See also Gregory N. Mandel, Anne A. Fast & Kristina R. Olson, “Intellectual Property Law’s Plagiarism Fallacy,” BYU L. Rev. 2015, no. 4 (2015): 915–83; Gregory N. Mandel, “How people understand intellectual property,
creativity and reward,” in Abbe E.L. Brown & Charlotte Waelde, eds., Research Handbook on Intellectual Property and Creative Industries (Cheltenham, UK: Edward Elgar, 2018), p. 295 et pass.
I discussed various libertarian with Tom Woods on his show today, Episode 592. From Tom’s show notes:
Stephan Kinsella joins me to discuss negative/positive rights and obligations, “loser pays,” whether creation makes you an owner, how we can consider spam aggression, and more. Fun!
Grok shownotes:
[00:00:00 – 00:15:00] In this episode of the Tom Woods Show, host Tom Woods interviews Stephan Kinsella, a libertarian lawyer and theorist, to discuss five common mistakes libertarians make. Kinsella begins by addressing the misuse of terms like “coercion” and “aggression,” which libertarians often apply too broadly, diluting their precision in describing violations of property rights. He critiques the tendency to treat all government actions as inherently coercive, emphasizing that fraud or contract breaches also constitute aggression under libertarian principles. The conversation highlights the importance of grounding libertarian arguments in property rights, as seen in Kinsella’s title-transfer theory of contract, and avoiding oversimplified rhetoric that conflates voluntary agreements with coercion.
[00:15:01 – 00:30:53] The discussion continues with Kinsella identifying additional pitfalls: misunderstanding the role of the state, overemphasizing utilitarianism, neglecting legal theory, and failing to engage with opposing views. He argues that libertarians should view the state as a monopolistic aggressor but avoid dismissing all governance outright, advocating for decentralized, voluntary systems. Kinsella warns against relying solely on utilitarian arguments, which can undermine principled libertarianism, and stresses the need for robust legal frameworks like his title-transfer theory to address issues like fraud and contract enforcement. The episode concludes with a call for libertarians to refine their arguments by studying philosophy and law, engaging critics thoughtfully, and avoiding dogmatic echo chambers to strengthen the movement’s intellectual rigor.
[00:00:00 – 00:07:30] Introduction and Mistake #1: Misusing “Coercion” and “Aggression”
Tom Woods introduces Kinsella, noting his expertise in libertarian legal theory and his work on the title-transfer theory of contract.
Kinsella identifies the first mistake: libertarians’ overuse of “coercion” and “aggression” to describe any disliked action, which dilutes their meaning.
He clarifies that aggression, per libertarianism, involves violating property rights, including through fraud or contract breaches, not just physical force.
[00:07:31 – 00:15:00] Mistake #2: Treating All Government Actions as Coercive
Kinsella critiques the tendency to label all government actions as coercive, arguing that some, like enforcing valid contracts, align with libertarian principles if done voluntarily.
He emphasizes that libertarianism should focus on property rights violations, using his title-transfer theory to explain how contracts are about title transfers, not enforceable promises.
Woods and Kinsella discuss how sloppy terminology can weaken libertarian arguments, urging precision in debates.
[00:15:01 – 00:22:00] Mistake #3: Misunderstanding the State’s Role
Kinsella identifies the third mistake: viewing the state as inherently evil without nuance, which ignores the possibility of voluntary governance in a free society.
He advocates for decentralized, market-based systems over monopolistic state control, but cautions against rejecting all forms of governance outright.
The discussion touches on historical libertarian debates, with Kinsella citing Rothbard’s nuanced views on governance.
Kinsella warns against relying solely on utilitarian arguments (e.g., “libertarianism maximizes wealth”), as they can falter against competing utilitarian claims.
He argues for grounding libertarianism in principled property rights and natural law, which provide a stronger, more consistent foundation.
Woods agrees, noting that utilitarianism can lead libertarians to compromise core principles for perceived practical gains.
[00:27:31 – 00:30:53] Mistake #5: Neglecting Legal Theory and Engagement
Kinsella highlights the final mistake: libertarians’ failure to develop robust legal theories and engage with critics, often retreating to echo chambers.
He promotes his title-transfer theory as a framework for addressing complex issues like fraud and contract enforcement in a free society.
The episode ends with a call for libertarians to study philosophy, law, and opposing views to refine their arguments and strengthen the movement’s intellectual credibility.
❧
Transcript [not yet edited]
Tom Woods Show: Five Mistakes Libertarians Make
Stephan Kinsella and Tom Woods, “Tom Woods Show: Five Mistakes Libertarians Make,” StephanKinsella.com (Feb. 12, 2016)
00:00:00
TOM WOODS: The Tom Woods Show, episode 592.
00:00:03
INTRO: Prepare to set fire to the index card of allowable opinion. Your daily dose of liberty education starts here, the Tom Woods Show.
00:00:14
TOM WOODS: Hey everybody. Welcome to another episode of the show. Talking to Stephan Kinsella today because he’s just – he’s got one of those sharp, sharp minds. He thinks clearly. He writes clearly. He writes and speaks very precisely. He helps to clarify my own thinking, and I thought we’d talk about some areas of libertarian thought or some questions where we’re liable to get off track or get confused or maybe not really know what the right libertarian answer is. So it’s always fun to talk to Stephan who is a libertarian legal theorist. He is the author of Against Intellectual Property and many articles that are of importance in libertarian theory. We’ll be linking, of course, to his material and his contact information at tomwoods.com/592.
00:01:09
Now, let me tell you one quick thing. I don’t know why this happens, but one episode out of 100 the recording software I use just fails completely, and you have no warning that it’s going to fail. It’s recording perfectly fine. You can catch the clock going, and then boom, no recording when you’re all done. It’s Pamela, by the way, Pamela for Skype. Now, you really need software to be 100% reliable. You really do, so if you have an alternative to Pamela, I would grab it. Right now, I don’t have time to figure out an alternative, so thank goodness; thank goodness Stephan was recording the episode on his end. So whatever gremlin was trying to screw with me, we got the last laugh here because Stephan was doing the recording.
00:01:52
So in this episode, his audio will be better than mine because he’s recording himself basically locally and then me through Skype, so his audio will be better than mine. That’s the reason. And then at the end, apparently what – I – we – the connection got dropped, which there’s no reason Pamela shouldn’t have still recorded. I mean there’s no reason. You should record what you have, but anyway, ridiculous Pamela. Anyway, the point is, at the very end, I’ll jump back in on my end here and wrap it up because just as I was wrapping it up the connection cut out. So anyway, that’s way more information than you need, but I’m giving it to you anyway. I want you to know what goes on here at the show, so off we go, talking to Stephan Kinsella whom I am very glad to welcome to the show right now. Stephan, welcome back.
00:02:40
STEPHAN KINSELLA: Thanks Tom, glad to be here.
00:02:41
TOM WOODS: I’ve got a whole bunch of these things to talk to you about because you sent them to me. So it helped me to come up with some ideas of things we can talk about. There are so many things we can talk about, but I love these little bite-sized errors and fallacies that even I myself I’m sure have fallen into in a few cases. But it helps us to get our thinking clear and straight.
00:03:04
So let’s see here. Let’s start with one that’s a little theoretical but is pretty fundamental to libertarianism. There is this idea that we believe in the idea of negative rights, and our opponents believe in positive rights. And negative rights are things that don’t actually require us to do anything. They require us simply to refrain from doing things. So that is to say, I don’t strictly have a right to life. I have a right not to be killed.
00:03:40
But if I really say I have a right to life, that could mean that I have a right to you putting me on a kidney dialysis machine, but I don’t actually have that right. I don’t really have a right to property in the sense that if I don’t have any then my rights are being violated. I have a right not to have my property taken from me, so those are negative rights. A positive right would be I have a right to a Cadillac. That’s the basic distinction between these things. What am I missing in here? What am I – how am I misstating this in your view? Am I misstating it?
00:04:10
STEPHAN KINSELLA: Well, I think it’s largely correct. The insight here that libertarians are drawing on is the idea that they recognize that rights and obligations are correlative. If you say someone has a right, that implies an obligation on the part of someone else and vice versa. So that’s why they’re correlative. Every time you say someone has a right to something it implies other people have a duty or an obligation to respect that right. And if it’s a positive right, that means the right to be provided with something. That means other people have the right – have the obligation to provide you with it.
00:04:42
So whenever you announce that there’s a natural human right, a positive right to education or food, which is, by the way, in these United Nations declarations of human rights and things like that and like with the Four Freedoms, these kind of things: freedom from want, freedom from fear, these kinds of things. When you announce that someone has a positive right, you are in effect saying that other people are your slaves because they have an obligation to provide you with these things. And that’s the libertarian intuition in opposing that and saying the only rights are negative rights because that only imposes negative obligations on others: the right – as you say, the obligation to refrain from hurting other people. The imprecision here is that it leaves out the possibility of positive rights and positive obligations that do exist because of your actions. In other words, what we really should say is we’re against unchosen positive obligations.
00:05:42
TOM WOODS: Oh okay, all right, all right. Give me some examples then.
00:05:45
STEPHAN KINSELLA: Okay. So there’s – a couple of obvious examples. One example that I think most libertarians would not disagree with is an obligation that arises as a result of an act of aggression. So as a simple example, if I bump someone into a lake, I have an obligation to rescue them to try to reduce the harm I’ve done to them already. By contrast, if I’m walking by a lake and I see someone drowning, I don’t have a positive obligation under law to rescue them, maybe a moral obligation but not a positive obligation.
00:06:14
But in the case where I’m responsible for the harm caused to that person, I do have a positive obligation. So you can acquire positive obligations, and someone else could acquire a positive right by virtue of an act of aggression, so that’s one example. And I think that’s not that controversial, but it does add a nuance to the – so you have to say unchosen, and I would say it’s chosen here by your action. If you commit aggression, you choose to commit aggression, then you’ve acquired a positive obligation. Another case which is a little bit more controversial among libertarians…
00:06:44
TOM WOODS: Is it children?
00:06:45
STEPHAN KINSELLA: Is children, and maybe with you and I it’s not as controversial. I would – in my view, when you choose to procreate and bring a dependent, needy, rights-bearing child into the world, you are in effect putting that child in the position of someone you pushed into a lake. They’re going to drown because you put them in that position. A young baby is helpless and can’t survive on its own. So I think that you have put that baby into a position of natural need, and you’re the natural provider as the procreator, as the parent. So in that case I would – I think there’s an argument that could be made for positive obligations on the part of parents to their children. But it’s chosen. Again, it’s chosen by your actions.
00:07:27
TOM WOODS: Now, have you written on that? I know people who have because – I’m asking because I want to have a really robust show notes page for this episode.
00:07:34
STEPHAN KINSELLA: Yes. In my article, “How We Come to Own Ourselves” I talk about it, and then I have another blog post, which I can send you the link to, which I go into it in a little bit more detail. And of course this goes into the abortion question too, which we probably don’t want to get into here today, but you could extend this to the whole issue of abortion.
00:07:51
TOM WOODS: All right, I’ve also – I’ve done an episode on that, so I’ll link to that. This is already – I’ve already got great links, and we’ve only been talking for about five seconds. So okay – all right, that’s good. I – there are a couple of more – there are a couple of things here that I actually want to jump ahead to.
00:08:06
STEPHAN KINSELLA: Sure.
00:08:07
TOM WOODS: Because I’m surprised at them, and I – and what I love is discovering that I haven’t been hardcore enough. I love these discoveries. Oh darn it. That guy is right. So I picked out two sort of – two legal principles that everybody takes for granted. And when we hear them repeated we just assume they’re probably old, and so therefore they’re probably compatible with libertarianism because they’re probably just old examples of respect for rights that go back to the Magna Carta or whatever, but maybe they’re not. So for instance – well, this one I think actually goes back to some republican policy proposals of the past 30 years.
00:08:50
The idea of loser pays in court, especially given that there are obviously frivolous cases that are brought against people, and if you lose, it’s thought that you should have to pay the legal fees and the expenses incurred by the other person. You’re saying that’s not libertarian. I don’t know what your argument is. That’s why I’m asking you. What is it?
00:09:11
STEPHAN KINSELLA: Right. I think I read some time in the past people used to say it was the American rule or something, but it’s basically the everywhere-but-America rule. A lot of other countries apparently—and I’m not an expert on the other legal systems—but it’s more common for the prevailing party in a lawsuit to be able to collect the fees from the party who loses. In America, it’s more usually – unless there’s an exceptional case, everyone pays their own fees. And libertarians have argued that it should be loser pays. In other words, if I sue you for harming me and I win, I should be able to collect damages, but you should also have to pay for my attorney’s fees because you forced me to go to court to do that. The problem with – there’s several problems with this. First of all, the law we have now is largely unjust.
00:10:02
And so what you would happen – what you would have happen in a large number of cases is you’re just magnifying the damage done to the victim of an unjust law. For example, if someone is sued for patent infringement, now let’s just assume that we don’t like the patent system or some aspects of it. Someone sues some innocent guy for making a product because it infringes their patent. Now let’s say the patent holder wins because we do have a patent system in the country, and some patents are actually valid under the way the law works. Well, then the plaintiff would be able to recover attorney’s fees. Now, the plaintiffs usually are corporations.
00:10:43
They already have an overwhelming advantage when they threaten someone with some of these lawsuits—antitrust lawsuits, copyright lawsuits, patent lawsuits, other lawsuits—because if they sue a smaller person, the legal fees alone could run in the hundreds of thousands of dollars if not millions on top of statutory damages like $75,000 per infringement for copyright. So they can be millions of dollars of damages. So you have someone who is running around, and they get sued, and they’re facing unimaginably high damages already. So there’s a big incentive for them to settle even if it’s unjust and even if they could win. They just can’t afford to do that.
00:11:24
If you add on top of that anther penalty, which is they have the pay the attorney’s fees, it just makes the whole situation even more unbalanced. It’s a little bit like the situation faced by defendants of the criminal system when the prosecutor charges them with dozens of years in jail for some fairly minor offense, which is not even a real offense under libertarian principles. And they don’t even want to risk going to jury trial, so they plea bargain and they go to jail for ten years or something like that, so it’s this power that it gives plaintiffs. And in my view, what we should have is a losing – aversion of the loser-pays rule, but it would only be the losing-plaintiff rule. The losing plaintiff pays. So, for example, if I sue you for patent infringement and I lose, then I, as the guy who initiated the action, basically who initiated the aggression in the courts, I should have to pay the defense costs of the person who was exonerated.
00:12:24
TOM WOODS: Okay. I can – I was going to say because otherwise it does seem like I could just really annoy people all day long by filing frivolous suits against them, so it seems like there should be some version of the rule.
00:12:33
STEPHAN KINSELLA: I think it should be a one-way rule basically. The person who institutes the suit should have – I would not be opposed to them having to pay the costs of the person that they’re hauling into court. But someone who is hauled into court should not have to pay if they lose. If they just stand up and defend themselves, they shouldn’t have to pay.
00:12:50
TOM WOODS: Here’s another one. Aggressors are not innocent until proven guilty. All right, go.
00:12:57
STEPHAN KINSELLA: Okay. This is a good one. This is fairly trivial, but this is a statement people make, not just libertarians, but everyone. And I think it’s a result of the fact that we give some credence to the basic rule of the Bill of Rights and natural rights and natural law. And we – but over time we start becoming positivists, legal positivists in the sense that we start thinking of these rules that are in the constitution and that are in our legal system and even that are good rules that they’re really part of natural law. But we have to distinguish between what’s called civil rights and what are natural rights.
00:13:34
A lot of the rights in the constitution are there just because there’s a government, and one of them is the presumption of innocence, for example. The presumption of innocence is simply a way to make the government bear the burden of proving that someone is guilty. It doesn’t mean they’re not really guilty. Now, if you get technical, guilty means someone who is adjudicated to be guilty. But if you go by that standard, then it really means very little in libertarian terms because even if you’re adjudicated to be guilty, the court may be wrong, the jury may be wrong, and they may not be guilty.
00:14:07
So in our sense as libertarians, guilty means someone who actually did the crime, someone who’s really the bad guy. The government needs to go through a process of proving that. The state needs to have a burden of proof of proving that. So we have an epistemic issue. We have an issue where we have to have knowledge about who did what. So we come up with these, what we call, prophylactic rules, things that bind the state, that slow down the state, that restrict what the state can do for the sake of individual and overall liberty. But it doesn’t mean that in reality someone is innocent until proven guilty.
00:14:40
If someone murders someone, they are actually guilty. They just haven’t been proven to be guilty by the legal system. So when journalists or when everyday people say something like, well, did OJ do it? I don’t know. He’s innocent until proven guilty. That’s just a standard the court has to follow, and it’s good that the court has to follow that standard because we’re limiting what the state can do. We’re making the state have high burdens to overcome to put someone in jail. But it doesn’t mean we can’t have an opinion. It doesn’t mean we can’t say someone is guilty.
00:15:12
I mean as far as I know, Hitler was never convicted in court of being a mass murderer, but everyone says he’s a murderer. I mean why isn’t Hitler innocent until proven guilty? So he’s been proven guilty by the facts of history. You don’t have to have a legal decision. So I just think we should be careful trying to import into everyday understanding of life and our everyday conclusions and judgments about people the rules that – and the procedures that apply to courts. We don’t have to be bound by those.
00:15:44
TOM WOODS: That’s a very good point because I – you often hear these kinds of expressions about innocent until proven guilty just in casual conversation. When you’re talking about a guy you’ve actually observed do something and they still say, well, you know we’ve got to give him his trial. Now wait. I saw the guy do it.
00:16:05
STEPHAN KINSELLA: No, he might have – he attacked me. I saw him. I’m supposed to say he’s…
00:16:09
TOM WOODS: Yeah. Believe me; I was there. I’m not calling him the alleged attacker. Come on now.
00:16:13
STEPHAN KINSELLA: Exactly.
00:16:14
TOM WOODS: And there have even been times when the guy – I’ve heard journalists say alleged attacker. They’re just so used to saying it like even after the guy is convicted, which still call him that.
00:16:26
STEPHAN KINSELLA: Honestly, I think one reason for that, Tom, is I believe that’s a fear of libel lawsuits or defamation lawsuits.
00:16:32
TOM WOODS: Oh yeah.
00:16:33
STEPHAN KINSELLA: If we did not have defamation law, there would be a lot less tip-toeing around things like that, I believe, by journalists and by others. People would just say, look. It looks like the guy is a murderer.
00:16:45
TOM WOODS: Yeah. It looks – he’s got the bloody knife in his hand.
00:16:48
STEPHAN KINSELLA: He’s not an alleged murderer.
00:16:49
TOM WOODS: I shouldn’t be laughing about brutal killings here. All right, let’s talk about spam or hacking. I like talking about things where you can imagine non-libertarians saying how could a libertarian possibly handle X problem. And even libertarians themselves who will write to me and say, I want to be able to say there’s some libertarian response to the issue of spam, but yet it’s not obvious to me what it would be. So how have you worked this out?
00:17:16
STEPHAN KINSELLA: In one background piece I’ve written you might want to have a note to is my piece with Pat Tinsley QJAE called “Causation and Aggression.” So that’s sort of background theory for this. It’s a way of looking at what we should be responsible for. I think you and I talked earlier. I think it was you in a previous show about the emergence of the – how there was a common law developing in airwaves, and then the FCC sort of expropriated the field and took it over in the early ‘30s or something like that.
00:17:48
In spam, something similar has happened. There have been some cases like the Cubby v. CompuServe case and others which have addressed this spam issue, which I think the right way to approach it from a libertarian point of view is to simply think what is prohibited and what’s permissible under libertarian principles?
00:18:09
Think about a neighborhood situation. You own a home. You live next to neighbors. There’s a common sidewalk or whatever the sidewalk is, but you have a private sidewalk leading up to your door. You have a doorknocker, a doorbell on your front door. Generally speaking, if a neighbor walks up to your door and they knock on your door they are using your property. They’re using your land. They’re using your door. The question is, is that a trespass, or is it that a licensed or a permitted use? And what we would normally say is that’s a permitted use because the standards in the area, by having your house in a certain – oriented a certain way without having a no trespassing sign up, you’re inviting certain innocuous uses like that. But the whole thing is rooted in the idea of property and property control.
00:18:54
Now, if you go to a computer situation, what is happening if someone calls your house repeatedly as a telemarketer? Or what is happening if someone knocks on your door when you’ve told them not to come to your door? In that case, they are a trespasser because they’re using your property without your consent. Now, in my view, hacking is basically using your computer without your consent because no one really wants their computer to be hacked. Now, it is true that the person that’s doing this is sitting in Bangladesh or somewhere, and they’re doing it over the internet. They’re using a mechanism. We’re all connected to an internet, to a network.
00:19:32
So they are basically causing something to happen using signals and using electrical circuits, but they’re manipulating the actual internal operations of your computer, the same thing with spam. If someone sends me a bunch of spam—and no one wants spam, and that’s commonly understood. People don’t want spam. They’re basically clogging up the operations of your computer. They’re putting stuff on your hard drive. They’re making your hard drive do stuff, especially with – when people out these malicious viruses and things like that onto your computer. My point is it’s basically like a remote-control use of your property without your permission, and so I think that could be considered a type of trespass.
00:20:11
Let me give a more concrete example. Let’s suppose you have a neighbor, and they have one of these remote-control drones in their house, and you can see into their living room through their window. And you have a device that you’re able to control their drone in their house. And one night for kicks you turn on your little remote control and you start flying their drone around inside their kitchen, and you break a bunch of their cups and you scare their dog and all that kind of stuff. I would say that’s an act of trespass because you’re commandeering one of their resources without their permission. So that kind of analysis I think can show why spam and why uninvited telemarketing calls, all these kind of things are – can be types of trespass or maybe a nuisance.
00:20:53
TOM WOODS: All right, I’m sorry for just jumping from one to the other but…
00:20:57
STEPHAN KINSELLA: That’s all right.
00:20:57
TOM WOODS: I’ve got so many of these great ones you sent me, and I want to get the answer. I actually – for this one, I’ve read your answer, and I think it’s just absolutely airtight. It’s this idea of creation as an alleged source of property rights. Look, I created this, and therefore, I own it.
00:21:16
STEPHAN KINSELLA: Right.
00:21:17
TOM WOODS: And this – a lot of – obviously we see this a lot of times when it comes to IP.
00:21:20
STEPHAN KINSELLA: Yes.
00:21:21
TOM WOODS: But I don’t think it’s necessarily – the concept is not necessarily tied to IP.
00:21:25
STEPHAN KINSELLA: No.
00:21:26
TOM WOODS: That creation and property rights, one doesn’t follow from the other unless by creation you have some kind of homesteading in mind. But creation in and of itself does not give rise to property rights, so let’s hear it.
00:21:38
STEPHAN KINSELLA: Well, yes, and some people – what they’ll say is if you homestead a virgin piece of land in the middle of the wilderness then you’ve, in effect, created that land because it didn’t exist before in some sense because no one was observing it or valuing it. You can play games with words like that, and you can say that every act of homesteading is an act of creation, and that’s fine.
00:22:00
But then there’s some equivocation involved because they switch the meaning later on. The reason this is something to get straight, the reason it’s important to get this issue straight is because it can lead to confusion. So let me tell you. My view on this is the following. When people say that creation is a source of property rights, I think they’re wrong because they’re conflating two different things. There’s a source of wealth, and there’s a source of property rights. Those are two different things.
00:22:32
It is true that, if I own a raw material and I use my labor and my intellectual abilities and my creativity and my ideas to transform it, I might transform it into something newer and better that is worth more to me or to someone I might sell it to. So in that sense, creation is a source of wealth, but it’s not a source of property rights because, to do that, I have to already own some underlying resource, my body and some resource that I’m transforming. And I transform this thing that I own into something that’s more valuable, and that makes it more valuable. I increase the sum total of wealth in the world or for me, but there’s no new property right involved. I have a piece of raw steel, and I transform it into a horseshoe. Now it’s more valuable because I can use it for something. But I already owned the steel that was in the horseshoe. I’ve just rearranged its shape.
00:23:27
And by the way, Mises and Rothbard and even Ayn Rand have statements that say almost exactly this, that really we’re just rearranging materials in the world. The reason I say creation is not a source of property rights is because there’s only really two or three sources of property rights. Number one, you acquire something that was unowned. That’s homesteading. That’s Lockian homesteading. You do something to mix your labor with it, to put up a border around it, to create a visible objective connection between you and the thing that other people can see.
00:24:01
That’s one way to acquire ownership. And the other way is to get the thing from someone who previously owned it by contract or by some other conveyance. There is no other way that you can imagine that my creation is a source of ownership, and let me just give a couple of examples where creation is neither necessary nor sufficient for ownership. Okay. It’s not necessary because, as I said, if you just – you’re the first one to stumble across an unowned resource, you didn’t really create the resource, so creation is not necessary. You’re an owner of the resource because you were the first one to use it, not because you created it. And it’s not sufficient because let’s imagine I have a small factory or a company, and I hire someone to take my resources, like my raw iron, and make horseshoes with those.
00:24:48
Now, the laborer is actually the one creating the horseshoe in a sense because he is changing the shape of the metal into a horseshoe. But he didn’t own the raw material, and we have a contract as employer/employee where he doesn’t own the result either. He gets paid a wage. That’s what our contract is, so that shows that creation is also not sufficient for ownership, so basically it’s just a mistake. People are right to think that creation is a source of wealth, but it’s not a source of property rights.
00:25:19
TOM WOODS: Stephan, I want to talk about the rest of these on a future episode, but for now, tell people once again how they can follow you because a lot of times people listen to you and they want more. So how do they get more Kinsella?
00:25:31
STEPHAN KINSELLA: Just stephankinsella.com.
00:25:32
TOM WOODS: All right, that’s my conversation with Stephan. I was trying to thank him, but Skype wouldn’t let me. So I just want you to know I was thanking Stephan, urging people to check out stephankinsella.com and tomwoods.com/592. Let me give you a few parting notes. Monday will be another debate episode if you can believe that, oy, yoi, yoi. Lew and I do intend to carry on, by the way, into the general election. We’ll do those debates as well.
00:25:56
Anyway, before I let you go, three little links to remind you of, number one, Bernie Sanders did very well in New Hampshire, so you need my e-book, Bernie Sanders is Wrong, to help bolster your arguments. How do you get that e-book? You can either go to bernieiswrong.com, or you can text the name, Bernie, to 33444, whatever is more convenient. But grab that thing. It costs you nothing, and it’s a book. Come on. What’s going on here? I mean you’ve got to love that. So that’s one thing.
00:26:29
Second thing is I’ve often told you that I will help publicize your blog and I’ll give you a bunch of free tutorials to help get you up and running as a blogger. And I had somebody in my supporting listeners group not too long ago say that the Woods tutorials on this are among the best materials he’s seen for beginners. So I will give you these, and they don’t take too long to watch, but there are about two dozen of them showing you how to do all different things, basic things like posting a post or putting a picture in a post but also more advanced topics like what if there’s something you want to put at the bottom of every post like, hey, sign up for my newsletter, or if you’re new here click on these links or whatever.
00:27:13
You want that on every single post. How do you do that? It’s not obvious how you do that, but I’ll show you in just a few minutes how you do stuff like that. So all that stuff is there. You get those tutorials, and you get the free publicity if you get your hosting through tomwoods.com/publicity. You’ll see the links there, how to sign up for web hosting, and if you use my link for that, then I’ll gladly give you these free goodies. And it’s easy to do. I even have a free video that’s right up there on tomwoods.com/publicity showing you how to be up and running in just five minutes, so no more excuses. You want to jump into the world of blogging—no more excuses, tomwoods.com/publicity.
00:27:51
And finally, today I’m speaking to you on February 12, 2016, which means that the Rocket Languages 60% off sale has begun, and they’re only doing this for the first 750 courses sold or the next couple of days, whichever comes first. So you’ve got to grab yours; 60% off is ridiculous. You don’t have to take out a mortgage finally to have a really good language course because if you look at some of the other courses, good grief, they cost a fortune. But this is inexpensive plus 60% off. Check it out: tomwoods.com/rocket. Enjoy your weekend. We’ll be talking debate on Monday.
Back in the 1990s there was a fascinating debate carried on among various Austrians, mostly in the pages of the Review of Austrian Economics(RAE), on the issue of socialism, the economic calculation problem, and the “knowledge” argument advanced by Hayek and various Hayekians.
The debate was kicked off by some provocative comments by Misesian-Rothbardian Joseph Salerno, first in his Postscript to a 1990 reprint of Mises’s great 1920 article on the socialist calculation problem, and followed by Salerno’s 1993 article kicking off the Mises-Hayek “dehomogenization” debate.
I’ve compiled below a chronological listing of these pieces, and a few other works, with links to online versions, where available, for those who feel like reading up on this interesting issue. This is basically a (skeletal) ebook.
If anyone is aware of any significant material I have omitted, please let me know.
Update: I’ve combined most of the “main debate” and “additional materials” files into a single PDF.
Boettke, “The Significance of Mises’s Socialism,” Preface to Mises, Socialism (LFB edition 2012; book not online, because of the legacy of copyright and the absurd contracts academics agree to)
Boettke, ed., Socialism and the Market: The Socialist Calculation Debate Revisited, 9 volumes (New York, NY: Routledge, 2000; not online, because of the legacy of copyright and the absurd contracts academics agree to, despite warnings to the contrary)
Prompt: “Consult the attached paper by Krasnozhon, https://stephankinsella.com/2025/11/international-law-protect-property-rights/ and https://kinsellalaw.com/wp-content/uploads/publications/polrisk.pdf . summarize the paper by Krasnozhon and explain its relevance for and connections between Kinsella’s points about using international law to guararantee investor property rights and investments, e.g. via internationalized agreements and stabilization clauses and choice of neutral/third party law and obligation to arbitration. Explain how Kinsella’s work here ties in with Krasnozhon’s abstract comment: “We argue that rational economic calculation requires the state’s institutional ability to make a credible commitment to constraints inhibiting public predation.””
The paper “State Capacity and the Socialist Calculation Debate” by Mykola Bunyk and Leonid Krasnozhon (published in the Southern Economic Journal in 2022) seeks to bridge the classic socialist calculation debate—pioneered by economists like Ludwig von Mises and Friedrich Hayek—with modern new institutional economics. The socialist calculation debate, originating in the 1920s–1940s, primarily argued that rational economic calculation (i.e., efficient allocation of scarce resources among competing uses) is impossible under Marxist socialism due to the absence of market prices, private property, and rivalry. However, the authors contend that this debate has remained narrowly focused on economic calculation while neglecting broader political and institutional factors that determine economic development.
Drawing on new institutional economics, the paper emphasizes that economic calculation is intertwined with state capacity, defined as the state’s ability to enforce contracts, provide public goods, maintain law and order, and constrain itself from public predation (e.g., arbitrary expropriation or rent-seeking). High state capacity can support markets but also risks abuse if unconstrained, while low capacity often leads to instability, conflict, or failed reforms. The core thesis is that rational economic calculation requires not just markets but a state’s institutional ability to make a credible commitment to constraints inhibiting public predation—such as rules limiting government interference in private property and contracts.
To illustrate this, the paper uses two historical case studies in Section 3:
Gorbachev’s Perestroika (1985–1991) in the Soviet Union: This reform attempted to introduce market elements into a socialist system but failed disastrously. The authors argue it was incentive-incompatible with rational calculation, as it lacked credible institutional commitments to protect markets from state predation. Instead, it restructured patronage and rent-seeking networks, exacerbating economic chaos rather than fostering genuine reform. Low state capacity and worsening conditions amplified the failure, aligning with Mises’s critique but highlighting the need for political constraints.
Deng Xiaoping’s Reforms (1978–1989) in China: Despite China’s low state capacity at the time, these reforms succeeded in shifting toward rational economic calculation and rapid growth. The key was the state’s credible commitment to institutional constraints (e.g., gradual market openings and protections for private initiatives), which inhibited predation and supported market-preserving mechanisms. This contrasts with the Soviet case, showing that credibility, not just capacity level, is crucial.
In Section 4, the authors conclude that the socialist calculation debate should incorporate state capacity analysis to better explain real-world outcomes like the Soviet collapse and China’s “growth miracle.” They draw on scholars like Barry Weingast, Timothy Besley, and Peter Boettke to underscore that market economies and high-capacity states are complementary, but only when predation is credibly constrained. The paper contributes to comparative economics by showing how institutional credibility enables the Misesian ideal of rational calculation in transitional economies.
Relevance and Connections to Kinsella’s Points on Using International Law to Guarantee Investor Property Rights
Stephan Kinsella, a libertarian legal scholar and patent attorney, has extensively explored how international law can protect property rights, particularly for foreign investors facing political risks in host countries (e.g., developing nations prone to expropriation, regulatory changes, or arbitrary interference). His 2025 blog post “Using International Law to Protect Property Rights and International Investment” (reprinted by the Libertarian Alliance) and his paper “Political Risk and International Investment Law” (available on his law firm site) emphasize non-coercive, contractual, and treaty-based mechanisms to safeguard investments. These works align with libertarian principles of natural law, non-aggression, and pacta sunt servanda (agreements must be kept), viewing international law as a “real” framework for peaceful dispute resolution without needing a global government.
Kinsella’s arguments directly connect to Krasnozhon’s framework by providing practical tools for states—especially those with low or unreliable capacity—to credibly commit to constraints on public predation, thereby enabling rational economic calculation for investors. In Krasnozhon’s view, without such commitments, states risk descending into rent-seeking or predation, undermining efficient resource allocation (as seen in Perestroika). Kinsella’s mechanisms internationalize these commitments, shifting enforcement from potentially biased domestic institutions to neutral international ones, which deters predation and encourages investment in risky environments. This fosters the market-preserving conditions Krasnozhon deems essential for development, similar to how Deng’s reforms succeeded through credible (if gradual) protections.
Key connections via specific mechanisms Kinsella discusses:
Internationalized Agreements: Kinsella highlights how contracts (e.g., concessions or Bilateral Investment Treaties [BITs] like the U.S.-Russia BIT) can be “internationalized” by referencing international law, treaties (e.g., CAFTA-DR), or bodies like the International Centre for Settlement of Investment Disputes (ICSID). This elevates agreements beyond domestic jurisdiction, making them binding even if host states change laws. For instance, in the Próspera case, Honduras’s revocation of a ZEDE (Zone for Employment and Economic Development) law triggered an $11 billion ICSID claim under a Legal Stability Agreement. This relevance to Krasnozhon: Such agreements force states to commit credibly to non-predation (e.g., no arbitrary expropriation), addressing the “fundamental dilemma” of state capacity—empowering states to protect markets without allowing confiscation. In low-capacity states (like post-socialist ones in Krasnozhon’s cases), internationalization provides an external constraint, enabling rational calculation by assuring investors of property security and thus promoting efficient capital allocation.
Stabilization Clauses: These clauses “freeze” the host state’s laws at the agreement’s signing, protecting against future regulatory predation (e.g., tax hikes or nationalization). Kinsella cites arbitral cases like Texaco v. Libya and Liamco v. Libya, where such clauses led to damages awards for breaches. Connection to Krasnozhon: Stabilization embodies the credible commitment to “ex-ante constraints” on predation, preventing the misuse of state capacity (as in high-capacity but abusive regimes). In Krasnozhon’s Chinese case, Deng’s reforms used similar gradual stabilizations to build trust; Kinsella’s tools extend this internationally, allowing investors in unstable states to calculate risks rationally, knowing predation is deterred by enforceable clauses.
Choice of Neutral/Third-Party Law: Investors can select impartial laws (e.g., English or New York law) to govern disputes, bypassing host state biases. Kinsella notes this supplements treaties, ensuring predictability. Relevance: This neutralizes the predation risks from low legal state capacity (e.g., weak rule of law in Krasnozhon’s Soviet example), aligning with Krasnozhon’s call for institutions that constrain fiscal capacity (taxation/redistribution) while bolstering legal capacity (contract enforcement). It enables rational calculation by providing a stable informational framework akin to Mises’s market prices—investors can allocate resources based on reliable legal signals rather than fearing arbitrary changes.
Obligations to Arbitration: Kinsella stresses mandatory arbitration under ICSID, UNCITRAL, or the New York Convention, which binds states to neutral resolution and enforceable awards (including lost profits). Examples include BITs prohibiting indirect expropriation without compensation (per the Hull Formula: prompt, adequate, effective). Tie-in: Arbitration shifts power from states to investors, deterring predation through accountability (e.g., higher damages). This mirrors Krasnozhon’s emphasis on viability of markets requiring constraints on internal violence or rent-seeking traps in low-capacity states. In Kinsella’s libertarian lens, it avoids “gunboat diplomacy” (historical force-based protections) while achieving the same end—protecting property to foster prosperity, much like how credible commitments in Deng’s China avoided the Soviet pitfalls.
Overall, Kinsella’s work operationalizes Krasnozhon’s abstract point by showing how international law creates “market-preserving federalism” (echoing Weingast, cited in both) on a global scale. Risky states can “borrow” credibility via treaties and clauses, committing to non-predation and thus enabling investors’ rational economic calculation. This is especially pertinent for transitional economies, where domestic institutions alone fail (Perestroika) but external bindings succeed (Deng). Kinsella critiques statist UN frameworks while promoting these as ethical, voluntary tools, reinforcing Krasnozhon’s view that development hinges on constraining predation to support markets.
Update:
El debate sobre la deshomogeneización de Mises y Hayek en el cálculo económico socialista.
Mises en 1920 dijo que el socialismo era imposible como sistema de asignación racional.
El argumento es que sin propiedad privada sobre los medios de producción no hay intercambio genuino…
This is my Austrian AV Club Interview by Redmond Weissenberger, Director of the Ludwig von Mises Institute of Canada, back from Aug. 25, 2012. [RIP; rip] We had a long-ranging discussion on the issue of net neutrality, and we touched on other issues as well including various ways the state impinges on Internet freedom, such as in the name of IP (SOPA, ACTA), child pornography, terrorism, online gambling, and so on.
Back in the 1990s there was a fascinating debate carried on among various Austrians, mostly in the pages of the Review of Austrian Economics(RAE) or Quarterly Journal of Austrian Economics (QJAE), on the issue of fractional-reserve banking and so-called free banking. On the one hand were Rothbardians such as Hoppe, Hülsmann, Huerta de Soto, and Salerno; on the other, supporters of freebanking such as Selgin, White, Dowd, and Horwitz. The Rothbardians believe fractional-reserve banking is unstable and fraudulent; the free bankers disagree. My own take is that the Rothbardians are right on the economics, although I think the fraud charge could be obviated with sufficient warnings to customers and recipients of FRB notes.
I’ve compiled below a chronological listing of these pieces, and a few other works, with links to online versions, where available, for those who feel like reading up on this interesting issue. This is basically a (skeletal) ebook.
If anyone is aware of any significant material I have omitted, please let me know.
Update: I’ve combined most of the “main debate” and “subsequent discussion” files into a single PDF(out of date).
“Gold and Free Market Banking” (video), Lawrence H. White, “The Gold Standard: An Austrian Perspective” Conference held in Washington, DC, November 16-17, 1983
Rothbard, Man, Economy, and Liberty (1 March 1986) (Rothbard comments and responds to the speakers and papers presented at the “Man, Economy and Liberty” colloquium hosted by the Mises Institute; backup Youtube)
In this episode of Outside the Music Box, we discuss one of the most sacred cows in life, that of Intellectual Property (IP). Stephan explains his position that IP creates confusion regarding the whole concept of property in general. He then gives practical guidance on how to survive and even thrive in this brave new world of IP in which we find ourselves.
This is a Libertarianism Q&A I did using the new Facebook Mentions “Live Video” feature (from this Facebook post; Facebook Live Video; Jan. 11, 2016). I fielded a few questions on various topics, e.g. verbal threats as assault, assault and battery, causality, praxeology, etc.
I discussed the libertarian non-aggression principle with Tom Woods on his show today, Episode 566:
Ep. 566 Why Are Some Libertarians Rejecting the Nonaggression Principle?
It’s become fashionable in libertarian circles to ridicule the nonaggression principle. Stephan Kinsella and I speak in its defense. This one is long overdue.
I was a guest today on the Mid-Life Criss podcast, episode 4, produced by my friend Jack Criss, of BAMSouth. We discussed my IP views, anarchy, and a few related matters.
“Stephan and I discussed his path to anarchism, the changing labels for the liberty movement, artificial intelligence, religion, world government, and prospects for the future of liberty.”
I discussed legislation and law with Tom Woods on his show today, Episode 557:
Ep. 557 The State’s Corruption of Private Law, or We Don’t Need No Legislature
Ever since we learned in school how a bill becomes a law, we’ve absorbed the idea that it’s normal for law to be imposed from the top down. But it’s possible, and indeed the historical norm, for law to emerge in a completely different, more libertarian-friendly way. Join me for a great conversation with Stephan Kinsella!
The State’s Corruption of Private Law, or We Don’t Need No Legislature
Stephan Kinsella, interviewed by Tom Woods
The Tom Woods Show, Dec. 17, 2015
Transcript
00:00:00
TOM WOODS: The Tom Woods Show, episode 557.
00:00:03
INTRO: Prepare to set fire to the index card of allowable opinion. Your daily dose of liberty education starts here, the Tom Woods Show.
00:00:13
TOM WOODS: Hey everybody. Welcome to another episode of the show. Stephan Kinsella is back with us again. There are so many episode topics I could cover with Stephan Kinsella, and today we’re talking about law and legislation. Is it possible to think of law other than as something that’s imposed from the top down by a bunch of legislators on society? That’s what we want to talk about because it’s important, has important ramifications, and I thought I haven’t done it yet. Doggone it; it’s episode 557. Let’s do it.
00:00:48
Stephan Kinsella is a libertarian legal theorist. He has pioneered in the study of intellectual property. I’m going to link to all kinds of material about Stephan at tomwoods.com/557. You can find out more about him at stephankinsella.com. Let me remind you because there’s been a little bit of confusion. I am giving away a free autographed book. You can look through my book selection at tomwoods.com/books. I am giving away a free autographed and personalized book to people who buy gift subscriptions to libertyclassroom.com this year, only for gift subscriptions.
00:01:28
It’s like when you go to Chili’s, which I don’t recommend, but if you go to Chili’s and you buy a $25 gift card, they give you a $5 gift card, it’s that kind of principle. So if you buy a gift, you get something for yourself. So I probably won’t be able to get it to you before Christmas, so don’t think of it as a gift to give to your recipient. You’ve already given your recipient a gift. It’s enough giving for one person. Keep the book for yourself. So just get the subscription at libertyclassroom.com and just drop me a line at tomwoods.com. Tell me what book you’d like, give me your address, and I’ll mail that baby right on out to you. All right, let’s talk now to Stephan Kinsella. Stephan, welcome back to the show.
00:02:08
STEPHAN KINSELLA: Thanks Tom, glad to be here.
00:02:09
TOM WOODS: This is a topic I get but I don’t fully get, and I say that as somebody who’s been a libertarian for a long time, and I want you to help us flesh out this topic of law and legislation as two different things that if we say that we don’t like legislation that doesn’t mean we don’t like law. What do these things mean? Can you have law without a centralized lawmaker that hands down authoritative statements that bind everybody in society? Is there another way of thinking about how law comes about? That’s what we want to look at today. We’re going to have a lot of links on the show notes page, so if this topic interests you, tomwoods.com/557 will have a whole bunch of stuff, some stuff by Stephan Kinsella, some stuff by Bruno Leoni and others.
00:02:57
All right, let’s set the stage here. Let’s bear in mind that obviously as anarcho-capitalists we don’t see a role for a legislature to begin with, but that’s not the central claim that’s being made here. I mean F.A. Hayek was not an anarchist, and yet he still spoke very favorably about what we might call judge – not judge-made law because that again sounds constructivist, but judge-discovered law. Give me the two-minute bird’s eye view, and then we’re going to take it apart.
00:03:29
STEPHAN KINSELLA: Well, let’s go back to what the term law means and why we use law because the word law is used in the physical sciences, in physics, and it’s used in the social sciences as well in different ways. I was just reading – listening to a great speech by a professor at Oxford about the famous scientist, James Clerk Maxwell, who’s a – I’m an electrical engineer background, so all double E’s, no Maxwell’s equations. So Maxwell is like one of the top brilliant natural scientists of all history really. I mean he’s up there with Einstein and Newton.
00:04:06
What he came up with in the 1800s was incredible. He unified electromagnetism and light theory, and his father wanted him to be a lawyer, and he said, dad, I’m going to pursue another kind of law. So I kind of like that because it shows that there’s this unifying idea of laws that we all search for in different realms of intellectual inquiry. But the physical laws are one thing. They’re physical laws you’re trying to discover according to the scientific method. And then we have laws, like what people talk about normally as it’s against the law to do A, B, and C.
00:04:47
Nowadays, because we have a heavily, legally positivistic culture and I can explain what that means, most people nowadays think in those terms, so they think of a law as a piece of paper with words on it that some legislature has written down what the law is just like people think of contracts, and I think we talked about this recently. They think of contracts as a piece of paper with words on it that announce what the contract is. So they identify the contract with the piece of paper. They identify the law with what’s written down in a statute. That’s what legislation is.
00:05:26
And sometimes you’ll hear the more simple-minded types talk about the law books, the law books. You’ll hear these common law court nuts or the income tax conspiracy types who will say that it’s not illegal to pay income tax because show me the law books. Show me the law. So they’re equating in their minds law with what’s written down on a piece of paper that was published by some authoritative body, the legislature, or the king or maybe God or maybe the Bible, whatever. So they’re thinking of law that way.
00:06:01
But this is not – and I think they think of that now because – and they didn’t used to, Tom. And you know a way lot more about history than me, so you might be able to fill in some of my meanderings or gaps on this issue. But the approach I like to take is this. Law in terms of legal law, in terms of normative rules that humans come up with to help us get along with each other in society, and basically all laws are property rights that determine who can use resources that we could otherwise conflict over.
00:06:35
So the question is what should the law be, which means who should the owner be? Who should win in this dispute? In older times, the conception of law was that there’s a sort of natural justice. There’s a background of what we call higher law, and we’re trying to do justice. So you have a judge or a court or a tribunal or an arbitral tribunal, someone who is appealed to because of their wisdom or their place in society, and the two or more contestants who have a dispute over who basically gets to own a given resource that’s in dispute – who’s going to get to own it?
00:07:12
And then the job of the judge is to do justice, that is, to try to find the right answer, and they try to do this. And over time, a body of law develops in a decentralized fashion. Now, this happened historically, Tom, and the two major periods would be in the Roman law period roughly from -500 to 500 – from -500 A.D. to – or B.C. to 500 A.D. like the thousand-year period of the German – I’m sorry, the Roman empire. And then the second period would be the English common law, which started developing around – I think probably around 1000, something like that. And it borrowed partly from the Roman law, which was preserved in part because of the codifications by Emperor Justinian and preserved I think by the Muslims and the Arabs for quite awhile during the Dark Ages.
00:08:06
So basically we have these two great systems in the world of law – the Roman law and the English common law. They are both systems which developed in a piecemeal, decentralized fashion, principles of law which were reached by an attempt by the people finding the rules to do justice. It doesn’t mean it’s perfect. It doesn’t mean it wasn’t tainted by state interference from time to time, but at least it was a system that arose out of the practical necessity of trying to resolve disputes in a fair manner.
00:08:42
So that’s what we have, these two big legal systems in the world: the common law, which is basically in place in England and its various commonwealths and the United States, and the civil law, which is the modern version of the Roman law in the European continental system. Other systems would be Sharia law and the canon law of the Roman Catholic Church, and the law merchant of the, say, 700 years ago, and international law is another big field. But the two big fields of private law in today’s modern world are common law and Roman law.
00:09:24
TOM WOODS: All right, let me ask you if this parallel works because in terms of how people understand these two models. When I think about socialism and capitalism and the extent to which people understand how they work, I can see how socialism in the classical sense of state ownership of the means of production is an easy system to understand. The state just directs production, period, simple. It’s not so easy for the average person to understand how capitalism works, the price system, the structure of production, the decentralized nature of it, the role of entrepreneurship, the role of prices. That’s more complicated for the average person.
00:10:01
They can see how order is imposed in the economy by one single entity in the form of socialism, but they don’t really understand how it works with capitalism. Well, likewise, with law in society, I think it’s easy for people to understand how legislation works. Lawmakers, so called, get together. They issue some legislation. They pass it into law, and it is imposed on all of us, whereas the decentralized kind of law that you’re talking about – it seems like it’s a series of decisions in particular cases. How does that go from a series of decisions in particular cases to general principles that we live by?
00:10:41
STEPHAN KINSELLA: Well, there’s partly a role of legal scholars here, so on the side you have the legal community, the law professors, the legal scholars who are analyzing the actual ongoing results of all of these decentralized decisions. And they try to summarize them and provide guides for them and to explain what’s going on. And when they notice inconsistencies in the law, they point it out and they basically nudge and they give criticisms, and these are taken into account by future judges and courts when they’re making further laws. So there’s sort of a feedback effect, so you’ll have a respected treatise by Coke or by – and nowadays we have the American Law Institute restatements of the law.
00:11:28
And they will basically codify what’s gone before in non-legislative fashion. It’s just a book, but it attempts to codify what is basically the essence of the law that’s developed, and they will suggest changes. They’ll say there’s a discrepancy here. There’s an unfairness here. And sometimes that will get picked up in the future, and on occasion, legislation will come in, and they will adopt those changes. The thing that’s happened is that, in the modern world – Hans-Herman Hoppe talks about this in his writings on democracy. He talks about how there are different institutions in society that the modern state, especially the democratic state, tries to co-opt and take over.
00:12:10
You have communication. You have defense and the courts and justice, education, and you – and welfare, and you have law. And that basically means that when we have a democracy, you start having more and more law produced in the – by democracy. Either the people vote, or their representatives just decree things. And over time, you have this body of private law, in Roman law or in the common law, and when I say Roman law I also mean the modern civil law in Europe. The civil law basically was started around 1800 when Napoleon started codifying – he got legal experts together to codify in the form of civil codes the existing principles that had been developed over centuries with Roman law and with European law in between the time of the end of the Roman empire and the time of the beginning of the modern codifications.
00:13:15
It was basically an attempt to clear away the clutter, scientifically codify the law, and make it legislation too. So you had that aspect of it, which is bad. But it was at least an attempt to codify what had gone before. So you have – the situation now is we have a private law system, which is based upon these organically bottom-up, decentralized legal decisions determined by legal experts and by neutral parties who were trying to do justice, trying to do the fair thing. And over time, a body of rules emerges, and with the help of legal scholars, it gets cleaned up and sometimes revised.
00:13:57
But what’s happened since the emergence of democracy is that we’ve begun to have a sea of legislation, just legislation is just being issued left and right over the last 100 or more years by the modern western democracies, and they gradually encroach upon the territory of the existing private law. They override it, and the law starts to take the form of just the edicts and decrees by a committee. Even the US Constitution, which was a general document and which was based in part upon a lot of evolved principles from the British constitutional system, is still a piece of legislation as is the entire federal code as is the statutes of the states. And these statutes – and in England this is happening too.
00:14:47
There’s more and more legislation that invades the territory of the common law, and what that means is when someone goes to court to ask a judge to determine the outcome of this case, this dispute, in the older system, the judge at least was oriented towards trying to do justice. So he would look at precedent, he would look at what the law had developed before, and he would try to do justice. And he might make new law when he did that, or he might just respect old law when he did that.
00:15:18
But nowadays, the job of the judge is not to do justice. The judge is more of a functionary. He’s like a civil servant whose job it is to interpret words written down by another branch of the government whether those words are just or not. So, for example, the big debate recently was over Obamacare, which is a purely – which is a pure creature of statute. It’s just a statutory creation just like the Social Security Act and the Immigration Act and the Americans with Disabilities Act, all these statutes that could not exist without legislation and statutes.
00:15:58
And so the question came to be to interpret some of the words in that statute about the state exchanges and that – the whole legality of this Obamacare depended upon that. The judges had to make a decision. As John Hasnas points out in his great classic article “The Myth of the Rule of Law” where he uses some of the reasoning of the crits, the critical legal studies guys, who claim that a lot of law is really oriented towards achieving goals that are not really stated on the surface. They’re not about justice.
00:16:35
His point is that a lot of law – there really is no objective answer. When the judge is faced with construing a case, and this is especially so when he’s interpreting legislation. If he’s trying to do justice in a common law context, he can resort to justice because that’s his job, and that’s the format of the common law that’s arisen. It was trying to do justice. But when his job is just to interpret words, then you can’t really blame the judge for just either punting or making an arbitrary decision or just going with what the words say, which may be totally unjust.
00:17:12
If the law says that the minimum sentence for the following non-crime is 35 years in prison, the judge has little discretion to do anything about that. So his job is not to do justice anymore. It’s just to interpret words written down on a piece of paper that came from another committee in the state.
00:17:30
TOM WOODS: All right, I want you to help me flesh this out in my mind here. I’m going to give you an example of – let’s say we have a couple of different judges, and let’s say we’re not dealing with centuries and centuries ago, but we’re dealing with a society that is run according to these sorts of principles today. Let’s imagine a society today, and in society today, of course, there are competing theories of justice, and there are competing views held by all different people. And I think most people who go through official legal training today hold views of justice that are completely removed from my own.
00:18:07
So we’ve got two judges, and one of them says that a person who is working for an employer and is earning $3 an hour is, just from the point of view of equity, being mistreated, and therefore, we can bring damages against the employer. Another judge says, hey, I have this case where somebody is being paid $3 an hour. This was a voluntary decision that improves the lives of both people, so I uphold this arrangement. How does a general principle binding us ever evolve out of this?
00:18:43
STEPHAN KINSELLA: Well, okay, so I would say first let’s contrast it to what’s going on now. In legislation, the legislature can just decree something. It doesn’t have to conform to reality. It doesn’t even have to be consistent with itself even. There could be inconsistencies. There can be vague terms, and often that’s done as part of the political bargain. They will – the Republicans and Democrats will intentionally agree on a vague term and punt it to the courts to figure it out later just to get the law passed.
00:19:10
Okay, so that’s the whole process. There’s no reason to expect that justice would arise from that. There’s no reason to expect that those legislated – those acts of legislation, those statues would embody justice. They might to the extent that they’re basically an attempt to codify what had been developed before. But if we look at the free market and the decentralized system, we have to imagine that we live in a somewhat of a free society and that the reason people go to legislate – sorry, go to judges or courts or arbitrators to resolve a dispute is because they have a preference for justice themselves.
00:19:51
They have a dispute, but they know they all have their own argument for their dispute, and they don’t want to have a war with each other. They want to live in some civilized fashion, so they’re going to try to do the reasonable thing, which is to submit their case to someone who is a neutral third party who can make a decision and so that they can go on with their lives.
00:20:15
That entire process supports and basically depends upon a more libertarian-ish view of the world because the only time you look for someone to resolve a dispute is when you’re opposed to disputes. And the only time you have a dispute is when you both want to use a scarce resource. So we basically have a propertarian conflict, and we have a desire on the parts of everyone – both parties, the court, and the community – that the right choice be respected. So the way these common law courts work is if you pick someone who makes crazy decisions, then, over time, he will be ignored and not – he won’t get repeat business. It’s almost an evolutionary thing.
00:21:01
So that’s part of it. Also, the nature of the common law and of the Roman law before it was that the discretion or the ability of the law finder was very limited. This is why you hear terms like – well, when you’re speaking out of turn in court. If – it’s called obiter dicta. If the judge, in the middle of the case, he’s deciding a case between John and James over who owns a cow, if he just has a paragraph in his opinion saying, and by the way, I believe that people should be taxed to support infirmities or something like that, that would be obiter dicta. It would not affect parties that were not parties to the case. It could not be general legislation, and if it was totally out of character, it would just be ignored by other judges.
00:22:00
These judges basically are trying to fit their decisions within the existing growing framework of justice that’s respected by everyone, and it does just happen to grow that way. If you look at the body of the Roman law that existed near the end of the Roman empire, or the body of the common law that existed at its height, it’s a really impressive series of practical attempts to do justice to work out ways that people can live with each other in a world of conflict. That’s the only way you could expect that it could be done. It could not be done when the state gets involved or when a committee of legislators just get together and announce their will.
00:22:39
TOM WOODS: All right, I want to ask you about what happens when, let’s say, there’s a new technology, like society wide that everybody uses. How could this type of system cope with that? We’ll do that after this message.
00:22:55
I’m going to tell you a little story, and it involves Murray Rothbard and me. When I was in college, I had to learn a lot of history on my own. It was not going to be taught in the classroom. Well, that’s a tall order for a young college student because how do I know what to study, where to study it, where to find what I was looking for? So, for instance, I wanted to know more about what happened to Robert Taft at the 1952 Republican convention. Had the nomination really been stolen from him by the Eisenhower people? Well, the next time I saw Murray Rothbard, I just asked him. What should I read about this?
00:23:29
And he said, oh, read Chesly Manly’s book, The Twenty-Year Revolution, a book only Murray Rothbard even knew existed. Now, most people can’t just go ask Murray Rothbard a question, and that’s why I created libertyclassroom.com so that you can learn the history that you should know. You can learn the economics that you should know, and have at your disposal a whole slate of pro-liberty faculty, ready to answer your questions, and teach you at your leisure. All our courses are downloadable for viewing or listening at any time you like.
00:24:04
You can learn US history from me. You can learn the US Constitution from Kevin Gutzman. You can learn Austrian economics from Jeff Herbener and, very soon, Bob Murphy, both guests of this program, and many other topics taught by many other awesome people plus so many other features. Never lose another debate. Maybe somebody should buy a subscription for that weasel, Michael Malice. So treat yourself this Christmas at libertyclassroom.com, and as I said, if you buy a gift subscription for somebody, I’ll also send you a free autographed book. Just write to me at tomwoods.com after you get that gift subscription, and I’ll send you whatever book you like, libertyclassroom.com, the history and economics they didn’t teach you.
00:24:47
All right, Stephan, I want to ask you. Let’s say we’ve got something like the internet, which completely revolutionized society. Doesn’t it seem as if it would be – I’m just playing devil’s advocate here, but doesn’t it seem as if it would be more efficient to have a centralized agency saying, okay, here are the rules we’re all going to abide by in using this new system? Doesn’t it seem like it would be slow and cumbersome? Would we have to all be standing around, waiting for the judges to reach a consensus haphazardly as cases are brought to them before we really know what the principles that we should be observing and using this technology are?
00:25:22
STEPHAN KINSELLA: Well, I see no reason to think that. First of all, as libertarians, our political system, our political principles are really pretty simple if you boil them down. It’s whoever owns a resource first has the better claim to it unless you made a contract with regard to it, in which case you can lose ownership, or if you harm someone else and you owe them compensation.
00:25:44
So those basic principles can help determine the ownership of resources, which is the only disputes there can be. As technology changes, there’s no reason to believe that these principles couldn’t adapt and be applied to new technological developments. In fact, that is what has happened in the past until the state stepped in and short-circuited it. So as a couple of examples – well, let’s take a recent example. In the 1980s, Bill Clinton, if I’m remembering my history right, approved a couple of laws that kind of froze the internet’s current system into place with this DMCA system, this takedown system that we have now, also with the safe harbor provision, which talked about ISPs, internet service providers.
00:26:35
Now it’s being used by YouTube and others and blogs, which no one knew about YouTube or blogs back then, but we’re kind of stretching these concepts to cover that. But the law is creaky, and it’s already out of date because it’s legislation, and legislation usually doesn’t have an expiration date except maybe I guess the security laws we have now have that luckily. But most legislation doesn’t have a sunset provision, so it’s going to last forever until it’s updated, and then they don’t usually update it in time.
00:27:06
So legislation is the problem that freezes things in place in the face of technological change, and we can think of tons of examples. The – at the dawn of the internet, common law was starting to evolve to take these things into account. There’s a case. I think it’s called Cubby v. CompuServe maybe from 1980s, and they – the courts were starting to use principles of common law trespass theory to analyze the right way to approach a case of a computer cyber hack, like if I hack into your computer, what is it? And so they were just using, stretching, bending, applying, analogizing the existing common law principles, and it was working fine.
00:27:56
I see no problem with that. Earlier in the 20th century, when the electromagnetic spectrum was discovered and it as realized it could be used for communications, people started broadcasting television signals and radio signals, things like. A common law was developing at that time that was going to – it was figuring out common law property rights in the electromagnetic spectrum, and this is detailed, by the way, in the great book by David Kelley and Roger Donway called Laissez Parler, Freedom on the Electromagnetic Spectrum or something like that. It’s one of David Kelley’s very nice little monographs.
00:28:39
But the FCC was created and came in and just monopolized everything and took it over, and now we have FCC with the fairness doctrine and all their other rules because they basically own the airwaves. They took it over, and they dole it out as they see fit, and they impose rules on the users, the major television networks, can’t have certain curse words, etc. because the government has expropriated the ownership of the airwaves themselves so – by legislation. So I would think that a better approach would be to let it develop according to the common law as it was doing just fine until the government intervened.
00:29:18
TOM WOODS: Wow. I don’t generally say that the guests – you are just hitting my questions out of the park, but I didn’t expect you to have such a good answer to that, to be honest with you, and I’m sorry if that comes out wrong. Stephan, how could you possibly have such a good answer? But it was pretty darn good. Now, earlier on, I made this comparison between socialism and capitalism, and I drew an analogy between legislator-made law and judge-discovered law in terms of how people understand how society works.
00:29:49
It’s easier to understand the centralized version than it is to see how the decentralized version could work, but I think the analogy can be taken even farther. And, in fact, in your article on this that I’m going to link to at tomwoods.com/557, you actually run with the idea of legislation itself as being a form of central planning.
00:30:09
STEPHAN KINSELLA: Yes. Now, that was an argument that Bruno – so Bruno Leoni was a brilliant Italian legal theorist, unfortunately murdered by one of his clients in his prime.
00:30:23
TOM WOODS: Is that what happened to him?
00:30:23
STEPHAN KINSELLA: Yep. When he was in his mid-to-late 40s, one of his clients murdered him, so very sad.
00:30:29
TOM WOODS: Wow. I didn’t know anything about that. Okay, so anyway, look at this. Look, you’re taking over the whole show here with all your insights. All right, go ahead.
00:30:35
STEPHAN KINSELLA: He stabbed him if I remember, but I’m not sure. Anyway, it was a shame because he was so brilliant. And what he did was he made an analogy between Hayek’s – the Hayekian version of the argument against socialism and made an analogy between that and legislation. So basically Hayek – you know the Misesian ideas that socialism can’t work well because you need a private – you need a free market in private property and trading of the capital resources to establish real free market prices, and those prices help us compare otherwise heterogeneous units, things that couldn’t be otherwise easily compared.
00:31:17
So it allows us to engage in economic calculation. It’s really a mathematical argument in a sense. Hayek built on that and sort of emphasized the role of knowledge and said that knowledge is tacit. A lot of things we know how to do we can’t explain to people, and – but when we act, that knowledge is embedded in sort of what we produce, and therefore it affects the prices. And so these price signals are kind of a way of conveying this tacit knowledge that otherwise couldn’t be conveyed and makes the economy work. That was Hayek’s spin on it, which I have some personal problems with, but I understand where he was going.
00:31:53
Leoni picked up on this and said that legislation is very much like that. Legislation is like central – it’s similar to central planning of the economy by a committee because it’s central planning of law by a committee. You have a committee that says here’s what the law should be. But because they can’t have the relevant information that’s tacitly spread across society, they can never make the right laws. I wrote that actually in my article, and I think that’s one of the things I would – I won’t say I retract, but I have backed off on it a little bit. I think I was a little bit too enthralled to the Hayekian version of the calculation argument, which I think is not as rigorous as I would like. I think there are some problems with it. There are some analogies that can be made, but we have to be careful how far we take this Hayekian knowledge problem and use it as a problem of legislation.
00:32:54
TOM WOODS: Well, given how radically different the system that we live under now is from what you’ve been talking about today, how does what you’ve been talking about today help us in any way? Can it help us to see our current situation more clearly? Is it something to shoot for? If so, how would we do that? Or is it just a pure intellectual exercise?
00:33:14
STEPHAN KINSELLA: Well, I think it’s good to – I mean legal theory is always helpful in terms of classifying the existing legal structure of society, and so I do think we need to treat legislation differently than the result of more spontaneous or common law-type processes. So we need to understand it, for one thing. And in terms of policy proposals, once you understand this, you develop basically a general hostility towards legislation as the way to make or to discover or find law. It would be advocating for a return to a more decentralized or common law system or even arbitration system, and to limit the power of legislation. So, for example, you could propose – we can advocate for a sunset provision where every piece of legislation that’s introduced has to automatically expire after a certain time unless it’s renewed.
You could have super-majority requirements. You could say that only legislation that’s a super majority. A more radical proposal would be something like this. Like in the US system, we have a constitution, which is a piece of legislation in a sense, but it’s at least general and somewhat noble in its goals. And you have a court who’s interpreting that, the Supreme Court and the federal courts, which is not common law exactly because they’re interpreting words on a piece of paper. They blend in justice concepts when they need to, but still they’re just interpreting it.
00:34:39
What you could do is you could say the job of Congress is to pass legislation, number one, that only affects the inner workings of the state. It’s not like replacing or supplanting private law that governs the relations between people. That could be more of a common law process, or the court could be – the legislature could be limited to passing a law that overturns a given court decision. So their job would be let’s say the Supreme Court comes up with Roe v. Wade or some decision that everyone is outraged by.
00:35:16
Well, you could let a majority of the state legislatures or the Congress, some kind of system like that – I think Marshall DeRosa actually proposed this in his great book when he talked about the Confederate constitution. You could say that the states – if three-fourths of the state legislators certify that they want this decision overturned, then that Supreme Court decision would be null and void. So it’s a type of nullification really, and it’s a clever way. It limits the legislature to just overturning bad judicial decisions, so that would be – instead of allowing them to write the law, they would be able to guide the process of the development of this quasi-common law that the federal courts engage in by just striking down the really bad or egregious decisions of the federal courts.
00:36:03
TOM WOODS: So it turns out that this line of discussion really can inform our current views of what direction we should be moving in and what would be good reforms, what would be the right way to go. So it’s not just an empty, speculative, intellectual discussion. So- and by the way, I love empty, speculative, intellectual discussions, nothing wrong with those, but it’s interesting that this really can bear some fruit; stephankinsella.com is your website. And you sent me a whole bunch of links today for people who want to read more about this, and they’ll all be at tomwoods.com/557. Is there anything left unsaid that, if said, would clear any remaining questions up?
00:36:44
STEPHAN KINSELLA: Just – maybe just two things. Number one, I would recommend – I don’t have time to read it now, but I have a blog post, which you can link to, about James Carter, this lawyer in 1884 in New York who was opposing the legislative codification of the common law of New York. He’s got a great quote, which is just great. So you’ve just got to read that. It’s in my blog post.
00:37:03
The other would be to be aware that, in addition to legislation in America, we have this huge thing called regulations, which are emitted by federal agencies, which are like quasi-legislation. And the length of the federal – the code of federal regulations – I lost count. It’s like 22,000 pages or something or maybe it’s more now, and they’re coming out all the time. So legislation is a problem in its pure form and also in its bastardized form where the legislature basically deputizes these agencies to emit quasi-legislation, which is sometimes even worse, and it sometimes had criminal implications as well. So we need to be ware – be wary of legislation and regulations, which are sort of a spin-off of that.
00:37:57
TOM WOODS: All right, and we will leave it off there. So tomwoods.com/557 is where you should go for all the stuff that we’ve been talking about and for links to Stephan, your website, stephankinsella.com. We’ll get your – are you on Twitter?
00:38:11
STEPHAN KINSELLA: I am on Twitter.
00:38:13
TOM WOODS: All right. Then in that case, your Twitter is also there. Everything people want to know about you within reason will be on that page. Thanks a lot, Stephan.
00:38:21
STEPHAN KINSELLA: Thank you, Tom.
00:38:21
TOM WOODS: All right, that will do it for another episode. I once again solicit ideas from you, and I’m sorry I can’t always respond. I deeply appreciate your suggestions, but if there’s a topic you’d like discussed, then send along a good guest for that topic, and I will certainly look into it. Again, I like to avoid scientific topics where I feel like I’m out of my depth. I don’t want to do that. But otherwise, I’m quite open to a wide array of topics. So please send your suggestions to me at tomwoods.com.
00:38:51
You’ll see there’s a contact tab, and I get that just like an email. So if there’s just a guest, you don’t even know a topic, but you just think it would be interesting for me to talk to a particular person, I’m game for that as well. But the ideal is the guest-and-topic combination. I could certainly use your input, and I certainly welcome it, especially from those of you who have been listening for a long time. I’ve gotten a lot of good ideas from you guys. In fact, I only heard about that weasel, Michael Malice, because somebody wrote to me about him. I hadn’t even heard of him before, and Judith Curry, who was really good this week likewise. I hadn’t been familiar with her, and I thought we had a wonderful conversation.
00:39:32
So thanks so much for playing this role in the show for helping me sometimes to brainstorm about ideas. So tomwoods.com is where you can submit your suggestion. If you want to scan and see what I’ve covered, tomwoods.com/episodes will give you the whole list of everything that has been done so far. All right, thanks for listening. See you tomorrow.
This is a discussion with Ash Navabi, an economics grad student at George Mason, who messaged me this question:
Hi Stephan. I’m having a conceptual problem distinguishing IP and tangible property.
In Against IP, you said that an IP right gives the IP owner “invariably transfer partial ownership of tangible property from its natural owner to innovators, inventors, and artists.”
But doesn’t this apply to every property right? If I own a tract of land, why can’t we say that if I ban you riding across it with your dirt bike, then I am claiming ownership over your dirt bike?
I decided to just discuss this with him for the podcast. We ended up veering into a couple tangential issues like auctions for trade secrets in an IP-free world, and so on.
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