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The Intellectual Intolerance Behind “Check Your Privilege” – Article by Gary M. Galles

The Intellectual Intolerance Behind “Check Your Privilege” – Article by Gary M. Galles

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The New Renaissance Hat
Gary M. Galles
July 19, 2015
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A decade ago, no one had ever been told to “check your privilege.” Now it commands an appreciable “market share” in academia and social justice rhetoric. But it does so despite sharply opposed interpretations of its meaning. In fact, its expanded footprint is partly because of its ambiguity.

It Could Be an Invitation to Debate

In a sense, “check your privilege” largely amounts to “check your premises” behind your views, and many are willing to recognize that such a reminder can be useful in advancing conversations about social issues.

However, I question whether people are so bereft of concern for, or understanding of, one another that they need repetitive “check your privileges” reminders that imply they would believe more accurately and act more effectively if only they were more empathetic. I tend to agree with Adam Smith, in The Theory of Moral Sentiments, that:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it … we often derive sorrow from the sorrows of others.

Further, repeatedly sermonizing to fix people as a way of “uplifting” them becomes little more than nagging, and any insight it may add gets crowded out. In the same way, repeatedly invoking “check your privilege” tends to destroy its usefulness leaving increased irritation and disharmony.

But the Phrase Could Simply Mean “Shut Up”

And when does “check your privilege” become code for “be quiet” rather than “evaluate your premises”? “Check your privilege” is about shutting down discussion when the user is making the assertion that you are hopelessly confused in your understanding, and that your opinions amount to aggression (whether “micro-” or “macro-”). This position was wellarticulated decades ago by Robert Heinlein, in The Moon is a Harsh Mistress:

Where do you start explaining when a man’s words show there isn’t anything he understands about [a] subject, [but] instead is loaded with preconceptions that don’t fit facts and [he] doesn’t even know …?

The assertion of your hopeless confusion then becomes the basis for claims that, unless you are a member of some accepted victimized class, you must be part of the oppressor class. Therefore, as Max Borders put it,

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.

In other words, others assert that they don’t need to listen to you, much less respect your arguments.

The Ad Hominem Attack

That leap involves several logical failings. Included in that list is the idea that any guilt for what was true of some members of an arbitrarily defined class or group (rather than treating people as the individuals they are) at some point in time passes on to every current and future member of that class or group. In addition, it incorporates the ad hominem fallacy that because you are judged as bad or part of an oppressor class, your argument is false, while conversely, their self-defined goodness and non-oppression means theirs must be true, both of which are unrelated to the logical validity of an argument.

Given that “check your privileges” could mean either “remember to be empathetic, so we can better understand and help” or “we can disregard your beliefs and violate your rights,” how can we tell which one is intended?

Where confusion reigns, to better understand and help requires the confusion to be replaced with clear, accurate understanding. That, in turn, requires a serious, ongoing “give and take” conversation.

However, when “check your privilege” is used to preemptively cut off conversation by stopping those who disagree from any chance to be heard, much less to rebut their demonization and targeting, no improvement in either empathy or results can result. So the key to evaluating “check your privilege” is to ask what would be entailed if it was intended to advance such a serious conversation.

How Real Dialogue Happens

Importantly, any conversation would not stop at “watch your privileges.” It would only begin there. By itself, the phrase says you are wrong in your understanding or views, but it leaves how completely unspecified, beyond having something to do with membership in some allegedly dominant or privileged group. Stopping the conversation there leaves “check your privileges” as an insult, without any ability to clarify understanding or reduce disagreements or disharmony.

Progress toward better understanding and results would require several more steps.

It would start by precisely specifying what faulty premises, assumptions, or arguments someone supposedly holds, either included or excluded inappropriately. Then it would explain why it is inappropriate for the issue being considered. It would lay out the correct or appropriate premise that would take its place and articulate the reasons why.

Building on that foundation, it would show how the “new and improved” premises would change one’s conclusions. Consequently, it would lay out the appropriate remedy based on the alternative analysis. In the process, it would have to explain how the proposed remedy cannot be explained solely on a narrowly self-interested “more for me” basis, completely apart from the argument offered, as part of laying out the new special privileges that would be created for those put forward as victims. It would also have to explain how others will be affected in order to address the asserted problem, including whether there would be coercive impositions on members of the supposedly dominant or victimizer class who had nothing to do with the “sins of the fathers.”

When “check your privilege” means think more carefully about others’ circumstances, which may be far different than yours, and to be empathetic, it can be useful in advancing our potential for mutual understanding. But it has to be only the beginning of a much farther-reaching discussion to bear fruit — a discussion which, carefully and earnestly pursued, would lead us back to the self-ownership and voluntary arrangements of liberty.

In contrast, when “check your privilege” is used as a magic phrase to peremptorily end “social justice” discussions, it is the assertion of a special privilege for some to be allowed to define themselves as white hats and those who disagree as black hats, without ever having to make a real argument. It also allows users to turn it into an epithet of social demonization to try to impose their “solutions,” always at the expense of the supposed black hats. In the process, it undermines social cooperation by undermining the rights upon which it is built.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read. Send him mail. See Gary Galles’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Ludd vs. Schumpeter: Fear of Robot Labor is Fear of the Free Market – Article by Wendy McElroy

Ludd vs. Schumpeter: Fear of Robot Labor is Fear of the Free Market – Article by Wendy McElroy

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The New Renaissance Hat
Wendy McElroy
September 18, 2014
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“Report Suggests Nearly Half of U.S. Jobs Are Vulnerable to Computerization,” screams a headline. The cry of “robots are coming to take our jobs!” is ringing across North America. But the concern reveals nothing so much as a fear—and misunderstanding—of the free market.

In the short term, robotics will cause some job dislocation; in the long term, labor patterns will simply shift. The use of robotics to increase productivity while decreasing costs works basically the same way as past technological advances, like the production line, have worked. Those advances improved the quality of life of billions of people and created new forms of employment that were unimaginable at the time.

Given that reality, the cry that should be heard is, “Beware of monopolies controlling technology through restrictive patents or other government-granted privilege.”

The robots are coming!

Actually, they are here already. Technological advance is an inherent aspect of a free market in which innovators seeks to produce more value at a lower cost. Entrepreneurs want a market edge. Computerization, industrial control systems, and robotics have become an integral part of that quest. Many manual jobs, such as factory-line assembly, have been phased out and replaced by others, such jobs related to technology, the Internet, and games. For a number of reasons, however, robots are poised to become villains of unemployment. Two reasons come to mind:

1. Robots are now highly developed and less expensive. Such traits make them an increasingly popular option. The Banque de Luxembourg News offered a snapshot:

The currently-estimated average unit cost of around $50,000 should certainly decrease further with the arrival of “low-cost” robots on the market. This is particularly the case for “Baxter,” the humanoid robot with evolving artificial intelligence from the US company Rethink Robotics, or “Universal 5” from the Danish company Universal Robots, priced at just $22,000 and $34,000 respectively.

Better, faster, and cheaper are the bases of increased productivity.

2. Robots will be interacting more directly with the general public. The fast-food industry is a good example. People may be accustomed to ATMs, but a robotic kiosk that asks, “Do you want fries with that?” will occasion widespread public comment, albeit temporarily.

Comment from displaced fast-food restaurant workers may not be so transient. NBC News recently described a strike by workers in an estimated 150 cities. The workers’ main demand was a $15 minimum wage, but they also called for better working conditions. The protesters, ironically, are speeding up their own unemployment by making themselves expensive and difficult to manage.

Labor costs

Compared to humans, robots are cheaper to employ—partly for natural reasons and partly because of government intervention.

Among the natural costs are training, safety needs, overtime, and personnel problems such as hiring, firing and on-the-job theft. Now, according to Singularity Hub, robots can also be more productive in certain roles. They  “can make a burger in 10 seconds (360/hr). Fast yes, but also superior quality. Because the restaurant is free to spend its savings on better ingredients, it can make gourmet burgers at fast food prices.”

Government-imposed costs include minimum-wage laws and mandated benefits, as well as discrimination, liability, and other employment lawsuits. The employment advisory Workforce explained, “Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment—which, much more often than not, is the case—the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial.”

At some point, human labor will make sense only to restaurants that wish to preserve the “personal touch” or to fill a niche.

The underlying message of robotechnophobia

The tech site Motherboard aptly commented, “The coming age of robot workers chiefly reflects a tension that’s been around since the first common lands were enclosed by landowners who declared them private property: that between labour and the owners of capital. The future of labour in the robot age has everything to do with capitalism.”

Ironically, Motherboard points to one critic of capitalism who defended technological advances in production: none other than Karl Marx. He called machines “fixed capital.” The defense occurs in a segment called “The Fragment on Machines”  in the unfinished but published manuscript Grundrisse der Kritik der Politischen Ökonomie (Outlines of the Critique of Political Economy).

Marx believed the “variable capital” (workers) dislocated by machines would be freed from the exploitation of their “surplus labor,” the difference between their wages and the selling price of a product, which the capitalist pockets as profit. Machines would benefit “emancipated labour” because capitalists would “employ people upon something not directly and immediately productive, e.g. in the erection of machinery.” The relationship change would revolutionize society and hasten the end of capitalism itself.

Never mind that the idea of “surplus labor” is intellectually bankrupt, technology ended up strengthening capitalism. But Marx was right about one thing: Many workers have been emancipated from soul-deadening, repetitive labor. Many who feared technology did so because they viewed society as static. The free market is the opposite. It is a dynamic, quick-response ecosystem of value. Internet pioneer Vint Cerf argues, “Historically, technology has created more jobs than it destroys and there is no reason to think otherwise in this case.”

Forbes pointed out that U.S. unemployment rates have changed little over the past 120 years (1890 to 2014) despite massive advances in workplace technology:

There have been three major spikes in unemployment, all caused by financiers, not by engineers: the railroad and bank failures of the Panic of 1893, the bank failures of the Great Depression, and finally the Great Recession of our era, also stemming from bank failures. And each time, once the bankers and policymakers got their houses in order, businesses, engineers, and entrepreneurs restored growth and employment.

The drive to make society static is powerful obstacle to that restored employment. How does society become static? A key word in the answer is “monopoly.” But we should not equivocate on two forms of monopoly.

A monopoly established by aggressive innovation and excellence will dominate only as long as it produces better or less expensive goods than others can. Monopolies created by crony capitalism are entrenched expressions of privilege that serve elite interests. Crony capitalism is the economic arrangement by which business success depends upon having a close relationship with government, including legal privileges.

Restrictive patents are a basic building block of crony capitalism because they grant a business the “right” to exclude competition. Many libertarians deny the legitimacy of any patents. The nineteenth century classical liberal Eugen von Böhm-Bawerk rejected patents on classically Austrian grounds. He called them “legally compulsive relationships of patronage which are based on a vendor’s exclusive right of sale”: in short, a government-granted privilege that violated every man’s right to compete freely. Modern critics of patents include the Austrian economist Murray Rothbard and intellectual property attorney Stephan Kinsella.

Pharmaceuticals and technology are particularly patent-hungry. The extent of the hunger can be gauged by how much money companies spend to protect their intellectual property rights. In 2011, Apple and Google reportedly spent more on patent lawsuits and purchases than on research and development. A New York Times article addressed the costs imposed on tech companies by “patent trolls”—people who do not produce or supply services based on patents they own but use them only to collect licensing fees and legal settlements. “Litigation costs in the United States related to patent assertion entities [trolls],” the article claimed, “totaled nearly $30 billion in 2011, more than four times the costs in 2005.” These costs and associated ones, like patent infringement insurance, harm a society’s productivity by creating stasis and  preventing competition.

Dean Baker, co-director of the progressive Center for Economic Policy Research, described the difference between robots produced on the marketplace and robots produced by monopoly. Private producers “won’t directly get rich” because “robots will presumably be relatively cheap to make. After all, we can have robots make them. If the owners of robots get really rich it will be because the government has given them patent monopolies so that they can collect lots of money from anyone who wants to buy or build a robot.”  The monopoly “tax” will be passed on to impoverish both consumers and employees.

Conclusion

Ultimately, we should return again to the wisdom of Joseph Schumpeter, who reminds us that technological progress, while it can change the patterns of production, tends to free up resources for new uses, making life better over the long term. In other words, the displacement of workers by robots is just creative destruction in action. Just as the car starter replaced the buggy whip, the robot might replace the burger-flipper. Perhaps the burger-flipper will migrate to a new profession, such as caring for an elderly person or cleaning homes for busy professionals. But there are always new ways to create value.

An increased use of robots will cause labor dislocation, which will be painful for many workers in the near term. But if market forces are allowed to function, the dislocation will be temporary. And if history is a guide, the replacement jobs will require skills that better express what it means to be human: communication, problem-solving, creation, and caregiving.

Wendy McElroy (wendy@wendymcelroy.com) is an author, editor of ifeminists.com, and Research Fellow at The Independent Institute (independent.org).

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

The Strengths and Weaknesses of “Atlas Shrugged: Part III” – Video by G. Stolyarov II

The Strengths and Weaknesses of “Atlas Shrugged: Part III” – Video by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 16, 2014
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Mr. Stolyarov reviews the final installment in the “Atlas Shrugged” film trilogy.

Although Mr. Stolyarov favorably reviewed the first two installments, in his view the third film fails to do full justice to the culmination of Ayn Rand’s magnum opus, where one would expect to witness the coalescence into an integrated worldview of all of the philosophical and plot pieces that Rand meticulously introduced during the first two parts. Atlas Shrugged: Part III is not without its merits, and it is inspiring in certain respects – especially in its conveyance of Rand’s passionate defense of the creator-individualist. However, the film is also not a great one, and the creators could have made Rand’s source material shine consistently instead of glowing dimly while occasionally emitting a bright flicker.

References

– “The Accomplishments of ‘Atlas Shrugged: Part I’” – Article by G. Stolyarov II
– “Rejecting the Purveyors of Pull: The Lessons of ‘Atlas Shrugged: Part II‘” – Article by G. Stolyarov II
– “The Strengths and Weaknesses of ‘Atlas Shrugged: Part III’” – Article by G. Stolyarov II

The Strengths and Weaknesses of “Atlas Shrugged: Part III” – Article by G. Stolyarov II

The Strengths and Weaknesses of “Atlas Shrugged: Part III” – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 13, 2014
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In my reviews of Part I and Part II of the Atlas Shrugged film trilogy, I expressed largely favorable reactions to those films’ message and execution. Naturally, I was eager to see Part III and the completion of the long-awaited Atlas Shrugged trilogy. After I watched it, though, my response to this conclusion is more muted. The film fails to do full justice to the culmination of Ayn Rand’s magnum opus, where one would expect to witness the coalescence into an integrated worldview of all of the philosophical and plot pieces that Rand meticulously introduced during the first two parts. Atlas Shrugged: Part III is not without its merits, and it is inspiring in certain respects – especially in its conveyance of Rand’s passionate defense of the creator-individualist. However, the film is also not a great one, and the creators could have made Rand’s source material shine consistently instead of glowing dimly while occasionally emitting a bright flicker.

Strength 1: There is now a complete film series spanning the entire story arc of Atlas Shrugged. What Ayn Rand herself and many successive filmmakers could not achieve, producers Harmon Kaslow and John Aglialoro have been able to bring into existence. For decades, admirers of Ayn Rand’s work have lamented that no Atlas Shrugged movie had been made. The fact that this particular lament is obsolete constitutes major progress for Objectivism (where the rate of progress is admittedly extremely slow).

Weakness 1: Part III is, in my view, the most poorly executed of the three Atlas Shrugged movies, even though it had the potential to be the best. The extreme brevity of Part III – a mere 90 minutes, compared to 102 minutes for Part I and 112 minutes for Part II – orphaned many of the events of the film from their contexts, as compared to the meticulous rationale for each of Ayn Rand’s decisions in the novel. John Galt’s speech – which received some 70 pages in the novel – had been cut to bare bones and lacks the deep, rigorous, philosophical exposition that Ayn Rand saw as the substance and culmination of the novel.

Strength 2: As was the case with the previous installments, the film’s creators conveyed a plausible sense that the events of Atlas Shrugged could happen in our own world, or at least in a world that greatly resembles ours, as opposed to the world of 1957. In this sense, the film’s creators succeeded in conveying the universality of Atlas Shrugged’s moral message.

Weakness 2: Changes in directors and the entire cast for every single one of the Atlas Shrugged films greatly detract from the continuity of the story, especially for viewers who may watch the films back to back, once all of them are available on DVDs or other media.

Strength 3: The reactions to Galt’s Speech by Ron Paul, Sean Hannity, and Glenn Beck added authenticity and relevance to the film and reinforced the message that the conflict between value-creators and “looters” (cronyists or purveyors of political pull) is very much present in our era. In addition, whether one agrees or disagrees with these notable figures, it was amusing to see them in a dramatization of Ayn Rand’s literary world.

Weakness 3: The film fails to do justice to many important plot elements in Part Three of the book. Hank Rearden – my favorite character from the book and the most compelling character in Part II – barely makes an appearance. Cheryl Taggart’s suicide is only expressed in retrospectives of her realizations that drove her to this desperate act – while she is not actually shown taking any steps toward it. The fate of Eddie Willers at the end of the film is almost completely unaddressed, with a mere intimation that the protagonists have another man in mind for whom they plan to stop – but no validation that this would indeed be Eddie Willers. The treatment of Eddie Willers in the novel is ambiguous; Ayn Rand leaves him beside a broken-down Taggart Transcontinental train engine, abandoned by the railroad workers. He might be rescued, or he might perish – but he has not yet been invited into Galt’s Gulch. The film creators neither pose the ambiguity nor attempt to resolve it. For me, the fate of Eddie Willers – a sincere, moral, hard-working man who respects the achievements of heroic individualists but is not (according to Rand) one of them – is a key concern in Atlas Shrugged. I think Rand treated him with undeserving harshness, considering that people like Eddie Willers, especially if there are millions of them, can be tremendous contributors to human flourishing. The film creators missed an opportunity to vindicate Eddie and give him some more serious hope of finding a place in the new world created by the inhabitants of Galt’s Gulch. In Galt’s Gulch, the film shows Dagny explaining her plan to have a short railroad built to service Francisco d’Anconia’s new copper mine. But who would actually physically build the railroad and do the job well, if not people like Eddie Willers?

Strength 4: The film’s narrator does a decent job at bridging the events of the previous two installments and the plot of Part III. The events in the film begin with Dagny Taggart crash-landing in Galt’s Gulch, and even those who did not read the book or watch the preceding two films would be able to follow how and why she got there. The film is also excellent in displaying the corruption, incompetence, spitefulness, and callous scheming of the crony corporatist establishment that Rand despised – and that we should despise today. The smoky back-room scene where the economic planners toast to the destruction of Minnesota is one of the film’s high marks – a memorable illustration of what the mentality of “sacrificing the parts” for the whole actually looks like.

Weakness 4: While moderately effective at conveying narratives of events and generally decent in its treatment of ethics and politics, the film does not do justice to the ideas on metaphysics and epistemology also featured prominently in Atlas Shrugged. Furthermore, the previous two films were generally superior in regard to showing, in addition to telling, the fruits of the creative efforts of rational individualists, as well as the consequences for a society that shackles these creators. In the Part III film, many of the scenes utilized to illustrate these effects seemed more peripheral than central to the book’s message. Much of the footage hinted at the national and world events that take place in the book, but did not explicitly show them.

Amid these strengths and weaknesses remains an opportunity to continue the discussion about the undoubtedly crucial implications of Ayn Rand’s message to today’s political and societal climate – where there looms the question of how much longer the creator-individualists who power the motor of the world can keep moving forward in spite of the increasingly gargantuan obstacles placed in their way by legacy institutions. Any work that can pose these questions for consideration by wider numbers of people is welcome in an environment where far too many are distracted by the “bread and circuses” of mindless entertainment. Atlas Shrugged: Part III is a film with intellectual substance and relevance and so is worthy of a relatively short time commitment from anyone interested in Ayn Rand, Objectivism, philosophy, and current events. However, those who watch the film should also be sure to read the novel, if they have not already done so, in order to experience much greater depth of both plot and philosophical ideas.

All You Need Is Toleration – Article by Max Borders

All You Need Is Toleration – Article by Max Borders

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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 ethos—all 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.

Meaningful and Vacuous “Privilege” – Article by G. Stolyarov II

Meaningful and Vacuous “Privilege” – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
December 3, 2013
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Sanford Ikeda’s concise and insightful lists of 14 common fallacies about the free market (available in two installments from The Freeman here and here) motivate careful thought about the commonly used and misused term “privilege” and the conflations in which it can result. In discussing the second fallacy regarding the free market, that it is identical to a system where the government grants special privileges to businesses, Dr. Ikeda writes that “People sometimes define ‘privilege’ as any advantage a person or group may have over others. Certainly such advantages exist today and would exist in a free market—you may be born into a wealthy family or have superior drive and resourcefulness—but these advantages are consistent with the absence of privilege in the libertarian sense, as long as you acquired such advantages without fraud or the initiation of physical violence against the person or property of others.”

Indeed, the increasingly common usage of the term “privilege” to mean any advantage whatsoever eviscerates it of any genuine meaning it once had. This problem in today’s discourse spreads far beyond discussions of connections between businesses and governments.

Certainly, the very fact that one individual is different from another – with a different set of experiences, different physique, different knowledge, and even different standing room at any particular time – provides that individual with opportunities that the other lacks, while rendering him or her limited in ways that the other is not. Unfortunately, this trivial fact is increasingly being misconstrued in some circles to suggest vile inequities arising out of innocuous human differences. People who have not aggressed against, or even demeaned or ridiculed, anyone are increasingly being identified as “privileged” simply for belonging to broadly and crudely defined groups – be it all people of European descent, all males, or even all non-overweight people (witness the pseudo-concept of “thin privilege”) or people who are not disabled. (“Ableism” is apparently an emerging sin in the vocabulary of the increasingly militant and vitriolic collectivistic “social justice” movement – which is about neither true individual-oriented justice nor the preservation of a civilized and tolerant society.)  Such a vacuously expansive view of privilege is a tremendous insult to the true victims of coercive privilege throughout history – from slaves in all eras, to women who in prior eras were denied suffrage and property rights, to the freethinkers and forbears of liberty and reason, whose voices were too often snuffed out by the arbitrary power of absolute monarchs and theocrats in the pre-Enlightenment world.

Thomas Jefferson, an opponent of privilege in its meaningful sense, put it best when he expressed in his 1826 letter to Roger C. Weightman “the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride legitimately, by the grace of god.” Jefferson was a staunch opponent of the coercive privilege that enabled some to gain artificial advantages by restricting others from pursuing life-improving courses of action. Accidents of birth, or special lobbying skills, should not, in a just system, enable a person to acquire prerogatives which could not be earned through the free, peaceful exercise of that person’s abilities. Jefferson saw the future and strength of the American republic in the hoped-for emergence of a “natural aristocracy of talent and virtue” – people who, when allowed the liberty to flourish through honest work and competition, would become role models for others solely through their examples. This natural aristocracy would not need force to maintain its prominence, because the traits of the most knowledgeable, most industrious, and most virtuous people will be emulated by any who earnestly seek to improve their own lives and who have the freedom to acquire knowledge and make their own decisions.

Yet Jefferson’s natural aristocracy would be denounced as an example of horrid “privilege” by the “social justice” types – simply due to the necessarily unequal distribution of outcomes on a free market of open and honest production, competition, and cooperation. After all, not everyone can originate the same ideas at the same time. Not everyone can take advantage of the same opportunity for entrepreneurial profit, whose attainment, as economist Israel Kirzner demonstrated in Competition and Entrepreneurship, arises out of alertness to opportunities that others have missed. Kirzner writes that “Because the participants in [a] market are less than omniscient, there are likely to exist, at any given time, a multitude of opportunities that have not yet been taken advantage of. Sellers may have sold for prices lower than the prices which were in fact obtainable… Buyers may have bought for prices higher than the lowest prices needed to secure what they are buying…” (43). Would it be an example of unacceptable “privilege” for an alert entrepreneur to remedy such an arbitrage opportunity and thereby bring otherwise-unrealized value to consumers?

Yes, the free exercise of human abilities will produce outcomes where some people will have some advantages over some others (while, of course, leaving fully open the possibility that those very others will have their own distinct advantages, obtained through hard work, knowledge, or sheer luck). But, as long as coercion is not involved in securing and maintaining those advantages, the people endowed with them are not “booted and spurred” to ride the rest of us. As Dr. Ikeda points out, the differences among people are a source of strength harnessed by the free market: “The free market gives you an incentive to profit from associating with and learning from others who might be very different from you, who operate outside your normal social networks.” By incentivizing and facilitating these interactions, the free market encourages greater tolerance, understanding, and visible societal heterogeneity of the sort that constitutes the best safeguard against truly heinous oppressions based on collectivistic stereotypes. Instead of condemning others as being too “privileged” simply on account of innocuous differences, it is far more productive to think about how those differences can help one achieve one’s own values through honest, peaceful, and productive interaction, cooperation, and exchange.

Rejecting the Purveyors of Pull: The Lessons of “Atlas Shrugged: Part II” – Article by G. Stolyarov II

Rejecting the Purveyors of Pull: The Lessons of “Atlas Shrugged: Part II” – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
October 13, 2012
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Atlas Shrugged: Part II is a worthy successor to last year’s Part I, and I am hopeful for its commercial success so that John Aglialoro and Harmon Kaslow will be able to release a full trilogy and achieve the decades-long dream of bringing the entire story of Ayn Rand’s Atlas Shrugged to the movie screen. The film is enjoyable and well-paced, and it highlights important lessons for the discerning viewer. The film’s release in the month preceding the US Presidential elections, however, may give some the wrong impression: that either of the two major parties can offer anything close to a Randian alternative to the status quo. Those viewers who are also thinkers, however, will see that the film’s logical implication is that both of these false “alternatives” – Barack Obama and Mitt Romney – should be rejected decisively.

While the cast has been replaced entirely, I find the acting to have been an improvement over Part I, with the actors portraying their respective characters with more believability and emotional engagement. Samantha Mathis, in the role of Dagny Taggart, showed clearly the distress of a competent woman who is ultimately unable to keep the world from falling apart. Esai Morales aptly portrayed Francisco d’Anconia’s passion for ideas and his charisma. Jason Beghe also performed well as Hank Rearden – the embattled man of integrity struggling to hold on to his business and creations to the last.

The film emphasizes strongly the distinction between earned success – success through merit and creation – and “success” gained by means of pull. The scene in which two trains collide in the Taggart Tunnel is particularly illustrative in this respect. Kip Chalmers, the politician on his way to a pro-nationalization stump speech, attempts to get the train moving through angry phone calls to “the right people,” thinking that all will be well if he just pulls the proper strings. But the laws of reality – of physics, chemistry, and economics – are unyielding to the mere say-so of the powerful, and the mystique of pull collapses on top of the passengers.

As the world falls apart, the film depicts protesters demanding their “fair share,” holding up signs reminiscent of the “Occupy” movement of 2011 – “We are the 99.98%” is a clear allusion. Yet once the draconian Directive 10-289 is implemented, the protests turn in the other direction, away from the freedom-stifling, creativity-crushing regimentation. Perhaps the protesters are not the same people as those who called for their “fair share”  – but the film suggests that the people should be careful about the policies they ask for at the ballot box, lest they be sorely disappointed upon getting them. This caution should apply especially to those who think that Barack Obama’s administration parallels the falling-apart of the world in Atlas Shrugged – and that Mitt Romney’s election would somehow “save” America. Nothing could be further from the truth.

If there is any character in Atlas Shrugged who most resembles Mitt Romney, it is not John Galt. Rather, it is James Taggart – the businessman of pull – the sleek charlatan who will take any position, support any policy, speak any lines in order to advance his influence and power. Patrick Fabian conveyed the essence of James Taggart well – a man who succeeds based on image and not on substance, a man who has a certain polished charisma and an ability to pull the strings of politics – for a while. James Taggart is the essence of the corporatist businessman, a creature who thrives on special political privileges and barriers to entry placed in front of more capable competitors. He can buy elections and political offices – and he can, for a while, delude people by creating a magic pseudo-reality with his words. But words cannot suspend the laws of logic or economics. Ultimately the forces of intellectual and moral decay unleashed by corporatist maneuvering inexorably push the world into a condition that even the purveyors of pull would have preferred to avoid. As Ludwig von Mises pointed out, the consequences of economic interventionism are often undesirable even from the standpoint of those who advocated the interventions in the first place. James Taggart is ultimately pushed into accepting Directive 10-289, though his initial plans were much more modest – mostly, a desire to hang onto leadership in the railroad business despite his obvious lack of qualifications for the position. Mitt Romney, by advocating James Taggart’s exact sort of crony corporatism, may well usher in a similar overarching totalitarianism – not because he supports it now (in the sense that Mitt Romney can be said to support anything), but because totalitarianism will be the logical outcome of his policies.

Because, in some respects, Ayn Rand wrote during a gentler time with respect to civil liberties, and the film endeavors to consistently reflect Rand’s emphasis on economic regimentation, there is little focus on the kinds of draconian civil-liberties violations that Americans face today. The real-world version of Directive 10-289 is not a single innovation-stopping decree, but an agglomeration of routine humiliations and outright exercises of violence. The groping and virtual strip-searching by the Transportation Security Administration, the War on Drugs and its accompanying no-knock raids, the paranoid surveillance apparatus of large-scale wiretaps and data interception, and the looming threat of controls over the Internet and indefinite detention without charge – these perils are as damaging as an overarching economic central plan, and they are with us today. While not even the most socialistic or fascistic politicians today would issue a ban on all new technology or a comprehensive freeze of prices and wages, they certainly can and will try to humiliate and physically threaten millions of completely peaceful, innocent Americans who try to innovate and earn an honest living. Obama’s administration has engaged in this sort of mass demoralization ever since the foiled “underwear” bomb plot during Christmas 2009 – but Romney would do more of the same, and perhaps worse. Unlike Obama, who must contend with the pro-civil-liberties wing of his constituency, Romney’s attempts to violate personal freedoms will only be cheered on by the militaristic, jingoistic, security-obsessed faction that is increasingly coming to control the discourse of the Republican Party. There can be no hope for freedom, or for the dignity of an ordinary traveler, employee, or thinker, if Romney is elected.

I encourage the viewers of the film to seriously consider the question, “Who is John Galt?” He is not a Republican. If any man comes close, it is Gary Johnson, a principled libertarian who has shown in practice (not just in rhetoric) his ability and willingness to cut wasteful interventions, balance budgets, and protect civil liberties during two terms as Governor of New Mexico. He staunchly champions personal freedoms, tax reduction, foreign-policy non-interventionism, and a sound currency free of the Federal Reserve system. Gary Johnson was, in fact, a businessman of the Randian ethos – who started as a door-to-door handyman and grew from scratch an enterprise with revenues of $38 million.  And, on top of it all, he is a triathlete and ultramarathon runner who climbed Mount Everest in 2003 – clearly demonstrating a degree of ambition, drive, and pride in achievement worthy of a hero of Atlas Shrugged.

Ayn Rand never meant the strike in Atlas Shrugged to be an actual recommendation for how to address the world’s problems. Rather, the strike was an illustration of what would happen if the world was deprived of its best and brightest – the creators and innovators who, despite all obstacles, pursue the path of merit and achievement rather than pull and artificial privilege. Today, it is necessary for each of us to work to keep the motor of the world going by not allowing the purveyors of pull to gain any additional ground. Voting for Mitt Romney will do just the opposite – as Atlas Shrugged: Part II artfully suggests to the discerning viewer.

The Importance of Subjectivism in Economics – Article by Sheldon Richman

The Importance of Subjectivism in Economics – Article by Sheldon Richman

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The New Renaissance Hat
Sheldon Richman
October 3, 2012
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After many years, Frédéric Bastiat remains a hero to libertarians. No mystery there. He made the case for freedom and punctured the arguments for socialism with clarity and imagination. He spoke to lay readers with great effect.

Bastiat loved the market economy, and badly wanted it to blossom in full—in France and everywhere else. When he described the blessings of freedom, his benevolence shined forth. Free markets can raise living standards and enable everyone to have better lives; therefore stifling freedom is unjust and tragic. The reverse of Bastiat’s benevolence is his indignation at the deprivation that results from interference with the market process.

He begins his book Economic Harmonies (available at the FEE store) by pointing out the economic benefits of living in society:

It is impossible not to be struck by the disproportion, truly incommensurable, that exists between the satisfactions [a] man derives from society and the satisfactions that he could provide for himself if he were reduced to his own resources. I make bold to say that in one day he consumes more things than he could produce himself in ten centuries. What makes the phenomenon stranger still is that the same thing holds true for all other men. Every one of the members of society has consumed a million times more than he could have produced; yet no one has robbed anyone else.

The Existence of Privilege

Bastiat was not naïve. He knew he was not in a fully free market. He was well aware of the existence of privilege: “Privilege implies someone to profit from it and someone to pay for it,” he wrote. Those who pay are worse off than they would be in the free market. “I trust that the reader will not conclude from the preceding remarks that we are insensible to the social suffering of our fellow men. Although the suffering is less in the present imperfect state of our society than in the state of isolation, it does not follow that we do not seek wholeheartedly for further progress to make it less and less.”

He wished to emphasize the importance of free exchange for human flourishing. In chapter four he wrote,

Exchange is political economy. It is society itself, for it is impossible to conceive of society without exchange, or exchange without society. …For man, isolation means death….

By means of exchange, men attain the same satisfaction with less effort, because the mutual services they render one another yield them a larger proportion of gratuitous utility.

Therefore, the fewer obstacles an exchange encounters, the less effort it requires, the more readily men exchange.

How does trade deliver its benefits?

Exchange produces two phenomena: the joining of men’s forces and the diversification of their occupations, or the division of labor.

It is very clear that in many cases the combined force of several men is superior to the sum of their individual separate forces.…

Now, the joining of men’s forces implies exchange. To gain their co-operation, they must have good reason to anticipate sharing in the satisfaction to be obtained. Each one by his efforts benefits the others and in turn benefits by their efforts according to the terms of the bargain, which is exchange.

But isn’t something missing from this account?

Austrian Insight

Indeed, there is: the subjectivist Austrian insight that individuals gain from trade per se. For an exchange to take place, the two parties must assess the items traded differently, with each party preferring what he is to receive to what he is to give up. If that condition did not hold, no exchange would occur. There must be what Murray Rothbard called a double inequality of value. It’s in the logic of human action–which Ludwig von Mises christened praxeology. Bastiat, like his classical forebears Smith and Ricardo, erroneously believed (at least explicitly) that people trade equal values and that something is wrong when unequal values are exchanged.

Perhaps I am too hard on Bastiat. After all, he was writing before 1850. Carl Menger did not publish Principles of Economics until 1871. Yet the Austrians were not the first to look at exchange strictly through subjectivist spectacles, that is, from the economic actors’ points of view. The French philosopher Étienne Bonnot de Condillac (1715-1780) did so a hundred years before Bastiat wrote:

The very fact that an exchange takes place is proof that there must necessarily be profit in it for both the contracting parties; otherwise it would not be made. Hence, every exchange represents two gains for humanity.

Bastiat Unaware?

Well, perhaps Bastiat was unaware of Condillac’s argument. That is not the case. He reprints the quote above in his book and responds:

The explanation we owe to Condillac seems to me entirely insufficient and empirical, or rather it fails to explain anything at all. . . .

The exchange represents two gains, you say. The question is: Why and how? It results from the very fact that it takes place. But why does it take place? What motives have induced the two men to make it take place? Does the exchange have in it a mysterious virtue, inherently beneficial and incapable of explanation?

We see how exchange . . . adds to our satisfactions. . . . [T]here is no trace of . . . the double and empirical profit alleged by Condillac.

This is perplexing. Clearly, the necessary double inequality of value is not empirical or contingent. Contra Bastiat, the double inequality explains quite a lot, and his questions all have easy answers.

Yet more perplexing still is Bastiat’s statement in the same chapter: “The profit of the one is the profit of the other.” This seems to imply what he just denied.

Consequential Failure

Bastiat’s failure to grasp this point had consequences for his debates with other economists. For example, he and his fellow “left-free-market” advocate Pierre-Joseph Proudhon engaged in a lengthy debate over whether interest on loans would exist in the free market or whether it was a privilege bestowed when government suppresses competition. Unfortunately, the debate suffers because neither Bastiat nor Proudhon fully and explicitly grasped the Condillac/Austrian point about the double inequality of value. As Roderick Long explains in his priceless commentary on the exchange,

[E]ach one trips up his defense of his own position through an inconsistent grasp of the Austrian principle of the “double inequality of value”; Proudhon embraces it, but fails to apply it consistently, while Bastiat implicitly relies on it, but explicitly rejects it. . . .

Proudhon’s case against interest seems to depend crucially on his claim that all exchange must be of equivalent values; so pointing out the incoherence of this notion would be a telling reply. But Bastiat cannot officially give this reply (though he comes tantalisingly close over and over throughout the debate) because elsewhere–in his Economic Harmonies–Bastiat explicitly rejects the doctrine of double inequality of value.

How frustrating! Bastiat has so much to teach. But here is one blind spot that kept him from being even better.

Sheldon Richman is the editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America’s Families.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Dead-Tree Luddites – Article by Genevieve LaGreca

Dead-Tree Luddites – Article by Genevieve LaGreca

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The New Renaissance Hat
Genevieve LaGreca
May 28, 2012
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Imagine you’re living in the 15th century. You’re witnessing a revolution that will profoundly change the world. This revolution doesn’t involve swords and cannons but rather words and books. The cause of this upheaval is the most important invention in more than a thousand years: the printing press, by Johannes Gutenberg.

Within a few decades of its launch, you see the printing press transform the field of bookmaking in ways previously unimaginable. Printed books are far easier, faster, and less costly to produce than the books that had preceded them, which had to be laboriously copied, one page at a time, by hand. In the time it takes to copy one page by hand, the printing press can turn out hundreds or thousands of copies of that same page, thereby making it possible for the first time in history for almost anyone to own books.

Within a century of its creation, the printing press will spread throughout western Europe, producing millions of books, spurring the economic development of industries related to it, such as papermaking, and spreading literacy and knowledge around the world. The printing press will make possible the rapid development of education, science, art, culture — and the rise of mankind from the medieval period to the early-modern age.

Let us further imagine that not everyone in the 15th century is happy about this innovation. Unable to match the benefits of the printing press, the producers of hand-copied books are outraged. The scribes are being put out of business. The penmanship schools that train the scribes, the quill makers that supply their pens, and the manufacturers of the stools and drafting tables that literally support them are seeing a drop in sales. The hand-copied books are now priced too high to compete with the Gutenberg press, so their publishers are experiencing no growth, with no new capital coming into their industry. The sales force for the hand-copied books is also in despair, with their customers now ordering the new printed books from the Gutenberg people, and their lost income being money they can no longer put into their communities. Alas, the monopolistic monster, the printing press, is taking over.

The hand-copied-book interests complain bitterly to the Great Sages at their Hallowed Council of Justice. “Sires,” they cry, “you must stop the predatory pricing and scorched-earth policies of the Gutenberg press. It’s wiping out the competition. How can this be in the public interest?”

Fast-forward to the 21st century, and we see another revolution that is turning the book industry topsy-turvy — the transformation from printed books to electronic ones. This revolution is spearheaded by a modern-day Gutenberg, Amazon.com, the pioneer of the ebook, the Kindle device for reading it, and the online marketplace for publishing and selling it.

What Amazon has accomplished is truly amazing. With Kindle, it has eliminated the industry middlemen who come between the writer and reader of a book — from agents to publishers to distributors to wholesalers to brick-and-mortar bookstores. Kindle has also eliminated the need for a physical inventory of books, with its high printing, warehousing, and shipping costs. These innovations have resulted in far less expensive books now available to consumers. And the new marketplace of ebooks has been especially advantageous for self-publishers unable to get their books accepted through the traditional channels, who now have an avenue open to them for reaching customers directly.

The popularity of these ground-breaking innovations is enormous, with Kindle books now outselling the combined total of all paperback and hardcover books purchased from Amazon.

Without any middlemen or gatekeepers, with virtually no costs involved, and with self-marketing possible through social media and other Internet channels, electronic publishing is creating a robust market for new writers and books. For example, one novelist who was unable to find an agent or publisher has self-published two of her novels on Kindle. With her books priced at $2.99 and with a 70 percent royalty from Kindle, she earns approximately $2 per book. She is selling 55 books per day, or 20,000 books per year, which amounts to sales of $60,000 and royalties to her of $40,000. (As a simple comparison, without getting into the complexities of book contracts, this author might earn a royalty of approximately 10 percent from a traditional publisher, which would require her to achieve sales of $400,000 to earn as much money as she does self-publishing on Kindle.) Other authors are doing even better, including two self-published novelists who have become members of the Kindle Million Club in copies sold. These writers started with nothing — they were not among the favored few selected by agents and trade publishers, and they had no publicists or book tours — yet, thanks to electronic publishing, they are making a living, with some achieving stunning success.

The low pricing of ebooks, scorned by the traditional publishing interests, is the emerging writer’s new ticket of admission into the book industry. While readers may be highly reluctant to risk $25 in a bookstore to try a new writer’s hardcover work, they are buying the ebooks of new writers priced at or around $2.99 on Kindle. Writers are finding their fans and making money at these prices, and readers, judging by Amazon’s “customer reviews,” are happy with these low-cost books.

The writer-publisher in America dates back to our founding, promoting vigorous free speech and intellectual entrepreneurship. Benjamin Franklin’s Poor Richard’s Almanac and Thomas Paine’s Common Sense, both bestsellers in their day, were self-published. If the American dream is to start with nothing but one’s own talent, motivation, and hard work, and from that achieve success, then in recent times this dream was essentially closed to writers who failed to win the favor of the agents and trade publishers. Prior to the ebook revolution and online marketing spurred by Amazon, there was a stigma attached to self-publishing, despite its long and distinguished tradition in America. The major trade reviewers would not consider a self-published book, which meant that libraries and bookstores, which order based on the reviews, would not carry it. Now, ebooks are not only taking the stigma out of self-publishing but arguably making it the preferred route. Amazon has opened the avenue to pursuing the intellectual’s American dream once again.

Yet the same medieval attacks projected above against the printing press are now being launched against Amazon, with the attackers imploring the modern-day “sages” at the Justice Department to stop the new menace called Amazon.

Leading the charge back to the Middle Ages is the New York Times. Two articles appearing on the front page of its business section on April 16, 2012, illustrate what happens when the Luddites (i.e., those hostile to technological development) meet the statists (i.e., those who look to achieve their ends through government force).

“Daring to Cut Off Amazon” by David Streitfeld praises a publisher-distributor for pulling its printed books out of Amazon. (Amazon discounts not only ebooks but also the printed books it so successfully sells.) The company is Educational Development Corporation, whose CEO, Randall White, laments, “Amazon is squeezing everyone out of the business.… They’re a predator. We’re better off without them.”

One of Mr. White’s concerns was that his sales people were losing business because their customers were buying the company’s books cheaper from Amazon. Sales consultant Christy Reed comments about her local customers, “Yes they got the books for less [from Amazon]. But my earnings go back into our community. Amazon’s do not.” It apparently didn’t occur to her that by buying books cheaper on Amazon, her former customers have more money to spend in her community, and the Amazon staff who replaced her have more money to spend in their communities. But where spending does or doesn’t take place is not the main economic point. The real point is that for the same total spending in the economic system as a whole, people now obtain more books and have money left over to buy more of other things.

“Book Publishing’s Real Nemesis” by David Carr cites the recent antitrust suit brought by the Justice Department against five publishers and Apple, charging they engaged in the price-fixing of ebooks. Instead of condemning this police action against production and trade, Mr. Carr bemoans the fact that the strong arm of the law didn’t go far enough to grip the “monopolistic monolith” Amazon, which “has used its market power to bully and dictate.” Mr. Carr considers it bullying and dictating when a private company (Amazon) sets its terms, and other players (the publishers) are free to do business with it or not. But it’s not bullying and dictating when the compulsory power of the state intervenes to set economic terms and punish businesses arbitrarily?

Mr. Carr quotes Authors Guild president and best-selling author Scott Turow, who worries that the club of authors and publishers will shrink. (Really?) “It is breathtaking to stand back and look at this and believe that this is in the public interest,” complains Mr. Turow about Amazon’s success. He also wonders if Amazon will drive the price of books so low that there will be “no one left to compete with them.” Apparently the “public interest” doesn’t include the millions of customers who choose to buy the mother lode of affordable ebooks from Amazon and who may not welcome his solicitous concern over the low prices they’re paying. And apparently the “public interest” doesn’t include the fresh crop of new authors now sprouting through ebooks, without the benefit of the major publishers and lucky breaks that he had.

The Luddite tone of the attacks against Amazon rings like the following: The electric light will replace the candle. The car will replace the horse and buggy. The cure for tuberculosis will put the sanatoriums out of business. The computer will replace the typewriter.

The statist element lies in the attackers’ desire to enlist the police power of the state to stifle the competition and artificially prop up their businesses.

Granted, it may be disappointing and painful for those whose jobs are thinning out or becoming obsolete due to technological advancements, but that can’t justify government intrusion. Morality is on the side of the people engaged in voluntary trade and against those who urge the Justice Department’s encroachment into their industry. The charges levied against Amazon — as a predator, monopolist, bully, etc. — actually do not apply to a company engaged in voluntary trade, no matter how big its market share, but rather to those trying to preserve their interests through government action.

In the case of Amazon, the ones trying to restrain trade are the attackers themselves. Moreover, not only is morality on the side of Amazon, but so too are the long-run material self-interests of everyone in the economic system. Everyone working will earn money, but, thanks to Amazon and every other innovator of better products or more efficient methods of production, the buying power of the money he earns will be greater. The enemies of productive innovators are, by the same token, antisocial enemies of the general buying public.

The complaints lodged against Amazon would be harmless if the complainers could not use the government to advance their cause. But they can, through antitrust laws. These laws give the state the power to evaluate the price of a company’s product in relation to its competition and to punish companies — severely and arbitrarily — for prices deemed to be unacceptable. If a company’s price for its goods is deemed to be too low, it can be punished for being predatory and destructive of competition. If the price is deemed to be the same as its competitors, it can be punished for collusion and price-fixing. If the price is deemed to be too high, it can be punished for being monopolistic.

Using antitrust laws against the book industry poses an additional grave danger over and above their use against other industries. Because the book industry represents the dissemination of knowledge and ideas, an attempt to regulate the price of books abridges the free flow of ideas and violates our First Amendment right to freedom of the press.

Anyone interested in the survival of a robust book industry — or any other industry — with the free flow of products, the creativity of new business methods, and the preservation of economic freedom and property rights, must support the repeal of these oppressive laws.

The market — comprising the voluntary decisions of millions of free people — determines the pricing of books, the form a book will take, the device it will be read on, the winners and the losers of the competition. If the market chooses an innovative technology and a new direction, then so be it. Let the medieval bookmakers copying their books by hand and their contemporary counterparts using needless paper and ink, warehouses, delivery trucks, and bookstores, adopt the advances or quit!

Totally unlike competition in the animal kingdom, in which the losers are eaten or die of starvation, the losers of an economic competition do not die. At worst, they must relocate in the economic system at a lower level. But in an economic system free enough rapidly to progress, as ours has been for most of the last two and a half centuries, even the lowest-paid workers enjoy a standard of living that surpasses that of the kings and emperors of earlier ages. This is why the Gutenbergs of the world must be left free to dream, to create, and to trade without fear of punishment.

Gen LaGreca is the author of Noble Vision, a novel that won a ForeWord magazine Book of the Year Award and was a finalist in the Writer’s Digest International Self-Published Book Awards. After being rejected by dozens of agents and unable to find a trade publisher, it now enjoys steady ranking in the Top 100 Best Sellers in medical and political genre fiction on Kindle. Send her mail. See Genevieve LaGreca’s article archives.

Economist George Reisman contributed to this article.

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Copyright © 2012 by Genevieve LaGreca. Permission to reproduce is granted with attribution.

Eliminating Most Foreclosures: An Innovative and Just Approach to Mortgage Delinquencies

Eliminating Most Foreclosures: An Innovative and Just Approach to Mortgage Delinquencies

Comments 2 comments
The New Renaissance Hat
G. Stolyarov II
March 25, 2012
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The economic and personal consequences of foreclosure are devastating. Foreclosures leave behind not only blighted neighborhoods, but ruined lives. Furthermore, during the past three years, immense abuses of the foreclosure process have come to light – with numerous banks being found to have improperly foreclosed on thousands of homeowners. The banks have either been unable to produce documentation that demonstrated their right to foreclose – or, worse, have foreclosed on individuals who were never even delinquent or did not have mortgages in the first place (see, for instance, here, here, and here). The violations of due process, private-property rights, and the rule of law have been astounding.

At this point, any solution that can reduce the number of foreclosures will be a welcome benefit to individual liberty, the US economy, and millions of Americans. Indeed, the concept of foreclosure – the expropriation of one’s home – resulting from a few late payments has always struck me as draconian. It disregards one fundamental fact: the homeowner has equity in his or home, even if he or she fails to make a few scheduled payments. So, suppose that a homeowner has a $150,000 outstanding mortgage loan on a home whose market value is $200,000. This means that the homeowner’s equity in the home is $50,000 – or one quarter of the home’s value. If the homeowner fails to make a $1000 hypothetical monthly payment on time, why is the bank entitled to appropriate the entire home and thereby deprive the homeowner of the entire $50,000 in equity? Suppose, as is often the case these days, that the foreclosure proceedings drag on for a year. A 5000% annual rate of interest for that one delinquent payment is quite steep indeed!

While delinquencies ought to be penalized, wholesale expropriation of a home is an unnecessary and disproportionate response in most cases. It would not have been possible on a truly free market, where roughly equal negotiating power would exist between lenders and borrowers. In today’s politicized financial environment, however, the large banks receive all of the privileges: bailouts, loan guarantees, access to “free money” from the Federal Reserve, barriers to entry for smaller competitors, the ability to “securitize” personal loans through means of dubious accountability, the ability to flout laws such as those pertaining to mortgage modifications, and a swiftly operating “revolving door” between bankers and politicians. Thus, homeowners are often left to acquiesce to terms that are far harsher than what they could have gotten for themselves in a truly free market.

A more equitable solution, that recognizes that the real value of the homeowner’s equity, is not to foreclose, but rather to reduce the homeowner’s equity for each delinquent payment. If the homeowner fails to make a scheduled payment, then the bank should be able to recoup its resulting losses – by seizing the portion of the homeowner’s equity corresponding to the amount of the delinquency, perhaps also incorporating an interest charge at the prevailing market rate. Only when all of the homeowner’s equity has been exhausted in this way should the bank have the right to foreclose. In today’s housing market, where many homes are “underwater” (i.e., the mortgage balance exceeds the market price, which has declined precipitously since the days of the housing bubble), this solution would still mean that some foreclosures would occur. But the number of foreclosures would be greatly reduced, and the majority of currently planned foreclosures would never occur. Furthermore, the “underwater” homeowners could still be helped by downward principal modifications that recognize the illusory and unsustainable nature of the inflated market prices that existed during the housing bubble and that were fueled by the expansionary monetary policy of the Federal Reserve. Homeowners should not be made to suffer for the Federal Reserve’s blunders.

Under my proposed approach, the mere involuntary loss of one’s job, or a catastrophic illness, would not put one’s place of shelter in immediate jeopardy. Rather, in the time that it takes for the homeowner’s equity to be exhausted, the homeowner would have the opportunity to attempt to regain his or her employment or health. Furthermore, with fewer foreclosures, the unsightly, wasteful, and dangerous effects of neighborhood blight would be greatly scaled back. A homeowner will still largely maintain his or her residence, even if he or she cannot make a regular mortgage payment. But once a home enters foreclosure, it suffers from deterioration and decrepitude at best – and outright vandalism and destruction at worst.

In rolling back the political privileges of the large banks, it is essential to compensate ordinary, law-abiding, innocent homeowners for the damage that these special privileges have wrought. The benefits of years of hard work and consistent mortgage payments should not be nullified overnight by a single delinquency. Over a year ago, in “Wrongful Foreclosures and the Free Market”, I advocated breaking up the bailed-out banks and declaring a temporary moratorium on foreclosures. Rewriting foreclosure law to require the exhaustion of the homeowner’s equity before a foreclosure can be initiated can be another step to wipe out most foreclosures at the stroke of a pen – while restoring an outcome more compatible with individual liberty, true market freedom, and natural justice.