I gave my new debate partner a few introductory reads to get a hang for what framework of thought we would be bringing to our policy debate this year. I gave him these articles:
http://mises.org/journals/scholar/mahoney3.pdf
http://mises.org/daily/1388
http://www.thefreemanonline.org/columns/peripatetics-quotthe-tariff-is-the-mother-of-trustsquot/
http://www.cato.org/research/articles/cpr28n4-1.html
This is the discussion we had today, with names bleeped out:
THE GUY
o Hey PERSON are we for a laissez-faire economy because one article says that libertarians want the government to have little influence over the economy while another article stated that big business want big government???
•
about an hour ago
MEEE
o Yes, that's our argument.
o And what specific property rights do we want to give to the private sector??
o is that a question about one of the specific articles?
o or in general
o And I don't know what you mean saying "what private property rights"
o I meant to say private property rights
o right, I don't know what you mean by asking what rights we want to give them
o And I'm asking how does private property rights relate to providing tax breaks to private companies
o do you have video?
o No I'm reading the Mahoneys paper property rights and misallocation and I'm trying to make the connection between this paper and our affirmative case
o right
o so you don't have a webcam?
o Do you pay for incoming calls?
o might be easier to explain if I call
o Ok can u call me later? And yea I can webchat to fb our oovoo is find
o I'm not home right now thats y
o ah
o Or*
o alright
o well
o should I still tell you now
o something, at least
o to think about?
o Sure to give me clarity
o Alright. So the entire idea is that the market, the economy, property rights, politics, and allocation of resources are all interconnected
o property rights entitle a person to the product of his labor
o also, any transactions he has with anyone else
o and any gifts
o for example
o I go to a piece of unowned land
o I fence it off
o I improve the land in some way
o (farm it, build a house, something)
o and it becomes mine
o because I mixed my labor with it
o and people don't just randomly mix their labor with stuff, they do it to satisfy needs and wants
o (I'm getting there)
o (slowly)
o Ok lol
o People could hypothetically satisfy their wants and needs by themselves
o however, this is very difficult
o because we can't all be awesome at everything
o I can't farm my food, teach my children, clean the house, perform surgery on myself, fix my computer, build my house, fix my plumbing, and to my dental work
o not only because I don't have all that time
o but because I do not in fact posess all of those skills
o hence, it is useful to me to exchange goods that I am good at producing for other people'
o s goods and services
o I do this, again, to satisfy my wants and needs
o in fact
o all human action aims to do this
o Humans act to satistfy their uneasiness
o whenever you act, you are showing your preference for one state of being over another
o if you move from A to B, you prefer being at B rather than at A
o So we know that trade seeks to satisfy the wants and needs of people
o People engage in trade because it benefits them
o the division of labor (or people specializing in stuff) helps "society" provide the goods and services needed
o All in all trading is good because its effective and easier??
o Sort of
o it's good because it makes use of other people
o 's skill
o ss
o (other people
o dangit
o (other people's skills)
o there we go
o we can't do everything by ourselves
o Now, let's unpack the word "economy": People usually talk about some monolithic entity called "the economy." The economy does this, the economy does that, etc. Now, what does this mean? The economy is in fact billions of interactions between individuals and groups
o It is not one big beast that exists outside the realms of humans that humans must bow down to
o hence, the economy is made up of people trying to improve their lot by voluntarily trading goods and services
o Now that we understand what the economy is, we can talk about the distribution of resources in society
o this is also called the allocation of resources
o The paper I gave you talks about some of the basics behind the allocation of resources
o though it frames it in an odd manner
o essentially, it means this:
o people trade resources because they believe that's the most productive use of their resources
o They allocate their own resources in such a way as to maximize their utility (also known as "satisfaction" or "happiness" or "the usefulness they gain from stuff)
o Hence, when each individual acts (as we have already said), he is showing a preference
o he prefers to trade $10 for a shirt
o This means that he values the shirt he is buying more than the $10
o the seller, on the other hand, values the $10 more than he values the shirt
o (this is called subjective value theory - nothing has a natural "value" - it is individuals who assign values to objects. A lawnmower may have no value to me, but to you it may be very useful. In the same way, I have no use for anti-smallpox medications, though a person 100 years ago would have died for some)
o so, because trade happens, we know that people are allocating their resources in the way they deem best for them
o people are using their legally, ethically obtained property as they see fit without harming any of the property of others
o What if they obtained it illegally??
o now
o well, that is part of what the paper deals with
o Is the value valid??
o that is what the paper deals with, in part
o I am about to go into that
o Ok
o when the interactions are all peaceful, all's good
o people are maximizing their utility
o and using their resources as they see fit
o after all, an economy exists to satisfy people's wants
o when we use our own property as we see fit, we are able to do as we see fit
o when COERCIVE power is entered into the equation, things go bad
o when resources are forcefully taken from one person and given to another, then misallocation occurs
o that is partly what the paper talks about
o it begins with the simpler and more obvious case of the burglar
o Whats a good example of misallocation relating to big government??
o I am not completely sure their approach is the best, so I will give you an alternative one here (feel free to interrupt at any point)
o right, I'm sloooowly getting there
o When someone forcefully takes your property, the economy stops being a web of people improving their lives by voluntarily exchanging goods
o There are two important points here
o 1) Voluntary exchange is mutually beneficial - that means that any transaction is good for both parties. Why? Well, if it weren't then it wouldn't occur. If I valued my $10 more than you t-shirt, I wouldn't buy the shirt! By acting and actually buying it, I am showing my preference of your shirt over my $10
o forceful taking, however, is not mutually beneficial
o it benefits one person at the expense of the other
o we cannot in fact say whether "society" is better off, because there is no way to compare the utility of different people
o you can't say John lost 4 utils by having his iPod stolen and Michael gained 6 utils for getting it instead, so "society" is better off
o you can't say that
o why?
o because it is impossible to compare utilities (or satisfactions and happiness) of different people
o not just practically, but even theoretically
o surveys don't work
o How can we know that my satisfaction rating 7/10 is better than your 6/10
o You can easily imagine a pouting rich kid saying his satisfaction is 4/10 while a starving African child receiving ten baskets of food from Bill Gates has a satisfaction of of 10/10
o comparing the numbers is useless, because there is no way to "standardize" the measurements
o standardization is a mathematical term meaning doing something to a group of numbers that makes the numbers meaningful to compare to each other
o I'll explain standardization a bit more:
o Say that the US has 1 million people and Canada has 10
o (10 people, not million)
o Hm, let me make a better scenario for a sec
o ok
o the US has 1 million people and Canada has 10,000 people
o that is the new scenario
o a survey finds out that 7,000 Canadians like apple pie
o while 9,000 American like apple pie
o From this, one might be temped to say "Americans like apple pie more"
o why, well, because 9000>7000
o right?
o wrong!
o In fact, 9,000 Americans are a tiny fraction of the total population
o 7,000 canadians, on the other hand
o are a BIG fraction of their population
o you can't simply compare the numbers!
o Standardizing
o in this case
o would be dividing by the total population of each country
o hence, 7000/10000 for Canada, which gives 70%
o For America, 9000/1000000
o which gives less than 1%
o Once these numbers are processed a bit (in this case, made into percents), comparison makes more sense
o and we clearly see that Canadians like apple pie more
o on avergae
o loosely speaking
o Hence, you see that in this case it makes sense to standardize
o when dealing with "satisfaction", however, you cannot standardize
o it doesn't make sense
o there is no mathematical function
o that allows you to equate
o the 4/10 of the rich snob with the 10/10 of the starving child
o No amount of surveys or mathematics will allow you to make sense of the surveys
o For this reason, it is said that interpersonal utility comparisons are impossible
o And for this reason, using force to redistribute resources cannot tell you whether society is objectively better off
o after the redistribution
o Society is only better off when voluntary trade occurs
o because by acting peacefully, both individuals are showing a preference, and are getting what they want
o when both people are better off, you are GUARANTEED for society to be better off
o This is the first point - Forecful reallocation of resources leads to misallocation because society is not better off
o because individuals (who cannot be added up) are getting screwed
o now, the next point
o 2) Forceful redistribution is bad because it created misallocation within the production structures
o Complex sounding, but not too difficult to grasp
o essentially, it means this;
o when you farm potatoes to sell on the market for shirts, you are producing potatoes not because you want to eat them, but because you want to trade them for shirts
o hence, you are producing in order to consume
o you have definite cost-benefit analysis
o 3 hours of your time farming potatoes and $20 fixed costs for the shovel and seeds in exchange for 7 t-shirts
o when someone forcefully takes your property
o it causes a distortion of the production structure
o you are no longer benefiting from the fruits of your labor.
56 minutes ago
o Can property be just money??
o There is no more a rational connection between your costs and your benefits
o yes
o Anything you own is property
o Allow me to quickly define property
o property - the exclusive right to a scarce good
o (to control)
o something that is scarce is something that is limited
o essentially, all resources on the world are scarce
o this includes land, money, goods, AND your body
o you have a property right to your body
o it is a scarce resources
o now, what does having a "right" mean?
o it means that you may legitimately use force to protect your ability to do something
o For example, if I have a right to the property of my house
o then I can use force to protect against aggressions against my house
o (a proper amount of force, mind you)
o (I can't shoot a man if he happens to step on my property)
o (I may initially reprimand him, if I find so fitting, and if he remains, I can go to him and show him the way out. If he refuses, I can gently push him, and if he resists, I can get a bit more physical. If he is clearly strongly resisting, I can call the cops (which I could do anyway), or I can use bodily force to remove him. If he reamains even then still, I can draw a gun on him (but not kill him))
52 minutes ago
o you get the idea
o you cannot inflict undue harm to someone to get him off your property
o Yea
51 minutes ago
o yet you do have the ultimate right to your property
o and everyone else has the right to theirs
o hence, when people talk about "life, liberty, and property" being the rights of man
o it can in fact be folded into one: property
o You own your body (a property right, as dull as that may sound), so you have your life and your liberty
o But the government doesn't respect these rights??
50 minutes ago
o essentially, yes
o that is what I'm getting at
o let me see where I cut off a few minutes ago
o to explain rights
o ight
o so
o forceful interference with property rights
o destroys the connection between your labor and your rewards for labor
o you are no longer allowed to benefit from your labor
o or the resources other people willingly gave to you
o therefore, rational economic calculcation no longer makes sense
o production stops being for the purpose of consumption
48 minutes ago
o your labor stops being you using your life and time to provide for yourself while respecting the rights of other
o s
o In this way, property is misallocated
o and sorry, but there is a third meaning
o Np
o more precisely, consequence
o of property misallocations
o 3) Property misallocation diverts resources from productive uses and good stewards of property and towards inefficient property uses
o again, complex sounding, easy to understand
o when a person has accumulated a certain amount of wealth on the free market
o it reflects his abilities to manage his resources
o he found the best use for his land/labor/money/furniture, whatever
o Profits and wealth don't exist in a void
o people aren't simply wealthy or poor
o (more properly, not wealthy, as poverty is a slightly different issue, on which I will elaborate a bit later)
o as I said, wealth doesn't simply go to people
o (in economics, wealth simply means posessions such as money and goods)
o when people make more money, it is because they make more trades
o they make more trades when they offer goods and services that people like
o and so they get more customers
o not only that, but if they make a profit, then it means that people are in fact willing to pay a good amount for that good or service
o Hence, far from being evil, profits on the free market are a good thing
o Profits indicate an ability to serve the customer
o But not only this!
o When a company has a profit, then this creates an incentive for other companies to enter the market
o this, in turn, drives down the price of their good
o this means that profits also allow for the coordination of markets
o they tell entrepreneurs where the money is
o this means that entrepreneurs see where there is room for more competition
43 minutes ago
o So competition is good??
42 minutes ago
o if they see Walmart suddenly making a lot of money, they will enter the market and drive down prices while competing
o competition is good
o because it drives down prices
o and because it brings innovation
o I invent the Mac, for example
o I make $1,000
o off of each Mac
o that is $1000 profit, which means after I subtract my cost
o when you see that I make great money off of Macs, you come in the market and charge $900
o you take away some of my customers and still make a handsome profit
o I get angry and I charge $800
o At some point, we may come to an agreement to not lower our prices any more
o this is called a cartel
o now, one would say "see, the market fails!"
o BUT
o cartels always fail
o the incentive for even more people to enter the market is too great
o Mr Papas comes in and charges only $300 per iPad
o etc
o having the profit signal tells us when customers are willing to spend more money than the business owners put in
38 minutes ago
o So how does competition benefit a company if prices go down and make less profit??
o becuase entrepreneurs always look for a way to make a profit, they can come into a market that has high profits, make innovations and cut costs, and draw away some of my profit
o Alright
o One sec
37 minutes ago
36 minutes ago
o give me 5 minutes
30 minutes ago
o ok back
o sorry, phone
o you there?
o I'm here
29 minutes ago
o Alright, so - competition doesn't necessarily benefit a company. The thing is, competition benefits the consumers - it gives them more products at a cheaper price and with more features
o it's not a problem that it doesn't benefit companies
o because companies exist to sell products to consumers
o if a company can't sell good products, then it's not a good user of its resources
o either because it wastes them, or it incorrectly measured a need in the market
o but in either case, the company that doesn't make a profit will not exist any more because it doesn't provide useful goods to consumers
o this is inherently different from government, because government forces people away from their choices, while companies failing on the market is not forceful and doesn't direct resources away from useful projects
o it in fact makes sure that resources go to the useful companies
o so this ties back to what I said before
o coercive action does the opposite of the market - it misallocates resources
o it takes them away from the useful, productive, and good sectors of the economy (the profitable ones)
o and gives it to sectors that have not met the market test - for example, the GM bailout
o GM was paying its workers crazy high wages and not making cars that Americans wanted
o hence, GM was about to fail
o but government, in the name of nationalism
o gave it a bailout
o what this does is it destroys the natural customer sovereignty in the market
o while buying and selling on the market allows companies to learn what projects are useful to the consumer, and firms which are not very good fade away (thus naturally pruning the market for the consumer)
o bailouts destroy this natural market force
o bailouts take resources away from productive, profitable (and hence, customer-satisfying) businesses
o and give them to failed businesses
o which create either poor products
o or waste resources
o or create products that the public doesn't want
o (again, waste)
o hence, this government redistribution is no more than corporate welfare - a forceful tool of special interests
o to take money from the public (and individuals) and give it to bad companies
o which do not provide society with useful products that pass the cost-benefit test of the market
o and which are ungoverned by market mechanisms
o In this way, government reallocation of resources takes the resources from where they are being useful and providing a good service and puts them in a place where they are not as useful
o occasionally, the government may put the resources in a place the market would have placed them anyway
o but most of the time, it doesn't
o if it sometimes does, it is a fluke
o However, all of this is hidden behind deceptive rhetoric
o They say "X millions of jobs were saved/created"
o while they neglect to look at what is unseen
o sure, the government could have "created" 2 million jobs, but the question is "compared to what"?
o To give you a taste of what I mean, consider this:
o the government forcefully takes half of all the wealth in the US and creates 1 million jobs
o they announce this on TV and they say "yay, we saved the economy, see? 1 million jobs!"
o But they are only looking at what is seen, and not at what is unseen
o they are not looking at the billions of ways that this could have been put to use in other ways
o which would have been determined by the market - that is, consumer preference
o which likely would have created millions of more jobs
o now you see why it's a fake when a politician says "the government saved 300,000 jobs"
o alright, Mr. Romney, how many did it prevent, though?
o alright, Mr. Obama, how do we have any clue that these are "useful" jobs
o the only test for the usefulness of products is the market and the consumer test - do people buy this thing and hence show their preference for it over something else
o Now, take this effect and multiply it by many thousands
o because that is how much the government distorts market forces
o in millions of ways
o onerous taxes, regulations, bans, restrictions
o all of these on peaceful individuals who are not harming anyone else
o crime is obviously illegal, and duly punished, but a man can go to jail if he merely refuses to pay taxes
o deconstructing this and seeing it for what it is, it is men coming into your house, using force to kidnap you, put you in a cage, and in the meantime take the stuff that you worked your life to accumulate through thousands of voluntary, peaceful trades with other people
o of course, this might be disguised as something like "it's the social contract - we must pay the price for being born in society"
o but of course, closer inspection reveals this to be false
o and fallacious (we'll be using this word a lot - it essentially means based on bad logic)
o Saying "born into a civilized, good society" is a veil for what actually lies underneath
o we are not merely born into a world and privileges fall from the sky on us from this entity called "society"
o We do not owe this abstract "society" our lives so as to have it take stuff from us
o break the scene down
o What is society?
o Individuals interacting
o what is this "civilization" that we get from society?
o It likely means technology, available food, heat and water, etc
o all things which aren't given by an arbitrary being called "society"
o but actually by "the market"
o It's not like babies are washed in the waters of some divine river and then we owe our lives to repay the debts that we have now acquired
o no
o you are born
o look at it from the outside perspective
o your parents have you
o you come out of your mom's belly
o SHE pays for your hospital stay
o SHE clothes you
o SHE feeds
o you
o SHE gives you shelter
o SHE pays for your food
o SHE pays for your entertainment
o the clothes on your back are thanks to your FATHER's money
o You grow up under the wing of your parents who buy things on the market with THEIR money
o then you grow up
o get a job
o and then YOU pay for your own stuff
o There is no abstract service called "civilization" that you are getting
o all of these things are people selling you goods and you paying for them
o There is no mysterious "original sin" that is put on babies by society and civilization
o there is no sin we have to repay
o the only reason this "civilization" rains on us is because we pay for it
o we work for it
o and we trade with each other
o civilization is a product of the market, of voluntary interactions, of people cooperating because voluntary cooperation improves life
o sometimes thanks to the profit motive, sometimes thanks to moral motives
o either way, it's thanks to people individually maximizing their utility
o by exercising control over their authority in such a way that it improves their lives
o by doing what THEY believe is best for them
o Yes, we must pay for civilization - it's called the market, and we pay for it by getting a job and working - all voluntarily
o So there is no "social contract" signed in blood when you are born that is due to you being "born privileged"
o even if you are born rich, it is because your parents worked hard and made the right choices
o and then they decided to voluntarily gift you with life and property
o because that was what made them happy
o all of this, IF there is a market
o if your parents made their fortunes on the market, they satisfied the wants of their customers (or employers) well
o if your parents made their fortunes through government, that is different
o in that case, it is production that has been taken from productive people
o (and mind you
o if your parents work for the government it's no the same thing)
o (they're not evil or something)
o (don't hate the player, hate the game)
o what I mean is, that the legal system based around institutionalized theft is the bad thing
o I don't blame bureaucrats for being evil
o perhaps misguided if they want to expand the government, but they're not criminals themselves
o it's the institution that corrupts
3 minutes ago
o and here I will make a small exception for the courts, army, and police
o I do not want to go on a discussion about those
o because they're more complex
o let's assume, for the sake of the argument at the moment, that minimal taxation to run the courts, police, and army is necessary (ie, a neccessary evil)
o That is, it is preferable that they didn't exist, but due to pragmatic considerations they must exist
o we can discuss this later or some other time
about a minute ago
o Can we finish off tomorrow because I have to start my homework but in summary we want the government to have little influence in the economy because they use their power to misallocate our property but this is bad because we aren't sastified with how our property is used?
o essentially
o the economy then stops being people improving their lives
o And a good example of misallocation is the government using our money to assist failing companies??
o and it also stops being resources going to the most efficient players
o "players"
o do note that many of the companies today have gotten big thanks to government
a few seconds ago
o Ok thxs for explaining and we can continue tomorrow
o and not the free market
o so don't look at all companies and praise them
o One more question but I gotta keep it short is taxation an example of misallocation??
22 minutes ago
o Do you think it fits into what I described?
o (I will discuss poverty and related issues some other time)
o Since the government is redistributing our property where we don't profit??? And yes I think it fits
21 minutes ago
o yes, it fits the bill, correct
20 minutes ago
o Ok in summary we want little government influence in economy because of misallocations
o Yes. It makes society poorer
19 minutes ago
o That included government not having the right taxing companies for space exploration
18 minutes ago
o If the companies exist, it's because they make money. If they make money, they provide useful services. If government taxes them, it nullifies the market signals that consumers are sending to the business with the profits
o Government prevents the creation of wealth (as dictated by consumers) in this way
o Our tax breaks will be a first step towards restoring the proper market forces
12 minutes ago
o Ok thxs again u sure do know a lot lol I feel smarter
o haha
o Does what I say make sense?
o I'm certain I'm not perfect
o
11 minutes ago
o It makes complete sense
o Also let me know if you disagree, and we can talk about stuff
o Sure
o Oh yea one more thing lol
10 minutes ago
9 minutes ago
o Should i disregard the article big business and big government because it stated that big businesses like big government which contradicts our lassiez fair belief
o nah, the article is central to our theme!
o Our argument is laissez-faire good
o the article says that big business likes big government
o hence, these actions of big business are not good
o the reason for including it is this:
o many people look at the free market and laissez-faire and think "Big Business wants laissez-faire! If you have free market the evil corporations will take over!"
o This is in fact incorrect, as the article shows
o there might be some leaders in larger businesses who want free markets
o because they believe in the power of voluntary actions
o *action
7 minutes ago
o Ohhh ok
o Such as the founder of PayPal or the founder of Wikipedia
o both libertarians
o but the point is - Big Businesses don't want laissez-faire, they want government!
o If you want a world controlled by corporations, keep passing regulations and government interference
o if you want a world where people are productive and the customer comes first, then don't have government interference
o By using government, "progressives" are actually ushering in their worst nightmare
o Most of the monopolies that have ever existed were government-created monopolies
o Not free market ones
o That is why the article is key
o we show that the evil most people decry comes because of forceful intervention
o not from free trade
o We are realizing that what we have right now is not free markets, but a very convoluted system of forceful action against peaceful individuals - often with the intent of helping the wealthy and to keep the elite in power
o Ok u answered all my questions for now xD
2 minutes ago
o glad I could help
o and don't think you're off the hook! This is just the beginning!
o Hahahaha I look forward to learning about the ways of economics/politics
o it's important being informed
o I try to make an argument that I support
o I hope I can convince you of it, or if not, then give you an alternative perspective
o Yea its sad so many Americans miss the opportunity to learn about governmental actions that affect us daily and yes u have convinced me lol
o It takes some time to absorb all of this
And there are a lot of question left unanswered
o But I've given you a general framework to analyze the world, and the next times we meet I will provide an interpretation of history through this lens
o To see whether we've had free markets and what they (or the lack of them) have brought us
How do you think I did? Did I make any mistakes? Can I explain something in a better way?
Wow, that was hard-hitting! You were able to pack a lot of info into each sentance. I'm saving this to share with newbies down the road.
Here is one of my favorite analogies from Walter Williams that I shared back in college when the teacher talked about capitalism being all about greed and not serving your fellow man. It was very effective so maybe it will be useful:
Indeed, we might think of the dollars people earn as certificates of performance. Think of it in the following way. You hire me to mow your lawn. After I have completed the task, you give me $20. I go to the grocer and demand a pound of steak and a six-pack of beer that my fellow man produced. The grocer says, "You're demanding something that your fellow man has produced. What have you done to serve him?" I reply, "I have served my fellow man by mowing his lawn." The grocer says, "Prove it!" That's when I hand him my $20, my certificate of performance.
Income earners owe nothing else to their fellow man; they have met their social obligations.
You are doing really good! I saved it right after reading it for the same reason as Anarcho. I've always liked that Walter Williams analogy above and it also came to mind as I was reading this. :)
Lookin good! I just wish there was a quick way to put that dialog into a more readable format. Did you try going to your Messeges and copying it from there? I think it may come out a little cleaner than what you get from the main chat window.
Also is your topic focused on tariffs? Or did you just figure that would be an easy way to help get points across?
This was great! haha I like the format too (of a chat). I sent a buddy of mine a reading list along these lines (he's been arguing anarcho-communists) and this discussion between you and your friend seems happily similar. If you can, show him Hoppe's argumentation ethics (with the ground you covered, I'm surprised this wasn't here haha!). My buddy and I have used that in our battles and we haven't heard back from the other side since (last communications were about a week ago), so I'm guessing it's over. Try to bring the crux of logic to your debate- drop it like it's Hoppe! This was a very fun read- good luck!
If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH
One thing to note is that the deepest reason that we cannot compare utility between individuals is because we cannot actually model the human being - this is not merely practically impossible, it is actually theoretically impossible.
Clayton -
I put your dialogue in a little bit more readable format (regexp ftw), have fun. You did a good job (judging from what I've read so far). :)
Guy: Hey PERSON are we for a laissez-faire economy because one article says that libertarians want the government to have little influence over the economy while another article stated that big business want big government??? Me: Yes, that's our argument. Guy: And what specific property rights do we want to give to the private sector?? Me: is that a question about one of the specific articles? or in general And I don't know what you mean saying "what private property rights" Guy: I meant to say private property rights Me: right, I don't know what you mean by asking what rights we want to give them Guy: And I'm asking how does private property rights relate to providing tax breaks to private companies Me: do you have video? Guy: No I'm reading the Mahoneys paper property rights and misallocation and I'm trying to make the connection between this paper and our affirmative case Me: right so you don't have a webcam? Do you pay for incoming calls? might be easier to explain if I call Guy: Ok can u call me later? And yea I can webchat to fb our oovoo is find I'm not home right now thats y Me: ah Guy: Or* Me: alright well should I still tell you now something, at least to think about? Guy: Sure to give me clarity Me: Alright. So the entire idea is that the market, the economy, property rights, politics, and allocation of resources are all interconnected property rights entitle a person to the product of his labor also, any transactions he has with anyone else and any gifts for example I go to a piece of unowned land I fence it off I improve the land in some way (farm it, build a house, something) Me: and it becomes mine because I mixed my labor with it and people don't just randomly mix their labor with stuff, they do it to satisfy needs and wants (I'm getting there) (slowly) Guy: Ok lol Me: People could hypothetically satisfy their wants and needs by themselves however, this is very difficult because we can't all be awesome at everything I can't farm my food, teach my children, clean the house, perform surgery on myself, fix my computer, build my house, fix my plumbing, and to my dental work not only because I don't have all that time but because I do not in fact posess all of those skills hence, it is useful to me to exchange goods that I am good at producing for other people' s goods and services I do this, again, to satisfy my wants and needs in fact all human action aims to do this Humans act to satistfy their uneasiness whenever you act, you are showing your preference for one state of being over another if you move from A to B, you prefer being at B rather than at A So we know that trade seeks to satisfy the wants and needs of people People engage in trade because it benefits them the division of labor (or people specializing in stuff) helps "society" provide the goods and services needed Guy: All in all trading is good because its effective and easier?? Me: Sort of it's good because it makes use of other people 's skill ss (other people dangit (other people's skills) there we go we can't do everything by ourselves Now, let's unpack the word "economy": People usually talk about some monolithic entity called "the economy." The economy does this, the economy does that, etc. Now, what does this mean? The economy is in fact billions of interactions between individuals and groups It is not one big beast that exists outside the realms of humans that humans must bow down to hence, the economy is made up of people trying to improve their lot by voluntarily trading goods and services Now that we understand what the economy is, we can talk about the distribution of resources in society this is also called the allocation of resources The paper I gave you talks about some of the basics behind the allocation of resources though it frames it in an odd manner essentially, it means this: people trade resources because they believe that's the most productive use of their resources They allocate their own resources in such a way as to maximize their utility (also known as "satisfaction" or "happiness" or "the usefulness they gain from stuff) Hence, when each individual acts (as we have already said), he is showing a preference he prefers to trade $10 for a shirt This means that he values the shirt he is buying more than the $10 the seller, on the other hand, values the $10 more than he values the shirt (this is called subjective value theory - nothing has a natural "value" - it is individuals who assign values to objects. A lawnmower may have no value to me, but to you it may be very useful. In the same way, I have no use for anti-smallpox medications, though a person 100 years ago would have died for some) Me: so, because trade happens, we know that people are allocating their resources in the way they deem best for them people are using their legally, ethically obtained property as they see fit without harming any of the property of others Guy: What if they obtained it illegally?? Me: now well, that is part of what the paper deals with Guy: Is the value valid?? Me: that is what the paper deals with, in part I am about to go into that Guy: Ok Me: when the interactions are all peaceful, all's good people are maximizing their utility and using their resources as they see fit Me: after all, an economy exists to satisfy people's wants when we use our own property as we see fit, we are able to do as we see fit when COERCIVE power is entered into the equation, things go bad when resources are forcefully taken from one person and given to another, then misallocation occurs that is partly what the paper talks about it begins with the simpler and more obvious case of the burglar Guy: Whats a good example of misallocation relating to big government?? Me: I am not completely sure their approach is the best, so I will give you an alternative one here (feel free to interrupt at any point) right, I'm sloooowly getting there Guy: Ok Me: When someone forcefully takes your property, the economy stops being a web of people improving their lives by voluntarily exchanging goods There are two important points here 1) Voluntary exchange is mutually beneficial - that means that any transaction is good for both parties. Why? Well, if it weren't then it wouldn't occur. If I valued my $10 more than you t-shirt, I wouldn't buy the shirt! By acting and actually buying it, I am showing my preference of your shirt over my $10 Me: forceful taking, however, is not mutually beneficial it benefits one person at the expense of the other we cannot in fact say whether "society" is better off, because there is no way to compare the utility of different people you can't say John lost 4 utils by having his iPod stolen and Michael gained 6 utils for getting it instead, so "society" is better off you can't say that why? because it is impossible to compare utilities (or satisfactions and happiness) of different people not just practically, but even theoretically surveys don't work How can we know that my satisfaction rating 7/10 is better than your 6/10 You can easily imagine a pouting rich kid saying his satisfaction is 4/10 while a starving African child receiving ten baskets of food from Bill Gates has a satisfaction of of 10/10 comparing the numbers is useless, because there is no way to "standardize" the measurements standardization is a mathematical term meaning doing something to a group of numbers that makes the numbers meaningful to compare to each other I'll explain standardization a bit more: Say that the US has 1 million people and Canada has 10 (10 people, not million) Hm, let me make a better scenario for a sec ok the US has 1 million people and Canada has 10,000 people that is the new scenario now a survey finds out that 7,000 Canadians like apple pie while 9,000 American like apple pie From this, one might be temped to say "Americans like apple pie more" why, well, because 9000>7000 right? wrong! In fact, 9,000 Americans are a tiny fraction of the total population 7,000 canadians, on the other hand are a BIG fraction of their population you can't simply compare the numbers! Standardizing in this case would be dividing by the total population of each country hence, 7000/10000 for Canada, which gives 70% For America, 9000/1000000 which gives less than 1% Once these numbers are processed a bit (in this case, made into percents), comparison makes more sense and we clearly see that Canadians like apple pie more on avergae loosely speaking Hence, you see that in this case it makes sense to standardize when dealing with "satisfaction", however, you cannot standardize it doesn't make sense there is no mathematical function that allows you to equate the 4/10 of the rich snob with the 10/10 of the starving child Me: No amount of surveys or mathematics will allow you to make sense of the surveys For this reason, it is said that interpersonal utility comparisons are impossible And for this reason, using force to redistribute resources cannot tell you whether society is objectively better off after the redistribution Society is only better off when voluntary trade occurs because by acting peacefully, both individuals are showing a preference, and are getting what they want when both people are better off, you are GUARANTEED for society to be better off This is the first point - Forecful reallocation of resources leads to misallocation because society is not better off because individuals (who cannot be added up) are getting screwed now, the next point 2) Forceful redistribution is bad because it created misallocation within the production structures Complex sounding, but not too difficult to grasp essentially, it means this; when you farm potatoes to sell on the market for shirts, you are producing potatoes not because you want to eat them, but because you want to trade them for shirts hence, you are producing in order to consume you have definite cost-benefit analysis 3 hours of your time farming potatoes and $20 fixed costs for the shovel and seeds in exchange for 7 t-shirts when someone forcefully takes your property it causes a distortion of the production structure you are no longer benefiting from the fruits of your labor. Guy: Can property be just money?? Me: There is no more a rational connection between your costs and your benefits yes Anything you own is property Allow me to quickly define property property - the exclusive right to a scarce good (to control) something that is scarce is something that is limited essentially, all resources on the world are scarce this includes land, money, goods, AND your body you have a property right to your body it is a scarce resources now, what does having a "right" mean? it means that you may legitimately use force to protect your ability to do something For example, if I have a right to the property of my house then I can use force to protect against aggressions against my house (a proper amount of force, mind you) (I can't shoot a man if he happens to step on my property) (I may initially reprimand him, if I find so fitting, and if he remains, I can go to him and show him the way out. If he refuses, I can gently push him, and if he resists, I can get a bit more physical. If he is clearly strongly resisting, I can call the cops (which I could do anyway), or I can use bodily force to remove him. If he reamains even then still, I can draw a gun on him (but not kill him)) Me: you get the idea you cannot inflict undue harm to someone to get him off your property Guy: Yea Me: yet you do have the ultimate right to your property and everyone else has the right to theirs hence, when people talk about "life, liberty, and property" being the rights of man it can in fact be folded into one: property You own your body (a property right, as dull as that may sound), so you have your life and your liberty Guy: But the government doesn't respect these rights?? Me: essentially, yes that is what I'm getting at let me see where I cut off a few minutes ago to explain rights ight so forceful interference with property rights destroys the connection between your labor and your rewards for labor you are no longer allowed to benefit from your labor or the resources other people willingly gave to you therefore, rational economic calculcation no longer makes sense production stops being for the purpose of consumption Me: your labor stops being you using your life and time to provide for yourself while respecting the rights of other s In this way, property is misallocated and sorry, but there is a third meaning Guy: Np Me: more precisely, consequence of property misallocations 3) Property misallocation diverts resources from productive uses and good stewards of property and towards inefficient property uses again, complex sounding, easy to understand when a person has accumulated a certain amount of wealth on the free market it reflects his abilities to manage his resources he found the best use for his land/labor/money/furniture, whatever Profits and wealth don't exist in a void people aren't simply wealthy or poor (more properly, not wealthy, as poverty is a slightly different issue, on which I will elaborate a bit later) as I said, wealth doesn't simply go to people (in economics, wealth simply means posessions such as money and goods) when people make more money, it is because they make more trades they make more trades when they offer goods and services that people like and so they get more customers not only that, but if they make a profit, then it means that people are in fact willing to pay a good amount for that good or service Hence, far from being evil, profits on the free market are a good thing Profits indicate an ability to serve the customer But not only this! When a company has a profit, then this creates an incentive for other companies to enter the market this, in turn, drives down the price of their good this means that profits also allow for the coordination of markets they tell entrepreneurs where the money is this means that entrepreneurs see where there is room for more competition Guy: So competition is good?? Me: if they see Walmart suddenly making a lot of money, they will enter the market and drive down prices while competing yes competition is good because it drives down prices and because it brings innovation for example I invent the Mac, for example I make $1,000 off of each Mac that is $1000 profit, which means after I subtract my cost when you see that I make great money off of Macs, you come in the market and charge $900 you take away some of my customers and still make a handsome profit I get angry and I charge $800 At some point, we may come to an agreement to not lower our prices any more this is called a cartel now, one would say "see, the market fails!" BUT cartels always fail the incentive for even more people to enter the market is too great Mr Papas comes in and charges only $300 per iPad etc etc having the profit signal tells us when customers are willing to spend more money than the business owners put in Guy: So how does competition benefit a company if prices go down and make less profit?? Me: becuase entrepreneurs always look for a way to make a profit, they can come into a market that has high profits, make innovations and cut costs, and draw away some of my profit Alright One sec Guy: Ok Me: give me 5 minutes Guy: Ok Me: ok back sorry, phone you there? Guy: I'm here Me: Alright, so - competition doesn't necessarily benefit a company. The thing is, competition benefits the consumers - it gives them more products at a cheaper price and with more features it's not a problem that it doesn't benefit companies why? because companies exist to sell products to consumers if a company can't sell good products, then it's not a good user of its resources either because it wastes them, or it incorrectly measured a need in the market but in either case, the company that doesn't make a profit will not exist any more because it doesn't provide useful goods to consumers this is inherently different from government, because government forces people away from their choices, while companies failing on the market is not forceful and doesn't direct resources away from useful projects it in fact makes sure that resources go to the useful companies so this ties back to what I said before coercive action does the opposite of the market - it misallocates resources it takes them away from the useful, productive, and good sectors of the economy (the profitable ones) and gives it to sectors that have not met the market test - for example, the GM bailout GM was paying its workers crazy high wages and not making cars that Americans wanted hence, GM was about to fail but government, in the name of nationalism gave it a bailout what this does is it destroys the natural customer sovereignty in the market while buying and selling on the market allows companies to learn what projects are useful to the consumer, and firms which are not very good fade away (thus naturally pruning the market for the consumer) bailouts destroy this natural market force bailouts take resources away from productive, profitable (and hence, customer-satisfying) businesses and give them to failed businesses which create either poor products or waste resources or create products that the public doesn't want (again, waste) hence, this government redistribution is no more than corporate welfare - a forceful tool of special interests to take money from the public (and individuals) and give it to bad companies which do not provide society with useful products that pass the cost-benefit test of the market and which are ungoverned by market mechanisms In this way, government reallocation of resources takes the resources from where they are being useful and providing a good service and puts them in a place where they are not as useful occasionally, the government may put the resources in a place the market would have placed them anyway but most of the time, it doesn't if it sometimes does, it is a fluke However, all of this is hidden behind deceptive rhetoric They say "X millions of jobs were saved/created" while they neglect to look at what is unseen sure, the government could have "created" 2 million jobs, but the question is "compared to what"? To give you a taste of what I mean, consider this: the government forcefully takes half of all the wealth in the US and creates 1 million jobs they announce this on TV and they say "yay, we saved the economy, see? 1 million jobs!" But they are only looking at what is seen, and not at what is unseen they are not looking at the billions of ways that this could have been put to use in other ways which would have been determined by the market - that is, consumer preference which likely would have created millions of more jobs now you see why it's a fake when a politician says "the government saved 300,000 jobs" alright, Mr. Romney, how many did it prevent, though? alright, Mr. Obama, how do we have any clue that these are "useful" jobs the only test for the usefulness of products is the market and the consumer test - do people buy this thing and hence show their preference for it over something else Now, take this effect and multiply it by many thousands because that is how much the government distorts market forces in millions of ways onerous taxes, regulations, bans, restrictions all of these on peaceful individuals who are not harming anyone else crime is obviously illegal, and duly punished, but a man can go to jail if he merely refuses to pay taxes deconstructing this and seeing it for what it is, it is men coming into your house, using force to kidnap you, put you in a cage, and in the meantime take the stuff that you worked your life to accumulate through thousands of voluntary, peaceful trades with other people Me: of course, this might be disguised as something like "it's the social contract - we must pay the price for being born in society" but of course, closer inspection reveals this to be false and fallacious (we'll be using this word a lot - it essentially means based on bad logic) Saying "born into a civilized, good society" is a veil for what actually lies underneath we are not merely born into a world and privileges fall from the sky on us from this entity called "society" We do not owe this abstract "society" our lives so as to have it take stuff from us break the scene down What is society? Individuals interacting what is this "civilization" that we get from society? It likely means technology, available food, heat and water, etc all things which aren't given by an arbitrary being called "society" but actually by "the market" It's not like babies are washed in the waters of some divine river and then we owe our lives to repay the debts that we have now acquired no you are born look at it from the outside perspective your parents have you you come out of your mom's belly SHE pays for your hospital stay SHE clothes you SHE feeds you SHE gives you shelter SHE pays for your food SHE pays for your entertainment the clothes on your back are thanks to your FATHER's money You grow up under the wing of your parents who buy things on the market with THEIR money then you grow up get a job and then YOU pay for your own stuff There is no abstract service called "civilization" that you are getting all of these things are people selling you goods and you paying for them There is no mysterious "original sin" that is put on babies by society and civilization there is no sin we have to repay the only reason this "civilization" rains on us is because we pay for it we work for it and we trade with each other civilization is a product of the market, of voluntary interactions, of people cooperating because voluntary cooperation improves life sometimes thanks to the profit motive, sometimes thanks to moral motives either way, it's thanks to people individually maximizing their utility by exercising control over their authority in such a way that it improves their lives by doing what THEY believe is best for them Yes, we must pay for civilization - it's called the market, and we pay for it by getting a job and working - all voluntarily So there is no "social contract" signed in blood when you are born that is due to you being "born privileged" even if you are born rich, it is because your parents worked hard and made the right choices and then they decided to voluntarily gift you with life and property because that was what made them happy all of this, IF there is a market if your parents made their fortunes on the market, they satisfied the wants of their customers (or employers) well if your parents made their fortunes through government, that is different in that case, it is production that has been taken from productive people (and mind you if your parents work for the government it's no the same thing) (they're not evil or something) (don't hate the player, hate the game) what I mean is, that the legal system based around institutionalized theft is the bad thing I don't blame bureaucrats for being evil perhaps misguided if they want to expand the government, but they're not criminals themselves it's the institution that corrupts Me: and here I will make a small exception for the courts, army, and police I do not want to go on a discussion about those because they're more complex let's assume, for the sake of the argument at the moment, that minimal taxation to run the courts, police, and army is necessary (ie, a neccessary evil) That is, it is preferable that they didn't exist, but due to pragmatic considerations they must exist we can discuss this later or some other time about a minute ago Guy: Can we finish off tomorrow because I have to start my homework but in summary we want the government to have little influence in the economy because they use their power to misallocate our property but this is bad because we aren't sastified with how our property is used? about a minute ago Me: essentially the economy then stops being people improving their lives about a minute ago Guy: And a good example of misallocation is the government using our money to assist failing companies?? about a minute ago Me: and it also stops being resources going to the most efficient players "players" yes do note that many of the companies today have gotten big thanks to government Guy: Ok thxs for explaining and we can continue tomorrow Me: and not the free market so don't look at all companies and praise them Guy: One more question but I gotta keep it short is taxation an example of misallocation?? Me: Do you think it fits into what I described? (I will discuss poverty and related issues some other time) Guy: Since the government is redistributing our property where we don't profit??? And yes I think it fits Me: yes, it fits the bill, correct Guy: Ok in summary we want little government influence in economy because of misallocations Me: Yes. It makes society poorer Guy: That included government not having the right taxing companies for space exploration Me: essentially, yes If the companies exist, it's because they make money. If they make money, they provide useful services. If government taxes them, it nullifies the market signals that consumers are sending to the business with the profits Government prevents the creation of wealth (as dictated by consumers) in this way Our tax breaks will be a first step towards restoring the proper market forces Guy: Ok thxs again u sure do know a lot lol I feel smarter Me: haha Does what I say make sense? I'm certain I'm not perfect Guy: It makes complete sense Me: Also let me know if you disagree, and we can talk about stuff Guy: Sure Oh yea one more thing lol Me: o Guy: Should i disregard the article big business and big government because it stated that big businesses like big government which contradicts our lassiez fair belief Me: nah, the article is central to our theme! Our argument is laissez-faire good the article says that big business likes big government hence, these actions of big business are not good the reason for including it is this: many people look at the free market and laissez-faire and think "Big Business wants laissez-faire! If you have free market the evil corporations will take over!" This is in fact incorrect, as the article shows there might be some leaders in larger businesses who want free markets because they believe in the power of voluntary actions *action Guy: Ohhh ok Me: Such as the founder of PayPal or the founder of Wikipedia both libertarians Me: but the point is - Big Businesses don't want laissez-faire, they want government! If you want a world controlled by corporations, keep passing regulations and government interference if you want a world where people are productive and the customer comes first, then don't have government interference By using government, "progressives" are actually ushering in their worst nightmare Most of the monopolies that have ever existed were government-created monopolies Not free market ones That is why the article is key we show that the evil most people decry comes because of forceful intervention not from free trade We are realizing that what we have right now is not free markets, but a very convoluted system of forceful action against peaceful individuals - often with the intent of helping the wealthy and to keep the elite in power Guy: Ok u answered all my questions for now xD Me: Alright glad I could help and don't think you're off the hook! This is just the beginning! haha Guy: Hahahaha I look forward to learning about the ways of economics/politics Me: o it's important being informed I try to make an argument that I support I hope I can convince you of it, or if not, then give you an alternative perspective Guy: Yea its sad so many Americans miss the opportunity to learn about governmental actions that affect us daily and yes u have convinced me lol Me: It takes some time to absorb all of this And there are a lot of question left unanswered Me: But I've given you a general framework to analyze the world, and the next times we meet I will provide an interpretation of history through this lens To see whether we've had free markets and what they (or the lack of them) have brought us