Friday, April 29, 2011

A few parables with easy lessons in basic economics and classical liberty that modern liberals lose sight of

1. Scarcity is a law of nature, and all humans must consume scarce resources to survive.

Imagine a person stranded on a island. Call him Adam. Adam needs to consume to live. He eats by fishing or gathering. Maybe he goes Robinson Crusoe and captures some wild boar, and starts raising them. He builds a shelter, drinks water for a spring that he's diverted toward his shelter, burns wood for heat if needed. But everything he consumes, he alone must produce or obtain. If he doesn't produce something himself, he can't consume it. For him, equal balance between consumption and production is not just an ideal, it's a fact of life, as much as gravity, and the changing of the seasons, and even potential injury, possible sickness, and eventual death.

2. Trade, Charity, and Theft: for an individual to consume scarce resources, he must produce them himself, or trade, beg or steal from another.

Now say there are two people on the island, Adam and Brett. Suddenly, Adam has the potential to consume something that he didn't produce, because Brett produced it. Cool! So how does Adam get what Brett produced? He has a few options. First, he could beg for it. "Hey, Brett, c'mon man, I didn't catch any fish today. Can't you spare one of yours?" Second, he could trade for it. "Hey Brett, I didn't catch any fish, but I did pick a bunch of mangoes. Wanna trade?" Or he could steal it. It's obvious which option is morally acceptable, which is morally salutatory, and which one is morally condemnable.

It is also important to understand that even though Adam no longer needs to rely solely on his own production, that he still can't consume something that he or someone else did not first obtain or produce. Adam will either: 1. consume or save value equal to his production by trading with Brett; 2. consume value greater than the value of his production by stealing or receiving gifts from Brett; or 3. consume less than the value of his production by donating to or being the victim of Brett. But, again, like gravity, the equilibrium between aggregate consumption or savings on the one hand, and aggregate production on the other is a law of nature, a fact of life. Brett and Adam cannot agree to a policy to ensure that they are both prosperous. That would be like legislating that pi equals 3, or like trying to repeal thunderstorms. Adam and Brett collectively can only consume what they collectively produce or obtain.

Now add a third person, Charlie. The basic law of nature still applies. The things that Charlie produces or obtains are accessible to Adam and Brett only through the same three options: trade, charity, and theft. To pretend otherwise is to pretend that gravity doesn't exist.

3. When authorities forcible take an individual’s production against his will, it’s still stealing

Now let's say Adam is stronger than Brett, who is stronger than Charlie, and that Adam starts stealing from Brett through brute force. Brett has at least two options. He can enlist Charlie's aid and present a united front against Adam. Alternatively, he could subordinate himself to Adam, and in turn oppress Charlie.

Perhaps Adam is so powerful that he declares himself King of the whole island. He appoints Brett as his noble, and allows Brett to enslave or enserf Charlie. Now Charlie is doing all the work, under Brett’s supervision, for the benefit mostly of Adam. Being citizens of a liberal democracy, we easily grasp that Adam, although he calls himself the “government,” is really nothing more than a thief. There is nothing special about his status as the “government” that excuses his theft. He produces nothing and yet lives like, well, a king. Adam’s moral position is not improved by the fact that he allows Brett to retain a portion of the production that he confiscates from Charlie as a “rent”. That’s why today, economists define “rent seeking” as “attempts to derive economic rent by manipulating the social/political environment in which economic activities occur. An example of rent-seeking is the limitation of access to skilled occupations imposed by medieval guilds.”

Note also that the aggregate production of this rent-seeking society has now declined, because Adam and Brett are not producing anything. Thus, rent-seeking behavior is usually considered to be a hindrance to the economy. (Id.)

4. Free trade, protection of private property, and enforcement of contracts are the best ways to incentivize production; and they set people free to boot.

Now let’s assume that Adam, Brett, and Charlie are about equal in strength, or all have access to weapons that mitigate their physical differences, and also agree to live in a civil society in which they will not enslave each other, nor steal from each other. Furthermore, they divide the island into three parts, which they all agree are of equal value (but not necessarily equal size), and each one of them takes ownership of one of the parts. They trade with each other, and sometimes gift things to each other. Each produces what he wants, or what the others will trade for. Say Adam gets really good at growing mangoes, and Brett’s part of the island is just perfect for raising pigs, and Charlie’s part has a bay with the most tasty fish. They live free, and they live as prosperously as their collective production and ingenuity allows.

One day, Charlie wanted some mangoes, but hadn’t yet caught any fish, even though he planned to go fishing the next day. So he asked Adam for some mangoes, and promised to give him a fish on the next day. Adam agreed. The next day, Charlie went fishing and caught several fish, but ate them all himself. When Adam arrived to collect his fish, he was outraged. “I thought we were trading, but really, you were stealing,” he said. “I will never trade with you again!”

Adam told Brett what happened, and Adam and Brett approached Charlie. Brett said, “You broke your promise to trade with Adam, so how do I know you will honor the promises you have made to me? I will no longer trade with you, unless you give to Adam a fish as you promised.” Charlie replied, “but I have no more fish today.” Adam said, “then go fishing tomorrow and give to Charlie a fish tomorrow.”

Charlie realized the error of his ways, and decided he still wanted to trade with Adam and Brett. So he went fishing the next day, and gave Adam a fish, plus another fish as a gift to make up for the bad feelings.

Furthermore, the three decided it was useful that when two of them had a dispute, to refer it to the third person to decide it fairly and in accordance with the rules that had been agreed-to previously.

5. When the majority decides to take an individual’s property against his will, the majority is engaging in a facially morally questionable act that must be justified if it is to taken at all.

Nevertheless, Charlie continued to a have a little anti-social streak in him. One day, while passing near Adam’s property, he saw some perfectly ripe mangoes hanging from the trees. He crossed onto Adam’s property and stole some mangoes. Adam, standing some distance away, saw him. Adam, per the island’s agreement, brought his grievance to Brett. Adam and Brett then approached Charlie.

Brett said “you should give the mangoes back.” Adam protested, “but I’ve already eaten them.” Brett then asked Adam, “how many fish does Charlie usually give you for a mango, and how many mangoes did he take?” Adams said, “usually I ask for one fish for two mangoes, and Charlie took four mangoes.” Brett thus declared: “Charlie, you must give to Adam two fish.”

Now Charlie had just been fishing that day, and his net was full of fish, but Charlie averred: “I do not agree with your judgment, I will not give Adam any fish, so if you take my fish, you will therefore be stealing from me.”

Brett and Adam conferred for a moment, and then Brett said: “yes, taking your fish against your will is morally questionable. But you had also agreed to abide my rulings when you had a dispute with Adam. And I find that you have also stolen from Adam. So if you do not agree to abide my ruling, in this case, we find that the wrong of taking from you against your will is justified by your prior wrongful actions.” Outnumbered, Charlie could not prevent Adam and Brett from taking two of his fish against his will, and so they did.

Charlie, steaming, then went onto Brett’s property and stole a pig from Brett. Brett took his grievance against Charlie to Adam. Adam said to Charlie, “we all agreed to live in a society in which we no longer steal from each other. We would only trade with or receive gifts from others. If you do not honor this agreement, we can no longer agree to allow you to be in our society. We will banish you from the island.” Charlie considered this, and again realized the error of his ways, so stopped stealing (we hope).

6. People are mortal; extending and improving an individual’s life has costs; and forcibly imposing those costs on other citizens is morally murky.

One day, an old sea trunk washes up on Adam’s beach. In it, are some medical instruments, and a few medical text books. Adam looks through the text books, and realizes that they are generally way over his head. He tells Charlie and Brett about the trunk, and they inspect the books. They both think that if they took some time to study the books and practice with them, they might be able to learn some useful things. Charlie, however, is less interested in investing the time to do so. He works hard fishing, and likes to spend his free time surfing. Brett, while he is also busy raising his pigs, thinks it would be interesting to study the books in his free time, so he says that he wants the books. Adam claims they’re his. Charlie agrees that since the books washed up on Adam’s beach, they are Adam’s, and if Brett wants them, he’ll have to trade for them. Adam and Brett subsequently reach a deal.

After a while, Brett has learned some useful things. He has figured out how to dress wounds, and distill an antiseptic from some of the local flora. One time, he cuts himself, and treats the wound himself.

Some time later, Charlie gets a bad gash on his shin while surfing. He visits Brett, who is busy tending his pigs, and asks if Charlie has learned anything from books that will help him. Brett says that he has, and tells Charlie that he can rent the book for awhile for a couple of fish. Charlie looks at him, and says “can’t you just help me?”

Brett responds, “well, I could, but right now, I’m busy tending to my pigs. Also, I spent a lot of time studying the book and learning how to dress wounds and make antiseptics. You said you weren’t interested in doing that, because you wanted more leisure time. Don’t forget that it was your ruling that the book was property, and so it, and the information in it, needed to be traded for. And, you know, things aren’t really the best between us since you stole one of my pigs. Also, your fish nets are usually always full. So I’m not sure why I should just do something that you could have done yourself. Also, I’ve run out of my stock of antiseptic, so I’d have to collect more flowers to make more.”

Charlie thinks for a moment, and says, “o.k. we’ll trade. I’ll go collect the flowers, and then watch your pigs while you distill the antiseptic. And I’ll give you five fish for your trouble.”

“Seven fish,” says Brett

“Six and no more.”


* * *

Some time later, Adam cuts his hand tending his mango trees. He visits Brett and asks for his help. He asks Adam to treat him for free, because he was never able to understand the text books in the first place, and his mango groves haven’t fully recovered after a hurricane that passed through fairly recently.

Brett responds, “I don’t know Adam, I’m really busy right now. I spent a lot of time learning this stuff, and distilling the antiseptic. And you sold me the books fair-and-square, so I don’t know if I want to take the time to help you for free. I know your mango groves took a hit a while ago, and Charlie and I were very happy to help you through a rough spot there with some gifts. But it looks like they’re coming back, now. I think you can afford to trade me some mangoes.” Adam, upset, calls Brett “selfish” and says he’s taking the matter up with Charlie.

The three meet to settle the dispute. Charlie tells Adam, “Adam, as you and Brett have taught me, we agreed that we are only to trade with each other, or accept gifts, and never steal. On what basis can I tell Brett to treat you?”

Adam avers, “You should tell Brett to treat my wound as a gift. After all, I can’t do this myself. It’s not my fault that I couldn’t understand the text books. And my mango groves have still not fully re-grown from the hurricane. Brett is just selfish if he wants me to give him mangoes to treat my wounds. Now, he’s just trying to steal my mangoes, just like you used to do, and which you realize was wrong. I’m hurt, and he has no sympathy for me.”

Charlie responds, “Well, it’s not true that Brett is trying to steal your mangoes. I did, and I paid the price. But Brett is simply offering a trade. It is true, however, that your inability to understand the book is not your fault. On the other hand, there is no ‘fault’ in Brett for being able to understand the book, and having taken the time to study it, and learn from it. Still, on balance, I agree that he should treat you for free, because that would be a very nice thing for him to do. Brett, my ruling is that you must treat Charlie for free, as a gift.”

Brett retorts, “Wait a second. You can’t force me to give someone a gift against my will, because then it’s not a gift. Gifts are things of mine that I decide to give to someone else for free, not things of mine that you decide I should give to someone for free. Furthermore, the only reason it’s even possible for me to treat Charlie as a gift is because I took the time to learn this stuff. So, what are you going to do if I refuse to treat him for free? Beat me until I do? That would simply be enslavement, which is another thing we had decided not to do to one another when we established our civil society.”

Charlie thinks for a moment and says, “Yes it’s true we agreed not to enslave each other, and it’s true that I was not willing to study the medical books, even though I could have. So I will not enslave you. We can, however, take your pigs as a fine unless you treat him.”

Brett retorts, “well, that’s just stealing! When Adam and I took your fish against your will, it was because you had stolen from Adam. That was why we were justified in taking something of yours against your will. But I have never stolen from Adam, so on what basis do you take from me against my will? Also taking my pigs is not going to get Adam treated. Why can’t Adam just trade for my services, the way he usually trades for everything else?”

At this point, Adam jumps in, “I know! Charlie, your fish nets are almost always full. Why don’t you just give Brett some of your fish as a trade to treat me. Or just give me some of your fish as a gift so that I can trade them with Brett, instead of my mangoes. Either way, there will be a trade and a gift. We’ll be doubly good.”

“That sounds like a good idea to me,” says Brett.

“Hold on,” says Charlie, taken aback, “how did this come back on me? Why do I have to give Adam a gift?”

Adam says, “I don’t know, but if you don’t agree to give me some fish to trade with Brett, then I’ll take up the dispute with Brett, who will surely side with me, knowing that he’s going to get the fish in the end.”

“Yeah,” Brett joins in, “and if you don’t agree to trade me fish to treat Adam, then I’ll take the dispute up with Adam, who will surely side with me, because then he’ll get treated for free.”

“Well that’s just stealing!” shouts Charlie.

“Maybe it’s just that you’re the one who’s really the selfish one,” says Brett.

“Me?” asks Charlie. “C’mon, Adam’s the one who’s going around asking to get stuff for free, and raising disputes with everyone who doesn’t give it to him.”

“That’s true,” says Brett. “Maybe he is the selfish one.”

“Dang it,” says Adam, “now my head and my hand hurt.”

7. Providing public goods and services requires confiscating citizens’ production against their will, raising a moral problem.

Coming soon!