Тег: Economics

Is flying an aircraft over territory belonging to another person trespassing under ancap?

Do you need to ask them for permission before flying? Is it necessary to somehow amortize the risk of the aircraft falling on the property of people located beneath it, and how to compensate for the noise of the engines/propellers? What is your personal/Montelibero/Montenegrin position on this issue?

L29Ah (the question is accompanied by a donation of 0.012345678901 Monero)

I like how David Friedman analyzes this and many other questions (sorry for buzzing your ears with him so much). He analyzes the topic in great detail in the book The Machinery of Freedom. I have managed to get through about a third of it so far. Much more concisely—in one of the chapters of The Machinery of Freedom. There, economic analysis of law is also used as a basis for reasoning. This often allows for a fairly clear generalization of those specific answers that I have to give from time to time.

To put it very briefly, the lower the transaction costs for proposed deals to purchase rights to actions that violate others’ interests, the more convenient it is to recognize the owners’ right to prohibit such actions. If necessary, the potential trespasser will buy the right of passage. And the higher the transaction costs, the more convenient the procedure of judicial settlement of such cases becomes through claims for damages. No one defines a specific threshold altitude at which one can fly over someone else’s property, but if the flight caused damage, it will have to be compensated in court. Flights over someone else’s territory at a sufficiently high altitude (so as to at least not crash into terrain irregularities in normal mode and not frighten people with the wild roar of engines) are clearly the second case; obtaining permission to fly from all owners over whose territory it may occur is an unrealistic task.

Specifically in Montenegro, there is state licensing for the import of drones into the country, certain weight restrictions, a ban on flying above a certain altitude, and other highly sophisticated restrictions, some of which can be bypassed, while in others it proves too expensive, and it is simpler to accept that a certain application of drones is too troublesome to engage in systematically. Naturally, we in Montelibero find the complete repeal of all these regulations desirable, because drones can at least be used to take beautiful photos, which is useful for promoting the project. But, of course, the drone owner must be prepared for the fact that if their expensive toy falls on someone else’s plot, they may well lose it. The plot owner is not responsible if a cow steps on the fallen drone, or if his underage son decides to break something off this unexpected gift. He is not even obliged to let the drone owner onto his territory—here, the right of prohibition applies, because the transaction costs for purchasing the right of passage are small.

Here we filmed our plot with a drone, but this required flying over the neighbors as well

A positive feedback loop breeding inequality. Terrifying.

I watched the conversation between Grigory Bazhenov and representatives of the European University on the topic of inequality.

I didn’t do this immediately after the video was released because the topic seemed boring and leftist to me; it is obvious that if inequality is caused by redistribution through plunder (for example, taxes) and coercion (for example, regulations), then one can oppose the consequence, but it would be more useful to eliminate the causes. And if inequality is caused by the fact that people voluntarily give more money to Alice than to Bob, then one can only be happy for Alice and reflect on whether something can be adopted from her practices so that we can get more too. But then I had a bit of free time, took a look, and didn’t regret it.

The part where it was listed that there is income inequality, wealth inequality, and inequality in the number of limbs was not very interesting. I was struck by one specific strong take that I would like to discuss—regarding inequality caused by the difference in time preference.

Its content is approximately as follows. If one economic agent has a lower time preference, and economic agents can lend to each other at interest, then, all other starting conditions being equal, in the long run, he will plunge all economic agents with a higher time preference into debt bondage, with the further prospect of starving to death. This is, obviously, a mathematical model; however, I immediately recalled historical precedents.

Ancient Athens was formed by a union of Ionian tribes settled in Attica, with an initially fairly high level of equality. Over time, however, the stratification between citizens increased, and some gradually fell into debt bondage to others. This led to civil unrest, and as a result of Solon’s reforms, all old debts were forcibly forgiven, land was redistributed, and debt slavery was prohibited. In other words, the market—due to the difference in time preference—led to extremely unpleasant consequences, which were then corrected by purely etatist methods.

The emancipation of the peasants under Alexander II in the Russian Empire provided roughly equal starting conditions for all members of any given peasant community. However, again, the difference in entrepreneurial abilities and time preference over half a century led to stratification from kulaks to hired laborers, with the latter losing their means of production and often finding themselves in credit bondage. Then there was a civil war, followed by a complete redistribution of property and the writing off of old debts.

The question is: what can free-market anarchism oppose this mechanism with under modern technological conditions? Because if we answer “nothing,” it will mean the unviability of the anarchic model—it will inevitably be replaced by something much more leftist, after which, at minimum, property will be redistributed and debts written off, and at maximum, successful entrepreneurs and their heirs will be hanged from lamp posts.

Let’s look at what mechanisms the free market provided to counteract the mentioned effect in the two previous examples.

Becoming landless, selling one’s household members and oneself into debt slavery was not the only possible development for a landowner with a higher time preference or someone less competitive for some other reason in the ancient polis. Furthermore, as such people accumulated, the polis established colonies. There, land-poor colonists received much larger plots than in their homeland, and with them, a new chance for prosperity. This extensive path to solving the problem of inequality led to the colonization of the entire Mediterranean by the Hellenes. Subsequently, a division of labor arose between the colonies and lively trade began. Now, instead of farming a small patch of land, our Athenian could engage in, for example, molding amphorae or sewing sails—this also gave him a new chance for prosperity.

Similarly, becoming a hired laborer was not the only option for an unlucky peasant in the Russian Empire either. He could become a colonist and move to Siberia, or move to the city and become a worker. Under the conditions of a freer market in the USA, urbanization absorbed a huge number of former farmers without any revolutions, and those who remained began to cultivate much larger areas using much more serious equipment, supplied to them thanks to the much higher-paid labor—compared to that of a hired hand—of their former poor neighbors.

So I believe that an anarchic society under a free market will be able to avoid the scenario embedded in the mathematical model with different time preferences but unchanging market conditions. If the emergence of new markets is not legally restricted, then those with a higher time preference will actually strive to take advantage of new opportunities and obtain windfall profits—while those with a lower preference will stay in a reliable but relatively low-margin business, and everyone will be relatively well off. The second factor weakening intertemporal inequality is personal freedom. You are not a member of a community. You are not the property of the head of the family, who can sell you into slavery to pay off a debt. You are self-owned; you have your own time preference, your own inclinations and talents. You won’t perish. In any case, you are not doomed to perish, and let the scary mathematical model not frighten you.

How do you feel about Vatoadmin and his criticism of AES?

In one of the streams, he mentioned to an interlocutor that economic schools are irrelevant and that everything best from those schools has been integrated into the mainstream. Do you agree? Has he gotten too fat?

P.S. It’s a pity the site crashed. I hope all is well with you. I haven’t figured out crypto yet, but I’ll donate somehow.

Some Kazakh

Thank you for the explication from Vatoadmin, because I would have been too lazy to sift through his streams in search of specific quotes. As for the thickness, he is still far from Kakha Bendukidze; let him keep trying.

Now, to the main part of the question.

Economic mainstream today, indeed, has long ceased to be some kind of cohesive theory. It is simply a set of views on economics, none of which are perceived by economists as complete nonsense. At the same time, taken together, they can be internally contradictory—to this, an economist will say that each economic tool has its own area of application, and that is perfectly normal—and the task of economics is precisely to study when a wise regulator should apply what.

The Austrian school is indeed part of the mainstream. It primarily describes exactly how economic agents behave in a free market, and also shows with disdainful curiosity what distortions are introduced by this or that form of coercion. The mainstream also describes how economic agents behave in a free market (and often does so using an apparatus that grew out of the Austrian school), and then asserts that the market can and should be regulated, that it is done in such-and-such a way, for such-and-such goals, and produces such-and-such results. Or it doesn’t, in which case one must study what went wrong and make corrections to economic policy next time.

Regarding the Austrians’ dislike of using mathematical apparatus to describe complex phenomena, I would explain it roughly like this. A mainstreamer will imperturbably calculate how many human bodies and how many horse bodies a White Walker needs to lay out a pattern in the snow, how much time he will spend on it, and by how much the temperature in the forest will drop as a result of performing this ritual. An Austrian simply postulates that White Walkers are an evil that has no place in the forest, and he will not require mathematical models for this.

Now tell me, how can a decent economist not despise such primness?

Predatory Things of the Century and Their Digital Immortality

Once, depending on my mood, I wrote a short review of three books by the Strugatsky brothers, among which was Predatory Things of the Century. In that book, among other things, there was a description of a certain secret order of patrons who found pleasure in stealing masterpieces from museums and then secretly destroying them in a solemn atmosphere. In the sixties of the last century, the Strugatskys managed to predict modern society quite well. And yesterday, on the MyGap channel, I stumbled upon an almost literal embodiment in our world of that very order of patrons.

A blockchain company burns a painting worth 95 thousand dollars on a live stream. What is the difference from what the Soviet sci-fi writers predicted? The difference, naturally, is that the company bought the painting honestly, and there was no need to burn it in secret; on the contrary, it became a public action. What can you do—while having an amazing intuition for social trends, the Strugatskys happened to be quite out of their depth in economics.

Burning a painting followed by the issuance of a unique token containing its digital copy and denoting ownership of it demonstrates how value arises from rarity. If the token were linked to an undestroyed painting, it could be thrown away, and one could simply settle for factual ownership of the painting without any certificate. It is precisely the fact that the token is left all alone that gives it value; otherwise, it would be an unnecessary tag.

I can easily understand how all of this blows the minds of the adepts of material production, who are convinced that humanity has fallen victim to digital delusions. But there is nothing to be done: the substance of value is not contained within things themselves. Value is in the consciousness. And consciousness is fickle, quickly loses interest in routine, and clings to everything fresh, rare, and unusual. The more sophisticated the consciousness, the harder it is to find such rarity. The more abundant the society, the harder it is to lure consciousness with the ghost of scarcity to suggest that this particular entity is rare and valuable. And so we have lived to see these patrons. What’s next on the Strugatskys’ plan? Sleg?

A bit of economic crash course in cute animation

How useful do you think it would be to translate this into Russian?

L29Ah

In some places, there is quite a large amount of text, so subtitles alone are unlikely to suffice; the images will have to be redrawn. But the videos are truly pleasant, and it would be great if someone took them on. I’m posting the first two as they are, but the third one, about Keynesianism, was previously provided with Russian subtitles by one of my regular readers and donors, Viktor Parkhomets.

https://youtu.be/ODJPUdnRY8M

From which side should Temasek be gnawed?

After publishing yesterday’s post, I encountered an interesting objection from Anton Epikhin, the lead of the channel RLN.Today. He argued that my idea of privatizing a profitable state-owned company is not the best thing that can be done to abolish the state. In short, the reasoning is as follows. People are used to a certain set of public goods provided by the state, and the state’s refusal to provide them would cause widespread outrage, and therefore the situation would be quickly rolled back. Consequently, from a purely political standpoint, it is quite difficult to strip the state of habitual functions such as the police or courts, even if it provides these services at a high cost and very low quality. However, one can try to sell citizens the idea that these services be provided by joint-stock companies where all citizens are shareholders. But a “Court” JSC is also not the most obvious idea. However, if one starts with a state investment company, then why not; this type of state ownership is certainly not essential, and the idea of transferring it to citizens would be successful. Instead of selling it at auction to private individuals, with a subsequent distribution of the proceeds among citizens, the company’s shares could be distributed equally among citizens. After the change of nominal owners, the company would continue to operate in the same mode, except that instead of paying dividends to the sole shareholder—the state—it would pay them to the new shareholders—the citizens.

I reasonably countered that it doesn’t really make a difference. After receiving the shares, people will still decide for themselves what to do with them—hold them, sell them, or buy them from others to obtain a large stake. With equal success, one could have first sold them to those interested, and then let them spend the proceeds however they wish. But no, Anton replies, there is a difference. Having seen the example of high-liquidity state assets and realized that they can be transferred to the ownership of citizens, citizens will get a taste for it and will be more likely after some time to demand that this operation be repeated with other assets, including the army and the police. But if the investment company were simply sold and the money distributed, it would be much easier to say about other state structures that “you don’t understand, this is different,” and that “this other thing” will be funded by taxes.

It still seems to me that there is no significant difference. More precisely, there is none from an economic point of view, but as for which specific decision from a psychological and political rhetoric standpoint will be easier to sell to people, and which is more likely to be followed by further steps toward the denationalization of society—that is difficult for me to say. So I am simply describing this point of view; perhaps it is indeed valid, and in that case, any Singaporeans among my readers should, of course, insist specifically on such an option for the reorganization of Temasek Holdings.

Why is the Indonesian state company Temasek so successful if state management is inefficient?

анонимный вопрос

As far as I can tell, this most likely refers to the Singaporean company Temasek Holdings. As we all know from the blockbuster about Putin’s palace, the funds for its construction were initially accumulated from kickbacks on the supply of medical equipment to budget institutions under the pretext of creating a sovereign wealth fund. Given that during Putin’s first term, the concept of authoritarian modernization and, specifically, Singapore, was constantly looming in public discourse, it can be assumed that there was a desire to create something like Temasek.

Essentially, we are dealing with an interesting way of increasing a country’s investment attractiveness: instead of maintaining high taxes, state corporations are formed, whose official task is to bring profit to the budget. The more profit from state corporations, the less the need for taxes. As a result, a country like Saudi Arabia, thanks to revenues from the state oil industry, could allow its few citizens to live in practically a tax-free state.

State corporations can also be used to develop infrastructure or, for example, for geopolitical goals. This is also a powerful tool, but as soon as other considerations begin to prevail over economic ones, the income from such corporations naturally declines. The infrastructure being built may turn out to be unwanted, and geopolitical efforts can just as easily end in failure. So, adopting some Chinese experience is a dangerous game for a state.

But, as far as I can tell, in Singapore, the state holding simply invests in attractive assets around the world; that is, the state consciously imposed self-restrictions, allocated a package of state ownership for use strictly for commercial purposes, and has consistently adhered to this tactic.

Of course, the greatest danger for the citizens of a state who expect to be the beneficiaries of a state corporation is that the company’s managers have their own opinion on “benefit,” and they start plundering the company. That is why Lee Kuan Yew first very harshly suppressed corruption, then spent several more years diligently weeding that garden, and only then created the investment company in 1974.

I took a look at the company’s financial indicators. Over the last ten years, the company’s portfolio has grown by 70%. Thus, it can be stated that if you do not set unnatural goals for an investment company, punish corruption mercilessly, and implement all the advanced reporting and management practices developed in the market, there is a chance that the company will indeed operate like a market entity and with fully comparable indicators. Well, yes, authoritarian modernization is indeed possible, and state institutions are indeed capable of following written rules for some time under strict control. Nevertheless, I wish for the Singaporeans to privatize this company, reducing government spending by the amount of lost budget revenues—and divide the one-time profit from privatization equally among the citizens. They’ve played around—enough is enough; you cannot win at the casino indefinitely. Then, each citizen can decide for themselves whether to use the proceeds to buy shares in Temasek Holdings or something else.

Is there perhaps a card number where a donation can be transferred?

The “Money and Apocalypse” channel (close in spirit)

I took a look at your channel; there are some interesting thoughts, and I subscribed, although in my opinion, there are too many reposts, materials are released too frequently, and the overall content is more about the apocalypse than about money. So, after some time, I might unsubscribe, once I’ve had my fill. It’s a bit strange that an economist and a financier, not unfamiliar with reading materials from Simon Cordonsky and reposting figures of Bitcoin’s annual growth, prefer to request a bank card number for donations, even though it could be done in Bitcoins, whether on-chain or via Lightning. But a potential donor has the right to their own quirks, so I added a form for sending rubles to the donations page.

Of the interesting thoughts in the channel, I’ll mention the last one. The graph of returns on education, which shows a growth in returns in the nineties, followed by a decline in the two-thousands. You and some of your readers suggest that this is due to the decrease in economic freedom, where loyalty replaced competence. Other readers point out that it might be due to the general decay of higher education, because the world has become too fast for long-term study. I haven’t seen a similar graph for, say, the USA; it would be interesting to compare, as rumors suggest they have similar problems there as well. In short, there is something to reflect upon here.

I would also like to note the thought migrating from post to post that the decline in real disposable income of citizens, observed for almost all the “tens” (decades), is not just man-made, but also deliberate. A subject must be poor so that they think about their daily bread, rather than pondering strange non-material questions like changing the regime. Moreover, a low level of wages provides the country with some degree of investment attractiveness, regardless of country risks. This is an interesting conspiratorial consideration that explains the observed facts, but is not substantiated by any leaks of secret instructions or similar things, which are, in fact, the only way to confirm conspiratorial theories.

Will there be a New Year under ancap?

Libertarian Band suddenly delighted us with a bonus New Year’s video, in which they examine the question mentioned in the title. Someone in the team is clearly a fan of Bazhenov, because the analysis is conducted from the perspective of economic mainstream. Thus, most of the video consists of discussions on how profitable holidays are for the state economy, which has a very indirect relation to ancap. However, in any case, such a video is clearly better than my dismal year-end review yesterday, and the conclusions drawn in the video are quite correct.

Happy New Year, if you so desire!

The Gilded Age in the USA and Its Crises

Alright, I admit, the Fed messed up. Let’s assume the Federal Reserve really did inflate financial bubbles during the war and even after, which led to the depression of 1930-39. But what about the panics of 1873 (and subsequently the long depression of 1873-79), the devastating 1893 and the prolonged depression until 1896, and the short-term 1908. There wasn’t even a hint of a Fed back then.

Moreover, I am placing more emphasis on the depression of 1893, as it was the most terrifying in scale and damage (surpassed perhaps only by the Great one). The unemployment rate reached 17-19% at its peak! And all this happened during the administration of Grover Cleveland, who is considered the most libertarian US president. He was for: low taxes and non-interference in the economy. And against: high tariffs (which were simply enormous at the time!), business subsidies, pensions and material aid to victims (for example, he refused to allocate $100,000 to farmers in Texas affected by crop failure in 1887). And he gave a f… that is, he vetoed unconstitutional (as he believed) laws that Congress wanted to push through. By the way, what do you think of him?

An anal magician

And once again, Pavel Usanov comes to my aid in answering the question. Last time, I referred to his 2014 preprint The Great Depression and the New Deal — Lessons for Today. This time, I will refer to a more recent 2018 preprint The Gilded Age and the Progressive Era in the USA: Lessons for Today. Here, by the way, is a video in which he gives a report on this topic:

And as the older brother who explains everything in much more detail, but whom few will read, this time we have the book by Milton Friedman and Anna Schwartz A Monetary History of the United States, 1867-1960. I will be taking illustrations from there.

The Crisis of 1873-1879

We see that during this time, the decline in business activity was accompanied by a decrease in the money supply, a drop in prices and — attention! — an increase in real income. In other words, production grew at a frantic pace — and this despite deflation (the reasons for deflation are well known: the US was returning to full convertibility of dollars into gold after issuing a huge number of unsecured greenbacks during the Civil War years). Thus, deflation does not necessarily lead to a slowdown in production. In general, calling this period a depression is somehow strange; rather, it was simply a structural reorganization of the economy under conditions of rapid economic growth and a decrease in the money supply. In the twenties of the 20th century, there was also frantic economic growth — but it was accompanied by the inflation of the money supply, which I wrote about when answering the question about the Great Depression.

The Crisis of 1893-1896

The crisis was preceded by a significant increase in the money supply, from 210 to 308 million dollars in Treasury accounts over the period from 1879 to 1888. This was due to the growing number of supporters of “soft money”: the return of greenbacks, i.e., unsecured treasury notes, or the unlimited issuance of silver dollars (it was precisely at this time that silver began to depreciate sharply because its mining rates increased). Meanwhile, the bimetallic standard assumed a fixed ratio between the price of gold and silver. Anyone interested can read about what arbitrage opportunities this hides in popular form in chapter four of the fanfiction Harry Potter and the Methods of Rationality. What happens when the state persists in maintaining the bimetallic standard can also be read in Saifedean Ammous’s The Bitcoin Standard, which summarizes the experience not only of the USA, but also, for example, the Chinese Empire.

Add to this that, although the USA did not yet have the Fed at that time, there was unregulated banknote emission by approximately 8,000 banks under conditions of fractional reserve. Therefore, once all these factors of monetary expansion had worked for long enough, any shift in market conditions was sufficient to trigger a banking panic. This happened in 1893. Under fractional reserve conditions, this inevitably meant the bankruptcy of many banks. The money supply shrank sharply, followed by a decrease in the volume of investments.

At the same time, although unemployment grew to significant levels and incomes fell at the peak of the crisis, the market adjusted very quickly to the new conditions, and soon it fell again. So here too, we see a trend: the crisis passes quickly if the state does not twitch and does not try to cure it with regulation. The illustration shows a classic V-shaped crisis structure: a rapid decline, a rapid recovery. Real income recovered to pre-crisis levels as early as 1895.

The Crisis of 1908

The same thing: credit expansion (the money supply grew from 261 million dollars in 1897 to 339 million dollars in 1906), a banking panic, the V-shaped nature of the crisis, and just over a year to recover to pre-crisis indicators.

Grover Cleveland (President in 1885-1889 and 1893-1897)

As is easy to see from the dates of the presidency, the crisis of 1893 could not possibly be Cleveland’s fault, because he had only just taken over from his Republican predecessor, Benjamin Harrison. Thus, he should rather be credited with the rapid exit from the crisis, and the record number of vetoes he placed on bills passed by Congress contributed exactly to this: he prevented the inflation of government spending (Warren Harding reacted to the crisis of 1921 in exactly the same way later — and with the same success), advocated for the reduction of tariffs, killed a bill on the emission of additional silver dollars, and solved the problem of the Treasury’s gold reserve by attracting private capital — a syndicate of several financiers simply bought up a sufficient number of bonds.

Cleveland turned out to be the only president in US history who managed to serve two non-consecutive terms — and this characterizes the intensity of the passions that prevailed at the time around the question of what is more beneficial: Laissez Faire or economic regulation. Unfortunately, Cleveland’s fight against the growth of statism ended up being lost: while under him the Democratic Party, in contrast to the Republican, remained practically libertarian, later the Democrats were consumed by the merging supporters of Mikhail Svetov the Populist party, and since then, instead of a choice between freedom and statism, US citizens choose between a giant enema and a shit sandwich.