How To Stop Government Bitcoin Sales

On June 27, the US Marshals Service conducted the auction of 29,656.51306529 Bitcoins. They have been in the possession of the federal government since they were stolen through civil asset forfeiture from Ross Ulbricht upon his arrest in October 2013 on charges of narcotics trafficking conspiracy, computer hacking conspiracy, and money laundering conspiracy for allegedly running the anonymous Internet marketplace Silk Road.

From a philosophical libertarian perspective, this is a travesty. Agents of the state seized Ulbricht’s Bitcoins and sold them under civil asset forfeiture laws, which allow agents of the state to take any person’s property and sell it at auction by accusing that person of a crime and confiscating the property as evidence. It matters not whether the person is later exonerated of all charges; neither the property nor its value may be recovered. If a group of private citizens were to act in the same manner, it would be possible to bring federal charges against them of robbery, receipt of stolen monies, transportation of stolen monies, and conspiracy to commit the aforementioned crimes. These crimes carry a maximum combined sentence of 52.5 years in prison and a fine of $750,000. But because the agents of the US Marshals Service are agents of the state, and the state has a monopoly on the enactment and enforcement of laws, they will face no punishment for this conduct.

Of course, the best way to combat injustice is through direct action. While it is too late to stop the theft and auction of Ulbricht’s Bitcoins, cryptocurrencies such as Bitcoin provide several mechanisms for preventing other such events from happening in the future. Let us examine some of them.

1. Use strong encryption methods when engaging in state-disapproved activities. Ulbricht failed to do this, even revealing his real name on an Internet forum using an unencrypted connection, which allowed agents of the state to link him to Silk Road and make an arrest. It is possible to encrypt a wallet so strongly that even the most powerful computers cannot crack it by the laws of thermodynamics. One can also use the Tor network and mixing pools to make it more difficult for agents of the state to spy on one’s activities.

2. Use cold storage outside of one’s computer. Ulbricht kept the Bitcoins being auctioned, as well as another 144,342 Bitcoins linked to Silk Road, on his personal computer. If he had stored them in a cloud-based wallet service, a cryptocurrency exchange, an encrypted USB drive, a silver ring, or some other medium, they would have been much more difficult to seize and auction.

3. Give access to one’s Bitcoin wallet to a confidant. This is somewhat risky, as the confidant could betray the Bitcoin user and steal the Bitcoins out of a wallet. But if Ulbricht had done this, then the operating funds of Silk Road along with Ulbricht’s personal Bitcoins could have been kept out of state hands and given to another person who could continue running the operation without losing assets.

4. Use assassination markets to discourage agents of the state. An assassination market is a prediction market in which people can anonymously place bounties on people and receive payment for correctly guessing the date of unnatural death of an individual in advance. Several of these already exist. Such a market could be used to increase the hazard level of being a politician who passes legislation against non-aggressive behavior (such as that of Ulbricht in operating Silk Road), or of being an enforcement agent for such legislation, to the point that few would want to take the risk of doing such things.

5. Implement a method of tarnishing stolen Bitcoins. Such a method is not currently part of any cryptocurrency, but a framework for such a method has been created. The idea is to add a function, either to the Bitcoin protocol or as an external supplement, that informs users that a particular amount of cryptocurrency is stolen money or otherwise ill-gotten. This would disincentivize dealing with people who steal cryptocurrencies or use them in the commission of aggressive acts, as well as dealing with people who deal with such people.

6. Convince enough Bitcoin miners to use a majority of the hash rate to stop transfer of seized Bitcoins. This method goes one step further than tarnishing Bitcoins; it effectively freezes them. The blockchain is a public ledger that is a fundamental part of Bitcoin. The process of mining includes maintaining and updating the blockchain. If miners who control a majority of the hashing rate do not wish to see a particular transaction performed, they have the power to stop it by denying it any confirmations. While this is normally a bad thing in the form of a 51% attack on the network, it could be used to prevent governments from selling seized cryptocurrency.

It is thus clear that Bitcoin users have many tools at their disposal to thwart agents of the state who would do to others what has been done to Ross Ulbricht. It is now up to each member of the Bitcoin community to use them as one sees fit.

The five Ws of fake libertarianism

So far, this year has been a time of debate and infighting amongst libertarians. Aside from the original disagreement within libertarianism, that of minarchism versus anarchism, we also now have newer divisions of thick versus thin, also known as brutalist versus postmodernist, and complete non-violence versus the limits of non-aggression. In a significant number of cases, supporters of one side or another within a division have accused each other of not truly being libertarians at all. In other words, accusations of fake libertarianism abound. In this piece, I will attempt to resolve the issue of precisely what constitutes fake libertarianism.

What is a fake libertarian?

In order to consider this question, we must first have proper definitions for “libertarian” and “fake.” Fortunately, this is not hard to do. Firstly, libertarianism is a philosophical position on what constitutes a proper use of force. It says that initiating the use of force is never justifiable and using force in a defensive manner is always justifiable, even if it is not always preferred. Secondly, we must consider what makes a fake adherent of any position a fake adherent. A fake adherent of a position is a person who claims to believe in that position while explicitly rejecting the premises of that position or their logical conclusions, or a person who adds to or subtracts from the premises of that position. Note that one may believe in additional premises beyond a certain position without being a fake adherent of that position, but to falsely represent such premises as being contained within that position does make one a fake adherent. Thus, a fake libertarian is a person who claims to be a libertarian but does one or more of the following:

  1. Supports initiating the use of force for any reason;
  2. Rejects a logical conclusion of the non-aggression principle;
  3. Claims that another principle can trump the non-aggression principle;
  4. Claims that libertarianism contains something that it does not contain, or vice versa.

When and where are there fake libertarians?

There are fake libertarians to be found in many places, within many organizations, and throughout the history of libertarian thought. But this much should be obvious, otherwise the subject would not attract the attention of my penmanship.

Who is a fake libertarian?

There are two ways of addressing this question. One approach is to call out individual people who espouse false versions of libertarianism. But the point of this piece is not to accuse (relatively) famous people of heresy and treat them to excommunication, but rather to provide rebuttal to falsehoods and inconsistencies, as these are truly the root of all evil. There is also a danger in naming a person as a fake libertarian who later becomes a true libertarian, as this would date a piece that would otherwise stand the test of time. As such, I will take the other approach of calling out certain ideologies within the libertarian “movement” and showing how they amount to fake libertarianism.

First, let us consider minarchism and anarchism. Libertarianism demands that no one initiate the use of force, regardless of who is initiating force, whom force is initiated against, why force is being initiated, or what the consequences of intiating force may be. As this is a universal principle, no exception may be made for agents of the state. This leaves the state with no means of operating, as all of its funding comes from taxation, currency debasement, and borrowing, and all of its laws are backed by the threat of force being used against those who disagree and act upon their disagreement. The collection of taxes, like all actions carried out by agents of the state, is done under the threat of kidnapping and caging for non-compliance, with the threat of murder should one resist being kidnapped and caged. This violates the non-aggression principle and is therefore forbidden under libertarianism. Currency debasement is merely taxation without legislation, a hidden tax that steals the wealth out of everyone’s money by devaluing it and giving it to government-favored bankers. Borrowing is simply taxation deferred to the unborn, who cannot possibly have a say in the matter. As invalid conclusions necessarily follow from false premises, the operation of a state is incompatible with libertarianism.

But surely not every advocate of limiting the size and scope of government is a fake libertarian. If this were true, then most people (those who were not always anarchists) would necessarily have to become fake libertarians before they could become true libertarians, an absurdity. It is for this reason that a distinction must be made between those who either have doubts about the practicality of anarchism (such as how certain services will be provided in the absence of government) or have never seriously considered anarchism and those who explicitly reject anarchism. There is nothing wrong with having curiosities about the operation of a stateless civilization, and there are many ideas for how these services may be provided which will need to be tested as and after the state is eliminated. There is, however, something wrong with letting such concerns lead one to rule out the possibility of anarchism. Ruling out the possibility of anarchism means accepting some degree of statism. As this involves rejecting a logical conclusion of the non-aggression principle, those who call themselves libertarians but explicitly reject anarchism are fake libertarians.

Second, let us consider thin libertarianism versus thick libertarianism, or as Jeffrey Tucker and an author with the pen name Bulbasaur have renamed it, libertarian brutalism versus libertarian postmodernism. Libertarian brutalism is the non-aggression principle, nothing more and nothing less. Libertarian postmodernism, on the other hand, suggests that libertarianism tells us more about what ideals we should have and how we should interact with other people beyond the restrictions of the non-aggression principle. While there are other positions on issues which logic demands that one take beyond the non-aggression principle, these are distinct and separate from libertarianism, as one can assert various individual preferences without initiatory force, and these may be incongruous from person to person. But there are those who try to blur the lines and say that libertarianism includes additional tenets and requires additional commitments on other issues, such as racism, sexism, environmentalism, wealth disparity, and so forth. These people claim that libertarianism contains something that it does not contain. As such, libertarian postmodernists are fake libertarians.

Third, let us consider pacifism versus a belief in the legitimacy of violence used in self-defense. Libertarians are free to choose not to exercise the right to use violence in self-defense. It may be a stupid thing to do, and it will likely cause them to wind up dead when matters take a turn for the worst, but one does not truly have a right if one is not free to choose not to exercise it. But a problem arises when pacifists insert total nonviolence into libertarianism as an additional tenet. These people claim that libertarianism contains something that it does not contain; namely, a prohibition on all uses of force, not just initiatory uses of force. Thus, libertarians who include pacifism inside their definitions of libertarianism are fake libertarians.

Why are there fake libertarians?

There are several motivational factors for fake libertarians. Let us examine the two most common ones.

There are some pundits who wish to espouse either conservative or progressive ideas, but find that their lack of talent prevents them from finding an audience among conservatives or progressives, as their relatively larger talent pool is already dominated by more persuasive propagandists. But in a smaller community with a relatively smaller talent pool, like the libertarian “movement,” they are capable of being the big fish in a small pond. And since we are talking about conservative and progressive pundits, twisting the truth is just part of the gig, so they find nothing wrong with taking on the libertarian mantle, adding a few buzzwords to their vocabularies, and using their talents to corrupt the message of liberty.

There is another motivation similar to the first, but it has a more nefarious purpose than dishonestly gained self-advancement. Some fake libertarians are leftist entryists who are attempting to take over and destroy libertarianism so that it can no longer pose a threat to statism in general and their political ideologies in particular. Lest this sound like a conspiracy theory, one must remember that it has happened at least twice before. “Liberal” used to mean civil liberties, limited government, private property rights, and laissez-faire, but leftists entered liberalism and changed that. “Conservative” used to mean tradition, limited government, anti-colonialism, and anti-federalism, but leftists entered conservatism and changed that. Now it is libertarianism’s turn, unless true libertarians successfully combat this effort.

In closing, there is something important to remember about why there are fake libertarians. Just as counterfeiters do not make copies of worthless banknotes and forgers do not falsify meaningless signatures, political charlatans do not pretend to hold a position if doing so has no potential benefit. Thus, true libertarians should take heart. The very fact that there are fake libertarians means that true libertarianism is worth something, and that defending it against those who would falsely assume it and attempt to destroy it is worth doing.

Free Markets Require No Regulation

This article is a rebuttal to an article titled “Free markets need more regulation than you think” by John Aziz, taking the form of a point-by-point commentary.

The article is subtitled “After all, they can’t just magically appear out of nothing.” No one is claiming that free markets magically appear or that they arise out of nothingness, so this is a straw man fallacy. Now let us delve into the article proper.

“I have always found it unfathomable that people think a “free market” means little to no regulation.”

This is an argument from personal incredulity. That one person finds an idea unfathomable has no bearing upon its truth value.

“Yet since the days of Reaganomics, an increasingly large number of economic thinkers have made exactly that case, to the extent that deregulated markets have become Republican orthodoxy. What is so mind-boggling is that the policies they champion have little to do with the intellectual heritage they invoke.”

This is a fair point. Many Republicans claim to support government deregulation of markets while in practice, they tend to merely reduce regulations rather than eliminate them. They also tend to favor regulations that help large corporations at the expense of smaller competitors, as well as protect certain industries, such as the military-industrial complex and the petroleum industry.

“Proponents of deregulated markets say their cause was born from the idea that millions of people acting freely in the marketplace make more efficient decisions consistently than any group of Wise Men appointed by government can. In this world, humans are rational actors pursuing rational ends and the competition between them is a better regulator than any government official. The market simply rejects the businesses who do not offer a good service, while rewarding those who do.”

This is not entirely correct, as we need not assume rational actors pursuing rational ends. If people are irrational actors, then the government which is composed of people will contain irrational actors, who will therefore do nothing to solve problems by imposing irrational government regulations.

“These laissez-faire attitudes are encapsulated in a quote from Reagan himself: “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.'” The implication is clear — government regulators and bureaucrats come in, misunderstand the market, and just get in the way of entrepreneurs. At best, it is argued, this hurts efficiency. At worst, it is a road to totalitarianism, where the government completely squashes economic and political freedom.

Friedrich Hayek’s The Road to Serfdom is a book frequently cited by many who see government regulation as a slippery slope toward totalitarianism.”

All of this is true.

“Yet Hayek himself was more pragmatic about regulation than the title of his book implies, condemning a “wooden insistence” on “laissez-faire” as harmful to the cause of economic freedom.”

Pragmatism is a rejection of the very idea of having principles. It says that there is no a priori knowledge, which is a performative contradiction because the act of asserting that there is no a priori knowledge requires the use of logic, which is an example of a priori knowledge. It also says that truth is either not a property which can be attributed to a statement (deflationary), or that truth simply means “useful to believe” (pragmatic). This rejection of objective truth is another performative contradiction, as to reject objective truth is to make an objective statement, which cannot be true by the premises of the argument. That the falsehood of pragmatism is proven has helped to grow the Rothbardian school of thought to eclipse the Hayekian school. Rothbard, it should be noted, was equally (if not more) condemning of Hayek’s defenses of limited statism and deviations from laissez-faire.

“Advocates of laissez-faire and deregulation generally argue that government’s regulatory role is the prevention of violent coercion, fraud, and theft, as well as the enforcement of property rights and contracts, and little more. In other words, it should act as the night-watchman state. Some — such as the anarcho-capitalist followers of Murray Rothbard — go further and argue that it is beneficial for even these functions to be taken over by the market.”

The reason that anarcho-capitalists advocate for the market to take over night-watchman state functions is that it is contradictory for governments to perform them. Governments cannot prevent violent coercion because they are institutions of violent coercion. Governments cannot prevent fraud because their supposed legitimacy comes from contracts that no one living has ever signed or been given an option not to sign, which is a fraudulent basis for legitimacy. Governments cannot prevent theft because they are funded by taxation, which is theft. Governments cannot protect property rights because their powers of taxation and eminent domain are violations of property rights. While governments can enforce contracts, they use violence to monopolize this service within their geographical areas, meaning that they can charge almost any price and provide as poor a quality of service as they wish.

“Yet Hayek pointed to a number of areas where he considered regulation beneficial — and the list may shock advocates of laissez-faire economics. Hayek cited the restriction of excessive working hours, the maintenance of sanitary conditions, and the control of poisonous substances.”

These are all necessary protections, but the idea that government regulation is the only way to create such protections is a positive claim which carries a burden of proof. As that burden has not been fulfilled, there is no obligation to accept the claim. There is also an appeal to authority here; just because Hayek considered regulation to be beneficial does not mean that it is.

“He argued that regulation by the market became ineffective when property owners weren’t charged for the damages they caused, and thus saw a need to regulate deforestation, farming, and the smoke and noise produced by factories.”

Such results were caused by government intervention. Through the legal fiction known as a corporation and the government monopoly on the enforcement of law, business owners and investors have been shielded from civil and criminal liability for their acts of property damage. A better alternative to the statist system for dealing with pollution has been laid out by Stefan Molyneux here.

“So what “road to serfdom” was Hayek talking about if he favored government regulation in many areas? He was actually describing central economic planning, where the government takes over the process of allocating resources, setting prices, and directing economic activity entirely. In other words, Hayek warned of states like Soviet Russia, Cuba, and North Korea. And if we look at the lack of political and economic freedoms in a country like North Korea, it is clear that Hayek was at least partially right.

But the key thing that Hayek grasped that many modern advocates of laissez faire don’t is that government regulation of markets is not the same thing and not even close to being the same thing as full-on central economic planning.”

Regulation and central planning differ only in degree, not in kind. Both are coercive interventions by the state into the economy. Government regulation always has some economic impact, and will in some way alter the process of allocating resources and setting prices through the effects of compliance costs. There is also the overwhelming tendency for state power to expand, meaning that today’s regulation can easily turn into tomorrow’s full-on central economic planning.

“In fact, I’d go even further and argue that the existence of a free market where individuals can freely pursue their economic desires and enjoy the fruits of their labor is a product of freedoms secured through government regulation.”

This is an ipse dixit fallacy, as to argue a point, one must actually provide logical deduction and/or empirical evidence to support the point. The author does not do this.

“A free market isn’t something that just magically appears out of nothing.”

This straw man fallacy has already been dealt with above.

“It is a complex system born out of the context of a whole framework of legal, social, and political conventions that allow for the development of individuals who are capable of making the discerning economic and social decisions required for the functioning of a free market.”

This is true, but the claim that a government is required for this is a positive claim with an unfulfilled burden of proof. The claim should therefore not be accepted.

“Beyond the basic freedoms of the night-watchman state — secure property rights, freedom from coercive violence, freedom of movement, freedom of association — a genuinely free market requires regulation to secure other freedoms as well, like the freedom from being tricked by misleading advertising or from being poisoned by dangerous chemicals. I would also suggest that the following are equally important to the creation of a free and healthy marketplace: freedom from starvation; freedom from dying from easily curable diseases; freedom from environmental degradation caused by pollution; and the freedom to develop yourself as a person through education.”

We have dealt with the security of property rights and freedom from coercive violence above. From there, the contradictions of government continue. Governments have not defended freedom of movement; in fact, they have done the opposite through immigration laws, passports, vehicle operation licenses, and economic and travel sanctions. Governments cannot protect freedom of association because they violate freedom of association by forcing people to associate with them. Governments cannot protect people from misleading advertising because they engage in misleading advertising in the form of propaganda. Governments have infringed upon the freedom to develop oneself through education by forcibly indoctrinating children in public schools and by denying children the ability to learn a trade through child labor laws.

Mr. Aziz advocates for some positive liberties, which are invalid because their provision violates negative liberties. Freedom from starvation implies that a farmer or hunter/gatherer should be forced to provide food to someone, a violation of the freedom of association of the food provider. Freedom from dying of easily curable diseases implies that a doctor should be forced to treat a person, and/or that a personal trainer should be forced to help a person stay physically fit enough to repel disease. These are violations of the freedom of association of the doctor and/or personal trainer.

Pollution, as explained above, is a problem that free markets can solve, but governments have used their violence to prevent such solutions.

“After all, it is no coincidence that the market economy only really began to develop when the modern democratic state did too.”

We end with both an ipse dixit fallacy and a cum hoc ergo propter hoc fallacy. No rational or empirical evidence is given to support the idea that the market economy developed because of the modern democratic state. Numerous economists and historians have argued that this has occurred in the opposite order. There is also the possibility that it is just a coincidence, as well as the possibility that some other factor is responsible for the development of both.

To conclude, a free market is an economic system in which no fraud, coercion, or initiatory force is present. Government is an organization that initiates force. Therefore, free markets do not need more regulation than one might think. They require, by definition, no regulation at all.

Six observations on the secession of Crimea

On March 16, Crimeans voted overwhelmingly to secede from Ukraine and rejoin Russia. Crimea had been part of Russia until it was given to Ukraine in 1954, and has been an autonomous republic since. Recently, Russian soldiers occupied Crimea and surrounded Ukrainian military bases in the region.

As with most events in world history, this is a teachable moment with several important observations to make and lessons to learn. Here follow six such observations and lessons:

1. There is no comparable event involving United States history.

Some writers insist upon trying to understand the events in Crimea by comparing them to United States history involving Texas. This is not a valid comparison for several reasons. First, there is no group in Texas that is comparable to the Crimean Tatars, an ethnic group that used to have a khanate in the region and is descended from the Mongols. Second, there is no pipeline running through Texas that is comparable to the Druzhba pipeline system that runs through Ukraine. Third, Texas was once an independent country which became part of the United States, seceded as part of the Confederacy, and was reconquered by the United States. Fourth, never was part of another state given to Texas and then taken away again. Thus, any comparison must involve hypotheticals which simply cannot comport with historical facts.

2. If voting changed anything, it would be illegal.

It is clear that the vote in Crimea was carried out under duress, and the vote result is suggestive of the votes carried out in authoritarian regimes like North Korea or those of the Arab world, where voting against what is desired by the ruling class is extremely hazardous to one’s well-being. If, however, the vote had gone in the opposite direction, it is unlikely that it would have made any difference. After all, ballots perform rather poorly at stopping bullets, and Putin is the sort of leader who has no reservations about using force to achieve his goals, as evidenced by the Russian occupation of Crimea.

3. A condition of anarchy exists between states.

The word anarchy comes from Greek αναρχος (anarkhos), meaning “without rulers.” The world system has no overruling authority, unlike the system inside a single state. There is no hierarchically superior power that can resolve disputes between nations. The United Nations is a weak attempt to do such a thing, but this instance shows its ineptness: Russia has veto power over UN Security Council Resolutions, and will simply veto any resolution condemning its activities in Crimea and/or prescribing punishments for such activities.

While this sort of anarchy is not the sort that anti-statists wish to create, it does demonstrate that a situation without rulers need not degenerate into a Hobbesian war of all against all. However, a stateless society would need to have better dispute resolution options than those which are available to states today, such as contract/reputation ratings and insurance policies against aggressive acts.

4. Putting trust in an agreement for which there is no viable recourse when the agreement is breached is unwise.

This should go without saying, but this error appears to be a systematic error at all levels of human interaction, from voters trusting the promises of politicians to negotiators of agreements between governments trusting the word of negotiators who represent far more powerful governments.

When the Soviet Union collapsed in December 1991, Ukraine had in its territory the world’s third largest strategic nuclear weapons arsenal. In 1994, Ukraine, Russia, the United States, and the United Kingdom signed the Budapest Memorandum on Security Assurances, in which Ukraine gave up its nuclear weapons in exchange for pledges to respect the territorial integrity of Ukraine. The problem with the agreement is that Ukraine was left with no recourse if the agreement were breached, as it has been by Russia’s invasion of Crimea, its own military could not repel the threat, as Ukraine’s current forces cannot, and no other signatory provided military aid, as none have.

5. The supposed legitimacy of the actions of states is based solely upon the ability and willingness to use violence.

To quote Mao Zedong, political power grows out of the barrel of a gun. Other standards of the establishment of state legitimacy do not work; going by length of time a government has operated, the presence of a military, legal opinions written by lawyers, or an edict by a body with authority over states does not allow a state to get established in the first place, while going by a constitution or a vote would prevent the continuing operation of states by allowing for individual secession. And if the vote for Crimean secession is illegitimate because it has been carried out under occupation by a foreign military, then the governments of Iraq, Afghanistan, Japan, Germany, and even the United States within the states which were part of the Confederacy are likewise rooted in illegitimacy.

6. If one has nuclear weapons, giving them up is unwise. If one does not have nuclear weapons, seeking them is wise.

Since the Cold War paradigm was established in 1949, no nation that has had a nuclear deterrent has been invaded. There has been no more effective deterrent against threats to a nation’s sovereignty and territory in human history than having a strategic nuclear weapons stockpile. Ukraine surrendered its nuclear weapons after the 1994 memorandum, and has now been invaded. Muammar Gaddafi and Saddam Hussein abandoned their quests for nuclear weapons, and now they are dead. This sends a strong message to those who are worried about their security and the potential for foreign invasion, and makes the likelihood of a nuclear exchange occurring somewhere in the world much higher.

Book Review: Selected Salvos from the Loose Cannon Libertarian

Selected Salvos from the Loose Cannon Libertarian is a collection of political, social and cultural articles written by fellow Libertarian Examiner Garry Reed.

Mr. Reed begins with an article about a lesson taught by a comic strip about Scrooge McDuck which shows how free markets reward productivity and punish corruption, as well as offers an explanation for why currency debasement is not helping to fix the economy. In the next article, Reed presents a solid case for how government is the cause of most of the chaos present in daily life, rather than the barrier keeping disorder at bay, as is the common delusion.

Next, Mr. Reed explores some hypothetical future news stories which have yet to happen. While the stories are plausible, they lower the credibility level of the book and feel out of place.

The following article considers the faith-based initiative during the Bush administration and the media’s reaction to it. Predictably, they focused on the matter of separation of church and state but ignored the replacement of charity with the distribution of stolen goods through government welfare programs, an injustice perpetrated by Democrats and Republicans alike.

Next, there is a foray into the subject of jury nullification. While a good article, it is somewhat incomplete from a historical perspective, failing to mention the Supreme Court decision Sparf v. U.S. (1895), which led to the current lack of information given to juries about the option, as well as Bushell’s Case (1670), in which the practice of jury nullification was firmly established in English (and hence American) law.

Another article concerns the failure of government-run public transportation, as well as how a free market in such services is more efficient, but it reads more like a petition than a logical case against government services.

The next article purports to explain libertarianism to the uninitiated, but really only succeeds at explaining what libertarianism is not. A philosophical approach to libertarianism must be found elsewhere, and Mr. Reed even admits as much, begging the question of why it is included in the book.

Several articles following concern a libertarian, non-interventionist (but not isolationist) approach to foreign policy, and how failing to follow such policies has incited hatred and violence against Americans. Mr. Reed recommends a few measures that are not purely libertarian, such as maintaining a state-run military and offering rewards (presumably tax-funded) to intelligence-bearing defectors from other nations, he does deliver a mostly sound criticism of current foreign policy, and even manages to sound a bit like Harry Browne at times. He also explores the civil liberties issues of the PATRIOT Act in standard libertarian form.

Mr. Reed then turns his attention to the judicial branch, and some of the reasons why it has failed to protect Americans from the overreaches of the legislative and executive branches. Toward the end of this section, he recommends the correct solution: make the state irrelevant by disobeying and nullifying its laws.

Next up is a humorous piece with a multitude of pork references concerning multiple manners of government interference in the affairs of peaceful people. While a good read, it feels out of step with much of the rest of the book.

Mr. Reed finishes with criticisms of the War on Drugs, adeptly pointing out the logical fallacies of government anti-drug ads, as well as the truth about where drug cartels and terrorists get much of the money they need to cause havoc (spoiler alert: it is stolen from American taxpayers and handed over by the US government).

Overall, the book has high points but is lacking in details and depth, and Mr. Reed’s self-deprecating sense of humor in some places can become tiresome. This could be a possible starting point for those interested in libertarianism, but better introductions can be found elsewhere.

Rating: 3/5

Arguments for stimulus and how to counter them

It has now been five years since the passage of the American Recovery and Reinvestment Act of 2009. Several commentators are claiming that the stimulus has been successful, despite its unpopularity, or that it was at least an improvement over a laissez-faire approach. Let us examine these claims.

The Federal Reserve, the TARP program, and the auto industry bailout prevented an economic collapse. The stimulus saved or created 6 million jobs.

Such claims are an example of the broken window fallacy. While they point out the jobs that were created by the stimulus, they ignore the jobs that could have been created if the money had been left in private hands. Many supporters of Keynesian stimulus have anticipated this argument and have offered rebuttals. Let us examine some of these.

The broken window fallacy does not apply because desired savings are not automatically converted into investment spending, so that government borrowing need not come at the expense of private investment.

To some extent, this is a fair point. The broken window fallacy is necessary but not sufficient to explain why stimulus is not effective. Due to the nature of debasement and borrowing, another argument is needed to explain why exploiting the velocity of money and stealing from the future to feed the present will not be effective.

Many proponents of austerity will say that the stimulus money must come from somewhere, but this is not true. Its fiat nature in modern economies allows it to be created out of thin air. But its value must come from somewhere. In the case of currency debasement (also known as quantitative easing), the value is extracted from all existing money in the economy. But as this extraction of value takes time to occur, the original spenders get to spend the money at its current value, while those farther down the line get to spend the money at its debased value. This effect helps to make the rich richer and the poor poorer, and is thus a form of income inequality caused by governments.

In the case of government borrowing and deficit spending, the value is extracted from the future productivity of the tax base, thereby selling the unborn into debt slavery. Thus, while stimulus does increase the resources used at present, this comes at the expense of having less resources to use in the future. The effect on the economy is much like the effect on a farmer who runs out of food in the winter and decides to eat his seed crop. He will be better off for a time while his resources last, but he is consuming the resources in the present that he needs to use next spring to provide for himself in the future. (This metaphor may fly over the heads of some younger farmers, but those who were farming before seed companies were able to use the legal fiction of intellectual property to force farmers to purchase seeds from them each year will understand.)

Governments had to spend because the private sector would not.

Spending occurs in the private sector when people have money to spend and believe that they will receive a reasonable return on investment. The problem is that a large amount of private capital was lost in the housing bubble. This bubble was caused by Federal Reserve policies from 2000 to 2004, which true to Austrian business cycle theory, set off a wave of malinvestments in housing that collapsed in 2008, following a tightening of monetary policy in 2006. As the Federal Reserve is authorized by Congress to perform its manipulations of the economy, we are left with the idea that government intervention is the solution to a problem created by government intervention, which is a contradiction.

Now let us consider what happens when governments spend money because the private sector will not. First and foremost, there is cronyism. The politically connected members of the 1 percent are most likely to receive stimulus funds. There is also a lack of profit motive. Governments do not have to earn a reasonable return on investment because they obtain their funds at gunpoint rather than by voluntary means, and they have excluded all competitors from their geographical areas. Thus, they have no incentive to invest wisely with stimulus funds, and they frequently do not. These malinvestments, in the worst cases, can help to fuel the next business cycle.

Spending cuts since 2011 have destroyed jobs. A sort of reverse broken window fallacy is at work here, as one cannot see the jobs that would have been saved if higher levels of spending had continued.

There is something to this argument, even though there is no way to be sure that spending cuts destroyed jobs because we have no control group to observe. But it must be remembered that jobs which are sustained by elevated government spending are temporary jobs which will end whenever elevated government spending ends. Eventually, such spending must end in one way or another, so these jobs were destined to be lost at some point. But again, we have the broken window fallacy of ignoring what the private sector can do if money is not taken out of it to fund stimulus, as well as the seed crop consumption problem if stimulus is funded by debasement or borrowing.

Now let us consider two more arguments:

Europe tried an austerity approach that failed, and this provides a control group which shows what happens without stimulus.

Quite simply, Europe did not engage in austerity. There have been riots in protest of proposed austerity measures, as well as theft from the bank accounts of private citizens to help keep government spending going, but very little in the way of actual spending cuts. According to Eurostat, only eight countries in Europe (out of 30) cut government spending between 2008 and 2012. But even if there had been austerity and accompanying economic hardships, short term losses are to be expected as the economy adjusts to a lack of stimulus, but this will result in long term gains.

Also note that unlike the US, individual European countries cannot use central bank manipulations to attempt to solve their problems. But this is probably a good thing, as will be shown below.

The stimulus should have been larger, but doing something was better than laissez-faire.

The historical evidence does not support this assertion. By comparing the laissez-faire approach used from 1887 to 1913 with the Keynesian approach used from 1933 to present, we find that while stimulus by governments and central banks spaces out recessions to an average of every 5.7 years from every 3.9 years, the recessions which do occur are much deeper, doing 46.11 percentage-point months of industrial production lost until previous peak is regained (PPM) of damage to the economy per year versus 40.98 PPM of damage per year with an Austrian approach. Factoring the time difference and damage difference together, this means that a Keynesian-managed recession is 64 percent worse on average than an Austrian-managed recession.

By using the same methods used by Adorney, we find that the period of monetary stimulus only from 1914 to 1932 resulted in a recession every 3.2 years on average, doing 137.3 PPM of damage per year. This makes an average recession managed solely by a central bank 67 percent worse than an average Keynesian-managed recession and 175 percent worse than an average Austrian-managed recession. Clearly, central banking alone produces by far the worst results. While a period of government stimulus without monetary stimulus would be interesting to examine, no data for such a period exists.

Like the seed crop consumption analogy discussed earlier, we see a short term gain followed by a long term loss. Increasing the amount of stimulus to get over one recession will set the stage for a much worse long-term recession, one which may not be responsive to stimulus.

Coal Ash Pollution And A Free Market Solution

On Feb. 2, a 27-acre coal ash pond operated by Duke Energy leaked into the Dan River in North Carolina, releasing up to 82,000 tons of coal ash mixed with 27 million gallons of contaminated water.

Environmental regulators first reported that arsenic levels in the water were safe, but later acknowledged that they had misreported test results, which showed that arsenic concentrations exceeded the standard of 10^-5 grams per liter. Other tests showed elevated levels of copper and iron in the water. Coal ash is also known to contain cadmium and selenium, the former of which is extremely toxic and the latter of which is a trace nutrient but is toxic in large amounts.

“We’re not downplaying risks. We’re doing our objective analysis of what we’re seeing so far, and I think we are concerned,” said Jamie Kritzer, a spokesman for the North Carolina Department of Environment and Natural Resources. “The Dan River is a gem, and people value it throughout the state for not only being a source of drinking water, but also for its aquatic life that it provides a home to and all the recreational uses. This is certainly something that concerns all of us.”

Situations like this one present one of the greatest challenges to free market advocates, as many people cannot envision how people could solve a problem like environmental pollution without government intervention, and will thusly support state action out of this believed necessity. It is therefore worth examining how voluntary methods can solve pollution problems, as well as how statist methods actually interfere with solving pollution problems.

First, we must define what pollution is. The Free Dictionary provides a useful definition: pollution is the contamination of soil, water, or the atmosphere by the discharge of harmful substances. As such contamination results in damage to private persons and property, this creates a tort (specifically known as a mass toxic tort) for which victims may sue the polluter for damages and restitution.

But this is where government intervention actively prevented a free market solution to the coal ash problem. According to the AP, three citizen lawsuits prior to the recent leak concerning the danger of such pollution and ongoing leaks of coal ash dumps were blocked by the N.C. Department of Environment and Natural Resources, which asserted its regulatory authority to take enforcement action and then declined to take such action. The agency has now proposed a settlement in which Duke would pay slap-on-the-wrist fines but is not required to perform any restitution for its property damage. Those who would suggest an increased need for regulation should bear in mind how regulation stopped a potential solution to the problem, as well as how large corporations can bribe politicians and regulators to treat them favorably (and any competitors unfavorably).

The solution is thus counter-intuitive; less regulation leads to less pollution because allowing pollution (or the imminent threat thereof) to be treated as a violation of property rights and thusly handled by civil courts (or private dispute resolution organizations) can lead to action in time to prevent an environmental disaster, while stopping this process with government regulation and oversight allows polluters to get away with substandard environmental protection until it is too late.

On Peter Schiff, minimum wage, offensive terminology, and philosophy

On the Jan. 28 episode of “The Daily Show with Jon Stewart,” correspondent Samantha Bee interviewed businessman and financial commentator Peter Schiff on the subject of the minimum wage. In the interview, Schiff made the controversial statement that the work of a mentally retarded person would be worth only $2 per hour.

The interview provoked a response by Allen Clifton of Forward Progressives. While Schiff’s comments certainly deserve a thoughtful response, this was not quite it. Let us examine this piece philosophically and provide rebuttal where necessary.

“I’m sure many of you have met those people who ‘just don’t get it.’ I had a friend growing up who was born into a wealthy family. I remember a debate I had with her once about who had it harder, rich people or poor people. She said rich people did. Her example was that when her basement flooded the damage amounted to over $100,000 to fix, whereas a poor person who can’t pay for their electric bill only needs a couple hundred dollars.

I remember this debate so vividly because I honestly couldn’t believe the ignorance. She just didn’t get it.

Well, that’s the same feeling I had watching an interview from The Daily Show where the CEO of Euro Pacific Capital, Peter Schiff, discussed his ridiculous beliefs about the minimum wage.”

With only the information given, the girl mentioned above does appear to have an ignorance of economics. But as we will see, Mr. Schiff’s position against the minimum wage is not ignorant, even if he does make a terrible argument in defense of his position.

“His belief is in line with many ‘free market loving’ Republicans who believe that workers should be paid what they’re worth. Which sounds great, until you realize the reality that the “worth” of a worker is determined by the person paying them – a person whose only real concern is growing their wealth, not yours.”

The quotation marks around “free market loving” are fair, as Republicans are statists who do not believe in a truly free market with no government interference. However, the next sentence is false. The truth is that the worth of a worker is not determined solely by the person paying them; it is also determined by the maximum worth of that worker assessed among all possible employers, modified by the costs of travel to a different place of employment, the inconvenience of finding a different employer, the inconvenience of starting one’s own business versus continuing to work for someone else, and so forth.

“By all means if we want to hire tens of millions of independent arbiters to go into every job, assess the work each worker does then assign a fair value to each employee that their employer must pay – then I fully support abolishing the minimum wage. Because I can promise you one thing, most workers would be paid much more than they are now.”

This is not an abolition of the minimum wage at all. It is just a more intrusive means by which the state could interfere with the labor market by mandating a certain wage for a certain amount of labor of a particular type. As for a fair value, it cannot be determined in such a manner. A fair value is a value agreed upon by both buyer and seller without the use of coercion or fraud. An arbiter as described above, who is actually not independent because he or she is employed through the state, will have his or her assessments enforced by coercion applied by agents of the state. Essentially, this would create a planned economy. Take a close look at North Korea or the former Soviet Union to see how well this tends to work.

“Honestly, who really feels that they’re paid what they’re worth?”

Probably no one, from lowliest worker to wealthiest CEO. But feelings are economically irrelevant unless one acts upon them. A person who feels he or she is worth more should demonstrate this by either becoming more productive, finding another employer who will pay more, or starting his or her own business. There are government barriers that make these actions more difficult, and these should be targeted and eliminated.

“Look at teachers. They mold the minds of our future generations, yet their salaries are often below $50,000 per year.”

Under the current system, teachers mostly indoctrinate children with a pro-state view of the world. There is no reason to assume that a state-run public education system is necessary, especially with developments of private alternatives such as the Khan Academy and the theories of unschooling and natural learning. If the system is unnecessary, then the jobs will not exist, so speaking of the salaries for such jobs becomes meaningless.

“Firefighters risk their lives saving others, yet they’ll never be part of the top 1%.”

This is because there is a difference between loss prevention and wealth creation. If acts of loss prevention were to create a “top 1 percent” degree of wealth for those preventing losses, then they would have to cost more than the objects whose loss was prevented. Then it would make no economic sense for there to be activities of loss prevention, such as firefighting.

“So don’t give me this nonsense about ‘workers should be paid what they’re worth.’ Especially when you see the pay of some of these executives making 300-400 times more than the average employee at their company.”

On the contrary, paying workers an amount other than what they are worth is nonsense. Paying workers less than what they are worth makes it unprofitable for a worker to work at a certain job, while paying workers more than what they are worth makes it unprofitable to keep employing them. As for executives, if they make this much more in a free market, it is because their efforts are worth that much to shareholders. Of course, there are government interferences that help to create this disparity in the current market, such as a corporate law system that tends to shield the wealthiest people from competition, criticism, and liability.

“Well, Mr. Schiff took it a step further by basically saying the ‘mentally retarded’ should only be paid about $2 an hour. In other words, if you suffer from some kind of disadvantage in life which has precluded you from obtaining many skills required for better employment opportunities – you should be devalued as a human being.

Oh, but he wrote an ‘explanation.’ Basically he blamed Comedy Central for airing that part of the interview, claiming that the only reason he used the phrase ‘mentally retarded’ is because he couldn’t think of the proper phrase.

Using that logic, it’s perfectly acceptable to say anything derogatory if the socially acceptable term escapes your mind.”

What Mr. Schiff said about “mentally retarded” people is factually incorrect, and he deserves to be criticized for it. There are many people who have mental disabilities who are capable of producing enormous labor value, such as savants.

But let us look at the term “mentally retarded.” While this term has fallen out of favor, it is the subject of a euphemism treadmill. As Nicholas Cummings and Rogers Wright note in Destructive trends in mental health: the well-intentioned path to harm, the terms “mental retardation” and “mentally retarded” were invented in the mid-20th century to replace the previous set of terms, which were deemed to have become offensive, such as “imbecile” and “feeble-minded.” Now these newer terms have come to be widely seen as disparaging and in need of replacement. At some point, it is necessary to recognize that a negative condition is going to be described by negative-sounding terms and stop viewing such things as offensive. Or, to return to Mr. Schiff’s mistake, we could stop defining people by their shortcomings and assuming that those shortcomings must necessarily diminish one’s worth.

“But let’s think about his $2 per hour comment for a moment. That would be $80 per week x 52 weeks = $4,160 per year.

Basically what this man is advocating is that businesses should be allowed to pay workers based on ‘what they’re worth.’ So if they deem a worker to be worth no more than $2 per hour, how’s that worker expected to live on that?

Oh, I know – they can rely on government programs.

Then these people will come out complaining about the millions of people on these government programs, while simultaneously supporting policies which force more people to rely on government programs.”

The worker may not have to live on $2 per hour if he or she can find another employer or become self-employed in order to earn more. But let us consider the next argument; that people will come out complaining about the millions of people on government programs, while simultaneously supporting policies which force more people to rely on government programs. The government programs are the root problem, as companies would not be able to pay such low wages without them. Over the long term, people cannot work for less than what will keep them alive, and this natural minimum would be higher without a social safety net that allows people to survive on lower wages. While this position is frequently caricatured as heartless, it is actually one of the best ways to raise wages throughout the economy.

“Not to mention that by drastically cutting the pay for millions of Americans you’ll hurt demand for products.”

This ignores the fact that lowering pay for workers lowers the operating costs for a company. This means that the company can sell goods and services cheaper, as labor costs are usually the most expensive costs of a company. So while workers would receive less currency for their labors, that currency would have more purchasing power. Note that the opposite effect will occur if the minimum wage is raised, which is why a minimum wage increase will not help the economy.

“And again, don’t give me this nonsense about ‘paying workers what they’re worth.’ The reason why we have a minimum wage in the first place is because businesses weren’t paying workers enough. If they were, there wouldn’t be a minimum wage.”

The first federal minimum wage law was passed in 1938, and they were passed not to protect workers from business owners, but to codify racism and eugenics into law. The major proponents of minimum wage laws were white union workers who did not want to be out-competed by black workers. If there is a mandated wage floor and the white union workers are paid at that level, then no one can legally undercut the racist employers and employees by hiring black workers and paying them less. But if there is no mandated wage floor, then a non-racist employer can hire previously rejected black workers for less money, thereby running a more efficient business and making a racist employer pay a substantial cost for his or her racism. The minimum wage removes the ability of the free market to punish prejudice.

Of course, some on the left who embraced eugenics policies understood how the minimum wage could destroy opportunity and create unemployment for the most vulnerable people, but they thought it to be a positive development. As Thomas Leonard writes in Eugenics and Economics in the Progressive Era, “The progressive economists believed that the job loss induced by minimum wages was a social benefit as it performed the eugenic service ridding the labor force of the unemployable.”

“It’s the same reason why we have child labor laws. If companies hadn’t tried to exploit child labor, we wouldn’t need child labor laws.”

Child labor was also outlawed in 1938, and it was also done not to protect children from exploitative business owners, but to shield established workers from competition. Defining a whole sector of the workforce out of official existence is a handy way to lower the unemployment rate, and it continues to this day in the form of manipulated numbers from the Bureau of Labor Statistics. Barring children from working was not even effectual by this time period; in 1930, only 6.4 percent of male children and 2.9 percent of female children between the ages of 10 and 15 were employed, and of those, 74.5 percent of the boys and 61.5 percent of the girls worked on farms.

Today, such laws mostly have the effect of preventing children who are knowledgeable about technology from being paid for their skills.

“But this belief that by just allowing businesses to ‘regulate themselves’ and all will be right in the world is ridiculous. These businesses operate to make profits, not jobs.”

This is a straw man. Businesses are not regulated solely from within; they are regulated externally by their customers. If the customers of a business believe that the owners and/or employees of the business are doing something reprehensible, then those customers are free to boycott the business, support a competitor, or start a competing business which does not do the reprehensible activity.

“Most employers make their employees well aware of the fact that they’re replaceable. If you don’t like working for them, quit – we can find someone who will.”

The correct response for an employee is to provide value to such a degree as to become irreplaceable.

“Even with regulations, most companies do anything and everything possible to get around them. Why do you think there’s such a big push by many of them to eliminate the minimum wage? It sure as heck isn’t to pay their workers more, it’s so they can pay them less.”

The truth about regulations is that they are written by the wealthiest players in a given industry. The wealthiest players in an industry have every incentive to bribe politicians and regulators to write and enforce regulations in a way which is favorable to them and unfavorable to their competitors. By increasing the cost of doing business through compliance costs, regulations can drive smaller companies out of business, thereby allowing larger companies to increase their market share. This is how large corporations become mega-corporations. Those who fail to understand this process, such as most left-wing statists, then call for more of what caused the problem in the first place.

“Quick question: Without regulation on offshore drilling, do you think we’d have more or fewer environmental disasters like the BP oil spill in the gulf a couple of years ago?

If you really believe we’d have fewer of these instances, you’re crazy.”

As Socrates said, “When the debate is lost, slander becomes the tool of the loser.” But let us actually address the question. While there would probably be more environmental disasters if restrictions on deep-water drilling were lifted, the choice between government regulation of offshore drilling and open access for anyone is a false dichotomy. In a free market in which private property rights are respected, polluters are made to perform restitution for damages they cause, and there are multiple mechanisms to prevent polluters from setting up shop in the first place. The area in which the Deepwater Horizon disaster occurred should have rightfully been owned by the fishermen who labored in the area, as property is justly acquired through the homesteading principle by mixing one’s labor with natural resources. Under such a system, the fishermen could simply refuse to grant permission to oil drillers, and could hire private military companies to defend the area if the oil drillers sought to trespass and build anyway.

“The same goes for the minimum wage. If we ended it, these companies would abuse a society that didn’t have protections for its workers.”

A society cannot be abused, because there is no such thing as a society. Each individual person exists; a collective is just an idea with no independent form in physical reality. The idea of the minimum wage as a protection of workers has been refuted above, and the idea that it is the only protection for workers is refuted by the presence of unions and workplace safety standards, among other measures.

“Instead of having $2 an hour sweatshops like they have all over developing Asian countries, we’d have them here.”

$2 an hour has more purchasing power in developing Asian countries than it has here, so this is comparing apples to oranges.

“This whole argument is absolutely absurd. And Mr. Schiff’s ignorance about it was appalling.”

Indeed it is. It is clear that while Mr. Schiff made a terrible argument against the minimum wage, the case against the minimum wage is solid. To claim otherwise on the basis of a bad argument is to commit the argumentum ad logicam fallacy.

Defending Panthers Ticket Scalpers

How The Salvation Army Commits The Broken Window Fallacy

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

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

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

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