Other Things Equal

When does income inequality matter? Less often than Paul Krugman thinks, according to Dan Drezner.

While we're on the subject though, in Dan's earlier post on inequality, he notes briefly, in a postscript, a problem with frequent claims about U.S. income mobility you hear in conservative and libertarian circles. The most optimistic numbers always seem to come from a 1992 Treasury Department survey that Glenn Hubbard did—I know Tom Sowell cites it with some frequency, as have Bruce Bartlett and Heritage. Bizarrely, some of the same sources cite an Urban Institute report that explains precisely why the Treasury study is pretty much useless. By restricting its sample to persons who filed tax returns, the Treasury study is, most obviously, skewed in favor of those who did well enough to keep filing returns over that period and, slightly less obviously, filters out those who died over the course of those ten years—disproportionately the elderly and those with less access to quality medical care. This is a pretty glaring methodological problem, and it's bugged me for some time that "our side" nevertheless continues to use those figures, when there are other less spectacular but less flawed data we could reference.

Comments

[Jeff Clothier]

It always gives me a chuckle reading knee-jerk anti-corporate screeds banged out on an Intel-based PC, most likely on Microsoft software, and delivered on the internet where it passes through more corporate iron than a hot rivet. Hard-line libertarianism feeds off the productivity of corporations just like the rest of us. Corporations are merely people in the aggregate, after all. The real culprit is the legal fiction that a corporation can be dealt with as if it were an organic entity in itself. There are individuals, both good and bad, at the heart of every corporate or state endeavor. Rather than rail about "the system," identify, prosecute and punish bad actors for their bad acts. Then the only question regarding wealth inequality is "Did you earn what you have, or did you steal it?"

[Julian Sanchez]

Jeff-
I don't think that's a particularly good critique as presented. Someone with different politics might just as easily say: "It always gives me a chuckle to read some libertarian screed on the DARPA-funded Internet..." And while there's obviously a sense in which corporations are "just people in aggregate," the statement's so misleading that it may as well be false. Everything we know about economics and psychology tells us that institutions matter, and that you can't explain (e.g.) the differences in economic performance or levels of criminality across societies just by positing that there must be a greater preponderance of intrinsically wicked people in some places. The whole point of the public choice critique of government is that a different institutional setting can make people who'd do good things in the private sector behave harmfully. There's no reason in principle that the same mightn't be true of corporate forms.

[Flapjack]

Kevin: Are your exaggerations and generalizations about corporations and billionaires and "robber barrons" statements of fact or just rhetoric aimed at the unwashed masses? With radicals it is sometimes difficult to tell if one is debating visons or strategy.

As for my vision, it is considerably more restrained - which is why I refer to the anarchoradical vison of the free market as utopianism.

People won't be angels without the State, in fact they are more likely to turn into predators. Yes the system is less than free, but are you calling for a "revolution" over the unfixable "state capitalist system"? Sadly we know where those usually lead...

[Jeff Clothier]

Julian -

If by that overly-academic statement you mean people behave differently in groups than they do one at a time, I agree with you. That's precisely why limited, Constitutional central government - ultimately accountable to the people via representative election - is absolutely necessary to civil society.

Pure Liberarianism, like pure Democracy, is a threat to freedom, not its exemplar. There is nothing more democratic than a lynch mob.

[Madog]

Jeff - How dare you imply that my freedom to lynch people in a mob setting be infringed! It's because of people like you that we lived in this oppressed statist hellhole!

[Kevin Carson]

Flapjack,

When I refer to large corporations and billionaires existing entirely by reason of the State's subsidies and intervention, I mean it literally. When you think of the massive centralizing and concentrating effects of railroad, airport, and highway subsidies; the cartelizing effects of tariffs and patents; the percentage of plant and facilities, and the entire industries, created at direct taxpayer expense during WWII and the Cold War; and how many technologies that the current high-tech, capital intensive system of production depends on were created by State R&D funding... and then you consider, not the effects of each one of them singly, but the synergistic effects of all of them together--it's mind-boggling.

And that's leaving out even more fundamental forms of intervention, like the role of the British State in the first industrial revolution: the role of its enclosures and other expropriations in creating a propertyless class of wage laborers; and its role in maintaining a domestic police state (laws of settlement, poor laws, combination laws) to keep the laboring class from freely getting the best bargain for its labor; or its role in mercantilist policies that suppressed foreign competition and artificially created a world "market."

The charge of hyperbole and exaggeration, I think, lies on the heads of those shameless enough to refer to things like "our free market system."

[Joanne McNeil]

What is your problem with the report, Julian? And how would you have done it differently? This isn't exactly a "60 cents to man's dollar" kind of analysis. It begins by pointing out:

"On the other hand, this understatement is at least somewhat offset at the low end of the income scale by the presence of an underclass which does not file tax returns year after year."

Consider the number of people that don't file tax returns that are handicapped, mentally ill, illegal aliens, or otherwise can't realistically exist their bracket in statistically signifigant numbers. And the elderly are elderly -- how are they expected to exit their quintile, social security benefits? Throwing out data that is extreme or that is affected by other variables isn't something unusual.

Secondly, if the lowest class isn't advancing as or more rapidly that only goes to show how well our welfare-entitlements programs are doing.

[fyodor]

Jeff Clothier,

My own take on what Julian said is that your point that the current system does indeed work does nothing to counter the possibility that it could be improved. That said, you seem to be agreeing with the "hard-line libertarians" you ridicule when you say, "the real culprit is the legal fiction that a corporation can be dealt with as if it were an organic entity in itself," no?

But somebody please educate me: how does this "legal fiction" manifest itself in a real and nefarious manner? The one way I'm aware of is third party limited liability, which I heartily agree is a bad thing. Is there something else I'm missing?

[fyodor]

Kevin Carson,

Re: "When I refer to large corporations and billionaires existing entirely by reason of the State's subsidies and intervention, I mean it literally."

If you literally mean "entirely," I would vote you guilty on the charge of hyperbole and exaggeration.

[Flapjack]

Dear Kevin: Of course you leave out that most corporations also pay taxes. And you unfarily lump millions of companies and individuals together as if they were a single entity. And you don't note those interventions probably decreased the net wealth of everyone, including capitalists.

You are not the first to point out that the system isn't perfect. The free enterprise system is not perfect -- never was and never will be. A "perfect" or "pure" system, akin the Cosmic Quest for "social justice" and its ilk, is a fools errand.

There is a lot of grey areas as far as what the "free market" means. I for one disagree of excluding all arguments except those based on a non-attainable utopia.

[PLC]

Hey, Flapjack - do you now understand why I said "insane"?

[Kevin Carson]

Jeff Clothier,

Is that really the best you can do?

You know what gives ME a chuckle? People who actually argue that reliance on the products that are currently available in the current Statist system is somehow hypocritical for those who criticize the Statist system; in a system where the government subsidizes some players at the expense of others, and enables them to establish dominance in the rigged market, what do you expect me to do?

I don't like the first-class mail monopoly of the Postal "Service," but guess what? I use them to send letters anyway. There's another chuckle for you.

[Jeff Clothier]

fyodor,

Essentially, you hit the camel on the hump. The concept of "limited liability" is an outcrop of the fiction that a crime can be committed by - and responsibility dissiptated within - a corporate entity rather than leveled at the specific individuals who actually commit it. Through it, a Ken Lay can claim no personal liability for his own actions or the actions of his people. Compare a CEO to a ship's captain, who by tradition and maritime law is almost SOLELY responsible for the actions of those under him, and you see an entirely alien ethic at work. We refer to ships at sea as "she," yet nobody tries to sue an entire battleship if its guns misfire and take out a fishing trawler. Courts martial are convened, and both the captain and the seamen or officers involved lose their commissions and ratings pretty quickly.

It is the concept of the "corporate person" that should be ended, not the corporate economy itself, driven as it is by economies of scale that ultimately benefit the consumer through less expensive, higher quality merchandise. Ultimately, if there is undue cahootinizing between business and government, it is government that is at fault, not business. Businessmen pretty much can do nothing but play the game the way they find it. The trick is to separate the businessmen from the politicians.

[Jeff Clothier]

Kevin,

Suit yourself, chum. Just realize you are both biting the hand that feeds you, and holding the hand you seem to think is harming you.

[joe]

fyodor,

If the bias stays the same, trends that emerge are still real. If a study produced annual number of 20, 30, 50, and 80, the factor being studied is rising, even if each of those numbers overstates the actual levels by half.

[Flapjack]

Jeff: Perhaps in theory you are correct, but in practice specific individuals are charged and held liable for their actions.

My theory is that corporate entities are not "bastions of injustice" as they are a hold-over from inefficiant aggragators of liabality that existed prior to the invention of insurance and other forms of risk-managment. Without an orderedly State-run divy of assets from failed enterprises, people were literally reaching for their pistols.

Today there are probably better ways to struture the enterprise and manage risk for shareholders and liquidate enterprises.

[Jeff Clothier]

Flapjack,

You could be right and I hope you are. One of the blessings of communications and network computing technology is an opportunity to decentralize, making a strictly hierarchical corporate structure less necessary - again, in theory.

[Mark A.]

While I won't take to attacking him personally, I think that Kevin's vision suffers from several serious flaws:

1) Not everyone is like Kevin Carson. The small number of libertarian purists /anachists in this country, as well as virtually any poll taken the subject or a related one, indicate that most people prefer some degree of government. Some folks particularly benefit from government and like a lot of it.

2) If this country 'evolved' (devolved!) into a world that fit Kevin's vision we would have a Hobbesian Luddite nightmare (except for the priveleged few like Carson to whose tastes this world was fashioned).

3) The nightmare created above would never be self-sustaining. People will get together in various forms of organization. Call these organizations what you like -- unions, cartels, guilds, corporations, armies, 'strange attractors in the free market non-linear dynamical system', etc. -- they will spring up. Inevitably. A true free market is simply not enduring; it will evolve entities that, despite liberatarian claims to the contrary, can do certain things more efficiently (like create/horde wealth, control others).

4) I am not aware of any true free market society
that has existed at any time in history. Maybe there were. Either way, this tends to support the third thesis.

[joe]

Kevin,

Wouldn't there be a lot less wealth to go around under your system? Isn't it likely that working people would be worse off, even if the remaining pie was divided more fairly? That R&D, and the transportation subsidies, have seriously boosted GDP compared to what it would be without them - no?

[Jeff Clothier]

The interesting thing to me is the extent to which these questions of influence-peddling, insulation from personal liability, corruption and wealth-hoarding have increased in volume over the years as regulatory law has replaced statutory and criminal law as the standard by which business is conducted.

Take emissions regulations, for example. Legal standards for air and water pollution are often expressed in parts per million allowed, that is, a plant may emit, say 1 part per million of phosophorus into the local water table. What this actually does is create a standard by which factories are ***allowed by law to pollute*** - an amazing proposition when you think about it.

Or, consider a city ordinance which says you cannot place a dumpster closer than 100 feet from the door of a restaurant. 99 feet, eleven inches - illegal, 100 feet, one inch - perfectly legal. The difference in health and safety? Negligible.

On the other hand, using simple tresspass law as a standard, there is no logical way in which a business or private entity can be allowed to tresspass - which is to say to prevent its neighbors from enjoying the full, exclusive use of their real property - at all. This sets up a standard - no matter how difficult to achieve in practice - of zero pollution of common water sources, the air, neighboring lands, etc., which, it seems to me, most of us would agree would be desireable.

All an overweening regulatory environment does is to dissipate responsibility and cloud definitions of right and wrong conduct in the marketplace.

[Dave Gross]

Being of a libertarian bent, myself, I often read Reason magazine's on-line presence and other outposts of libertarian thinking. And the commentaries, which many times would fit in just as well on the Wall Street Journal editorial page, often make me very uncomfortable. In his comments here, Kevin Carson has captured my feelings as to why.

I've often suspected that many people who call themselves libertarians are mostly dedicated to eliminating only those parts of the state that interfere with the ability of well-off people to become more well-off, without eliminating those many parts of the state that help well-off people preserve, defend and augment their wealth.

It's been a sickening exercise to watch so many "libertarians" grow hawkish about Iraq, for instance. If they can justify a State that should build a bloated military to support a policy of unilateral invasion to preempt possible challenges to an already interventionist and undemocratic foreign policy - it makes opposition to welfare or environmental regulation or public education look like pathetic, ungenerous footnotes to their real state-loving instincts.

[Jeff Clothier]

Dave,

LOL, I presume I may be one of those who is sickening you. Thing is, I don't claim to be a Libertarian. I'm more of an Objectivist. I don't care if someone is rich or poor, my only question is whether they came by whatever they have honestly, or stole it.

[Brad S]

Julian - when it comes to public discourse these days, "spectacular and flawed" will beat "unspectacular and unflawed" any day of the week...

[Jason Ligon]

Kevin,

I don't think anyone is denying that roads are built by tax dollars. I also don't think that anyone is denying that large scale government involvement in the economy was historically a fact.

The assertion that the corporation is analogous to a titled lord is just silly, though. The same argument could be used for you and the house you live in. It, in fact, is the same argument used by those who argue against any private ownership of land. Why pick on the corporation? You have roads that lead to your house, and you buy products that are shipped on roads. Why is the road subsidy a boon to Wal Mart, but not to you who chooses to buy things at Wal Mart?

There is no question that there are subsidies built into our current system, and I believe that nearly every libertarian seeks to reduce those subsidies and allow capital to flow more freely. That said, short of blatant pork-barreling, the subsidies you refer to (r&d, roads) benefit the consumers of those goods, and that means both corporations and people like yourself. The existence of roads does not rig the market in favor of one player or another.

The existence of patents rigs the market in favor of those who invest in development, or mingle thier labor with the research, if you prefer.

Inequity of wealth in modern America is largely due to the fact that $1,000 invested for X time getting an 8% annual return does better than $1 invested on the same terms. It is not unfair, it is mathematics that is necessitated by the belief in private property.

[Russ]

"When does income inequality matter? Less often than Paul Krugman thinks, according to Dan Drezner.

Has anyone kept count of the number of instances of Paul Krugman thinking?

[Jeff Clothier]

Jason,

Your last post was right on. However, it does begin to sound like me debating Social Security with my 70 year old mother. She argues that I will benefit from the program in the end (which is a huge assumption on her part, but to simplify things, I grant it) but the point is that I was coerced into the program. I didn't choose it, and I can't opt out. The "Eat it, it's good for you," argument - while perhaps having some utilitarian merit to it, is the essence of Statism.

[Kevin Carson]

Flapjack,

By your statement that "corporations pay taxes," you are unfairly lumping Microsoft and Boeing into the same category as an incorporated small business. The corporate income tax is actually a pretty effective cartelizing device; many of the very largest pay little or no tax, thanks to tax exemptions skewed toward large enterprises. The effect is the same as if you started out with a corporate tax rate of zero, and then imposed a punitive tax only on (mostly small) corporations involved in non-favored pursuits. I'm all for eliminating the corporate income tax.

As for intervention lowering the net wealth for everyone (including the wealthy), I don't buy it. Its main effect is to distribute wealth to the wealthy. The overall pie is likely smaller, but their bigger slice more than makes up for it.

[Kevin Carson]

Jeff Clothier,

An inhabitant of the USSR twenty years ago who opposed a state-owned and centrally planned economy, arguably, was biting the hand that fed him, since an apologist for Gosplan could quite accurately say that everything the critic owned was produced by a state enterprise. Anyway, this from a man who criticizes the legal fiction of corporate personhood--it's a pretty good guess most of the stuff you consume is produced by a legal fiction of one kind or another. Talk about being hoisted on your own petard!

As for the second part of that sentence--"holding the hand that harms you"--what exactly do you mean? I certainly don't support forcible redistribution by the State, if that's what you're implying; just removing the kinds of State intervention that produce inequality in the first place.

I do, in fact, strongly agree with your preference for common law liability as a substitute for the regulatory state.

[Kevin Carson]

Mark A.,

A strategy for dismantling state capitalism one piece at a time, based on getting a majority on your side on general philosophical principle would be a bad one. It would make much more sense to attempt ad hoc coalitions on each bit of the piecemeal rollback; and dismantling or reducing any particular form of government activity may be supported by many different interests for different reasons. My main concern is with the direction of change, not how fast or total it is at any one time.

[Jeff Clothier]

Kevin,

I guess I am confused by YOUR point. Are you saying you would be more comfortable in a Medieval craft/guild system where everything was handmade and distributed one-to-one? That's the only way you're going to have a market economy at all in a totally decentralized, Libertarian society. The only reason it worked then is that it was the best system for manufacturing and distribution available. In a technological society like ours, you can't arrive at economies of scale such that a large portion of the populace can afford cell phones, PCs, PDA's, much less food commodities and clothing, without mass production, which implies some sort of top-down planning, organization, etc., and some source of large sources of capital - in other words, some form of corporate organization.

Personally, I thank God for Intel and Microsoft (although, as a Mac user, I REALLY thank him for Apple and Motorola) and can't imagine having to build my own every time I wanted a new gadget, or having to wait for months/years for Bartholomew the Gadgeter and his apprentices to cobble something together for me, then pay him a year's wages for the result.

Now, if you want to talk about corporate law and politics, we'll probably be more on the same wavelength. But just grousing about "the evil corporations" or some such is pretty short sighted, wouldn't you agree?

[Kevin Carson]

joe,

If something is not efficient enough to pay for itself when the person consuming it is spending his own money, then it is not creating net wealth (in the sense of goods that people are willing to spend their own money on). Government subsidies to transportation and R&D promote the consumption of those inputs beyond the point of efficiency; they just shift the COSTS of inefficiency from those who are profiting by them to the taxpayers. Subsidies, by destroying the link between the consumption of an input and its real cost, only CONCEAL inefficiencies. If the overall benefits of a particular form of production exceed the overall costs, there is no need for State intervention to promote it; economic actors will use it out of their own self-interest. If the benefits do not exceed the costs, distributing the costs and benefits to different sets of economic actors will not change the net inefficiency, regardless of the "efficiency" to those who get the gravy instead of the bone.

A great deal of the increase in GNP you refer to comes from the increased transaction costs of producing the same amount of consumption goods, when the State subsidizes less efficient ways of doing things. The total inputs into the GNP are doubtless higher when you buy stuff from a huge factory 1000 miles away that is operating above peak economy of scale, because the government is subsidizing its distribution cost, than it would be if you bought the same good from a smaller, efficient factory 50 miles away. If you paid people to build pyramids and then tear them down again, the GNP would be increased.

[Wild Pegasus]

fyodor:

Kevin Carson is quite right about a number of corporations being entirely or almost entirely products of the state. ABB, DynCorp, General Dynamics, United Defense, SAIC, Honeywell...most people have never heard of these companies (with the exception of Honeywell), but they're some of the biggest companies in the world. What do they do?

They sell stuff to the state. That's it. If the defense contracting business were abolished tomorrow, they would liquidate their assets on the spot.

ObTopic: Never having lived in anything approaching an ideal libertarian society, I think it's difficult to say just exactly how big companies would be in the absence of the state. There are both economies and diseconomies of scale, and I would be fascinated to find out just how they played out without the state's hand.

- Josh

[Kevin Carson]

"The existence of roads does not rig the market in favor of one player or another."

It certainly does when those imposing the most costs on the road system are not contributing a proportionate share of the revenue for building and maintaining it. When you subsidize any input into the economy, you are subsidizing those firms that are most intensively dependent on that input, at the expense of those who use less of it. So if the State subsidizes long-distance shipping by building roads that long-haul trucks do most of the damage to, without charging them for the full cost of that damage, it is (OBVIOUSLY) subsidizing those enterprises that are most dependent on long distance shipping: large, centralized firms producing for extended market areas. If transportation were operated on a cost basis, the increased costs of distribution would outweigh the reduced costs (if any) from internal economy of scale, at a much lower level of production than at present.

[Kevin Carson]

Jeff Clothier,

Economy of scale, in terms of unit production costs, is reached at a relatively low threshold compared to the size of existing production units. All I want is for the State to STOP subsidizing the inefficiencies of large-scale production, and let the market find which scale of production really is more efficient.

There is a large body of economic literature by people like Barry Stein and Walter Adams, that has found economy of scale peaks out with plants producing for markets of about two or three percent of the U.S. population. And reducing output to, say, a third of that level only increases unit costs about five percent. But none of this takes into account the extent to which decreased distribution costs would offset even higher unit production costs from still lower levels of output. Kirkpatrick Sale pointed to studies twenty years ago showing that production of most light consumer goods was quite feasible in plants of fifty or fewer workers (especially using multiple-use production technology and switching between production runs of different kinds of related goods), serving markets of a few thousand people.

On a purely anecdotal level, Steve Jobs started out assembling Apple computers from his garage, in wooden housings. And many of the electronic components are amenable to small-scale production.

I don't deny that SOME forms of centralized economic activity are necessary. But they encompass fewer sectors of the economy than is generally supposed. And even in those sectors genuinely requiring relatively centralized production, the overall economy would consume quite a bit less of their output if they were forced to pay the actual costs through a market pricing mechanism.

[Jeff Clothier]

Kevin,

Then, in practical, non-academic, "many-studies-have-shown-that" terms - and assuming you are correct about the production end - what about distribution? I assume you wouldn't deny that in a country roughly equal east to west to the diameter of the Moon, some form of permanent, long-range transport is necessary. The interstate system, railroads, air, teleportation, whatever, and that such as system is likewise necessary to commerce. In the absense of central authority, what causes that system to come into being, who pays for it, who makes sure it is used in a safe manner, who finances and executes maintenance, etc? I'm not particularly interested in hearing about the Pennsylvania Turnpike or somesuch, either. Toll roads were established in another era, and although the politics of the time were much to be envied for their simplicity, the practicalities of this time don't lend themselves to privately-funded thoroughfares paid for strictly by tolls.

As to one-client companies - defense contractors and such - we may have less argument. It is within our power to clearly define and identify what is truly a business and what is simply a quasi-governmental agency. My point is that we should make those distinctions, not lump all corporations together. Again, if government and business interact illegitimately, it is government that is at fault, and the answer is at the ballot box.

[fyodor]

Will Pegasus,

"What do they do? They sell stuff to the state. That's it."

But that still requires initiative. It may appear to be quibbling, but that's still something other than being rich "entirely" thanks to the State. (At least you had the sense to use the qualifier, "almost"!) Besides, that's not Kevin Carson's argument (probably because companies like that are not a large part of the economy). KC is arguing that all government involvement in the economy has the effect of creating billionaires--as if out of thin air--at the expense of others. Now sure, I could how maybe the economy would be more efficient and fair without government involvement, but this is a matter of degree, not simply a matter of govt creating billionaires as if they haven't done a damn thing and haven't contributed anything.

Kevin Carson,

I agree, the State subsidizing of roads benefits those who use roads more at the expense of those who use roads less but still have to pay for them.

However, you make it sound like it's devised that way and that it's an instrument of social inequity. To follow up on whoever you're quoting (don't wanna bother to look it up in the thread), it benefits some big corporations and some consumers at the expense of others. It's not like there's some class of people (i.e., rich or corporate) that is benefiting at the expense of others (regular folks?). Those who use roads more benefit, those who use roads less lose. And if Statists are right that the State is an efficient mechanism for building roads (I'm not sure it is, but I'm not sure it ain't), then the winners and losers are only relative. After all, roads are the favorite example of Statists of something that almost everyone wants the State to do...

[Kevin Carson]

Jeff Clothier,

Some long-distance distribution would be necessary, sure enough. But I think a lot less of it would be used if the users were paying for it on a cost basis. Traffic would be weighted much more heavily toward geographically limited commodities with a high value-to-weight ratio, like minerals, genuine champaigne and scotch whiskey, etc. Reproducible goods would be exchanged over long distances only when, owing to necessary capital intensiveness (e.g. cars), the costs of shipping were outweighed by the benefits; and even for those goods, the level of consumption and freight traffic would probably be lower if the buyers were paying the real cost.

I don't have any problem with operating highways on the turnpike principle, myself. There are electronic technologies that make it a lot more convenient and feasible than it was, say, 150 years ago.

This is probably my last post on the thread. All these exchanges have certainly been challenging and thought-provoking to me; but I also provoked a lot more of a free-for-all than I expected, and I'm getting writer's cramp and brain fatigue from taking on so many assailants at once.

Thanks to you and the others for an interesting discussion.

[JDM]

Wouldn't you still end up with large corporations with decentralized manufacturing? (Supposing the most successful processes were kept as corporate secrets through patents or otherwise.) In other words, the intellectual capital would still be the determiner of who was most successful. Or do you think the world would work more efficiently if geography were still a barrier to communication as well as transit?

[Jeff Clothier]

Hey, I don't have any problem with tollroads myself, either. Or more decentralized, lighter industry, etc.- in theory.

But back when I worked for DuPont, that evil megaconglom, I was responsible for the communications plan for Six Sigma, a process-improvement, efficiency optimizing, cost containment and revenue-enhancement program. Briefly, it identifies a discreet process in manufacturing, supply chain management, etc., identifies the current minimum and maximum specs for that process, uses fairly brainy math to figure out how to narrow those specs, narrows them, then tries to keep that process within the new specs, thus saving money, time, labor, etc. and increasing productivity.

All too often we found that what looks really good in theory just isn't as possible, practical or cost-effective in reality. Since reality ALWAYS wins, it is the theory that generally is in error.

Decentralization is all very well. A total Balkanization of the economy, however, is rather a scary proposition and appears to be the likely practical result of a complete divorce between government and industry. Much as I would love to see laissez-faire come to pass, that is merely a sentiment. Not something I expect to happen, or to bring a substantially better civil order if it does. Likewise, I don't expect to see little mini-corporations springing up all over the place servicing a limited geographic area. It is in our nature to want to grow continuously. We grow or we stagnate. My problem with most Libertarian theorists is they appear to me to have little understanding of, or respect for, human nature.

[Jason Ligon]

I would suggest the review of a corporate balance sheet for MS to anyone who wants a good idea of what 'little or no tax' means as applied to MS's share.

[Jason Ligon]

I see that Kevin has left the building.

I'll comment anyway. The lack of someone to talk to has never stopped me before.

I don't think that regionalization would be as great as Kevin believes in the absence of subsidized infrastructure. The railroad would still be built, because people want a railroad. What might be different is the specific methods of integration the economy uses, but I think it is a bit pastoral to believe that international trade would not occur. Capital will flow toward efficient uses in a free market, and I think the value gained by way of Ricardo and asymmetries in labor capabilities and wealth would still lead to the private investment in infrastructure. Immobility of goods is simply not efficient. In an unregulated environment, pressures still push to one economy.

Kevin suspects that roads would not be used if people were forced to pay the true cost of their use, but I suspect that roads would simply become better.

[joe]

Kevin, you assume away the efficiencies of having one universally available system of roads. Just in constructions costs, there is a vast economy of scale, compared to the private construction of many roads. Not to mention the lower barriers to entry.

[Kevin Carson]

Just thought I'd pop back into the building for a few minutes and see what's going on.

JDM,

Patents are a whole different issue that a lot of ink has been spilled on on other threads. Suffice it to say, I like patents about as well as transportation subsidies. Trade secrets are well and good; but without patents, there's the possibility of independent development, which is quite plausible when the component technologies prerequisite for a new development are already there and the principle of a hypothetical invention are in the air (e.g. Edison and Tesla). Then too, there's reverse engineering and variant applications of a basic technology.

Jeff Clothier,

I don't by any means favor Balkanization. Just the amount of long-distance trade that is genuinely efficient, when all the costs and benefits are on one balance sheet. Growth may be a psychological imperative, but it's a lot harder when you don't have the help of a government to shift your costs to a third party.

Jason Ligon,

Since we're both engaged in counterfactual speculation, let's just agree to try a free market and see how it turns out. If a corporation can grow to gigantic proportions through entirely non-coercive and voluntary transactions, more power to it.

joe,

But this is another public goods argument: it assumes that the "efficiencies" created by robbing us at gunpoint and using the money to impose a centralized system from the top down, or compelling people to sell land at state-determined prices, outweigh people would have preferred to do with their own money and land. The only standard of what's the best use of someone's own money and land is what he chooses to do with it--i.e., revealed preference. The public good argument requires positing an objective State value scale that's superior to all the petty values of the people who actually want to keep the products of their labor.

Well, tomorrow's a long day, so it's time to leave the building again. I'll check in tomorrow and see what's happening on this thread, if it isn't bumped. 'Night, all.

[Kevin Carson]

So why does a libertarian feel any need to defend the inequality in the present system--as if the present system was even an approximation of a free market, or existing inequality resulted mainly from the free market elements in the system?

If anything, I'd guess that the case is just the opposite. A free market society would be much more decentralized, and its largest corporations would be much smaller. And the largest fortunes would be much more modest. You don't have to look very hard or very long at the largest corporations and the backgrounds of billionaires to see that they are very closely wound up with the State, and that the State has played a big role in their success.

At the same time, the State promotes unemployment by subsizing forms of production that are much more high-tech and capital-intensive than would pay for themselves in a free market, and shutting off many avenues of subsistence and independence for those at the bottom (e.g., the "professionalization" of housing and health-care and attendant prohibition of many D.I.Y. approaches to same, prohibitions on unlicensed trades and jitney services, etc). So the threshold of subsistence would also probably be considerably lower in a free market society.

I find the big divide in libertarians in between those who see the present corporatist system as a proxy for a free market, and feel compelled to defend it; and those who see the present system as fundamentally statist, and aimed at extracting wealth for privieged classes through the "politcal means" rather than production.

[Flapjack]

It is pretty clear that humans are not equal and the Micheal Jordans of the world will make more than factory workers. That seems self-evident.

Kevin: The difference is that many libertarians are radical - seeing the free market as their version of an Marxian utopia - while others are conservative, understanding the the free market ('corporatist') system needs reform, but is probably the best we can hope for presently.

[joe]

Even if the data source has flaws, if the same methods are used year after year, the trends that emerge are still significant.

[fyodor]

joe,

Just on the surface of it, I would say that if a particular data source contains a built-in bias for producing a particular result, that result is suspect no matter how consistently it's produced. Having said that, I have made no effort to try to determine if the data source in quesstion contains any such bias, and thus I have no idea.

[PLC]

Flapjack - another way to put it might be that some libertarians are sane, where-as others are clearly quite insane.

[Kevin Carson]

Flapjack,

The irony, though, is that classical liberalism was founded as a radical populist movement. It sympathized with the producers against the political extraction of wealth by privileged monopolists and quasi-feudal landlords. But a major segment of this movement today is actively apologizing for today's closest analogue to the British landlord of 1830: the state capitalist corporation.

When you compare a genuine free market to a Marxist utopia, are you denying that such a free market would be incomparably fairer and more beneficial to the average person, or simply claiming that it would be very hard to achieve?

If only the latter, I have no fundamental disagreement. A system that makes some people billionaires at other people's expense, at gunpoint, is not just in need of "reform." It is not even an approximation of a free market. It has about as much to do with free markets as the Ministry of Truth had to do with truth.

I'm not at all opposed to piecemeal improvements, or to gradualism. Every step in the right direction is, well, a step in the right direction. But every step in the right direction will make something like Microsoft or Boeing a lot less likely, and make people like David Rockefeller less likely as well. And the further we move in that direction, the fewer billionaires and giant corporations there will be.

A free market is not just the nineteenth-century robber baron era without welfare. If we ever get anywhere near a free market, its appearance will owe a lot more like Karl Hess, Ivan Illich and Colin Ward, than to the American Enterprise Institute.

[Jim]

I dunno - I don't consider myself an anarcholibertarian radical, but I think Kevin's got a good point that many sources of inequality are introduced by restrictions on the free market. Certainly some industries benefit from government regulation and largress and have built up more wealth than they would have otherwise. On the other hand, the original 'robber barons' in America produced massive wealth in times before excessive government interference in the economy, so it's hard to say if overall inequality would increase or decrease in the absence of government interference. I basically view regulation as a form of inefficiency, so while all boats would rise with the tide, some 'waves' would peak lower and some higher, thus increasing inequality at least as measured by the width of the bell curve, if not its shape.

Since we don't actually have a completely free market to measure, we have to use what we have as a proxy anyway so debating it isn't terribly helpful. It also begs the question as to whether inequality is such a bad thing. Thomas Sowell, I believe, has said something to the effect that it is much better to have the vast majority of the population beyond the dangers of starvation and poverty than to worry about who makes more than who.

[Kevin Carson]

Why some people have a lot of money and others have very little was the original subject of this thread, and I'm in favor of eliminating the forms of statist intervention that cause such polarization of wealth; so obviously, I'm not advocating cost-based services in the context of Dickensian England.

And in a society with much narrower disparities of wealth, it's much more likely sidewalks will be put where they do the most good when they're paid for by people who want them enough to put up their own money. (I'm thinking of sidewalks as a cooperative venture of the small businesses on a downtown street, or of the homeowners on a street). Come on, we're not talking about paving them with gold, here!

One of the advantage of market pricing of services is that market demand is much more efficient than any administrative mechanism in determining where the most resources should be allocated.

[joe]

"The only standard of what's the best use of someone's own money and land is what he chooses to do with it--i.e., revealed preference."

The interests and welfare of people without money are just as important as the interests and welfare of those with money. A sidewalk that gets used by 50 people an hour does more good than one used by one person, no matter who pays for it.

[joe]

In short, a public good or service does the same amount of good or harm, regardless of its financing.

[joe]

I just don't see the radical levelling you posit as occuring through anyting but radical, violent political activity, or many thousands of years of social evolution. In the mean time, there are sidewalks to build.

In the world we live in, the one that provides the conditions around which we must make our plans, the market would locate sidewalks based on the wealth of those who would use them, not the number. Your efficiency then becomes a question of the total income of the people who walk on them per day, which can turn out to be very different from the number of people (of any income class) who use them, which is the true measure of the efficiency of the money spent.

[Lewis Danielle]

EMAIL: [e-mail]
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DATE: 01/20/2004 11:43:13
Ideas on Earth are badges of friendship or enmity.