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Hillary Clinton’s Ideological Vortex of Power and Planning by Jeffrey A. Tucker

Just trust her. Truly, just trust her: to know precisely how much energy we ought to use, where it should come from, how it should be generated, how we should get from here to there, and the effects that her plan will have on the global — the global! — climate, not just in the near term but decades or a century from now.

If you do this, you will have embraced “science,” “reality,” “truth,” and “innovation,” and, also, “our children.” If you don’t go along, you not only reject all those good things; you are probably also a “denier,” the catch-all epithet for anyone doubtful that the brilliance of Hillary Clinton and her czars know better than the rest of humanity how to manage their energy needs into the future.

Hillary’s campaign seems designed to prove that F.A. Hayek was a prophet.

That brilliant economist spent 50 years explaining, in book after book, that the greatest danger humanity faced, now and always, was a presumption on the part of intellectuals, politicians, and bureaucrats that they know better than the emergent and evolving wisdom of social forces.

This presumption might seem like science but it is really pretense. Civilization arises from, is protected by, and advances through the dispersed knowledge of billions of individual decision makers and the institutions that arise from them.

Hayek called the issue he was investigating the knowledge problem. Society needs to know how to use scarce resources, how to navigate a world of uncertainty, how to form rules that turn struggle into peace. It is a problem solved through freedom alone. No ruler, no scientist, no intellectual can substitute for the evolving process of decentralized decision making and trial and error.

The message is bad news for people like Hillary, who is supposed to embody the ideology called “liberalism” in America. Yet it is anything but liberal. It seems to know only one way forward: more top-down control. That’s a tough sell in times when everything good so obviously comes from anything but government, and, meanwhile, governments are responsible for every failing sector from health to education to foreign wars.

But here’s the problem. People like Hillary Clinton are stuck in an ideological vortex with no way out. Government planning is their thing, and they refuse to recognize its failures. So they press on and on, even to the point of preposterous implausibility, such as the claim that government can know everything that is necessary to know in order to plan the entire energy sector with the aim of managing the climate of the world.

Economist Donald Boudreaux puts matters this way: “why should someone who cannot ensure the proper use of a single private server be trusted with the colossal power necessary to design and to oversee the remaking of a trillion-plus dollar sector of the U.S. economy (a sector, by the way, in which this person has zero experience)?”

With this presumption comes the inevitable hypocrisy.

After unveiling her plan to ration energy use and plaster the country with solar panels, Ms. Clinton boarded a private jet that uses more fuel in one flight hour than I use in a year. “The aircraft, a Dassault model Falcon 900B, burns 347 gallons of fuel per hour,” wrote the muckraker who did a public service in exposing this. “The Trump-esque transportation costs $5,850 per hour to rent, according to the website of Executive Fliteways, the company that owns it.”

Notice how rarely it is mentioned that the US military, with hundreds of bases in over a hundred countries, is the worst single polluter on the planet. If we really believe in human-caused climate change, this might be a good place to start cutting back. But no, there’s not a word about this in any of Hillary’s plans. Government gets to do what it must do. The rest of us are supposed to pay the price, bicycling to work and powering our homes with sunshine and windmills.

When I first read about her energy plan, my response was: Why would any self-interested politician make the need for reduced living standards a centerpiece of her campaign? After all, her speech was made in a setting piled high with bicycles (oddly reminiscent of Mao’s China), while demanding a precise path forward for energy and everything that uses it (oddly reminiscent of Lenin’s first speech after he took control of Russian economic life).

As it turns out, people aren’t that interested. Sure, most people tell pollsters that they favor renewable energy to stop climate change. You have to say that or else risk being denounced as a denier. On the other hand, it seems like very few people really care enough to forgo the benefits of modern life, which is probably what will save civilization itself from plans like hers. Note that days after release, her pompous video only had only 54K views — pathetic given her celebrity and how much money her campaign is spending, but encouraging that nobody seems to put much stock in her plan for our future.

It’s extraordinary how quickly one branch of the political class has leapt from the delicate and ever-changing science of climate monitoring to the absolute certainty that extreme and extremely specific application of government force is the way to deal with it. Writes Max Borders: “The sacralization of climate is being used as a great loophole in the rule of law, an apology for bad science (and even worse economics), and an excuse to do anything and everything to have and keep power.”

The last point is critical. Everything done in the name of public policy in our lifetimes has become a handful of dust, yielding little more than unpayable debts and unworkable programs, and leaving in its wake an apparatus of compulsion and control that robs society of its inherent genius.

What to do? Give up? That’s not an option for these people. Instead, they find a new frontier for their schemes, a new rationale to sustain a failed model of social and economic organization.

I can think of no better words of rebuke but the closing of Hayek’s Nobel speech in 1974:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Yes, it surely ought to.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Does “I, Pencil” Need a Pro-Government Update? by George C. Leef

In a book I recently read, Complexity and the Art of Public Policy by David Colander and Roland Kupers, I was surprised to find a chapter entitled “I Pencil Revisited.” Yes, they meant Leonard Read’s famous essay showing how market prices and competition work to coordinate production in a way that no single person, however powerful or intelligent, possibly could.

The authors aren’t exactly hostile to Read’s message but say that it leaves out something important — the role of government.

They write,

For me to be produced, someone had to protect the property rights upon which the market is based, someone had to guarantee that the contracts between individuals would be enforced, and someone had to be on the lookout for lead, for the safety of machines, and similar problems, which if not addressed might well lead to a society to undermine the institutional structure that produced me.

And, again writing through the voice of a pencil, Colander and Kupers say,

The reason I, Pencil downplayed government’s role is that he was afraid its inclusion would lead some people to expand the role of government to solve the inevitable problems that come about in coordinating production.

I believe that they are mistaken on that. The reason why Leonard Read focused exclusively on the remarkable story of voluntary market cooperation and did not expand the piece to discuss the proper role of government was that he figured most people already had some understanding of the need to protect property, enforce contracts, and settle disputes.

What very few people had any comprehension of was the way individuals all across the globe are brought into cooperation by the market for pencils.

Going into the role of government in the essay would have been like Mozart adding a few extra movements to his Jupiter Symphony.

Here is why the authors make this argument. They don’t like what they call the “market fundamentalism” of Leonard Read, former FEE president Don Boudreaux, and others (like me) who argue that the people of any society will be the most productive, happiest, and best able to deal with the problems they see if the government is kept only to the functions of protecting the rights of life, liberty, and property.

Instead of laissez-faire, Colander and Kupers favor what they call “laissez-faire activism.”

In short, they want us to believe that there is an ideal middle ground between unsophisticated “market fundamentalism” and top-down government planning and control of the economy. The latter, they understand, is bad because such authority will squelch innovation and competition, but the former supposedly doesn’t do enough to allow people to realize their “collective goals.” Here is a crucial passage:

What simplistic or fundamentalist free market advocates sometimes miss is that a complex system works only if individuals self-regulate, by which we mean that they do not push their freedom too far, and that they make reasonable compromises about benefiting themselves and benefiting society.

Of course, the common law framework that thinkers in the Adam Smith, Frederic Bastiat, Leonard Read line advocated does put limits on individual action. Rights and the sphere of legitimate action are clearly established, and to the extent that people have collective goals, they are free to pursue them voluntarily. But Colander and Kupers think government can and should do just a bit more.

One of their ideas is that government should adopt policies that will “nudge” people to do what they “really want to do,” but can’t sufficiently discipline themselves to do. They extol the book Nudge by Cass Sunstein and Richard Thaler, which purports to show how government can “encourage” people to act in preferable ways, without dictating behavior to them.

But why can’t we rely entirely on voluntary efforts by concerned individuals and organizations to do that encouraging? Churches, for example, have been encouraging people to behave better for millennia; Alcoholics Anonymous has been helping people recover from alcohol abuse since 1935; parents have been “nudging” children to make wiser decisions since time immemorial. Why look to government policy?

Sometimes, the reason why people seem to need “nudging” is that current government policy encourages undesirable behavior. Few Americans save much these days, for instance. But instead of trying to “nudge” them to save more, why not change the tax laws that discourage thrift? Going back towards “laissez-faire fundamentalism” would solve or ameliorate many of our problems.

Moreover, Colander and Kupers ignore the great and, I maintain, insuperable problem of keeping government interference within bounds. If the state has the authority to “nudge” people, what keeps politicians from ratcheting up the power if it doesn’t work? Nudging turns into pushing, then shoving. Interest groups will importune politicians with arguments for policies they favor, crafting them as merely helping “the people” to realize the social goals they “really” favor.

They way democratic politics tends to be captured by interest groups is the big message of Public Choice theory, but Colander and Kupers never think to explain how they’d prevent their “laissez-faire activism” from turning into plain old activism.

After reading Complexity and the Art of Public Policy, I fail to see how government can improve upon capitalism combined with the host of voluntary organizations that spring up in a free society. I, Pencil does not need to be revisited.

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

Gays Need the Freedom to Discriminate by Jeffrey A. Tucker

Gaining the right to be married is a win for liberty because it removes a barrier to free association. But how easily a movement for more freedom turns to the cause of taking away other freedoms!

Following the Supreme Court decision mandating legal same-sex marriage nationwide, the New York Times tells us that, “gay rights leaders have turned their sights to what they see as the next big battle: obtaining federal, state and local legal protections in employment, housing, commerce and other arenas.”

In other words, the state will erect new barriers to freedom of choice in place of the old ones that just came down!

To make the case against such laws, it ought to be enough to refer to the freedom to associate and the freedom to use your property as you see fit. These are fundamental principles of liberalism. A free society permits anything peaceful, and that includes the right to disassociate. Alas, such arguments seem dead on arrival today.

So let us dig a bit deeper to understand why anti-discrimination laws are not in the best interests of gay men and women, or anyone else. Preserving the ability to discriminate permits the market system to provide crucial information feedback to a community seeking to use its buying power to reward its friends and noncoercively, nonviolently punish those who do not share its values.

Ever more, consumers are making choices based on core values. Does this institution protect the environment, treat its workers fairly, support the right political causes? In order to make those choices — which is to say, in order to discriminate — consumers need information.

In the case of gay rights, consumers need to know who supports inclusion and who supports exclusion. Shutting down that information flow through anti-discrimination law robs people of crucial data to make intelligent buying decisions. Moreover, such laws remove the competitive pressure of businesses to prove (and improve) their commitment to community values, because all businesses are ostensibly bound by them.

A market that permits discrimination, even of the invidious sort, allows money and therefore success and profits to be directed toward those who think broadly, while denying money and profitability to those who do not. In this way, a free market nudges society toward ever more tolerant and inclusive attitudes. Money speaks far more persuasively than laws.

Notice that these proposed laws only pertain to the producer and not the consumer. But discrimination is a two-edged sword. The right can be exercised by those who do not like some groups, and it can be exercised by those groups against those who do not like them.

Both are necessary and serve an important social function. They represent peaceful ways of providing social and economic rewards to those who put aside biases in favor of inclusive decision making.

If I’m Catholic and want to support pro-Catholic businesses, I also need to know what businesses don’t like Catholics. If I’m Muslim and only want my dollars supporting my faith, I need to know who won’t serve Muslims (or who will put my dollars to bad use). If a law that prohibits business from refusing to serve or hire people based on religion, how am I supposed to know which businesses deserve my support?

It’s the same with many gay people. They don’t want to trade with companies that discriminate. To act out those values requires some knowledge of business behavior and, in turn, the freedom to discriminate. There is no gain for anyone by passing a universal law mandating only one way of doing business. Mandates drain the virtue out of good behavior and permit bad motivations to hide under the cover of law.

Here is an example from a recent experience. I was using AirBnB to find a place to stay for a friend. He needed a place for a full week, so $1,000 was at stake. The first potential provider I contacted hesitated and began to ask a series of questions that revolved around my friend’s country of origin, ethnicity, and religion. The rental owner was perfectly in his rights to do this. It is his home, and he faces no obligation to open it to all comers.

On the other hand, I found the questions annoying, even offensive. I decided that I didn’t want to do business with this person. I made a few more clicks, cancelled that query, and found another place within a few minutes. The new renter was overjoyed to take in my friend.

I was delighted for two reasons. First, my friend was going to stay at a home that truly wanted him there, and that’s important. Force is never a good basis for commercial relationships. Second, I was able to deny $1K to a man who was, at best, a risk averse and narrow thinker or, at worst, an outright bigot.

Declining to do business with him was my little protest, and it felt good. I wouldn’t want my friend staying with someone who didn’t really want him there, and I was happy not to see resources going toward someone whose values I distrusted.

In this transaction, I was able to provide a reward to the inclusive and broad-minded home owner. It really worked out too: the winning rental property turned out to be perfect for my friend.

This was only possible because the right to discriminate is protected in such transactions (for now). I like to think that the man who asked too many questions felt a bit of remorse after the fact (he lost a lot of money), and even perhaps is right now undergoing a reconsideration of his exclusionary attitudes. Through my own buyer decisions I was actually able to make a contribution toward improving cultural values.

What if anti-discrimination laws had pertained? The man would not have been allowed to ask about national origin, religion, and ethnicity. Presuming he kept his room on the open market, he would have been required under law to accept my bid, regardless of his own values.

As a result, my money would have gone to someone who didn’t have a high regard for my friend, my friend would have been denied crucial information about what he was getting into, and I would not be able to reward people for values I hold dear.

This is precisely why gay rights leaders should be for, not against, the right to discriminate. If you are seeking to create a more tolerant society, you need information that only a free society can provide.

You need to know who is ready to serve and hire gay men and women, so they can be rewarded for their liberality. You also need to know who is unwilling to hire and serve so that the loss part of profit-and-loss can be directed against ill-liberality. Potential employees and customers need to know how they are likely to be treated by a business. Potential new producers need to know about business opportunities in under-served niche markets.

If everyone is forced to serve and hire gays, society is denied important knowledge about who does and does not support enlightened thinking on this topic.

Consider the prototypical case of the baker who doesn’t want to make a wedding cake for a same-sex couple. He is within his rights. His loss of a potential customer base is his own loss. It is also the right of the couple to refuse to give this baker business. The money he would have otherwise made can be redirected towards a baker who is willing to do this. It is equally true that some people would rather trade with a baker who is against gay marriage, and they are within their rights as well.

Every act of discrimination, provided it is open and legal, provides a business opportunity to someone else.

How does all this work itself out in the long run? Commerce tends toward rewarding inclusion, broadness, and liberality. Tribal loyalties, ethnic and religious bigotries, and irrational prejudices are bad for business. The merchant class has been conventionally distrusted by tribalist leaders — from the ancient to the modern world — precisely because merchantcraft tends to break down barriers between groups.

We can see this in American history following the end of slavery. Blacks and whites were ever more integrated through commercial exchange, especially with the advance of transportation technology and rising incomes. This is why the racists turned increasingly toward the state to forbid it. Zoning laws, minimum wage regulation, mandatory segregation, and occupational licensing were all strategies used to keep the races separate even as the market was working toward integration.

The overwhelming tendency of markets is to bring people together, break down prejudices, and persuade people of the benefits of cooperation regardless of class, race, religion, sex/gender, or other arbitrary distinctions. The same is obviously and especially true of sexual orientation. It is the market that rewards people who put aside their biases and seek gains through trade.

This is why states devoted to racialist and hateful policies always resort to violence in control of the marketplace. Ludwig von Mises, himself Jewish and very much the victim of discrimination his entire life, explained that this was the basis for Nazi economic policy. The market was the target of the Nazis because market forces know no race, religion, or nationality.

“Many decades of intensive anti-Semitic propaganda,” Mises  wrote in 1944, “did not succeed in preventing German ‘Aryans’ from buying in shops owned by Jews, from consulting Jewish doctors and lawyers, and from reading books by Jewish authors.” So the racists turned to the totalitarian state — closing and confiscating Jewish business, turning out Jewish academics, and burning Jewish books — in order to severe the social and economic ties between races in Germany.

The biggest enemy of marginal and discriminated-against populations is and has always been the state. The best hope for promoting universal rights and a culture of tolerance is the market economy. The market is the greatest weapon ever devised against bigotry — but, in order to work properly, the market needs to signaling systems rooted in individuals’ freedom of choice to act on their values.

And, to be sure, the market can also provide an outlet for people who desire to push back for a different set of values, perhaps rooted in traditional religious concerns. Hobby Lobby, Chick-Fil-A, In-and-Out Burger, among many others, openly push their religious mission alongside their business, and their customer base is drawn to them for this reason. This is also a good thing. It is far better for these struggles to take place in the market (where choice rules) rather than through politics (where force does).

Trying to game that market by taking away consumer and producer choice harms everyone. Anti-discrimination laws will provide more choices at the expense of more informed choices. Such laws force bigotry underground, shut down opportunities to provide special rewards for tolerance, and disable the social learning process that leads to an ever more inclusive society.

New laws do not fast-track fairness and justice; they take away opportunities to make the world a better place one step at a time.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

“The President that Couldn’t”: Why Obama’s Agenda Failed by Thomas A. Firey

With time running out on his administration, President Obama has embarked on a sort of “apology tour” to disillusioned supporters. They are frustrated that he hasn’t delivered on many of their favored policies, from gun control to single-payer health care to carbon controls.

With candidates queuing up to replace him — many with very different policy goals than his — he apparently feels the need to rally the disaffected behind a successor who would carry on his agenda.

His message to the disheartened supporters is simple: The political failures aren’t his fault. He’s tried hard to deliver, but “Congress doesn’t work” and American government “is broken.” According to Obama:

As mightily as I have struggled against that… it still is broken. … When I ran in 2008, I, in fact, did not say I would fix it. I said we could fix it. I didn’t say, “Yes, I can”; I said — what? … “Yes, we can.”

Washington Post columnist Chris Cillizza, writing about the apology tour, throws some shade at the president, claiming that he did in fact promise to change policy. But ultimately Cillizza agrees with Obama, writing that the American “political system is … more broken than any one person — no matter who that person is or the circumstances that surround that person’s election — could hope to solve.”

But both the president and Cillizza are completely wrong; the American political system assuredly is not broken. The system was designed — and we should all be very grateful that it was designed — to not allow the radical change that Obama’s supporters — or supporters of other politicians across the political spectrum — want.

It is the rare times when such change does occur — think Franklin Roosevelt’s expansion of national government or George W. Bush’s anti-terrorism initiatives and war in Iraq — that American governance had failed and very bad things happen.

Today the United States is a nation of more than 320 million remarkably different people, living in unique situations, having highly individual concerns, desires, and risk preferences, and holding a wide variety of mostly noble values. They each operate in a world of uncertainty and limited resources. Given those dramatically varied circumstances, any national policymaking is likely to harm and anger tens of millions of people.

For that reason, the Framers (who likewise lived in an incredibly diverse nation for their era) designed American government to elevate private action and decentralize governance while limiting national policy to matters of broad consensus and compromise.

Because few of the policy goals advocated by President Obama and his “progressive” supporters have such support or allow for serious compromise (even the signature item that he did manage to enact), it shouldn’t be surprising that few of those goals have been achieved. That doesn’t mean American government is broken — quite the opposite! — but rather that Obama’s conception of governance is.

Perhaps the next president will better appreciate the genius of American government’s design and work within that design for policy change that he or she believes is important. But it’s clear from President Obama’s comments that he is not up to that task.

For the reason, we should all be very grateful that, no, he couldn’t.

Thomas A. Firey

Thomas A. Firey is a Maryland Public Policy Institute senior fellow, and also is managing editor of Regulation magazine, the Cato Institute’s quarterly review of business in government.

EDITORS NOTE: This first appeared at MDpolicy.org.

Against Eco-pessimism: Half a Century of False Bad News by Matt Ridley

Pope Francis’s new encyclical on the environment (Laudato Sii) warns of the coming environmental catastrophe (“unprecedented destruction of ecosystems, with serious consequences for all of us”).  It’s the latest entry in a long literary tradition of environmental doomsday warnings.

In contrast, Matt Ridley, bestselling author of GenomeThe Agile Gene, and The Rational Optimist, who also received the 2012 Julian Simon Memorial Award from the Competitive Enterprise Institute, says this outlook has proven wrong time again. This is the full text of his acceptance speech. Video is embedded below.

It is now 32 years, nearly a third of a century, since Julian Simon nailed his theses to the door of the eco-pessimist church by publishing his famous article in Science magazine: “Resources, Population, Environment: An Oversupply of False Bad News.”

It is also 40 years since The Limits to Growth and 50 years since Silent Spring, plenty long enough to reflect on whether the world has conformed to Malthusian pessimism or Simonian optimism.

Before I go on, I want to remind you just how viciously Simon was attacked for saying that he thought the bad news was being exaggerated and the good news downplayed.

Verbally at least Simon’s treatment was every bit as rough as Martin Luther’s. Simon was called an imbecile, a moron, silly, ignorant, a flat-earther, a member of the far right, a Marxist.

“Could the editors have found someone to review Simon’s manuscript who had to take off his shoes to count to 20?” said Paul Ehrlich.

Erhlich together with John Holdren then launched a blistering critique, accusing Simon of lying about electricity prices having fallen. It turned out they were basing their criticism on a typo in a table, as Simon discovered by calling the table’s author. To which Ehrlich replied: “what scientist would phone the author of a standard source to make sure there were no typos in a series of numbers?”

Answer: one who likes to get his facts right.

Yet for all the invective, his critics have never laid a glove on Julian Simon then or later. I cannot think of a single significant fact, data point or even prediction where he was eventually proved badly wrong. There may be a few trivia that went wrong, but the big things are all right. Read that 1980 article again today and you will see what I mean.

I want to draw a few lessons from Julian Simon’s battle with the Malthusian minotaur, and from my own foolhardy decision to follow in his footsteps – and those of Bjorn Lomborg, Ron Bailey, Indur Goklany, Ian Murray, Myron Ebell and others – into the labyrinth a couple of decades later.

Consider the words of the publisher’s summary of The Limits to Growth: “Will this be the world that your grandchildren will thank you for? A world where industrial production has sunk to zero. Where population has suffered a catastrophic decline. Where the air, sea, and land are polluted beyond redemption. Where civilization is a distant memory. This is the world that the computer forecasts.”

Again and again Simon was right and his critics were wrong.

Would it not be nice if just one of those people who called him names piped up and admitted it? We optimists have won every intellectual argument and yet we have made no difference at all. My daughter’s textbooks trot out the same old Malthusian dirge as mine did.

What makes it so hard to get the message across?

I think it boils down to five adjectives: ahistorical, finite, static, vested and complacent. The eco-pessimist view ignores history, misunderstands finiteness, thinks statically, has a vested interest in doom and is complacent about innovation.

People have very short memories. They are not just ignoring, but unaware of, the poor track record of eco-pessimists. For me, the fact that each of the scares I mentioned above was taken very seriously at the time, attracting the solemn endorsement of the great and the good, should prompt real skepticism about global warming claims today.

That’s what motivated me to start asking to see the actual evidence about climate change. When I did so I could not find one piece of data – as opposed to a model – that shows either unprecedented change or change is that is anywhere close to causing real harm.

Yet when I made this point to a climate scientist recently, he promptly and cheerily said that “the fact that people have been wrong before does not make them wrong this time,” as if this somehow settled the matter for good.

Second, it is enormously hard for people to grasp Simon’s argument that “Incredible as it may seem at first, the term ‘finite’ is not only inappropriate but downright misleading in the context of natural resources.”

He went on: “Because we find new lodes, invent better production methods and discover new substitutes, the ultimate constraint upon our capacity to enjoy unlimited raw materials at acceptable prices is knowledge.” This is a profoundly counterintuitive point.

Yet was there ever a better demonstration of this truth than the shale gas revolution? Shale gas was always there; but what made it a resource, as opposed to not a resource, was knowledge – the practical know-how developed by George Mitchell in Texas. This has transformed the energy picture of the world.

Besides, as I have noted elsewhere, it’s the renewable – infinite – resources that have a habit of running out: whales, white pine forests, buffalo. It’s a startling fact, but no non-renewable resource has yet come close to exhaustion, whereas lots of renewable ones have.

And by the way, have you noticed something about fossil fuels – we are the only creatures that use them. What this means is that when you use oil, coal or gas, you are not competing with other species. When you use timber, or crops or tide, or hydro or even wind, you are.

There is absolutely no doubt that the world’s policy of encouraging the use of bio-energy, whether in the form of timber or ethanol, is bad for wildlife – it competes with wildlife for land, or wood or food.

Imagine a world in which we relied on crops and wood for all our energy and then along comes somebody and says here’s this stuff underground that we can use instead, so we don’t have to steal the biosphere’s lunch.

Imagine no more. That’s precisely what did happen in the industrial revolution.

Third, the Malthusian view is fundamentally static. Julian Simon’s view is fundamentally dynamic. Again and again when I argue with greens I find that they simply do not grasp the reflexive nature of the world, the way in which prices cause the substitution of resources or the dynamic properties of ecosystems – the word equilibrium has no place in ecology.

Take malaria. The eco-pessimists insisted until recently that malaria must get worse in a warming 21st century world. But, as Paul Reiter kept telling them to no avail, this is nonsense. Malaria disappeared from North America, Russia and Europe and retreated dramatically in South America, Asia and Africa in the twentieth century even as the world warmed.

That’s not because the world got less congenial to mosquitoes. It’s because we moved indoors and drained the swamps and used DDT and malaria medications and so on. Human beings are a moving target. They adapt.

But, my fourth point, another reason Simon’s argument fell on stony ground is that so many people had and have a vested interest in doom. Though they hate to admit it, the environmental movement and the scientific community are vigorous, healthy, competitive, cut-throat, free markets in which corporate leviathans compete for donations, grants, subsidies and publicity. The best way of getting all three is to sound the alarm. If it bleeds it leads. Good news is no news.

Imagine how much money you would get if you put out an advert saying: “we now think climate change will be mild and slow, none the less please donate”. The sums concerned are truly staggering. Greenpeace and WWF, the General Motors and Exxon of the green movement, between them raise and spend a billion dollars a year globally. WWF spends $68m alone on educational propaganda. Frankly, Julian, Bjorn, Ron, Indur, Ian, Myron and I are spitting in the wind.

Yet, fifth, ironically, a further problem is complacency. The eco-pessimists are the Panglossians these days, for it is they who think the world will be fine without developing new technologies. Let’s not adopt GM food – let’s stick with pesticides.

Was there ever a more complacent doctrine than the precautionary principle: don’t try anything new until you are sure it is safe? As if the world were perfect. It is we eco-optimists, ironically, who are acutely aware of how miserable this world still is and how much better we could make it – indeed how precariously dependent we are on still inventing ever more new technologies.

I had a good example of this recently debating a climate alarmist. He insisted that the risk from increasing carbon dioxide was acute and that therefore we needed to drastically cut our emissions by 90 percent or so. In vain did I try to point out that drastically cutting emissions by 90% might do more harm to the poor and the rain forest than anything the emissions themselves might do. That we are taking chemotherapy for a cold, putting a tourniquet round our neck to stop a nosebleed.

My old employer, the Economist, is fond of a version of Pascal’s wager – namely that however small the risk of catastrophic climate change, the impact could be so huge that almost any cost is worth bearing to avert it. I have been trying to persuade them that the very same logic applies to emissions reduction.

However small is the risk that emissions reduction will lead to planetary devastation, almost any price is worth paying to prevent that, including the tiny risk that carbon emissions will destabilize the climate. Just look at Haiti to understand that getting rid of fossil fuels is a huge environmental risk.

That’s what I mean by complacency: complacently assuming that we can decarbonize the economy without severe ecological harm, complacently assuming that we can shut down world trade without starving the poor, that we can grow organic crops for seven billion people without destroying the rain forest.

Having paid homage to Julian Simon’s ideas, let me end by disagreeing with him on one thing. At least I think I am disagreeing with him, but I may be wrong.

He made the argument, which was extraordinary and repulsive to me when I first heard it as a young and orthodox eco-pessimist, that the more people in the world, the more invention. That people were brains as well as mouths, solutions as well as problems. Or as somebody once put it: why is the birth of a baby a cause for concern, while the birth of a calf is a cause for hope?

Now there is a version of this argument that – for some peculiar reason – is very popular among academics, namely that the more people there are, the greater the chance that one of them will be a genius, a scientific or technological Messiah.

Occasionally, Julian Simon sounds like he is in this camp. And if he were here today, — and by Zeus, I wish he were – I would try to persuade him that this is not the point, that what counts is not how many people there are but how well they are communicating. I would tell him about the new evidence from Paleolithic Tasmania, from Mesolithic Europe from the Neolithic Pacific, and from the internet today, that it’s trade and exchange that breeds innovation, through the meeting and mating of ideas.

That the lonely inspired genius is a myth, promulgated by Nobel prizes and the patent system. This means that stupid people are just as important as clever ones; that the collective intelligence that gives us incredible improvements in living standards depends on people’s ideas meeting and mating, more than on how many people there are. That’s why a little country like Athens or Genoa or Holland can suddenly lead the world. That’s why mobile telephony and the internet has no inventor, not even Al Gore.

Not surprisingly, academics don’t like this argument. They just can’t get their pointy heads around the idea that ordinary people drive innovation just by exchanging and specializing. I am sure Julian Simon got it, but I feel he was still flirting with the outlier theory instead.

The great human adventure has barely begun. The greenest thing we can do is innovate. The most sustainable thing we can do is change. The only limit is knowledge. Thank you Julian Simon for these insights.

2012 Julian L. Simon Memorial Award Dinner from CEI Video on Vimeo.

Anything Peaceful

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Socialism Is War and War Is Socialism by Steven Horwitz

“[Economic] planning does not accidentally deteriorate into the militarization of the economy; it is the militarization of the economy.… When the story of the Left is seen in this light, the idea of economic planning begins to appear not only accidentally but inherently reactionary. The theory of planning was, from its inception, modeled after feudal and militaristic organizations. Elements of the Left tried to transform it into a radical program, to fit into a progressive revolutionary vision. But it doesn’t fit. Attempts to implement this theory invariably reveal its true nature. The practice of planning is nothing but the militarization of the economy.” — Don Lavoie, National Economic Planning: What Is Left?

Libertarians have long confounded our liberal and conservative friends by being both strongly in favor of free markets and strongly opposed to militarism and foreign intervention. In the conventional world of “right” and “left,” this combination makes no sense. Libertarians are often quick to point out the ways in which free trade, both within and across national borders, creates cooperative interdependencies among those who trade, thereby reducing the likelihood of war. The long classical liberal tradition is full of those who saw the connection between free trade and peace.

But there’s another side to the story, which is that socialism and economic planning have a long and close connection with war and militarization.

As Don Lavoie argues at length in his wonderful and underappreciated 1985 book National Economic Planning: What Is Left?, any attempt to substitute economic planning (whether comprehensive and central or piecemeal and decentralized) for markets inevitably ends up militarizing and regimenting the society. Lavoie points out that this outcome was not an accident. Much of the literature defending economic planning worked from a militaristic model. The “success” of economic planning associated with World War I provided early 20th century planners with a specific historical model from which to operate.

This connection should not surprise those who understand the idea of the market as a spontaneous order. As good economists from Adam Smith to F.A. Hayek and beyond have appreciated, markets are the products of human action but not human design. No one can consciously direct an economy. In fact, Hayek in particular argued that this is true not just of the economy, but of society in general: advanced commercial societies are spontaneous orders along many dimensions.

Market economies have no purpose of their own, or as Hayek put it, they are “ends-independent.” Markets are simply means by which people come together to pursue the various ends that each person or group has. You and I don’t have to agree on which goals are more or less important in order to participate in the market.

The same is true of other spontaneous orders. Consider language. We can both use English to construct sentences even if we wish to communicate different, or contradictory, things with the language.

One implication of seeing the economy as a spontaneous order is that it lacks a “collective purpose.” There is no single scale of values that guides us as a whole, and there is no process by which resources, including human resources, can be marshaled toward those collective purposes.

The absence of such a collective purpose or common scale of values is one factor that explains the connection between war and socialism. They share a desire to remake the spontaneous order of society into an organization with a single scale of values, or a specific purpose. In a war, the overarching goal of defeating the enemy obliterates the ends-independence of the market and requires that hierarchical control be exercised in order to direct resources toward the collective purpose of winning the war.

In socialism, the same holds true. To substitute economic planning for the market is to reorganize the economy to have a single set of ends that guides the planners as they allocate resources. Rather than being connected with each other by a shared set of means, as in private property, contracts, and market exchange, planning connects people by a shared set of ends. Inevitably, this will lead to hierarchy and militarization, because those ends require trying to force people to behave in ways that contribute to the ends’ realization. And as Hayek noted in The Road to Serfdom, it will also lead to government using propaganda to convince the public to share a set of values associated with some ends. We see this tactic in both war and socialism.

As Hayek also pointed out, this is an atavistic desire. It is a way for us to try to recapture the world of our evolutionary past, where we existed in small, homogeneous groups in which hierarchical organization with a common purpose was possible. Deep in our moral instincts is a desire to have the solidarity of a common purpose and to organize resources in a way that enables us to achieve it.

Socialism and war appeal to so many because they tap into an evolved desire to be part of a social order that looks like an extended family: the clan or tribe. Soldiers are not called “bands of brothers” and socialists don’t speak of “a brotherhood of man” by accident. Both groups use the same metaphor because it works. We are susceptible to it because most of our history as human beings was in bands of kin that were largely organized in this way.

Our desire for solidarity is also why calls for central planning on a smaller scale have often tried to claim their cause as the moral equivalent of war. This is true on both the left and right. We have had the War on Poverty, the War on Drugs, and the War on Terror, among others. And we are “fighting,” “combating,” and otherwise at war with our supposedly changing climate — not to mention those thought to be responsible for that change. The war metaphor is the siren song of those who would substitute hierarchy and militarism for decentralized power and peaceful interaction.

Both socialism and war are reactionary, not progressive. They are longings for an evolutionary past long gone, and one in which humans lived lives that were far worse than those we live today. Truly progressive thinking recognizes the limits of humanity’s ability to consciously construct and control the social world. It is humble in seeing how social norms, rules, and institutions that we did not consciously construct enable us to coordinate the actions of billions of anonymous actors in ways that enable them to create incredible complexity, prosperity, and peace.

The right and left do not realize that they are both making the same error. Libertarians understand that the shared processes of spontaneous orders like language and the market can enable all of us to achieve many of our individual desires without any of us dictating those values for others. By contrast, the right and left share a desire to impose their own sets of values on all of us and thereby fashion the world in their own images.

No wonder they don’t understand us.


Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

The Good Life and the Sanction of the Victim by Steven Horwitz

Few libertarian authors generate more heated disagreement than Ayn Rand. Whatever her flaws, she could often be a very sharp observer of human behavior and human culture, and there are ways to put those observations into use beyond politics and in interpersonal relationships instead.

The primary moral message of Atlas Shrugged, I would argue, is the idea that evil has, to a large degree, only the power that its victims grant to it.

Consider the image that provides the book’s title. Francisco D’Anconia asks a party guest,

If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders — what would you tell him to do?

Francisco answers his own question: “To shrug.”

The point here is that Atlas is only a victim because of his willingness to think he is morally obligated to suffer, to continue doing the thing that is crushing him.

This concept is refined further in the book and is best summarized as the importance of “the sanction of the victim.”

In the book’s political economy, this idea refers to the fact that the creators and producers continued to work hard at what they love, even as those around them made it increasingly more difficult to do so.

Like Atlas, the weight of the “looters” continued to bear down on the attempts of the producers to keep the railways and steel factories open. What John Galt does is to try to convince them all that it is time to shrug — to withdraw their sanction from the very code that made them victims.

For most of the main characters in the book, the key moment is when they realize they are complicit in their own unhappiness because they have accepted the moral code of their victimizers. This is why Rand insisted, both in her novels and nonfiction, on the importance of philosophy, and especially ethics.

Characters like Hank Rearden don’t think they need philosophy as they can just continue doing what that they love and ignore the people who try to bring them down. But without philosophy, Rand argues, Hank and the others who Galt tries to get to join him in his strike cannot understand their own victimization.

Choosing to ignore ethics simply allows others to dictate the terms of morality, and to the extent that the producers of the world tacitly or explicitly accept the looters’ morality, they have given them “the sanction of the victim.”

Whether it’s Atlas shrugging, Rearden leaving his unhappy marriage, or capital going on strike, all of them are connected by the refusal to bear a burden that has been self-imposed by accepting without question the (mistaken) moral code of others.

This basic idea also has relevance outside the context of political economy, and understanding it can make your life a better place.

Rearden’s relationship provides one example. If you are in a relationship where it seems impossible to please your partner, despite your best honest efforts to do so, it’s likely to make you miserable. Here is where it’s worth asking if you bear some responsibility by having bought into your partner’s problematic value scale that makes pleasing him or her impossible.

By agreeing to a set of rules that has rigged the game against you, you agree to lose and forgo your own happiness. You have given that person the sanction that turns you into a victim by agreeing to a code that ensures you can never win.

Recognizing this point can improve your life immensely if you simply shrug. Naming what’s happening and refusing to agree to the other person’s rules is the first step to happiness, either by changing the rules or ending the arrangement. But you first must recognize the role played by your passive acceptance of a rigged system.

You can see this idea at work in the office as well. Co-workers who make you miserable often do so because they are able to convince you to play office politics by their rules they created, and those rules are likely to make you the loser. Again, recognizing that you do not need to accept those rules, and sanction the implicit moral code they involve, is the first step in freeing yourself from your victimization.

What Atlas Shrugged ultimately asks us to consider is whether we have thought carefully about the moral rules and ethical principles that we explicitly or implicitly accept. If you are unhappy with your life, and especially with your various professional or interpersonal relationships, it is worth asking whether that unhappiness is of a kind with Atlas trying to carry a weight that he cannot possibly support.

If so, withdraw your sanction of the rules of a rigged game. Shrug off that weight. Find new rules or different players. As Rand emphasized, your happiness is within your grasp if only you recognize your role in making it possible:

Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the not-quite, the not-yet, and the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved and have never been able to reach. The world you desire can be won, it exists, it is real, it is possible, it’s yours.

Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

Decentralization: Why Dumb Networks Are Better

The smart choice is innovation at the edge by ANDREAS ANTONOPOULOS…

“Every device employed to bolster individual freedom must have as its chief purpose the impairment of the absoluteness of power.” — Eric Hoffer

In computer and communications networks, decentralization leads to faster innovation, greater openness, and lower cost. Decentralization creates the conditions for competition and diversity in the services the network provides.

But how can you tell if a network is decentralized, and what makes it more likely to be decentralized? Network “intelligence” is the characteristic that differentiates centralized from decentralized networks — but in a way that is surprising and counterintuitive.

Some networks are “smart.” They offer sophisticated services that can be delivered to very simple end-user devices on the “edge” of the network. Other networks are “dumb” — they offer only a very basic service and require that the end-user devices are intelligent. What’s smart about dumb networks is that they push innovation to the edge, giving end-users control over the pace and direction of innovation. Simplicity at the center allows for complexity at the edge, which fosters the vast decentralization of services.

Surprisingly, then, “dumb” networks are the smart choice for innovation and freedom.

The telephone network used to be a smart network supporting dumb devices (telephones). All the intelligence in the telephone network and all the services were contained in the phone company’s switching buildings. The telephone on the consumer’s kitchen table was little more than a speaker and a microphone. Even the most advanced touch-tone telephones were still pretty simple devices, depending entirely on the network services they could “request” through beeping the right tones.

In a smart network like that, there is no room for innovation at the edge. Sure, you can make a phone look like a cheeseburger or a banana, but you can’t change the services it offers. The services depend entirely on the central switches owned by the phone company. Centralized innovation means slow innovation. It also means innovation directed by the goals of a single company. As a result, anything that doesn’t seem to fit the vision of the company that owns the network is rejected or even actively fought.

In fact, until 1968, AT&T restricted the devices allowed on the network to a handful of approved devices. In 1968, in a landmark decision, the FCC ruled in favor of the Carterfone, an acoustic coupler device for connecting two-way radios to telephones, opening the door for any consumer device that didn’t “cause harm to the system.”

That ruling paved the way for the answering machine, the fax machine, and the modem. But even with the ability to connect smarter devices to the edge, it wasn’t until the modem that innovation really accelerated. The modem represented a complete inversion of the architecture: all the intelligence was moved to the edge, and the phone network was used only as an underlying “dumb” network to carry the data.

Did the telecommunications companies welcome this development? Of course not! They fought it for nearly a decade, using regulation, lobbying, and legal threats against the new competition. In some countries, modem calls across international lines were automatically disconnected to prevent competition in the lucrative long-distance market. In the end, the Internet won. Now, almost the entire phone network runs as an app on top of the Internet.

The Internet is a dumb network, which is its defining and most valuable feature. The Internet’s protocol (transmission control protocol/Internet protocol, or TCP/IP) doesn’t offer “services.” It doesn’t make decisions about content. It doesn’t distinguish between photos and text, video and audio. It doesn’t have a list of approved applications. It doesn’t even distinguish between client and server, user and host, or individual versus corporation. Every IP address is an equal peer.

TCP/IP acts as an efficient pipeline, moving data from one point to another. Over time, it has had some minor adjustments to offer some differentiated “quality of service” capabilities, but other than that, it remains, for the most part, a dumb data pipeline. Almost all the intelligence is on the edge — all the services, all the applications are created on the edge-devices. Creating a new application does not involve changing the network. The Web, voice, video, and social media were all created as applications on the edge without any need to modify the Internet protocol.

So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge. Applications that only have two participants only need two devices to support them, and they can run on the Internet. Contrast that to the telephone network where a new “service,” like caller ID, had to be built and deployed on every company switch, incurring maintenance cost for every subscriber. So only the most popular, profitable, and widely used services got deployed.

The financial services industry is built on top of many highly specialized and service-specific networks. Most of these are layered atop the Internet, but they are architected as closed, centralized, and “smart” networks with limited intelligence on the edge.

Take, for example, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international wire transfer network. The consortium behind SWIFT has built a closed network of member banks that offers specific services: secure messages, mostly payment orders. Only banks can be members, and the network services are highly centralized.

The SWIFT network is just one of dozens of single-purpose, tightly controlled, and closed networks offered to financial services companies such as banks, brokerage firms, and exchanges. All these networks mediate the services by interposing the service provider between the “users,” and they allow minimal innovation or differentiation at the edge — that is, they are smart networks serving mostly dumb devices.

Bitcoin is the Internet of money. It offers a basic dumb network that connects peers from anywhere in the world. The bitcoin network itself does not define any financial services or applications. It doesn’t require membership registration or identification. It doesn’t control the types of devices or applications that can live on its edge. Bitcoin offers one service: securely time-stamped scripted transactions. Everything else is built on the edge-devices as an application. Bitcoin allows any application to be developed independently, without permission, on the edge of the network. A developer can create a new application using the transactional service as a platform and deploy it on any device. Even niche applications with few users — applications never envisioned by the bitcoin protocol creator — can be built and deployed.

Almost any network architecture can be inverted. You can build a closed network on top of an open network or vice versa, although it is easier to centralize than to decentralize. The modem inverted the phone network, giving us the Internet. The banks have built closed network systems on top of the decentralized Internet. Now bitcoin provides an open network platform for financial services on top of the open and decentralized Internet. The financial services built on top of bitcoin are themselves open because they are not “services” delivered by the network; they are “apps” running on top of the network. This arrangement opens a market for applications, putting the end user in a position of power to choose the right application without restrictions.

What happens when an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network? A tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives. We saw that with the Internet, as traditional telecommunications services were reinvented with email, instant messaging, and video calls.

This first wave is also characterized by disintermediation — the removal of entire layers of intermediaries who are no longer necessary. With the Internet, this meant replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, bitcoin will create a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete. The big difference is that some of these disintermediated layers are multibillion dollar industries that are no longer needed.

Beyond the first wave of innovation, which simply replaces existing services, is another wave that begins to build the applications that were impossible with the previous centralized network. The second wave doesn’t just create applications that compare to existing services; it spawns new industries on the basis of applications that were previously too expensive or too difficult to scale. By eliminating friction in payments, bitcoin doesn’t just make better payments; it introduces market mechanisms and price discovery to economic activities that were too small or inefficient under the previous cost structure.

We used to think “smart” networks would deliver the most value, but making the network “dumb” enabled a massive wave of innovation. Intelligence at the edge brings choice, freedom, and experimentation without permission. In networks, “dumb” is better.

ABOUT ANDREAS ANTONOPOULOS

Andreas M. Antonopoulos is a technologist and serial entrepreneur who advises companies on the use of technology and decentralized digital currencies such as bitcoin.