I will collect here links to various articles or discussions about how authors, etc. can make money without relying on the copyright monopoly model. Please feel free to email suggestions or add them to the comments; I’ll update this post from time to time.

• Writers Can Prosper Without Intellectual Property, by Gennady Stolyarov II
• Reminder: Big Concerts Are Not All Of The Live Music Business
• Murakami Releases His Own eBook Without His Publisher
• Tom Palmer, Technological Alternatives to Patents and Copyrights
• Techdirt, Reinventing Book Publishing: Building Real Communities, And Only Holding Rights For Three Years
• The Creator-Endorsed Mark as an Alternative to Copyright
• Would the Absence of Copyright Laws Significantly Affect the Quality and Quantity of Literary Output?, Julio H. Cole
• Boldrin and Levine Against Intellectual Monopoly
• Power to the Pixel 2009: Nina Paley (Youtube: A FREE DISTRIBUTION CASE STUDY: SITA SINGS THE BLUES: If its free, how do you make money? Seven months after the Copyleft release of her animated musical feature Sita Sings the Blues, Nina Paley presents the second round of hard data from the project. The more the audience freely shares the film, the more they purchase DVDs, theatre admissions and merchandise. See the ££ numbers that prove it.) See also Paley’s interview on FreeTalk Live on 7/28/10 (last 20 minutes or so); Understanding Free Content; and What’s Stopping You? (Competition as free market research)
• Johanna Blakley: Lessons from fashion’s free culture (TED Talk)

The question of how to objectively determine damages for negligence (tort) in a libertarian system often arises. There is not much solid, libertarian analysis out there on this issue–the answers are usually either positivistic and assume some presumptive validity of common law rules; or they are libertarian but without much mooring in any coherent libertarian legal theory.

I don’t have a fully-developed view of this but I have touched on these matters in some publications and have always meant to return to this issue. I haven’t done so yet, but given the lack of much systematic libertarian treatment of this I will set forth below some tentative thoughts on how to approach this issue.

Restitution and the Right to Punish

First, note that the right to punish can serve to help make restitution more objective. As I argued in Knowledge, Calculation, Conflict, and Law, a review essay of Randy Barnett’s The Structure of Liberty, “It is … more costly to seek punishment than to seek restitution. For this and other reasons, restitution would probably become the predominant mode of justice in a free society.” However, as I explain there and elaborate in Inalienability and Punishment and Punishment and Proportionality,

Nevertheless, acknowledging (and justifying) the theoretical legitimacy of punishment can be useful. For example, punishment (or a theory of punishment) may be utilized to reach a more objective determination of the proper amount of restitution, because a serious aggression leads to the right to inflict more severe punishment on the aggressor, which would thus tend to be traded for a higher average amount of ransom or restitution than for comparatively minor crimes. Especially offended victims will tend to bargain for a higher ransom; and richer aggressors will tend to be willing to pay more ransom to avoid the punishment the victim has a right to inflict, thereby solving the so-called “millionaire” problem faced under a pure restitution system (where a rich man may commit crimes with impunity, since he can simply pay easily-affordable restitution after committing the crime).

Moreover, even if punishment is banned (de facto or de jure) and is not an actual option–because of the possibility of mistakenly punishing innocents, say–an award of restitution can be based on the model of punishment. To-wit: a jury could be instructed to award the victim an amount of money it believes he could bargain for, given all the circumstances, if he could threaten to proportionately punish the aggressor. This can lead to more just and objective restitution awards than would result if the jury is simply told to award the amount of damages it “feels” is “fair.”

This latter point is significant because, as noted above, restitution based on the idea of restoring the victim is often impossible, and thus meaningless; for this reason, those advocating restitution usually are vague about the proper standard (since there is no proper standard), or just “punt” it to the juries or courts, much like Congress does when it uses vague terms in statutes or Constitutions such as “accommodate” in the Americans with Disabilities Act or “privileges or immunities” in the Fourteenth Amendment.

(Further elaboration may be found in my post Fraud, Restitution, and Retaliation: The Libertarian Approach.)

Also, as noted above (see also “Wouldn’t Rich People Go On Murder Sprees In a System of Private Law?”: Reply to Bob Murphy), the punishment-based approach solves the “rich man” problem that some libertarians complain about but are unable to solve.

Intentionality, Threats, Fraud and Incitement

Notice that crime is thus viewed as an intentional action: action employing means selected to achieve the end of invading the property or body of another person. Viewing it this way helps also to solve other issues that sometimes vex libertarians. For example libertarians often throw “threats” and “fraud” into the list of things that libertarianism prohibits–aggression, the threat of aggression, and fraud. It is clear to most libertarians why, or at least that, we are against aggression; but it is not immediately clear why, or how, threats, or fraud, are types of aggression.

Fraud

I as explain in Fraud, Restitution, and Retaliation and The Problem with “Fraud”: Fraud, Threat, and Contract Breach as Types of Aggression, for the libertarian, fraud is a type of aggression (namely, theft), just because it is a means by which one party receives or uses or takes the property of someone else without their consent–and there is failure of consent because the first party’s misrepresentation meant that one of the conditions to transfer of title was not satisfied. To understand this, you have to have a clear grasp of the Evers-Rothbard title-transfer theory of contract. (See A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability.)

See also The Libertarian View on Fine Print, Shrinkwrap, Clickwrap, for examples of how clear understanding of libertarian property and contract principles help solve these issues too.

Threats

As noted in Fraud, Restitution, and Retaliation and The Problem with “Fraud”: Fraud, Threat, and Contract Breach as Types of Aggression, I tried to show, in Punishment and Proportionality: The Estoppel Approach (pp. 68-69), why threats can be a form of aggression (see also this version of the Punishment article, p. 639, section “Why Assault and Threats Are Aggression”). The basic idea is that a threat (“assault”) is either the attempt at aggression, or action that puts a victim in fear of receiving a battery (aggression). By the logic of estoppel (based on the same symmetry that permeates the libertarian non-aggression principle), the victim is entitled to do to the threatener what he did to the victim. But (as elaborated in those linked articles) the only way for the victim to have the right to attempt to use force against the threatener is to actually have the right to carry through with it; and the only way for him to have the right to put the threatener in fear of receiving a battery is to have the right to do it (otherwise the threatener knows it’s just play-acting and won’t be afraid).

So, a clear understanding of rights and the right to punish, combined with a libertarian focus on the non-aggression principle and related symmetry, helps clarify the threat issue too.

(See also my post The Limits of Armchair Theorizing: The case of Threats.)

Incitement

This issue continually confounds libertarians. Some say incitement is never a crime; others say that an indirect actor is liable only if he pays the direct actor, or is coercing him. Pat Tinsley and I discuss in our Causation and Aggression. We point out that, first, many such views are based on the fallacious notion that only one person is liable: if you blame the boss, you absolve the underling; or that there is a fixed amount of liability to be divided between the two. Some accept mainstream, positive law reasoning on this and believe that if there is a human in the chain of causation between the boss/indirect actor, and the victim, the boss is absolved. Nonsense. There is no fixed amount of liability; it can be joint and several. And humans can be means to action to. And there is no need to limit responsibility to the case of a contract or coercion.

But the point for our purposes here is the recognition that a crime is an action: it is the use of (efficacious) means to cause the invasion of the borders of others’ property. The means can be anything efficacious, including inanimate scarce resources, or even other people.

Strict Liability

One more brief point before turning to liability for negligence. Many libertarians seem to assume the validity of some kind of “strict liability.” They say this with respect to property, when they assume that the owner “is responsible” for harm that is done by or with his property.

I believe this an unjustified assumption, and is based on lack of careful analysis of property rights. Property is the right to use or control a scarce resource. It is not immediately clear why the right to use would imply obligations. Thinking this way clouds other property-related issues like IP. People say, for example, that IP is not problematic just because it limits what you can do with your own property–after all, your rights in your property are not unlimited, since you can’t use your property to commit aggression against others.

This latter phrase is said repeatedly by libertarians. I can’t count how many times I’ve heard it over the years. The problem is it improperly links the prohibition on aggression to ownership of one’s own property, thus implying that property rights are limited. But a crime is simply an action, and actions employ means. But the actor does not need to own the means. If I steal A’s handgun to shoot B, I am the murderer, not A. I violated A’s right to control the gun; but A’s right to the gun does not make him the murderer. We can see that the idea of strict liability as it applies to “responsibility for owned things” is deeply flawed.

In other words, just because you have no right to commit aggression (via any means, whether the means are your owned property or not, or even other humans, whether owned or not) does not mean that property rights are “limited.” The non-aggression principle limits what actions you are permitted to engage in. And since inanimate property does not act by itself, then it never commits crimes. It is people who commit crimes. If the owner commits a crime, he is liable, whether he uses his own property or not. But if another person uses my property to commit a crime, why should I be liable? It was not my action. Therefore, we can see that the assumption that “ownership implies responsibility” is relatively mindless, unthinking, and useless.

Torts/Negligence

I bring the foregoing up because it helps illuminate how to approach negligence. Sometimes negligence is treated as strict liability; but as noted above, there are some problems with strict liability; and there are problems with divorcing wrongful action from intentionality on the part of the wrongdoer. A wrongdoer is someone who intentionally causes harm or does something that gives the victim or recipient of the action a right to forcefully respond. This is true in the case of aggression (self-defense or retaliation); threats (the action of attempting harm, or making someone fearful of receiving a battery gives rise to a right to use force in response); fraud (the defrauder intentionally and knowingly takes property of the victim without the victim’s genuine consent); incitement (the boss uses other humans as a means to cause a victim’s borders to be invaded).

So how should we view negligence? I believe it should be viewed as being on a spectrum between non-action or mere behavior, and fully intentional action (crime). It is “partially” intentional. As I noted Causation and Aggression (note 11 and accompanying text):

… when we ask if someone was the cause of a certain aggression, we are asking whether the actor did choose and employ means to attain the prohibited result. For there to be “cause” in this sense, obviously there has to be cause-in-fact—this is implied by the notion of the means employed “attaining” or resulting in the actor’s end. Intentionality is also a factor, because action has to be intentional to be an action (the means is chosen and employed intentionally; the actor intends to achieve a given end).11

11. Notice that this analysis helps to explain why damages or punishment is greater for intentional crimes than for negligent torts that result in similar damage. For example, punishment is an action: it is intentional and aims at punishing the body of the aggressor or tortfeasor. In punishing a criminal, the punishment is justified because the criminal himself intentionally violated the borders of the victim; the punishment is therefore symmetrical …. However, in punishing a mere tortfeasor, the punishment is fully intentionally, but the negligent action being punished is only “partially” intentional. Therefore punishing a tortfeasor can be disproportionate; it would be symmetrical only if the punishment were also “partially” intentional. But punishment cannot be partially intentional; therefore, the damages inflicted (or extracted) have to be reduced to make the punishment more proportionate.

If this analysis is right, the “strict liability” approach that would treat the damages from murder the same as for manslaughter is wrong. Thus, in my approach, given that the right to punishment is the standard for fully intentional torts (crimes), and helps arrive at an objective determination of damages–you just back off of this by determining how intentional (negligent) the tort was. For example, for an act of fully (100%) intentional murder, then the heirs have a right to kill the murderer in revenge. They have this right because it is symmetrical: the murderer intended, and caused, the death of the victim; the victim’s agents are doing this back to him: they are intending to kill him. So that can be used to bargain for some kind of ransom, e.g. wergeld (see also David Friedman on this).

If you kill someone out of negligence, it’s not 100% intentional; but retaliation necessarily is. So killing the tortfeasor is disproportionate. For example say you did something that had a 10% chance of killing the victim. So the punishment is 100% certain, so the severity of punishment has to itself be reduced by 90% to make it balance out. So you have a right to (say) chop off someone’s arm. Then you use that as a bargaining chip (or model) to get damages from that, which would be (say) 10% of the standard wergeld.

[Mises Blog cross-post]

At Recovery or Stagnation?, a Mises Circle held in San Francisco on August 29, 2009, there was a great Speakers’ Panel featuring Walter Block, Thomas DiLorenzo, Douglas French, and Robert Murphy. Great comments on the current financial mess.

One thing that especially interested me were Walter Block’s comments from about 12:45 to 13:35, where he distinguishes between economic theory and one’s ability to predict or forecast. Sure, having a sound understanding of theory can help, but it cannot make your predictions foolproof. For example one’s understanding of the business cycle might lead you to recommend buying gold; but then the state might confiscate gold soon after that.

This brings to mind some discussions I’ve had about the nature of economics and its role in investing or forecasting. My view is the Misesian-Rothbardian-Hoppean one, which I understand to be that the future is uncertain, but not radically so; that knowledge of economics laws can help, ceteris paribus–but that usually other factors are dominant. The skill of forecasting is called the understanding, or verstehen; but it is not merely “luck,” as some in thrall to monism-scientism are wont to deride it. Peter Klein mentioned to me that the question of why or how someone has the better skill at forecasting is really meta-economics–more of a psychological field, which is studied at Effectuation, from a Kirznerian perspective. It could be that one reason Austrian investors don’t dominate is that economic understanding only gives you a second order marginal advantage over others, that psychological or other factors are more important.

In other words, the better your economic understanding, the better a forecaster you can be. The future, while uncertain, is not radically so, and knowledge of economics helps constrain the possibilities. So ceteris paribus a better economics would be a better investor. The problem is the ceteris is not usually that paribus; that economic knowledge is only a small factor of investing success, since it depends also on other factors, which apparently usually tend to dominate-other factors such as the possession of capital to invest; your access to certain knowledge or data; and your investing ability or knack, the leftover part that is more art, that Mises called verstehen. Possible, in times of a typical Austrian business cycle bust, sound economics could play a bigger role in one’s ability to forecast, which could explain why Austrians like Schiff and others are standing out right now.

See also Peter Klein’s work on the nature of entrepreneurship, e.g. his Opportunity discovery, entrepreneurial action, and economic organization:

Abstract: This article reviews and critiques the opportunity discovery approach to entrepreneurship and argues that entrepreneurship can be more thoroughly grounded, and more closely linked to more general problems of economic organization by adopting the Cantillon-Knight-Mises understanding of entrepreneurship as judgment. The article begins by distinguishing among occupational, structural, and functional approaches to entrepreneurship and distinguishing among two influential interpretations of the entrepreneurial function – discovery and judgment. It turns next to the contemporary literature on opportunity identification and argues that this literature misinterprets Kirzner’s instrumental use of the discovery metaphor and mistakenly makes opportunities the unit of analysis. The article then describes an alternative approach in which investment is the unit of analysis and link this approach to Austrian capital theory. I close with some applications to organizational form and entrepreneurial teams.

Some more good quotes on this from (what I think of as) the High Austrians:

Rothbard, Praxeology as the Method of the Social Sciences:

For the praxeologist, forecasting is a task very similar to the work of the historian. The latter attempts to “predict” the events of the past by explaining their antecedent causes; similarly, the forecaster attempts to predict the events of the future on the basis of present and past events already known. He uses all his nomothetic knowledge, economic, political, military, psychological, and technological; but at best his work is an art rather than an exact science. Thus, some forecasters will inevitably be better than others, and the superior forecasters will make the more successful entrepreneurs, speculators, generals, and bettors on elections or football games.

The economic forecaster, as Professor Jewkes pointed out, is only looking at part of a tangled and complex social whole. To return to our original example, when he attempts to forecast the price of butter he must take into consideration the qualitative economic law that price depends directly on demand and inversely on supply; it is then up to him, using knowledge and insight into general economic conditions as well as the specific economic, technological, political, and climatological conditions of the butter market, as well as the values people are likely to place on butter, to try to forecast the movements of the supply and demand of butter, and therefore its price, as accurately as possible. At best, he will have nothing like a perfect score, for he will run aground on the fact of free will altering values and choices , and the consequent impossibility of making exact predictions of the future.

Hoppe, Economic Science and the Austrian Method:

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

In fact, the reason why the social and economic future cannot be regarded as entirely and absolutely uncertain should not be too hard to understand: The impossibility of causal predictions in the field of action was proven by means of an a priori argument. And this argument incorporated a priori true knowledge about actions as such: that they cannot be conceived of as governed by time-invariantly operating causes.

Thus, while economic forecasting will indeed always be a systematically unteachable art, it is at the same time true that all economic forecasts must be thought of as being constrained by the existence of a priori knowledge about actions as such. [37]

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

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

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

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

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

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

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

Hoppe continued (on uncertainty):

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

Hoppe continued (on knowledge):

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

Hoppe continued (on radical uncertainty):

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

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

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

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

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

Mises, Human Action:

Understanding is not a privilege of the historians. It is everybody’s business. In observing the conditions of his environment everybody is a historian. Everybody uses understanding in dealing with the uncertainty of future events to which he must adjust his own actions. The distinctive reasoning of the speculator is an understanding of the relevance of the various factors determining future events. And–let us emphasize it even at this early point of our investigations–action necessarily always aims at future and therefore uncertain conditions and thus is always speculation. Acting man looks, as it were, with the eyes of a historian into the future.

Mises:

VI. UNCERTAINTY
7. Praxeological Prediction

Praxeological knowledge makes it possible to predict with apodictic certainty the outcome of various modes of action. But, of course, such prediction can never imply anything regarding quantitative matters. Quantitative problems are in the field of human action open to no other elucidation than that by understanding.

We can predict, as will be shown later, that?–other things being equal?–a fall in the demand for a will result in a drop in the price of a. But we cannot predict the extent of this drop. This question can be answered only by understanding.

The fundamental deficiency implied in every quantitative approach to economic problems consists in the neglect of the fact that there are no constant relations between what are called economic dimensions. There is neither constancy nor continuity in the valuations and in the formation of exchange ratios between various commodities. Every new datum brings about a reshuffling of the whole price structure. Understanding, by trying to grasp what is going on in the minds of the men concerned, can approach the problem of forecasting future conditions. We may call its methods unsatisfactory and the positivists may arrogantly scorn it. But such arbitrary judgments must not and cannot obscure the fact that understanding is the only appropriate method of dealing with the uncertainty of future conditions.

Salerno: Mises and Hayek Dehomogenized:

For Mises, human action, whether isolated or involving monetary exchange, is always motivated by the eagerness of the actor to enhance his welfare and consists of choosing among alternative employments of resources whose necessarily future results are not known with certainty. Because the choice process logically implies uncertainty–choice and action would be obviously futile in a world where humans are predestined to endure a rigidly unchangeable sequence of future events known with perfect certainty–the prerequisite of any specific act of choice is the acquisition of knowledge, via direct experience or from other sources of information, about the events and prevailing circumstances of the recent past that may be relevant in formulating an “understanding” of the future conditions upon which the actions under consideration will impinge.

Mises: http://www.mises.org/humanaction/chap15sec8.asp

Like every acting man, the entrepreneur is always a speculator. He deals with the uncertain conditions of the future. His success or failure depends on the correctness of his anticipation of uncertain events. If he fails in his understanding of things to come, he is doomed. The only source from which an entrepreneur’s profits stem is his ability to anticipate better than other people the future demand of the consumers.

Note Mises and the other Austrians are careful not to speak of knowledge of the (uncertain) future, but verstehen/understanding, judgment, anticipation, forecast.

Hülsmann, Knowledge, Judgement, and the Use of Property:

to choose correctly does not mean that one has experienced all relevant data, but that one acts according to a correct judgment upon these data … Entrepreneurial appraisements of the factors of production do not presuppose information about the future. They are judgments based on estimates, that is, judgments about the future.

… the conditions of action are not immutable. Rather, they change from day to day. Here lies the problem of the application of past knowledge. We have to judge whether the same conditions will prevail in the future as well. To this task all our empirical knowledge is of no help. … No past experience tells us what we should expect for the future to come. Neither can it tell us which actions we should choose. … Each action presupposes an ingredient that is entirely distinct from knowledge and information, namely, a judgment upon the conditions prevailing in the future.

The market process is thus inextricably linked to choice and action. Knowledge and communication, on the other hand, are secondary.

(For additional, related quotes, see also my post Knowledge vs. Calculation.)

Henry Hazlitt, in his review of a Kirzner book:

It is not always true that the entrepreneur perceives an opportunity. He thinks he perceives it He perceives an apparent opportunity. In fact, he is betting on an assumed future condition. What he acts on may not be a perception but a guess. As Kirzner himself concedes, … , the entrepreneur’s action “must to some extent constitute a gamble.” … Every entrepreneur is pitting his own guess or ‘perception’ against the composite guess or perception of all the rest.

[Mises cross-post]

A 1982 article, The Impossibility of anarcho-capitalism, was recently called to my attention. In it, the author, one Tony Hollick, argues that the “components” of anarcho-capitalism are:

1. A belief that a fully-fledged free-market private property based social order can be realised and maintained without the existence of a single, finally arbitrary system of lawmaking and enforcement which asserts jurisdiction over non-consenting parties.
2. A preference for the imagined advantages of that social order however conceived.
3. A willingness to advocate attempts to instantiate it as an actual experiment in the more or less foreseeable future.

This type of argument is typical of those who want to argue for states and the aggression states commit, while still adopting the libertarian label. It is a way of changing to subject away from the aggression they favor, by insinuating the presumption that the anarchist is for something, and thus needs to prove it before we abandon the current (statist) order and “adopt” the system known as anarchy. This approach tries to color anarchy as just one of many prima facie equally valid competing possible systems. Anarchists have the burden of proving we should “adopt” it just like a socialist bears the burden of proving we should adopt socialism. Thus, it is not surprising Hollick concludes, “One can only be struck by the similarities between ‘socialism’ and ‘anarchism’. Partisans of every kind rush to show that their vision is uniquely realisable; and the visions cover the entire range of mutually contradictory systems and practices.”

But, of course, anarchists don’t advocate a “substitute system”. We are not for something, other than respect for rights. Rather, we are an-archist, “without (belief in) (political) rulers.” We simply are not persuaded that political action is justified. This is because we see that states by their nature commit aggression–and as we are libertarians and against aggression (see my What Libertarianism Is), we are thus against states.

In other words, to be an anarcho-libertarian is simply to be opposed to aggression, and to recognize that states are inherently aggressive. It does not mean, for example, as Hollick asserts, that we anarchists, qua-anarchist, maintain “A belief that a fully-fledged free-market private property based social order can be realised and maintained without [whatever].” The anarchist is not someone who has a belief about “what will work”. Rather, he is someone who opposes aggression in all its forms. As I explained in What It Means to be an Anarcho-Capitalist:

Conservative and minarchist-libertarian criticism of anarchy on the grounds that it won’t “work” or is not “practical” is just confused. Anarchists don’t (necessarily) predict anarchy will be achieved – I for one don’t think it will. But that does not mean states are justified.

Consider an analogy. Conservatives and libertarians all agree that private crime (murder, robbery, rape) is unjustified, and “should” not occur. Yet no matter how good most men become, there will always be at least some small element who will resort to crime. Crime will always be with us. Yet we still condemn crime and work to reduce it.

Is it logically possible that there could be no crime? Sure. Everyone could voluntarily choose to respect others’ rights. Then there would be no crime. It’s easy to imagine. But given our experience with human nature and interaction, it is safe to say that there will always be crime. Nevertheless, we still proclaim crime to be evil and unjustified, in the face of the inevitability of its recurrence. So to my claim that crime is immoral, it would just be stupid and/or insincere to reply, “but that’s an impractical view” or “but that won’t work,” “since there will always be crime.” The fact that there will always be crime – that not everyone will voluntarily respect others’ rights – does not mean that it’s “impractical” to oppose it; nor does it mean that crime is justified. It does not mean there is some “flaw” in the proposition that crime is wrong.

Likewise, to my claim that the state and its aggression is unjustified, it is disingenuous and/or confused to reply, “anarchy won’t work” or is “impractical” or “unlikely to ever occur.” The view that the state is unjustified is a normative or ethical position. The fact that not enough people are willing to respect their neighbors’ rights to allow anarchy to emerge, i.e., the fact that enough people (erroneously) support the legitimacy of the state to permit it to exist, does not mean that the state, and its aggression, are justified.

In other words, it just won’t do for Hollick to attack anarcho-libertarianism by arguing we haven’t shown that “a fully-fledged free-market private property based social order can be realised and maintained without [whatever]“. In fact, since anarcho-libertarianism just means stringent opposition to aggression, to attack anti-aggressionism just is to defend aggression. And you can’t justify aggression by alleging that libertarians have not proved that a private property order can “work.” What kind of argument is that? “Sir, why are you robbing me? Why are you entitled to do this?” “Why, because you haven’t proved that a private property order can work, that’s why!”

Update:

Stephan Kinsella

Russ, “I believe that anarchism will result in more violations of rights than a minarchist state will, hence I reject it.”

This is a pretty way of covering up the fact that you are advocating aggression. Instead of saying outright, “I favor some aggression to stop worse aggression; to make an omelet you have to break a few eggs,” you say “I reject anarchy.” Sounds nicer. You are doing just what Hollick does: you set it up as if the anarchist is making a case for which the burden is on him to defend. As if he has to justify his view that aggression is unjustified.

What you are saying is that you are against a situation in which there is no aggression, because you think if there is no aggression, that will somehow result in … more violations of rights than occur where there is institutionalized aggression. I see. Got it.

Let me ask you this, Russ: are you against all private crime (aggression), or only against some private crime? I mean, how can one be against all private crime–that’s “naive,” right? After all, who really thinks that would “work”? Who really thinks we will ever have a crime-free world? How can you oppose something if it is bound to occur? Right?

Me, I despise crime and criminals, and apologists for either.

Published: August 20, 2009 9:51 PM

Stephan Kinsella

Jay, You’re welcome.

That still leaves me with the desire to apply practical strategies to weaken the state, discredit statists, and in general promote liberty and destroy or limit government as much as possible (even if I am pretty sure that we’ll always have the state in some form, at least till the eternal state).

Exactly. This is a perfect attitude. Of course most of us want to do what we can to be on the side of right, to advance liberty, even if it’s a doomed or losing battle. After all, we are libertarians in the first place because we have chosen the values of peace, civilization, etc., even though our world infringes these all the time, and can be expected to for a long time. But of course there is a role for strategy, tactics, and activism. It’s just important to keep in mind the distinction to ward off disingenuous attacks by statists in libertarian clothing.

Where are the best pracitical suggestions along those lines – if any of you know and are willing to share?

My personal view is that in the long run the only that that can work is economic literacy. Thus we need to educate people; and one way to do it is to support the Mises Institute, and to keep spreading a consistent, principled message of liberty. We can keep learning, both to improve ourselves and to improve our ability to persuade. And by improving ourselves we help present “one improved unit” to society, thus helping to win over people to our other views by the power of attraction.

I would recommend not deluding oneself that we can “win” once and for all; or that winning is all that matters. That way lies the perils of self-delusion, compromise, despair, disengagement, and activism (see my The Trouble with Libertarian Activism).

I would recommend fighting because you want to do the right thing, be on the right side, and make even incremental progress. I would suggest taking heart in Nock’s idea of “the Remnant“–”In his 1936 article “Isaiah’s Job”, which appeared in the Atlantic Monthly, Nock expressed his complete disillusionment with the idea of reforming the current system. Believing that it would be impossible to convince any large portion of the general population of the correct course and opposing any suggestion of a violent revolution, Nock instead argued that libertarians should focus on nurturing what he called “the Remnant”. The Remnant, according to Nock, consisted of a small minority who understood the nature of the state and society, and who would become influential only after the current dangerous course had become thoroughly and obviously untenable, a situation which might not occur until far into the future.”

As for self-education and education of others, one could do worse than to start with bibliographies such as “Hans-Hermann Hoppe on Anarcho-Capitalism” and
“Lew Rockwell on Reading for Liberty”; see also my The Greatest Libertarian Books.

So: educate yourself; excel; attract; speak out; be principled; join like-minded libertarians; persuade; fight for liberty!

Published: August 20, 2009 10:39 PM

Stephan Kinsella

Jay, also see Top Ten Books of Liberty and Other Top Ten Lists of Libertarian Books. And you might also find of interest my post Why I’m a Libertarian — or, Why Libertarianism is Beautiful:

In a recent email, Walter Block wrote, responding some pessimistic comments I had about our libertarian movement:

“Dear Stephan: I never feel like dropping out. Never. No matter what. To me, libertarianism is a most beautiful thing, right up there with Mozart and Bach. Non corborundum illegitimi.

I replied with some comments, and Walter encouraged me to post them, so here they are, lightly edited:

Walter’s email got me to thinking about why I’m a libertarian–why libertarians are libertarian. What is it about us that drives us, that makes us passionate advocates of it, and intensely interested in it? Some of us have been self-indulgent enough to write up how we became libertarians (e.g., my How I Became A Libertarian); but I don’t mean exactly that. I mean what is it about it that you love; that drives you; that attracts you?

Walter’s comment that libertarianism is beautiful struck a chord with me; I think I’d never thought of it that way before. It seemed just, and fair, and right, but beautiful–? but then, justice, and rightness, and fairness, and goodness are beautiful.

I think I’m a libertarian because for some reason I hate injustice; I hate bullies; I hate inconsistency; I love fairness and logical consistency and treating people correctly. I like answering the question asked, and not dodging issues: if someone asks how should this person be treated, I try to answer that question, rather than advert to some Marxian notion of utopia.

I like the ruthless logic of libertarianism and its unflinching honesty: how we are unafraid to say that people have a right to be greedy, or selfish, or rich, or not to hire people because of their race–because it is their property. I like the in-your-faceness of it … when it is simply a matter of venting or justice to hurl in the face of a soma-ridden mainstreamer the solid, bracing truth about things, even if it will do no good. I like libertarianism–I love libertarianism–because I think it is the outcome of goodness applied to human interaction. I do agree that libertarianism is beautiful. It is refreshing and cleansing to know that I am willing to respect the rights of all who will respect mine; and to take the responsibility to earn my own way, and to pay for my own mistakes–and the right to profit from my successes. I am a libertarian because it is obviously good, and I would rather be good than evil; and the more good, the better.

***

Thoughts of others on your reasons for why you’re a libertarian are welcome in the comments.

Published: August 20, 2009 10:48 PM

[Mises blog cross-post]

Someone asked me the proper way to view deposit contracts, in the context of a discussion about fractional-reserve banking (FRB). He noted that in my A Libertarian Theory of Contract I state that contractual obligations can either be “to do” or “to give”; and that “to do” contracts are generally not enforceable due to specific performance, but can only result in damages if non performance actually occurs. This implies that the only real enforceable obligations are “to give” something. My correspondent asked me if this means that a deposit contract is not really a contract–i.e., based on the idea that a deposit is a “to do” contract (i.e., safekeep this deposit), while a loan would be a “to give” contract (i.e., return the money at the end of the term). An edited version of my reply follows.

First, I don’t view a loan as an obligation to return “the” money. It’s just a transfer of title to a certain sum of future money (IF you own it at the time). See my Contracts paper, pp. 32 et seq.

Second: in my article I wrote: “Contractual obligations may be classified as obligations to do or to give. An obligation to give may be viewed as a transfer of title to property, as it is an obligation to give ownership of the thing to another. An obligation to do is an obligation to perform a specific action, such as an obligation to sing at a wedding or paint someone’s house. ” The purpose of noting the positive law’s obligation to do/to give classification was to show that even in the current law, it’s really all about title transfer–to set the stage for Rothbard/Evers’s title-transfer theory of contract. Actually, I don’t view contracts as really being obligations at all; they are just title transfers. If I sell you my apple for $1, then the title to my apple transfers to you, even if/while I still (temporarily) possess it. Now, I am holding your apple, and I now have an obligation to let you have it, when you demand it, but not because of a contract or obligation to do, but just because of property rights, which the contract has rearranged. Contracts change, or rearrange property titles. Once this happens, people can then have different obligations–obligations to respect the property rights of the owners. If you find yourself in possession of property belonging to another person because a contract’s title-transfer provision has been triggered, even though it was your money a minute before, you now have to respect the wishes of the (new) owner.

I then explained that in the positive law, “to do” contracts are generally not enforceable due to specific performance, but can only result in damages if non performance actually occurs. My inquisitor says this implies that the only real enforceable obligations are “to give” something. And this is correct. And even in the case where they are enforced, such as a contract for a piece of real property, even here it’s not against the person but just effectuates the property title. I.e., you don’t need to call it an obligation. Again, my point was to show that the practical results of the current law can be achieved by the title-transfer conception of contract.

Now, does this imply that a deposit contract is not really a contract, on the grounds that a deposit is a “to do” contract (i.e., safekeep this deposit), while a loan would be a “to give” contract (i.e., return the money at the end of the term)? I don’t think so. I think that there are no obligations to do something–to perform; but you can arrange a contract so that there are consequences (the payment of damages, say–a title transfer to money) for failure to do something–the failure to do serves as a condition or trigger of a title transfer. Again, this is what the result is, in effect, in positive law, because obligations to do are not usually enforceable by “specific performance,” but by an award of monetary damages for failure to perform–for a “breach.” In the title-transfer theory of contract, failure to perform is not a breach of an obligation; it is just a previously-agreed upon trigger of a payment of damages. (In this way it is similar to the law and economics idea of “efficient breach of contract“–but arrives at this naturally, as a result of a principled respect for property rights–without any wealth-maximization contortions.)

In other words, the law views contracts as enforceable promises, and has various theories to justify this. Rothbard and Evers (and I) view this as confused. Rahter a contract should be seen as one or more title transfers. The ability to transfer title to property simply flows from the property rights of the owner–his right to exclude people, to permit them to use it, or to transfer all or some of the title to others, for charitable purposes, or in exchange for something else (some performance, or some other title transfer).

Now, how does all this apply to deposit “contracts”? Well, first, I assume we are talking here about a genuine deposit, as opposed to a FRB “deposit.” In a FRB it is a loan by the customer, not a deposit, since the customer loses title to his money–he has to in order for the “bank” to have the right to loan it to some borrower (who needs to have title to the money in order to use it for the purposes for which he borrowed it). On this see Huerta de Soto, Money, Bank Credit, and Economic Cycles, pp. 3 et seq., where he explains quite correctly that a standard loan is a mutuum (sometimes called a “loan for consumption”–see my A Civil Law to Common Law Dictionary).

By contrast, in a deposit (see Huerta de Soto, pp. 4-5) the depositary or custodian does not acquire title to the property. In a regular or specific deposit, such as a warehousing arrangement or safe deposit box, the depositor retains title to his property. For example, in a deposit arrangement, you give your money to the bank to warehouse it for you. In this case you don’t actually transfer title to your gold–you put it in the bank’s safety deposit box, say. Now is this really a deposit “contract”? Well, this description is a bit misleading. Contracts transfer title; but the title to the gold has not been transferred. What of the depositary’s “obligation” to warehouse the gold? Well, note that property owners have the right to set rules for use of their property; they have the right to give others varying levels and types of permissions or consent as to what they can do with their property. I can invite you to a party to my house, and some of the rules, stated or implied, include: you may not fornicate on my kitchen floor; you may not slap my dog; etc. I can lend you my car (a commodatum, Huerta de Soto, p. 3–or “loan for use,” Civil Law Dictionary) to drive to the movie for an afternoon, but not to abscond to Canada for a month.

So in a typical deposit arrangement, the best way to describe the relationship and situation consonant with libertarian property principles and the title-transfer theory of contact is that the bank agrees (consents) to let you use their property (box) in certain ways; while you let them control your gold in limited ways (they can prevent even you from accessing it, if you don’t: show proper ID, come during business hours, pay any owed fees, etc.). You agree to pay them a fee every month–title transfer of money to them, in exchange for their letting you use their box. So there is no real title transfer of the gold. (Consider a guard you hire to guard your home while you are on vacation; you “deposit” your home into his care, and agree to pay him for watching it; you do not give him permission to hold parties at the house or to own it or sell it. The depositary is like the guard. Would you call the arrangement with the guard a “house deposit contract”? If he trashes your house has he breached his contractual obligations, or has he simply committed trespass?)

In any event, the regular deposit is expensive and inefficient for deposits of fungible goods, such as grain or money, so such items are usually intermixed with deposits of other depositors; this is an irregular deposit (Huerta de Soto, p. 4). The irregular deposit can be viewed in this way: say there are 100 depositors. These people all agree to transfer title to their gold, and in exchange they receive a fractional ownership of the fungible mass of gold in the bank, with the right to withdraw their share at any time. The bank again has no title to the gold. They are like the warehouser in the case of the regular deposit. The depositors jointly own all the gold, have specified among themselves how each can withdraw his portion and exit the relationship.

Now if the bank loans your gold to someone else, they are actually stealing it–converting it. Trespassing. It has little to do with contract, unless by “contract” you mean the rules you, as owner, lay down for the banks’ use of your property (gold)–but by this loose usage, if you fornicate in my house during a party, you are in breach of contract. Okay, fine, but this is a bit of a stretch. I’d say it was a type of trespass–a use of my property that i have not consented to. But you can view the permissions granted by the owner as a type of contract, since it’s like a temporary and limited grant of a certain specified right to use the property to another person, whereas a normal contractual title transfer is usually permanent and complete.

Incidentally, I think we can assume there are a bunch of subsidiary, implied (or written) accessory contractual title transfers: e.g., IF the banker doesn’t safeguard your gold, THEN he pays damages to you (which is a title transfer of his money), etc. So there is a contract there.

So I would say a “contract of deposit” refers to the various permissions with respect to property (the bank’s permission to limit access to your money, but not permission to loan it out; your permission to use the bank’s facilities to store your gold); and subsidiary and related title transfers (your payment of fees; the bank’s payment of damages if it breaches certain prohibitions).

Note, however, that if we are talking about a FRB “deposit,” which is not really a deposit, but rather a loan to the bank, the entire analysis changes. In this case, the FRB does acquire title to the customer’s property; in exchange the customer acquires a future, conditional title-transfer from the FRB: title to a certain sum of money in the future at a certain time (say, when the customer makes a “demand”), but of course, only if the bank owns at that time assets to which title can transfer to the customer. If the FRB is bankrupt, due to a run (as some of believe is inevitably the case), then when the customer demands money, the bank simply has no money. This situation is then analogous to that of the deadbeat debtor discussed on pp. 32-33 of A Libertarian Theory of Contract.

[Mises blog cross-post]

As I wrote here, in response to another commentator who had said: “Ludwig von Mises himself was not an anarchist and went so far as to outright denounce anarchism as ‘altogether untenable’”:

Mises was wrong. However, his views on this matter were so close to anarchy to be almost indistinguishable. See Rothbard:

How far would Mises push the principle of secession, of self-determination? Down to a single village, he states; but would he press beyond even that? He calls the right of self-determination not of nations, “but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit.” But how about self-determination for the ultimate unit, for each individual? Allowing each individual to remain where he lives and yet secede from the State is tantamount to anarchism, and yet Mises comes very close to anarchism, blocked only by practical technical considerations:

If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done. This is impracticable only because of compelling technical considerations, which make it necessary that the right of self-determination be restricted to the will of the majority of the inhabitants of areas large enough to count as territorial units in the administration of the country.

That Mises, at least in theory, believed in the right of individual secession and therefore came close to anarchism can also be seen in his description of liberalism, that “it forces no one against his will into the structure of the State.”

And Mises did believe in a vigorous right to secede, Liberalism pp. 109-10:

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars. … However, the right of self-determination of which we speak is not the right of self-determination of nations, but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit. If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done.

See also Ludwig von Mises and the Justification of the Liberal Order, by William Baumgarth (“Mises, then, opened himself up to the claims of the individualist anarchists, who believe such a radical self-determination not only feasible but, on Mises’ own grounds, the ultimate source of social peace.”).

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

Legitimizing the Corporation

In Defense of the Corporation

October 27, 2005 4:38 PM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (55)

Piet-Hein van Eeghen’s article “The Corporation At Issue, Part I: The Clash With Classical Liberal Values and the Negative Consequences for Capitalist Practices,” in the latest issue of the JLS, argues that “the corporate form of business organization is inherently incompatible with the principles of classical liberalism.” (Further summary of van Eeghen’s piece reprinted below.)

I have elsewhere posted a brief reply to other libertarian critics of the corporation (that reply is reprinted below), and more or less defended the pro-corporation view of Objectivist Robert Hessen. Part II of van Eeghen’s article, to be published in JLS 19.4, will offer a critique of Robert Hessen’s defense of the corporation, but I will go ahead now and summarize some of my comments on Part I.

I found most of van Eeghen’s arguments to be beside the point, at least for what to me is the basic question, which is: does respecting corporate status violate anyone’s rights?

Van Eeghen implies it does, because of limited liability. It seems to me that the corporation basically says shareholders are not liable for contractual obligations of the corporation. Obviously this could easily be recreated solely using private contracts. The person or company who does a deal with ABC Corp. is in effect agreeing not to pursue the assets of the shareholders if the company owes him money. So whose rights are violated?

As for tort liability–well, I am not aware of corporate law limiting the liability of any person, shareholder or otherwise, for torts he commits. In libertarian law, if you have a complex organization or business, you need to show some given person is responsible for the tort committed by someone else if you want to hold them responsible. It’s a causation question (Pat Tinsley and I go into the issue of causation and responsibility in Causation and Aggression).

If the FedEx truckdriver negligently runs over you, is the shareholder responsible? Well, why would he be responsible in the first place? Because he gave a bit of money to the company? But so do customers! And banks. And suppliers. (And actually, most shareholders never gave money to the company–they bought the shares from a previous shareholder.) Because they control the company’s actions? Well they had no more influence over the concrete decisions of the truck driver, or his direct supervisor, than an influential creditor or customer. The point is if you can make a case that a given person other than the one directly responsible (the truck driver) is causally, jointly liable, fine–then under libertarian principles this person is also liable. In such a case I am not aware that corporate law grants them immunity from suit; and if and to the extent it does, then it should not (I don’t think it does but would need to check this).

If there is a problem with the law in this regard, it is with the law’s failure to assign liability according to sound principles of causation. If some critic of the corporation thinks some managers, and perhaps some directors, in a given incident are causally responsible for the tort, then fine, say so, and make the case. I would not oppose this in general. I believe it’s very difficult in most cases to connect the actions of the shareholder to damage caused by an employee of a company in which the shareholder holds stock. But if it could be shown in a particular case, then fine, he is liable. What has this to do with corporate law, which as far as I know primarily is aimed at limiting the liability of shareholders for contractual debts of the company–which is perfectly libertarian.

***

From Roderick Long’s summary of the JLS issue:

Walter Block has argued in an earlier issue — JLS 16.4 (Fall 2002) — that “Henry Simons Is Not a Supporter of Free Enterprise.” In “The Corporation At Issue, Part I: The Clash With Classical Liberal Values and the Negative Consequences for Capitalist Practices,” Piet-Hein van Eeghen offers a qualified defense of Simons by taking up what he sees as one of Simons’s key insights: that the corporate form of business organization is inherently incompatible with the principles of classical liberalism.The problem with the corporate form is that it grants to private business a distinctive governmental feature — legal personhood, and the accompanying privilege of limited liability — without the correlative burden of democratic accountability; granting such a status, van Eeghen argues, constitutes an un-libertarian surrender of individual responsibility, and confers the benefits of ownership without its corresponding costs, thus enabling corporations to concentrate power and externalize risk in ways to which libertarians should object. (Part II, to be published in JLS 19.4, will offer a critique of Robert Hessen‘s defense of the corporation as an institution.)

***

Legitimizing the Corporation [from LRC blog]Marginal movements tend to draw their share of nuts and cranks; unfortunately, libertarianism is no exception. In addition to claims that we don’t (not “shouldn’t” but “don’t”) owe income tax, or “that hiring an attorney means abandoning personal sovereignty before the law, or that having a yellow-[or gold-]fringed flag in a room means you are under martial [or admiralty/maritime] law,” there are also a fair number of libertarians who view the modern corporation with suspicion. They are concerned that the corporation is viewed as a “person” and believe, erroneously, that corporations shield corporate employees from liability for negligence.

I usually find that the opposition to corporations comes from leftists, or, if libertarians, from ignorance of contract and corporate law…. most people don’t even realize that if a FedEx truck runs you over negligently you can sue the driver. They think he is immune from suit or something. But it is the other way around; if a FedEx truck negligently hits you, it is of course the driver that is responsible. His employer is responsible for its employee’s own negligence and liability only because of the doctrine of respondeat superior; but if the employee is found to be non-negligent, the employer-corporation is off the hook too. This is in fact why corporations usually defend their employee and themselves when sued for the employee’s actions.

But opposition does not always stem from ignorance of the law or leftism: for example, one critique comes from two libertarian-Austrian attorneys: “De-legitimizing the Corporation: An Austrian analysis of the firm”, Jeffrey F. Barr & Lee Iglody, Austrian Scholars Conference 7, March 30-31, 2001, Auburn, Alabama.

Robert Hessen’s (a Randian) In Defense of the Corporation is a good defense of corporations. He shows that they don’t require privilege from the state to exist; they can be constructed from private contracts. One of Hessen’s articles nicely summarizes some of his views. Some excerpts are pasted below. My view is that corporations are essentially compatible with libertarianism. As for voluntary debts being limited to the corporation’s assets; this is no problem since the creditor knows these limitations when he loans money. What about limited liability for torts or crimes? As mentioned, the person direclty responsible for a tort or crime is always liable; sometimes the employer (which is often a corporation) is also liable for the employee’s actions, via respondeat superior. Who else should be responsible? In my view, those who cause the damage are responsible. Shareholders don’t cause it any more than a bank who loans money to a company causes its employees to commit torts. The shareholders give money; and elect directors. The directors appoint officers/executives. The officers hire employees and direct what goes on. Now to the extent a given manager orders or otherwise causes a given action that damages someone, a case can be made that the manager is causally responsible, jointly liable with the employee who directly caused the damage. It’s harder to argue the directors are so directly responsible, but depending on the facts, it could be argued in some cases. But it’s very fact specific. Perhaps the rules on causation should be relaxed or modified, but this has nothing to do with there being a corporation or not–for the laws of causation should apply to any manager or person of sufficient influence in the organization hierarchy, regardless of legal form of the organization (that is, whether it’s a corporation, partnership, sole proprietorship, or what have you).

Excerpts from the Hessen article–

The actual procedure for creating a corporation consists of filing a registration document with a state official (like recording the use of a fictitious business name), and the state’s role is purely formal and automatic. Moreover, to call incorporation a “privilege” implies that individuals have no right to create a corporation. But why is governmental permission needed? Who would be wronged if businesses adopted corporate features by contract? Whose rights would be violated if a firm declared itself to be a unit for the purposes of suing and being sued, holding and conveying title to property, or that it would continue in existence despite the death or withdrawal of its officers or investors, that its shares are freely transferable, or if it asserted limited liability for its debt obligations? (Liability for torts is a separate issue; see Hessen, pp. 18-21.) If potential creditors find any of these features objectionable, they can negotiate to exclude or modify them.

Economists invariably declare limited liability to be the crucial corporate feature. According to this view the corporation, as an entity, contracts debts in “its” own name, not “theirs” (the shareholders), so they are not responsible for its debts. But there is no need for such mental gymnastics because limited liability actually involves an implied contract between shareholders and outside creditors. By incorporating (that is, complying with the registration procedure prescribed by state law) and then by using the symbols “Inc.” or “Corp.,” shareholders are warning potential creditors that they do not accept unlimited personal liability, that creditors must look only to the corporation’s assets (if any) for satisfaction of their claims. This process, known as “constructive notice,” offers an easy means of economizing on transactions costs. It is an alternative to negotiating explicit limited-liability contracts with each creditor.

Creditors, however, are not obligated to accept limited liability. As Professor Bayless Manning observes; “As a part of the bargain negotiated when the corporation incurs the indebtedness, the creditor may, of course, succeed in extracting from a shareholder (or someone else who wants to see the loan go through) an outside pledge agreement, guaranty, endorsement, or the like that will have the effect of subjecting non-corporate assets to the creditor’s claim against the corporation.” This familiar pattern explains why limited liability is likely to be a mirage or delusion for a new, untested business, and thus also explains why some enterprises are not incorporated despite the ease of creating a corporation.

Another textbook myth is that limited liability explains why corporations were able to attract vast amounts of capital from nineteenth-century investors to carry out America’s industrialization. In fact, the industrial revolution was carried out chiefly by partnerships and unincorporated joint stock companies, rarely by corporations. The chief sources of capital for the early New England textile corporations were the founders’ personal savings, money borrowed from banks, the proceeds from state-approved lotteries, and the sale of bonds and debentures.

Even in the late nineteenth century, none of the giant industrial corporations drew equity capital from the general investment public. They were privately held and drew primarily on retained earnings for expansion. (The largest enterprise, Carnegie Brothers, was organized as a Limited Partnership Association in the Commonwealth of Pennsylvania, a status that did not inhibit its ability to own properties and sell steel in other states.)

External financing, through the sale of common stock, was nearly impossible in the nineteenth century because of asymmetrical information—that is, the inability of outside investors to gauge which firms were likely to earn a profit, and thus to calculate what would be a reasonable price to pay for shares. Instead, founders of corporations often gave away shares as a bonus to those who bought bonds, which were less risky because they carried underlying collateral, a fixed date of redemption, and a fixed rate of return. Occasionally, wealthy local residents bought shares, not primarily as investments for profit, but rather as a public-spirited gesture to foster economic growth in a town or region. The idea that limited liability would have been sufficient to entice outside investors to buy common stock is counterintuitive. The assurance that you could lose only your total investment is hardly a persuasive sales pitch.

No logical or moral necessity links partnerships with unlimited liability or corporations with limited liability. Legal rules do not suddenly spring into existence full grown; instead, they arise in a particular historical context. Unlimited liability for partners dates back to medieval Italy, when partnerships were family based, when personal and business funds were intermingled, and when family honor required payment of debts owed to creditors, even if it meant that the whole debt would be paid by one or two partners instead of being shared proportionally among them all.

Well into the twentieth century, American judges ignored the historical circumstances in which unlimited liability became the custom and later the legal rule. Hence they repeatedly rejected contractual attempts by partners to limit their liability. Only near midcentury did state legislatures grudgingly begin enacting “close corporation” statutes for businesses that would be organized as partnerships if courts were willing to recognize the contractual nature of limited liability. These quasi-corporations have nearly nothing in common with corporations financed by outside investors and run by professional managers.

Any firm, regardless of size, can be structured as a corporation, a partnership, a limited partnership, or even one of the rarely used forms, a business trust or an unincorporated joint stock company. Despite textbook claims to the contrary, partnerships are not necessarily small scale or short-lived; they need not cease to exist when a general partner dies or withdraws. Features that are automatic or inherent in a corporation—continuity of existence, hierarchy of authority, freely transferable shares—are optional for a partnership or any other organizational form. The only exceptions arise if government restricts or forbids freedom of contract (such as the rule that forbids limited liability for general partners).

Update: See further discussion and my list of resources on this in Sean Gabb’s Thoughts on Limited Liability.

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Sean Gabb’s Thoughts on Limited Liability

September 26, 2006 10:16 AM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (47)

A previous post, In Defense of the Corporation, discussed whether “limited liability” of modern corporations is compatible with libertarian principles. This topic was also discussed on Kevin Carson’s “mutualist” [socialist? neo-Marxist?] blog; see the excellent comments there by “iceberg.” Carson also recently promoted some anti-corporate comments by the eloquent libertarian Sean Gabb. I wrote Gabb about this, and he responded to some of my questions in Thoughts on Limited Liability. He quoted most of my substantive comments in his piece, so I won’t reprint them here. My response to his piece follows:

Very reasonable and thoughtful comments, Sean, and a profitable way to pursue this. I do not disagree strongly with much of what you write. I will elaborate more on this later after your post becomes linkable or emailed.

The main differences here would probably be this–first, if you want to show a link between ownership of shares, and liability for acts done by any employee of the enterprise that uses property of the company, then I simply think more needs to be shown. You have provided a sketch of a possible theory that might show a sufficient connection, and I would not be hostile to seeing if it plays out. I am not so confident this can be done from one’s armchair. It seems to me the application of the general principles might need to be left open.

In other words, it seems to me the default libertarian position is that an individual is responsible for torts he commits. If you want to hold others liable for this too, you need to show some kind of causal connection between something done by the third person, and the tort committed by the direct tortfeasor. You seem to assume that this connection is present in the case of a shareholder because he is the “true” or “natural” owner of the company’s assets. This I think is what troubles me the most–it seems too much of an assertion to me. I do not see its basis. And as I alluded earlier, it seems to rest on the notion of respondeat superior. Maybe this legal principle could be justified but I have never been quite sure exactly how or why it is justified under libertarian principles. It seems to me the idea is that the principle of respondeat superior simply is the presumption or finding that the employment relationship necessarily is a sufficient causal connection to hold the employer responsible for torts of his agent-employee. I am not hostile to this conclusion but am not quite sure the case has been made. Maybe there is a presumption, maybe in many or most cases the employer is causally responsible, but I am not sure it is necessarily the case (I have always loved the idea that if the employee goes off on a “frolic” then there is no respondeat superior liability; so you have cases examining whether the employee who deviates from his assigned duties is on a “frolic” or not–ha!). But consider: the basis for respondeat superior (and I bring this up b/c it seems to me something along the lines of this principle must be employed to hold the shareholder liable for acts of employees) has to do with the employer’s practical right or ability to control or direct the actions of the employee (this principle probably underlies the “frolic” exception too). Can we assume that this control is present when we move further back the chain of causation? Say, to the directors, who appoint the managers? Or to the shareholders, who elect the directors? And if practical control is one of the main relevant features that determines whether there is liability, again, why couldn’t lenders, employees, suppliers, customers, etc. at least potentially be held liable? In some cases they exert more control and give more “aid and comfort” or “aid and abet” in more visible and substantial ways than a mere shareholder.

This highlights that you still seem to draw some kind of bright line between the position of a lender and a shareholder. Something about this troubles me–it seems too artificial; too reliant on the state’s own positive legal distinctions. In my view, the general question is one of causation. I cannot say from my armchair that lenders necessarily are radically less responsible for the actions of company employees than are shareholders. It seems to me one needs to say this, however, in order to draw the bright line distinctions you do. In economic or financial terms, for example, it is common to classify shareholders and lenders/creditors on a spectrum, based on who gets paid first: if a company is going bankrupt, say, then out of its remaining assets: first, you pay secured lenders; then unsecured lenders; then, say, preferred shareholders; then finally, common shareholders. Sure, for legal purposes you classify some as shareholders and some as lenders; but financially, in a sense, this is just a way of specifying priority of payout and relative risk of capital. And there is nothing inconceivable about a lender agreeing (for some reason) to be paid only after shareholders receive a certain liquidation preference amount… all kinds of mixtures are conceivable. This would muddy the waters about who is the “natural” owner, it seems to me. The point, to me, is that this shows the limitations of relying on “natural ownership” as a key principle here.

Also I would say that if you had your way, I could see creative commercial lawyers and businessmen thinking of different investment vehicles that are economically similar to the joint stock company (as you even intimate in your comments about bonds being another way to finance endeavors and the “naturally” limited liability of bondholders). You conceive of a shareholder as the “natural” owner of the enterprise. I am skeptical of relying on the conceptual classifications imposed by positive law. To me a shareholder’s nature or identify depends on what rights it has. What are the basic rights of a shareholder? What is he “buying” when he buys the “share”? Well, he has the right to vote–to elect directors, basically. He has the right to attend shareholder meetings. He has the right to a certain share of the net remaining assets of the company in the event it winds up or dissolves, after it pays off creditors etc. He has the right to receive a certain share of dividends paid IF the company decides to pay dividends–that is, he has a right to be treated on some kind of equal footing with other shareholders–he has no absolute right to get a dividend (even if the company has profits), but only a conditional, relative one. He has (usually) the right to sell his shares to someone else. Why assume this bundle of rights is tantamount to “natural ownership”–of what? Of the company’s assets? But he has no right to (directly) control the assets. He has no right to use the corporate jet or even enter the company’s facilities, without permission of the management. Surely the right to attend meetings is not all that relevant. Nor the right to receive part of the company’s assets upon winding up or upon payment of dividends–this could be characterized as the right a type of lender or creditor has.

The main shareholder right that could be latched on is the right to elect directors. This the only “real” factor I see of genuine relevance. That is why I say that the alleged causal connection between the shareholder and the employee has to rest on the shareholder’s control. Which really rests on his right to vote for and elect directors. That is all. So the question is: is this degree of or level of control (due to the right to vote for directors) sufficient to make the shareholder causally responsible for the actions of agents of the enterprise? Again, I do not see how one can maintain there is automatically or necessarily liability here, without opening up a huge can of worms: because, as I noted, it is not only shareholders who exert “control” over which directors are elected, or which managers are appointed, or which employees hired, or which policies or directives are issued by the managers. There are many others–employees, unions/coops, customers, vendors, creditors, landlords…. I am not in principle against holding any of these types of actors responsible for torts of the corporation–if the causal connection can be shown. It has to be demonstrated, in each case, based on the facts and context. I just see no reason why this is not also true of the case of shareholders.

[Incidentally: I am actually not sure whether modern corporate limited liabilty does prohibit a victim of a tort done by personnel of a company from suing shareholders--if he could somehow establish the shareholder played a role. Maybe there is some kind of presumption against this since the state has not provided adequate standards for causation; if this is so (I am not sure) then maybe your argument is really against the inadequate provision of causal responsibility in state legal systems--not the limited liability of corporations, which I believe has more to do with voluntarily acquired "debts" of the company than with tort liability anyway.]

Finally, it seems to me the chief aspect of limited liability that is objected to by the detractors of modern corporations is not the immunity from tort liability, but rather the contractual limited liability aspect (which you accept). It seems to me that a company that is sufficiently capitalized can simply purchase insurance that would effectively immunize shareholders for tort liability–then we’d be back to where we are now (except maybe there would be a greater incentive to have such “shareholder insurance”).

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Incidentally, for a real-world example of a limited liability provision, see the recently enacted Texas Business Organizations Code, in particular § 21.223, as well as other provisions such as §§ 21.106, 21.107, 21.224, 21.225.

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Corporations and Limited Liability for Torts

December 10, 2008 11:13 PM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (72)

There’s been a good deal of discussion lately of the legitimacy of corporations: see my posts Left-Libertarians on Corporations “Expropriating the Efforts of Stakeholders” and In Defense of the Corporation. Various types–anti-industrialists, socialists, left-libertarians–make a variety of criticisms of the corporation. Some oppose it because they oppose “capitalism”; or because it is invariably in bed with the state; or because it exploits workers; or because they dislike “bigness”. Most of these are wrongheaded or off point.

Another very common criticism is that corporations receive special privileges from the state–”limited liability”. This concerns two basic issues: the limited liability of shareholders for contractual liability of the corporation; and for torts committed by employees of the corporation. The former is easily dealt with–see Hessen (more on this below).

The most controversial issue is the tort issue. This is bizarre for a number of reasons. In the typical case, the victim injured by the tort of an employee of the corporation can of course sue the employee who committed the tort; but he usually just sues the company because it has deep pockets. He is not usually affected by the inability to sue the shareholders, since he would not anyway. The corporate assets, or its insurance, would cover it. But it bugs anti-corporate types that shareholders can’t be sued for torts of employees of a company they own shares in.

Lately I’ve begun to emphasize that the anti-corporatists, in characterizing limited liability as a privilege, have to assume that on the free market shareholders should have liability. But this is a dubious assumption. First, it rests on the idea of respondeat superior (master is liable for torts of his servant), which itself dubious. Second, it rests on an undeveloped notion of strict liability which assumes that you are liable for torts committed “with [or by?] your property.” But property does not commit crimes or torts–people do. Property serves as means. If you borrow my car and run over someone, it is not obvious to me that I am responsible for your negligent action–just because I owned the car. Second, as I discussed in The Over-reliance on State Classifications: “Employee” and “Shareholder”, this rests too much on state definitions of ownership. Marriage, shareholder, owner, adult, citizen, money, bank, employer, employee, hobby, …. — so many things are keyed off their classifications. It irks me when libertarians build up their arguments and concepts based on these, as if they are objective and valid distinctions.

Looking at reality: ownership is the right to control a resource–in a company it’s distributed, since shareholders can’t just walk in and use the assets of the company (drives its cars; use its HQ to throw a party). As a practical matter, people with control over property are distributed in complex ways.

Second, it’s often assumed that shareholders are “investors”–people who gave money to the company. This seems to implicitly assume that you are responsible for aiding and abetting the company. Several problems here. (a) shareholders are not necessarily investors (if you buy Exxon stock from another shareholder, you give him money, but not Exxon); (b) other people give Exxon much more money, like customers; (c) the control exerted by shareholders is minimal–they can vote for board members, who in turn appoint officers, who hire managers and employees. Others–creditors, vendors, contractors, employees, unions, “stakeholders”–often exert more influence over what the company does than any given shareholder or even the whole class of shareholders.

I believe the only way to sort this out is to apply a carefully developed and libertarian-compatible theory of causation. Whenever you want to attribute responsibility to A for actions of B, you have to have a good reason. This area is underdeveloped but my approach is laid out in Causation and Aggression. I am not even sure if respondeat superior is justified; much less stretching it to cover shareholders–stretching it so far would make so many other parties potentially responsible for the actions of one tortfeasor. Libertarians want to just point to the rules developed in the common law and take this for granted, as if it’s unquestionably legitimate. It’s not. We are libertarians, not positivists.

I just recalled, in correspondence with Brad Spangler, that there is a great pity excerpt from Hessen, pp. 18-21 of his classic book In Defense of the Corporation. He grants (a bit too generously, perhaps) the application of respondeat superior to the company itself, but argues very concisely–and without a carefully developed theory of causation but with sound insight and good intuition–why shareholders should not be liable for torts of employees. I highly recommend you read pp. 18-21. (N.b. left-libertarians: at pp. 20-21, Hessen explains that if anything, the state takeover of corporate law benefits not large companies, but small, one-man and “close” corporations since they would normally be liable for their actions, unlike shareholders of a large company.)

Bottom line: libertarians who claim that limited liability for torts is a state privilege have the burden of proving that shareholders should be liable for torts committed by employees of a company the shareholder owns a share in–and to show why creditors, suppliers, employees, and other “aiders and abetters” are not liable. And don’t just point to the common law rules and respondeat superior–we are libertarians. Show why this rule is libertarian.

I went over this in a 2004 LRC post, Legitimizing the Corporation, which I excerpt below:

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… most people don’t even realize that if a FedEx truck runs you over negligently you can sue the driver. They think he is immune from suit or something. But it is the other way around; if a FedEx truck negligently hits you, it is of course the driver that is responsible. His employer is responsible for its employee’s own negligence and liability only because of the doctrine of respondeat superior; but if the employee is found to be non-negligent, the employer-corporation is off the hook too. This is in fact why corporations usually defend their employee and themselves when sued for the employee’s actions.

But opposition does not always stem from ignorance of the law or leftism: for example, one critique comes from two libertarian-Austrian attorneys: “De-legitimizing the Corporation: An Austrian analysis of the firm”, Jeffrey F. Barr & Lee Iglody, Austrian Scholars Conference 7, March 30-31, 2001, Auburn, Alabama.

Robert Hessen’s (a Randian) In Defense of the Corporation is a good defense of corporations. He shows that they don’t require privilege from the state to exist; they can be constructed from private contracts. One of Hessen’s articles nicely summarizes some of his views. Some excerpts are pasted below. My view is that corporations are essentially compatible with libertarianism. As for voluntary debts being limited to the corporation’s assets; this is no problem since the creditor knows these limitations when he loans money. What about limited liability for torts or crimes? As mentioned, the person direclty responsible for a tort or crime is always liable; sometimes the employer (which is often a corporation) is also liable for the employee’s actions, via respondeat superior. Who else should be responsible? In my view, those who cause the damage are responsible. Shareholders don’t cause it any more than a bank who loans money to a company causes its employees to commit torts. The shareholders give money; and elect directors. The directors appoint officers/executives. The officers hire employees and direct what goes on. Now to the extent a given manager orders or otherwise causes a given action that damages someone, a case can be made that the manager is causally responsible, jointly liable with the employee who directly caused the damage. It’s harder to argue the directors are so directly responsible, but depending on the facts, it could be argued in some cases. But it’s very fact specific. Perhaps the rules on causation should be relaxed or modified, but this has nothing to do with there being a corporation or not–for the laws of causation should apply to any manager or person of sufficient influence in the organization hierarchy, regardless of legal form of the organization (that is, whether it’s a corporation, partnership, sole proprietorship, or what have you).

Excerpts from the Hessen article–

The actual procedure for creating a corporation consists of filing a registration document with a state official (like recording the use of a fictitious business name), and the state’s role is purely formal and automatic. Moreover, to call incorporation a “privilege” implies that individuals have no right to create a corporation. But why is governmental permission needed? Who would be wronged if businesses adopted corporate features by contract? Whose rights would be violated if a firm declared itself to be a unit for the purposes of suing and being sued, holding and conveying title to property, or that it would continue in existence despite the death or withdrawal of its officers or investors, that its shares are freely transferable, or if it asserted limited liability for its debt obligations? (Liability for torts is a separate issue; see Hessen, pp. 18-21.) If potential creditors find any of these features objectionable, they can negotiate to exclude or modify them.

Economists invariably declare limited liability to be the crucial corporate feature. According to this view the corporation, as an entity, contracts debts in “its” own name, not “theirs” (the shareholders), so they are not responsible for its debts. But there is no need for such mental gymnastics because limited liability actually involves an implied contract between shareholders and outside creditors. By incorporating (that is, complying with the registration procedure prescribed by state law) and then by using the symbols “Inc.” or “Corp.,” shareholders are warning potential creditors that they do not accept unlimited personal liability, that creditors must look only to the corporation’s assets (if any) for satisfaction of their claims. This process, known as “constructive notice,” offers an easy means of economizing on transactions costs. It is an alternative to negotiating explicit limited-liability contracts with each creditor.

Creditors, however, are not obligated to accept limited liability. As Professor Bayless Manning observes; “As a part of the bargain negotiated when the corporation incurs the indebtedness, the creditor may, of course, succeed in extracting from a shareholder (or someone else who wants to see the loan go through) an outside pledge agreement, guaranty, endorsement, or the like that will have the effect of subjecting non-corporate assets to the creditor’s claim against the corporation.” This familiar pattern explains why limited liability is likely to be a mirage or delusion for a new, untested business, and thus also explains why some enterprises are not incorporated despite the ease of creating a corporation.

Another textbook myth is that limited liability explains why corporations were able to attract vast amounts of capital from nineteenth-century investors to carry out America’s industrialization. In fact, the industrial revolution was carried out chiefly by partnerships and unincorporated joint stock companies, rarely by corporations. The chief sources of capital for the early New England textile corporations were the founders’ personal savings, money borrowed from banks, the proceeds from state-approved lotteries, and the sale of bonds and debentures.

Even in the late nineteenth century, none of the giant industrial corporations drew equity capital from the general investment public. They were privately held and drew primarily on retained earnings for expansion. (The largest enterprise, Carnegie Brothers, was organized as a Limited Partnership Association in the Commonwealth of Pennsylvania, a status that did not inhibit its ability to own properties and sell steel in other states.)

External financing, through the sale of common stock, was nearly impossible in the nineteenth century because of asymmetrical information–that is, the inability of outside investors to gauge which firms were likely to earn a profit, and thus to calculate what would be a reasonable price to pay for shares. Instead, founders of corporations often gave away shares as a bonus to those who bought bonds, which were less risky because they carried underlying collateral, a fixed date of redemption, and a fixed rate of return. Occasionally, wealthy local residents bought shares, not primarily as investments for profit, but rather as a public-spirited gesture to foster economic growth in a town or region. The idea that limited liability would have been sufficient to entice outside investors to buy common stock is counterintuitive. The assurance that you could lose only your total investment is hardly a persuasive sales pitch.

No logical or moral necessity links partnerships with unlimited liability or corporations with limited liability. Legal rules do not suddenly spring into existence full grown; instead, they arise in a particular historical context. Unlimited liability for partners dates back to medieval Italy, when partnerships were family based, when personal and business funds were intermingled, and when family honor required payment of debts owed to creditors, even if it meant that the whole debt would be paid by one or two partners instead of being shared proportionally among them all.

Well into the twentieth century, American judges ignored the historical circumstances in which unlimited liability became the custom and later the legal rule. Hence they repeatedly rejected contractual attempts by partners to limit their liability. Only near midcentury did state legislatures grudgingly begin enacting “close corporation” statutes for businesses that would be organized as partnerships if courts were willing to recognize the contractual nature of limited liability. These quasi-corporations have nearly nothing in common with corporations financed by outside investors and run by professional managers.

Any firm, regardless of size, can be structured as a corporation, a partnership, a limited partnership, or even one of the rarely used forms, a business trust or an unincorporated joint stock company. Despite textbook claims to the contrary, partnerships are not necessarily small scale or short-lived; they need not cease to exist when a general partner dies or withdraws. Features that are automatic or inherent in a corporation–continuity of existence, hierarchy of authority, freely transferable shares–are optional for a partnership or any other organizational form. The only exceptions arise if government restricts or forbids freedom of contract (such as the rule that forbids limited liability for general partners).

In my contribution What Libertarianism Is in the Hoppe Festschrift, Property, Freedom and Society, I included a very long footnote (23) critiquing the mutualist “occupancy” view of property rights and, specifically, Kevin Carson’s contention that this is compatible with libertarianism. A edited excerpt from the article on this issue is provided below.

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Why is appropriation the relevant link for determination of ownership? First, keep in mind that the question with respect to such scarce resources is: who is the resource’s owner? Recall that ownership is the right to control, use, or possess, while possession is actual control—“the factual authority that a person exercises over a corporeal thing.”[21] The question is not who has physical possession; it is who has ownership. Thus, asking who is the owner of a resource presupposes a distinction between ownership and possession—between the right to control, and actual control. And the answer has to take into account the nature of previously-unowned things: to-wit, that they must at some point become owned by a first owner.

The answer must also take into account the presupposed goals of those seeking this answer: rules that permit conflict-free use of resources. For this reason, the answer cannot be whoever has the resource or whoever is able to take it is its owner. To hold such a view is to adopt a might makes right system where ownership collapses into possession for want of a distinction. Such a “system,” far from avoiding conflict, makes conflict inevitable.[23]

[23] This is also, incidentally, the reason the mutualist “occupancy” position on land ownership is unlibertarian. As mutualist Kevin Carson writes:

For mutualists, occupancy and use is the only legitimate standard for establishing ownership of land, regardless of how many times it has changed hands. An existing owner may transfer ownership by sale or gift; but the new owner may establish legitimate title to the land only by his own occupancy and use. A change in occupancy will amount to a change in ownership. . . . The actual occupant is considered the owner of a tract of land, and any attempt to collect rent by a self-styled [“absentee”] landlord is regarded as a violent invasion of the possessor’s absolute right of property.

Kevin A. Carson, Studies in Mutualist Political Economy (Self-published: Fayetteville, Ark., 2004), chap. 5, sec. A (emphasis added). Thus, for mutualism, the “actual occupant” is the “owner”; the “possessor” has the right of property. If a homesteader of land stops personally using or occupying it, he loses his ownership. Carson contends this is compatible with libertarianism:

[A]ll property rights theories, including Lockean, make provision for adverse possession and constructive abandonment of property. They differ only in degree, rather than kind: in the “stickiness” of property. . . . There is a large element of convention in any property rights system—Georgist, mutualist, and both proviso and nonproviso Lockeanism—in determining what constitutes transfer and abandonment.

Kevin A. Carson, “Carson’s Rejoinders,” Journal of Libertarian Studies 20, no. 1 (Winter 2006): 133 (emphasis added). In other words, Lockeanism, Georgism, mutualism are all types of libertarianism, differing only in degree. In Carson’s view, the gray areas in issues like adverse possession and abandonment leave room for mutualism’s “occupancy” requirement for maintaining land ownership.

But the concepts of adverse possession and abandonment cannot be stretched to cover the mutualist occupancy requirement. The mutualist occupancy view is essentially a use or working requirement, which is distinct from doctrines of adverse possession and abandonment. The doctrine of abandonment in positive law and in libertarian theory is based on the idea that ownership acquired by intentionally appropriating a previously unowned thing may be lost when the owner’s intent to own terminates. Ownership is acquired by a merger of possession and intent to own. Likewise, when the intent to own ceases, ownership does too—this is the case with both abandonment of ownership and transfer of title to another person, which is basically an abandonment of property “in favor” of a particular new owner. See Kinsella, “A Libertarian Theory of Contract,” pp. 26–29; also Louisiana Civil Code, Art. 3418 (“A thing is abandoned when its owner relinquishes possession with the intent to give up ownership”) and Art. 3424 (“To acquire possession, one must intend to possess as owner and must take corporeal possession of the thing”; emphasis added).

The legal system must therefore develop rules to determine when property has been abandoned, including default rules that apply in the absence of clear evidence. Acquisitive prescription is based on an implicit presumption that the owner has abandoned his property claims if he does not defend it within a reasonable time period against an adverse possessor. But such rules apply to adverse possessors—those who possess the property with the intent to own and in a sufficiently public fashion that the owner knows or should know of this. See Yiannopoulos, Property, § 316; see also Louisiana Civil Code, Art. 3424 (“To acquire possession, one must intend to possess as owner and must take corporeal possession of the thing”; emphasis added) and Art. 3476 (to acquire title by acquisitive prescription, “The possession must be continuous, uninterrupted, peaceable, public, and unequivocal”; emphasis added); see also Art. 3473. The “public” requirement means that the possessor possesses the property openly as owner, adverse or hostile to the owner’s ownership—which is not the case when, for example, a lessee or employee uses an apartment or manufacturing facility under color of title and permission from the owner. Rules of abandonment and adverse possession are default rules that apply when the owner has not made his intention sufficiently clear—by neglect, apathy, death, absence, or other reason.

(In fact, the very idea of abandonment rests on the distinction between ownership and possession. Property is more than possession; it is a right to possess, originating and sustained by the owner’s intention to possess as owner. And abandonment occurs when the intent to own terminates. This happens even when the (immediately preceding) owner temporarily maintains possession but has lost ownership, as when he gives or sells the thing to another party (as I argue in Kinsella, “A Libertarian Theory of Contract ,” pp. 26–29).)

Clearly, default abandonment and adverse possession rules are categorically different from a working requirement, whereby ownership is lost in the absence of use. See, e.g., Louisiana Mineral Code, § 27 (“A mineral servitude is extinguished by: . . . prescription resulting from nonuse for ten years”). Loss of ownership is not lost by nonuse, however, and a working requirement is not implied by default rules regarding abandonment and adverse possession. See, e.g., Louisiana Civil Code, Art. 481 (“The ownership and the possession of a thing are distinct. . . . Ownership exists independently of any exercise of it and may not be lost by nonuse. Ownership is lost when acquisitive prescription accrues in favor of an adverse possessor”; emphasis added). Carson is wrong to imply that abandonment and adverse possession rules can yield a working (or use or occupancy) requirement for maintaining ownership. In fact, these are distinct and independent legal doctrines. Thus, when a factory owner contractually allows workers to use it, or a landlord permits tenants to live in an apartment, there is no question that the owner does not intend to abandon the property, and there is no adverse possession (and if there were, the owner could institute the appropriate action to eject them and regain possession; see Yiannopoulos, Property, §§ 255, 261, 263–66, 332–33, 335 et pass.; Louisiana Code of Civil Procedure, Arts. 3651, 3653 & 3655; Louisiana Civil Code , Arts. 526 & 531). There is no need for “default” rules here to resolve an ambiguous situation. (For another critique of Carson, see Roderick T. Long, “Land-Locked: A Critique of Carson on Property Rights,” Journal of Libertarian Studies 20, no. 1 (Winter 2006): 87–95.)

A final note here: I cite positive law here not as an argument from authority, but as an illustration that even the positive law carefully distinguishes between possession and ownership; and also between a use or working requirement to maintain ownership, and the potential to lose title by abandonment or adverse possession, to illustrate the flaws in Carson’s view that an occupancy requirement is just one variant of adverse possession or default abandonment rules. Furthermore, the civilian legal rules cited derive from legal principles developed over the ages in largely decentralized fashion, and can thus be useful in our own libertarian efforts to develop concrete applications of abstract libertarian principles. See Stephan Kinsella, “Legislation and the Discovery of Law in a Free Society,” Journal of Libertarian Studies 11, no. 2 (Summer 1995): 132–81; also idem, “Knowledge, Calculation, Conflict, and Law,” pp. 60–63 (discussing Randy Barnett’s views on the distinction between abstract legal rights and more concrete rules that serve as guides to action).

[Cross-posted at Mises.org]

I am from time to time asked by young libertarians considering, or in, law school, what fields are good to go into; how to choose the “best” or “most libertarian” law school, and so on. This has happened often enough that I’ve re-churned the advice many times now, and have ended up collecting a group of libertarian law students or lawyers that I include on the list. These include Pat Tinsley, J.H. Huebert, Brad Edmonds, Dick Clark, Greg Rome, Lee Iglody, Jeff Barr, and others. Below I’ve compiled, edited, and anonymized some of the typical types of questions I get and advice I or others have given out.

Other libertarian law types are welcome to email me suggestions or add them to the comments below. Also, I remember I started a Googlegroup  “Libertarian Law and Lawyers” a few years back which is moribund at present; anyone who wants to join for similar discussion, feel free. And also see my posts:

• The Most Libertarian Patent Work
• An Anti-Patent Patent Attorney? Oh my Gawd!

Questions:

Sample:

On 9/7/07, X wrote:

Mr. Kinsella,

I am considering a career change to law.

Can an anarcho-capitalist make a difference in this field, or does he face a futile, emotionally damaging travail against the forces of the state? The more I learn about how “the world” operates, the more cynical and frightened–and angry–I become. I realize this is a loaded question, but I’m interested in your views.

What makes a great lawyer, in your opinion?

Being honest and professional and competent; knowing the law and working hard to represent his clients, and not trying to involve your personal hobbies and values like libertarianism.

That is why I think one’s anarcho-capitlalist activism ought not to be the reason to go to lawschool. That said, I have some law-student libertarian friends who are a bit more idealist than me. Want me to run this by them? They are on the LibertarianForum list–Brad Edmonds, Dick Clark, and others–want to join?

Does one come to understand “legalese” at last through repetition and study? It looks like mind-numbing stuff, but I can see its purpose: to be explicit and comprehensive so as to prevent ambiguity and loopholes. (Still, the Bill of Rights is relatively straightforward.)

Any other thoughts? I hope I’m not being too naive.

***

Another recent one is excerpted here:

I am currently a senior at [] and am currently seeking a double BA in []. I am considering, but having trouble rationalizing my reasons for moving further in my education in law school. I am writing to you in what amounts to a crisis of faith in my beliefs regarding my very deep rooted anarcho-capitalist philosophies. I recently read a few articles you wrote for lewrockwell.com titled, What it means to be an anarcho-capitalist, another piece, How I became a Libertarian and several of your other articles on the site. They were all well written and very enjoyable, and my instinct pushed me into writing to you.

In high school, I became interested in economics, and the workings of and development of modern business concepts. My plan has always been to study business in undergrad school, and corporate law in graduate school. To make a long story short, I have spent the last 4 and a half years studying Business at a publicly funded school on a scholarship and have hated almost every one of my classes. (I liked my operations teacher, he was a libertarian that emigrated from India thirty years ago.) My passion these last years has been primarily in the realm of political and philosophical discourse. Like you at a younger age, my friends and family have been adamantly pushing me into going to law school.

Personally, I feel like I have learned nearly nothing studying business thus far. The experiences I have had in undergraduate school have been very, very disappointing. My professors do not allow for dissent on any analysis of how businesses work. The classes are meant to groom us for middle management, and little more. Every class pushes a bizarre group think process to class projects; everything is done in a group that must conform to expectations to the worship of diversity of race and sex. In the name of political correctness I have been called sexist, racist and privileged by more than one teacher, solely for the horror of being born where I was born, with the skin pigments my genetics ‘cursed’ me with The women’s study office is three times the size of the history office. Efficiency is seen as evil. Equality is everything. Profit is lamented as unnecessary. Groupthink is double-plus good. For the past 4 years, I spent my time in class trying not to cross the party line, partly because of how strongly I wanted to believe that a degree would enrich my abilities for the better. I have learned more working for my father in a month then I have in 4 studying Business. The coursework forced me to take classes like astronomy and geology, wasting my energies that I could have used studying higher levels of economics, the actual history of business theory, and how government, epistemology and metaphysics fits. In short, everything that I should have learned that I learned reading Mises’ Human Action and Rothbard’s Man, Economy and State.

This semester has been one of the worst. I dared challenge my statist professors in their own domain. Between the election (When Paul lost the primary, and the country embraced socialism) and one of my classes, I am on the verge of losing my spirit and turning into a Gultcher. In one of my classes, “Global Policy and Strategic Management” is a senior level seminar class that is meant to capstone the last 4 years of my education. When the bailout happened, I had to endure my professor’s lamentations about how “Capitalism has failed” and how “The greed of these people was caused by under regulations, (etc.) When I offered both qualitative and quantitative proof to the other wise, and tried to start a discussion about the real causes of the problems right now (central bank, fiat money), she claimed that lending had disappeared. Then I countered with the October report of the Minneapolis Fed saying otherwise. For weeks we battled during discussions. Eventually, she banned the class (me) from bringing in non-approved articles to her class. I am worried that I will go to graduate school for law and find only more of the same.

For the past few months, I have been battling with myself. I am currently preparing to take the LSAT this December and begin the process of finalizing a future with a decent law school. I am worried that I will face more of the same rabid state worship that I have endured for the last 4 years. I think part of the problem I have had was in going to a public university. But at the same time, I also don’t want to risk close to $32,000 for one year at a private school in [], just to be disappointed. I want to pursue law, but not at the expense of my principles. I am looking for some advice on how to deepen my education with out sacrificing my morality. Part of me wants to tough it out, and keep working toward my goal of a degree in law. Part of me wants to focus my energies on becoming as good a businessman as my father, and using our families’ business as a launching point into changing the system. Part of me wants to know who John Galt is. Are there steps I can take to find a law school with the qualities and openness to discourse that I desire? Does such a school even exist? In your own experiences, how hard and often were your libertarian views pushed? It’s not the challenge that gives me reservations, but rather my frugalness. I’d rather avoid wasting my time and efforts with something that may not work out for my goals.

***

Advice/Suggestions/Exchanges:

One guy recently asked, “Could you recommend law schools that would be strong on libertarian principles?”

My answer was:  “I don’t think there are any–they have to teach actual law to be accredited, and actual law is not libertarian.”

I shared this with some libertarian lawyer friends, and some of them disagreed. Our exchange went roughly as follows–but the point is the prospective student has to make his own mind up, since even practicing libertarian lawyers have different takes on this:

One of my friends demurred:

“Law schools attract left-wing faculty.  Even religious ones in the South. Most faculty at my school are either silent on the topic, or are flaming left-wingers.  There are two real libertarians in a faculty of 30+; one fake one (left-lib); and one strong “conservative” (good on governmentt when it comes to taxation policy, but not good about agreeing that taxation is theft). And that is probably as good as it gets.”

Me: “The faculty are irrelevant. Law school is to teach the law. What has policy to do with it?”

Him:

“Absolutely, the faculty has everything to do with it.  They choose what to teach, and how to present it. They can present criminal procedure from the viewpoint of someone who hates the state, or someone who cheers for it.  It has everything to do with your quality of life in class, and with what and how you learn.  Have you not heard how the crits teach? … It appears you’re confusing what law schools ought to do with what they actually do.  You don’t think left-wing law professors use the
classroom as a forum to promote their ideas?”

Me:

“To be accredited they have to do an adequate job of teaching the positive law. As for promoting their ideas: yes–to some degree, and this is helped by the lefty-bias in the system. But a law school that tried to teach libertarian law would bedoomed from the start, and would not be law school. It would be meta-law school. Who would you hire to write your will? In any event, if you’re smart and sound enough to want to avoid that type of school, you’ll probably be immune to the indoctrination anyway.”

“‘To be accredited they have to do an adequate job of teaching the positive law.’

No, they don’t.  Just as one example, if you take the first-year real property course at Harvard or Yale, you very well might spend the entire semester talking about nothing but the Rule in Shelley’s Case.  My school had a recent Harvard or Yale grad come here and teach criminal law, or maybe crim pro; she spent a whole semester on one narrow topic, and was gone within a year.

Law schools are judged on the law schools the faculty went to; incoming students’ LSAT scores; student/teacher ratio; literal number of books in the library; and bar pass rate.  When the ABA visits, every teacher knows it, and they put on the right face for them.  Every law student nowadays who passes the bar takes that $2500 BAR/BRI course toget all the stuff he didn’t learn in law school.  Only the lower-tier schools worry about teaching the law and getting people through the bar exam.  I could go on…

Also, who’s suggesting that a law school just teach “libertarian law”?  Of course they teach the positive law, but they present it with a slant that varies depending upon the perspective they bring to it. For example, when Richard Epstein teaches torts, you don’t just learn torts, you learn all about his views on the law of torts.  That may be
self-indulgent of him, and may not do anything extra to prepare you for the practice of law, but that’s how it is.  Most professors — particularly as you move down the tiers of law schools — probably don’t go to the extreme that he does, but their own take is always part of what you’re getting.  Otherwise, you’d just be getting the
equivalent of a BarBri course.

So it would be better if theywere libertarians rather than leftists.

***

From a file I was going to use for a draft of an article, “Advice to a Confused Anarchist,” drawn from some emails I’ve written–fyi. Not heavily revised here:

ADVICE TO A CONFUSED ANARCHO-CAPITALIST LAW STUDENT

Dear Mr. Kinsella:

[…] I am about to enter my YYY year at YYY Law School, but I am not sure I want to return to law school given my recent thoughts on the life of a young Austrian-following, (anarcho-) libertarian lawyer who thinks he has an obligation to try to promote a stateless society (or at least help lay the groundwork for it to come a reality sometime in the future) in his professional career, as opposed to merely being a nice theoretical hobby pursued in my leisure time.

[…]

I was thinking that perhaps I could do well and not do injustice by working in antitrust or in tax law (as long as I was not a government attorney) defending government-targeted clients against these terrible laws. Could this be justified? Is there another area of
the law that I could do some real good in pursuit of promoting this cause? If you could provide any advice of any sort along these lines, I would appreciate it.

Sincerely,

XXX

***

Dear XXX,

I will offer you a few of my thoughts, but please do not take them as gospel. Everyone has a different approach.

Yes, I am a hardcore libertarian and anarchist. My life is short and precious. I don’t think it should be wasted. I also think it should be lived for me. Altruism is fine, but not to an unhealthy extent. And finally, I believe in the principle of not blaming the victim. That is crucial.

Our current society is statist, and I fear it always will be. At least, I am certain it will be, throughout our lifetimes, at least to a significant extent. Given this, your rights and prosperity will be hampered due to the existence of the state. Which is due NOT to your own actions, but to those of most of your fellow man. They are the ones responsible for your predicament: they support, vote for, give aid and comfort to, and legitimize the state. As a libertarian, you are a victim of the state. Your democrat and republican neighbors are not. Why not? Because they consent to it. Think about it. I do NOT have a problem with most taxation–most of it affects liberals and republicans. I don’t care about them. I do not think it is a rights violatoin for a democrat to be thrown in jail for failing to pay taxes, for example. Poetic justice. Likewise, most companies, e.g., Microsoft, are run and owned by people who almost 99% of them would not deny the legitimacy, in general, of anti-trust laws. So do I feel sorry for them for being ensnared in its web? A little, but not very.

So. I am in favor of liberty, but it IS a hobby for me, or at least an interest. I personally want to *be* a libertarian; I want to understand liberty. And, yes, advocate it–but not under the delusion that I will have a big effect, or even under the delusion that I have an obligation to do so. To believe the latter is altruistic and worse, it is blaming the victim.

You are placed into a society where lots of choices are foreclosed. You cannot be a judge, without being an evil one (you have to put people in jail for selling pot). You can’t be a cop, without having to bust innocent people. Etc.

Enough. I am one who says that the innocent inmates of a tyrannical system do not have any obligation to add insult to injury. I do not think you or I have any obligation to engage in a futile quest, draining significant portions of our lives, in a futile attempt, to slightly, maybe, possibly increase liberty, for a temporary time, largely for the benefit of our fellow citizens who do not even deserve it.

I feel like enough bad things are done to me. I will be damned if I am going to further add additional, voluntary restraints on my life, to be restricted by rules that my socialist neighbors are not. For example, if I lose my job, and can get unemployment insurance, yes, I’ll do it, for several reasons. First, it is restitution, and I am more entitled to it than my fellow socialist neighbors. Better I get it than them. At least I am entitled to restitution, while they are not. Second, I am already harmed by extant laws. Why would I harm myself further, by putting myself at a competitive disadvantage with others who have no qualms whatsoever about playing by the libertarian rules.

Now I do not say there are not limits; it is hard to draw them. No, I would not be a guard in a concentration camp. But just to be a lawyer in normal society? I see no problem with it. You are not responsible for the laws that exist. Just like you are not responsible for the fact of public roads. Yet I am sure you use them. What is the difference?

And there are plenty of legal fields you can feel okay about. Like commercial law. Etc. I myself have come to terms with it, though I admit maybe I am just rationalizing; or maybe I am simply not as principled or courageous as you. But for example I concluded patents are invalid. Yet I am a patent attorney. I file and apply for and obtain patents for my clients (now, my employer). Most of them issue and sit on a shelf. If I were a litigator, I would sometimes defend, and sometimes sue, others for patent infringement. I might feel a bit guilty about suing someone for it–but first, you can avoid such things, if you want; and second, what’s wrong with suing someone for patnet infringment, if they themselves accept the legitimacy of the patent system? But in actuality, in my case, our portfolio of patents is primarily defensive: GIVEN the existnece of patents, we might be sued; so we have a portfolio to use defensively, in a cross-claim, if possible and necessary.

But imagine you are at a big law firm, and you do a “pure” type of law, like contract only. Yet you are making money *from* the firm’s other “impure” activities. At one of my firms, they got a huge judgement in the tobacco litigation against a state. This filtered down to the partners (of which I was one). Should I refuse the mone? How much? It’s fungible. BUt if i refuse it, more goes to my fellow, more-socialist attorneys. Why is that preferable? In any event, it is unavoidable to share in some of the loot. Driving on the roads. Etc. But remember, don’t blame the vicitm! You are NOT responsible for this.

My advice is what I follow: just have a good career. Do not worry about things you are not responsible for. Stay as active in the movement as you want, and enjoy, but do not believe you have an obligation to save everyone and do not be deluded that you will. Live your life. Don’t waste it. Don’t add further unnecessary burdens to your life, on top of the others already heaped upon you by socialists. Screw them. Try to avoid getting involved with really nasty things, like the CIA or drug enforcmenet or IRS etc., but other than that, live your life and try to be as mainstream successful as you can. (Actually, I could see working as a young lawyer for the IRS for a while, to learn it inside and out, then jumping ship to represent clients to defend them against the IRS. I would have no qualms with that.)

Good luck.

Stephan

****

Advice from a law student friend, sent to a prospective law student at my request:

Dear X:

Let me tell you how I came to law school and what’s happened since I’ve been here; maybe I’ll address some of your fears/questions indirectly. I grew up in a suburb of [southern city]. My parents taught me the joys of small government and exposed me to Ayn Rand. They don’t describe themselves as such, but they’re basically paleoconservatives. I attended undergrad at Loyola as a []/political science double major. I was the only libertarian in the poli sci dept, and spent a lot of time getting verbally jumped in class. Loyola as a whole is also tremendously liberal; “social justice” is one of their core values. In my liberal arts classes, my treatment was similar to yours. I was definitely outnumbered by nanny-statists and bleeding hearts and got shouted down more than once. At some point, I stopped bothering and decided to leave them to the state they deserved.

One semester, however, I went to buy my textbooks and saw that there was a class teaching Atlas Shrugged as an optional text. I bought the books and signed up for the class immediately. That’s how I met Walter Block. I think the class was Law and Economics, and the required text was Walter’s Defening the Undefendable. Loyola’s econ department, it turned out, was significantly Austrian. I didn’t know what that meant at the time, but I was soon trying to figure out how I could replace my poli sci major with econ. It was too late to get an econ degree by that point, but I took what classes I could. Walter is an amazing teacher, and he brought me into the fold of Austrian economics and principled Libertarianism.

I graduated in the spring of 2006 and began [] Law School in the fall. I will tell you this: if you decide to attend law school, you will spend a considerable amount of time being angry. You will be upset by stupid, unprincipled decisions. You will hate every single government intrusion. You’ll curse judges’ names for failing to protect liberty. On the other hand, you’ll occasionally cheer. Sadly, you won’t cheer with nearly the frequency you’ll boo. You will almost certainly be vastly outnumbered in every single class by people with whom you virulently disagree. If you champion causes like liberty and free trade and the right for private parties to discriminate against anyone for any reason, you will be probably labeled a crank or worse. Principled thinkers of any stripe are incredibly rare, let alone principled libertarians or anarchists. Nearly all of your classmates – both liberal and conservative – will worship the state. Law school isn’t really any different than anyplace else; you will be different.

That being said, you will probably meet some really great people who, even if you disagree with them ideologically, are genuinely good and want to do good things. You’ll probably be closer to some of the friends you make in law school than the vast majority of friends you enter with. Law school is a pain in the ass. At times, it’s boring; at others, it’s grueling. It’s a lot of work, even if you do as little as possible to pass. It’s pretty much the perfect place for bonding through shared misery, and, I expect, when it’s over I’ll even miss it. However, right now I have the right, shared by all students, to bitch constantly.

Despite your uncommon views, there is absolutely no reason to sacrifice your principles. More likely than not, you’ll be graded anonymously. As a result, you can air your views and values in class without fear of reprisal on the exam (which will almost certainly be your only grade for the entire semester). However, if you know the prof disagrees with your views and there is a place on the exam where you can rub his nose in it, you’d be a fool to take the opportunity. Keep your head down, write the answer the prof wants, and think what you want. If you want to compete for top clerkships/inernships/jobs, your grades are important. It’s not worth throwing it away over trying to show your prof just how wrong his views are; he won’t change his mind, and you will take academic and professional the hit if the prof is petty, which he probably is because he is a law professor and filled with self-loathing.

I have dealt with the discrepancy between my views and the views of the prof and most of the class by laughing at them internally and not challenging them. Honestly, I don’t care what they think on political/philosophical issues. I have no interest in saving them from themselves, and fighting with them isn’t nearly as entertaining as it was before I got old and grumpy.

I will be completely honest; I take home a state check twice a month [from a government job]. From my libertarian friends, I’ve gotten responses ranging from indignation for taking dirty money and supporting the state to gratefulness that there was a libertarian sitting in [that position] minimizing the damage the state causes as best he can.

I approach the subject in the latter vein, much like Stephan approaches his patent practice. For the foreseeable future, state courts will exist. Those courts will have clerks. The judges in those courts will often be bound to behave in a way contrary to freedom. However, there is a continuum of action available ranging from draconian to benign. By being a clerk – a state actor – I can and have effectively pushed my court’s behavior closer to the benign side of the spectrum. Overall, it’s a better condition than if I hadn’t accepted the job. There are people who would classify this thought process as facile rationalization. That’s fine; I’ll take my lumps and keep on doing what I think is the best job I can. I’m advancing liberty more than if I simply sat around complaining about the state.

I plan on entering private practice after passing the bar. I hope to do a lot of small property/contract law, family/estate law, and very minor criminal defense. Those practice areas are normally pretty neutral, as far as liberty goes. Really, what’s cleaner than defending property rights and the sanctity of contract? Since it’s a small/solo firm, I don’t really have to worry about ill-gotten gains creeping into my income streams from less principled partners. Finally, I hope to be judge some day.

Stephan’s right; you can’t be a judge without doing some evil. On the other hand, my earlier argument applies here a fortiori. It’s much better that I do it while trying to restrain the state as much as possible than a state-worshiper do it for the greater glory of the establishment. I might be damned but I’m willing to take that risk.

Well, this has gotten overwhelmingly long, and I apologize for that. I hope you can use my experience to help you decide where to go from here. It’s certainly possible to go to law school and remain a libertarian. The state is strong and will probably always be with us, but the sweetest victories I’ve ever taken part in are those where the state’s laws were used against it. Pretty much the only place you’ll learn to do that is in law school. If nothing else, the training is great for self defense.

Cheers,
Y

***

Advice from another friend:

This is my advice, based on my having been to law school (and having looked for a job) and having been in grad school in [other fields]:

1. Get into the best law school you can, period. You’re already libertarian, and the nature of your school won’t affect that. It’s more important that you get a job than that your political development is made more efficient by combining it with your law school coursework. If you can get into Harvard or Yale, do it. If you want a libertarian education, get it on your own time. More important is having a high-paying job; or else one that permits you to exert some influence in moving others toward libertarianism. The only such thing I can think of is law school teaching, and law schools want professors only from the top institutions.

2. There are a precious few libertarian-leaning programs in other disciplines; probably none in law. Law schools attract and prefer leftist teachers, and since they’re teaching the actual law, libertarian theory is not a priority. That said, IF among the best schools you (a) can apply to with a reasonable expectation of getting in, or (b) have been accepted to, they are otherwise identical as to reputation, then just look over the faculty, and pick the one that has the more or better ones you want vis-a-vis your libertarian leanings.

Really, the bottom line: pick the best law school you can get into, period; pursue libertarianism with your whole heart outside of that. One last piece of advice: nobody in law school — faculty, admin, fellow students — really needs to know you’re libertarian or ancap, unless you just insist on convincing them you’re a loon and you want to limit your job options.

End the stuff you’re to cut and paste to future supplicants. Btw, I don’t think I’ve hurt myself by being libertarian; I hurt myself by getting too many other degrees first, and by being too old for a [certain southern city]. Not a problem, I’ll do fine, and this stuff doesn’t relate to advice to give others — few will have my special impediments.

So asks this Reason post, discussing five types of libertarian identified by Tyler Cowen. The five types are:  1. Cato-influenced; 2. Rothbardian anarchism; 3. Mises Institute nationalism; 4. Jeff Friedman and Critical Review; and 5. Hayek libertarianism. “Cato-influenced” is defined as “orthodox” libertarianism, “defined by the troika of free markets, non-interventionism, and civil liberties.  It is based on individual rights but does not insist on anarchism.  A ruling principle is that libertarians should not endorse state interventions.” Of course, Mises Instituters tend to adhere to these principles (and to be Rothbardians, often anarchists; and not “nationalists”). As Wirkman Virkkala notes:

Cowen apparently desired to carry water in the culture war between George Mason economists and the scholars and enthusiasts associated with the Mises Institute. His characterization of a “Mises Institute Nationalism” borders on bizarre, though I see why he would make the attempt. The fact that so many of these folks are themselves anarchists means that whatever “nationalism” they promote must be a different sort. I took from this short description that Cowen doesn’t like Hans-Herman Hoppe. Yeah, thanks for sharing. This description of a strand of libertarianism is less coherent than the previous.

Look, I’m glad Cato is generally on our side. But the implication that Cato is “orthodox” libertarian, compared to the Mises Institute’s “nationalism” is guffaw-inducing. Of course, no group’s members have perfectly uniform views, but consider the following cases that seem to stray from the troika of basic libertarian principles of free markets, non-interventionism, and civil liberties, where various Catoites:

• have opposed tax cuts;
• think people who advocate the aboliton of all medical licensing are “moonbats”;
• think we need inflation to counter irrational exuberance;
• defend the Iraq war (not all of them, thank goodness);
• praise socialist-welfarist John Rawls;
• defend federal surveillance and the “Police America Act”;
• prefer Hamilton to Jefferson;
• are tepid in criticizing state-imposed intellectual property (and many of them support IP);
• support centralized federal supervision of states;
• praise “sensible gun regulations“;
• sought $3.5M in DC taxpayers’ money for reimbursement for helping to foist a national rule on the entire country that redefines the natural right to bear arms as a limited State-conferred privilege, clearing the way for all manner of gun regulations;
• flirt with the idea of carbon taxes;
• support NAFTA’s managed trade system;
• laud Ben Bernanke’s performance as Fed Chairman and distractingly focus on the importance of the “independence” of the Fed;
• want to run the TSA (and see Bob Poole on the TSA);
• opposed Ossetian independence from Russian in the name of “territorial integrity”;
• consort with Russian dictators.

It’s almost a compliment to be called a nationalist by someone who holds up this as the libertarian ideal.

ABSOLUTELY HEROIC post by Lew Rockwell! Yes, it’s time to take the gloves off, my fellow libertarians. No more excuses for the state! No more state worship! Down with constitutional sentimentalism!

‘Untold Truths About the American Revolution’

Murray Rothbard wrote that “There have been only two wars in American history that were, in my view, assuredly and unquestionably proper and just”: “the American Revolution, and the War for Southern Independence.” Now these wars may be just under “just war” theory, but in my view they were all unjust by libertarian standards. The use of conscription and taxation alone–by the US in the former, and the CSA in the latter–is enough to condemn the actions of these states as criminal.

Libertarians are not usually reluctant to condemn state crime and war, but for some reason if you make similar observations about the Revolutionary War, or the Civil War (either Lincoln’s, or the CSA’s, criminal actions), libertarians become apoplectic. Case in point: the reaction to my post Happy We-Should-Restore-The-Monarchy-And-Rejoin-Britain Day! “Proud Patriot” in the comments says that I “blame the freedom-loving patriots of the American Revolution for the mass murdering tyrants of the twentieth century”.

Well, some libertarians may want to overlook the typical crimes committed by states anytime there is war, but I don’t. The Declaration of Independence of course led to all the standard evils of war and raising an army-as Hummel noted, “unfunded government debt, paper money, skyrocketing inflation, price controls, legal tender laws, direct impressment of supplies and wide-spread conscription.”

Casual googling leads to all kinds of information on this. E.g.: as noted here:

The absence of a strong, central, colonial government resulted in a vast shortage of funding and human resources. Paper money and bills of credit financed the war, and while the paper money became almost valueless, inflation rocketed. Profiteers took advantage of these conditions to make money while workers held strikes for higher wages. Soldiers were also in short supply, with state militias sometimes competing against the Continental Army for them. Soldiers were generally ill fed, poorly clothed, and lacked weapons.

Around 5,000 blacks served in the colonial army. At first only free blacks were accepted, but the shortage in soldiers led to the conscription of slaves. Blacks fought with whites in unsegregated units. Americans Indians, threatened by colonial expansion, most often fought for the British, and after the revolt ended their claims to land and self-rule were largely ignored.

And here:

As the war dragged on, it became more difficult to find soldiers. States increased bounties, shortened terms, and reluctantly forced men to serve. But conscription was such a distasteful and dangerous exercise of state power that legislatures would use it only in extreme circumstances. More frequently, legislatures tried to reinforce the army with men drawn by incentive or compulsion from the militia for only a few months of summer service. The army’s composition thus reflected a bewildering variety of enlistment terms. After 1779, for example, a Connecticut company might have eight or ten privates serving for three years or the war, and twice or three times that number enlisted only for the summer. Washington’s complaints to Congress have obscured his genius in building an effective army out of the limited service most Americans were willing to undertake.

Here:

During the Revolutionary War, state governments assumed the colonies’ authority to raise their short‐term militias through drafts if necessary. They sometimes extended this to state units in the Continental Army, but they denied Gen. George Washington’s request that the central government be empowered to conscript. As the initial volunteering slackened, states boosted enlistment bounties and held occasional drafts, producing more hired substitutes than actual draftees.

Here:

Even with their powerful new ally, the Americans remained in dire straits. Enlistments were down and conscription, while utilized, was unpopular.

This book mentions the execution of soldiers during the Revolutionary War for desertion and other things — “For examples of soldiers executed without recourse to a trial by courts-martial, see Henry Lee, Memoirs of the War in the Southern Department of the United States ..”

As my friend Manuel Lora wrote me: “In order to be free we shall establish a state, inflate the money supply, control trade and enslave people to work the fields and the killing fields. … Happy 4th of July.”

Update: ¿Feliz día de la Independencia? by Albert Esplugas: an excerpt: “I am not convinced that [July 4th] should be celebrated in America either”

A good comment on Don Boudreaux’s post The Founders Would Be Appalled:

Ray Gardner,

I agree with you when you wrote that “the form of government that was laid down by these men set the stage for the most dynamic, and freest civilization the world has ever known.”

But I passionately hate this romantic notion regarding the founders of this country, purported by many libertarians and conservatives, as somehow being noble and good, and different from modern politicians, when in fact, many of them were hypocritical slaveholders.

To debunk this nonsense about these people as somehow being outstanding American citizens, I will emphasize my last post for the other readers to be perfectly clear:

“…these men knew what they were doing was not only morally reprehensible, but entirely against everything which they were fighting for, and yet they still held these people as slaves!

To be clear, they were hypocrites who talked a big game about liberty and justice, but were abject failures because they lacked the courage to follow their passionate convictions. They were pure cowards, and nothing better.”

That’s my beef…….that so many libertarians and conservatives look up to these cowards as somehow superior and worthy of emulation, when they failed at following up on even the most basic tenets of their writings and speeches.

In fact, had they not enslaved people, then yes, I probably would be exalting the things they wrote about too, but unlike many other libertarians, I see them for the complete cowards they were.

I mean, how can a man think, write, speak and fight for liberty and justice all day from the comforts of his home while looking out the window as the people he “owns”, his slaves, are being forced to work against their will.

Really, let’s stop this foolishness about the “founders” being so great and “better” than today’s politicians, and get a proper perspective of history here.

–Pingry

And from Trevor Bothwell:

Celebrating Evil

Today I will be celebrating friendships at the Fourth of July party I’ll be attending. Unlike the vast majority of people, however, I will not be celebrating my country’s decision to shed one criminal enterprise for the formation of another, nor will I delude myself into thinking that the United States is in any capacity a free country in terms of libertarian values.

We live in a state that sanctions the theft, assault, and murder of innocent citizens on a daily basis. That, my friends, is nothing to raise a glass to.

And in Los padres fundadores, con perspectiva histórica, Albert Esplugas discusses this post.

Update: Hurrah for King George!, by John Attarian.

[LCR Cross-post]

[From Mises Blog, Jan. 2009]

Hayek, IP, and Knowledge

January 16, 2009 5:00 PM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (60)

I am hesitant to compliment Tucker’s A Book that Changes Everything, given that he generously over-praises me in it, but I can’t help it–it’s really a great piece–just perfect. And he has a tantalizing suggestion in it: “As I’ve thought more about their book, it seems that it might suggest a revision in classical-liberal theory. We have traditionally thought that cooperation and competition were the two pillars of social order; a third could be added: emulation. In addition, there is surely work to do here that integrates Hayek’s theory of knowledge with the problem of IP”

Now, I’ve long been critical of aspects of the Hayekian focus on “knowledge problems” (see my post Knowledge vs. Calculation). But Tucker has a good point. Property rights are rights in scarce resources. All actions employ means, including scarce resources in our bodies, and in appropriated scarce resources (property). All action employs these means to attain certain ends. But all action is based on information or knowledge: beliefs by the actor about what causal laws are operative, what ends are possible, and so on. People acquire knowledge as they develop and grow; some by introspection and experience, but so much more is acquired dissemination from others, by those in one’s community, and by the inherited body of knowledge passed down, and added to, over the centuries. Emulation and the acquisition of knowledge play a key role–are essential to–society, and economy.

So Tucker has hit the nail on the head: one problem with IP is that by monopolizing information, knowledge–patterns–it restricts and locks up the flow of knowledge. It thus impedes the operations of the free market and productivity, by reducting the scope of human action, impairing its efficiency by hampering the means at one’s disposal.

Update: See also my Against Intellectual Property, p. 53, noting that “All action, including action which employs owned scarce means (property), involves the use of technical knowledge. Some of this knowledge may be gained from things we see, including the property of others.”

Also, see my Knowledge, Calculation, Conflict, and Law, pp. 58-59, arguing that it should be realized that “knowledge” is merely a “technical problem that confronts any individual when choosing means to achieve certain ends, and when deciding which ends to pursue. … The need to acquire knowledge faces even Crusoe alone on his island, who has no need for private-property rules because there are no other people and thus no possibility of interpersonal conflict.”

And see Guido Hülsmann’s Knowledge, Judgment, and the Use of Property:

However, there is still a more fundamental condition of action. This is the fact that knowledge as such is never scarce. Knowledge problems thus do have a place in economics only insofar as knowledge has to be selected for application. Yet the selection of knowledge depends entirely on the property of the acting person.

At each moment we dispose of a myriad of information, and we often know of many ways to achieve any given end. For example, if my apartment is cold, I could keep my body warm through gymnastics or additional sweaters. I could also burn parts of my furniture or simply turn on the heating and pay higher bills. I could also sit down in my armchair and invent a new technology permitting one to heat my apartment at half of the present cost. To be sure, the latter alternative is the most elegant one. In any case, as conditions do not cease to change, we constantly have to acquire new knowledge if only to conserve our present standard of living. However, economic science does not have to deal with the factors conditioning the acquisition of knowledge.

… For the moment we are entirely unconcerned with the creation of knowledge, that is, of judgments that prove to be successful in action. We do not bother about the way we reduce our sheer ignorance. Rather we have to consider the principles that govern the selection of the judgments that we actually apply in our actions.

…In choosing the most important action we implicitly select some parts of our technological knowledge for application. In other terms, our choices imply a judgment upon the importance of our technological knowledge under the expected conditions of our action. This economic judgment is our only concern. Technological knowledge as such is immaterial for economics.

Notice how Hülsmann here distinguishes between action, and the means one employes, and the “technological knowledge” ones uses to guide one’s actions, to employ various causal means in the world to achieve certain ends–but that it is distinct from action and means.

[From Mises Blog, July 11, 2006]

Knowledge vs. Calculation

July 11, 2006 9:24 PM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (8)

On occasion I’ll see someone try to smooth over the Mises-Hayek “dehomogenization” debate which argued whether and to what extent Mises’s and Hayek’s approaches to the impossibility of socialism differed. One side–what I’ll call the Rothbardian or praxeological-Misesian view–sees Mises’s insight as having to do with the use of money prices to serve as a cardinal unit for purposes of economic calculation. This approach is championed by Rothbard, Hoppe, Herbener, Salerno, Huelsmann, and others, and arguably Mises. This view also sees Hayek’s contribution as different, and as possibly confused or flawed: that prices help to spread otherwise localized information through the economy, thus enabling efficient use of resources. The Hayekians tend to emphasize the knowledge or informational aspects of money, but also maintain that this is just “the other side of the coin” of Mises’s insights.

See, e.g., Yeager, in Mises and Hayek on Calculation and Knowledge, “question[ing] the supposed distinction between calculation and knowledge problems.” See also: Pete Boettke, Hayek and Market Socialism: Science, Ideology, and Public Policy (Don Lavoie [in Rivalry and Central Planning, 1985] argued that one must read Mises and Hayek’s arguments as two sides of the same coin, and I follow him in this regard and will not dehomogenize their different contributions to the analysis of socialism”); also his Economic Calculation: The Austrian Contribution to Political Economy (“the essential argument that Mises and Hayek rose against socialist proposals–the problem of economic calculation–and their understanding of how the private property system affords monetary calculation are complementary contributions to economic theory”).

Also see Steve Horwitz, Monetary Calculation and the Unintended Extended Order: The Misesian Microfoundations of the Hayekian Great Society (“An Austrian economics for the 21st century is going to have to rediscover those Misesian insights and more fully integrate them with Hayek’s work on knowledge and coordination. … a “praxeological” social scientist has both a Hayekian and a Misesian task: The Hayekian task is to recognize and describe the nature of the unplanned order that is to be explained, while the Misesian task is to describe the process by which intentional human action is guided such that it can produce that Hayekian order. … The “de-homogenizers” have … correctly identified microfoundations [including] the importance of monetary calculation and Mises’s concept of “appraisement,” but … they ignore what seems to be the obvious relationship between those microfoundations and Hayek’s vision of the social order. That is, they ignore that the outcome of the use of economic calculation by individual entrepreneurial actors and by firms and households is precisely the “use of knowledge in society” that characterizes the Hayekian spontaneous market order.”).

Also: Bob Murphy in a recent post wondered: “I don’t understand why Salerno (and Kinsella and perhaps others too on their side of this) think it so crucial to hammer home the point that market prices don’t convey knowledge.” Murphy and I had some back-and-forth on this in the comments to this post, as well.

(Some more information is available on the Wikipedia entry on the economic calculation debate.)

So the Rothbardians/praxeologists view the Mises and Hayek approaches as different (and the latter as a weaker point, at best, or confused and distracting, at worst); while the Hayekians claim the approaches are complementary and intertwined.

On occasion I have corralled and summarized some of the resources but do this often enough that I thought it might be useful to put some of the links and references in one place. It is my view that the (primarily Rothbardian/praxeological) sources below, at the very least, make it difficult to argue that the two approaches are “two sides of the same coin”. Below is a brief discussion and summary of and some links to some of these arguments.

***

What I take to be the Rothbardian or praxeological-Misesian approach to the socialism-knowledge-calculation debate is found in the writings of: Salerno (Economic Calculation in the Socialist Commonwealth: Postscript: Why a Socialist Economy is “Impossible”, Reply to Leland B. Yeager on “Mises and Hayek on Calculation and Knowledge”, Ludwig von Mises as Social Rationalist), Hoppe (Socialism: A Property or Knowledge Problem?), Hülsmann (Knowledge, Judgment, and the Use of Property), Herbener (Calculation and the Question of Arithmetic; Ludwig von Mises and the Austrian School of Economics), Rothbard (The End of Socialism and the Calculation Debate Revisited), and, of course, Mises (The Equations Of Mathematical Economics And The Problem Of Economic Calculation In A Socialist State; Economic Calculation in the Socialist Commonwealth; Human Action, esp. Ch. 16, Secs. 1, 2, and 3).

A summary of some of these views is found in my essay Knowledge, Calculation, Conflict, and Law. See. e.g. p. 53 and n. 8, discussing Hülsmann‘s discussion of Hayek’s tin example:

In this example, what information, exactly, is supposed to be conveyed by prices? Let us explore the possibilities. Can the original cause of the price increase (i.e., the change in demand or supply) itself be conveyed via prices? Well, no. Prices are the result of action. Thus, action that changes the prices must already be informed by knowledge.8

8 In other words, the prices generated on the market are past prices, which are always the outcome of action, not its cause. Hülsmann (p. 26) explains that “all information that this action was based upon had to be acquired beforehand. The price itself could not have communicated the knowledge that brought it [the price] about.” With regard to the tin example, “tin does not become scarcer and then this fact can come to be known to someone and lead to adaptations. Rather it is the other way around. The very fact that demand increases means that someone already knows of a more value-productive employment of tin” (p. 28).

Note that even Hayek says that mere users of tin do not know “anything at all about the original cause of these changes.” So prices might rise for a number of reasons: 1. because some people correctly assess that supply is reduced and therefore bid prices up; 2. because some people mistakenly believe supply is reduced and therefore bid prices up; 3. because some people correctly assess that demand will increase; 4. because some people mistakenly forecast that demand will increase. Etc. So if price goes up does it give you any information? All you know is it went up for some reason. You don’t know why. The people who bid it up know why they bid it up, based on their own assessment and knowledge–which is of necessity information they have that they did not get from prices; it is their knowledge and opinions that they use to form the price, not the other way around.

In fact it’s important to realize, in my view, that it is not a bad thing that information is “dispersed.” In fact, as Salerno points out (pp. 114-15), “dispersed knowledge is not a bane but a boon to the human race; without it, there would be no scope for the intellectual division of labor, and social cooperation under division of labor would consequently, prove impossible.”

Prices are important because they serve as an “accessory of appraisement.” “Current” (immediate past) prices tell only what the current price structure is, and thus serve as a basis for forecasting what the future array of prices will be, given the current starting point. For this reason, Hülsmann argues (p. 47) that present prices “can have no communicative function because they are only the, if indispensable, starting point for our understanding of the future.”

Some of Mises’s writing is extremely useful here, on the formation of prices and the distinction between future and past prices. See, e.g., Human Action, pp. 336-37:

In drafting their plans the entrepreneurs look first at the prices of the immediate past which are mistakenly called present prices. Of course, the entrepreneurs never make these prices enter into their calculations without paying regard to anticipated changes. The prices of the immediate past are for them only the starting point of deliberations leading to forecasts of future prices. The prices of the past do not influence the determination of future prices. It is, on the contrary, the anticipation of future prices of the products that determines the state of prices of the complementary factors of production. The determination of prices has, as far as the mutual exchange ratios between various commodities are concerned, no direct causal relation whatever with the prices of the past. The allocation of the nonconvertible factors of production among the various branches of production and the amount of capital goods available for future production are historical magnitudes; in this regard the past is instrumental in shaping the course of future production and in affecting the prices of the future. But directly the prices of the factors of production are determined exclusively by the anticipation of future prices of the products. The fact that yesterday people valued and appraised commodities in a different way is irrelevant. The consumers do not care about the investments made with regard to past market conditions and do not bother about the vested interests of entrepreneurs, capitalists, landowners, and workers, who may be hurt by changes in the structure of prices. Such sentiments play no role in the formation of prices. (It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference.) The prices of the past are for the entrepreneur, the shaper of future production, merely a mental tool. The entrepreneurs do not construct afresh every day a radically new structure of prices or allocate anew the factors of production to the various branches of industry. They merely transform what the past has transmitted in better adapting it to the altered conditions. How much of the previous conditions they preserve and how much they change depends on the extent to which the data have changed.

The economic process is a continuous interplay of production and consumption. Today’s activities are linked with those of the past through the technological knowledge at hand, the amount and the quality of the capital goods among various individuals. They are linked with the future through the very essence of human action; action is always directed toward the improvement of future conditions. In order to see his way in the unknown and uncertain future man has within his reach only two aids: experience of past events and his faculty of understanding. Knowledge about past prices is a part of this experience and at the same time the starting point of understanding the future.

If the memory of all prices of the past were to fade away, the pricing process would become more troublesome, but not impossible as far as the mutual exchange ratios between various commodities are concerned. It would be harder for the entrepreneurs to adjust production to the demand of the public, but it could be done nonetheless. It would be necessary for them to assemble anew all the data they need as the basis of their operations. They would not avoid mistakes which they now evade on account of experience at their disposal. Price fluctuations would be more violent at the beginning, factors of production would be wasted, want-satisfaction would be impaired. But finally, having paid dearly, people would again have acquired the experience needed for a smooth working of the market process.

For some other interesting views on this:

• Rothbard (p. 66): “the entire Hayekian emphasis on ‘knowledge’ is misplaced and misconceived”
• Hülsmann (p. 39): discussing “the irrelevance of knowledge problems”
• Salerno (p. 44): “[t]he price system is not–and praxeologically cannot be–a mechanism for economizing and communicating the knowledge relevant to production plans. The realized prices of history are an accessory of appraisement”
• Hoppe (p. 146): “Hayek’s contribution to the socialism debate must be thrown out as false, confusing, and irrelevant.”
• Kinsella: “The encoding metaphor seems to be a pseudoscientific and scientistic attempt to give this kind of economic theorizing a patina of scientific respectability by borrowing engineering terminology. It is scientistic because, in vainly trying to borrow natural science terminology, there is an assumption that only the “hard” or natural sciences have true validity. It is akin to using such inapt phrases as the “momentum” of the leading team in a basketball game, the “energy” of crystals and astral forms, or, even worse, “revving the engine” of the economy. Both economics and ethics can be sciences, but not in the same way as the causal, natural sciences.”

In Reason: Copyright Should Last Half A Century I mentioned libertarian writer Cathy Young’s advocacy of a 50-year copyright term in discussing the looming book-banning of a Catcher in the Rye sequel based on copyright. Well, the judge has made her decision and banned the book. Yep. Here, in America, land of the free, home of the brave, we are literally banning books–and what’s worse, this is due to a law that many libertarians support.

Congratulations, Ms. Young, and other pro-IP libertarians. Shame, shame.

Question: if being pro-war is not enough to revoke your libertarian credentials–how about book-banning?

Update: On Masnick’s blog, someone recommended Eugene Volokh and Mark Lemley’s “Freedom of Speech and Injunctions in Intellectual Property Cases” (which I have not yet read).

[LRC cross-post]

The celebration of the 4th of July as if it’s a libertarian holiday is a bit much to bear. Secession from Britain was a mistake. It’s easy enough to realize that the Constitution was not some libertarian achievement as conservatives and libertarians delude themselves into thinking. The Declaration of Independence in 1776 led to all the standard evils of war and raising an army–in the words of Jeff Hummel, “unfunded government debt, paper money, skyrocketing inflation, price controls, legal tender laws, direct impressment of supplies and wide-spread conscription.” Hmm, doesn’t sound very libertarian to me. (See also below on the language of the Declaration.) Stealing, conscripting, enslaving, murdering. The glorification of democracy. The expansion of empire. The entrenching of corporatist interests with the state. The substitution of traditional order with worship of the democratic state.

Monarchy isn’t perfect, as Hoppe argues, but the move from monarchy to democracy was not “progress” as even some libertarians have mistakenly believed (as Hoppe notes, “although aware of the economic and ethical deficiencies of democracy, both Mises and Rothbard had a soft spot for democracy and tended to view the transition from monarchy to democracy as progress”). When I suggest it was a mistake to secede from Britain, libertarians–brainwashed by both Saturday morning Schoolhouse Rock propaganda (No More Kings; Fireworks; Three-Ring Government; The Preamble) and Randian pro-America mythology–freak out. “You want us to have a king? How terrible?!” or “But Britain is more socialist than we are!” Well, first, I don’t want us to have a king. I’d prefer we have no state: no kings or congresscritters or revenuers. But we have a king now, under another name; he can tax and murder us, just like the dreaded monarchian boogey-man; the state is overlord of all our property, as in feudalism. And rejoining socialist Britain now would be terrible–but would the European monarchies have become democratic socialist states if America had never left Britain? Our secession led to a constructivist new utopian order based on a “rational, scientific” paper document and the rejection of traditional, unwritten, limits on state power, thus setting the world on the path of democracy and democratic tyranny, and all the evils of the 20th Century–WWI, WWII, the Holocaust, the Cold War, Communism, Naziism, Fascism, Great Depressions I and II (see Goodbye 1776, 1789, Tom for links). America’s reckless utopianism corrupted its mother state, rendering it unfit to rejoin. But had we never left? One percent tax paid to a distant King over the ocean sound appealing, anyone? (See Would YOU sign the Declaration of Independence?)

If I didn’t hate states and flags so much I might just fly the ole Union Jack this Saturday!

What about the Declaration itself? How libertarian is it? Well, let’s just take a few choice parts:

We hold these truths to be self-evident, that all men are created equal,

–Well, yes, except for Africans and women, and young men who don’t want to be drafted or executed for desertion, and probably atheists and witches.

that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty, and the pursuit of happiness — that to secure these rights, governments are instituted among men,

This is not the reason governments form–to secure our rights. This is just a sales job for the criminal state.

deriving their just powers

This falsely implies the state can have just powers. It cannot.

from the consent of the governed, that whenever any form of government becomes destructive of these ends,

This implies government does not necessarily become destructive–that good goverment is possible. It’s not.

it is the right of the people to alter or abolish it, and to institute new government,

But not to have no government, right? Why does it deny us the right to get rid of the state altogether?

laying its foundation on such principles, and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.

In other words, they should be free to try one utopian experiment after another.

Update: Some friends sent me some other useful links debunking the “libertarian” aspects of the American Revolution: First, regarding US independence, see A gentle introduction to Unqualified Reservations (part 2), by Mencius Moldbug (“So: let’s put it as bluntly as possible. At present you believe that, in the American Revolution, good triumphed over evil. This is the aforementioned aggregate. We’re going to just scoop that right out with the #6 brain spoon. As we operate, we’ll replace it with the actual story of the American Rebellion – in which evil triumphed over good”). According to Moldbug everything people know about the American Revolution is BS. He recommends this wonderful piece: Strictures upon the Declaration of the Congress at Philadelphia, a devastating attack on the Declaration of Independence and American Revolution written by one of its contemporaries, Thomas Hutchinson, the former Governor of Massachusetts.

And let’s not forget Mencken’s classic The Declaration of Independence in American — an excerpt:

That any goverment that don’t give a man these rights ain’t worth a damn; also, people ought to choose the kind of goverment they want themselves, and nobody else ought to have no say in the matter. That whenever any goverment don’t do this, then the people have got a right to can it and put in one that will take care of their interests. Of course, that don’t mean having a revolution every day like them South American coons and yellow-bellies and Bolsheviki, or every time some job-holder does something he ain’t got no business to do. It is better to stand a little graft, etc., than to have revolutions all the time, like them coons and Bolsheviki, and any man that wasn’t a anarchist or one of them I. W. W.’s would say the same. But when things get so bad that a man ain’t hardly got no rights at all no more, but you might almost call him a slave, then everybody ought to get together and throw the grafters out, and put in new ones who won’t carry on so high and steal so much, and then watch them. This is the proposition the people of these Colonies is up against, and they have got tired of it, and won’t stand it no more. The administration of the present King, George III, has been rotten from the start, and when anybody kicked about it he always tried to get away with it by strong-arm work. Here is some of the rough stuff he has pulled: …

Update: Hurrah for King George!, by John Attarian.

[Mises crosspost]

Study Finds Patent Systems May Not Be an Effective Incentive to Encourage Invention of New Technologies reports:

A new study published in The Columbia Science and Technology Law Review challenges the traditional view that patents foster innovation, suggesting instead that patents may harm new technology, economic activity, and societal wealth. These results may have important policy implications because many countries count on patent systems to spur new technology and promote economic growth.

The study is: Patents and the Regress of Useful Arts, by Dr. Andrew W. Torrance & Dr. Bill Tomlinson, Colum. Sci. & Tech. L. Rev. 10 (2009): 130 (Published May 15, 2009).

As those familiar with my libertarian and IP views know, I’m not a utilitarian (see my There’s No Such Thing As A Free Patent; Against Intellectual Property); but almost all IP proponents are, and claim that IP is “worth it” because it generates additional innovation the value of which is implicitly presumed to be obviously much greater than the relatively trivial cost of having an IP system. So it is striking that there seems to be no empirical studies or analyses providing conclusive evidence that an IP system is indeed worth the cost. Every study I have ever seen is either neutral or ambivalent, or ends up condemning part or all of IP systems. Utilitarian IP advocates remind of the welfarist liberals skewered by Thomas Sowell in his The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy–liberals continue to advocate policies long after there is overwhelming evidence these policies do not work, even by the naive, socialistic standards of their proponents; likewise, utilitarians keep repeating the mantra that we need patent and copyright to stimulate innovation and creativity, even though every study continues to find the opposite.

For other studies or discussion of same, see, e.g., Study: Free Markets Superior to Patent Monopolies; Kinsella, Revisiting Some Problems With Patents (2007); Bessen & Meurer: Patents Do Not Increase Innovation; There’s No Such Thing As A Free Patent (note 10); What are the Costs of the Patent System?; The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism (slides 66 et seq.); Petra Moser, “How Do Patent Laws Influence Innovation? Evidence from Nineteenth Century World Fairs,” NBER Working Paper 9099 (August 2003) [AER 95(4), Sept. 2005] (examines innovations exhibited at World’s Fairs during the 19th century and concludes that countries with patent systems do not have a higher rate of innovation per capita, but that patents affect the industries in which different countries make their innovations); Cole, Patents and Copyrights: Do the Benefits Exceed the Costs?; Lawrence Lessig, The Future of Ideas (2001); Padraig Dixon & Christine Greenhalgh, The Economics of Intellectual Property: A Review to Identify Themes for Future Research (November 2002); Fritz Machlup, U.S. Senate Subcommittee On Patents, Trademarks & Copyrights, An Economic Review of the Patent System, 85th Cong., 2nd Session, 1958, Study No. 15; Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. 1; Roderick T. Long, “The Libertarian Case Against Intellectual Property Rights,” Formulations 3, no. 1 (Autumn 1995); Stephen Breyer, “The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs,” Harvard Law Review 84 (1970), p. 281; Wendy J. Gordon, “An Inquiry into the Merits of Copyright: The Challenges of Consistency, Consent, and Encouragement Theory,” Stanford Law Review 41 (1989), p. 1343; Jesse Walker, “Copy Catfight: How Intellectual Property Laws Stifle Popular Culture,” Reason (March 2000).

See also: Jonathan M. Barnett, Cultivating the Genetic Commons: Imperfect Patent Protection and the Network Model of Innovation, 37 U. San Diego L. Rev. 987, 1008 (2000) (“There is little determinative empirical evidence to settle theoretical speculation over the optimal scope and duration of patent protection.”) (citing D.J. Wright, “Optimal patent breadth and length with costly imitation,” 17 Intl. J. Industrial Org. 419, 426 (1999)); Robert P. Merges & Richard R. Nelson, “On the Complex Economics of Patent Scope,” 90 Colum. L. Rev. 839, 868-870 (1990) (stating that most economic models of patent scope and duration focus on the relation between breadth, duration, and incentives to innovate, without giving serious consideration to the social costs of greater duration and breadth in the form of retarded subsequent improvement)); Tom W. Bell, Prediction Markets for Promoting the Progress of Science and the Useful Arts, 14 G. Mason L. Rev. (2006):

But [patents and copyrights] for the most part stimulate only superficial research in, and development of, the sciences and useful arts; copyrights and patents largely fail to inspire fundamental progress. … Patents and copyrights promote the progress of the sciences and useful arts only imperfectly. In particular, those statutory inventions do relatively little to promote fundamental research and development ….

And see Thomas F. Cotter, “Introduction to IP Symposium,” 14 Fla. J. Int‘l L. 147, 149 (2002) (“[E]mpirical studies fail to provide a firm answer to the question of how much of an incentive [to invent] is necessary or, more generally, how the benefits of patent protection compare to the costs.”); Mark A. Lemley, Rational Ignorance at the Patent Office, 95 Northwestern U. L. Rev. (2001), at p. 20 & n. 74:

The patent system intentionally restricts competition in certain technologies to encourage innovation. Doing so imposes a social cost, though the judgment of the patent system is that this cost is outweighed by the benefit to innovation. … There is a great deal of literature attempting to assess whether that judgment is accurate or not, usually without success. George Priest complained years ago that there was virtually no useful economic evidence addressing the impact of intellectual property. … Fritz Machlup told Congress that economists had essentially no useful conclusions to draw on the nature of the patent system.

See further Julie Turner, Note, “The Nonmanufacturing Patent Owner: Toward a Theory of Efficient Infringement,” 86 Cal. L. Rev. 179, 186-89 (1998) (Turner is dubious about the efficacy of the patent system as a means of inducing invention, and would argue against having a patent system if this were its only justification); F.A. Hayek, The Fatal Conceit: The Errors of Socialism (U. Chicago Press, 1989), p. 36:

The difference between [copyrights and patents] and other kinds of property rights is this: while ownership of material goods guides the use of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopedias, dictionaries, textbooks, and other works of reference could not be produced if, once they existed, they could freely be reproduced. … Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period. [citing Fritz Machlup, The Production and Distribution of Knowledge (1962)]

See also Kinsella, Patents and Innovation, noting economic historian Eric Schiff’s conclusion that when the Netherlands and Switzerland temporarily abolished their patent systems, they experienced increased innovation; Petra Moser’s finding that countries without patent systems innovate just as much, if not more, than those with patent systems.

For Mises’s views on IP, see Mises on Intellectual Property.

Update: David Koepsell has compiled a summary of some studies: see here and here, pasted below:

Bibliography with abstracts:

2006 Pollock, Rufus “Innovation and Imitation with and without Intellectual Property Rights, MPRA Paper No. 5025 http://mpra.ub.uni-muenchen.de/5025 Abstract: an extensive empirical literature study indicates that returns from innovation are appropriated primarily via mechanisms other than formal intellectual property rights and that “imitation” is itself a costly activity…

Debrah Meloso, Peter Bossaerts, Jernej Copic, “Promoting Intellectual Discovery: Patents versus markets” Science, Vol. 323. no. 5919, pp. 1335 – 1339, DOI: 10.1126/science.1158624. Abstract: Because they provide exclusive property rights, patents are generally considered to be an effective way to promote intellectual discovery. Here, we propose a different compensation scheme, in which everyone holds shares in the components of potential discoveries and can trade those shares in an anonymous market. In it, incentives to invent are indirect, through changes in share prices. In a series of experiments, we used the knapsack problem (in which participants have to determine the most valuable subset of objects that can fit in a knapsack of fixed volume) as a typical representation of intellectual discovery problems. We found that our “markets system” performed better than the patent system.

Torrance, Andrew W. and Tomlinson, Bill, Patents and the Regress of Useful Arts (May, 28 2009). Columbia Science and Technology Law Review, Vol. 10, 2009. Available at SSRN: Abstract: Patent systems are often justified by an assumption that innovation will be spurred by the prospect of patent protection, leading to the accrual of greater societal benefits than would be possible under non-patent systems. However, little empirical evidence exists to support this assumption. One way to test the hypothesis that a patent system promotes innovation is experimentally to simulate the behavior of inventors and competitors under conditions approximating patent and non-patent systems. Employing a multi-user interactive simulation of patent and non-patent (commons and open source) systems (”The Patent Game”), this study compares rates of innovation, productivity, and societal utility. The Patent Game uses an abstracted and cumulative model of potential innovations, a database of potential innovations, an interactive interface that allows users to invent, make, and sell these innovations, and a network over which users may interact with one another to license, assign, infringe, and enforce patents. Initial data generated using The Patent Game suggest that a system combining patent and open source protection for inventions (that is, similar to modern patent systems) generates significantly lower rates of innovation (p<0.05), productivity (p<0.001), and societal utility (p<0.002) than does a commons system. These data also indicate that there is no statistical difference in innovation, productivity, or societal utility between a pure patent system and a system combining patent and open source protection.

2005 Moser, Petra, “How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World’s Fairs” in American Economic Review, Vol 95, Issue 4. Abstract: Studies of innovation have focused on the effects of patent laws on the number of innovations, but have ignored effects on the direction of technological change. This paper introduces a new dataset of close to fifteen thousand innovations at the Crystal Palace World’s Fair in 1851 and at the Centennial Exhibition in 1876 to examine the effects of patent laws on the direction of innovation. The paper tests the following argument: if innovative activity is motivated by expected profits, and if the effectiveness of patent protection varies across industries, then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective. Analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important, while innovation in countries with patent laws appears to be much more diversified. These findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries

Anthony Arundela, * and Isabelle Kablab “What percentage of innovations are patented? empirical estimates for European firms” in Research Policy, Volume 27, Issue 2, June 1998, Pages 127-141. Abstract: A 1993 survey on the innovative activities of Europe’s largest industrial firms obtained useable results on patenting activities for 604 respondents. The data are used to calculate the sales-weighted propensity rates for 19 industries. The propensity rates equal the percentage of innovations for which a patent application is made. The propensity rates for product innovations average 35.9%, varying between 8.1% in textiles and 79.2% in pharmaceuticals. The average for process innovations is 24.8%, varying from 8.1% in textiles to 46.8% for precision instruments. Only four sectors have patent propensity rates, for both product and process innovations combined, that exceed 50%: pharmaceuticals, chemicals, machinery, and precision instruments. Regression results that control for the effect of industry sector show that patent propensity rates increase with firm size and are higher among firms that find patents to be an important method for preventing competitors from copying both product and process innovations. The effect of secrecy is not so straightforward. Firms that find secrecy to be an important protection method for product innovations are less likely to patent, as expected, but secrecy has little effect on the propensity to patent process innovations. The R&D intensity of the firm has no effect on patent propensity rates for both product and process innovations. The sector of activity has a strong influence on product patent propensities but very little effect on process patent propensities, after controlling for the effect of other factors.

Helios Herrera & Enrique Schroth, 2003.
“Profitable Innovation Without Patent Protection: The Case of Derivatives,” Working Papers 0302, Centro de Investigacion Economica, ITAM. Abstract: Investment banks develop their own innovative derivatives to underwrite corporate issues but they cannot preclude other banks from imitating them. However, during the process of underwriting an innovator can learn more than its imitators about the potential clients. Moving first puts him ahead in the learning process. Thus, he develops an information advantage and he can capture rents in equilibrium despite being imitated. In this context, innovation can arise without patent protection. Consistently with this hypothesis, case studies of recent innovations in derivatives reveal that innovators keep private some details of their deals to preserve the asymmetry of information.

2008 Boldrin, M and Levine, D, Against Intellectual Property, Cambridge University Press. Reviews: ‘One should bear a heavy burden of proof to enjoy a monopoly. Boldrin and Levine have dramatically increased that burden for those who enjoy intellectual monopoly. All economists, lawyers, judges, and policymakers should read this book.’ W. A. Brock, University of Wisconsin, Madison ‘Boldrin and Levine, highly respected economic theorists, have produced a lively and readable book for the intelligent layman. In it, they challenge conventional wisdom about patents and argue that we would be better off without them. The book will open a fresh debate on the policy on intellectual property protection.’ Boyan Jovanovic, New York University ‘There is a growing and important skepticism about the fundamental rules we have used to regulate access to information and innovation. This beautifully written and compelling argument takes the lead in that skeptical charge.’ Lawrence Lessig, Stanford Law School ‘For centuries, intellectual property rights have been viewed as essential to innovation. Now Boldrin and Levine, two top-flight economists, propose that the entire IPR system be scrapped. Their arguments will generate controversy but deserve serious examination.’ Eric Maskin, Nobel Laureate, Institute for Advanced Study, Princeton ‘This is an important and needed book. The case made by Boldrin and Levine against giving excessive monopoly rights to intellectual property is a convincing one. Monopoly in intellectual property impedes the development of useful knowledge. I think they make the case that granting these monopoly rights slows innovation.’ Edward C. Prescott, Nobel Laureate, University of Minnesota ‘Boldrin and Levine present a powerful argument that intellectual property rights as they have evolved are detrimental to efficient economic organization.’ Douglass C. North, Nobel Laureate, Washington University in St. Louis ‘How have we come to view ideas as if they have some physical existence that we can lock up behind a set of property rights laws akin to, but remarkably different from, those we use to protect our physical property? This is the central question in Against Intellectual Monopoly by Michele Boldrin and David Levine. The answer they come to is startling: except in a few rare cases, intellectual property protection does more economic harm than good and ought to be eliminated. The technology of digital computers and the Internet, as Boldrin and Levine show again and again, has exposed long-standing moral shortcomings of current intellectual property laws in a particularly stark way.’ Stephen Spear, Carnegie Mellon University

Fiona Murray, Scott Stern, “Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis”, NBER Working Paper No. 11465*Issued in July 2005 NBER Program(s): IO PR. Abstract: While the potential for intellectual property rights to inhibit the diffusion of scientific knowledge is at the heart of several contemporary policy debates, evidence for the “anti-commons effect” has been anecdotal. A central issue in this debate is how intellectual property rights over a given piece of knowledge affects the propensity of future researchers to build upon that knowledge in their own scientific research activities. This article frames this debate around the concept of dual knowledge, in which a single discovery may contribute to both scientific research and useful commercial applications. A key implication of dual knowledge is that it may be simultaneously instantiated as a scientific research article and as a patent. Such patent-paper pairs are at the heart of our empirical strategy. We exploit the fact that patents are granted with a substantial lag, often many years after the knowledge is initially disclosed through paper publication. The knowledge associated with a patent paper pair therefore diffuses within two distinct intellectual property environments – one associated with the pre-grant period and another after formal IP rights are granted. Relative to the expected citation pattern for publications with a given quality level, anticommons theory predicts that the citation rate to a scientific publication should fall after formal IP rights associated with that publication are granted. Employing a differences-indifferences estimator for 169 patent-paper pairs (and including a control group of publications from the same journal for which no patent is granted), we find evidence for a modest anti-commons effect (the citation rate after the patent grant declines by between 9 and 17%). This decline becomes more pronounced with the number of years elapsed since the date of the patent grant, and is particularly salient for articles authored by researchers with public sector affiliations.

Thomas David and André Mach, Institutions and Economic Growth: The Successful Experience of Switzerland (1870-1950)
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2006/101
Title:
Institutions and Economic Growth: The Successful Experience of Switzerland (1870-1950)

***

I’ll try again… my comments weren’t making it through, for some reason. I had attempted to post a list of references with abstracts, which might have been too long. Instead, here’s a set without abstracts. These are the files I offered to forward to Gene and anyone else who wanted to read up on the sources I had prepared for our debate, that Gene alleges I am somehow a “fraud” for not disclosing, though I have offered the full articles repeatedly… As for commenting a site regarding anarchism, Gene did the same. Anyway, for anyone who wants to read more, please see below:

for another take on the problem with IP, see my Cardozo talk slides here:
http://davidkoepsell.com/TheEthicalCaseAgainstIP.ppt.htm

as well, here’s a partial list of references on our side of the debate:

2006 Pollock, Rufus “Innovation and Imitation with and without Intellectual Property Rights, MPRA Paper No. 5025 http://mpra.ub.uni-muenchen.de/5025

Debrah Meloso, Peter Bossaerts, Jernej Copic, “Promoting Intellectual Discovery: Patents versus markets” Science, Vol. 323. no. 5919, pp. 1335 – 1339, DOI: 10.1126/science.1158624.

Torrance, Andrew W. and Tomlinson, Bill, Patents and the Regress of Useful Arts (May, 28 2009). Columbia Science and Technology Law Review, Vol. 10, 2009. Available at SSRN: http://ssrn.com/abstract=1411328.

2005 Moser, Petra, “How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World’s Fairs” in American Economic Review, Vol 95, Issue 4.

Anthony Arundela, * and Isabelle Kablab “What percentage of innovations are patented? empirical estimates for European firms” in Research Policy, Volume 27, Issue 2, June 1998, Pages 127-141.

Helios Herrera & Enrique Schroth, 2003.
“Profitable Innovation Without Patent Protection: The Case of Derivatives,” Working Papers 0302, Centro de Investigacion Economica, ITAM.

2008 Boldrin, M and Levine, D, Against Intellectual Property, Cambridge University Press.

Fiona Murray, Scott Stern, “Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis”, NBER Working Paper No. 11465*Issued in July 2005 NBER Program(s): IO

Thomas David and André Mach, Institutions and Economic Growth: The Successful Experience of Switzerland (1870-1950)
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2006/101
Title:
Institutions and Economic Growth: The Successful Experience of Switzerland (1870-1950)

Update: File-sharing has weakened copyright—and helped society Ars technica (21 June 2010) (“they round up a host of studies from the past few years suggesting that, on average, one-fifth of declining music sales might be chalked up to piracy. (The rise of new entertainment options like video game has also hurt the business, and consumers finally stopped “re-buying” old albums on CD by the mid-2000s.)  … But looking at such declines provides only a narrow view. Looked at more broadly, the music industry “has grown considerably” in the last few years. When concert revenue is added to recorded music revenue, the authors note that the overall industry grew more than 5 percent between 1997 and 2007. That’s in large part because consumers’ willingness to pay for “complements” like concerts and merchandise goes up as the price of music and movies falls, and because consumers are exposed to many more artists when prices are low or nonexistent. Even if the music industry was shrinking, though, the authors point out that creativity has not declined—which suggests that weaker copyright can still promote the “Progress” sought by the Founders.”)

[Cross-posted at Mises blog and AgainstMonopoly]

On GMO patent infestation, Kent Hastings comments on my IP views and those of J. Neil Schulman. Schulman responded:

My article “Informational Property: Logorights” begins by specifically disclaiming any state grants of monopoly. The concept stands or falls on its natural-property-rights arguments. Neither Samuel Edward Konkin III or Stephan Kinsella or anyone else has ever successfully answered the challenge I raised in my article, that without the identity of a thing being real enough to make it claimable as property, there would be nothing identifiable existing to be copied in the first place.

This is not arcane. It’s just being pointedly ignored — and Kinsella’s attempts to change the subject don’t make me forget what I wrote.

My response is as follows:

Neil, I said your term “logorights” is somewhat arcane, not your theory, and there was no disrespect implied.

I think you are just wrong to assume that “having an identity” is a sufficient condition for being subject to property rights.

Consider: one has no property right the value of one’s property, as Hoppe and Rothbard have argued (see Sheldon Richman on Intellectual Property versus Liberty); and likewise, one has no property right in the “identity” of one’s property.

The reason is that owning value, patterns, identify gives you an ownership right in others’ already-owned property. Saying you own the “identity” of a thing you own is another way of saying you own the pattern by which it is arranged–which is a disguised way of saying you have ownership rights in things everyone else owns. The standard Lockean account of property accepted by most libertarians says that the person who appropriates a previously unowned scarce resource becomes its owner. The IP advocate, of which you are one, says that if A thinks of a unique way to use his property or a unique pattern to impose on his own property, this act of intellectual innovation magically gives him partial ownership rights in property already owned by others. It lets you tell B how he can use his own property, even though B is the appropriator and by Lockean principles only B should be the owner. Granting A an IP right just means some of B’s rights of control are transferred to A–it’s a transfer of wealth or property, and it’s incompatible with libertarian property rights.

The mistake Rand made was thinking “anything you create” is property, without first asking if the thing created is the type of thing that is subject to property in the first place. In fact, creation is neither necessary nor sufficient since if you create some new pattern using others’ property you are not its owner; and if you impose a new pattern on property you own, then you own the transformed thing since you already owned the stuff of which it’s made. A focus on creation as a source of ownership is the mistake made here. Creation is a source of wealth, sure, but not of ownership, since you can only create using things you already own.

Tibor Machan makes a similar mistake to your “identify” view when he assumes that many “ontological” types of things can be property–the mistake is in assuming that the way we conceptually and terminologically understand the world has some metaphysical basis that translates into property rights. By this view any concept we come up with to “identify” things that is successful, has magically created a new class of property. I find the concept “poem” useful–it is conceptually valid.. poems “have” “identity”–voila, they must be property!

I don’t agree with this way of making rights depend on what concepts we have or how we identify and understand things in the world. Just because we can call something by a word, or call it a “thing,” does not mean it is ownable. In fact, all ownership rights are enforced in physical terms against scarce resources; which means that granting rights in anything else has to undermine and dilute real rights in real things.

For a further explanation of what is wrong with Schulman’s “logorights” theory and why it is contrary to libertarian property rights, see text at notes 48-49 et pass. to my Against Intellectual Property; see also the following posts, which point out various errors in the Randian “creationist” approach to IP (and apply more or  less to Schulman’s logorights idea too):

Articles:

• “Intellectual Property and Libertarianism” (in particular see here and the section on Libertarian Creationism);
• also “The Case Against IP: A Concise Guide”;
• for an alternative to the Randian approach to rights and politics, see What Libertarianism Is.

Media:

• I discuss problems with Rand’s view at length on the Peter Mac show
• and at the Mises University this year;
• also The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism.

Blog posts:

• An Objectivist Recants on IP
• Elaborations on Randian IP
• Rand on IP, Owning “Values”, and “Rearrangement Rights”;
• Libertarian Creationism;
• Objectivists: “All Property is Intellectual Property”
• Thoughts on Intellectual Property, Scarcity, Labor-ownership, Metaphors, and Lockean Homesteading;
• Renaming Intellectual Property;
• Perkins on Pursuing Insufficiently Abundant Intangible “Values”
• Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors;
• Inventors are Like Unto …GODS….
• Also these blog posts: Intellectual Products and the Right to Private Property;
• New Working Paper: Machan on IP;
• Owning Thoughts and Labor;
• Objectivists on IP.

[Cross-posted on Against Monopoly and Mises Blog.]

When I started practicing law in 1992 I had framed some nice prints of the Trumbull painting of the Signing of the Declaration of Independence; a facsimile of the Declaration itself; and the famous Rembrandt Peale portrait of Thomas Jefferson. In the years since I’ve become more and more disgusted and cynical about constitutional sentimentalism and have become much more critical of America’s baleful effect on world history and my rosy view of its founding. Contrary to Randian mythology, America was not some minarchist paradise at its founding (and even if it was, minarchism is just another form of statism; see my What It Means To Be an Anarcho-Capitalist): it was a flawed utopian experiment resulting from an illegal coup d’etat (see my The Institute for Justice on our Munificent Constitution). It was a society that condoned slavery, one of the worst evils ever, while establishing a constructivist new order based on a “rational, scientific” paper document and rejecting traditional, superior, unwritten, monarchist limits on state power, thus setting the world on the path of democracy and democratic tyranny, and all the evils of the 20th Century–WWI, WWII, the Holocaust, the Cold War, Communism, Naziism, Fascism, Great Depressions I and II–not to mention the illegal, immoral, murderous, centralizing War to Prevent Southern Independence (which some “libertarian” centralists for some reason support!) (see my When Did the Trouble Start?; Hoppe’s Murray N. Rothbard and the Ethics of Liberty; also my post Supreme Court: Innocence is No Defense; also Manuel Lora, Constitution Worship Undermines the Cause for Freedom).

And while I still admire many things about Jefferson, let’s face it, he was a slaveowner, probably a slave-raper; he violated the Constitution while in office; and he helped foist on the world this utopian experiment that has led to the present state of the world.

So, I can no longer bear to look at these icons in my office, and am giving them away (maybe to Gil Guillory).

Updates: See my post Jeff Hummel’s “The Constitution as a Counter-Revolution.”

Paul Aubert writes:

Man, you’ve got to chill. Don’t you know that you live in the greatest country ever even thought about, and aren’t you grateful to all of the soldiers who died for you to be able to spew your bile?

Obviously, that was a little bit of my sarcasm, but isn’t it tiring how every single non-Christian holiday turns to military-worship? There is even some military-worship creep in the Christian holidays, like Easter and Christmas. We have (in order):

1. Memorial Day in May, a day to memorialize dead soldiers (and to cheer on our current wars);

2. July 4th, a day originally meant to commemorate the signing of the document of secession from Great Britain, now designed to spew disgusting sayings like, “Remember those soldiers who died so you could be free” (and to cheer on our current wars);

3. Labor Day (in September), a holiday with Communist origins that we somehow link to remembering soldiers who died for our freedom (and to cheer on our current wars); and

4. Veterans Day (in November)…insert everything I just said for Nos. 1-3 above.

Starting in May, there is a day every other month until November to make sure we’re all still on board with the military and killing. We even interject a little military-worship into Thanksgiving (don’t forget to thank those soldiers who are killing, maiming and being killed in places like Afghanistan and Iraq so you can be free).

The absolute worst is when you go to church on the weekend closest to these days; the church is draped in flags, and we sing disgusting songs of murder, like “Glory, Glory, Halleluiah.” We pray for our soldiers to kill foreign civilians before they kill us because we’re free. Mark Twain’s War Prayer is priceless for getting this point across.

It’s gotten to the point where I dread even going to church on those weekends (like the weekend coming up).

Another wrote:

Just read your 6/29/09, 10:26 AM post on the LRC Blog. Also used the included link to re-read your “When Did the Trouble Start?” As had happened before, it reminded me of this closing speech from one of my favorite movies, The Day the Earth Stood Still (1951).*

You probably know about it, but if not . . .

Klaatu: “I am leaving soon, and you will forgive me if I speak bluntly. The universe grows smaller every day, and the threat of aggression by any group, anywhere, can no longer be tolerated. There must be security for all, or no one is secure. Now, this does not mean giving up any freedom, except the freedom to act irresponsibly. Your ancestors knew this when they made laws to govern themselves and hired policemen to enforce them. We, of the other planets, have long accepted this principle. We have an organization for the mutual protection of all planets and for the complete elimination of aggression. The test of any such higher authority is, of course, the police force that supports it. For our policemen, we created a race of robots. Their function is to patrol the planets in spaceships like this one and preserve the peace. In matters of aggression, we have given them absolute power over us. This power cannot be revoked. At the first sign of violence, they act automatically against the aggressor. The penalty for provoking their action is too terrible to risk. The result is, we live in peace, without arms or armies, secure in the knowledge that we are free from aggression and war. Free to pursue more… profitable enterprises. Now, we do not pretend to have achieved perfection, but we do have a system, and it works. I came here to give you these facts. It is no concern of ours how you run your own planet, but if you threaten to extend your violence, this Earth of yours will be reduced to a burned-out cinder. Your choice is simple: join us and live in peace, or pursue your present course and face obliteration. We shall be waiting for your answer. The decision rests with you.”

Now I ask you, how could anyone not love that movie? And let me suggest that you replace those discarded office icons with a nice big beautiful picture of Gort.

*Actress Patricia Neal thought in 1951 this was one of the silliest films ever and, in scene after scene, could barely keep a straight face while delivering her lines. In later years she changed her mind, calling it a marvelous movie that she was very proud to have been in.

Another wrote:

The Catoites rejoice: “This ruling is the latest in a series of steps the Court has taken to strike down race-conscious actions that violate individual rights…” What individual right is Shapiro referring to? The right to get promoted by a government agency?

[Cross-posted at LRC.]

My list is here.

Mentioned on:

• Annoying and pretentious terms (Althouse blog)
• Adjectivey, Alliterations, Britishisms, and Loving (Karen De Coster’s blog)
• Stephan Kinsella’s rulings on term coolness (metafilter)

From Althouse:

Annoying and pretentious terms
Collected by N. Stephan Kinsella (via Metafilter). The list is excellent — reminds me of one of my all-time favorite books: Flaubert’s “Dictionary of Accepted Ideas.” The list is also pretty long, so let me select a few that especially annoy me …

Like everyone, my political and ethical views have evolved over time. From a somewhat racialist milieu in rural Louisiana, I consciously rejected racism when I was in my young teens. From a devout Catholic youth I became a secularist and freethinker at a fairly young age. From libertarian-conservative hawkish Reaganism at 18 I quickly became a die-hard libertarian minarchist, then an anarchist. My initial conservative and Randian pro-American exuberance has given way to a much more critical view of America’s baleful effect on world history and my rosy view of its founding has been replaced with skepticism, disdain, scorn, and regret. On abortion, initially militantly pro-choice in the Randian fashion, over the years my aversion to it has grown deeper and deeper to where I see at least late-stage abortion to be tantamount to murder (though I still don’t favor its being outlawed by states). On affirmative action, my conservative and libertarian overboard “meritism” has given way to a more contrarian view. My initial attraction to natural rights and natural law type arguments slowly shifted to a more realistic and focused transcendental type approach. On intellectual property, despite my initial–but hesitant and troubled–assumption that it was legitimate, after struggling to find a better way to defend it than arguments such as Rand’s and those of utilitarians, I finally rejected it after realizing it is indeed incompatible with property rights. And though I initially praised centralist libertarian ideas such as the Lochner-type caselaw praised by some libertarians I later came to develop a radical skepticism of the wisdom and legitimacy of trusting a central state to monitor state actions. For one more example, despite initially accepting the Hayekian knowledge arguments, I became more skeptical of their coherence in the wake of the Austrian “dehomogenization” debate.^*

And so it is with gay marriage. My views evolved from mild ambivalence and recommendation of civil unions (see Gay Marriage, Feb. 2004; “The” Libertarian View on Gay Marriage, June 2006) to an increasingly pro-gay marriage position (Second Thoughts on Gay Marriage, Nov. 2006). And it’s become even clearer to me now; I’m no longer reluctant.

Why am I for gay marriage? First, I’ve never been even slightly homophobic, despite the assumptions of prejudiced “enlightened” liberals (after all, I am from the South!). So that didn’t play into the gay marriage issue for me. I was initially somewhat opposed to gay marriage, but not for the standard reasons about it “damaging” the “institution of marriage” and all that malarkey, but because I feared (a) it would instantly grant more positive rights to gay couples, and (b) it was the thin end of the wedge and would be used to argue next for anti-discrimination law being applied to gays, which I of course did and do oppose. I still agree with these concerns, but they are not dispositive.

The basic case for gay marriage is this: in a private order the state would not be involved. Contracts would be enforced by the private legal system, including contracts incidental to consensual regimes such as marriage. Marriage would be a private status recognized socially, with contractual and related legal effects: co-ownership defaults, joint liability presumptions, guardianship assumptions, medical decision and visitation rights, alimony or related default considerations upon termination, and the like. Initially religions and societal custom would regard only heterosexual unions as marriage, but eventually, with secularization of society, gay couples would start being more open, and referring to their partners as spouses, and have “wedding ceremonies.” At first mainstream society would be reluctant to accept homosexual unions in the concept or term “marriage,” but I suspect that politeness, manners, increasing exposure to and familiarity with open homosexuals (co-workers, family members), and increasing cosmopolitanness and secularization of society would result in an initially grudging including, finally more complete inclusion, perhaps always with a bit of an asterisk among some quarters. Or maybe not, but I think so. In any case the contractual regimes associated with any type of consensual union would be recognized and enforced legally, whether between hetero couples, homosexual couples, spinster sisters, frat buddies, group unions, whatever. The hetero couples, and perhaps one-man-many-wife groupings, would be referred to as marriages, the members as husband and wife. Perhaps the partners in a homosexual union would be referred to as married and spouses; perhaps not. I think so, eventually, but it’s irrelevant. There would be no legal battle; capitalist acts among consenting adults would be given legal effect, no matter what the accessory union is named.

But. The state is involved. Even now I think the state should not be involved in marriage, even if it insists on monopolizing the legal system. Ideally, the state should get out of the marriage business and enforce whatever contractual arrangements are ancillary to voluntary unions, whatever the members, whatever society, calls these various unions.

But for now, the state monopolizes the laws and regulations governing co-ownership, child-guardianship and custody issues, medical and death-related decisions and visitation, and the like. And it insists on pigeon-holing the relationships that it will give full contractual effect to in the “marriage” category (which means only that the state uses the word “marriage” in the caption of the statutes giving effect to the consensual arrangements of individuals). So be it. If the state is going to monopolize the legal and court system, if it is going to insist on labeling as “marriage” any relationship whose contractual incidents it will deign to recognize legally, then of course it has no right to deny this to gay couples who wish to have the civil aspects of their relationship legally recognized.

Yes, it’s true, this will probably end up with gays getting included in anti-discrimination laws. So what. Abolish the anti-discrimination laws, then.

As for Christian fundamentalists who are so worked up about this: who cares what word the state uses in the caption of the statute giving legal effect to private parties’ contracts? If you are opposed to this, stop supporting the state and positive law. (And if you hate evolution being taught in public schools–stop sending your kids there; stop supporting taxation, democracy, the state, and public schools.)

As for the complain that gay marriage will “harm marriage”–first, nonsense. How is any person’s marriage harmed by the choice of word used in the caption of artificial law made by a criminal state? Second, even if it does harm the “institution” of marriage, this is the result of the state monopolizing this area, or of its failure to fully enforce the contractual regimes of non-standard voluntary relationships since they don’t fit the traditional definition of marriage–that’s no excuse!

As for “purist” libertarians who say we should not extend the reach of the state in this way: well, the state should not have roads either. But would we not oppose a law banning gays from the roads? We would not hide behind, “Well, it’s not nice that the state prohibits gays from using the roads, but the solution is not to let gays use the roads–it’s to abolish the public roads!” No.

Does gay marriage violate anyone’s rights? No. It is not an act of aggression. Does it violate gays’ rights to be prevented because of the state’s monopolization of the legal system from having their relationships given legal effect? Yes. [N.B.: This whole mess, and other considerations (see State Monopolization of Marriage Eviscerates Private Contract) should also highlight for homosexuals why they should also oppose the state and its involvement in this whole area.]

In sum: the state should get out of marriage. If it remains in existence and monopolizes the legal system, it should enforce any contractual aspects of regimes entered into by consenting adults. What they call it is irrelevant. Ideally it would be unlabeled and private society would figure out naming conventions. But the state should not be allowed to hamper the rights of non-standard couples just because it insists on decreeing what is and what is not “marriage.” If the state insists on regulating unions and giving it the label “marriage,” then gays ought to be able to legally protect their relationships and associated regimes. The state infringes their rights to do this if it monopolizes the field then denies them entrance.

Not only should libertarians support gay marriage, but of course they should.

***

For other posts on gay marriage, see Re Gay Marriage, Feb. 2004; Subsidiarity and San Francisco, Feb. 2004; Gay Marriage Amendment, Feb. 2004; Happy Marriage, Nov. 2005; State Monopolization of Marriage Eviscerates Private Contract, Feb. 2009.

^*The links embedded in the first paragraph are, in order of appearance: How I Became A Libertarian; When Did the Trouble Start?; Supreme Confusion, Or, A Libertarian Defense of Affirmative Action; New Rationalist Directions in Libertarian Rights Theory; NSK rights theory articles; my IP articles; Libertarian Centralists; Objectivists and Federalism; Bolick on Judicial Activism; Legislation and the Discovery of Law in a Free Society; Knowledge, Calculation, Conflict, and Law.

Update: see McElroy and Peron on Gay Marriage.

Update 2: See Interracial couple denied marriage license in La.: This is what morons get who trust the state to officially decree marriage. Gay marriage advocates should want the state OUT of the marriage-licensing business, not to be included in it.

by Charles A. Burris (posted with permission)

I would like to call your attention to a virtually unknown little book, The Lost Literature of Socialism, by George Watson, Fellow in English at St. John’s College, Cambridge and editor of the New Cambridge Bibliography of English Literature.

As the publishers explain on the back of this book: “In this hard-hitting and controversial new book, the author examines the foundation texts of socialism to find out what they really say… and the result is blasphemy against its canon of saints. This study, the first review of socialist literature since 1945, reveals how closely socialism was linked to conservative, racist, and genocidal ideas. As a literary critic the author’s concern is to pay a due respect to the works of the founding fathers of socialism, to attend to what they say rather than to what their modern disciples wish they had said. The book forces the reader to abandon long-standing assumptions in political thought, enabling a genuine debate to be revived.”

In this brilliant work examining the foundation texts of socialism, Watson provides a powerful indictment of their reactionary, racist and genocidal ideas. There is a direct line from Marx and Engels to Hitler and the Holocaust; to Lenin and Stalin and the liquidation of the Kulaks and the extermination of the Ukrainians; to Bergen-Belsen, Buchenwald and Auschwitz, and to Kolima, Vorkuta and Karaganda.

What distinguishes “socialism,” the political/economic ideology, and its ideological twin, “sociology,” the social science, are their common inheritance and origins from backward, reactionary ideas (anti-individualism, collectivism, anti-capitalism) and thinkers (Hegel, Comte, de Bonald, de Maistre, Southey, Saint-Simon). Scholars such the sociologist Leon Branson, The Political Context of Sociology, and Nobel Laureate F. A. Hayek, The Counter-Revolution of Science, have thoroughly traced and documented this non-liberal lineage. These horrific ideas were explicitly formulated and conceived against those of classical liberalism, individualism, and free market (laissez-faire) capitalism. But today, according to established authorities in academia and the media, they are the height of “progressive” thought. How did this all come about?Here is how Murray Rothbard put it in his magnificent For a New Liberty:

“(W)e must first remember that classical liberalism constituted a profound threat to the political and economic interests — the ruling classes — who benefited from the Old Order: the kings, the nobles and landed aristocrats, the privileged merchants, the military machines, the State bureaucracies. Despite three major violent revolutions precipitated by the liberals — the English of the seventeenth century and the American and French of the eighteenth — victories in Europe were only partial. Resistance was stiff and managed to successfully maintain landed monopolies, religious establishments, and warlike foreign and military policies, and for a time to keep the suffrage restricted to the wealthy elite. The liberals had to concentrate on widening the suffrage, because it was clear to both sides that the objective economic and political interests of the mass of the public lay in individual liberty. It is interesting to note that, by the early nineteenth century, the laissez-faire forces were known as “liberals” and “radicals” (for the purer and more consistent among them), and the opposition that wished to preserve or go back to the Old Order were broadly known as “conservatives.”

“Indeed, conservatism began, in the early nineteenth century, as a conscious attempt to undo and destroy the hated work of the new classical liberal spirit — of the American, French, and Industrial revolutions. Led by two reactionary French thinkers, de Bonald and de Maistre, conservatism yearned to replace equal rights and equality before the law by the structured and hierarchical rule of privileged elites; individual liberty and minimal government by absolute rule and Big Government; religious freedom by the theocratic rule of a State church; peace and free trade by militarism, mercantilist restrictions, and war for the advantage of the nation-state; and industry and manufacturing by the old feudal and agrarian order. And they wanted to replace the new world of mass consumption and rising standards of living for all by the Old Order of bare subsistence for the masses and luxury consumption for the ruling elite.

“By the middle of and certainly by the end of the nineteenth century, conservatives began to realize that their cause was inevitably doomed if they persisted in clinging to the call for outright repeal of the Industrial Revolution and of its enormous rise in the living standards of the mass of the public, and also if they persisted in opposing the widening of the suffrage, thereby frankly setting themselves in opposition to the interests of that public. Hence, the “right wing” (a label based on an accident of geography by which the spokesmen for the Old Order sat on the right of the assembly hall during the French Revolution) decided to shift their gears and to update their statist creed by jettisoning outright opposition to industrialism and democratic suffrage. For the old conservatism’s frank hatred and contempt for the mass of the public, the new conservatives substituted duplicity and demagogy. The new conservatives wooed the masses with the following line: “We, too, favor industrialism and a higher standard of living. But, to accomplish such ends, we must regulate industry for the public good; we must substitute organized cooperation for the dog-eat-dog of the free and competitive marketplace; and, above all, we must substitute for the nation-destroying liberal tenets of peace and free trade the nation-glorifying measures of war, protectionism, empire, and military prowess.” For all of these changes, of course, Big Government rather than minimal government was required.

“And so, in the late nineteenth century, statism and Big Government returned, but this time displaying a proindustrial and pro-general-welfare face. The Old Order returned, but this time the beneficiaries were shuffled a bit; they were not so much the nobility, the feudal landlords, the army, the bureaucracy, and privileged merchants as they were the army, the bureaucracy, the weakened feudal landlords, and especially the privileged manufacturers. Led by Bismarck in Prussia, the New Right fashioned a right-wing collectivism based on war, militarism, protectionism, and the compulsory cartelization of business and industry — a giant network of controls, regulations, subsidies, and privileges which forged a great partnership of Big Government with certain favored elements in big business and industry.

“Something had to be done, too, about the new phenomenon of a massive number of industrial wage workers — the “proletariat.” During the eighteenth and early nineteenth centuries, indeed until the late nineteenth century, the mass of workers favored laissez-faire and the free competitive market as best for their wages and working conditions as workers, and for a cheap and widening range of consumer goods as consumers. Even the early trade unions, e.g., in Great Britain, were staunch believers in laissez-faire. New conservatives, spearheaded by Bismarck in Germany and Disraeli in Britain, weakened the libertarian will of the workers by shedding crocodile tears about the condition of the industrial labor force, and cartelizing and regulating industry, not accidentally hobbling efficient competition. Finally, in the early twentieth century, the new conservative “corporate state” — then and now the dominant political system in the Western world — incorporated “responsible” and corporatist trade unions as junior partners to Big Government and favored big businesses in the new statist and corporatist decision-making system.

“To establish this new system, to create a New Order which was a modernized, dressed-up version of the ancien régime before the American and French revolutions, the new ruling elites had to perform a gigantic con job on the deluded public, a con job that continues to this day. Whereas the existence of every government from absolute monarchy to military dictatorship rests on the consent of the majority of the public, a democratic government must engineer such consent on a more immediate, day-by-day basis. And to do so, the new conservative ruling elites had to gull the public in many crucial and fundamental ways. For the masses now had to be convinced that tyranny was better than liberty, that a cartelized and privileged industrial feudalism was better for the consumers than a freely competitive market, that a cartelized monopoly was to be imposed in the name of antimonopoly, and that war and military aggrandizement for the benefit of the ruling elites was really in the interests of the conscripted, taxed, and often slaughtered public. How was this to be done?

“In all societies, public opinion is determined by the intellectual classes, the opinion moulders of society. For most people neither originate nor disseminate ideas and concepts; on the contrary, they tend to adopt those ideas promulgated by the professional intellectual classes, the professional dealers in ideas. Now, throughout history, as we shall see further below, despots and ruling elites of States have had far more need of the services of intellectuals than have peaceful citizens in a free society. For States have always needed opinion-moulding intellectuals to con the public into believing that its rule is wise, good, and inevitable; into believing that the “emperor has clothes.” Until the modern world, such intellectuals were inevitably churchmen (or witch doctors), the guardians of religion. It was a cozy alliance, this age-old partnership between Church and State; the Church informed its deluded charges that the king ruled by divine command and therefore must be obeyed; in return, the king funneled numerous tax revenues into the coffers of the Church. Hence, the great importance for the libertarian classical liberals of their success at separating Church and State. The new liberal world was a world in which intellectuals could be secular — could make a living on their own, in the market, apart from State subvention.

“To establish their new statist order, their neomercantilist corporate State, the new conservatives therefore had to forge a new alliance between intellectual and State. In an increasingly secular age, this meant with secular intellectuals rather than with divines: specifically, with the new breed of professors, Ph.D.’s, historians, teachers, and technocratic economists, social workers, sociologists, physicians, and engineers. This reforged alliance came in two parts. In the early nineteenth century, the conservatives, conceding reason to their liberal enemies, relied heavily on the alleged virtues of irrationality, romanticism, tradition, theocracy. By stressing the virtue of tradition and of irrational symbols, the conservatives could gull the public into continuing privileged hierarchical rule, and to continue to worship the nation-state and its war-making machine. In the latter part of the nineteenth century, the new conservatism adopted the trappings of reason and of “science.” Now it was science that allegedly required rule of the economy and of society by technocratic “experts.” In exchange for spreading this message to the public, the new breed of intellectuals was rewarded with jobs and prestige as apologists for the New Order and as planners and regulators of the newly cartelized economy and society.

“To insure the dominance of the new statism over public opinion, to insure that the public’s consent would be engineered, the governments of the Western world in the late nineteenth and early twentieth centuries moved to seize control over education, over the minds of men: over the universities, and over general education through compulsory school attendance laws and a network of public schools. The public schools were consciously used to inculcate obedience to the State as well as other civic virtues among their young charges. Furthermore, this statizing of education insured that one of the biggest vested interests in expanding statism would be the nation’s teachers and professional educationists.

“One of the ways that the new statist intellectuals did their work was to change the meaning of old labels, and therefore to manipulate in the minds of the public the emotional connotations attached to such labels. For example, the laissez-faire libertarians had long been known as “liberals,” and the purest and most militant of them as “radicals”; they had also been known as “progressives” because they were the ones in tune with industrial progress, the spread of liberty, and the rise in living standards of consumers. The new breed of statist academics and intellectuals appropriated to themselves the words “liberal” and “progressive,” and successfully managed to tar their laissez-faire opponents with the charge of being old-fashioned, “Neanderthal,” and “reactionary.” Even the name “conservative” was pinned on the classical liberals. And, as we have seen, the new statists were able to appropriate the concept of “reason” as well.

“If the laissez-faire liberals were confused by the new recrudescence of statism and mercantilism as “progressive” corporate statism, another reason for the decay of classical liberalism by the end of the nineteenth century was the growth of a peculiar new movement: socialism. Socialism began in the 1830s and expanded greatly after the 1880s. The peculiar thing about socialism was that it was a confused, hybrid movement, influenced by both the two great preexisting polar ideologies, liberalism and conservatism. From the classical liberals the socialists took a frank acceptance of industrialism and the Industrial Revolution, an early glorification of “science” and “reason,” and at least a rhetorical devotion to such classical liberal ideals as peace, individual freedom, and a rising standard of living. Indeed, the socialists, long before the much later corporatists, pioneered in a co-opting of science, reason, and industrialism. And the socialists not only adopted the classical liberal adherence to democracy, but topped it by calling for an “expanded democracy,” in which “the people” would run the economy — and each other.

“On the other hand, from the conservatives the socialists took a devotion to coercion and the statist means for trying to achieve these liberal goals. Industrial harmony and growth were to be achieved by aggrandizing the State into an all-powerful institution, ruling the economy and the society in the name of “science.” A vanguard of technocrats was to assume all-powerful rule over everyone’s person and property in the name of the “people” and of “democracy.” Not content with the liberal achievement of reason and freedom for scientific research, the socialist State would install rule by the scientists of everyone else; not content with liberals setting the workers free to achieve undreamt-of prosperity, the socialist State would install rule by the workers of everyone else — or rather, rule by politicians, bureaucrats, and technocrats in their name. Not content with the liberal creed of equality of rights, of equality before the law, the socialist State would trample on such equality on behalf of the monstrous and impossible goal of equality or uniformity of results — or rather, would erect a new privileged elite, a new class, in the name of bringing about such an impossible equality.

“Socialism was a confused and hybrid movement because it tried to achieve the liberal goals of freedom, peace, and industrial harmony and growth — goals which can only be achieved through liberty and the separation of government from virtually everything — by imposing the old conservative means of statism, collectivism, and hierarchical privilege. It was a movement which could only fail, which indeed did fall miserably in those numerous countries where it attained power in the twentieth century, by bringing to the masses only unprecedented despotism, starvation, and grinding impoverishment.

“But the worst thing about the rise of the socialist movement was that it was able to outflank the classical liberals “on the Left”: that is, as the party of hope, of radicalism, of revolution in the Western World. For, just as the defenders of the ancien régime took their place on the right side of the hall during the French Revolution, so the liberals and radicals sat on the left; from then on until the rise of socialism, the libertarian classical liberals were “the Left,” even the “extreme Left,” on the ideological spectrum. As late as 1848, such militant laissez-faire French liberals as Frederic Bastiat sat on the left in the national assembly. The classical liberals had begun as the radical, revolutionary party in the West, as the party of hope and of change on behalf of liberty, peace, and progress. To allow themselves to be outflanked, to allow the socialists to pose as the “party of the Left,” was a bad strategic error, allowing the liberals to be put falsely into a confused middle-of-the-road position with socialism and conservatism as the polar opposites. Since libertarianism is nothing if not a party of change and of progress toward liberty, abandonment of that role meant the abandonment of much of their reason for existence — either in reality or in the minds of the public.

“But none of this could have happened if the classical liberals had not allowed themselves to decay from within. They could have pointed out — as some of them indeed did — that socialism was a confused, self-contradictory, quasi-conservative movement, absolute monarchy and feudalism with a modern face, and that they themselves were still the only true radicals, undaunted people who insisted on nothing less than complete victory for the libertarian ideal.”

As classical liberalism underwent a “crisis of faith,” in the late nineteenth century, so to did socialism: the “crisis of Marxism.”

The “crisis” developed out of the failure of Karl Marx’s prediction regarding the increasing immiseration of the working class. This impoverishment of the proletariat, as the result of economic recessions, was not occurring.

In fact, just the opposite was happening. Working conditions in industrial countries were improving. Standards of living and purchasing power for consumers was increasing due to the innovations and entrepreneurship of capitalism.

These predicted economic recessions under capitalism, said Marx, would result because the working class is unable to buy the full product of their labors. The ruling capitalists would continue to consume all of the surplus value created by the proletariat. A proletariat or socialist revolution must occur, according to Marx, where the state (the means by which the ruling class forcibly maintains rule over the other classes) holds its tight reins.

It was out of this late 19th century “crisis of Marxism,” that four new major strands of thought or ideologies developed:

Revisionist Marxism, or Social Democracy, tried to come to terms with these contradictions of the orthodox Marxist faith, and put forth a program of adaptation and revision we have come to call “the welfare state.” In contemporary America, these are the neoconservatives goosestepping behind Bush and the Republican party, and the progressives marching in lockstep behind Obama and the Democrats.

Marxism/Leninism, or Bolshevism, ignored these inherent contradictions, and put forth a program for the seizure of power by a revolutionary vanguard elite acting in the name of the people (“the Dictatorship of the Proletariat”);Fascism, emerging explicitly from the far left-wing socialists during this “crisis of Marxism,” combined elements of syndicalism and elite rule, and put forth a program of revolutionary populism and nationalism, which over time once established in power, became known as “the Corporate State,” or corporatism.

And finally, National Socialism. George Watson, in his The Lost Literature of Socialism, has an intriguing chapter on Adolf Hitler, where he cites evidence from published accounts of Hitler’s private conversations and remarks to confidants and followers such as Hermann Rauschning and Otto Wagener, that National Socialism was based on Marx. His version of socialism based upon nationalism and race would unify Germans and be successful. Communism, based upon internationalism and the class struggle, only sought to divide and would consequently flounder and fail. Both socialist visions had a common enemy, the bourgeois individualism and classical liberalism of democratic capitalism. National Socialism was the true expression and fulfillment of the Marxian vision. Watson refers to a seminal article by Friedrich Engels, “The Hungarian Struggle,” published by Marx in January, 1849 in his journal, the Neue Rheinische Zeitung, where Marx’s valued collaborator and financial angel explicitly calls for the genocide of Serbs and other Slavs, as well as Basques, Bretons, and Scottish Highlanders. “The Marxist theory of history required and demanded genocide,” Watson observed, “for reasons implicit in its claims that feudalism, which in advanced nations was already giving place to capitalism, must in turn be superseded by socialism. Entire races would be left behind after a workers’ revolution, feudal remnants in a socialist age; and since they could not advance two steps at a time, they would have to be killed. They were racial trash, as Engels called them, and fit only for the dung-heap of history.” Another excellent volume exposing these racist, imperialist and genocidal ideas of Marx and Engels is Nathaniel Weyl’s Karl Marx: Racist.

A very good article on Benito Mussolini and the origins of fascism resulting from this “crisis of Marxism,” is David Ramsay Steele’s “The Mystery of Fascism.”

Four excellent books which further explore these subjects are:

• As We Go Marching, by John T. Flynn (1944)
• Omnipotent Government: The Rise of the Total State and Total War, by Ludwig von Mises (1944)
• The Vampire Economy: Doing Business Under Fascism, by Guner Reiman (1939)
• Friendly Fascism: The New Face of Power in America, by Bertram Gross (1980)

What we are fighting against is the corroded, diseased vestige of reactionary ideas of two centuries ago, ideas which have brought untold death, destruction, and misery to millions.

We must never fail to point out to our adversaries this central fact.

Never concede, never retreat, never surrender.

From Mises Blog, March 30 2008

Quotes on the Logic of Liberty

March 30, 2008 12:30 PM by Stephan Kinsella | Other posts by Stephan Kinsella | Comments (3)

Here are some quotes I’ve collected from previous thinkers, mostly well-known, both ancient and more modern–including Hegel, Bastiat, Spenser, Madison, Locke, as well as Knight, Madison, Machan, Rasmussen-den Uyl, Hare, Narveson. The quotes contain language evocative of the intuitions underlying Hoppe’s argumentation ethics, estoppel, or similar defenses of libertarian principles. (Many of the quotes below are drawn from my own publications, especially the footnotes in: A Libertarian Theory of Punishment and Rights and New Rationalist Directions in Libertarian Rights Theory, plus some other sources. I previously let John Cobin post some of them at his site.)

If anyone has any suggestions for quotes to consider adding to this collection, send them on to me at nskinsella@gmail.com, or add to the comments, especially quotes that highlight some of the insights crucial to the argumentation or estoppel based defense of rights: e.g., the idea that when people come together to discuss ethical situations, they cannot deny ethical norms presupposed in argument itself; the idea that it’s legitimate to use force against criminals simply because the logic of their own action is to endorse the use of force; etc.

Essentially, economic analysis consists of: (1) an understanding of the categories of action and an understanding of the meaning of a change in values, costs, technological knowledge, etc.; (2) a description of a situation in which these categories assume concrete meaning, where definite people are identified as actors with definite objects specified as their means of action, with definite goals identified as values and definite things specified as costs; and (3) a deduction of the consequences that result from the performance of some specified action in this situation, or of the consequences that result for an actor if this situation is changed in a specified way. And this deduction must yield a priori-valid conclusions, provided there is no flaw in the very process of deduction and the situation and the change introduced into it being given, and a priori—valid conclusions about reality if the situation and situation-change, as described, can themselves be identified as real, because then their validity would ultimately go back to the indisputable validity of the categories of action.

Hoppe, A Theory of Socialism and Capitalism, p. 118-19.

Libertarianism and Rights:

“The only proof that can be offered for the validity of the liberal position is that we are discussing it and its acceptance is a presupposition of discussion, since discussion is the essence of the position itself.”
–Frank H. Knight, Freedom and Reform (Indianapolis: Liberty Press, 1982): 473=9674.

“[T]he various values defended by liberalism are not arbitrary, a matter of mere personal preference, nor do they derive from some natural law . . . . Rather, they are nothing less and nothing more than what could be called the operative presuppositions or intrinsic features and demands of communicative rationality itself. In other words, they are values that are implicitly recognized and affirmed by everyone by the very fact of their engaging in communicative reason. This amounts to saying that no one can rationally deny them without at the same time denying reason, without self-contradiction, without in fact abandoning all attempts to persuade the other and to reach agreement. . . . [T]he notion of universal human rights and liberties is not an . . . arbitrary value, a matter of mere personal preference . . . . On the contrary, it is nothing less and nothing more than the operative presupposition or intrinsic feature and demand of communicative rationality itself.”
–G.B. Madison, The Logic of Liberty (New York: Greenwood Press, 1986): 266, 269.

“[O]ur existence is due to the fact that we do not, indeed cannot accept a norm outlawing property in other scarce resources next to and in addition to that of one’s physical body. Hence, the right to acquire such goods must be assumed to exist.”
–Hans-Hermann Hoppe, The Economics and Ethics of Private Property: Studies in Political Economy and Philosophy (Kluwer: 1993): 185.

“[J]ust as one cannot win a game of chess against an opponent who will not make any moves–and just as one cannot argue mathematically with a person who will not commit himself to any mathematical statements–so moral argument is impossible with a man who will make no moral judgements at all . . . . Such a person is not entering the arena of moral dispute, and therefore it is impossible to contest with him. He is compelled also–and this is important–to abjure the protection of morality for his own interests.”
–R.M. Hare, Freedom and Reason (1963): A7 6.6

“A man who would consider himself a bandit if, pistol in hand, he prevented me from carrying out a transaction that was in conformity with my interests has no scruples in working and voting for a law that replaces his private force with the public force and subjects me, at my own expense, to the same unjust restrictions.”

BASTIAT, FREDERIC, Harmonies

“When men hire themselves out to shoot other men to order, asking nothing about the justice of their cause, I don’t care if they are shot themselves.”
–Herbert Spencer, from Facts and Comments (1902)

“[T]he victim is entitled to respond according to the rule (‘The use of force is permissible’) that the aggressor himself has implicitly laid down.”
–John Hospers, “Retribution: The Ethics of Punishment,” in Assessing the Criminal: Restitution, Retribution, and the Legal Process, Randy E. Barnett and John Hagel III, eds., (Cambridge: Ballinger, 1977): p. 191.

“The injury [the penalty] which falls on the criminal is not merely implicitly just–as just, it is eo ipso his implicit will, an embodiment of his freedom, his right; on the contrary, it is also a right established within the criminal himself, i.e., in his objectively embodied will, in his action. The reason for this is that his action is the action of a rational being and this implies that it is something universal and that by doing it the criminal has laid down a law which he has explicitly recognized in his action and under which in consequence he should be brought as under his right.”
–G.W.F. Hegel, The Philosophy of Right A7 100 (T.M. Knox trans., 1969) (reprinted in Philosophical Perspectives on Punishment (Gertrude Ezorsky ed., 1972): 107 (Emphasis in last sentence added; brackets in Ezorsky)

“It is easier to commit murder than to justify it.”
–Papinian (Aemilius Papinianus), quoted in Barry Nicholas, An Introduction to Roman Law, p. 30 n.2 (1962).

Alternative quote to the above: “Papinian [a third-century Roman jurist, considered by many to be the greatest of Roman jurists] is said to have been put to death for refusing to compose a justification of Caracalla’s murder of his brother and co-Emperor, Geta, declaring, so the story goes, that it is easier to commit murder than to justify it.”
–Barry Nicholas, An Introduction to Roman Law, p. 30 n.2 (1962).

Old saying: “What you do speaks so loud I can’t hear what you are saying.”
–Quoted in Clarence Carson, “Free Enterprise: The Key to Prosperity”, in The Freedom Philosophy Vol. 27, 27 (1988).

“With him [an aggressor] we are returned to the first-stage state of nature and may use force against him. In so doing we do not violate his rights or in any other way violate the principle of right, because he has broken the reciprocity required for us to view such a principle [of rights] as binding. In this we find the philosophic grounding for the moral legitimacy of the practice of punishment. Punishment is just that practice which raises the price of violation of the principle of right so as to give us all good reason to accept that principle.”
–J. Charles King, A Rationale for Punishment, 4 J. Libertarian Stud. (1980): 154.

“In transgressing the law of Nature, the offender declares himself to live by another rule than that of reason and common equity . . . and so he becomes dangerous to mankind; . . . every man . . . by the right he hath to preserve mankind in general, may restrain, or where it is necessary, destroy things noxious to them, and so may bring such evil on any one who hath transgressed that law, as may make him repent of the doing of it . . . .” B6 11: A murderer “hath, by the unjust violence and slaughter he hath committed upon one, declared war against all mankind, and therefore may be destroyed as a lion or a tiger, one of those wild savage beasts with whom men can have no society nor security.”
–John Locke, The Second Treatise on Civil Government B6 8

“It has been noted that one who wishes to extinguish or convey an inalienable right may do so by committing the appropriate wrongful act and thereby forfeiting it.”
–Randy E. Barnett, “Contract Remedies and Inalienable Rights,” Social Philosophy and Policy 4 (Autumn 1986): 186, citing Diana T. Meyers, Inalienable Rights: A Defense (New York: Columbia University Press, 1985), p. 14.

“[W]hen someone is punished for having violated others’ rights, it is not the case that the criminal has alienated or otherwise lost his rights; rather, it is the case that the criminal’s choice to live in a rights-violating way is being respected.”
–Douglas B. Rasmussen & Douglas J. Den Uyl, Liberty and Nature: An Aristotelian Defense of Liberal Order (1991): 85

“[I]f someone attacks another, that act carries with it, as a matter of the logic of aggression, the implication that from a rational moral standpoint the victim may, and often should retaliate.”
–Tibor R. Machan, Individuals and Their Rights (1989): 176

“[T]hose who do not want peace, or want it only for others in relation to themselves rather than vice versa, are on their own and may in principle be dealt with by any degree of violence we like.”
–Jan Narveson, The Libertarian Idea (1988): 210

“What we cannot speak about we must pass over in silence.”
–Ludwig Wittgenstein, Tractatus Logico-Philosophicus, (D.F. Pears & B.F. McGuinness trans., London & New York: Routledge, 1961): ¶ 7.0 (p. 74).

“[L]ife for life, eye for eye, tooth for tooth, hand for hand, foot for foot, burn for burn, wound for wound, stroke for stroke.”
–Exodus 21:23-25, in God, The Jerusalem Bible: Reader’s Edition (1968). See also Deuteronomy 19:21; Leviticus 24:17-21.

Related

“[T]he basic axiom of libertarian political theory holds that every man is a self-owner, having absolute jurisdiction over his own body. In effect, this means that no one else may justly invade, or aggress against, another’s person. It follows then that each person justly owns whatever previously unowned resources he appropriates or ‘mixes his labor with’. From these twin axioms– self-ownership and ‘homesteading’–stem the justification for the entire system of property rights titles in a free market society.”
–Murray N. Rothbard, “Law, Property Rights, and Air Pollution,” Cato Journal, Vol. 2 (1982): 60-61.

“Whatever may be open to disagreement, there is one act of evil that may not, the act that no man may commit against others and no man may sanction or forgive. So long as men desire to live together, no man may initiate–do you hear me? No man may start–the use of physical force against others.”
–Ayn Rand, “Galt’s Speech,” in For the New Intellectual 164 (p. 133, paperback edition) (1961), quoted in The Ayn Rand Lexicon: Objectivism from A to Z (Harry Binswanger, ed. 1986), at 363.

Other

“When we say that one has the right to do certain things we mean this and only this, that it would be immoral for another, alone or in combination, to stop him from doing this by the use of physical force or the threat thereof. We do not mean that any use a man makes of his property within the limits set forth is necessarily a moral use.”
–James A. Sadowsky, “Private Property and Collective Ownership,” in The Libertarian Alternative, ed. Tibor R. Machan (Chicago: Nelson-Hall Co., 1974), 120=9621.

“Having once the right to punish, we may modify the punishment according to the useful and the pleasant.”
–F.H. Bradley, Ethical Studies (2d ed. 1927): 26-27.

“[W]e must distinguish two questions commonly confused. They are, first Why do men in fact punish? This is a question of fact to which there may be many different answers . . . . The second question, to be carefully distinguished from the first, is What justifies men in punishing? Why is it morally good or morally permissible for them to punish?”
–H.L.A. Hart, Punishment and Responsibility (1968): 74.

“[T]here is no affront [or injustice] where the victim consents.”
–[Roman jurist] Ulpian (Domitius Ulpianus), Edict, book 56, 4 The Digest of Justinian (Theodor Mommsen, Paul Krueger & Alan Watson eds., 1985), at Book 47, A7 10.1.5 (nulla iniuria est, quae in volentem fiat).

“The case for the recognition of consent as a defense in case of the deliberate infliction of harm can also be made in simple and direct terms. The self-infliction of harm generates no cause of action, no matter why inflicted. There is no reason, then, why a person who may inflict harm upon himself should not, prima facie, be allowed to have someone else do it for him.”
–Richard A. Epstein, Intentional Harms, J. Legal Stud. 4 (1975): 411.

“When men are judges in their own cases, it can be objected that “self-love will make men partial to themselves and their friends; and, on the other side, ill-nature, passion, and revenge will carry them too far in punishing others . . . .”
–John Locke, The Second Treatise on Civil Government at 13 (B6 11)

“But when mankind increased in number, craft, and ambition, it became necessary to entertain conceptions of more permanent dominion; and to appropriate to individuals not the immediate use only, but the very substance of the thing to be used. Otherwise innumerable tumults must have arisen, and the good order of the world been continually broken and disturbed, while a variety of persons were striving to get the first occupation of the same thing, or disputing which of them had actually gained it. As human life also grew more and more refined, abundance of conveniences were devised to render it more easy, commodious, and agreeable; as, habitations for shelter and safety, and raiment for warmth and decency. But no man would be at the trouble to provide either, so long as he had only an usufructuary property in them, which was to cease the instant that he quitted possession; if, as soon as he walked out of his tent, or pulled off his garment, the next stranger who came by would have aright to inhabit the one, and to wear the other.”
–2 William Blackstone, Commentaries on the Laws of England (last emphasis added): *4.

Court Rules Convicts Have No Right to Test DNA reports that “The Supreme Court said Thursday that convicts have no constitutional right to test DNA evidence in hopes of proving their innocence long after they were found guilty of a crime.”

This should be no surprise. After all, ignorance of the law is no defense–this makes sense when law is restricted to malum in se; but it’s perverse when it applies to artificial crimes, malum prohibitum offenses (see also Mencken on this). And if the state can convict you of a malum prohibitum offense–one in which you are not really guilty of any real crime–then it should also be no surprise that actual innocence of committing even a genuine crime–malum in se–is not a defense.

What is a surprise is that we have libertarians who are still in favor of government–so called “minarchists”–and, worse, in favor of centralizing power to the feds and the Supreme Court in the hopes that the wise men will decree justice (see my posts Libertarian Centralists; Bolick on Judicial Activism; Objectivism and Federalism).

It should be clear by now that minarchism is just another form of statism (see my What It Means To Be an Anarcho-Capitalist). America was not some minarchist paradise: it was a flawed utopian experiment resulting from an illegal coup (see my The Institute for Justice on our Munificent Constitution). It was a society that condoned slavery, one of the worst evils ever, while establishing a constructivist new order based on a “rational, scientific” paper document and rejecting traditional, superior, unwritten, monarchist limits on state power, thus setting the world on the path of democracy and democratic tyranny, and all the evils of the 20th Century–WWI, WWII, the Holocaust, the Cold War, Communism, Naziism, Fascism, Great Depressions I and II–not to mention the illegal, immoral, murderous, centralizing War to Prevent Southern Independence (which some “libertarian” centralists for some reason support!) (see my When Did the Trouble Start?; Hoppe’s Murray N. Rothbard and the Ethics of Liberty).

Hoppe is right: “an institutionalized interference with or aggression against private property and private property claims.” (A Theory of Socialism and Capitalism, p. 2; also see pp. 12, 7) The state is inherently socialistic; it’s organized, institutionalized crime, by its nature. So it’s no wonder that every state in history has been criminal, murderous, and tyrannical, and has grown in power; the idea of a minimal or just state is utter fantasy. To support any state, to support centralism, to regard the criminal state’s robed employees as real judges deciding on matters of justice is naive at best; and malevolent usually.

Update: Scott Horton points me to this chilling quote by a Judge on the Texas Court of Criminal Appeals: “We can’t give new trials to everyone who establishes, after conviction, that they might be innocent. We would have no finality in the criminal justice system, and finality is important.” (Too bad I lost when I ran for this Court in 2002.)

This conservative-statist emphasis on the importance on “finality” reminds of the similar Objectivist view–see, e.g, Anarchy Reigns; and the “Randians and One-World Government” in Libertarian Centralists; and Roderick Long’s comments about the Objectivists’ belief in the need for a “final arbiter” in his excellent Libertarian Anarchism: Responses to Ten Objections.

[Cross-posted at LRC.]

A couple years ago the Texas LP convinced me to run for judge on the Texas Court of Criminal Appeals (see below).

There was a pretty funny interview that came out of it, in LightReading, an optics industry magazine (pasted below, as the link died):

[Editor's note: In the recent election, Stephan Kinsella was one of nine candidates vying for three judgeships on the Texas Court of Criminal Appeals. He barely missed the judgeship by a scant 2.4 million votes.]

Phil Harvey: Senior Editor, Light Reading: Are you glad the elections are over?

Stephan Kinsella: Yes, so I can get back to my job of helping AOI make the world’s best transmitter lasers for the analog cable television, wireless repeater, and telecom markets.

PH: Was this the first time you had ever run for public office?

SK: Yes, that I know of. And hopefully the last.

PH: What did you like most and least about this election?

SK: On the plus side, my wife thought I was some kind of celebrity for a few days, and kept calling me “Judge.” On the negative side, I didn’t like that the Libertarians had such a low chance of winning. I take comfort in blaming it on the populace. As the saying goes, “Nobody ever went broke underestimating the intelligence of the American public.”

PH: Ah, so you ran on the Libertarian ticket. I’m not too familiar with the party. They aren’t the ones with the white robes and hoods are they?

SK: That’s pretty funny. I’m glad to see you’re regaining your sense of humor after that terrible kiddie porn incident.

PH: Let me try another approach. You must have a pretty thick skin to run as a third party in Texas. How extensively and aggressively did you campaign? Did you do any live debates or just the normal sign-in-the-yard kind of stuff?

SK: I think I spent 2 cents total, for the paper used to fax something to the election commission. As for the extent of my campaigning, when friends and colleagues told me they would vote for me, I did my best to refrain from uttering my favorite aphorism, “Don’t vote. It only encourages them.” I’m starting to think I’m not cut out for politickin’.

PH: What was your most memorable campaigning experience?

SK: When a reporter asked me if the term for Judges on the Court of Criminal Appeals was four or six years, and I didn’t know the answer.

PH: Who’s your all-time favorite politician?

SK: My favorite is President William Henry Harrison, who caught pneumonia during his inauguration speech and died one month later. Among the living, however, my favorite is surely Congressman Ron Paul, the “Conscience of the Congress.”

PH: Where did you watch the election results? Did you have a victory party planned? If it were me, I would have made up a drinking game around the returns — like “Lose a Precinct, Take a Shot.”

SK: If I had done that, I don’t think I’d be awake yet… What’s a precinct, by the way?

— Phil Harvey, Senior Editor, Light Reading

***

See also Kinsella for Judge:

From Challengers hope to beat three incumbent judges, Houston Chronicle, Oct. 20, 2002:

Three incumbent Republicans are being challenged in their bids for re-election to the Texas Court of Criminal Appeals, the state’s highest appellate court for criminal cases.

[...]In Place 1, incumbent Tom Price faces Democrat John W. Bull, Libertarian Stephan Kinsella and Green Party nominee Robert C. “Rob” Owen.

[...] Kinsella, a Houston attorney, said there should be no hesitancy by appeals judges to overturn unconstitutional laws. He said the current court often “sides with the state because it’s run by mainstream (political party) judges.”

From Court candidates could steer path of criminal justice: 3 posts contested on court weighing life or death decisions, Dallas Morning News:

The Place 1 race pits incumbent Judge Tom Price against Democratic Municipal Court Judge John W. Bull of San Antonio. Also on the Place 1 ballot are Libertarian candidate Stephan Kinsella and Green Party candidate Robert C. Owen.

Judge Price said he didn’t want to lose a close race between the two major parties because of votes going to third-party candidates. He is focusing his efforts on personal appearances and direct mailings to those on voting lists from the Green Party and the Libertarians.

***

Stephan Kinsella: for Judge, Texas Court of Criminal Appeals, 2002

I am running, on the Libertarian Party ticket, for Place 1, Judge, Texas Court of Criminal Appeals, in the upcoming (November 5, 2002) election. The LP advocates both economic and personal liberties, and very small government.

The Texas Court of Criminal Appeals is the highest Texas state court for the appeal of criminal matters. Criminal law is crucial because it is where the rubber hits the road, from a libertarian perspective–it’s how the state ultimately enforces its laws.

The LP needs at least 4% of the vote for at least one statewide candidate to maintain ballot access in Texas. The statewide judge positions sometimes achieve this, and then some. For example, in the 2000 election (click here for historical election returns), the Libertarian candidate for Judge of the Texas Court of Criminal Appeals, Rife Scott Kimler, ran against Republicant Charles Holcomb (no Democrat or other candidate ran). Kimler received 15.5 % of the vote, or 704,237 votes, to Holcomb’s 3,824,312 (84.44%). Also, Libertarian candidates in the 2000 election for three positions on the Texas Supreme Court, running against Republican incumbents (no Democrat running), obtained 9.7%, 15.73%, and 18.66% of the vote.

Recent Press

• Challengers hope to beat three incumbent judges, Houston Chronicle, Oct. 20, 2002
• Court candidates could steer path of criminal justice: 3 posts contested on court weighing life or death decisions, Dallas Morning News
• TEXAS COURT OF CRIMINAL APPEALS: PLACE 1: Incumbent Price faces two challengers for seat, Houston Chronicle, Feb. 28, 2002

Links/Further Info

• Texas LP Candidate/Election Info
• Texas Secretary of State Candidate/Election Info
• Job profile: Texas Court of Criminal Appeals, from The Houston Chronicle
• Texas Court of Criminal Appeals info
• League of Women Voters–DemocracyNet: DNet Texas
• DNet Texas: Court of Criminal Appeals, Pl. 1

• Stephan Kinsella Bio

Final Results of 2002 General Election

Court of Criminal Appeals, Place 1

Results of the 2002 Judicial Preference Poll Results, Houston Bar Association

Court of Criminal Appeals, Place 1

Results of the 2002 General Election Poll, Dallas Bar Association

(Released 05/15/02)

Court of Criminal Appeals, Place 1

Results of the 2002 Judicial Poll, State Bar of Texas

(Released 02/13/02)

Place 1, Judge–Full Term, The Court of Criminal Appeals

God’s Blog: This is sacrilegious, but God’s Live Journal is hilarious as all get out. Sample entries: “Did you know that the part of your little brains that controls sneezing is the same part that controls orgasm? I did that on purpose, but I can’t remember why. [...] Sometimes I think you don’t really love Me, but that you’re only saying you do so I will give you cool stuff. I usually feel better after I make a bird or two shit on your car. [...] Medammit I hate doing My taxes. I think this year I’m going to claim you all as My dependents, along with birds of the air, and lillies of the field. I wonder if I should classify Myself as an independent contractor… [...] Just the other day, I needed to call Vishnu to find out what time we were leaving to go see Allah, but I couldn’t find his number anywhere. I thought I knew it, but accidentally called Krishna instead. And he’s all like, so what are you and Vishnu doing? And I’m like, ummm, nothing really, just hanging out, and it won’t be that fun talk to you later. Last thing I need is for that tamborine-slapping freak tagging along with us. I finally got Vishnu on AIM, and he says Allah’s pissed because I didn’t call him on his birthday, so he didn’t want us coming over. Allah gets pissed way too easily. But I called him, and worked it all out by telling him he sure didn’t want to get Vishnu mad, because he probably can shoot 50 arrows at once with all those arms of his. Allah was a little confused, but I said Dude, he’s Indian, isn’t he? And that seemed to work.”

Philosophy of Punctuation: For those who get worked up about proper use of commas, dashes, semicolons, and the like, see this fascinating article by Paul Robinson, author of Opera, Sex, and Other Vital Matters.

WWII Propaganda Posters Updated for Modern Era: These spoofs of WWII propaganda posters are hilarious (some are crude). (Thanks to Karen De Coster.)

Good Math: The Orgasmic Calculator is worth trying, at least once, but not at the office…

Shades of Galambos: Along the lines of “if you build it, they will come,” we have the IP analogue, “if government enacts a right to obtain property rights in arbitrary, intangible ‘things,’ they will apply for it”: Man Claims Copyright of His Name, FindLaw (AP), 2002-05-16. Sounds like something–dare I use his name?–Galambos would do (see discussion of Galambos in this article, at footnotes 49-53).

I liked Gene Healy‘s latest “Reflection” in Liberty, and reprint it below in full (with Gene’s permission), since the Liberty site is not up to speed yet. I especially like the part about Beverly Jones’s method of finding time to exercise. –SK

DOWDY AND DEPRESSED?

[by Gene Healy]

In her New York Times column April 9, Maureen Dowd joins Pat “Death of the West” Buchanan in lamenting the birth dearth among successful Americans. But where Pat blames feminism and other ideological culprits, Mo blames men. Fragile and insecure, the modern male flees from career-minded alpha females. “Men,” she notes, “apparently learn early to protect their eggshell egos from high-achieving women.”

She has at least half a point; but first, let’s talk about where she’s wrong.

For one thing, it’s not so much that men are intimidated by high-status, career-minded women as it is that men could not care less about how successful a woman is. In seeking a mate, women are drawn to men with power and status; men, to women with beauty and charm. That’s a generalization, sure. Generalizations are generally true–that’s why we make them. Thousands of generations of human evolution have hard-wired these differences into our brains.

When Henry Kissinger said, “power is the greatest aphrodisiac,” he meant that it had that effect on women. Henry the K is said to have been a very successful womanizer in his day. In contrast, all the power in the world isn’t going to make Madeline Albright look any better in a pair of leather pants.

It’s not just a matter of brains: successful high-status men of limited intellectual gifts have no trouble getting girls. If Kid Rock was behind a deli counter smearing mustard on a sandwich, Pam Anderson wouldn’t look at him twice. Put Pam behind the counter, though, and suddenly every yob in the neighborhood is buying lunch there. Some of the ugliest men in show business–Steven Tyler, Jimmy Page, Mick Jagger–had groupies lining up by the dozens while the willing and lonely Janis Joplin often drank herself to a solitary sleep.

It’s a cruel world, and both genders are pretty shallow as far as what we’re attracted to. But we’re shallow in different ways.

Second, Maureen is wrong to suggest, via an unnamed male friend, that “if there’s one thing men fear, it’s a woman who uses her critical faculties,” and “men prefer women who seem malleable and overawed.” “Malleable and overawed”: how exciting. If so, she’d better be pretty damned attractive, because the woman Maureen is describing doesn’t sound like she could hold up her end of the conversation past the appetizer.

But Maureen is correct to suggest that men may be avoiding career-minded women. The statistics she quotes make her case: 55 percent of 35-year-old career women are childless. Between a third and half of 40-year-old professional women are childless. The number of childless women age 40 to 44 has doubled in the past 20 years.

I have a theory about why this may be so: women who focus maniacally on their careers are insufferably annoying. I can best illustrate this with following passage from December 2000′s Washington Lawyer magazine. In an article about how big-firm lawyers find the time to exercise, we’re introduced to one “Beverly Jones”:

“As a junior partner in a growing law firm several years ago, Beverly Jones devised a legal strategy for rethinking her priorities and for retaining exercise as a regular habit. ‘There always seemed to be a deadline or problem or issue that got in the way,’ she recalls, ‘until I decided to treat exercise like a client and to make a contract with myself stipulating the steps I was required to execute and the penalties for noncompliance.’”

Now I don’t know Ms. Jones, and I probably shouldn’t judge her. For all I know, she’s happily married, and has several children with whom she schedules quality time, providing strict penalties for noncompliance. But if she isn’t married, I’m not going to ask her out.

Moreover, I would not be surprised if, like the Holly Hunter character in the film Broadcast News, Ms. Jones also schedules a daily morning session in which she unplugs the phone, then cries and gasps hysterically for thirty seconds before composing herself and returning to the day’s business. Would you date her?

I’m not setting up a double standard here or making some troglodyte argument that a woman needs a career like a fish needs a bicycle. What goes for Ms. Jones would go for Mr. Jones as well. A person that has to work an entry for “fun” into his or her day planner, is a person no one should want to spend their life with. And yet women seem far more willing to put up with this sort of bargain than men. Why? See discussion re: status and power, above.

I don’t know how much of all this applies to Maureen Dowd. I don’t know why she’s fiftyish, single, and can’t get a date. But I do know that reasoning from one’s own hard luck to a general social theory about gender relations is fraught with peril Most people who are unlucky in love cry in their beer and grumble to a friend on the next barstool–they don’t do it on the New York Times op-ed page.

Gene Healy is a writer living in Washington, D.C., and the publisher of www.genehealy.com.

If you read nothing else this month, read: Grow Up, Canada, by Ralph Raico. A stunning article, and one of the most insightful and beautiful things I’ve read in some time.

Are we headed toward a technological singularity? The end of life as we know it, in 40-50 years, due to the unpredictable and ever-accelerating pace of technological “progess”? See: Vernor Vinge’s The Coming Technological Singularity: How to Survive in the Post-Human Era; A Critical Discussion of Vinge’s Singularity Concept ; and Kurzweil’s Law. Food for thought…

Nice Fox News/ifeminist article by Wendy McElroy, Good Will Toward Men.