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.

On Market Failure

The idea of market failure is a widely believed misconception which has found widespread use in statist propaganda for the purpose of justifying government intervention in the private sector. Though the term itself has only been in use since 1958, the concept can be traced back to Henry Sidgwick. It is used to describe a situation in which the allocation of goods and services is Pareto inefficient. This occurs when the rational self-interest of individuals is at odds with the optimal outcome for a collective. Such a situation is frequently blamed on conflicts of interest, factor immobility, information asymmetry, monopolies, negative externalities, public goods, and/or time-inconsistent preferences. Among these, monopolies, negative externalities, and public goods receive the most attention from mainstream economists.

But let us pause to consider what a market is. A market is a structure that allows buyers and sellers to exchange goods, services, and information. The participants in the market for a particular commodity consist of everyone who influences the price of that commodity. To say that a market has failed is to say that this process of assembling the information about a commodity which is reflected in its price and its change over time has failed. But the causes listed above are either inconsistent with a free market or unresolvable by interventions which bind the market. Let us explore this in detail.

Monopolies

While monopolies are frequently blamed for market failures, a monopoly in a particular market is typically the result of government intervention which has raised barriers to entry in that market. Through a vicious cycle of regulatory capture, larger businesses can put smaller competitors out of business by bribing politicians and regulators to favor the former and harm the latter. This continues until a market is effectively monopolized. Therefore, this type of monopoly is actually a government failure rather than a market failure.

Another type of monopoly can occur when there are natural barriers to entry, such as the need to build vast amounts of infrastructure in order to provide a good or service. This can give the first entrant into a market an insurmountable advantage. Consumers may then complain that this monopolist is abusing them rather than show gratitude that they are getting a service which was formerly nonexistent. But if the monopolist were really overcharging, then it would become feasible for another provider to either challenge the monopoly directly or provide an alternative service. This type of monopoly is actually a market signal that a particular good or service would be better provided by another means, and entrepreneurs should look for those means.

Third, a monopoly can arise in a free market if one business satisfies all consumers of a good or service to such an extent that no one cares to compete against them. This kind of monopoly is not a market failure, but an astonishing market success.

This leaves only the ‘public goods’ argument, which merits its own section.

Public Goods

Public goods and services are those whose consumption cannot be limited to paying customers. It is frequently argued that this produces waste in the form of unnecessary duplication and excess costs born by those who are not free riders. There is also the matter that non-excludable and rivalrous resources in a commons may be depleted without intervention. The latter can only be fully resolved by eliminating the commons, as restoring exclusive control to the resource is the only method of eliminating the perverse incentives created by a commons. The concerns over free riding and unnecessary duplication ignore incentives, prove too much, and commit the broken window fallacy.

If we wish to have a rational discussion, it is essential to define terms. A problem is an undesirable situation which can be remedied. This is because a situation which is not undesirable presents no problem to solve, and an undesirable situation which has no remedy is just a fact which must be tolerated. The free rider “problem” is a situation of the latter type, as it is impractical to make sure that everyone pays exactly what they should pay for the amount of public goods that they consume. That government monopolies destroy competition, and thus the market price system, makes the free rider “problem” impossible to solve, as the information needed to determine how much each person should pay for the amount of public goods that they consume is destroyed beyond repair.

If taken to its logical conclusion, the idea that no one should be able to consume more than or pay for less than their fair share of a public good means that the state should be eliminated, as the very presence of a state means that some people are consuming more than and paying for less than their fair share of the total wealth in the economy, as states are funded by coercive means which violate private property rights. Those who receive government welfare payments, bailouts, grants, or any other form of government funding are free riding upon the backs of taxpayers and anyone else who uses currency printed by a government’s central bank. The latter group of people are forced riders who are required to pay for public goods from which they receive insufficient benefit. Charity would also be unjustifiable if the concept of the free rider problem is taken to its logical conclusion, as those who receive charity are not paying the full cost for what they are using.

But suppose we ignore this as well. If we accept for the sake of argument that there are public goods and that no one should be able to consume more than or pay for less than their fair share of a public good, then the result will be a massive distortion of the economy, as both the state and private charity must go. While the demise of statism is nothing to lament, the absence of any form of private charity would lead to the very sort of Hobbesian war that statists fear and think that they are preventing. It must also be noted that the money for payments for public goods which are now being made was once being put toward another purpose. Whether that purpose was spending on other goods and services or investment (which is really just another form of spending), the diversion of spending away from these purposes and toward public goods will eliminate some other economic activities that were occurring.

Nearly all competitive production involves supposedly wasteful duplication, in that each provider must have the infrastructure necessary to produce that which is being provided. But if the duplication is truly wasteful, the market signals this by rendering the wasteful duplication unprofitable. Government intervention interferes with such signals, and government control over an industry completely eliminates them, leading to far worse government failures than any failure of the market.

Externalities

A problem related to public goods is the problem of externalities, in which costs or benefits affect a party who did not choose to incur those costs or benefits. When firms do not pay the full cost of production, each unit costs less to produce than it should, resulting in overproduction.

The most frequent examples given are pollution, traffic congestion, and overuse of natural resources, but all of these contain externalities because the market has been prevented by governments from internalizing the costs. Air and water pollution are externalities because government intervention on behalf of polluters has eliminated the common law system of private property rights with regard to pollution. Before the Industrial Revolution, pollution was correctly viewed as an act of aggression against people and their property. Those victimized could sue for damages and obtain injunctions against further pollution. Polluters and victims can also bargain to reach an optimal level of both production and pollution. Additionally, the victims would be justified in using violence in self-defense against polluters, though this is an historical rarity. But government monopolization of environmental regulation has prevented these market solutions from being implemented. Therefore, pollution is a government failure rather than a market failure.

Traffic congestion is another tragedy of the commons that causes externalities in the form of pollution, wasted fuel, and lost time. But this is another case in which governments have monopolized a good and produced it out of accordance with market demand. Without competing private firms to build different traffic systems in search of more efficient ones and without private property rights determining location and control over the transportation system, we are left with a non-excludable good that is incentivized toward overuse. Attempted solutions of congestion pricing, mass transit, and tolls mitigate some effects, but not to the extent that private service providers might implement such methods. Again, we have government failure at work.

A third example of externalities occurs with overuse of natural resources, such as fish and lumber. But once more, we see government intervention against private property mechanisms creating problems. Because state personnel in modern democracies do not personally benefit from maintaining the value of state-controlled property and work almost solely with the usufruct thereof, they are incentivized to engage in bribery and corruption. When states sell only the resource rights but not the territory itself, they get a renewable source of income. But firms that harvest renewable resources can abuse this system, stripping the resource bare then vanishing when it is time to replenish. These ‘fly-by-night’ lumber companies, fishers, and other such exploiters lead to the fast demise of resources which were harvested and preserved for centuries prior to state intervention. In short, government fails yet again.

Before moving on, a quick word about positive externalities is in order. This is another way of talking about the free rider problem, so the same criticisms discussed above apply. But we should also consider the benefits of free riders. Although some people will argue that free riders are responsible for higher costs, they are actually signaling that a good or service is overpriced. While degenerate freeloaders do exist, most free riders who are aware of their free riding are willing to pay for what they are receiving but believe that said goods or services are overpriced. In the state-enforced absence of another provider, they choose to “pirate” the public goods rather than pay the cost which they believe to be too expensive. If there are rational, knowledgeable people in charge of a public good that has many free riders, then they will respond by lowering the cost to convince more people to contribute, which can actually raise the total contribution.

The above result is rare, of course, as rational, knowledgeable people tend to be productive rather than become part of the state apparatus. The more useful role of free riders is to crash government programs which cannot be ended by normal political means. Most government programs help a few people by a large magnitude while harming a much larger number of people by a much smaller amount. This means that an irate and tireless minority will work to keep their sacred cow from being gored, while the majority is not being harmed enough to take action to end the harm. Thus, there is nothing more permanent than a temporary government program, and it is politically impossible to abolish entitlement and welfare programs. While the strategy of overloading such programs was first proposed by leftists who wished to replace them with far more expansive redistributions of wealth, it could also be used by libertarian-minded people who wish to replace such programs with nothing.

Other Culprits

The less-discussed causes of market failure are conflicts of interest, factor immobility, information asymmetry, and time-inconsistent preferences. This is mostly because government intervention is more widely known to either cause these problems or fail to solve them. Conflicts of interest typically occur when an agent has a self-interest which is at odds with the principal that the agent is supposed to serve. For example, a lawyer may advise his client to enter protracted legal proceedings not because it is best for the client, but because it will generate more income for the lawyer. A politician may vote for a law not because it is in the best interest of the people in her district, but because she was bribed by lobbyists who support the law. The only solution to a conflict of interest is to recuse oneself from the conflict, and government offers no answer, especially since it inherently operates on conflict of interest.

Factor immobility occurs when factors of production, such as land, capital, and labor, cannot easily move between one area of the economy and another. This sometimes occurs due to malinvestment caused by government distortions of the economy; in other cases, it results from technological advancement that puts an industry into obsolescence. In any event, government regulations frequently make it more difficult to change occupations and maneuver capital than it would be in a free market. Interventions to help workers in a declining field typically fall victim to the knowledge problem; it cannot accurately retrain workers or educate future workers because it cannot know what the economy will need by the time the retraining or education is complete.

Information asymmetry occurs when some parties in a transaction has more and/or better information than others. This creates a power disparity which is sometimes called a market failure in the worst cases. Common sub-types of information asymmetry include adverse selection and moral hazard. Adverse selection occurs when one party lacks information while negotiating a contract, while moral hazard involves a lack of information about performance or an inability to obtain appropriate relief for a breach of contract. These cases are made worse by government laws, as laws can lead to both adverse selection and moral hazard. For example, an insurance firm that is legally disallowed from discriminating against high-risk customers is itself put at a higher risk through no fault or will of its own, being unable to turn away those who cost the most to insure or cancel insurance policies for reckless behavior by the insured. Fortunately, there are market methods for resolving informational asymmetries, such as rating agencies.

Time-inconsistent preferences occur when people make decisions which are inconsistent with expected utility. For example, one might choose to have ten ounces of gold today rather than eleven ounces tomorrow. Time preferences are expressed economically through interest rates, in that interest rates are the premium placed upon having something now rather than waiting for it. Governments interfere with interest rates through central bank monetary policies, leading to alterations of time preference that can be inconsistent. This is still another example of government failure rather than market failure.

Resource Failure

Another possibility for market failure which is rarely discussed is that of resource failure. If an economy becomes dependent upon a certain non-renewable resource, that resource becomes scarce, and there is no viable alternative, the result can be devastating not only to markets, but to peoples’ lives as a whole. For example, if peak oil occurs and there is no alternative energy source available to meet the energy demands fulfilled by fossil fuels, a market failure will occur due to resource failure. Another historical example is the destruction of trees on Easter Island. Resource failure is generally not amenable to government policy, and may be exacerbated by it if subsidies alter the market to keep it from finding the best solution to a resource shortage.

Complainer Failure

The last type of failure is not a market failure at all, but a failure by a critic to understand the nature of the market. Consumer demand does not drive the economy; capital investment does. The over-reliance on gross domestic product (GDP) as a measure of economic output has fooled many people into believing otherwise, but GDP neglects intermediate production at the commodity, manufacturing, and wholesale stages of production. As such, consumer demand and spending are an effect of a healthy economy and not the cause.

With this in mind, the idea that the market has somehow failed when it does not produce everything that a particular person might want and deliver it exactly where they want it for a cost that the person finds agreeable is ridiculous. A person levying this criticism should be advised to check their hubris. If a certain good or service is not produced in a free market, it is because such production is not sufficiently worthwhile for anyone to make a living through doing so. The fact that everyone gets by without that good or service indicates that no failure has taken place. Those who desire that good or service so much should make an effort to provide it so that they can have it.

Standards

The entire idea of market failures is based on Pareto efficiency. But there is no reason why we must choose Pareto efficiency as the measure of market success. One could just as well define market efficiency as the degree to which it permits its participants to achieve their individual goals. (Note that these are equivalent if the conditions of the first welfare theorem are met.) Another possible standard is that of productive efficiency, which is optimized when no additional production can occur without increasing the amount of resources, time, and/or labor involved in production. An economy with maximum productive efficiency cannot produce more of one good without producing less of another good.

Conclusion

In every case, that which appears to be a market failure is actually a failure of government policy, natural resource management, or economic understanding. We may therefore reject the very idea of market failure as yet another form of statist propaganda.

The Economic Illiteracy of Liberty Mutual, Part II

Every insurance company has a target demographic. For Geico, it is government employees. For State Farm, it is farmers. For Liberty Mutual, it appears to be people who are economically illiterate. Last year, the company released a series of nine advertisements, most of which commit economic fallacies. At the time, I examined and debunked them. Some of those have been phased out, while others remain. They have also made four more advertisements, all of which commit more fallacies. Let us analyze each one and find the fallacies therein.

Blah Blah Blah (Coverage Compass)

A woman says, “Your car insurance policy is 22 pages long. Did you read every word? No. Only lawyers do that. So when you got rear-ended and you needed a tow, your insurance company told you to look at page 5 on your policy. Did it say, ‘Great news, you’re covered!’ on page 5? No. It said, ‘Blah blah blah blah blah blah blah…’”

Reading and familiarizing oneself with the policy that one has purchased should be expected, as it is the car insurance customer’s responsibility to know what is covered and what is not. A person who does not read the fine print before agreeing to legal terms has no one to blame but oneself.

Mistake (New Car Replacement)

A man says, “Your insurance company won’t replace the full value of your totaled new car. The guy says, ‘You picked the wrong insurance plan.’ No, I picked the wrong insurance company.”

This man picked the wrong economics textbook, assuming he has ever read one at all. The reason that many plans cover the current value of a car rather than the original value is that depreciation occurs over time. Wear and tear begins as soon as a car is used for the first time, meaning that a car’s value begins its descent from new car price to scrap metal price as soon as it is driven for the first time. It makes no sense to insure anything for more than it is worth, as this only incentivizes the owner to destroy the insured object and file an insurance claim on it.

Of course, there is nothing inherently wrong with a New Car Replacement policy, but it will cost more, and for good reason. When the potential payout for a claim increases and all else is held constant, the insurance rate must increase in kind so that the insurance company can remain profitable. There is also nothing inherently wrong with an insurance company which chooses not to offer such a policy, so the man’s statement about picking the wrong insurance company is only a matter of subjective preference.

Perfect (Accident Forgiveness)

A man and woman present a dialogue.

Man: You both have a perfect driving record.

Woman: Perfect.

Man: No tickets, no accidents.

Woman: That is, until one of you clips a food truck, ruining your perfect record.

Man: Yeah.

Woman: Now, you would think your insurance company would cut you some slack, right?

Man: No, your insurance rates go through the roof. Your perfect record doesn’t get you anything.

Woman: Anything.

Man: Perfect!

Of course their perfect record does not get them anything, for it is not perfect anymore. Damaging other vehicles makes a driver a greater liability for an insurance company because it makes the insurance company pay out claims to the owners of those other vehicles. As past behavior is a useful predictor of future behavior, an insurance company raises rates on drivers who have had accidents recently in anticipation of having to pay more claims caused by those drivers in the future.

While there is nothing inherently wrong with an Accident Forgiveness policy that does not increase rates for the first accident, it will cost more, and for good reason. The money required to keep the insurance company afloat must come from somewhere, and it can only come from raising rates on accident-free drivers, raising rates on drivers with two or more accidents, lowering claim payouts, or some combination of the aforementioned.

Wife’s Car (New Car Replacement)

A man says, “You’re late for work. You grab your 10 gallon jug of coffee and back out of the garage, right into your wife’s car, with your wife watching. She forgives you, eventually. Your insurance company, not so much. They say you only have their basic policy. Don’t basic policies cover basic accidents? ‘Of course,’ they say. ‘As long as you pay extra for it.’”

Again, it is the car insurance customer’s responsibility to know what is covered and what is not. If the policy says that the circumstances are not covered, then it is up to the customer to either deal with such a mistake out of pocket or pay extra for a plan that covers such a mistake. And perhaps such a driver should not have a 10 gallon jug of coffee, as that level of caffeine would certainly impair one’s driving abilities.

Conclusion

This set of advertisements is appealing to the economic illiteracy and sense of entitlement of the general population, especially younger people. Unfortunately, because economic illiteracy is so widespread, Liberty Mutual seems to have a winning marketing strategy.

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.

 

The Not-So-Current Year: 2015 In Review

Though the specific demarcation of the passage from one year into another is a rather arbitrary social construct, it does provide a useful annual period for self-examination and remembrance. Now that 2015 has entered the history books, let us take a look back at a year’s worth of essays and review the not-so-current year.

In December 2014, an assassination of two NYPD officers prompted many libertarians to signal hard against the use of force against agents of the state. I decided to argue the opposing case. The harassment of the Meitiv family by Child Protective Services prompted another such article. Julian Adorney resolved that good government police exist, and I responded by explaining why this is impossible. I used another NYPD incident to argue that when government agents and common criminals fight, we should pull for no one. When Tremaine Wilbourn killed a police officer during a traffic stop in Memphis, Tenn, I wrote a list of observations on the event which mostly follow the aforementioned articles.

Many libertarians praise decentralization, and rightly so. But it is neither good nor evil in and of itself. It can be used for good or evil ends, and I explored the latter.

On Burns night, I observed that a proper haggis was unavailable in the United States and found that as usual, the state is to blame. Staying on the subject of food, economically illiterate researchers blamed Walmart for causing obesity, and I explained why this is fallacious.

The 70th anniversary of the liberation of the Nazi death camp at Auschwitz gave cause to examine how such an atrocity could be carried out without the state. The answer, of course, is that it would be all but impossible.

Entering February, I allowed my cynicism to wax to the point of formalizing it as a razor. It could use more detailing and strengthening, which is a project for a later time. I used the razor to explain why the Obama administration might want to disarm elderly people.

Alleged Silk Road creator Ross Ulbricht was convicted on February 4 and sentenced on May 29. I made lists of observations on both of these occasions. Some people were none too happy with the state’s treatment of Ulbricht, and their displeasure got them in hot water. This occasion also merited a list of observations.

The movie American Sniper did well at the box office, but a metaphor therein was left incomplete. I decided to complete the analogy of sheep, sheepdogs, and wolves by adding farmers of human livestock to the mix.

A video by Stefan Molyneux about two different types of statists compared them to warriors and wizards. I made the case that countering the state requires libertarians to be both character classes at once.

Ron Paul made a video appearance at the International Students For Liberty Conference, but some attendees decided to interrupt this by reading an open letter to him which was filled with leftist entryist nonsense. I wrote an open letter against them which gained wide recognition and helped run some of the people involved out of libertarian circles. It remains one of my proudest moments as a writer.

At the end of February, Republicans tried to use brinkmanship to force spending cuts, which failed miserably due to their track record of caving at the last minute. I wrote a list of observations on the event.

On March 9, I published my most popular article to date, which is also one of my most shallow, choir-preaching works. The correlation between the two can be most depressing at times. At any rate, here are 25 statist propaganda phrases and some concise rebuttals.

Several commenters have told me that I am at my best when I provide a sound defense for an idea that most people find to be outrageous. I did this several times in 2015, defending the killing of innocent shields in certain circumstances, the proliferation of nuclear weapons, letting Iran develop a nuclear deterrent, and the replacement of democratic elections with jousts to the death.

I went on a rebuttal streak in the spring of 2015. President Obama proposed that voting be made mandatory, and I argued the case against this. Michael Eliot argued that a violent revolution is not the correct strategy for creating a free society, and that the use of methods such as seasteading will be more successful. I explained why this is false. Walter Block argued in favor of Rand Paul’s presidential campaign, and I demonstrated why he is not a good choice. Austin Petersen effectively made a case against libertarianism itself, and I rebutted it.

Paul Krugman delivered some rather standard talking points about public goods, and I showed why they are wrong. I revisited the subject later in the year.

Rolling Stone decided to go ahead with a completely false story about campus rape, and did nothing beyond wrist-slapping to those involved in creating and editing the story. They also defended the ideas behind the story, with which I took great issue. Another sex-related story occurred on April 21 when the head of the Drug Enforcement Administration resigned due to a prostitution scandal that occurred on her watch. I explained why we should not be surprised, and should actually expect more of such behavior. The purity spiral of campus feminism has grown to such an extent that even left-wing feminist professors are not immune. Rape accusation culture struck once more at Amherst College, and the victim took the university to court.

Baltimore police officers arrested Freddie Gray, who died one week later as a result of injuries sustained during the arrest. Riots ensued, and I wrote a list of observations on the event.

Charles Murray published a book detailing a novel strategy for fighting the regulatory state: overwhelm it with civil disobedience, create a legal fund to defend victims of regulation, and start treating government fines as an insurable hazard. I argued that this would fail, but that it needs to be tried anyway.

The prohibition of excessive bail and fines, as well as cruel and unusual punishment, is a much-revered part of the United States Constitution. I argued that it should not be.

Dylann Roof carried out a mass shooting at a black church in Charleston, and I wrote a list of observations on the event.

Late June is Supreme Court season, and they delivered at least two bad decisions in 2015. First, they ruled very narrowly in favor of raisin farmers, but left the rights-violating practice of eminent domain intact. Then, they crammed same-sex marriage down the throats of all Americans.

Litecoin exchange rates suddenly spiked in early July. I took an educated guess at why, but it ended up being pure speculation.

Turmoil in Greece threatened to boil over into a default or even a Grexit. I took a deep look into the situation and concluded that only anarchy can fix the problems there.

Two seemingly disparate stories concerning Planned Parenthood and the ongoing conflict in Ukraine had a common thread: there is no such thing as non-lethal aid to an organization that conducts lethal operations.

I wrote a three-part series about fascism and communism in America, as well as how a nation can be both. Although I lated discovered that Lawrence Britt does not appear to be a real person, I found the 14-point list of fascist characteristics to be sound, so I did not revise the article.

A problem which is frequently cited as a reason why we must have a state is the problem of pollution. I dealt with the issues of water ownership and pollution in order to show why the state cannot solve the problem of pollution.

In one of my more controversial articles, I argued that Vester Flanagan, the man who murdered a reporter and a cameraman in Roanoke, Va., was a model social justice warrior. Examiner decided to pull it for offending their audience, but you can find it here.

Everyone knows that the Libertarian Party is not exactly a bastion of excellent strategic thinkers. I decided to offer them help, and a response to my essay advocating an alternate strategy is also worth reading.

Liberty Mutual created a series of advertisements that air regularly in my area, and they are full of economic fallacies. They annoyed me enough to dedicate an article to debunking them.

Reservation scalping occurred at Disney World restaurants, which outraged many people. I applied Walter Block’s reasoning for defending ticket scalpers to argue against the outrage.

September 11 always brings about discussions on security. I argued that there can be no such thing; only temporary and imperfect protection from particular dangers.

The term ‘cuckservative’ arose from alt-right circles to describe those who are insufficiently conservative, selling out their constituents, and/or acting against their own rational self-interests. I created the term ‘cuckertarian‘ to describe a similar problem among libertarians. Another problem with the libertarian movement that I addressed is the embrace of hedonism when libertarianism only requires that we not use aggressive violence to stamp out non-violent degeneracy.

After several years in prison for tax resistance, Irwin Schiff passed away. I wrote a list of observations on the event that gained praise from his son Peter.

I belatedly refuted Matt Zwolinski’s six reasons for rejecting the non-aggression principle. I had meant to do so when he published his piece back in April 2013, but other work took precedence and it languished in development hell. Next, I dealt with Youliy Ninov’s arguments against anarcho-capitalism in what is my most verbose article to date.

Islamic terrorists attacked Beirut and Paris on November 12 and 13, respectively. I wrote a list of observations on the events.

Many libertarians misunderstand immigration and borders, so after several pro-open-borders articles published in quick succession by other authors, I tried to set them straight.

Black Friday is revered by most libertarians as a celebration of free-market capitalism. I explained why this reverence is somewhat misplaced.

Robert Dear attacked a Planned Parenthood facility in Colorado Springs, Colo., killing three people and wounding nine others. I made the case that although the use of force against Planned Parenthood is defensive in nature, it is frequently impractical and counterproductive.

The success of the Donald Trump presidential campaign, as well as growing support for it in libertarian and reactionary circles, led me to examine the phenomena. I concluded that Trumpism is not a libertarian form of reaction, though we may have some common enemies.

My final article of 2015 addressed the common phrase ‘give back to the community.’ In short, it is communist nonsense that must be rejected.

I began work on another case against a constitutional amendment, but it was not completed for publishing before the end of 2015, so it will appear first in next year’s review.

All in all, it was an interesting year full of occasions to make sharp libertarian arguments. May 2016 bring more of the same. Happy New Year!

The economic illiteracy of Liberty Mutual

Every insurance company has a target demographic. For Geico, it is government employees. For State Farm, it is farmers. For Liberty Mutual, it appears to be people who are economically illiterate. The company recently released a series of nine advertisements, most of which commit economic fallacies. Let us analyze each one and find the fallacies therein.

Makes You Wonder

The narrator says to a video of cars in a junkyard, “No one thinks they are going to be in an accident. Which is why no one wants insurance. So we go cheap. You know, because we’re never gonna need it. Until one day, we do. Now that cut rate policy is costing us big. Makes you wonder if there’s something better out there.”

Perhaps economically illiterate people do not want insurance and think nothing can happen to them, but smarter people understand that there are dangers in life which should be prepared for in advance. This is why insurance exists; to mitigate unpredictable circumstances which are relatively unlikely to happen to a particular person, but are devastating for those who do suffer such misfortune.

New Car Replacement

A man says, “You drop 40 grand on a new set of wheels, then WHAM! A minivan T-bones you. Guess what? Your insurance company will only give you $37,000 to replace it. Depreciation, they claim. ‘How can my car depreciate before its first oil change?,’ you ask. Maybe the better question is, why do you have that insurance company?”

This man fails to understand the subjective theory of value. A car, like anything else, is worth what people are willing to pay for it. People are not willing to pay as much for a used car versus a new car, no matter how little used the car is. There are several reasons for this. Dealerships sell at retail price while used car owners sell at wholesale price, meaning that one would lose money just by buying a car from a dealer and selling it back as soon as one drives it off the lot. Used cars buyers usually cannot afford the price of a new car, and that which cannot be paid will not be paid. Wear and tear begins as soon as the car is used for the first time, meaning that a car’s value begins its descent from new car price to scrap metal price as soon as it is driven for the first time.

Of course, there is nothing inherently wrong with a New Car Replacement policy, but it will cost more, and for good reason. When the potential payout for a claim increases and all else is held constant, the insurance rate must increase in kind so that the insurance company can remain profitable. There is also the matter that an item insured for more than its value is worth more to its owner destroyed than intact, and the incentives involved in such a situation open a new can of worms.

Accident Forgiveness I

A woman says, “You pay your auto insurance premium every month on the dot. You’re like the poster child for paying on time. And then, one day, you tap the bumper of a station wagon. No big deal, until your insurance company jacks up your rates. You freak out. What good is having insurance if you get punished for using it? Hey, insurance companies, news flash. Nobody’s perfect.”

Does this woman want a cookie? Paying bills on time is what a person is supposed to do because that is what a person agreed to do upon signing up with the service provider that is sending the bills. Paying bills on time is also a separate matter from one’s risk profile. Speaking of risk profile, damaging other vehicles makes a driver a greater liability for an insurance company because it makes the insurance company pay claims. As past behavior is a useful predictor of future behavior, an insurance company raises rates on drivers who have had accidents recently in anticipation of having to pay more claims caused by those drivers in the future. Having insurance is still good even if one gets punished for using it because it keeps one from having to pay for all damage one causes while driving out of one’s own savings. It also means that any civil suits will be directed at the insurance company rather than at the driver.

As above, there is nothing inherently wrong with an Accident Forgiveness policy that does not increase rates for the first accident, but it will cost more, and for good reason. The money required to keep the insurance company afloat must come from somewhere, and it can only come from raising rates on accident-free drivers, raising rates on drivers with two or more accidents, lowering claim payouts, or some combination of the aforementioned.

Better Car Replacement

A woman says, “You owned your car for four years. You named it Brad. You loved Brad. And then you totaled him. You two had been through everything together. Two boyfriends, three jobs, you’re like, ‘Nothing can replace Brad.’ Then Liberty Mutual calls, and you break into your happy dance.”

Aside from the silliness of anthropomorphizing one’s car, this is the only passable advertisement of the bunch, as it is the only one that does not contain economic fallacies.

Blindsided

A man says, “You’re driving along having a perfectly nice day when, out of nowhere, a pickup truck slams into your brand new car. One second it wasn’t there and the next second, boom! You had your first accident. Now you have to make your first claim. So you talk to your insurance company and, boom! You’re blindsided for a second time. They won’t give you enough money to replace your brand new car. Don’t those people know you’re already shaken up?”

Only the economically illiterate would be blindsided by the concept of depreciation. This man commits the same fallacies discussed above for the New Car Replacement video combined with a logically irrelevant emotional plea. Being “shaken up” does not affect the monetary value of an insurance claim.

Easy Claim Filing

A man says, “You park your car. As you walk away, crunch! A garbage truck backs into it. So, you call your insurance company, looking for a little support. What you get is a game of a thousand questions. ‘Was it raining? Were your flashers on? Was there a dog with you?’ By the time you hang up, you’re convinced the accident was your fault. Then you remember you weren’t even in the car.”

Like any other business, an insurance company is not in business to lose money. The way that they avoid losing money, aside from keeping insurance costs high enough to make the business profitable, is to avoid paying out claims unnecessarily. To the economically illiterate, what the man describes may sound like a game of a thousand questions designed to attack the insured, but it is necessary to determine who is at fault so that the proper liability in a case may be established.

New Car Totaled

A woman says, “You totaled your brand new car. Nobody’s hurt, but there will still be pain. It comes when your insurance company says they’ll only pay 3/4 of what it takes to replace it. What are you supposed to do, drive 3/4 of a car? Now, if you had Liberty Mutual New Car Replacement, you’d get your whole car back. I guess they don’t want you driving around on three wheels. Smart.”

No, not smart. For the third time, these people fail to understand subjective value and depreciation. One is not supposed to drive 3/4 of a car; one is supposed to either get a different car that costs 3/4 as much, or pay for more out of pocket. An agreement with an insurance company is not meant to coddle drivers, but to pay claims to them according to the terms agreed upon when the insurance policy was purchased.

Accident Forgiveness II

A woman says, “You do all this research on a perfect car. Gas mileage, horsepower, torque ratios. Three spreadsheets later, you finally bring home the one, then smash it into a tree. Your insurance company is all too happy to raise your rates. Maybe you should have done a little more research on them.”

Maybe she should have done more research on how insurance works, as she demonstrates the same sort of ignorance as the woman in Accident Forgiveness I. And perhaps the person being discussed should have done more research on torque ratios, as a better understanding of how power is sent from the engine to the wheels may help one avoid running a car into a tree.

Deductible Fund

A woman says, “You pay your car insurance premium like clockwork. Month after month, year after year. Then one night, you hydroplane into a ditch. Yeah. Surprise! Your insurance company tells you to pay up again. Why pay for insurance if you have to pay even more for using it?”

For the second time, paying bills in a timely manner is not some heroic feat that deserves great praise and adulation upon completion. It is something that a responsible adult just does. This woman then shows the same lack of understanding as the women in the two Accident Forgiveness commercials.

Conclusion

This set of advertisements is appealing to the economic illiteracy and sense of entitlement of the general population, especially younger people. Unfortunately, because economic illiteracy is so widespread, Liberty Mutual might have a winning marketing strategy.

Austin Petersen’s Case Against Libertarianism

On May 12, Austin Petersen published an article called “5 Reasons Why I’m Not an Anarchist” in which he argues that anarchist libertarians do not really understand the basics of force, fraud, life, liberty, or property, and that some state is necessary. In this rebuttal, I will show on a point-by-point basis that he has failed to make the case, demonstrated blatant and willful ignorance on several issues, and actually made a case against libertarianism.

#1. Rights are guarantees

A right is something that MUST be provided.

This is the definition of an obligation, not a right. A right outlines an action which one should be free to perform without external interference. The idea of a right is prescriptive of the way people should interact, not descriptive of the way they do interact.

Any society aimed at protecting natural rights must use some type of force to guarantee those rights.

Petersen says this as though it is in dispute, but it is not. The only way that this would not be true would be for there to be no aggressors in the world, which has never been and likely never will be the case.

Any mechanism of force used to guarantee those rights have the same effect as government, no matter what that form may take.

Defending oneself from aggressors or hiring other people to assist one in doing so is much different from the effect of a group of people exercising a monopoly on initiatory violence in a geographical area. If one is dissatisfied with one’s current defense arrangement in the absence of a state, one can hire different defenders or acquire better weapons and armor, both of which are generally problematic if not illegal in a statist society, especially if one is seeking to use self-defense against the state, the ultimate aggressor in the area.

If there is a natural right to a lawyer if you are accused of a crime, then that right means that there must be resources expended to provide citizens with a defense against the government’s accusations.

There is not a natural right to a lawyer if one is accused of a crime. This would entail a right to force some lawyer to work for a particular person, which violates the lawyer’s rights of bodily ownership and freedom of association. These are natural rights because attempting to argue against them results in a performative contradiction. Also note that we need not worry about accusations from a government if there is no government.

A fully privatized law system would be justice for sale to the highest bidder. Citizens without the means to defend themselves could be railroaded into arbitration that works against their interests and for whoever paid for the judge.

It is interesting to note that the problems that statists believe will happen without a state do happen with a state. At present, those with money can bribe politicians and judges to get the results they want. This means that citizens, who lack the means to defend themselves from the state, are railroaded into the government monopoly legal system that works against their interests and for whoever paid for the politicians and judges. In a free society with multiple options for dispute resolution, those with money can try to bribe judges, but those judges will lose credibility and thereby lose customers to other judges who make fairer decisions. There is also no conflict of interest as there is in a statist system, where a citizen taking the government to court will do so before a government judge. Failing this, victims who cannot get justice by peaceful means would have an easier time employing defensive or retaliatory violence against those who have wronged them, as there would be no government monopoly on defense ready to defend the aggressors from vigilante justice. The aggressors would only have what protection they could afford, not the military might of a state.

For that reason, the constitution laid out the means for citizens to be protected from unreasonable searches and seizures, cruel or unusual punishments, or from things like double jeopardy.

The Constitution has done no such thing. In fact, it is the problem because it purports to establish and justify the institution that commits such wrongs against people. The interpretation of the Constitution is also left up to government agents, which means that foxes are guarding the chicken coop.

It means that while citizens have the right to defend themselves, they must also be defended if they are too weak to defend themselves. Members of the Arizona militia don’t worry about home invasions, but 90-year-old grandmothers in Massachusetts might.

Petersen is attempting to justify robbery and slavery here, which is obviously anti-libertarian. To say that someone must be defended is to say that someone must do the job and someone must pay for it. This means that if no one is willing to do it, then someone must be forced to do it. Forced labor is a form of slavery, and forcing people to fund something is a form of robbery. But according to Petersen, this is acceptable because he thinks it is necessary.

Of course members of the Arizona militia are not worried about home invasions. They have the means to exterminate those who would invade their homes. Where elderly women lack such means, it is generally because government gun control laws have forcibly prevented them from getting such means.

Competitive policing and private security would be available, but public security for those who can’t protect themselves is a natural right if the aim of society is to protect life, liberty, and the pursuit of happiness.

Society does not exist; each individual person exists. Therefore, society has no aim apart from the aim of each individual person. The reason why public security cannot be a natural right was explained in the previous section.

A virtuous society would also hopefully include the unborn in that definition.

This is not an argument, but a personal preference, so we may move on.

#2. An anarchist society is unable to protect its citizens from foreign invasion.

A fully anarchist society with no collective means of defense is at the mercy of foreign powers who have not abdicated such means of survival. An anarchist state is at the mercy of anyone who wishes to expand into their territory unchecked. The Native Americans can attest to this.

This is a straw man fallacy because no one is seriously proposing a fully anarchist society with no collective means of defense. In fact, most proposals involve private defense agencies armed with nuclear weapons to deter states from invading, along with a heavily armed population that is ready and willing to exterminate invaders on contact. This fallacy is made quite strange by Petersen’s previous mention of the Arizona militia.

Petersen is also shifting the burden of proof because the burden of proof is on the person who makes a positive claim. The statist must show that the state is the only way to provide military defense; it is not incumbent upon the anarchist to prove that the state is not the only way until the initial burden is met. One can understand why Petersen would shift such a burden, of course. The burden is impossible to bear because for the state to take a portion of one’s property to fund a defense of one’s property makes it a expropriating property protector, a contradiction of terms.

The Native Americans did not have anarchist societies. Most of them would be called social democracies in modern political terms. They also had a huge technology gap against the Europeans that anarchists will not have against statists. And was it not a relatively minarchist government that committed genocide against them?

The constitution laid out the means through which American society can protect itself.

The Constitution empowered the principal enemy against which Americans have not been able to protect themselves.

If I band together with my neighbors to form a mutual defense pact, and we call that a constitution, it would necessarily have the same effect as government.

If you and your neighbors form an organization that has the same effect as government, then it is not a mutual defense pact. The effect of government is to force people to engage or refrain from engaging in certain behaviors, as well as to force people to pay for certain goods and services. In a free society, your constitution would be treated as a charter for a criminal organization.

If government is to exist, its number one job is to protect citizen’s liberties, and after that to protect their lives through a reasonable national defense that is not overly interventionist or burdensome on its taxpayers.

It is impossible for a government to protect the liberties of its citizens because it inherently violates them. The best it can do is to act like a farmer and treat the citizens like sheep. The sheep may be protected from the wolves, but they are not safe from the farmer, who also intends to exploit them and quite possibly slaughter them in due time.

Citizens should absolutely be free to seek the means of self-defense, and should not be prohibited from exercising those means vigorously to defend their own lives, liberty, and property. They should be free to join together for mutual protection, provided they do not infringe on the fundamental natural rights of other citizens in doing so.

I suppose even a blind squirrel occasionally finds a nut. And sometimes, a person arguing against libertarianism manages to destroy his own arguments.

#3. Anarchy means the non-aggression principle is optional.

The non-aggression principle is always optional. Just because everyone should observe it does not mean that they will. The relevant question is always what penalties or retaliations, if any, one will face for violating the non-aggression principle.

If you believe in the non-aggression principle… who’s job is it to enforce it?

Anyone who wishes to use violence against aggressors may do so, as their violation of the non-aggression principle estops them from making a complaint when someone gives them a taste of their own medicine.

If someone breaks into your home, and you are unable to defend yourself, or pay for private security, who do you call?

This assumes that no one would ever defend another person without being paid to do so, which is false due to a great multitude of counterexamples. People would not suddenly lose what good will they have toward each other simply due to the absence of a violent criminal organization called the state. It also assumes that no company which only services paying customers would ever be proactive. Why would a defense company that is interested in providing better services than its competitors at a lower cost wait until an aggressor robs or kills one of its customers when that threat can be eliminated before such a crime happens? Their customers would demand no less, as it is against the rational self-interest of property owners to have aggressors running around their neighborhoods, even if their own properties have not yet been directly affected.

If Petersen would be consistent here, then he should abandon libertarianism and call for full socialization of everything that he thinks people should not have to do without.

If you have a dispute with your neighbor, who (you allege) stole your life savings, how will you sue them or have them arrested to get it back, assuming you might be correct?

Petersen demonstrates willful ignorance here because anarchists have set forth proposals for how this could be done and he does not appear to have bothered with reading them. The most notable proposal involves a number of dispute resolution organizations which one may choose to resolve the dispute. These would operate like a hybrid of an insurance company, a credit rating agency, and a mediation service, with private defense agencies on call when needed. If it is found that a person has committed an act of theft, then that person would have the choice to either pay restitution or become an outlaw who may be attacked by anyone at any time without penalty, as no DRO or PDA would want the reputation of protecting a person who ignores DRO decisions.

In an anarchist state, no one is responsible for defending life, liberty, or property unless they are paid to do so. Crimes such as theft, fraud, breach of contract, or murder could be committed against those who do not have the means of self-defense. In Ancapistan… no one can hear you scream. And no one cares.

Ignoring the fact that an anarchist state is a contradiction of terms (much like Libertarian Republic, the name of the website where Petersen’s essay is published), Petersen is once again worrying that the problems which do occur with a state might be problems without a state. That which may or may not work is always a better option than that which is known not to work. With a state, even those who are supposedly paid to defend life, liberty, and property are under no obligation to do so, as the state has monopolized the courts and may indemnify its agents for failure to provide defense services. No matter the system, crimes may be committed against those who do not have the means of self-defense. In a statist society, the state frequently victimizes people while the masses cheer for the oppressors and no one cares about the victims, and the victims are deprived by law of the means to defend themselves from the state.

#4. The Non-Aggression Principle? I didn’t sign sh*t!

The Non Aggression principle is a social contract… but I didn’t sign it, and neither did the enemies of liberty. Anarchist often sneer at constitutionalists, arguing that they didn’t sign the document, nor did they agree to it. Then they claim that the only thing we need to live in peace and harmony is the non-aggression principle. The only problem? I didn’t sign it. And neither did Kim Jong Un, Stalin, Hitler, Mao, or any other statist dictator on the planet. The non-aggression principle is a social contract, but there is zero obligation to live by it.

The non-aggression principle is not a social contract. It is a moral statement about what constitutes the acceptable use of force. (Nor is the Constitution a social contract; it is a slave contract written by slave-raping hypocrites who had no right to force their contract upon anyone who did not agree to be bound by it at the time, let alone those of us who live almost two centuries after its last surviving signatory died.) Petersen then uses another straw man, as no one is seriously claiming that the non-aggression principle is that the only thing we need to live in peace and harmony.

If Petersen truly believes that there is zero obligation to live by the non-aggression principle, then he should stop calling himself a libertarian, because he is not one.

Indeed, it would be dangerously naive to submit to any form of a non-aggression principle, for as soon as one party signs, those who have not could feel free to decline, and everyone who chooses to live life in a pacific state would be easy prey for those who do not live according to that principle.

The non-aggression principle is not the non-violence principle. Using defensive violence to deter, repel, and kill aggressors as necessary is allowed by the non-aggression principle. Petersen also demonstrates complete ignorance about the definition of a contract. A valid contract is not unilateral (this is why the social contract is invalid, but Petersen also fails to understand this), but is an agreement between two or more parties who enter the agreement in the absence of both coercion and fraud.

People who choose to live as pacifists are easy prey, period. History shows us that those who choose not to defend themselves will be exploited by those who are willing to prey upon them. The state itself is the most triumphant example of this.

Also, in many cases the non-aggression principle forbids the basic principle of a preemptive attack for the purpose of self-defense.

This is false because threatening someone counts as initiating the use of force and may be responded to with as much force as necessary to end the threat.

Anarchists argue that there is ‘no harm, no crime,’ however, if that is the case, then someone pointing a gun at you is not a crime. For if someone points a gun at you, it could be considered aggression, but if they do not shoot, then there is no harm. A minarchist society punishes threats and rightly labels such acts as aggression.

Not all anarchists take this position. No victim means that no restitution is owed and that once the aggressor is subdued, then no force beyond what is necessary to prevent the aggressor from victimizing someone in the future is justified. Thus, an anarchist society can also punish threats and rightly label such acts as aggression.

Now, what if Kim Jong Un placed a nuclear weapon on the launchpad aimed at Los Angeles… the equivalent of pointing a gun? Is it then moral or ethical to destroy their means of aggression? Who may be targeted ethically in such a situation?

If the weapon is ready to be launched and its target is known, then the weapon as well as those who are intent on using it are valid targets, just as one may shoot at a robber’s pistol or at the robber himself. One could also put one’s own nuclear missile on a launchpad and aim at Kim Jong-un’s location in response.

Is there any level of collateral damage acceptable in defending oneself from attack? If there is collateral damage, should there be forced redistributive justice against the citizens defending themselves and to those unfairly harmed as a consequence of being in proximity to destroying the nuclear weapon’s launchpad?

The first question is essentially about whether it is acceptable to harm human shields, and the answer is yes. To answer the second question, those who are in proximity to an implement that is being used for an act of aggression and suffer ill effects from its destruction are homesteaders of their own misery and may not pass that misery onto others in the form of a forced redistribution of wealth.

In even the most rudimentary of scenarios, the non-aggression principle does not provide for the means of adequate self-defense. Not in national defense, or personal.

This is not the function of the non-aggression principle. A moral statement about what constitutes the acceptable use of force would only serve as a guideline for such means.

#5. Private Property

Who defines what is private property? In an anarchist society, there is no commonly accepted definition.

Private property requires an anarchist society because having a state makes private property impossible. Private property is property which a individual has an exclusive right to control and use. In the presence of a state, the state will fund its activities through taxation, which is the taking of private property for state use. If any person or organization may take property from its rightful owner without penalty, then the owner’s right to exclusive control and use has been violated. Therefore, the only possibility for private property rights is to have no state.

Over time, a commonly accepted definition will arise within a particular area because it is less dangerous and more productive to avoid unnecessary violent conflicts, and the purpose of private property is to avoid violent conflicts.

Some may choose to argue that intellectual property is private. Some may decide otherwise and begin acquiring that property for their own benefit.

Some may choose to argue that two plus two equals potato, but they are speaking nonsense, as are those who try to apply the concept of private property to that which is not scarce, not rivalrous, and has no particular form in physical reality. As the entire concept of intellectual property is logically indefensible, there is no means to acquire that which cannot exist.

Some may argue that they have a right to food, and thus their neighbor’s surplus should be rightly theirs, seeing as how the creek from their property fed the crops next door. The farmer next door might argue that the creek actually belongs to him, since it flows across his fields. The beggar next door might argue that the fields are his, since he has been sleeping in them for longer than the farmer has sown them.

Again, people may try to argue for anything, but facts trump opinions. The fact is that while a person may own the ground upon which a creek flows, the water that constitutes the creek is passing from property to property, owned by no one unless someone gathers and uses it, mixing one’s labor with the unowned natural resource. The beggar has no rightful claim because he has not mixed any labor with any unowned natural resource.

Without a firm definition of what constitutes private property, there can be no reliable transactions between parties.

While true, this is not a problem for an anarchist society, as shown above.

An anarchist society can attempt to define what is truly property, but they cannot enforce it, even if they all agree.

Several possible means of enforcement have been discussed above.

To conclude, Petersen fails to prove any of his five points, has committed numerous logical fallacies, and has argued in favor of several anti-libertarian positions. But this is what one should expect in an argument for an idea that has internal contradictions, such as an expropriating property protector or a defense agency that threatens to become an attacking force if one does not submit to its whims.

Why Charles Murray’s Strategy Is Bad, But Should Be Tried Anyway

On May 12, Charles Murray released a new book called By the People: Rebuilding Liberty Without Permission. In it, he makes the case that government has greatly overstepped any legitimate functions it may have had, has grown too powerful to fight, and cannot be reined in by normal political means, such as voting and court challenges. While technological advances are helping to return some liberty to the people, there is still a burdensome regulatory state that holds back economic growth and does little (if anything) to actually protect people.

His strategy for dealing with this problem is to overwhelm the enforcement means of the state through large-scale civil disobedience. Examples could include becoming part-time Uber drivers, routinely making deposits of $9,999, or parents including cupcakes in their schoolchildren’s packed lunches. It could also mean people continuing to live life as they have, even though doing so is now in violation of government regulations. To aid in such efforts, Murray proposes a legal defense fund and an insurance against regulatory action. He calls the former the Madison Fund, which is to be an organization that will defend individuals and small businesses against government regulations which would be too costly and time-consuming for them to fight on their own. The latter is to be an effort to treat government fines for regulatory non-compliance as an insurable hazard like other natural or man-made incidents that can lead to financial losses. To aid in such efforts, he proposes that only regulations which are arbitrary, capricious, and lacking in public support be targeted. His goal is to “make large portions of the Code of Federal Regulations de facto unenforceable” and return the United States government to the constraints outlined in the U.S. Constitution.

While this strategy is better than nothing, it leaves much to be desired from a philosophical libertarian perspective. Let us see why this strategy is bad, but should be tried anyway.

The first thing to note is that this is not a strategy for harm elimination, but for harm reduction. Even if Murray’s proposals come to fruition and everything goes as planned, this tactic does nothing to end the source of the problem. His ultimate goal is merely to repeat the experiment of 1787, and we already know how this experiment plays out. The government will stay small for a time, but eventually people will figure out how to buy influence, vote themselves money from the public treasury, and use state power to get protections for themselves at the expense of others. In another century or two, our descendants will face the same problems all over again if Murray has his way. His strategy will also send the message that keeping and using the statist system is the path to liberty, despite the fact that the statist system has caused the erosion of liberty in the first place. There could scarcely be a more detrimental idea to the pursuit of liberty. It must also be noted that while the resisters are gaining inches through their acts of disobedience and court challenges, the state will continue to take miles behind their backs, just as it always has.

Another problem is that when such cases go to court, the courts are not an impartial forum for dispute resolution, as starry-eyed progressives would have us believe. The courts are monopolized by the state and presided over by judges on a government payroll. The prosecutors are also on a government payroll, and any jury members present are there because the state has summoned them. This degree of conflict of interest would not be tolerated in any situation not involving the government. It is thus in the rational self-interest of prosecutors to get decisions that favor the expansion of state power, judges to make such decisions, and both to nudge jurors in that direction. In short, the scofflaws will not get a fair hearing. There is also the matter that politicians will use the sudden clogging of the courts as a pretext for expanding the power of government by creating more courts.

Perhaps the greatest flaw in Murray’s presentation is that he does not fully consider the likely response of the state to his plans. The state will respond to challenges to its power as it always does, with violence, threats, fear, and intimidation. While Murray recognizes that many regulations are arbitrary and capricious, he does not seem to account for the fact that the penalties for violating said regulations can also be made arbitrarily severe to counter the influence of his proposed Madison Fund and insurance companies. Another likely response by the state will be to pick a few high-profile cases, preferably with defendants viewed unsympathetically by the public, and make examples of them, ruining their lives and livelihoods for daring to stand against the almighty colossus of state power. One should also expect to see the IRS and other agencies target the Madison Fund and any insurance company offering policies to protect against regulatory actions. The insurance companies may simply be banned by law from offering such policies, while the Madison Fund could be harassed out of effective operation by civil asset forfeitures and SWAT raids. The Madison Fund and the insurance companies will likely find no relief from this abuse in the courts for reasons explained above, and their manpower and resources would be too busy defending themselves to be able to help those it is intended to help.

There is also the matter that civil disobedience is something of a misnomer. Given that governments are institutions of force, its agents will respond uncivilly to those who practice civil disobedience. In the American civil rights movement and the struggle for Indian independence from Great Britain, the two most common examples used by advocates of non-violent resistance, many demonstrators were assaulted, kidnapped, and murdered. The leaders of these movements were both rewarded with assassination for their pacifism. Non-compliance until force is used risks sending a message to the public that government violence is the solution to the problem of dealing with lawbreakers, regardless of the nature of the laws being broken.

Clearly, this strategy has some serious flaws. But why should it be tried anyway? Murray correctly notes that civil disobedience can succeed where democratic voting cannot. Fewer people are needed to nullify regulations through mass non-compliance than are needed to vote out those who created the regulations, if such people are even subject to elections. More important, however, is the fact that the manpower and resources to resist the state more forcefully are not yet available, and perhaps the only way to gain them is to try more peaceful methods like those advocated by Murray and demonstrate their inadequacy. After all, most people are empiricists to the point of being anti-rational, depending mostly upon their own experiences with some influence from the experience of others, but with very little a priori logic involved. They will not be swayed by reason (otherwise the fight for liberty would have been won long ago!) and must therefore learn by observation and bitter experience. If we are to form a culture of resistance and end the state in our lifetimes, we must recognize that people tend to do the right thing once they run out of other options and do everything we can to test those other options and show their shortcomings as soon as possible.

Why Paul Krugman Is Wrong About Social Security And Public Goods

On Apr. 10, economist Paul Krugman wrote an opinion piece called “Where Government Excels” in which he praises some Democrats who are calling for the expansion of Social Security and defends a role of government in the provision of so-called “public goods.” In this rebuttal, I will attempt to show that these ideas are unsound.

Krugman claims that “We …know that some things more or less must be done by government. Every economics textbook talks about ‘public goods’ like national defense and air traffic control that can’t be made available to anyone without being made available to everyone, and which profit-seeking firms, therefore, have no incentive to provide.” First, let us ask how it might be known that some things must be done by government. There is no logical proof that government must provide certain services, as this would require one to show that every possible effort of private enterprise to provide said services must fail. This requires one to not only examine every historical effort, but to predict every conceivable future effort. This is an inexhaustible proof by exhaustion, and therefore cannot be proven.

The specific examples that Krugman gives are national defense, air traffic control, healthcare, and retirement security. To a person who believes in some degree of central planning and has an empirical rather than rational understanding of economics, this may make sense. But let us examine the true nature of these services.

National defense is largely a myth, as nations do not exist apart from the individual people that comprise them. The valid concept is that of individual defense. The purpose of government police and military forces is not the objective protection of the civilian population, but the protection of the rulers from the civilian population, the protection of the statist system should the civilian population overthrow the rulers, and the presentation of a deterrent to rulers of other nations elsewhere in the world who might seek to take over the tax base for themselves. Moreover, individual defense is made impossible by the presence of a government because governments force their subjects to rely upon their armed forces for defense, use said armed forces to destroy any competitors who may wish to offer defense services, and force their subjects to pay taxes to fund said armed forces. All of these activities are incompatible with protecting the citizenry, as true protection from violence must include protection from violence done by the state as well, so objective defense requires anarchy.

As for the provision of military defense in a stateless society, the private sector actually has every incentive to provide it. This is a service which all people want for themselves, and which everyone except for criminals wants for everyone else in the society as well. We know that the demand for this service is very high because people are willing to endure all of the oppressions of statism just to obtain the counterfeit version of it described above. It therefore stands to reason that many people will be willing to meet this demand and be paid for doing so, with competition driving down prices far below what defense budgets of governments currently cost.

Finally, Krugman raises the “free rider” objection, that military defense cannot be provided to anyone if it is not provided to everyone. If true, then the argument must apply to governments as well, which would mean that governments can “free ride” on the military defense provisions of other governments, which fails to explain why all governments field militaries and seek a strong national defense. Secondly, a private defense agency could simply tell any aggressors who would seek to invade an area who is not under their protection. (Although without any gun control laws to stop such people from acquiring military-grade weaponry and lower costs for defensive weapons due to the free market in defense technologies, an aggressive militant group would have a much tougher time attacking the average person than they would now.) Also note that because the “free rider problem” has no solution, it is not really a problem, but a possibly negative fact of life that must be tolerated. It is not certainly negative because money spent on one thing cannot then be spent on another, meaning that eliminating free ridership by making everyone who benefits from a service pay for it will eliminate some other economic activities that were occurring. To ignore this is to commit the broken window fallacy.

The case against air traffic control as a public good is much simpler because the idea that profit-seeking firms have no incentive to ensure the safety of their customers (as well as those on the ground who may be hit by falling aircraft) is sheer lunacy. If the goal of a company is to maximize profits, then civil lawsuits and criminal investigations for wrongful deaths and injuries that occur as a result of a lack of safety precautions that reasonable people would expect to be in place will certainly be detrimental to that goal. The losses would be exacerbated by customers fleeing from less safe airlines to more safe airlines.

Next, Krugman claims that government is better than the market at providing health insurance and that while conservatives agitate for privatization, this will make healthcare less efficient and more expensive. What conservatives agitate for is not true privatization, as this would mean an end to government involvement. Instead, they seek a sort of fascism where healthcare industry leaders and government officials work together to set policies that protect each other at the expense of smaller competing companies and the average person. This fake privatization would move us in the wrong direction, as it would magnify the worst of both worlds by capitalizing risks and socializing losses as well as combining the efficiency of the market with the evil of the state. But real privatization is quite different. Striking down barriers to entry, such as the restriction on buying health insurance across state lines as well as individual and corporate licensing requirements, would give consumers more choices and thereby force companies to either provide better insurance policies or be outcompeted.

Last, Krugman makes a case for Social Security. He argues that it is necessary because people are not rational actors and therefore cannot be trusted to save and invest based on a realistic assessment of what they will need in retirement and an intelligent understanding of risk and return. But what comprises the state? Is it run by a super-intelligent race of aliens who can centrally plan everyone’s lives? Of course not. Those who wield state power are people as well, subject to the same shortcomings as everyone else. He then says that people are losing billions of dollars because investment advisors are looking out for themselves first and their customers second, but if this is a surprise to anyone who uses their services, then they are paying the price for failing to observe caveat emptor.

Some will say, and Krugman does, that people should not be at fault for saving too little and making poor investment decisions. But the essence of liberty is the freedom to take one’s own risks, reap one’s own rewards, and suffer one’s own consequences without external molestation. While Krugman is correct to say that the economy “should not be an obstacle course only a few can navigate” and “is supposed to work for real people leading real lives,” the obstacle courses that few can navigate are arranged with state power on behalf of those who can buy political favor, and this prevents the economy from working for the average person.

Social Security is not the shining example of a working system that Krugman says it is. Since its inception, it has been worse than a Ponzi scheme, as Ponzi schemes at least spare the unborn and only take money from those who willingly enter them. Since the Reagan administration, the trust fund for Social Security has routinely been looted by politicians to fund their pet projects without raising the budget deficit as much as it would otherwise be raised. This sleight of hand would not be possible if people were allowed to completely manage their own retirement funds. While Krugman claims that expanding Social Security is necessary because of the replacement of private pensions with 401(k) plans, the reality is that pension plans for life are both economically unsustainable and logically indefensible, as they amount to paying people for not producing something of value just because they once did produce something of value.

Ultimately, there is no such thing as a right to a retirement. Until relatively recently, a period of relative relaxation and unproductivity between an arbitrary age and death was unheard of unless a person had earned the means to engage in such. Those who did not earn such means either had to continue working or be cared for by other family members. With government interference, the responsibility of a particular children paying for particular parents as well as full responsibility for one’s own financial affairs were erased, thereby creating moral hazards that have led to malinvestments. Krugman asks why we should not make Social Security bigger. The short answer is that malinvestments ultimately cause recessions, and the entitlement bubble is a potential killer of the economy as we know it. The impact of the collapse of this unsustainable system will be large enough without efforts to make it even larger.