StephanKinsella.com

“Suppose that you want to destroy a city. Should you bomb it, or would it be sufficient just to impose rent control?”

–Art Carden, The Unintended Consequences of Rent Control

No offense, economic illiterates out there who should be denied the right to vote.

My tongue-in-cheek reply to a mutualist on Roderick Long’s blog, who had written “I’ve read lots of Mises Institute articles since our last meeting, and apparently the ‘dark satanic mills’ were actually cool, the misery of industrial England was due to population explosion not capitalism ….”. My comment:

Stephan Kinsella on August 6, 2009 at 8:52 pm

I can picture a future world with little mutualist enclaves that anarcho-capitalists visit from time to time on vacation as tourist attractions, sort of like how I used to drive visitors, when I lived in Philly, out to Lancaster to see the Amish. But I would love to see the competition. I can picture a capitalist on a podium debating a mutualist, shouting at the top of his lungs, while banging his shoe on the table, “WE WILL BURY YOU!! WE WILL BURY YOU!!,” as a murmer of dismay ripples across the libertarian hemp-shirt wearing organic pot farmers in the audience.

See also links collected here: Corporate Personhood, Limited Liability, and Double Taxation.

Update: Roger Pilon’s Corporations and Rights: On Treating Corporate People Justly also has some very good stuff on why limited liability does not give any special privilege to shareholders.

See also: DEFENDING CORPORATIONS, WALTER BLOCK & J.H. HUEBERT

Legitimizing the Corporation

1. See Brian Doherty, It’s So Simple, It’s Ridiculous.[↩]

See here, and here, he says:

I’ll tell you something interesting about Priceline. Because Priceline was invented in a room, it was an invention. One of the things we did is applied and got U.S. patents on the invention. How do you like that? Then, along comes this little company and you might have heard of it. It’s called Microsoft. Microsoft owned this other company called Expedia, at the time. They said, This Priceline thing looks like it is going pretty well. We ought to do that too. We’ll just download some of the code right from the website, right from the HTML. Just take that HTML. So, somebody came into the office and said, Well, Jay, just like you said, Microsoft’s in our business. I said, Oh, that’s not good. But the fact is, in the United States, the intellectual property laws are reasonably strong and although most people didn’t understand what Priceline had patented, they thought we had patented some auction, stupid people, we have nothing to do with auctions at all. Some New York Times reporter called it a reverse auction and nobody every got over it. I never forgave the reporter for it. We were branded as an auction, but we weren’t. We were a demand collection system and because of that we sued Microsoft and Microsoft decided maybe it wasn’t the best idea to copy us. They turned off that functionality on Expedia. Since then, nobody has copied Priceline. It has been ten years. For as long as our present patents last, I don’t expect anybody to copy Priceline. Since Microsoft isn’t going to copy, that is probably a good sign that others probably shouldn’t either, but it proves a very important point. It proves the power of intellectual property, at some level, to provide space for a startup that is truly novel, that is warranting a patent, or we had several patents in this case, to give it the breathing room to invent something new, create value. Eventually, Priceline will have to compete on its invention when the patents expire. However, there are plenty of people competing with Priceline. They’re just not copying it. Somebody is offering LastMinuteFares.com and somebody else is offering JoinMyClub.com. In other words, there is a million people competing with Priceline. They just can’t copy Priceline’s essential idea which is name your own price, put up a credit card for a flexible set of terms and conditions where, if those terms and conditions are accepted, you basically own the product. That’s the core Priceline patent. So, there’s how Priceline, again, anticipated copying. Let’s just say there was no intellectual property. What would that mean? That would mean Priceline would have to go quickly, right? They would have to keep innovating.

Yeah–we’re from the government, and we’re here to help you–to “give you space,” to “give you breathing room”–while we tax and regulate the living crap out of you!

[Cross-posted on AM]

On yesterday’s Freedom Watch, Peter Schiff says (at about 6:30; I have this video starting at 5:20, with some preceding remarks):

I’m sure The British would have treated us much better as a colony. Look how good they did with Hong Kong. I think we would be much more prosperous today had we remained a colony of Great Britain.

(HT Michael Barnett) See also my posts Untold Truths About the American Revolution; The Murdering, Thieving, Enslaving, Unlibertarian Continental Army; Happy We-Should-Restore-The-Monarchy-And-Rejoin-Britain Day!

[LRC crosspost]

Libertarian Papers, Vol. 1 (2009), Art. No. 33: “Reply to Matt Mortellaro on ‘Block’s Paradox’: Causation, Responsibility, Libertarian Law, Entrapment, Threats and Blackmail,” by Walter Block

Abstract: Matt Mortellaro’s “Causation and Responsibility: A New Direction” is a brilliant Rothbardian analysis that makes numerous new and important points. It also critiques some of my own previous publications. In this piece I focus on Mortellaro’s rejoinders to me, and set forth a defense of my own positions.

Libertarian Papers, Vol. 1 (2009), Art. No. 32: “Gold, the Golden Rule, and Government: Civil Society and the End of the State,” by D.G. White

Abstract: Properly speaking, money and law are natural outgrowths of human society, evolving over time via the voluntary cooperation that lies at the heart of the social enterprise. And as gold and the golden rule have for millennia formed the basis, respectively, of society’s money and law, they accordingly constitute the “twin pillars of civilization,” governing the social enterprise such that, in Mises’s words, “the human species has multiplied far beyond the margin of subsistence.” It stands to reason, then, that if money and law are corrupted, the social enterprise will be corrupted as well. And as this is precisely what the state has done, essentially toppling the twin pillars of civilization, it is necessary to understand what the state is, where it came from, and how it has systematically gone about corrupting money and law, and thus the social enterprise as a whole. For only then can money and law be returned to their rightful owners, and only then can the state be put in its proper place. Which is no place so far as the proper functioning of civil society is concerned.

In What Are Words Worth?, the author writes:

I was listening to a podcast talk from Mises University 2009 the other night called “Intellectual Property and Libertarianism”, in which speaker Stephan Kinsella made the usual Slashdotty-type case against IP from a libertarian perspective. This was novel for me, perhaps because libertarians tend to be very defensive of property rights, such as Ayn Rand’s assertion of IP as a right to the products of a person’s own mind.

Kinsella rejects Rand explicitly, saying her case offers little more than deification of the creator. His counter-argument is interesting: IP is inconsistent with property rights because it violates the rights of others to use their property. To wit, if I own a typewriter and a stack of paper, or a CD burner and some blank discs, then those should be mine to do with as I see fit. But because of copyright, I can’t use the typewriter to transcribe a book, or to use the burner to copy a CD, even if I’ve bought original copies of the hypothetical book and CD. IP asserts a partial ownership — enough to say “you can’t do that” — over this other property I own. That, according to Kinsella’s argument, is inconsistent and therefore invalid.

Interesting, and tricky, and I don’t quite know what to make of it.

It’s important because, of course, my income is highly dependent on the idea of IP. If I couldn’t charge for copies of iPhone SDK Development, I probably wouldn’t have spent hundreds (possibly thousands?) of hours over the last year and a half co-writing it. If I couldn’t charge for apps on the App Store, would I write them?

The counter-argument comes from the open-source crowd, who say to give away your content (which, by the earlier argument, you couldn’t own anyways), and make your money some other way.

The author here is admirably open-minded. I think he is a bit confused when he says the “counter-argument” is to give away your content, but he also inadvertently hits on an important insight. It’s not a “counterargument” of ours to say you “should” just give away content. This is rather a prediction that some business models may employ this approach. But note the author says: “If I couldn’t charge for copies of iPhone SDK Development,…” Well, of course you can charge for copies. It’s just that it might be hard to prevent others from offering it for free or for a lower price, if you don’t find some means of exclusion. In other words, part of the entrepreneur’s job is to find efficient means of exclusion. Drive-in movie theater owners employ ticket counters, pay for locks on the doors, and for the installation of hundreds of parking-lot per-car speakers to exclude free-riders. Every business has costs of exclusion. If, in the end, the entrepreneur finds that he cannot make a profit in a given endeavor, taking all costs–including costs of exclusion–into account, then that project would require an inefficient allocation of capital. Simple.

[AM Crosspost]

This little chart served me well for many years, especially when I was a baby lawyer (when the suit was worn all the time). The Half-Windsor remains my knot o’ choice.

I saw this on a sign outside a conference room of a law firm in Houston where I was attending a CLE luncheon. Drucker needs some Hoppe. The future is uncertain, but not radically so.

See Hoppe, On Certainty and Uncertainty, Or: How Rational Can Our Expectations Be? As Hoppe notes,

“From the recognition of the fact that perfect foresight eliminates the very need of knowing and knowers, and that such a need only arises if, as in our world, foresight is less than perfect, and insofar as knowledge is a means of bringing about preferences, it does not follow that everything is uncertain. Quite to the contrary.”

“the idea of perfect or radical uncertainty (or ignorance) is either openly contradictory insofar as it is meant to say “everything about the future is uncertain except that there will be uncertainty-about this we are certain,” or it entails an implicit contradiction if it is meant to say everything is uncertain and that there is nothing but uncertainty, is uncertain, too.” (I do know such and such to be the case, and I do not know whether such and such is the case or not.) Only a middle-of-the-road position between the two extremes of perfect knowledge and perfect ignorance is consistently defensible: There exists uncertainty but this we know for certain. Hence, also certainty exists, and the boundary between certain and uncertain knowledge is certain (based on certain knowledge).”

“it cannot be ruled out categorically that we might be mistaken, and that the future will be so different from the past that all of our past knowledge will be entirely useless. It is possible that none of our instruments or machines will work anymore tomorrow, that our houses will collapse on top of us, that the earth will open up, and that all of us will perish. It is in this sense that our knowledge of the external physical world must be ultimately regarded as uncertain.”

“Notwithstanding this ultimate uncertainty of our knowledge concerning the external world, however, as a result of contingent circumstances, the relative stability and regularity in the concatenation of external objects and events, it has been possible for mankind to accumulate a vast and expanding body of practically certain knowledge. This knowledge does not render the future predictable, but it helps us predict the effects to be produced by definite actions.”

“Much of our future is, practically speaking, perfectly certain. Every product, tool, instrument or machine represents a piece of practical certainty To claim, instead, that we are faced with radical uncertainty and that the future is to all of us unknowable is not  only self-contradictory but also appears to be a position devoid of common sense.”

“Little of this ever attracts the attention of theoreticians of radical uncertainty. The existence of a practical working technology and of a vast and flourishing insurance industry constitutes an embarrassment for any theory of radical uncertainty. If pressed sufficiently hard, of course, Lachmann and his followers would probably admit the undeniable and, as if all of this did not matter, quickly move onto another problem.”

“Can we really believe that each successive socialist experiment requires a different explanation, and that it is impossible to say anything applicable to each and every form of socialism, so that as long as there exists no private ownership of the means of production, and hence no factor prices, economic calculation (cost-accounting) will be impossible and permanent misallocation (waste) will have to result? Can we really believe that, as long as socialism is not actually abolished, this proposition may no longer hold true, because agents can learn from experience and may no longer act in an identical fashion? Can we really believe that if a central bank were to double the paper money supply overnight, this would not, now and forever, lead to a drop in the purchasing power of money as well as a systematic income redistribution in favor of the central bank and the early receivers of the newly-created money at the expense of those receiving it later or not at all? Can we really believe that if the minimum wage were fixed today at one million dollars per hour and if this decree were strictly enforced and no increase in the money supply were to take place, this measure might not lead to mass unemployment and a breakdown of the division of labor because people can learn from experience?”

“To use a perfect analogy while it is true that I am unable to predict eveything that I will say or write in the future, this does not imply that I cannot predict anything about my future speaking and writing. I can predict, and indeed I can predict with perfect certainty, and regardless of whether I will speak or write in English or German, that, as long as I will speak or write at all, in any language whatsoever, all of my speaking and writing will have a constant and invariable logical (propositional) structure: that I must use identifying expressions, such as proper names, and predicators to assert or deny some specific property of the identified or named object, for instance. In the same way it holds that even though I cannot predict what goals I may pursue in the future,  that means I will deem appropriate to reach these goals, and what other conceivable courses of action I will choose to reject in order to do what I will actually do (my opportunity cost), I can still predict that as long as I act at all , there will be goals, means, choices, and costs; that is, I can predict the general, logical structure of each and every one of my actions, whether past, present or future. And this is precisely what economic theory or, as Mises has termed it, praxeology, is all about: providing knowledge regarding actions as such and knowledge about the structure which any future knowledge and learning must have by virtue of the fact that it invariably must be the knowledge and learning of actors.”

“I may not be able to predict that I will engage in voluntary exchanges, when, what it is that will be exchanged, or the exchange ratio at which the goods or services in question will be traded, etc., because all of this may indeed be affected by my and others’ knowledge and change as this knowledge changes. But I can predict with perfect certitude that if a voluntary exchange takes place,regardless of where, when, what, and at what exchange ratio, both exchange partners must have had opposite preference orderings and must have expected to benefit from the exchange. No possible learning can ever change this. Likewise, I may not be able to predict that or when a socialist experiment will be undertaken or discontinued. Nor will I ever be able to predict such an experiment’s many specific features. All of this may be affected by learning. But regardless of whatever people may learn and how their learning may shape the peculiar shape of socialism, I can’still predict with absolute certainty that as long as one is in fact dealing with socialism, any and all economic calculation will be impossible and permanent misallocations of production factors must result because this consequence is already logically implied in what socialism is. Similarly, I may not be able to forecast that a money will actually come into existence, and it is certainly possible that mankind may one day revert back to barter. Nor can I predict with certainty what specific kind of money will be employed in the future. But I can predict with perfect certitude that if there is any money in use at all, an increase in its supply must lead to a reduction in its purchasing power below what it otherwise would have been. This follows simply from the definition of money as a medium of exchange.”

And here Hoppe writes:

The argument establishing the impossibility of causal predictions in the field of human knowledge and actions now might have left the impression that if this is so, then forecasting can be nothing but successful or unsuccessful guessing. This impression, however, would be just as wrong as it would be wrong to think that one can predict human action in
the same way as one can predict the growing stages of apples. It is here where the unique Misesian insight into the interplay of economic theory and history enters the picture. [36]

In fact, the reason why the social and economic future cannot be regarded as entirely and absolutely uncertain should not be too hard to understand: The impossibility of causal predictions in the field of action was proven by means of an a priori argument. And this argument incorporated a priori true knowledge about actions as such: that they cannot be conceived of as governed by time-invariantly operating causes. Thus, while economic forecasting will indeed always be a systematically unteachable art, it is at the same time true that all economic forecasts must be thought of as being constrained by the existence of a priori knowledge about actions as such. [37]

The quantity theory of money then cannot render any specific economic event, certain or probable, on the basis of a formula employing prediction constants. However, the theory would nonetheless restrict the range of possibly correct predictions. And it would do this not as an empirical theory, but rather as a praxeological theory, acting as a logical constraint on our prediction-making. [38] Predictions that are not in line with such knowledge (in our case: the quantity theory) are systematically flawed and making them leads to systematically increasing numbers of forecasting errors. This does not mean that someone who based his predictions on correct praxeological reasoning would necessarily have to be a better predictor of future economic events than someone who arrived at his predictions through logically flawed deliberations and chains of reasoning. It means that in the long run the praxeologically enlightened forecaster would average better than the unenlightened ones.

It is possible to make the wrong prediction in spite of the fact that one has correctly identified the event “increase in the money supply” and in spite of one’s praxeologically correct reasoning that such an event is by logical necessity connected with the event “drop in the purchasing power of money.” For one might go wrong predicting what will occur to the event “demand for money.” One may have predicted a constant demand for money, but the demand might actually increase. Thus the predicted inflation might not show up as expected. And on the other hand, it is equally possible that a person could make a correct forecast, i.e., there will be no drop in purchasing power, in spite of the fact that he was wrongly convinced that a rise in the quantity of money had nothing to do with money’s purchasing power.

…. However, and this brings me back to my point that praxeology logically constrains our predictions of economic events: What if we assume that all forecasters, including those with and without sound praxeological knowledge, are on the average equally well-equipped to anticipate other concurrent changes? What if they are on the average equally lucky guessers of the social and economic future? Evidently, we must conclude then that forecasters making predictions in recognition of and in accordance with praxeological laws like the quantity theory of money will be more successful than that group of forecasters which is ignorant of praxeology.

It is impossible to build a prediction formula which employs the assumption of time-invariantly operating causes that would enable us to scientifically forecast changes in the demand for money. The demand for money is necessarily dependent on people’s future states of knowledge, and future knowledge is unpredictable. And thus praxeological knowledge has very limited predictive utility. [39]

SEE What’s Worse: $80 Billion or $30 Million? on the C4SIF blog.