Update

Well it has been a long while since I last posted on my blog. Talking last week with a friend of mine reminded me of it, and so now there's some new material. Here's a (hopefully) quick update on my goings-on:

• My uncle is very sick with cancer. We really hope he pulls through. He better at the very least hang in there so I can see him again in two months!!
• I have a little less than 10 weeks left here in Cottbus, Germany
• I'm working on my Master Thesis and I still have one exam left to take
• I now have a desk in another building, so I now longer have to put up with the jackhammering of all the renovations
• I'm now writing the thesis in english - now it'll be done much faster and be of higher quality.
• I still have no job to return to, though I'll find out at the end of August whether Lockheed has a position available for me
• Ever since running out of mises.org podcasts to listen to, I've been listening to the following podcasts, each of which I hope to review in the near future
• School Sucks (Brett Vinnoitte (sp?))
• Gnostic Media (Jan Irvin)
• Complete Liberty
• Peace Revolution
• the Lew Rockwell Show
• I'm excited to be done with school and to return home
• I'm starting to work on my Flash videos again. I want to summarize each chapter of Hazlitt's Economics in One Lesson in ten minute videos (or shorter)
• I've found a buyer for my bass guitar (Richard, my roommate)
• It's been a very rainy summer here in Cottbus
• I plan on visiting Vienna and Instanbul before returning home

The role of recipes in increasing productivity

(originally posted August 14, 2011 @ Facebook)

In Man, Economy, and State, Chapter 1.8 "Factors of Production: Labor versus Leisure," Murray Rothbard claims that improved technical knowledge by itself cannot increase production (that it merely broadens the bounds of what is possible with the given resources). I give the full quote at the bottom of this post. I disagree with him and I illustrate this with the following example:

Let's say Crusoe has a nice sharp rock and a heap of coconuts. At first it takes him an hour to crack each coconut until he stumbles upon a better technique. Perhaps he discovers that striking the coconut in a certain way or in a certain place opens it with one simply whack, bringing his production time down from an hour to five minutes.

So: same rock, same type of coconut, but twelve times the productivity. The only difference is his recipe, or technical knowledge. Now of course I do agree with Rothbard in his own example below that Crusoe can't build a mansion on his island even if he knew how to do it. This is because his resources are limited. But what about the coconut example? What do you guys say?
 
Fins


original quote:
"...It is evident that every man desires to maximize his production of consumers’ goods per unit of time. [...] The nature-given factors are limited by his environment and therefore cannot be increased. This leaves him with the choice of increasing his supply of capital goods or of increasing his expenditure of labor. It might be asserted that another way of increasing his production is to improve his technical knowledge of how to produce the desired goods—to improve his recipes. A recipe, however, can only set outer limits on his increases in production; the actual increases can be accomplished solely by an increase in the supply of productive factors. Thus, suppose that Robinson Crusoe lands, without equipment, on a desert island. He may be a competent engineer and have full knowledge of the necessary processes involved in constructing a mansion for himself. But without the necessary supply of factors available, this knowledge could not suffice to construct the mansion."

- Murray Rothbard (Man, Economy, and State)

Larken Rose, Jan Irvin (Gnostic Media), and roads

re: Gnostic Media Podcast: Jan Irvin interviews Larken Rose (pt. 3)

(Larken is an anarchist and author of "The Most Dangerous Superstition")

Larken speaks about how most people ask the question, "How will we pay for the roads in a free society?" His answer: "You already pay for the roads." As if it's a "well, duh!" kind of answer. But it's a straw man - he's answering a question that doesn't really concern people. The question that people really ask is "how do we prevent the free-rider problem?" or "what's to stop people from extorting those wanting to use their roads?" or similar concerns. These concerns may or may not be valid, but it is without a doubt that in a society of socialized roads, it is indeed difficult at least for most people to imagine a society without socialized roads. Most people don't have very good imaginations and so it is not surprising that people struggle with this issue. They're not stupid.

NAP: The Non-Aggression Principle

First Principles

Open Question: why is it important to argue from first principles?

Game Theory, Utility, the State, and more

Today I had a stimulating conversation with a fellow student. We each see the world a little differently, but as he studies Engineering and Business (sorry, I believe there's probably a better translation, but I do think that name gets the idea across) and is interested in economics, we can have more informed discussions and debates than with other normal folks who don't spend as much thinking about such geeky things.

Let's start with the positive! We both agree money is a good thing! I know, it doesn't sound like much, but I'm amazed at the number of people I regularly meet who demonize money. They have absolutely no idea that our current wealth and civilization is only possible through a universal medium of exchange ( = money).

Now to the juicy part. First of all, the conversation never would have taken place, had I not quoted Bastiat on a Facebook event page for Flashmob "Rettungsschirm für die Bildung" about a month ago. It was an event to protest the reductions the Federal State of Brandenburg had made in higher education. Here's what I wrote:

‎"Der Staat ist die große Fiktion, nach der sich jedermann bemüht, auf Kosten jedermanns zu leben." - FRÉDÉRIC BASTIAT

Studenten, Bankiers, Renter, Autofahrer, Farmers, Politiker, Eltern und Kinder plündern sich alle gegenseitig aber wer gewinnt letztendlich? Schlimmer noch, unsere Generation hat leider die Arschkarte gezogen. Uns wird gewisse Leistungen versprochen, für die wir bezahlen aber nicht genießen werden, dank dem Sozialstaat und demographischen Wandel, ua.

Vlt wird es langsam Zeit, das alles neu durchzudenken, anstatt stets mehr Geld von unsren Mitmenschen zu fordern. Just a thought..

My fellow student made a somewhat flippant comment on FB, to which I also replied flippantly. No need to reprint that here.

Anywho, we happened to be talking today about some engineering related issue, and I asked if he was the one that had replied to me back then. We determined he was indeed, and we started a nice conversation. I really to enjoy a good talk. So what did we talk about today?

What I tried to get to the bottom of was how he justified taking people's money for use on "public goods," ie roads, schools, defense, etc. Though we must have talked for about 2.5 hours, I'm not sure how far we got. We spent more of the time arguing over the method, validity, and applicability of Game Theory. Here's how Wikipedia briefly describes Game Theory:

Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers."

One typical game is one participant (Andy) is given, say, 10 pieces of candy. According to the rules, Andy must decide on a number of pieces of candy which he will offer to a second participant (Bob). Bob then muss decide whether to accept or reject the offer. If Bob rejects the offer, both participants lose their candy. If Bob accepts, he must accept the number of candy pieces that was offered him. For example, if Andy wishes to offer Bob only one piece, keeping nine for himself, he has to reckon with the possibility that Bob might refuse the offer out of spite, even though that means that Bob will also lose his one piece of candy. So maybe Andy offers five pieces to Bob in order to ensure that Bob will most likely accept his offer, so that Andy will at least come away with some candy.

That's all very interesting and all, but if someone can explain to me how this game can improve our knowledge and understanding of the real world, I'd appreciate it. I don't mean that to be totally glib. I really just don't understand what it tells us.

Another game is a village of, say, ten people. They survive in part thanks to a stream, from which they laboriously fetch their water. The question arises as to whether a well should be built, so that all have easy access to water. Now of course different people could value such a well very differently. Maybe one person lives relatively close to the stream, and feels it wouldn't be worth the effort or money he would have to contribute to the building of this well. There are perhaps other who live quite far away from the stream, or who don't like taking early morning strolls to the stream.

The point is, all participants have various needs, values, wishes, etc. There are Games which claim to prove how, in the absence of compulsion and given certain restraints (boundary conditions), each person would individually chose an outcome that worse for him and worse for the community as a whole. This proof would further go on to show that if they could someone all ensure that the others would pay for such a well (say, with force), then the outcome will be better for each individual and better for the community at large.

All these games are very strictly circumscribed and each "player" is given certain very specific goals and constraints, just as if one were playing a board game. The problem is that life is not a board game. There are few such clear cut rules and every shade of grey between options. So let's go into where I think my friend goes wrong.

The premises my friends bases his arguments upon include the following:

• Utility is measurable and quantifiable.
• Knowledge regarding real-life interactions can be gained from certain Game Theory scenarios.
• The State acts in an idealized fashion, ie it strives to maximize the utility of its subjects.
• The State is above moral reproach. That is, it may morally undertake certain actions that would be considered immoral and criminal if undertaken by an individual. This seems to be justified as long as utility is being maximized.
• Our relationship is with the state is that of voluntary beings contracting with one another.
• When talking about the utility derived from a particular policy, it is unimportant to consider the corresponding loss of utility by others. 

#1 Utility

Each person has certain goals in life. Economics has precious little to say in regards to the goals themselves, which could be "I want to be happy," "I want to live a more healthy lifestyle," or "I want to go to heaven." The evaluation of the goals is a task better left to philosophy or psychology. Economics is the study of how humans make choices given that they have these goals. Economics studies the means applied to achieving the ends. Utility, then, is simply that psychological satisfaction that one derives from an action (say, that new computer purchase, going on a date with that pretty girl you've admired for a long time, or giving to charity). 

We prefer means that get us closer to achieving our goals. Everything in life is a choice. Do I wake up at 6am to go to class or do I sleep in? Do I spend my Euro on a bottle of Coke or do I save that Euro for another time? To I continue writing this essay or go study for the Turbines final I have in less than a week? The Austrian school of economics teaches us that preference is demonstrated through choice. How else does one answer the question whether we "prefer to sleep in or go to class?" If I sleep in one day and miss class, it's because at that one point in time/history, I preferred sleeping in to going to class. Most days, however, I prefer going to class. We know this, because if I did not prefer going to class today, I would not have gone to class. 

In this process of choosing, we are ranking various options. When I got up today at 6am, this indicated that at that time, waking up was higher on my value scale that was sleeping in. I cannot make a statement like the following: "I value waking up to go to class 2.7 times more than I value sleeping in." It's like trying to quantify how much you love someone. There's no way to do it! Value scales are purely ordinal (ie, 1st, 2nd, 3rd, etc) and not cardinal (1, 1.45, 100.2, etc). 

I felt the need to write those three paragraphs in order to make my points about the first bullet point clear. A choice delivers more Utility, the higher on our value scale it lies. Something that brings us more utility is something that delivers more psychic satisfaction, and as such lies higher on our value scale. I hope I have clearly demonstrated that because our value scales are purely ordinal, a value cannot be applied to them. Same for utility. Because of this, utilities cannot be added, substracted, etc. Here's an example:

• I love Grandma Audrey more than Aunt Betty.
• I love Aunt Betty more than Uncle Christopher.

Logically, we can also say that I love Grandma Audrey more than Uncle Christopher. I might also be able to colloquially say that I love Grandma Audrey a whole lot more than Aunt Betty, and that I only love Aunt Betty a little bit more than Uncle Christopher. They're both pretty close. But is it possible to say whether I love Grandma Audrey more than Aunt Better and Uncle Christopher put together? Would such a statement even make sense? Can I add the love I feel for Better and Christopher and compare it to that for Audrey? I don't think so! And even if that were possible, how could a third party (say, an economist interested in such matters) determine these relationships? He would have to ask me. I could lie. I might change my mind tomorrow. 

When I was a little shaver (a "little shaver" is a child according to my family's vernacular), my mother and brother and I sometimes played a good-night game. My brother would stretch out his arms and tell Ma "I love you this much!" I was a little older and so I spread my larger wingspan and said "And I love you this much!" Well, Ma had longer arms for the both of us. But then I would declare that I loved her from from our house to the neighbor's house. My brother would then have to out do me, and so on, til we're burned up by the sun. 

Now if I may be glib for a moment - the point is, we did that in good fun, but many economists continue to believe that love utility is a measurable concept. To those, I ask, show me a Util (the supposed unit of utility)! I wanna see one!

IMHO, this is enough to destroy his whole argument, but there's more!

#2 - Game Theory

I already touched on this. Someone needs to show me why we should base decisions of so-called public policy based on a board game. Maybe I'm being too harsh, but at this juncture, I don't get it. That may admittedly be ignorance on my part. But since the goal of our would-be social engineer is prove an increase in social utility (which, again, cannot be added, multiplied, derived, or integrated) as a result of a particular policy, I don't know if he'll have much success in persuading me. But I endeavor to keep an open mind!

#3 The Idealized State

Ah yes, the State. To put it bluntly, no politician gets into office and then summons his social scientists to advise him on what would increase social utility. Most get into office, with certain ideas of what they would like to accomplish, with certain ideals, and with a certain idea of what will get him reelected. It just seems to me incredibly naive to believe anything else. To be sure, the politician may talk about increasing social utility, but surely only because it is a "scientific" rationale for that which he's already decided upon.And that's even ignoring the measurement/comparison problem I keep harping on! 

Or maybe I'm missing something. Anyone care to put me right?

#4 Morality and the State

My number one question for my friend, which I've saved for last, is probably the most important. Why does he exclude the State from the morality that we demand from our fellow man in more personal situations? Why is one group of people allowed to steal from another? 

His answer, which he mentioned fleetingly, I believe amounted to justifying this transfer, this theft, in that it maximizes social utility. Well, you know how I already feel about utility. But even if we could somehow measure the increase in utility, how does that have any bearing on the morality of the action? The rapist gains in utility will each person he victimizes. We would never even dream of justifying his action based on his utility. Scheiß auf sein Nutzen! Well, what if the majority hates redheads, and wishes to kill all of them or take all their money or lock them all up in prisons or drive them all from their homes and out of the country? Even if that increased that phantom Utility, who would claim that as a justification? 

I think these people are cherry-picking their arguments. Because once they admit that it's immoral to kill all the redheads (despite the increase in social utility), then they've admitted that there's some moral limit to the state. But where is that line and who determines it? Well, my friend determines it I suppose. Everything he wants to do is moral and for those that don't like it - tough!! That segues into the next point:

#5 The Social Contract

So I got the standard social contract story today. I insisted that I don't recall signing any such contract, to which he replied that I'm free to leave the country. I don't find his argument particularly convincing. For after all, if you argue that the State can do as it wishes as long as its citizens have the ability to renounce their citizenship and leave the country, well then the crime against the Jews was probably ok. After all, they were given ample opportunity to leave the country. Since they didn't all leave, we can only conclude those remaining were OK with the fate meted out to them, and that the holocaust was moral. Now of course no one, save maybe for a few crazies, believe that it's moral to murder millions of people. But again, my friend has to either change his argument, or admit that the holocaust was just and justifiable. Sorry, you can't have your cake and eat it too. This is the No-Cherry-Picking-Zone.

#6 That Which is Unseen

Frederick Bastiat is perhaps most famous for his Broken Window parable, where he demonstrates that we have to look at the unseen if we want to be good economists or if we really want to understand the world. If the State builds a bridge, it is impossible to know what people would have spent their money on had it not been expropriated and spent on something that they didn't necessarily want. This unknown counter factual would have brought some measure of utility to those making those decisions, but we'll never know what it is! And so we can't compare building a bridge with its real alternative (and *again* , that's assuming we can even measure social utility!!!). Therefore, all this talk of increasing social utility through public works projects (and basically all government spending, for that matter) is just scientific sounding bunk used to justify taxation.

Last Thoughts

Stephan Molyneux puts it pretty well when he points out that people will spend hours skirting around the main issue: State violence and coercion. Even I devoted only three short paragraphs to it. I think that's because the argument is deceptively simple: I may not agress against my neighbor, lest I be punished. This is the Non-Aggression Axiom (NAA). Statists are willing to argue all the technicalities or utility and game theory and on and on, but they will bend over backwards to avoid talking about the NAA and its application to the State. My question to all those that I ever have these debates is: "Why to you except the State from the NAA? Why does the State have a different set of moral rules? Why is someone who dons a state uniform suddenly permitted to do things that he could never get away with were he not wearing that uniform.

I have yet to get a satisfactory answer. Either from friends, the internet, philosophers current and past. Maybe the reason is that it is in fact not possible to answer satisfactorily. Maybe there is no justification. And if you can't justify it, shouldn't you then, in the name of intellectual honesty, have to try to shrink the State or do any with it altogether? 

Ahhh well, that's about it. I'm sure there are things I forgot. I'm no expert in making these arguments, though I think I understand them pretty well. I also hope I wasn't too harsh. If I'm making bad arguments here, I want someone to point them out to me. I'd like to think I'm in pursuit of the truth.

I very much enjoyed the conversation today and I sincerely look forward to our next meeting. Til next time..

Peace,

Fins

***

p.s. That Bastiat quote from the beginning of the essay reads as follows in English

The State is the great fiction by which everybody endeavors to live at the expense of everybody else.

What a gem.

Liberty, Freedom, and Power

The following are reflections upon Murray N. Rothbard’s The Ethics of Liberty, which I am reading for the third time (and the second time in two weeks!).

On Liberty

What is Liberty? I very much like Rothbard’s definition: The absence of molestation or invasion of one’s person or just property. The word just is there to distinguish between property acquired through means in accordance with Natural Law, that is, through production, trade, or gift and that property acquired by violence or the threat thereof. That is, if I stole your watch, I’ve unjustly made it my property and it would be your right to invade my property and person to repossess your property.

On Power

One thing I do not care for in Rothbard’s argumentation is his use of the word power. He claims that in the free society, we would not have the “power” to invade another’s person or property, either because we would all refrain from doing so, or because other would prevent us from doing so.

“I don’t have the power to do something” seems to be equivalent to “I am prevented by (threat of) force from doing something.”

So…

1. Liberty is the ability to do anything within my power.
2. That which is  outside my power (see above) to bring about does not limit my freedom/liberty.
3. So if a law prevents me from, say, painting my house pink, then my freedom is not at all restricted because the act of painting my house pink is no longer within the range of my abilities/ power

It would seem that according to Rothbard, ability is power. That is, leaping the ocean in a single bound is impossible because it is

1. not within my power, nor
2. within the scope of my abilities, nor
3. in my human nature to do so.

I don’t know why he lets Power into the discussion. His definition of liberty seems to do well enough on its own. Now, I still need to go back and read the thing again to really be sure I’m understanding him right. As much as I like Rothbard’s style, argumentation, and depth of knowledge, he is still an imperfect human being and not beyond criticism. So I intend to delve further in an attempt to either reconcile the above comments on power, or reject it.

Open questions:

1. Is there a difference between liberty and freedom? This might be a silly semantic argument or it may have real teeth. Either way, it must be recognized that other languages may either have only one word (German springs to mind, as that language has only the word Freiheit) or even more than our two to describe these concepts.
2. Where do these words come from and what were their original meanings?W
3. What changes in connotation has it undergone? After all, it seems that one can use Freedom to describe virtually anything, including socialism, redistributism, and worse.