Critique of Murray Rothbard's "The Ethics of Liberty"

            Murray Rothbard was a great economist, historian, political thinker, political activist, and thinker/writer in general. Reading Rothbard’s work fundamentally changed my perspective on the world, almost as much as reading Ludwig von Mises’ work did. Despite this, I think that one aspect of his intellectual legacy was negative rather than positive. This was his position that an objective, universalistic, rationally-determinable ‘natural law’, binding on all of mankind, existed and should provide the philosophical basis for social thought (instead of utilitarianism).

           

            In order to properly criticize this position, I wrote this passage-based critique of The Ethics Of Liberty[1], the book in which Rothbard laid out his position most systematically. I have focused my attention on the foundational chapters, as well as on the chapter in which Rothbard criticizes Ludwig von Mises’ utilitarianism.    

Chapter 2: Natural Law As “Science”

Rothbard: “Professor Hesselberg has shown, however, that Hume, in the course of his own discussions, was compelled to reintroduce a natural-law conception into his social philosophy and particularly into his theory of justice, thus illustrating the gibe of Etienne Gilson: “The natural law always buries its undertakers.” For Hume, in Hesselberg's words, “recognized and accepted that the social . . . order is an indispensable prerequisite to man's well-being and happiness: and that this is a statement of fact.” The social order, therefore, must be maintained by man.”

Brian: No, the social order is only an indispensable prerequisite to a man’s well-being and happiness if that man values everything that the social order can get for him, including vastly increased material wealth, the opportunity to specialize in a specific profession, and companionship, more than what he must give up in order to secure those benefits (ie. he must refrain from arbitrarily killing, assaulting, or robbing others). We can say that if the man wants the benefits, he must maintain the social order. But without the if statement, there is really no must about it.

Chapter 3: Natural Law Versus Positive Law

Rothbard: “At this point, we need only stress that the very existence of a natural law discoverable by reason is a potentially powerful threat to the status quo and a standing reproach to the reign of blindly traditional custom or the arbitrary will of the State apparatus.”

Brian: Replace “a natural law” by “a utilitarian science of human society” and the rest of the sentence still holds. Natural law is not at all necessary to criticize State orders or traditions, utilitarianism can serve this function equally well.

Chapter 6: A Crusoe Social Philosophy

Rothbard:  “Crusoe, we have said, learns about his ends and about how to attain them. But what specifically does his learning faculty, his reason, do in the process of obtaining such knowledge? It learns about the way things work in the world, i.e., the natures of the various specific entities and classes of entities that the man finds in existence; in short, he learns the natural laws of the way things behave in the world. He learns that an arrow shot from a bow can bring down a deer, and that a net can catch an abundance of fish. Further, he learns about his own nature, about the sort of events and actions that will make him happy or unhappy; in short, he learns about the ends he needs to achieve and those he should seek to avoid.”

Brian: We have two very different kinds of learning here. The first is learning “the natural laws of the way things behave in the world”, in Rothbard’s words. Inanimate objects such as nets and bows have constant properties that can be discovered by man’s reason. Even animals, because mainly guided by instincts, have relatively constant properties that can be discovered by man’s reason. The second is learning “about his own nature, about the sort of events and actions that will make him happy or unhappy”, in Rothbard’s words. This Crusoe and anyone else can surely do, but the all-important question is: once he discovers his own nature, has he also discovered something about man’s nature? I submit that he has not, because men are almost infinitely variable and differ so dramatically in tastes and conduct. What Crusoe learns about himself will not necessarily be applicable to other men, in contrast to what Crusoe learns about stones which will generally be applicable to other, similar stones as well.

Rothbard: “The individual man, in introspecting the fact of his own consciousness, also discovers the primordial natural fact of his freedom: his freedom to choose, his freedom to use or not use his reason about any given subject. In short, the natural fact of his “free will.” He also discovers the natural fact of his mind’s command over his body and its actions: that is, of his natural ownership over his self.”

Brian: Yes, these two things are natural facts, an individual man’s brain is in control of his actions and of his body. While true, these facts do not serve as the foundation for any kind of normative natural law theory, just as the fact that most men have ten fingers and ten toes at birth does not.  

Rothbard: “Suppose now that Crusoe is confronted with a choice of either picking berries or picking some mushrooms for food, and he decides upon the pleasantly tasting mushrooms, when suddenly a previously shipwrecked inhabitant, coming upon Crusoe, shouts: “Don’t do that! Those mushrooms are poisonous.” There is no mystery in Crusoe’s subsequent shift to berries. What has happened here? Both men have operated on an assumption so strong that it remained tacit, an assumption that poison is bad, bad for the health and even for the survival of the human organism—in short, bad for the continuation and the quality of a man’s life. In this implicit agreement on the value of life and health for the person, and on the evils of pain and death, the two men have clearly arrived at the basis of an ethic, grounded on reality and on the natural laws of the human organism.”

Brian: Two men can certainly agree on a lot of things, from the great value of life, as they do in this example, to the judgement that Mozart is the greatest musical composer of all time. But even if two men, or even two billion men, agree on something, it does not necessarily mean that all men who have ever lived or ever will live will so agree. And yet this is what the concept of a universal, natural law ethic implies. The existence of even one suicidal person in the world breaks the consensus that life is preferable to death. The consensus that life is preferable to death will remain extremely broad, but one does not need an “ethic” to pursue this preference. What’s wrong with just saying that most people will prefer life over death, and hence most people will try to adopt means that are suitable for attaining the end of preserving their lives? Why bring “ethics” into the discussion?

Rothbard: “If Crusoe had eaten the mushrooms without learning of their poisonous effects, then his decision would have been incorrect—a possibly tragic error based on the fact that man is scarcely automatically determined to make correct decisions at all times. Hence, his lack of omniscience and his liability to error. If Crusoe, on the other hand, had known of the poison and eaten the mushrooms anyway—perhaps for “kicks” or from a very high time preference—then his decision would have been objectively immoral, an act deliberately set against his life and health. It may well be asked why life should be an objective ultimate value, why man should opt for life (in duration and quality). In reply, we may note that a proposition rises to the status of an axiom when he who denies it may be shown to be using it in the very course of the supposed refutation. Now, any person participating in any sort of discussion, including one on values, is, by virtue of so participating, alive and affirming life. For if he were really opposed to life, he would have no business in such a discussion, indeed he would have no business continuing to be alive. Hence, the supposed opponent of life is really affirming it in the very process of his discussion, and hence the preservation and furtherance of one’s life takes on the stature of an incontestable axiom.”

Brian: If we assume that the Crusoe in the first scenario is not suicidal, then I have no problem calling his decision ‘incorrect’. He valued the end of preserving his life, but unwittingly adopted means that were not conducive to this end. He would have been better off if he were better informed. In the second scenario though, I cannot acquiesce in calling Crusoe’s decision ‘immoral’. Crusoe knew what the results of his action would be and decided to carry out the action, thus demonstrating that he preferred carrying out the action over not carrying out the action.

I am unimpressed by the so-called ‘axiom’ that Rothbard argues in favour of. If in the process of enjoying some vanilla ice cream, I stated that not everyone enjoys vanilla ice cream, I would not be contradicting myself. I am only demonstrating that I enjoy vanilla ice cream with my actions, not that everyone enjoys vanilla ice cream. It is the same thing with the preference for life over death. My continued existence does demonstrate that, at this moment, I prefer life to death. It by no means demonstrates that all men who have ever lived or ever will live always preferred/will prefer life to death at all times. I can, without contradiction, demonstrate that I value life over death with my actions, while at the same time arguing that other people might value death over life. One doesn’t have to be an “opponent of life” to argue that the preference for life over death is not a universally held preference among all mankind.

Finally, Rothbard says that life in terms of “duration and quality” is an “objective ultimate value”. But what if a man must choose between a longer duration of life and a greater quality of life, which most people will be in a position to do at least once in their lives? I will leave it to the believers in ‘natural law’ to resolve this paradox without reference to the subjective valuations of individuals. I believe that they will find it to be an impossible task.

Chapter 7: Interpersonal Relations: Voluntary Exchange

Rothbard: “A vital point: if we are trying to set up an ethic for man (in our case, the subset of ethics dealing with violence), then to be a valid ethic the theory must hold true for all men, whatever their location in time or place. This is one of the notable attributes of natural law—its applicability to all men, regardless of time or place. Thus, ethical natural law takes its place alongside physical or “scientific” natural laws. But the society of liberty is the only society that can apply the same basic rule to every man, regardless of time or place. Here is one of the ways in which reason can select one theory of natural law over a rival theory—just as reason can choose between many economic or other competing theories. Thus, if someone claims that the Hohenzollern or Bourbon families have the “natural right” to rule everyone else, this kind of doctrine is easily refutable by simply pointing to the fact that there is here no uniform ethic for every person: one’s rank in the ethical order being dependent on the accident of being, or not being, a Hohenzollern. Similarly, if someone says that every man has a “natural right” to three square meals a day, it is glaringly obvious that this is a fallacious natural law or natural rights theory; for there are innumerable times and places where it is physically impossible to provide three square meals for all, or even for the majority, of the population. Hence this cannot be set forth as some kind of “natural right.” On the other hand, consider the universal status of the ethic of liberty, and of the natural right of person and property that obtains under such an ethic. For every person, at any time or place, can be covered by the basic rules: ownership of one’s own self, ownership of the previously unused resources which one has occupied and transformed; and ownership of all titles derived from that basic ownership—either through voluntary exchanges or voluntary gifts. These rules—which we might call the “rules of natural ownership”—can clearly be applied, and such ownership defended, regardless of the time or place, and regardless of the economic attainments of the society. It is impossible for any other social system to qualify as universal natural law; for if there is any coercive rule by one person or group over another (and all rule partakes of such hegemony), then it is impossible to apply the same rule for all; only a rulerless, purely libertarian world can fulfill the qualifications of natural rights and natural law, or, more important, can fulfill the conditions of a universal ethic for all mankind.”

Brian: I agree that if we desire to elaborate and set up a universal natural law ethic for all of mankind as the basic law of our society, than a libertarian one is the only one that really qualifies. But this is actually a big if: what if a non-universal set of societal rules actually turns out to be better for the general well-being of mankind than the universal set? Why is universality of the rules necessarily the overriding consideration? Rothbard does not really justify his position, besides by saying that physical laws are universal and thus natural societal laws should be too. This is not really an argument at all though; it is just a striving to make unlike things (physical laws and ‘ethical natural laws’) more similar.

Chapter 8: Interpersonal Relations: Ownership and Aggression

Rothbard: “Let us set aside for a moment the corollary but more complex case of tangible property, and concentrate on the question of a man’s ownership rights to his own body. Here there are two alternatives: either we may lay down a rule that each man should be permitted (i.e., have the right to) the full ownership of his own body, or we may rule that he may not have such complete ownership. If he does, then we have the libertarian natural law for a free society as treated above. But if he does not, if each man is not entitled to full and 100 percent self-ownership, then what does this imply? It implies either one of two conditions: (1) the “communist” one of Universal and Equal Other-ownership, or (2) Partial Ownership of One Group by Another—a system of rule by one class over another. These are the only logical alternatives to a state of 100 percent self-ownership for all.

Let us consider alternative (2); here, one person or group of persons, G, are entitled to own not only themselves but also the remainder of society, R. But, apart from many other problems and difficulties with this kind of system, we cannot here have a universal or natural-law ethic for the human race. We can only have a partial and arbitrary ethic, similar to the view that Hohenzollerns are by nature entitled to rule over non-Hohenzollerns. Indeed, the ethic which states that Class G is entitled to rule over Class R implies that the latter, R, are subhuman beings who do not have a right to participate as full humans in the rights of self-ownership enjoyed by G—but this of course violates the initial assumption that we are carving out an ethic for human beings as such.

What then of alternative (I)? This is the view that, considering individuals A, B, C . . ., no man is entitled to 100 percent ownership of his own person. Instead, an equal part of the ownership of A’s body should be vested in B, C . . ., and the same should hold true for each of the others. This view, at least, does have the merit of being a universal rule, applying to every person in the society, but it suffers from numerous other difficulties.

In the first place, in practice, if there are more than a very few people in the society, this alternative must break down and reduce to Alternative (2), partial rule by some over others. For it is physically impossible for everyone to keep continual tabs on everyone else, and thereby to exercise his equal share of partial ownership over every other man. In practice, then, this concept of universal and equal other-ownership is Utopian and impossible, and supervision and therefore ownership of others necessarily becomes a specialized activity of a ruling class. Hence, no society which does not have full self-ownership for everyone can enjoy a universal ethic. For this reason alone, 100percent self-ownership for every man is the only viable political ethic for mankind.

But suppose for the sake of argument that this Utopia could be sustained. What then? In the first place, it is surely absurd to hold that no man is entitled to own himself, and yet to hold that each of these very men is entitled to own a part of all other men! But more than that, would our Utopia be desirable? Can we picture a world in which no man is free to take any action whatsoever without prior approval by everyone else in society? Clearly no man would be able to do anything, and the human race would quickly perish. But if a world of zero or near-zero self-ownership spells death for the human race, then any steps in that direction also contravene the law of what is best for man and his life on earth. And, as we saw above, any ethic where one group is given full ownership of another violates the most elemental rule for any ethic: that it apply to every man. No partial ethics are any better, though they may seem superficially more plausible, than the theory of all- power-to-the-Hohenzollerns.

In contrast, the society of absolute self-ownership for all rests on the primordial fact of natural self-ownership by every man, and on the fact that each man may only live and prosper as he exercises his natural freedom of choice, adopts values, learns how to achieve them, etc. By virtue of being a man, he must use his mind to adopt ends and means; if someone aggresses against him to change his freely-selected course, this violates his nature; it violates the way he must function. In short, an aggressor interposes violence to thwart the natural course of a man’s freely adopted ideas and values, and to thwart his actions based upon such values.”

Brian: This section is actually one of the most important sections of the book, and with it, I think, the general argument either succeeds or fails. As we discussed above, it assumes that we have to be looking for a universal ethic that applies equally to all of mankind. It is through this assumption that Rothbard disposes of any kind of elitist arrangement. As I explained above, if we do not particularly care about this assumption holding though, the argument is to no effect.

Rothbard then tries to dispose of all egalitarian arrangements by pointing out the gross impracticality of “Universal and Equal Other-ownership”. He writes: “But if a world of zero or near-zero self-ownership spells death for the human race, then any steps in that direction also contravene the law of what is best for man and his life on earth.” Here, Rothbard relies on another crucial assumption underlying his thinking, an assumption that I think is untenable. He assumes that we must ultimately settle on an absolutist ‘ethic’ of some kind. If one absolutist ethic can be shown to be generally good (absolute freedom and self-ownership), while another absolutist ethic can be shown to be horribly bad (complete egalitarianism), Rothbard assumes that anything in between the absolutist ethic of freedom and the absolutist ethic of egalitarianism will, because it is closer to the absolutist ethic of egalitarianism, necessarily be worse than just following the absolutist ethic of freedom.

But isn’t it at least conceivable that a non-absolutist arrangement could work better than both absolutist positions? When I, and other libertarian writers on economic and political affairs (including Rothbard himself), seek to argue against egalitarian policies, we don’t just state that since absolute egalitarianism is clearly ridiculous, any policy that contains any egalitarian elements must also be ridiculous. I suspect that we would be justly laughed at if we constantly employed this stratagem. Rather, we analyze and evaluate each social issue systematically, and generally argue that in most cases, freedom will work better than coercion (in either its egalitarian or elitist forms).

It is true that other libertarians and I also argue that since freedom works better as a general societal rule than elitist or egalitarian coercion, freedom should be allowed to operate even in isolated cases when coercion might produce a better result. Otherwise, a bad precedent might be set and the spreading use of coercion due to the precedent might end up causing more pain in general and in the long-run than it produced benefit in the isolated case. But while the costs of setting bad precedents and of compromising good general rules are significant and definitely worth considering carefully, it would be extravagant to say that these costs always override any benefits that might be obtained through the bad precedent-setting actions. There are no shortcuts to intelligent social policy analysis, and I think that Rothbard tries adopting one here.  

Rothbard: “Now the man who seizes another’s property is living in basic contradiction to his own nature as a man. For we have seen that man can only live and prosper by his own production and exchange of products. The aggressor, on the other hand, is not a producer at all but a predator; he lives parasitically off the labor and product of others. Hence, instead of living in accordance with the nature of man, the aggressor is a parasite who feeds unilaterally by exploiting the labor and energy of other men. Here is clearly a complete violation of any kind of universal ethic, for man clearly cannot live as a parasite; parasites must have non-parasites, producers, to feed upon. The parasite not only fails to add to the social total of goods and services, he depends completely on the production of the host body. And yet, any increase in coercive parasitism decreases ipso facto the quantity and the output of the producers, until finally, if the producers die out, the parasites will quickly follow suit.”

Brian: Again, the assumption that we need to find a universal ethic at all costs, which I think is not a justified assumption. Also, the argument assumes that every man has the same basic ‘nature’ as each another. What if some men, naturally, greatly enjoy being predators and despise engaging in production of any kind (Vikings for instance)? The fact that if everyone in the world became a predator the human race would die out is a good fact for would-be predators to be cognisant of, but there are means that predators can employ to avoid this eventuality. The most common technique is for predators to establish a monopoly of coercive force (or of predation) in a particular geographical area. They then use a combination of their superior force and of intellectual propaganda techniques in order to maintain their coercive, monopolistic rule. They are predators, but they use a great deal of their power to ensure that others don’t become predators in their geographical regions.

The result of the widespread use of this technique covered the earth in monopolistic ‘States’ long before the theory that governments should only exist by consent of the governed and should serve the interests of the governed became popular. This monopolistic State-system, while less than ideal from a social policy stand-point, certainly does not represent Rothbard’s nightmare scenario where everyone gives up production and becomes a predator. In this case, lucky predators can enrich themselves through their favored means as long as the prey doesn’t put up too much of a fuss. If a philosopher were to tell these predators that what they are doing does not accord with their natures as human beings, it is unlikely that they would be too bothered. Only the prey resisting the predators defensively in an organized fashion would ultimately serve to check their anti-social actions.  

Chapter 26: Utilitarian Free-Market Economics: C. Ludwig von Mises and “Value-Free” Laissez-Faire

Mises: “An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If the economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate.”

Rothbard: “Now this is surely an ingenious attempt to allow pronouncements of “good” or “bad” by the economist without making a value judgment; for the economist is supposed to be only a praxeologist, a technician, pointing out to his readers or listeners that they will all consider a policy “bad” once he reveals its full consequences. But ingenious as it is, the attempt completely fails. For how does Mises know what the advocates of the particular policy consider desirable? How does he know what their value-scales are now or what they will be when the consequences of the measure appear? One of the great contributions of praxeologic economics is that the economist realizes that he doesn’t know what anyone’s value scales are except as those value preferences are demonstrated by a person’s concrete action.”

Brian: I think that this criticism of Mises is unfair. Mises says that the economist “merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate”. Mises doesn’t say that he definitely knows that all of humanity will necessarily be aiming at the goal p, he just says that if they are, they will consider the policy a bad one. Mises makes it clear elsewhere in his writings that the findings of free-market economics are mostly useless from the point of view of total aesthetics or psychopathic murderers who don’t care about material well-being. The fact is though that the vast majority of humanity are neither of these things, and hence in most cases the evaluations of policies as ‘good’ or ‘bad’ by the free-market economist, if the listeners believe him when he describes the consequences of the policy, will generally be shared, at least in general terms, by the vast majority of the listeners.

Rothbard:  “Moreover, there is another fundamental reason for advocates of “inappropriate” policies to refuse to change their minds even after hearing and acknowledging the praxeological (economic) chain of consequences. For praxeology may indeed show that all types of government policies will have consequences that most people, at least, will tend to abhor; however, (and this is a vital qualification) most of these consequences take time, some a great deal of time. No economist has done more than Ludwig von Mises to elucidate the universality of time-preference in human affairs—the praxeologic law that everyone prefers to attain a given satisfaction sooner than later. And certainly, Mises, as a value-free scientist, could never presume to criticize anyone’s rate of time preference, to say that A’s was “too high” or B’s “too low.” But, in that case, what about the high-time-preference people in society who may retort to the praxeologist: “perhaps this high tax and subsidy policy will lead to a decline of capital; perhaps even the price control will lead to shortages, but I don’t care. Having a high time-preference, I value more highly the short-run subsidies, or the short-run enjoyment of buying the current good at cheaper prices, than the prospect of suffering the future consequences.” And Mises, as a value-free scientist and opponent of any concept of objective ethics, cannot call them wrong. There is no way that he can assert the superiority of the long-run over the short-run without overriding the values of the high time-preference people; and this cannot be cogently done without abandoning his own subjectivist ethics.”

Brian: Yes, the findings of free-market economics will be more important to people with lower time-preferences than to people with higher time-preferences, granted.

Mises: “Liberalism [i.e., laissez-faire liberalism] is a political doctrine. . . . As a political doctrine liberalism (in contrast to economic science) is not neutral with regard to values and ultimate ends sought by action. It assumes that all men or at least the majority of people are intent upon attaining certain goals. It gives them information about the means suitable to the realization of their plans. The champions of liberal doctrines are fully aware of the fact that their teachings are valid only for people who are committed to their valuational principles. While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness . . . abundance to poverty. It teaches men how to act in accordance with these valuations.”

Rothbard: “In this second variant, Mises has successfully escaped the self-contradiction of being a value-free praxeologist advocating laissez faire. Granting in this variant that the economist may not make such advocacy, he takes his stand as a “citizen” willing to make value judgments. But he is not willing to simply assert an ad hoc value judgment; presumably he feels that a valuing intellectual must present some sort of ethical system to justify such value judgments. But, as a utilitarian, Mises’s system is a curiously bloodless one; even as a valuing laissez-faire liberal, he is only willing to make the one value judgment that he joins the majority of the people in favoring their common peace, prosperity, and abundance. In this way as an opponent of objective ethics, and uncomfortable as he must be with making any value judgments even as a citizen, he makes the minimal possible degree of such judgments. True to his utilitarian position, his value judgment is the desirability of fulfilling the subjectively desired goals of the bulk of the populace.

A few points in critique of this position may here be made. In the first place, while praxeology can indeed demonstrate that laissez faire will lead to harmony, prosperity, and abundance, whereas government intervention leads to conflict and impoverishment, and while it is probably true that most people value the former highly, it is not true that these are their only goals or values. The great analyst of ranked value scales and diminishing marginal utility should have been more aware of such competing values and goals. For example, many people, whether through envy or a misplaced theory of justice, may prefer far more equality of income than will be attained on the free market. Many people, pace the aforementioned intellectuals, may want less abundance in order to whittle down our allegedly “excessive” affluence. Others, as we have mentioned above, may prefer to loot the capital of the rich or the businessman in the short-run, while acknowledging but dismissing the long-run ill effects, because they have a high time-preference. Probably very few of these people will want to push statist measures to the point of total impoverishment and destruction—although this may well happen. But a majority coalition of the above might well opt for some reduction in wealth and prosperity on behalf of these other values. They may well decide that it is worth sacrificing a modicum of wealth and efficient production because of the high opportunity cost of not being able to enjoy an alleviation of envy, or a lust for power or submission to power, or, for example, the thrill of “national unity” which they might enjoy from a (short-lived) economic crisis.  

What can Mises reply to a majority of the public who have indeed considered all the praxeological consequences, and still prefer a modicum–or, for that matter, even a drastic amount—of statism in order to achieve some of their competing goals? As a utilitarian, he cannot quarrel with the ethical nature of their chosen goals, for, as a utilitarian, he must confine himself to the one value judgment that he favors the majority achieving their chosen goals. The only reply that Mises can make within his own framework is to point out that government intervention has a cumulative effect, that eventually the economy must move either toward the free market or toward full socialism, which praxeology shows will bring chaos and drastic impoverishment, at least to an industrial society. But this, too, is not a fully satisfactory answer. While many or most programs of statist intervention—especially price controls—are indeed cumulative, others are not. Furthermore, the cumulative impact takes such a long time that the time-preferences of the majority might well lead them, in full acknowledgment of the consequences, to ignore the effect. And then what?”

Brian: I think that Rothbard misunderstands Mises’ position here. Rothbard says that: “True to his (Mises’) utilitarian position, his value judgment is the desirability of fulfilling the subjectively desired goals of the bulk of the populace.” But if you look back at what Mises actually wrote, he said: “While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness . . . abundance to poverty. It teaches men how to act in accordance with these valuations.” Preferring life to death, health to sickness, and abundance to poverty are real value judgements that liberalism assumes in its adherents. Mises clearly recognizes that if someone prefers poverty to abundance or sickness to health, (free-market) liberalism will not appeal to him.

The appealing thing about liberalism is that the free-market which it enables can cater to a wide array of different tastes. The only thing which market participants really have to agree on is to prefer abundance to poverty and to prefer the extra abundance that society enables more than the ability to violently assault and rob people which they must give up. Liberalism does not require unanimity from its adherents in terms of religion, lifestyle choices, ice cream flavour preferences, or a wide array of other things, and this is one of its great virtues as a political ideology.

            

           It is true, as Rothbard points out, that even if people agree on their fundamental valuations, their more detailed subjective valuations could in some cases lead them to want to deviate from absolutist libertarianism in certain cases. Firstly though, Mises wasn’t in fact an absolutist libertarian; he was a minarchist (supporter of strictly limited government) who might even have supported a limited scope for government welfare programs and public education, though his writings are unclear on these points. Thus, the fact that his version of liberalism wouldn’t necessarily lead everyone to advocate absolutist libertarianism wouldn’t bother him too much.

            

           Secondly, and more fundamentally, Rothbard fails to recognize that there are two complementary varieties of utilitarianism: egoistic utilitarianism (what the thinker believes will work best for him personally) and universalistic utilitarianism (what the thinker believes will work best for mankind as a whole). When engaged in intellectual discourse about social arrangements, utilitarians typically speak in terms of universalistic utilitarianism in order to persuade and to appeal to as broad an audience as possible. At the end of the day though, people will decide whether to support a particular social policy or political ideology based on their particular, egoistic utilitarian position. Mises points out how broadly beneficial his variant of liberalism is in order to persuade others to support it, but ultimately his advocacy of this position is based on his own egoistic utilitarian calculations. Mises, personally, thinks that his variant of liberalism is the best general way for organizing society, from his own subjective, egoistic point of view. People who value egalitarianism more than him or value material affluence less than him may support illiberal social policies, even if they are fully aware of their consequences, as Rothbard points out. But then to Mises and to those who think like him, these people are just enemies, enemies to be hopefully overruled (and overpowered if necessary) by the majority of citizens who agree with Mises.

            

           Now, Rothbard could try to respond by saying that this isn’t good enough, that advocacy of social policies shouldn’t just be based on subjective, egoistic whim. But it isn’t a question of good enough or not: that’s just the way it is. People will ultimately see the world through their subjective, egoistic points of view and will act accordingly. There is no objective natural law which can mysteriously induce people to conform to one another in terms of their fundamental valuations, however much Rothbard may wish there to be. I think that I have sufficiently demonstrated in this critique how Rothbard’s endeavour to formulate such an objective natural law fails.

       

             

   

 

    

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[1] Murray Rothbard, The Ethics Of Liberty (New York: New York University Press, 1998). 

Book Release: Thinking Like A Libertarian: Selected Writings Of A Utilitarian-Libertarian

I just wanted to let my readers know that I have revised and organized some of my best posts and used them to compile a collection in book format. 

If you have a Kindle E-Reader, you can get the book here: http://www.amazon.com/dp/B00HGZEFVW

If not, and you would like a free copy of the book, please leave a comment in the 'Comments' section of this post, and I will send you a copy of the book in pdf or epub format, whichever you request.

Thanks, and Happy Holidays!

Brian.

Free-Market Community Governance

            Community Governance under whose heading I include: roads, municipal infrastructure (water pipes, sewers, power lines, gas lines, etc…), zoning rules, aesthetic/architectural standards, parks and other public spaces, community events, etc… ‘Surely,’ the statist would say, ‘even libertarians must admit that Community Governance cannot be provided without government intervention. It is fraught with externalities, natural monopolies, and potential free-rider issues. Without some government coercion greasing the wheels, nothing would get done and everyone would be worse off.’ To this, I would respond that I by no means admit it, and that these things could be provided better by private individuals acting voluntarily than by coercive governments. In this post, I will explain how.

           

           Consider the case of hotels, apartments, office buildings, shopping malls, and condominiums: what do these things have in common? They are all ‘multi-tenant’ buildings that also have ‘common areas’ that are built and maintained by an organization that has the incentive and the means to do the job well. Hallways, swimming pools, central HVAC systems, lobbies, forums, etc… These common areas or common elements are typically not in ruins and dilapidated (except in some rent-controlled apartment buildings, but that’s another issue), because of the fact that the owner or manager of the building has an incentive (increased tenant satisfaction which leads to higher rents or property values) and the financial means (common area fees built-in to rent or collected as condominium fees) to keep these common areas and elements in good condition, and perhaps to improve on them or build more.  

            

           Now, take this multi-tenant/common area model, and imagine applying it to geographical communities separated by outdoor spaces rather than to just single building complexes. The occupants of individual residential and commercial buildings would constitute the ‘tenants’ in the ‘multi-tenant’ model, while what I described as Community Governance would constitute the ‘common areas/elements’ in that model.  Just as hotels do not need governments to build and maintain their swimming pools and HVAC systems for them, so communities organized under such a model wouldn’t need governments to intervene in Community Governance production or in urban infrastructure.

           

           Let us now consider how such communities could be established under a libertarian regime. Imagine that a property development company purchases a field on the outskirts of a city and decides that it would be profitable to make the land suitable for a mixed residential/commercial community. The developer knows that the only thing the government will do for his property is to provide basic law enforcement/police protection services, it will not involve itself in urban infrastructure or Community Governance in any significant way.  The developer will proceed to build some residential houses or multi-tenant residential complexes on some of the land, perhaps build some buildings destined to be commercial ones in the centre, connect everything with roads and urban infrastructure (sewers, water pipes, power lines, gas lines, telephone/internet cables), and perhaps build some public spaces such as squares or parks. This done, the developer now has three main options, which he will select, other things equal, based on the financial returns that they each offer. These options are:

1. Multi-Tenant Income Property: The developer either retains ownership of the land himself or sells the whole land package to a property management company. The property manager then leases out spots in residential and commercial buildings and maintains the common areas himself with some of the rent collected, doing so in order to maintain or increase the level of demand for his property and the rent that people are willing to pay. Hotels, apartments, shopping malls, office buildings, and industrial parks all employ this model currently, and it seems to work just fine, as long as tenants don’t mind or prefer leasing rather than owning property.

2. Condominium Arrangement: The developer subdivides parcels of the land but then binds them together in a contractual condominium arrangement. The condominium association would be given ownership of the common areas, the duty to maintain them, and the ability to levy condo fees from unit owners in order to pay for common areas and elements. This done, the developer would then sell units to those that wanted them, with the condominium arrangement and contract attached to the property, which would affect the market value of the property accordingly. The contract would probably provide for periodic elections for the Board of Directors of the condominium association, and once established, the Board would probably decide to hire a property management company to attend to the day-to-day operation of the common areas, elements, and services. This is the model used by condominium buildings around the world, and though the administration of the building might not be as smooth as under a multi-tenant income property arrangement, it is attractive for people who want to own property rather than lease it, but who also want to take advantage of the common area/element provisioning abilities of a collective arrangement.

(Note: Under the condominium arrangement and the multi-tenant income property arrangement, multi-tenant income buildings and condominium buildings could also exist, and they would just constitute a condominium arrangement within a condominium arrangement, a multi-tenant income arrangement within a multi-tenant income arrangement, etc…)

3. Free-Hold + Associations: The developer subdivides the land and sells each individual land parcel separately. Roads and the municipal infrastructure on them or underneath them cannot exactly be subdivided, so they are given to a newly-formed Road and Infrastructure Association to maintain. Membership in this association for land owners is mandatory, and fees can be levied for road and infrastructure maintenance (more detail on this below). If the developer built parks or other public spaces, he could either continue owning them himself and try to use them as income-generating properties (park admission fees, retaining ownership of commercial buildings on the public spaces and charging extra rent for to tenants of these buildings), or he could leave them to a Parks and Public Spaces Association, which would be funded by fees collected from members in the community who joined voluntarily. The maintenance of common areas would probably be choppier and more dependent on community spirit and voluntarism under this arrangement, but this arrangement would probably still be feasible in most cases, and would give people the full satisfaction of complete property ownership.   

            

           Whichever of these three options is chosen, the result is a market-based community development and maintenance process that requires no coercive government intervention beyond the provisioning of basic law enforcement services.

           

Some may now ask though: what is the point of this whole exercise? What makes these private land authorities (whether they be multi-tenant income landlords, condominium associations, or road and utility associations) any different from the municipal governments that already exist? While there are a few similarities between these private organizations and municipal governments, there are also some significant differences that distinguish private organizations for the better:

1. Smaller zones of authority=more competition:

In a free-market system, there often exist both economies and diseconomies of scale, pushing free-market organizations towards the optimal size for their type of organization. Though I don’t know for sure, I would guess that for the kinds of arrangements discussed above, the interplay of market forces would result in an average community size that covers a significantly smaller area than the average municipal government of today. This is because the larger private land organizations got, the less opportunity for differentiation of communities in the market there would be, and the harder the effective governance of these larger communities would get, particularly in the case of condominium arrangements.

I suspect that something like what we now consider as a semi-integrated ‘community’ within a larger urban area (the area around Yonge and Lawrence, Jane and Finch, Sheppard and Yonge, etc…), where the quality of public spaces/common elements have a real, noticeable, impact on the desirability of every tenant or owner’s property would prevail as the optimal size on a free-market. If so, this would mean something on the order of 60 or so self-governing communities within what is now governed by the City of Toronto. Many of these communities would be forced to compete with one another to attract tenants and residents, and the result would be a continuous tendency towards improvement in the quality of Community Governance.

2. Regulated by the profit motive rather than by the blunt hammer of elections:

           
         For any organization with authority over community affairs, whether private or governmental, there must be some way of holding them accountable to the residents of that community and making them responsive to the wishes of those residents. In the private sector, it is the profit motive that performs this function. In the case of a Multi-Tenant Income Property arrangement, this is obvious. The more the landlord of the community can make his community attractive to existing tenants and potential tenants, the higher rents he will be able to charge and, provided that the costs of making the community more attractive are less than the higher rents he will be able to charge as a result, the more profit he will net for himself. In a condominium arrangement, the stakeholders (the condo unit owners), have an interest in making their community attractive, both for their own current benefit as residents and for the sake of raising the market value of their property in case they want to sell their property or use it as collateral. Similar considerations apply to a Free Hold + Associations arrangement, although the process of keeping the community attractive might be a bit choppier and might be subject to free-rider problems in certain cases.

           

           For governments, on the other hand, it is popular elections that supposedly perform this regulatory function. However, governmental elections are too unfocused, deal with too many issues at once, offer too few options, occur too infrequently, and are too dependent on the personalities of politicians, in order to be effective, precise, and timely means of holding the government accountable to residents and making them responsive to the wishes of residents. Timely, precise, and incentive-heavy signals sent by the property markets via the profit motive are a much better means of making community organizations accountable and responsive.        

3. Once the transition period is over, joining these arrangements will be voluntary and not imposed on anyone:

            
           Once the transition period from the current statist system is over (discussed below), people will have to literally ‘buy-in’ to these private community organizations in order to be associated with them. People will weigh the quality of the community organization and the Community Governance, in addition to such factors as location and building quality, when deciding what property to buy. If they choose to buy or lease a property that is associated with a community organization, they will choose to associate themselves with that organization and choose to take on all that that entails (which can vary based on the specific contract) as part of the package deal for the property.

           

           If you still think that this should be defined as a government, then it would be a government where people actually would have to sign a real ‘social contract’ voluntarily in order to be under its rule. This is unlike the current governments, whose legitimizing ‘social contracts’ our ancestors supposedly agreed to somewhere in the mists of history, and which for some reason are still considered binding on us.

4. Different arrangements (multi-tenant income property, condominium, free hold + associations) to experiment with, rather than unitary one imposed by government:

            
           Under present arrangements, there is really no choice when it comes to the form of Community Governance: buildings will be owned separately and ‘common areas/elements’ will be provided by municipal governments out of the funds obtained from the unavoidable, coercive levy of taxation. Under free-market arrangements, people will be free to experiment with different methods of community organization. Perhaps some will prove superior and will win out over the others: perhaps multiple models will co-exist and cater to different groups of people. The coercive, uniform, statist method cannot tolerate this diversity, the flexible free-market is perfectly suited for it. How can we ever know which modes of community governance work better than others if the government never lets us try them out, instead simply imposing its own monopoly model on everyone?  

           

           I understand that the ideas and arrangements I am presenting will be unfamiliar and seem strange to many people, and many objections are bound to be raised to them. I will now take the opportunity to pre-emptively address some of the likely issues and objections that will be raised:

1. Transition Period:

            
           Some of the trickiest issues to solve are connected to the transition period. So far, the real estate markets and the actions of those involved in them have been guided by the supposition that it is the government’s responsibility to take care of urban infrastructure and other community governance issues. Municipal governments levy taxes as they will, and provide urban infrastructure as they will: in their private capacities, real estate owners were not really involved in the decision-making processes. How to get from this current, statist situation to the free-market arrangements described above without sacrificing the interests of current real estate owners?

            

            Well, I think that the first thing to sort out is ownership of the streets. It is obviously unfeasible for each owner of a subdivision to own, completely independently, the tiny stretch of road adjoining his property. What should be done is to (somewhat arbitrarily) divide urban areas into ‘neighbourhoods’ of moderate size, and then give every property owner in that neighbourhood shares in the ownership of the streets of that neighbourhood, based on the amount of street frontage of his property. The resulting corporation would be the Road and Infrastructure Association of that neighbourhood. This corporation would take ownership and thus decision-making rights over the streets of the neighbourhood, along with any municipal property on those streets and the real estate-based decision-making rights regarding any private infrastructure projects (such as telecom infrastructure) on the streets.

            

           For real estate owners in that neighbourhood, membership in the Association would be both automatic and mandatory. The Association would need funds to administer, maintain, and perhaps improve the roads and infrastructure, and would have the right to collect such funds either through levies of members or through charging road tolls or taking a cut of infrastructure rates. Membership would be mandatory for the simple reason that any property owner is going to be using the streets and the infrastructure, and it would be unfair if they could just access the benefits without paying their share of the costs. Though necessary due to the tricky transition period, forcing people to join community organizations is opposed to the spirit of my proposed reforms, and thus the powers of the Associations would have to be strictly limited to avoid abuse. Any funds collected would have to be through per-share levies of members or through uniform, level of service-based fees, no discriminatory pricing allowed. Also, the Associations could only collect the amount of funds necessary to do their job with regards to road and infrastructure, they would not be able to collect and use funds for other purposes, nor amass an unreasonably large reserve fund.

            

           With regards to the size and location of the somewhat arbitrarily determined ‘neighbourhoods’, they would certainly not be set in stone. Free hold property owners with ownership shares in a neighbourhood road corporation should be allowed to secede from that corporation under certain conditions. Firstly, they would need the agreement of every owner on an area of road the size of at least a standard city block in order to do anything. Secondly, to avoid the creation of a chaotic neighbourhood structure, any neighbourhood would have to be a minimum size, perhaps 5 by 5 standard city blocks or something like that. If everyone in such an area agreed to secede, they could start their own neighbourhood. Or, if city blocks were on the borders of adjoining neighbourhoods, they could choose to secede from their existing neighbourhood and just tack themselves on to the adjoining one, provided a majority of shareholders of the neighbourhood they wished to join agreed.  

            

           Now, this initial arrangement might seem clunky and inefficient, and it probably would be. A certain degree of this is inevitable in any transition arrangement, where the governments made a mess of things by not letting voluntarism structure the real estate market from the beginning. It will be nowhere near as simple and clear-cut as the developer and his field which we used as an example above.

            

           Nevertheless, this clunky initial arrangement still has the potential to evolve into the more sophisticated community forms discussed above. One thing property owners could do is pool their properties and the road ownership shares connected with them into a condominium arrangement. If more than 50% of the property owners in a neighbourhood agreed to do this, the condominium could take a controlling share in the Road and Infrastructure Association, and with condo fees levied from its members, could provide other Community Governance services as well. Similarly, property owners could sell their properties and the road ownership shares connected with them to a property management company, and then lease their former properties from the company, thus establishing a Multi-Tenant Income Property arrangement if more than 50% of the owners decided to sell.

It is true that there may be some hold-outs who refuse to agree to the condominium arrangement or to sell to the property management company. They would retain their membership in the Road and Infrastructure Association and continue paying the dues and fees associated with those services. They might, for a time, ‘free-ride’ for some of the services a condominium or Multi-Tenant Income Property organization might provide for the community. As time goes on though, and property is bought and sold, the significance of this ‘problem’ will probably be reduced as the condominium or landlord continues to try to buy up those properties. In any case, we can by no means condone the forcing of anyone into association with any condominium or landlord, as this would destroy the whole point of the reform, which is for voluntarism and free-market considerations to prevail as much as possible in the community organization market.   

2. Coordination Issues:

For most community organization purposes, it would seem that municipalities are currently too large. Nevertheless, in some areas of infrastructure coordination, these bigger units may be somewhat more suitable than smaller ones.

For instance, let’s say that an energy company has a power plant at the outskirts of Toronto. It wants to sell its power to consumers in Toronto. In order to do so, there needs to be infrastructure that can connect the power plant to the buildings of all the consumers that want to purchase the power. This will invariably mean power lines going through multiple different neighbourhoods, owned or organized by different organizations. What if some neighbourhood organizations are unreasonable and do not allow the power lines to cross their neighbourhood streets? (Let’s assume that these neighbourhoods get their power from another, competing company). Are the neighbourhoods that want the power from this company but who can’t get it because of the obstructionist outer neighbourhoods out of luck?

Firstly, something like this would only really be a problem, if then, in the transition period. Otherwise, if a power company is building a new power plant and intends to sell the power generated in this plant to the residents of Toronto, surely, before building the plant, it will ensure that it has the contractual right to build the requisite infrastructure through the relevant neighbourhoods. If they know that the neighbourhoods are by no means going to allow their infrastructure through, they will locate the power plant somewhere else where neighbourhoods are more accommodating. Secondly, if neighbourhoods really are just being unreasonable obstructionists, the government should be allowed to use their power of eminent domain, in these rare circumstances, to force the neighbourhoods to allow the power lines through, provided that they are compensated more than reasonably for the trouble.      

In some cases though, it’s not just a question of third party companies building connective infrastructure, but of an infrastructure service that really has to be provided in a coordinated manner city-wide. The most obvious example of this would be water and sewage. In Toronto, water is pumped out of Lake Ontario, purified, and then pumped into the homes of consumers. When the water the consumer uses goes down the drain, sewers take it to another water treatment plant, where the water is purified, and then put back into Lake Ontario. This circuit is really city-wide, and the relevant infrastructure really should be coordinated as such. Does this mean that we need the mega municipal governments after all?

No, and here’s why: Just as individual property owners can join together to form Road and Infrastructure Associations, so the various community organizations in a city (be they condominium associations, Road and Infrastructure Associations, or community landlords) could get together to form a Toronto Water and Sewage Association. They could take shares and decision-making rights in the association based on agreed-upon criteria, and then this association could be responsible for coordinating Toronto’s water and sewage services (it might run the water treatment plants, and perhaps lay down rules that the owners of community water and sewage systems must follow if they want to keep receiving the services). Community organizations would be incentivized to do this for the same reason that they are incentivized to provide good community services for their own neighbourhoods: because having a good sewage and water system would increase the property values and rents of the properties that they are concerned about. Neighbourhoods wouldn’t just compete against neighbourhoods, but cities would also compete against cities, and to do so effectively, sometimes the neighbourhood organizations of that city would have to cooperate to achieve a common end such as good water and sewage services.     

3. Land Monopoly Issues:

            
           Some readers will undoubtedly be concerned about a potential monopoly issue under this arrangement: what if one big property management company buys up an entire city and becomes an unaccountable monopolist who no longer cares about serving their clients well? In general, most people unjustifiably assume that the free-market is characterized by strong monopolistic tendencies. In actual fact, there is not much evidence for this belief. Most monopolies or near-monopolies have been the result of government decrees or interventions or have been protected and favoured by government interventions. In our particular case, I think that the diseconomies of scale would kick in and prevent any property management company from administering too many complex urban areas at once. For condominium arrangements, the diseconomies of scale would kick in even earlier, due to the participatory nature of condominium associations.

            

            If some readers’ hearts are not yet stilled though, I am willing to support a piece of (probably superfluous) legislation prohibiting any company or associated group of companies from owning more than 30% of the land in a municipal region (such as Toronto).

4. Unreasonable Regulations Issues:

            
           What if condominium associations or multi-tenant income property landlords insist on unreasonable rules and regulations? What if, for instance, some of them decide to fine gay residents, or fine people who don’t wear the mandated funny hats at all times, or fine property owners who don’t put a shrine to the Baby Jesus in their buildings?

            

           Firstly, it is highly unlikely that an organization that is interested in its property values will do so. Multi-tenant income property landlords, if they insist on silly regulations for their tenants, will create reduced demand for their properties, resulting in lower rents that people are willing to pay. In addition, tenants who don’t like the rules will be free to cease renting and find a new place. Similarly, condominium associations who insist on such rules will reduce the property values of all their constituents, which won’t be popular with them, and make their lives more onerous, which also won’t be popular. And, people can always sell their condominiums to people who don’t mind the silly rules and find another property where the rules are less silly.

            

           Again though, if people are still worried about unreasonable landlords and condominium associations, I don’t mind supporting some, largely superfluous, legislation in this case as well. The legislation could state that regulations made by condominium associations or by landlords can only apply to common areas/elements, to the external look of buildings, and to functional building features such as fire safety provisions. They may not apply to the interiors of tenants’/condo owners’ buildings (no regulations about what colour their furniture must be for instance) and they may not be aimed at the person of tenants or condo owners (no being fined based on personal characteristics such as sexual preference or based on the specifics of personal attire).

These general rules, plus the self-interest of condominium association leaders and multi-tenant income property landlords, will serve to minimize the issue of unreasonable rules and regulations, making it pale into comparison besides the same issue when applied to the current system of monopoly government community control.

So, there you have it, a discussion of private, free-market alternatives to the supposedly ‘vital’ government intervention in urban infrastructure and community affairs. So the next time you hear someone say that the free-market couldn’t possibly provide effective Community Governance, tell them that they shouldn’t be so sure, the free-market would probably overcome the government in this area too!

Policy Proposal: Individualized Forced Savings Plan (IFSP)

            I propose the following:

            

           That, in place of CPP/Social Security, Socialized Medicine/Medicare, and Employment Insurance, there be set up something I call an Individualized Forced Savings Plan (IFSP). Employed or self-employed individuals will be required to put 10% of their pre-tax income into their own IFSPs. Contributions will no longer be mandatory once there is enough money/assets in the IFSP to enable an individual to live modestly for about 10 years, let’s say the equivalent of $500,000 in today’s money. There will be nothing ‘collective’ about these plans, each individual will have their own plan and will manage it themselves. They may change the asset composition of their IFSPs at any time, with the proviso that no assets be used for personal consumption in any way, shape, or form (ie. no buying a luxurious mansion that you plan to live in yourself as an ‘investment’. If you want to invest in real estate, it must be a rental/income-generating property exclusively). The money in the IFSP can only be disinvested and used for consumption for the following purposes: 1. If the person becomes unemployed and needs to use the money to avoid poverty. 2. In case of medical emergency or in order to pay for catastrophic medical insurance insuring against such emergencies. 3. Genuinely career-focused educational investments for the person or their children. 4. Once the person retires and they are over the age of 65, they may use the money as they wish.

             

            The primary purpose of the IFSP is to act as a financial buffer, separating employed but unthrifty people from the minimal welfare social safety net that I expressed support for elsewhere (http://thinkingabouthumansociety.blogspot.ca/2013/03/issue-analysis-welfare-social-safety-net.html). With the IFSP in place, if an employed person loses their job, has a medical emergency, needs to invest in training for themselves or for their children, or gets to be too old to work, there will be a financial buffer, built up from contributions made during employment, that has to be used up before the person is eligible for the minimal social safety net. Not only will this reduce the welfare costs of the government, but it will also provide a certain degree of stability to the individual, as falling into the minimal social safety net would be quite disruptive to someone’s life. The minimal social safety net is supposed to be the last resort for desperate people, thus to have a buffer of forced savings between individuals and the net is a good thing to have.

            

           Another benefit of the IFSP is that, to the extent that people save in their IFSPs in the form of investment capital (which they will tend to do as long as their isn’t too much economic instability), there will be more capital available to businesses in the economy. This will lead to a generally more productive structure of production and to higher real wages for workers.

            

           Why an individualized plan and not a ‘collective’ one such as CPP/Social Security or Employment Insurance? The problem with these ‘collective’ plans is that they are not self-sustaining and they are too redistributive. These plans are typically not on a fully funded basis, but on a so-called ‘pay-as-you-go’ basis, where benefits come out of current contributions by other people to the plan, instead of out of an individualized pool of solid investment assets. The result is an unsustainable pyramid scheme which will become less and less financially viable as time goes on, as is happening with CPP/Social Security. In addition, with ‘pay-as-you-go’ plans, not much actual investment is going on, as there is no need to hold actual investment assets over long periods of time with this model as there is with an individualized, fully funded plan. Rather than saving for the future with investment assets, people are led by these plans to believe that they are covered. The result is less investment in the economy, meaning less capital available to businesses, meaning a less productive structure of production overall and lower real wages.    

            

           These plans are also too redistributive. Richer people pay far more than they receive from these plans, while poorer people receive far more than they pay. As with any egalitarian policy, the results are a relative crippling of the incentives to be productive and serve the consumers, and less saving and capital accumulation than would otherwise occur.

            

           Some libertarians will object that the government should not be in the business of telling people what they can and cannot do with their hard-earned income. I sympathize with this point, but given that I have already expressed support for a minimal social safety net, the IFSP needs to be in place as a buffer to avoid the abuse of the social safety net by profligate people. Of course, one could just say that this is a reason to scrap the minimal social safety net idea, but I think that the minimal social safety net plus the IFSP are, as far as government policies go, relatively benign, and could even lead to some good.          

An Egoist's Guide to Action

In social philosophy, there is probably no term more misunderstood than ‘egoism’.

In the language of formal economic theory, it can be said that every action is egoistic, if by egoistic we mean any action chosen by the individual because they expect that the benefits to themselves will outweigh the costs to themselves (which is the case for every action performed, by definition). Eating a hamburger or donating to charity, if performed by an actor, demonstrates that the actor expects to value the satisfaction derived from eating a hamburger or expects to value the satisfaction derived from donating to charity more than any other course of action, assuming resource and time requirements are equal, that they could have performed at the time.

If egoism is to have a substantive meaning in philosophy though, a discipline more concerned with evaluating the ends actors choose than economics, which is solely concerned with evaluating means and what ends they lead to, it must be defined more narrowly. The popular definition of an egoistic act is an act that is performed by an actor who doesn’t, or doesn’t ‘sufficiently’, evaluate the effect that that action will have on other humans when deciding whether to perform it or not. An altruistic act, on the other hand, according to the popular definition, is an act that is performed by an actor who does ‘sufficiently’ take into consideration the effects, positive or negative, that that action will have on other humans when deciding whether to perform it or not. Consuming beluga caviar by yourself would be a perfect example of an egoistic act, donating to charity concerned with helping others and which doesn’t redound at all to your material benefit would be a perfect example of an altruistic act.

            

           The problem with this definition of egoism is that it is too narrow. This is because, ironically, someone who only performed egoistic acts would fail lamentably at pursing their own self-interest, the advancement of which is supposed to be the goal of egoists. This is because men do not generally live as hermits, and their self-interest would generally not be advanced by living as hermits. Rather, most men live in society with others, something which enormously advances all of their self-interests. In order for this institution of society to be preserved and to operate beneficially, there can be no question of everyone always absolutely disregarding the effects that their actions will have on others in that society. The result would be a disintegration of whatever society that existed into a maelstrom of robbery, assault, murder, and chaos, something which serves no one’s self-interest.

            

           In order for people to advance their self-interests effectively, ‘societal’ and ‘indirect’ considerations must be considered, alongside the purely ‘selfish’ and ‘direct’ considerations contained in the popular definition of egoism, when evaluating the desirability of a course of action. I suggest five broad criteria for egoists living in society to consider when evaluating any course of action:

Selfish Considerations:

1. Direct effects on the actor, considered in isolation from ‘societal’ factors. Can be in the form of an immediate benefit (consumption) or a benefit to be reaped later (investment):

            

            To isolate this consideration, imagine for the moment that you are a hermit and that as long as you meet the cost, the benefit will just materialize without any social processes being involved. For a choice like deciding whether to eat a bowl of ice cream or not, these conditions are approximately true in reality, as the societal effects of your decision are fairly negligible. The main considerations are: how much will you enjoy the taste? How much is its money cost? How hungry are you? What will the long-term health effects be? How will you feel immediately after consuming the ice cream? Etc…

Societal Considerations

2. Sympathy Effects:

            

           As humans live together in society, especially in families or communities, they often become emotionally attached to one another and realize that others share many common, ‘human’ traits with them. The result is the development of feelings of sympathy between humans, defined as an emotional, empathetic link between two or more humans, a link that can vary widely in intensity. When bonds of sympathy are established between two people, if one perceives that the other is hurt, some of that hurt will be transferred onto the perceiver, while if one perceives that the other is happy, some of that happiness will be transferred onto the perceiver. The stronger the sympathetic bond, the more hurt or happiness is transferred. If an egoist who has developed bonds of sympathy with another wants to advance his self-interest effectively, he cannot ignore the effects that his actions will have on others. If he performs an action that hurts someone he cares about, part of that hurt will be transferred back to him through the bond of sympathy. This must be considered by any rational egoist who has the advancement of his self-interest in mind. Hurting yourself through hurting those you care about is not a good way of advancing your self-interest.

3. Fear of Retaliation or Hope for Recompense Effects:

            

           One of the first things that people living in societies together learn is that other humans are egos interested in their own well-being just as they are, and this fact must be taken into consideration when evaluating courses of action. Specifically, if an actor gratuitously hurts another person, he should take into account the possibility that the hurt person will retaliate and hurt the actor in return. On the other hand, if an actor gratuitously helps another person, he should take into account the possibility that the helped person will reciprocate the benefit and help the actor in return. Most people seem to have a natural, and societally beneficial, tendency to reciprocate both harms and benefits given by others. In many societies the retaliation/deterrent part is institutionalized and formalized by governments, acting through law enforcement agencies. These facts should not be ignored by rational egoists seeking to make decisions that will advance their self-interests.

4. Higher Probability that that Course of Action will Become a General Rule of Societal Action:

           

           Every time one member of society engages in an individually beneficial action that has bearings on the rules governing the social order, it becomes more probable that this kind of behavior will become a more general behavior amongst members of society. This is so due to the addition of the actor to the number of citizens engaging in that kind of action, and due to the possibility of imitation by other citizens who see that this kind of action can be beneficial to individuals. For example, if the actor is deciding whether or not to mug a man in the street and steal his wallet, he should consider what would happen if more and more people in society started doing that. Security of person and property would become less secure, which would result in a less productive, less prosperous, less peaceful, and more fearful society for everyone. The actor was looking to benefit himself materially with his action, but his material interests and other interests would be hurt if his action became generalized and performed by more and more people in society. Now, this effect is of course only a probabilistic effect (there is no guarantee that others will imitate the action), and should be discounted by the actor accordingly. Nevertheless, the reality of the effect remains, as demonstrated by phenomena such as the impoverishment caused by widespread interest group politicking, and must be taken into account by any rational egoist intent on advancing his self-interest.

5. Intellectual Consistency/Hypocrisy Effects:   

            

            I suspect that many people’s minds, like mine, crave consistency in thought. My mind would be distressed if, for example, my having engaged in a bodily assault of another person forced it to rationalize a position like: ‘bodily assault is good when I am doing the assaulting, but bad when other people are doing the assaulting, both because of the negative societal effects and because I might be the one assaulted.’ Moreover, if I tried to convince people that bodily assault was bad and that they shouldn’t do it, they would probably discount my opinion because of its obvious hypocrisy. How can someone who has assaulted someone preach that assault is bad and that you shouldn’t do it? Who would listen to the opinions of such a person on any social topic? For the sake of your inner peace of mind and to maintain your intellectual reputation, this effect must be considered before engaging in an action which, if speaking generally and universally, you would rationally condemn, such as bodily assault.

            To make this discussion more concrete and practical, I will now use my five criteria for rational egoistic decision-making to explain why, entirely on egoistic grounds, if I had the opportunity, I would not break into someone’s house and steal their precious jewellery:

1. Possessing precious jewellery, at the direct cost only of walking to the person’s house, breaking a window, finding the jewellery, and carrying it home, is certainly directly beneficial in a societally-isolated, selfish sense. I could exchange the jewellery for a lot of money and use it to invest in a better future for myself.

2. Even though I don’t know the owners directly, I would feel sympathetic pain from the proposed action. I would imagine what it would be like if I was in their shoes, and just lost something both emotionally and monetarily precious to me, and the sense of violation and anger that they would feel. The pain would certainly be lessened because in this case, I don’t know the owners personally, but it would still exist and be a significant factor in my decision-making, for I know that they are human and would just assume that they are average, relatively nice people who don’t deserve to be gratuitously harmed.              

3. Being a cautious person and lover of security, I would greatly fear societal or police retaliation for my proposed action. I would definitely not like to live in fear of being hauled away to jail at any moment.

4. As I mentioned already, if robbery became general, society would become a nastier and less productive arrangement. I would not like that one bit, and consequently, I would not like to contribute to making that eventuality more likely, nor if it occurred would I like knowing that I was part of the problem, not the solution.   

5. My social ideas are generally libertarian and robbery is anathema to libertarianism. My inner peace of mind would be seriously disturbed if my actions contradicted my social ideas, and no one would take me seriously if they knew that I was a robber who preached libertarianism. Not just with regards to social policy, but probably with regards to other intellectual issues as well, my opinions would be discounted as tainted with hypocrisy. All this would be seriously harmful to me.

 Conclusion: I must conclude that despite the tempting immediate material advantages, the disadvantages, in the form of societal considerations, significantly outweigh them, and I would not decide in favour of stealing the jewellery, unless perhaps I was starving to death or if the owners were known thieves or murderers themselves.

            

           Now, some may object that by including societal considerations in my analysis, by definition the analysis is no longer done from an egoistic perspective. This is why we must come to a better understanding of the definition of egoism. When egoist philosophers such as Max Stirner and James L. Walker use the term, they do not so much contrast egoism with altruism as is popularly done, but with idealism. In their view, an egoist is someone who acts based on values that flow naturally/spontaneously from their own bodies and minds. An idealist, on the other hand, is someone who acts based on the alleged absolute value of fixed ideals. These ideals are somewhat alien to the current individual, established either by an indoctrinator or as a piece of ossified past thought of the individual that he does not allow his mind to challenge rationally when circumstances have changed. Popular examples of such ideals include things like God, Universal Love, Equality, Family, Accumulation, Chastity, Law, and Property. These ideals become idols to which the individual is expected to, and often expects himself to, sacrifice his self-interest to. Rather than undertaking rational, egoistic calculations of actions as I did above with the jewellery stealing example, they adopt the sometimes useful, but sometimes harmful, shortcut of just inquiring whether an action fits in with one of their fixed ideals or not, and enthusiastically pursuing the action if it does, and impetuously rejecting it if it does not.

            

           To make the opposition between egoism and idealism clearer, I will offer some examples of how the conduct of an idealist might differ from that of an egoist:

1. The religious idealist might otherwise want to have sex before marriage, but if he thinks that his God does not approve of such actions, he might prevent himself from doing it. The rational egoist does what he calculates will be best for him, in the short and long-run, and as long as he takes proper precautionary measures against unwanted impregnations or STDs, he will probably choose to have sex before marriage when the right circumstances align, regardless of what people say a religious deity might think of his actions.

2. The rational egoist, when it comes to love and generous actions springing from that feeling, will probably save his love for those he is close to, admires, and/or cares about. The universal love idealist, on the other hand, thinking it his duty to adhere to the ideal of Universal Love, will push himself to try to love everyone equally, lavishing indiscriminate love on the peasant in Thailand he’s never met and on his own close friends and family alike. The idealist might think that his philanthropy must cover the whole world, and will spread it out accordingly, while the egoists will save his philanthropy for those he truly, spontaneously, and naturally cares about.

3. The egalitarian idealist will want to make all members of his society equal in socio-economic terms, in the name of his ideal of Equality. He will recommend harmful policies that will contribute to undermining the productivity of the society in which he lives in pursuit of this ideal. The rational egoist, on the other hand, if he is an employer for example, might choose to give his lowest paid workers a raise above the general market value of their services in order to make his employee’s salaries more equal, perhaps to increase their morale and perhaps out of sympathy. He will not go much further than something like this though, because he does not seek to sacrifice himself for the sake of the unattainable and destructive ideal of Equality.

4. The familial idealist will submit to many hardships in the name of Family, even if his particular family happens to be grasping and abusive. The rational egoist will seek to make his family happy, both out of sympathy for those close to him and, if family members had been good to him, to reciprocate those benefits received. If the family is rotten though, causing the egoist to feel little sympathy or need to reciprocate non-existent benefits dispensed, and/or if the family demands an unreasonable amount of sacrifice from the egoist, he will not unreasonably hurt himself as a sacrifice in the name of the idol of Family.

5. The miserly idealist is one who forgets that the purpose of amassing wealth is to consume or to allow those you love to consume, and instead just keeps amassing wealth in the name of the ideal of Accumulation. The rational egoist understands the value of wealth, and will make balanced and situation-specific decisions amongst devoting his wealth to consumption, investment (setting the stage for future consumption), or cash-holding to meet exigencies.       

6. The legalist idealist is one who thinks that everything that the government proclaims to be Law, they must unquestioningly obey. For example, let us assume that the actor is a small-business owner who could use some extra labor help with his business. A young man just out of high school offers to work for him. While the extra help would be useful, the business owner does not think that it would be worth $10.25 an hour (Ontario’s current minimum wage). The young man, however, really wants the job and is willing to work for $7 an hour. If the business owner is a legalist idealist, he will refuse and not hire the young man. After all, paying below the minimum wage is against ‘The Law’. If the business owner is a rational egoist, and the chances of their being found out by the authorities is small, he will probably gladly conspire with the young man so that he can work for $7 an hour. Both parties to the transaction benefit, and the main precedent that is set by the action is the mostly benign one of ignoring absurd laws of the government. 

            

7. The propertarian idealist is one who thinks that Private Property is sacred, and that to violate someone’s private property rights is always a grave sin. In all cases in which the issue comes up, the propertarian idealist will always choose to preserve the sanctity of Private Property, regardless of circumstances. Most knowledgeable egoists will maintain that respecting private property is good as a general rule, due to the many benefits to all that the institution provides. However, this will not prevent them from making occasional exceptions to that rule, in cases where the benefits seem to clearly outweigh the costs and where the exception is not likely to lead to a slippery slope, resulting in more and more violations of private property. For example, a rational egoist might support the principle that if a major, beneficial infrastructure project is being built but a stubborn hold-out is refusing to sell his small, but necessary, parcel of land at any reasonable price, the hold-out may be forced to sell at something like 1.5 times the current market value for similar parcels of land. The propertarian idealist, on the other hand, would never accept this exception to his ideal, and would prefer that the infrastructure project be built around the parcel, even if it means ludicrously costly detours.

            Thus, we have shown that if people became rational egoists, the disintegration of society would not result, as societal considerations must be considered alongside selfish considerations if the egoist is to pursue his self-interest at all effectively. We have also argued that consequently, the opposite of egoism is not altruism, as it is popularly supposed, but idealism. Idealism, if the ideal is a generally good one such as Family or Property, can sometimes serve just as an intellectual shortcut for those not wanting to constantly engage in egoistic calculations of courses of action. Even for good ideals though, and especially for bad, ludicrous, or questionable ones, this shortcut can sometimes lead to a lot of irrational decisions. Keeping the proper, egoistic foundations of decision-making in mind could help people to avoid more of these irrational decisions.