What are the shortcomings of the Austrian School of economics, [and its] internal problems?

анонимный вопрос

To make the answer to this question more authoritative, I turned to the most well-known popularizer of the Austrian School in Russia, Pavel Usanov (be sure to subscribe to his YouTube channel if you haven’t already). By the way, I will soon release a review of his new book, “Retrospective of Economic Thought.”

So, in Pavel’s opinion, the main difficulties for the Austrian School are as follows:

1. It is unclear how to reconcile Mises’s praxeology and Hayek’s market process

What is the difficulty? Praxeology is the logic of human action, derived deductively from general basic principles. The market process is the emergence of spontaneous orders from a multitude of individual acts of choice made by people. The study of these spontaneous orders is conducted using the method of induction. For physicists, perhaps the clearest analogy would be to liken praxeology to molecular-kinetic theory and the market process to thermodynamics. In other words, we are dealing with the problem of at which grain of sand a pile begins, or in the language of dialectics, the transition from quantity to quality.

In principle, game theory lies somewhere at the intersection of the two, but it still does not completely fill the gap.

2. Cryptocurrencies and the regression theorem

When I was asked a question about Bitcoin, I fell into this trap myself, referring to an article stating that Bitcoin satisfies the regression theorem, and later received criticism that it was unconvincing. I very much hope that Pavel will be able to bring some clarity to this issue in his book “The Future of Money,” the release of which he has already announced. Apparently, it should be expected in 2019.

3. Theory of the state: origin and evolution into democracy

Representatives of the Austrian School indeed express themselves in various ways regarding the origin of the state.

Hoppe derives the state from natural aristocracy, that is, the institution of turning to more competent persons when facing difficulties. Indeed, this is a common human practice reproduced in any community, from primitive tribes and mafia clans to modern leaders of non-systemic opposition and professional gurus.

Zolotorev argues that one should not mistake a blessing for a curse; while the “curse” in the form of the institution of informal leadership is widespread everywhere, the “blessing” in the form of the state is a historically recent parasitic formation. The only thing that remains unclear is whether human history could have done without this dubious acquisition.

There are also disagreements regarding the evolution toward democracy. Hoppe writes that this is due to the ruling class’s desire to increase irresponsibility, while Chetvernin points out that the emergence of stable libertarian-legal institutions required a rare combination of climatic factors, where instead of a rigid division into castes of laborers and warriors, a mixing of roles emerged in Hellas in the form of free community members and warrior-farmers; this gave rise to libertarian ethics, law, and polis democracy instead of the usual doctrine of plunder and coercion.

4. Enforcement without a state

Here, it is less about an internal problem of the Austrian School and more about how this problem was gradually solved as libertarian theory developed. Mises did not dispute the necessity of the state at all. Rothbard developed a general theory of anarcho-capitalism but left several statist rudiments, such as arbitrarily chosen patent expiration dates or the presence of forced imprisonment in ancap. Modern theorists, such as Zolotorev or myself, demonstrate the possibility of doing without these rudiments by proposing alternatives.
Nevertheless, the topic of non-state enforcement has not yet stabilized and is more of a doctrine than a theory, so there is room for work.

In the role of Frank Underwood – Pavel Usanov

Why do libertarians ask specific questions, such as “at what age does a person become a subject of law” and the like?

If I understand correctly, all possible rules/laws fall under the competence of the contractual jurisdiction, which can establish any rules on its territory, including the age of majority, and may adopt anything from a Sharia court to any other system, being limited in the adoption of laws only by the NAP regarding other jurisdictions—that is, entities that have not entered into an agreement with them to comply with their rules. Meanwhile, the institution (I don’t know what to call it if not a state) that legally stands above the jurisdictions is not concerned with establishing such specific rules, but only monitors compliance with the NAP. I admit that I may be catastrophically mistaken, as I have only recently become acquainted with libertarianism, and I would be glad if you could clarify these nuances regarding jurisdictions and their right to establish any rules on their territory.

анонимный вопрос

Regarding contractual jurisdictions, I have already had to answer. In short: a jurisdiction is not a territory, but a venue (legal competence), and a contractual jurisdiction differs from any other by its voluntary nature. Specific parties to a specific conflict agreed to have their case heard in a specific court and entered into a contract with that court. But today, for once, we are not talking about the court, but about the rules, so jurisdictions have nothing to do with this at all.

Any owner of a territory can theoretically establish any conditions under which they are willing to tolerate the presence of outsiders on their territory. Outsiders can either follow these rules or sabotage them if they believe that the potential costs of sanctions for sabotage are lower than the costs of following the rules.

The closer the rules established by the owner of the territory are to those that are understandable and familiar to people, the less effort the owner will have to spend to ensure their compliance. Yes, I can establish a ban on weapons, photography, and clothing on my territory, but if potential visitors to my beach are not yet used to the fact that beaches can be nudist, I will initially have to conduct a long explanatory campaign. And even then, it’s not a given that I will manage to convince people about weapons and photography; perhaps they will only agree to undress, and then I myself will give in and change the rules. Thus, from the sum of many private wishes and actions, spontaneous orders emerge, which eventually constitute our understanding of a norm. It is for this very reason that all these endless discussions of the criteria of “normal” exist.

As a result of many private actions, certain criteria of a norm become practically ubiquitous, receive precise formulations, and become generally accepted principles. In fact, this is exactly what the non-aggression principle is—it is a convenient convention, the observance of which reduces friction in society, and therefore societies that adhere to it tend to prosper. Meanwhile, some criteria of a norm remain purely a matter of taste. In one community, it is the norm to consider a person over 16 years old as having legal capacity, while in another, it is any member of the tribe who has passed the initiation rite, regardless of the age at which they passed it.

Dear adult legal-capacity tribesman

What’s going on with Bitcoin?

anonymous question (paid in the amount of 0.0002btc)

In short, everything is fine with Bitcoin. Throughout the year, the price has been gradually falling, as have trading volumes, commission sizes, and the frequency of Bitcoin mentions in the press. In other words, the bubble that burst at the end of last year has been successfully deflating, and now the price is approximately one-fifth of its peak. This drop is comparable in amplitude to the decline that lasted throughout 2014, and is far smaller than the catastrophic crash of summer-autumn 2011, when the dollar price of Bitcoin fell 13-fold.

Of course, the lower the trading volumes, the greater the possibility of causing significant price jumps using relatively modest funds. But high volatility attracts speculators, and volumes begin to grow again, which means the opportunities for price manipulation begin to decrease; thus, these market feedbacks prevent the cryptocurrency from spiraling out of control.

Once again, as in 2014-2015, mining profitability has dropped, which leads to the least efficient miners being sent to the scrap heap. In 2015, during the low exchange rate, bankruptcies of individual pools also occurred. Thus, this market is actively clearing out inefficient players, meaning the end of the crisis is not far off.

Against the backdrop of all this seemingly negative environment, active work continues both on the Bitcoin protocol itself and on the Lightning second-layer protocol, which allows for the creation of direct payment channels outside the blockchain and the movement of money through them with negligible time costs and negligible commissions. Therefore, in the event of a new price surge, the probability that the mempool will become clogged, as it did last autumn, and that the transaction fee will skyrocket, becomes much lower; the community is now far better prepared for such situations.

So, is it time to buy? You know, the Belarusians have a proverb that it is never too late to buy dollars; the same can be said about Bitcoin. It should be acquired whenever there is free fiat that does not need to be spent in the next five years. By doing this, you will not only preserve your purchasing power but also benefit the community.

On a logarithmic scale, it is clearly visible that everything is OK with Bitcoin

What to do if a friend and ally promotes a policy of authoritarianism and political regulations?

Is this a reason not to interact with him in any way other than through formal tools, as Mikhail Svetov enjoined us? Even if it is a friend, even if he is against Putin?

Vasily

I am not such a purist in this regard. Before the Adam Smith readings, I published a selection of my favorite materials from there, and my first item was a report by Dmitry Butrin “Non-cooperative Games”, about how important it is not to make a squeamish face when mentioning minor tactical successes, about how the drive for complete and final dominance over all ideological rivals looms over all Russian politics, and how important it is to know how to build coalitions.

Of course, if you promote hatred of the nomenklatura, then for your reputation as a fervent lustrator, it is very important not to get tainted by any informal relationships, even with the liberal opposition, unless it has passed a strict check for ideological purity. But if you plan, for example, to run for deputy, the ability to negotiate, both formally and informally, will be invaluable. To know where to start dismantling the system in your own small area, you need to study how the system works in that area. For this purpose, it is quite acceptable not only to hang out at the birthday party of a liberal radio station, but even to go and work as an assistant to a Communist deputy.

If people are to be judged by their deeds, then they should be judged by their deeds. Having a drink with someone at a party is not a deed; it is leisure. I had a short romance with a guy from some paramilitary nationalist group—there are countless such groups, I didn’t even remember the name. We constantly argued about political topics, and he honestly stated that if they came to power, it would be at the cost of great bloodshed, and that we liberals would be hanged from lampposts immediately after the government was executed. Did this interfere with our relationship? No, not at all. Did it affect my views? Yes, it did; I came to better understand the worldview of these guys, their concept of justice and national pride. If a minarchist scenario is realized in Russia, the knowledge gained will allow me to avoid hanging them from lampposts, because these cats can be prepared in a different way.

Also, at his insistence, I struggled through B. H. Liddell Hart’s “Strategy of Indirect Approach” (hello to Belisarius from the previous post), but that is a slightly different story.

Sir Basil, as it were, says: Mikhail, do not go head-on

Survey on channel promotion

Хочу расширения аудитории. Какие варианты действий предложите?
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Меня очень радует монетизация канала, а вот охват аудитории непростительно скромный, и с этим наверняка можно что-то сделать, интересует ваше мнение. Набросала варианты, также можно предлагать свои.

How will things stand with documents under ancap?

For example, a passport, a death certificate, and so on. Will they be issued, and if so, by which organization, and if not, what will replace them?

анонимный вопрос

Probably, if an IT specialist were to tell the history of mankind, the whole thing would boil down to who issued certificates to whom and how…

Any communications in a more or less complex society inevitably run into the problem of trust. Information is transferred from node to node via unsecured channels using an unknown number of intermediaries. Natasha Rostova, tripping while stepping out of a carriage, turns into Nikolai Vasilyevich Gogol sitting on a branch after a chain of retellings. Lieutenant Kizhe appears out of nowhere. Orwell writes from Spain about how war reports are composed without any link to real events. Chinese generals use the corpses of their own peasants for reporting purposes because it is easier than winning battles against a real enemy. Russian FSB agents repeat the feats of Chinese generals. And all of this is called the Byzantine Generals’ Problem—which, as is not hard to guess, tells us that the Eastern Roman Empire also had some difficulties with data reliability.

The state solves the Byzantine Generals’ Problem by creating cross-verification procedures, duplicating communication channels, and similar measures. Nevertheless, we frequently encounter episodes where a migrant in the EU had fourteen identity documents and received benefits for each, or conversely, a Russian pensioner spent several months proving to the state that he had not died, as written in the documents, and was still entitled to his pension, or Petrov and Boshirov turn out to be Chepiga and Mishkin.

Fortunately, all the technical means to solve this problem under ancap are already available. In 2008, Satoshi Nakamoto described a mechanism for solving the Byzantine Generals’ Problem through blockchain. A distributed public ledger stores unfalsifiable and indelible records thanks to the greed of miners and the suspicion of network node owners. And even earlier, asymmetric encryption made it possible to solve the specific problem of abandoning trusted intermediaries in data transmission, and now we communicate in secret chats, knowing that even Durov does not have the encryption keys, let alone Comrade Major.

With a competent approach, it is possible to ensure almost complete certainty that digital data will be preserved without distortion and will fall only into the hands of those to whom it is intended, while for everyone else, it will be nothing more than information junk. The trusted intermediary problem arises only at the stage of digitization. Yes, we can be sure that a document is certified by Alice’s signature, but we have no idea whether the signature has been compromised, whether Alice was under duress, and what kickback she received for her signature. So the problem of offline reputation will not go away even under ancap, but at least you will always know for sure that if Alice has certified a document with her signature, you can trust the document to the same extent that you trust Alice in general—both her competence and her ability not to fuck up her private key.

Perhaps the most well-known example of implementing passports and other documents associated by statists with the state, but without the state, is bitnation. States that look benevolently toward minarchism, such as Estonia, are already cooperating with the project, but any private company could do this with equal success.

In the photo: the most famous of the Byzantine generals and the most famous of the Byzantine emperors (the second one is just tagging along)

Which movies should you recommend to friends after an improvised lecture on the benefits of libertarianism?

…And Justice For All

The purpose of an improvised lecture on the benefits of libertarianism is to change a person’s perspective. After that, they can rewatch any films—whether from the beginning or from scratch—that touch upon the relationship between power and the individual in any way, and see everything in a new light.

Unfortunately, I don’t know of any films that provide a sufficiently accurate representation of a society under ancap. One would have to search thoughtfully to see if there is anything interesting about the stateless period of the Wild West, or the gold rush in Alaska, or if the mischievous Japanese have created some anime about ancap that is more plausible than Cowboy Bebop, and so on.

Sometimes libertarians tend to recommend something moralizing about how vile the state is, and how it particularly unpleasanty stepped on someone’s toes in a specific case. I don’t know, I’m not a big fan of direct propaganda; I find it more interesting to root for the Trade Federation in its entirely justified pursuit of secession from the Galactic Republic than to listen to pompous monologues from the adaptation of “The Fountainhead” (though Gary Cooper is a handsome man, of course!). And in general, it’s more pleasant to notice small details in passing than to be attacked directly; the latter is more likely to cause rejection.

Can a libertarian be a grammar Nazi? Specifically, dictate to others how to write, even if they write with mistakes?

anonymous question (paid in the amount of 0.00005btc)

Language is one of the most vivid examples of what Hayek called spontaneous orders. There is no reptilian from the Austro-Hungarian General Staff who could invent a language from scratch for a vast number of people, irradiate them with invisible radiation so that they would acquire this language, and then confidently assert which word forms are true and which are a vile deviation from the norm associated with the shielding properties of a tin foil hat.

I have already spoken about language in quite some detail while answering a question about Esperanto, so I will end the introductory part here and move on to a short answer to the actual question asked.

Of course, a libertarian can be a grammar Nazi. Within their sphere of influence, they can insist on as strict communication standards as they wish, as long as this does not involve the use of violence. you wll udnerstnd me evn if i am strnogly deviatng fr om th stndard, but you will need to exert some additional effort to understand this, therefore the market dictates that I orient myself toward current linguistic norms, which in most cases correspond to dictionary norms. Again, the language in which I write is largely the same language in which I read. Were I fascinated by the poetry of the Tang dynasty, you would certainly feel that influence in the language of my posts. Thus, a grammar Nazi can be understood: he wishes to read in a language that is pleasant to him and provides feedback to his circle of communication. If he does this tactfully enough, and the influence of his authority is great, many will even be grateful to him for this activity in implementing the linguistic norm.

Let us praise the tireless fighters against entropy, for their cause is as noble as it is hopeless, while we ourselves shall speak as we find convenient, ramin!

How are international crimes handled in the case of ancap? For example, carding.

royal_hacker

First, I want to say that the word “ancap” does not go well with the word “international” or the word “crimes,” because “international” is used today as a synonym for “interstate,” and “crime” means a violation of the law, which, again, does not exist under ancap; instead, there are many private rules and preferences that form spontaneous orders. So I will have to translate the question from statist to ancap before I begin to answer.

So, how are property rights violations handled in an anarcho-capitalist society when using global market tools? Let’s take carding as an example.

One of the popular carding business chains today looks roughly like this:
1. Using holes in the security systems of banks and online stores, hackers steal databases of credit card data.
2. Carders buy these databases in parts for further use.
3. A carder uses the stolen credit card data to buy goods from an online store.
4. The goods sent by the store are received by a drop.
5. The drop shares part of the cost of the goods with the carder and sells the product.
6. The carder launders the money received and gets a clean profit.

Don’t think anything strange—all these materials can be Googled in five seconds, and in half an hour you’ll have more knowledge about carding than I managed to acquire 😉

So, the peculiarity of this high-tech criminal business is the developed division of labor, the use of advanced anonymization technologies at every stage, and, accordingly, a rather high cost of catching even one of the chain participants, let alone unraveling the whole thing.

Another feature related to carding is that the cardholder is insured against such fraud through a bank chargeback procedure, and the bank, in turn, passes the costs onto the online store. Thus, the final victims and the main parties interested in the destruction of this criminal industry are the online retailers, and their primary tool is by no means the search for fraudsters, but the improvement of protection, which they can perfectly well do whether a state exists or not, since it seems to have no role here, as it apparently does not affect anything.

In reality, it does. State regulations make it difficult for stores to switch to cryptocurrency payments—which, unlike centralized banking systems, knows no such concept as reversing an operation, meaning it completely removes the store from the line of fire in such situations and makes the final victim the one who lost the private key to their crypto wallet.

In the absence of a state, it will be harder for banks to pass costs onto retailers because they will have to compete honestly in a free market with crypto and offer stores the most favorable acquiring terms possible. So they will at least have to obsess over data protection, implement two-factor authentication for online purchases across the board, and so on, and if a refund request does occur, they will mostly have to bear the losses themselves. Which is great; let them stay sharp.

So, can carders feel safe under ancap? This will depend on the strategy banks use. If they focus on passive defense, carders will be drawn into a technological race, which will increase the cost and intellectual threshold for engaging in the carding business. But defense can also be active. The market can be flooded with fake drops who will scam the carders, fake database sellers who will sell non-existent credit card details and try to report their buyers to the customer, moles can be planted in themed communities—in short, this criminal industry can be made significantly more costly and risky than it is now, and this could also lead to most criminal entrepreneurs retraining for something more innocent.

White cardboard is about another powerful branch of carding, but that is a completely different story

How would you react?

Today I was walking with my son, who is almost 4 years old; we weren’t bothering anyone. My son started messing with the ice on the road. A boy about 7-10 years old was passing by with his parents. They walked past, but the boy suddenly turned around, approached my son, and pushed him (not very hard—my son stayed on his feet).

анонимный вопрос

I cannot guarantee that in a real-life situation I would react the way I now conceptually consider to be correct; too much would depend on various insignificant factors. How repulsive the boy would be to me personally, how adequate his parents seemed to me, how much of a hurry they were in, and, most importantly, how shocking this episode was for my son.

The more vile the kid seems to me, the more unpleasant this episode was for my son, the less his parents are rushing, and the more sane they look, the greater the likelihood that I would develop the situation toward preventing such crap in the future. That is, I would draw their attention to this crap and ask them to hold the boy’s hand, since walking aggressive children on a leash is not common practice.

If, hypothetically, the interaction is likely to be very short, then I would probably limit myself to making a scary face and making some kind of sharp, threatening gesture toward the kid. Ideally, the kid should quickly bolt or recoil and fall on his backside. The goal is for the aggressor to be humiliated without the use of direct physical force, and then I can focus on figuring out how my son is doing.

If he is indignant and wants to fight back, then the conversation will be along the lines of “we really scared him!”. If he is more surprised and trying to understand what that was, then I’ll discuss with him what that was (imagine a dog barked at you on the street; you don’t need to kill the dog, it’s enough to chase it away). If he didn’t pay much attention, then let him continue with his business; it’s good when a person has a strong psyche.