Titles

4-20-2002

The Journal Retires Its Dartboard
In 1988, the Wall Street Journal began an experiment.  It asked staffers to throw darts at a list of stocks, and then kept track of the results of the "portfolio" thus randomly created, over the following six month period.  It subsequently compared those results with the results obtained by a portfolio prepared by expert stock analysts.  Over the subsequent fourteen years, there have been lots of new dart portfolios selected, and lots of new expert panels, creating the respectable alternative.  The expert-versus-dartboard comparisons have been a monthly staple for readers of the Journal.

This week, the Wall Street Journal announced that it is retiring its dartboard, and it tabulated over-all results. The darts managed an average annual return of 7%.  The experts won, getting a return of 11.2%.   So there might be some value to stock-selection expertise after all. 

It was a fascinating experiment, suggested by a book that Dr. Burton Malkiel wrote in 1973, where he defended the efficient capital markets hypothesis.  Said Malkiel, "Taken to its logical extreme, this means that a blindfolded monkey throwing darts could select a portfolio that would do just as well as one carefully selected by the experts."  Probably for workplace-safety reasons, the WSJ never actually employed monkeys or blindfolds, but they did allow Malkiel himself to throw out the ceremonial first dart.

Does this mean the efficient capital markets hypothesis has been disproven?  Not really: the experiment would be more persuasive if it had been kept silent over the 14 year period.  Dr. Malkiel himself suggested this week that there might have been a "publicity effect."  The WSJ has all along publicized the two sets of portfolios, and the news may have persuaded some investors to get on board with the stocks selected by the experts, making the superiority of those portfolios a self-fulfilling prophecy.  Another important advocate of ECMH, John C. Bogle, is also unimpressed.  He told the Journal he won't change his own investing practices, because trading costs weren't reflected in the results.

What is the ECMH?  It is the view that liquid and transparent markets tend to price in all available information about the prospects of alternative investments very quickly.  In other words, if there is any bad news about General Motors available in the press today, the price of GM stock probably reflects that news before I have a chance to sell it.  If there is any good news, the price likewise reflects that before I have a chance to buy it.  In this sense, the market knows more than any participant can ever know, so it's futile for any player to try to outguess the whole.  From the point of view of any one player, then, the price moves must appear to be a "random walk."  That is the reasoning that led Malkiel to his famous thought experiment about blind monkeys.

Necessary caveats aside, we think the editors of the Wall Street Journal gave the theory a pretty fair test and proved something important.  The market is not quite as smart as the "logical extreme" of ECMH thinks.  The market, then, can be outsmarted.  In a sense, this is a polemical setback for anarcho-capitalists.  The ECMH fits our world view rather nicely, after all.  But we might best accommodate this setback by thinking of ECMH as a goal, rather than an existing reality.  We can congratulate the markets on the degree to which they are efficient.  (Bogle has proven this, over the years, with his passive-investing index funds.  He has shown that by allowing his clients to invest in the market as a whole, through Vanguard, they can do as well as can the clients of any more active analysts, because in real-world contexts, trading costs and tax inefficiencies eat up whatever out-smarting of the market actually takes place.)

We can congratulate the markets on the degree of efficiency they have achieved, congratulate Bogle on taking advantage of that efficiency, and constantly make the point that the market is a heck of a lot efficient in distributing risk capital, taking account both of opportunities and of risks in the process, than any central planners ever could be or ever have been.  Experiments have been run on that point too, and the rubble that is now eastern Europe proves as much.

4-13-2002

The Obscene Salaries of Corporate CEOs
One of the favorite themes of left-wing denunciations of capitalism these days is that the chief executive officers of major corporations make way too much money, rock star money, home run slugger money.  Yet the CEOs can't play the guitar or hit balls out of the park with any regularity, so their compensation (more so than that of those other examples, it appears) must prove that they're robbing from the folks on the factory floor, the people at the bottom of their organizational flow charts.

There is much that defenders of capitalism ought to, and do, say in response to such critiques.  Since this is The Pragmatist, we are uniquely qualified to discuss such an issue while getting past the usual clichès of point and counterpoint, and we propose to do so with the help of a topical hook.   This week a major consultancy firm, William M. Mercer Inc. released its annual survey of executive compensation.  CEOs of the top 350 corporations headquartered in the United States saw their combined compensation (salary combined with bonuses) shrink, for the first time in more than a decade.

Obviously, this doesn't meant that CEOs are now hard up for cab fare.  It means, though, that Charles Gifford, the chief executive of FleetBoston Financial, got the same salary in 2001 he received in 2000 ($992,200) and his bonus was cut in half ($4.5 million in 2000, $2.25 million in 2001).  It means that John Chambers, the CEO of Cisco Systems, who received a $1 million bonus in 2000, received no bonus in 2001, and that his salary was cut (from $323,000 to $268,000).  There are many other such examples, but those two will suffice.

Who cares?  We do.  The reductions illustrate a point.  The Giffords' and Chambers' of the world have received a cut in the return they can command in the marketplace for corporate managers, because supply and demand conditions have changed.  Supply and demand: here as everywhere.  Its an old point, but worth hammering home.  The salaries of executives aren't free balloons drifting ever upward as the interlocking directorates do each other favors.  These salaries are just equilibrium points on the charts where supply and demand curves intersect.  Gifford, for example, became less valuable, in the eyes of his board, because FleetBoston found itself holding a lot of Argentine bonds when that government defaulted.

This brings us to another, and extremely important, point.  What is it that the CEOs of major corporations today bring to the table?  What is the analog to home runs or the skilled use of a guitar?  For the most part, we believe that CEOs are compensated for their connections.  It is, literally, not what they know but who they know (in the public sector) that counts.  This is the age of crony capitalism regnant around the globe, and the most highly paid corporate officers are the ones who are tightest with the better placed government officials.  It is in precisely this respect that Gifford failed his board.

We can hear the directors grousing, (or we can produce a quite plausible though imaginary scenario) now.  "If he had been in tight with the International Monetary Fund, they would have produced another bail out package and we'd still be getting dough from Argentina.  Or if he had been in close touch with friends in that country's cabinet, he would've seen this coming and we would have sold those bonds in time to cut our losses."  We should let our anti-capitalist friends know that if they really want to reduce CEO compensation, their foe is not the reality of capitalism, but its parody, crony capitalism.   If nobody cared any more about home runs, then Barry Bonds' income level would sustain a substantial drop, would it not?  Likewise, in an anarcho-capitalistic world, nobody would care anymore who a prospective executive's friends are.  The board would care what he knew about the managerial duties he'd be about to assume.  They'd pay him for his skills, not for his friends, real or fancied.   The shape of the bell curves for incomes would be immediately affected.

The causes of liberty and of equality, rightly understood, are not at odds.  They are the same cause.  The common foe of both of those values is privilege, which only survives when it is supported by sovereignty, directly or indirectly.

4-06-2002 

Dressing Up Creationism as Science
There are many points of view whence libertarians may (and do) view ongoing controversies over the teaching of evolution, especially the question of equal time for creationism in public schools.  We generally begin by expressing our skepticism about public schools altogether. That said, though, we at The Pragmatist propose just this once to say a few words about the scientific substance beneath such controversies.

"Anyone who writes about 'Darwin's theory of evolution' in the singular, without segregating the theories of gradual evolution, common descent, speciation, and the mechanism of natural selection, will be quite unable to discuss the subject competently."

So said the great geneticist, Ernst Mayr.  Let us take his advice and distinquish Darwin's different, though interlocked, theories.  Darwin believed that all the different forms of life on earth most likely arose from a single form of life in the distant past ("common descent,")  and that this happened through "speciation," that is, two or more distinct gene lines within a subspecies drift apart in form until fruitful sexual relations between members of one line and that of the other become impossible.  At this point, the different gene lines were and are different species.  Thirdly, Darwin proposed that speciation is a gradual and linear process, so that any given million-year period within any constant geographical area would probably be as fruitful in speciation as the million years just before it or the million years just after it.

Finally, Darwin believed that the process of speciation takes place largely through natural selection.  This part of his conceptual structure he took over from the economist Thomas Malthus.  It is the notion that different individuals, families, tribes, etc. within a species tend to multiply more rapidly than does their food supply.  Some are faced with starvation, others secure food and survive.  This ability to secure food against population pressures can come about in a variety of different ways, so it is a plausible engine for the differentiations behind speciation.

Creationists, when they are being most honest, say bluntly that they want to junk this whole structure, that they think it is all wrong and all best forgotten.  When they are not being quite so frank, they say that they just want "equal time' in public schools for the presentation of a contrary view, the view that a variety of different life forms may have been deliberately designed by an intelligent, supernatural Being. One peculiar feature of the debate on evolution and/or creationism in the public schools is that the creationists keep invoking the words of Stephen Jay Gould, who (they like to think) has proven that Darwin was wrong.

Well, let us be clear about this, then: Darwin was a fallible human being, and no doubt was wrong in many respects, just as was, say, Isaac Newton.  Contemporary evolutionists working in the post-Darwinian tradition can and have modified Darwinism, just as Einstein and other more modern physicists have modified the structure of Newtonian though.  Nonetheless, Newton himself provided the broad shoulders upon which one has to stand in order to see beyond the Newtonian horizon.  Darwin, in the fields most closely associated with his work, did much the same.   

The statements of Gould's that creationists always quote, as their excuse for refusing to climb up to those shoulders, simply take issue with gradualism.  In collaboration with Niles Eldredge, Gould has developed a paleontological theory of "punctuated equilibrium."  According to this, evolution moves in fits and starts.  Consider the most familiar sense of the word "puntuation," the ordering of sentences.  A sentence ends with a period, and the next one begins with a capital letter.  What is there in between the period and the next capital?  Just a blank space. There are such spaces in the fossil record, between one evolutionary equilibrium and the next.  But to draw vast metaphysical consequences from that is absurd.  The punctuated nature of evolution is just what one would expect, anyway, on the basis of the genetics of "allopathic speciation," worked out by the aforementioned Ernst Mayr decades before the Eldredge/Gould papers.

There is, in brief, no real substance to the arguments of anti-evolutionists, which is why they have to resort to twisting the statements of genuine scientists out of context.  Their successes can only make a bad thing (public education) even worse.

3-30-2002 

Cynicism?  No, Just Keen Perception
The week before Easter came with a rush of obituaries for show business legends.  Dudley Moore died, as did Milton Berle, as did the great director, Billy Wilder. We'll focus on Wilder here,  because we've never understood Berle's appeal, and we've never been "stuck between the moon and New York City"!

It seems to us that the extent (and the libertarian character) of Wilder's achievement remains largely underappreciated.  Wilder directed Sunset Boulevard (1950), Ace In The Hole (1951), Stalag 17 (1953), Witness for the Prosecution (1957), and on and on.  Movies like this earned him a reputation as a cynic, as the contra-Capra.   William Holden said that he had a "mind full of razor blades."   Yet there is a common thread through most of his movies, and through all of those just named.  Holden portrayed the manifold ways in which deception, and self-deception, both serve and depend upon violence, official or informal.

In Sunset, an aging actress, once the great star of silent films, deceives herself into the belief that the studio wants her back, and wants her to play Joan of Arc in an atrocious script she's written.  She shots her collaborator/lover when he forces her to face the truth.

In Ace In The Hole, a jaded and down-on-his-luck reporter (Kirk Douglas) discovers that a man is stuck in a cave.  He immediately recalls Floyd Collins, whose similar plight became one of the great media obsessions of the 1920s, and Douglas' character decides that this is his scoop, the way to resurrect his career, and with the help of a corrupt sheriff and the unfortunate spelunker's trampish wife, he drags out what might have been a simple rescue, eventually causing the poor sap's death.

This movie, also known as The Big Carnival, bombed at the box office.  One reviewer wrote indignantly that Wilder was telling "a distorted story of corruption and mob psychology that, in the reviewer's opinion, is nothing more than a brazen, uncalled-for slap in the face of two respected and frequently effective American institutions ­ democratic government and the free press."   Babblings of that sort are a good sign that someone has hit a nerve.

In Stalag 17, a group of American GIs in a German prison camp learn that there is an informer in their midst.  The camp hustler/opportunist, played wonderfully by Holden, seems the best suspect.   Holder clears his name and unmasks the actual snitch, who receives a fitting punishment.  This movie does more than portray mechanisms of power and deceit in the starkest possible setting: it implies that a hustler/opportunist isn't a bad thing to be, and may be the most trustworthy figure in such a setting, whih is a stunningly libertarian moral.

In Witness for the Prosecution,"Charles Laughton shamelesssly hammed his way through this picture, as a defense attorney trying to discover whether his client is innocent or guilty.   His client is guilty, but is acquitted, due to the deception practiced upon Laughton and the court by the defendant's wife, played wonderfully by Marlene Dietrich.  There is a common lesson in all of these movies.  It is that power is the disease that it pretends to cure and that we delude ourselves when we believe otherwise. There is nothing particularly cynical about that, and if we must think of this notion in the same breath as a razor blade we might think especially of Ockham's razor.  Those who want to go on believing that there is such a thing as legitimate coercion, as justifiable structures of state power, live in an unnecessarily complicated thought world.  Those of us who have dropped that belief, who have risen above the myth of sovereignty, are free (perhaps with some help from artists such as Wilder) to see the world straight and clear, to see it simply as it is.

Yes, Billy Wilder used to be big.  Actually, he always will be big.  Alas, pictures have gotten small.

3-23-2002

A Victory for the Goo-goos
We are unhappy, but not particularly distraught, by the victory of the good-government crowd this week: specifically,  passage of a campaign finance reform bill that restricts "soft money" contributions to political parties and that imposes new transparency requirements upon independent advocacy groups that spend money to express opinions relevant to upcoming elections.

More than a century ago, someone began using the term "goo goo" as a term of derogation for good-government politics.  We aren't sure of the particulars of the phrase's origin, but it seems clear that "goo goo" was something more than just an abbreviation, that it was meant to suggest baby talk.  The standard charge that goes with the term is that the good-government crowd elevates procedures over substance.  A related point ­ it often seems to want politics without partisanship, as signified by the regular ritual of hand-wringing over "negativity" in politics.   Of course, goo-goos will always deny both charges.  They'll always say that they're concerned about the process of politics because getting that right will enable the body politic to get the substantive issues right, too.  They'll also tell you that they acknowledge the necessary tensions of political debate and its partisanship.

In neither case is their own self-image very well informed: first, it is all too easy to be buried in process and to take one's eye off the ball; second, they do tend to acknowledge honest partisan loyalties only in the same way that an opera-goer might acknowledge professional wrestling.  The goo goo package is not, to our minds, an attractive one. 

Still, they have a victory.  They had to make crucial compromises to get it. They had to drop an effort to cap the price of broadcast campaign ads, for example.  Perhaps even more important, they had to agree to increase the permitted individual contribution in "hard" money from $1,000 to $2,000.   Those who followed the debate closely heard over and over again that 2002 money is not worth as much as 1975 money, so this adjustment is overdue, etc.  Still, there is no automatic indexing in the bill.  Do they expect that the currency will retain the same value forever after?  No:  because inflation isn't really what this provision of Shays-Meehan is about.  It is about lessoning the role of political parties, and increasing the role of an individual politician and his own staff.  As the government tightens the rules that apply to the flow of money through parties, and loosens the rules that apply to a campaign's own fund raising, it makes the designation by party ever less meaningful.  Of course, some of us have long thought it pretty close to meaningless: campaigns to come may bring many more to that way of thinking.

In general, the new law seems an "inside baseball" sort of reform. It is very important to professional fund raisers and campaign managers, much less important to those of us on the outside of their game.  The parts that are most offensive, that do smack of censorship, will likely be stricken by the Supreme Court.

Okay, a goo-goo might say, so this is only a small step. "But it is a small step in the right direction, toward taking the distortive impact of private money out of politics, working toward publicly funded campaigns that will allow the true voice of the people to make itself heard."

That is what some earnest people would like to believe, and what a very small number actually do believe.  If we believed that the forces at work in American politics were pushing in that direction, we'd be quite ticked off by the prospect.  But we don't.  The forces in American politics that made this step so small, that whittled down what otherwise might have been a sweeping reform into the inside-baseball category, aren't going away.

The first federal campaign finance reform measure in U.S. history was enacted during the admninistration of Theodore Roosevelt, after all.  Not a lot that is fundamental has changed since, in the way campaigns are waged.   The underlying historical trends that are moving the U.S, and indeed the world, toward anarcho-capitalism will not be disturbed or re-routed by goo-goo trivia. 

3-16-2002

Michael Walzer's Soul Searching
Michael Walzer has a fascinating article in the spring issue of DISSENT, with the deliberately provocative title, Can There Be a Decent Left?  His answer to that question is "yes," as one would expect.  His own leftward credentials are impeccable.  But the news is that he felt compelled to ask himself such a question, and that his "yes" answer is qualified and tentative in important and surprising ways, worthy of our attention here.

Walzer compares much of the left in the US in the early twenty-first century to that in England a century ago, and in France a half-century ago.

"The Boer War is a good place to begin," he says, "because of the fierce opposition it aroused in England--which wasn't marked, despite the cruelty of the war, by the kind of self-hate that we have seen on the American left. Nor were the 'little Englanders' hostile to English politics and culture; they managed to take a stand against the empire without alienating themselves from its home country. Indeed, they were more likely to regard England as the home country of liberalism and parliamentary democracy."

This is precisely the test that much of the contemporary US left flunks.  It doesn't know how to ­ or it does not want to take a stand against U.S. imperialism by any means other than by alienating itself from its home country, in ways that Walzer finds, as his headline indicates, quite indecent.

The little-England left gives Walzer his positive role model, while France in the 1950s and 60s, the era of existentialist angst on the left bank of the Seine, gives him a negative model. The French left might have taken its stand from within French tradition and culture ­ the country of the Enlightenment par excellance, the country that first yoked equality with liberty and fraternity, etc.  But it didn't do so. The Algerian war, in particular, gave rise to a "familiar self-hatred, most clearly manifest in Jean-Paul Sartre's defense of FLN terrorism."

Sartre said that for an Algerian to shoot a European is to kill two birds with one stone.  Before the killing, there had been an oppresser and an oppressed.  Afterward, there is only a dead man and a free one.  As Walzer observes, Sartre should logically have presented himself in Algeria with a painted target on his forehead.  He preferred to stay in Paris and grow old.  "His was a generalized, not a personal, self-hatred."

Walzer sees a lot more of the French model than of the English model in the American left of the moment.  Part of what recommends this pose of alienation to his ideological colleagues is its sense of moral purity, even of humility.  But that is an illusion, he explains.  "In fact," though, the impulse to blame America for everything wrong in the world, to exonerate Saddam or Mugabe of any taint, is an impulse of arrogance, one by which the blamers try to lift themselves "above the blameworthy (other) Americans. The left sets itself apart," contributing thereby to its own discredit and political ineffectuality.

So how does Walzer think the left should reform itself?  He says it could begin by jettisoning the "ragtag Marxism" which turns world politics into a sort of soap opera.  It could adopt instead, an ideology with just three pillars, "secular enlightenment, human rights, and democratic government."

What do we at The Pragmatist think of this?  To begin, we are not licensed participants in intra-left squabbles.  But we certainly do have opinions about secular enlightenment (it is a good thing), about human rights (an ambiguous notion) and about democratic government (we're against it).  The real problem with the left is identical to the problem with the right.  They quarrel over who should be driving the car, when the real task of our age is to dismantle the vehicle.

3-09-2002 

Compulsory Fuel Economy 
In 1975, Congress passed the first "corporate average fuel economy" standards, as a response to the "oil shocks" of the Nixon/Ford years.  There was much brave talk about forcing those evil auto makers to manufacture more fuel efficient vehicles.

Most students of the automotive market would agree that CAFE played a big role in the development of the smaller, lighter, models of car to which we have since become accustomed ­ and that this in turn slowed the long-run trend toward more safe vehicles.  There was a trade-off to be made, and Congress decided to trade away lives in order to reduce oil imports.  Of course, you'll never get any of the people responsible to put it just that way.  Anyway, it isn't clear that any reduction in imports was in fact achieved by this bargain.  The lives lost may, in fact, have been lost in vain.   The US imported only 35% of its oil in 1975.  That figure is 52% now.

Now Congress is considering an increase in the CAFE standards.  This didn't work before, so more of it will certainly work.  This reminds us of a classic definition of a fanatic, "one who, having forgotten his goal, redoubles his efforts."  We're also reminded of a wonderful recent episode of the satire, "That's my Bush." The episode portrayed debates over opening up the Alaska Wildlife preserve to oil drilling,  parallel to a plot involving an extramarital affair for Bush aide Karl Rove.  There was some very amusing dialogue about how both sex and petroleum drilling are "necessary evils"  - its best to buy both from strangers, rather than doing such nasty stuff in one's own home!

Anyway, lets get to the wonkish details.  Existing standards require that new cars get at least 27.5 miles per gallon if they are passenger vehicles, and 20.7 miles per gallon if they are light trucks [the category that includes minivans and sports utility vehicles.]  Massachusetts Senator John Kerry wants to enforce a 35 mpg average for all vehicles manufactured in or after 2013.  Arizona's John McCain suggests 36 mpg, but not until 2016.  Both plans would cover all vehicles, eliminating the separate category of light truck.

Would either plan reduce US vulnerability to oil shocks?  Not really.  There is no such thing as a "domestic US" oil market, anyway.  Even if the US reduced its oil imports to zero, its oil would continue to be bought and sold on exchanges of global reach, like the International Petroleum Exchange in London or the New York Mercantile Exchange.  The oil gets from wellhead to your street corner pump through such intermediaries.  Any oil shock that disturbs world market will have an impact on the US.  That's a consequence of living on a small globe.  Interdependence of markets will get you, like it or not.

On March 1, the L.A. Times ran a fine essay on this subject by William Niskanen and Peter Van Doren, both of course honchos of the Cato Institute.  "First, the standards put a damper on new car sales by increasing vehicle price or reducing size, and they reduce the per-mile cost of using cars because the vehicles use less fuel per mile. The lower sales of new cars means longer retention of existing cars. These older cars pollute more and use more gasoline, undermining the purpose of the CAFE standards. The new cars would use less gasoline per mile, which leads people to drive more. The current best estimate is that every 10% increase in the mpg standard results in a 2% increase in vehicle miles traveled.

"A second inefficiency of the CAFE standards arises from the interests of the auto unions. The United Auto Workers does not want unionized U.S. auto makers to comply with CAFE by importing small cars that use less gasoline. Under CAFE rules, gas-frugal imports only offset the gasoline use of other imports. To offset the gasoline use of low-mpg U.S. cars, high-mpg cars must be made in the United States, presumably with higher-cost UAW labor that would increase the price to consumers."

The whole idea, in short, is that the U.S. should take one more step on the road to serfdom that Hayek mapped out and warned us off so many years ago.

3-02-2002

Campaign Finance Reform: Who's Negotiating with Whom?
As this week began, the mainstream press assured us that the tracks were greased, and that the train of campaign finance reform would at last reach the station.  Shays-Meehan passed the house just before the President's Day break, and nobody expected much of a fight in the Senate.  The only remaining questions, then, were whether the President would sign the bill when it got to his desk, and how much of it the Supreme Court will invalidate when it gets there.

But nothing at all happened in the Senate this week.  Senator Daschle decided not to push the matter to the floor after all.  His press secretary, Ranit Schmelzer, said that Mr. Daschle is waiting on the outcome of talks between two Republicans ­ Senators John McCain and Mitch McConnell.   But what is there for them to talk about at this point?  Clearly McCain's views, and McConnell's, are still set in stone ­ neither hopes to convert the other on the merits.  Are they talking about rules for the debate?  -- even that would suggest that the tracks are not greased as thoroughly as we had been told.  And why is the Senate Majority Leader standing outside the room, literally or figuratively, while two members of the minority party discuss the rules for a debate?

Michael Crowley's article, in the March 4 issue of The New Republic, offers a clue. It seems that a lot of Democratic office holders have only recently read the bill, and are getting worried.

"One party staffer cancelled a luncheon interview with me last week," Crowley says, "becausehe had to spend the entire day explaining to House members that, contrary to their expectations, there were no easy end runs of the law already mapped out."  Since Shays-Meehan has already passed the house, it is a reasonable inference from that sentence that many House members voted in favor of the bill, and only thereafter made any inquiry of their party's staff what it would actually mean to them.  Apparently, they didn't like what they discovered.

"There is an absolute possibility that African American turnout drops by twenty percent or more by 2004," if this bill becomes law.  Who said so?  Jim Jordan, executive director of the Democratic Senatorial Campaign Committee ­ as quoted, again, in Crowley's useful piece.  Given the political demographics, African American turnout is good for Democrats, and it is often stimulated by voter mobilization campaigns that are stimulated by the sort of "soft money" this bill targets.  The Republican base, on the contrary, tends to have high turnout anyway.  It doesn't need to be mobilized through soft money.  None of this will matter for the 2002 campaigns, because the bill was written to take effect only thereafter.  But it could have a powerful and pro-GOP impact on the balance of power in both houses beginning in 2002.

Insofar as libertarians understand what we are about, we do not care.  We are, or should be, utterly indifferent to the balance of power as between Democrats and Republicans, because we are trying to dismantle the scales, not affect the way they tilt.  We insofar as we are also curious observers of the passing parade, we are allowed to form the following hypothesis: Daschle is not, in fact, hovering outside of a room waiting for McCain to talk some more with McConnell.  Daschle is, as is customary for him, in the thick of things.  He has heard what Jordan and others are saying, and he is trying to maneuver his way toward a better bill (better, of course, from the point of view of his constituencies.)

He doesn't want to send too many Naderites into the Green Party, so he can't openly scuttle this bill.  If he can arrange for amendments (mapping in those "easy end runs" mentioned by Crowley's acquaintance) then he can create differences between the two chamber's versions o the bill.  After creating the differences, he can secure passage of the new version and claim victory without actually having created any new law ­ because the two versions of the bill will then ave to go to conference, where they can both be quietly buried.  Nothing is certain, but that seems to us at this moment the most likely scenario.

2-23-2002

Cigarette Smugglers in the Service of Liberty
Tuesday this week a district court judge in NYC dismissed a lawsuit brought against tobacco company Philip Morris by several countries.  Most of the plaintiffs were members of the European Union, although they were joined by the nation of Columbia.  (Why?  Hold that thought!)

The European nations and Columbia claimed that Philip Morris deliberately supplied smugglers with cargo containers of its product, as a way of evading those nation's tariffs/taxes.  The courts of the US have long followed what they call the "revenue rule," i.e. in the absence of a very specific Congressional mandate, they will not interpret the laws of the US so as to help the governments of other sovereigns collect THEIR taxes. As recently as October 2001, the Second Circuit re-affirmed that rule in a case involved Canada, R.J. Reynolds, and a claim on all fours with the claim made here.  The 2d Cir. was mandatory authority for Judge Nicholas G. Garaufis, sitting in Brooklyn.

Lawyers for the EU understood that their case had this problem, and they did what they could to address it.  That's why they brought Columbia into the mix.  Columbia claims that the coke cartels in its territory launder some of the proceeds of their criminalized product by investing in cigarette smuggling, i.e. they use one drug to cleanse the money raised by the sale of another drug.  Very tricky, these entrepreneurs, um, drug lords.  Given this, the courts of the United States should help those nations enforce their tariff system, because in doing so they also fight the good fight in the war on (arbitrarily criminalized) drugs.

To his credit, we submit, Judge Garaufis rejected this pitch. He said this was "simply too slender a reed upon which to effect an abrogation of the revenue rule."    Not only legally but, we submit, morally this is a commendable decision.  Judge Garaufis joins the progressive march of human history.  Smuggling is a good thing.  It breaks down barriers, renders national borders irrelevant, and helps us all overcome the myth of sovereignty.

In William James' great essay, The Moral Philosopher and the Moral Life, one finds the following insight.  "That act must be the best actwhich makes for the best whole in the sense of awakening the least sum of dissatisfactions.  In the casuistic scale, therefore, those ideals must be written highest which prevail at the least cost, or by whose realization the least possible number of other ideals are destroyed."  This may sound to some like a certain sort of utilitarianism.  James acknowledges the similarity, but his pragmatic moral philosophy is distinct, in part because he brings in the course of human history as the mediator of conflicting demands.

"Since victory and defeat there must be, the victory to be philosophically prayed for is that of the more inclusive side, of the side which even in the hour of triumph will to some degree do justice to the ideals in which the vanquished party's interests lay.  The course of history is nothing but the story of men's struggles from generation to generation to find the more and more inclusive order."

The course of history shows that efforts at controlling the flow of goods and wealth at national boundaries impoverish the people on both sides of those boundaries, and often bring an end to the regimes that sought to enforce such rules with the greatest rigidity.  Blue jeans and rock muic from the west played a role in the destruction of the Soviet empire, after all.  If Philip Morris and its temerity in selling its product to willing buyers should prove to play a role in the immolation of all the bureaucratic machinery that has grown up around the "war on drugs," that will be all for the best.  It will constitute an achievement for the human spirit in a par with the dismantling of the Berlin Wall.  While waiting for such a wonderful day, we can at the least tip our caps to Judge Garaufis for taking out his one brick.

2-16-2002 

Real History, Phony History, Convenient History 
Henry Louis Gates, Jr. claims to have discovered the "first black woman novelist," a nineteenth-century fugitive slave.  He says he bought a manuscript at auction titled NARRATIVE OF A BONDSWOMAN, and he's bringing it out as a book this spring.

So we won't die of curiosity in the meantime, the considerate professor Gates has provided an excerpt for the latest issue of The New Yorker, accompanied by his commentary.  Yet there is something fishy about this "discovery."  Our own suspicion is that no nineteenth century black woman wrote it, just as Chief Seattle never gave anything like that ecological speech for which he is so often credited.  We are only speculating, but it appears Gates pieced something together himself.

After The New Yorker went to press with this excerpt, alert readers noticed that chunks of it appear to have been lifted from BLEAK HOUSE, by Charles Dickens.  Gates, Harvard University's director of the W.E.B. Du Bois Institute for Afro-American Research, no small figure in contemporary academic and intellectual life,  is to be congratulated indeed.  That Dickens was an American fugitive slave, and a woman at that, is an historical discovery of truly epic proportions!

How does Gates explain these passages?  Does he say, "so, I discovered a manuscript by a black woman who happened to be a plagiarist!"  Not quite.  Instead, "How audacious she must have been!" he says, "Imagine this ex-slave, reading Douglass and Stowe and Dickens and then trying to sketch out the conditions of her life by appropriating their rhetorical strategies, their language, and their metaphors. You could say that this kind of interplay between originality and tradition is the ultimate subject of literary scholarship: something borrowed, something new."  He seems to have a wedding-ceremonial cliché  confused with standards of scholarship here, but we won't press the matter.  We do not believe he has discovered a plagiarist.  We aren't buying into this.  After all, wouldn't an educated man such as himself have noticed the Dickens parallels befoe rushing the document into print, and pointed them out in the commentary published alongside the excerpt?  Why did he need to have them pointed out, after publication?  We suspect that he IS a plagiarist, and a fraud into the bargain.

But let us return to the matter of Chief Seattle, for the comparison is intriguing.  Seattle is a historical figure, clearly.  But a variety of high-flown "earth-is-our-mother" speeches are attributed to him, and none of THEM has any historical foundation whatsoever.  He is supposed to have written the following, for example, in a letter to President Franklin Pierce.

"The Great Chief in Washington sends word that he wishes to buy our land. . . . But we will consider your offer, for we know if we do not . . . the white man may come with guns and take our lands. . . . How can you buy or sell the sky-the warmth of the land?  The idea is strange to us.  Yet we do not own the freshness of the air or the sparkle of the water. . . Every part of this earth is sacred to my people. . . . When the buffaloes are all slaughtered, the wild horses all tamed, the secret corners of the forest heavy with the scent of many men, and the views of the ripe hills blotted by talking wires, where is the thicket?  Gone. Where is the eagle? Gone."

Where is that letter?  Gone.  The National Archives, the Smithsonian Institution, and the Library of Congress continuously receive requests for the original text.  They have none.  Nobody who has seriously searched for such a letter believes it ever existed.

The sentimentalization of the Amerinds that puts words into the mouth of Chief Seattle, so that contemporary (mostly white) American "greens" can feel they have a "usable past," has its counterpart, we submit, in Henry Louis Gates' "discovery" of a slave who wrote her own life using Dickens' words.  We are invited to learn from the past, but it is a phonied up, stereotypical, role-playing sort of past we are offered.  The most widely acclaimed historical scholarship of our time appears, on inspection, no better (no more interest in authenticity) than a Disney theme park.

2-09-2002

An "Apolitical Olympics" is an Oxymoron 
The Salt Lake City winter games have begun: with the opening ceremonies Friday night, then the first actual competitions this morning (Saturday).

The tattered U.S. flag found in the debris of the World Trade Center on September 11 was carried into the Olympic stadium during the opening ceremonies.  Earlier this week, IOC officials objected to that gesture, saying that the international games should not be too focused on the attacks on the US, because this would open the way to politicization of the opening ceremonies by every nation at every subsequent game, etc.  In the face of a good deal of outrage, the IOC backed down.

Wait!  We want to say, Hold it!  What terms do we use when discussing such matters, and what do we mean by them?  What is a nation's flag, what does it mean, and under what circumstances can its display fail to be a political act?   We'll start with the conceptual foundations (sovereign, government, flag) and work out.  A sovereign is the ultimate legal authority within a given territory.  A government is the institution that claims a monopoly on the legitimate use of force within that territory, and that invokes the sovereign in justification of that claim.  A flag is the banner of a sovereign.  By saluting a flag, one acknowledges (sometimes only in a pro forma sense, but sometimes of course in a very deeply felt and sincere manner) that invocations of that sovereign make sense:  that they are statements in a language one is one's self willing to speak.

What is politics?  This word is probably more ambiguous than any of those just defined. One speaks of "office politics," after all, even in the case of a private business.  One means by that phrase the competititon among individuals and cliques within a certain hierarchy for offices and perks.  But when unmodified by any adjective, the word "politics" seems most often to mean the competition among individuals, factions, and interests for the levers of government, generally fueled by mutually exclusive appeals to the same sovereign. The paradigmatic political claim is that, "What I mean when I salute the flag is different from what you mean when you salute the flag, and since it is the same flag one of us plainly must be wrong.  The one who is wrong  (which of course is you) clearly can't be trusted with the levers of government, the prerogative of coercion."

Now we're getting closer to understanding the Olympics.  Let's try another definition, though: what is diplomacy?  It is the art by means of which various governments recognize each other's sovereigns, legitimating one another in the process.  There is clearly no such creature as "apolitical diplomacy." At any given moment, only one (coalition of) factions of the politics of any given nation holds the levers of power.  That faction, or coalition, is the only one in a position to engage in diplomacy. It does so, inevitably, with an eye to its domestic political situation.  The goal of diplomacy is to see to it that the members of the club of "ins" support one another.

We have arrived, finally, at the point.  The very act of holding an Olympics is a diplomatic and so a political act of the highest order.  The opening ceremonies are quintessentially political when every delegation brings in its own national flag in some newly-minted and spotless form.  There is no coherent sense in which the use of a flag in somewhat tattered condition can make the proceedings more  political than it would be otherwise.  Differently political, one might well say, but not more so!

We'll do our best to enjoy what we have before us. Let the overtly political games begin!  And good luck to every athlete, from everywhere!

2-02-2002

Remember When Japan Was a Colossus?
It was not long ago that the popular wisdom held the following about Japan: that the country's economy was very strong, and would remain so, posing a threat to other industrialized nations; that its strength was a result of close industry-government co-operation ("Japan, Inc." as everybody called it); that this co-operation and its success proved the fallacious character of laissez-faire economic reasoning.  (Or, in one variant of this third theme, we were informed condescendingly that laissez-faire arguments were sound enough for the "Anglo-American" culture in which they arose, but run contrary to "Asian values.")

Many books were written on these themes in the 1970s and '80s.  Some of them were tinged with admiration for all things Japanese, from the Ministry of International Trade and Industry (MITI) to Noh theatre and kimonos.  Others of these books were more xenophobic in tone.  Some of them were actually packaged as novels.  All of them should have been.

The '90s were a miserable time for Japan, and the features of government-industry co-operation that had been so heavily praised during the good times were precisely the catalysts of this misery.   When the mighty fall, their intellectual flunkies fall with them.

This week the release of official 2001 economic statistics from Japan reminded us of these issues.  Last year, the Japanese yen lost 16% of its value against the U.S. dollar.  The stocks of many major corporations are now trading at or near 10year lows.  One statistic in particular, and its misuse, strike us as symptomatic of the continuing grip of statism on the land of the rising sun.  The government of Japan ceaselessly reminds the world that Japanese households possess 1,400 trillion yen in financial assets (i.e. about $10.42 trillion dollars).

The reason the government stresses this figure is in hope of suggesting that some or all of that huge sum is available as risk capital for entrepreneurship, so Japan may at any time resume its colossal importance on the state of world finance.

The problem, though, is that one-half of the household financial assets of Japan are now in accounts earning returns of less than 0.02%!  (That's the nominal return.  Given deflationary trends, that represents a "real return" of close to 1%, still astonishingly low.)  The Japanese don't approve of entrepreneurship ­ they won't seek higher returns than that by launching out into the open ocean of productive enterprise, because they much prefer to hug the safety of the shore in such dinghy accounts.

Not just the households, but the corporations themselves, suffer from an excess of caution, arguably induced in them by all those years of government-run paternalism.  In the good old days, MITI and the rest of the government bureaus looked after the big corporations, the big corporations looked after their workers, the unions acted like tame house-bred creatures, and everybody basked in the adulation of superficial observers around the globe.  Now that this balloon has landed, though, somebody is going to have to show the drive and the risk that such a system not only does nothing to create, but in important ways discourages.  That is Japan's problem now.

Alexandra Investment Management looks for opportunities around the globe, according to one of its managers, Andrew Pernambaco. "Right now we have over 50% in the US," he told a reporter recently: some in Europe, including Russia, and some in Asia, especially Asian emerging markets.

"No Japanese exposure for us," he also said.  Why not? Because Alexandra, like other investment concerns,  looks for opportunities where it has access to management, where there is "transparency," and he finds the Japanese corporate marketplace very opaque, "unless you have someone on the ground."

Laissez-faire arguments have been vindicated once again, in the only way in which they possibly can be, by the falsification of a competing conjecture.

1-26-2002

Nozick Leaves Ambivalent Legacy

Robert Nozick died this week.  Nozick, a Harvard professor of philosophy, learned of his stomach cancer in 1994.  To his credit, he had not gone quietly into the night, but had gone on working at the fundamental philosophical problems that intrigued him.  His last book came out in October 2001.  It was a defense of the possibility of objective knowledge of the world outside our skulls, perhaps the central problem in philosophy since the time of Descartes.  Furthermore, he continued teaching in his final years, concluding a fall-semester course in the Russian revolution just weeks before his death.

But Nozick's claim to lasting fame is his first book, ANARCHY, STATE, AND UTOPIA (1974).  This book's appearance coincided with the formative days of the Libertarian Party and, indeed, of self-conscious libertarianism as a political movement broader than that party.  Frankly, it seems to have had little effect on that movement at the level of doorbell-ringing activists.  One can probably count on one hand the number of committed libertarians who will say that they became such because they read Nozick's book: or who will say that he states their own theoretical commitments more precisely than Rand, Rothbard, or the elder Friedman.  In a movement that was top-heavy with theoreticians from the start, one might be excused for suspecting that Nozick was just one more.

Yet he wasn't.  Nozick was important because he took the fight to an enemy camp.  He was an ivy-league university professor, training in the Anglo-American tradition of analytical philosophy, committed to thinking about philosophical questions with the instruments provided by that tradition.  He was not a Russian novelist, or an economist of either the Austrian or the Chicagoan traditions.  He was in the unique position of making libertarian arguments in the same theoretical language from which came many of the most powerful statist arguments of the mid and late twentieth century.

As a result, there were people who would never have let themselves read any of the other three authors just named, who encountered for the first time in Nozick's pages a serious, indeed a rigorous, argument in a form that commanded their respect, to the effect that taxation is theft.  Nozick pressed the analogy between the income tax in particular, and forced labor: taking a proportion of my earnings is quite similar to making me spend that portion of my work day for another person's purposes.  The challenge to defenders of taxation, then, was EITHER justify forced labor (not for criminals, but quite generally applied to the productive portion of a population), OR explain the distinction between the two sides of the analogy.  Many of those who were not converted by this argument were nonetheless placed on the defensive, and found their statist assumptions undermined.

We are happy to acknowledge these positive effects of Nozick's work.  On the other hand, we consider it unfortunate that Nozick founded his political arguments upon a deontological ethics.  He referred to rights as "side constraints," i.e. as things that one person may not do to another regardless of the consequences.  He wrote, "The question of whether these side constraints are absolute, or whether they may be violated in order to avoid catastrophic moral horror, and if the latter, what the resulting structure might look like, is one I hope largely to avoid."

The problem with neglecting one's foundations in the manner indicated by that sentence, is that the foundationless house may drift away with the first hard rain.  Nozick's own drifting began almost immediately.  There were signs of it as early as PHILOSOPHICAL EXPLANATIONS (1981).  Over time, his repudiation of libertarianism became first unmistakable, and then explicit.

Still, people are born, grow, live and die and if they are lucky they leave behind them one achievement that will be remembered long after their corpse is cold.  The one achievement that will always be linked to Nozick's memory is his first book, and its emphatic assault upon the morality of the more-than-minimal state.  He is entitled to his corner of fame.

1-19-2002

The Fall of an Economics Pundit
Paul Krugman is in trouble, and this fact gives us a certain quantum of joy.  Krugman is an economics professor at the Massachusetts Institute of Technology, a regular columnist for the New York Times, the author of several books that attempt to present his own brand of economics to a general audience, and in general a ubiquitous presence in the world of economic/financial punditry.  We think his influence is pernicious, and hope that the ongoing flap over his ties to Enron helps bring it to an end.

This week, Andrew Sullivan has proved himself quite industrious in digging up Krugman's Enron ties.  Sullivan has found what even seems to have been a crude quid pro quo.  On the one hand, Krugman served on Enron's advisory board and received $50,000 for his services.  On the other hand, in 1999 Krugman wrote an article for FORTUNE (another of many regular outlets for his bloviations) in which he filled the whole visible heaven and earth with praise for Enron's brilliant new-economy breakthroughs, almost as if he was trying to sell his readers shares of its stock!

We don't believe that this was a crude quid pro quo, exactly.  We suspect that if Krugman sold out his convictions, the asking price would be higher than $50,000.  Something more curious is at work.  On his side, we suspect that the enthusiastic praise for Enron in FORTUNE represents the sort of crush that the articulate but uninfluential often feel for the inarticulate but powerful. "Kenneth Lay and Krugman sitting in a tree, K I S S I N G, first comes love."  On Kenneth Lay's side, something more cold-hearted was at work.  But let us go to exhibit A.

"The retreat of business bureaucracy in the face of the market" wrote Krugman in 1999, "was brought home to me recently when I joined the advisory board at Enron--a company formed in the '80s by the merger of two pipeline operators. In the old days energy companies tried to be as vertically integrated as possible: to own the hydrocarbons in the ground, the gas pump, and everything in between. And Enron does own gas fields, pipelines, and utilities. But it is not, and does not try to be, vertically integrated: It buys and sells gas both at the wellhead and the destination, leases pipeline (and electrical-transmission) capacity both to and from other companies, buys and sells electricity, and in general acts more like a broker and market maker than a traditional corporation. It's sort of like the difference between your father's bank, which took money from its regular depositors and lent it out to its regular customers, and Goldman Sachs. Sure enough, the company's pride and joy is a room filled with hundreds of casually dressed men and women staring at computer screens and barking into telephones, where cubic feet and megawatts are traded and packaged as if they were financial derivatives.The whole scene looks as if it had been constructed to illustrate the end of the corporation as we knew it."  You can almost hear the beating of an infatuated heart.

From a journalistic-ethical point of view, Krugman can point out that he did disclose his position on Enron's advisory board before praising the company.  On the other hand, he didn't mention his fee.  A naïve reader could have gotten the impression from the above that "advisory committee" was an honorary position, or a formality that had to be extended so Krugman could get a tour of the trading room. But what to say about Enron's side of this relationship?  We suspect it was simply hedging its political/academic bets.  If Al Gore were now in the White House, Paul Krugman would very likely have a key economic-policy post, and Enron would have a friend on the Gore team.  (Kenneth Lay, Enron' CEO, notoriously has a lot of friends on the Bush team, including Bush himself.  But he's a flirtatious sort, always casting eyes over to the Democratic side as well, in typical crony-capitalist fashion.)

Virginia Postrel, herself a columnist with the TIMES, thinks that this will end Krugman's career there. The grey lady "tends to take a simple 'follow the money' approach to identifying corruption," she writes, "and it worries a lot about the appearance of impropriety and its good name."  It may be a bad rap, but it couldn't happen to a more deserving guy, and we hope we'll have far fewer chances to read Krugman's statist/regulatory apologetics in the years to come.

1-12-2002

Plagiarism for Politicians and for Historians
In 1988, during the primary phase of the presidential campaign, Senator Joe Biden delivered a stirring speech much of which happened to have been ripped off, without attribution, from the UK labour party leader, Neil Kinnock.  The press soon discovered the similarities.  A resulting furor, and subsidiary revelations, eventually forced Biden out of the race.  But we wonder whether it should have.  Who was harmed in that situation?  Kinnock made no claim to possess property rights to those words.  Furthermore, since Kinnock and Biden aren't competing in any of the same markets, political or otherwise, its hard to see how he COULD claim to have been injured. No, the offence here was against informal norms that say that a politician will rely on his own speech writers, not someone else's.   We have often suspected that there is less to many "plagiarism" allegations than meets the eye.  Anyway, the issue of plagiarism came to our minds again this week tied to the name of a very prominent historian, Steven Ambrose.  Here we think there is something important at stake.

Ambrose is the author of UNDAUNTED COURAGE (1997), about the Lewis & Clark expedition, NOTHING LIKE IT IN THE WORLD (2000), about the Transcontinental Railroad, and several books on the Second World War that focus chiefly on the experience of rank-and-file Joes in the European theatre ­ D-DAY, BAND OF BROTHERS, THE WILD BLUE, etc. Facts that have come to light over the past week show that he has clearly transgressed the norms of either academic or trade publishing.  He is, indeed, as prolific as he is because he is running a literary "chop shop," repackaging the words of other and more interesting historians as his own.  Here is just one of the many samples now widely available (we got it from the on-line magazine SLATE).

"The bombadier, navigator, and nose-turret gunner were forced to squat down, almost on hands and knees,
and sidle up to their stations through the nose wheel well of the ship. Once inside, the three men, fully dressed
in their bulky flying gear, would be squeezed into a cramped compartment. ... The remaining members of the
crew entered the plane by crawling up through the open bomb-bay doors, no more than three feet off the ground.

Once in the bomb bay they would stand upright, step up onto the narrow catwalk. ... Jerry Barrett, the
engineer, stood between the pilot and copilot at takeoff, helping to monitor the engine and fuel gauges, but
once in the air he slipped to his position behind the pilot and just across from the radioman. ... It was the most
physically uncomfortable, isolated, and terrifying position on the ship. The gunner climbed into the ball, pulled
the hatch closed, and was then lowered into position."
Thomas Childers, WINGS OF MORNING, pp. 21-23 (1995).

"The bombadier, navigator, and nose turret gunner were forced to squat down, almost on hands and knees,
and sidle up to their stations through the nosewheel well of the ship. Inside, the three men had to squeeze
themselves into a cramped compartment. ... The other crew members entered the plane by crawling up through
the open bomb bay doors, about three feet off the ground. Once inside they would stand upright, step onto the
narrow catwalk. ... The engineer stood between the pilot and co-pilot at takeoff, helping to monitor the engine
and fuel gauges. In the air he took his position behind the pilot and just across from the radioman. ... The ball
turret was, as McGovern said, the most physically uncomfortable, isolated, and terrifying position on the plane.
The gunner climbed into the ball, pulled the hatch closed, and was then lowered into position." 
Steven Ambro se, THE WILD BLUE, pp. 95-96 (2001).

We think there is a lesson here.  In this case, the question, "who is hurt?" has a more persuasive answer than it does in the case of Biden's stale Kinnockian speech.  The public is hurt, in this case, because even that minority of citizens who do make a diligent effort to learn something about America's past, and so inform themselves as voters, are all being herded into the same group-think corral.  Ambrose doesn't have to do any original writing because he hasn't done any original thinking, and he doesn't have to do any of that because instead of a genuine debate about the significance of the aspects of American history he chronicles, all "we the people" ever get is a right-thinking chorus!

1-05-2002

A Tale of One City, and Two Mayors
Consider two (hypothetical) mayors who might have presided over the city of Amsterdam in the seventeenth century.  The first, Herr Gud Timen, sat in the mayoral chair (or frolicked with Rubensesque interns) during a period of boom in the city.  Early on in his term, a woman named Dot introduced a few tulip bulbs.  People became ecstatic over these flowers, and over their bulbs, declared their centrality to economic success the "new paradigm" in horticulture, and they started denouncing the few old fogies who didn't seem to "get it."

This excitement (known after that first importer as the Dot-tulip boom) was in turn responsible for the fact that people in later years remembered Gud Timen's term with such nostalgic satisfaction.  You could buy a tulip bulb one week for 100 kroners and sell it the next week for 200.  Then someone might sell it back to you for 400 and you'd find another buyer for 800.  Of course, nobody ever bothered putting these tulips in the ground, if it was so much more valuable to package and sell them as bulbs.

Excitement ran so high that Gud Timen's deputy mayor claimed to have created the first tulips.  Eventually, though, the dot-tulip bubble burst.  They went in value from 10,000 kroners to 20, seemingly overnight.  A few months later, the city's Nine Elders designated a new mayor, whom we'll call Shrub.  Some of the people in Amsterdam have formed a rather negative impression of Shrub, because it seems to them that the good times disappeared on his watch.  The wiser heads will observe that the recession that (as a statistical matter) did begin soon after the new guy took office, had its roots (no pun intended) in the dot-tulip bubble and its burst, which of course both happened on Gud Timen's guard.  Even wiser heads will look for the causes behind the perenniel phenomenon of boom and bubble, bubble and burst, and will try to assign responsibility for the whole cycle, not just for its particular phases.

To bright readers such as yourself, it will by now be obvious where we are going with this. We believe that George W. Bush has, in some quarters, taken quite the bum rap for the present recession.  History has assigned him to walk at the back of the 1990s' parade and scoop up what the animals have dropped.  We would not blame this president for those droppings.  Nor, for that matter, would we blame President Clinton.  He did not create the unsustainable dotcom boom, he simply rode the wave.  The fact that the wave peaked was no more his fault than the fact that it rose in the first place.  What would Yogi Berra have said about such events, had he been an economist?  "That which can't go on forever, tends to end."

We're interested, as always, in getting to the bottom of things.  We suggest that there are two causes at work in boom-bust cycles generally.  There is a psychological factor at play.  The tulip-mania of one year becomes the tulip-phobia of the next.  The parties on Gatsby's lawn on Long Island can't last forever.  But second, and more important on the whole, there is the malign influence of central bankers.  The bankers periodically decide to generate a boom by lowering the price of credit.  But such booms are always artificial contrivances.  The artificially stimulated loans go to marginal projects ­ to highly speculative ventures that could not have achieved funding otherwise.  Unfortunately, jobs come to depend upon these highly speculative ventures, and the bankers must make sure they don't fail (or don't fail all at once) by continuing to lower interest rates. As in riding a bicycle, it becomes necessary to keep moving forward in order to stay upright at all.

Eventually, though, the continued provision of cheap credit becomes impossible, because the practice is too inimical of the interests of savers, and somebody must save capital or there will be nothing to invest!

So the central bank eventually has to stop providing cheap credit, i.e. it pushes the rates back up.  This produces the bursting of the speculative bubbles that had ben depending on cheap credit, people lose their jobs, they cut back on their consumer purchases, and the whole network of symptoms known as "depression" or "recession" results. Eventually, the central bank feels political pressure to lower rates again, and the cycle resumes.  It is the cycle as a whole that we must oppose.

12-29-2001

The Keys to Gracie Mansion Change Hands
This week, Rudolph Giuliani finally shuffles off into the sunset, clutching his Time Man of the Year cover as personal validation from the media elite, and his designated successor, Michael Bloomberg, assumes the office of Mayor of New York City.

We hope this will be our last chance to take pot shots at the departing mayor, because we would like to think that he will never again darken the public stage with his presence.  That seems, alas!, unlikely, but we will fire away.  Giuliani first came to the attention of many of us as the camera-hogging prosecutor who brought a series of high-publicity "insider trading" cases in the 1980s.  That string led in time to what Tom Wolfe called "the Great White Defendant":  to Michael Milken, a villain straight from central casting, and that led into the mayor's office.  Republicans love the "tough cop" image, and Democrats love to see the toughness directed at the rich white guys, so everybody not themselves being railroaded was happy.

A funny thing happened, though, on his way to his successor's inaugural ball. Rudy decided to give the world one final demonstration of his megalomania.  This week, he announced a new stadium deal with both the New York Yankees and the New York Mets, displaying models of the proposed new stadiums, featuring very chi-chi retractable roofs. (The House that Ruth Built, arguably the most legend-choked piece of real estate on the planet, is hopelessly out of date.)  The $1.6 billion combined cost of the two stadiums  is to be divided evenly between the two teams and the city. That means that the city is on the hook for $800 million.  Giuliani claimed that this can be done without any new taxes.  Wellnone he has to worry about anyway, because he's on his way out the door.  Let Bloomberg worry about these tiny details.

But let us look, also, to the other half of this transition.  The good-government types have expressed their usual brow-furrowed "concern" about Bloomberg.  The man just spent too much of his own money getting himself elected, and that annoys the goo-goos no end.  Can't something be done about it???

Well, yes.  What could be "done" about it is the dismantling of government as an institution altogether.  Then no money will ever have to be spent on campaigns for mayor, because there won't be such an office.  In lieu of such a change, though, we are very happy that Bloomberg spent his $69 million that way. In general, any reduction in campaign spending heklps incumbents at the expense of challengers, and so further entrenches the governing class.  In this case, of course, Bloomberg wasn't running against an incumbent (although for a moment it looked as if he might have to ­ when the avalanche of favorable post-9/11 publicity led Giuliani to look for a way around term limits.)  In the end, he was runing against Mark Green.  Still, Green was well known to New York's voters, and Bloomberg was a novice in the political arena.  He was the one who suffered from the sort of disadvantages that generally plague a challenger against an incumbent.

Indeed, this election is the first time a Republican candidate has ever succeeded a Republican incumbent in the history of New York City, a fact that indicates how entrenched the Democrats.  Are the goo-goos saying that increased political competititon is a bad thing, because they want the Democrats in heavily Democratic cities to feel safe and entrenched?  We fear that this is what they are saying.

As for Bloomberg's stand on the baseball stadiums.so far it is an equivocal one. "The issue is really, 'Can we afford them?"' Bloomberg told reporters. "I will have to take a look down the road as the economy develops. Nobody knows today how deep or how protracted the current economic downturn is."

Sorry, Mr. Mayor, but that is not "the" issue at all.  The issue, rather, is whether George Steinbrenner should be required to buy his own toys, without coercively-obtained help from the taxpayers of your city.

12-22-2001

Globaloney! The Latest Efforts of the One Worlders
We haven't criticized the advocates of a world government in these columns for months ­ in fact, the last time we did so was  September 1.  Now, though,  we must return to that charge, because the advocates of what Claire Booth Luce used to call "globaloney" have taken a new tack.

On November 26, Anne Krueger, first deputy managing director of the International Monetary Fund, addressing the American Enterprise Institute in Washington, proposed what she called the "missing element we must provide" in the global financial system ­ a routinized procedure, to be administered through the IMF, whereby indebted governments could seek legal protection from their private sector creditors.  In other words, she proposed a one-world bankruptcy court.

In part, Ms Krueger's comments were inspired by the ongoing crisis in Argentina.  But in another and perhaps larger part, as she said herself, the idea is in reaction to the controversy that arose in 1999-2000, when hedge fund Elliott Associates LP forced Peru to pay it $65 million by threatening to seize money that Peru had transferred to U.S. banks to pay other creditors.  The company had purchased Peru's bonds at a deep discount.

Let us start with basics.  We oppose the whole idea of sovereignty.  We believe human beings should get over the idea that there are such entities as "Peru" or "the United States" or "Argentina." In this sense, then, we may be said to be one-worlders ourselves.  It is sovereignty which creates borders, and we would erase them.  But the problem with globaloney is that its partisans propose not to abolish sovereignty, but to extend it, making "the People of the planet Earth" our sovereign, and creating a super government to rule on behalf of that fictive entity.  This won't improve on the status quo.  Indeed, it would intensify all that is wrong with the status quo.  The simple question that always runs through our minds when we hear such plans is: where will the exiles go?   The best reason to oppose Ms Krueger's brainstorm, then, is that: it would strengthen quasi-governmental global structures, bringing a true one-world government that much closer to horrendous reality.

Yet this reform has other problems.  For example, the international court is professedly a way to cheat the private sector at the expense of the public sector.  The court would have no power to protect private companies from public creditors ­ it couldn't erase tax liens, for example!  Its only authority will work in the other direction.  The logical implication, it seems to us, is that governments collectively own everything in the world, and only let private individuals, and their associations (corporate or otherwise) keep some of it on suffrage now and then.  Only from that premise can it possibly follow that debts from public to private are more easily forgivable than debts that run in the opposite direction!  And that premise is precisely what we ­ rational freedom-loving people everywhere ­ must be willing to die rather than grant.

Almost as important, one wishes Ms Krueger would rethink her attitude toward such vulture funds as Elliott Associates.  Did their actions hurt the people of Peru?  She seems to be under the impression that Elliott profited in some sort of rogue-ish way, so extraordinary measures are necessary to keep anybody else from doing likewise.  Yet what was so horrible?   Elliott bought bonds at a discount because Peru's credit was of little value on the secondary markets.  They took on a big risk, profited from it, and in so doing helped create a market for those bonds.  Would Peruvians be better off today if nobody anywhere wanted to touch their government's bonds?

Michael Pettis has just written a fascinating book about international finance called THE VOLATILITY MACHINE.  He is no libertarian, much less an anarcho-capitalist, but he has a sharp mind and we heartily recommend the book, to our readers and to Ms Krueger. "As distasteful as it may seem," he writes, "risk-loving 'vulture' investors, or short-term speculators, have a very important role in the recovery process because, by buying cheap, risky assets during the most chaotic part of the collpse, they often act as the initial stabilizers.  This means that these types of investors need to be encouraged to jump into the market quickly."   It doesn't seem distasteful to us.

12-15-2001

Drawing Lessons from the Collapse of Enron, Part II
Lesson One.  Continue with Deregulation. Unsurprisingly, some politicians have already rushed to assert that the collapse of Enron proves that the electricity and natural-gas industries have been hastily deregulated, so the old regulatory schemes (which seem to them, through the hazy glow of nostalgia, to have worked impeccably well) should be re-imposed.

This is completely wrong, all around.  The financial troubles (and the accounting chicanery) that destroyed Enron aren't unique to the energy industry and aren't the result of hasty deregulation.  Indeed, they're the result of insufficient haste. Much more successful efforts to deregulate such industries have taken place recently in Britain and Scandanavia.  Those countries have followed a "Big Bang" pattern, not an incremental approach.  American incrementalism has made the somewhat-deregulated markets a patchwork affair, full of state, municipal and federal turf battles. We end up combining the inefficiencies of state-supported monopolies with the volatility of free-market competititon. The only way to do better is to move forward.

Lesson Two.  Stop pushing worker ownership!   As we noted last week, deep thinkers have long argued that free-market employee ownership is the wave of the future, that it will gradually render irrelevant the long dispute between capitalism and socialism, etc.  But employee ownership at Enron proved a disaster.  Of course, any employee who wishes to invest in the company for which he works should be free to do so.  Our problem is with encouraging that sort of thing as a matter of public policy.  After all, there is a body of old folk wisdom about "putting all of one's eggs in one basket."  If your labor is going into one "basket," your place of employment, then your savings should go elsewhere.  If you have opportunities to invest, you should use them to diversify, by putting my money where we work, or He works, or SHE works, etc. ­ not back where you work!

Lesson Three. Corporate bankruptcy is a racket!  The traditional conception of a "bankrupcy" is a situation in which some insolvent person receives protection from his creditors and a chance for a fresh start in life.  This is a market rational idea, and we expect that in an anarcho-capitalist world, some similar structures will evolve within the free-market courts.  But corporate bankruptcies, especially chapter 11 reorganizations, don't seem to us even remotely market rational.  They are impositions upon the world of free bargaining and contract, in which state action arbitrarily selects winners and losers.

One fairly small example of how this works will serve to make the broader point.  Several of the towns around Hartford, Connecticut have formed a common waste collection system called the Metropolitan District Commission.  The MDC has a contract with a quasi-public organization, the Connecticut Resources Recovery Authority, which turns trash into electric power.  The CRRA gets paid at both nds of its operations: itgets $51 per ton from the towns of the MDC for making the pick-ups.  It also has contracts with other energy firms to whom it sells the power.

Specifically, CRRA has been getting $26.4 million a year from Enron.  This year's payment is late, and it is likely that, given the bankruptcy, that check will never arrive.  In today's (Saturday's) issue of the Hartford Courant, the chief operating officer for the MDC is quoted saying that he expects the CRRA will increaese its charges to the towns to make up for the loss of revenue from the power sale.  Specifically, he thinks CRRA is going to start charging MDC a whopping $82 per ton. That is the sort of wealth redistribution brought about by the corporate bankruptcy system.  Its at the expense, in this case, of ordinary working stiffs and tax payers in central Connecticut who just want their trash picked up at their curb each week.

Fourth, securities regulation is another racket!  Enron's chicanery's were uncovered not by the public officials whose statutory mandates would seem to make that their job, but by Wall Street analysts and  reporters covering the finance "beat."  It was a triumph of the private sector's ability to watchdog itself, and proof that the public sector watchdogs are at sleep even on their good days.  (On their bad days, they are rabid, but that's another story.) 

12-08-2001 

Drawing Lessons from the Collapse of Enron, Part I
This week, we will present the bare facts of the rise and fall of Enron, perhaps the most dramatic story of financial failure to hit the business pages of your favorite newspaper since the collapse of Long-Term Capital Management in 1998. Next week, we will build on this factual base, discussing what lessons should (and should NOT) be drawn from this drama.

Enron was once a rather humdrum sort of company, back when its chief assets were natural gas pipelines.  Then came the internet, and Enron fell into the hands of visionaries, who turned it into a dotcom B2B.  This succeeded marvellously well ­ for a time.  Its EnronOnline energy-derivatives trading system provided the same sort of hedging and speculative possibilities for energy products (natural gas and electricity in particular) that the great Chicago exchanges have been providing for agricultural commodities since the middle of the 19th century.  Enron at its peak reached the Fortune Ten.

Earlier this year, though, the business press, specially the Wall Street Journal, began to run unflattering pieces about Enron's creative accounting.  Its stock tanked.  That was a matter of grave concern to employees, for Enron had pursued what in many quarters is considered the enlightened and progressive policy of encouraging employee ownership.  (Indeed, deep thinkers have long supposed that free-market employee ownership will gradually render irrelevant the long dispute between capitalism and socialism.)  In this case, the employees saw that they were taking a bath ­ even before they began to worry about losing their jobs.  This stock was worth $84 a share in December 2000.  By late November 2001, it was trading at penny-stock levels, $0.26 a share.  By then, the hope that it would be taken over by another Houston-based oil-patch concern, Dynergy, was the last life raft around.

On November 28, Dynergy pulled out of merger talks and, with that raft punctured, Enron's credit rating instantly plunged to the depths.  Standard & Poor' and Moody's both immediately downgraded Enron's bonds to "junk" status.

The following weekend saw Enron's filing for protection from its creditors in a New York court.  The combined list of creditors (for the parent company and for the thirteen major subsidiaries) attached to this bankruptcy petition went on for fifty-four pages.  Enron owes Citigroup more than $3 billion, J.P. Morgan almost $2 billion, the Bank of New York at least $2 billion.  And so on, down those 55 pages. Enron claimed assets of $24.76 billion for the parent corporation -- $50 billion if the assets of the subsidiaries are included.  But of course many of those assets are illiquid.

If you follow the "botom feeder" theory of investing, you might want to get in on this ­ get a secured interest in Enron, in the hope that you will end up with an equity interest in the reorganized company, when it emerges from its judicial cocoon for another flight. Now would be the time to lay bets on that future butterfly. In the week since its bankruptcy filing, Enron has received $1.5 billion in what is known as debtor-in-possession financing from creditor banks. The Wall Street Journal reported Thursday that Enron is in talks with at least three financial institutions to create a joint venture aimed at restoring up the credit worthiness of its on-line trading unit.

Meanwhile, though, critical attention in some quarters has turned to Andersen (the new sleeked-down name for the famous accounting firm that most people still know by its traditional moniker, "Arthur Andersen.")

Andersen's Houston unit repeatedly audited Enron's books, and repeatedly signed on to them ­ in effect, assuring the public that Enron's accounting was in accord with the best practices of the day.  This appears not to have been the case.  It is possible that some of those employees who relied for their pensions upon their participation in the company's stock-ownership plan, and whose nest eggs have been so rudely scrambled, knew of Andersen's reputation as a Big Five accounting firm, and relied upon those see-no-evil audits in their own financial planning, to their detriment.  It appears likely that some of this countries' best plaintiffs' lawyers are eager to make that case.  Andersen represents the nearest deepest pocket around.

These are the facts.  For the lessonswait out the week.

12-01-2001

The Justice Department Headquarters Gets a Name
There stands a large building in Washington DC that will hereafter be known as the Robert F. Kennedy Department of Justice Building.  This is not a particularly surprising bit of news.  Kennedy was Attorney General, after all, and he was subsequently the victim of an assassination, and we keep hearing that President Bush wants to promote a bipartisan spirit of consensus, which presumably means making nice with a powerful Massachusetts Senator.  The name change would have been, then, utterly unremarkable news but for the way in which the former Attorney General's daughter choose to make of it an opportunity for partisan confrontation, and the historical reflections to which that choice naturally lead.

Hours before the building's new name was to take effect, Kerry Kennedy Cuomo, at a human rights awards ceremony, alluded to this building and then directed the following remark to her six year old daughter: "If anyone tries to tell you that this is the type of justice your grandpa would embrace, don't believe it."

Actually, the Bush administration's worst moves in the area of civil liberties seem to us to be precisely the sort of thing that little Cara's grandfather DID embrace, repeatedly.  We have long maintained that most differences between Democrats and Republicans are for the sake of show, and this seems to be a wonderful illustration of that general point.

Yes, George W. Bush has authorized military tribunals to hold trials behind closed doors of foreigners accused of terrorism.  Yes, it is responsible for new rules allowing prosecutors to monitor phone calls between criminal defendants and their lawyers. Are these the injustices that Cara's grandpa would not embrace? We don't have a Tarot deck handy, but there is a historic record.  Robert Kennedy, after all,  worked for Senator McCarthy at the height of that tail-gunner's prominence.  Kerry Kennedy Cuomo's comments remind us of that, and of RFK's authorization, when he became A-G, of blatantly illegal wiretaps of Martin Luther King, Jr.

Kerry Kennedy Cuomo's comments remind us also of the Kennedy family's war on organized crime (in those days it was not yet anathema to call it "the mafia").  Indeed, one of the subtler motives behind the renaming of the Justice Department building may be to associate the domestic, law-enforcement aspects of the Bush administration's "war on terrorism" with that earlier law-enforcement "war."

There was an Inspector-Javert-like quality to RFK's pursuit of any figure, one he had decided that fellow was a tool of the mafia. Consider his shaky case against Jimmy Hoffa, and the bull-dog-like tenacity with which the Kennedy Justice Department made it stick.  In 1952, Beck became union president, and Hoffa his vice president.  Then a Senate committee investigating improper labor practices publicized evidence that the Beck/Hoffa crowd had diverted union funds to their own pockets, and that Hoffa in particular had accepted payoffs from trucking companies.  Beck was convicted on embezzlement and tax fraud charges and sent to prison.  The AFL-CIO, in order to disassociate itself from the corruption uncovered by the McClellan Committee, expelled the Teamsters. But the evidence against Hoffa in particular was unimpressive, a jury acquitted him, and he became union president in Beck's place in 1957.

The chief counsel of the McClellan Committee was one Robert Kennedy. Under him, the Justice Department charged Hoffa with accepting an illegal payment from an employer.  Again Hoffa walked.  But the Inspector Javert's of this world have their ways, and they soon went after Hoffa again, for jury tampering.  This time they were successful, and Hoffa was sentenced in 1964 to eight years in prison.

"Yes, Cara, your grandfather was a ruthless seeker of power, and our greatest hope for you is that in your life you live down that legacy and work to dismantle the structures of power. The building has a perfectly appropriate new name ­ except for the word 'Justice'".

11-24-2001

The Constants of Human Nature
Are we formed by our genes or by our environment?  The only possible answer to this question, of course, is "both," yet differences of degree may be crucial.  Let us look at the matter differently:  how should we understand this notion of a formative "environment"?  Are children gradually reared into an adult-dominated culture, educated and assimilated until they can join it, because they have been molded properly into its image?  Or is that backwards?  Are adults only living out, compulsively and predictably, the traumas of their earliest years, so that education is really only sublimation?

Let us look at the matter from yet another direction: the school of thought known as cultural relativism says, in effect, that there are a number of distinct (deeply and fundamentally distinct) societies or "cultures" that share this planet.  No one who has grown up in any one of them can properly make judgments about what goes on in another, because judgment requires more commonality than exists across cultural boundaries.  It is evil, it is imperialism, it is "orientalism," for anybody in the western world to say that any practice undertaken in, say, Afghanistan is wrong.

The first point to be made about cultural relativism is that it is self-refuting.  (Who is to say that imperialism is wrong?  By what standards?) But that is an obvious point.  A slightly more subtle point is that relativism implies certain definite views about nature and nurture.  It implies that human nature is almost nothing, aside from the obvious physical characteristics of the species, and that nurture is everything: or everything else.  This is wildly implausible.

We have just summarized some very old debates.  Why?  because they became fresher for some of us this week, when television brought us images of the women of Kabul taking off their veils and feeling sunlight on their cheeks for the first time in years.  Was it ever wrong, was it ever imperialistic, to doubt that these women wanted to live like that?  The pleasant feeling of the sun on one's face is a simple thing, an immediate human good.  Depriving people of that good, by decree under threat of death, is bad.  We will stake our all on that transcultural judgment, because the constant human nature that exits beneath and pervades any possible culture demands is of us.

Men and women alike are performing and listening to music again in Kabul.  Children are flying kites.  Is there a child anywhere in the world who will not take pleasure in a kite?   He takes pleasure in it, not because his parents or guardians tell him to, but because moving the flimsy colorful material flutters so appealingly in the wind, and his own hand on the string gives him a feeling of control, of mastery.  Something very mammalian in the human brain find this experience enjoyable.  A rational religion (if that is not an oxymoron) will channel the constant energies of our species, rather than denying them and prohibiting their expression.

All this brings us to the matter of religion.  At The Pragmatist, we do not consider that Islam is as a whole either better or worse than the other two world religions that share with it the same "jealous God." Each has its more-or-less reasonable, more-or-less secularized wing, and each has its fanatical atavism.  Our sympathies lie in each case with the former and against the latter.  The ongoing war reminds us that the atavists know that they are losing, they know that the course of history is against them, and they are becoming increasingly desperate about this fact.  Acts such as flying airplanes into skyscrapers are the acts of unhinged people who both know and insistently deny that time is against them.  So they call a halt to time.  They throw themselves on the tracks of progress to demand that the trains all stop.

Our duty is to keep the trains moving.  Let the sunlight flood in to places now coercively kept in the dark, let it warm faces now veiled.  Let the music play. Let the consciousness grow that there is only one society, only one culture, on this planet, because in the long run there is only room for one.

11-17-2001

Yes, This is a Real Stock-Market Rally
Rob Walker, writing in the on-line magazine SLATE this week, wondered aloud whether we have a "real" stock market rally on our hands, or whether it might be another bubble.  His question is important ­ it goes to the heart of how financial capitalism works (even in its present hobbeld state) and beyond that, it speaks to the issue of how well anarcho-capitalism will work, when we create it.

As Walker quite accurately notes, the market (as measuerd especially by the Dow Jones Industrial index) hit a low on September 21, ten days after the hijackings that shall live in infamy.  It has since moved upward at a pace that has caught most observers by surprise.  At the close of trading on November 15, the Dow was up more than 18% from that low.  (Alternative indexes, such as Nasdaq, show an even stronger rally).

"I thought" Walker confides,  "some of the more extreme predictions of economic calamity immediately after Sept. 11 were overdone. But are prospects for corporate profits really 20 percent better now than they were seven weeks ago? Maybe Mr. Market really does know things that we don't. Or maybe he only thinks he does."  It is our view that the market accurately appraised the situation on September 21, and again accurately appraises them in mid November.  In other words, "Yes, Virginia, prospects for corporate profits did improve by 20 percent!"

Why are prospects better? At least three good reasons come to mind. First, prospects improved because doomsday predictions about oil prices turned out to be unfounded.  Military action in the mideast usually causes an upward spiral in prices, which cuts into profits in petroleum-dependent industries, which in turn hurts the stock prices of firms in those industries.  This time, though, oil prices declined at the start of the current crisis and have remained low since. Russia has thrown in its weight with the US, which assures that oil will continue to flow. Military action in the middle east or southcentral Asia has usually produced precisely the opposite effect on oil markets, so this is good news that could not have been part of those earlier bearish calculations.

Second, developments in Argentina seem positive. Bond holders will take a hit on the rescheduling going on there, but it won't be an outright default, and it won't cause the sort of chaos in the bond markets that a default would have. This has only an indirect impact on stock markets, of course, but it does remove a certain load from "Mr. Market's mind", if we may adopt Walker's anthropomorphism.

Finally, the feds have settled with Microsoft, and half of the states have signed on. Mr. Market is happy about this, and doesn't believe that the other half of the states have the juice to mess this up for MS, which fact has ramifying effects throughout the high-tech portions of the economy.

Are we saying that investors (or their intermediaries, broker/dealers) are a bloomin' bunch of geniuses, who figure such things out before the yokels in Omaha could?  That is a cartoonish re-write of the rational-expectations view of the stock market one often encounters, but it is not implied in any of the above. The point, rather, is that the financial system as a whole knows more than any of its parts.  Every neuron is stupid but the complete functioning brain is intelligent.  No broker/dealer is necessarily a brighter "neuron" than the fellow driver a tractor in Nebraska might be.  But the broker/dealer is at the heart of a system that, in its totality, due to the crucial characteristics of liquidity and transparency, conveys accurate information about corporate profit prospects.

This illustrates the Austrian concept of "spontaneous order."  The only lasting sort of social order is that which arises through the unplanned higgle-haggle of buyers, sellers, renters, investors, etc., each seeking his/her own profit, none seeking or professing to seek the good of the whole.  That higgle-haggle will produce, precisely, the good of the whole.  Anarcho-capitalism: catch the fever!

11-10-2001

Meet Mike Bloomberg, the Latest Entreplut
This Tuesday, Michael Bloomberg won a narrow victory over Mark Green, becoming the new mayor of New York City.  The margin of victory in the city of 8 million was about 30,000 votes.  Bloomberg, an immensely wealthy man, (made so by the profit margin on all those "Bloomberg boxes" ­ specially adapted personal computers designed to provide every possible permutation of financial data in real time and on the click of a mouse) spent more than $50 million of his fortune on this campaign.

None of that spending was wasted.  Bloomberg was the Republican nominee, after all, and the Democrats have a 5-to-1 registration advantage over the GOP in the big apple.

Bloomberg's victory was part of a trend: that of the billionaire candidate, escaping the effects of campaign-contribution limits by the use of his own wealth.  The most interesting of these candidates have an entrepreneurial youth, and turn to politics (or "public service" as they typically prefer to call it) in late middle age.  Jon Corzine, who was once the chief executive officer of Goldman Sachs, and is now the junior Senator from New Jersey, is another example, as is two-time presidential candidate Ross Perot.  Once is a fluke, two is a coincidence, three times is a trend.  Each of these three men (Perot, Corzine, Bloomberg) has some claim to the title of self-made multi-billionaire, although of course none were born in log cabins. Bloomberg's father, William, was a bookkeeper who never earned more than $13,500 a year.

Each of these entrepluts makes a striking contrast with either of our last two Presidents.  Bill Clinton never had any career in the private sector to speak of.  He has spent his entire adult life as a public official or a candidate to become one, and now he will likely spend the rest of it as a professional ex-President.  George W. Bush was born into a wealthy family, and drifted through life on that piece of luck until well into middle age, when he entered politics perhaps as just another form of drifting when baseball team ownership got boring.  The professional politician and the silver-spoon baby are familiar types.

Bloomberg and the others represent a less familiar type.  Let us call them the entrepreneurial plutocrats, (or just the entrepluts?)  Why are they such a prominent part of our national life just now?  There are two answers to that, the "demand side" answer and the "supply side."  What kind of candidate is the voting public demanding these days?  And, what kind of candidate is the political system (not just the financing rules, but the party structure and even the political culture of the day) prepared to supply?

On the demand side, it is notable, and in a sense humorous, that the non-billionaire opponents of such candidates have been unsuccessful at using the entrepluts' deep pockets against them, by making  that wealth a target of public resentment.

Campaign consultants for the non-billionaires are often understandably dismayed by this!  They form their focus groups and they probe potential voters, asking and re-asking and re-phrasing the same question: "Aren't you ticked off that Corzine or Bloomberg is spending so much of his money to try to buy this office?"  But they never hear what they want to hear.  They get a range of responses that starts with a neutral shrug of the shoulders and works its way up to positive enthusiasm, "It's a relief to vote for somebody who knows how to run a business, who built one himself, who is putting his money to such a public-spirited use" etc.

But enough of such detached analysis!  What should lovers of liberty think about the entrepluts?  Our thoughts must begin with this: they often come to feel guilty about their own wealth, and end up supporting a lot of left-liberal restrictions on the ability of unfortunate latecomers to do what they did.  That, so far, has been the central motif of Corzine's Senatorial career, and of course on behalf of those latecomers, and on  behalf of everyone who may yet benefit from the wealth they ought to be allowed to create, we have to resist the entrepluts.  The best that can be said of them as a group is that they are far from being the worst adversaries of liberty ­ at home or abroad.

11-03-2001

October was a Good Month for Gun Owners, and Merchants
We stand at the start of November and look back upon a fascinating October.

Three developments last month must cheer those of us who believe in an armed and vigilant populace: one took place as the month began, a second smack in its middle, and the third as it ended, and trick-or-treaters hit the streets.  On the first of October, then, the Connecticut Supreme Court upheld a trial court, which had dismissed a lawsuit brought by the biggest city in that state, Bridgeport, against the major gun manufacturers.  This was the first time any state's highest court had ruled on the civil-liability question that Bridgeport was raising, although it will not be the last. 

Around the country, the mayors of and counsels for a variety of cities have decided to do for the gun industry what the state attorneys general of a few years back did for the tobacco industry.  Fortunately, the mayors are having a tough time of it, and with this decision it can only get tougher.

Bridgeport claimed standing to sue due to the effects of gun-related crimes upon the costs of municipal services, a reduced tax base, loss of investments and development, and injury to the quality of life in Bridgeport's neighborhood as well as the costs of detecting, investigating, and prosecuting the perpetrators of gun-related crimes. David J. Elliot, the attorney who successfully defended Sturm Ruger, described the position of the defendants this way, "The harm asserted by the city was too remote and too indirect to give the city standing to raise the claims it raised."

Of course, Mr. Elliot is right, and we congratulate him on his victory.  The city's claim went far beyond any common law conceptions of breach of duty or proximate cause of harm.  There are two reasons why Bridgeport's Mayor, Joe Ganim, (a lawyer himself, and knowledgeable enough to understand Elliot's point) brought this claim.  The two reasons are the old ones: money and power.  Sturm Ruger, Smith & Wesson, Colt, and other defendants are deep-pocketed corporations and tort lawsuits have long served as the weapons in such shakedowns.  Beyond that, politicians who haven't been able to get the gun regulations they want legislatively, seek the same from the courts, often occupied (as in the federal system and in Connecticut) by unelected and unresponsive, lifetime appointees.

This brings us to the middle of the month.  On the 16th , the fifth circuit court of appeals ruled explicitly that the second amendment protects not just some "collective right" to bear arms within one's state's National Guard, but the personal right to keep and bear arms.  It hedged on this right somewhat, but it acknowledged that there is such a creature.

The fifth circuit case, known as Emerson, arose out of a Texan domestic dispute. A wife, divorcing her husband, obtained a restraining order limiting her husband's conduct in certain specified ways. The order did not forbid him from owning a gun, but a federal statute prohibits ownership of a gun by anyone who is subject to such a state-law-based court order.  Emerson contended that the federal statute, as applied to him, violated the U.S. constitution for a variety of reasons, the second amendment among them.   The federal district court agreed with him, specifically on the second amendment grounds.  Mrs. Emerson appealed, and the case quickly became a cause celebre.  The fifth circuit has now said that yes, Emerson does have a constitutional right to bear arms, but he can be deprived of the exercise right if the deprivation follows due process of law.  It is unclear whether the two Emersons will accept remand to the trial court to litigate the matter further on these instructions, or whether one or both parties will appeal to the Supreme Court.

So you see already that it was a good month for gun freedom.  But what was the cherry on this sundae?  What happened on the day of trick-or-treats?  Federal authorities announced the indictment of Joe Ganim on a variety of corruption charges.  You knowJoe GanimMayor of Bridgeport?  See the first item above.

10-27-2001

Some Hope Arises from the Rubble
We don't know what people will say about the twenty-first cenury when it nears its end.  But we are reasonably certain they will consider it a lot different than was the twentieth, and we hope they will consider the newer century a vast improvement over its precursor.

How might the attack on New York City yet be turned to the cause of a better world, (by which we at The Pragmatist mean mostly a less governed world?)  We offer one hypothesis ­ this attack spells the end of the "central city" in a characteristically 20th century sense, and in that ending there is hope. The city as the center of a broader region, as romanticized for example in the books of Jane Jacobs ­ the city as the place that radiates vitality toward the outlying areas, finding markets there and creating ever-new uses for their resources ­ the city as the indispensable gathering place.  This may be finished.  Early in the 20th century, the growth of these central cities meant that there were too many people fitting into too confined a space, at least during working hours.  Instead of building out, then, architects and engineers found a way to build up.  They created the skyscraper. 

By the 1930s, various fancy architectural theorists had a polysyllabic phrase for this, "vertical aggregation."  Le Corbusier was especially enthusiastic.  The high-rise was not, he thought, just the inevitable place where office workers could spend their daylight hours, it was also the best possible environment for those who wished to make a home within city limits.  The sociologist Sudhir Venkatesh recently put it this way, "Le Corbusier reduced the city to composites of steel and glass high-rises, vast isolated tracts of unused public spaces, and expressways that moved through the expanse to connect the physical structures with one another."   Every major American city now has big ugly rectangles, known in the vernacular as "the projects," and they derive their look as much from Le Corbusier's elegant and misguided theorizing as from any other source.

But when people are brought together into central locations, whether for living or for working, they become that much easier to control and command.  With the central city, came the central state and its hierarchical, bureaucratic way of doing business.  No wonder the defenders of statist power, the Al Gores of the world, denounce "sururban sprawl"!  People who are spread out are that much more difficult to regiment.  Reason enough, we think for libertarians, and especially for anarcho-capitalists, to develop some enthusiasm about such sprawl.

Also, with the "central city" comes the necessity of the long commute and the traffic jam.  If people in the suburbs could live nearer where they worked, because of a general decentralizing of economic activity, then we as a nation would not be as addicted as we are to the import of oil from distant regions, an addiction that was also part if the chain of causes and effects leading to the attack on September 11.

But whether we are enthusiastic about it or not, the sprawl is here and it will continue.  Indeed, it will accelerate, now that the vulnerability of those conspicuous gleaming urban towers has been made so painfully, pathetically, obvious.  The vogue for "projects" development in Le Corbusier' style has long since past.  The vertical aggregation of offices, though, continues.  Or it did until September 11.

One of the marvellous accomplishments of recent technology is that there is no physical need anymore for people involved in the same meeting, the same business deal, actually to gather in the same building.  Likewise, there is no commercial need for a multinational corporation, or a brokerage firm, to have a single Mega-Headquarters.  It can have a lot of little heaquarters, each in a single-story building, if it wants.  Those little headquarters will themselves constitute some more of that suburban sprawl, and will create new difficulties for the control freaks of the world.  Bring it on!

10-20-2001

A Judgment About Post-Modern Art?
One evening earlier this week, Damien Hirst,  prominent London artist, set up his latest brainstorm in a room in the Eyestorm gallery in that city.  Hirst, by the way, is best known for his so-called "spin paintings," which are created by throwing paint at a canvas which is rolled up into a cylinder and revolving.  These sell for 40,000 pounds sterling (and a pound is worth about $1.43 ­ we'll leave further arithmetic to you), proving again that there's no fool like a wealthy fool.  

Anyway, this week Hirst tried something different.  He set up a representation of a messy artist's studio ­ including empty booze bottles, cigarette boxes, full ashtrays, and candy wrappers. The next morning,  a janitor named Emmanuel Asare, walked into that room and, in the normal performance of his duties, cleaned up the "mess," putting it all in a trashbin.

Museum officials managed to retrieve the stuff before it was carted off to a landfill somewhere.  It was put back together using photographs of its original condition.  A spokeswoman has also assured the British press that Mr. Asare has not lost his job.  I would bloody well hope NOT!  One suspects, from the evidence at hand, that he is a much more productive and useful subject of her majesty the Queen than is Mr. Hirst.

David Lee, editor of the art newspaper Jackdaw (and so not someone who can lightly be written off as a philistine on these matters) made an appropriate comment.  "If it doesn't look like a work of art, you can't blame people for getting rid of it.  It is actually not difficult to replace it.  Anything of seriously lasting value would be irreplaceable."  Mr. Hirsch's defenders cite as a precedent the surrealist Marcel Duchamp ­ who once exhibited a urinal under the title "Fountain."  It was art (runs the surreealist theory) simply because it was presented as art, in a museum.  But by the same logic, Mr. Asare's judgment, too, was impeccable.  As soon as he put the "art" in a trash bag it became, by such locational definitions, trash.

This is an amusing story which can take our minds for a minute off depressing war news, and we're all entitled to a laugh.  But is there a broader point to be made here, about aesthetics, and about the divergence between elite and mass culture?  Well, yes.  We might try to formulate a non-circular definition of art (in other words, something better than, "the stuff that gets exhibited in art museums.") The nearest dictionary that comes to hand first defines "art" in a broad sense and then defines the "fine arts" as a subcategory.  In the broadest sense (say the lexicographers) "art" includes "any specific skill or its applications."  But in the narrower sense, the fine arts "a making or doing of things that have form and beauty."

That sounds about right.  Good janitorial work is a skill, and no lexicographer would object were Mr.Asare to write a book titled The Art of Cleaning Buildings. Likewise, nobody objected too strenuously at the title of Donald Trump's memoirs, which he called, The Art of the Deal.  In THAT sense, Mr. Hirsch may indeed be said to be an artist.  He has the skill of persuading museum directors to let him do his thing on their premises, and persuading wealthy art patrons to buy what they see.  The specific applications of that skill may be said to be an art. We like to think, though, that that particular skill will get more difficult over time, as the expectation of potential buyers rise.  The wait may yet be a long one.

But the fine arts? ­ no, it does not seem to us that Mr. Hirsch has any claim to be practicing any of them.  We believe that an unsatisfied market demand for the fine arts does exist, and that here and there entrepreneurs are attending to it.  But the "mainstream" cultural establishment nowadays stigmatizes even the desire for fine arts, for the real thing, as philistinism.  We think that an exercise of their prerogative, of course, as free men and women.  Nonetheless, it is a shame.  It is also odd ­ the mass culture longs for "fine art," whereas the elite culture is satisfied simply with "art," as in the art of the deal.

10-13-2001

The Debate About Corporate "Poison Pills"
Shareholder activist Herbert Denton has just announced that the revocation of poison pills is his new cause.  Some large investors have rallied behind Denton. Mario Gabelli and William Miller are among them.  Should libertarians (many of whom also, of course, are investors with shares of common stock in various companies) lend our numbers and our proxies to such a crusade?  We won't offer a definitive answer here but will take the first three steps.

The first step is to get our definitions in order. A poison pill is a corporate by-law that attaches to certain classes of stock expensive redemption provisions that will be triggered by any hostile takeover attempt.  In effect, then, a poison pill frightens away bidders, and so deprives shareholders of the opportunity to receive the "control premium" that takeover bids typically involve.  It also has the general effect of entrenching incompetent managements from the threat posed by more competent bidders!

Naturally, these provisions, often adopted by boards of directors without any explicit shareholder assent,  are controversial and are frequently the subjects of litigation.  They seem to have been invented in the early 1980s, by a New York attorney named Martin Lipton. That was a golden age of corporate takeovers, when managements were desperately casting about for good ways to entrench themselves into their prerogatives.  "The rationale was to level the playing field between the raiders and target companies," Mr. Lipton told a reporter for Reuters this week.

Many shareholders think that such plans are a cheat.  "I might be perfectly happy to sell by stock to a corporate raider.  Management's concerns are not mine.  And if I want to make that deal, and the would-be raider wants to make that deal, then we should be free to make it, third party interference be damned!"  So runs the argument. Unfortunately,  in a landmark decision in 1985, Moran v. Household International,  the Delaware Supreme Court upheld poison pills. Yet that was not the last word.  In a 1998 decision the Delaware Court of Chancery said that some poison pill plans go too far, and it struck down the one in the case before it as a violation of Delaware statutes.  The court described the issue in such cases as a tension between "the directors' acknowledged authority to manage the affairs of the corporation, and the shareholders' independent right and authority to choose the corporation's ultimate destiny."

The second step, then, is to grasp that "corporate law" is by definition the creation of the state.  In the US it is a complicated intertwining of the state law of Delaware on the one hand, and federal securities regulation on the other.  What would happen in a free society?  We expect that many voluntary associations would arise that would pool the assets of investors in something very similar to the corporate form, simply because it is a very efficient way of raising risk capital and doing business.  Furthermore, in many of these cases there would be a "secondary market" in stock, or in whatever documentation established voting rights within these neo-corporations ­ and there would be the possibility of takeover attempts.  The "law" that pertained to such takeover attempts would arise through explicit contract and through custom, not through the declaration of a sovereign's legislators or judges.  This law of contract-and-custom might have to be interpreted by free-market courts ­ mediators or arbitrators chosen and paid for by the parties. If they got into the habit of having their decisions printed up, and then of reading each other's rulings, something like the old "common law" might re-emerge through spontaneous order.

The task for libertarians, then, is to establish as best our circumstances allow, whether and when "poison pills" would come about and would maintain themselves over time within a free system of that description.  Then we should work, through our own proxies and, if necessary, as litigants, to make this system approximate that one.

The third step in our analysis is to offer a working hypothesis.  So we propose this one: no directors should impose a restrictions on the resale of stock, regardless of real or imagined takeover threat, unless a special meeting of shareholders called for the purpose specifically approves of it, and approves by a supermajority establishing a genuine consensus.

10-06-2001

The Meaning of the Rubble in Southern Manhattan
Last week we discussed the "machinery of collective delusion" as it has been working (on overdrive!) since the terrorist attack of 9/11. This week we propose to take a more positive tack. What is the undeluded (and undiluted!) truth of the matter?

We believe that September 11 marks the end of a long-standing constitutional regime in the United States,  a regime that lasted for sixty-four years, since the Supreme Court abandoned its opposition to the New Deal in 1937.  This year, then, marks the beginning of a time of turmoil.  In the nature of things, the turmoil of the next few years will constitute a transition ­ some new stable equilibrium will arise somehow.  But what that order will be like, whether it be nearer or farther from our ideals than the one now passing away, we cannot say except as an expression of hope.

Yet let us say what we know. The first stable political system within the territory now known as the United States was the monarchy of Jolly ole England, in the rival plantations of Virginia and New England.  The rivalry was real ­ cavaliers to the south, and lowchurchmen, pilgrims and puritans and the like, to the north.  Yet despite the tumults between those factions in the mother country (up to and through a civil war) the colonists held together fairly well, perhaps because they had too much else on their minds in their unfamiliar surroundings to fall upon one another. So let us call the period 1607- 1675 the First Monarchy of the (future) United States.

In 1675, though,  King Philip's War broke out in New England, followed shortly by Bacon's rebellion to the south. In the late 1680s, the colonies stuck in this period of transitional turmoil started getting confusing, even contradictory, orders from the mother country, itself in the midst of the transition that, in hindsight, the Brits call their "Glorious Revolution."  After the dust settled, once William and Mary were secure on their thrones and their surrogates secure on the other side of the Atlantic, a new period of relative peace and equilibrium emerged, the Second Monarchy, which one may roughly date 1690-1763.

In 1763, though the French surrendered Canada. This was a great blow to the Second Monarchy, which had been held together largely by a common fear of the French.  With that threat gone, and with disputes on how to pay for the just-concluded wars inevitable, the colonies became quite restive about orders from a distant parliament.  In time, of course, this restless state led to revolution.

The first republic of the United States, born in 1787, fell apart by 1857, the year of the Dred Scott decision and the start of the one-term Buchanan administration. What followed was a period of terrible turmoil, which proved to be at the same time the transition to a new equilibrium, the second republic, which came into its own with the ratification of the 13th, 14th, and 15th amendments in 1865-66.   The second republic lasted almost as long as had the first.  It, too, fell apart (all things created by mortals, prove mortal).  Specifically, it was undermined by the monetary crunch and trade wars of 1929-30.  A third republic had arisen by 1937, when the Supreme Court suddenly abandoned its defense of some of the central legal doctrines of the second.  It is, then, this third republic, this post-Roosevelt legal and constitutional system that is now breathing its last oxygen.  The year 2001 will go down in the history books as one as full of portent as 1857 or 1929.  The time, the phrase "stock market crash" has a much more literal meaning!

What we might derive from this rapid tour of history is the following generalization: Political equilibrium does not outlast a healthy human life.  Neither of the two kingdoms, none of the three republics, has lasted more than 73 years.  Anyone who avoids an early death will experience one of the periods of transitional turmoil, so none of us can curse our unlucky fate that "our" turmoil has now arrived.  It is simply our turn.  Let us try to face it with some moral courage and determination, and turn its privations to the advantage of the cause of liberty.

9-29-2001

Rationality Takes a Holiday?
In the weeks since 9/11, the workings of the machinery of collective delusion have been very impressive.  Is there anything so stupid that people will not believe it?

Some of these stupidities are harmless and, indeed, amusing.  There is a phony quartrain supposedly from Nostradamus circulating on the internet.   He predicted a devastating attack on "two brothers" and an equally devastating retaliation, you see.  Except that he wrote no such thing ­ and the people who circulate this rumor generally get the date of his writings wrong anyway, so they have him issuing this particular prediction only long after his death. Furthermore, they are generally the same folks who told us in 1999 that they had decoded his writings and were sure that he had predicted the world would end before Y2K came in.  At any rate, booksellers are happy.  ThEy've sold a lot of volumes of Nostradamus' writings in recent days, no doubt unloading many of them to folks who wanted to find that non-existent quatrain.

Let us move on.  There is a new "urban legend" circulating, to the effect that the call letters of one of the hijacked planes was Q33 NY.  The originators of this one tell us to type Q33 NY in the "wingdings" font and see what happens.  But they don't leave it up to us, they also kindly tell us what to expect ­ a picture of an airplane, then two scissors, then a death's head, and finally the star of David.  This sounds like a bizaare code for what happened, anti-Zionists dealing death by using scissors to take over airplanes.  Or maybe someone is codedly trying to tell us that Israel actually planned this.  Could it be more than coincidence?

So runs the legend.  The fact is, if you try the experiment you will get an airplane, then two striped rectangles that look a little like filing cabinets, then the death's head and star.  It doesn't seem like such an eerie code without the scissors.  (You can get the scissors only if you hold down the "shift" button while  hitting the number 3.  But you would only do that if you thought the plane was Q## NY!)  Furthermore, none of the planes was Q33 NY ­ that particular combination of letters and numbers is aeronautically meaningless.  Finally, what exactly would it prove even if it was all true?  Wouldn't a rational person be required to survey some of the other ideographic font systems before making a final decision?  If you type in "Q33 NY" under the "webding" system, you get a tree, two arrowheads, an eye and a heart.   Gee, what is the mysteriously coded message there?

Again, those are relatively harmless manifestations of irrationality.  Even so, it is right that we bring them to your attention.  We don't mean to sound too Randian here, but rationality considered as a human trait and habit is essential to prospects for a free society.  "To think is the only moral act," said William James. A free society will come about when everyone gets into the habit of thinking clearly about our respective individual interests, in order to act productively and to trade the fruits of our productive activities each with the others.

Let us introduce one more example of crisis-caused irrationality.  This one doesn't amuse us at all.  In the weekend before the securities markets in downtown Manhattan re-opened, there was a good deal of talk about how everyone had a patriotic duty to buy stocks. Buying stocks on the NYSE, especially stocks within the Dow Jones index, was we were told a matter of investing in America, expressing one's confidence and national pluck.  "It will show those terrorists a thing or two about what they are up against!"  All this talk showed a profound inability to understand what capitalism is all about.  If your own portfolio is best served by buying stocks, by all means do so.  If it is better served by selling, do that ­ and don't let anyone guilt trip you into doing anything contrary to your interests as you understand them.

How can the purchase of stock possibly be a duty?  It is impossible for anyone to buy stock unless someone else at the same time is selling stock, after all.  So we have here the odd notion of a "duty" that can only exist in a state of symbiosis with someone else's breach of it.

9-22-2001 

Terror Cannot Threaten the Law of Supply and Demand
On September 11, 2001, hijacked airplanes struck and destroyed each of the twin towers of the World Trade Center.  Their fall, in turn, destroyed or damaged several other buildings in the neighborhood, and forced the closing of the financial district in Manhattan for the remainder of that week.  Another hijacker/kamakaze headed a plane into the Pentagon in Washington.  Yet a fourth seems to have been headed for Washington, but never made it ­ crashing himself and his victims into a field in western Pennsylvania instead.  The world awaits the U.S. government's response.

We are certain we will have plenty of opportunity in the weeks ahead to reflect upon the implications of these horrendous events but, for the moment, we will invoke them as a parable about supply and demand.

At the New York Mercantile Exchange on Monday, September 10 contracts for crude oil for October delivery closed at $27.63 a barrel.  On September 19, October crude closed at $26.72. In other words, in the face of an almost unprecedented military attack by a foreign power on the mainland of the United States, in the face of a certain US military reaction in south central Asia, the price of a barrel of oil has FALLEN. How so?

Contrast that for a second with 1990. When Iraq invaded Kuwait, oil prices measured by the barrel immediately rose, as they had risen repeatedly in similarly tense political conditions in the 1970s.  So why haven't they risen now?  One might give several explanations, yet they all add up to the Ur-explanation: Price and production level are both set by the point of equilibrium of supply and demand.

Consider the demand side.  Immediately after the attack, the aviation industry in the United States shut down.  In other industrialized countries, too, the demand for airplane seats understandably declined.  If there had been no attack on 9/11, a lot of airplane fuel would have been expended by now, that instead is still sitting in barrels in a warehouse somewhere.  Consider also that an industrial slow-down was underway even before the attack.  This means of course a slackening in the demand for petroleum for industrial use.  Consider, finally, that the oil ministers of OPEC may be capable of a long view.  They want their product to meet healthy demand not just today and tomorrow, but next year and next decade.  The last thing they want is a prolonged, severe, recession throughout the industrial world.  Do merchants prefer poor customers to wealthy customers?

Now think of the supply side.  The invasion of Kuwait meant that fighting was underway among the oil derricks.  There were immediate effects on production, and very sound reasons to speculate there would be further cuts as the situation developed.  But in this instance, no oil derricks have been threatened, and it seems that the Bush administration is trying to localize the conflict ­ trying to make it a matter of "the civilized world versus the Taliban."  Unless that diplomatic stance collapses and this becomes a broader war than it now seems likely to be, there will be no cut to the supply side of the oil market's equation.

That will do, for market analysis, for the moment.  There is a broader point here, one that involves market rationality.  Markets are unpredictable, precisely because they are supremely rational mchanisms.  They are more rational than any of their participants, or would-be predictors. Prices convey information, and since prices rise and fall in reaction each to the others, the whole of a freely-functioning market is a single intricately co-ordinated information processing system.  If you appreciate organicist metaphors, you might consider the securities and futures markets as society's brain.  Every neuron is intricately interconnected with every other neuron, and intelligence arises as a function of the whole.  Any government interference harms the whole, and lessens the intelligence of the allocation of resources.  Of trivial interferences, we can say, "well, only a few neurons were killed in THAT party."   But that flippant remark, even when true, is hardly a good excuse, and when one takes the hair of the dog the next morning one is on the road to permanent severe disability.

We suggest going, and staying, "on the wagon" ­ sobriety in this analogy is anarcho-capitalism.

9-15-2001 

James R. Hoffa's Life and Death: Part Two
What, then, is to be said about the disappearance and presumably the death of Jimmy Hoffa, legendary Teamsters leader?   (For those who want the bare facts, and the latest evidence, scroll down to last week's column.  Only one further tidbit of fact has arisen since we wrote that summary. An FBI agent named Andrew Sluss tried last weekend to convince Charles O'Brien to take a lie-detector test.  On the advice of his lawyer, William Bufalino II, O'Brien has declined.  Bufalino released to the press a copy of a letter he received from Agent Sluss.)

Although we claim no certitude in the matter it begins to look more and more as if O'Brien was involved in Hoffa's disappearance, and as if O'Brien represented a nexus of sorts between the Teamster leadership who took over after Hoffa stepped down, and organized crime figures in the Detroit area in the early 1970s.

But what can we say about all this at the level of matters of principle? To begin with, we should say that this case confirms the long-standing libertarian contention that there is no two-party system in the United States.  There is only one party, the Republicrats, with two wings.  Despite cosmetic differences, the Republicrats make policy consistently.  That is, they consistently serve their own interests as a cohesive elite, from one administration to the next.  The Kennedy administration prosecuted Hoffa, unsuccessfully, for allegedly accepting pay-offs. Then the Johnson administration continued the vendetta, it also prosecuted Hoffa, this time successfully, for jury tampering.  In subsequent years, the Nixon administration opposed parole, until Hoffa agreed to resign as Teamsters President.  For all the good their differences did him, they might as well all have consisted of the same folks.

Why, though, was the Republicrat leadership so eager to remove Hoffa from his post as President of the Teamsters?  If some voluntary organization, "The National Organization of Left-Handed Guys Named Joe," wants to have an imprisoned felon as its president, that is between it and him.  Why would even the Leviathan demand that Joe Felon resign as president of NOLGNJ before he could be paroled?   Just for the sake of making and enforcing a demand and so proving its omnipotence?  Perhaps: but in the instant case there is more to it than that.

The US labor movement was co-opted in the 1930s and turned into an arm of the sovereign.  The National Labor Relations Board ever since then has taken it upon itself to say what is or is not an approprite bargaining unit, to certify or decertify unions, to supervise union elections, etc.  In short, the NLRB acts like the Bureau of Indian Affairs toward the union members on its statutory reservation.  There have always been some elements of blue-collar labor resistance to the state -- ld-fashioned "syndicalism," dating on these shores from the time of the prominence of the Industrial Workers of the World, the "wobblies."

The wobblies still exist, although much diminished from their time of glory a century ago.  They did not, and do not, believe that the state can be changed to help working people.  They believe in smashing the system of statism and capitalism as a whole, in a struggle "from below," on the shop floor.  As anarcho-capitalists, we believe there are some misplaced emphases in syndicalist writings and ideology, but the heart of it is very much in the right place, and its defeat by the conformist Gompers and Meanys of the  world deserves much regret from rational folk.

Hoffa was no wobbly, but he does seem to have had in his bones the sense that the government was necessarily on the employers' side, so he ought to be against it.  It seems to us he was removed (first from freedom, then from office) because he posed a threat to the comfortable co-optation of unions by the paternalistic keepers of their reservation.  In a sense, he was removed from the world of the living for the same reason, although the US government appears not to have sought that result. It achieved his death indirectly nonetheless. The post-Hoffa union leadership had to protect their franchise, and various organized crime factions had to protect the cozy deals they had made within that post-Hoffa leadership.

Force protecting coziness -- there is hardly a better definition of evil known to us.

9-08-2001

James R. Hoffa's Life and Death:  Part One
In this and next week's current-events columns we will look at the mysterious disappearance 26 years ago of the President of the International Brotherhood of Teamsters, James R. Hoffa.  This week, we'll give a straightforward account of what seem to us the pertinent facts, next week we'll draw some lessons from the story.  This matter comes to mind because DNA tests this week matched a sample of Hoffa's hair taken from a brush he owned with a strand of hair found in a car that was being used, on what seems to have been the last day of his life, by an associate of his, and a key suspect in the case ­ Charles O'Brien.

But let us back up a bit.  In the 1940s, Hoffa worked his way up the Teamster hierarchy with the help of a mentor, Dave Beck.  In 1952, Beck became union president, and Hoffa his vice president.  Then a Senate committee investigating improper labor practices publicized evidence that the Beck/Hoffa crowd had diverted union funds to their own pockets, and that Hoffa in particular had accepted payoffs from trucking companies.  Beck was convicted on embezzlement and tax fraud charges and sent to prison.  The AFL-CIO, in order to disassociate itself from the corruption uncovered by the McClellan Committee, expelled the Teamsters. Hoffa beat the rap, and became union president in Beck's place in 1957.

The chief counsel of the McClellan Committee was one Robert Kennedy, who in the course of time became Attorney General, and who could not forgive Hoffa for beating that rap. Under him, the Justice Department charged Hoffa with accepting an illegal payment from an employer.  Again Hoffa beat the rap.  But the Inspector Javert's of this world have their ways, and they soon went after Hoffa again, for jury tampering.  This time they were successful, and Hoffa was sentenced in 1964 to eight years in prison.

Imprisonment had shaken Beck out of the presidency but for a long time it seemed incapable of doing the same to Hoffa, who continued to run the Teamsters from inside his cell, a fact employed at his expense at three Parole Hearings.  Finally, Hoffa announced his retirement in 1971.  Perhaps not coincidentally, soon after Hoffa stepped down as Teamster head, President Nixon commutted his sentence.  Why were the statists so eager to have him step down?  If a private organization wants to keep a president who happens to be inside a prison cell, that would seem to be his business and its, not a matter of public policy or parole board concern.  (But we've just promised to leave the philosophizing until next week.)

Here we reach the "whodunit."  During his incarceration, Hoffa had had run-ins with a fellow resident of the facility in Lewisburg, Pennsylvania, named Anthony Provenzano, a New Jersey Teamster official.  Hoffa blamed the Jersey operation for bringing down much of the heat upon the Brotherhood as a whole.

Immediately upon Hoffa's release, he began manuveuring to take back control of the union.  The new president, Frank Fitzsimmons, had apparently cut deals with organized crime in the Detroit area that were satisfactory to all parties.  Obviously, third party interference with such mutually satisfactory arrangements can have its downside.  On July 30, 1975, Hoffa drove to the Machus Red Fox Restaurant in Bloomfield Township, Michigan, apparently to meet Mr. Provenzano (and a mob enforcer named Anthony Giacalone.) Neither of the Tonies showed up.

But sometime that day Charles O'Brien borrowed Giacalone's car, a 1975 Mercury Marquis.  Hoffa was never seen again. O'Brien told investigators that he had run an errand involving dead fish that day.  He picked up a box of fresh salmon at Teamsters HQ and dropped it off at the home of a union official.  Naturally, the dead fish dripped blood over the back seat of the borrowed car, he said, so he had been forced to have the car's interior thoroughly cleaned.  Trained dogs identified Hoffa's scent in the back of the car and the trunk.  Unfortunately, the investigation couldn't get any further because, darn it, the folks who cleaned out the dead fish had been efficient in their work.  Investigators did find a strand of hair, though, and that brings us back to 2001 and the DNA test.   It was Hoffa's hair.  Next question?

9-01-2001 

Fight Global Taxation: Defend Currency Speculation!
Prime Minister Lionel Jospin of France declared this week that he favors an international tax on all foreign exchange transactions.  The theory behind his proposal, a theory developed by the American economist James Tobin 30 years ago, is that such a tax will not discourage GOOD currency transactions: prudent long-term investments or hedges.  It will only (so Tobin thought) discourage BAD currency transactions, i.e. speculation.  Jospin is very enamoured of this theory.  He said that he will propose a European initiative on this subject when the finance ministers of the European Union get together in Liege (in Belgium) three weeks from now.

We are reminded in an odd way of Faraday's great experiments in electro-magnetism.  There is a story that one day Faraday was visited in his laboratory by a prominent member of parliament.  The MP witnessed some experiments, nodded sagely, and asked, "Of what use is all this?"  How did Faraday reply?  That depends on which version of the story you have heard.  One account has him answering a question with a question, "of what use is a new born babe?" Another account has a more politically pointed punch line, "I don't know sir, but I'm sure that one day you will figure out how to tax it."

The baby of electro-magnetism has long since matured, has begun providing immeasurable services to humanity,  and now suffers tremendous tax burdens as a direct consequence of its value.  Will the same prove true of the foreign exchange markets?  These markets are, if not babes, still in their relative youth in recognizable form.  They began taking their contemporary form only after Richard Nixon closed the US gold window in the early 1970s. Nixon's action destroyed the "Bretton Woods" system that had existed for the previous thirty years, and left the various currencies of the world to "float" each against the other.

The ups and downs of the world's currencies create uncertainty, and such uncertainties inspire entrepreneurs and managers to hedge their bets, by getting into the marketplace themselves.  Can we say "hedgers are good, but speculators are bad" as Tobin seems to?  No, because those are just two opposite sides of the same transaction.  On the other side of a buyer there is a seller, and on the other side of a hedger there is a speculator!  On the other side of someone trying to play things safe there is someone taking a risk.

A British newspaper, editorializing about Jospin's comments this week, put some crucial points very well.  Currency speculators, said The Guardian, are "an exceptionally useful lot, working day-in, day-out, risking their own wealth to supply a thing called liquidity.  Without liquidity, markets dry up, prices become volatile and goods become difficult to shift."

Perhaps, though, Jospin's comments are not really what they seem.  Perhaps he is not so much anti-speculation as he is pro-revenue.  Perhaps the issue of where the money comes from concerns Jospin less than does the issue of where it goes.  Perhaps he even has in mind for it worthy goals such as feeding the victims of famine or clearing out land mines.  That side of the equation, we like even less!

The revenue needs of government, any level of government, are like the nutritional needs of the plant from outer space in Little Shop of Horrors. The plant wants human blood, it shouts "feed me!" and with every infusion of blood it grows.  With greater size comes greater desire for blood.  The whole idea of giving governments the blood of currency speculation is scary whether we think of this as a multi-national arrangement among the existing nation states or we think of it as the birth of a true world government. Who is the enforcement authority for that government?  Suppose Taiwan refuses to co-operate, and currency traders desiring freedom from this tax all begin doing business out of Taiwanese offices.  Will blue-helmeted UN policers storm the beaches of that island to close these operations down?  If they don't, the whole thing will end up as just an elaborate way of stimulating the business climate of Taiwan (or whatever the lucky haven turns out to be) at the expense of the rest of the world.  But if they do, shudder while you are still allowed.

8-25-2001

Sex, Scandal, and Chandra Levy
We imagine most of our readers are by now familiar with the basics of the Chandra Levy matter. Our own question about all current events, when we sit down to write this column, is always the same: do they relate to the fundamental issues of politics and sovereignty?  Can anarcho-capitalism help us go behind the headlines here?  For the first time this week, after almost four months of Chandra newsprint and Chandra broadcasts, we begin to see our way to an affirmative answer.  Miss Levy was last seen on April 30, apparently preparing to go back home to Modesto, California, because her internship with the Bureau of Prisons had ended.

There are lots of missing persons cases, of course.  What has given this one notoriety is the involvement of Modesto's congressman, Gary Condit.  There is one point on which there seems to be some consensus. Condit almost certainly did have a sexual relationship with this young woman.  We cannot prove that with explicit photographs, but common sense would seem to do the job well enough.  Miss Levy's aunt says her niece confided as much in her.  She sent e-mails to friends hinting at it. The DC police say Condit told them of an affair the third time they interviewed him. Condit has elaborately avoided any "yes" or "no," itself under the circumstances a fairly emphatic "yes."

You might fairly ask, "so what?"  There are several possible answers to that.  In straightforward political terms the best answer is that the Condit/Levy link has given the Levy family the handle they need to keep their daughter's name before the public, and to keep pressure on the DC police to discover her fate.  That is what is quite naturally foremost on their minds right now.  What happened to her?  Is she alive or dead?  If dead, by whose hand?  We do not know the answers to these questions, but we know that if we were in their shoes we would use any news hook available to keep her name out there, keeping up pressure and interest until we found out.

The pressure and interest was sufficient to push a reluctant congressman into a sit-down with Connie Chung this week.  It was very odd television event.  It is not often that an interviewer asks a congressman, pointblank and with the cameras rolling, a question that begins with the words, "did you kill?"  But she asked it and, predictably enough, he said no.  There were little touches that will stick in our minds.  For example, at one point Condit said that he had expected to hear from Levy "on the 31st," the day after her disappearance.  Chung gently reminded him that "there was no 31st," since April 30 rolls directly over into May 1.  Basically, though, Condit had a couple of brief canned speeches he wanted to give, one saying that he is "not perfect and has made mistakes," the other saying that he and Levy "never had cross words."  He kept waiting for Chung to give him opportunities to insert one or the other of these speeches, and she gave him several.

But what drew our attention, and what may yet make this a matter for principled people to watch, was the fall-out from that interview late this week.  The minority leader of the house of representatives, Dick Gephardt, says he found Condit's demeanor "disturbing and wrong," and he is going to talk to other colleagues in the House about action against him.  Why?  Until now, Gephardt has defended Condit as one would expect.  The Democrats would love to gain a majority of the House in 2002, and every seat is important.  These troubles have turned what was a safe seat for Gephardt's party into a possible Republican gain, and one would expect Gephardt to rally around his back bencher.  What did he hear during the Chung interview that has caused him to switch sides?

Ah, here we come at last to the milk inside the coconut.  In an interview with the St. Louis Post-Disptch Friday, Gephardt said that Condit came across as insufficiently candid or apologetic.  "When any of us lack credibility, it affects the institution. It all adds to the general perception that politics is no good and politicians are a bunch of bums."   (Do you think you've been having a great deal of luck keeping that fact secret until now, Dick?)

8-18-2001

Why are Farm Subsidies a Bad Idea?
On Wednesday this week, that great bastion of conventional statist reasoning, the Washington Post, seemed briefly to have grasped the notion that farm subsidies are a bad idea.

An editorial complained that President Bush allots too much money for such subsidies in his budget.

"U.S. farm subsidies," the editorial informed its readers, "hurt American taxpayers and they also harm poor farmers in other parts of the world, including Latin America, which Mr. Bush says he wants to help by means of expanded trade."  So far so good.  Still, this is not quite complete, because it conveys no understanding of the reasons why farm subsidies do harm.  We will get back to that, but in the meanwhile, allow us to say that it is the very next sentence that disappointed us ­ or, rather, that restored our faith in the predictability of the Post.  "If any food-related issue threatens U.S. foreign policy, it is that over-reliance on farm subsidies may complicate the administration's ambition to launch a new round of global trade talks."

Listen up, editors.  Farm subsidies are wrong because they are bad economic policy.  That are not wrong because they make the diplomats of other countries unhappy.  Contrarians as we are by nature, that latter points tells as a mitigating fact in their favor!  If the maintenance of U.S. subsidies accomplishes anything positive at all, it is the complication of U.S. diplomat efforts!  The Post's desire to see the issue in this way is simply obtuse.

Farm subsidies are wrong ­ pragmatically wrong ­ because they distort prices.  Prices should remain undistorted because, in their free rise and fall, they constitute an extraordinary system for the conveyance of information throughout the world, among producers, consumers, and service providers of all varieties.  Consider the price of corn.  What other prices affect it, and what other prices does it, in turn, affect?  On the demand side, corn prices are in a constantly-shifting equilibrium with the prices of potential substitute goods ­ soybeans, wheat, etc.  They are also in ever-revisable relationship with the prices of supplemental goods.  For example, if I as an ultimate consumer like my corn with butter, and in this preference I represent a sizeable part of the market, then a fall in the price of corn will increase demand for butter, increasing its price. In general, the prices of substitute goods rise and fall together, the prices of supplemental goods rise and fall inversely.

On the supply side, meanwhile, the price of corn will come to reflect the price of all the inputs of corn ­ the rent for arable land, the wage scales for farm labor, the price of tractors and their component parts, etc.  A free-market corn farmer cannot simply "pass on" these prices to the next link in the marketing chain, of course.  But the price of corn will come to reflect input prices indirectly.  If the input prices rise and squeeze or eliminate profit margins, then marginal farmers will leave the corn market altogetehr (to try growing wheat, or to sell their land to oil barons or condominium developers and retire, or whatever). As producers leave a market, the aggregate supply of the commodity they used to produce will fall, and its market value will rise, thus incorporating those higher market prices.

In sum, then, a free market pricing system is the best possible resource-allocation software, a program that employs the whole planet as its hardware.  Every datum in this software is intimately correlated with every other datum, so that the resource allocation that would result, were the program fully debugged and run (i.e. in circumstances of anarcho-capitalism) would be optimal.  The states of the world are so many bug-creating hackers, undermining the perfection of the system.  That, we would like to tell our friends at the Post, is why it is bad for the United States to subsidize, or otherwise to meddle with, corn prices.  They will no doubt never come to that realization, because they have too much stake in the pseudo-legitimacy of the hackers, so at best they can say timidly that such subsidies do some harm and complicate diplomacy.

We suppose that even that tepid opposition to farm subsidies is better than nothing.  But only just. 

8-11-2001 

Stem-cell Research: Another Victory for Credentialism
On Thursday this week, President Bush ended months of public agonizing over the issue of whether the government should fund stem-cell research. He followed an old family tradition and split the difference, drawing some more-or-less arbitrary lines in the sand so he could say, 'we will fund research that goes so far, but no farther.' 

At The Pragmatist we, of course, do not believe that the government ought to fund anything, because we do not believe that it ought to exist.  But let us play within the language-games of contemporary politics here, because a threshold of considerable historical significance has been passed.  The threshold concerns not the rights and wrongs of research, but who gets to be considered an authority on a subject within the realm of political debate, and on what ground.

The president announced creation of a new  commission to study the matter and (so far as we can tell) to try to translate those lines in the sand into commands carved in stone.  His commission will be headed by Leon Kass, referred to everywhere in news reports as a "bioethicist."   Query: what exactly does that word mean?  Is anyone who pontificates on right and wrong, life and death, a bioethicist?  In that case, the President does not need the assistance of bioethicists because he is one himself, as the speech demonstrated.  Or is "bioethicist" a new type of credential.  Is it a major in college?  Or does it require postgraduate work?

A grasp of the biological essentials of the stem-cell debate requires no postgraduate training.  It requires literacy and some common sense.  Stem cells are primitive cells that can transform themselves into any of many other types of cells, which fact suggests that they may have therapeutic uses, for the regeneration of damaged organs or tissues.  On the one hand, stem cells have been extracted from aborted embryos, so the issue of research thereon is tied up with the always-divisive subject of abortion.  But on the other hand, stem cells can be replicated in the laboratory, so that once a stem cell "line" is in existence, it can be copied and recopied without the need.  On the third hand, a line of copies of copies of copies, etc. may not remain viable forever.

That is the scientific background to Bush's split-the-difference decision.  He said federal funds will be used to finance stem-cell research only on 60 stem-cell lines worldwide, because with their embryos "the life and death decision has already been made."   Administration spokesmen, clarifying the speech, have told us that the National Institutes of Health will set up a registry.  Researchers who want to get government funding will have to identify their work with one of the sixty lines in the registry.  Bush's Secretary of Health and Human Services, Tommy Thompson, said Friday morning, in an interview on CNN, at one moment that no one knows how long the lines will preserve their liability and at another that he is "absolutely" certain  these lines will suffice for whatever research gains are attainable.  You can judge the mutual consistency of those two statements for yourselves.  You don't need a fancy title to do so.

Why did Kass in particular get the nod to head this commission?  Virginia Postrel, on her website, suggested Thursday evening that this was because Kass was "the only Republican bioethicist available.  No bioethicist from the party's more libertarian wing has entered the public fray, assuming such a bioethicist even exists."   Postrel is often admirably sharp, but here we are afraid she is accepting too much baggage, too much of the conventional wisdom, far too uncritically.  She seems to be buying the notion that there is some such credential as 'bioethicist' as something more substantive than convenient political cover.  The experts credential each other, and they tell the rest of us, 'we and we alone know how to run things.  Go away and let us make these decisions.'  Their vested interest is in blurring the distinction between being an authority and being in authority.

History shows, we submit, that experts never know how to run things.  Neither do "we, the people" as a collective. People can make themselves 'authorities' in this or that as they always have, but no credential for being-in-authority should follow from that.  Things run themselves fairly well, when allowed to do so.  Spontaneous order is the only kind of order that is fair and that can last.

8-4-2001

Forbes Sides with Establishment, Against Rude Capitalism 
The political establishment in most of the world today is worried.  For its denizens thought that they had tamed capitalism decades ago.  Yet an untamed: indeed, a perfectly rude, sort of capitalism keeps breaking out.  What to do?  Wellone classic remedy to such a problem is to mobilize the establishment press to attack and stigmatize those nasty parvenus, those social climbers, thouse uncouth nouveaus! By way of an exhibition of this remedy, we refer you to the cover of Forbes, for August 6.  Against a yellow background, bold faced black letters spell out, THE $500 BILLION HEDGE FUND FOLLY.  Whose folly?  Ah, that takes some explaining.

A hedge fund is a specialized sort of mutual fund.  Hedge fund managers can do business free of most forms of government regulation, and when we say "government regulation," we mean what we say.  Hedge funds are free from most regulation by any government on earth.  A typical hedge fund might have a corporate headquarters in the Bahamas, list its own stock on the Irish Exchange, and be affiliated with a limited partnership of the same name in the United States. 

As part of the implicit deal with the regulators of those various places, and others, hedge funds receive their freedom for a price: they limit their clientele.  Only high net worth individuals or institutions are supposed to invest in hedge funds, and even they are only supposed to learn about particular funds through word of mouth or free media. Obviously, mutual fund managers, who are extensively regulated, are often quite vocal about their unhappiness with this situation. The mutual funds get to go after the small investors, but the hedge funds get freedom from regulation and the really big money comes to them?  One can hardly begrudge the mutuals some grumbling.

What should libertarians with no immediate or tangible stake in it, think about this situation, this bifurcation of the investment fund market?    Is it yet another concession by the powerful to the wealthy?  Well yes. Are the hedge funds offering unfair competition to the mutual funds?  Well...yes.  But get over it!  There is something hopeful happening here.  The relative freedom of hedge funds represents a hole in the dike that protects the establishment.  We are rooting for the hole to stay open, because we are rooting for a flood.

This gets us back to our lead.  Forbes, by running a bag job on the whole hedge fund industry this week, has stuck its thumb into that hole.  It is the journalistic voice of the establishment, of the mutual funds, of tamed capitalism is general.  Decide for yourself whether it is, in fact, a bag job.  Read the first paragraph of the cover story, which asks, "What do Barbra Streisand, Senator Robert Torricelli and Bianca Jagger have in common?  They have all lost money investing in hedge funds."

Now, if we were trying to come up with a short list of the mavens of contemporary finance, not one of those three names would have come to mind!  What is the point?  Could one not as easily come up with a list of three celebrities who had lost money in, say, real estate?  Of course, and that list, too, would have no real point.  In fact, we do not believe that this list is even accurate.  Senator Torricelli's name most likely does not belong on it.  Forbes' writers probably put him there because he was once an investor in a fund called Porpoise Investors, and because Porpoise itself went (excuse the marine-zoological pun) belly up.    But Torricelli himself did not lose money in that deal, a fact that was revealed in a story in SmartMoney in June.  Do the folks at Forbes ever read their competitors?  We gather that they don't read what they don't want to read, or don't absorb what does not fit their thesis.  They wanted to create a list of three household names that had lost money in these scary institutions they were trying to blacken, but they couldn't do better than 67% accuracy.

More power to hedge funds!  Libertarians should try to widen the holes in the establishment's dikes, and to pull away from the wall anyone so misguided as to have stuck his thumb therein.

7-28-2001

Indonesia and Its Cycle of New/Old Brooms
On July 23, Indonesia's legislature voted President Adulrahman Wahid out of office, elevating the vice president, Megawati Sukarnoputri, to the nation's highest office. 

In the Javanese naming tradition, which Megawati's family follows, "putri" is a suffix meaning "daughter of."  And is she ever.  Sukarnoputri is the daughter of the Sukarno, founder of the Indonesian nation-state.  ("Putra," by the way, means "son of," and it is also common in the Javanese tradition for people to go through life with only one name, so that Sukarno himself was never known as Anybodyputra, or by any name lengthier than "Sukarno.")

Here is a two paragraph history of Indonesia.  In the 1940s, Sukarno sided with the Japanese against the Dutch colonialists in east Asia.  He and many others saw the Japanese as a new broom that might help sweep out all the old imperialist corruption.  After the war, he welded together a variety of disparate ethnic groups and territories and called the whole "Indonesia" which, in the decolonizing spirit of that moment, the rest of the world soon recognized as one nation among all the others.  In 1966, a military coup drove Sukarno from office and installed Suharto, at that time widely seen both inside and outside the country as a new broom that might sweep clean the accumulated corruption of the Sukarno cronies.

The new broom, as is common in such cases, simply brought in its own cronies.  Yesterday's reform is today's crying need for reform.  In 1999, Suharto was himself driven from office by massive street protests.  His vice president, B.J. Habibie, replaced him briefly,  and supervised the elections that led to a fractured parliament and deadlock over who would become the next president.  That deadlock was broken by the deal that gave the presidency to Abdulrahman Wahid (whose family, by the way, follows Islamic rather than Javanese naming conventions, which is why he is neither just Abdulrahman nor Wahidputra!) and the vice-presidency to Sukarnoputri.  Wahid, a devout Moslem, was himself looked to by many as the new broom.  But he, too, simply represented a new center for the old cronyism.

What will the new regime be like?  This week, as one speaker after another heaped flowery praise upon the new president, hecklers soon grew tired or amused and began to shout out, "There's another job seeker!"  Will this be yet another case of "meet the new boss, same as the old boss"? In a development on Friday that may be something of an omen, the multinational petroleum company BP announced that it had handed over an oil field in the Java Sea to the state-owned Indonesian oil company Pertamina due to the expiration of its production-sharing contract.   We will be hopeful about the new administration if it moves to reverse this drift:  if it privitizes Pertamina.  We very much doubt it will do anything of the sort.  State-owned firms like Pertamina are plum trees for cronyist regimes, and nothing has changed with the return of the Sukarnos that indicates cronies are no longer going to be rewarded with plums.

An Associated Press story Tuesday quoted George Aditjandro, a professor at the University of Newcastle, about the new president.  "She thinks it is her birthright to be president and will enjoy the glory associated with it, but others will be running things for her."  Meanwhile, Wahid continued to occupy the presidential palace until Friday, hoping crowds of supporters would show up to support his defiance.  They did not, and he eventually got the point and left.

It seems that in this new millennium, the notion that there is such a thing as "legitimate" government, as an expression of anything other than the momentary configurations of power, the direction in which the tanks are pointing, has become quite threadbare.  Legitimacy is such a thin and thinning veil that the world is falling back on the oldest form of legitimacy of all: family descent.  None of the later innovations has proven the superior of that old chestnut.  At heart, most people understand that the old brooms that are blamed for corruption today were the hopeful new brooms of yesterday, and even cynics find it harder than ever just to keep up.

7-21-2001

Conflict Over the Nature of Science Intensifies
In 1962, the University of Chicago Press brought out a book by Thomas Kuhn, called The Structure of Scientific Revolutions.  It had and continues to have an enormous impact: not the least of which is the trendiness of the word "paradigm."  Before Kuhn, all that word really meant was that one phenomenon can provide a good example of some broader range of facts: Lassie is a paradigm of collies.  But since and as a result of Kuhn's book, paradigm is a word weighted with significance.  It means, roughly, a set of background assumptions shared by some community of inquirers.  Nowadays, everyone who wants to be thought profound declares that he is shattering old "paradigms" and creating new ones.  One critic has counted 21 different meanings of the word in Kuhn's book alone, and the meanings have exploded exponentially since.

Kuhn passed away in 1996, and the posthumous publication of some of his papers re-appraising his famous book has helped stimulate further discussion.  The world warily approaches the fourtieth anniversary of Structure, next year. 

In the meantime, a sociologist named Steve Fuller, (also published, appropriately, by Chicago) has given us some food for thought in Thomas Kuhn: A Philosophical History for Our Times.  This work criticizes Kuhn in political terms, saying that he preserved and strenghtened an elitist and heroic view of a narrowly based scientific community. There is according to Kuhn, no standard higher than the assent of the relevant scientific community for the rightness of a paradigm.  Fuller's problem with this is that the relevant community is always a small one, consisting of people who have been to the best schools, who read each other's journal articles and who understand the same lingo.  The relevant community, in other words, is an elite, defining truths that the masses must quietly accept.

Fuller's friends and critics alike tend to say that he is attacking Kuhn "from the left."  As libertarians, that is as people with a more complicated conception of political possibilities than anything that can be captured by a simplistic left-right spectrum, we will simply make that observation and pass by.  Left, schmeft.  That is not at all what is important to keep in mind about Fuller's book, or Kuhn's.

There are two key points.  First, the fact that there is some validity in Fuller's complaint.  Second, the respect in which it shares too many assumptions with Kuhn to be truly effective.  Fuller and Kuhn both seem to think that truth and falsity are decided by majority vote.  They differ only over how one gets to the ballot box.  A deeper problem, though, is that there is no such ballot box. The fundamental epistemological situation is this: The world outside my skull is resistant to me, and truth emerges out of my wrestling with that resistance. We at The Pragmatist are Jamesian in our foundational epistemological views, and Popperian in our understanding of the nature of science.  We believe, looking at the Kuhn's theses from either point of view, that he set the world of "science studies" off in a very unproductive direction, and we fear that Fuller does nothing to set this right.

But let us say something about the arts and humanities, since Kuhn's influence seems to be greatest here. The compilers of the "Arts and Humanities Citation Index"  once examined their records for the years 1976-83, and issued a report on which 20th century books and authors were most often cited in scholarly articles during that period.  The most frequently cited author was Vladimir Illyich Ulyanov,  better known by the pen name Lenin.  That speaks volumes, already, about late 20th century art scholarship, does it not?  The most frequently cited single book was, you guessed it, The Structure of Scientific Revolutions.  The result would quite likely be the same were the sampled years more recent.

That is an interesting juxtaposition of cites.  Lenin, after all, identified the Communist Party as the "vanguard" of the proletariat, the most "scientific" and self aware portion thereof.  The Party knows best, he said, and must keep a tight leash on revolutionary adventurism.  Just like a clique of self-selected credentialed scientists at their peer-reviewed journals, vetting each other's articles?

7-14-2001

This Week's Twists and Turns for Campaign Finance Censorship
This week was to be a big one, but became anticlimatic, in the world of campaign finance reform.  In that world, as we at The Pragmatist have explained before, the word "reform" means censorship.  The cause of freedom of speech cannot be separated in fact from the material conditions of such speech.  My voice can only reach whatever small group of people stands in its way.  Any effort to expand the scope of my speech beyond that small group entails mechanisms, i.e. a bullhorn, a printing press, a web site.  It involves the expenditure of money upon those mechanisms.  To ban the money used to buy bullhorns is in effect to ban the bullhorns, and to ban the bullhorns is to restrict speech.

At any rate, the censors, coming off a win in the U.S. Senate, took their cause to the House of Representatives this week.   But they ran into some difficulties in what they had thought was a secure part of their base, the black caucus.  African-American legislators believe that they need to put money to work to mobilize their constituencies, which have historically a low voter turnout.  So they are not enthusiastic at all about "soft money" bans.  Campaign reformers hoped that they could persuade one of the stalwarts of the black caucus, Charles Rangel, to take a leading role, to shore up their support here.  But early this week, Rangel let them know that he would not carry such water.  He would give them his vote, but he would not ask anyone else in that caucus to vote anything but their conscience.  Rangel's one vote wasn't enough (as he surely knew when he offered it).  The censors needed some sign of enthusiasm for him, some sign of a willingness to take heat.

By the way, in earlier sessions of Congress, the black caucus has been reliably in favor of such legislation as this.  Why were they in favor before, and why have they gone soft now?  The answer, of course, is that when they knew the measure would lose anyway, it was a free vote.  They could use it to confirm the solidity of their membership in a left-liberal coalition.  As soon as it became the sort of measure that might win, they had to think for the first time about what effect it might have upon them and their political future if it passed.  Only then did they decide that there is something to be said for soft money, after all.

At any rate, the censors arranged a variety of amendments to the bill that, they hoped, would attract some fence sitters, giving them the magic number of 218 votes.  House Speaker Dennis Hastert (who is on the side of liberty in this matter, although hardly a reliable friend!)  proposed a rule that would have required a separate vote on each of these 14 proposed amendments, whereas the sponsors/censors wanted them all wrapped into a single package and considered as a single amendment.  The censors, notably Scott Harshbarger, president of Common Cause, were having enough trouble getting to 218 for any vote, they were sure they'd never be able to hold that number for a prolonged series of votes.  Harshbarger said Hastert's rule would have assured "almost a guaranteed loss" for McCain-Feingold in the end.

Here we get to the anticlimax.  On Thursday,  the only vote that was actually taken was on the narrow procedural question of whether to proceed with debate under the rule Hastert had proposed.  The House voted 228 to 203 against.  Only one Democrat voted in favor of Hastert's procedure, and several Republicans joined the opposition.  Now the spin game can proceed.  The Republicans can say that the Democrats had their chance for a debate on the bill and backed out, so will get no more such chances this session.  The Democrats who favor the bill can work for a discharge petition, and can tell their constituencies that the bill lives on, and shall overcome in the end.  Those Democrats with qualms about the bill have the best of both worlds.  Since no vote was taken, they did not have to break openly with their party leadership, yet they can still go out and raise money in the usual ways for upcoming election campaigns, voter registration drives, etc.

Through nobody's planning, through "spontaneous order" if you like, the cause of liberty won a small victory.

7-06-2001

Why Keep One's Word?
Northern Irish politics continues to be complicated and disheartening.  Effective July 1, David Trimble resigned as the leader of a power-sharing government.  The legislature convened without him, at the Stormont building in Belfast, the following day. Meanwhile, a disarmament commission confirmed the news that led to Trimble's resignation: that the Irish Republican Army is not keeping its 1998 promise (the Good Friday Accords) to give up its arms stockpiles.

The Social Democratic and Labor Party,  long a key ally of the IRA and Sinn Fein, is now the target of anxious punditry around the globe.  Will this party's leadership now break with their Catholic allies, and demand that they disarm in order to bring back Trimble, no longer a government official but still the leader of the chief Protestant party?

In the background, the key point is that the Accords give the government of the UK authority to dissolve the three-year-old government altogether and resume direct control of the affairs of Northern Ireland if the legislative machinery there does not function.  Trimble's gamble is simple.  His resignation throws a wrench into that machinery, in the hope that various influential Catholic politicians will decide that disarming themselves is less odious than is a resumption of rule from London, and his resignation forces them to choose between those options.

We are not enthusiasts of disarmament.  Indeed, the whole idea of "disarmament" implies an all-powerful sovereign which is alone entitled to bear arms, and bountifully licenses individuals to do so ­ a license it (the sovereign) can always revoke at will.  Under certain circumstances, a promise to disarm could be considered voluntary, and the actual disarmament then would be an obligation following from the promise. We aren't sure that is the case here. But we are inspired to ask: Why does anyone keep promises?  To disarm or to show up at a meeting on a date certain or to pay a debt or to do anything else? There are several possible answers to this question.  We will focus on just two of them; the pragmatic and the legalistic.

The pragmatic answer is this, "One learns to keep one's promises because doing so helps one cope with both the natural and the social world.  Integrity works, in the long run, and dishonesty fails.  One learns this fairly early in life, when one's young friends are trading baseball cards, or betting their school lunch money on televised sports. Liars become known as liars, and are quickly cut off from the mutually beneficial exchanges possible for those whose word is a sufficient bond."

In sharp contrast to this, a legalistic answer to the same question, why should I be honest? is that some authority has commanded me to be honest.  That authority may be either natural or supernatural.  Command-theory theists say I should keep promises because God has told me "Thou shalt not bear false witness."

Both sides of the conflict in northern Ireland are theistic, and have largely the same conception of this God and of his interventions into history.  Their theological differences are over such issues as transubstantiation, which needn't concern us here.  On both sides, it would be easy to elicit the answer, "yes, I keep promises because God wants me to."  Frankly, though, we don't believe that an effective motivation.  Do the militants on either side really believe that lying to members of the other side will lead God to consign them to hell?   They no doubt find a lot of persuasive formulae by which they persuade themselves that particular lies are perfectly compatible with the will of God after all.

No ­ what is behind a lot of politics, and misguided political theorizing, these days is the other form of the legalistic answer.  "I keep my promises because some earthly authority ­ like the British army ­ can  enforce them, and I can rely upon the other parties to an agreement for the same reason."  It is long past the right time for the human race to grow out of that.  Neither the utility of promises nor that of individual arms possession derives from or requires the permission of a sovereign.  Let us free our minds from the myth of sovereignty, and everything else good will follow.

6-30-2001

The Promise of Globalization 
International capitalism as a force for peace.  That could have been (but, alas, was not) the headline on a story in the Wall Street Journal, Wednesday, June 27, by Daniel Pearl.

On July 14, Pakistani General Pervez Musharraf will arrive in Agra, India to talk to India's prime minister, Atal Bihari Vajpayee about a pipeline for natural gas that will originate in Iran, run through Pakistan (which will of course get transit fees based on volume) and end in gas-poor India.  These talks, Pearl said with some understatement, "could present a quandry for the Bush administration [which] has strongly opposed previous energy projects involving Iran.  U.S. oil companies are lobbying hard for the administration to let sanctions on Iran expire this year instead of renewing them for two years."

So far, we seem to have a story about some routine negotiations among three sovereign powers (four, if the US is counted into the mix).  But here is an intriguing detail.  Reliance Industries, a company based in Bombay, may become the buyer of record for the liquified gas moving through this pipeline, rather than India's state-owned gas company.  Pakistan's leadership don't want to be seen making deals directly with India.  They'd rather be in the position of simply getting permission from India to make a deal with an Indian-based private company.  Should not India insist in return that the transit fees be paid to a privitized operation which will undertake the task of maintaining this pipeline throughout the Pakistani portion of its route?   It sounds like a reasonable idea to us.  The political games of sovereigns are leading to a wonderful result ­ the phasing out of sovereignty.

What would be the quickest feasible resolution of the long enmity between India and Pakistan?  Since both countries now are openly in possession of nuclear weapons, this is hardly a point on which anybody living on this globe can be indifferent.  Should all inhabitants of the subcontinent listen to John Lennon tapes until they "imagine" their way to peace?  Call us cynical, but that does seem to us a pragmatically unhelpful notion.  Here is a better one ­ India gives its okay to this project and turns the matter over to Reliance. That creates the momentum for the further privitization and deregulation of India's absurdly Fabian economic system.  Trade among Indians, Pakistanis, and Iranians (as individuals and through private associations, such as corporations) will in time reach a critical mass at which it will defy or otherwise frustrate renewed efforts to control it.  The sovereigns will have to follow the economic facts, as barriers break down.  People may continue to dislike each other throughout western Asia, but once they are profitting from each other across boundaries the salience of those boundaries will lessen, and war will become ­ not impossible but ­ less and less likely.  That is the consummation devoutly to be wished.

On the broader issue of free international trade, we urge our readers to remember that in the 1980s we all heard an inordinate volume of talk about Japan, Inc., how it was inevitably rising to dominance on the world trade scene, and how if the United States did not wise up and adopt  centralized politicized trading policies that could do industrial battle with the Japanese on their own turf, they would bury us.

The statist ignoramuses told us in those days that at the center of this wonderful new Jpanese paradigm was MITI ­ the Ministry of International Trade and Industry in Tokyo.  MITI steered private capital into high-priority areas, encouraged exports, discouraged imports, instructed private businesses in which that avoided ruinous competititon and kept everyone on the same team.  Where (we need to ask) is that Japanese powerhouse now?  Where were they throughout the 1990s?  Central planning does not work, and whether the planners call themselves capitalists or communists,  their best-laid plans will go, in the words of a Scot, always awry.

The international capitalism that is the force for peace is real capitalism, not the phoney cronyist sort.  What happened in Japan in the 1990s was simply that a cronyist structure overstayed the quite temporary equilibrium that had allowed it to prosper.  This is happening all over, more here and lesser there, and real capitalism, the unplanned dynamic sort, is breaking out all over, like "June" in a Rodgers & Hammerstein musical.

6-23-2001 

State Lotteries versus Liberty 
Somehow, "gaming" has become the new euphemism for what used to be described as "gambling."  We will accept the nomenclature for the purpose of making our point, but first must pause to observe that this is one more small example of the pollution of American English, this rampant rejection of words and creation of new ones at a rate that makes mutual understanding, even civil conversation, ever more difficult.  There are no swamps, only wetlands.  There are no jungles, only rain forests.  Nobody gambles, although a heck of a lot of people play games. 

Okay, though: so it is gaming.  The libertarian contention: people ought to be free to do it. We'll assume general consensus on that point among readers of this website, and pass to a related contention: gaming is best kept in the private sector: state lotteries are a flim-flam in much the same way that everythings states do is a flim-flam.  On this point, there seems to be some confusion, even in libertarian circles, where we often hear lotteries praised as a voluntary alternative to taxation.

Begin with some consideration of the odds.  If you go to a Vegas casino and play craps, your expected return in 98 cents on the dollar: i.e. for every dollar you bet, you lose 2 cents to the house. That is your payment to them for this particular form of entertainment.  If you play the slot machines, the payout is not so good.  It is 90%.  But what if you are enough of a sucker to play your state's lottery?  Then your pay-out will be a lousy 50%!   So why do people put up with this? Why does anyone play a game with a 50% payout when 90% of better is available?

One big part of the answer is that states use their powers, the force of sovereign coercion, to see to it that the private alternative remains only theoretical.  For most people, those private casinos are far away, and the state numbers racket is at the nearest convenience store.  Suppose a private person arranges a numbers racket along the same lines as that of the state where he lives, but he makes the pay-out 90% instead of 50%.  Will he be applauded as a clever entrepreneur, keeping the state on its toes?  Well, yessome of the visitors to his prison cell might applaud him for that.  But the business that will really benefit from his efforts will be license-plate manufacturing.

Another, related, reason why the states have gotten away with such lousy pay-outs is that they lie about it.  They keep telling you that last week Joe Smith "won a million dollars!' when what they mean is he won their promise to pay him $50,000 a year for twenty years.  Of course if Joe had really won a million dollars, in a lump sum, he could have invested it at 5% interest.  Then he could have made those $50,000 withdrawals every year and he would STILL have had $1,000,000 in the bank at the end of the two decade run.  Obviously, the two situations are not equivalent.  No ­ such a stream of payments is in fact worth a lump sum (again assuming 5% interest) of $650,000.  States use such misleading figures in order to dim the dissatisfaction that would otherwise arise from their measly payout ratios.

Should we, nonetheless, be happy about the creation of these non-coercive revenue raising measures?  No.  First of all, they are only less directly coercive than taxation.  As we've just noted, the statist monopoly is kept (or, sometimes, shared with Indian tribes) only through the constant presence of coercion, and that monopoly is all that makes this "voluntary" revenue stream at all attractive.  Second, though, libertarians should not reconcile ourselves to the very existence of sovereigns.  We should be opposing the whole idea of sovereignty.  We should not be trying to make it "nice" at the margins.  The only real alternative to coercion-based government is anarcho-capitalism, and we should be very clear about what that is and why we want it.  State-run lotteries, even if embraced only as a "transitional" matter, are a snare and a delusion.

6-16-2001

The Final Mimeograph of Timothy McVeigh
On Monday, officials acting on behalf of the sovereign People of the United States killed Timothy McVeigh.  He spoke no last words, but sometime that morning or the previous evening he had apparently written out the words to the poem Invictus, by William Ernest Henley, and after his death his lawyers passed out mimeos of it on his behalf to the reporters present.

This act makes McVeigh the epitome of a celebrity-sotted age.  He is nobody's martyr, but he is a typical creature of the media and for such a creature one's "last words" might as well be a handout to reporters as anything else.  Still, let us attend to the poem he chose, for there are ironies aplenty here. Henley's poem is a product of the High Victorian imperialist period in England, and is part of a genre of "moral uplift" poetry that was very popular in that time and place - McVeigh might as well have quoted Tennyson or Kipling, contemporaries of Henley, who could produce similarly stirring verse, if one likes that sort of thing.

So McVeigh, who clearly thought of himself as an anti-government soldier, and as someone who had struck back at the U.S. for the murders its officials committed at Waco, harked back in his final hours to the verse produced by an earlier imperialist power at the height of its hegemony.  Odd, that.

Despite its origin, though, did the verse speak to his situation?  He appears to have thought so, "under the bludgeonings of chance my head is bloody, but unbowed" as Henley said.  Still, what did "chance"have to do with his fate?  Was it that McVeigh thought that only by bad luck, chance, was he caught or convicted or sentenced?  No ­ if we take seriously his own statements, he understood the likelihood of all of that 'going in.'

There is yet more that is strange here.  We submit as a historical judgment that Invictus owes its continuing popularity mto its place in the play, "Sunrise at Campobello."  Indeed, we suspect it would have passed into a decent obscurity by now otherwise.  In that play, Louis McHenry Howe recites Henley's verse as a tribute to his friend/employer/guru, Franklin Delano Roosevelt.  The play as a whole is clever pro-New-Deal propaganda.

Think about that for a second, in connection with McVeigh's conception of himself as an anti-government "soldier." Who did more for the entrenchment of the contemporary U.S. welfare/administrative state than FDR? In effect, McVeigh died reciting pro-New-Deal propaganda himself.  Odd again, that.

In general, McVeigh was not only an amoral monster but a pathetic creep.  This is a good time to reiterate a point we at The Pragmatist have made before.  We do not advocate the use of violence to achieve freedom.  Our opposition to such violence has nothing to do with the so-called "non-initiation principle," which seems to us quite hollow.  After all, in McVeigh's own eyes he certainly wasn't "initiating" violence, he was responding to the violence the U.S. had initiated at Waco.  His example illustrates why talk of initiating versus non-initiating violence is in fact utterly pointless.

The point rather is that, in pursuit of our goal, the use of violence not only doesn't work, it achieves the opposite of the desired effect.  Our goal is anarcho-capitalism.  This means, simply, that we oppose the whole idea of sovereignty ­ the idea that there is, within any given territory, some "highest legal authority" that serves as the lodestone for the resolution of disputes, and the top rung of a ladder of lesser authorities.  We oppose command and control.  Yet when bombs start going off in downtown buildings, what is the most predictable, the most natural response of the surrounding population?  Fear, revenge, and a rallying around some presumptively protective authority.  In short, terrorism heightens support for sovereignty.  Terrorism aimed at the abolition of sovereignty is, in effect if not in intention, an oxymoron.  Sovereignty will only be abolished through education, as people come to realize that there are better ways of ordering their affairs each with the other, as free people ­ so we can all, in the foreseeable future, live liberated lives in a liberated world.

6-09-2002

A New "Pentagon Papers" Case, Part II.
Last week, in this place, we described the bare facts of the Supreme Court's recent Bartnicki decision.  Scroll down a bit if you want a refresher course, but the gist of it
is that a union of public teachers attempted to use a lawsuit to silence a radio station, which had played on-air a tape of a cell phone call between two union officials.  The Supreme Court upheld the radio station's right to play that tape, and so upheld a dismissal of the union's lawsuit.

The great irony of this case is that it comes just at the 30th anniversary of the Pentagon Papers decision, and yet the sides (in "left/right" terms) seem to have switched.  In 1971, the left/liberals were protesting a war, and pursuant to that protest published stolen documents about the origins of American involvement in Indochina.  In 2001, on the other hand, the "taxpayer revolts" in many municipalities around the country are generally launched by people who think of themselves as conservatives, or rightists of you will.  They target public teachers and school budgets in general in order to give their anger about property taxes a focus.  It seems to have been in service of that cause that some person unknown taped a cell phone conversation between union officials.

In essence, then, conservatives were breaking the law so that other conservatives could use a media outlet to undermine what some see as excessive left/liberal influence upon municipal and state governments.  In both cases, in 1971 and 2001, the cause of free speech prevailed at the Supreme Court.  Rightist censorhip lost then, leftist censorship lost now.  In both cases, we believe the result was good news, although in both cases these are small victories in a much larger war, and the efforts of the censors of both sorts will no doubt continue, in ever-mutating form.

Public discussion of this case has been muddied with references to a "right to privacy."  The term evokes abortion and birth control and such, and suggests that the teachers have a claim of constitutional dignity themselves.  They do not.  In the constitutional sense, the "right to privacy" is a form of substantive due process, and is a barrier to sovereigns.  It does not affect the operations of radio stations at all!  There is no "right" to silence someone else for one's own comfort.  If Bartnicki had such a right, then why did Dean Rusk not?

But Libertarians should go further than making such observations as that.  We should go, as is our wont, to the core of the problem.  The LP likes to consider itself the "party of principle," and as such it should oppose the government-school monopoly in the first place.  This opposition should go well beyond a call for a voucher system. Vouchers are still a government program, and they may have the effect of co-opting any (nominally private) school that accepts reimbursement in this way.  Whenever you let government pay the piper, you run the risk that government will be calling the tune.  Far from empowering private schools, voucher money threatens to deputize them, turning them too into public officials.  No, opposition to the government-school monopoly, in order to become rigorous and consistent, must soon become opposition to government schools.  Just close them all down.  Tomorrow if possible.  The fact that the employees of these schools act just like military brass whent heir secrets are threatened with disclosure is a telling symptom of all that is wrong with them.

What would happen if all government schools were closed down tomorrow?  A generation of ignorant people being loosed on the working world?  No.  That is the result we seem to be getting from the status quo.  Ignorance is the reality, not the threat.  What would happen is that the issue of education would be turned over to the forces of spontaneous order.  People would stil want their children to learn, they would be willing to employ part of their productive abilities to that end.  Businesses would want to hire employees who had some skills.  Basic language and math skills improve one's performance at even the simplist of jobs, and more than that is required for employments other than the simplest.  With all of this demand for education, entrepreneurs would work to support it.  A new equilibrium would arise.

That is, of course, a nightmare scenario for many teachers within the organized unions within the government-school monopoly of our day.  They SHOULD worry!

6 ­ 02 ­ 2001

A New "Pentagon Papers" Case, Part I.
Back in 1971, Daniel Ellsberg stole the Pentagon Papers ­ a collection of documents that revealed much about the history of U.S. involvement in Vietnam, including much that the government did not want the people to know.  Ellsberg gave the papers to the New York Times, and the Nixon administration rushed into court seeking an injunction against their publication.  The case soon came to the U.S. Supreme Court, which held that in favor of the Times, by a six to three vote.

In an extrordinary twist, the Pentagon Papers case produced nine written opinions. Everybody had to write one!  This excess of individual expression made it very hard for observers to understand just what, exactly, the majority was trying to say ­ the six opinions on the winning side were all over the jurisprudential map in terms of their offers to explain their ruling.  Perhaps the most memorable of those opinions was Justice Black's.

"Paramount among the responsibilities of a free press," he wrote, "is the duty to prevent any part of government from deceiving the people and sending them off to distant lands to die of foreign fevers and foreign shot and shellthe New York Times, the Washington Post, and other newspapers shoul be commended for serving the purposes that the founding fathers saw so clearly."

Fast forward.  In May 1993, some person unknown made an illegal recording of a cell phone conversation, between two officials of a labor union representing public school teachers in a Pennsylvnia town. The union was at the time involved in tense negotiations with the school board, and the union president made a statement during this conversation about how the porch of a certain school board member might explode if he did not come to see things the union's way.

The illegal tape of this conversation found its way to a radio station, which played the snippet about the exploding porch on the air repeatedly.  The union officials brought a lawsuit against the radio station for the alleged violation of their privacy.  On May 21, the U.S. Supreme Court decided in favor of the radio station.  (The process of appeal took longer in this case than in the early 1970s chiefly because of the nature of the remedy sought ­ a civil damages claim doesn't require the same quick reaction as a demand for an injunction.) 

The analogies between the two cases are very strong.  First, there was the illegal act by which certain information came into the hands of a media outlet.  Second, there was the presumption in both cases that the officials of the media outlet (the newspaper in the former case, the radio station in the latter) were themselves innocent of that crime, simply the passive recipient of the papers or tape.  Third, there was the intense public interest in this material.  Anyone old enough to recall 1971 knows how deeply the nation was split by the Vietnam War at the time ­ anyone not that old, should learn!  As a parallel, consider that the broad issues involved in these labor negotiations are fought over in every municipality in America all the time.  How much money should be budgeted to public schools? And how much of that ought to go to the teachers' salaries?

In the Bartnicki case, the union president says of course that his remark about an exploding porch did not indicate any genuine violent intentions on his part.  He was letting off steam in a conversation with a colleague and friend.  So he says.  But, of course, the radio station simply put his words and their exact intonations out on the airwaves, so its listeners could make that decision for themselves.  It is a matter of intense public concern not just what decisions result, but how these negotiations are conducted.

Fourth, there was once again a 6 to 3 vote.  Once again, the cause of free speech got the majority.  Although this case produced only three opinions, not nine, it is still less clear than one might want it to be, just what the rule of law is that the majority thinks it has invoked here.  On the whole, libertarians ought to applaud the result, but should not be entirely content either with the court's decision or with the concurrence.  There remains much more to be said, and we reserve that "more" for next week.

5 ­ 26 ­ 2001

Jeffords: Taking the Political Show Seriously
In U.S. politics, the big story this week is that Senator James Jeffords will change his party affiliation from Republican to Independent.  The immediate consequence of this is that in an upcoming vote on partisan control of the Senate (June 5 is the target date so far, it may change ­ Republicans certainly have every incentive to delay it), Jeffords will abstain. 

In the absence of some other dramatic development nobody now foresees, the Democrats will win that vote 50-49, and will take control of the Senate's committee structure for the first time since January 1995.

As regular readers know, at The Pragmatist our enthusiasm for any developments within the realm of two-party competition has always been firmly in check.  The Republicans and Democrats seem to us to be merely two wings of the same statist bird.  Or (to change the metaphor), their struggles have an air of unreality, like the choreographed fights between Sharks and Jets that take place on a Broadway stage.  We know that when the show is over, James Carville sleeps in the same bed with Mary Matalin, a relationship that provides as valid a microcosm of broader Washington realities as any we can think of.

Still, let us engage with the world, rather than withdrawing from it monkishly.  One hears Rush Limbaugh and the usual conservative crowd accusing Jeffords of bad faith. "He ran on the Republican label," runs the complaint, "he was elected as the bearer of that label, only last year.  Now he has cheated the people of Vermont of their franchise ­ it will be another five years before they can punish him for it.  He should resign and submit himself to a special election immediately."

Such accusations leave us unmoved.  First, if Jeffords had resigned, the immediate impact would have been to give the only "franchise" to the Governor of Vermont, who would pick a new Senator until a special election could be held.  Why would that not be cheating the people of the state of their prerogative? Second, Jeffords didn't really run on the Republican label in any substantive sense, so there is no reason to believe that the people who voted for him were cheated. Jeffords has been vocally out of sympathy with the national Republican Party for a long time.  (He could not have won in Vermont if it were not so.) 

Third, polls show that he is the most popular politician in the state.  So if he resigned and won the special election as an independent, what would the Republicans, or the people of Vermont, have gained?  Only, it seems to us, an empty exercise in formality.  Fourth, Ben Nighthorse Campbell switched party allegiance in 1995 ­ from Democrat to Republican.  The folks who are blaming Jeffords now were quite welcoming to Campbell and, of course, the folks who are welcoming to Jeffords were critical of Campbell. The symmetry between the two incidents is nearly perfect, and establishes just how seriously one should take all the partisan charges and counter-charges that surround such events. 

Should we swing to the other extreme, then, and conclude that Jeffords is a hero?  That also strikes us as a misreading.  Jeffords gives as his own reasons for his switch the threat that the White House might oppose a dairy subsidy from which Vermont's farmers benefit, and the fact that he was excluded from a Rose Garden ceremony honoring a Vermont teacher.  In the former case, he is the defender of statism and of privileges for any such special interest group as can manage to beggar taxpayers and consumers.  A "hero" in such a cause is not worth honoring.  In the latter case, he is a creature of personal ruling-class prerogative and pique.  (Like Newt Gingrich unhappy with his seating on Air Force One.)

After our brief but sincere effort at taking this show seriously, then, we end where we began.  There is no cosmic significance to Jeffords' switch.  He is neither a villain nor a hero, because when the action underway on stage is a farce, neither heros nor villains are necessary.

5 ­ 19 ­ 2001

Hope for the Emerging Markets
A story in the Wall Street Journal (May 10) has given us some cause for hope about the North/South split.  Capitalism (despite the fact that it is everywhere hampered and rendered imperfect by statism) so far works unevenly, it works much better for the industrialized parts of the world than for others, and we at The Pragmatist naturally share the hope of many good people all around the globe that the nations of what is generally called the "South" will emerge from their condition of underdevelopment and join the fair.

Unfortunately, too many people are misled by this hope into joining calls for nation-to-nation developmental aid, calls and programs that strengthen statism on both sides of the transaction and worsen the problems the good hearts involved in these programs hope to solve.  (On a related point, let us assert that the benevolent effects that the Marshall Plan is supposed to have had in Europe in the late 1940s are a myth.  Those who want evidence for that assertion can find it if they look, but will have to look elsewhere.  At any rate, it is a powerful myth, and libertarians do battle every day against polemical demands for a "new Marshall Plan" for this region or that.)

Those demands are not a source of rational hope.  Nor are the Bretton Woods institutions, the World Bank and the International Monetary Fund, any cause for hope. They are part of the problem. They were established in 1944, while the Second World War still raged, and they were created because the allied governments ("northern" in the relevant sense all of them,) could see past the end of that conflict.  Statists are not always short-sighted ­ they would be less trouble if they were.  At any rate, the Bretton Woods sisters have been run ever since in the service of their creators.   What, then, is the hope? 

Last fall, so the WSJ reports, a group of high-powered U.S. investment fund managers travelled to Rio De Janeiro, Brazil, under the leadership of Peter Clapham, an executive at a giant pension fund, TIA-CREF.  Clapham's group flew to Rio to plan a new model stock market, one designed to mediate between the capital of the north and the entrepreneurs of the south.   They named their project the New Market or (in Portugese,  the language of the host country) the Novo Mercada.

Their Novo Mercada will open for business this summer.  It is not like any other exchange (unlike, for example, the dominant exchange in Brazil today, the Bovespa of Sao Paulo). The Novo Mercada is distinquished by the tough standards it imposes on any country that wants to be listed there ­ standards of respect for minority shareholder factions and of transparency to the public.

In the words of Stephen Davis, a portfolio manager closely following the experiment, "Brazil is saying that the New Economy isn't based on better technology but on greater accountability.  The Novo Mercado isn't about new tech ideas but about shareholder rights and transparency."

Why does this matter?  Because by removing some of the mystery from investments in the "emerging markets," the Novo Mercado could draw vast stores of capital from investors willing to risk funds for the prospect of return.  Investors with risk capital to employ have been very reluctant to let any money stray from the already-developed parts of the world.  The new market's rules are designed to widen their comfort zone, to overcome some of that reluctance.  It only has to work at the margin to work wonders.  Of course, if it works, then over new-modelled exchanges can be expected to spring up in the highest form of flattery.

We don't know whether Novo Mercado will succeed or fail.  What we do know is that it is the only sort of thing that can possibly succeed, that coercion does not produce development.  What we also know is that market forces are hard at work, as they always are, because investors are always on the lookout for new sources of profit and entrepreneurs are always on the lookout for new sources of capital.  They will find one another, on this ever-shrinking globe, if governments stay out of the way. 

5-12-2001

We Welcome the New Foes of Campaign Finance Censorship
There is important news from the House of Representatives. Members of the Congressional Black Caucus and Congressional Hispanic Caucus are apparently having second thoughts about signing on to one of the favorite causes of their usual allies, white liberal Democrats.

Albert R. Wynn, for example, is a Democratic congressman from Maryland and a member of the Congressional Black Caucus, who says that the unpleasantness in Florida last fall has made minority lawmakers more aware of "what goes on at the street level, the need for voter registration for example." Voter registration drives, and get-out-the-vote campaigns, of the sort important to Rep. Wynn, require money, and the sort of "soft money" that has been demonized of late is precisely the sort most often used by political parties for this purpose.

This fact has suddenly made the CBC and CHC sensitive to the fact that money and political expression are not severable issues, that blocking the flow of money blocks its use for purposes of speech. Indeed, campaign money ("hard" or "soft": the usual distinctions are meaningless) is in general money used to convey a clear message, vote for A, vote against B, support this political party, support that bill before Congress, etc. A certain well-known document says in quite clear language that Congress shall make no law abridging freedom of speech.

Having said all that, we should add at once that we at The Pragmatist are not constitutionalists. Further, we have always argued with those who claim that libertarianism is "about" going back to the original intent of the US constitution. Insofar as it has any intellectual or historical clarity at all, it is about no such thing!

Right and wrong are what they are regardless of the papers on which they have or have not been written down, and the act of interpreting texts does not change right into wrong or vice versa. So we should be cle ar: coercive prohibitions on speech, and so on the flow of money necessary to speak, are wrong. Fortunately, they also happen to be unconstitutional, which helps us in opposition.

The usual objection to a laissez-faire, laissez-passer system of campaign finance is that it amounts to bribery. We might reply that the ethics of bribery are entirely situational. Consider a father in a repressive regime, bribing border guards to get his family out to safety or a freer life? Is the bribe a crime, or is the crime the existence of border guards, and their life-or-death power? That case is one of a wide class. Bribery is quite often a matter of self-defense, and the particular form of bribery known as campaign finance must remain available for those to whom it is a necessity, until such time as the statists of the world are no longer in a position to extort it. When there are no public officials, there will be no bribery.

But let us get back to the new political developments. Welcome to the cause of freedom, Mr. Wynn. Jump on in, the water is fine! Bring as many of your friends and associates along with you as you can manage!

Cynics might indeed observe that in years past the CBC and CHC members have all supported campaign finance reform. Has it really just occurred to them that their might be a downside? No. But one thing that has changed is precisely the fact that in years past, when Republicans had a clear majority in the Senate (not just a 50/50 tie), the CBC/CHC members in the House of Representatives could vote for a lot of things, secure in the fact that they would never become law anyway, because the Senate would block them.

Now, say a variety of reporters covering the Hill, the minority lawmakers in the House are concerned that they are actually going to be making law if they continue supporting CFR, and that this will be law that will bind their own political activities in years to come. So (in the words of Rep. Wynn again, recently quoted in a N.Y. Times account) they want to "l ook at some options" to McCain-Feingold. May we suggest the "option" of freedom? Or even the option of dismantling sovereignty and its mechanisms altogether?

5-05-2001

Remember the Branch Davidians, Keep Up the Fight!
In the fall of 1999,  former Senator Danforth became a special prosecutor charged with investigating the federal government's assault on the Branch Davidian home near Waco, Texas, in 1993. In February of this year, Danforth's office closed up shop.  Some people (i.e. those who consider themselves the "mainstream" media) think that the final word has been said, and that the whole grisly matter of an armored assault on a peaceful community of religious dissidents ought to be laid to rest. 

Of course we at The Pragmatist are determined that it shall not be laid to rest.  Just as the similarly motivated attack on the community at Masada has continued to resonate through the centuries so, we are convinced, must this one.   As a small token of the general worthlessness of most of what the mainstream media has to say about this whole matter, consider the constant and unwarranted use of the word "compound" in this connection.  Janet Reno's troops are never said to have attacked a home, a commune, a community.  They are always said to have attacked the Branch Davidian "compound."  What does that word mean?  It seems to us there was nothing compound-like about the grounds in question.  The term is generally used to give the impression that one military force attacked another. 

At any rate, with such a cloud of misinformation about, we are thrilled to be able to inform our readers that the Cato Institute has just published its own report, written by their criminal-justice maven Timothy Lynch, "No Confidence: An Unofficial Account of the Waco Incident."  Lynch argues forcefully that "Danforth's sweeping exoneration of federal officials is not supported by the factual evidence," and that many obvious crimes have gone unprosecuted.

Danforth assigns no importance to the fact that several of the same officials who were intimately involved in the attack on the Weaver family at Ruby Ridge a few months before were again in supervisory positions and on the scene at Waco.  Their involvement "should have set off alarm bells" in the minds of any vigilant special prosecutor, Lynch says.  One of these officials at the heart of both incidents was eventually sentenced to 18 months in prison for destroying evidence and lying to investigators in covering up what happened at Ruby Ridge.

Does this mean that he, or any of the other members of what one might call the massacre-overlap team, was necessarily guilty of crimes in connection with the second of these two incidents, too?  Not as a logical matter, no.  But it is certainly a point on which Danforth would have borne down, if his real goal had been to uncover truth rather than simply to provide the status quo with cloture. "Danforth should have hauled these individuals before a grand jury and questioned them about missing Waco evidence," Lynch says.

Lynch adopts the stance of outraged naivete that seems to be something of a tradition for critiques of this kind, and that is responsible for some jarring passages.  He writes, for example, that if the obvious crimes of authorities at Waco go unpunished, "the Waco incident will leave an odious precedent ­ that federal agents can use the 'color of their office' to commit crimes against its citizens."  Consider the meaning of the word "precedent."  Doesn't it imply something new?  When the sun rises in the east tomorrow morning, will that set a "precedent" for the sun rising in the east?  It seems to us an abuse of language to say so.

The officials of a sovereign authority always use the color of their office to commit crimes against their citizens.  That is what sovereignty is all about, and has been all about since the rise of Sumeria.  We like to think that someone as bright and as well-informed as Timothy Lynch seems to be, understands this.  But he has adopted this pose of naivete because that serves the general meliorist tactics of the Cato Institute.  We admire this particular report, and hope that it helps keep the Waco issue open, but we have no taste for meliorism.  The goal of libertarians should be, not one of making statism slightly less beastly here and there, but one of making it disappear.

4-28-2001

No Free Lunch Even If It's Backbacon, Eh?
We've heard from some of our Canadian friends, lately.  It seems that there is a certain body of opinion on the northern shore of the Great Lakes to the effect that libertarianism is a disease of the U.S. ­ a symptom of our rampant individualism.  Canadians (some of them, anyway) believe that their country has figured out how to manage a welfare state and how to make it work, and that if those of us in the 'States would get off our nationalist high horse and try to learn from them, we could better ourselves.

Needless to say,we think this is wrong.  It is wrong, first of all, because we aren't  nationalists in any sense, we do not trim our principles to suit the status quo in the US, and (a closely related point!) it is wrong because the United States is not a very libertarian country.  In terms strictly of what is called "economic policy," just for example, the U.S. is more laissez-faire than Canada of course, but less so than some of the "dragons" of east Asia.

Nonetheless, this line of criticism did stimulate us to do some research. We discovered only recently that on February 28 of this year, the Canadian Finance Ministry made public its proposed budget. What we found impressive and important about this document is that if the Finance Minister (Paul Martin) gets his way, personal income taxes will fall by an average of 15% by fiscal year 2004-05, or 21% for families with children. Furthermore, Martin has been explicit that this is an effort to stop the "brain drain" ­ the simple and dangerous fact that the brightest minds and hardiest entrepreneurs have in recent years been leaving Canada for more profitable pastures elsewhere in the industrilized world.

On March 30, the largest phone company in Canada, BCE, announced that it is "reviewing" its budget and will likely reduce spending on network equipment this year. This development is, in one sense, closely tied to the other. For this pullback by BCE is expected to hit its suppliers hard, and its suppliers operate in exactly those markets where the phenomenon of a "brain drain" is of greatest significance.

We bring up these facts because they help make the point that there is no free lunch, and there isn't any successful way to "manage" the false illusion of a free lunch, either.  It is possible to run up a big debt on a charge card and, if one closes one's eyes to the future, it is possible to pretend one is enjoying a free lunch.  Reality avoidance has a way of punishing precisely those who are best/worst at it.  The brain drain that rightly worries Minister Martin is part of the credit card bill.  The high taxes that Martin now sees as the problem are necessitated by the need to maintain that extensive and expensive welfare state.

He plans to address the problem by fiscal year 2004-05? There is no reason to believe that reality will give him that long, or that the dismantling of the welfare system that will be entailed (and which will have to go further than the L-Dems now admit) will be a smooth one. There will be major changes in the Canadian system in the next few years, they will have absolutely nothing to do with the usual suspects ­ nothing to do with Quebec separatism, for instance ­ nothing to do with the Alliance Party spying that made the headlines earlier this month. It will have everything to do with the underlying dynamics of the welfare state, and the fact that the distribution of resources by the forces of spontaneous order is generally superior to any effort at centralized planning, however democratic the planners may be, or may think they are.

"But," you might respond, "Canada's welfare state has had a pretty good run, even if it collapses shortly.  Why has it lasted as long as it has?"  That is a complicated question, and one that might be answered in many complementary ways.  For now, we will observe only that the welfare states that have seemed most stable for fairly long period have all been in climates that the rest of the world considers (not to put too fine a point on it) undesirable.  Canada, like Scndanavia, has been able to afford some tax-based generosity because it's COLD ­ and so does not attract the unsustainable levels of immigration that would have bankrupted the system much more quickly.   Still, we think the jig is up.

04-21-2001

A New Decision on Racial Gerrymandering
This is what defenders of the status quo want us to think: taxes, regulation, drug prohibitions, and the wide variety of other impositions upon our lives are legitimate because they are the manifestation of majority will, as expressed by properly elected representatives.  "After all," goes the usual line, "the people pick their representatives, for their town councils, for the state assemblies, for Congress and, if the people don't like the results, these representatives can be recalled or voted out of office when their term is up." 

We won't insult the intelligence of our readers by trying to list all the flaws in that reasoning.  Heck, there may not be enough room in all of cyberspace to list ALL the flaws in that reasoning.  But news from the U.S. Supreme Court this week reminds us vividly of one of those flaws.  It is not the case that the constituents of a district pick their representatives.  What really happens is that the representatives pick their constituents, in a process known as "reapportionment."  With the Y2K census behind us, that process is underway again ­ but, of course, it has overlapped with the continuing litigation over the reapportionments that followed the 1990 census.  This overlap shows vividly that the re-creation of district lines to suit the incumbents is not a once-in-awhile emergency expediant, but a continuous process, for the benefit of the perpetuation of the incumbents.

 Nothing less than the concept of "representation" is at stake here ­ since the governing class draws the lines on the map necessary to perpetuate itself, then "we the people" play a very passive role in the process by which we are governed, serving simply as the demographic data that the politicians have to take into account. All this brings us to the latest big reapportionment decision by the Supreme Court,  Easley v. Cromartie, handed down Wednesday. 

The specific issue before the Court involved racial gerrymandering.  Since 1993, the court has held that electoral districts produced by the state legislature's desire to grant voters of a particular race a "safe seat" violate the rights of other voters, those who are arbitrarily consigned to minority status in this way.  Was that true of the latest incarnation of the 12th district in North Carolina?

By a 5-4 vote (Justice O'Connor performing her now customary function as the court's pivot), the Supreme Court upheld the constitutionality of  district 12.  Breyer wrote for the Court, that the plaintiffs had not "successfully shown that race, rather than politics, predominantly accounts for the result."  In other words, the state's incumbent representatives in Congress naturally had friends and political allies in the state legislature, and through those surrobates that brokered the district lines that would kep their congressional seats safe.  What seems to the majority an argument for upholding the boundaries of the 12th district seems to us a good reason for conemning it.  "We aren't racists, we are merely a self-preserving inbred elite!"  Well thank goodness that's been settled!

This fact, too, may be germane: the oral arguments in Easley took place in the same week as that in which the Supreme Court decided to make George W. Bush the next president.  One wonders what connections the Justices themselves might have drawn.  They are not shy about deciding how state officials should count ballots, but now they might become shy (or less bold than in the mid-90s they seemed to be) about deciding how state legislatures should draw district lines. Could O'Connor have decided to 'even up' her swing vote in one direction in one of those cases with a swing vote in the other direction in the other case?  As Lily Tomlin says, we try to be cynical but we can't keep up!

By the way, two weeks ago, we posted a "current events" piece about the apparent arrest on drug charges of a certain individual prominent in libertarian affairs.  We lamented that arrest and drew some broad conclusions from that.  Unfortunately, we have now discovered that the "news" of that arrest was in fact an elaborate April Fools' Day joke played by the Heartland Institute, apparently as a way of preparing its public for a coming change in its stance on drug laws.  We will keep that posting in place, because we think the broader points it makes are valid, and because people who play such "jokes" deserve to run the risk that they will linger.  But, for the record, the individual we have named two weeks ago was NOT in fact arrested. 

04-14-2001

Reflections on the Federal Taxes "Due" Tomorrow
We (all adult humans alive on this planet) are the victims of a lifetime of brainwashing on the subject of taxation.  In the U.S., the brainwashing has been especially ardent on the matter of the federal income tax.  The middle of April is, as always, an appropriate time to seek to break free thereof.

As an instance of the statist sentimentalities with which we are bombarded, consider that the headquarter building of the Internal Revenue Service contains this Holmesian aphorism on its façade. "Taxes are the price," so the stonemason, at Holmes' instruction, tells us, "we pay for a civilized society." But are taxes really a price, or a contracted-for debt that can be said to be "due" without equivocation?  Consider shoes ­ a tangible private-sector item with a real honest-to-goodness price. When I buy shoes and they pinch I can bring them back to the store for a refund. If the store won't take them I can at the least make a mental note not to patronize that institution any more. Which of these options are available if the "civilization" pinches?

Some people actually believe that carved Holmesian sentiment profound. We at thepragmatist.com prefer by far the words of Lysander Spooner,  "And there is no difference, in principle - but only in degree - between political and chattel slavery. The former, no less than the latter, denies a man's ownership of himself and the products of his labor; and asserts that other men may own him, and dispose of him and his property, for their uses, and at their pleasure."  This is not barren assertion propounded with oracular intonations.  This is reasoning.  Furthermore, there seems blessedly little chance that any of the words of Lysander Spooner will ever be carved into a government building anywhere. 

As Spooner knew, the first income tax in U.S. history was enacted in order to help finance the civil war.  It was upheld by the Supreme Court, but repealed soon after the war.  (Spooner died in 1887.) A new income tax became law in 1894, and it was soon thereafter declared unconstitutional.  The statists had to push through a constitutional amendment in 1913 in order to get around the constitutional scruples of the Justices.  But the deep and important objections to taxes, on income or otherwise,  are those that cannot be stated in the language of constitutional law, because they are also objections to the very existence of a body of constitutional law. The Libertarian Party (at its best and most self-conscious) is not the "constitutionalist party."  We are not complaining that the constitutional amendment authorizing an income tax was enacted improperly.  We are complaining that it is wrong.  It represents a pragmatically inferior way of doing business. 

Suppose a group of fifty people decide to play a game.  They arrange themselves in a circle, and each contributes one dollar to a "pot" in the center.  A moderator at the center of the circle (we will assume it is a robot, programmed for the game, just to define away the irrelevant issue of motives) then grinds up twenty-five of the dollar pills into dust, and hands the other twenty-five to one of the players.  What has just happened?   That one player (a successful "special interest") has experienced a net win of $24., and so is presumably happy about the result of the game so far.  One of the other players is too upset over this, after all, each has lost only one dollar.  As for the ground-up $25 that has been lost ­ that is the cost of playing the game, the necessary grease for the government/robot's operations.

If the game continues for fifty rounds, then the most fair result possible is that everyone wins once.  At the end of the fiftieth round, then, we will suppose that everyone has contributed $50., and has a net loss of $25.  Clearly they would not be so stupid as to continue playing this game once they had figured this out, would they?  One hopes not.  The duty of libertarians, then, is to assist the other players in seeing the game as it is, so that they will understand the futility of the game, too, and eventually the robot will no longer have enough grist to grind.  We have to free our minds, and then free the minds of others, of any lingering thought that we "owe" anything to the robot, that anything it does is "necessary" or that it "all evens out, because everybody else gets subsidized too." We can then then make educated decisions about how we want our society to be legally structured in order to provide for a restitution based system, totally independent from a robot redistribution system.  As it is now even the most fair result possible leaves half of society's wealth uselessly pulverized, and no government in the world is as fair and honest as our hypothetical robot.  Anarcho-capitalism.  Catch the fever!

04-07-2001

Heartland Institute, and the Arrest of Joseph Bast
Joseph Bast has long been the President and CEO of the Heartland Institute, a libertarian think tank headquartered in Chicago.  Under him, Heartland has earned a prominent place for itself within the libertarian movement and (although we of course respect Bast's energy and achievements), we have a quarrel to pick with that place. 

Heartland has made great contributions to the ongoing national discussions of environmental, budgetary, and educational questions.  All of that we applaud.  But it has also, under Bast and in part because of the choices he has made, become an important institutional advocate of an alliance between conservatives and libertarians, in a political/cultural war against the common leftist foes. True to that imagined alliance, Heartland has played down the important issue of drug legalization. Of course, there is no such alliance, so the fear of splintering it is hooey.  And this gross error in judgment has come back to haunt Mr. Bast in the worst possible way, in a way we would never have wished on him.

On Thursday, March 15, federal agents arrested Bast at O'Hare Airport.  The narcs alleged that he was trying to bring a bag of methamphetamines with him onto a plane to Boston.  The Institute posted bond and Bast was released Saturday afternoon, but Heartland's board of directors has since asked him to take a leave of absence as president until the charges are resolved.  Is the board, too, trying to placate rightists?  By whom is Heartland funded, anyway?  Is the board concerned that funding sources will dry up if they stand by their president?

It occurs to us that "co-optation" is very pervasive trap in the world of the non-profit foundations that set out to enlighten the world about the wonderful efficacy of liberty, or of spontaneous order.  The state has its fingers in every pie about in the land, and so some or many of the sources of funding of such an institution are always bound to be recipients of some subsidy, license, or regulatory favor somewhere. 

At Bast's bail hearing, the prosecutor argued that a high bail should be set because this defendant is a flight risk, since he works "for an organization that advocates the use of illegal drugs."  Bast's lawyer, Philip Felstein, immediately objected. But you cannot unring a bell. The judge heard those words, and if Bast was so unfortunate as to draw a judge who really believes the war-on-drug propaganda the effect of the remark could not possibly have been positive.

In the May issue of the Institute's flagship publication, Bast declares his innocence, and says he has no idea how that meth got into his bag.  For our part, and little though it may matter: we believe him.  The prosecutor's words at the bail hearing give us a good reason to believe him. If the climate among the drug warriors is such that Bast's "advocacy" is a good reason for sticking him with a high bail, then it is apparently such that his advocacy would be a good reason for some narc to plant the meth in his bag in the first place.  The issue of principle, of course, is that there is no good reason to prohibit the stuff, no good reason to tell free people what they can or cannot put into their own bodies, or sell to one another for that purpose, so Bast is a victim of tyranny even if he is "guilty" on the facts.

The great irony here is that Bast was never the president of an organization that "advocates the use of illegal drugs."  He wasn't even the president of an organization that was especially interested in advocating the right to use drugs that are now deemed illegal (a different matter!)  He was, in fact, the president of an organization that sought to persuade other libertarian organizations to back off of the issue and to focus their/our energies and organizational skill elsewhere.  A cynic might say that Bast was an (unwitting) ally of the war on drugs all along.  Our guess is that he knows better now.

But we hate to make converts in such a way.

03-31-2001

The Medicinal Use of Marijuana
The struggle against the myth of sovereignty has no more important, no more urgent, front that the effort to demythologize the drug warriors, to rip off their façade of piety and "responsibility" and reveal the power hunger behind everything they do.  In the words of Friedrich Nietzsche, "The state tells lies in all the tongues of good and evil; everything it says is a lie and everything it has, it has stolen."  Nowhere is the part about lying truer than when the state tells us, "drugs are bad for you, so we will lock you up to protect you from yourself."  Nowhere is the part about statist theft truer than when the authorities grab property under drug forfeiture laws.  Two points for honest old Nietzsche!

But this is our current events column ­ we discuss timeless truths here not in themselves but as they apply to the events in the headlines.  So let us turn our attention to the U.S. Supreme Court, where on Wednesday the Justices heard oral arguments in litigation involving the Oakland Cannabis Buyers Cooperative, one of 39 groups established under provisions of a California law subsequent to a 1996 referendum, in order to provide marijuana to sick and dying individuals.  In 1998, federal officials obtained an injunction against the continued operation of this cooperative, arguing that federal law is supreme over state law, and this co-operative's state-sponsored actions are in blatant violation of the Controlled Substances Act.

The co-op appealed to the 9th Circuit, which struck down the injunction, announcing that there is a limited exception to the federal statute for some seriously ill patients who use marijuana out of "medical necessity."  The Justice Department appealed, and the Supreme Court must now decide whether to re-instant the injunction.  Let us be clear first of all about the bipartisan nature of the war on drug users.  Both of the major parties support it ­ it was under the Clinton administration that the Justice Department went into court asking for this facially inhumane injunction in the first place, the Bush administration is only in on the last act of this one.  This is one of the innumerable cases that might be mentioned in which the "two parties" are but two wings of one party ­ a ruthless ruling class.

That point made, let us go back to court.  Wednesday, Justice John Paul Stevens asked one of the government lawyers point blank, if "there really are some people for whom this is a medical necessity, or should we assume that there are no such people."  Came the reply, "There are no such people."  What a load of crap there is in that answer.  Certainly there are many pain killers to which the U.S. government has given its official approval.  But, in the particular circumstances of many of the patients who patronize the Oakland co-op, there is none better ­ none with the combination of effects (the stimulation of appetite, and suppression of nausea, along with the relief from pain itself), or none not barred by its side effects or prohibitive expense. Several pharmaceutical companies are working on drugs that will use the active ingrediant in pot for medical purposes.  They have assured the government that they will produce a drug which does the good of marijuana, but does not produce the high.

Think about that for a minute.  The government objects specifically to the high ­ to the possibility that this particular substance might do more than relieve pain and disease symptoms, to the dreaded contingency that it may actually produce pleasure.  We are reminded of the ancient "dance of the seven veils."  There are various layers of lies over the simple truth here.  The simple, naked, truth is that the "war on drugs" is an excuse for the exercise of power, and power is the ultimate addictive drug.  The outer veils consist of a variety of crappy arguments about why prohibited drugs are bad and the FDA-approved drugs are good.  But after six of those veils have been stripped away, the one lie that is closest to the truth is this  -- WE CAN'T STAND IT THAT OUR SUBJECTS MIGHT BE HAVING SOME FUN.  Joyless conformisn in the service of power.

03-24-2001

Argentina May Swear Off its Seed-Corn Diet
The newspapers this week have been filled with the latest twists and turns in the  political and financial crisis in Argentina. Yesterday, the country's Congress enacted part of an emergency economic package presented to it by the new economy minister, Domingo Cavallo.  Investors in Buenos Aires' stock and bond markets approved of Congress' action, and the Merval stock index rallied, increasing  more than six percent that day.  What, exactly, is going on?

We might start answering that question by going back a few years, and asking another one. The last time Mr. Cavallo was part of the government, he was behind the decision to peg the value of the peso to the United States dollar, in 1991.  Question: why would one nation want to peg the value of its currency to that of another nation?  Answer: the decision reflected Mr. Cavallo's healthy skepticism about Argentina's own ability to preserve the value of its money supply ­ any thoroughly external peg would have served the same purpose.  A gold (or silver) standard, for example, would likewise have halted the hyperinflation that has been a persistent and disastrous aspect of the Argentinian scene ever since the glory days of Juan Peron in the 1950s.

In the immortal words of Milton Friedman, "There ain't no such thing as a free lunch."  Argentina for decades had sought to maintain that expensive Peronista welfare state by inflating its currency. After 1991 and the dollar peg, that became impossible.  But the country kept eating its big lunches, and pretending to itself that they were free ­ so the payment had to come from somewhere.  Argentina began consuming its productive system, like a farm family that gets through the winter by eating the spring's supply of seed corn.

In 1999, the national product of Argentina declined by 3%.  In 2000, it decline less quickly than that, but continued on this downward slope, and unemployment rose into the neighborhood of 15%.  In October 2000, a Senate bribery scandal broke out, and the cabinet has ever since been something of a revolving door.   The International Monetary Fund stepped in, and did what it usually does in such situations. It made a bad situation worse.  It offered loans with a lot of strings attached, essentially forcing increased levels of statism on the economic system.

Now we return to this week's headlines. On Tuesday, March 20, President Fernando de la Rua named Mr. Cavallo his economics minister ­ he became the third man to occupy that post within three weeks. Cavallo is a bright man and proposed the only sensible course ­ cuts in taxes, the privitization of certain government agencies, and repeal of burdensome regulations to bolster investment confidence.  Opinion polls show that the public in Argentina is increasingly desperate about politics as usual, and willing to support Cavallo in this course.  The opposition party, the Justicialistas (less formally known as the Peronists) have acknowledged the depth of the crisis.  Their most recent presidential candidate, Eduardo Duhalde, asked that party's legislators to support Cavallo's package of reforms, saying "This is no time to joke around."  There is a certain concise eloquence in that phrase, although I doubt Andrew Lloyd Webber will be setting it to music.

There is even more eloquence in the observation of deputy cabinet chief Armando Caro Figueroa.  "The only alternative" to deregulation, tax cuts, etc., "is that we will continue to slide into a decadent spiral similar to what happened to the former Soviet Union."  Imagine that!  Here we have the official of a government that was itself never part of the Soviet bloc, in a country that seems to have accustomed itself well to multi-party elections and the toleration of official dissent, asserting that notwithstanding those facts there is a real analogy between the peril his country faces now that that faced by the Soviet Union of blessed memory.   He is right, of course, but the fact that he would say such a thing is remarkable nonetheless, and indicates that there is hope ­ for the Argentines, and for the rest of us.

03-17-2001

Recapping the 20th Century in Obituaries
Three very prominent Republicans have thrown off their mortal coil in recent days, and reading their obituaries together gives one the intense sense of reliving much of the recent history of American politics.  That is not an altogether pleasant experience, but it is an instructive one. 

Harold E. Stassen, 93, youngest ever Governor of Minnesota, (at age 31) died in Bloomington, MN, Sunday, May 4.  As every obituary noted, Stassen sought the GOP nomination for Presidency nine times, turning his name into a running gag and a synonym for political futility.  But in his salad days, there was nothing funny about his aspirations.  He was among those who would have saddled us with a global government, a government whence flight would have become impossible without a Mars-bound rocket ship. Global government is a horrible prospect for every true lover of liberty, and we owe it to ourselves to keep that aura of horror around the memory of Mr. Stassen.

In the years just before and just after the second world war, one of the most pertinent political distinctions with the Republican Party was that which separated "internationalists" from "isolationists."  I use (and put in well-warranted scare quotes) the labels that have become prevalent. The isolationists, notably Robert Taft, son of a President and aspirant to that office himself, believed that America ought to fight wars only when attacked, and ought to avoid collective commitments and entangling alliances in times of peace.  The internationalists (like Prescott Bush, or young Harold Stassen) wanted the United States to serve as a sort of permanent world policeman, or at least as a central pillar in collective institutions that could do so, in the hope thereby of rendering war obsolete as an instrument of diplomacy, and moving toward a true global government in the process.

Harold Stassen became a figure to be reckoned with on the national scene when he assisted the Roosevelt administration in writing the charter of the new United Nations, that quintessential internationalist cause.  His Republican credentials gave the administration bipartisan cover, and his credentials as a UN-charter draftsmen gave his hopes for the party's nomination for president in 1948 credibility.

James A. Rhodes, 91, the only man in the history of the state of Ohio ever to serve four terms as Governor, died on the same day as did Stassen.

Rhodes was first elected Governor in 1962, and was re-elected in 1966.  The state constitutional prohibited a third consecutive term so he ran for the Senate in 1970.  Unfortunately for that particular aspiration, the Republican Senatorial primary took place only one day after Rhodes sent the National Guard to Kent State, an order that led to the death of four students and the wounding of nine others.

The next day, as the bullet shots rang in the ears of the voters, Rhodes lost the primary to Robert Taft, Jr., son of the very same "isolationist" leader who had contended with Stassen and Dewey for the soul of the GOP a quarter-century before.

Four years after Kent State, Rhodes made a comeback, returning to the Governor's office, and he won re-election in 1978. There are several lessons from his career that we might ponder, chief among them the futility of term limits.  The same governing class stays in control with or without term limits ­ they are forced by such rules to play some games of 'musical chairs,' but that game is no victory for the cause of liberty.

On Friday, March 11, James St. Clair died.  His place in history is secure as the lawyer who argued to the Supreme Court that President Nixon had no obligation to provide the Watergate tapes either to a special prosecutor or to a Congressional investigating committee. Lord Acton would have been wise to observe that even a colorable claim to absolute power corrupts absolutely.

03-10-2001

An Upcoming Battle Over Campaign Finance Reform
The Senate is scheduled to begin debate on campaign finance reform on March 19.  In our view, almost everything that is meant by the phrase "campaign finance reform" in our day is a blatant attempt at censorship: cutting off the money used to speak is, effectively, cutting off the speech.

Of course, in an anarcho-capitalist world there will be no "campaigns" in the sense in which that term is now used.  There will be a variety of voluntary associations, some perhaps employing something like the corporate form.  Some of these associations will fill offices through elections, (others might fill them through lot, or primogeniture!) and those that do hold elections, will of course make their own rules.  But there will be no over-arching sovereign, no posturing about what a wonderful thing is majority rule, no one-person-one-vote presumption.  Election procedures will themselves be part of the ongoing creative higgle-haggle of the marketplace.

To get some more specific sense of how some of these truly free elections might work, let us look at contested elections (proxy fights) in the corporate world.  The general presumption in this context is one-share-one-vote.  This, in turn, means that those with the largest investment in the common enterprise have the most say about who sits on the board.  That seems perfectly appropriate to us. But we live where we live. And in the United States, there is a continuing threat that envious majorities will destroy the imperfect similucrum of capitalism that now exists, by voting their way into the pockets of any relatively affluent minority that comes to their attention.  Much of the history of the United States is a history of the fall, one by one, of barriers to such a catastrophe.  The chief barrier to the unaccountable power of envious majorities that remains, is the simple fact that politicians have to find private financing for their election campaigns.  To get that financing, they have to go where the money is.  The folks who hold the purse strings of campaigns can make use of that fact to maintain their hold on their own property.  The buying of elections (um, we mean contributions to campaigns and independent expenditures, sorry about the slip!) the buying of elections is a m eans for the self-defense of the propertied, and ought to be preserved, until such time as capitalism is ready to take the offensive, and push us into another phase of human history altogether.

Constitutional arguments are always a means to an end.  In this case, we are very happy that first amendment arguments have had some effect in helping to preserve a system in which campaigns are privately funded, and we think those arguments ought to be pushed still further. Now let us praise the AFL-CIO.  The labor federation has in these last few days turned against the particular campaign finance bill before the Senate.  The bill, after all, would bar the AFL-CIO, or anyone else, from airing a television ad within sixty days of an election, if the ad happens to mention a candidate.  It doesn't need to mention him AS a candidate either: the ad would run afoul of the law simply by mentioning a human being who happened to be a candidate.

Suppose that one of the two candidates for a contested Senate seat is (as is usually the case) the incumbent.  The incumbent, Senator Smith, has just voted in favor of a bill that will allow replacement workers during a strike to torture the puppies of the unionists they have replaced!  Under McCain-Feingold, both animal-welfare groups and labor unions will be banned from running any ad expressing displeasure with that vote, within sixty days of the election, even if the ad says nothing whatsoever about the impending election.  If this does not violate the prescription that "Congress shall make no law" it is difficult to imagine what would.

"This can criminalize all sorts of politics" says Laurence Gold, the AFL-CIO expert on the subject. So we have before us the unlikely propect of an alliance between Mr. Gold's boss, John Sweeney, who was described in the Wall Street Journal recently as "the most liberal labor leader since Eugene Debs," and who no doubt regards such comparisons as great praise ­ and Mitch McConnell, the long-standing Darth Vader of the money-is-bad crowd.  Onward, Darth!  Onward, Sweeney!

03-03-2001
The Latest Vacuous Manifesto of the Third Way.
Tony Blair, prime minister of the United Kingdom, likes to refer to his political party as "new Labour" and to his own political platform as a "third way" between the leftism of "old Labour" and the rightist Thatcherite regime.  What he means, as best I can determine, is this: "Mrs. Thatcher cleaned our clocks and we've learned our lesson.  The unreconstructed social democracy of old Labour created the economic crises of the 1970s, and the rise of the Conservatives was a natural electoral reaction to those crises.  We in Labour are properly repentent.  But through a third way we can have it all.  We can again use the force of the state to guarantee working folk solidarity and security ­ but this time around we can do so while respecting the dynamism and growth of capitalism."

Tony Blair is, then, the Bill Clinton of his country.  Clinton's "triangulation" represented much the same impulse.  Re-read the above hypothetical speech, substitute "malaise" for "crises," substitute Reagan's name for Thtcher's, Carter's crowd for 'old Labour,' and you will get a proper sense of the real parallels in the recent political developments in both nations. Yet the Brits intellectualize their politics much more than American do, so from the other side of the Atlantic we have gotten a slew of manifestos explaining that the third way is not just political opportunism, not just clever marketing,  No, oh no, this is a movement that demands to be taken seriously.

Let us do so, then.  A new book on this subject has just arrived in the 'States.   The Weightless Society, by Charles Leadbeater.  So that we will not miss the point, the dust jacket quotes Tony Blair himself.  "Charles Leadbeater is an extraordinarily interesting thinker.  His book raises critical questions." Also on this dust jacket, a blurb from Rosabeth Moss Kanter of Harvard Business School, who calls this book a "'fourth way' vision."  We suspect that means that a lot of people have gotten sick of the 'third way' sloganeering and want to think of this as something fresh.  Yet a fourth way would require some break with the third, and there is none here, just mild variations of the Blairite theme.So let us tear our eyes away from the dust jacket and read a sample from the book itself.  Early on, Leadbetter takes up the always-interesting issue of higher education.  "Expanding access to college is of course a good idea," he says. "But we should also think through its consequences."

Wait a minute, Mr. Leadbetter! Even before we think through the consequences of your axiom, should we not ask ourselves what exactly it means?  What do we mean by 'college' for example?  Any institution that calls itself a college?  Does 'expanding access' to such institutions simply mean that it would be good were more people to be sitting in seats inside buildings in campuses that designate themselves as colleges?  If not, then some definition of these terms would seem to be in order.  But if the terms are left undefined, then one has to wonder why this is supposed to be a good thing.  Note, also, the classic use of the phrase "of course" to signal that we ought not question such a statement.

To his credit, Leadbetter goes on to discuss some of the negative consequences of public subsidization of colleges ­ grade inflation, credential inflation, etc.  But these consequences do not lead him to reconsider the planted axiom.  The gist of the discussion seems to be that subsidization of college educations must expand, but its consequences must be carefully managed (and massaged) by the technocrats in power.  Education "needs to be blended with real world experience that fosters skills that cannot be taught in a classroom and entrepreneurial verve."  So perhaps a "third/fourth way" government will subsidize not only the receipt of credentials at a college, but the early apprenticeship years of employment, too, when those unteachable skills are presumably being acquired.

The latest crises in the UK involve livestock ­ newfangled "mad" cows on the one hand, old fashioned hoof-and-mouth disease on the other.  Since this is a sector of considerable importance to the economy, it is possible that such old-economy troubles will bring about the fall of the Blair government.  If so, perhaps its successor will describe its own views as "compassionate Thatcherism" or some such thing, and the parallelism across the Atlantic will continue. We look forward to new and better books from the next lot of blocks in power.

02-24-2001
The Next Curve in the Internet Hype Cycle
A year ago, business-and-technology pundits couldn't stop talking about the wonders of the internet, which had changed everything, and about the new economics of the dot-com industry, where stock prices could only move in one direction ­ up.  The fact that on the morning of January 1, 2000, we all woke up to a world free from the sorts of disasters that had been fervently predicted for that date, only enhanced the giddiness of the George Gilder wannabees.

But by March, that ever-upward stock-price road had gotten rocky, and throughout the rest of the year, it turned upside down.  By now, the giddiness has produced an equal-but-opposite grumpiness, by the operation of some sort of pop-cultural Newtonian mechanics.  The same pundits have decided that the internet was just a fad, that technology changes nothing. The most talked-about Super Bowl commercial of 2001 featured a monkey shedding a tear over the death of a dotcom-advertising sock puppet.

Both giddy and the grumpy have been (understandably) over-reacting to an ambivalent reality.  The real story is that the internet until now has been a mostly-American phenomenon, and that this is what is coming to an end.  AOL has recently announced a $100 million investment in India.  In Hong Kong, a company called ADM Capital Management this week publicized its ambitious plans to use the web to sell southeast Asian debt instruments, creating new liquidity for corporate restructurings and new start-ups throughout the region. Through the vast People's Republic of China, internet deployment is growing so quickly that Chinese may be the most used language on the web as soon as 2007.   The internet is changing the world of business.  It is doing so more slowly than at first expected because 'the world' turns out to be a bigger and more complicated place than American investment counsellors in particular are sometimes inclined to believe.  But the Nasdaq and S&P declines of 2000 are characteristic of a hype cycle common when new technologies enter the world:  first the quick build-up based largely on the hope of finding a 'greater fool' than one's self, then the bust, then the slow process of utilizing the real potential of the new instruments.

Even the habit of distinquishing between one "market" and another is a statist assumption.  In an anarcho-capitalistic world, all markets will tend to merge into one, a gigantic ongoing real-time higgle-haggle always moving toward the same receding goal ­ the most effective possible employment of available resources. Take, for example, the notion that there are "old economy" markets on the one hand and "new economy" markets on the other. Please. Thirteen months ago, Michael O'Donnell, CEO of Salon.com, disparaging the significance of the AOL Time Warner merger, opined thus: "They're taking a white-hot Net stock and partnering with one of the world's biggest bricks-and-mortar companies."  He thought it self evident that such a partnership could never work.  Or maybe he just wanted us to think that self evident.

Clearly, though, we aren't all going to become ethereal beings, living in a cyberspace world.  We will continue to live as physical organisms in brick-and-mortar structures.  We will continue to possess a marvellous capacity to conceptualize our world, to wield abstractions as implements, and "cyberspace" will likely continue to be useful as one of those abstractions.  To speak of a "partnership" that crosses such market lines as if it were an incoherent business plan is, itself, incoherent.

At this point, a reader may sensibly ask, "Why are you telling us this? The Pragmatist is not in the business of giving personal-finance advice.  It is in the business of promulgating political ideas.  Could you get to the point?"  We'd be delighted.   For anarcho-capitalists, the issue is always sovereignty.  How can we best help the human race get over the idea of any legitimate highest authority, any sovereign, defined by territory and populace? In the modern world, the sovereign is the nation-state.  How quickly will the nation state crumble, and how likely is it that an anarcho-capitalistic world will arise from the ashes when it does? The spread of the internet itself undermines territorial assumptions, the closely-related spread of encryption technology undermines government control, and the deepening of the habits of freedom in cyberspace encourages resistance to arbitrary authority in conventional space.  Hurrah for that!

02-17-2001
Reactions Come In, As the Lights Go Out in California
Three weeks ago, Time ran a cover story on the power outages, and the resultant hue and cry, in California.  This week, it runs the letters.  The spectrum of opinion they represent is far more interesting to us at The Pragmatist than was the initial story.

We suggest classifying the six letters under three headings: the thoroughly obtuse, the over-stimulated, and thenearly-comprehending.  For sheer brick-wall obtuseness, it is hard to beat the letter of the California bureaucrat who wrote in to defend his agency, the Calif. Energy Commission, against the charge (the slander! The sheer effrontery!) that it has not been siting a sufficient number of power plants.  Of course we have, replies CEC Executive Director Steve Larson!  There is no real problem and we are working very hard to fix it! The bottom line is that California has not brought a single new power plant on-line in seven years.  As the older ones go off-line, or deteriorate and require higher maintenance costs to continue functioning, just what is the likely result from the perspective of power availability or expense?  What else did the Steve Larsons of the world ever think would happen, other than what has?

But let us not be too hard on Mr. Larson. The problem, after all, is not what his commission has or has not done.  The problem is itsexistence. When you see a gerbil running within its wheel, you do not wonder at the incompetence of that gerbil, that it is not getting anywhere.  It is inthe nature of the system that the gerbil will do a lot of running and get nowhere.

Another good reason to extend some sympathy to our gerbilly Mr. Larson is that the public sector has no monopoly on obtuseness.  The same letters page offers us a wonderful private sector example from Patricia Jean Zottarelli of Huntington Beach.  "Wouldn't we save a lot of killowatts by not illuminating all those unsightly billboards across the state?" she asks.

A couple of other correspondents just let their emotions get the better of them.  William Dixon of San Jose, "It is frightening to know that the U.S., a nation of world stature and technical knowledge, is suffering serious power shortages.  California looks like a Third World nation when it comes to power generation and management."  Yesand for the same underlying reasons that afflict so much of the Third World, too, but Mr. Dixon is too carried away with fright, and with it-shouldn't-happen-here indignation, to let the implications of his own words register in his own head.

Likewise over-stimulated is a Hawaiian correspondent, who may have put up with one too many mainland tourists looking about forMcGarrett.  "If any population deserves to be unplugged" he says, "it's California's.  If your car was running out of gas, you would probably have the smarts to put some more gas in the tank."  He is irritated at what he plainly sees as the Californian sense of entitlement.  Fair enough. But some people do sometimes neglect to put gas in their tank in a timely manner even in (we dare to venture) Hawaii.

We want to give kudos, though, to two folks who did manage to see a salient point about the electrical-utilities as part of a system,rather than simply as a source of sensational headlines.  They didn't make all the key connections, but their insights do give us hope.  A man from Oregon wants to know why neighboring states have to bail out California.  Wade Anderson says he is tempted to turn on extra lights, just to see if it will cause any more trouble to his south!  Also, Thomas Polacek of Rednor, Pennsylvania warms the cockles of our hearts with this outburst of analysis.

"The obvious solution is to let the free market rule; let prices rise.  If it results in consumers' being forced to make the economic choice of buying power or buying gas to that they can idle in their SUVs on clogged freeways, so be it.  Perhaps as Californians sit in the dark, they will obtain the wisdom to completely understand the free market."  Analytically short-winded, Mr. Polacek, since the non-obvious but more thorough solution goes further than you have proposed, but we urge you to pursue the thought.

02-10-2001
The Latest U.N. Power Grab
We are indebted to Ted Galen Carpenter for a timely warning of the latest power grab by the bureacrat/diplomats on the East River. Carpenter, the foreign-policy guru at the Cato Institute, has posted an article on Cato's web site this week about a new United Nations task force report that suggests imposing a global tax on "speculative" currency transactions, in order to collect roughly $150 billion a year for U.N. coffers.

Such a proposal is not new.  World-government types have long complained that the UN is woefully inadequate, a creature of its member states rather than a true global government in its own right, and they ave often suggested that the UN should have the authority to impose a direct tax on international trade as the quickest way to remedy this, to get funding for those blue helmets without having to beg for it from the Jesse Helms' of the various contrary legislatures of the world.

But this proposal, Carpenter says, is different.  It does not come from some fringe world-government-promoting ivory-tower conclave.  This is a trial balloon floated from within the bureaucracy of the UN itself.   At The Pragmatist, of course, we are opposed to the idea of sovereignty at any level.  We expect that the UN will disappear the moment the nation-state system itself disappears, and that day cannot come soon enough.  Until that time, we are not at all sympathetic to its efforts to find funding for itself by any means other than the solicitation of voluntary contributions.

Do the children of liberal parents still go out on Halloween and say "Trick or Treat for Unicef"?  We don't know, but we would surely love to see the whole of the UN dependent upon THAT sort of revenue!  In the meantime, the idea of a tax on currency speculation deserves opposition, immediate and vigorous.  Consider this column our addition of our own small voice to what we hope will become a considerablchorus.

But something else is going on here.  The one-worlders are, we suspect, not the only or the most formidable, hands engaged in the launch of this balloon.  The governments of certain East Asian countries, ticked off at international currency markets that have frustrated their efforts to monopolize the wealth of their countries in the hands of their cronies, have for years sought allies and an effective institutional expression for their outrage.  But the outrage is unjustified, because the cronyism that it is invoked to defend is both monstrous and obsolete.

In February 1999 the G-7 nations, in response to complaints from the governments of eastern Asian nations that global macro hedger George Soros' activities had destabilized their currencies and financial systems, established the Financial Stability Forum (which had no institutional ties to the UN), to study threats to the stability of the world financial system.  At the FSF's third meeting, in Singapore in March 2000, this group endorsed ten recommendations, one of which was that the United States should work through both regulation and legislation to enhance public disclosure of highly-leveraged institutions (also known as HLIs).  At that moment, there was a bill in the US Congress that would have mandated disclosure for HLIs that operate within the jurisdiction of the US, a bill drafted by Richard Baker of Louisiana.

But many in Congress were distinctly unimpressed by such authorities.  Congressman Patrick Toomey  told a reporter in April, "There is international support to do something, but its not clear to me that this [a disclosure mandate] is the only possible approach" toward lessening the problems created by highly leveraged hedge funds.  At any rate, Rep. Baker's bill died in committee, but the half-articulate desire to "do something," the vague notion that currency speculators must be up to no good, remains.  That is what the corrupt governments of cronyist regimes count on, and we are concerned that they may yet get the UN to do their bidding.

There are, then, two bad reasons for the proposed currency-spec tax.  First, it has proponents who want to see the UN get the revenue.  Second, it has others who want to see those evil "speculators" or HLIs, lose that revenue, have it taken from their hands by a globally-legitimated force.  Both of those factions deserve to lose this one.

02-03-01
A Victory for Capitalism in London
On Monday, January 29, a new type of global equity trading began.  The London International Financial Futures Exchange (LIFFE) began listing futures on single stocks.  (The acronym LIFFE, by the way, is pronounced with two syllables, Life-fee.)  Until now, "options" have been available on single stocks, but never futures.  For a variety if reasons, options trades have been appropriate for the professional fund manager, but an eye-glazing irrelevance for the mass market.  The only contact a normal Joe ever has with stock options is when he takes a job with a company that offers that as part of its compensation package.

Futures are a more convenient mass market tool, and have long been available on commodities (hence Hillary Rodham Clinton's now infamous cattle-futures trades).  In the early 1980s, futures became available on broad market indices of stocks, i.e., in other words, it was possible by buying a future to bet on the fate of the market as a whole, or some broadly-defined sector of it, but it was not possible in this way for the mass-market retail investors to bet on the fate of a particular company's stock.  That is what has now changed.

A "future" is a contractual obligation to deliver (or to receive) some underlying asset on some future date. If John buys a 90-day futures contract on Cisco Systems through LIFFE, he is in effect betting that the value of that stock will rise between the date of the purchase and the date of delivery.  As I write these words, the underlying asset (a share of Cisco common stock) is worth about $35. on the Nasdaq.  If I buy a future share of Cisco through LIFFE for that delivery price today, and its price rises to, say $90. in the next 90 days, then I stand to do quite well.  I'll have a contractual right to buy the share at $35, then I'll flip it over for $90 and pocket the difference.  My profit will be $55., minus of course the price I paid for the future itself, i.e. the price I paid for locking in the earlier price.  That is called "buying long."  The other side of that coin is "selling short."

Again, what a short-seller is paying for when he takes the "short side" of a futures contract is the same thing that a long-buyer is paying for when he takes the "long side," i.e. each is locking in a price, in the hope or expectation that the underlying asset will move away from that price in the preferred direction.  A short seller is betting that the value of Cisco stock (or cattle, or the orange-concentrate featured in the Eddie Murphy movie Trading Places) will fall over that 90 day period, so the seller will be able to buy it at, say $10. a share before meeting his commitment to sell it at $35.  One of the parties, either the long or the short side, must be wrong. In this sense, the system is what game theorists call "zero sum."  The long side wins only what the short side loses.  LIFFE does not care who wins or loses, because both sides have to pay for the futures.

"It sounds to me like you guys are bookies," said Eddie Murphy's character to his new bosses.

"You see, I TOLD you he would understand!" says one boss, gleefully, to the other.

But in other sense, this is not a zero-sum game.  It has positive effects outside of the game room itself, in society at large.  The long though tacit international agreement that futures would not be made available on single stocks, although they've all along been available on somany other assets, has hampered social and economic development around the world.  The collapse of that agreement in London means that the exchanges of New York and Chicago, or Hong Kong and Taipai, can be expected soon to follow suit, and this will soon become part of the routine of global capitalism.

The inability of the average investor to sell stock short has in recent years created a fundamental market distortion in favor of optimism, and so against pessimism.  With the average investor newly empowered, with that asymmetry removed, we can have a reasonable expectation for a much more rational system of global resource allocations in the years to come.  Hurrah for London!

01-27-2001
When Businesses Regulate Themselves
Those of us who have involved ourselves in libertarian proselytizing over any substantial period will find this speech familiar.

"You aren't being realistic.  We need government.  Businesses never regulate themselves, after all."

It is useful, then, to have before us examples of instances in which private businesses do regulate themselves.  The classic example is the "UL" stamp on electrical appliances.  There is no "Federal Electrical Appliance Safety Board" stamping light bulbs etc. with the mark of the FEASB.  There is the underwriters' laboratory, created (as its name implies) by the insurers of the manufacturers.  Of course with the statist drift of the time we have no reason to believe that the UL will keep its market niche.  It could well be forced out and an FEASB created in its place.  Then, a generation from now, when the public will have forgotten that any other system was ever in place, we will hear the same whine. "You aren't being realitic.  We need government to create consumer-protective institutions such as the FEASB.  Businesses never regulate themselves, after all."

Today, though, we'd like to say a few words about an example of industry self-regulation that is not as well known as is the UL. There are fewer accountants in the US than there are purchasers of electrical appliances, and as a rule only accountants are familiar with the operation of the Financial Accounting Standards Board, or FASB (pronounced "fas-bee" when read as an acronym.)

FASB is a private body, which relies on the Finncial Accounting Foundation for the selection of its members and the receipt of its budgets (by donation). Since its creation in 1972, working from an inconspicuous headquarters building in Norwalk, Connecticut, it has become the chief arbiter of accounting principles in the US.  (The analogous body for the rest of the world is the International Accounting Standard Commission, or IASC.)  These private bodies decide issues that have a real impact on the economy, and not just on the working days of a few numbers-crunchers in cubicles.

One example came to our attention this week, when FASB met on Wednesday and voted unanimously to eliminate the "pooling of interests" accounting method, on traditional means of accounting for a merger.  This vote does not end the matter.  The board is at work on a detailed "exposure draft" on the change it proposes, that will be posted on its web site by the middle of February.  As the name implies an "exposure draft" is intended for public comment and possible subsequent revision.  But the drift of the FASB's thinking is clear.  Virtually all mergers are not in fact the pooling of assets by two equals but the purchase of one company by another ­ who is cquired and who is the target can in most cases bye clearly identified.  The "pooling" method is used to create erroneous impressions for the benefit of investors, and so impairs the efficiency of the capital markets, which depends upon transparency.

Now, the pooling method has its defenders, and the FASB will no doubt hear from them in the months to come. The Pragmatist, of course, does not take any position on the merits of the case. We cite it only as a case in which an important regulatory issue is even now being decided without a sovereign in sight ­ with no votes in Congress, no plebiscites in the countryside, no pontificating from the "bully pulpit" of the White House.  The FASB is the instrument of spontaneous order ­ it exists because the accounting industry needs  a watchdog in order to keep its own practices uniform and so in order to bolster its own credibility with the relevant publics.

Here, again, with the statist drift of the time, we have no reason to believe that the FASB  will keep its market niche.  Interests unhappy about some of its decision could appeal to Congress to vest the SEC with the authority to determine financial accouning rules.   Then, a generation from now, when the public will have forgotten that any other system was ever in place, we will get an ugly shock of déjà vu.  "You aren't being realistic.  We need government agencies like the SEC.  Businesses don't regulate themselves, after all."

01-20-2001
The Clinton Crowd Leaves ­ But Not Really
This morning, with just two hours left in his presidency, Bill Clinton issued a final round of pardons. Susan McDougall's name was on the list, as was Patricia Hearst's. Despite a lot of preliminary discussion, Michael Milken was not among those receiving the dubious benefit of such a pardon.  That Milken was imprisoned in the first place has always seemed to us an act of the grossest tyranny.  Yet he did serve his time, he has resumed a successful life, and he can be content in that, while allowing the political and the chattering classes to politic around and to chatter away about him.  In short, Milken can tell now-former-president Bill to put his unbestowed pardon where the sun never shines.

In a fairer world, Giuliani, the former prosecutor directly responsible for Milken's imprisonment, would need a pardon. Nonetheless, we live where we live. Indeed, the way in which a Milken pardon has been discussed over the last few weeks has simply demonstrated the utter inability of the chatterers to cometo grips with any of a variety of underlying realities. One babbling faction (which included Giuliani himself, God save the mark!) said that Milken should havebeen pardoned because he has been such a generous philanthropist in the years since his release.  The other faction has said that inside trading is such a terrible thing that it cannot be forgiven on the basis of any amount of philanthropy.  There are three problems here.  First, no one has ever made an intellectually respectable case for regarding insider trading as a crime.  Second, even assuming that it is a terrible thing, there is no real good reason to believe that Milken engaged in it.  His prosecution was a classic railroading job, and the guilty plea was extorted from him by Giuliani's threat to go after other Milken family members.  Third ­ the prosecution of Milken was part of  broad political/cultural attack on finance capitalism in the 1980s, the era when Oliver Stone came out with the movie "Wall Street" capturing all the usual cliches about the participants in capital markets.

We should all be very glad that the attack failed, and Milken's own post-imprisonment prosperity is a sign of its failure. Clinton leaves office having failed to grasp any of this.  (Did he ever even consider "pardoning" his wife for her dealings in cattle futures?)  In his cluelessness, he is true to himself to the end.  Polonius would be proud.

In a fitting although presumably unrelated development, two days before the Bush inauguration, Clinton confidante and "spiritual adviser" Jesse Jackson released a statement confirming that he is the father of a 20-month-old child, the product of an extramarital affair with an employee of his flagshiporganization PUSH.  That acronym, BTW, stands for "People United to Save Humanity."  Despite rumors, it does not stand for "Please Undress, Some Hanky-panky."  Whatever its name, PUSH paid Jackson's lover $35,000 in "severance pay." Even dedicated philanthropists (like Milken???) might wonder whether they should open their checkbooks the next time they receive a solicitation from PUSH, now that they have some idea how that money is in fact used. The Reverend Jackson has the decency to be somewhat embarrassed by all this.  He said that he wil withdraw from public life for some indefinite period of time.

It is tempting to ay, "good riddance ­ to Jackson, to Clinton, to the whole crowd."  It is too tempting.  First, Clinton in particular isn't going anywhere ­ or not anywhere very far.  We doubt he will spend a lot of time in Arkansas or Chappaqua, New York.  He is a Senator's spouse, and he will be in residence in Washington, D.C.  or its environs.  Probably no further than the town named after a comedian ­ Chevy Chase. When he has something to say, (which will be often) the newspapers will be happy to quote him. Second, Jackson will be back.  His career in the public eye has had its ups and downs, there is no reason to believe that he is permanently "out" this time.  No, the only way to get rid of Clinton and his crowd is to get rid of Clintonism, including the "inner Clinton" within many of those who despise him the most.  Clinton is simply the embodiment of politics-as-usual, and it all has to go.

01-13-2001
Why a Golddigger Is Not a Prostitute
George W. Bush's first choice for Secretary of Labor, Linda Chavez, ran into what is by now a predictable sort of trouble last week, and this week bowed to the inevitable, formally withdrawing her name from Senatorial consideration for that office.

In the early 1990s, Chavez took into her home an illegal immigrant from Guatamala.  She says that the immigrant was not an employee but a "house guest," who did various errands around the house as well-mannered guests do, and who received some "spending money" out of the goodness of Ms Chavez' heart.  But the two facts (the errands and the money, that is) were not quid pro quo, so this was not the employment of an illegal alien as a domestic.

The AFL-CIO, which opposed Chavez on policy grounds before the story about her alien houseguest became public knowledge, was happy to join in the hue and cry.  "Her explanation sounds too much like the explanation of employers who have tried to skirt the law by saying that individuals are not their employees,"  they said.

As Chavez returns to private life, like Zoe Baird and Kimba Wood before her, let us take this opportunity to reflect. What evil are illegal aliens committing, when they seek such employment?  Is it that they are taking jobs away from citizens?  Would Chavez have found a U.S.-born "house guest" to do the dishes had no alien been available?  We're not sure, and we don't think it especially matters.  After all, the great fact about productive employment is that it generates new opportunities, it expands the whole "pie"!  The protectionism of the AFL-CIO (keep those people away from our labor market!) makes sense from the self-interested point of view of the labor bosses themselves, but it disserves most of humanity, foreign and domestic.  What surprises us is that many people who would scorn such arguments from Chrysler (keep those Japanese cars away from our product market!) think they make perfect sense from organized labor.  It is protectionism in either case, and we have to say that we react to it in either case in much the same way that the new President's father reacts to broccoli.

Our sympathies are with Baird, Wood, Chavez, and the corporate employers with which the AFL-CIO is in fact more concerned, as well as with the would-be employees they wish to lock away from opportunities.

We wish to use this moment to reflect, too, on the nature of labels.  In an anarcho-capitalist world, "employment" would be a concept with indefinite boundaries, subject to redefinition in every context in which it occurs.  Consider the word "chair," famously discussed by Ludwig Wittgenstein. Is a stool a type of chair, or are stools and chairs two different sorts of furniture?  Of course, for your own purposes you can stipulate a definition of "chair" that excludes a stool. You can say, "I use the word 'chair' to refer to a piece of furniture on which only one person at a time can sit, and that has armrests and a back."

But then someone else can come along and say, "That is odd.  I use the term differently.  For me, a 'chair' can be any sort of furniture normally used to rest the human derriere."  Under the broader definition, a sofa (which sits more than one person at a time) is one sort of chair, a stool (which sits one person, but has no back or arm rest) is another, and yon recliner (which meets the narrowest definition) is yet  third.  All are chairs.

"Wittgenstein's point, and ours, is that only very silly folk would argue about such things."  In an anarchic world, the same would be true of "employment," and no consequences would follow from whether Chavez had a "house guest" or a "domestic employee" so long as the two consenting parties to the situation understood each other.  The difference, after all, is akin to that between a prostitute and a gold-digger.  A prostitute and her "john"/employer make an explicit bargain of money for sex, and so break the law.  A golddigger and her "sugar daddy" make an unspoken bargain for the same exchange, and so become at worst the objects of some smirks in not-so-polite company. It is only because the world is full of control freaks that these verbal distinctions even seem to be more important than the ones that either separate or unit stools and recliners.

01-06-2001
Making Book On Oliver Wendell Holmes -
A New and Important Book About the Life and Thought of Oliver Wendell
Holmes has just made its appearance. This book possesses the wonderfully evocative name, LAW WITHOUT VALUES. Its author, Albert Alschuler, backs up that title, too. He reviews Holmes' career and finds everywhere the same premise. He finds that Holmes believed that law is simply codified force, and that Holmes was a willing servant (indeed, an enthusiast) of the law understood in precisely that amoral sense.

When we encouter an amoral definition of law in the writings of an anarchist, we know what is coming. A sentence that begins, "Law is unreasoning, valueless force" should end, "so let us abolish it, and live uncoerced lives!" But Holmes combined the same premise with a very different conclusion. A very rough paraphrase of his views, as Alschuler reconstructs them, is this: "Law is unreasoning, valueless force, and all the more adorable for that!" Unreasoning and valueless admiration for Holmes (reflected even in a movie from Hollywood's golden age), distorts both academic and popular understandings of the history of American law over the last century, so it is good that those of us who have long resisted this admiration, who have long resisted the statist drift of pop culture in general, have a new and careful ally in Alschuler.

Alschuler understands that Holmes saw all of politics as an arena for a darwinian struggle, red in tooth and claw. A legislature is just a quieter battlefield. The good judge, in his conception, is one who comes onto the battlefield once the fighting is done and kills off the wounded soldiers of the losing sides, the unfortunate fellows whose army had to abandon them in its retreat. So if, for example, a laissez-faire economic policy cannot win its battle in the legislature, it should not expect help ­ or even mercy ­ from the U.S. Supreme Court. His much-quoted pro-sterilization remark, "Three generations of imbeciles is enough," is on this reading not a momentary lapse of taste but an integral piece of this broader whole ­ a sense of judicial restraint not out of a principled reading of the Constitution, but out of power worship.

Even those who think Holmes a not particularly great judge or justice have often thought him an especially acute legal scholar and they have pointed, as their key exhibit, to his most famous work, The Common Law, (1881). But what Holmes' admirers remember of this book boils down to a single line, a snappy but superficial one at that, "The life of the law has not been logic; it has been experience." Holmes seem to have bewitched subsequent generations into believing that he was slaying a real-life dragon here, that the formalists of his day or before had refused to acknowledge the role of experience in the law, had tried to spin legal conclusions out of purely logical premises like a spider making a web from its own entrails. Alschuler knows better. All the great formalists ­ Blackstone, Marshall, Langdell, were also empiricists. Their difference from Holmes was in the width of their understanding of what experience means, and the narrowness of his.

It is interesting that the headquarters of the Internal Revenue Service contain a Holmesian aphorism on its façade. "Taxes are the price," so the stonemason, at Holmes' instruction, tells us, "we pay for a civilized society." When I buy shoes and they pinch I can bring them back to the store for a refund. If the store won't take them I can at the least make a mental note not to patronize that institution any more. Which of these options are available if the "civilization" pinches?

Alschuler himself is no anarcho-capitalist. But the rethinking of Holmes in which he has now joined is a good thing for reasons that go beyond any program of his. It may well contribute to a rethinking of statism, to a new questioning of the difference between faith in force and confidence in reason, even to a rededication to contract over status. It may well advance the day when we can tear down that headquarters, and tear down any other building anywhere that might bear such a motto. When will we come to realize that willingness to pay restitution for our harm, out of the fruits of our own productive lives, is the only and the sufficient price for civilization?

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