Wednesday, August 26, 2015

Self-Organizing Society And States

Voluntary law flows from the ancient truth that society cannot be organized without the use of domination, fraud and coercion, unless each member follows their own code.  Conversely, it is the quality of each person following their own code that makes an anarchy (in the sense of a self -organized society) exist as a recognizable social entity possessing organization.  A pure anarchy may be very highly organized, and may be much more highly organized than an authoritarian society.  Anarchies, while punishing hypocrisy and allowing for self-defense, exclude the exercise of compulsory authority of one person over another.  In the limiting, ideal case, self-rule is anarchy's only organizing motive force.  If any organizing force other than self-rule is at work, the society is not an anarchy in the purest sense.

By "only motive force," I mean that there is no compulsion of any person or group on another, using coercive or fraudulent levers, requiring that a law be followed.  When each person is participating knowingly and voluntarily, each in a sense is following her own internal law.  Whether or not the internal laws of different people happen to be the same, or are written down somewhere: justification for enforcement every law flows only from its self-adoption.  All law is in a sense internal, but in self-organizing societies, no law exists except those which each person decides to follow, without threats or fear of punishment.

There is endless confusion about consequences and fear in self-organizing societies.  In authoritarian societies, there are consequences and fear associated with failing to follow the law willed by some imposed authority.  In self-organizing societies, there are consequences and fear associated with two things: (1) failing to follow one's personal honor code or "law", or (2) adopting a personal honor code that people in all available support networks view as abominable.  In the first case, one who fails to follow their own law cannot be trusted, and thus will not find it possible to enter into trust-based relationships upon which society depends.  In the second case, the person adopting a law that all condemn is not untrustworthy per se, but will be shunned as one that holds to contemptible or dangerous views.  However, such pressures arise naturally from the population as a whole, and not by the will or whim of an individual or collective entity.

Coercion is willed by identifiable entities.  Fraud is likewise willed.  Self-organizing societies eliminate coercion and fraud in the adoption and application of law, but not natural pressures to behave sociably.  Naturally occurring, non-coerced and truthfully-based  shunning does NOT amount to coercion.  Shunning cannot be considered coercion, because a duty to serve or transact with another cannot be imposed on any free person, without violating basic notions of self-sovereignty.  In other words, it would be illogical to consider shunning to be coercive, per se.  A person who voluntarily decides to shun another is not free, if shunning is forbidden.  However, shunning that occurs as a result of fraudulent disparagement of the person shunned, or as a result of threats of force against those who would otherwise not choose to shun, is certainly a form of coercion.  The proper complaint lies against the person who has fraudulently disparaged or threatened force, not against the one who shuns, in that case.

Thus, the essential organizing principle in self-organizing societies is "Do what thou wilt shall be the whole of the the law."  If "what thou wilt" includes initiation of aggression or fraud, however, imperfections in order arise.  Well-ordered anarchies need something in addition to self-rule, sometimes called reciprocity or love.  It has been recognized since ancient times that social order depends on reciprocity, which has two principle aspects or "prongs":  esteem by members of the society of a higher, non-subjective morality, insofar as consistent with treating others as you would like to be treated in similar circumstances.  These same two principles, or some recognizable variation on them, underlie every well-ordered anarchy.

Self-organizing societies do not work if large majorities of their members do not generally seek to do what is right (the first prong) by some rule or principal based in reciprocity (the second prong).  When most do, the incentives for doing evil diminish, because everybody knows they will be taken care of.  There is no need to take risks associated with robbery, murder, theft, or other violations of property and person, merely to survive or to alleviate fear of poverty.  "Carry your own weight" and "care for the unfortunate" arise naturally.  Crimes of passion and simple negligence still happen, but less so economic crimes.

The principal of non-aggression is another example of a rule of reciprocity that can be applied in a self-organizing society.  Because "non-initiation of aggression"  (i.e., the Non-Aggression Principle, or "NAP") and "love your neighbor as yourself"  (the "Golden Rule")  are distinctively different moral precepts, they will result in different kinds in self-organized societies.  So there can be different kinds of self-organizing societies, based on different principles of reciprocity like these.

These different kinds of self-organizing societies or social networks can be intertwined.  Any number may so coexist.  Their memberships may overlap, up to the point where the same people are subjected to conflicting self rules.    On the other hand, one cannot simultaneously be a member  that esteems Red over all other colors, while also being a member of a society that esteems Blue most highly, unless one is colorblind.  Nonetheless, self-organized Red and Blue societies can coexist, so long as esteem of one's favorite color is not considered a license for aggression.  This illustrates the notion that some types of self-organized societies are compatible, when intertwined.  For example, a person may be a member of a first self-organizing society in which all members follow the non-aggression principle, while also being a member of a second self-organizing society in which all members follow the Golden Rule.  This is because the Golden Rule subsumes the non-aggression principle.  One cannot violate the non-aggression principle while following the Golden Rule, and it does not matter that the converse is not true.

Self-organizing societies based on the NAP and the Golden Rule are compatible, because both principles prohibit aggression except for defensive purposes. It does not matter that one can violate the Golden Rule without violating the NAP, because those who hold to the Golden Rule are bound to take no aggressive action against such transgressions.

In addition, both the Golden Rule and the NAP require a certain restraint with respect to actions that are not aggressive or fraudulent, but are nonetheless repugnant.  People have different moral sensitivities, and are easily outraged when others openly do what they consider to be terribly immoral.  Under a Golden Rule approach, other folks would have to consider your publicized moral sensitivities because they would like you to respect theirs.  Because everybody is making an effort to respect others' moral sensitivities, fellow members in a Golden Rule society can have confidence that their  fellows will not willfully dishonor their own sincerely held and publicized moral sensitivities.  At the same time, the Golden Rule prevents prying into victimless conduct that participants prefer to keep private.  In a NAP society, nobody would object to any victimless public or private behavior either, because all are following a rule that say one is not supposed to care about whether their own sensitivities are respected, so long as nobody initiates force or fraud.

Therefore if Golden Rule and NAP societies are intertwined, it is inevitable that NAP members will openly engage in victimless conduct that is nonetheless offensive to some of the Golden Rule members.  Wouldn't the Golden Rule people take action to intervene when the NAP people publicly disrespected their "higher" sensibilities?  Then, wouldn't the NAP people forcibly defend against such intervention,  as violating the NAP?  Not actually.  The Golden Rule people would, by their own rule, have to consider how they would like to be treated if they were in the shoes of the NAP people.  They would have to see that if they were NAP people, they would feel justified in defending against forcible intervention directed at anything other than protecting against coercion or fraud.  So the Golden Rule people would have to limit their response to truthful and non-coercive actions, or they wouldn't be loving their neighbor.  Also, the burden on the Golden Rule people would be to forgive (but not to forget) if the offender repents.  The NAP people would recognize no positive duties, including a duty to forgive.  So around the NAP people, the Golden Rule people would recognize a need to handle controversy without aggression.  If the NAP guys just want to be jerks to the love-thy-neighbor guys to intentionally inflict severe emotional distress, depending on the circumstances that might amount to aggression and violation of their own laws, and could be resisted.  But in all other cases the members of NAP self-organizing societies could do as they pleased, without fear of repercussion.  So intertwined anarchies of the NAP and Golden Rule types are compatible, and can co-exist happily.

It's hard to get to such a place of not caring, of accepting that others may do things you find terribly immoral.  Could you really not care if the people over there were being wantonly cruel to helpless puppies?  Of course not.  You might want other moral principles to be enforced, like "don't be cruel to animals,"  "conserve the natural environment," and so on.  Although one can feel very deeply about many different moral beliefs, and take action to promote knowledge and observance of moral precepts, both the NAP and the Golden Rule prohibit aggression as a means for such promotion.  Caring is permitted; aggression is forbidden.  In an anarchy based on either the Golden Rule or the NAP, you can certainly choose to defend puppies against torture or abuse, if that is what you want to do.  However, you cannot force others to join in that defense, nor will you enjoy any special privilege while defending your sacred moralities.  You will be risking injury or loss only to your own account by engaging in a defense, as well as laying full claim to any glory attending your heroism.  Any legal claim against you for your actions will be made on the basis of a law you have already agreed to accept - or else you are not really living in a self-organized society.

Some self-organizing societies are incompatible.  A society based on "might make right" (MMR), for example, is incompatible with any society in which might (power) is constrained somehow.  Members of intertwined "might-makes-right" and "might constrained" societies will not be able to agree on moral resolutions of disputes.  The MMR crowd can't accept any constraints on the exercise of power; whatever is possible is moral, in their view.  Constraints might lead somewhere the MMR folks don't want to go, like an obligation to not aggress against, or to love, their neighbors.

Many personal codes do not support the emergence of any society, or degrade the effectiveness of society.  Consider, for example, a group of people all following a "might makes right"  personal code.  Depending on the craftiness of such persons, society may or may not be able to emerge.  For simple-minded people, following a MMR code means the abolition of all trust, because any person can do anything at any time without any social repercussions.  In its simplest form, MMR produces a unorganized melee, not a society.  People, however, are not simple minded, and do not fail to notice that coalitions and alliances convey power ("might"), but require a degree of mutual trust.  So in the real world, a group of people may enforce a set of rules among themselves, as a tool for gaining an advantage over another group.

States have a degree of MMR and a degree of constraint.  Of course, states are the antithesis of self-organizing society.  But we can think of them as a sort of self-organized network based on constrained MMR for advancing corporate (in the sense of collective) power.  The model fits in some respects.

For example, we might conceptualize the great bulk of state laws as laws that in practice apply only to those in government.  People outside of government don't generally know what the rules are, and thus, generally don't internalize them.  When a state puts somebody in prison, for example, they are operating within their own law.  The prisoner is certainly not following state law by being imprisoned, because the prisoner has no choice in the matter.  The prisoner can't be following anything in the matter.  For further example, a person filling out a tax form and paying taxes does not comply out of an internal sense of right or wrong, but because he fears that if he does not, agents of the state bearing weapons will pay a visit an an inopportune time.  The taxpayer is therefore conforming to external pressure, and not following any internal law.  In other words, we can think of state law, in  moral or philosophical sense, as a form of corporate law applying to corporate groups and agents of such groups, and not to anyone else.

Anarchies can interwine with states, too.  Amazingly, people who are members of the state can also be members of a self-organized society!  Such people may sometimes be placed in the uncomfortable position of violating either the rules of the state they have agreed to apply, or their personal honor code that admits them to self-organized society.  I have written more about this subject, here.

Don't miss the main point! Self-organizing societies arise out of self rule, period.  That means such societies can spring into being any time two or more people adopt compatible rules and know of each other's existence.  Self-organizing societies can exist in the here and now; they do exist in the here and now.  There is no need to wait for the state to dissolve away.  To be part of a self-organizing society, one only needs to adopt a set of moral principles, and let others who adopt compatible principles know about your adoption.  Build and develop that energy, that society, to be larger and more powerful in a social sense.

If you love the idea of voluntary society, start building one today.  That will be a better use of your time than dwelling on all the negativity that the state produces with its various instruments of coercion, deception, and oppression.  The state cannot be saved because it rests on an immoral foundation.  It can only be peacefully replaced by something based on a morality of reciprocal and equal natural rights.
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Photo Credit to Kasi Metcalfe
Under  Creative Commons License
Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Thursday, July 2, 2015

Lascivious Prudes v. Licentious Puritans

Let's get the standard disclaimer out of the way right off the bat, even though it's not the point of this post: Issuing marriage licenses, determining who may, or may not marry, or distributing benefits or levying penalties based on such licenses, is not a proper function of a minimal state.  The only moral state is one that is not a "state" at all, i.e., one that is entirely a voluntary organization, which cannot claim any authority to grant or deny licenses over the activities of any non-consenting person.  The remainder of this post reacts to what an inherently immoral outfit - the state - has done, in reaction to those - the statists - who legitimize its exercise of authority, so don't expect to encounter any Platonic forms there.  There will remain an itch that has not quite been scratched, after you are finished reading.

While obviously not based on libertarian principles at its root, the Obergefell opinion is worthy of acknowledging positively (if not celebrating) by libertarians for at least two general reasons: (1) a majority of the Court cited liberty as a protectable interest that justifies extending access to state-granted licenses to traditionally excluded people, and (2) abundant schadenfreude, irony and instruction are provided by the explosion of passionate dissents from the conservative justices, hypocrites who have proven they are quite willing to do what they condemn, ergo, to rule from the bench, when it suits them.  That's not to say the opinion couldn't lead to much less libertarian rulings down the road -- but such outcomes are the natural tendency of the statists anyway.  Philosophy aside, a big practical plus of the ruling is that all of us can now now have our 1-on-1 marriages recognized, if we wish, whatever our sexual preferences.  I have friend and relatives who are relieved about that, which makes me glad.

Some libertarians, however, may view the increasing acceptance of same-sex marriage as cultural decadence, with some dread.  The forsaking of old traditions may feel that way, but there are often clear distinctions between tradition and morality.  Same-sex marriage, with or without state license, is one such case.   Marriage as a state of intimacy and legal commitment between two or more people, entered into and subsisting voluntarily, is either entirely neutral when it come to decadence, or tends to oppose it.  War, greed, selfishness, injustice, coercion, domination, sloth, fraud, oppression, hatred of one's own species: all of these things (and other vices) increase decadence.  But the very demons of hell could all marry each other, and it would not increase the decadence of hell one iota.  Indeed, the Evil One might find it an alarming development.

To use a more prosaic example, when LGBT people or others settle down and marry, we can confidently assume there will be some decrease in promiscuity among them.  If one supposes that sexual activity is immoral unless done for some limited purpose -- such as, for example, reproduction or family-building -- then more LGBT marriages will necessarily cause a decrease in decadence.  Some portion of these marriages will involve the raising of children, and thus some portion of the sex will be sanctified, however imperfectly, by the accompanying obligations of family and parenthood.  Even if one believes that certain sexual practices can never be sanctified at all, no matter its underlying purpose (which position creates another set of logical problems), the simple decline in promiscuity suffices: same-sex marriage must decrease decadent sex, and thus, cannot be opposed for moral reasons.   On the other hand, if sex between consenting adults is never immoral for any reason, then there is no basis for regarding homosexual activity as any more decadent than sex between a man and a woman, in the first place.  Under either view, it would be illogical to regard homosexual marriage as increasing decadence, in and of itself.

If extending marriage as a social institution cannot logically be blamed for increasing cultural decadence, what explains the discomfort of some libertarians at the increasing acceptance of homosexuality as a normal aspect of the human condition?   Although in some traditions homosexuality was (or in some cases is) firmly regarded a crime worthy of death, the passing of such beliefs from the mainstream of Western culture is no more to be mourned or regarded as decadent than the passing of chattel slavery, or the cessation of sacrificing virgins to gods. One cannot hold to the non-aggression principle, while advocating for the criminalization of any sexual activity between willing adults not motivated by coercion or fraud.  No libertarian indulges in such advocacy, and none mourn the passing of these ancient theocratic attitudes.

A libertarian might reasonably believe, however, that some forms of non-criminal conduct or conditions constitute social vices or spiritual sins, for example: sloth, gluttony, greed, envy, and other sins, without amounting to tortious conduct or crime.  To such a list, a libertarian might add certain sexual or economic behaviors, including adultery, lasciviousness, masturbation, fetishes of various kinds, sodomy, distribution or consumption of pornography, prostitution, and many other behaviors with an erotic tinge, with or without good reason.  There is no point in debating moral preferences of this sort here; we shall assume that decadence (like beauty) is in the eye of the beholder.  That is, decadence can only be measured against some cultural standard held by some person or group of persons, which cultural norms we know from hard experience to be about as uniform and predictable as the ischial callosities of a baboon.  Nonetheless, if one believes (for example) that gluttony is sinful, then it is rational for the anti-glutton to make a connection between growing social protections or esteem for the obese, and cultural decadence.  By the same logic, a socially conservative libertarian can reasonably make a similar connection concerning the growing social acceptance of same-gender sexual behavior, of which the Obergefell opinion is merely a notable signpost.  So can a theocratic social conservative, for that matter.

The libertarian social conservative, however, faces a tension that the theocrat does not.  The libertarian must acknowledge that sinners of all types must enjoy equal protection under the non-aggression principle.  Moral or religious beliefs cannot excuse the initiation of aggression, without negating the non-aggression principle.  The theocrat, in contrast, is commanded to initiate aggression to the point of death, for any reason written in the Qur'an, Torah, or other hallowed book or teaching.  One cannot hold the literal meaning of Leviticus or the Qur'an regarding penalties for homosexuals, for example, while also holding to the non-aggression principle.  Something's got to give.  No one can serve two masters.  One either observes the non-aggression principle, or one does not. 

It follows that one cannot be a libertarian, while at the same time adopting the penalties proscribed in holy writings such as Leviticus or the Qur'an for homosexuality.  What these writings teach on that subject is plainly contrary to the non-aggression principle.  These traditional authorities must either be rejected as literal standards for present-day social conduct, or must be followed in every respect, in aggressive theocratic fashion.

Let us postpone the moral debate between theocracy and liberty until the Last Judgement, or at least until a later post.  Until then, there are debates aplenty to be settled between the puritanical, prudish libertarians and the licentious, lascivious libertarians.  And perhaps even between the lascivious prudes and the licentious puritans.  There are enough varieties of decadence afoot to keep us all busy decrying for a long while.  But whatever moral preferences you defend, or decadence you decry, do not fail to notice that -- just like that other libertarian you are sniping at -- your preferences are subservient to your forbearance from initiating aggression for political or social purposes.  That unifying principle is worth celebrating, and no oligarchic ruling of five robed justices declaring a license of the state to be a fundamental liberty can hold a candle to it. 

Saturday, May 23, 2015

The Case For A $100 Minimum Wage, Right Here, Right Now In The City of Angels

The City Council of Los Angeles, in a stirring show of solidarity for their comrades in the City of Seattle, voted yesterday to set a city-wide minimum wage of $15 by 2020.  The figure of $15 was chosen for enhanced effect of the aforesaid show, and the year 2020 was the perfect choice for a number of reasons: 5-year plan, 20/20 vision, and perhaps for one of the numerological meanings identified with the number "20."   "To seize and hold," perhaps?  Loud cheers, the tolling of bells, and cries of purest joy were heard throughout the City of Angels, at least within the sound-proof interiors of the luxury cars listening to public radio while driving between Santa Monica and Beverly Hills.  The residents of Fifth and Sixth Streets between S. Los Angeles and S. San Pedro prepared for longer lines and more competition for sidewalk space.   What justice!  What sagacity!  Soon the nation will follow!

At this point, the script calls for classical liberals, libertarians, and paleo-conservatives to gasp in horror and complain "Not again!  Raising the minimum wage just cuts down viable businesses and jobs, and opportunities for low-skilled workers!"  To which the retort of the central-planning comrades is "Not so, you heartless tax-subsidized crony-capitalists!  Studies show that the minimum wage has no discernible effect on employment!"  As a libertarian with leftist leanings, I say: throw away that script.  No mas!  It has not been working very well since at least about 1940. 

After all, the progressives DO have a point about tax subsidies for crony capitalists.  A close working relationship between big business and big government has been the rule since the Great Depression.  Who would work for less than it costs to live in Los Angeles, were it not for the enormous subsidies given to the working poor in the form of SNAP, health insurance subsidies, earned-income credits, Section 8 housing subsidies, and such like?  Who would take a demeaning, subsistence-level job at a corporate fast-food chain or big-box retailer, if the alternatives were not pretty much limited to a risking an even more dehumanizing stay in a heavily tax-subsidized prison by engaging in some sort of illegal trade, going deeply into debt to finance an education that is grossly overvalued because of government subsidies, living on the street at the mercy of strangers, or if you're lucky, staying in your mother's basement?  And who profits from these subsidies, if not the profit-driven crony capitalists and exploiters of the poor, large and small?  It's high time to throw in the towel, and admit that there's no saving the centrally-planned economy by holding down the minimum wage.  Advocating for a stagnant minimum wage just makes one seem mean, to the multitudes who do not understand the One Lesson of economics.

There is a better way.  Instead of playing the dependable foil for progressives wishing to seem compassionate, it high time we make THEM oppose higher wages for the lowest-paid workers.  Or at least, to call their bluff.  If raising the minimum wage to $15 is a good idea, why stop there?  How about an even rounder number, like $100 per hour, equivalent to about $200,000 per year?  Make the central planners defend a poverty-level minimum wage of $30,000 per year.  We should be arguing for $200,000 as the new minimum, which will still barely qualify for a condominium loan in these parts, depending on the level of one's student loans.  If the minimum wage has no effect on employment as the central planners' own studies show, then it should be set at a rate that guarantees at least a middle-class existence.  I'm not just joking around.

Despite appearances, $15 is not really very generous, and will more or less only maintain the status quo.  Per the poster above, the Federal minimum wage was $1.45 in 1970.  That might not seem like much, but according to the Bureau of Labor Statistics, $1.45 had the same purchasing power as $8.84 does in 2015.  By the same token, if inflation continues at the same rate for the next five years,  $15 in 2020 will have the same purchasing power as $13.82 does today.  So we are really talking about raising the minimum wage by just about five bucks, in real terms -- only $0.82 in 1970 dollars.  This might be too much for Topeka, but in Los Angeles, the illegal day laborers hanging out in parking lots of hardware stores are already demanding $10 cash, tax free, per hour - plus lunch and transportation to and from the job site.  Figuring a combined corporate tax rate of about 44%, the tax benefits of of the additional expense deduction make up for extra cost.  Or something.  The point is, $13.82 pre-tax is actually less than $10 cash after tax, once the 44% tax rate is considered.  So the central planners want to limit minimum wages to that of a illegal day laborer! Outrageous and just plain mean!

We should stand for the little guy, and demand at least a $100 minimum wage, NOW!  Think of the benefits: everything that is not worth at least $100 an hour will either disappear from the local economy, will be available only on the free (so-called "black") market, or from a self-employed owner-operator or general partnership.  Only the highest-value service jobs will remain, and everything else will have to be supplied by owner-operators with no employees.  Demeaning, low wage jobs will disappear entirely.  Employers will have to offer decently-paid jobs, or none at all.  Thus, a huge sector of the economy will have to be deserted by crony capitalists with their tax-subsidized ways, and left for the free market to handle without creating low-value jobs.  Every thing at the low end will have to be provided by independent contractors, free agents, or general partnerships without any low-value employees.

That would be epic.  Disruptive and painful at first, to be sure, as all epic things are.  The future would look more like Uber, and less like the taxi companies.  More like the street vendor or Eastern bazaar, and less like the big-box stores.  Only owner-operators or true partnerships would be able to operate in the low-value space.  Every fast-food joint and retail store, every janitorial service, every gardening service, nearly every restaurant would go out of business -- but wait!  Either demand will push the value of undervalued services up, or these services would only be available from owner operators or general partnerships whose income depends solely on profits.  The low-wage boss would disappear.  There would be an explosion of micro-entrepreneurs in the low value space, each keenly aware of the need to turn a profit and minimize taxes.  A substantial fraction of this low-value work would thus find its way to the free market, teaching sound economic principles and the benefits of voluntary exchange as only a community of equal market participants can. 

On top of all that, does anyone whose labor is worth less than $100 per hour really deserve to live in the glorious City of Angels anyway, unless as a pure charity case or entrepreneur?  Are these people really doing anything that more valuable people can't do for themselves, or program a robot to do?  $100 is less than a good BMW mechanic makes already.  Why should people with economic value have to tolerate people who lack the self-motivation to start a business or learn a more valuable skill cluttering up their streets, demanding public services, and emitting all that CO2 that is warming the Earth?  Why should people with valuable skills waste their time supervising people with no skills?  If the job is not worth even $100 an hour, anybody should be able to figure it out on their own, without some boss lording over them. Tongue planted in cheek, here.

Yes, $100 should be the new minimum, if there is to be any minimum.  That's what I say.  If the central planners want to argue for a lower minimum, I'll let them.  But as far as I am concerned, no hourly rate is too high for a crony capitalist to pay.  Free the entrepreneurs!

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Photo Credit: "Minimum Wage, 1967"
by Dr. Monster  
Photo and essay are subject to Creative Commons License

Wednesday, May 13, 2015

Leviathan The Great Caterpillar

The state will wither away from the Earth, or so it has been intuited.  The departure has been predicted for centuries.  Not just by the Marxists and Anarchists.  At least as early as the Jewish prophet Daniel, writing of the fate of empire from the perspective of ancient Babylon.  Recall his dream of the great idol of golden head, silver torso, iron legs, and clay feet, crushed to smithereens by a meteorite.  The beast will be slain.   All the empires of the Earth will fall, whether by natural, supernatural, or human hands, eventually.  That is a mathematical certainly.

Whether humanity will survive the death of the state and empire as a reoccurring phenomenon is an open question.  Some of us choose to believe that it will.  Some of us choose to believe that one day, a more enlightened humanity will lay the idea of state on its deathbed and allow it to slip into an eternal slumber, never to rise again among humans.  What a happy day that will be!

Death as a final destiny is not the only allegory that might be applied to the future of the state.  When a caterpillar undergoes metamorphosis does it die?  In a sense, yes: the caterpillar and all of its behaviors are no more.  The emergent moth is an almost unrecognizably different creature, both in physical form and behavior.  In a sense, no: the identity of the moth as an individual is traceable through its metamorphosis from its prior identity as a caterpillar.  If we hope for a post-apocalyptic society in which humanity will thrive, metamorphosis is a more useful analogy than death.

Some ancient seers foresaw the caterpillar or "worm" Jacob climbing the ladder to heaven, and being reborn as a divinely led body.  Whatever your beliefs regarding prophetic utterances, you can probably recognize that widely held beliefs about the future have real consequences.  We undoubtedly influence our futures by first imagining them.  We can chose to imagine that great worm Leviathan, comprised of all the nation-states, undergoing metamorphosis and emerging transformed and liberated.  We can imagine a new world in which the machinery of war, rule by force, deceitful politics, privilege and taxation are in the distant past, and widely abhorred.  We can imagine that if any such transformation is to occur, it must come from within.  If the transformation is imposed by force or fraud, it has not occurred.  Liberty by imposition is an impossibility.  If believed, it can only be delusion.

If you believe metamorphosis to a stateless society to be possible, whether you ascribe it to a divine plan or to a multitude of complex and coordinated conscious choices by billions of individuals makes no real difference.  One is as miraculous as the other, and both can be simultaneously true.  Either way, we as individuals make up the DNA of the Great Worm.  We as individuals possess the only cellular machinery capable of transforming the Worm into a stateless society that frees all people to thrive in greater harmony and peace.  We all have equally important jobs to do.

All of these imaginings are based in hope, and contradict much of the evidence at hand.  Today, the power of the state seems to be growing ever more pervasive, invasive, and far reaching.  Enumerating all these unfortunate realities is not my present purpose, nor do I mean to count all the counter trends providing a rational basis for hope, however slim. We are free to hope that the state will eventually be reduced to dust, displaced by a more rational and just scheme for organizing society, however long that takes.  We are always free to hope.

What survives the death of the state?  Bare subsistence as hunter-gatherers?  A pre-industrial agrarian society?  An advanced post-industrial society that supports dense and fulfilling urban living, sophisticated division of labor, and technological advancement?  Why only one?  All three of these and more might co-exist in ways both surprising and conventional.  We cannot know what the endpoint will be, nor is it necessary to know it.  We can know only that the future stateless society will lack the characteristics of state, by definition, by whatever name such characteristics are called.

When it is recognized that transformation to stateless society must come from within, the idea of the state as enemy must be discarded.  State is not enemy.  It is precursor.  We would be foolish to wish for its destruction, because its fabric is us.  State would not exist were it not for the fears and lusts of humanity, and cannot be destroyed without the destruction of humanity.   If we are wise, we will wish only for its transformation.

All that may seem like a lot of mumbo-jumbo, but there is a practical point. We who have taken the red pill and absorbed some stark lessons about the nature of power may naturally resent the continuing slumber of our fellows.  There is an impulse to excoriate those who still cling to that great fiction by which (as Bastiat wrote) everybody tries to live at the expense of everybody else.  Excoriation has its place, but has not proven terribly effective in bringing about a new stateless society, or even in restraining the worst excesses of the state.  People cling to the current order, not because of ideology, but out of practical self-interest.  They do not see enough viable alternatives. But where they do see less regulated environments that provide some benefit, they flock to them.

This dynamic runs the world.  There is a voluntary sector, where all production occurs and most innovation emerges.  And there is a compulsory sector, that extracts a substantial portion of the wealth produced by the voluntary sector, and redistributes that wealth to its favored constituents.  The success of the modern state rests on that at which it truly excels: deception and coercion.  It has proven itself able to stealthily extract a tremendous fraction of the total wealth of the voluntary sector, by using tools such as central banking and compulsory fiat money systems, credit expansions, complex taxation systems, and vast regulatory bureaucracies that invade almost every crevice of human activity.  So subtle are the mechanisms of wealth extraction by the state, that most people are unable to comprehend how they have been robbed.  On the contrary, a great many people credit the state with being primarily responsible for their prosperity and security! Somehow, the state has managed to convince most of us that we are its beneficiaries, and therefore it deserves our protection.  The state is not adept at producing goods and services that people will voluntarily buy, but is the master of coercion and deceit.

It follows that mere participation in the voluntary sector will do nothing to transform the leviathan. Silent acquiescence just plays into the current servitude, and emboldens constituents of the state to take a greater share.  Deliberate activism is required.  That activism can take many forms, but in evaluating its likely efficacy, we might ask this question:  Does the activism increase the fraction of real economic and beneficial life activity that takes place voluntarily, and diminish the fraction that passes through the coercive or deceptive mechanisms of state?  More simply, does the activism promote processes for justly meeting human needs that reduces the entanglement of coercive government in meeting those needs?  If so, the activism is transformative, and worth doing.  If not, it is likely not worth doing, and is counterproductive to liberty.  With, and only with, enough transformative activity by we its constituents, Leviathan will certainly be transformed, and the Worm will die.

* * *
Photo Credit: "Metamorphosis: Free as a Butterfly and Ready to Fly"
by chekabuja   
Photo and essay are subject to Creative Commons License

Monday, March 16, 2015

The Elephant Out In The Dark, Dank, Dung

Thank you Mr. Barnes for engaging in the dialog in a profound way.  You stimulated my thinking; actually opened up a whole new area or way to think about things.

Thinking and writing (and OMG talking!) about voluntary (a.k.a.personal) law as if it were a topic relevant to libertarians is a bit like four blind people feeling up an elephant on a moonless night out far from the  lights of human cities, somewhere on the wide savanna.  Not only is it pitch dark, there are piles of dank elephant dung strewn about, the poor sods are blindfolded and each has stumbled across a different part of the leviathan.  One, feeling the truck yells "Watch our for the constrictor!"  A second, brushing against the ear, reassures "It's just a banana leaf."  A third encounters the side and reports, "Hey guys I think I found a cave."  A fourth blinded wanderer is impaled by the tusk, and does not say anything that will be repeated here.  This retelling of the old Indian parable about the four blind man reporting on the different natures of the elephant was brought to you by the Element of Farce, with support from a Dash of Allusion.  And by, A Need To Make A Point, hopefully with art by inserting the only difference of logical significance: our wanderers did not expect to run into an elephant, and hadn't even figured out that they had run into the same animal before the parable ended.  The Indian blind men, at least as I remember hearing the tale, knew they were supposed to be inspecting an elephant.

Be patient, there is a point in here somewhere.  Voluntary and personal law can be thought of as a branch of social philosophy in the broader category of voluntaryism or social theories based on non-aggression, that intersects with the philosophy of law.  Voluntaryism is itself a minor school in the broader university of social philosophies dominated by schools that are much more popular these days, that make use of aggression as an organizing principle.  The point is, by discussing concepts like voluntary law we are pretty far out on the dark savanna of ideas, talking about concepts that are not widely discussed or well-defined.  The principles we are getting at are as old or timeless as creation, but the conceptual framework is unfamiliar.  It is to be expected that experiences will vary from different perspectives, and we may not even realize that we are just experiencing different aspects of the same leviathan.  And we are guided as much by intuition as by sight.

The point I have been tirelessly pushing is that the essence of every moral legal system is personal.  Law is at its highest essence is personal.  It is the laws that you uphold that are the ones you should be judged by.  And that it is possible to build communities and networks of communities based on this principle.

Voluntary law can and should be used by communities.  The critical point is how particular rules become enforceable laws within communities. There is absolutely no external difference between a community of persons who hold to the same law because they all unanimously agree that that the law is acceptable, and a community upon which the same law is imposed by some subset of the group, be it a majority, an elite, or whatever.  The differences are internal.  In the first, everybody agrees that the law is acceptable, there is a lack of tension, and much greater confidence that one's neighbors will follow the law.  In the second, there are bound to be some people who disagree with the law, so there will be greater tension, and less confidence.  The philosophy of non-aggression is about getting communities closer to the first state of harmony without using aggression.  Those who hold to non-aggression believe that aggression doesn't work, is morally wrong, or both, for building communities of harmonized laws.

And another thing.  One can be a member of communities that hold to different laws, and therefore any person can hold to distinct sets of law.  A person may adopt one set of laws for resolving disputes with members of a first community, and another set of laws for resolving disputes with members of a different community.  Tying this to the idea of contractual republics, voluntary law is not only personal, it is also a  form of covenant between members of the same community.  Where two or more people are transacting subject to same voluntarily accepted law, there is a sort of contractual republic formed, which may be transient in nature and be limited to the boundaries where the law of the two is in agreement.  One could even belong to different communities that hold to conflicting laws.  The only question in that situation is what law to apply when dealing with a third person.  Voluntary law suggests it would be a really good idea for everybody who rejects aggression to have a more general law defined that works with any other voluntaryist who accepts the same set of principles for resolving differences between voluntary laws.  For resolving such differences, voluntary law suggests using The Rule Of The Weakest Tool - TROTWET.

Identifying general principles and not just a set of specific rules is also fundamental to voluntary law.  Like natural property rights, moral laws arise from the person.  A neat thing about voluntary law is its worst limitation: it only works with other voluntaryists.  One cannot respect personal laws without rejecting aggression as a way of harmonizing laws.  Conversely, one cannot hold to non-aggression without recognizing that, if aggression cannot be used for harmonizing law, then every person must have the right to define their own law.  In a manner similar to how all reasonable people are libertarians, they just don't know it yet, all libertarians recognize the sanctity of personally defined law.  Some just don't know it yet.

Last point: It is the hierarchical logical structure of a well designed voluntary law system that enables its use with different communities.  At lower levels, there are more specific rules.  There are more general rules above those.  There is no lower limit to the number of levels, so long as each level is personally adopted by all on whom it is enforced, and its adoption is without coercion or fraud.  Each person's personal legal code can be simultaneously as simple as their most general principle, and as potentially complex as their DNA.  At the apex of this wonderful potential complexity is the most general principle, which is for voluntary law is essentially the Golden Rule or the non-aggression principle.  This general principle at the apex is what separates voluntary legal systems from all others.

So the first step in implementing voluntary law for people to just adopt a principle consistent with non-aggression as their most general principle of law, publish that fact and live as though it is an enforceable principle by which their own actions will be judged. To facilitate order in complex large societies of strangers, more detailed rules will be useful.  When large numbers of people recognize their personal right and responsibility to publish their own personal rules, so that others who also hold to non-aggression can make use of them, new orders will spontaneously emerge, without any bloody revolution or turmoil.  We have the power to build an orderly society, just by honoring the personal laws of those who reject aggression as a tool for organizing society.

Friday, March 6, 2015

Libertarian Brutalism and the Fuzzy Venn Diagram

Maybe the libertarian brutalism brouhaha blew over ages ago.  Or perhaps it festers still.  Either way, it might be used as an excuse to draw a fuzzy Venn diagram.  So I did.

Whatever Jeffrey Tucker originally intended or actually said in comparing a subset of libertarians to the movement in architecture known as brutalism, I perceived him as saying that a certain strand of libertarians are like architectural brutalists in wanting to emphasize just the essentials, and that such brutalism is less preferable than non-brutalist, humanist or "thick" libertarianism. Hopefully my perception is reasonably accurate.

Whatever Mr. Tucker actually wrote, within the small but growing community of people who identify as libertarians and comment on issues of the day, an ongoing storm of controversy intensified following Mr. Tucker's essay.  The controversy can be boiled down to a debate over the definition of "libertarian."  Over what it means to be a true Scotsman, so to speak, with opponents divided into two basic camps.  Forgive me for greatly oversimplifying things, but one camp argued that being a libertarian necessarily required that one renounce all bigotry, except perhaps for bigotry against bigots.  The other camp, the so-called brutalists, argued that, whatever the merits of bigotry, one's status as a bigot or non-bigot is irrelevant to whether or not one is a libertarian.  I reside in the second camp, not because I condone bigotry, but because I favor a more restricted definition of "libertarian."  Like all preferences concerning the meaning of symbols, it is by nature arbitrary and personal.  I can't control what meanings and arbitrary preferences other people adopt, but I can explain why I adopt my own, and why you should, too.

To service such explanation, I created the fuzzy Venn diagram depicted above.  It's fuzzy because boundaries of classification systems almost always have some degree of fuzziness around the edges.  But that's not the point.  The point is simply that the set of all moral principles (shown in pinkish-white) is larger than and entirely contains the subset of social moral principles, i.e., the moral principles that relate to social behavior (shown in yellow).  Further, that the subset of social moral principles is larger than and entirely contains the sub-subset of non-aggression principles (shown in green).  One might even go further and distinguish political non-aggression principles from more broadly social non-aggression principles.

To avoid going too far afield I'll neglect issues touching on what is, and is not, a properly stated non-aggression principle and underlying issues such as the definitions of "person," "property" or "aggression."  These issues are more fundamental and will inevitably cause divisions within the libertarian community.  For example disagreements over the rights of a fetus cannot be resolved by the non-aggression principle itself, because such disagreements rest on assumptions underlying it.  But such divisions are not the topic at hand.

Assuming that the Venn diagram above is valid, the brutalism controversy might be summarized as a debate over whether or not the term "libertarian" should be applied to everybody who adheres to moral principles in the green, non-aggression area, or only to some subset of such people who also adhere to other principles.  When summarized in this way, there are few who advocate for redefining the term "libertarian" based on acceptance of the N.A.P. plus some other principle. In fact, unaided by a search engine I can't think of anyone clearly arguing for such redefinition.  I can't say such people don't exist.  It is confusion over that point that is at the heart of the brutalism controversy.

Instead, those who eschew brutalism excoriate those who reject or fail to defend other moral principles, besides the N.A.P., whatever those other principles may be.   The "thickists" may point out that the failure to teach other moral principles hurts the cause of liberty, or is immoral.  Such arguments are healthy and unobjectionable. They might go as far as stating "I refuse to associate with brutalists." Fine.  If they exclaim "brutalists are not even libertarians!" then I object.  Or if they argue that one can (or should) be a libertarian while elevating some other moral principle above the N.A.P., this is also objectionable.  More than that, it's illogical.

Suppose, for example, that one values an ethic of multiculturalism.  If Jennifer values multiculturalism as superior to non-aggression, then she believes that it may sometimes be morally acceptable to use coercion to enforce multicultural values, however regrettable that aggression might be.  Conversely, if John values non-aggression over multiculturalism, then he believes that however regrettable bigotry and prejudice may be, it is never acceptable to oppose them with coercive force to any extent greater than justified by necessary defense.  Since Jennifer values multiculturalism over non-aggression, she cannot possibly be considered a "libertarian" because she rejects the non-aggression principle, which by definition forbids aggression for any purpose but necessary defense against the aggression of others.  Conversely, whether or not John is a bigot, he cannot be considered as anything other than a "libertarian" so long as he adheres to the non-aggression principle.  If you don't like bigotry, and John is a bigot, you may call him out as such.  But if you deny the possibility that bigoted libertarians can exist, or should be recognized as libertarians, you are depriving the word "libertarian" of its established meaning.  There is no other word in use to precisely identify people who hold to the non-aggression principle.  If "libertarian" is defined as somebody who takes exception to non-aggression in favor of some other set of moral principle even if only in limited circumstances, then some other word will have to be found to describe people who adhere to the non-aggression principle, which forbids such exceptions.

Why is it so hard to accept that "libertarian" can be used to describe people who hold to other beliefs that are abhorred?  The word is merely a general term, relevant to a narrow set of moral principles.  It must exclude other moral principles to be a useful term, and therefore it is inevitable that some libertarians will find other libertarians holding abhorrent beliefs, saying and doing abhorrent things.   Some atheists likewise may find other atheists abhorrent, yet we do not find any movement to redefine "atheism" as anything other than a belief that God does not exist.  Instead, people classify the genus of "atheists" into various species.  And it is considered perfectly normal to accept some species of atheism while abhorring others.

Whatever explains the desire to define "libertarianism" as something more than the a belief in the morality of the non-aggression principle, as if "libertarian" were a synonym for "good person," the desire is damnable.   "Libertarian" should not be thought of as a synonym for "good person."  There are good libertarians, who eschew all evil.  And there are bad libertarians, who do not eschew all evil, but who at least eschew the evil of non-defensive aggression.  What makes libertarianism such a powerful political ideology is its ban on using disagreements over principles in other areas of the moral Venn diagram as justification for aggression.  Take that away, and libertarianism becomes just another ideology justifying coercive rule by political elites, based on whatever principles or whims infuse their egos.

So is "brutalism" just a species of libertarianism?  It depends on how far one extends the concept of being a non-brutalist or humanist libertarian.  If the humanism is subservient to the non-aggression principle, such that aggression serving the cause of humanism is forbidden, then libertarians may be divided into separate non-humanist and humanist species.  However, if the humanism is not subservient to the non-aggression principle, the ideology is in no sense libertarian, as it justifies aggression for other than necessary defense.  A humanist who justifies aggression in the cause of humanism is not a libertarian, nor is one being "brutalist" by pointing that out.  But the confusing terminology of "brutalist libertarian" might lead some believe that one can be a libertarian of a non-brutalist sort, while rejecting the non-aggression principle.  Such confusion would be bad, if it became widespread.  Very bad.  It would divide those who hold to non-aggression, destroy all the utility of the word "libertarian" that has been building for the past 45 years or so, and require that a new word be adopted to replace it.  Some libertarians are also bigots or other scurrilous things, and there will always exist disagreements over moral principles. So let's just call out bad people for the evil they do, whether or not they are also libertarians.

Wednesday, February 25, 2015

My Vision For Libertarian Success

The Libertarian Party of LA County is going through the exercise of developing a strategic plan.  Part of that exercise includes adopting a vision statement.  Inspired by an earlier draft, I've put together my own vision.  It could be shorter, but is serviceable.

LPLAC Succeeds When:

The sum total of public discussion in LA County includes divergent views and dynamic cross-fertilization of ideas, but a clear majority of both the electorate and general population insists that all of these divergent views fit within a political framework that minimizes compulsory forms of government in favor of maximizing voluntary solutions, personal autonomy, and economic freedom. Los Angeles County and its environs develops a reputation as one of the leading libertarian-influenced and politically innovative regions in the world. Liberty and peace-loving people from all over the world desire to visit and reside here, including notable public opinion leaders who advocate for freedom-oriented policies and the end of government-sanctioned aggression locally and around the world.

Along the way, Libertarian Party candidates and are included on virtually every ballot in the county, are routinely included in debates, sought out for interviews, and covered in stories by both alternative and mainstream media. Candidates of other parties become substantially libertarian-leaning in key aspects. Libertarian Party candidates win offices and appointments while expressing views consistent with the non-aggression principle. Many Libertarians holding public office are supported by teams of activists and advisers, and are widely recognized as principled and effective leaders. Aided by their teams and motivated by the passion for liberty, these leaders grow in political influence and exploit every good opportunity to implement and expand liberty and non-aggression in public policy and legislation locally, regionally, in Sacramento and in Washington D.C. LPLAC and its members are seen as valuable members of the community, actively engaged in resolving issues of the day and effectively advocating for innovative solutions that expand personal liberty, prosperity, and justice.

We seek no dogmatic, static ideological endpoint and seek only to apply the non-aggression principle in the political sphere to the maximum extent possible given the constraints of the day. It is impossible to predict every social benefit that will be realized by the freed people of LA County, once they have learned to abhor the initiation of force for achieving political or social goals, and prefer to implement voluntary solutions to social problems. We nonetheless expect that fruits of our activism will include, in the long term, the widespread condemnation of wars of aggression, and strong public preferences for peace and voluntary exchange with people locally and around the world. Our residents will enjoy increased prosperity, privacy, security and justice. Equal opportunities to benefit from the fruits of their own labor will expand, while government-sanctioned monopolies, free riding on the labor of others, and economic stagnation will diminish. No person will be punished for conduct that does not harm or threaten an actual victim, and victimless crimes will become relics of the past. The rule of just laws will prevail, and justice will be administered by officers and service providers who are not above the laws they enforce. As general prosperity increases, the need for tax-funded welfare will diminish and care for the indigent and poor will gradually be transferred to volunteers and voluntary organizations. Corporate welfare and undue influence will diminish. Our environment will become cleaner and our food and water healthier by operation of just laws, vibrant free markets and public forums where truth is vigorously debated and authority questioned. Taxes will become more like fees for services rendered or reputation-enhancing donations, and less like compulsory payments made under threat of force. Authority will become more decentralized, wealth more evenly distributed, and collective social projects more voluntary in nature.

Tuesday, February 3, 2015

Libertarian Party Spends Equivalent to Annual Budget on Study Concerning Use of The Word "Asshole" on Facebook Group Page


In other news, the Libertarian Party of  Waffangeles County reported today that it has spent the equivalent of its annual income on a study of the use of the word "asshole" on its Facebook Group page, based on the Federal minimum wage and a count of words used by the study's investigators, assuming 2.35 seconds is required per word, on average, all factors considered.  The study found 100% of the uses of "asshole" by both posters and commentators within the Waffangeles County group to be appropriate.  A search of the forum turned up only one use of the offending word, which was not directed at any identifiable person or used to appeal to prurient interests.  The statistical breakdown is shown in Table 1:
Table 1

The County's group page compared to favorably the Facebook page for the County's state parent organization, the Libertarian Party of Kalitaxya, which registered a 25% inappropriate use rate, 63% appropriate use rate, and 13% incidence of posts using an apparent close equivalent of "asshole" (labeled "Uncertain" in Table 2).
Table 2

The inappropriate uses in the LP Kalitaxya group consisted of references to identifiable persons participating in a discussion.  There were no uses found to appeal to prurient interest, and no suggestions that any person perform any act involving any real or imaginary "asshole" organ, human or otherwise.

Perhaps the most interesting finding of the study involved a post returned by Facebook's search engine that lacked any use of "asshole" or its known synonyms, in any known language.  This post consisted of a reference to this 2012 story contrasting Libertarian Presidential candidate Gary Johnson's position on legalization of marijuana and other drugs with former Speaker of the House Newt Gingrich's proposal to make possession of two or more ounces of the "devil weed" punishable by death or life in prison. A faction of the investigators concluded that the article was most likely identified because Facebook's heuristic, artificially intelligent search engine was obviously evolving towards a sentient state, and had acquired enough reason and moral sense to recognize that, in the context of politics, a proposal to kill or imprison for life any person found with two or more ounces of an herb recognized for centuries as having medicinal, nutritional and industrial value represents unadulterated assholery.  This faction reasoned that, since the statement was identified as made by Newt Gingrich, the artificial intelligence was drawing an equivalence between Gingrich and "asshole" that met the study parameters for inappropriate speech.  A competing faction reasoned that, regardless of the reason for the search engine's flagging the post, any fool could understand the equivalence of "Gingrich" and "asshole" in the aforementioned context.  However, the faction reasoned that Newt Gingrich is a public figure who was not actually participating in any discussion taking place within the state party's Facebook group.  Therefore the competing faction concluded that the use met the study parameters for appropriate speech.  After long and tedious debate, during which both sides reminded each other of past grievances over petty slights and basked in the obvious rightness of their respective positions, no agreement could be reached.  The factions therefore "agreed to disagree" and settled on categorizing the incident as "uncertain."

The Waffangeles County Party Central Committee met to consider the study results and released the following statement:

"We note with some surprise the meager number of words that can be afforded at a rate of 2.35 seconds per word and Federal minimum wage until exceeding the equivalent of our annual budget, and the relative lack of imagination of our members and guests in their use, both appropriate and inappropriate, of the word "asshole" in public forums associated with the Libertarian Party statewide.  We are pleased, although not surprised, that our membership has attained absolute perfection in the appropriateness of "asshole" as expressed in our forum.  We hold up this up as a reflection and example of the moral perfection emanating from the Non-Aggression Principle (NAP), of which our possession allows us to literally nap while we wait for our fellow Kalitaxya-ians to be drawn to the light.  The study should dispel once and for all the dispersions cast by our enemies, who label the Libertarians as a debate society dedicated to issues involving their own navels, by scientifically proving our capability to use at least one potentially offensive word in an entirely appropriate manner in our public outreach.   We are dismayed, but not surprised, that our state party has failed to attain the perfection we have achieved locally in policing of asshole incidents, and blame the leadership for this failure."

The Central Committee then announced a follow-on study concerning use of the phrase "horse's ass."
If you will now permit the author of the foregoing report to editorialize a little: as member of the Waffangeles Party Central Committee, I blush a little at the smug self-satisfaction and absorption sometimes expressed in our public statements, and the endless debates over trifles.  Nonetheless, I remain a loyal member.  It is preferable to the unsavory alternatives of, on the one hand, identifying with a party whose most prominent members have recently called for the death sentence for those caught with less than a salad's worth of a useful herb.  Or on the other hand, identifying with its principal opponent party, which despite possessing a majority in the legislature and control of the administration, studiously avoided any consideration of removing cannabis from Schedule 1 status, preferring instead to spend its political capital on further restricting Americans' relatively limited medical freedoms and cartelizing the health insurance industry.  Call me what you will, but I know when I'm being shat upon.  Bickering is just a natural if not inevitable result of renouncing the right to rule others by power of aggression, and forming a political party around a moral principle.
The foregoing post is entirely fictional, and any resemblance to any actual person or organization within is purely coincidental.

Monday, January 12, 2015

On Commodity Price Manipulation Using Futures or Derivative Markets

This is an educated non-economist's attempt to understand one mechanism for commodity price manipulation, and its ramifications.  One need only search "price manipulation using futures" or similar phrase to see that it is not a new topic.  For example, writing in Forbes about crude oil prices in 2011 (which at the time were high and increasing), Jerry Taylor and Peter Van Doren of the Cato Institute concluded that "[e]ventually, futures prices have to reconcile with 'market fundamentals' (the term of art for the real supply and demand . . .in physical markets)." They explained how the price manipulation mechanism works and concluded that it was not likely behind recent increases in crude oil prices for essentially two reasons.  First, they saw no reason for traders to push prices upward only, when they can just as easily push prices downwards.  Second, they believed there was a lack of evidence of increasing oil inventories that should naturally accompany collusion to artificially bid futures prices upwards, by action of arbitrage of spot market prices.   I am no expert in the oil markets and have no opinion as to the reasonableness of their conclusions regarding crude oil price action in 2011.  That is not the point.  The crude oil market is complex and includes too many variables to draw quick conclusions.

A simpler market exists in precious metals such as gold, where the commodity is not perishable or consumable, and cost or supply of  storage facilities are not major factors.  Repeating the search mentioned above with the added word "gold" produces a spate of recent articles on the topic, at or near the top of which is likely this article by Paul Craig Roberts. Written almost exactly a year ago, the article summarizes processes for manipulating the price of gold, notes that some of these processes require gold to be supplied by the party manipulating the price downwards, and predicts that once the supply runs out "the Fed will have to abandon QE or the US dollar will collapse and with it Washington’s power to exercise hegemony over the world."  Numerous articles along the lines of Mr. Robert's can likewise be found, but typically not from mainstream sources.  Many are published by gold investment services, who might be expected to promote stories predicting future increases in gold prices. Nonetheless, there is a  evident widespread populist belief in a grand conspiracy to depress the price of gold, expected to end with a dollar collapse and/or end of QE and therefore sharp rise of interest rates, that goes beyond mere shilling for gold investors.  Mainstream media stories on the topic can be found, but these ignore or dismiss the grand conspiratorial story.  For example, this story from Bloomberg describes an actual instance of price manipulation using gold futures, under limited circumstances now reported as corrected.  Grand conspiracies are beneath mention.  This recent story, also from Bloomberg, ascribes the fall in gold prices to weak oil prices and diminished inflation fears.  This conclusion seems reasonable enough.

Actually, the dollar has been increasing against most commodities since July of last year, as illustrated by this chart (partially reproduced above).  The general weakness of commodities since that time until now can be verified from many sources.  Not only has the dollar done well against commodities over the past six months or so, but it has also outperformed most if not all of the world's major currencies.  It's been a remarkable performance, and it is not clear what might have triggered such a broad advance.  One thing thing that probably helped were reports that the U.S. had surpassed Saudi Arabia as the world's largest oil producer, back in July 2014.  A glance at the charts confirms that for at least the past six months, a major factor in gold price has been dollar strength, probably outweighing other factors including price manipulation, to the extent it occurs.  But I digress.  Trends analysis is not the purpose of this post.

No, this post was inspired by a sort of waking dream that has been floating around my head for a while, a thought experiment if you will.    Imagine the planet Economa, much like our own Earth, on which a global empire of intelligent aliens has evolved.  Like us, the aliens discovered the utility of gold as a medium of exchange, and transitioned through gold certificates and a great war in which one nation amassed most of the planet's gold, to a global fiat money backed by that nation's gold certificates, which eventually became its fiat reserve currency.  So, urged and guided by a coalition of bankers who recognized the superior profit opportunities they would enjoy as officiators of inexhaustible fiat money supplies,  the entire planet used fiat currencies, and traded fiat currencies.  Generations passed, fiat currencies were digitized, and the aliens forgot the utility of gold as a medium of exchange.  Gold was much less convenient than the digital tokens they used for exchange, and prone to taxation and other forms of theft.  Gold had a few uses, but was mainly valued as a long-term asset for storing value at a relatively low cost.  Thus, the aliens were prone to buy gold when they perceived other commodity prices increasing, and sell gold when they perceived commodity prices to be falling.  The bankers of the coalition found these habits annoying, and vaguely threatening.

Control over the money supplies of the entire planet of Economa made the coalition of banks extremely powerful, and so it came to control all of the important social institutions of Economa, including its politicians, bureaucrats, police, military, and religious leaders.  These institutions it funded partly by newly-created fiat money certificates, and partly by requiring payment of taxes in the fiat money.  The coalition knew it was important to keep taxes high enough so that all economic activity on the planet would continue to use the fiat money that the coalition controlled.  They found that keeping taxes high allowed them the opportunity to create even more fiat money, and thereby control a greater share of total economic activity on Economa.  Even if that meant that the total economic activity was a lot smaller than it might otherwise have been, the coalition preferred to make sure that they controlled a great enough share so that they would not face any threat of opposition.  Their share was much more than enough to securely enjoy all the pleasures and services that Economa provided.  Mostly, they used it to work their will, such as by rewarding their allies and undermining their opponents.  Any alien that attempted to get into the fiat money business, and certainly the gold certificate business, without the coalition's approval quickly found itself out of business, if not behind bars! 

The aliens of Economa raised vast farms of geekonut trees bearing geekonuts, from which they extracted geekonut oil.  Geekonut oil was not only edible and nutritious; it was very clean-burning, producing only water and carbon dioxide when burned at high temperature.  Accordingly, geekonut oil was used for food, and as an energy source for industry, households, and transportation.  Despite advances in geekonut farming technology, the supply of geekonut oil could not keep up with demand.  Exacerbated by the ever-increasing supplies of fiat money washing over Economa, geekonut oil was always going up in price for as long as anybody could remember, with only seasonal dips now and then.  Prices of everything else went up pretty much along with it.  Whenever the aliens perceived or feared that prices would soon be going up fast, the price of gold would go up especially fast.

One day, a process was discovered for recovering geekonut oil not only from geekonuts, but from the constantly shedding leaves of the geekonut tree also.  It was estimated that this discovery would increase Economa's supply of geekonut oil three fold and outstrip all demand for the foreseeable future, at only a marginally higher cost of extraction.  Investors rushed to build processing plants, and the planet's supply of geekonut oil began to increase.  After a time, the price of geekonut oil began to fall.  And fall. And fall still further.  So did prices of everything that depended mainly on geekonut oil, or competed with it.  However, because the coalition of banks was still regularly increasing fiat money supplies, prices of everything else started to go up.  And up.  And still further up.  But this was not noticed as much by ordinary aliens, because so many of day-to-day things depended mainly on geekonut oil.

Imagine that these aliens had futures and derivatives markets that were founded in response to demand for hedging price volatility by commodity producers, but that had grown to be dominated by speculators.  The coalition of banks used these markets to influence commodity prices up or down as they pleased.  When the coalition wished to depress a commodity price, it sold "naked" futures or derivatives in the commodity, driving the price down, buying the futures back just before expiration, even if at a loss.  By "naked," it is meant the underlying commodity is not owned by the seller, who intends to repurchase the future closer to its expiration, without ever delivering any of the actual commodity.  The coalition repeated the selling/rebuying of the naked futures, "rolling" the future forward near the end of each cycle.  It did the reverse when it wished to drive a price up; it bought futures or derivatives, driving the price up, and rolling it forward just prior to expiration, at a loss if necessary.  The coalition did not fear losses in fiat because of its control over an inexhaustible supply.

A debate raged among the bankers of the coalition.  Some wanted to stabilize the price of geekonut oil, fearing the unpredictability of prolonged lower prices in so vital a commodity.  Others (not letting a good crises go to waste) wanted to use the confusion caused by the unexpected fall in geekonut oil prices to crush the idea of gold as a safe "store of value" forever, or at least enough so that the coalition could buy back the gold it had sold off after the great war, and once again own most of Economa's gold.  It was decided to concentrate all firepower on driving the price of gold down for a long enough period to secretly repurchase most of the gold.  So the question for the thought experiment is, all other things being equal, can the coalition accomplish its goal?

There is no mathematical formula that can be applied in the general case to answer this question, because there is no general case.  Market behavior will depend on the behavior of its participants, which behaviors depend on numerous variables, including the knowledge and motivations of buyers and sellers, that are beyond reckoning.  It is necessary to assume a specific case.  Assume the participants in the Economa gold futures market consist of coalition banks, wholesalers for gold retailers, gold producers, and speculators.  Nobody else is interested.  Assume the coalition banks always act in concert, being controlled by a single person, named "Stan."  Assume the wholesalers buy to supply retail inventory, and gold retailers tend to adjust inventory levels in response to trends in gold prices.  That is, retailers tend to favor increasing inventory when prices are rising, and decreasing inventory when prices are falling.  Assume producers participate for price hedging purposes, to ensure that future production will receive at least a certain minimum price, and that production is only a small fraction of total market volume.  Assume speculators are interested in short-term profits only.  The behavior of ordinary retail purchasers has already been noted: they tended to buy gold when perceiving other commodity prices increasing, and to sell gold when perceiving commodity prices to be falling.  Assume derivatives are settled in cash (fiat) only, while futures are settled in the underlying commodity if held at expiration, but can be traded for cash up to the date of expiration.

With these assumptions, it is apparent that the coalition, backed by its inexhaustible supply of fiat, can accomplish its goal, as least for so long as the price of geekonut oil is adjusting downwards or remains at "historically low" values.  There are no independent banks of consequence on Economa. When the coalition floods the futures market with sell orders, it holds steady or slightly decreases its buying activity in futures and spot markets.  Speculators detect the coalition's market actions and deduce that a downtrend is incipient, so they also switch to selling, hoping to ride the trend downward.   Fearing lower future gold prices, producers buy only enough futures to cover committed production, and begin making plans to cut the least profitable mines if prices fall further.  Their diminishing output does not impact the market greatly because it is only a small fraction, and can be balanced by reduced demand from the coalition. Wholesalers are not eager to increase inventory in an atmosphere of falling prices, and buy mainly to supply the consumer market; they may even deplete inventories, fearing lower prices in the future.  The consumers of Economa, true to form, generally perceiving stable or falling prices in geekonut oil and related commodities, sell or hold.  Prices fall; speculators and the coalition profit in the futures markets, and the coalition is able to gradually build back its holdings.

The coalition will suffer short-term losses in its gold holdings as prices continue to fall.  Such losses are of utterly no concern to it.  The coalition has infinite liquidity in fiat, which is only enhanced by the falling price of gold, so can never run out of money.  Also, it can reverse course and control future gold prices upwards whenever inflation starts to bite the consumer again, as it inevitably will.  It knows that it will eventually profit from its gold holdings, which meanwhile will help to dampen panic over its inflating fiat, because it can once again claim that the fiat is "backed by gold."

Earth is not Economa, but many of the assumptions made about about the gold market on Economa seem roughly true on Earth.  We on Earth have also been experiencing falls in commodity prices, driven in part by new technologies, although there may be less clarity about how long this can continue.  There is at least one notable difference.  While there may be a spiritual "Satan" in the form of a love of money and will to dominate at least partly motivating central bank activity, Earth seems to have banking factions that are pretty clearly in competition with one another.  There is no identifiable "Stan" here.

The Federal Reserve coalition has the advantage of reserve status for the moment, but is tied to a nation-state suffering from chronic trade deficits.  Some other national banks, notably China, are tied to countries enjoying trade surpluses.  Would such a bank be willing to exchange a chronic trade surplus from its tax farm with de facto reserve status for its own currency?  One might think so, but China is among the governments advocating replacing the reserve status of the dollar, with a "basket of currencies" rather than a single currency.  Geopolitically such a suggestion makes sense for China, but it is curiously close to the "American dream" of a world reserve bank identified by Murray Rothbard near the end of his book "History of Money and Banking in the United States."  It would in effect convert the international financial system into a consortium of the central banks whose currencies appear in the basket, and would require rules of economic governance for each member bank's tax farm similar to those now applied and failing in the Euro block.  This would certainly disrupt the Federal Reserve's ability to finance a globally-dominant military force, while still leaving it an important but not necessarily dominant member of the ruling consortium.  For many banks outside the United States, this may be the preferred outcome.

If the "currency basket" approach does take hold without major disruptions from acts of war, how much difference would there be between Earth and Economa?  Perhaps not very much.  If major banks such as China are openly or secretly in favor of a "basket" approach, perhaps this explains in part why members of the Federal Reserve might dare to suppress prices without fear that other central banks would embark on massive futures buying and refuse to sell at any price, demanding delivery of gold.  Such tactics would unmask the ruse, and risk sudden devaluation of the dollar and economic shock when it is discovered that the banks selling the futures have no ability to deliver the gold they have sold.  If there were any aggressive buying of gold by banks holding massive quantities of the reserve currency, massive selling of gold futures by the reserve currency issuer bank would be very risky. On the other hand, if central banks collaborate with a shared goal of transitioning to a currency basket approach and destroying faith in fiat alternatives such as gold, allowing certain banks to gently accumulate gold while others reap the benefits of reserve currency status for a while longer may merely be an aspect of the bargain.

Conspiracies by nature are easy to suspect and difficult to prove.  I make no claim of proof here, and will admit that even my suspicions may not be well-founded.  The point is, if a global banking conspiracy to suppress gold prices exists, it might not end in a dollar collapse, but in a collapse in confidence in gold, followed by a transition (gradual or otherwise) to an effectively worldwide fiat currency based on a basket of fiats governed by international agreement.  This would likely be followed in short order by intense international regulation of all fiat alternatives.  In an environment of cooperating central banks enjoying public confidence in their fiat certificates, such an outcome is not unthinkable, and there are reasons to think would be highly preferable to the persons controlling such banks, whomever they are.  The goal is perfect knowledge and a generous percentage of every voluntary exchange of value between strangers facilitated by any medium of exchange, superficially for social goals, in actuality to cement the power of those controlling the fiat spigots and preventing anyone else from accruing real wealth.

If so, accumulating gold, ammunition, bitcoin, or other fiat alternatives will ultimately prove to be of little value in self-preservation.  You might do better by reducing the number of strangers you depend on, and increasing the number of true friends.  By this I mean building communities of mutual trust that do not depend on some medium of exchange to facilitate exchanges of value, by the laying up of treasures "in heaven" instead of the earthly sort.  It means doing excellent things by social trading without any medium that can be exchanged for a fiat certificate.  Such a goal is worth meditating on, even though it seems in a practical sense utterly impossible.  It flowers in a thousand ways that are taken little notice of.  If you see such a flower in your life, take note of it, and water it well.