The Full Catastrophe (Empirical Q.E.D.)

This piece of news concerning the latest Greek protests against austerity measures provides a perfect illustration of my previous post. Heavily redistributionist statism, additionally fuelled by the creation of the "monetary commons" of the Eurozone, unsurprisingly degenerated into a war of all against all for government handouts. However, since every action has its opportunity cost, engaging one's time in the use of political means necessitates not engaging one's time in the use of economic means - in other words, the pursuit of redistributionist parasitism necessarily comes at the cost of abandoning economic production.

This, in turn, leads to the emergence of an inevitably unsustainable system of social relations, where instead of producing scarce goods for others, everybody tries to free ride on someone else's productive activities. Furthermore, since among the participants of such systems there are none who are without blame with respect to sustaining and nurturing them, when the unavoidable conflict finally takes a violent turn, the violence is expectedly directed at the nexus of the ongoing mutual parasitism, at Bastiat's "great fiction" - the state.

Like Rothbard, I am inclined to think that in such scenarios bankruptcy might actually be the most healthy outcome, capable of ultimately exposing the sustainability of redistributive statism for what it is - a dangerous fiction. The alternative - prolonged and even more intense draining of the monetary commons of the Euroland - can only further reinforce, solidify and possibly institutionalize the financial moral hazard, not only among the current near bankrupts, but also, and perhaps even more importantly, among those heading the same way, and those who, given proper incentives, might happily join in.

PS. The link at the beginning of this post (which is very typical in this regard) mentions the most violent among the protesters against governmental retrenchment as "anarchists". Could one think of a better proof of living in an Orwellian world?

Hobbesianism Turned on Its Head

The Hobbesian story can be summarized in the following equation: no territorial monopoly of force = nasty and brutish war of all against all in the territory in question. The problems with this assertion are too numerous and well-known to bear repetition here. However, I believe that a somewhat underappreciated point is that Hobbesianism is not only problematic in the sense that the above implication is generally dubious, but also, and perhaps most notably, in the sense that it is not its left-hand side, but its negation, that can be plausibly claimed to imply its right-hand side.

It is a relatively uncontroversial contention that monopolies of force can survive only for as long as their subjects ("citizens") obey them. And continued obedience cannot be treated as a given - any large-scale collective action problem is, admittedly, very difficult, but not impossible to overcome. Hence, it is practically necessary for the institutions in question to corrupt their subjects with promises of handouts, thus turning them into (at least semi-voluntary) clients. But since monopolies of force generate their revenues exclusively through coercive expropriation, they can satisfy their specific clients exclusively by expropriating their other clients (or those of their subjects who resist being clientelized), the result being that every member of "governmental" clienteles tries to live at the expense of every other such member. Admittedly, the scope of this "soft" war of all against all varies with the type of political regime (in a feudal system it may be largely restricted to the landowning classes, whereas in modern day social democracies it is virtually all-encompassing), but the conflict in question is nonetheless the defining feature of every form of statism.

Thus, it turns out that not only is the Hobbesian story highly implausible, but also that implementing the Hobbesian recipe for peace generates the very problem that it was supposed to counter. In other words, Bastiat ("the state is the great fictitious entity by which everyone seeks to live at the expense of everyone else") turns Hobbes on his head.

An Asymmetry Between Rothbard's Treatment of Positive and Negative Externalities

According to Rothbard, a positive externality is an economically unoperationalizable term, because by definition there can be no demonstrated market demand for the goods alleged to exhibit such externalities. However, he does concede that there exists a perfectly meaningful economic definition of negative externalities - i.e., the effects of transactions between A and B which physically interfere with the property rights of C. How can this conceptual asymmetry be explained? In my view, two things have to be taken into account in order to answer this question.

First, it has to be recalled that non-action with respect to someone else's assets that are alleged to create positive spillover effects can be given a number of equally plausible though mutually exclusive psychological interpretations (free-rider's enjoyment, indifference, dislike, etc.), but only one praxeological interpretation (a preference for non-payment over payment for the ostensible "good" under consideration). Likewise, non-action with respect to one's own assets can be psychologically interpreted in many different ways, but only one explanation makes praxeological sense in this context - namely, a preference for keeping the assets in question over trading them for something else, giving them away or disposing of them in any other manner.

Hence, it becomes visible that an action (payment or other form of voluntary acceptance) is required on the part of the putative beneficiary of a positive externality to prove that he is in fact one, but no action is required on the part of someone whose property is uninvitedly interfered with to classify any such interference as a negative externality. This, as I see it, is because the benefits derived from keeping one's property assets can be traced back to the preceding action of acquiring them (via a regression theorem of social interactions), but the benefits of being affected by positive externalities can be traced back to none of the preceding actions of the ostensible beneficiaries.