Skip to main content

One weird trick shows how to keep government from wasting more of your money!*

I recently had an illustrative conversation on Twitter. In brief:

Simon Richardson: Government has not just the power, but the right to compel payment of tax.
Me: Government has no ability, nor right, to compel me. What will government do if I choose not to produce? Use my brain and limbs without me?
Simon Richardson: Can't physically force you to work, but if you do work, can take a share of your income.

This exchange illustrates why simply increasing taxes without considering the disincentive effects doesn't work. People have choices. In many situations, such as low tax, it's easier for someone who produces wealth to simply go along, but as the taxes and regulations are increased, people get fed up with it. They start changing their behavior. Producing less. Paying for useless, non-wealth-increasing goods such as tax avoidance. Voting with their feet, by moving their business operations or (after that is noticed) themselves to other competing jurisdictions.

In short, you can't just keep raising taxes to cover an unlimited "government service" model. Not to say that it is immoral (although it would be), it's also impossible without totalitarian control. That's one of the reason full communist nations either betray their methodology and turn more "capitalist", or end up without fail in totalitarianism. It's the path their leaders must go if they want to keep controlling more of people's production. It's also why they fail economically, because it's physically impossible to force people to produce to their potential. Perhaps someday they'll make better mind control devices to change that, but most wouldn't exactly see that as a good thing.

Tax incentives also explain why user fees, while not as efficient as true markets, are much more efficient than general wealth and income taxes.

Let's compare two models for paying for electricity.

Model T - Wealth or Income Taxes
Everyone is expected to pay a certain percentage of their wealth or income to the Department of Power, which then provides electricity "services" to everyone who wants/needs it.

Model F - User Fees
Anyone who wants/needs electricity must pay a fee based on what percent of the electricity generated they use. Use 0.0002% of the electricity and pay 0.0002% of the total cost to generate and deliver all the electricity

Now there are serious problems with Model F that could be solved with a market solution, but compared to Model T it's incredibly more efficient.

Under Model T, no one gets their electricity anywhere but the Department of Power if they can avoid it. After all, they're already paying for it with their taxes whether they use it or not, so they might as well use it, even if they happen to be able to purchase say, solar cells, that in their particular circumstance might be more efficient. Everyone also uses all the electricity available to them. After all, they aren't being charged more for it, so they might as well get as much as possible out of the system. It's even justified to them... they pay exorbitant taxes to fund it, might as well get back as much as possible in return. So why turn down the air conditioner? Electricity generation also becomes a political issue. Politicians run for office promising to make more and more electricity services available to people. People need to have air conditioning and lighting, right? You can't live in modern society without electricity, so there must be a right to as much as you can use. Perhaps we just need those greedy people who have more to contribute a bit more to power generation? After all, those rich people are always taking advantage of the government power system by paying lawyers to figure out schemes to use more electricity than anyone else!

Under Model F, if the Department of Power electricity becomes too expensive, people look for substitutions. They might put in solar power, or pay for local privately provided power, or substitute natural gas in some applications. This puts a natural limit on how inefficient the Department of Power will become. If people use more power by changing their thermostat, they have to pay more for it, so based on the price they conserve where it makes sense. People trade off the value to others of what they can produce vs. how much it will cost them in resources, including power, to produce it.

Model T leads to a lot more electricity being generated and used, to the point where it may become a massive portion of the economy. Model F leads to electricity being used only where it's more efficient to use it compared to alternatives. You could use Model M - Markets, to make it even more efficient and able to compete better and increase wealth faster, but Model F at least works on a fundamental level. Model T is not sustainable. It's an economic catastrophe waiting to happen and it serves as a massive drag on the economy in the meantime.

So why is Model T used to fund so many government "services" rather than the alternatives? Well, who benefits from controlling all that power? Again, it comes back to incentives. Incentives matter and people in government respond to incentives just like the rest of us.

*One weird trick headline is just a joke spoofing those stupid advertisements and shouldn't be taken too seriously, but if you did, the trick is user fees and markets.

UnCommon Knowledge regarding Knowledge Commons

I've recently been attempting to discuss commons and the tragedy of the commons with regards to the Internet with Luca De Biase.

To summarize/recap the conversation, he posted a response in Edge, I questioned the notion of the Internet being a commons that disproved the idea of the tragedy of the commons and he's replied further. He also brought up this paper on the concept of a knowledge commons.

In the original post, the root of our disagreement is his statement "But the Internet has grown to become the biggest commons of knowledge in history." before going on to explain that there isn't a tragedy of the commons awaiting the Internet as a fate. To an economist the idea of a tragedy of the commons refers to a specific type of commons and Luca De Biase's commentary to that effect appears to be a commentary more on why the Internet is not and should not be considered a commons.

It appears that once we've come to terms (English isn't his first language, so much should be excused based on that), Luca De Biase and I will agree on most points. As defined in the reference knowledge commons paper, knowledge is a "Public Good" in the economic sense. Knowledge is not rivalrous (we can both use the same knowledge without excluding others from it) and not subtractable (we can both use the same knowledge without damaging that use of that knowledge by someone else).

The confusion seems to result from the overloading of the term "commons". In English language economic terminology, a commons is by definition something that is rivalrous and subtractable. The "Tragedy of the commons" refers to the usage patterns of goods that are considered under common ownership (effectively no true ownership) vs. goods where someone in particular has an ownership interest to see them preserved. See The Concise Encyclopedia of Economics for a good summary if you are unfamiliar with the idea.

It is the nature of the "commons" thus described that leads to the "tragedy". A necessary prerequisite for a tragedy of the commons is that one person's use can negatively impact another person's use.

It seems obvious that because one person having knowledge or information doesn't prevent others from having that same knowledge or information, knowledge isn't a commons in the economic profession's sense of the word. Because knowledge isn't a commons in the sense of the word being used in the phrase "Tragedy of the Commons", it's nonsensical to state that existence and usefulness of shared knowledge somehow disproves the tragedy of the commons.

Happening to be one of those rare individuals who have a big background in both economics and in the Internet, having founded an Internet Service Provider (ISP) and worked in the e-commerce industry since before it really existed, I suppose I'm uniquely situated to criticize the analogy from both sides.

For you see, the Internet itself, the literal physical thing we call the Internet, consists of individual nodes of private property and contractual agreements. It's not "public" at all, in the sense that everyone owns it. Quite the opposite. It's a Catallaxy, a free marketplace where anyone can agree to connect to anyone else with their own private property. Where this breaks down is that in some locations (I'm looking at you, American cities) the government establishes monopolies around some specific methods of getting a connection to the Internet (see cable monopoly). Thankfully, there are generally decent alternative methods available to most private individuals. Where the Internet really shines is at the backbone/ISP level. Internet Bandwidth providers (people with contractual relationships to exchange network traffic with others) compete to offer different types of connections. ISPs make contractual agreements to carry Internet traffic for one another. At every connection point, contractual agreements are in place that govern the private use of the connection in both directions. Some of the business rules involved are enforced at a technological level, while others are simply enforced by cutting the connection if the other side isn't honoring them.

For you see, the reason why no one can "abuse" the internet, the reason it can not devolve into a "Tragedy of the Commons" is because of these private agreements and the availability of alternative competitors. Abuse, at it's simplest level on the Internet, is defined as doing something the owner of a network doesn't want you to do. At best, someone can only do bad things on their own network. If abuse spills out into someone else's network, then the offender is ultimately cut off by the nodes they connect to at the network level. This ability exists because there are specific owners of these networks who are responsible for their care and maintenance and responsible for ensuring they continue to serve the purposes of their owners and customers.

You can name distributed accessible knowledge a "knowledge commons". Just realize the Internet is a distinct thing. Your web browser and someone else's web server are things that use the Internet to connect to each other, they aren't the Internet. i.e. your car isn't a private highway.

Thankfully, there is much we agree on. Knowledge isn't a commons and thus doesn't need a tragedy of the commons solution. That's a truism much easier to understand once you understand the characteristics of an economics commons and how they don't apply to knowledge and information. This also makes it easy to see that most intellectual property laws, the ones that try to turn knowledge or information into a form of property, don't make a lot of sense. Copyright must stand under another justification than some misguided idea that people will "use up" too much information, thus denying that information to others. Just stating that idea shows how nonsensical it is. There are good reasons the USSC ruled you can't copy-write collections of facts.

So primarily, what we agree on is that while there are conflict among people around knowledge sharing rules and laws, the tragedy of the commons doesn't apply and has few lessons for that discussion. I think creating the term "knowledge commons" only serves to advance the misunderstanding that knowledge might be a commons, but some special sort of commons, but I suppose that if the proponents can distinguish it well enough that those involved aren't confused, it may work out for them. Personally, I'd just state that the rules of a commons don't apply to knowledge because it doesn't have the properties of a "commons", historically defined. That seems sufficient to dispose with the tragedy of the commons argument and get into the real issues of how to deal with a world where almost anyone can access a virtually costless reproduction of any information being made available for copying.

But don't forget, when you talk about global distributed information, the "distribution" portion of that is a triumph of spontaneous order created by individuals and groups acting in their own best interests. There is no International Internet Committee that establishes how each network will be allowed to connect to another and what types of network traffic they will be allowed to pass. To paraphrase Adam Smith, it is not from the benevolence of the bandwidth seller that we expect our information, but from their regard to their own interest.

Do better workers routinely get ripped off?

Bryan Caplan has an interesting response to a paper about why firms prefer more able workers.

The explanation given is that workers who contribute more capture less of their value to the company than less able workers, and thus they are more profitable to the company to hire.

Taking this as a given (which it isn't necessarily 100% true, but I think there is at least some truth to the idea that abler workers aren't typically compensated in proportion to their ability), it would also imply that a large source of entrepreneurs would be more able people seeking a way to capture the true value of their abilities in the market.

In the same manner, the franchise model of McDonald's, etc... is based on being able to attract the more able by making them a franchisee who is compensated based on the ability and performance more accurately than if they were an employee.

That in turn makes me think that in the future, as we see more independent contracting, working remotely, working commission, etc... those with higher ability should be able to command a higher percentage of the compensation using similar models.

So if you truly have a much higher ability level than your peers, you should look at opportunities to get paid in some manner based more on your specific ability. If you have a lower ability than average, then make sure you get a good job in a stable company.

Learning Truth vs Received Wisdom

Posted in

In response to David Henderson's post regarding Academic Freedom for students:

This fall is my daughter's second semester at college and her first taking heavier "academic" classes outside her regular interests. She's 15, generally soft-spoken and polite, so not exactly intimidating to most adults.

Despite trying to choose her professors well to limit the philosophical issues with her education, she's already come back from her psychology class having decided that she can't discuss her truthful views in class because in the psychology department, any sort of religion or freedom of choice as a basis for anything is forbidden. Everything must be mechanistic and biologically deterministic and she needs to just repeat back the professor and the textbook's point of view in order to get a good grade in the class.

There are plenty of other examples I'm familiar with, and they are worse in the humanities, especially in the humanities that tend to be more and more subjective and less tangible results oriented. (teaching, literature, "studies", etc...)

The pursuit of truth in learning has been largely replaced by the pursuit of memorizing accepted wisdom, with what is accepted determined by full time academics, with input from the media and government bureaucrats.

You generally have to get your own education if you actually want one. There aren't many places you can pay to get an actual education anymore, vs. a piece of paper certifying you can memorize and regurgitate the approved information at a minimal level.

Students realize and internalize this. That's one reason they immediately forget what they "learned" in most classes. No practical future application beyond their "education". It would be funny, if the waste wasn't so sad.

Human Wave Garage Sale Book Reviews

My reviews of a few of the titles that were featured in the Human Wave Garage Sale... at least, the ones I've finished reading in the 5 days since the sale ended:

"Spinning Away" by Sarah Hoyt is a fun look at the future of media, introducing a world where Spinmasters provide the news for 90% of the population, but pay for it with a lack of personal space and attempts on the life that remains to them. It's just a short story, but the world introduced could contain an entire series.

Well written, professionally done Science Fiction, "Spinning Away" also weaves in a bonus forsaken love story on the loom of futuristic science fiction.

Highly recommended, especially if you like to consider the future of media in a connected world, or just want to enjoy the plight of those caught up in the future.

Plenty of present tense action intertwined with a personal history of the main character's career in Spinning mean you'll likely finish this story quickly, but enjoy it all the more.

"The Sky Suspended" by Laura Montgomery follows two main characters. This first, Tri, is a young man yearning for space, but cynical about the process to get there. The second, Calvin, is a young government lawyer unwillingly falling into legally forbidden love while trying to orchestrate mankind's open expansion into the stars. There are several villains, but primarily the government bureaucracy and those that serve it and feed off of it. The government makes an indifferent, but powerful villain, with Tri working to sign up for future interplanetary flights and Calvin taking an interest from a related government agency.

The writing and editing is professional. The disparate plot elements and story-lines come together rapidly at the end in ways you suspect, but don't necessarily expect. Laura's descriptions of how government space agencies could work in the future rings true to anyone with insider knowledge of the regulatory process. She puts her real life experience out for the reader to experience themselves. Maybe it's not everyone's cup of tea, but I love it. The logic and give and take of the law and working around it is fascinating to those of us interested in it.

If you're looking for a lot of swashbuckling science fiction action, this isn't that book, but if you are of an intellectual bent, or prone to philosophy and like your science fiction to analyze and project societies and the interplay of world-changing space events, then this book will be just what you're looking for.

Highly recommended, surprisingly readable and enjoyable, only the shallowest of Science Fiction readers, those who prefer sound and explosions in space to philosophizing about the impact of space on humanity, would find the story and the background lacking.

A legal thriller set in the future and revolving around the consequences of interplanetary space flight and colonization, "The Sky Suspended" is a great book and I can't wait to see if there is a sequel!

"Snow Angel" by Cedar Sanderson is a short story which introduces you to a world large enough to support a series. The story is just a taste, not long enough to explain how everything works, but it's a sweet description of a specific incident tied around a family with a special needs child and their guardian angels.

The writing is professional and full of feeling, but the story itself is cute and full of the right kinds of "family values" for everyone. It's obvious Cedar is writing something she knows with regard to medical science.

Recommended for anyone with a heart and a few minutes to spare in order to fill it.

Not in the sale, but recently finished book by one of the HWGS Authors:

"A Few Good Men" by Sarah Hoyt, a novel in the Darkship series, follows the personal journey of Lucius Keeva, son of one of the "Good Men" who rule Earth in Sarah's far future history. Besides revealing many of the society's quirks hinted at in the previous books, the book primarily covers the revolution of various anti-good-men groups descended from several of today's philosophies and societies.

Along the way Sarah delves into Lucius' background and life throughout the revolution, including his relationships with key members of his family and personal staff. Lucius struggles against both the twisted morality he was brought up in, but also with the conflicts between that morality and the philosophy the local revolutionaries he becomes involved with. The revolutionaries are appealing, but he has to decide to give up the many personal advantages his own society brings him as a member of the ruling class in order to support them. The actions of his foes among the "Good Men" weighs heavily on one side of that scale, but he also has to reconcile his personal views of the world over time.

The book reminds in style and content me of a memoir for a real historical revolutionary. The revolution is covered, but mostly in the background. There is plenty of action, as Lucius is key to several battles, escapes, etc..., but an even larger dose of personal discovery and philosophizing.

Highly recommended, especially if you are a fan of the American Revolution, libertarian philosophy or just action-oriented Science Fiction.

Human Wave Garage Sale

 The Human Wave Garage Sale

When did it become fashionable for published fiction to be full of self-loathing for qualities most intelligent humans value? Where's the adventure, the courage, the fun? We suppose it was about the same time that Literature Majors because the arbiters of what was good and right in publishing.

Fortunately their reign of grey goo and boredom is at an end.  Having gone Indie, authors can choose to write humans as they wish.  And since most authors are (allegedly) human they can even write heroic humans who fight for things that have meaning.

The ennui of the cognoscenti no longer holds sway. The new bad boys on the block are Human Wave authors, whose characters might sometimes be trapped in dystopia but never helpless. And if they must go down fighting, they do so gloriously and for principles bigger than themselves.

Be daring.  Be creative.  Be revolutionary.  Read (and write) Human Wave.

Guest Post above by Sabrina Chase.The authors below are all participating in the Human Wave Garage Sale!


Thomas Sewell

Hitchhiking Killer For Hire -- A border gang beats Ex-Special Forces soldier Sam Harper and leaves him for dead in the desert. Sam must discover “Why?” in this story of government corruption and human smuggling in the near future west. Dedicated to Louis L’Amour. Free for Kindle August 1st through 5th

Sarah Hoyt

Ill Met By Moonlight -- Young Will Shakespeare is a humble school master who arrives home to find his wife and infant daughter, Susannah are missing, kidnapped by the fairies of Arden Woods, the children of Titania and Oberon. His attempts at rescue are interrupted and complicated by a feud over throne of fairyland, between Sylvanus, king regnant, and his younger brother Quicksilver who is both more and less than he seems. Amid treachery, murder, duel and seduction, Shakespeare discovers the enchantment of fairyland, which will always remain with him, for good and ill. Free from the 1st to the 5th of August.

Spinning Away-- In a world where the ability to pick what news will interest most people is very real power, Layna Smythe strives to stay ahead of her rivals and alive. She often forgets that she's also lonely, until an attack reminds her of the man she left behind. Free from the 1st to the 5th of August.

Crawling Between Heaven and Earth -- Sarah A. Hoyt’s first short story collection, initially published by Dark Regions Press in 2003.  Contains most of Sarah’s early published work. Free

Wings -- Second short story collection. $2.99


Michael Hooten

Cricket's Song, Book 1: The Cricket Learns to Sing -- Cricket is a young orphan growing up on an obscure farm in the country of Glencairck.  He wants to be just like Harper, who plays for the people through the winter, but Harper is not content to let him just learn how to harp.  He teaches him the ancient traditions of the Bards of Glencairck, a noble order that is responsible for not just entertaining the people, but for providing impartial judgement to their disputes.  When Cricket is old enough, he enters the wide world  and finds that not everyone knows the old rules, or follows them.  He has to decide for himself what is right--and how far he is willing to go to defend his beliefs. Free for Kindle August 1-5


Rawle Nyanzi

Alien Frontier-- Fifteen-year-old Norma Teague must avoid getting drafted into an alien army. However, her home village demands that she go since she has a magic belt that lets her destroy any armor made of matter. $1.99


Elizabeth Bruner

Flash of Fire -- A collection of super short stories (1000 words or less) on the subject of fire. Ranging from the love of a volcano goddess to natural phenomena encountered as humans explore a distant planet, these stories evoke a sense of wonder and awe at the nature and power of fire. $.99 for Kindle August 1 through 5th


Zachary Ricks

Battlehymn -- (Also Barnes & Noble)  It's a story of giant robots, forbidden love, princesses in danger, and the power of rock 'n roll. If you're a fan of Macross, you might enjoy Battlehymn. $1.99


Cedar Sanderson

Snow Angel-- When a child's imagination leads his mother to a startling discovery, she must then protect him and his guardian from unknown danger. A human mother is fiercer than angels! Free July 31 to August 4

Little Red and the Wolf-Man-- Little Red wears a red cloak, and keeps her shotgun hidden under it. But Grandmother has the biggest secret in the forest, and she is dying… can Little Red help the forest dwellers? $1.49


Mike Weatherford

Cynthia -- (Also Barnes & Noble) Cynthia was a nice girl from a prestigious family, with a "nice-girl" education.  That didn't help much when she found herself chased by an organized criminal element, captured by pirates, and stranded on a planet that was so deadly human government had declared it forbidden.  Luck, in the form of Rat - a trained survivalist - can help, but will it enable her to survive? $0.99


Kiti Lappi


Fourth Sword-- A portal fantasy: woman from our world gets transported to one with an ongoing generations long war and working magic, and finds out, after some adventures and to her chagrin, that she was taken there for a purpose. $ 1.49

The Demons of Khemas-- A tavern wench has fallen for a barbarian swordsman (not that she admits it). When he disappears she needs to find out what happened. $ 1.49


Short stories:

Nights of the Wampyrs -- A small town has problems with a couple of vampires, and the only people who figure out what is going on realize they have to become vampire hunters. Old school vampires, based more on the European folk tales than the later fictionalized versions. First story tells of the birth of one vampire, the two others concentrate on the hunters.

    Raven’s Night$0.99

    After Night Descends$0.99

    Night Work free from 1st of August to 5th, $ 0.99 after that


Dealing with Elves-- A young woman is drawn to a forest where elves live. Urban fantasy, mostly a mood piece. Free from 1st of August to 5th., $ 0.99 after that.

The Task-- A ghost story set in a traditional fantasy world, a peasant girls shelters for a night in an abandoned castle. $ 0.99


Sabrina Chase

Bureau of Substandards Annual Report -- (B&N)Five short stories of that pearl among pan-dimensional bureaucracies, the Bureau of Substandards--and the stalwart security janitors, attack admins, and bemused subdirectors that serve there. $1.99

The Long Way Home-- (Book 1 of the Sequoyah trilogy) (B&N) Webspace pilot Moire Cameron is one of the best--but even she can’t fly her way out of a catastrophic drive failure that triggers a time-dilation bubble. Left suddenly eighty years out of date, she is on the run in a world she no longer knows, caught in the middle of a human-alien war while agents of Toren hunt her for the information only she has--the location of the pristine world of Sequoyah.$1.99

Like what you see? Tweet it out with #HumanWaveGarageSale !

Using Bonding to solve the net cost Immigration Debate

Posted in

One point of contention between pro- and anti-immigration folks is whether immigrants are a net benefit or a net cost to the country they are immigrating to. This debate especially revolves around government taxes paid vs. benefits received.

A bond posted by the immigrant (could be subsidized by a company, or whomever) purchased from a bonding company to cover the entire net cost from their moving to the United States solves this problem.

By net cost, I mean +taxes paid, -welfare received, -criminal damage done, -direct government benefits received.

The key point is that the competing bond companies would be on the hook for the total net cost, but could set the price to the immigrant (or their sponsor) to whatever is mutually agreed upon.

You'd have to create requirements similar to an insurance company's capital requirements for the bonding companies, but competition would help ensure the immigrant would be charged a fair and individual rate, minus transaction and tracking costs.

Thus if immigrants from a particular country are a higher risk of doing massive criminal damage, that would be priced into the cost of their bonds. If immigrants from another country, or without a degree, or without a job offer, are higher risk of ending up on welfare, their bond price would be appropriately more expensive.

If, as the pro-immigration side proposes, immigrants are a net benefit, then the bonds will be very inexpensive on average, just covering administrative costs.

If, as the anti-immigration side suggests, immigrants are a net drain, that drain will be paid for by the immigrant.

Either way, the "good" immigrants will be more encouraged to come than the "bad" immigrants and the bonding companies will be incentivized to gather all the most relevant information to telling the two apart.

Seems like a simple enough solution to work.

What actually makes sense to recycle? Not as much as environmentalists claim.

Posted in

What are the most valuable items for a typical consumer to recycle?

People routinely recycle houses, cars, bikes and most of what you'll find in a pawn shop or on craigslist. There's no government/social encouragement required to convince people that it's ok to live in a "used" house that requires a few repairs rather than building a brand new one on the site.

The difference in that type of recycling is that it actually makes economic sense, vs. the kind of municipality/government/school encouraged recycling which is nothing more than ritualized worship of world enviro-socialism and association with the "cool kid" celebrities disguised as superior moral preening.

If it made sense to recycle your processed sand (glass) and other "recyclables", businesses would pay you enough for your time and resources to make it worthwhile for you to recycle them. Any scheme where the government must subsidize recycling is strong evidence that it's not economically efficient to recycle that product. In reality, even once people have invested time and resources into sorting, cleaning and transporting-to-a-recycling-center green glass, so as perfect a condition you can get, no one wants to buy it, let alone pay enough for it to justify all that effort.

The key piece of information in recycling is the price for that material. If you have to pay someone else to haul a material away, it's garbage. If someone will pay you enough for the material that it's worthwhile to give it to them, it's a resource to be recycled. Typically, laws and regulations are made to encourage or even force people to recycle what is actually garbage.

What about landfill use?

In part this is a result of another type of government failure, landfills.

The government doesn't want people to dump randomly, so they subsidize a landfill. Note, not a competitive market for garbage disposal, but with typical ham-handedness, a government managed monopoly scheme. Then they get concerned about landfill use, so they regulate what goes into it and start requiring "recycling" of anything they think they can avoid going into it, because after all, if they're subsidizing it, they need to prevent unnecessary use of it, right?

Look, there's plenty of space for landfills around and when land is done being used for a landfill and covered over, it can be recycled into another land use. Talk about bulk recycling! If ever predictions of garbage being "valuable resources" come true, then they can be mined out of the old landfills. We'll know where they were stored.

Something municipal recyclers prefer not to discuss is how much of the "recyclables" that are collected in these programs actually just end up in a landfill after all. I suppose they count it as a win that sometimes the city is forced to pay to truck the material to a landfill in another state because of state recycling regulations.

Just recognize government-subsidized recycling for what it is, nonsense disguised as environmental religion.

In the meantime, if someone calls you evil for not putting your garbage in the "correct" bin, just let them know you've recycled entire houses before.

Citizens United, Regulatory Capture and Public Choice

Campaign finance reform is periodically all the rage. Typically, when people who disagree with the media or Hollywood have the temerity to want to broadcast their views.

Generally, there is a desire to "get money out of politics", or "stop special interests from controlling elections." What it generally comes down to in the end is a desire to shut people up. There is a pretense that they just want to restrict or ban political advertising so that the "little guy" can be heard. In reality, it's just another method of power and rent seeking from media and politicians trying to tile the playing field in their favor.

In theory, you could ban all political advertisements. In reality, you need an enforcement mechanism, which comes with regulators, prosecutors, etc... You also get a government board or committee to setup rules defining what is allowed and what isn't under a law banning political advertisements.

Pretty soon, that board is run by either big media companies or else entrenched political consultants, because hey, they're the ones that really care enough to really study the laws and the regulations and gosh darn it, they have all sorts of relevant experience that makes them perfect for the job, right? So the board starts defining terms like "political" and "advertisement". Is a movie about events in Benghazi political? Is it an advertisement? Perhaps that depends on who is making the movie, some right-wing group, of course it's political. Hollywood? Of course not, they're not political, right? Maybe it depends on if Hilary or Obama are mentioned by name in the movie or not? Or perhaps we can just exclude stuff like that when it's shown say, within 60 days of an election where people mentioned in the move are involved?

Not sure if you're movie is going to fall afoul of the regulations? Better to just make sure your movie gets preclearance from the regulators who report to the board. That way you can be sure you aren't wasting your money on that Benghazi movie the government will order you to not release, or fine you or throw you in prison for showing.

Of course, like with all other laws, there's prosecutorial discretion. I mean, we have to allow for the prosecutor to have some common sense in only going after the actual bad guys, right? Maybe if the prosecuting attorney happens to be appointed by someone who is politically friendly to you, you get a little more leeway in what kind of movies and advertisements you can put out there? Perhaps everyone knows that if old Joe wasn't the prosecutor, you couldn't put that union "Let's all work together!" ad out there because someone else might call it political, but since Joe doesn't prosecute that sort of thing, you're ok.

I mean, it's not as if your elected and bureaucratic representatives have any incentives around caring which politicians get elected, right? No incentive to ensure the system can be gamed for their benefit?

Hopefully you can begin to see why restricting or banning political advertisements is in effect, the same as giving whoever is in power a filter to tilt media and advertising in their direction. That's what campaign finance reform has always been about in Congress in this country. Gaining an advantage over your political foes, tilting the playing field and ensuring you keep power.

Campaign Finance Reform is just a special case of regulatory capture as predicted by Public Choice economics. The only thing special about it is that those doing the capturing are the politicians themselves.

Fortunately, we (all forms) have a right to free speech and the current supreme court is interested in preserving it more than they're interested in letting those in power in the government restrict it. Before you propose a fix, make sure it's not worse than the original issue.

Sovereign Security Companies and Military Underwriters - Answers For Dave

This is Part III of a continuing series about how sovereign security companies and military underwriters could work to provide private justice and defense from foreign aggression in a society.
Original Econlog Post is here.
Part I is here.
Part II with Dr. Huemer's response is here.

Dave has some comments and follow-up questions about the discussion. His comment was:

Michael, I think your objection to "invasion insurance" being impossible to collect really only applies if we are concerned about the whole world being conquered. Against more moderate threats, the insurance can be backed by people all over the world in different jurisdictions. (I don't think you could run a private defense force out of, say, the US or Britain, but maybe you could write a credit default swap on one, or hold money in escrow for one)

Thomas, I guess I'll have to read your book. It sounds like you rely on some kind of limited "cartelish" norms enforcement to ensure that security firms pay "their share" of defense costs? What do you think of my claim that the possibility of "moderate scale" extortionary attacks, targeted against security firms without any defense insurance, would discourage free riding security firms?

What laboratory can you use to find out if these ideas actually work? EVE online?


My response:

Thanks for the excellent notes on how a market can use financial transactions to spread risk across borders.

It sounds like you rely on some kind of limited "cartelish" norms enforcement to ensure that security firms pay "their share" of defense costs?

More along the lines of each underwriter, i.e. military defense unit, is an independent company, but the norm is to agree to a set of interlocking contracts with the others in the area because keeping the peace is what their ultimate customers are paying them for. A refinement of the threat of force being the best way to keep the peace, if you will. Also a way of specializing, because one group may be best at mobile armor, but desire support from an air group and a light infantry group, and some specialists in anti-air defense, and a medical team, and contracts with suppliers who specialize in military logistics, and arms dealers, etc... Modern warfare capability is a complex thing and ultimately the market advantage would go to groups that can arrange to do it most efficiently for their customers.

In terms of individual customer cost, that would be the subject of negotiations between the large consortia and the local security companies. As long as there is competition, or at least the possibility of competition, then the payment for services would have to converge on the amount willing to be paid by the ultimate individual consumer. In that case, the local security companies end up as just a pass through in the average case, because other than having an ability to potentially negotiate a better deal for themselves, the average prices are going to revolve around the available supply and demand for military defense services overall.

What do you think of my claim that the possibility of "moderate scale" extortionary attacks, targeted against security firms without any defense insurance, would discourage free riding security firms?

I think that could occur, but it may be more likely to come into play when two local security firms are negotiating with each other over a case between their subscribers. If one of them has a contract with a big underwriting company to back them up as long as they are following the agreed upon rules of justice, choice of law and courts, etc... defined in their contract and the other one is on their own with no such relationship, guess who is going to have the negotiating advantage and is going to attract more subscribers? It's a competitive advantage in servicing their customers to ensure they're taken seriously enough.

As a result, once they've both contracted with an underwriter, either the same one or underwriters that also contract with each other, directly or indirectly, then that also creates a strong norm to keep the peace and work out any minor differences of opinion through the arbitration provisions in their web of contractual relationships.

A similar situation of friction between a "backed" company and an area that doesn't want to allow competition for government-style services arises in the sequel to Sharper Security, which isn't quite out yet. That competitive advantage explains part of the process of how local unaffiliated groups end up joining enough of the sovereign security company/underwriter legal framework to keep the peace and keep their influence. Similar to how having an industry standard for something causes competitors to converge on it because while there isn't direct enforcement of it, if they don't, they'll be at a competitive disadvantage to those that are interoperable as their customers desire.

What laboratory can you use to find out if these ideas actually work? EVE online?

That's a good suggestion. I'd like to see it. :) Currently I'm exploring them by writing fiction based on such a society and seeing how things turn out, how problems that arise are dealt with, etc... as much to see where the ideas take me as to expose them to the competitive light of the market place for ideas. If nothing else, it gets some people used to pondering the possibilities.

Syndicate content