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Monday, August 26, 2013

Who? And When?

At any given moment in time, I have no doubt that some number of poor individuals are better off with the big government welfare state. I don't mean better off in just a gaming-the-system somewhat materially enhanced sort of way, but truly better off.  Some number of other individuals are no doubt worse off.  The welfare state saves some lives.  Others die because of the welfare state.

As with any set of policies, there are winners and losers.  With the welfare state, lobbyists win, politicians win, bureaucrats win, some of the poor win, some of those win who have a strong subjective preference that some of the poor win via help from the government, and most others lose.  Given that there are winners and losers, it's always possible to construct utility functions that justify the welfare state or show that it's a net negative.

Let's for a moment examine one of the more well thought out analyses that's often used to justify the welfare state. A Theory of Justice by John Rawls does just that.  He does this by stepping through a set of clever thought experiments.

Everything flows from the first innovative thought experiment called the original position:
The original position is a hypothetical situation developed by American philosopher John Rawls as a thought experiment to replace the imagery of a savage state of nature of prior political philosophers like Thomas Hobbes. In the original position, the parties select principles that will determine the basic structure of the society they will live in. This choice is made from behind a veil of ignorance, which would deprive participants of information about their particular characteristics: his or her ethnicity, social status, gender and, crucially, Conception of the Good (an individual's idea of how to lead a good life). This forces participants to select principles impartially and rationally. [...]
Rawls argues that the representative parties in the original position would select two principles of justice:
  1. Each citizen is guaranteed a fully adequate scheme of basic liberties, which is compatible with the same scheme of liberties for all others;
  2. Social and economic inequalities must satisfy two conditions:
    1. to the greatest benefit of the least advantaged (the difference principle);
    2. attached to positions and offices open to all.
The reason that the least well off member gets benefited is that it is assumed that under the veil of ignorance, under original position, people will be risk averse. This implies that everyone is afraid of being part of the poor members of society, so the social contract is constructed to help the least well off members.
In other words, Rawls claims that those in the original position would all adopt a maximin strategy which would maximize the prospects of the least well-off.  Inequality is allowed to happen, but only to the extent that it creates incentives for the well-off to produce more such that it benefits the least well-off:
The Difference Principle regulates inequalities: it only permits inequalities that work to the advantage of the worst-off. 
The vast majority of academic criticism of A Theory of Justice came from the Left (i.e. it's not socialist enough).  However, "in Anarchy, State, and Utopia, Robert Nozick argues that ... Rawls's application of the maximin rule to the original position is risk aversion taken to its extreme."

But depending on when the maximin rule is applied, I'm not sure it is extreme in its risk avoidance.  A thousand years ago, it was pretty important to avoid being among the worst-off pretty much everywhere in the world.  Even now, an awful lot of the world is pretty awful and if Rawlsian justice were achievable in those awful places, it would be pretty tempting to adopt it.  Unfortunately, it's precisely because no sort of justice is achievable in most of the awful places that they are awful in the first place.

To me, the primary problem with the original position, the veil of ignorance, the maximin rule, and the difference principle, is that they don't even attempt to take into account the effect of the structure of society on the future.  For example, assume that human civilization will ultimately span 100,000 years (it's spanned somewhat less than 10,000 years so far).  If a society constructed around completely free markets grew at a mere one-hundredth of one-percent per year faster than a society constructed around Rawls' difference principle, the median GDP per capita over the 100,000 year period for the free market society would be 148 times greater than for the difference principle society.  Even if we assume that the worst off get only one-hundredth as large a piece of the pie, the better bet from the original position, if you didn't know which time frame you were going to be part of, is the free market approach for all but the most extremely risk adverse people in the original position.

One of the biggest problems I have with the welfare state is that I believe that it's stealing from me now, but even worse, it's stealing even more from my children's future, and a tremendous amount from their descendants.

To summarize, the welfare state has winners and losers, but more and more losers over time.

Monday, August 19, 2013

Hey, What's Libertarianism, Anyway?

In the posts and comments on this blog, the term "libertarianism" is used quite a bit.  Unfortunately, like most "isms", it means significantly different things to different people.  I can't say what others mean when they use the word, but I'll at least try to be a bit more concrete by what I mean by it.

We'll start with the extremely useless dictionary definition:


1. a person who advocates liberty, especially with regard to thought or conduct.
Anyone who's read a sampling of the posts here knows that liberty is extremely important to me, and is part of the reason libertarianism has appeal to me.  However, there's a bit more to it than that.

Moving onward to Wikipedia, we have:
Libertarianism (Latin: liber, "free")[1] is a set of related political philosophies that uphold liberty as the highest political end.[2][3] This includes emphasis on the primacy of individual liberty,[4][5] political freedom, and voluntary association. It is the antonym to authoritarianism.[6]
That definition is more complete, but still not adequate, because the Wikipedia article points out:
Different libertarian schools of thought disagree over whether or not the state should exist at all and, if it should, to what extent.[7] While minarchists propose a state limited in scope to preventing aggression, theft, breach of contract and fraud, anarchists advocate its complete elimination as a political system.[8][9][10][11][7][12][13] While certain libertarian currents are supportive of private property, such as in land and natural resources, others reject private ownership and instead advocate collective or cooperative ownership and management.[14][15][16][17]

Whoa! Some libertarians "reject private ownership" and "advocate collective or cooperative ownership" instead?  I'll admit that's news to me and I definitely don't mean that when I use the term.

When I think of a libertarian state, I think of the United States just after the constitutional convention.  At the Federal level, it was mostly a Minarchy:

In the strictest sense, it holds that states ought to exist (as opposed to anarchy), that their only legitimate function is the protection of individuals from aggression, theft, breach of contract, and fraud, and that the only legitimate governmental institutions are the military, police, and courts. In the broadest sense, it also includes fire departments, prisons, the executive, and legislatures as legitimate government functions.[1][2][3] Such states are generally called night-watchman states
Minarchists argue that the state has no authority to use its monopoly of force to interfere with free transactions between people, and see the state's sole responsibility as ensuring that contracts between private individuals and property are protected, through a system of law courts and enforcement. Minarchists generally believe a laissez-faire approach to the economy is most likely to lead to economic prosperity.
That's a pretty good definition of the direction I'd head and what I mean by libertarianism.

There are a few caveats.
  1. I only advocate for libertarianism at the federal level.  As far as I'm concerned, the 50 States can do whatever they like (within constitutional constraints) since I can always move.
  2. I'm libertarian leaning as opposed to libertarian.  That is, I believe that all incremental change at the federal level should be towards a smaller government and that the change should be done in small increments as opposed to a revolution or rapid restructuring.  I suspect that well before we got to a true minarchy at the federal level, I'd want to put on the brakes, but we're so very, very far from that point today, that I simply needn't worry about it now (or in my lifetime).  I'm also very, very sure that the federal government does not need to get any bigger and yet more cumbersome.
So that's what I mean when I use the term libertarianism.

Monday, August 12, 2013

Ranch Liability

I went on vacation (with my wife and daughters) to a ranch (Rankin Ranch) last week.  The main activity is riding horses.  All guests have to sign a liability waiver which says something to the effect that we indemnify, hold harmless, and promise not to sue regardless of what happens during any and all activities (including horseback riding) while on the ranch.  Even though I'm well aware of the substantial danger of riding a horse, I was perfectly happy to sign that form and accept the risk.

I was talking with the ranchers, and they still have a large and very expensive liability insurance policy which imposes a number of restrictions on the types of horseback riding that's acceptable (for example, it's okay to gallop, but the guests have to be in a straight line while doing so) and the ranchers are still extremely worried about losing the ranch to lawyers because some guest gets hurt.

I don't know that much about liability law.  Why does the ranch need to be concerned with liability if everyone has signed a liability waiver?

Saturday, August 03, 2013

Quote of the Day

From Don Boudreaux at Cafe Hayek:
Deirdre McCloskey is right and correct to point out that one of the biggest steps we humans ever took toward being truly civilized was when a sufficient number of us began to regard bourgeois pursuits as virtuous.
Perhaps our next big step forward toward being even more civilized – a step that has yet to be taken by a minimally sufficient number of people – will be when we come to regard those who lust to hold political power as being ethically indistinguishable from pickpockets, shoplifters, and card sharks.
That's been one of the themes here at this blog.  Governments, warlords, and marauding bandits have a lot in common and the difference between shepherds and wolves is fairly minor as far as the sheep are concerned.