute resources to help provide for collective goods, they won’t. This is main argument for the necessity of non-voluntary government. Because collective goods cannot be denied to anyone, every individual has an incentive to mooch off the contributions of others but not contributing themselves and if there are a great number of individuals, without noticeably affecting the total amount of good supplied. Since everyone has this same incentive, without the existence of a good that only goes to those that contribute to producing collective goods, collective goods will be largely under-produced. A separate, private, excludable good is needed to convince people to contribute towards collective goods.
Let’s look at an example. One of the simplest examples is national defense. National defense is a collective good because if someone provides defense services they cannot really deny those services to anyone. In the case of national defense, if individuals have the a choice whether to pay taxes to support an army to defend the nation, they won’t. No person will voluntarily pay those taxes because it is very tempting to simply take advantage of the national defense that already exists without themselves contributing, and since the contributions from one person don’t even buy a single soldier, the effect of one person’s non-contribution is not noticeable. People require another incentive to contribute to national defense in order to achieve a reasonable level of security.
If government largely provides collective goods, and collective goods require other incentives or coercion to get people to contribute to them, why do I think that government can be voluntary? I think voluntary government is plausible because I think the protection of property rights (I use the term broadly here) by the police and the courts is potentially that excludable benefit. The general tranquility provided by those services, is a collective benefit, but the individual protection of those rights is excludable, because a government can declare that it will no longer protect a certain individual’s property. There is no doubt that if the government made such a declaration, that individual would be in a heap of trouble, so there is a large non-collective aspect to private property protection services. The important thing about the protection of property rights is that they are very important to the enjoyment of a lot of other goods, it is hard to enjoy physical goods if there is no one stopping others from taking them from you. I won’t use municipal services, like water and sewer, which are often excludable, in my argument because I think that is an issue for another day. The key to voluntary government is bundling collective goods with the protection of individual property rights, people get and pay for all that the government provides or none of it. People will be willing to pay for the collective goods they enjoy if it is the price they pay to get the protection of the police and the courts.
Google Trends is my new favorite tool for tracking the popularity of political party primary candidates. Here is a comparison of five of bigger Democratic candidate (including Bill Richardson, currently my personal favorite). Here is the same for the Republican party. It is difficult to say exactly what high or low search volume indicates about the popularity or name recognition of a candidate. I would think that search volume would be indicative of some combination of the current popularity of a candidate and rate of new interest in the candidate, while news reference volume is indicative of media support for a candidate.
If I could figure out a way to pull data off of Google Trends, I would compare these results with polls. Also, the data seems only to go up to February.
The Whitehouse has announced that they, Senate Democrats and Republicans have negotiated a comprehensive immigration reform proposal (link). The proposal is considerably better than I expected; it includes a lot of the policy changes that the Cato institute has called for (link). The proposal has four zmain parts: more funding for border security, the creation of a temporary worker program, the creation of a path to legality for illegal immigrants currently in the country, and an increase in the number of several visa types. The proposal has been introduced in the Senate as the STRIVE Act (link to summary).
The temporary worker program is a good idea; first, because it eases restrictions on immigration, putting labor into the set of markets being liberalized, and second because it reflects the nature of immigration from Mexico; the majority of immigrants from Mexico return after some time. Most Mexican immigrants come to work for a relatively short time and then go back to their home country. Harsh border enforcement without a legal avenue for such a work pattern means that immigrants who do make it into the country illegally, tend to stay. Even so, the proposal does include a path to citizenship for temporary workers.
The proposal does not tie temporary work visas to a specific employer which is important because visa tying would give employers leverage over temporary workers and undoubtedly lead to abuses. Guest workers must be free to fully participate in the labor market. The abuses associated with the, guest-worker like, Bracero program which resulted largely from tying visas to employers eventually lead to the demise of the program.
Providing a path to legalization for the 12 million or so of illegal immigrants already in the nited States will also have several positive effects. First, it will stop a lot of resources from being wasted as they are now. U.S. immigration officials will stop using resources to find and deport productive members of society, and currently illegal immigrants will stop using resources to evade those officials. Second, currently illegal immigrants will find it much easier to travel back and forth between Mexico and the U.S. to see their families, which will undoubtedly improve their quality of life. Third, legalization will eliminate the ability of employers to threaten immigrant employees with deportation. Eliminating that threat will improve working conditions and pay for immigrants by improving their bargaining position.
I am somewhat concerned about some of the details of the proposal. President Bush stated that the proposal includes making English the official language of the United States. I don’t think making it official will really change much, but doing so seems unnecessary and makes me very uncomfortable. The proposal will also change the criteria for immigration from family based to skill based; I am not sure how I feel about this.
Overall, this proposal seems to be very good, and would dramatically improve our immigration policy. I have written before (link) about the need to liberalize immigration policy in order to be intellectually honest about pushing for other trade liberalization, and this is a step in that direction; visa cap increases, amnesty for current illegal immigrants and the temporary worker program all reduce migration restrictions. I hope that both the House and Senate enact a plan similar to this.
The United States citizen, Jose Padilla, who was designated an illegal enemy combatant by president Bush in an attempt to deny him habeas corpus protections has finally been brought to trial (link). Padilla’s attorney sums up the case:
Political crises can cause parts of our government to overreach. This is one of those times.
I would go further than that; the government always tries to unduly expand its power; political crises let it get away with it.
Tyler Cowen points to an excellent article by James Surowiecki on why we should not force U.S. IP law on trading partners. I have been thinking about intellectual property lately (IP), though not about how it relates to trade, but I still agree with Surowiecki wholeheartedly. At the very least, new IP protections should only apply to patents and copy rights established after the change in laws. Making IP protections retroactive will only reduce the use of ideas without promoting any future invention.
Even in the U.S. I would guess that IP protections are too high by a wide margin, especially where software is concerned. Intellectual property rights exist to promote investment of resources into the creation and use of ideas. Low intellectual property right protections means that not enough investment will go into creating ideas. High intellectual property right protections means that right holders will attempt to extract all the value created from their idea and so too few ideas will be used. Clearly there should be some optimal level of protection.
In fields such as the software industry, bad patents are common. For example, Amazon.com owns a patent over one click shopping. It is not surprising that the US has higher than optimal IP protections or that the US pushes to force new trading partners to adopt higher IP protections. In developed countries, higher intellectual property right protections generally benefit concentrated and organized interests overdispersed and unorganized interests. The concentrated interests are usually well organized companies who have the resources to patent every patentable idea they have and enforce those patents. The dispersed interests are small and potential companies who want to use those ideas to create new businesses and the public at large. It is a well established result from group theory that concentrated interests have much greater power to lobby for legislative bodies than dispersed interests because the ratio of individual benefit to the cost of lobbying is much higher for concentrated interests. This is why I believe that IP protections are very likely too high in the US.
In the Dallas, TX suburb Farmers Branch, the city council become the first in the nation to pass an ordinance to require renters to prove their legal national status (link). The key phrase from the article:
[City councilman] O’Hare contends the city’s economy and quality of life will improve if illegal immigrants are kept out.
O’Hare means the economy and quality of life of current residents, obviously, not the economy and quality of life of business owners or those immigrants. Farmers Branch residents are trying to use their superior organization to improve their position, in terms of rent and wages, at the expense of business owners and illegal immigrants. By restricting who can live in their area, residents keep housing demand and labor supply in their favor, keeping local rents down and local wages up. Restricting and monitoring immigration might be a national security issue, but small suburbs have no business setting immigration policy, especially no business restricting intra-national immigration.
I just finished reading Chomsky on Anarchism, which I read to better understand radical leftist thought from a man who seems like one of the more legitimately intellectual radical leftists. The book is a collection of talks, essays and interviews that give insights into what Chomsky stands for (Chomsky’s work is usually criticism of existing society, rather than describing what he advocates). Chomsky says he advocates libertarian socialism (anarchism), which, as I understand it, is essentially socialist democracy where democracy permeates essentially all economic life. Workers and communities form councils which control resources in their respective spheres democratically. Councils send delegates to other councils which coordinate resources on a wider scale. Chomsky wants to dismantle all forms of non-democratic power, especially private property, which I think he sees as the worst form of this power in the west.
The reason I disagree with so much of what Chomsky says is that his conception of humanity is very organic and non-individualist, while my view is very individualist. I think in his view, people have what I will call solidarity with people in their group; every person has a very deep connection with others in their group and values outcomes for those people almost as much as for themselves. He applies this conception to common working people, who he sympathizes with, and even more strongly to the elites of society. Solidarity amongst non-elites leads to worker and community organization, which is naturally democratic. Solidarity amongst elites causes them to work hard and deliberately to strengthen and maintain the power of their group. This was done by brute force but is increasingly done by subverting the solidarity amongst non-elites. For example, the current capitalist, private property structure of society works to undermine solidarity amongst working people by pitting them against each other. I think to Chomsky it seems obvious that in a libertarian socialist society that solidarity and democracy will eliminate all problems of scarcity and competing interests.
I am unsure how explicit this view of humanity is for Chomsky, he does very occasionally make individualist arguments, but I don’t think he recognizes that there are significantly different views of humanity because I have never seen him address issues which people with a different view (for example, most economists) would raise.
I have written before about the chapter in Hans Hoppe’s book The Economics and Ethics of Private Property which lays down an argument for the private property ethic (link to chapter), and now I would like to revise my position on his argument. His justification for private property ethics is essentially this:
- if physically arguing a a certain logical proposal demonstrates non-belief in the proposal, the proposal is self-contradicting and should be rejected
- all argumentation involves the use of resources, mainly one’s body and resources immediately surrounding one’s body like air, etc.
- legitimate use of resources implies property rights over those resources
- so, no one can argue for any other ethical system except for private property and the ability to acquire private property through homesteading
This line of reasoning is quite seductive for a libertarian, and I was initially very receptive to it, but I now think Hoppe overgeneralizes, and his argument proves much less than he claims. His mistake is that legitimate use of resources does not imply property rights over those resources. Even if private property ethics are presupposed, legitimate use of resources does not imply property rights in all cases; for example, legitimate use of a non-scarce resource, such as air, does not imply ownership over it. More importantly, property rights are defined by the right to and exclude others from using the property. Hoppe’s argument addresses the right to use resources, but not the right to exclude others from using them. It is still possible to consistently argue that nobody has the right to exclude people from using resources. He has not demonstrated even exclusive use over one’s own body. Hoppe’s argument demonstrates an ethical right to use one’s own body and at least a limited right to use resources around one’s body, because no one can argue that people do not have an ethical right to use their body or resources around their body at least to a limited extent in a logically consistent way.
His argument does not deny that there are other rights, but it does positively assert these rights of limited use of resources, so it has created a starting point for rights, but not an ending point for them. It is possible that someone else will find a way to prove more than these limited rights, but it is also possible that nothing more can be said, and that all other ‘rights’ are social rules, adopted for their usefulness. I do suspect there is a way to demonstrate exclusive use over at least one’s own body.
My friend Jeff directed me to an article about new advances in combustion engine technology. Reading about new technology has always been pleasurable for me. It’s almost like I can sense the future rushing past. It’s very refreshing. Maybe I should be a journalist who writes about new technology. Would be pretty nice — I could travel, meet interesting people. Alas, I have chosen to be an economist. But then I am pursuing something brighter on the horizon in that field, too; a world in which unimpeded commerce and trade ties us all together in peace and allows us to have as much of the things we value as possible.
Daniel Klein at CATO has a wonderful article on coercion (HT to Arnold Kling). Klein has two main points: first, that the distinction between coercive interaction and non-coercive interaction is a useful one to make, and second, that the presumption that more liberty (less coercion) is good, should be a maxim, not an axiom, and should be used as a principle for analysis not automatic condemnation of coercion.
I like his idea of using the presumption of liberty as a maxim, but I think he overemphasizes the coercive nature of government action. Most government actions are indisputably coercive (if we accept private property ethics, at least) because they are enforced by the threat of force; in general, if one doesn’t comply with a government rule, government will ultimately use executive force to ensure compliance. Furthermore, many individuals would ignore certain individual government orders, for example to pay their taxes, without that threat of force. The government as a whole, however, is much less coercive. While the threat of force is used to require participation in the government as a whole (the civil war made that clear), most individuals would choose to participate in the government if they could only choose between total participation, including taxes etc., and no participation, losing all protections and benefits the government provides. The government as a whole is technically coercive, but the moral harm caused by the coercion is fairly small because most individuals would choose to participate in most western governments anyway. Furthermore, I can easily imagine a government which lets its citizens make that choice, eliminating coercion even for individual government actions.
I don’t think we need to discard Klein’s maxim as a tool for analysis because government power need not be coercive, but it needs to be modified a little bit. I have not found a good way to articulate how I think it needs to be modified, so I will talk about that in another post.
I should note that Klein’s view of coercion presumes individual private property as its ethics, which I am not ready to wholly accept, but I will leave that discussion for another day.
I don’t know how many Americans have been following the French presidential election, but it just ended and the center-right candidate Nicolas Sarkozy has won. This outcome, based on what I have been reading over the last few months, represents a HUGE shift in French politics. Strike one against the French social model! According the NYTimes, “Sarkozy has pledged to remake France by, among other things, slashing unemployment, cutting taxes, keeping trains running during strikes, making people work harder and longer, shrinking the government bureaucracy, reforming pension rules and making it easier to create new businesses.”
Great stuff, though I’m not sure about “making” French people work longer hours — I think the idea is to give them the option of doing so, as it is currently against the law. The promise to make entrepreneurship easier is particularly encouraging.
Sir Dennis Robertson, quoted in The Calculus of Consent (available online), offers the best description of the role of the economist I have read yet:
There exists in every human breast an inevitable state of tension between the aggressive and acquisitive instincts and the instincts of benevolence and self-sacrifice. It is for the preacher, lay or clerical, to inculcate the ultimate duty of subordinating the former to the latter. It is the humbler, and often the invidious, role of the economist to help, so far as he can, in reducing the preacher’s task to manageable dimensions. It is his function to emit a warning bark if he sees courses of action being advocated or pursued which will increase unnecessarily the inevitable tension between self-interest and public duty; and to wag his tail in approval of courses of action which will tend to keep the tension low and tolerable.
I really like the National Do Not Call Registry, but something struck me today: why didn’t phone companies develop analogous services way before the government registry was established? Imagine how popular a service to prevent telemarketers would have been before 2003. It would have been very lucrative for phone companies to offer an option to stop telemarketers from calling their customers, especially in terms of market share. There must have been some reason why such services were not offered, but I can’t come up with one. I have ruled out technical limitations and legality issues because phone companies are (and were) able to block specific numbers. I remain baffled.
John, your argument is that education produces positive externalities that cannot be captured by the person who is educated. Seems reasonable enough, but let me try to pick some holes in it. (All in good humor, eh?)
Jeff asks: “And this is a good thing why? I mean I love the idea of overpopulation and depleting resources the same as everyone else but…” (Referring to my half-serious suggestion to promote a higher birthrate in the US.)
Overpopulation is a non-issue, at least on a global scale. The world is pretty close to the replacement fertility rate (2.5 children per woman currently vs. 2.2 replacement rate) and should get there around 2050 (though the error bars are pretty wide). There is a lag between the fertility rate and the population growth rate, so the world’s population will keep growing for a while after we reach replacement.
I have been listening to a few talks given by Noam Chomsky, and while I disagree with a lot of what he says, he does bring up a few good points. For instance, in this talk on globalization, he brings up the point that modern globalization in large part does not involve increased freedom of immigration from poor countries to wealthy countries. This is pretty hypocritical because any intellectually honest argument for trade liberalization must also be an argument for labor trade liberalization.
Immigration restrictions are very similar to unions; a group of insider laborers has the power to keep outsider laborers from competing in some segment of the labor market. In the case of immigration restrictions, voters in a country have the political power to restrict foreign laborers from entering the country to compete in the domestic labor market despite the willingness of domestic firms and foreign laborers to engage in trade. The result is that laborers in more productive countries raise their own wages at the expense of the wages of laborers in less productive countries.
The same potential gains from fewer restrictions international trade in goods also exist for fewer restrictions on international trade in labor. The gain in wages by foreign laborers must be greater than the loss in wages by domestic laborers, otherwise domestic laborers could pay foreign laborers not to work in their market and still come out ahead, so laborers as a group are better off with fewer restrictions. Likewise, the reduction of costs for domestic employers must be greater than the increase in costs for foreign employers, otherwise foreign employers could pay domestic employers not to hire their workers and still come out ahead, so employers as a group are also better off with fewer restrictions. Since both laborers as a group and employers as a group are better off with fewer restrictions, there has been a net gain.
Protectionism for domestic laborers is just as destructive as protectionism for domestic producers. The large unrealized gains from labor globalization are evident by the great pressure on borders; Between 400,000 and 700,000 people each year immigrate into the US illegally.
Interestingly, the current Republican administration has been somewhat consistent about this. The Bush administration has shown a desire to liberalize both trade in goods and immigration. Twice the Bush administration has unsuccessfully pushed for a Temporary Worker Program, which would liberalize labor trade to a small extent. The administration has also negotiated a free trade treaty with South Korea, which has not been approved by congress yet but would liberalize trade to a small extent.
The general libertarian position on education has long been that it should be privately funded, but I suspect libertarians have tended to be somewhat quiet on the issue because they suspect that some subsidization of education is good. I agree with this notion, and so I aim to provide a justification for limited public subsidization of primary education.
The main benefit from primary education is that those educated improve their communication skills. Improvements in skills like reading, writing, basic math, and spoken language are obvious, but more subtle improvements in social skills are also important. Communication skills are a good because they lower the cost in time and effort of sharing information with other people. The benefits of those communication skills accrue to both the individual with the skills and all those who communicate with them because any time or effort saved through good communication is usually saved to all parties.
Investment into communication skills, without subsidization will be socially sub-optimal because individuals don’t get most of the benefit from those skills. Individuals have very little capacity to charge for the benefit others derive from their communication skills for several reasons. First, the benefits to each party from communication skills are closesly bound, in most cases, it is impossible for the skilled individual to deny the benefit of his skills to others without denying himself the same benefit. Second, in everyday life, the time and effort wasted trying to charge for the benefits others derive from one’s communication skills would easily be more than the time saved by having good skills. Because individuals cannot get reimbursement for the benefits to others from their investment into communication skills, society as a whole should be willing to pay individuals to make those investments.
Public subsidization of communication skill improvement internalizes the benefits of those skills so that people make decisions that are much closer to social optimal. Unfortunately the benefits derived from communication skills are very hard to measure, even though they are probably very large, so it will be very difficult to find a socially optimal level of subsidization except through trial and error.
Loyal reader Jeff sends this link.
Do women recieve less pay than men for the same work because of employer discrimination?
