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Thoughts on James Sterba’s “Liberty and Welfare” – Article by G. Stolyarov II

Thoughts on James Sterba’s “Liberty and Welfare” – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
April 14, 2012
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In “Liberty and Welfare” (2007), James P. Sterba of the University of Notre Dame makes an argument that a libertarian society, grounded in the principle of classical enlightened egoism, would be consistent with a government-organized system of welfare, or redistribution of wealth from wealthier to poorer members of the society. There are some areas where I am in agreement with Sterba’s premises, and some areas of difference.

Sterba’s argument, essentially, is that enlightened self-interest renders it legitimate for a person to take the property of another in certain “conflict situations” – cases where doing so would save that person’s life (or not doing so would endanger that person’s life).  I acknowledge that there may be cases where it is legitimate to violate the property right of another in order to save one’s life – but only to the extent actually necessary to save one’s life and only if proper compensation is made afterward. For instance, suppose Person X is ejected from a burning airplane onto the vast estate of Person Y, a wealthy landowner with plenty of fruit orchards. Person Y is an absentee landowner, and is not able to give permission, and it would take Person X several days on foot to leave Person Y’s land. In my view, Person X can legitimately eat some of Person Y’s fruit so as to survive his journey. However, the proper course of action after Person X has returned to his normal life would be for him to contact Person Y and ask whether Person Y desires to be compensated for the fruit that was taken. There is, at that point, a likelihood that Person Y would be generous and overlook the incident, recognizing Person X’s need to survive. But, if this does not happen, Person X could offer Person Y a reasonable payment for the fruit. It is unlikely that Person Y would, for instance, turn down a payment that is several times the fruit’s market value.

As the loss of life is irreversible, while loss of many kinds of property can be undone through adequate compensation, in true emergency situations, it may be justified for someone else’s property to be put to use in truly saving an individual’s life. But this can only be carried out if confined to true emergencies, if done with minimal interference, and if adequate reparations are made afterward.

That being said, what I am referring to are true emergency situations – which are, by definition, acute events that subside after the cause of the emergency has passed. An ongoing situation where one person or a group of people appropriate the belongings of others without the consent of those others is not a justifiable position within a truly free society. Sterba’s paper borders on implying that there exists some group right for “the poor” to expropriate “the rich” without regard for the circumstances of specific individuals having either of these designations or for whether individuals called “the poor” could, in fact, manage to survive without such expropriation. If there is a way not to take another’s property without his consent and to still preserve human life, then that is the course of action that should be pursued.

Ultimately, Sterba’s argument leads to the support of some manner of redistributionist welfare system. Such a system may indeed be justified in an unfree or semi-free society, where artificial political privileges result in a non-meritocratic distribution of wealth – and where, for instance, inefficient and customer-unfriendly firms can achieve market dominance or incompetent individuals can come to control vast resources. The overall level of wealth in such societies is lower compared to a libertarian society, and there may be many “worthy poor” in such societies, who are poor for none of their fault and despite earnest efforts at improving their position. Indeed, the United States at present, with its massive levels of involuntary unemployment resulting from an economic bubble inflated by the Federal Reserve, could be considered to exist in such conditions. Thinkers such as Sheldon Richman have argued that, in such situations, welfare systems can be seen as secondary or “band-aid” interventions to mask or mitigate some of the harmful effects of the primary interventions (e.g., corporate subsidies, barriers to entry into markets, and laws that limit innovation and progress). While the secondary interventions bring their own unintended negative consequences, a national government that only practiced the primary interventions (which benefit and enrich a favored and politically connected elite) would be much worse in its effects. The only aspects of the secondary interventions that might be justified are those aspects that would undo some of the harms of the primary interventions and more closely approximate a meritocratic, individualistic, market-driven outcome.

I contrast “band-aid” welfare measures in a mixed economy – which could be justified – with redistribution of wealth by a government in an otherwise libertarian society – which would not be justified. Such redistribution of wealth would infringe on the justly earned property of numerous individuals, simply because they belong to some arbitrarily designated category (e.g., “the rich” – as defined by some artificial threshold). In a libertarian society, occasional emergencies might arise whereby one or a few people might legitimately avail themselves of the property of another, but only if they compensate the owner fairly afterward. But, by definition, such emergency treatment cannot apply across the board and as a systematic, ongoing matter. Furthermore, unlike the emergency treatment I described, a welfare system by definition redistributes wealth from some people to others, and does not compensate the people whose wealth has been redistributed. In a fully libertarian society, where all wealth is acquired based on the principles of merit and consent, such redistribution would be unjustified and harmful. It would, further, be unnecessary, as practically all people would be massively more prosperous than the majority of people are in today’s Western societies.

A Barrage of Assaults on Internet Freedom – Video by G. Stolyarov II

A Barrage of Assaults on Internet Freedom – Video by G. Stolyarov II


Even after SOPA/PROTECT IP’s demise, assaults on the Internet in its present form have continued on a variety of fronts. Some of these assaults are in the form of legislation, while others are deployed by nominally private entities that in fact thrive on political connections and special privileges. These attempts would limit harmless individual expression and create the presumption of guilt with respect to online activity — quashing that activity until the accused can demonstrate his innocence.

Mr. Stolyarov focuses on four of these assaults: H.R. 3523 – the dubiously named Cyber Intelligence Sharing and Protection Act (CISPA), NSA surveillance, ISP/trade-association cooperation, and Arizona’s House Bill 2549.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational discourse on this issue.

References:
– “A Barrage of Assaults on Internet Freedom” – Essay by G. Stolyarov II
– “Cyber Intelligence Sharing and Protection Act” – Wikipedia
– “Stop Online Piracy Act” – Wikipedia
– “PROTECT IP Act” – Wikipedia
– “The NSA Is Building the Country’s Biggest Spy Center (Watch What You Say)” – James Bamford – Wired Magazine – March 15, 2012
– “NSA vs USA: Total surveillance zooms-in on Americans” – Video from RT
– “RIAA chief: ISPs to start policing copyright by July 1“- Greg Sandoval – cNet – March 14, 2012
– “American ISPs to launch massive copyright spying scheme on July 12” – Stephen C. Webster – Raw Story – March 15, 2012
– “US ranked 26th in global Internet speed, South Korea number one” – Shawn Knight – TechSpot – September 21, 2011
– “Arizona bill could criminalize Internet trolling” – Chris Morris – Yahoo! Games – April 3, 2012
– “Arizona Wants to Outlaw Trolling by Banning ‘Annoying’ Comments” – Paul Lilly – Maximum PC – April 5, 2012

A Barrage of Assaults on Internet Freedom – Article by G. Stolyarov II

A Barrage of Assaults on Internet Freedom – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
April 11, 2012
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           After massive public outrage and activism by major technology companies in January 2012 put an end to the draconian proposed Stop Online Piracy Act (SOPA) and PROTECT IP Act, one might have expected the US political and media establishments to relent in their attempts to suppress Internet freedom. But the assaults on the Internet in its present form have continued on a variety of fronts. Some of these assaults are in the form of legislation, while others are deployed by nominally private entities that in fact thrive on political connections and special privileges. These attempts would limit harmless individual expression and create the presumption of guilt with respect to online activity – quashing that activity until the accused can demonstrate his innocence. Virtually every attempt is promoted under the guise of one of four motivations: “security” against “terrorist” online activities, copyright protection, protection against pornography, or the simple desire not to be offended.

            Consider H.R. 3523 – the dubiously named Cyber Intelligence Sharing and Protection Act (CISPA). Like most of the worst bills, it is a “bipartisan” creature, sponsored by Representatives Michael Rogers (R-MI), C. A. “Dutch” Ruppersberger (D-MD), and 29 others. This bill is being advanced with the dual ostensible purpose of “protecting” networks against unspecified “attacks” and enforcing copyright and patent law. The end result of the bill would be a virtually unlimited power of the US federal government (or private companies that would be empowered to “voluntarily” hand over private user data to the federal government) to monitor any and all online activities at any time without a warrant – even if the activities have no relation to online attacks or infringement of patents or copyrights. Furthermore, there is no limitation in CISPA on how the information collected by government agencies and private companies could be used – and no guarantee that it will not be used for purposes other than “cybersecurity.”  Indeed, the agencies to whom CISPA would delegate authority over “cybersecurity” – the National Security Agency and Cybercommand – are military agencies that are permitted to operate in complete secrecy regarding their aims and protocols. This is a common pattern in attempts to gain power over the Internet: a specific series of threats is asserted, but the proposed “remedy” to these threats is so broad and general as to encompass practically every online activity – with no safeguards to preclude nefarious uses, even when including those safeguards would be a matter of basic common sense. This leads to the unsurprising conclusion that the specific threats are a mere convenient excuse for something else.

            The National Security Agency, in the meantime, does not believe that it even requires legal authority (much less Constitutional authority) to construct a massive data center in Bluffdale, Utah (see this article from Wired Magazine and this video from RT) that is intended to capture and store all e-mails, voice mails, online searches, and other Internet activities by all Americans, all under the ostensible aim of somehow enhancing “national security” – as if your phone conversation with a friend or business e-mail could somehow have any conceivable connection to terrorist activity! While this information will do nothing to prevent terrorist attacks, it will allow the federal government to launch investigations of individuals on the basis of information that has hitherto remained off-limits: sensitive health and lifestyle data, details of private lives that individuals would rather not share with the outside world, the misconstrued off-hand remark in an e-mail or text message, legitimate and peaceful entrepreneurship or intellectual expression that are disagreeable to some federal official, or the unintended violation of some obscure federal law that one did not even know existed.  Even today’s deeply convoluted and often inscrutable system of federal laws can be endured by most Americans, simply because the federal government does not have the ability to pry into the minutiae of each of their lives. Of course, there is so much information online that the NSA would not be able to focus on every individual’s activities in real time. But with access to the entire “electronic footprint” of a person, crucial information about such activities could be produced on demand – say, if a powerful politician wished to investigate a vocal critic for tax evasion (as Franklin Roosevelt often did to his political opponents), or if a federal agency sought to catch a prominent activist in an act of indiscretion (as the FBI routinely attempted to do with leaders of the civil-rights movement). Such surveillance will not lead to every technical violation of every obscure prohibition or mandate being recognized and punished – but if you stand out too much and attract notice for other (perfectly legal) reasons, beware!

          Much of the vast information that would come to the NSA would be automatically flagged for containing “suspicious” keywords or patterns of words – without the imposition of a common-sense filter of meaning. There is the real possibility that Americans might be subject to surveillance, investigation, prosecution, or worse, on the basis of a statistical algorithm. The NSA is even working on ways to break some of the codes used by individuals to encrypt their online communications – a deliberate attempt to bypass privacy safeguards which these individuals have intentionally put in place.

            The trade associations for establishment media interests, the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA), have not stopped in their designs to limit internet freedom for people merely suspected of copyright infringement. Having lost the legislative battle (which they will surely attempt to fight again), the RIAA and MPAA have instead decided to partner with the regional-monopoly high-speed internet service providers (ISPs) in order to arrive at a “voluntary” scheme of graduated response against individuals whose usage of Internet bandwidth is deemed “suspicious.”  This arrangement is expected come into effect on July 1, 2012, and would, in practice, largely affect users of torrents (which could be utilized for entirely legal purposes, such as an independent artist or game designer freely “seeding” his own work). The first several times, torrent users would be given warnings and asked to attend RIAA/MPAA-sponsored “educational” courses. Ultimately, after repeated suspicions of “infringement,” the ISPs would be required to severely limit the user’s bandwidth – although it is not clear whether they would be permitted to terminate Internet access for the user altogether. All this would be done without recourse to legal due process, without the presumption of innocence, and without the opportunity for the accused user to demonstrate innocence to a body whose Executive Board will be comprised of RIAA/MPAA leadership anyway.

            While this arrangement may superficially seem like a consensual deal among private trade associations and private ISPs, this is far from the underlying reality. Neither the RIAA/MPAA nor the American ISPs are close to free-market entities. The RIAA and MPAA have routinely attempted to use the force of legislation to limit competition and protect the market dominance of their members – the large film and recording studios whose greatest fear is the open, free, decentralized culture of creation emerging on the Internet. The ISPs grew out of telephone companies with local or regional monopolies on service granted to them by law – a legacy of the breakup of AT&T, which until 1982 was the coercive telephone monopoly in the United States. While the AT&T breakup legalized some measure of competition, it did not provide for a market of truly open entry in each jurisdiction; rather, each of AT&T’s pieces (many of which have since re-consolidated) became a mini-AT&T and has used its monopoly profits to artificially bolster itself in subsequent rounds of technological evolution. As a result of their legal privilege, many large ISPs have been able to engage in quasi-monopolistic practices, including the capping of bandwidth on ostensibly “unlimited” plans, the requirement that customers rent modem equipment which they could easily purchase themselves, byzantine phone “help” lines which seem more designed to deter consumers from calling than to actually offer assistance from real people, and frequent reluctance to improve Internet infrastructure despite the ready technological means to do so. The coercive monopolies of the ISPs have resulted in the United States being in mere 26th place in the world – just slightly ahead of the global average – for Internet download speeds. In South Korea, typical Internet speeds are about four times faster – a tantalizing hint at what a freer, more competitive market could accomplish for consumers.  Some of the greatest harms of unfreedom come not in the form of direct legislative or executive action, but rather from the creatures of unfreedom – the politically privileged entities that would not have existed in a free society and that use their power to make deals amongst themselves at consumers’ expense.

            For those who do not understand that freedom of speech includes freedom to offend, there is a new possible recourse in Arizona’s House Bill 2549 (see here and here), which has already passed both houses of the Arizona Legislature. The bill is intended as a way of deterring online bullying, but it would, among other prohibitions, render it illegal to use “any electronic or digital device” to “annoy or offend” anyone or to “use any obscene, lewd or profane language” – punishable by six months in jail for violations that do not involve actual stalking. If you make a controversial comment about a political or religious subject – or simply offend someone’s tastes in art, sports, or food – you will certainly “annoy” someone and be guilty of a Class 1 misdemeanor in Arizona. And as for that First Amendment and its guarantee of free speech – bring that up, and you will surely have annoyed someone, so off to jail you go. And if you think that “profane language” is limited to words relating to human bodily functions, a religious fundamentalist might have a rather different understanding of that term, which might involve your disbelief or less fervent belief in the principles of his religion.

          The pattern is clear: a seemingly limited purpose with at least some public sympathy is used as a rationale for unprecedented, sweeping powers of surveillance and punishment – designed to transform the Internet of today from an engine of creativity and individual empowerment into a tamed arm of the establishment. The Internet envisioned by the politicians and lobbyists championing CISPA, NSA surveillance, ISP/trade-association cooperation, and Arizona’s House Bill 2549 is a glorified and technological version of “bread and circuses” for the masses – providing them with plenty of entertainment but within carefully controlled and supervised parameters. The intellectual innovator, the independent artist, the small-scale technologist, the do-it-yourself researcher, the electronic activist, the open-source software designer – all members of the “read-write” Internet culture of individual hyper-empowerment – have no place in the centrally planned world of these political and media elites. The old world in which these elites thrived is rapidly succumbing to the broadly uplifting possibilities of electronic technology – but they will not let their power go without a fight. As the downfall of SOPA and PROTECT IP showed, only massive public outrage can defeat ongoing efforts to limit Internet freedom, the last bastion of largely unfettered liberty that exists in contemporary Western societies. An Internet that continues to be predominantly individualistic and unrestrained can catalyze technological and cultural progress that will make freedom and prosperity in all other areas possible within our lifetimes. An Internet that is placed in shackles will become a mere tragic tool for surveillance and social control.

ECM Distributed Computing Project and Mr. Stolyarov Discover Factor for 118^67 + 67^118

ECM Distributed Computing Project and Mr. Stolyarov Discover Factor for 118^67 + 67^118

The New Renaissance Hat
G. Stolyarov II
April 6, 2012
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I am pleased to announce that my participation in the ECM distributed computing project (organized via Yoyo@home) has resulted in the discovery of a hitherto unknown factor for a large number. I am credited with the discovery here.

Did you know that the number 118^67 + 67^118 (see its long form here) has a multiplicative factor of 2091937057168244837833711997693707725557784572281 – a formidable 49-digit number?

Well, now you know, because of all the computing power I have devoted to the ECM project since late 2011. Finding such large factors of even larger numbers is a rarity. My computer had to examine 1546 project workunits (each involving an attempt to factor a large number) before finding one that resulted in a new discovery. I have thus far accumulated 277,345.88 BOINC credits for the ECM project.

ECM is a free distributed computing project that anyone can participate in. Its goal is to find factors for large numbers using the method of Elliptic Curve Factorization. It is highly rewarding to be able to devote otherwise idle resources to an endeavor for the convenient discovery of previously unknown truth.

Piano Composition #6, Op. 10 (2002) – Video by G. Stolyarov II

Piano Composition #6, Op. 10 (2002) – Video by G. Stolyarov II

Mr. Stolyarov wrote this original composition in Spring 2002. This work resembles a light, brisk march and conveys a sense of purpose and aspiration.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download here.

The artwork is Mr. Stolyarov’s Abstract Orderism Fractal 32, available for download here and here.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

Piano Composition #7, Op. 12 (2002) – Video by G. Stolyarov II

Piano Composition #7, Op. 12 (2002) – Video by G. Stolyarov II

Original piano composition by Mr. Stolyarov, created in 2002 and played in the Finale 2011 software using the Steinway Grand Piano instrument. The melody is brisk, uplifting, and refined.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download, here.

The artwork is Mr. Stolyarov’s Abstract Orderism Fractal 38, available for download here and here.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

Technology as the Solution to Existential Risk

Technology as the Solution to Existential Risk

The New Renaissance Hat
G. Stolyarov II
April 2, 2012
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What is the relationship between technology and existential risk? Technology does not cause existential risk, but rather is the only effective means for countering it.

I do not deny that existential risks are real – but I find that most existential risks exist currently (e.g., risks from asteroid impacts, a new ice age, pandemics, or nuclear war) and that technological progress is the way to remove many of those risks without introducing others that are as great or greater.  My view is that the existential risks from emerging technologies are quite minor (if at all significant) compared to the tremendous benefits such technologies would have in solving the existential risks we currently face (including the biggest risk to our own individual existences – our own mortality from senescence).

My essay “The Real War – and Why Inter-Human Wars Are a Distraction” describes my views on this matter in greater depth.

In short, I am a techno-optimist, one who considers it imperative to restore the Victorian-era ideal of Progress as a guiding principle in contemporary societies. The problem, as I see it, is not in the technologies of the future, but in the barbarous and primitive condition of the world as it exists today, with its many immediate perils.

As a libertarian, I believe that the entrepreneurship and innovation in even semi-free markets can address existential risks far more effectively than any national government – and bureaucratic management of these efforts would only hamper progress while incurring the risk of subverting the endeavors for nefarious objectives. (The National Security Agency’s recent attempt at a total surveillance state is a case in point.)

But fears of technology are our greatest existential risk. They have a real potential of halting progress in many fruitful areas – either through restrictive legislation or through the actions of a few Luddite fanatics who take it upon themselves to “right” the wrongs they perceive in a world of advancing technology. I can point to examples of such fanatics already exploiting fears of technologies that are not even close to existing yet. For instance, in a post on the LessWrong blog, one “dripgrind” – a sincere and therefore genuinely frightening fanatic – explicitly advocates assassination of AI researchers and chastises the Singularity Institute for Artificial Intelligence for not engaging in such a despicable tactic. This is the consequence of spreading fears about AI technology rather than simply and calmly developing such technology in a rational manner, so as to be incapable of harming humans. Many among the uneducated and superstitious are already on edge about emerging technologies. A strong message of vibrant optimism and reassurance is needed to prevent these people from lashing out and undermining the progress of our civilization in the process.  The Frankenstein syndrome should be resisted no matter in what guise it appears.

Gains for Ron Paul at the Douglas County Republican Convention in Nevada – and Outrageous Rigging in Carson City

Gains for Ron Paul at the Douglas County Republican Convention in Nevada – and Outrageous Rigging in Carson City

The New Renaissance Hat
G. Stolyarov II
April 1, 2012
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Ron Paul has been gaining ample numbers of supporters as delegates to the Nevada State Republican Convention. I am proud to have participated in the March 31 Douglas County Republican Convention, which was civil and administered quite fairly. Both my wife Wendy and I have been selected as delegates to the Nevada State Convention, along with a sizable number of other supporters of Ron Paul (a majority, by some accounts). As an added bonus, I had the opportunity to speak in favor of individual liberty on a variety of issues during the discussions of the proposed Douglas County GOP platform.  It pleased me that speakers were recognized in a procedurally impartial manner, and each side of an issue was always able to express its views.

Nearby in Carson City, however, there was foul play and subversion of the legitimate process by those who wished to rig the outcome. I encourage you to read Doug Wead’s description of some of the outrageous usurpations of power by those in charge at that unfortunate convention. The contrast between the civility and good order in Douglas County and the overt abuses at the Carson City convention is stunning. In any event, with the majority of the delegates from Clark County, a sizable contingent from Douglas County, and all of the delegates from Nye County, Ron Paul will have a good number of delegates on his side at the State Convention on May 5.

Mr. Stolyarov Quoted in Article on Verizon Spectrum Acquisition

Mr. Stolyarov Quoted in Article on Verizon Spectrum Acquisition

The New Renaissance Hat
G. Stolyarov II
March 27, 2012
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I am pleased to have again been quoted in Heartlander Magazine, this time in the article “Verizon Spectrum/Cross-Marketing Deals Hit FCC Roadblock” by Kenneth Artz. The end of the article is devoted to my remarks regarding the advantages of the FCC allowing companies to harness currently unused wireless spectrum.

I have always strongly supported judging each issue on its own merits. The ability to focus on the impact of a particular transaction or measure – without letting it be clouded by surrounding tangential or even unrelated matters – is a major reason why, for instance, I support line-item veto power for the President and a legislative germaneness rule to prevent the packaging of any number of unrelated measures. The same principle should apply to the deliberations of the FCC.

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

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

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.