WorldSys: Austrian Home Study Course, Week 22

READINGS: “The Environmentalist Threat” in Lew Rockwell’s The Economics of Liberty

1 How is the environmentalist movement similar to Marxism?

It’s a utopian, absolutist constellation of ideas nestled firmly within Leftism and perfectly comfortable with outrageous violations of basic civil liberties.

2 Whom does Rockwell consider the father of environmentalism?

Jean-Jacques Rosseau.

3 Aren’t extreme environmentalists just a harmless fringe group?

If they bought some territory in Montana and didn’t bother anyone, they might be, but as it stands they aim to use the coercive might of the State to force the rest of us to behave in the manner they deem fit.

This is far from harmless.

4 How is environmentalism a type of religion?

Quite a lot of environmentalism is explicitly religious, conceiving of the biosphere as a kind of integrated system which is Holy in an important way and worth preserving even at significant human cost.

5 What are the alleged sins of Christianity, according to some ecologists?

It provided the foundations for capitalism and industrialism, which you may recall as being two of the most profound forces for material advancement in the history of Earth.

6 What is the acceptable standard of living for humans, according to some ecologists?

Only barely above subsistence.

7 What was Albert J. Nock’s view of Nature?

As a dangerous adversary to be tamed. Most of nature is either inhospitable or actively dangerous to human beings, which might account for why humans have been changing their environments for something like a quarter of a million years.

8 Describe the dangerous legal trends illustrated in the Exxon case.

It suggests a return to the feudal policy of holding the ‘master’ (in this case, Exxon Mobile) responsible for the actions of subordinates (in this case, an employee that violated company policy by getting drunk on the job).

This will put a significant legal onus on companies and make it far easier to go after them in court, even when they have taken all the safety precautions required under any sensible set of rules.

9 Is wetlands policy moderate at least under Republican administrations?

No. Rockwell describes a case in which a Hungarian immigrant bought an old junkyard, improved it by cleaning away the refuse and putting down a layer of topsoil, and was slapped with steep legal penalties as a result because his property was technically classified as ‘wetlands’ under the clean water act.

10 Describe some of the environmentalist warnings that are based on dubious scientific claims.

Environmentalists would have us believe we’re a few years away from living amidst garbage piles towering over us as far as the eye can see. Needless to say, this has never proven true in the many decades since they’ve begun issuing this dire proclamation.

John Holdren, a physicist, claimed in the mid ’80’s that by 2020 climate-change-driven famines would kill as many as a billion people. We’re part of the way through 2018 and nothing remotely like such a calamity appears forthcoming.

11 Which U.S. president does Rockwell associate with the rise of the modern environmentalist movement?

Theodore Roosevelt.

12 How does environmentalism promote world government?

The terrestrial environment is not neatly delineated at the same places national boundaries are; there is simply no way to take seriously the policy proposals of even moderate environmentalists without realizing that their implementation would require something like a powerful world government enforcing supranational standards.

13 How would a free market address environmentalist concerns?

Any number of ways. Steven Cheung’s pioneering work on externalities demonstrated that orchard owners and beekeepers had done rather a nifty job of arranging mutually-beneficial pollination services between themselves, and there’s no reason to think similar such policies couldn’t obtain in the economy more generally.

One of the best ways to protect the environment is with a robust private-property regime. In the 19th century American courts frequently ruled against plaintiffs in cases wherein damages were sought for air or water pollution because it was believed that a healthy manufacturing sector was ‘in the public interest’. Had this precedent not been established it might be easier to sue factory owners when they foul the environment in ways deleterious to the public’s health, and such enterprises might be less inclined to due so.

Better yet, sell the rivers and make them private property. It’s always easier to pollute a thing that no one legally owns.

The Structure of Science as a Gnostic Manifold

Part I

While reading Paul Rosenbloom’s excellent “On Computing” I feel as though I’ve glimpsed the outlines of something big. 

In the book Rosenbloom advances the argument that computing should be counted among the ‘Great Domains’ of science, instead of being considered a mere branch of engineering. During the course of advancing this thesis he introduces two remarkable ideas: (1) a ‘relational architecture’, describing how the Great Domains relate to one another; (2) an accompanying ‘metascience expression language’ which defines the overlap of the Physical (P), Social (S), Life (L), and Computing (C) Domains in terms of two fundamental processes: implementation and interaction. 

Though I’m only a few chapters in I’ve already seen that his methods for generating monadic, dyadic, and polyadic tuples of different combinations of the Great Domains could be used to create a near-comprehensive list of every area of research possible within the boundaries limned by our current scientific understanding.

Let me explain: ‘pure computing’ consists of any overlap of computing with itself (C + C), and subsumes such areas as computational complexity and algorithmic efficiency analysis. ‘Mixed computing’ would be the combination of computing with any of the other great domains: computer hardware would be Computing (C) + Physical (P), a simulation of predator/prey population dynamics would be Life (L) + Computing (C), computer security and AI would be Social (S) + Computing (C), genetics/physics simulations would be Physical (P) + Computing (C), brain-computer interaction would be Computing (C) + Social (S) + Physical (P), and so forth. 

A simple program could make a list of every possible permutation of C + P + S + L (including standalones like ‘P’ and pure overlaps like ‘P + P’), and you might be able to spot gaps in the current edifice of scientific research — there might be certain kinds of C + L + S research that isn’t being done anywhere, for example. With this in hand you could begin to map all the research being done in, say, Boulder CO onto the resulting structure, with extensive notes on which labs are doing what research and for whom.

(Bear in mind that I still haven’t gotten to the parts where he really elucidates his metascience expression language or the relational architecture, so these ideas are very preliminary.) 

Part II

This alone would prove enlightening, but its effectiveness would be compounded enormously by the addition of an ‘autodidact’s toolkit’ of primitive concepts which, when learned together, open up the greatest possible regions of the gnostic manifold [1]. In a post generative science guy-who-knows-literally-everything Eric Raymond briefly explores this idea. In a nutshell, the concepts from some sciences can be used in many more endeavors than the concepts from other sciences. As beautiful as it is, concepts from astronomy are mostly only useful in astronomy. Concepts from evolutionary biology, however, have found use in cognitive psychology, economics, memetics, and tons of other places. So maybe a person interested in science could begin their study by mastering a handful of concepts from across the sciences which are generative enough to make almost any other concept more understandable. 

Eric and I have been in talks for several years now to design and build a course for exactly this purpose. Someday when my funds and his schedule are in sync we are going to get this done. 

This relates to the ideas from section I because a mastery of the autodidact’s toolkit would allow one to dip into an arbitrary point in the gnostic manifold and feel confident that they could learn the material relatively quickly. Imagine being able to look at research being done at a major university and then get up to speed in a month because it’s just variations on concepts 3 – 6 from the toolkit [2].

But I think we can go even further. Based on discussions of hyperuniformity and the unusual places it appears I began to wonder whether or not there might be special branches of mathematics from systems theory, chaos theory, and possibly information theory which might not act as bridges between some of the concepts from the autodidact’s toolkit. The linked article discusses how a certain kind of pattern crops up in places as far away as the distribution of cones in avian retina and the formations of certain kinds of unusual crystalline solids.

My question is: if you had a map of the gnostic manifold, you’d mastered the autodidact’s toolkit, and you understood the relevant math, might you not have been able to hop into a research gap, spend a month or two looking for hyperuniformity, learn about quasicrystals in 1/3rd of the time anyone else would’ve required, and then glimpsed the pattern ahead of the competition? If so you could’ve had a startup in place to exploit the new knowledge by the time the first research papers were coming out. 

Part III

Organizing, representing, gathering, and communicating this wealth of knowledge would be much easier with an ‘acquisition infrastructure’. Here I’m imagining a still-theoretical integration of the best mnemonics systems, a supercharged version of Anki, whatever the best knowledge map software is, matlab/mathematica (or open-source alternatives like octave), all running on a supercomputer with insane amounts of both memory and storage.

Furthermore, I want to develop the concept of a ‘drexler audit’, the baby version of which is advanced by Eric Drexler in how to understand everything. The basic idea there is rather than try to understand the details of a given field you instead use a series of object- and meta-level questions to get a firm grasp on what the goals of the field are, what obstacles stand in the way of those goals, and what gaps remain in the knowledge required to move forward. 

This absolutely does not count as expert-level knowledge but it does give you the kind of overview which can prove useful in future exploration and investment.

With a map of the gnostic manifold you could choose some fields on which to perform a drexler audit and others to explore deeply with the combination of systems math and the autodidact toolkit. With a breakdown of the who/what/where/why of the research community in a given region you’d be in a position to bring the right minds together to solve whatever tractable problems may exist to give a field a jumpstart. And if you understood the economics of scientific research and the basics of investing the resulting machinery might, with a bit of luck, start coughing up wads of money while doing enormous amounts of good. 

(Of course it could also crash and burn, but so could SpaceX — nothing great is accomplished without a healthy dose of risk)

Part IV

I’ve said all of the above because it points to a tremendous opportunity: an amalgamation of Y-Combinator, Berkshire Hathaway, TED, and Slate Star Codex. If it works out the way I think it might, whoever manages the beast could make Elon Musk look like a lazy, sharecropping half-wit. 

The STEMpunk Project helped lay the foundation for the research required. If I can make the necessary contacts and get the funds together, I’d like to flesh this out in the next five years.

***

[1] See this related idea.

[2] Of course I’m likely underplaying the difficulty here. Brian Ziman, perhaps the most technically accomplished person I know, has pushed back on my optimism at this point. My view is that even if it proves orders of magnitude more difficult to construct I think the Gnostic Manifold is a framework worth fleshing out.

WorldSys: Austrian Home Study Course, week 21

READINGS: Chapter 9 of Robert Higgs’s Against Leviathan, ‘Private Law’ chapter of Bob Murphy’s Chaos Theory

1 Is it reasonable to require that a medical product be completely safe?

No, all any certifying agency can hope to do is ensure that medical products are as safe as possible and that the manufacturer is not making bold, erroneous claims about its efficacy.

2 Describe the history of the FDA.

The FDA was established by the Food, Drug, and Cosmetic act of 1938 for the purpose of certifying that food and drugs weren’t dangerous, a mandate which was extended in 1962 to include requirements for proving a drug’s efficacy. In 1976 the agency gained regulatory powers over medical devices in addition to drugs.

3 What are some of the typical activities of the FDA

They approve or deny the performance of clinical trials for new drugs and devices, regulate product information, monitor manufacturing practices, and enforce requirements that companies monitor and report on products after their introduction to the marketplace.

4 Describe the incentives of the FDA when it comes to approving a new drug.

Suppose a new drug is either safe and effective (SE) or isn’t (NSE) and that an FDA reviewer can either approve (A) a drug or not (NA). The only two scenarios in which a problem will arise is NSE/A, in which an unsafe drug is sent to market, or SE/NA, in which a safe drug is restricted from the market.

As far as incentives go the reviewer is much more likely to be nailed to the wall for NSE/A than for SE/NA, because in the former case there will actually be a drug on the market which people can recognize and point to. In the latter case the drug simply never appeared, and it’s much less likely that someone will pore over FDA data and notice that a good product failed review and the public was therefore deprived of its use.

The official, therefore, is better off being very, very cautious about handing out approvals. Rather than using common sense and his best judgement he will instead refuse to approve a product unless there is damn-near no chance at all he can later be blamed for its failure.

5 How does Higgs evaluate the success of the FDA in providing safety?

Very poorly. While no one is sure how many lives have been lost because the FDA held up development of life-saving drugs there is reason to believe it’s a solid order of magnitude greater than the number of lives saved by preventing dangerous drugs entering the market.

An unsafe drug would almost certainly be pulled from the market as soon as it became widely known that it was unsafe. But no one ever knows about the absence of a drug held up in the FDA’s Byzantine regulatory proceedings. Every year that the safe drug is not allowed to come to market the death toll rises and goes on rising.

And this doesn’t account for the fact that human beings are wildly divergent in their appetite for risk. Many people would be fine taking an experimental drug with little or no knowledge of its likely side effects, while others will be reticent until a comprehensive decade-long study on the matter has been published. Every bit of this heterogeneity is simply ground under by the FDA’s blanket protocols.

6 Why does Higgs say that “more than health is at stake” on this issue?

Because the existence of the FDA and the scope its breathtaking powers is tantamount to declaring American consumers to be children not capable of weighing risks and making their own decisions. The moral arrogance of this stance can scarcely be exaggerated.

7 How does name brand recognition allow for safer products?

There will be serious consequences to a company’s reputation if it allows one of its products to kill people. Even if it winds up somehow not being the company’s fault it might never again recover its standing among consumers.

8 Describe the function of intermediaries in providing consumer protection.

Over and above the FDA there are now a number of entities intervening betwixt consumer and drug company, including “…prescribing doctors, health-maintenance organizations, and hospital formularies…” which add extra layers of protection to the consumer.

9 In the present system, how do unions and government licensing restrict service and raise prices? In a free society, how might trade associations offer consumer protection?

Unions are notorious for subdividing tasks in ridiculous spread-work schemes, such as those cases in which plumbers aren’t allowed to remove the tiles around a toilet because that is the province of tile layers. It probably doesn’t take much to see how these redundancies and inefficiencies raise prices. Licensing requirements, while perhaps sensible at first glance, wind up involving vastly more schooling and training than is often necessary.

10 Describe the role of insurance in medical malpractice in the current system.

Insurance in the current system is badly distorted by decades of government meddling and mandating. Insurance companies have to pay for things like routine check ups which would otherwise be more sensibly paid for out-of-pocket after services are rendered, and it is often difficult to get an accurate itemized list breaking down the costs. This means both that people are more careless in their consumption of medical services (because they aren’t paying for them) and also unable to shop around for the best deal (because the prices aren’t easily attainable).

Contrast this with auto body work. If you want an oil change, you walk into an establishment and ask for an oil change, which will usually run something like $40. If you ask the price, you’ll be told, and if it isn’t to your satisfaction you can go elsewhere. This puts a cap on how expensive an oil change can be.

If auto repair were treated like medical care then oil changes would be routed through insurance companies and cost $400 dollars because there’s neither incentive nor mechanism for cost control.

11 Describe the possible role of insurance in air travel in a hypothetical libertarian society.

Passengers, wanting some hedge against the possibility of their plane crashing or malfunctioning in some way, will require their airlines to sign a contract to the effect that if there is a problem the airline will pay some pre-determined amount of money to the claimant.

12 Wouldn’t private safety inspectors be susceptible to bribes by big corporations.

That’s not inconceivable, but the damage to reputation that would ensue should anyone get wise to these maneuvers should suffice to dis-incentivize bribery. It wouldn’t take long for contractors to realize that the inspectors of x agency are being bribed by Big Cement before they’d refuse to use inspectors of that agency.

Worse: bribes are a constant fact of life in the prevailing public-sector system, so this can hardly count as points against the hypothetical system being described.

13 If the entire world became a bastion of private property and free enterprise, would consumer protection standards necessarily be uniform in every area?

No, they would likely vary by region.

14 In the interview, Murphy erroneously referred to “Underwriters Association” and their symbol, “UA”. Which certification organization did he actually have in mind?

Underwriter’s Laboratory.

WorldSys: Austrian Home Study Course, Week 20

READINGS: Chapter 4 of Gene Callahan’s Economics for Real People; Chapter 5 of Holcombe et al.’s Fifteen Great Austrians (a chapter on French economist Frederic Bastiat)

1 What is the law of association?

It was the term given by Mises to the broader application of the ‘law of comparative advantage’ to all human cooperation, on which more below.

2 What is the law of comparative advantage?

David Ricardo’s famous ‘law of comparative advantage’ states that it is still in the best interest of two people to divide labor even if one of them proves better at everything than the other. The superior person should specialize in whatever they are most best at and allow the inferior person to specialize in something else, then trade their effort.

3 If U.S. workers are more productive than Mexican workers in every good and service, will the U.S. be hurt by trade with Mexico?

No, for the reasons detailed above. Even if Americans proved better at manufacturing everything they still can’t actually manufacture everything, so it is in everyone’s best interest to let Mexico handle some of the manufacturing.

4 Suppose U.S. workers can make either 2 TVs or 10 radios per hour, while Mexican workers can make either 1 TV or 7 radios per hour. Which nation has the comparative advantage in radio production?

Mexico. Their comparative advantage lies in whatever they are comparatively best at producing, not absolutely best at producing. In this example U.S. workers are better at making both TVs and radios, but they are comparatively better at making 2 TVs — that is, they are most better at making TVs.

So let the Mexicans make radios and trade with them!

5 Continuing with this example, if we only consider unfettered trade between U.S. and Mexico, describe the likely flow of goods (I.e, describe the pattern of exports and imports for each country with respect to these two goods.)

I imagine that firms in the U.S. would make vastly more TVs than they needed and send them to Mexico in exchange for Mexican-made radios.

6 Should the U.S. government lower tariff barriers only if other governments agree to do likewise?

No, the advantages accrue to freer economies regardless.

7 What was the subject of Bastiat’s The Law?

The proper and necessary role of government in upholding worthy laws. The last adjective is imperative — senseless or outrageous laws cannot be upheld indefinitely without bad consequences. The state should therefore restrict itself to the essential function of defining and enforcing only those laws that prevent force and fraud.

8 What was the subject of Bastiat’s Economic Sophisms?

This work has been described as “…the most complete case for free trade ever constructed up to that time…”, wherein Bastiat applied concepts like the law of comparative advantage to argue forcefully for trade between nations. Drawing a historical connection between barriers to this practice and war Bastiat admonished his readers that one of the best ways to stop armed conflict is to ensure trade is ongoing.

9 What was the subject of Bastiat’s Economic Harmonies?

It was an answer to the claims made by Marx in Das Kapital to the effect that the profits of the capitalists necessarily come at the expense of the workers.

10 Describe Bastiat’s famous essay, “The Candlemaker’s Petition.”

Bastiat ridicules state-mandated protection of domestic industries by describing a fictional account of a Candlemaker’s guild petitioning to have all cracks and windows sealed off to prevent the interference of a ruinous competitor: the sun.

11 Why did Bastiat (satirically) recommend that French ships dump their goods after leaving port?

It would guarantee a ‘favorable balance of trade’ for France because it would prevent the vessel from selling its goods at a profit, buying other goods for the return trip, and then importing them. By sinking the vessel immediately after its left it has frozen the whole economic picture at a rosy frame containing only exports.

WorldSys: Austrian Home Study Course, Week 19

READINGS: Sections from Murray Rothbard’s What Has Government Done to Our Money, Henry Hazlitt’s Economics in One Lesson, and Lew Rockwell’s The Economics of Liberty.

1 What are the functions of a bank?

In Rothbard’s vision banks act as warehouses storing big piles of gold on behalf of depositors. The banks might issue gold-substitute certificates so that large transactions don’t require physically moving gold around, but otherwise they would do little in the way of investing or speculating (except, one assumes, in those cases when the bank makes clear upfront that they intend to do so and gets advance consent from depositors)

2 How does the existence of banks encourage saving and investment?

With banks around you have a safe place to store money long term. If you have to keep piles of gold in your house or buried in your yard, you’ll be less incentivized to accrue large amounts of it because it’s a hassle to guard and organize and also takes up a lot of space. Not so with banks.

By analogy, we can say that banks encourage saving and investment in the way that gyms encourage exercise. There’s nothing stopping people from doing push-ups or even building an entire workout facility in their home basement, but that places hurdles in your way which don’t appear if you just go somewhere else to workout.

3 What is fractional reserve banking?

Fractional reserve banking occurs when banks only retain a small fraction of total deposits in reserve. So if bank A has $1,000,000 in deposits and keeps all $1,000,000 in its vault, it’s just a money warehouse, but if bank B has $1,000,000 in deposits and loans out all but $10,000 of it, it is engage in fractional reserve banking.

The latter approach has all sorts of potential dangers, most obviously being the possibility of many depositors asking for their money simultaneously and precipitating a ‘bank run’.

4 What is central banking?

A system in which an often nominally private bank will be closely intertwined with the government and enjoy state-backed monopoly on issuing currency. In the United States the system of central banking began with the Federal Reserve Act of 1917, which established our central bank and set up various provisions. Among these, for example, is the fact that all banks must keep a fraction of their reserves in deposit at the Federal Reserve — they can’t just keep gold reserves in their own vaults.

Central (and sometimes even private) banks are afforded the privilege of suspending specie payments; that is, they can refuse to redeem bank notes when their depositors come demanding their deposits back. This is a big part of why there were economic crises even prior to the instantiation of the Federal Reserve.

5 Is government oversight necessary to ensure sound banking?

If anything, government involvement in the banking sector just introduces more problems and distortions in the incentive structure. In a truly free banking system each bank would be constrained by a handful of factors: the narrowness of its own clientele, the narrowness of the clientele of the whole banking industry, and the overall confidence of the clients in their banks.

So if a single bank begins drastic inflation it will lose the supports of its patrons, who will then move on to another bank. As with any other business banks would be compelled to provide the product and service most demanded by the public.

Now let’s examine how government oversight has changed this picture. By gradually pulling society away from using gold and silver and toward using paper money the government has made inflation possible at a scale inconceivable before; by allowing for the suspension of specie payments the U.S. government made it possible for a nominally private banking sector to precipitate numerous economic crises throughout the 20th century. Of course the establishment of the Federal Reserve in 1913 was meant to head off these swings, and it has accomplished nothing but to profoundly exacerbate them.

All in all it looks to me as though banking, like most things, should be left to the private sector.

6 Why is the government interested in controlling the banking system?

Such control affords the government a fair bit of power in the form of being able to manipulate both the money supply and the over all level of inflation in the economy. And If a government has enough control over the central banking system it can go off the gold standard, effectively removing the last check on its power.

7 In what sense can banks “create money” by making loans?

They can simply write checks for assets against their reserves. If there isn’t a gold standard this is relatively straightforward — a central bank can buy a $1000 asset by writing a cheque for $1000. Obviously if this is taken too far too fast then the resulting inflation could cause the economy to spiral into depression, but if used judiciously then why shouldn’t a bank simply declare itself to have more of the baseless green pieces of paper floating around?

8 Wouldn’t banks lose money if they held 100 percent reserves?

No, they would charge fees for handling and storing money like any other warehousing operation. It’s conceivable that such banks in the free market might work out some sort of investment vehicle to be funded with depositor money with the depositor’s consent, in which case you’d have <100% reserves without the nightmare of ultra-leveraged fractional-reserve banks.

9 Don’t high interest rates slow economic growth?

In some ways and in some circumstances. The Austrian view of interest rates is that they are a kind of price, an exchange rate between current and future dollars. This price might be prohibitively high and thereby discourage investment in a manner similar to the way in which high startup and overhead costs might discourage someone from opening a capital-intensive business on credit. But the point isn’t simply economic growth at all costs, it’s sound, sensible, sustainable growth which steadily enlarges the pie for everyone.

That having been said it’s hard to know whether or not a high interest rate set by the free market would actually slow economic growth because other things like regulatory burden and regime uncertainty would be less of a problem in the absence of state meddling.

10 Should the government give (or guarantee) low-interest loans to farmers and other important groups?

Look at it this way: almost by definition the government only lends to those whom individuals that had to risk their own funds didn’t think were safe bets. Armed with this insight alone we can probably conclude that the government shouldn’t be providing loans to such people with taxpayer money.

But we can expand this analysis and ponder the consequences of taking from one group of people to loan to another; just as we have to avoid the broken window fallacy, we must avoid the isomorphic ‘awesome government loans to poor farmers whom other people considered an unsafe bet’ fallacy (for which we really need a better title).

When taxpayer funds are diverted to beet farmers to buy tractors they are not loaned to another group, used on public works projects, or (preferably) returned to private individuals with a little note that says ‘sorry I robbed you.’ While we may never see the gap created by these non-ventures, it still exists, and we cannot ignore it for the sake of focusing on the spike in capital-goods ownership in the beet industry.

We needn’t stop at funds, though: the number of tractors is finite, and if the government is taking finite money and loaning it to farmers to buy one of the finite number of tractors no one else can buy that tractor. And government lenders needn’t pass the same rigorous tests as private lenders. A successful private lender must repeatedly exercise his judgement and risk his own funds with each transaction; a civil servant does not.

The distortions keep piling up.

11 Does saving cause business depressions?

No, it is only by saving that one can gain the funds required to invest, and only investments of this sort are what allow businesses to expand their stock of capital goods. It might conceivably be argued that if a large enough fraction of people simply buried their cash in their yards a depression might ensue. But the burden of proof is on them to demonstrate such conditions exist, because as far as I know no one ever saves money in this fashion.

As Hazlitt points out ‘active saving’ — putting your money in a bank, or investing it — is really just another, longer-term form of spending.

12 How does saving lead to capital accumulation?

People saving money and loaning it to businesses so that the businesses can buy capital goods.