History of an Idea
(posted by Roderick T. Long)
Or, How An Argument Against the Workability of Authoritarian Socialism Became An Argument Against the Workability of Authoritarian Capitalism
In 1920, Ludwig von Mises published an argument against the workability of “socialism” (by which he meant state ownership of the means of production), an argument subsequently elaborated by himself and his student Friedrich Hayek.
The idea in a nutshell: the value of a producers’ good depends on the value of the consumers’ goods to which it contributes. Hence in deciding among alternative production methods, the most efficient choice is the one that economises on those producers’ goods that are needed for the most highly valued sonsumer’s goods.
But there’s a difference between technical efficiency and economic efficiency. (The following way of explaining the difference is indebted to David Ramsay Steele’s From Marx to Mises.)
Suppose we’re comparing two ways of making widgets; method A uses three grams of rubber per widget produced while method B uses four grams of rubber per widget produced (with everything else being the same). In that case method A is clearly more efficient than method B; that’s a case of technical efficiency, because we can figure out which is more efficient just by looking at quantities expended without concerning ourselves with any economic concepts like demand.
But now compare method C, which uses three grams of rubber and four grams of steel per widget, with method D, which uses four grams of rubber and three of steel (with all else remaining the same). In this case neither C nor D is more technically efficient than the other. To figure out which is more economically efficient, we have to figure out the comparative value of rubber vs. steel – i.e., which forgoes a more highly demanded alternative use, a gram of steel or a gram of rubber? As per Mises and Hayek, that’s something there’s no clear way to figure out except through market competition and a price system, whereby consumer valuations of first-order goods get translated, by means of prices, into varying demand for their factors of production (as reflected in, say, a higher price for steel than for rubber, thus prompting producers to economise on steel). State ownership of the means of production means no market in, and thus no prices for, producers’ goods, and so no way to transmit this information.
But why couldn’t a state-socialist central planner have access to this information? Well, first, most of the relevant information about preferences is local, inarticulate, and constantly changing; it can be expressed through the actual consumer choices that embody it, but there’s no easy way to collect it otherwise. (This is the aspect of the problem stressed by Hayek – who also included other kinds of local, inarticulate, and constantly changing information – besides that concerning preferences – in his focus.) Second, even if you could get this information, it would all be in the form of ordinal rankings, and without translation into cardinal prices there’s no way to combine the ordinal rankings of different people. (This is the aspect of the problem stressed by Mises.) Finally, even if you could get the information into cardinal form, in order to use it to plan the economy you’d have to solve millions of simultaneous equations at rapid speed. (Critics of Mises and Hayek often write as though this third problem is supposed to be the main problem – and thus have supposed, for example, that fast enough computers could substitute for the price system – but from the Mises-Hayek perspective it’s a relatively minor afterthought.)
If central planning is as hopeless an endeavour as the calculation argument claims, then why haven’t state-socialist regimes like the Soviet Union been even less successful than their actual record (which, while lousy, was not as completely chaotic as one might expect the Mises-Hayek argument to imply)? The reply is that the Soviet state, like similar regimes, was never completely insulated from the price system, since it had access to international prices (to say nothing of its own internal black market). Hence the information transmission mechanism, while seriously hampered, was able to function to some extent. (Most forms of governmental intervention merely distort the price system rather than suppressing it entirely. Of course the effects of these distortions can be serious enough – as when, per the Austrian theory of the business cycle, state manipulation of the money supply artificially lowers interest rates, sending investors the signal that consumers are more willing to defer consumption than they actually are, thereby directing resources into longer-term projects (boom!) that prove unsustainable (bust!), as in 1929 – or 2008. But the application of Austrian price theory to the current financial crisis is a story for my next post.)
The Mises-Hayek account of the limits of state centralisation was subsequently extended, by Mises’s student Murray Rothbard, to cover the limits of private cartelisation as well. In his 1962 work Man, Economy, and State (see especially here and here):
In order to calculate the profits and losses of each branch, a firm must be able to refer its internal operations to external markets for each of the various factors and intermediate products. When any of these external markets disappears, because all are absorbed within the province of a single firm, calculability disappears, and there is no way for the firm rationally to allocate factors to that specific area. The more these limits are encroached upon, the greater and greater will be the sphere of irrationality, and the more difficult it will be to avoid losses. …
[I]f there were no market for a product, and all of its exchanges were internal, there would be no way for a firm or for anyone else to determine a price for the good. A firm can estimate an implicit price when an external market exists; but when a market is absent, the good can have no price, whether implicit or explicit. Any figure could be only an arbitrary symbol. Not being able to calculate a price, the firm could not rationally allocate factors and resources from one stage to another. … For every capital good, there must be a definite market in which firms buy and sell that good. It is obvious that this economic law sets a definite maximum to the relative size of any particular firm on the free market. Because of this law, firms cannot merge or cartelize for complete vertical integration of stages or products. Because of this law, there can never be One Big Cartel over the whole economy or mergers until One Big Firm owns all the productive assets in the economy. The force of this law multiplies as the area of the economy increases and as islands of noncalculable chaos swell to the proportions of masses and continents. As the area of incalculability increases, the degrees of irrationality, misallocation, loss, impoverishment, etc., become greater. Under one owner or one cartel for the whole productive system, there would be no possible areas of calculation at all, and therefore complete economic chaos would prevail.
Everyone knows about economies of scale; after all, that’s why we have firms in the first place. What Rothbard’s analysis shows is that there are also diseconomies of scale, and that these grow more severe as vertical integration increases.
What happens when a firm grows so large, its internal operations so insulated from the price system, that the diseconomies of scale begin to outweigh the economies? Well, that depends on the institutional context. In a free market, if the firm doesn’t catch wise and start scaling back, it will grow increasingly inefficient and so will lose customers to competitors; markets thus serve as an automatic check on the size of the firm.
But what if friendly politicians rig the game so that favoured companies can reap the benefits associated with economies of scale while socialising the costs associated with diseconomies of scale? Then we might just possibly end up with an economy dominated by those bloated, bureaucratic, hierarchical corporate behemoths we all know and love. (For some of the ways that state intervention contributes to the Dilbertesque nature of today’s business world, see Kevin Carson’s article “Economic Calculation in the Corporate Commonwealth” – and for more detail, his online books Studies in Mutualist Political Economy and the still-in-progress Studies in the Anarchist Theory of Organizational Behavior.)
The good news, then, is that the unlovely features of the economy that often get blamed on the free market (or on something called “capitalism,” which means either the free market, or plutocracy, or somehow magically both) are in fact the product of government intervention. We can embrace the free market without embracing big business.
But it’s not just opponents of the free market that get markets and business interests mixed up. All too many libertarians still rush to defend giant corporations like Microsoft and Wal-Mart (two firms whose whole business model in fact depends heavily on government intervention – via, e.g., IP protectionism for Microsoft, eminent domain plus socialised transportation costs for Wal-Mart, and general suppression of competition from the less affluent for both) as though such a defense were part and parcel of a commitment to markets. As libertarians we can hardly complain when we’re accused of being apologists for corporate plutocracy, so long as we’re actually contributing to that perception ourselves by allowing ourselves to lose track of the basic facts about the price system that we of all people should remember.
So long as the confusion between free markets and plutocracy persist – so long as libertarians allow their laudable attraction to free markets to fool them into defending plutocracy, and so long as those on the left allow their laudable opposition to plutocracy to fool them into opposing free markets – neither libertarians nor the left will achieve their goals, and the state-corporate partnership will continue to dominate the political scene.
That’s why we need a left-libertarian alliance.
Next time: how government caused the current financial crisis and why government cannot cure it.
October 3rd, 2008 at 12:49 am
Brilliant again, Roderick! And thanks for the links.
As I argue in the article you link, I think Rothbard’s application of the calculation argument to the corporation was extremely conservative.
For one thing, he seemed to assume that, even under state capitalism, getting too big and integrated to have access to outside market data for one’s inputs was — if not an entirely theoretical possibility — at most a problem for a few outlying firms. I think he neglected the question of how many intermediate goods involved in creating complex manufactured goods are product-specific, and thus have no reference to an outside market for pricing. Back in the ’50s, an article on transfer pricing (whose author I’m too lazy to look up) presented data that the vast majority of intermediate goods in the auto industry were product-specific rather than generic, and that transfer prices were estimated on a cost-plus basis from the lowest-order component goods for which a price existed in the outside market. If the link to outside prices were too tenuous, some advocates of “market-based management” propose simply setting transfer prices by trial and error, and then adjusting them in response to experience — IOW, exactly what Lange proposed and Mises scoffed at.
If Rothbard’s stated standard is applied, then most large manufacturing corporations are islands of calculational chaos, or have at best extremely indirect recourse to market data for most of their intermediate goods.
In addition, Rothbard believed it didn’t matter that much whether the outside market prices reflected spot conditions of supply and demand different from those prevailing inside the firm. The fact that prices existed at all was sufficient; they didn’t have to be very “thick” in the information they conveyed. But this situation is directly analogous to the state socialist expedient Mises discussed, of recourse to the market prices in some other country. If GM can operate just fine based on imperfectly relevant outside prices, then the USSR ought to have operated just fine based on American prices. But somehow I don’t think Mises would have been willing to concede that such far-removed prices were good enough.
October 3rd, 2008 at 1:21 am
P.S. Your observation about government insulating corporations from the competitive ill effects of diseconomies of scale suggests the answer to Stephan Kinsella’s earlier question–i.e., how large corporations are able to function, if they are de facto branches of the state, without being crippled by calculational chaos.
The answer, of source, is that being “crippled” is relative. The old economy of the USSR was able to function, in the sense that it created use-value. State industry manufactured refrigerators, tractors, etc., and people bought them (or at least a considerable portion of them) because they were, after all, better than nothing. They cooled food, or hauled farm machinery, after a fashion. The problem is that nobody knew if they were the best possible use of the inputs that were consumed creating them, or even if they were a net loss of value compared to the resources used up to make them.
The large corporation, similarly, allocates capital to different more or less productive activities, and designed products that are consumed because they’re better than nothing. But the corporation has little idea whether the allocation of capital was to its most efficient use, or whether the product design was the best use of available resources. The prices of its production inputs are heavily distorted by subsidies, and likewise the prices of its products, its internal pricing system is at best tangentially related to any outside market, the skimming off of capital to support management self-dealing and consumption on the job is a “feature” of corporate life shared by all the major firms in the industry and therefore carries no competitive penalty, and the ability to enter the market and offer competing products is severely constrained.
In short, like the Soviet economy (if to a lesser degree), the American corporate economy works better than nothing, but we have no way of knowing just how badly it functions compared to a free market.
October 3rd, 2008 at 8:05 am
The irony is that there is indeed a systematic way for centrally planned economies to obtain the necessary information without markets and their prices, and the USSR actually used it. It involves having stocks of things around at each stage, then observing whether there is a tendency for stocks to grow or shrink. That tendency, considered as an exponential growth or a time to run out, gives comparatives to let you prioritise; basically it aims at homeostasis for each accumulation point, interpreted as a dynamic feedback adjustment to previous values of input controls rather than a simple determination of new controls based on stock levels. Each local control just handles a manageable part of the calculation problem, and it’s still a distributed calculation system.
There are at least two catches, and possibly a third if you count the last as distinct from the first:-
- You need tied up stocks sitting around, which means more working capital.
- You can only adjust an existing system “easily” this way; it is hard to introduce new products or new value adding paths (which can be thought of as new intermediate products).
- When and where levels are driven to zero or near zero, you get very clumsy information - poor signal - since all you really know is that there is a shortage and bottleneck there; you don’t have quantitative estimates of how serious it is, that would be provided by market prices pooling many individual estimates or by the time to run out information you get when stocks are still there. Of course, this is the situation when you start a planned system, and it is endemic/chronic unless and until you pull clear - which is that much harder because of the cost of the stocks.
To use a loose analogy, this is how homeostasis works within a living organism. No prices, but lots of redundancy.
As for solving the simultaneous equations - that’s near trivial, because it’s a special case where you can use a trick. You are actually dealing with the same problem over and over again, with incremental changes - a combination of trends and cyclical changes. You are basically looking to invert matrices - Leontiev Matrices - but you already have all the previous inverses to hand when you get to each new one. It’s quite practical to use a variant of Newton’s Algorithm to do it, even by hand and even though that needs a first estimate that is “close”, because you can just extrapolate the previous inverses to get one. When you start, of course, you have the historical data from before the planned approach came in.
October 3rd, 2008 at 10:45 pm
Bryan Caplan argues that calculation didn’t really matter for the USSR:
http://econlog.econlib.org//archives/2006/03/the_socialist_c.html
Eric Crampton argues that inability to calculate actually IMPROVED things there:
http://econlog.econlib.org//archives/2006/07/second_best_and.html
October 4th, 2008 at 6:08 am
Did you know if you strike Bryan Caplan in his knee with a rubber mallet he says something the opposite of what some Austrian economist said?
October 4th, 2008 at 6:25 am
Its eloquently written, but I have to complain about the sweeping conclusion. One which is not fully supported by the initial explanation of what limits company size in absence of government intervention. You make an argument that applies well to manufacturing companies but then go on to cite 2 harmfully oversized companies which are not involved in manufacturing.
Neither microsoft nor walmart are in manufacturing. IP protection is a completely different argument, production of IP is a pathalogical case (marginal cost=0) and whether it is a good thing or not is a different discussion but there are arguments for both sides. In this case given that IP protection exists a compensating anti-trust regulation should be enforced. Though it is clearly not in the interests of the united states as in microsoft it has a strong international monopoly that is good for the national balance sheet.
Actually consumer goods manufacturing companies are the ones which are most subject to market forces and generally they do not make super normal profits. Are they made bigger by government intervention? I am not convinced. Government intervention in manufacturing does not have a happy history.
It may not make for a persuasive style hedging everything with previsos, but as it stands the post is unbalanced.
October 4th, 2008 at 8:12 am
[...] History of an Idea by Roderick T. Long [...]
October 4th, 2008 at 9:04 am
Sorry to ask, but who cares what Caplan thinks? I think Callahan’s comment hits the nail right on the head.
October 4th, 2008 at 11:10 am
Excellent, Roderick.
I have a question though with one aspect of what you wrote:
“But it’s not just opponents of the free market that get markets and business interests mixed up. All too many libertarians still rush to defend giant corporations like Microsoft and Wal-Mart (two firms whose whole business model in fact depends heavily on government intervention – via, e.g., IP protectionism for Microsoft, eminent domain plus socialised transportation costs for Wal-Mart, and general suppression of competition from the less affluent for both) as though such a defense were part and parcel of a commitment to markets.”
I often find myself defending Wal-Mart against for reasons that have nothing to do with what you are saying here. I find myself defending the free exchange. People consume, Wal-Mart offers things to consume at better prices….a simple fact that gets missed by many liberals. I’m not being a corporate apologist here. I’m simply defending the free exchange.
But what you’re talking about is all together different. What I don’t quite get is where the break down that allows this comes from and what public policy can do about it. I don’t defend state privilege but Wal-Mart conversations leave people like me in a bit of lurch. Wal Mart operates within an institutions that it didn’t necessarily create.
Eminent Domain abuse sounds like a legal problem having to do with courts and local government. What’s the cure?
But the socialized transportation costs you speak of are not clear to me.
Could you explain this a little better along with what the answer to it is?
Thanks.
October 4th, 2008 at 11:12 am
oops. html error in my post!
I forgot the “/” at the end of the part I quoted from Long. Could someone with editing powers fix that?
October 4th, 2008 at 1:17 pm
Why I think Caplan’s point has merit: the Soviet system was very “workable” when it came to the military, nukes and the space program. That’s because they were willing to use incentives properly there. So we can tell that the problems with the Soviet system were not caused by the calculation problem but bad incentives. If you think Caplan and Crampton have flawed arguments then feel free to critique them, but note that would require more than “screw them”.
I would also add that Caplan doesn’t just disagree with Austrians every chance he gets. He thinks that Mises (along with Bastiat) were ahead of all the classic Public Choice scholars and credits them in his book and papers.
October 4th, 2008 at 7:08 pm
[...] Long explains why small is beautiful. And by the way, everything this guy writes about economics is well-worth [...]
October 5th, 2008 at 9:13 am
I don’t see how that “refutes” Mises in the least. Allow for pure socialism and the USSR would collapse, in the absence of other nations to leech off. Boettke issued a rebuttal to Caplan at any rate.
October 9th, 2008 at 3:37 pm
Mike G: You make an argument that applies well to manufacturing companies but then go on to cite 2 harmfully oversized companies which are not involved in manufacturing.
I don’t see why the argument should apply any less well to non-manufacturing industries than to manufacturing ones; can you explain?
John V: Eminent Domain abuse sounds like a legal problem having to do with courts and local government. What’s the cure?
Ideally, abolishing the power of eminent domain entirely; but in the shorter run, placing restrictions on its use, as is in fact to some extent happening locally in the wake of Kelo.
But the socialized transportation costs you speak of are not clear to me. Could you explain this a little better along with what the answer to it is?
The govt. pays (or makes taxpayers pay) for the highways. The costs of transportation for transportation-intensive companies like Wal-Mart is thus subsidised, making it easier for them to compete with local businesses with lower transport costs. The solution? Ideally, privatise the highways; in the shorter run, shift from tax-funding to toll-funding.
October 9th, 2008 at 11:58 pm
[...] Roderick T. Long: Mike G: You make an argument that applies well to manufacturing companies but then go on to cite 2 harmfully oversized companies which are … [...]
October 10th, 2008 at 10:52 am
Roderick T. Long: I don’t see why the argument should apply any less well to non-manufacturing industries than to manufacturing ones; can you explain?
Its just standard cases of market failure, in particular when fixed costs are high and the marginal costs are low you can get a stable situation where a product can remain dominant without being good (compared to the competition that it never had). The end result is you up with a big and unproductive corporation (microsoft), but not one that market forces would obviously rein in if left to their own devices.
Of course microsoft relies on IP protection, but whether this is a good or bad thing I think is different territory as without it you get the potential for another type of market failure, companies not being prepared to invest (as a practical matter I think we would be better off as good software gets made essentially without any financial investment, but as it comes about without financial incentives its a conclusion that the above kind of analysis cannot reach).
Also can either microsoft or walmart be considered vertically integrated? Which would be markets have they subsumed?
October 10th, 2008 at 9:45 pm
[...] problem just as well by keeping A but adding regulation B alongside it? The answer is no, because central planning doesn’t work; when one responds to bad regulations by adding new regs to counteract the old ones, rather than [...]
October 13th, 2008 at 10:21 pm
Excellent article.
One issue: I don’t think Microsoft is a good example of a privileged company. That’s not to say they aren’t, but no more than any other software corporation. If you look at the financial losses from lawsuits as well as the restrictions placed on their core products, I think they’ve been hurt more than helped on the whole by government intervention. In regards to intellectual property, Microsoft has not simply relied on state law. Product activation, digital rights management, etc. are all things that could be done in a free market and those are used as primary means of protection.
October 13th, 2008 at 11:31 pm
Mike G.: The point, though, is that IP is one of the structural bulwarks to a state of affairs in which software is something “companies invest” in, rather than (as in the OS community) something teams of software designers do. The basic item of capital equipment for designing software exists in over 100 million homes in America alone. The teams of designers inside Microsoft are indistinguishable from those outside. The impermeability of corporate walls depends on ownership of IP. Otherwise the boundaries between the teams inside and outside would blur; software design wouldn’t be the work of companies, but of teams, with teams freely taking on projects, people joining them and moving on, and projects forking, exacly like with Linux. The very existence of boundaries between the “company” and the outside world depends on IP rights.
Likewise, without IP rights music wouldn’t be something giant record companies invested in, associated with a few manufactured blockbuster acts signed on to major labels. It would be the work of tens of thousands of minor artists marketing their music directly to consumers on something like the old folk model.
October 15th, 2008 at 7:47 pm
The govt. pays (or makes taxpayers pay) for the highways. The costs of transportation for transportation-intensive companies like Wal-Mart is thus subsidised, making it easier for them to compete with local businesses with lower transport costs.
But the government is an inefficient provider - in a free market, transportation costs would almost certainly be lower, at least on “main trunk routes”. Thus government provision of roads is not a subsidy but a cost…
October 16th, 2008 at 3:45 am
Adding to the above: the costs of roading, etc., is paid for with user charges (in the form of taxes on fuel, milage charges for commercial vehicles, etc.), not through general taxation, so the supposed costs to WalMart are not spread over the general public - in fact, since most of the costs are paid by commercial users (>80% here, according to data I saw recently), it’s likely that WalMart is subsidizing you, as a private citizen.
October 16th, 2008 at 8:01 am
Peter,
I would love to see the statistics you cite to, because they are apparently completely the opposite of the statistics I have read on the subject. Care to share the source?
October 16th, 2008 at 12:10 pm
Jeff:
Are you claiming that Microsoft doesn’t use the legal system to enforce its copyrights?
Quite frankly, copy-protection schemes don’t work. They’re almost always cracked soon after the product is released, and sometimes even before then. The threat of copyright enforcement is the only thing keeping the proprietary software business model viable.
October 16th, 2008 at 9:13 pm
Kevin,
In your anarchist world, couldn’t Microsoft just hire a protection agency to enforce its copyrights? MSFT pays a crapload in taxes, I’m sure the savings from not paying off Uncle Sam would be more than enough to hire out Blackwater to enforce copyrights. The protection force would only have to shoot up a couple offending pirates before the message got around quick not to bootleg MSFT products.
Quite frankly, copy-protection schemes don’t work. They’re almost always cracked soon after the product is released, and sometimes even before then. The threat of copyright enforcement is the only thing keeping the proprietary software business model viable.
If you can find me a crack for WMA 11 files, let me know … MSFT’s getting pretty good with the DRM. Plus, a lot of MSFT’s profits are selling to other companies who are more than willing to pay $200 rather than bother installing a bunch of cracks.
October 16th, 2008 at 11:04 pm
Devin Finbarr writes “In your anarchist world, couldn’t Microsoft just hire a protection agency to enforce its copyrights? MSFT pays a crapload in taxes, I’m sure the savings from not paying off Uncle Sam would be more than enough to hire out Blackwater to enforce copyrights.”
That would be absolutely correct, except for one thing. You are so accustomed to the way things are now that you have accidentally built in part of that, which leads to assuming the very thing at issue.
What is this “Blackwater”? Why, a corporation. Why does it provide those services for hire? Because contracts are enforceable on it. What would happen without a state structure to do that? Why, either its own employees would defect or it would start to impose its own rules - but then it becomes a state itself and would have no incentive for providing Microsoft with any services for hire but would rather act as the state does now. Furthermore, as, when and if circumstances were right for defeating the state, those circumstances would undercut a transformed Blackwater too.
Basically, there would be no such thing as “Microsoft” as a cohesive entity in its own right, only Bill Gates and any personal followers he managed to assemble in the face of undercutting circumstances like that. Finding and implementing those - ah, now, that’s the question.
October 16th, 2008 at 11:09 pm
P. M. Lawrence-
My comment was also a backdoor way of arguing that a state structure will inevitably emerge from an anarchist situation. Being being a fuedal lord is simply too profitable, so either there will be a lord, or the populace will have to setup a stable security structure ( ie government) to prevent the lord from establishing dominance and reaping taxes.
BTW, do you want to live in a world without enforceable contracts?
October 17th, 2008 at 1:45 am
Devin Finbarr: I don’t believe what MS currently pays in taxes could even pay the interest on what copyright enforcement would cost in a free market. Without state-mandated DRM technology, and intrusive surveillance technology and use of the subpoena power against service providers, consumers would tell Microsoft (and the RIAA and MPAA) to go piss up a rope. Even now, the law is pretty much unenforceable for anyone who uses a proxy server and strong encryption, and the cases in which the law *is* enforced against file-sharers is like bailing the Titanic with a thimble. “Intellectual property” is just one example of the kind of exogenous enforcement mechanism that wouldn’t be profitable if the beneficiaries had to pay for it on their own nickel.
October 17th, 2008 at 2:14 am
Devin Finbarr, quite simply, you are being too narrow in the range of possibilities you can think of. Why on earth would “let’s communally form a government” be the approach anyone would think of to stop feudal lords - unless they had been brought up to know only that? For one thing, in the 19th century people formed vigilance committees (hence “vigilante”) to alert themselves of incipient threats they ought to unite in a temporary way to head off. For another, feudal lords did not form a threat like that, by and large; they were actually what happened when locals came to an enduring arrangement with strong men to head off outside threats (think Seven Samurai/Magnificent Seven, with the good guys staying on a retainer basis). Or think how most of Italy gave rise to partisan groups in response to German occupation, but the French speaking area (never having been radicalised by the French Revolution and its aftermath) responded by organising in the traditional way, around the local squirearchy. Oddly enough, Gibbon sketched that out as how the French would react if days of barbarian invasions ever returned!
No, apart from getting rid of what we have now in physical fact, the main problem is getting it out of people’s heads and getting alternatives in instead, along with continuing traditions of watchfulness (since the descendants of feudal lords who came in as good guys were often still in place as bad guys).
Oh, and I would prefer “to live in a world without enforceable contracts”, provided only the concept of honour were alive and well in it. See Montaigne for how that worked to keep men true to their word for fear of never being able to give it more, as shown in his account of why the Grand Turk gave up his foothold in the Heel of Italy. But statist perfidy (”it’s OK for the police to lie to suspects”) has crowded out much if not all honour; little but currently confusing literature remains to instruct us (try and understand what Hamlet speech is saying on this matter). What we resort to now is but one more instance of states generating a need for themselves, and is not a justification for them but another reason to wind them back.
October 17th, 2008 at 11:06 am
Devin:
“If you can find me a crack for WMA 11 files, let me know … MSFT’s getting pretty good with the DRM.”
Try FairUse4WM. It’s claimed to work with WMP 11 files, though it looks like it may take some finagling.
Specific implementations are beside the point, however. The concept of DRM itself is fundamentally flawed. No matter how good Microsoft gets at creating DRM systems, they will always be circumventable.
“Plus, a lot of MSFT’s profits are selling to other companies who are more than willing to pay $200 rather than bother installing a bunch of cracks.”
And for that, they’re dependent on the threat of legal enforcement to keep cracking activities underground. If those who crack proprietary software and operate rogue update servers are allowed to gain mainstream credibility, Microsoft’s business model will be sunk.
October 17th, 2008 at 11:51 am
I think the thing Devin was getting at is that the “regulatory state” condition as we know it is a strong attractor for larger, more prosperous human societies. I don’t see anybody disagreeing with that part, and P.M.’s 11:04 comment describes a path towards that attractor in so many words. Feudalism is another (intermediate?) attractor, though it doesn’t seem to scale under conditions of prosperity.
What’s debatable — and interesting, and important — is what other attractors might be nearby, and how to get to them. And this, as P.M. and Kevin are saying, is where education and culture come into the picture. Your polity can’t possibly drift toward a nearby-but-preferable attractor (assuming one exists) unless your citizens can individually contemplate changing their behavior. But the destination can’t be centrally determined. If it could then “intentional” political cultures (Soviet Communism being everybody’s favorite poster child for this :-)) wouldn’t have such a consistent record of counterdrift and eventual failure. Whatever “culture” you’re aiming for has to be compatible with ecological, psychosocial, and economic stability as well. The attractors exist in multiple dimensions, and you can’t know where one is ahead of time… You have to get there iteratively.
So political “improvement” definitely requires educating people first — it just doesn’t (generally) work to educate them to do a particular thing, for basically the same reasons that it (generally) doesn’t work to determine economic outcomes centrally. What you can do is educate people to identify and consider the widest possible range of choices and then see what they pick.
October 18th, 2008 at 5:17 pm
Sorry for not responding… Anyone know what happened to those reply notification emails that I swear I used to get from AOTP? (Or the preview functionality for that matter).
The discussion has moved quite far from the original arguments about company scales and market efficiencies. Free markets as they are defined here, without ip protection, can in some industries result in there being no markets. Or at the very least a radical transformation with winners and losers amongst consumers as well as producers.
There are still arguments for the libertarian position, but there is not a singular comprehensive pure economic one. That the arguments in the above article are not comprehensive is not acknowledged, nor is this type of omission atypical in libertarian discourse.
Eliminating IP is such a radical step that I am not convinced any of us can fully predict how things would pan out, but it is an interesting discussion. Certainly other impetuses for the creation of art/ip may fill the vacuum to a degree.
My brief prognoses for the following ip-dependent fields:
software: EXCELLENT, production of software should be a marginal cost as software is made up of building blocks.
music: GOOD, live performances give revenue possibilities, but some acts/styles will do better than others.
writing: AVERAGE, still economically feasible, but monetary incentives will largely disappear.
films: BAD, regular large productions may not be feasible.
October 18th, 2008 at 5:19 pm
Sorry for not responding… Anyone know what happened to those reply notification emails that I swear I used to get from AOTP? (Or the preview functionality for that matter).
The discussion has moved quite far from the original arguments about company scales and market efficiencies. Free markets as they are defined here, without ip protection, can in some industries result in there being no markets. Or at the very least a radical transformation with winners and losers amongst consumers as well as producers.
There are still arguments for the libertarian position, but there is not a singular comprehensive pure economic one. That the arguments in the above article are not comprehensive is not acknowledged, nor is this type of omission atypical in libertarian discourse.
Eliminating IP is such a radical step that I am not convinced any of us can fully predict how things would pan out, but it is an interesting discussion. Certainly other impetuses for the creation of art/ip may fill the vacuum to a degree.
My brief prognoses for the following ip-dependent fields:
software: EXCELLENT, production of software should be a marginal cost as software is made up of building blocks.
music: GOOD, live performances give revenue possibilities, but some acts/styles will do better than others.
writing: AVERAGE, still economically feasible, but monetary incentives will largely disappear.
films: BAD, regular large productions may not be feasible.
October 21st, 2008 at 8:03 am
Mike G:
“There are still arguments for the libertarian position, but there is not a singular comprehensive pure economic one. That the arguments in the above article are not comprehensive is not acknowledged, nor is this type of omission atypical in libertarian discourse.”
The libertarian position is that so-called “intellectual property” is *wrong*, and that enforcement of an IP claim is an act of aggression. Any arguments about the “social welfare” benefits of eliminating IP laws are purely secondary.