by Dr. Win Wenger, Professor Jan Narveson, and Frederick Mann.
Introduction
The publication "Mixed Economy: National and World Solution Suggestion" by Win Wenger, Ph.D. invited reader comments, which resulted in some debate on the Professors of Liberty email discussion list.
WENGER:
"We pressured Russia to cut the command strings in all its industries before getting competition set up in ANY one of them! Buyers had no alternative to turn to, whose availability would have held down a price surge. The result was one of history's worst episodes of hyperinflation and the wrecking of what remained of Russia's economy."
NARVESON:
But this is wrong. You cannot have hyperinflation merely from having a bunch of monopolies around. What you also need is irresponsible government control of the money-supply. In Russia, resort to the printing press was standard. That is what caused the hyperinflation, not monopoly.
WENGER:
That was a pretty good "merely." Each industry monopoly trippling its prices because people have no alternatives to turn to, in the first round....and then again because its own costs are raised by everyone else raising their prices accordingly, for the second and subsequent rounds..... after awhile, such a monopolies-driven inflation gets to be real noticeable. you aren't going to have that kind of situation going for long, with people starving in the streets, without a government, irresponsible or not, printing more money to try to keep some sort of economic production activity going. Certainly the money-printing made the inflation worse but was not the original or main cause of it. A respected economist claiming that monopoly pricing had nothing to do with it and only irresponsible government money printing caused the inflation, only makes my point about our economists over there wearing ideological blinders.
NARVESON:
You can't do this if the money isn't there, and if the printing presses aren't working overtime, it won't be. You seem not to appreciate that monopolies do not and cannot operate in a vacuum. When the price for item X is too high, the consumer does without and buys something else with his limited budget. In the case, which is certain in your scenario, that this is true of almost everybody, your monopolies are going to go out of business, or else lower their prices - they don't have any choice. But with government printing presses rolling, it's another matter. Hyperinflation is then virtually assured, depending on how enthusiastically they operate the presses.
What is needed to have a free economy is, well, freedom: that is to say, you don't need to do any from-above prevention of monopoly, but you DO need to have prevention of non-market means of maintaining monopolies (such as the Mafia to take care of your potential competitors,a widely-practiced method in Russia).
WENGER:
Where do you think we here would be without the Sherman Anti-Trust Act? Even within our so cruelly constrained system here, ENRON in california's energy market points to how a less constrained system would go. And how do you contain or prevent a Mafia without government - one of those indivisibility issues?
NARVESON:
Where we would be without anti-trust acts is, a lot better off. Consult any of the informed economic historians. Antimonopoly legislation is a fraud, so far as I can see, and it has NO basis in economic theory.
It should be pointed out that the definition of 'monopoly' is such that it is impossible to say, in general, that it isn't both everywhere and nowhere. Consider the corner store down the street from my house. Does it compete with the supermarket, which is about twice as far in the other direction? The corner store is open earlier and later, and you can get stuff in it without having to equip yourself with roller skates, and the owner is cute and awfully nice; and they charge a lot more than the supermarket. Well, the corner store has managed to survive against the extremely competitive pricing of the supermarket, and why? They have *something* that the supermarket hasn't got, and they alone have it. Hey, they're a "monopoly"!
Conversely, take any monopoly, so called. But unfortunately, it is in fact competing against ALL the other things that the consumer COULD spend his money on instead if he wanted to; and if the monopolist's prices are very high - which is the point of being a monopoly, afterall - then he will in fact spend it elsewhere.
If we try to make the definition of monopoly specific to a certain "kind" of goods, then the trouble is that all the people making different goods that could be substituted for the ones the monopolist sells are in a position to take business away from the monopolist.
WENGER:
True, the russian Mafia got off to a strong start under the dying communist government - but got much worse when we finished wrecking the russian economy and there seemed for a long several years to be nowhere else for people to turn to and survive. Multiple causes of the Mafia; multiple causes of the hyper-inflation; both however getting their greatest impetus from the errors our ideology-driven economists got the russian government to make.
NARVESON:
Facts needed on this one. What I'm saying is that you don't have free enterprise when firm X gets to compete with firm Y by killing off Y's CEOs etc. And Russia really fell down on THAT job, big time, to my knowledge.
This is not to say that monopolies are desirable. It is rather to say that IF monopolies are undesirable, it is BECAUSE there are better alternatives that someone WOULD create IF he is ALLOWED to. In Russia, this latter condition is what did not prevail.
WENGER:
"This latter condition did not prevail" - you just made my original point. And how long would that condition prevail here if we repealed Sherman Anti-Trust and like regulations. ---Or do you believe that most public utilities don't have declining long-run cost curves reflecting economies-to-scale, leaving no corners for competitors to survive in an unregulated market?
NARVESON:
It would prevail forever, so far as I can see. You appear not to understand monopolies or the economics of the market. See DAvid Friedman's analysis in his recent book 'Hidden Order.'
More general note on the so-called "PERFECTLY COMPETITIVE MARKET" and its dire effects on recent economics:
Economists are very, very fond of citing - to the point of making it into a mantra - the definition of "perfect competition", in which there are no transaction costs, no externalities, perfect consumer knowledge, and so many producers that it is impossible for anybody to unilaterally influence prices. THIS definition is what they employ in their "proofs" that a free market will maximize utility.
The definition is, of course, utterly inapplicable to any real-world economy. So IF you think that the ONLY way to maximize utility in a free market economy is to make it less free, viz. by having anti-trust laws and god knows what else, then this "definition" will enable the otherwise free-market enthusiast to plump for considerable intervention in the economy.
WENGER:
Yes, doesn't it. You've just acknowledged that a completely ungoverned free market can't exist in real life. Thank you for helping make my point that there cannot be a wholly free market, that some government in some form is required.
NARVESON:
I have done nothing of the sort. I don't understand how you could think that.
WENGER:
So i argue not for abolition of government, but a sensible scaling-down of government and the role of government, by changing emphasis to incentives and away from more overt forms of governing. The system won't be perfect, but a lot more workable than either what we have now or an abolition of government.
NARVESON:
What you're advocating IS what we have now, and it seems to me that it doesn't work. What works is the free-market component of what we have now. It's eroding, but what's left is doing very well - as usual.
WENGER:
You're going to have a power hierarchy in either case - in the one instance driven by "wall street greed,"
NARVESON:
What you call "Wall Street greed" is simply the "greed" of everyone who is trying to increase his income by getting into stocks. For Wall Street to be in power is for the people to be in power, so to speak; and the power they have is the only power they should have: the power to make anyone they like an offer, and to have it be effective only if the person to whom the offer is made voluntarily accepts it.
WENGER:
The historic altruism of Big Oil and the like; and those so-thoughtful executives at ENRON, with no recourse this side of violent revolution.
NARVESON:
I don't buy that either. There is of course a recourse on the matter of fraud; which Enron may well be guilty of (I don't know, in fact). Or anyway, there should be.
WENGER:
In the other case, at least some potential for democratic inputs which, though themselves less than perfect, not only allow for more recourse but which have to pay some attention, at least, to the general public good even if that is not the primary interest of the power brokers.
NARVESON:
You'll notice that the "democratic input" is there, big time. Also that the people who invested in Enron are losing their shirts, which is precisely what should happen in a free market.
The definition [to remind: we are talking here of the notion of a 'perfectly competitive market'] is crazy and also to use it for this purpose is, simply, wrong. The correct one to employ is this: a *perfectly free market* - one in which the particular externality which consists in the use of interpersonal force initiated against persons and their property, or of fraud (which in my view is a special case of interpersonal force anyway) is absent, either because the participants accept this as a moral restriction on their activities, or because people have somehow inaugurated effective devices for penalizing those who do offend against that constraint.
WENGER:
At risk of ad hominem, i'm afraid you've just again demonstrated my complaint about respected economists wearing ideological blinders. We never are going to see a perfect free market, especially as you've defined it. I've outlined what appears to be the only way we'll see a substantially freer market - otherwise chaos and hardship gives us back more government than we just got free of.
NARVESON:
Unfortunately, what you have responded to me with here isn't an argument, though evidently you think it is. All I did was to define the term 'perfectly free market' and note that there is nothing inherently impossible about this; on the other hand, there is something inherently impossible about the economists' classical notion of 'perfectly competitive'. To suppose that we can criticize the free market, and found legislation on the criticism, on the ground that it is not doing the impossible, is indeed to indulge in bad ideology.
...Given the above, then whether there will be a monopoly on anything depends on whether somebody is interested enough in getting into a competitive productive enterprise to set it up.And he will do that if it looks likely that he can make a profit in doing so.
WENGER:
Please! you're a professional economist. You know about long-term declining cost curves and economies-to-scale - and you know at least some economic history!
NARVESON:
I'm not a professional eonomist, but merely a philosopher who has paid considerable attention to economics. The stuff about long-term declining cost curves etc. is simply irrelevant to the above, not a criticism.
Note that one of the areas in which there is scope for market activity is in the area of transaction costs. It is the fact that these can be decreased in ways that can be bought and sold that is responsible, after all, for the very existence of banks.
WENGER:
Agreed. Government regulation has long since run amok. An incentive system such as we propose would reduce that cost enormously. An Alexandrian Gordian Knot, definitely will not.
NARVESON:
I'm not sure what the phrase about a 'gordion knot' refers to. Re the previous sentence, I have to point out that what I've said has nothing directly to do with the sort of incentives you're talking about. The incentives that operate in a market are simple: profit (more generally, maximized returns to the agent, be they from wages, rent, or profit).
The major area in which people have supposed government intervention to be necessary is regarding externalities, notably negative ones such as pollution. Our major battle, I suppose, is with those people....
WENGER:
I guess it is. I'd prefer to be getting the size and cost of government in the real world reduced, however....
NARVESON:
Who said otherwise??
Now consider Wenger's general thesis:
"What makes a market economy "good," far more efficient than government command could ever be at immediately making the detailed adjustments of a million-and-one changing conditions which keep most people and resources usefully engaged at their best or near-best uses, is the Directory service provided by freely changing prices and wages. When conditions are generally fairly consistent, and when not too much at a time is out of whack, people know pretty much what to expect and how to react, and the market is usually a far better answer than is authoritarian command.
When those conditions no longer prevail, in emergency or with multiple major difficulties under way, the pricing mechanism no longer is an effective guide. The Directory goes off its tracks. People and resources go unemployed, disruption spreads. Without intervention, the economy can actually collapse, so abjectly that Humpty-Dumpty can't be put back together again and no recovery is possible in the foreseeable future."
But which are "these conditions"?
WENGER:
Wars, epidemics, natural (and man-made) disasters; sudden major economic upsets....And all those distorting conditions which Adam Smith cited, besides. Even in "normal" times. The directory is good at what it does, over a range. It is not perfect; I would not sacrifice everything to the moloch of extending its "purity" for ideological reasons. The well-functioning directory afforded by (under most conditions) a (relatively) free market is a means to an end; it is not the ultimate goal to the exclusion of all other considerations.
NARVESON:
That's true by definition: a market is simply a meeting of diverse agents who may be able to gain from voluntary exchanges among themselves. What they exchange are goods, and it is the goods that are good - not, of course, the market itself. Similarly, money is, by definition, not an end in itself; it is, instead, a medium of exchange. Etc.
And I deny that the market is "moloch". On the contrary: guys with guns are moloch - guys like the IRS. The market is, basically, just people trying to get on.
The most important [condition] by far is security of life, especially from threats mounted by "competition" which happens to feel free to promote its interest by murder. Russia fell way, way down on this, in considerable part by not doing anything about its bloated and useless armed forces, which took to putting their weapons (those who had any) to more profitable uses, made more profitable by the fact that since they were getting paid in monopoly money instead of real money, they had a marked incentive as well as the means to turn to nasty ways of making a living.
WENGER:
What makes our corporate mafia, now somewhat marginalized amongst the many really good people who head corporations in our mixed system, in kind or principle any different from the russian mafia?
The answser is simple and obvious: no American corporation is able, without fear of legal consequences, to deal with its competitors by murder. Too many of them are able to deal with them by getting the government to legislate on their behalf, which is on the road, I agree, toward mafia rule, but doesn't actually get us there, yet anyway. But otherwise, sorry: ordinary businesses, operating within the rules of respecting people and their property, can only compete by offering better products and lower prices.
WENGER:
You find the same kinds of people everywhere - here, in our mixed system, people with high aims at least have a good chance. Get rid of government altogether and our own corporate Mafia would soon be controlling everything.
NARVESON:
Again, you use the word 'controlling' very loosely. You cannot control the consumer with an income to spend as he likes.
Wenger virtually accepts my point above when he goes on to say, "...[E]ven that most exemplary (relatively speaking!) of market economies, the United StateS economy, has ALWAYS had the good sense to lend its Directory a helping hand. Wars, depressions, other emergencies - fairly quickly we've responded to them by setting up structures, either outside the market place or regulations within the market place, to contain the worst effects and bring conditions back toward the point where normal pricing could once again bear a rational relationship to the greater good. ..."
WENGER:
Are you sure i wan't making my point instead with that? Some, perhaps most, of those extra-market interventions were in fact needed to bring conditions back toward where a market system and directory could once again function reasonably well.
NARVESON:
It's a little odd to think of wars as cases of unusual conditions needing to be got over before normal pricing can return. And there is room for debate about the widespread of use of price and wage controls in the US during WWII; the only thing there isn't room for debate about is that, however they did it, the Americans won; and right after the war, they very rapidly dismantled their military machine, with strikingly positive economic results. About as direct a contrast as you can imagine with the Russian situation in 1989...
WENGER:
Yes, including that we had competition in place in nearly all our industries......
NARVESON:
Competition is entirely natural; if you let people do as they please, short of dealing with their erstwhile competitors by force, then competition will of course spring up. The reason is obvious. The reason to want to be a monopoly is so you can charge above-market prices. But an above-market price is an invitation for someone else to set up shop and make money by charging less. Monopolies in a free market (as I defined it, NOT one with anti-trust legislation in place) will not, of course endure, and as you presumably are aware, all the charges of 'monopoly' about past U.S. companies have been shown to be baseless.
Wenger talks about "other" conditions without being very specific about them, but one guesses that he thinks that heavy anti-trust laws, careful federal regulation of banks, and so forth are part of the package.
WENGER:
You are correct. However, even these could be considerably lessened by a system employing the appropriate incentives.
NARVESON:
They can be thrown into the garbage where they belong, because a free-market economy HAS the only appropriate incentive there is, namely, the desire to do better on the part of people who are allowed to try to do so.
WENGER:
And I agree that in the instance of regulating banks and loan institutions, we've paid a more disastrously heavy price than most people know (which I wrote about in my little book on incentives).
NARVESON:
Wenger sets forth the general thesis, familiar (I trust) to all readers of Libprofs, that the market tends to undersupply public goods.
WENGER:
I guess that makes me a libprof, though absolutely no libprof thinks so.
"In cost externality situations, things tend to get done whose cost to society as a whole is greater than the benefits to society as a whole - often far greater.
"In benefit externality situations, things tend not to get done whose benefits to society would be greater - often far greater - than their cost would be, so that considerable well-being and positive opportunity are lost.
"In all three of these conditions (as well as the other conditions cited by Adam Smith), the Directory is off the track. Normal pricing mechanisms for prices and wages no longer direct people and resources toward their best uses, but away from them. What makes the free market system "good" no longer does so."
NARVESON:
It should be noted that a considerable part of the action here has to do with accumulative, small-scale negative externalities such as pollution, where the transaction costs of internalization are quite high. Of course, if the principle that the guy who is in the wrong has to PAY those transaction costs, maybe things would be a bit different. And if the public court systems through which you must go didn't add so hugely to those costs. And so on.
Wenger is aware that governments getting into these things can create costs as well, and maybe make things worse than they were before. (Examples: the FDA, the EPA, and most other government organizations..... - though whether Wenger would accept those as examples, I don't know!)
WENGER:
Fair examples which support our points as well as they do yours, FDA probably supporting yours a bit more. Just about every agency can supply considerable ammunition to either of our cases. Here's the real point: every piece of amunition FDA or other agencies makes for your case, makes more imperative what we propose for reducing government under a rational incentive system, since you're simply not able to get rid of government any other way that lasts.
NARVESON:
Whether we are able, in the end, to "get rid of government" is unclear but doesn't matter here. What matters here is whether we need the particular kind of "incentives" you advocate to do the specific things you want done. I say that we do not, noting that your incentives are the flip side of disincentives, provided by taxation.
However, consider this, from him: "Long-term situations and policy, however, are carefully kept under civilian control because, otherwise, outside the focus of a given emergency, for every situation such a command structure makes right it goes wrong in ten other situations, as we saw was the case with communism and as we see today in most surviving authoritarian countries."
Now, if you just delete the word 'authoritarian' from the last sentence, you get a more realistic view, I think. But Wenger thinks that *authoritarian* government, rather than, simply, government, is the problem, and he proposes:
"Long-term policy should be democratic, with everyone having an opportunity to make an input into it, having a legitimate chance to affect the outcome by virtue of the case they make."
What we ought to know by now is that democracy guarantees that bad solutions will stay in place for a long time, and worse ones will come into view every week or so. How could he think that command government by umpty-million incompetents is sure to be better than command government by a small committee of incompetents?
WENGER:
(1) My above comments on (a very imperfect, but at least slightly) democratic government with recourse, versus rule by a corporate Mafia.
NARVESON:
If what you call the "corporate mafia" is in fact not a mafia at all, but simply a large business which, let us suppose, is at a particular time in a "monopoly" position, then "rule by corporate mafia" is immensely preferable to rule by The People at the voting booth.
WENGER:
(2) Still the same case - reduce that problem by reducing government, which apparently can be done effectively only under a rational incentive system.
NARVESON:
As I say, the rational incentive system we have always with us.
WENGER:
Either way, you have people making decisions and taking actions which affect other people, sometimes unfairly. You'll never get entirely rid of that.
NARVESON:
Maybe but you can get very, very close.
WENGER:
Our best hope is a rational incentive system reducing government and the stakes of power, and providing recourse.
NARVESON:
We HAVE a "rational incentive system", namely the desire on the part of every person to have a better life than he has now, in respects in which it can be improved by interaction with others.
WENGER:
Basis of another discussion: my definition of democracxy is: people having a meaningful say in the decisions which affect them. I do not confuse that with voting under modern conditions.
NARVESON:
But redefining the word 'democracy' is no use. There isn't anything particularly difficult about the usual notion of democracy, which is political rule by the people, which entails rule by majority. (If you don't think it does, see assorted proofs of the matter; I summarize it, briefly, in Ch. 10 of my 'Respecting Persons in Theory and Practice' but I get it from others. Chapter and verse would require more minutes' search than I Want to devote to it just now, but it's quite straightforward.
On the other hand, trying to build "meaningful" use of one's vote into the definition is, alas, doomed to failure. If you have democracy, then you have everyone, regardless of capacity for "meaningfulness", getting into the political act on a basis of equality with everyone else. If what you meant by 'meaningful' is merely that it's potent, then of course democracy as ordinarily conceived is plenty meaningful.
WENGER:
I also point out that one of the major virtues of a free market system (however imperfect) is, in fact, that it is democratic.
NARVESON:
Not unless you change the meaning of 'democracy'.
WENGER:
Everyone's actions affect prices and wages and prevailing conditions, through "dollar votes."
NARVESON:
But dollar votes are not "votes". There is no political compulsion at the end of the line, which by definition means that dollars are not votes. A dollar spent is a bit of evidence that people will spend a dollar on that kind of thing under those conditions. What some entrepreneur will make of this is his business. Whatever he makes of it, though, he will not have the power to legislatE his conclusions - in stark contrast to a democracy as ordinarily so called.
WENGER:
Equalitarianism is a separate issue.
NARVESON:
Equalitartianism in general is, but democracy is by definition the equal general distribution of political power. Depart from one person one vote and you depart that much from democracy, and into something else. (Cf. for example John Stuart Mill's 'Considerations in Representative Government' in which he advocates giving plural votes to the intelligentsia....
WENGER:
Further point of possible discussion is Jeremy Bentham's Utilitarian Premise, that (informed--whoops!) individuals usually have a better idea of what's in their better interests than does some far-off ruler, so that, in at least that regard, their having an input into the matters which affect them tends toward the Greater Good.
NARVESON:
That's true on the market, but it's false in democracy, as you shouLD surely know.
WENGER:
Meanwhile, am I to understand that you think democracy is a very bad idea?
NARVESON:
Yes, unless it is highly constrained. In America it is somewhat constrained by the Bill of Rights. But of recent times, America has not constrained democracy's tendency toward electoral larceny.
WENGER:
"What leads the market mechanism astray in some types of situation, such as cost or benefit externalities, is that, in those instances, what's beneficial to the doer is less than beneficial to the larger community."
NARVESON:
This is, of course, correct. But if you put the "solution" into the "hands" of the larger community, you will certainly generate a large bundle of further negative externalities at the hands of the elected committee that the many voter-incompetents put in place to deal with the situation.
Have a look at Wenger's proposals about pollution:
"1.General tax on all classes of economic activities which result in pollution, in proportion to the seriousness of the pollution. In order for there to be more carrot than stick.
2.Those firms are exempted from that tax where they prove - with the burden of proof on the firm - that in this particular instance they in fact have prevented or stopped the pollution. With the burden of proof on the firm, the firm will be bringing the evidence to the government, rather than government having to go police the polluters. Some policing in any case, but a very different situation and much less cost to implement.
3.Special incentives in form of tax break to firms to invest in the means to limit or end their pollution. "Sunset clause:" provide these tax breaks on a sliding scale - more if they do it now, somewhat less if they do it soon, considerably less if they do it eventually. This arrangement provides thereby the additional incentive to make that investment sooner rather than later."
Now, all of this ASSUMES that we know what is pollution and what isn't. But pollution isn't like that. It's a matter of degree...
WENGER:
In proportion to the seriousness of the problem," as said just above.
NARVESON:
That raises the question but it does not solve it.
WENGER:
We do have at least some science on the matters these days.
NARVESON:
Alas, no. Science tells us all the basic things except what to make of them. It's the people affected who need to do the latter. Now, if each person could respond to negative effects on himself by charging the polluter on a market basis, that would be cool. Democracy, howeover, distorts this a lot. As you know, the tendency in a democracy is for the squeakiest wheel to get the grease - at the expense of he silent majority.
WENGER:
We would, however, need to establish a set of groundrules by which that science could be applied in due process.
NARVESON:
Yup. BTW, one good thing has happened lately - potentially the most important thing that ever happened in American legislative halls: John Graham, formerly Director of Harvard Centre for Risk Analysis. John has managed, somehow, to tack onto some bill or other a requirement that federal moneys to be spent on anything involving risk won't be spendable on it unless it meets some rudimentary criteria of responsibility regarding the science pertinent to the matter. Getting such legislation to actually work is a problem, but if John Graham, who has been given a pretty hefty position in the EPA, is allowed to do his thing, we should have very good results very soon.
...[A]nd generally speaking small amounts of it [pollution], which are *very* expensive to avoid, are essentially harmless: anybody would prefer that amount of pollution plus the low-priced goods or services which introducing that much pollution, given that productive technology, would enable, to paying huge sums of money for the services with zero production of the pollution.
WENGER:
In a proportionate incentive system - and, your point here well-taken - some sort of threshhold should be set to avoid unnecessary costs.
NARVESON:
Yes. What's really hard is to get that threshold right.
It's only when the pollution gets considerable that we have problems, and then the trouble is that different people respond VERY differently.
WENGER:
Then we come down to a rational (and proportionate) incentive system, plus a system of tort law such as libertarians propose as a basis, with presumably a modicum of science serving in both.
NARVESON:
Now the question is whether the system you propose will have those properties. I am dubious, as will be obvious. But it's early days.
[Example: cigarette smoke, prolonged exposure to which promotes cancer in many people, but not in others, people like Winston Churchill, who died at 88 or so having smoked several cigars per day all his adult life; etc.]
The Wengerian proposal will, we may be absolutely certain, result in setting the thresholds way too low, making the tax way too high, and keeping many many officials in cushy jobs while making life more expensive without providing any real benefits for most of us."
WENGER:
Undoubtedly. Actually, such extreme outcomes would result from failure to take other factors into account besides those permitted to vision by ideology. We've done enough of that - let's try for the practical. Thank you very much for writing, and helping to define the case.
NARVESON:
You're welcome.
The question is, though, why space exploration should get this benefit and not all of the other harmless activities in which we all (almost all?) engage daily?
WENGER:
Maybe ocean development as well. Maybe not. Our mixed system isn't perfect, nor is any society today that's identified more or less with democracy. The advance of electromedia such as this net we're using, offers some hope - after all, it was the advent of fax machines that defeated that last communist coup in the falling soviet union. Better information - if people pay better attention to it - can make better decisions. Collective decisions are necessarily cumbersome and costly - but frequently on matters which would be far more costly without them in some form. I propose to change the form by using incentives instead of more overt government means, wherever possible. Once we reduce the stakes of power, we'll also start getting better decisions. I prefer individual decisions and initiative wherever possible - but seek to extend the range of conditions for which such individual decisions, initiative and actions are appropriate and feasible - not by just deciding that, in all cases, individual is good and collective bad and so abolish government.
NARVESON:
I myself benefit appreciably from the government's preference for culture: I get sizable tax deductions for my contributions to various classical music-producing organizations. Also for contributions to assorted charities and to my own university and some others, etc. But you can't have this kind of "incentives" (which they are, to be sure) except against a background of oppressive taxation of everything else. And much as I love music, I do not think that governments are justified in taxing other people in order to supply it to people like myself, even though, of course, I and my music-loving friends are CLEARLY the BEST PEOPLE, right?...
WENGER:
(I love classical music myself and even write some.) This example opens up discussion of need of public mass transit, or at least of a roadway system with eminent public domain, to make getting to concerts and the creation of music possible in the first place, together with the vast majority of other ecopnomic activities.
NARVESON:
There is a good deal of discussion and analysis devoted to things like this, but basically the current system isn't so bad, I have to say. It isn't great, certainly, and it is...
WENGER:
We'd be pretty bad off if our society and culture were devoid of the arts, to say nothing of those other economic activities. Your real point here is that (nominally) democratic government is unqualified to make decisions which set or affect general public policy. You are correct in that. But the corporate Mafia which would result (if total collapse didn't happen first) from the abolition of government, would be considerably less qualified still. Reducing government within a rational system of incentives would reduce the degree of error. I don't pretend it would abolish error altogether. Right now, no other or practical system is in sight for reducing that error. I propose setting aside your goal of abolishing government, and that we get together to set about reducing that error and cost in a realistic, practical way.
MANN:
I suspect that Wenger doesn't realize that "corporations" are "government creatures." In the absence of government, there wouldn't be "corporations" as we now have. There would of course be business enterprises and "companies," but they couldn't be "corporations" ("government charters").
It may be worthwhile to distinguish between individualist and collectivist thinking, and to analyze in terms of individual actors.
Some individuals (who are the "we" Wenger refers to?) presumably masquerading as so-called "US-govt officials" sent "incentive messages" to certain individuals in another part of the world ("Russia"). It's likely that the senders of the messages suggested benefits (incentives?) to the recipients. Most likely, the senders practiced some kind of "Wenger incentivism" (Though Wenger himself, I imagine, would have sent different "incentive messages." But would anyone have paid any attention to them?)
For years, individuals in "Russia" had been dumbed down and impoverished by tyrants who constantly sent their victims "incentive messages" -- obey or die!
When new political tyrants stopped sending certain "incentive messages," many dumbfounded victims didn't know what to do. Some economic tyrants (monopolists) raised prices and others printed more fiat currency than previously. (Certain political tyrants had an effective monopoly on the printing of "official money.")
Some individuals are apt to form themselves into groups called "Mafia," "Government," "Enron," etc. Such groups are usually organized along hierarchies, with people at the top constantly sending "incentive messages" to those lower down the hierarchies. The "top alpha apes" in some of the groups (depending on how many guns the members of the groups command) may claim "jurisdiction" (so-called) over members of other groups. So we get the phenomenon of alpha apes in one group sending "incentive messages" to members of other groups.
"Incentives" can be strong or weak: Do such and such, or we'll shoot you; or we'll pay you a "bonus"; whatever...
Dumbed-down idiots listen to the "incentives" of "experts-from-afar" at their own peril! (If Wenger is so clever, why didn't he tell the idiots what to do with his "superior system of rational incentives?")
Wenger seems to believe that in the absence of tyrants with "incentive guns" telling their idiot-subjects what to do, they won't be able to build dams, canals, etc. and operate them profitably. Given that the poor idiot-subjects have suffered hundreds of years of brainwashing, I sympathize with Wenger's view. What can be expected about the understanding of people who've never experienced freedom in certain areas of their lives?
WENGER:
Thank you for helping make my point that there cannot be a wholly free market, that some government in some form is required.
MANN:
A different point could be considered. As long as there's a multitude of dumbed-down idiot-subjects, there will always be groups of tyrants (masquerading as "government," "mafia," etc.) who interfere in the marketplace with "incentives" of all kinds. This reminds me of Jeremy Bentham:
"Behold here one of the artifices of lawyers. They refuse to administer justice to you unless you join with them in their fictions; and then their cry is, see how necessary fiction is to justice! Necessary indeed; but too necessary; but how came it so, and who made it so?
As well might the father of a family make it a rule never to let his children have their breakfast till they had uttered, each of them, a certain number of lies, curses, and profane oaths; and then exclaim, "You see, my dear children, how necessary, lying, cursing, and swearing are to human sustenance!" -- 'Bentham's Theory of Fictions'
Maybe Wenger believes that if tyrants call themselves "government," then these tyrants by doing so acquire "magical powers" to perform all kinds of miracles that "ordinary idiots" are incapable of. Methinks careful observation of politicians and bureaucrats might lead to a tentative hypothesis of fecal alchemy: If politicians and bureaucrats touch anything, it's more likely to turn into shit than not!
When Wenger says that his way appears to be the "only way," it reeks of delusion to me. I suspect that if you analyze Wenger's political and economic "solutions" in terms of the criteria for solutions I propose -- see "What Constitutes a Solution" -- you might find them to be nonsolutions... "dead on arrival."
WENGER:
...rational system of incentives...
MANN:
Of course, Wenger is so clever that he has all the real-time data of all the relevant factors in his head, and can do all the necessary computations, so he can persuade all the idiots in the world to do what's best for them, in accordance with his "rational system of incentives!" See also #TL07C: Wenger Debate #1.
WENGER:
Frederick - I had hoped for arguments from you which I could publish. Even given that we are using the term "incentive" in somewhat different ways, if you take a look at http://www.winwenger.com you will see that we are pursuing a certain degree of cogency and elegance and lack of unnecessary invective which makes it difficult to publish there what you've [written above]. Could we try again? It'd be neat to have your perspective represented in the published debate.
I don't believe I've offered to wave any sweeping magic wands here. Getting some of these considerations a little closer into mainstream public view is part of my strategy for eventually improving somewhat the situation in which we are embedded. In the topical focus of this debate, I've offered what APPEARS to be the only practical and lasting way of effectively reducing government, but I'm certainly open to looking at - and even promoting, if I can see it would do the job as well - any other practical, meaningful and long-term effective way that leaves us with a working, human, civilization.
I'm glad you've read Jeremy Bentham. I dare say not one person in ten thousand in this country has, for all his pivotal role in the formation of this country and of the other western "democracies."
MANN:
Thanks for the offer to publish my perspectives! Here goes:
PERSPECTIVES FROM FREDERICK MANN
Solutions and Nonsolutions
Before discussing particular proposed solutions, it may be worth examining what constitutes a solution and what doesn't. For example, suppose I propose some "solution" to the "problem of third-world hunger." Suppose my "solution" requires that certain politicians and bureaucrats do what I propose to solve the problem. Suppose further that I have no practical means to get said politicians and bureaucrats to read and consider my proposal (never mind implement it). I contend that under these circumstances, my proposal (whatever its nature) is a nonsolution. See "What Constitutes a Solution."
Government and Free Market
If we discuss "government" and "free market," it may be worth thinking carefully about what we include under each category.
For the purposes of this article, I define "government" as an agency of coercion. In other words, the essential characteristic that identifies "government" is coercion. See "Why You Must Recognize and Understand Coercion" and "#TL07B: The Nature of Government."
To me, the "free market" is characterized by three essential qualities:
1. Private ownership of property;
2. Voluntary exchange (absence of coercion);
3. Honoring contracts, entered into voluntarily.
Where Do Corporations Fit In?
The next issue to address is whether "corporations" are part of "government," part of the "free market," or whether they overlap or span the two categories. A "corporation" has a government-issued "licence" that often protects it from competion by the "unlicenced." Corporations also enjoy "limited liability." In other words, corporations enjoy "coercive advantages" such as:
1. A degree of coercively-imposed exclusivity in engaging in certain commercial activities;
2. Limited liability;
3. Coercively-imposed import quotas and tariffs;
4. Other "favors" such as "subsidies" in return for "campaign contributions" and other forms of bribes;
5. Government contracts paid for with coercively-collected taxes;
6. Government-legislated "pollution limits" that allow corporations to pollute "up to a point";
7. Coercively-imposed patent protection.
When corporations collect taxes from their employees, they could be regarded as government agencies in that respect. Of course, corporations also manifest some free-market characteristics.
To the degree that government officials are "owned" by corporations -- for example, one could argue that George Bush and Dick Cheney are "owned by BIG Oil" -- government can be regarded as a coercive agency or an "arm" of corporations.
So it may be an error to regard corporations as part of the free market. It's more accurate to think of them as "hybrid creatures" having some government characteristics as well as some free-market characteristics. See also "Is the Private Sector Really Part of the Public Sector?"
Monopolies
Given the above, it's extremely unlikely, if at all possible, for consequential harmful monopolies to occur in the free market. I doubt that anyone can provide an example of a consequential harmful monopoly that has ever occurred in the free market.
Is "Effective Government" Possible?
1. Individual human beings are volitional. We have power of choice. Through our brains, we essentially control the energy that animates our bodies. If someone points a gun at me and tells me to lift my finger, it's still my decision that causes my finger to lift or not.
1a. The notion that we can be "externally controlled" is doubtful. It's only because most people have been brainwashed into believing and obeying "coercive masters" that the apparency of "external control" is created in some people's minds. Check out William Glasser's "Choice Theory."
2. From cybernetics (the science of control and feedback systems) we learn that in many cases a controlling process has to be around 1,000 - 10,000 times faster than a controlled process. Consider, for example, a steel-making oven controlled by a computer. The "significant time frame" of the oven is about five minutes. If the oven starts overheating, corrective action typically has to be taken within five minutes to prevent permanent damage to the oven.
In order for the computer to take corrective action within five minutes, it typically has to perform of the order of 100 actions or calculations per second. The "significant time frame" of the computer has to be around one-hundredth of a second. In addition, the computer must be able to "sense" the temperature of the oven, detect changes that require intervention, and transmit signals to the oven's heating mechanism for corrective action. (In this example, the controlling process is about 30,000 times faster than the controlled process.)
2a. Consider driving a car. Your brain and senses constitute the controlling process. The car is the controlled process. If the car starts veering off the road, or some other eventuality requires corrective action, you typically need to do something within a second to prevent an "accident" or disaster. Therefore, the "significant time frame" of the car is around one second, maybe less.
In order for your brain to be fast enough to signal your muscles to take the exact and precise corrective actions necessary, within a second, it probably has to perform actions and calculations at the rate of at least 1,000 per second. It may have to perform parallel processing to achieve this. A strong case can be made that the brain as controlling process requires a "significant time frame" 1,000 times or more faster than that of the car being controlled.
2b. There are certain "dumb" control processes such as the governer of a steam engine. The governor consists of "flaps" that rotate above openings from which steam can escape. As the engine speeds up, centrifugal force raises the flaps, enlarging the openings, enabling more steam to escape, slowing down the engine. The governer establishes and maintains the maximum speed of the steam engine.
Another example of a dumb control process is the thermostat that turns the air-conditioning system on an off.
2c. Considering these cybernetic factors, you could conclude that, in order for "effective government control" to be possible:
(i) Government agents would have to have extremely fast brains -- at least 1,000 times faster than the brains of their subjects;
(ii) The "controlled" subjects would have to provide the government agents with all the information necessary for "external control" in real time (or the government agents would have to be omniscient);
(iii) The "controlled" subjects would have to have extremely slow brains -- at least 1,000 times slower than the brains of their "masters";
(iv) The "controlled" subjects would have to be brainwashed into belief and obedience, that is, further "dumbed down" into dronehood;
(v) The "controlled" subjects would have to be subject to control by dumb control processes.
2d. Many "controlled" companies use computers. From a cybernetic perspective, would government computers, to be effective "controllers," have to be 1,000 times faster than company computers, with real-time access to all the information in all the company computers?
What About "Wenger Incentives?"
Individual human beings have their own "incentive systems" built into their genes. In terms of Glasser's "Choice Theory," the basic incentives are "survival, love and belonging, power, freedom and fun."
What would be the requirements for Dr. Wenger (or any group of government officials) to create a "rational incentive system" to override and nullify built-in individual incentives (even if only in those respects Dr. Wenger et al, in their wisdom, deem necessary)?
1. Would they have to be omniscient with access to all the information in all the brains of their "subjects?"
2. Would their brains have to be at least 1,000 times faster than those of their "subjects?"
3. Would they have to dumb down into dronehood their subjects so they couldn't think for themselves?
4. Would they need computers at least 1,000 times faster than the computers of their "subjects?"
5. Would their computers need real-time access to all the information in all the computers of their "subjects?"
In terms of William Glasser's "Choice Theory," do "Wenger Incentives" fit under "Seven Deadly Habits" #7: "Bribing or rewarding to control?" See also 'Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes' by Alfie Kohn.
Do "Wenger incentives" represent an extreme in arrogance, unworkability, and absurdity?
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It remains to be seen how much of the above (if anything) Dr. Wenger publishes.
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