Tuesday, May 29, 2007

Reconciling Agnosticism

I am only an agnostic with respect to the question of creation, because I do not believe that the big bang theory entirely sufficies as an explaination for the beginning of the universe. However, on the question of the existance of god, there is clearly no evidence. The concept of dieties is entirely illogical and contradicts every known fact about physics and the property of matter.

In retrospect, agnosticism is an ambiguous position. An agnostic is like an atheist that lacks the courage of their convictions (and a centrist is like a totalitarian that lacks the courage of their convictions). Someone who is afraid of reaching a conclusion. An agnostic is someone who tries to claim that there can be no truth-statements with respect to the existance of a diety. However, there can be truth statements about it when all physical and logical evidence contradicts the claim that dieties exist.

That being said, I do reject the "radical atheist" viewpoint that anyone who is religious is inherently stupid. Ignorant perhaps, but not stupid. People who are religious are not that way because of they have lesser intelligence than people who do not. They are religious because (1) they were socially conditioned into being religious by their parents and the general culture and (2) they purposefully choose to ignore the evidence to the contrary before their own eyes.

The main flaw with agnosticism is that it easily becomes a form of radical subjectivism. Radical subjectivism as a philosophy can be very irrational because it refuses to aknowledge the extent to which reality exists independantly of what people think. While it is true that there is a degree of subjectivity with respect to what people think, objective reality still exists regaurdless - it does not bend to people's wills.

The entire principle of science is that people's ideas must change and conform in the face of evidence that contradicts those ideas. Radical subjectivism, however, defies the scientific method by implying that reality does conform to people's subjective wills. Objective reality does not function this way. If someone thinks that apples fall upwards, the laws of physics do not reverse as to make the apple fall upwards. Apples still fall downwards. Objective reality still exists, contrary to such irrational beliefs.

Why do people hold irrational beliefs? Not because they are incapable of seeing the truth. Most people are perfectly capable of seeing what is wrong with such beliefs. People hold irrational beliefs because, while they are perfectly aware of the implications of the truth, they fear the implications of the truth. People fear the consequences of the truth, especially in terms of the limits on human capability and life. As a consequence, they hold onto irrational ideas as a protective mechanism. They choose ignorance.

People should not be afraid to point out irrational ideas for what they are. Agnostics are too afraid to declare that the emperor (or diety) has no clothes. This is because the agnostic is not entirely sure wether or not the diety does have clothes. They may very well know that it does not, but their set up a methodology in which they refuse to aknowledge that they do know. While the agnostic proudly proclaims, "I do not know", they most likely actually do know and are in denial, or too afraid to offend the senses of either themselves or others.

The only way to get people to move away from mysticism and towards rationality is to make them, through peaceful arguementation (NOT violence), to reconcile the contradictions between their ideas and objective reality. Their ideas must give way to objective reality or they are choosing to be ignorant. The route of blind, indiscriminate tolerance of all irrational ideas cannot decrease the net amount of irrationality. To the contrary, it only encourages it. This is not to say that people who hold irrational ideas should be persecuted in any way. It does mean, however, that we should not be afraid to employ powerful arguementation to refute their irrationalities.

Monday, May 28, 2007

Heirarchy, Equality and Entropy

In philosophical and political discussions, particularly over the question of how to organize and structure society, we are generally presented with a dychotomy with absolute equality on one hand and absolute heirarchy on the other. Some people genuinely believe in the goal of absolute equality and oppose all forms of heirarchy. On the other hand, some people genuinely believe in the goal of absolute heirarchy, a pyramid scheme, and oppose all forms of equality. It is my goal here to show how both views are wrong.

To begin with, the ideal of absolute equality, which is part of the essence of communism, is obviously an ideal that is impossible to be reached. This notion has been throughly discredited by all facts of human nature and behavior. But beyond the impossibility of absolute equality, when one considers its implications, it is also highly undesirable, as it contradicts people's individuality and therefore variance/diversity. The reason for this is because human beings are naturally unequal in their mental abilities, physical caracteristics, personal preferances, actions and so on.

This means that the attempt to create absolute equality will always fail because of human nature, because of the diversity of and conflict between people's thoughts and actions. But not only is pure equality impossible in humans, it is also impossible in terms of resources; that is, the resources of the earth are distributed in a diverse and unequal way across the face of the planet. This is why, no matter what the communists do to try to bring about a utopia of equality, it is never actually reached. Despite their intention to bring about a state of absolute equality, the communists ended up with something quite different in practise. What they ended up with was a governmental dictatorship that acts in the name of the goal of equality.

"The iron law of oligarchy" puts forth that heirarchy is an inevitable and naturally arising structure. While this notion is compelling for various reasons, there are some problems with it. The problem is that no oligarchy is actually permanent. Neither has there ever been a pure pyramid scheme; there has always been imperfect pyramids, not perfect ones. So, just like absolute equality, a pure heirarchy is an impossibility. Why? Because there is always some degree of both upward and downward mobility, no matter how much one tries to freeze things in place.

All things considered, heirarchy does have a little bit more leeway then absolute equality in that it does seem that there is at least a tendency toward it in institutional arrangements. However, it is never actually reached. It is not only impossible to create a mathematically perfect pyramidical progression, but even if such a progression were achieved it would be impossible to sustain. Even seemingly heirarchal institutions such as a monarchy never reaches a true pyramid scheme and eventually break down.

I would like to replace the iron law of oligarchy with the iron law of entropy. The contention here is this: both egalitarian equality and pyramidal heirarchies are not natural structures, and the attempt to impose them will inevitably break down. To be clear, this does not mean that I oppose all structure (the original meaning of "anarchy"). It does mean, however, that no structure is permanent and that there is no such thing as an institutional arrangement that is either purely heirarchal or purely equal.

Entropy tells us that (1) there is no such thing as a static atmosphere, there is always change over time (2) because of this, there is no such thing as a permanent institution and (3) since there is no permanence, all institutions will eventually break down. Entropy is that natural force that causes central systems to inevitably break down. The more centralized a system becomes, the more that it sows the seeds for its own downfall and the more drastic this entropic downfall will be. The more complex an economy, the more complex information becomes, the less discernable and managable it becomes by central planning.

The existance of the individual, of variance, means that some people's choices will cause them to rise above or drop below others in a particular area. This entropic force of the individual works against both attempted equality and attempted heirarchy. In regaurds to equality, such an individual creates inequality and therefore breaks down the system of attempted equality. In regaurds to heirarchy, such an individual creates mobility and therefore breaks down the system of attempted heirarchy by moving upwards or downwards in their position.

The more of such individuals that are out there making decisions, the harder it becomes to impose equality or heirarchy. It defies central planning in every way. The iron law of entropy can be thought of as being one and the same with the iron law of decentralization. The decentralized decision-making of a diverse array of individuals (1) makes prediction pretty much impossible (2) makes economies, societies harder to control/manage through central planning and central control (3) causes a natural diversity in outcomes, and therefore inequality and (4) causes outcomes and social positions to change over time.

The desire for centralization and static atmospheres (which inevitably imply permanence) stems from various misunderstandings about human nature. Let us establish some facts about human nature then. To begin with, human beings are rational creatures, and by rational we mean the ability to freely make choices (free will in a handbasket). The term rational here does not refer to standard measures of intelligence or wether or not the person's choice is the correct one or actually leads to the ends that they desire. It does not refer to wether their desired ends are "smart or dumb" or "good or bad".

Human beings choose to act in their self-interest in the name of achieving desired ends. This simple fact about human behavior makes the ideal of absolute equality impossible. The decisions of individual people to achieve the ends that they desire and improve their own economic and social conditions works entropically against any attempt to impose equality in economic and social results. It also works against any attempt to impose a pyramid in economic and social results. Both require the impossibility of freezing people into place once either total equality or a total pyramid is reached; and of course it never makes it to the point where total equality or a total pyramid reached.

Under communism, which is supposed to mirror the ideal of absolute equality according to its starry-eyed proponents, the desire of human beings to improve their conditions as individuals does not dissapear. The natural diversity, and therefore inequality, between people's physical and mental abilities, ideas, personal preferances and actions does not dissapear. The unequal distribution of resources on the planet and between people does not dissapear. So what does communism actually do? It temporarily erodes at the positive fruits of the freedom and diversity in human capability and social interaction. However, this does not stop all such activity. Inevitably people's diversity manifests itself in their choices and the central system attempting to equalize them crumbles.

Under pyramidical heirarchy, which is supposed to mirror the ideal of an absolute pyramid according to its starry-eyed proponents, these same traits of human nature do not dissapear. People still desire to improve their conditions. People are still diverse and have the potential for mobility. So what do highly heirarchal systems such as monarchy actually do? They temporarily erode at the positive fruits of the freedom and diversity in human capability and social interaction. Just like communism, it is impossible for it to truly stop all of such activity under a system such as monarchy. People's autonamous decisions cause a degree of mobility which gives leeway to the lower social classes (peasants, serfs, etc.) to rise upwards while forcing the upper social classes (kings, nobles, dukes, etc.) back downwards, and the central system attempting to pyramidize them crumbles.

The communists fail to understand that there is nothing inherently wrong with inequality between the abilities and conditions of human beings. For example, take a mail-man and a physicist. They are inherently unequal in what they prefer to do and in what they are good at doing. There is nothing wrong with this at all. It is a manifestation of diversity in human ability and desires. To ask for absolute equality would lead us to the absurdity of expecting one to become identical to the other.

Under communism, anyone considered to be in a position that is more beneficial or above another is expected to become identical to a lowest common denominator. As such, the communist system temporarily erodes human potential. However, because human nature cannot be abolished, human potential and choice causes this attempt to fail and the system attempting to enforce it to crumble.

The monarchists and fascists fail to understand that there is nothing inherently wrong with mobility (I.E. change over time) in the conditions of human beings. While the desire of the communist is a static atmosphere of equality, the desire of the monarchist is a static atmosphere of rigid, mathematically regressive pyramids. To demand that all peasents permanently stay in the same place economically is to expect the impossible. Inevitably, some individuals within the peasantry will find ways to improve their economic conditions. Likewise, to demand that all nobles stay in place economically is to expect the impossible. Inevitably, some individuals within the nobility will make poor decisions and face worsening economic conditions.

Under monarchy, anyone demonstrating mobility, particularly anyone in the lower classes showing the potential of rising upwards, is expected to stay in their place. As such, the monarchal system temporarily erodes human potential. However, just as in communism, because of the fact that human nature cannot be abolished, this causes the attempts to fail and this system to crumble as well.

To claim that we have a one-dimenstional choice between absolute equality and the iron law of oligarchy is to set up a false dychotomy because neither of the two ideals are ever actually achieved in the absolute, as they go against the nature of their subjects. The negative effect such systems have on their subjects become quite obvious for all to see. People have a natural tendency to work against it and this only intensifies over time. The iron law of entropy shows us why.

Saturday, May 26, 2007

The Giant Gas-Gouging Gaffe

By Robert P. Murphy

On Wednesday the House passed a bill that would make price gouging by oil and gas companies a federal crime. The legislation called for jail time and fines of up to $150 million a day for charging "unconscionably excessive prices" and taking "unfair advantage" of consumers.

As frequent readers of this website already know, this proposed legislation is horrendous and would do nothing to help the American motorist. In this short piece I'll outline some of the major problems.

VAGUE LANGUAGE

The most obvious difficulty is the arbitrariness of the "crime." Say what you will about outright price controls, at least they're explicit. In contrast, how's the owner of a gasoline station supposed to know if he's charging "unconscionably excessive" prices? After all, if he's taken a basic economics course, he might think that any market-determined price is quite reasonable. If this bill becomes law, sellers here will be at the mercy of the FTC the way drivers are at the mercy of traffic cops — you can always get written up for something.

While we're at it, let's just spend a moment on the wording of this bill. Why isn't it a crime to merely charge "somewhat excessive" prices — though perhaps not receiving the same penalty as unconscionably excessive ones? (After all, it's a crime to murder someone, but it's also a crime to punch someone in the face.) Come to think of it, shouldn't we also punish unconscionably low prices — after all, they're unconscionable by definition! And if you can't imagine what that would mean, maybe an unconscionably low price is one where mom and pop gasoline stations can't stay in business. (You know, kind of like unconscionably cheap imports from China that we have to keep out for reasons of "fair trade.")

And let's not forget the other clause, taking "unfair advantage" of the consumer. Shouldn't it also be a crime to take "fair advantage" of the consumer? (After all, you're still taking advantage of the consumer in this case.)

My point, of course, it that this language refers not to objective behavior, but merely reflects arbitrary subjective judgments on the part of the government official meting out the punishments. Adding on a layer of uncertainty and vague threats of massive fines and possibly jail time won't increase the supply of gasoline, and hence won't help motorists.

WHY ARE PRICES SO HIGH?

Before using the guns of the federal government to try to force them down, people ought to first consider why it is that gasoline prices are so high. The usual explanation — "The oil companies are greedy and want to screw over the hapless drivers!" — makes no sense. After all, oil companies were greedy during the whole 1980s, when the price of a barrel collapsed to under $11 (in nominal terms) in July 1986. And automobiles weren't invented in the last three years, so it's not as if the US "addiction" is something new.

The general causes for high oil prices are pretty straightforward: Supply is restricted because of the mess in the Middle East (not to mention environmental and other regulations), while demand is booming as China and other developing countries grow much more quickly than people had anticipated years ago (when oil infrastructure decisions were made). On top of these "real" factors, the general uncertainty about the Middle East — especially the possibility of war with Iran — has caused speculators to push up the price even higher.

Now high oil prices explain gasoline prices in part; if oranges are really expensive, you can bet that orange juice won't be cheap. But what is particularly strange is that oil prices are actually a lot lower than they were just last July ($64 and change as of this writing, compared to highs of $78 in July), yet prices at the pump are at all time (inflation-adjusted) highs.

The immediate answer is that refineries can't keep up. (If there were a major strike at Tropicana packaging plants, then the price of orange juice would be higher still, than would be justified by higher orange prices.) There are all sorts of reasons people have given, such as the lingering effects of Katrina, new environmental regulations about diesel fuel, restrictions on new refinery construction, and so on.

PRICE CAPS CAUSE SHORTAGES

But regardless of the specifics, the thing to remember is that market prices are not arbitrary. The market price is the one that (tends to) equate quantity demanded with quantity supplied. If a gas station can charge "whatever the market will bear" at $3.15 per gallon, but only charges $2.85 out of fear of fines, then it automatically follows that this gas station will have to sell people fewer gallons than they want to buy at the lower price. In other words, the proposed legislation will cause dreaded shortages of gasoline.

The only thing I've "assumed" to reach this conclusion is that people buy more gasoline at lower prices. If you grant me that, then you have to admit that government efforts to reduce prices below their market levels will cause shortages, and that means (as in the 1970s when the great Republican Nixon imposed price controls) long lines at the pump and arbitrary rationing schemes.

This is an important point so let's make sure we follow it: The market price is the one that matches supply with demand; it's the one where gas stations want to sell the same amount of gallons that motorists want to buy. So if the government forces the gas stations to lower this price, then motorists want to buy more gallons than they would have at the higher price. So unless you think a gas station owner would be willing to sell certain stockpiles of gas for (say) $2.50, but he wouldn't want to sell them at (say) $3.15, you have to admit that this legislation will lead to lines at the pump.

Incidentally, this isn't academic speculation. This is exactly what happened during the hurricane season, when people in the Gulf states tried to flee to safety. Certain gas stations (out of fear of punishment or perhaps misguided altruism) didn't raise their prices, even though their business was astronomical (since everyone was headed for the highways). The result? These gas stations got drained fairly quickly, and consequently many of the fleeing motorists ran out of gas and were stranded on the interstates.

TAKE IT TO THE LOGICAL EXTREME

I'll wrap up this article with a simple question: If all it takes is a stroke of the pen for Congress to magically lower gas prices back to "conscionable" levels, why not go further? Why not make it a crime to charge "moderate" prices too, so that we're left with very cheap gasoline? Woo hoo, break out the SUVs!

Once you think through the logic of why a government-imposed cap of (say) 25 cents per gallon wouldn't work, it's not much harder to see why a cap of $3 would be bad too.

The reason for high prices is increased scarcity. The way to solve that is to make it worthwhile for producers to increase supplies. No one in his right mind would spend billions looking for new oil fields, laying pipelines, hiring geologists, etc. if it looks like Congress might tax "windfall profits," impose price controls, or artificially stimulate demand for a competitor's products.

The oil industry involves long time horizons, and investors don't want to be exposed to a fickle public. Property rights serve a purpose, after all.

The solution to high oil and gas prices is to get the government out of the way. Ease restrictions on new refineries and oil drilling, get rid of taxes on gasoline, and stop threatening to nuke Iran. That would solve the "crisis" very quickly.

Thursday, May 24, 2007

Immigration, Secession, and Taxation

by Roderick Long, from his blog Austro-Athenian Empire

1. A frequent argument against secession is: What about the tax money that the rest of the country has invested in the would-be secessionist region for infrastructure, education, security, etc.? A region shouldn’t be allowed to secede until it first pays back the full costs of those investments.

Now many things could be said in response to this objection: do these investments really outweigh the costs, direct or indirect, that the larger unit has been imposing on the region? to what extent did the region voluntarily solicit these investments? and so on.

But I want to offer a somewhat different response. Suppose this argument is a good one. Then by the same logic it should be justifiable to forbid individuals to leave the country. Let’s say I want to move to Canada, and the U.S. government says, “Not so fast – we paid for part of your education, we’ve protected you from criminals and foreign invaders, and now you can’t leave the country until you first pay back our investment.”

Now some countries have indeed had just such a policy – the Soviet Union, for example. But nowadays hardly anyone, including opponents of secession, is willing to embrace the idea of forbidding emigration. So if a history of tax-funded investment isn’t legitimate grounds for forbidding emigration, why is it grounds for forbidding secession? What’s the difference? Why should the principle of “consent of the governed” apply in one case and not in the other?
If the claim to a return on tax-funded investment doesn’t justify a prohibition on emigration (and I agree that it doesn’t), I don’t see how it can justify a prohibition on secession.

2. A frequent argument against open borders (strikingly similar to the anti-secession argument above, though not necessarily offered by the same people) is: What about the tax-funded benefits, such as welfare and education, that immigrants become eligible to receive? So long as immigrants can draw on these benefits, don’t those who pay the taxes have the right to demand that immigrants be excluded from the country?

Here too, many things could be said in response to this argument: is the average immigrant really a net tax-recipient rather than a net taxpayer? and so on. But here too, I want to offer a somewhat different response.

Suppose this argument for forbidding entry by those who would probably become net tax-recipients is a good one. Why wouldn’t it be an equally good argument for deporting native-born citizens who are likewise net tax-recipients? Now most proponents of restrictions on immigration don’t favour deporting existing U.S.-born welfare recipients. But again, what’s the difference? How can the right of net taxpayers to defend themselves against net tax-recipients depend on where the net tax-recipients were born?

Just as in the secession case, so here, if tax-based considerations don’t justify compulsory emigration (and I agree that they don’t), I don’t see how they can justify compulsory non-immigration.

Tuesday, May 15, 2007

Security, Washington-Style

by Ron Paul

Congress voted this past week to authorize nearly $40 billion for the Homeland Security Department, but the result will likely continue to be more bureaucracy and less security for Americans.

Five years into this new Department, Congress still cannot agree on how to handle the mega-bureaucracy it created, which means there has been no effective oversight of the department. While Congress remains in disarray over how to fund and oversee the department, we can only wonder whether we are more vulnerable than we were before Homeland Security was created.

I was opposed to the creation of a new Homeland Security Department from the beginning. Only in Washington would anyone call the creation of an additional layer of bureaucracy on top of already bloated bureaucracies “streamlining.” Only in Washington would anyone believe that a bigger, more centralized federal government means more efficiency.

When Congress voted to create the Homeland Security Department, I strongly urged that -- at the least -- FEMA and the Coast Guard should remain independent entities outside the Department. Our Coast Guard has an important mission -- to protect us from external threats -- and in my view it is dangerous to experiment with re-arranging the deck chairs when the United States is vulnerable to attack. As I said at the time, “the Coast Guard and its mission are very important to the Texas Gulf coast, and I don’t want that mission relegated to the back burner in a huge bureaucracy."

Likewise with FEMA. At the time of the creation of the Department of Homeland Security, I wrote “we risk seeing FEMA become less responsive as part of DHS. FEMA needs to be a flexible, locally focused, hands-on agency that helps people quickly after a disaster.”

Unfortunately and tragically, we all know very well what happened in 2005 with Hurricanes Katrina and Rita. We know that FEMA’s handing of the disaster did in many cases more harm than good. FEMA was so disorganized and incompetent in its management of the 2005 hurricanes that one can only wonder how much the internal disarray in the Department of Homeland Security may have contributed to that mismanagement.

Folding responsibility for defending our land borders into the Department of Homeland Security was also a bad idea, as we have come to see. The test is simple: We just ask ourselves whether our immigration enforcement has gotten better or worse since functions were transferred into this super bureaucracy. Are our borders being more effectively defended against those who would enter our country illegally? I don’t think so.

Are we better off with an enormous conglomerate of government agencies that purports to keep us safe? Certainly we are spending more money and getting less for it with the Department of Homeland Security. Perhaps now that the rush to expand government in response to the attacks of 9/11 is over, we can take a good look at what is working, what is making us safer, and what is not. If so, we will likely conclude that the Department of Homeland Security is too costly, too bloated, and too bureaucratic. Hopefully then we will refocus our efforts on an approach that doesn’t see more federal bureaucracy in Washington as the best way to secure the rest of the nation.

Friday, May 11, 2007

Non-interventionism vs. Isolationism Revisited

Ludwig von Mises: "The productivity of social cooperation surpasses in every respect the sum total of the production of isolated individuals." - Epistemological Problems of Economics

There are some very compeling reasons for distinguishing between a non-interventionist and isolationist foreign policy. The key differances are over international trade and immigration. In sofar as isolationism applies to economics and the association of individuals, it is a bad thing and constitutes a form of interventionism, not non-interventionism. Economic protectionism is a key tenet of traditional isolationist foreign policy, as is what could be considered cultural protectionism. While the paleo-conservative movement can be considered better than the neo-conservative movement in various ways, unfortunately many paleoconservatives have a tendency to support protectionism.

What does the isolationist foreign policy imply? Painfully high tariffs, import quotas, export bans, immigration quotas, martial law at the borders, walls at the borders, prohibition of lower-end jobs, prohibition of various goods and services. Taken to it's furthest extremes, it implies a ban on all trade and immigration between America and other nations. In either case, it implies a plethora of potential government interventions. This sentiment represents a sub-culture of "buy American products only" and "the immigrants are taking our jobs" people. It has culminated in a "anti-globalization" movement, constituted by people ranging from the far left to the paleo right. This sentiment is riddled with economic fallacy.

The non-interventionist foreign (and domestic) policy, in contrast, would inevitably have to be opposed to such measures. They are, afterall, government interventions in the market. The non-interventionist foreign policy with respect to foreign trade can only lead to one possible conclusion: the unhampered division of labor, voluntary exchange, is the correct policy for both inner-national trade and inter-national trade. This inevitably means that protectionist devices such as tariffs, quotas and prohibitions have to be eliminated. If we accept the principle of the division of labor within a country, we must accept the division of labor within the world. "Globalization" is the beginning of the global division of labor.

For the same reason that blocking trade between people in New Mexico and Arizona would have a hampering effect on production, so too will blocking trade between people in, say, China and America. Economics provides us with the insight that voluntary exchange is mutually beneficial to both parties and has a ripple effect of sorts (I.E. its benefits may extend beyond the two people exchanging down the line). Any kind of protectionism is going to block this mutually beneficial exchange. It always is at the expense of consumer choice and bestows a privilege to one narrow interest at the expense of everyone else, and eventually at the expense of the original "beneficiaries" themselves. And since it stifles competition, it has the obvious effect of artificially keeping prices higher than what the true market level would be. This has been proved beyond the shadow of a doubt in the field of economics long ago.

If mass-protectionism were instated on a world-wide scale, here is what would happen: first, people in 3rd world countries would die off like flies, secondly, 1st world countries would experience a restriction of supply (and thus bloated prices) and thirdly, the population of 1st world countries would also start to decline. In other words, it is impossible to sustain the global population without the expansion of the division of labor. Mass-protectionism creates the effect of a major restriction of access to resources for all parties. Such restriction can only lead to population control.

Let us examine the isolationist policy as it applies to immigration and questions of segregation vs. integration. The isolationist position on immigration is, at minimum, to greatly limit immigration. This involves a plethora of proposed government interventions: immigration quotas, going after those who hire immigrants, putting up physical barriers such as walls and fences, increases in police powers and persueing the drug war at the borders. Once again, the non-interventionist position must oppose such measures. But not only are they all government interventions, many of which are economic, but they violate very basic rights of both immigrants and citezens who associate with them.

Immigration itself is merely the act of moving from place A to place B. This is typically coupled with the act of purchasing a home. It should be obvious that this is a free trade activity just as much as any other. Yet many anti-immigration advocates, in effect, wish to illegalize selling goods and services to such people, hiring such people or allowing them onto one's own property; charity even. Such measures inevitably violate the property rights of both the immigrant and the ciitezens that they are associating with. If the government stops me from selling a home to an immigrant, hiring one or associating with them in any way, then my property rights are being violated along with that of the immigrant.

Libertarians are bound by the non-aggression axoim. This axoim leads one to support free association (and disassociation) between individuals on the basis that no aggression is used to force people to either associate or disassociate. This means that one must oppose both forced integration and forced segregation (forced association and force disassociation). If force is used to stop people from voluntarily associating, then a rights violation has occured. As such, using the law to stop immigrants from associating with citezens (and all that comes with it) is a rights violation on the part of both people in question. But the cultural isolationist essentially is argueing in favor of using the law to enforce forced segregation.

Of course, economically and socially, such separatism is counterproductive even for the people who wish to remain isolated. While people are perfectly within their rights to choose not to associate with people, they undermine their own well-being the more liberally that they isolate themselves. For example, if a buisiness refuses to sell products to group X, they lose buisiness, indeed, they are restricting their consumer base. It becomes vitally in the best interest of people to associate and engage in social cooperation, otherwise they harm themselves in the long-term by withdrawing from the benefits of society. This applies to immigration as well. To forcably block off immigration is also to aschew the benefits of social cooperation. While there is indeed a right of voluntary disassociation, the person who chooses to freely disassociate often does so at their own risk.

The non-interventionist policy towards immigration inevitably can only lead to the conclusion that immigration, free association and movement of people across land masses, must be left entirely alone and unhampered, within the domain of private property. The isolationist view sharply contrasts from this, putting forth that this free association must be hampered by the government in the name of preserving "the nation", "our jobs" or "our culture". The political isolationist is a separatist who wishes to use the state to enforce their desired separation. They are not content with free disassociation; they essentially want to make it the law that people must disassociate.

Simply put, the isolationist policy is a form of interventionism geared towards forced disassociation/forced segregation. The non-interventionist policy, as can obviously be inferred from the name, is the lack of interventionism, which can only lead to voluntary association and disassociation, and thus be in opposition to forced association and disassociation. The non-interventionist policy does not suggest wether to associate or disassociate, only that it be done voluntarily and that the government not intervene. On the other hand, the isolationist policy does indeed make a judgement and suggestion in favor of disassociation and supports force (governmental or otherwise) being used to bring it about. Isolationism is essentially a policy of government intervention to stop people from associating.

Thursday, May 10, 2007

The "Hole" in State's Rights

The doctrine of state's rights, or more broadly, decentralization, is a valid and useful one. It is undeniably true that the higher levels of government are particularly dangerous because they posses more power. Whichever level of government is highest will always constitute the ultimate arbiter in the "chain". A city or state is incapable of pulling off many of the things that federal/national governments can do. The doctrine of state's rights puts forth that the lower levels must be kept autonamous to prevent the federal government from usurping power. When the concept is applied down one level, it means that cities must likewise be kept autonamous from state governments.

However, most adherants of state's rights do not apply it beyond this level. What about keeping, say, the country club autonamous from the city? And, to take things further, what about keeping the individual autonamous from the city? Why must the concept stop at states or cities? Surely, if the principle rings true, then it applies consistantly across the board. And when the concept is consistantly applied at lower and lower levels, it eventually stops at the individual human being. The true autonomy in question is therefore always that of the individual. In a sense, the level of government becomes irrelevant because the real question is the individual vs. any government.

States do not have rights. Cities do not have rights. People do. There is a certain danger of allowing the state's rights concept to become an anthropromorphization of governments (governmental polylogism, if you will). States and cities are not autonamous decision makers, with minds, thoughts and actions of their own. Individual human beings are. Our use of the term state or city should only be an expression to indicate the cumulative result of the autonamous decisions of all individuals that make them up. If it is anything other than this, then it is anthropromorphic and polylogistic.

While state's rights can be very helpful as a tool in opposing federal laws, it is possible for it to be used as a tool to support state or city laws. I understand that many adherants of state's rights probably do not try to overtly use it this way, at least most of the time. However, there is nonetheless a danger of eliminating an unjust federal law and stopping there, allowing states to have that same unjust law. If we believe that, say, federal laws prohibiting drugs are a no-no, we should also believe the same for the same type of laws on the state and local levels. Consequentially, consistancy must lead us to be abolitionists. Strict adherance to state's rights can only be considered abolitionist with respect to federal laws.

The true question is about the individual vs. positive laws. The autonomy of the individual is a tool in opposing positive laws of all levels of government. If the federal government can secede from the united nations and if the state of Texas can secede from the federal government, then why can't Galveston secede from Texas? And why can't the individual in Galveston secede from Galveston? The individual is the ultimate and true unit of autonomy. The place to start methodologically is with the rights of person and property of each individual. The concentration on state vs. federal can blur this central question.

The state's rights doctrine also has another flaw in it, if I may suggest. While it is true that the federal government is worse than your city government because the politicians and bereaucrats are far away from you and therefore isolated from and inaccessable to you, it is also true that the city government's particular danger is that you are so closely accessable to it. To use an example of the absurdities that city governments can impose, consider fines being imposed by cities for growing your grass above a certain height (it's always defended with a 3rd party/externality arguement). City governments are filled with such laws over trivialities, which amount to telling people what to do with their own property. There is also a lot of government collusion with local buisiness, particularly with respect to zoning laws.

While state's rights is valid in various ways, it does not cut to the rub of the matter and is prone to misuse. In short, decentralization is a valid concept but most of its adherants do not consistantly apply it, they only apply it part of the way. The state's rights doctrine is, in fact, moderate decentralization. If one moderates it one step further, we get to the level of "national sovereignty" or centralization at the federal level; decentralization can only exist in this atmosphere to the extent that national governments remain independant from eachother. One step further than that lies unified global government, and hence no decentralization at all.

Thus, centralization and decentralization can be mapped out on a scale looking something like this, from the most decentralized to the most centralized:
  • Individualist Anarchism
  • City-State Republicanism
  • State Republicanism with city autonomy
  • State Republicanism without city autonomy
  • National Government with some state autonomy
  • National Government without state autonomy
  • Global Government with some national autonomy
  • Global Government with no national autonomy

Tuesday, May 08, 2007

Libertarians For Mass-Murder

In chatting and debating on libertarian message boards, I have repeatedly come across some people who staunchly support our current foreign policy, particularly the war in Iraq. I have seen some even clamor for intervention with Iran. These people may not constitute a majority in libertarian circles, but they are a sizable faction and it appears that they are starting to gain disproportionate control of libertarian institutions.

Nothing makes my blood boil more than to see self-professed libertarians express pro-war sentiment. I sometimes wonder if half the people out there who consider themselves libertarians think that libertarianism is some sort of special brand of conservatism, with hookers and bongs added into the mix. Where in the heck are these people getting their ideas about government from? Apparently not from any libertarian authors.

I'll admit, I have not been involved in this movement for any more years than I can count on one hand. But it was very clear to me from the very beginning that non-intervention in foreign affairs, particularly opposition to war, is a central tenet of this philosophy (one that I generally held before becoming interested in it). So when I see a sizable portion of "libertarians" supporting the war in Iraq and "war on terror", of course I become disturbed.

Now, there is of course some room for disagreement between libertarians. Some particular areas of debate have been over immigration and abortion. But on this particular issue, the warfare state, I can see no honest disagreement between libertarians, particularly because the warfare state is the most blatant and gigantic manifestation of what libertarians are supposed to oppose. It is the most aggressive manifestation of the state and it is the mechanism by which the state expands its power the most.

How one can believe that government is inept, yet somehow simultaneously act as if this ineptitude does not apply to the military sphere makes no sense. How can someone believe that central planning of the domestic economy fails while simultaneously believing that central planning of foreign policy is immune to the laws of economics? Indeed, the case against central planning applies to foreign policy and military affairs just as much as it does to domestic matters. All of the great economists from Mises onwards were perfectly aware of this, and Hayek's "Road To Serfdom" is a textbook example of how the warfare state is a means to transfer a country into socialism.

If a "libertarian" supports the "war on terror", then in practise they must support all that comes along with it. That means that they must support the huge growth in government powers, which includes the massive increase in spending, the centralization of executive powers, the inflation and the nation building. When it all is considered, it adds up to a sizable portion of the status quo (no, a net increase in the state's power), expressed in trillions of dollars.

How is this libertarian? How is a trillion dollars in spending justified on libertarian grounds? If it is, then I guess libertarians should have been pleased with Clinton's budget for the entire federal government a decade ago, which is an amount that is equivalent (lesser than, even) to the cost of our current crusade. Let's make this clear: the cost in military spending alone for this is quickly becoming in exess of what the entire federal budget was under a "big government" Democrat!

Consequentialist and pragmatic considerations aside, the absurdity of pro-war libertarianism is obvious when held up the standards of the philosopher's stone of liberty: the non-aggression axiom. Most would agree that to murder one person would violate the axoim. Yet modern offensive war is the largest possible violation of this axoim, for it is the mass-destruction of life and property. I wrote more in depth about this in a past article here. The anti-war, anti-empire position is a logical deduction from the non-aggression axoim. Without it, a huge chunk of this philosophy falls into the void.

Unfortunately, pro-war "libertarianism" seems to be very popular among many modern followers of Ayn Rand and assorted right-wingers. I fear that this is partially the fault of the libertarian movement itself for tieing itself to the hip of the right for so many years. The result has been an infiltration of the movement by conservatives. To these people, libertarianism is apparently just a special form of conservatism in which we get to gloat about how much more conservative we are then the others. They never picked up on left-right revisionism and the re-alignment of the political spectrum, so they are still trapped in a false political dychotomy.

I can tolerate anti-immigration libertarians, left-libertarians, right-libertians, agorists, objectivists, etc. Such groups can have faults and inconsistancies without giving up the bulk of the philosophy. But I cannot tolerate "pro-war libertarianism" because it is not libertarianism; it is not possible to take such a position without giving up a huge chunk of this philosophy. If I was anti-war before becoming interested in libertarianism (and I was, I was), then surely "libertarians" can be anti-war already.

Monday, May 07, 2007

Senate Opposes Free Trade In Pharmacudicals

http://www.chron.com/disp/story.mpl/ap/politics/4782946.html

WASHINGTON — In a triumph for the pharmaceutical industry, the Senate on Monday killed a drive to allow consumers to buy prescription drugs from abroad at a significant savings over domestic prices.

On a 49-40 vote, the Senate required the administration to certify the safety and effectiveness of imported drugs before they can be imported, a requirement that officials have said they cannot meet.

"Well, once again the big drug companies have proved that they are the most powerful and best financed lobby in Washington," said Sen. David Vitter, a Louisiana Republican.

The vote neutralized a second amendment, later passed on a voice vote, that would legalize the importation of prescription drugs manufactured in Canada, Australia, Europe, Japan and New Zealand.

Sen. Bernie Sanders, I-Vt., called the certification amendment, introduced by Sen. Thad Cochran, R-Miss., a "poison pill" for the drug-imports legislation. Sen. Byron Dorgan, D-N.D., acknowledged it nullified his bid to allow the purchase of drugs abroad.

"This is a setback for us. But the drug industry is one of the strongest industries in this town," Dorgan said.

Sen. Mike Enzi, a Wyoming Republican, said the requirement for a safety certification was essential to protect the public.

"Under both Democratic and Republican administrations, secretaries of Health and Human Services have declined to certify that foreign drugs — like those allowed under the Dorgan Foreign Drug Act — are safe for American consumers. They realized, as I do, that close enough isn't good enough," Enzi said.

The maneuvering occurred on broader legislation to renew the FDA's ability to collect fees from the drug industry to defray the cost of reviewing new drugs. Lawmakers have seized on the bill to overhaul the agency, including its handling of drug-safety issues highlighted in the wake of the withdrawal of the painkiller Vioxx.

Advocates of drug importation have argued for years that an existing ban is more a protection for the drug industry than a safety issue.

Overseas, drugs can cost two-thirds less than they do in the United States, where prices for brand-name drugs are among the highest in the world. In many industrialized countries, prices are lower because they are either controlled or partially controlled by government regulation.

Dorgan said allowing imports would drive down the price of U.S. brand-name drugs. He said 90 doses of the cholesterol drug Lipitor costs $321 in the U.S. — about twice the cost in Canada.

The idea of allowing prescription drug imports enjoys broad popular support. However, lower prices overseas would not automatically translate into large savings for domestic consumers, according to a 2004 study by the Congressional Budget Office.

The study found that allowing drug imports from a broad set of countries would cut U.S. drug spending by $40 billion over 10 years, about a 1 percent savings. It said foreign governments could limit drug exports to protect their own domestic supplies, and that U.S. drug companies could respond to an importation bill by increasing prices abroad.

The pharmaceutical industry vehemently opposes allowing drug imports, arguing that they could leave the nation vulnerable to dangerous counterfeits.

Similar drug-import legislation is pending in the House.

Sunday, May 06, 2007

David and Goliath


Why Ron Paul will not be elected: my reaction to the Debate

Many people may believe that the reason Ron Paul will not make the GOP primary is because his opinions are to “extreme” or it would be “throwing your vote away.” There are several reasons why Ron will never be commander-in-Chief, the main one is money. Ron would never be able to raise the kind of funds that Hilary Clinton or John McCain would garner on the trail. This discrepancy has also blocked 3rd party candidates out of the presidential primaries. There are some politicians that talk vaguely about the corruptions of “fund raising” but will turn around and abuse soft money policy.

Another reason is media coverage of campaigns and exposure. Which is a direct consequence of his inability to fund raise to the level of the other candidates. The Republican Party has not “endorsed” him as there front man. So far it seems that they are behind McCain or perhaps even Giuliani if he steals the primary. Many core Republicans find Giuliani to be “controversial.” Ron on the other hand, also shares that weakness but in a slightly different fashion. He is far too high browed, talking about inflation and intent of the constitution. Most people don’t know what either of those ideas entails in the context of US policy.

Perhaps the last reason is that he has said very openly that he wants to abolish the welfare state. That has not gone over well with many people who see those services as vital. In the long run ending those programs or turning them over to the states would be best for all who are concerned but the masses do not seem to understand.

There are a number of more difficult and complex reasons dealing with voter efficacy, party ID, and candidates. I however feel that sometimes simplicy is best in these situations.

Saturday, May 05, 2007

Don't Be Fooled by Propaganda

by Charley Reese

There is an ongoing slander campaign against Islam, claiming that it is a religion that promotes violence and hinting that it seeks world conquest.

Before you buy the malarkey that is being produced by people with their own agendas or prejudices or who are just plain ignoramuses, follow these few suggestions:

Compare the history of Islam with the history of Europe, which for centuries was called Christendom. An objective look will show you that Christendom wins by a landslide when it comes to violence and wars. After all, Europe and its offspring did not come to dominate the world, including the Islamic countries, because they practiced the gentle virtues of Jesus.

As for the common practice of cherry-picking Scripture from holy writings and presenting it out of context, just check out what Christians call the Old Testament. There you will find God advocating a double standard of morality, condoning slavery, ordering the Israelites to commit genocide and committing infanticide himself on a mass scale. I don't believe you will find anything comparable in the Quran.

The word "jihad," which is so over-used these days, has, like a lot of words, more than one meaning. It means basically to struggle, but this can be personal or spiritual, or a peaceful political struggle. Only if Islam is attacked are Muslims required to defend it. As for that obnoxious propaganda term "Islamo-fascist," just recall that fascism is a European invention by nominal Christians. To my knowledge, the only fascist governments ever to exist on this planet were all European and nominally Christian.

Another canard is that Islam promotes forced conversion. Not so. Even when the Arab empire was expanding, rarely were any of the conquered people forced to convert. The Quran even forbids it, as I recall. Naturally, once Muslims were in charge, a lot of people decided it was in their own self-interest to convert, but this is just one of the sleazy aspects of human nature.

I remember when Florida elected its first Republican governor of the 20th century. I saw plenty of people crawl out from under their rocks and convert to the Republican Party, drawn by the smell of patronage. With some rare exceptions, human beings always act in what they perceive, rightly or wrongly, to be in their self-interest.

It was Christian Europe that slaughtered the Jews, and nothing remotely resembling the Holocaust is to be found in the history of Islam. In fact, during the past, when Jews were being persecuted by Christian Europe, they frequently fled to and found sanctuary in the Muslim countries. Until Israel was established, practically every Muslim country had sizable Jewish populations dating back centuries. And there are still Jews and Christians in some Muslim countries.

A final suggestion is that when you hear some individual radical Muslim being quoted, just remember he is one of a billion people and speaks only for himself and his small following. And be wary of the quotations he uses, for they are often deliberately fabricated or distorted.

If Muslims really desired to conquer the world, don't you think it's strange that we've been living in peace with them for nearly a millennium and a half, except for those times when we attacked them (the Crusades, the European colonial movement and our invasion of Iraq)? Don't forget either that some of the countries the Bush administration calls allies are themselves Muslim – Egypt, Jordan, Kuwait, Saudi Arabia, etc.

You have nothing to fear from Islam. The al-Qaida movement is a tiny percentage of Muslims and wouldn't be the force it is except for the fact that the Bush administration has gone out of its way to make all of Osama bin Laden's propaganda become true.

Friday, May 04, 2007

The Fallacy Of "Hate Crime" Laws

The entire concept of a hate crime is a fallacy. A white man killing a black man should be treated just as a white man killing a white man or a black man killing a white man. The crime is murder, race is irrelevant. Hate crime legislation is just the opposite. It gives heavier punishments by discriminating in favor of certain minorities and creates a new classification for crime that makes no sense. Hate itself is not a crime. What's a crime is harming the person or property of another. The person's race or gender is irrelevant to it. To make the group-identity of people the basis of crime and punishment completely negates the concept of "blind justice" and "equality under the law".

We already have laws against murder. We already have laws against assault. We already have laws against arson. We already have laws against trespassing. ENFORCE THEM. There is no need to pass new laws with these special interest group classifications. It makes no sense to make new laws making it a special classification of crime based on what minority group the victim belongs to. A crime is a crime, no matter what group the victim belongs to; what group the victim belongs to is not what determines a crime, what determines a crime is what damage to person or property the victim suffered. Simply enforce the common crimal law and treat everyone as individuals, not based on group-identity.

Furthermore, due to the nonsensical views of contemporary liberalism, hate crime laws are starting to be applied to speech. In other words, speech that might offend any kind of minority group is being deemed as a "hate crime"; the crime of "hate speech". But it is very clear what it really is: it is free speech (more specifically, free association as defined/determined by private property rights), regaurdless of wether or not we agree with what the person is saying. It should be very clear what making this a "hate crime" is: censorship. It borders on if not embraces the idea of "thought crimes". And it isn't just that this censorship can be applied to racists and the like, it can easily be construed to censor much of what would be considered casual speech, or anything that a comedian can currently get away with. Such laws are written with such open-ended language that the possibilities for free association violations are endless.

Thursday, May 03, 2007

The Republican Debate



The Republican debates on MSNBC was definitely already rigged in favor of the main contenders (particularly McCaine, Guliani and Romney). Certain canidates were given more questions and longer times than others, and there was little to no room for actual one on one debate between the canidates, I.E. there were little follow-ups. Essentially, the media has already chosen the canidates for us, and that seems to be how our system works unfortunately.

As I expected, Ron Paul outshined his contenders in the debate. Every one of them accept for Ron Paul maintained support for the war in Iraq and advocated economic and military hostility towards Iran, while some of them took the meaningless and watered-down position in favor of "better management" (code language for continueing the war, just with a switch in personell) in Iraq. In short, most of them put forth their crackpot ideas as to how to micro-manage the war. There was a point when McCaine and Romney were war-mongering viciously.

The same old propaganda about "islamists" and "terrorists" was repeated by most canidates. Ron Paul stood as the one canidate who clearly held firm to a non-interentionist foreign policy, and this was the central theme of his. He made the important point that increased foreign intervention actually decreases defense. And he compared himself to a more respectable conservative such as Taft rather then the cliche of Ronald Reagen.

On taxes, a number of canidates, particularly Sam Brownback, supported the fairtax or some variation of it. Others concentrated on eliminating the alternative minimum tax, while others simply boasted about their records as governors. Ron Paul took a much firmer position: eliminate the income tax and even more importantly, eliminate the inflation tax and return to sound money. The importance of this was probably lost on most viewers, and this was the only mention of monetary policy in the entire debate.

On immigration, most contenders supported a national I.D. card. Ron Paul never got to put forth his full position on immigration. Sam Brownback surprisingly opposed the national I.D. card idea. Ron Paul came out strongly against it and emphasized the importance of protecting the personal privacy and secrecy of the citezens rather than the government. Paul emphasized avoiding the police state at home. He also mentioned the danger of regulating the internet, because of the important of free association.

There was some talk about stem cell research. Some on stage wanted the government to ban it, others wanted the government to subsidize it, particularly John McCaine and Guliani. Ron Paul was the only one that took a well-explained position on stem cell research: that we should neither prohibit or subsidize it. As is typical of Republican politics these days, some time was spent pontificating on faith. Fortunately, Paul didn't really involve himself in it. Most canidates pontificated on the ideal of a "strong man" executive, and of course the typical worshopping of Ronald Reagen.

The three most mainstream contenders leave us with a dire picture of possibilities. John McCaine is a pandering "centrist" who ultimately supports the military industrial complex. Rudy Guliani is like a social liberal (in every bad implication of the term; he was the one canidate who supports government funding for abortion) with a neoconservative "law and order" streak. Mitt Romney is a war-monger who oppurtunistically changed his positions on countless issues within the past few years. The rest of the people running are interventionists on foreign policy and not particularly economically libertarian. The only worthy person on stage was Ron Paul.

For the most part, this debate didn't cover too many issues of substance outside of the war on terrorism. Too much time was spent on abortion to allow for discussion of other pressing issues. The only good thing to come of this is that America got to see a tiny peek of Ron Paul, the anti-war canidate. The central question in the current climate really should be over foreign policy, and Paul was the only sane canidate on foreign policy (and everything else). While all other canidates proposed more government in one way or another, Ron Paul resisted government consistantly.

Penn & Teller: Bullshit! - Big Brother

Wednesday, May 02, 2007

Democracy and Islam: Are they compatable?

The short answer:
hat question has been asked in more papers and books than I care to think about. MOST authors and scholars would say no, not with American style "democracy" anyways...

We have three main forces at work:
  1. Liberalization (or westernization)
  2. Islamic civilization
  3. Democratic institutions
As far as I can tell with the fight between the global markets of the west and Islam effectually cut the legs out from under democratic institutions. The level of dialectic interaction between the forces of westernization and Islamic society have been inadvertently tyrannical. That relationship has been ranging from invisibly constraining consumerism to an all too palpable barbarism. Islamic society views the westernization as surrendering there judgment and abjure common willing, leaving public goods to private interests and subordination communities and their goods to individuals and their interests.

Islam has shown itself to be politically willing to make democracy an exercise of exclusion and resentment. Look at Iraq if you want a illustration. Even though it promotes community, it is usually at the expense of tolerance and mutuality and hence creates a world in which belonging is more important then empowerment and collective ends posted by charismatic leaders that the place of common grounds produced by democratic deliberation. Islam seems to be a culture of self-determination but its fatal flaw is it severs collective independence from the active liberty of individual citizens.

However, what we need to be most weary of in the Middle East conundrum is carefully crafting an image of democracy that does not decry of “exploitation. ” It was John Pocock who asked “whether the subordination of the sovereign community of citizens to the international operations of post-industrial market forces would create a disaster to a fledging democracy.” The answer is yes. Which is the situation in Iraq right now.

Most in Islamic society will not see the difference between totalitarian collectivism and Democratic search for common goods will want to dispute quasi-capitalist dogma. I think that attitude is based on historical interactions with the west.

As far as I can tell, we either have radical collectivism (islam) or radical individualism (westernization). Democracy will not survive either extremes.

Tuesday, May 01, 2007

Bank Collapse and Depression

The banking panics of the nineteenth century
and the Great Depression of the 1930s are widely viewed as failures of our economic
system. Moreover, such events are far from unique to U.S. monetary history. However, a fully satisfactory explanation for these events has not been provided. Although no fully satisfactory explanation for banking panics and depression has emerged, existing theory gives guidance in searching for one. One natural place to look for an explanation for failure of our economic system is known failures in the economic model of Walrasian equilibrium. Paul Samuelson introduced a failure to Walrasian equilibrium in his pure consumption-loans model. He showed that
with overlapping generations of finite-lived individuals in a model with no last period, the Walrasian equilibrium need not be Pareto optimal. Moreover, he introduced the concept of a negative net worth entity, the "social contrivance" of fiat (unbacked) money, the use of which makes everyone better off and yields Pareto optimality. We might, then, model recurrent banking panics and depression as recurrent and once-and-for-all collapse of a fiat money system, respectively. It can be demonstrated that such collapse of a fiat money system can generate reduced production and employment.

There are, however, several problems with modeling banking panics and depression as collapses of a fiat money system. First, one must determine what events precipitate a collapse of a fiat money system and why. The collapse of a negative net worth entity causes a net loss, and therefore is something economic agents seek to avoid. Second, the fiat money model has the property that with reinstitution of a fiat money system, the economy revives instantly and completely. The introduction of a negative net worth entity generates excess profits and i entered into at once. However, during the Great Depression deposit insurance and additional bank regulations were introduced, actions that might have reinstituted banks' role as providers of fiat money. Unfortunately, the economy remained depressed. Last, very generally, fiat money is a solution to the capital overaccumulation problem of the competitive economy. In models more elaborate than Samuelson's, fiat money has value because its existence keeps the economy from accumulating too much capital. This suggests that the collapse of a fiat money system causes a period of overaccumulation of capital. It seems wrong to treat the banking panics and Great Depression as periods of high demand for investment.

The above remarks suggest that one look for a model with the "social contrivance'' of a positive net worth entity that solves a capital underaccumulation problem. Cass and Yaari in an elaboration of Samuelson's model, briefly introduce just such a positive net worth entity.' The possibility of such an entity arises in a model of overlapping generations of finite-lived individuals with no first period. This entity has just the symmetric properties one would expect. Because it is a positive net worth entity, economic agents gain from its collapse, they lose from initiating it, and if constrained to reinstitute it following a collapse, they do so to the smallest extent possible. Lastly, collapse of the net worth entity causes a drop in the demand for investment.

All the above facts stem from a basic observation on the positive net worth entity. In Samuelson's model, given that otherwise there will be no fiat money in the future, it is Pareto improving to introduce fiat money and maintain it for all time. Symmetrically, in a model with the positive net worth entity, it is Pareto superior that there will have always been this entity than that it will have never existed. Now we turn to a simple model on the positive net worth "social contrivance." Naturally, to get simplicity one must trade off realism. Therefore we then turn to elaborations of the model that, hopefully, clarify its implications for the real world.