Why Price Gouging Is Good

When a natural disaster strikes, it is almost guaranteed that there will be yet another uproar about price gouging. Media pundits will take to the airwaves to virtue signal against people who would dare to exploit disaster victims. Government officials will use the crisis to score political points by portraying themselves as defenders of the common people against greedy capitalists. But how accurately does this reflect reality? Let us explore the nature of price gouging to see the economics of such a situation and explain the behavior of journalists and state agents.

Economic Forces

In order to intelligently approach the concept of price gouging, one must first define it. Price gouging is a sudden, sharp increase in prices that occurs in response to a disaster or other civil emergency. Though this defines the act well, it does not explain the mechanisms behind it. When a disaster approaches, there are certain goods that people wish to acquire in greater quantities than normal, such as clean drinking water, non-perishable foods, wooden boards for protecting windows, and so on. If supply is held constant, then this sudden increase in demand for such goods will produce a sudden increase in their prices.

If left unhindered by the state, this upward pressure on prices will produce important benefits. First, it serves as a signal to producers and distributors of those goods that more supply is needed. The producers and distributors thus learn where their goods are most urgently in demand, allowing them to engage in mutually beneficial transactions with disaster victims. This is how free markets are supposed to function in order to meet the needs of customers.

Second, price gouging encourages proactive preparations. A potential business model for a firm is to invest in equipment that allows it to operate when a disaster would otherwise force it to close, and use the proceeds from price gouging to amortize the cost of the equipment. This helps consumers by allowing them to purchase goods at higher prices rather than be left without essential items during a crisis.

Third, price gouging provides an important benefit by conserving the fixed amount of resources which are present before more deliveries can be made to the disaster area. The higher cost of scarce goods disincentivizes people from buying up supplies that other people need, thus helping to keep the items in stock. This keeps scarce resources from being wasted on marginal uses, directing them toward their most valued uses and the people who most need them instead.

Markets And Malice

Unfortunately, not every instance of price gouging is so benevolent. Business owners who seek to exploit vulnerable people in order to make money do exist. But engaging in such behavior in a free market produces a short-term gain followed by a long-term loss. In a pure capitalist environment, reputation is everything for a business. Whatever profits may come from gouging disaster victims in the present will be more than outweighed by the sales that one will lose in the future because of the damage that this does to one’s brand. After all, most people would view such behavior as adding insult to injury and vote against it with their wallets. Though it is impossible to accurately count sales that do not happen, to dismiss this effect as nonexistent is to commit the broken window fallacy.

Enter The State

Most people are economically illiterate, so they tend to focus on the malevolent type of price gouging and be unaware of the benevolent type. In a democratic state, this has predictable results. Politicians and other government agents will frown upon price gouging and seek to punish anyone who they believe to be engaging in it. But it can be difficult to distinguish the natural effects of demand spikes and limited supplies upon price from the efforts of greedy exploiters of disaster victims, especially for government officials who are too far removed from the disaster area to be intimately familiar with the economic dynamics there. Thus, all price gouging is suppressed by the state, and while this may protect a few people from exploitation, it causes more harm than good by disrupting the market signals which would have informed producers and distributors that their goods need to be sent to the disaster area. The end result is that scarce goods are depleted and not replaced, leading people to once more blame the market for failing them when the actual cause of their shortage was a government failure.

Suppression of price gouging has several deleterious effects. First, by placing price controls on goods, the state deprives entrepreneurs of the profit motive to bring additional supply to the disaster area. Without state inteference, people who live outside of the disaster area and are willing to travel there in order to bring supplies could charge enough for their goods to recover their travel costs and be compensated for the inconvenience of spending time in a disaster area, all while making enough profit to make such a venture more attractive than other economic opportunities. Price gouging laws remove such action, leaving only state agencies and altruistic private groups to provide aid. Note that like all government regulations, price gouging laws are subject to regulatory capture by the largest businesses.

Second, removing the incentive for proactive preparations makes untenable the business model for operating during a disaster described above. Third, removing the conservation effect of price gouging forces business owners to sell goods below their market-clearing price. This incentivizes hoarders to buy more than they need and scalpers to buy goods for resale. The existence of scalpers also makes desired goods more difficult to find, as resellers will be more difficult to locate than established stores. Thus, laws against price gouging do not eliminate the practice, but rather shift it from primary markets to secondary markets and cause a different set of people to profit. Taken together, these effects result in artificial scarcity that makes conditions in a disaster area even worse.

A Pair of Razors

Given the clear case in favor of price gouging, one may wonder why so many people in positions of political power rail against it. Reece’s razor suggests that we look for the most cynical explanation when attempting to determine a motive for state policy. No other possibility prioritizes the self-interest of politicians and their minions over the lives and properties of citizens quite like the idea that government officials want to suppress the natural response of markets in order to make government disaster relief agencies look effective and necessary, thus justifying their existence and expansion, so Reece’s razor selects it.

However, it is not in the rational self-interest of elected officials to increase the suffering of disaster victims who are capable of removing them from office in the next election. A better explanation is offered by Hanlon’s razor, which says that one should not attribute to malice what can be explained by stupidity. In this view, government officials are not trying to increase the harm done during a disaster; they simply know no better because they are just as economically illiterate as the electorate, if not more so. This razor is a better fit for the available logic and evidence.

Conclusion

It is clear that price gouging has an important economic role in ensuring that goods both go to those who need them most and remain available in times of emergency. Market prices are important signals that tell producers and distributors where their goods are most urgently needed. When the state interferes with this process by imposing price controls, it turns off the signal and incentives for market actors to send aid, encourages hoarding and scalping, and discourages conservation and farsightedness. These effects mean that laws against price gouging harm the very people that they are ostensibly supposed to help. Therefore, price gouging should not be punished by the state or demonized by the press.

Disasters and the Pax Romana Problem

Whenever disasters impact an area in modern times, governments play a large role in the cleanup and recovery efforts. People file claims with the state to recover their losses while simultaneously inflicting those losses upon taxpayers elsewhere in the nation. Building codes are enhanced, and because resources spent on one expense cannot be spent on another, the result is less resources available for communication, medical care, and transportation to warn people of disasters, get them away from danger, and treat any injuries or diseases that result. The usual pork barrel spending and high-profile boondoggles will rear their ugly heads among the disaster relief spending.

But there is an even more insidious problem at work here, which we may term the Pax Romana Problem. Students of history will be familiar with the time of relative peace and stability from the time of Augustus (r. 27 BCE-14 CE) until the time of Commodus (r. 177-192 CE). During this time, the economy, the arts, and agriculture flourished because the tribal battles that predated Roman conquests as well as the rebellions and riots that predated the Pax Romana were largely suppressed. But there was a dark side to this, particularly in parts of the empire which were much closer to the border than to Rome. With Roman forces in charge of law, order, and security, many peoples suffered losses in the ability to provide these services themselves. After all, societal organs tend to decay from disuse just as individual people do. When the Pax Romana ended, these peoples were without the stabilizing forces which they had come to rely upon and were out of practice in providing these services for themselves. The end result was that several of these peoples were raided and conquered by various barbarians and empires.

At first glance, this may not appear to have much to do with disaster relief. But there is a similarity between what happens when governments step in during disasters and what happens when a large empire takes over security for formerly independent smaller tribes. Before there was massive government intervention to help disaster victims, people had more of an incentive to plan ahead and be ready for potential disasters because they knew that if something were to happen, they would have to rely upon themselves and the people in their communities to survive and recover. Without the potential for government agents to step in, people were less likely to view disaster relief as someone else’s problem and thus more likely to donate to relief efforts. When one relies upon people one knows for support during hard times, defrauding people is disincentivized due to both the loss of reputation in the community as well as the potential for reprisals. Looting is also less of a problem when security is handled directly by private property owners without involving the state because they and their hired help are both more competent at and more concerned with solving local crime problems than distant bureaucrats and their minions. Of course, these conditions meant a stronger social fabric and less dependence on the state, so governments found it all too tempting to interfere.

Before there was significant government involvement in the insurance industry, insurers would either refuse to insure or charge exorbitant rates to cover properties which were at a continually high risk for being destroyed by floods, earthquakes, volcanoes, and other such periodic catastrophes. This was an important market signal that certain areas are not good places for humans to build permanent residences. Of course, some people ignored those signals and suffered the consequences of their stupidity, but this has better outcomes for everyone else than rewarding such stupidity with government handouts which incentivize people to stay in places where they are likely to suffer disasters.

Now that governments play an active role in disaster relief, all of the problems that one might reasonably expect are present. When politicians have a choice between doing what is best for the people and doing what helps their public image, they will almost invariably choose the latter. Because the state has a coercive monopoly, it cannot be fired or have its funding suspended by normal means, regardless of how terrible its performance is or how much it interferes with private efforts which are trying to help people. To the contrary, failure means that statists can claim that insufficient funding is the reason for failure. There is also the matter of vote-buying, in that the people have an incentive to elect politicians who will deliver them the most funds from the government treasury. Disaster relief is not as reliable a payout method as welfare programs, but it is still a means of legal plunder available to those who live in disaster-prone areas.

We can also see the typical one-size-fits-all policies rather than the more targeted solutions that a private effort would attempt. For example, following Hurricane Katrina in New Orleans, the Federal Emergency Management Agency announced a program to give away $2000 to every household that claimed to be affected by Katrina, regardless of size or need. Of course, this was subject to much waste, fraud, and abuse. Unlike private organizations who must rely upon voluntary donations, the state has no incentive to actually figure out how much help each household needs, so it overpays some and underpays others.

With government infrastructure management, people are encouraged to live in places which are at higher risk for disasters than would otherwise be economical to inhabit. To use the example of Katrina again, levees held back water from areas which have an elevation below sea level. Investigations into their failure showed cost-cutting during construction as well as poor maintenance. While there is no guarantee that a privately built and maintained system would have been successful, that which may or may not work is better than that which is known to fail. Then again, leaving infrastructure up to the private market could have meant that low-lying areas would have always been underwater and thus uninhabited, meaning that structures and lives would not have been at risk there because they would have been absent in the first place.

Government flood insurance programs also encourage people to take risks which would not make economic sense in a free market. What is incorrectly perceived as a market failure is actually a market success; the process of voluntary exchange and decentralized calculation produces the result that flood plains are inferior places to build a house or business. Rather than people rebuilding communities in unstable locations for the umpteenth time, a free market in flood insurance would cause low-lying areas to be abandoned and returned to a state of nature, as is proper. Perhaps in time, such places which are near coastlines and below sea level could fill in with sediment and become livable lands which do not require levees to keep water out of them.

Finally, government police and National Guard forces have largely displaced private security measures to prevent looting during disasters. Worse than that, they have actively engaged in attacks upon disaster victims who were trying to provide such defense for themselves, causing the very problem they should be trying to solve.

Fortunately, this perverse state of affairs will not last forever. Someday, the United States government will decline and fall, just like Rome and so many other empires throughout history. Just like the outer peoples of the Roman Empire after the Pax Romana ended, the American people will be left to fend for themselves in the absence of the federal government. The degree of government involvement in their lives will leave them weakened in the face of disasters which will not cease to afflict them when the state does. But a return to proper incentive structures will mean that in the long run, behaviors will be positively modified, the attitudes of the people will change to match those behaviors, and the community bonds which support a truly healthy society can be rebuilt.

Government Will Not Hold Government Accountable

Since the beginning of statism, rulers have sought to monopolize the provision of justice and criminal punishment for obvious reasons. Not only is it lucrative to do so, in the form of rulers taking for themselves in fines what should be given to victims in restitution, but it also allows for agents of the state to engage with impunity in activities which are criminalized for the commoner. Since time immemorial for those alive at the time of this writing, the nation-state has done so the world over. But when a government politician or enforcement agent is examined by government investigators or tried in a government court, this creates a conflict of interest. Government prosecutors and judges may be interested in promoting justice (or an illusion thereof), but they must also interested in maintaining the structure of state power, which may be endangered by indicting or convicting a politician or enforcement agent. And then there is the matter that the laws being used by said investigators, prosecutors, and judges are monopolized by the state, the common result of which is that a politician or enforcement agent is exonerated for what would land a commoner in prison.

While there is a long line of abuses and usurpations stretching back millennia, three well-publicized concrete examples of these problems have manifested themselves just in the United States in the month prior to the time of this writing. These are the non-indictment of Hillary Clinton for her mishandling of classified information, the overturning of Bob McDonnell’s conviction for political corruption, and the acquittal of Caesar Goodson in the Freddie Gray case. Let us consider each of these cases.

Hillary Clinton

While Hillary Clinton was Secretary of State, she used private email servers and mobile devices to conduct government business. On July 5, 2016, an FBI investigation found that “from the group of 30,000 e-mails returned to the State Department, 110 e-mails in 52 e-mail chains have been determined by the owning agency to contain classified information at the time they were sent or received. Eight of those chains contained information that was Top Secret at the time they were sent; 36 chains contained Secret information at the time; and eight contained Confidential information, which is the lowest level of classification. Separate from those, about 2,000 additional e-mails were ‘up-classified’ to make them Confidential; the information in those had not been classified at the time the e-mails were sent.” Three additional classified emails were found outside of the group of 30,000, one Secret and two Confidential. Evidence was found that Clinton or her colleagues were “extremely careless in their handling of very sensitive, highly classified information.” According to FBI director James Comey, “None of these e-mails should have been on any kind of unclassified system, but their presence is especially concerning because all of these e-mails were housed on unclassified personal servers not even supported by full-time security staff, like those found at Departments and Agencies of the U.S. Government—or even with a commercial service like Gmail.” It was assessed that hostile actors could have gained access to Clinton’s email account and that they did gain access to email accounts belonging to people who corresponded with Clinton on classified matters.

Despite such a damning litany, Comey recommended that no charges be brought. Although the requirements for criminal charges under USC Title 18, Section 793, Subsection F were clearly met, Comey set up a straw man by claiming that there is not sufficient evidence of intent, even though intent is not part of the statute. This is for good reason because negligence in protecting classified information that can put innocent people in danger, and is therefore a malicious form of incompetence. Comey’s language concerning a “reasonable prosecutor” (whatever that means) was especially concerning, as it condemns as unreasonable anyone in the Department of Justice who might disagree with Comey’s recommendations. It is also noteworthy that Gen. David Petraeus and Maj. Jason Brezler were pushed out of the military in recent years for less.

The most likely explanations for this result are that Attorney General Loretta Lynch received her major career push from former President Bill Clinton, that Hillary could expose much deeper issues and many more violations in response to being indicted, that Comey lacks the fortitude to upset the electoral apple cart, and that Democrats care more about keeping power than accountability.

Bob McDonnell

In 2014, former Virginia governor Bob McDonnell and his wife Maureen were convicted of accepting more than $175,000 in gifts, loans and other benefits from Star Scientific executive Jonnie R. Williams Sr. in exchange for the governor’s help in securing state testing of dietary product. Bob was sentenced to two years in prison for bribery and extortion, while Maureen was sentenced to one year and one day for corruption. He appealed his conviction, which was upheld by the Fourth U.S. Circuit Court of Appeals in July 2015. The Supreme Court reviewed the case and overturned the conviction on June 27, 2016.

At issue was whether Gov. McDonnell committed (or agreed to commit) an “official act” in exchange for the loans and gifts. An “official act” is defined as “any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit. The Court decided 8-0 that the prosecutor’s view of an “official act” was too broad, and that although McDonnell conduct was “tawdry,” it should not have resulted in a criminal conviction.

Jack Abramoff, a former congressional lobbyist who was imprisoned for fraud, corruption, and conspiracy, said of the ruling,

“I continue to be concerned by what seems to be a lack of understanding on the part of the justices that a little bit of money can breed corruption. When somebody petitioning a public servant for action provides any kind of extra resources — money or a gift or anything — that affects the process. People come to think those seeking favors and giving you things are your friends, your buddies. Human nature is such that your natural inclination is, ‘He has done something for me, what can I do for him?’ The minute that has crept into the public service discussion, that is a problem.”

Whereas the overarching theme of this article is conflict of interest, it is worth noting that the very Supreme Court justices who decided this case are themselves the recipients of lavish paid trips and gifts from private donors.

Caesar Goodson

On April 12, 2015, Baltimore police arrested Freddie Gray for possessing what was alleged to be an illegal switchblade. While Gray had a prior criminal record, some of which was comprised of crimes against people and property, simple possession of a switchblade knife would not be criminal in a free society unless one were on private property whose owner disallows such armaments. While being transported in a police van driven by Officer Caesar Goodson, Gray was rendered comatose and was taken to a trauma center where he died on April 19. His death was caused by injuries to his spinal cord. It was found upon investigation that Gray was not secured properly in the van; he was handcuffed and foot shackled, but not buckled to his seat.

Goodson opted for a bench trial rather than a trial by jury. On June 23, 2016, Circuit Judge Barry Williams acquitted Goodson of all charges, including second-degree depraved heart murder, second-degree assault, involuntary manslaughter, manslaughter by vehicles (criminal and gross negligence), reckless endangerment, and misconduct in office. These charges could have resulted in up to a 30-year prison sentence. Williams claimed that the prosecution lacked the evidence to prove its case. Williams acquitted another officer involved in the case in May 2016.

The Common Problem

The thread which ties together these seemingly disparate cases is that all of them involve certain or nearly certain misdeeds by government personnel. These personnel are then subject to what is essentially an internal review, as they are investigated by another branch of the same organization. The investigation predictably finds that no wrongdoing worthy of prosecution or conviction occurred unless the conduct was so egregious that it is simply impossible to cover up, and the bar for this is set quite high.

Government will not hold government accountable because it is not in their interest. The only way to solve this conflict of interest is to eliminate it. If we are to have justice for the crimes of government personnel, we must take direct action to end the government monopoly on criminal justice. The remainder of this essay will consider what forms this might take and address likely objections.

Solving The Problem

The first response of most people when confronted with a proposal to end a government monopoly on a service is that one must be objecting to any organized provision of that service at all. In other words, they assume a false dilemma between state laws, police, courts, and prisons, or a vigilantist free-for-all. There is something positive to be said for vigilante justice, in that it can be better than no justice at all, and no justice at all is what the government system tends to provide for those who are victimized by the state. Vigilantism can also demonstrate that an oppressed people have had enough, and that those in power should listen to their grievances lest they be removed from power by an angry mob. But vigilantism has a tendency to descend into directionless violence that accomplishes nothing in the long run. As such, it is necessary to construct competing criminal justice systems which can replace the government monopoly and provide the due process that a lynch mob cannot.

Laws

We must, of course, start with the law itself, for no good cider may be made from poisoned apples. Government laws have extended into every facet of life and have become so complex that most people run afoul of the law on a regular basis without even realizing it. Without a government monopoly on laws, people would have the freedom to choose their own legal codes by either choosing from a number of law service providers or going into business as such a service provider. This system in which only the laws that people are willing to financially support through voluntary means can be enforced would have the effect of shrinking the laws which are mandatory for every person to the bare minimum; no murder, slavery, rape, kidnapping, assault, theft, vandalism, and so forth. Any activity which does not constitute aggression against a person or their property would not be criminal unless one had agreed not to engage in that activity as part of a valid contract, which is a contract that all parties enter into without fraud or coercion and that does not demand the impossible. This would swiftly eliminate police confrontations with citizens over such issues as possessing a state-disapproved kind of weapon or drug, or engaging in a state-disapproved business venture.

Police

Next, we must consider the enforcers of the law. When the state has a monopoly on law enforcement, its agents can break the law with impunity to the extent that the statist system will not hold itself accountable. But in a system of competing private enforcers, the agents of one police company may be held in check by agents of all of the other police companies as well as a considerably more armed citizenry, as gun control laws would almost certainly be among the government laws which would fall by the wayside. Without the ability to enforce higher-order aspects of legal codes to which people have not consented and with the much greater probability that overreaching enforcers may be fired or martially defeated, non-government police lack the mechanisms that make government police so oppressive.

Courts

Third, we must consider private court systems. Without government laws and courts, every interaction between people of any complexity would need to involve a contract to specify how the people involved in the interaction agree to handle disputes which may arise between them. Individuals would likely hire insurance companies to co-sign their contracts for the purpose of ensuring that victims get restitution without having to wait for a contract breaker to provide it. Should one engage in criminal activity, one would be tried in a court specified by one’s contracts, with the appeals process also specified. Failure to abide by the ruling that one contracted to abide by would be economically crippling, as private defenders and dispute mediators would treat this as a risk worthy of raising a person’s rates significantly or even dropping them as a customer. Being without private defenders and dispute mediators would leave one in a difficult position, as one would have trouble buying, selling, entering into contracts, or even defending oneself.

Punishment

Fourth, we must consider how a private legal system will deal with punishment and restitution. While the libertarian theoretical limits of punishment are quite broad, there is no reason why these limits must be approached in every case. Punishment in a libertarian society would generally take the form of forced restitution in cases where an aggressor refuses to make restitution without being forced, with the possibility of “eye for an eye” punishments where restitution is impossible.

In a private justice system, prisons would be tailored to the purpose of helping criminals provide restitution by keeping them safe and in decent living conditions while they do so. Several incentives are at work toward this end. The private prisons are competing with each other to house prisoners, so they each must try to offer the best service for the least cost. The prisoners are paying customers of the insurance companies which are affiliated with the prisons, so they can take their business and transfer their prison time elsewhere if they feel mistreated or endangered and can find a better option. The insurance companies wish to reduce violent crimes for which they must pay claims, and so have an incentive to keep prisoners from harming or being harmed by anyone. Getting criminals to go to prison could be accomplished by making their continued coverage contingent upon going there and making restitution, with the alternative being life as an outlaw in the traditional sense.

Note that unlike a statist system with mandatory sentencing requirements, a private justice system may allow the victim of a crime to negotiate an agreement with the criminal to reduce or even eliminate the criminal’s obligation to perform restitution. One could even specify in one’s will what should be done to one’s murderer if one is murdered.

Additionally, there is one punishment that one may undoubtedly inflict upon anyone for any reason without any need for judicial oversight: ostracism. To be denied association with one’s fellows as well as with one’s trading partners by said fellows and trading partners can certainly meet all of the above definitions of punishment. Psychologists have found that the pain of ostracism is quite similar to the pain of physical injury in terms of the effect it has on a person. The long-term effects that an episode of ostracism has make it an effective way to enforce beneficial social norms without violating the non-aggression principle. The lack of government anti-discrimination laws in this proposed system makes the full realization of ostracism possible.

Objections Rebutted

Such a proposal typically meets three criticisms which were not addressed above. First, there is the “public goods” argument that this system may leave behind the poorest people who cannot afford to pay for it. Aside from the fact that “public goods” are a myth, the amount of productivity that could be unleashed by ending the government monopoly on laws should ensure that no one who does not wish to be poor would have to be. Even if this were not the case, the poor could still receive charity or form neighborhood watch groups while using the aforementioned newly legal heavy weapons, which would also be cheaper due to loosened restrictions on manufacture and ownership.

Second, there is the argument that competing private police forces will fight. The problem with this argument is that the incentives are all pointed in the opposite direction. Fighting will result in deaths for both private police forces, which makes it harder and more expensive for the surviving officers to serve their customers while hurting the public relations of the fighting forces. This creates an opportunity for other private police forces to step in and provide services more efficiently, thus sending the fighting forces into an economic death spiral. Note also that heavy area effect weapons cannot be used in such a fight without harming innocents and bringing legal claims and militant reprisals against the offending officers and companies. Failing all of this, such forces would still be less capable of destruction than nation-states currently are.

Finally, there is the contention that the state will not allow such a system to replace its monopoly. The state is quite profitable to those who run it and those who benefit from its influence, and they will not simply surrender this power. This would be the ultimate result of losing a monopoly on criminal law, as a private law system would treat government crimes committed under color of state law as though they were committed by private citizens. This is why liberty requires revolution, as the answer to the state disallowing a challenge to its power is to put it out of a position of being able to allow or disallow anything.

Conclusion

While government will not hold government accountable, the people living under it can, and it is they who must do it if they wish it done. The above market solution outlines an alternative to the statist criminal justice system, but it is up to the citizens afflicted by state crimes to build and operate such a system. The sooner this is done, the sooner all people can be held to the same basic standard of conduct and the crimes of the state can end.

 

Book Review: Freedom!

Freedom! is a book about libertarian theory written by activist Adam Kokesh. The book discusses the philosophy of libertarianism, applies it to various socioeconomic issues, and discusses its potential.

Mr. Kokesh begins by discussing the nature of freedom from a self-ownership perspective, and shows how government is philosophically incompatible with this perspective. He then shows how the non-aggression principle and the right to claim property derives from self-ownership. The validity of the self-ownership perspective has been argued with more robustness elsewhere, but we can assume that Kokesh omits a deeper discussion of argumentation ethics for the sake of brevity. Strangely, Kokesh does not include the precise definition of government that he has used repeatedly elsewhere (a group of individuals who exercise a monopoly on the initiation of force within a geographical area). He finishes the first chapter by proposing a society in which people only engage in voluntary relationships.

The second chapter is about the history of the state and how we might evolve past it, with an emphasis on the role of technology in helping people see through the lies of government propaganda and become productive enough to oppose the state in meaningful ways. The overall tone is rather Pollyanna-ish, as governments have become far more dangerous with recent advances in technology, and technology alone is not guaranteed to lead to the end of the state. There is also an alternative interpretation of the available data which is not directly discussed; namely, that the evolution from more crude forms of government to democracy did not occur because common people wanted more influence in government, but because rulers found that human livestock are more productive when given the illusion of freedom.

The third and fourth chapters briefly discuss the nature of self-defense and justice in a free society, with much more space devoted to the ways in which governments have corrupted these concepts with their monopolies on legal systems and military defense. Such corruptions include military interventionism, foreign aid, conscription, the military-industrial complex, wars against abstract ideas and tactics rather than physical foes who may be defeated, laws that criminalize victimless behaviors, laws that restrict access to weapons, courts that give agents of the state cover to assault peaceful people, the prison-industrial complex, and a legal system of punishment rather than a justice system of restitution.

The fifth chapter discusses taxation and explains why it is immoral, in both direct forms and indirect forms such as central banking. Kokesh shows that attempting to use the state to rein in the excesses of the rich will fail because the rich control the state by funding politicians. He then demonstrates that taxes discourage production because removing incentive to work in the form of income taxation will lead to less work being done (at least officially). After explaining how fiat currencies are imposed and how they are used to make it easier to tax a population, he argues that eminent domain and property taxes violate private property rights and are yet another form of theft. Kokesh finishes the chapter with a glimmer of hope; that a generation of people will come who will disown national debts because such debts legitimately have nothing to do with them. There are two problematic arguments in this chapter. First, there is the idea that taxation can be voluntary if one believes that governments serve people, one’s tax money is used properly, and one willingly pays taxes. This is false on two counts. Truth is independent of belief and morality is objective, so taxation is immoral even if one does not believe that it is. Also, consent under duress is not valid consent. As it is impossible to distinguish consent given only because of duress from consent given despite duress, it is impossible to consent when duress is present. Second, Kokesh claims that the only options for fighting taxation are to fight tax collectors in court and to conduct economic activities out of the view of tax collectors. This is false because the use of defensive force against agents of the state is also an option, even if there are not yet enough potential practitioners to make it likely to succeed.

In the sixth chapter, Kokesh begins by explaining the ideal of trade without force, fraud, or coercion, then examines how destructive government interference in trade is to the economy. He then goes into more detail about how central banks and fiat currencies distort the economy, and suggests cryptocurrencies as a possible way to solve this problem. Next, there is the problem of corporations, which led to the formation of unions. Kokesh explains that corporations are legal fictions created by the state to protect the wealthy who bribe politicians, and that this led to strong unions as a reaction by workers to the formation of powerful corporate interests. After this, he discusses the effect of government monopolization on infrastructure and utilities, which has hampered advancement beyond current technology and raised the cost of all goods and services by eliminating the increased efficiency that results from competition among service providers. The fifth section of the chapter is devoted to the method of ostracism and boycotting to bring about change in a peaceful manner. Unfortunately, the shortfalls of ostracism are not fully explored. Kokesh ends the sixth chapter by making the case that everything should be viewed through the lens of economics.

In the seventh chapter, Kokesh demonstrates how government interference in schooling, medicine, assistance for the poor, drug use, environmental protection, and the free flow of ideas has harmed everyone. Free market solutions to these problems are discussed perhaps too briefly, but discussing them at full length would make the book several times longer, and this has been done elsewhere by other authors.

The eighth chapter discusses government involvement in personal and family relationships. Here, Kokesh makes the case against laws forbidding consensual relationships as well as the case for peaceful parenting and treating children more like people and less like property vis-à-vis their current standing in society. This perspective is then applied to the problem of bullying in government schools. The chapter ends with a discussion of racism that examines its nature, its uses from a libertarian perspective, and how it is used by power elites to divide and conquer.

The last two chapters present Kokesh’s advice for living free in an unfree world, as well as his prediction for where the human species is going. His advice includes learning to master one’s emotions, becoming knowledgeable about taking care of one’s body and using that knowledge, living as debt-free as possible, doing work that one can be proud of, and choosing to have a positive state of mind. The last chapter returns to the theme of the second chapter; namely, that of technological advancement reaching an asymptote beyond which the state cannot function. Fortunately, the Pollyanna-ish tone does not return here, as Kokesh warns about the destructive potential of states with technology at a nearly asymptotic level. The next three sections discuss the methods by which people may transition to a voluntary society, which include education, civil disobedience, conducting business out of view of the state, and abolishing states gradually from the top level down rather than all at once. The use of force to topple governments is perhaps unfairly downplayed, however. Kokesh ends the book by explaining that the transition to a free society is not a revolution in the historical sense, but an evolution to something entirely new.

Overall, the book could explain some concepts in more detail and could avoid a few specious arguments, but it is what it was meant to be: a strong but concise treatise on the philosophy and potential of libertarianism.

Rating: 4/5

How The Salvation Army Commits The Broken Window Fallacy

Every year during the Christmas season, the Salvation Army sends out bell ringers to collect donations as part of its annual Red Kettle campaign. These bell ringers stand in public places or at entrances to large shopping centers and ring handbells loudly and incessantly, stopping only momentarily to express gratitude when someone makes a donation. This business model for charitable donations appears to work (otherwise it would be discontinued), and the funds are used for noble purposes, but there is a problem with the Red Kettle campaign. It focuses on what is seen and ignores what is unseen, which is one of the most persistent errors in economics. It was pointed out by Frédéric Bastiat in 1850, and has become known as the glazier’s fallacy or the broken window fallacy.

The broken window fallacy gets its name from the parable of the broken window, which was discussed by Frédéric Bastiat in his 1850 essay Ce qu’on voit, et ce qu’on ne voit pas (That which is seen, and that which is not seen) to illustrate why destruction, and the resources and effort required to rebuild after destruction, is not a net-benefit to society. The parable demonstrates that the modern economic concept of opportunity cost, along with unintended consequences, has an effect on economic activity that is frequently ignored.

Bastiat told a parable about a shopkeeper’s son who threw a rock through the window of the family business. The glazier then gets the business of repairing the window, and then he can buy some clothes from the tailor, who can then buy bread from the baker, and so on. This is what is seen. But if the shopkeeper did not have to fix his window, he could spend his money on something else. Perhaps he could buy some clothes from the tailor, who can then buy bread from the baker, and so on. This is what is unseen.

Bastiat, along with Austrian School economists, often used this story figuratively, with the glazier representing special interests and the boy who breaks the window representing government intervention. But this case requires a different interpretation. In this case, what is seen is that people donate when the Salvation Army workers set up a red kettle and ring their bells. What the Salvation Army workers either ignore or fail to realize is that their bells can be off-putting to people who are annoyed by ringing noises, repetitive noises, loud noises, or some combination of the aforementioned. Such people will be disincentivized from giving donations, but because there is no way to count a non-donation, this cost to their organization is hidden. To simply dismiss this effect in favor of giving attention only to the donations that are given is to commit the broken window fallacy.