Тег: Efficiency

Imperfect People and the Social Ideal

In your posts, you often state that under ancap, all people (or most of them) will not be prone to violence (and those who are can be “reprogrammed”), which will allow for the construction of a violence-free society. But hold on! With ideal people, one could build an ideal society based on almost any ideology—even communism in its early idealized conceptions. Any modern social structure, however, is built on the fact that people are almost always imperfect—emotional, foolish, aggressive, greedy, cowardly, and so on—and the social order must neutralize human flaws. How can ancap exist in a society of imperfect people, if even now criminals are stupid enough to steal right under cameras, and in the absence of a universally recognized police force, they will become completely brazen, and their capture/shooting by private security companies will become difficult due to the scale of crime and overloaded courts? Will this not lead to a rapid slide of society into a wild state, where even adequate people are forced to be in a permanent state of war against all?

Anonymous question

You are right; many things can be built from ideal people. That is precisely why Bitarch and Voluntarist—the authors of the posts regularly appearing on this channel about building a non-violent society—do not bother with building specifically ancap; for them, the economic model is secondary, and the absence of a central authority is secondary, while the primary value is non-violence, in its narrow sense of the absence of physical coercion.

The doctrine of anarcho-capitalism assumes that the human inclination toward physical coercion will not undergo serious changes. The only thing required for its triumph is the emergence of a critical mass of technologies that make decentralized production and trade more economically viable than centralized ones—this is if we proceed from a materialist position, where being determines consciousness and the base determines the superstructure. If, on the contrary, we assume that consciousness shapes being, then the triumph of ancap requires a critical mass of people for whom libertarian ideas have significant value. To me, it essentially makes no difference which end of the loaf I bite into; it tastes equally good from both ends.

When decentralized technologies dominate everyday life, it means that an uber-police force will arrive faster and provide service more cheaply and with higher quality than a police squad from the Ministry of Internal Affairs; therefore, the Ministry will lose the economic competition for the client and die off. And if people steal right under cameras, decentralized technologies will more likely provide the ability to issue them a fine right under those same cameras. And if they wave at the camera instead and claim that they are, say, renting this car, then instead of a disproportionately large fine, a modest rental fee will be debited from them in favor of the car owner. Or perhaps I am talking nonsense, and the “market” will decide some other way.

When libertarian ideas dominate society, then even under conditions of technologically driven centralization of a large number of industries, people will still value freelancing or freelance-like relationships relatively higher, and the owner of the production facility will have to adapt to this demand if they wish to secure a workforce. People will join the police, but will still view their patrol crew as an autonomous entrepreneurial unit, with its own permanent clients and obligations to them that mean far more than formal subordination within a police department.

The most terrifying thing for libertarianism is an increase in the efficiency of the centralization of violence. In the middle of the 20th century, such efficiency was at its maximum; humanity fought with armies of millions, and there was not the slightest prospect for building a libertarian society. Now, an army of a hundred thousand is considered large, and one hopes that decentralization will continue at an accelerating pace. Cheap and effective decentralized violence, which scales very poorly as the number of involved persons increases or additional capital is invested—this is exactly what is required so that even in the event of armed conflicts, they quickly fade away without further escalation.

As you can see, it is not at all necessary to indulge in empty dreams about how chipping will make everyone “sweethearts and darlings.” Instead, one can indulge in empty dreams about how total armament with handheld weapons—effectively and as painlessly as possible incapacitating a person, but having low lethality—will make everyone “sweethearts and darlings.” As for my time free from empty dreams, I prefer to build a local libertarian community where all necessary skills of interaction between people are acquired through simple habit—and these habits will strongly conflict with the habits of obeying the state or any other centralized force.

No one needs a Leviathan. Hobbes is sad.

Concentration of Capital in a Free Market

At first glance, free capitalism, unrestricted by the state, has one fundamental characteristic — the inevitable concentration of all capital in a few hands. This leads to a situation that is no better than “state capitalism” in the USSR (roughly speaking, if 1% owns 99% of the capital now, it is clear that over time 0.1% will own 99.9%, and so on). In other words, the absence of state intervention in the market leads to the emergence of such an omnipotent monopoly capitalist that the state would seem like the lesser evil.

Where can I read, if available,
1) A refutation (preferably empirical) of the thesis on the concentration of capital.
2) What can stop concentration, other than non-economic (read: state) intervention?

The question is accompanied by a donation in the amount of 0.00080000 BTC

Unfortunately, any attempts at empirical confirmation or refutation of the thesis on the inevitable concentration of capital under capitalism run into the distorting influence of the state. One can provide examples of how capital concentrates because large capitalists successfully lobby for their interests, and as a result, regulations are adopted by the state that benefit large businesses and disadvantage small ones. Meanwhile, the market reasons for capital concentration remain behind the scenes. One can demonstrate how state antitrust services hinder the notorious concentration of capital, while the purely market mechanisms that also oppose it remain behind the scenes. Therefore, I would like to focus specifically on the market mechanisms working in one direction or another.

Concentration of Capital

The main market reason for the concentration of capital is the positive effect of scale. A large company can afford to use a greater amount of capital goods that increase labor productivity, which allows it to generate more profit and reinvest it, again, into increasingly capital-intensive factors of production.

It is also worth noting that consumer goods are becoming more complex, and the production of many of them inevitably requires the involvement of significant capital. For example, a small shipyard cannot build a cruise liner, and a small studio cannot film a blockbuster.

Diffusion of Capital

Now let’s look at the reasons that contribute to the decrease in the concentration of capital.

First, besides the positive effect of scale, there is also a negative one. The larger the structure, the more costs are attributed to parasitic processes. Orders move through the chain of command more slowly than they would in its absence. An order in a chain of command is more likely to be distorted than in conditions where an individual entrepreneur sets tasks for themselves or directly for the executors. Employees in large structures are no longer motivated by the company’s profit, which they influence only very indirectly, but by artificial KPIs. As a result, they are more focused on achieving KPIs rather than on the interests of the business. All this reduces margins. At a certain size of the structure, the negative effect of scale becomes stronger than the positive one. A business that has grown beyond its optimal size begins to eat away at its capital, yielding market share to smaller competitors.

Second, it is small businesses that implement the lion’s share of innovations. Even in a large company, pilot production is relatively small in size and relies on a small number of scarce specialists. Sensing excess profit as a result of implementing their idea, such a specialist can quite easily leave the company and open their own startup, which then skims the cream off the market. Successful startups grow, and the share of old capital decreases.

Third, for the sake of reducing risks, a large entrepreneur will prefer not to put all their eggs in one basket and will invest money in several companies. This dilutes the ownership structure of companies; the owner can no longer closely monitor the development of their business, responsibility is shifted to management, and it is the top managers who become the primary beneficiaries of the process, while the relative income of investors falls.

Finally, the factor of capital dilution upon inheritance does not disappear. The larger the company, the greater the chances that a bunch of people, as well as various funds, will be mentioned in the will, whereas a small enterprise is more likely to go to a single heir.

And what does this tell us?

Nothing. The optimal size of a business for each industry, and often for each region, is different and constantly changing; it is determined by the level of technological development, which can contribute both to increasing the returns from centralization (for example, auto repair shops were quickly displaced by auto plants after the introduction of the assembly line) and to increasing the returns from decentralization (for instance, broadband internet sharply increased the number of content producers and decreased the average size of a newsroom).

The concentration of capital in the hands of a few may increase or decrease; in essence, this is not important. What is important is that in a free market, the welfare of the poorest grows even when the welfare of the richest grows even faster. And there are indeed many empirical studies on this topic (although, of course, one must remember here as well that empirics will inevitably be distorted by state intervention). You can read more about this in one of the chapters of David Friedman’s *Machinery of Freedom*, which I am translating, titled “The Rich Get Richer, and the Poor Get Richer”. The desired empirics are also present there.

… when the impoverishment of the working class just doesn’t seem to happen…

On the Harm of Free Trade

Free trade leads to a wide variety of goods appearing on the domestic market, and they are cheap. This is not surprising, because free competition reaches an ideal state. Everyone has equal access to the market. There are no hints of anyone’s monopoly.

Free trade has a strong negative consequence. Many local producers cannot withstand competition from foreigners, go bankrupt, and leave the market. In critical cases, this phenomenon can become mass. Entire industries perish, and the population becomes impoverished. Goods are sold cheaply, but this pleases no one. There is no money to buy them. The second negative consequence is that the money of local residents ends up in the hands of foreign sellers and flows abroad.

How to solve this problem without the state?

Anal Magician

I tried for a long time to imagine a situation in which this internally contradictory set of statements could be observed, and I succeeded!

I take a boat, a tent, a laptop, a solar panel, a shotgun, cartridges, a net, fishing rods, and a couple more dozen kilograms of gear—and I head to a small island a kilometer from the nearest shore, where a village stands on the coast. The island is uninhabited, and I declare it mine, although fishermen and vacationers often hang out here, but it hasn’t occurred to anyone to settle here yet.

Then I begin to manage the household.

I can catch fish; it will be enough for fish soup, and if I build a smokehouse, I can preserve some. But in the village, they smoke fish in the same way, and my goods brought from the island are not in particularly high demand. I could plant a garden, but the soil is mediocre, manual non-mechanized labor is unproductive, and everyone in the village has plenty of such produce.

I could go to the shore with a shotgun and demand money from vacationers for the right to hang out on my shore, but they don’t take the threat seriously and are only willing to pay if I provide some service in return. In response to my warning shot in the air, they tell me that I’ve gone crazy and that they will, of course, sail away, but tomorrow they will return with weapons, because they are willing to tolerate my presence in a place where they are used to vacationing only as long as I don’t interfere with them. I reply that I was joking, bring out some smoked fish to go with their beer, we hang out together, and the incident is resolved.

Eventually, I arrive at the following business model: I catch fish for personal use, continue running this channel, occasionally write articles for hire, and begin to play the role of a hospitable hostess of the island, who entertains vacationers with conversation, and in return receives donations, primarily food, and occasionally, depending on the mood, sex. From time to time, I swim to the village to buy everything I need. The goods there are inexpensive; I cannot compete with their producers in any category, and my money gradually runs out. Eventually, I realize that I have begun to spend too much effort and time on activities that bring me a disproportionately small income, and too little remains for writing texts for money, and the internet here is half-dead. So, I end this prolonged vacation, pack my things, and return to where there is internet, a hot shower, and other blessings of civilization that allow me to focus on what I am more competitive in.

Yes, under ancap, any business model can well turn out to be unprofitable. Free trade is precisely what allows one to quickly realize such things and switch to more profitable activities. And if profitable activity with existing competencies is fundamentally impossible in a certain area, then one must change locations and go where those competencies are more in demand.

At the same time, I will note that in the same example with the island, having capital and knowledge, I could have opened a yacht club, or a hotel, or a diving school, or organized a larger-scale fishing and processing operation—and turned a profit. Singapore itself was dirty and poor until it attracted investments, so the same place under different conditions can turn out to be either completely prospectless or a gold mine.

And in conclusion, I will finally answer the question posed in one phrase. How to solve the problem of market inefficiency without the state? Entrepreneurial initiative.

Ancap-chan came to homestead an island

The Effectiveness of Ancap

Arguments about the possibility of ancap often arise, and in theoretical terms, ancap is doing fine. Until recently, I was a confident ancap myself, until I thought about one idea of classical conservatism: in theory, just as people find the most profitable paths in a free market, society finds the most effective social institutions for itself. Thus, can it be said that the state is the most effective and natural way to combat crime, without which things would be bad? Preferably without Hoppean gimmicks: his theory is mainly devoted to Western Europe, and besides, centralized states like the Roman Empire existed in Europe even before feudalism.

anonymous question

Of course, the free market leads to the most effective solutions. However, the basis of the processes occurring in the market is freedom of activity and agreement. Any solution arising in the market cannot contradict these principles; it operates precisely as long as the agents involved agree to conduct their activities based on the terms of the agreement established between them. This solution ceases to operate in relation to anyone if the subject decides to break the agreement and refuse further cooperation. Thus, in the market, no one can forcibly compel someone to be a client of a particular organization, buy its products and use its services, or participate in any jurisdiction or any other form of collective of people. Indeed, market solutions do not use coercion.

Suppose that such a form of social management as centralized political power is, at a certain point, accepted by people as the most effective solution. However, living conditions gradually change, and people’s interests change as well. Naturally, no single solution can be effective forever. In the market, ineffective solutions are usually replaced by other solutions that are effective relative to the new conditions. A solution such as the “state” establishes itself as an eternal and indestructible solution, which no one has the right to challenge under any circumstances, and even less so to replace it with some other solution. Therefore, even if we assume that the state could have arisen through a market path of voluntary agreement, this in no way makes it an effective solution at any point in time other than the one in which it was accepted by everyone, since subsequently living conditions and people’s interests changed, yet the state provided no right to challenge it.

However, I would not even be quick to assume that states arose through a market path. Most likely, they arose through violent coercion. This is indicated to us by the theory of the stationary bandit, which states that states arose as a result of the settling of nomadic bandits who decided to subjugate the population of a certain territory and collect a regular tribute from it. You can read more about this theory here. Furthermore, history is known for numerous conquests and subjugations; therefore, even if one of the centralized territorial formations did arise through agreement, it ceased to be a market solution as soon as it was either forcibly subjugated by someone or decided to engage in the subjugation of others.

The state is not the most effective option for social relations simply because it consists of violence against people, as well as prohibits the implementation of any alternative solutions and establishes itself as an unshakeable and eternal truth.

Vitaliy Tizun