Monthly Archives: January 2014

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All You Need Is Toleration – Article by Max Borders

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Categories: Culture, Philosophy, Tags: , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Max Borders
January 28, 2014
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Truth carries within itself an element of coercion.
Hannah Arendt

Identity politics has come to the freedom movement. But does it fit?

Many newly minted libertarians have come out of America’s indoctrination factories feeling a mix of guilt and sanctimony. They’re still libertarians, but they admonish you to “check your privilege” and caution that you may unwittingly be perpetuating a culture of oppression.

Libertarianism alone is not enough, they say.

Our tradition, they urge, needs now to find common cause with various fronts in the movement for “social justice”—struggles against racism, sexism, ageism, ableism, weightism, classism, and homophobia. In that movement, the unit of injustice is the group. Still, joining up means libertarians can attract more young people while forging a more complex, ethically rich political philosophy.

In short, we ought to hitch our wagons to what one might call the “victimhood-industrial complex.” If we don’t, some warn, the millennials will all run to progressivism.

Now if you don’t think this victimhood-industrial complex exists, ask Jonathan Rauch. In his 1993 book Kindly Inquisitors, he argued that free speech was quickly being lost to politically correct censors—especially in higher education. Twenty-plus years later, Rauch says, free speech in the academy is virtually dead:

Unlike most workplaces, universities are at the heart of intellectual life, and so the bureaucratization of speech controls there is more disturbing. In American universities, the hostile-environment and discriminatory-harassment doctrines have become part of the administrative furniture.

And for their student bodies, so also have diversity training, sensitivity seminars, and entire majors devoted to inculcating the victimhood ethosall of which allows victim groups to justify a dangerous promiscuity with power. That’s one reason libertarians should take caution.

Prime Virtue

To take any moral high ground on matters of subjection, we don’t need to adopt the language or agenda of the victimhood-industrial complex. Indeed, that complex (double entendre intended) is part of progressive intellectuals’ designs on power. It is intended to fragment people along contrived, collectivist lines. And we can do better.

I normally don’t make arguments based on ideological purity, but here’s an area in which pragmatic and philosophical considerations prompt us to look to our own tradition for answers. That is, we libertarians already have a virtue that works. It captures the best of our humane concern for others and discards the bromides, the claptrap, the unearned guilt of the dangerously collectivist “social justice” movement.

That virtue is toleration.

Toleration is what separates libertarianism from competing doctrines, at least when it comes to society and culture. If some principle of non-harm orients our political compass, toleration is a moral guide. I realize that might sound a little funny to anyone who’s spent five minutes on Facebook with a rabid Rothbardian. And, of course, self-styled progressives bandy the term about, too. But the classical liberal form is the original—and most resilient—sense of toleration (or tolerance), because it does not carry with it any baggage that might corrode the rule of law, or the freedoms of expression and conscience.

What has liberated great swaths of humanity is not just the idea that people should be as free as possible; it’s the idea that in order for this great pluralist project to succeed, we have to embrace a virtue that allows us to coexist peacefully with others who may not share our particular ideas about the good life (values, religion, ethnicity, culture, or lifestyle preferences). Classical liberals have always accepted the idea that people are seekers and strivers looking for something. Of course there are a billion paths to happiness, life meaning, and well-being. Accepting that, we have to put the pursuit of happiness first, which requires admitting that we’re all different, one to the next, and we will take different paths.

Toleration starts with conscientiously agreeing not to obstruct another’s path.

Our toleration is also dispositional. A more robust toleration involves a mien of empathy, respect, and open-mindedness. It requires us not just to leave other people alone in their pursuits, but also to consider their perspectives and circumstances. The toleration of social justice is often not so tolerant. It requires conformity, censorship, and consensus.

So, if by “check your privilege” one means try to imagine what life might be like for someone in different circumstances, then great. If by “check your privilege” you’re accusing someone of being part of an oppressor class just because she hasn’t been designated a victim, then you’ve thrown toleration out with the bathwater. This formulation seems to mean your rights and opinions are invalid and you have no real complaints or suffering because you belong to X group. Or, more to the point: You are obligated to pay because people who look like you in some ways did bad things at some point.

The Apparently Perfect vs. the Good

So what does it mean to coexist peacefully with others? And doesn’t toleration have limits? Toleration does not come without its paradoxes, real or apparent. It may be difficult to tolerate the intolerant, for example. But radically free speech and a thick skin are about the best we can do—though such may include fiercely criticizing others for their intolerance in a world without any bright line between disrespect and disagreement. As libertarians, we might draw our own line and not tolerate those who regard themselves as “entitled to force the value [they hold] on other people”—and we can use any peaceful means to thwart them in their attempts to disrupt others’ life plans.

No, toleration is neither a perfect virtue nor the only virtue, but it does the work of peace.

What Liberal Toleration Is Not

Our conception does not require envy or guilt to operate. Nor does it require state censorship or wealth redistribution. It doesn’t require that we adopt cultures and communities we don’t like, but rather acknowledges that those communities and cultures will emerge. Our conception of toleration requires only acknowledgement of differences coupled with that disposition to openness.

Our conception of toleration does not accept the murky idea of victim classes. The problem here is the term “class.” Some member of a class may not be a victim at all. Besides, and more to the point, accepting the idea of victim classes implies that there are perpetrator classes—that if group X has frequently been discriminated against, or abused outright, then all members of group Y are liable for those actions (and, indeed, it’s fair to assume their perspective is tainted).

What’s more, the common acceptance of the idea of a victim class can perpetuate a psychology of victimhood among the members of that class, which holds people back. Some theories of social justice go as far as to require that non-members of the victim class accept that they are victimizers by default. While it is possible to institutionalize mistreatment of a group, justice requires us to dismantle the rot in that institution and to stop putting people into groups at all, not to violate other groups for the sake of abstract redress, or to handicap the excellent, or to reward something irrelevant such as someone’s race.

Proponents of the idea of victim classes view “social justice” as a vague cluster of goods, words, and opportunities to be filtered and apportioned equally among people by an anointed few. What isn’t vague, though, is the power they demand and the privilege they mean to extract. By contrast, proponents of liberal toleration require only that you treat individuals with respect, and first, “do no harm.”

Our conception does not hypostasize or collectivize people—treating them as automatically deserving either special consideration or zealous sensitivity, which is supposed to accrue by virtue of the ascribed group membership. Such collectivism lobotomizes individuals. It robs them of their identities and pushes them to accept identities fashioned by others. It strips them of their individual circumstances. It thins their sense of personal responsibility. And it ignores the content of their character.

Our conception does not demand a perpetual pity party, nor invent reasons to be offended, nor cause one to contrive an invisible latticework of injustice that extends up and out in every direction. Instead, our conception embodies the liberal spirit of “live and let live.” The more people who think that way, the fewer victims—real and imagined—there will be. Toleration needs neither rectitude nor guilt, so demonstrations of piety are also unnecessary. It’s a position that can be held by those who think all people are basically good, or that all people are basically lousy. But that means setting aside the business of sorting out victims (the righteous) and oppressors (the sinful).

Finally, as our conception does not require the ubiquity of injustice, it allows for the flourishing of real community. Real community needs real toleration, free speech, and the inevitable frictions that come along with our colliding perspectives. It is from those frictions that better ideas and more favorable consensuses can emerge—at least if you believe John Stuart Mill and Jonathan Rauch.

Taking Back Toleration

The old adage says: To a hammer, everything looks like a nail. To someone who has been educated in the victimhood-industrial complex, everything looks like social injustice.

Toleration might ask more of us sometimes, such as that we not only acknowledge the differences among people but to try to see things from others’ perspectives (empathy). Taking on that view helps us consider how we might reduce all the frictions and figure out the kind of people we want to be. This is not a political doctrine, however. It’s more like remembering the golden rule. It’s about respecting one’s neighbor—be he Sikh or freak or breeder. It’s about acknowledging what evil, intolerant people have done in the past, but also moving on from it.

Toleration even requires us to put up with—politically, at least—the ugliest forms of expression. As Rauch reminds us, “The best society for minorities is not the society that protects minorities from speech but the one that protects speech from minorities (and from majorities, too).” And that’s hard. One has to listen to different voices, taking into account the circumstances of time, place and person, as opposed to treating people as caricatures. Whatever one’s intentions, we must remember that a lot of evil has flowed from forgetting that people are individuals.

Of course, none of this is to argue that racism or sexism or homophobia doesn’t exist, or to deny that people have been mistreated throughout history for reasons that seem arbitrary and cruel to us. It is not even to deny that people are mistreated to this very day—often for those same arbitrary reasons. Rather, my argument is intended to show that a libertarian principle of respect for persons requires toleration, not identity politics.

The great thing about libertarianism is that it is a political superstructure in which most other political philosophies can operate. No other political philosophy features such built-in, full-fledged pluralism. The other basic political philosophies have built-in asymmetries. Progressivism does not tolerate libertarians living as they wish, but libertarianism tolerates progressives living as they wish (with all the caveats about voluntary participation.) And as Hayek said about the conservative: “Like the socialist, he is less concerned with the problem of how the powers of government should be limited than with that of who wields them; and, like the socialist, he regards himself as entitled to force the value he holds on other people.”

So progressives are intolerant of economic freedom. Conservatives are intolerant of social freedom. Only libertarianism maximizes varying conceptions of the good. Nothing under libertarian doctrine precludes embedded communities of any political stripe, and in a free society, we ought to tolerate these clusters as long as they guarantee a right of exit. Indeed, our only requirement would be that if any such community is to persist, it should do so in a matrix of persuasion rather than of coercion.

If we take back toleration, we have a moral high ground that is both appealing to younger generations and works to the benefit of all people. We don’t have to live with the contradictions of progressive social engineers or with conservatives’ half-hearted deference to individual liberty. By practicing real toleration, we can dispel all the various “isms” while leaving people their life plans.

And that’s good enough for libertarianism.

This article was originally published by the Foundation for Economic Education.

Max Borders is the editor of The Freeman and director of content for FEE. He is also cofounder of Voice & Exit and the author of Superwealth: Why we should stop worrying about the gap between rich and poor.

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Cryptocurrencies as a Single Pool of Wealth – Video by G. Stolyarov II

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Categories: Economics, Technology, Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,

Mr. Stolyarov offers economic thoughts as to the purchasing power of decentralized electronic currencies, such as Bitcoin, Litecoin, and Dogecoin.

When considering the real purchasing power of the new cryptocurrencies, we should be looking not at Bitcoin in isolation, but at the combined pool of all cryptocurrencies in existence. In a world of many cryptocurrencies and the possibility of the creation of new cryptocurrencies, a single Bitcoin will purchase less than it could have purchased in a world where Bitcoin was the only possible cryptocurrency.

References

– “Cryptocurrencies as a Single Pool of Wealth: Thoughts on the Purchasing Power of Decentralized Electronic Money” – Essay by G. Stolyarov II

– Donations to Mr. Stolyarov via The Rational Argumentator:
Bitcoin – 1J2W6fK4oSgd6s1jYr2qv5WL8rtXpGRXfP
Dogecoin – DCgcDZnTAhoPPkTtNGNrWwwxZ9t5etZqUs

– “2013: Year Of The Bitcoin” – Kitco News – Forbes Magazine – December 10, 2013
– “Bitcoin” – Wikipedia
– “Litecoin” – Wikipedia
– “Namecoin” – Wikipedia
– “Peercoin” – Wikipedia
– “Dogecoin” – Wikipedia
– “Tulip mania” – Wikipedia
– “Moore’s Law” – Wikipedia

The Theory of Money and Credit (1912) – Ludwig von Mises

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Dispatch from Ukraine – Article by Anonymous Ukrainian Journalist

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Categories: Politics, Tags: , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Anonymous Ukrainian Journalist
January 27, 2014
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This article was originally published by the Foundation for Economic Education (FEE).

Note from FEE President Lawrence W. Reed: Events in Ukraine in recent days have gripped the hearts of people around the world. We at FEE are appalled at the repressive measures being taken by the Ukrainian state against protesters, particularly young people who are active there in the movement for peace, liberty, and representative government. We sincerely hope that the brutality of statism, on vivid and tragic display at this very moment in Ukraine, will be crushed by the forces of freedom and with a minimum of bloodshed. Below, we share with our readers a moving account of what’s happening from a Ukrainian journalist who is in Kiev on the front lines of the current upheaval. We withhold his name for his protection.

—Lawrence W. Reed, FEE president.

Dear friends—especially foreign journalists and editors,

These days I receive from you lots of inquiries requesting descriptions of the current situation in Kiev and overall in Ukraine, express my opinion on what is happening, and formulate my vision of at least the nearest future. Since I am simply physically unable to respond separately to each of your publications with an extended analytical essay, I have decided to prepare this brief statement, which each of you can use in accordance with your needs. The most important things I must tell you are as follows.

During the less than four years of its rule, Mr. Yanukovych’s regime has brought the country and the society to the utter limit of tensions. Even worse, it has boxed itself into a no-exit situation where it must hold on to power forever—by any means necessary. Otherwise it would have to face criminal justice in its full severity. The scale of what has been stolen and usurped exceeds all imagination of what human avarice is capable.

The only answer this regime has been proposing in the face of peaceful protests, now in their third month, is violence, violence that escalates and is “hybrid” in its nature: special forces attacks at the Maidan (the central square of Kiev, the Ukrainian capital) are combined with individual harassment and persecution of opposition activists and ordinary participants in protest actions (surveillance, beatings, torching of cars and houses, storming of residences, searches, arrests, rubber-stamp court proceedings). The keyword here is intimidation. And since it is ineffective, and people are protesting on an increasingly massive scale, the powers that be make these repressive actions even harsher.

The “legal base” for them was created on January 16, when the Members of Parliament, fully dependent on the President, in a crude violation of all rules of procedure and voting, indeed of the Constitution itself, in the course of just a couple of minutes (!) with a simple show of hands voted in a whole series of legal changes which effectively introduced dictatorial rule and a state of emergency in the country without formally declaring them. For instance, by writing and disseminating this, I am subject to several new criminal code articles for “defamation,” “inflaming tensions,” etc.

Briefly put, if these “laws” are recognized, one should conclude: in Ukraine, everything that is not expressly permitted by the powers that be is forbidden. And the only thing permitted by those in power is to yield to them. Not agreeing to these “laws,” on January 19 the Ukrainian society rose up, yet again, to defend its future.

Today in television newsreels coming from Kiev you can see protesters in various kinds of helmets and masks on their faces, sometimes with wooden sticks in their hands. Do not believe that these are “extremists,” “provocateurs,” or “right-wing radicals.” My friends and I also now go out protesting dressed this way. In this sense my wife, my daughter, our friends, and I are also “extremists.” We have no other option: We have to protect our life and health, as well as the life and health of those near and dear to us. Special forces units shoot at us, their snipers kill our friends. The number of protesters killed just on one block in the city’s government quarter is, according to different reports, either 5 or 7. Additionally, dozens of people in Kiev are missing.

We cannot halt the protests, for this would mean that we agree to live in a country that has been turned into a lifelong prison. The younger generation of Ukrainians, which grew up and matured in the post-Soviet years, organically rejects all forms of dictatorship. If dictatorship wins, Europe must take into account the prospect of a North Korea at its eastern border and, according to various estimates, between 5 and 10 million refugees. I do not want to frighten you.

We now have a revolution of the young. Those in power wage their war first and foremost against them. When darkness falls on Kiev, unidentified groups of “people in civilian clothes” roam the city, hunting for the young people, especially those who wear the symbols of the Maidan or the European Union. They kidnap them, take them out into forests, where they are stripped and tortured in fiercely cold weather. For some strange reason the victims of such actions are overwhelmingly young artists—actors, painters, poets. One feels that some strange “death squadrons” have been released in the country with an assignment to wipe out all that is best in it.

One more characteristic detail: In Kiev hospitals the police force entraps the wounded protesters; they are kidnapped and (I repeat, we are talking about wounded persons) taken out for interrogation at undisclosed locations. It has become dangerous to turn to a hospital even for random passersby who were grazed by a shard of a police plastic grenade. The medics only gesture helplessly and release the patients to the so-called “law enforcement.”

To conclude: In Ukraine full-scale crimes against humanity are now being committed, and it is the present government that is responsible for them. If there are any extremists present in this situation, it is the country’s highest leadership that deserves to be labeled as such.

And now turning to your two questions which are traditionally the most difficult for me to answer: I don’t know what will happen next, just as I don’t know what you could now do for us. However, you can disseminate, to the extent your contacts and possibilities allow, this appeal. Also, empathize with us. Think about us. We shall overcome all the same, no matter how hard they rage. The Ukrainian people, without exaggeration, now defend the European values of a free and just society with their own blood. I very much hope that you will appreciate this.

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How Time and Uncertainty Can Make Us “Antifragile” – Article by David Howden

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The New Renaissance Hat
David Howden
January 26, 2014
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Antifragile: Things that Gain from Disorder, Nassim Nicholas Taleb (New York: Random House, 2012).

No two buzzwords define the present crisis more than “contagion” and “robustness” in the world of economists and policy wonks. The current interrelated nature of the financial system has bred a fragile situation where the success of the greater economy supposedly hinges on its individual components, such as banks that are too big to fail. To combat this fragility, economists have increasingly sought to build robust institutions. Such institutions will remain strong in the face of adverse effects if an individual component of the economy fails — be it subprime mortgages, sovereign debt, deposit-taking institutions or investment banks. This approach to the crisis stresses that if we cannot battle contagion, we had better construct strong institutions to weather future storms.

Nassim Taleb takes great issue with this approach in his new book Antifragile. His view is that constructing such so-called robust institutions is not sufficient as they continually fight yesterday’s battles. Instead the focus should be in building “antifragile” insti­tutions. Although often confused with robustness or resilience, an antifragile institution is not only unharmed by adverse events, but is actually strengthened by them. Building antifragile institutions will not only strengthen the global economic arena, but also have wide-ranging social applications.

Taleb’s latest work builds on two of his previous books, Fooled by Randomness (2001) and The Black Swan (2007). The common theme underlying all three is that there are events which are fundamentally unknowable — true uncertainties — in distinction to merely risky outcomes. Since we cannot know in advance what these events are, or what their effects will be, we should not exert too much effort in constructing contingency plans.

It is at this point that my first quibble with the book arises, and one I had with its predecessor The Black Swan. Taleb bifurcates between two definitions of uncertain events. On the one hand he invokes random or fundamentally unknowable events. Readers of this journal will be sympathetic to this definition of uncertainty, bearing close resemblance to Mises’s own use of “case probabilities”[1] (1949, pp. 110–113), or Shackle’s (1949) use of “non-seriable, non-divisible” events.[2] On the other hand, it is also clear that Taleb also thinks of uncertain events as merely rare events. These are events located on the fat or long tails on a probability distribution. Even though he thinks that these represent true uncertainty, there is no doubt that he is referring to funda­mentally probabilistic events.

This quibble aside, one can apply much of the remaining work cognizant that Taleb’s terminology differs from that of the Austrian economists, and also that the domain of his theory is slightly different than he thinks.

Something is “antifragile” if it gets stronger from a negative event. What are some examples? Taleb applies the prefix of his book liberally to outline what choices we should be pursuing. Indeed, the body of the book gives a long list of antifragile actions that, at least on one level, boil down to doing the exact opposite of what you think you should be doing.

Authors should be shocked to learn that there is almost no news that can harm a writer’s credibility, and that any publicity is good publicity (pp. 51–52). Corporations and governments that try to “reinstill confidence” should not be trusted because they would do so only if they were ultimately doomed (p. 53). Children shouldn’t be on antidepressants as this removes a source of learning from the life experience and thus make individuals less capable of dealing with unwanted events later in life (p. 61). The sinking of the Titanic was a positive disaster as it put shipbuilders on their toes, and possibly avoided an even larger accident later (p. 72). The general theme is that those who make errors are stronger than those who don’t — reliability, or antifragility — only comes when something is regularly tested by an unwanted event.

The theory has merit. Consider this lesson applied to central bank policies. In the wake of the dot-com bust a concerted effort by the world’s central banks flooded the global financial system with liquidity. The liquidation of assets that should have happened never did, and as a result lenders and borrowers didn’t learn their lesson on prudential money management. The seeds were sown for the larger crisis starting in 2007–2008 because a simple lesson was not learned when the financial system’s problems were still in relative infancy.

There is much to learn from this book and much to be wary of. At the end of the day, Taleb reckons the best test of an anti-fragile institution is Mother Nature mixed with a healthy dose of time. In chapter 21 he criticizes the prevailing orthodoxy of “neomania,” the mistaken belief that newer is better. Those institutions that have existed the longest are, in all likelihood, those that will continue to exist into the future. As an example, imagine that the year is 1988 and answer the following: which structure will last the longest, the Berlin Wall or the Great Pyramid of Giza.

In this test, as in much of the book, Taleb asks too much and too little. He asks too much because those institutions with the most longevity were once upon a time also the ones with the least. There must be a better test than longevity, as it only pushes the problem back in time to identify the source of antifragility. It cannot be turtles all the way down.

An applied example relevant to the present financial crisis would involve looking for those institutions that have been strengthened by current affairs. The crisis has taken its toll on many aspects of the financial services industry, but some general types of products have proven surprising resilient, or antifragile. Governments with prudent fiscal policies — e.g., Germany, Switzerland and Singapore — have fared well and indeed been strengthened as finances deteriorate in more profligate countries. Investment funds capitalizing on what were once unorthodox strategies, such as gold and other precious metal holdings, have out-performed more traditional investments as the financial crisis worsens. Readers of this journal will also notice that their stock in Austrian economics has increased in value over the past decade. Question begging and failed policies developed through more mainstream theories have led many former outsiders to the ranks of Austrian economists. An unwanted event caused an offsetting positive outcome in all these scenarios. That is what being antifragile is about.

Taleb asks too little by not exploring the true sources of antifragility. He comes close, alluding in many places that market-based institutions better combat the false security that planned institutions create. Explaining and elaborating on this link would do much to take the fundamental merits of antifragility to the next level. It would be, however, fodder for another book.

References

[1] Mises, Ludwig von. 1949. Human Action: A Treatise on Economics. Auburn, Ala.: Mises Institute, 1998.

[2] Shackle, G. L. S. 1949. Expectations in Economics. Westport, Conn.: Gibson.

David Howden is Chair of the Department of Business and Economics and professor of economics at St. Louis University’s Madrid Campus, Academic Vice President of the Ludwig von Mises Institute of Canada, and winner of the Mises Institute’s Douglas E. French Prize. Send him mail. See David Howden’s article archives.

This article first appeared in the Fall 2013 edition of The Quarterly Journal of Austrian Economics.

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The Paradox of Public Assistance – Article by David J. Hebert

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Categories: Economics, Tags: , , , , , , , , , , , ,

The New Renaissance Hat
David J. Hebert
January 26, 2014
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Let’s put ideology aside for a moment. One might not think it’s morally or politically justifiable to take from one person in order to help another. But for now, let’s ask another question: Does it help?

A lot of people see the existence of “poverty amid plenty,” wherein a few people have acquired a lot of wealth while the overwhelming majority struggles to make ends meet. The standard call is to provide some means of transferring those resources from the haves to the have-nots, either through a progressive tax policy or via some direct transfer program.

The problem with these policies is obviously not in their stated goals. Who could argue against the desire to help people? Nor is it, entirely, the coercive nature of redistribution. The real problem comes in the ability of welfare advocates to actually reduce poverty in an effective and long-lasting manner.

World Coyne

In his latest book, Doing Bad by Doing Good, Chris Coyne discusses problems with delivering effective humanitarian aid to other countries. Coyne identifies two potential problems: the planner’s problem and the incentive problem.

Briefly, the planner’s problem refers to the impossibility of people outside of a society actually to possess the information required to assist in fostering continued economic development. The incentive problem refers to the idea that the planners may face perverse incentives to go ahead and do something that the planner’s problem suggests is impossible to start with.

These points are all well and good, and should be well received at least by readers of this publication. But I think we can go further to urge that the problems Coyne identifies apply equally to issues related to domestic intervention.

Disconnect

The people who advocate most strongly for poverty relief programs are not, in fact, people who are poor. Rather, they are people who are typically either politicians seeking reelection or wealthy people who have some overwhelming desire to do something (usually they want to get other people to give them money to do something). They are not poor, but rather they simply do not like seeing poor people suffer and feel some desire to help. However, because they are not poor themselves, they have absolutely no idea what it is that poor people actually want.

Do they want shelter, clothing, and food? Yes. Do they want education, hygiene, and employment? Of course. But in what order, how much, and of what type? In a world of scarcity, the answers to these questions are of crucial importance if we are to find ways to help the most people as quickly and effectively as possible. And yet, the answers to these questions are wholly unknowable to outside observers.

Similarly, and perhaps more importantly, the incentive problem that the planners face also applies to domestic intervention. Politicians are people who, just like us, are primarily concerned with helping themselves. Given their position, what is in their interest might sometimes in be the interest of the “general public” (providing genuine public goods, the rule of law, etc.) but as James Buchanan and Gordon Tullock rightfully point out in their groundbreaking book, The Calculus of Consent, this is not guaranteed to be true at all times and in all cases. In fact, it may be the case that as a direct result of political involvement, incentives may direct their behavior in ways that enrich concentrated interests and impoverish poor people even more.

The War on Poverty

One answer is that the disparity might be much, much worse without government intervention—that is, the rich would be even richer and the poor would be even poorer. But another possibility is that the war on poverty directly contributes to a burgeoning underclass. How can we adjudicate between these positions?

On the surface, giving people aid seems like a straightforward proposition. We observe people suffering and then send resources to them to alleviate that suffering. On the other hand, as Buchanan pointed out in 1975, we run into problems in which the aid designed to alleviate poverty actually perpetuates it, creating dependency. This dependency, in turn, means that an increasing number of people derive the majority of their income from aid.

Paid to Be Poor

That some of the poor get most of their income from the government is not to argue that welfare recipients are lazy or don’t wish to work. Rather it suggests that the incentives they face may make them reluctant to accept employment opportunities at offered wages. We can think through this proposition logically: Suppose I offer you $240 per week in financial aid while you are between jobs. You would be receiving that money for zero hours of work per week. Being an honest person, you go out and look for work, eventually finding a job that pays you $8 per hour, or $320 per week working full time. Should you take that job?

On the one hand, you would receive more money by taking that job than you would by accepting the aid. However, economics teaches us the value in thinking at the margin. Doing so reveals that you would only receive an additional $120 per week in exchange for your 40 hours of work. In other words, taking into account your opportunity cost, you would really only be earning $3 per hour! While I certainly cannot speak for everyone, I feel reasonably confident in saying that few people in this country value their time at only $3 per hour. Realizing this, it is no puzzle why people receiving aid tend to stay unemployed for so long. The Cato Institute recently published a study offering evidence of the work versus welfare trade-off, which can be found here.

Politics and Perquisites

Now that we understand why domestic aid programs may lead to the perpetuation of poverty among the poor, we’re ready to discuss how they may lead to the enrichment of the already wealthy. When politicians decide to try to do something about an issue, one of the first things that they do is convene special hearings about the issue. Here, they call upon the testimonies of experts to try to figure out (1) what can be done and then (2) how best to do it.

The problem here is that the very people who are best equipped to detail how to solve the problem will typically explain that they themselves (or the people that they represent) are in fact the best to solve the problem and should be awarded the contract to solve the problem. We see this in government all the time. Take, for example, the company that was placed in charge of rebuilding Iraq after the US invasion in 2006: Halliburton, which was formerly run by then-Vice President Dick Cheney. Is it any wonder why this company was awarded these contracts? Kwame Kilpatrick, when he was mayor of Detroit, would routinely award offices and several perks to his friends and family members. Don’t forget about the legendary William Tweed, better known as “Boss Tweed.” The point here is not that all politicians are corrupt, but that knowing a politician who is in a position to award perks puts you in good stead to be the recipient of largesse. And, of course, if that’s true, you have very good reasons to create incentives for the politician to steer favors in your direction. It is the nature of politics.

What to Do

Evidencing the failure of domestic aid to help combat poverty, Abigail Hall has an excellent article, forthcoming in the Journal of Private Enterprise, detailing the failure of the Appalachian Regional Commission. This line of research might lead one to the sobering conclusion that there is little that can be done to alleviate the suffering of the poor. Nothing could be further from the truth, however.

We can take away a couple of things from this type of work:

1) The limits of what can be directly achieved through political means of alleviating poverty; and

2) The idea that the expansion of opportunity ultimately drives economic growth and helps the poor.

Rather than focusing on giving poor people the resources to live well, we should instead focus on removing the barriers that prevent people from discovering ways to be productive. Doing so would not only provide them with the tools to lift themselves out of poverty, but would also provide the basis of dignity.

David Hebert is a Ph.D. student in economics at George Mason University. His research interests include public finance and property rights.

This article was originally published by The Foundation for Economic Education.

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The Rational Argumentator Now Accepts Dogecoin Donations

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The New Renaissance Hat
G. Stolyarov II
January 20, 2014
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I am pleased to announce that, in addition to accepting Bitcoin donations, The Rational Argumentator now also accepts donations in Dogecoin, the world’s first meme-based cryptocurrency. This broadening of donation options is motivated by the desire to encourage the further evolution of decentralized media of exchange, and also by the fact that Dogecoin is presently easier to mine than Bitcoin, thereby facilitating easier entry into the cryptocurrency arena for those who wish to mine rather than purchase cryptocurrencies. Besides, as I pointed out in my recent and fast-spreading article, “Cryptocurrencies as a Single Pool of Wealth”, the purchasing power of Bitcoin and all other similar cryptocurrencies is closely connected, as long as there is free exchange among the cryptocurrencies.

You can donate using the code on the sidebar widget. Here are the donation codes for both Bitcoin and Dogecoin, for your convenience.

Bitcoin: 1J2W6fK4oSgd6s1jYr2qv5WL8rtXpGRXfP

Dogecoin: DCgcDZnTAhoPPkTtNGNrWwwxZ9t5etZqUs

Much cryptocurrency of either kind will be appreciated.

Dogecoin_logo

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Fear of “Agent Orange” Crops – Article by Bradley Doucet

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The New Renaissance Hat
Bradley Doucet
January 13, 2014
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Crops_1

Another online petition, another misleading fear campaign. The latest to catch my eye is one from causes.com opposed to “the approval of Dow’s genetically engineered (GE) ‘Agent Orange’ corn and soybeans designed to survive repeated spraying of the toxic herbicide 2,4-D, half of the highly toxic chemical mixture Agent Orange.” Sounds scary, but a sober second look at this petition’s emotional language and sins of omission tells a different story.
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First of all, good luck using a non-toxic herbicide to control weeds. The whole point of herbicides is that they’re toxic, but selectively so. They kill undesirable plants in order to help crops grow. Now, the petition makes it sound as if 2,4-D is toxic to humans, saying it “has been linked” to cancer and other health problems. This seems bad, but how conclusive is the evidence? Causes.com doesn’t specify, which is suspicious, and indeed, a quick glance at Wikipedia suggests “conflicting results.”
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As for Agent Orange, just in case some people are unaware of its wicked pedigree, the petition helpfully explains that it “was the chemical defoliant used by the U.S. in Vietnam, and it caused lasting environmental damage as well as many serious medical conditions in both American veterans and the Vietnamese.” No indication, though, of the fact that those medical conditions have been attributed to the other half of Agent Orange (the 2,4,5-T component) and its contaminant, dioxin.

The petition does say that “industry tests also show that 2,4-D is contaminated with dioxins,” which is cause for concern, but again, there’s no indication of how prevalent this contamination might be. To the extent that it is a concern, though, it’s not specific to these GE crops. Why? Because 2,4-D is the world’s most widely used herbicide—something the petition also neglects to mention.

Bradley Doucet is Le Québécois Libre‘s English Editor and the author of the blog Spark This: Musings on Reason, Liberty, and Joy. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.

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Cryptocurrencies as a Single Pool of Wealth: Thoughts on the Purchasing Power of Decentralized Electronic Money – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
January 12, 2014
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The recent meteoric rise in the dollar price of Bitcoin – from around $12 at the beginning of 2013 to several peaks above $1000 at the end – has brought widespread attention to the prospects for and future of cryptocurrencies. I have no material stake in Bitcoin (although I do accept donations), and this article will not attempt to predict whether the current price of Bitcoin signifies mostly lasting value or a bubble akin to the Dutch tulip mania of the 1630s. Instead of speculation about any particular price level, I hope here to establish a principle pertaining to the purchasing power of cryptocurrencies in general, since Bitcoin is no longer the only one.

Although Bitcoin, developed in 2009 by the pseudonymous Satoshi Namakoto, has the distinction and advantage of having been the first cryptocurrency to gain widespread adoption, others, such as Litecoin (2011), Namecoin (2011), Peercoin (2012), and even Dogecoin (2013) – the first cryptocurrency based on an Internet meme – have followed suit. Many of these cryptocurrencies’ fundamental elements are similar. Litecoin’s algorithm is nearly identical to Bitcoin (with the major difference being the fourfold increase in the rate of block processing and transaction confirmation), and the Dogecoin algorithm is the same as that of Litecoin. The premise behind each cryptocurrency is a built-in deflation; the rate of production slows with time, and only 21 million Bitcoins could ever be “mined” electronically. The limit for the total pool of Litecoins is 84 million, whereas the total Dogecoins in circulation will approach an asymptote of 100 billion.

Bitcoin-coins Namecoin_Coin Dogecoin_logoLitecoin_Logo

The deflationary mechanism of each cryptocurrency is admirable; it is an attempt to preserve real purchasing power. With fiat paper money printed by an out-of-control central bank, an increase in the number and denomination of papers (or their electronic equivalents) circulating in the economy will not increase material prosperity or the abundance of real goods; it will only raise the prices of goods in terms of fiat-money quantities. Ludwig von Mises, in his 1912 Theory of Money and Credit, outlined the redistributive effects  of inflation; those who get the new money first (typically politically connected cronies and the institutions they control) will gain in real purchasing power, while those to whom the new money spreads last will lose. Cryptocurrencies are independent of any central issuer (although different organizations administer the technical protocols of each cryptocurrency) and so are not vulnerable to such redistributive inflationary pressures induced by political considerations. This is the principal advantage of cryptocurrencies over any fiat currency issued by a governmental or quasi-governmental central bank. Moreover, the real expenditure of resources (computer hardware and electricity) for mining cryptocurrencies provides a built-in scarcity that further restricts the possibility of inflation.

Yet there is another element to consider. Virtually any major cryptocurrency can be exchanged freely for any other (with some inevitable but minor transaction costs and spreads) as well as for national fiat currencies (with higher transaction costs in both time and money). For instance, on January 12, 2014, one Bitcoin could trade for approximately $850, while one Litecoin could trade for approximately $25, implying an exchange rate of 34 Litecoins per Bitcoin. Due to the similarity in the technical specifications of each cryptocurrency (similar algorithms, similar built-in scarcity, ability to be mined by the same computer hardware, and similar decentralized, distributed generation), any cryptocurrency could theoretically serve an identical function to any other. (The one caveat to this principle is that any future cryptocurrency algorithm that offers increased security from theft could crowd out the others if enough market participants come to recognize it as offering more reliable protection against hackers and fraudsters than the current Bitcoin algorithm and Bitcoin-oriented services do.)  Moreover, any individual or organization with sufficient resources and determination could initiate a new cryptocurrency, much as Billy Markus initiated Dogecoin in part with the intent to provide an amusing reaction to the Bitcoin price crash in early December 2013.

This free entry into the cryptocurrency-creation market, combined with the essential similarity of all cryptocurrencies to date and the ability to readily exchange any one for any other, suggests that we should not be considering the purchasing power of Bitcoin in isolation. Rather, we should view all cryptocurrencies combined as a single pool of wealth. The total purchasing power of this pool of cryptocurrencies in general would depend on a multitude of real factors, including the demand among the general public for an alternative to governmental fiat currencies and the ease with which cryptocurrencies facilitate otherwise cumbersome or infeasible financial transactions. In other words, the properties of cryptocurrencies as stores of value and media of exchange would ultimately determine how much they could purchase, and the activities of arbitrageurs among the cryptocurrencies would tend to produce exchange rates that mirror the relative volumes of each cryptocurrency in existence. For instance, if we make the simplifying assumption that the functional properties of Bitcoin and Litecoin are identical for the practical purposes of users, then the exchange rate between Bitcoins and Litecoins should asymptotically approach 1 Bitcoin to 4 Litecoins, since this will be the ultimate ratio of the number of units of these cryptocurrencies. Of course, at any given time, the true ratio will vary, because each cryptocurrency was initiated at a different time, each has a different amount of computer hardware devoted to mining it, and none has come close to approaching its asymptotic volume.

 What implication does this insight have for the purchasing power of Bitcoin? In a world of many cryptocurrencies and the possibility of the creation of new cryptocurrencies, a single Bitcoin will purchase less than it could have purchased in a world where Bitcoin was the only possible cryptocurrency.  The degree of this effect depends on how many cryptocurrencies are in existence. This, in turn, depends on how many new cryptocurrency models or creative tweaks to existing cryptocurrency models are originated – since it is reasonable to posit that users will have little motive to switch from a more established cryptocurrency to a completely identical but less established cryptocurrency, all other things being equal. If new cryptocurrencies are originated with greater rapidity than the increase in the real purchasing power of cryptocurrencies in total, inflation may become a problem in the cryptocurrency world. The real bulwark against cryptocurrency inflation, then, is not the theoretical upper limit on any particular cryptocurrency’s volume, but rather the practical limitations on the amount of hardware that can be devoted to mining all cryptocurrencies combined. Will the scarcity of mining effort, in spite of future exponential advances in computer processing power in accordance with Moore’s Law, sufficiently restrain the inflationary pressures arising from human creativity in the cryptocurrency arena? Only time will tell.

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Congress Defers to President On NSA Reform – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
January 12, 2014
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Congress’s decline from the Founders’ vision as “first among equals” in government to an echo chamber of the unitary executive, has been a slow but steady process. In the process we have seen a steady stream of unconstitutional wars and civil-liberties abuses at home. Nowhere is this decline more evident than in the stark contrast between the Congressional response to intelligence agencies’ abuses during the post-Watergate era and its response to the far more serious NSA abuses uncovered in recent years.In 1975, Senator Frank Church (D-ID) convened an historic select committee to investigate the US intelligence services for possible criminality in the wake of Watergate. Thanks in part to reporting by Seymour Hersh and others, abuses by the CIA, NSA, and FBI had come to light, including the monitoring of US peace activists.The Church Committee played its proper Congressional role, checking the power of the executive branch as it had been spiraling out of control since the 1950s and the early CIA covert action programs. The Committee sought to protect US citizens against abuses by their government after those abuses had come to light through leaks of secret government documents.

The parallel to the present NSA scandals cannot be ignored. What is completely different, however, is that Congress is today acting as an advocate for the executive branch’s continuing abuses, and as an opponent to the civil liberties of US citizens. Not only has Congress – with a precious few exceptions – accepted the NSA’s mass spying program on American citizens, it has actually been encouraging the president to continue and expand the program!

Where once there was a Congressional committee to challenge and oppose the president’s abuse of power, today the president himself has been even allowed by a complacent Congress to hand pick his own NSA review commission!

Are we really expected to believe that a commission appointed by the president to look into the activities of the president’s intelligence services will come to anything more than a few superficial changes to give the impression of real reform?

One of the president’s commission recommendations is that the NSA cease holding our phone records and demand that the private phone companies retain those records instead – for the NSA to access as it wishes. This is supposed to be reform?

The president will make a speech this Friday to tell the rest of us which of the suggestions made by his own commission he will decide to implement. Congress has no problem with that. Rep. Adam B. Schiff (D-Calif.) admitted last week that Congress has no intention of asserting itself in the process. “It’s my hope that [Obama will] do as much as he can through the executive process because the legislative process will be difficult, perilous and long.”

Senator Church famously said back in 1975:

In the need to develop a capacity to know what potential enemies are doing, the United States government has perfected a technological capability that enables us to monitor the messages that go through the air… We must know, at the same time, that capability at any time could be turned around on the American people, and no American would have any privacy left… There would be no place to hide…. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision so that we never cross over that abyss. That is the abyss from which there is no return.”

Have we reached that point? Let us hope not. Real reform begins with the repeal of the PATRIOT Act and of the 2001 Authorization for the Use of Military Force. If we keep our eye on that goal and not allow ourselves to become distracted with the president’s phony commissions we might force Congress to listen.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

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Gennady and Wendy Stolyarov’s Forthcoming Presentation on “Death is Wrong” at Transhuman Visions 2.0

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I invite all of my readers to join me at the Transhuman Visions 2.0 East Bay conference in Piedmont, CA, on Saturday, March 1, 2014. I will be there with my wife Wendy Stolyarov to deliver the opening presentation about Death is Wrong, our new ambitious illustrated children’s book on indefinite life extension. For a prelude to my presentation, I invite you to read my article, “Why I Wrote a Children’s Book on Indefinite Life Extension“. Also, autographed copies of Death is Wrong will be available for sale.

The Transhuman Visions 2.0 East Bay conference is produced by the Brighter Brains Institute and its energetic, prolific, and creative founder, Hank Pellissier. For detailed information about the conference, see the official Brighter Brains Institute page here.

The poster for this event was designed by none other than Wendy Stolyarov. It is a testament to her skill in graphic design and the new standard of excellence her art brings to the transhumanist movement.

Transhuman Visions 2.0 East Bay – Poster by Wendy Stolyarov

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