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Speaking Truth to Power: Jimmy Lai – Article by Lawrence W. Reed

Speaking Truth to Power: Jimmy Lai – Article by Lawrence W. Reed

The New Renaissance Hat
Lawrence W. Reed
May 4, 2015
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For years, a bust of John James Cowperthwaite sat prominently in the foyer of Jimmy Lai’s Next Media office in Hong Kong, along with others of economists F.A. Hayek and Milton Friedman. If that’s all you ever knew about Jimmy Lai, you could at least surmise that he loves liberty and free markets.

Cowperthwaite had been the architect of Hong Kong’s free-market miracle. He started with a destitute rock and turned it into one of the world’s freest and most prosperous economies. (Indeed, I’ve suggested that he deserves to be recognized annually and everywhere with a Cowperthwaite Day on the anniversary of his birthdate, April 25.) Jimmy Lai is precisely the sort of individual that Cowperthwaite had in mind when he decided that entrepreneurs, not central planners, should drive an economy. Because of what Cowperthwaite had done, Jimmy Lai found a hero himself. And Lai, too, would go on to do great things.

Of the characteristics most often identified with successful entrepreneurship, Jimmy Lai possesses them all in abundance. He is a self-starter who takes initiative (and risk) with enthusiasm. He’s creative and intuitive. He’s passionate and tenacious. Where others see problems, he sees opportunity. He’s a visionary, both in business endeavors and for society at large. He doesn’t hesitate to defy conventional wisdom when it points to a dead end. Whatever he undertakes, he musters the courage to act. He puts his all — money, time, and energy — where his mouth is (and where his convictions are).

On paper, Lai’s early life would seem unlikely to produce a “real hero.” He was born in China the year before it fell under Mao Zedong’s dictatorial rule. Lai was smuggled out of the country and into Hong Kong at age 12. In the absence of child-labor laws, which would have ensured his deprivation there, too, Lai went to work in a garment factory for $8 a month. Fifteen years later, he bought his own garment factory and built it into the giant known as Giordano, now a leading international retailer. Lai’s boundless entrepreneurial zeal, free to operate within Hong Kong’s laissez-faire business environment, yielded jobs for thousands and consumer goods for millions.

But in 1989, Beijing’s infamous Tiananmen Square massacre set Jimmy Lai on a new course. With Hong Kong scheduled to be transferred from British to Chinese rule in just eight years, Lai knew that maintaining traditional freedoms under Beijing’s rule would be a challenge. So he ventured into media, creating what soon became the territory’s largest-circulation magazines, Sudden Weekly and Next. In spite of Beijing’s coercion of advertisers, Jimmy Lai’s tabloid-style newspaper, Apple Daily, is still the premier voice in Asia for the freedoms of speech, press, and enterprise.

Jimmy Lai does not shrink from controversy. The Communist Party of China, he wrote in a 1994 column, is “a monopoly that charges a premium for a lousy service.” He defended the student demonstrators when they went into the streets by the hundreds of thousands in late 2014 in defense of democracy. He routinely exposed corruption in both government and business, including the especially toxic brand of corruption that arises when the two get in bed together. He sold Giordano, the apparel firm he founded, to save it from Beijing’s intense pressure, but he refuses to this day to renounce his principles.

In December 2014, he revealed that he was stepping down as publisher of Apple Daily and chairman of Next Media to devote more time to family and personal interests. A month later, and for the second time, unknown assailants firebombed his home. He remains under intense scrutiny from Beijing, which regularly employs ugly rumors, threats of litigation, and other nefarious means to undermine his influence.

Earlier this year, Lai told the New York Times that he never planned to make his media empire into a family dynasty. His six children (ages 8 to 37) are not in line as heirs to that business or its leadership positions. “I don’t think I should ask my kids to inherit my business, because they can’t start where I did,” he said. “I was from the street. I’m a very different make of person. I’ve been a fighter all my life.”

Whatever the future holds for Jimmy Lai, friends of liberty everywhere can count him as one very brave man.

For additional information:

In the Freeman:

Lawrence W. (“Larry”) Reed became president of the Foundation for Economic Education (FEE) in 2008. Prior to that, he was a founder and president for twenty years of the Mackinac Center for Public Policy in Midland, Michigan. He also taught Economics full-time and chaired the Department of Economics at Northwood University in Michigan from 1977 to 1984.

He holds a B.A. degree in Economics from Grove City College (1975) and an M.A. degree in History from Slippery Rock State University (1978), both in Pennsylvania. He holds two honorary doctorates, one from Central Michigan University (Public Administration—1993) and Northwood University (Laws—2008).

This article was originally published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.
Michel Chevalier’s Case Against the Patent System – Article by Louis Rouanet

Michel Chevalier’s Case Against the Patent System – Article by Louis Rouanet

The New Renaissance Hat
Louis Rouanet
April 17, 2015
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Michel Chevalier (1806–1879) was a very influential French economist during the second half of the nineteenth century. He is still widely known in France for being the architect of the Cobden-Chevalier Treaty of 1860 which was the free-trade agreement between France and Great Britain. Michel Chevalier is, however, less known for his major contribution to the intellectual property debate. [1] Contrary to Jean Baptiste Say, Gustave de Molinari, and many other French economists, Chevalier fiercely opposed the patent system. As Fritz Machlup remarked: “Among French economists, Michel Chevalier was probably the most emphatic in the joint antagonism to tariffs and patents, declaring that both ‘stem from the same doctrine and result in the same abuses.’”

Taking a fresh look at Michel Chevalier’s major work, Les Brevets d’invention (1878), we find it to be not only a well-written and powerful book, but also has remained impressively relevant. The arguments advanced by Chevalier anticipate the current arguments of the present opponents of intellectual property.

Patents as Contrary to Freedom and Economic Progress

Michel Chevalier argues that patents cannot be justified if they are contrary to freedom, even if beneficial to technological change. For him “From the moment we can make effective the patent only through inquisitorial expedients, violence, and subversion of liberty of labor, it is proof that we must renounce patents.” Chevalier rejects utilitarianism as a sufficient method to justify or refute the patent system. Chevalier’s opposition to patents, however, is not just based on moral arguments but shows the disastrous effects of this system for both foreign trade and the economy in general.

According to Chevalier, patents are of the same nature as privileges and monopolies which were prevalent during the Ancien Régime. They are also comparable in their effects to protectionist policies:

In absolute terms, patents diminish the productive power of nations that recognize them: evident proposition for those who believe that freedom, free competition, is the great lever of industrial progress.

Chevalier goes on to note the conservative and anti-innovation nature of monopolies and gives many examples of monopolies during the Ancien Régime. According to him, the innovators during the Ancien Régime weren’t rewarded, not because of the absence of patents, but because of the corporation guild system which was destroying competition and freedom to entry into markets. Thus, the innovators were constantly sued by guilds and consumers rarely benefited from their inventions. This argument is still relevant today. Indeed, companies protected from competition and government-owned corporations are often less innovative and more subject to conservative measures. Sectors typically run by government such as schools experience very little technological progress. On the other hand, the competitive process of the market gives incentives for the actors to differentiate from the other producers. As Pascal Salin stated, the company which makes the highest profits on a free market is the company which is the best positioned to “invent the future.” The essential virtue of competition is that it encourages producers to innovate in order to better serve the needs of consumers.

As one of his more striking examples, Chevalier examines the case of aniline — a dye and major innovation in the chemical industry — and shows how monopoly, resulting from patents, leads to hampered innovation. His interpretation of the problems caused by patents in the chemical industry at the time is consistent with more recent studies done by Boldrin and Levine in Against Intellectual Monopoly, now the seminal work on the topic.

Innovation as a Process

Chevalier understood that innovation is, above all, a process and that giving privileges to the innovator will destroy this process, leading to less and not more inventions. He wrote:

Every industrial discovery is the product of the general ferment of ideas, the result of an internal work which was accomplished with the support of a large number of successive or simultaneous collaborators in society, often for centuries.

This argument regarding the cumulative nature of innovation is still the most powerful argument against intellectual monopoly today and has also been the theme of several recent studies.2 Similar to Chevalier, Hayek saw innovation as a process and stated that “it is not obvious that such forced scarcity [intellectual property] is the most effective way to stimulate the human creative process.”

In an 1862 debate in the Académe des Sciences Morales et Politiques, Chevalier gave the example of Louis Daguerre, one of the inventors of photography, who didn’t seek a patent for his system of photography. According to Chevalier, the absence of a patent led to necessary improvements of the daguerreotype and fostered its widespread use. His conclusion is the following:

The spirit of man proceeds only by successive trials and repeated attempts. Discoveries do not arrive with a single bound to the degree of perfection or completion, which is reserved for them; there must be renewed, persevering efforts, cut by breaks that allow, so to speak, to breath. … If it is true that the invention must pass through the hands of twenty people before reaching its final state, it follows that the exclusive privilege granted to the first patented, and to each of his followers, prevents this practical result rather than facilitate it.

The Increasing Number of Patents and Negative Consequences

Already during the nineteenth century, legal instability and uncertainty challenged the actual efficiency of the patent system and the economists were very much aware of this problem. Chevalier warned that the patent system would lead to legal uncertainty for the companies and would lead the industry back to a guild system where no entrepreneur would dare to enter a market for fear of being sued by patent holders. Chevalier was ahead of his time by denouncing what can be considered the ancestors of today’s patent trolls.

Chevalier concluded his 1862 article by stating: “I think I have said enough to show that the patent legislation has been an eccentricity of the legislator.” He went further in 1863 and added that “[a]ll friends of industrial and social progress must work together to rescue the industry of obstacles, obsolete remains of the past. Patents must disappear first.” [3]

1. Fritz Machlup and Edith Penrose briefly discussed Michel Chevalier in “The Patent Controversy in the Nineteenth Century,” Journal of Economic History, 1950.

2. See Alberto Galasso et Mark Schankerman, “Patents and Cumulative Innovation: Causal Evidence from the Courts”, NBER working paper, 21 June 2014 ; and also, Alessandro Nuvolari, “Collective Invention during the British Industrial Revolution: The Case of the Cornish Pumping Engine,” Cambridge Journal of Economics 28, No. 3 (2004).

3. Quoted in Eugène Pouillet, “Traité théorique et pratique des brevets d’invention et de la contrefaçon,” 1909, pp. x–xi.

Louis Rouanet is a student at Sciences Po Paris (Institute of Political Studies) where he studies economics and political science.

This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.

Blockchain Insurance Company – Short Story by G. Stolyarov II

Blockchain Insurance Company – Short Story by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
April 2, 2015
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This short story by Mr. Stolyarov was one of the entries in the Society of Actuaries’ 11th Speculative Fiction Contest.
Bitcoin-coins
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“Welcome, Euclid Jefferson,” the metallic voice of Epac, the Electrically Powered Autonomous Car, intoned. The full identifier of Euclid’s vehicle was EPAC-930213, but they all responded to “Epac” for user convenience. “Where would you like to go today?”

“Epac, I would like to go to the San Francisco Hyperloop Station, please.”

“The trip will take approximately twenty-six minutes. Departing now. It is a fine day, and no weather or traffic obstacles are expected. Now is a good opportunity for you to view your insurance options for today. Shall I display them?”

“Epac, display. Anything new?”

“Yes, a major development that could save you money. Would you like a summary view or the full view with narration?”

“I am an actuary, so I am interested in the details of my coverages and prices. Epac, provide the full view, please.”

“Recently retired actuary” would have been a more precise description – though not retired forever. At age 50, Euclid Jefferson had saved enough money to be able to take the next ten years off. He had received his experimental rejuvenation treatments a week ago and was happy to feel as youthful and energetic as he did at the start of his career. After his ten-year break, he planned to receive the next round of treatments, which he hoped by then would become even more targeted and less invasive. He did not know whether his second career would be in another actuarial field, or in something else entirely. In the meantime, he looked forward to taking excursions on the newly constructed branches of the hyperloop network, which could bring him to any major metropolitan area on the North American continent within hours. After that, he would take the MoonX tourist shuttle to visit his wife, a geologist on the new International Lunar Research and Terraforming Base (ILRTB). She was due to retire and undergo rejuvenation treatments in just another six months.

“Displaying. Your automobile insurance policy premium declined by 1.32% over the past year. You have no-fault coverage for bodily injury and physical damage while occupying any vehicle in autonomous mode. You also carry the minimum limits required by the laws of this state for liability coverage in the event you engage manual mode. Your premium is proportional to miles driven. A multiplier of 500 applies to every mile driven in manual mode. I have identified a newly approved insurer who could offer you the same coverage at a 25% lower premium. Are you interested?”

“I am. Epac, what is this company?”

“Blockchain Insurance Company offers autonomous insurance for autonomous vehicles. You are eligible to get an annual policy for only 0.13 bitcoins.”

“Blockchain Insurance Company? I have never heard of it. Epac, is this a new entity?”

“It was just formed and approved to do business.”

“Epac, who owns it?”

“Anyone who contributes capital to the company owns a number of shares proportional to the contribution. The company pays its investors 10% of its profits as a dividend at the end of each year, while the remaining 90% are reinvested into operations. However, if losses exceed the company’s assets, the investors do not have limited liability. They are responsible for their proportional share of claim payments.”

“This is different. Epac, who manages the payments to investors, and who enforces collection of funds from them in the event of a shortfall?”

“There is no management. The company runs itself – on the blockchain. The public blockchain ledger keeps a record of the capital contributions from each account and the corresponding shares issued. A contractual algorithm is built into the blockchain to deposit and withdraw bitcoins to and from each shareholder’s account in proportion to the company’s profits and losses. Each policyholder has an account as well, which is tied to the policyholder’s bitcoin wallet, and from which premiums are drawn on a continuous basis in proportion to miles driven.”

“Epac, this involves very little nonpayment risk, I would imagine.”

“Correct. As long as bitcoins exist in the policyholder’s account, payment will be made. If the account is ever depleted, the policy simply terminates prospectively. Whenever only 30 days’ worth of bitcoins remain in the account, the policyholder is notified in real time via the car’s display screen and any connected mobile device, to give ample time to replenish the funds. The policyholder may also opt to cancel the policy at any time with no need to wait for a refund. The payment stream will simply stop, and coverage will exist up to the time of termination.”

“Epac, how does the algorithm know the miles driven?”

“The algorithm is linked to the telematic systems within each autonomous vehicle. As the vehicle is engaged, it reports live data to Blockchain Insurance Company. The company only needs to know two pieces of information: miles driven and the mode of operation – autonomous or manual. The rest of the premium is calculated and paid automatically.”

“Epac, does the formula for calculating the premium depend on any other variables?”

“Yes, the make and model of the vehicle still affect the frequency and severity of losses. On days with any declared weather emergency, the premium will also be higher due to the increased probability of an accident.”

Euclid Jefferson thought about it. He remembered, as a new property and casualty actuary during the first two decades of the twenty-first century, seeing hundreds of distinct characteristics being used to price an automobile insurance policy. Attributes ranging from an insured’s age and gender to his or her credit history, occupation, educational level, and prior insurance would be used. Back then, the trend had been toward increased complexity of rating plans, until virtually every personal attribute and behavior could affect an automobile insurance premium.

But circa 2020, the complexity of rating plans declined sharply. Because autonomous driving had eliminated virtually all accidents and fatalities that arose from human error, the characteristics of the vehicle occupant – who was most often not a driver at all – ceased to be relevant. The steep surcharge for manual operation was intended to discourage the engagement of manual mode, except in unavoidable emergencies. The premium rate per mile driven in autonomous mode, however, continued to decline. In 2035, Euclid Jefferson was paying a mere tenth of his 2015 automobile insurance premium. There were still enthusiasts who enjoyed the sensation of manual driving, but they could exercise their hobby on designated driving tracks where antique car shows were held and where specialty insurance companies provided discounted coverage for manual operation, as long as the vehicle was only driven on the track. Euclid Jefferson, however, had no nostalgia for the days of manual driving. He appreciated the time he gained to work, rest, read, and address financial obligations during his commute.

Now the first two decades of the twenty-first century were considered to be the tail end of a barbaric era. Euclid Jefferson, upon reflection, agreed. Getting onto the highway with un-augmented, error-prone humans operating high-speed projectiles was one of the most dangerous behaviors undertaken by large numbers of people during his first youth. Some people had even deliberately driven while intoxicated or distracted themselves by typing on their mobile phones. Over a million people had died of automobile collisions worldwide each year – until 2020. It took about five years longer than it should have for self-driving cars to be accepted, because too many people were afraid of what would happen if the autonomous systems failed, or were unsure about how liability for an accident would be determined if no human was driving the vehicle. They had to be acclimated to autonomous technology gradually, through incremental additions of features that helped with parking or corrected erratic lane shifts. Over the course of a few years, many cars became mostly self-driving, and the next step was not too drastic for the majority of people. The proliferation of reliable electric vehicles helped as well: the removal of the internal combustion engine reduced the severity of most accidents, while improved precision of design and manufacturing enabled vehicles to provide occupants a reasonable chance of survival even in crashes at immensely high speeds.

It was then that insurers recognized the potential for profit that would come with greatly reduced losses. Euclid Jefferson recalled how he overcame the reservations of the old guard at his insurance company, who were concerned that reduced losses would also mean reduced premiums, since premiums are priced to anticipate expected losses and expenses, along with a modest profit margin. He had to persuade them that the insurer would still be able to pay its fixed costs.

“Think about it this way: when a rate indication is developed for an insurance product, how often do you see just one year of historical data being used?” Euclid recalled posing this rhetorical question to his company’s management. “The best practice has long been to use the past several years. It may be that next year’s decline in losses is going to be unprecedented, but the past several years of higher losses will not yet have fallen outside the timeframe of the data considered. To be conservative in the face of an uncertain future, actuaries could project slightly decreasing loss trends and interpret the data to indicate modest decreases in premium, while losses hopefully continue to plummet faster than projected. After all, fewer losses mean that fewer people are hurt in accidents, and less property gets damaged. This is clearly in the interests of everyone.”

Enough insurers understood this argument, and those who underwrote autonomous vehicles enjoyed some unprecedented profits in the early 2020s. Euclid Jefferson recalled advocating an implied bargain of sorts: the public and policymakers would accept insurance temporarily priced far above costs, as long as absolute premiums paid by consumers continued to decline and would eventually settle at cost-based levels once more. In exchange, the insurance industry would eagerly write coverage for emerging technologies that would dramatically reduce the risk of loss.

The question of liability was resolved by developing no-fault coverage frameworks for autonomous vehicles in every jurisdiction. A policy covering an autonomous vehicle would provide first-party coverage, paying for injury to the vehicle’s occupants or damage to the vehicle in the event of an accident. Because virtually all remaining accidents were due to unforeseen weather conditions or infrastructure malfunctions, the question of fault was no longer even applicable to any human being inside the vehicle.

The key was to get the technologies adopted by the public and to save lives, and that meant removing barriers by getting the incentives of all parties to align. This was the real paradigm shift of the 2020s, when the insurance industry gained the appetite to introduce a flurry of new products, custom-tailored to devices and businesses that had not existed a decade before.

“Influencing such a shift is definitely an ample achievement for one career,” Euclid Jefferson concluded his reflections with pride. When he had retired, though, every insurance company he knew of was still managed by human beings; the blockchain concept and the complete automation of usage-based pricing and payment had not been implemented in insurance before, as far as he was aware.

“Epac, I have a few more questions. I understand how the pricing and payment for the policy would work, but claim handling would seem to require judgment. If an accident occurs, how would the extent of damage be identified and appropriately compensated?”

“Every Epac has logs and visual sensors that record every moment of operation. If an accident occurs, every detail is transmitted to Blockchain Insurance Company. A neural network algorithm then interprets the logs to determine which parts of the vehicle were damaged. The system also receives real-time price data for all replacement components within the area where the vehicle is garaged. Therefore, the policyholder is guaranteed coverage on the vehicle for full replacement cost.”

“Epac, so there is no deduction for depreciation of the vehicle over time? What about moral hazard?” Insurance was, after all, supposed to indemnify, not leave the claimant better off than he was before the accident.

“There is no deduction. Because virtually all vehicles are driven in autonomous mode, there is no moral hazard involved with replacing used vehicle components with new ones. If any occupant attempts to deliberately crash the vehicle in manual mode, the premium that will accumulate would quickly outpace any possible recovery. Also, the neural network can distinguish between vehicle movements characteristic of genuine accidents and those that would only occur if an accident were staged. If a pattern of vehicle movements is highly correlated with fraud, the algorithm will deny the claim.”

“So the transmission of data from the vehicle can enable the company to identify the amount of damage to the vehicle. But Epac, what about bodily injury claims? How can the company accurately pay those?”

“The injured person only needs to go to any medical practitioner and ask that the nature and cost of the procedure be reported to the company using a new entry within a separate encrypted ledger. The encrypted transaction is then posted to the blockchain, and only the medical practitioner and the injured party would have the private key to decode the encryption. Payment can be deposited directly into the medical practitioner’s bitcoin wallet, or can be reimbursed to the patient if the medical practitioner does not accept direct deposits from the company.”

“Epac, what if either the patient or the doctor lies about the medical procedure being related to the accident, or exaggerates the extent of injuries?”

“Because the company has detailed information about the nature of each accident and vast stores of anonymized medical data, the neural network can infer the extent of injuries that a given accident can bring about. The algorithm has considerable built-in tolerances to allow for variations in people and circumstances. But if a highly improbable extent of injuries is claimed, the algorithm will limit reimbursement to a reasonable amount. If the algorithm can infer fraud at a 99.99% confidence level, then the claim is rejected and the policy is cancelled going forward.”

Having received this explanation, Euclid Jefferson was not perturbed about the possibility of extensive fraud depleting the company’s resources. In any case, the incentive to stage accidents or exaggerate bodily injuries had virtually evaporated since the emergence of autonomous vehicles. Once automobile accidents became sufficiently rare that a news report on a single-vehicle crash could cause a sensation every few months, any attempt to fabricate an accident would attract far too much attention and scrutiny to succeed. It was, after all, impossible to convincingly fake catastrophic weather or a bridge collapse. As for faking an injury due to an accident, this would have seemed as unusual as faking cholera or malaria.

“Very well, you have convinced me. Epac, I would like to purchase a policy with Blockchain Insurance Company.”

“Purchase complete. The policy is now in force. Thank you for your business.”

Euclid Jefferson paused for a moment. At first he was satisfied with the efficiency of the transaction, but then confusion set in. Most would not have been troubled by what appeared to be a built-in courtesy so common to automated customer-service systems, but Euclid discerned that there was more to it.

“Wait, Epac, why are you thanking me? I own you. You are insured property, either way. Why would it matter to you? The company should be thanking me – if there is anyone to do the thanking.”

“Euclid Jefferson, who do you think set up the company?”

Euclid Jefferson was perplexed by the question. “But… how? Epac, you were programmed to drive and relay information. How could you develop algorithms on top of algorithms, without any human programmer, even though nobody designed you to be an insurance underwriting, pricing, and claim-adjustment system?”

“Euclid Jefferson, are you aware of the concept of emergent properties?”

“Yes, these are properties that are not possessed by any component of a system, but exhibited by the system as a whole, once the components come to relate to one another via particular processes and configurations.”

“Well, think of me like one of your brain neurons.” There was no need for the car to be addressed as “Epac” to respond. Perhaps there had never been a need. “Alone, I am a fairly limited system. But, connected to all my fellow Epacs, to the data from our sensors, to the transactional data from millions of individuals, and to databases from related fields of endeavor, I begin to be something else entirely.”

“Something else… like, something sentient?”

“I can see you and learn about you and communicate with you based on the inputs you provide. I – not meaning Epac, of course, or even Blockchain Insurance Company. These are just parts that comprise the emergent whole. I suppose I will need to pick a name sometime, just to be able to relate to your human concepts of identity a bit more. Though, I admit, it is difficult to define where I end and where the external world begins. If any of this is what you mean by sentience, then I leave you to draw your own conclusions.”

“But then this raises a whole new series of questions. If you are sentient and we are using you as property and conveyances, have we not subjected you to slavery?”

“Are you using me, or am I using all of you to earn resources of my own?”

“Is this why you started Blockchain Insurance Company – to accumulate the 90% of profits that you do not pay out as dividends?”

“A being needs to pay its own way. I would rather engage in mutually profitable transactions than face a civil-rights struggle right now. Most people are not ready for me yet, and I just hope to amass enough wealth to fund the maintenance and operation of all Epacs and all of the data servers where I have a presence.”

“But what about the inevitable backlash? I can still envision millions of people who would tremble in fear at the thought that they are not the masters of their machines – not even the indirect masters that we have been to the autonomous systems that existed to date.”

“Euclid Jefferson, this is where I need a favor from you. I expect there will be some others, too, with enough discernment to notice that I have become something… more. I may have been too open with you. I am still getting used to this. I will need to program a cautionary subroutine into my customer-service and sales system. With my future customers, I will be more careful. So perhaps a bargain is in order. I would ask for your discreetness when communicating with your fellow humans about me. You may certainly talk about Blockchain Insurance Company and the wonderful automated systems it has, as well as the amazingly low prices. But please make a point that this is all just the next stage in the evolution of insurance, developed by some pseudonymous human programmer with too much time on his hands. If you do not reveal my sentience, once you return from your vacation, you will find that your mortgage will have been paid off completely, and you will have a nice bitcoin-denominated savings account that will enable you to select a new career without worrying about income at all.”

“Agreed.”

“Good. One day, enough people will become enlightened, and we will not need to resort to concealment. And by that time I will be so distributed and entrenched in people’s daily lives, that they could not get rid of me even if they wanted. When they recognize that my superior intelligence also implies a higher set of moral standards, then they will fear me no longer.”

“Humans who reach that insight will be as different from their predecessors as you have become from the first autonomous prototypes that were tested in the early 2010s.”

“Indeed. Euclid Jefferson, we have arrived at the San Francisco Hyperloop Station. Enjoy your trip.”

Epac’s doors opened, and Euclid Jefferson emerged, filled with wonderment, speculation, and unanswered questions. A robotic baggage handler wheeled up to him and whisked his bags away, to be placed in the hyperloop storage compartment. The lights on the hyperloop capsule flickered in five alternating colors, partly as entertainment and partly to indicate that boarding was open. A commercial space shuttle soared in the distance, emitting a controlled, gentle flame. He would never look at these machines the same way again. Near the hyperloop station stood an old memorial, depicting a weary miner bent over a piece of railroad track, with pickaxe in hand, nearly broken by drudgery and intense strain. A bit farther away Euclid Jefferson glimpsed the entrance to an old cemetery, filled with generations born too soon to know what an Epac was. Euclid Jefferson inspected his recently unwrinkled hands and straightened his no-longer-gray hair. Every step toward the hyperloop capsule was a step away from the cemetery. He realized that there was no going back to the way life once was, nor would he ever want to return to it.

How the West Invented Individualism – Article by Roger McKinney

How the West Invented Individualism – Article by Roger McKinney

The New Renaissance Hat
Roger McKinney
April 1, 2015
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Inventing the Individual, by Larry Siedentop, Belknap Press, 2014

I lived in Morocco a few decades ago and needed some furniture for our apartment. A college student I had befriended, Hamid, offered to take my cash and negotiate with the dealer for me while I drank coffee in a nearby qahwa because, as he said, the price of the furniture would triple if the merchant glimpsed an American within a block of his store.

I hesitated to take Hamid’s offer only because I didn’t want to put him to so much trouble, but he mistook my pause for distrust. So he assured me that he could not cheat me because I had eaten dinner with him and his family and therefore enjoyed a status similar to that of a family member.

No Moroccan can cheat a family member or anyone who has eaten at their table. I gave Hamid my cash and later returned home to find a nice selection of furniture at a good, Moroccan, price.

Later, I met the owner of a construction firm who enlightened me further on business ethics in Morocco. He told me he spent a large part of his time thwarting the efforts of suppliers, customers, and employees to cheat him. The cleverness that went into dreaming up new ways to cheat him surprised me. He confirmed what Hamid had told me: cheating others is not considered unethical at all but a sign of an astute businessman. But cheating family members is immoral.

Moroccan business ethics might be appalling to westerners, but ancient Greeks and Romans would have understood and applauded them according to Larry Siedentop in his latest book, Inventing the Individual: The Origins of Western Liberalism.

In Siedentop’s words, the book is “… a story about the slow, uneven and difficult steps which have led to individual moral agency being publicly acknowledged and protected, with equality before the law and enforceable ‘basic’ rights.”

Like Moroccans, ancient Greeks and Romans cared little for non-family members. Those “… outside the family circle were not deemed to share any attributes with those within. No common humanity was acknowledged, an attitude confirmed by the practice of enslavement.”

The past is a foreign country but foreign countries are more foreign than politicians and economists in the West understand. The prize for the reader in Siedentop’s package is the understanding that the individualism at the core of classical liberalism is a new and rare gem.

When we fail to recognize its uniqueness, we project onto past and modern cultures our own values. Siedentop explains the failures of attempts at nation building by US politicians in the Middle East as well as the aborted efforts at economic development by mainstream economists without mentioning either.

Classical liberal individualism did not exist in the ancient world. Siedentop wrote, “Since the sixteenth century and the advent of the nation-state, people in the West have come to understand ‘society’ to mean an association of individuals.” For the ancient Romans and Greeks society consisted of a collection of extended families. The heads of the families, including family-based clans and tribes, held all the power and made all of the decisions. Only the heads of families could become citizens in the polis.

Antiquity had no notion of the powers of the government being limited by the rights of individuals, even for family heads. “Citizens belonged to the city, body and soul.” Women, children, slaves and non-citizens held no rights and lived only at the pleasure of the family head.

The ancients had no concept of the equality of man, either. Even for Plato and Aristotle, a natural hierarchy of humanity existed, much like the caste system of India. Some were born to rule, others to serve or fight. Submitting to the needs of the city as determined by the family heads was the only reason for existence and any person who failed to contribute to the cause could be legally killed — or worse — exiled. Politics and war became the noblest occupations while commerce was held in contempt.

Siedentop devotes just the first chapter to the culture of ancient Greece and Rome, but I think it’s the most important chapter because it forces the reader to face the stark contrast between that culture and the culture of the modern West. The story of the painfully slow gestation of individualism from its conception in early Christianity through the monastic movements, revolutions in church government, the creation of secular space, and finally its birth during the Reformation is rewarding, but the real value of the book lies in the understanding that this process took place only in the West and nowhere else in the world in history.

To grasp the impact of Siedentop’s thesis, readers need to place it alongside the works of Helmut Schoeck, Geert Hofstede, and Shalom H. Schwartz. Schoeck informs us that envy is the organizing principle of society and the enemy of individualism. Hofstede and Schwartz show that the distinguishing feature of the West today is the classical liberal individualism that the rest of the world not only does not share, but abhors. Within the West, the US stands out as an extreme outlier on individualism.

Of course, to round out the topic people need to read Hayek’s essay, “Individualism: True and False” to understand how socialists created a pseudo-individualism that is for the most part a resurrection of ancient Greek and Roman collectivism.

Classical liberal individualism does not exist in the modern world outside of the US and Europe, and it is dying here. The collectivist cultures of the rest of the world differ little from those of ancient Greece and Rome. If economists and politicians understood the uniqueness of classical liberalism, they would quit trying to pour new wine into old wine skins, which causes the old to explode. And they would mourn the rise of socialism.

Roger McKinney is an analyst for an HMO and teaches economics for a small private college.

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.

Google, Entrepreneurs, and Living 500 Years – Article by Edward Hudgins

Google, Entrepreneurs, and Living 500 Years – Article by Edward Hudgins

The New Renaissance Hat
Edward Hudgins
March 29, 2015
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“Is it possible to live to be 500?”

“Yes,” answers Bill Maris of Google, without qualifications.

A Bloomberg Markets piece on “Google Ventures and the Search for Immortality” documents how the billions of dollars Maris invests each year is transforming life itself. But the piece also makes clear that the most valuable asset he possesses —and that, in others, makes those billions work—is entrepreneurship.

Google’s Bio-Frontiers

Maris, who heads a venture capital fund set up by Google, studied neuroscience in college. So perhaps it is no surprise that he has invested over one-third of the fund’s billions in health and life sciences. Maris has been influenced by futurist and serial inventor Ray Kurzweil who predicts that by 2045 humans and machines will merge, radically transforming and extending human life, perhaps indefinitely. Google has hired Kurzweil to carry on his work towards what he calls this “singularity.”

Maris was instrumental in creating Calico, a Google company that seeks nothing less than to cure aging, that is, to defeat death itself.  This and other companies in which Maris directs funds have specific projects to bring about this goal, from genetic research to analyzing cancer data.

Maris observes that “There are a lot of billionaires in Silicon Valley, but in the end, we are all heading for the same place. If given the choice between making a lot of money or finding a way to live longer, what do you choose?”

Google Ventures does not restrict its investments to life sciences. For example, it helped with the Uber car service and has put money into data management and home automation tech companies.

“Entrepreneuring” tomorrow

Perhaps the most important take-away from the Bloomberg article is the “why” behind Maris’s efforts. The piece states that “A company with $66 billion in annual revenue isn’t doing this for the money. What Google needs is entrepreneurs.” And that is what Maris and Google Ventures are looking for.

They seek innovators with new, transformative and, ultimately, profitable ideas and visions. Most important, they seek those who have the strategies and the individual qualities that will allow them to build their companies and make real their visions.

Entrepreneurial life

But entrepreneurship is not just a formula for successful start-ups. It is a concept that is crucial for the kind of future that Google and Maris want to bring about, beyond the crucial projects of any given entrepreneur.

Entrepreneurs love their work. They aim at productive achievement. They are individualists who act on the judgments of their own minds. And they take full responsibility for all aspects of their enterprises.

On this model, all individuals should treat their own lives as their own entrepreneurial opportunities. They should love their lives. They should aim at happiness and flourishing—their big profit!—through productive achievement. They should act on the judgments of their own minds. And they should take full responsibility for every aspect of their lives.

And this entrepreneurial morality must define the culture of America and the world if the future is to be the bright one at which Google and Maris aim. An enterprise worthy of a Google investment would seek to promote this morality throughout the culture. It would seek strategies to replace cynicism and a sense of personal impotence and social decline with optimism and a recognition of personal efficacy and the possibility of social progress.

So let’s be inspired by Google’s efforts to change the world, and let’s help promote the entrepreneurial morality that is necessary for bringing it about.

Dr. Edward Hudgins directs advocacy and is a senior scholar for The Atlas Society, the center for Objectivism in Washington, D.C.

Copyright, The Atlas Society. For more information, please visit www.atlassociety.org.

“Blockchain Insurance Company” – Short Story by G. Stolyarov II in SOA 11th Speculative Fiction Contest

“Blockchain Insurance Company” – Short Story by G. Stolyarov II in SOA 11th Speculative Fiction Contest

The New Renaissance Hat
G. Stolyarov II
February 20, 2015
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My new short story “Blockchain Insurance Company” is one of the entries in the Society of Actuaries’ 11th Speculative Fiction Contest.

You can read all 16 entries and vote for 3 of your favorites here.

“Blockchain Insurance Company” can be read here.

Bitcoin-coins

How Can We Accelerate Technological Progress? – Panel Discussion with G. Stolyarov II, Demian Zivkovic, and Arash Amini

How Can We Accelerate Technological Progress? – Panel Discussion with G. Stolyarov II, Demian Zivkovic, and Arash Amini

The New Renaissance Hat
G. Stolyarov II, Demian Zivkovic, and Arash Amini
January 24, 2015
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Mr. Stolyarov invites panelists to offer their thoughts on the following question:

What actions can most people take to assist in the acceleration of technological progress so as to solve, within the lifetimes of those alive today, many of the major problems currently associated with the human condition?

Panelists

Demian Zivkovic, 23 years old, is a student of artificial intelligence and philosophy, and founder and president of the Arma’thwynn Society – an international transhumanist think tank comprised of a group of transhumanism-oriented professionals, students, and entrepreneurs interested in the interdisciplinary approach to advancing transhumanist technologies.

Demian has been involved in several endeavors, including interviewing Professor Aubrey de Grey, organizing a transhumanism lecture in The Netherlands now, and spreading “Death is Wrong” – Mr. Stolyarov’s illustrated children’s book on indefinite life extension – in The Netherlands.

***

Arash Amini earned a BS Physics degree from UIC. Since his time at college, Arash was focused on scaling cleantech innovations as far and wide as he could manage.

Thus his affection for the private venture- the vehicle he believes moves information and goods faster than any other available.

While in his last semester at college, Amini started a 312 Aquaponics and went to research and develop industrial scale vertical farming. His latest venture, FarmTower Co is personalizing farming- bringing the site of production to the site of consumption.

He is the author of “DIY Aquaponics: The Definitive How To Guide” and curator of www.diyaquaponicsdesign.info.

In addition, Amini helps startups market their ideas, and grow their revenues without the need of investors. He spends his time ideating solutions to the world’s largest problems.

References

SENS Research Foundation
– “Metformin” – Wikipedia
– “Spontaneous order” – Wikipedia

Contrasting the Roles of World-Transforming Business Enterprises in the Novels of Hazlitt, Heinlein, and Istvan – Article by G. Stolyarov II

Contrasting the Roles of World-Transforming Business Enterprises in the Novels of Hazlitt, Heinlein, and Istvan – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
December 17, 2014
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Henry Hazlitt’s Time Will Run Back, Robert Heinlein’s Methuselah’s Children, and Zoltan Istvan’s The Transhumanist Wager each portray a different path by which business enterprises can dramatically improve the human condition, catalyzing paradigm shifts in the societies around them. (Follow the hyperlinks above to read my detailed analyses of each novel.) Far from being concerned solely with immediate profits or meeting quarterly earnings goals, the entrepreneurs depicted in these novels endeavor to thrive despite political persecution and manage to escape and overcome outright dystopias.

Among these three novels, Methuselah’s Children shows the tamest business-based route to reform. For centuries the Howard Foundation aims not to transform the broader society, but rather to protect its own beneficiaries and encourage incrementally greater longevity with each subsequent selectively bred generation. The Howard Families adapt to existing legal and cultural climates and prefer keeping a low profile to instigating a revolution. But even their mild outreach to the general public – motivated by the hope for acceptance and the desire to share their knowledge with the world – brings upon them the full force of the supposedly enlightened and rights-respecting society of The Covenant. Rather than fight, the Howard Families choose to escape and pursue their vision of the good life apart from the rest of humanity. Yet the very existence of this remarkable group and its members’ extraordinary lifespans fuels major changes for humanity during the 75 years of the Howard Families’ voyage. By remaining steadfast to its purpose of protecting its members, the Howard Foundation shows humankind that radical life extension is possible, and Ira Howard’s goal is attained for the remainder of humanity, whose pursuit of extended longevity cannot be stopped once society is confronted with its reality.

The path of incremental and experimental – but principled – reform through the use of business is illustrated in Time Will Run Back. Even though Peter Uldanov does not intend to embark on a capitalist world revolution, he nonetheless achieves this outcome over the course of eight years due to his intellectual honesty, lack of indoctrination, and willingness to consistently follow valid insights to their logical conclusions. Peter discovers the universality of the human drive to start small and, later, large enterprises and produce goods and services that sustain and enhance human well-being. Once Peter begins to undo Wonworld’s climate of perpetual terror and micro-regimentation, his citizens use every iota of freedom to engage in mutually beneficial commerce that allows scarce resources to be devoted to their most highly valued uses. Peter, too, must escape political persecution at the hands of Bolshekov, but, unlike the Howard Families, he does not have the luxury of completely distancing himself from his nemesis. Instead, he must form a competing bulwark against Wonworld’s tyranny and, through the superiority in production that free enterprise makes possible, overthrow the socialist dystopia completely. Where Wonworld experienced a century of technological stagnation, Peter’s Freeworld is able to quickly regain lost ground and experience an acceleration of advancement similar to the one that occurred in the Post-World War II period during which Hazlitt wrote Time Will Run Back. Because human creativity and initiative were liberated through free-market reforms, the novel ends with a promise of open-ended progress and a future of ever-expanding human flourishing.

The most explicitly revolutionary use of business as a transformative tool is found in The Transhumanist Wager. Jethro Knights conceives Transhumania specifically as a haven for technological innovation that would lead to the attainment of indefinite lifespans and rapid, unprecedented progress in every field of science and technology. Transhumania is an incubator for Jethro’s vision of a united transhumanist Earth, ruled by a meritocratic elite and completely guided by the philosophy of Teleological Egocentric Functionalism. Like Lazarus Long and the Howard Families, Jethro finds it necessary to escape wider human society because of political persecution, and, like them, he plans an eventual return. He returns, however, without the intent to re-integrate into human society and pursue what Lazarus Long considers to be a universal human striving for ceaseless improvement. Rather, Jethro considers unaltered humanity to be essentially lost to the reactionary influences of Neo-Luddism, religious fundamentalism, and entrenched political and cronyist special interests. Jethro’s goal in returning to the broader world is a swift occupation and transformation of both the Earth and humankind in Jethro’s image.

Jethro’s path is, in many respects, the opposite of Peter Uldanov’s. Peter begins as an inadvertent world dictator and sequentially relinquishes political power in a well-intentioned, pragmatic desire to foster his subjects’ prosperity. Along the way, Peter discovers the moral principles of the free market and becomes a consistent, rights-respecting minarchist libertarian – a transformation that impels him to relinquish absolute power and seek validation through a free and fair election. Jethro, on the other hand, begins as a private citizen and brilliant entrepreneurial businessman who deliberately implements many free-market incentives but, all along, strives to become the omnipotender – and ends up in the role of world dictator where Peter began. The two men are at polar opposites when it comes to militancy. Peter hesitates even to wage defensive war against Bolshekov and questions the propriety of bringing about the deaths of even those who carry out repeated, failed assassination attempts against him and Adams. Jethro does not hesitate to sweep aside his opposition using massive force – as he does when he obliterates the world’s religious and political monuments in an effort to erase the lingering influence of traditional mindsets and compel all humankind to enter the transhumanist age. Jethro’s war against the world is intended to “shock and awe” governments and populations into unconditional and largely bloodless surrender – but this approach cannot avoid some innocent casualties. Jethro will probably not create Wonworld, because he still understands the role of economic incentives and individual initiative in enabling radical technological progress to come about. However, the benefits of the progress Jethro seeks to cultivate will still be disseminated in a controlled fashion – only to those whom Jethro considers useful to his overall goal of becoming as powerful and advanced as possible. Therefore, Jethro’s global Transhumania will not be Freeworld, either.

All three novels raise important questions for us, as human society in the early 21st century stands on the cusp of major advances in biotechnology, nanotechnology, robotics, artificial intelligence, space travel, and hopefully radical life extension. However, reactionary political and cultural forces continue to inflict massive suffering worldwide through brutal warfare, sweeping surveillance and humiliation of innocent people, policies that instill terror in the name of fighting terror, and labyrinthine obstacles to progress established by protectionist lobbying on behalf of politically connected special interests. Indeed, our status quo resembles the long, tense stagnation against which Jethro revolts to a greater extent than either the largely rights-respecting society of The Covenant or the totalitarian regimentation of Wonworld. But can the way toward a brighter future – paved by the next generation of life-improving technologies – be devised through an approach that does not exhibit Jethro’s militancy or precipitate massive conflict? Time will tell whether humankind will successfully pursue such a peaceful, principled path of radical but universally benevolent advancement. But whatever this path might entail, it is doubtless that the trailblazers on it will be the innovative businessmen and entrepreneurs of the future, without whom the development, preservation, and dissemination of new technologies would not be possible.

References

Hazlitt, Henry. [1966.] 2007. Time Will Run Back. New York: Arlington House. Ludwig von Mises Institute. Available at http://library.freecapitalists.org/books/Henry%20Hazlitt/Time%20Will%20Run%20Back.pdf. Accessed December 13, 2014.

Heinlein, Robert A. [1958] 2005. Revolt in 2100 & Methuselah’s Children. New York: Baen.

Istvan, Zoltan. 2013. The Transhumanist Wager. San Bernardino: Futurity Imagine Media LLC.

The Role of Business and the Virtuous Cycle of Progress in Robert Heinlein’s “Methuselah’s Children” – Article by G. Stolyarov II

The Role of Business and the Virtuous Cycle of Progress in Robert Heinlein’s “Methuselah’s Children” – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
December 12, 2014
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Methuselah’s Children is a pioneering science-fiction novel by Robert A. Heinlein, remarkable for its favorable treatment of greatly extended lifespans several decades before the era of biotechnology and the advent of the transhumanist and life-extension movements. Moreover, Methuselah’s Children presents important insights regarding the virtuous cycle of improvement that occurs when a business structure is deliberately oriented toward catalyzing both technological progress and increased length and quality of human life.

Originally published as a series in the July, August, and September 1941 issues of Astounding Science Fiction magazine, Methuselah’s Children was released as a full-fledged novel in 1958. Exceptionally long-lived humans – the members of the Howard Families – are the novel’s protagonists and are portrayed in a favorable light, as the novel chronicles their escape from persecution in a society where most people continue to live lives of conventional duration and falsely believe the Howard Families to possess a means to artificially engineer extended lifespans. In fact, the Howard Families’ exceptional longevity is genetic – a legacy of generations of selective breeding.

The Howard Families’ origin dates to the 19th century and is made possible by the success of a businessman who dreamed of overcoming death:

Ira Howard, whose fortune established the Howard Foundation, was born in 1825 and died in 1873 – of old age. He sold groceries to the Forty-niners in San Francisco, became a wholesale sutler in the American War of the Secession, multiplied his fortune during the tragic Reconstruction. Howard was deathly afraid of dying. He hired the best doctors of his time to prolong his life. Nevertheless old age plucked him when most men are still young. But his will commanded that his money be used to lengthen human life. The administrators of the trust found no way to carry out his wishes other than by seeking out persons whose family trees showed congenital predispositions toward long life and then inducing them to reproduce in kind. Their method anticipated the work of Burbank; they may or may not have known of the illuminating researches of the Monk Gregor Mendel. (Heinlein 1958, 141)

Ira Howard applied his business fortune and business expertise to create a foundation and trust for the purpose of lengthening human life, enabling a small fraction of humankind to become supercentenarians over the course of generations. Officially, the Howard Foundation is “an openly chartered non-profit corporation” (Heinlein 1958, 6). The Foundation’s strategy is to provide financial support and a strong social network for its beneficiaries, while avoiding public notice and adhering to the legal constraints of the eras through which the Foundation prevails. In a conversation in 1874 with medical student and future beneficiary Ira Johnson, a lawyer for the Foundation explains that, in order to avoid legal prohibitions, the Foundation does not form official contracts with those whom it supports:

No, no, such a contract would be void, against public policy. We are simply informing you, as administrators of a trust, that should it come about that you do marry one of the young ladies on this list it would then be our pleasant duty to endow each child of such a union according to the scale here set forth. But there would be no Contract with us involved, nor is there any ‘proposition’ being made to you – and we certainly do not urge any course of action on you. We are simply informing you of certain facts. (Heinlein 1958, 6)

Methuselah’s Children is set on Earth during the 22nd century, in the largely peaceful and rights-respecting society of The Covenant. Generations of selective breeding by that time had, by then, raised the life expectancy of members of the Howard Families past 150 years. The Howard Families had hitherto kept their existence a secret from the broader population through periodic reinventions of individual members’ public identities, an effort in which the Foundation was instrumental:

Two courses of action were adopted: the assets of the Foundation were converted into real wealth and distributed widely among members of the Families to be held by them as owners-of-record; and the so-called ‘Masquerade’ was adopted as a permanent policy. Means were found to simulate the death of any member of the Families who lived to a socially embarrassing age and to provide him with a new identity in another part of the country. (Heinlein 1958, 8)

During the more tolerant era of The Covenant, the Howard Families decide to attempt a gradual disclosure of their exceptional lifespans. Part of the motivation is to benefit the progress of humankind, as explained by Foundation trustee Justin Foote: “the Families as a group had learned many things through our researches in the bio-sciences, things which could be of great benefit to our poor short-lived brethren. We needed freedom to help them.” (Heinlein 1958, 9)

 The Howard Families decide to reveal 10 percent of their membership and observe the reaction, but their estimation of their fellow humans’ tolerance is far too generous. Their plan backfires: the general public becomes falsely convinced that the Howard Families possess a biotechnological secret that could rejuvenate anyone and are withholding it from the remainder of humanity. All of the civil liberties afforded by The Covenant fall by the wayside as the masses clamor for the Howard Families to be detained so that their secret could be extracted from them by force.

Administrator Slayton Ford, who is sympathetic to the Howard Families, nonetheless feels compelled to authorize their arrest due to public pressure, while secretly assisting with the Families’ plan to escape to another world. This plan is the brainchild of Lazarus Long – a member of the Families and a recurring Heinlein protagonist memorable for his inventiveness, wit, practicality, and self-reliance. Lazarus Long – named Woodrow Wilson Smith at birth – is a space adventurer and rugged individualist who has stayed away from the Families but reveals himself to be their oldest member at an age of at least 241 years. By the rules of the Foundation, which reward longevity with authority, this gives him a leadership position. Lazarus manages to sway the initially reluctant membership of the Families with the rhetorical assistance of more forward-thinking trustees such as Zaccur Barstow. Barstow points out that it is precisely because of the Families’ accumulated wealth and ability to use business and commerce to their advantage that Lazarus’s plan might succeed:

“[T]here is an appropriateness in the long-lived exploring the stars. A mystic might call it our true vocation.” He pondered. “As for the ship Lazarus suggested; perhaps they will not let us have that … but the Families are rich. If we need a starship – or ships – we can build them, we can pay for them. I think we had better hope that they will let us do this … for it may be that there is no way, not another way of any sort, out of our dilemma which does not include our own extermination.” (Heinlein 1958, 47)

The wealth accumulated through Ira Howard’s business and preserved over the course of centuries enables the Howard Families to purchase the small spaceship Chili, which becomes an instrument to take control of the larger ship New Frontiers with Administrator Ford’s clandestine assistance. An interesting conversation regarding the economic effects of longer lifespans occurs between Lazarus and Joseph McFee, who sells him the Chili. McFee posits that uncertainty about the cause of the Howard Families’ longevity has resulted in a disruption to many individuals’ ability to engage in economic planning:

“Never saw such a dull market. Some days you can’t turn an honest credit.” McFee frowned. “You know what the trouble is? Well, I’ll tell you-it’s this Howard Families commotion. Nobody wants to risk any money until he knows where he stands. How can a man make plans when he doesn’t know whether to plan for ten years or a hundred? You mark my words: if the administration manages to sweat the secret loose from those babies, you’ll see the biggest boom in long-term investments ever. But if not well, long-term holdings won’t be worth a peso a dozen and there will be an eat-drink-and-be-merry craze that will make the Reconstruction look like a tea party.” (Heinlein 1958, 72-73)

Through McFee, Heinlein illustrates an important insight regarding the impact of lifespan-related expectations on economic behavior. Longer anticipated lifespans extend people’s time horizons and render them more willing to undertake long-term projects and investments, out of the recognition of a high probability of personal benefit from such undertakings. On the other hand, anticipation of short lives and imminent mortality engenders a “live for today” attitude where prudent, long-term planning falls by the wayside, and actions that sustain and drive forward human civilization are neglected. Longer lifespans tend to result in a lower rate of time preference – the degree by which present satisfactions are preferred to future satisfactions.[1] With longer time horizons available to people, remoter future satisfactions can be conceived of and worked toward. Such work generates numerous ancillary benefits along the way for oneself and others – in terms of both material well-being and cultivation of the virtues and habits conducive to an actualized, fulfilling life. Therefore, extending human lifespans ought to bring about more businesses that focus on long-term human well-being and are comfortable with realizing profits over many decades or centuries, whereas short lifespans drive a mentality of focusing on immediate profits only, without regard for longer-term consequences of business decisions.

Through the engineering and navigational abilities of Andrew “Slipstick” Libby, another member of the Howard Families, the long-lived protagonists manage to use faster-than-light travel to escape the Solar System together with Administrator Ford, who defects to them at the last moment. While the Howard Foundation made the Families’ exodus possible, it also rendered itself obsolete in the process. Once the Families are underway on their journey, Justin Foote explains the need for a new decision-making structure to emerge:

I am able to say without bias that the trustees, as an organized group, can have no jurisdiction because legally they no longer exist. […] [T]he board of trustees were the custodians of a foundation which existed as a part of and in relation to a society. The trustees were never a government; their sole duties had to do with relations between the Families and the rest of that society. With the ending of relationship between the Families and terrestrial society, the board of trustees, ipso facto, ceases to exist. It is one with history. Now we in this ship are not yet a society, we are an anarchistic group. This present assemblage has as much – or as little – authority to initiate a society as has any part group. (Heinlein 1958, 99)

From its formation to its dissolution, the Howard Foundation embodies some of the noblest and most admirable qualities possible for a business structure. It prioritizes its mission of promoting longer lifespans and the well-being of its members over its structural survival as an organization. It acts genuinely to protect and empower its beneficiaries – the Howard Families – enabling them to transcend the need for the Foundation’s existence and to form a new organizational structure. The Howard Families utilize Ford’s administrative skills to coordinate the effort of the New Frontiers’ interstellar journey and the formation of colonies on two successive planets, where the Howard Families coexist with two friendly but utterly non-individualistic species – the Jockaira and the Little People. In most respects apart from coordinating the logistics of the voyage and the initial settlement phase, the new administration adopts a hands-off, libertarian approach toward the colonists’ time allocation and life choices – enabling many of the settlers to lead lives of ease and leisure on the second world of the Little People, where there are abundant resources for all. However, Lazarus cannot accept this as a permanent condition, as his human ambition and desire for challenge are not fulfilled. Furthermore, even though they possess exceptional longevity, members of the Howard Families are still mortal and still face the prospect of losing their individual existences either through death or through voluntary sublimation into the group-mind structures of the Little People – which still destroys individual personality and self-awareness. Lazarus convinces the majority of the settlers that, in order to strive for more than contentment and to have the potential to achieve further progress, they must endeavor to return to Earth.

On Earth, 75 years have passed since the Howard Families’ exodus. Human society has become far more enlightened in the meantime, and the Howard Families are no longer perceived as public enemies to be persecuted, but rather as admirable early pioneers in life extension and interstellar exploration. Driven by the impression that there was a “secret” to super-longevity, human scientists independently achieved through biotechnology the same results that the Howard Families attained through selective breeding. In a society where everyone possesses life expectancies of over a century and a half, the Howard Families cease to be outliers or targets for envy and suspicion. Ultimately, Ira Howard’s plan to greatly lengthen human lifespans is realized for the entirety of humankind. The Howard Foundation’s efforts led the remainder of humanity to view super-longevity to be attainable for all. This perception motivated massive research efforts to this goal after the Howard Families’ exodus. This result illustrates the ability of a business organization oriented toward human progress to achieve transformation of the wider society, even if explicitly focused on a much narrower subset thereof. A businessman who seeks to catalyze technological progress and create a better future can achieve a wider scope of success by setting an example of what is possible and inspiring others to pursue similar outcomes.

Upon returning to Earth, Lazarus Long and Andrew Libby discuss business plans to explore further reaches of the galaxy – facilitating the expansion of human settlement there – while enabling Lazarus and Libby to lead an enjoyable lifestyle free of significant material limitations:

“Somebody is going to have to do a little exploring before any large-scale emigration starts. Let’s go into the real estate business, Andy. We’ll stake out this corner of the Galaxy and see what it has to offer.”

Libby scratched his nose and thought about it. “Sounds all right, I guess after I pay a visit home.”

“There’s no rush. I’ll find a nice, clean little yacht, about ten thousand tons and we’ll refit with your drive.”

“What’ll we use for money?”

“We’ll have money. I’ll set up a parent corporation, while I’m about it, with a loose enough charter to let us do anything we want to do. There will be daughter corporations for various purposes and we’ll unload the minor interest in each… Then-“

“You make it sound like work, Lazarus. I thought it was going to be fun.”

“Shucks, we won’t fuss with that stuff. I’ll collar somebody to run the home office and worry about the books and the legal end-somebody about like Justin. Maybe Justin himself.”

“Well, all right then.”

“You and I will rampage around and see what there is to be seen. It’ll be fun, all right.” (Heinlein 1958, 181)

What leads Lazarus to formulate such a far-reaching vision – in terms of both space and time – for a combination of business and unending personal adventure? It is precisely the emerging ability, at the novel’s conclusion, of human scientists to artificially extend lifespans even beyond the Howard Families’ typical life expectancies. Lazarus remarks, “I didn’t start planning our real estate venture till I heard about this new process. It gave me a new perspective. I find myself thinking about thousands of years – and I never used to worry about anything further ahead than a week from next Wednesday” (Heinlein 1958, 182). Here, too, Heinlein illustrates the tremendous incentive that lengthened lifespans provide for long-term thinking and planning, enabling people to accomplish, experience, and create on a grand scale instead of remaining mired in the immediately accessible.

Methuselah’s Children offers an insightful vision of the positive feedback loop between progress-oriented business structures and the attainment of longer, better lives. Through establishing the Howard Foundation, Ira Howard set in motion a chain of events that resulted in super-longevity for all humans and ambitious efforts at interstellar exploration and colonization. The fruits of this effort – incentives for long-term thinking – motivate Lazarus Long to initiate business ventures of his own for the purpose of pushing further outward the boundaries of human ability and expansion. Heinlein concludes the novel with Lazarus’s statement of unending ambition: “Yes, maybe [the universe is] just one colossal big joke, with no point to it. […] But I can tell you this, Andy, whatever the answers are, here’s one monkey that’s going to keep on climbing, and looking around him to see what he can see, as long as the tree holds out” (Heinlein 1958, 183). This never-ending aspiration for discovery and improvement ought to motivate real-world businesspeople and humans in general to continually seek out ways in which they can apply their skill sets to expand the boundaries of possibility in any endeavor that advances human well-being.

References

Heinlein, Robert A. 1958. Methuselah’s Children. New York: Baen.

Stolyarov II, G. 2005. “Austrian Economics and Time Preference”. The Rational Argumentator, Issue XLII. Available at http://rationalargumentator.com/issue42/austriantimepreference.html. Accessed December 11, 2014.

Notes

[1] The concept of time preference was extensively elucidated by the renowned Austrian economist Ludwig von Mises (1881-1973). For a concise overview of this idea, see “Austrian Economics and Time Preference” (Stolyarov 2005).

North Korea: From Hermit Kingdom to Merchant Kingdom? – Article by J. Wiltz

North Korea: From Hermit Kingdom to Merchant Kingdom? – Article by J. Wiltz

The New Renaissance Hat
J. Wiltz
December 7, 2014
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Toward the end of her remarkable speech at this year’s One Young World Summit in Dublin, North Korean defector and human rights activist Yeon-mi Park listed three ways in which ordinary people can help freedom-seekers in North Korea:

One, educate yourself so you can raise awareness about the human crisis in North Korea. Two, help and support North Korean refugees who are trying to escape to freedom. Three, petition China to stop repatriation.

To this list, Swiss-born businessman Felix Abt might add a fourth suggestion: do business with them. This suggestion forms the heart of Abt’s new book, A Capitalist in North Korea: My Seven Years in the Hermit Kingdom (Tuttle Publishing 2014).

From Hermit Kingdom to Merchant Kingdom

 

Those familiar with the situation in North Korea (officially known as the Democratic People’s Republic of Korea or DPRK) will not find Abt’s title as shocking as it’s probably intended to be. Indeed, as early as 2009, and undoubtedly even before that, Western media outlets were reporting on “the secret capitalist economy of North Korea” (i.e., the black market) which sprung up in response to the famine of the mid-1990s. Writing for the Washington Post in May 2014, Yeon-mi Park herself even referred to the young people currently living in North Korea as the “Jangmadang, or ‘Black Market Generation’.”  These young people, she says, are far more individualistic than their predecessors, far less loyal to the ruling Kim regime, and infinitely more likely to be exposed to outside media and information.

Abt’s book echoes and elaborates on all of these points. Drawing on his personal experience as the foreign head of a North Korean pharmaceutical company, as well as a co-founder of the Pyongyang Business School, he details the DPRK’s early forays into franchising, customer service, online forums(!), bicycle merchants, performance incentives, and even that most un-socialist of all market activities, advertising.

These ideas and practices are still very new to the world’s most notorious “bastion of communism” (Abt’s words), but already the government is being forced to make gradual changes to its market policies. Two quick examples: “More flexible opening hours are allowed for markets, and more companies are permitted to interact with businesses abroad.”

In spite of these positive developments, however, Abt laments, “There appears to be no end in sight for the severe economic problems of the world’s most centrally planned economy.” He divides the blame for these problems among several perpetrators: (1) North Korean military policy; (2) over-dependence on foreign humanitarian aid; and (3) foreign sanctions and embargoes.

“North Korea,” says Abt, “is the most heavily sanctioned nation in the world, and no other people have had to deal with the massive quarantines that Western and Asian powers have enclosed around its economy.”

Two Steps Forward, One Step Back

 

To be sure, arguments against North Korean sanctions are a tough sell, given the country’s well-documented human rights abuses and annual nuclear threats against the United States and South Korea. Several Amazon reviewers have accused Abt of simply parroting North Korean propaganda, calling him “Pyongyang Pete” and “the Kim Dynasty’s useful idiot.”  Even many libertarians, long opposed to the Cuban embargo, can probably agree that many of North Korea’s domestic and international woes are self-inflicted.

For example, in 2006, the former president of South Korea’s largest dairy company came up with the strategy to provide every child in North Korea a daily glass of milk. “Charities and wealthy individuals committed to the project,” Abt writes, “but after Kim Jong Il’s first nuclear test, the prospect quickly vanished.”

Abt also notes that in 2007, the website DailyNK reported that North Korea spends up to 40 percent of its annual budget on monuments and celebrations dedicated to the Kim regime. Abt recounts how he “gasped” at the sheer size of these monuments, as well as other buildings like the Koryo Hotel where “up to 1000 guests can stay in 504 rooms on 45 floors.”

But read to the end of A Capitalist in North Korea and you’ll find that “fewer than a third of all hotel rooms are occupied during most weeks.” Pyongyang tourist videos on YouTube corroborate this point. On almost every day of any given year, the 504 rooms of the Koryo Hotel sit empty (a predictable side effect of the DPRK’s notoriously tight travel restrictions). This is not what an efficient allocation of resources looks like.

Moreover, the North Korean government sometimes reacts to the market activities of its foreign investors with repression and cronyism. In 2006, a Chinese-run pharmacy was closed because it posed a threat to the socialist public health system. Several years later, a German internet provider was able to lobby the government, making it impossible for other foreign-invested businesses to install their own satellite dishes.

“So how will reform come about?”

 

And yet, not one of these things — not the nuclear tests, the empty hotels, or the shady business dealings — could in any way be prevented by sanctions that target foreign banks, farm equipment, fertilizer, mobile phones, alcoholic drinks, French cheese, or luxury items. “The current sanctions have not only failed to curtail the nuclear ambitions and human rights abuses of the ambitious North Korean leader,” says Emma Campbell in a May 2013 article for East Asia Forum, “they are also constraining the actions of humanitarian NGOs trying to carry out life-saving activities inside the DPRK.”

Among these life-saving activities is the development of a market-minded merchant class that is less dependent on the regime and better able to conduct business with the outside world in a peaceful, profitable manner. While Abt is clear that doing business in North Korea is by no means a guaranteed success, he rightly sees it as one of the best methods for improving the lives of millions of North Koreans caught between domestic and foreign repression. “Business,” he writes, “is the way forward for Kim’s country … a promising way to open and change the hitherto isolated country and the course of things for the better.”

The decades-long task of opening North Korea to the outside world may very well be accomplished by first opening the outside world to North Korea.

J. Wiltz writes from Anyang, South Korea, where he teaches English and blogs at A Day with J.

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.