The Angry Economist

Knights

Back in the Y1K, a knight was invincible. A knight mounted on horseback could not be defeated by the peasantry. A suit of armor was very expensive, but it afforded the wearer the ability to do what he wanted, when he wanted. A knight could go into a village and demand tribute, and the villagers could do nothing. It was, in essence, a license to steal.

Technology created the knight, and technology ruined the knight. The steel and iron armor of the day could deflect sword and lance blows. That lasted until the invention of the Welsh longbow, and later handheld firearms. Anybody could become a knight, however a knight's steed and armor were very expensive.

Politics couldn't bring much violence to bear on knights. Only another knight could defeat a knight. The church did its best to keep knights from being the horseback equivalent of the motorcycle gang by its chivalric code.

Patents

The US patent system has become amenable to a protection racket. First, you start a patent holding company. Then you get a patent. It should be something broadly written so that everything plausibly infringes it. Then you go to a small company and say "You infringe this patent. We will sue you, or you can settle for $1000." Obviously the small company settles; it would be insane to do anything else. You keep going to more and more companies, increasing the settlement offer; but always keeping it below their cost of winning a lawsuit.

How does a patent racket differ from a protection racket? The threat differs. In a protection racket, the criminal offers harm to the victim while taking on a risk that they will get caught inflicting that harm. In a patent racket, the criminal offers harm to the victim and themselves at the same time (the cost of bringing and defending a lawsuit). The government typically opposes protection rackets (modulo bribing of police) but tolerates patent rackets.

One of these days some Attorney General planning to run for Governor will wise up to this scam, and go after these firms for criminal extortion. A patent system which allows this kind of activity is clearly unconstitutional since it doesn't "promote the progress of science and useful arts".

J.D. Von Pischke writes to The Quaker Economist (not yet published there):

"The first step of emancipation is to learn to recognize when your emotions are being manipulated for profit. --Loren Cobb" Gain would be a better term than profit, which usually refers to money. Profit is a subset of gain, and gain conveys power. We should be concerned about the creation of power, its distribution, its uses and responses to it. Non-profit organizations exist to obtain power, just like profit-making enterprises. Each has governance problems, and the outcomes achieved by each are complex and hotly disputed.

Lots of people are concerned about the greed of big corporations, seeking larger and larger profits. Of much more interest to me are concentrations of power rather than profit.

Everyone has of course heard of offshoring: moving jobs which do not need to be performed in-person off shore, presuambly to someplace with a lower cost of living. That boat goes both ways, though. I've spent the last week working (on-site in Mumbai) for Rediff.com. No doubt there are people in India who cry "Oh! You're shifting jobs to foreigners!". Sound familiar? Sure; it's the usual protectionist nonsense heard in the US.

No links to examples; there are too many of them to pick just one.

I think that the society that I would prefer to live in would have the most voluntary cooperation possible. I greatly value freedom, but if you look at some other cultures, you can see that they have even more freedom than ours. Look at a comment on a CafeHayek article by Camilo about Mexican society.

Camilo points out:

Mexicans don't stop for red lights. Mexicans don't stop for anything. Mexicans are raised to do everything and anything they want. Hegel defined true freedom as adherence to the law and caprice as its opposite: the very worst of all oppressions. I tend to agree. There are few things more oppressive than the knowledge that you are one of the few paying taxes and stopping at red lights when it's every man for himself all around.

You can easily say that Mexicans have more freedom, since they do what they want when they want where they want. Camilo points out that while that's freedom, it's not a valuable freedom. The freedom to run through red lights is not voluntary cooperation.

That would sound like an argument for a strong state, but it isn't. A government does not create voluntary cooperation. A government coerces obedience and calls it cooperation. The government has created a monopoly on local roads. If you wish to travel, you must do it on a government road, observing monopoly government rules. Objecting to this may sound stupid on the face of it, but we all know that monopolies become complacent. They don't innovate, they don't create new efficiencies, they tend to solve problems slowly if at all. "We don't care. We don't have to. We're the phone company." --Lily Tomlin as Ernestine.

There is no reason why a government monopoly should be any different kind of monopoly than a corporate one.

Thus you have my call, not for greater freedom from the constraints imposed by living around other people, but a call for greater voluntariness coupled with a call for greater cooperation. Not the kind forced on us by government, but the kind of cooperation that comes from the love of our fellow man. The peaceful kind. The joyful kind. The silent night kind.

Merry Christmas!

Austrian economics reasons out economics by starting from assumptions, and expanding upon them. If the assumption generates conclusions that are not observed in the real world, then the assumption is not correct. It's very useful to know which people prefer: work or leisure. One way you can figure this out is to keep everything else the same, and then see which people choose. That's hard to do since everything else is never the same. Another way to figure it out is to assume that people prefer one to the other and see if it makes sense. Jim Thompson claims to prefer work to leisure. Let's decide if he's right or just confused.

What would someone do if they really did prefer work to leisure (again, keeping everything the same)? The difference between work and leisure is that you get paid to do things other people choose, whereas nobody pays you for leisure of your own choice. Clearly everything is not the same, so let's assume that you get paid for your leisure. If anybody preferred to work under those conditions, then they would prefer to NOT do what they wanted, but instead to do things that other people chose. Does anybody actually act that way? No, of course not. This assumption generates ridiculous conclusions like "employees will never quit no matter how little you pay them, because under identical conditions they choose work over leisure."

Clearly Jim isn't used to this kind of thinking. Why should he bother to learn it? Well, if he thinks economics is boring, he wouldn't. But if he wants to say things about economics which are coherent, then he needs to understand good economics, and where it comes from.

What does this kind of thinking tell us about the real world? Because surely some people work (do what other people want) instead of enjoying leisure (doing what they want). It tells us that everything is NOT the same (because if it were, people would seek leisure). People don't ordinarily get paid for leisure. Further, it tells us that even if people are doing work of their own choice, they prefer to get paid to doing the same thing for free. Similarly, it tells us that if you pay someone incrementally less, some times the person will choose leisure.

A preference for leisure over work is a special case of another principle: that everyone wants to minimize the value (to them) of the things they give away when they trade. People are naturally cheapskates. Again, look at the counterexample: What if somebody didn't want to minimize the value they traded away? Do you ever see people arguing that they should pay a higher price? No, of course not.

Another way of saying this is that everyone is lazy. Racists claim that blacks are lazy, and I've tried to explain why in a posting of that title. Jim claims that my thesis is wrong, but he fails to restate it correctly, so I can't tell if he's claiming that I'm wrong, or if he's disagreeing with his restatement (which surely both of us agree is wrong).

I think that everyone has a built-in tendency to be racist and sexist and ageist and every other attribute with which you can lump people together. Let's call that Xist thought. People are vociferous pattern-matching machines, and we have a natural tendency to find meaningless patterns. With every signal comes some noise. Typesetters try to avoid "rivers", which are places where the spaces in words line up vertically. It's meaningless, but distracting to the reader. It's very easy to create a pattern out of random data, like "blacks are lazy", or "italians are gangsters", or "jews are greedy". Surely some blacks are lazy, some italians are gangsters and some jews are greedy--people will be people--get enough of them together and you'll find any kind of behavior.

Xists are the people who don't understand that they're seeing a false pattern. The rest of us understand that sometimes we will see patterns that aren't real. We all need to struggle against those spurious pattern matches. Blacks aren't lazy -- just that one you saw leaning on his shovel. Whites aren't racist -- just the one that treated you unfairly because of your skin. Jews aren't greedy -- just that one who profited from the letter of the agreement.

Of course, Xism isn't limited to negative attributes. It's Xist to say that blacks jump higher than whites. I could out-jump my brother-in-law any day even if he started on a footstool. It's Xist to say that Jews are smarter than everybody else. On average, they test higher on IQ tests, but you can't say anything about the average Jew because NOBODY is average. NOBODY is normal. Normal doesn't exist; everybody is an individual.

Treating individuals as exemplars of each group they belong to is intellectual error. Let the dummies (oops!) make that mistake--don't you.