Tuesday, May 28, 2013

We're All Criminals Now

There are many men and women who see police officers as heroes, as those who save us from the lawlessness which would engulf a world without government and law enforcement. They never tire of telling us how important the police are, they side with the police in every dispute, give them the benefit of the doubt whenever allegations arise, and even should a crime be proven to have been committed by an officer, they will explain it is a rare exception, that the profession is, for the most part, filled with noble and decent men and women.

But put them in a car, and let them see red and blue lights in their rear view mirror, or a state trooper with a radar gun, and they will roundly curse those same police officers the same as anyone else.

Perhaps that is a bit of an exaggeration, but I think it illustrates the point with which I want to open. That is, for most of us, police are good and decent men. And many of us will even allow that other government functionaries are worthy individuals pursuing thankless tasks. However, once the context changes and we are uncertain of our legal position, or worse, know we are going to be seen as in the wrong, and we suddenly see those noble functionaries as hated rivals1.

The depressing part of this revelation is that it does not have to be. We could easily exist in a nation where, unless we intentionally broke the law, we would never find ourselves in this circumstance, but it is not to be. Why? The reason we find ourselves in such circumstances are threefold, and both are due to problems with our contemporary government.

First, we find ourselves in confrontation with authority figures because laws are passed which are consistently broken by a majority, or at least a considerable minority. Speed limits come to mind as the best example of legal fictions. A vast majority of us regularly violate the speed limits, including those who passed the laws. While they are justified with platitudes about safety and fuel economy and what not, we all demonstrate we either do not believe such statements, or don't care. In either case, we are passing laws in which we do not believe, and thus end up in constant conflict with authority.

Second, there are laws which, as written, or as enforced, are simply impossible to understand, or at best are subject to completely arbitrary interpretation, leaving us uncertain whether or not what we are doing is legal. As we worry that at any moment what was once acceptable will now result in a penalty, we find ourselves fearing and hating those charged with enforcing these unintelligible laws.

Finally, there are laws which are simply impossible to obey, or which, at best, impose massive real world penalties upon those who obey them. For example, a well known liability case involved a pesticide company sued for failing to put specific warnings on a label, despite the fact that government regulations said the label could only contain specific pieces of text, not including such warnings. These sort of laws leave individuals forced to choose between obeying the law and facing financial ruin or other dire penalties. As a result, those who enforce such laws become seen as enemies quite quickly.

Some may say that this is inevitable, we will always have such situations, and we just have to accept it. But I would argue this is not true. Perhaps taxmen will always be unwelcome, but even there I think a more clear tax code would do wonders. Int he other cases, there is every reason to believe this sort of enmity need not exist. For example, historically, police have not been seen as foes by those outside the criminal classes, at least in states which did not try to use police for purposes other than protection of rights. And similarly, I imagine were we to limit laws to preventing force, theft and fraud, and punishing those crimes when they occur, people would not see police or government in the negative light many now do. It is simply because intrusive, arbitrary government turns so many of us into law breakers, or potential law breakers, that we have such a negative impression of police and the state.

Of course, there is another argument for adopting such a simplified set of laws as well. The flip side of this problem, the hostility we feel toward the state, is the way our law breaking affects the state's view of us. Just talk to an IRS employee for a time and see what he thinks of tax payers. Thanks to the environment of the IRS, and the fact that they tend also to see taxpayers in such confrontational circumstances, the IRS tends to see taxpayers not as those who are confused and make mistakes, but to a man as intentional tax cheats. Similarly, it is not uncommon for police officers to come to see the average man as a law breaker.

Of course, no reform will completely eliminate this, as the contexts in which these professions operate will always color their views. But, if we has less casual law breaking, or fewer circumstances in which confusion or unclear laws made unintentional violations possible, it is likely those charged with enforcing laws would see a lot fewer of us and might come to develop a less jaded attitude.

And such attitudes do cause problems. When faced with creating laws and regulations, if a law maker sees individuals as intentional law breakers, he is likely to take much different actions than if he thinks violations are due to confusion or imprecise wording. In short, it is much easier to justify taking stronger action against those who intentionally break the law than those who do not, or those whose violations are due to flaws in the law.

And there is one final consideration. If the majority of us are criminals, or potential criminals, due to some technical violation or other, then we also are all potentially subject to arrest. It is unlikely we will ever be picked up for such petty violations as most of us commit, but just as the police use petty infractions to bully informers into providing information, or lawyers bargain away charges to get confessions to other crimes, it is possible that some government agent who wants us to do something, anything, might use that little violation as a level to get us to do it. And, given the attitude mentioned above, it is likely he won't even feel any guilt. After all, we are just another criminal.

But the problem is, as the title states, we are all criminals, or at least a lot of us are. Be it a health code violation, code violations in our homes, home improvements without a permit, failure to report interest on our taxes, the failure to license our cat, or something else, it is likely that we have all violated some law or another, some regulation, something. And in the end, that is an undesirable circumstance. A free government, of free men and women, should concern itself with significant matters, not trivialities. If you find that the majority of your people have broken the law, then something is wrong with the laws, not the people. Perhaps such trivial violations will have no effect, will never make a difference in your life, or in the actions of the state, but once we accept that we are always going to be breaking some law, don't we lose a little respect for all laws? And worse, doesn't the state come to see us, as well, as habitual criminals, unable to obey laws? And that is a situation which will bring nothing good.

================================================================

1. This is likely why the IRS is the one group about which very few have anything good to say. Almost all interactions with the IRS are confrontational. As we complete taxes without their aid, we almost never see IRS staff except for audits and other inquiries likely to cost us money. In addition, because of the uncertainty we all feel about tax laws, even less confrontational encounters are fraught with danger, as we are never really sure we did not violate some rule.

The Problem of Antitrust

Likely the most noteworthy antitrust suit in recent years was that of Microsoft. Being one of the largest, if not the largest, tech company, and familiar to even non-technical individuals far and wide, with a suit centered on products most Americans knew to some degree, it was in the news for a considerable time. However, what is interesting is how little most people knew or understood about the issues being debated, or even why the suit was brought -- at least the legal justification, the actual motives may have been somewhat different -- though I should not really be surprised, as the world of antitrust law is, for all the power granted to the state, quite a nebulous area, and one which even the experts fail to understand or agree upon.

Antitrust is the ultimate populist measure1, born as it was from the ever popular "fear of the big"2. It is not coincidence that the Sherman Antitrust Act was created in 1890, the same year that saw the decision in Munn v Illinois push the interstate commerce clause to the limits, including even commerce that never left a single state3, as well as the first step in the transformation of the Democrats from the states' rights, laissez faire party of the 19th century into the statist party of Wilson, FDR, Kennedy, Carter, Clinton and Obama4. Though at the time largely supported by the "reform Republicans", the lack of a united Democratic party, as well as the existence of numerous "Free Silver", "Populist" and other fringe parties and movements, definitely played a part in the passage of this bill, along with many of the early interventionist measures. (Including the State Banking System which would eventually become the basis for the Federal Reserve system5.)

But enough history -- I have already described at length both the changes that occurred in and around 1890 and the subsequent shift in the platforms of both parties elsewhere, and those who are interested can find those essays easily enough -- what we need to understand is precisely what the antitrust laws say and do, as the true measure of a law is not what it was supposed to do, but rather what it actually accomplishes. Though, in the case of antitrust, the intent and result are much closer than most bills, not that that is necessarily a good thing.

The problem is, there is no real answer to these questions. Most people have a vague "common sense" understanding of antitrust laws, based upon an equally vague understanding of the concept of monopoly, but in truth, the assumptions most of us hold have little to do with what the antitrust laws truly say, or, to make things even less precise, what they have been understood to mean by various and sundry courts.

Taken at face value, antitrust laws exist to prevent monopolies -- and perhaps cartels -- from forming within certain markets. Of course, even that overly simplified definition is problematic, with terms such as "market" being not only ill-defined, but so subjective that it is effectively meaningless6. But beyond that, the law has been expanded to cover all manner of supposed imbalances of competition, trying to ensure that competition is -- to use another ill-defined term7 - "fair".

There are two problems with this approach. First, the problem that almost every measure used to determine what is an is not a monopoly is predicated upon ill-defined or undefined terms. Second, the entire idea that a supposedly coercive monopoly could exist in a free market for any time -- or that non-coercive monopolies would be harmful -- is ludicrous. Actually, there are other problems as well, such as the fact that most theories of monopoly make frequent use of meaningless measures such as "market price", which makes it impossible to determine what is or is not a monopoly, and  whether a monopoly exists or not, what harm it is supposed to do8. And yet, on the basis of a term the meaning of which is exceedingly uncertain, and the harm it may cause being unproven and unknown, we fine businesses, jail executives, break up firms, prevent mergers and otherwise exercise an unheard of amount of control over economic affairs.

But I have said all of this elsewhere, and in much greater detail. So, what is my point? Why did I start with mention of Microsoft? What, in other words, am I trying to say?

To keep it brief, my point here is that antitrust laws, far from being useful tools for protecting the competitive market, are actually both a very dangerous tool for government coercion of business, and a source of dangerous uncertainty that actually cripples the free market, making businesses reluctant to undertake many ventures. And, worse still, their nature is such that, even were the state run by saints who would never intentionally abuse such laws, their uncertain meaning and differing opinions among honest and honorable men as to what is and is not sufficient competition would mean that the uncertainty I mentioned could never be eliminated so long as these laws exist.

Of course, all of this assumes that the laws have some valid purpose in the first place, that there is some ill that must be remedied, but let us put that aside for the moment, and instead take a closer look at this uncertainty, at the lack of a fixed definition of the crime, at the impossibility of know in advance whether a given course of action is permissible or not, and ask what harm this might do, and whether or not it may be remedied in practice by some additional action. After examining that question, then we can ask why these laws exist at all, and whether there exists a reason to maintain these laws or not.

Let us start by looking at the charges brought in the Microsoft case, and compare them to some actions by both Apple and Google, which seem to be quite similar, and yet which have received no attention from regulators.

In the case of Microsoft, while the attention of regulators was probably drawn by the size of the company and omnipresence of Microsoft products, the ostensible reason for the suit was initially that Microsoft attempted to exclude competitors in the web browser market through integrating the browser into its operating system so thoroughly that it excluded competitors. As one who regularly used Mozilla, Netscape and Firefox -- even Opera and Amaya -- on Windows machines at the time, I can attest it was a rather ludicrous charge. Anyone who was interested in using a different browser would have no trouble finding and installing one. However, that was the charge, so for the moment let us act as if it was a valid one.

But if it was valid, if excessive integration was grounds for fines and other penalties, as well as requiring a change to their operating system and browser, then how do we explain the lack of suits against Apple or Google? Apple has not only created a tightly integrated package of hardware and operating system, to such a degree that one pretty much must use the two together, but also integrated iTunes, and numerous other applications, very closely into the operating system, making them much more integrated than Internet Explorer ever was. Or, how about Google? Google not only bought out numerous online services and bound them together, it then created the Chrome browser, and made sure that these services were an integral part of it, and, conversely, that many of the services provided additional features when used with Chrome. And if that were not enough, Google went far beyond that and created an operating system essentially based upon its browser, making something far more integrated than Microsoft ever considered. Yet Google too has not faced antitrust action.

Please, do not take this to mean I think antitrust action is warranted in either case. In the first place, I do not believe antitrust laws are of any use, as I shall explain shortly. Beyond that, I do not believe that the two firms in questions are in any way excluding competitors. My point is, what they are doing, or have done, is not significantly different from what Microsoft did. However, Microsoft faced the wrath of the government lawyers, while Apple and Google do not. And that is my point. Or one of them. One cannot know, in advance, or even while producing a given product or service, whether or not he is a criminal. In fact, he can work in a field for a decade or more, without a single complaint, only to find that the same behavior that was acceptable for that decade is suddenly an antitrust violation. In short, because the laws are such that one can --with a sufficiently clever theory -- find an antitrust violation wherever one wants, what is legal today, has been legal for years, decades, even centuries, can suddenly support massive fines, judicial decrees, even criminal charges tomorrow.

Some will say I go too far, that the laws may be broad, but they are not that broad. However I would disagree. For example, suppose you restore autos and resell them. Suppose, because you believe them the best product, you always use specific brands of parts. Guess what, you have violated antitrust laws! Because buying your product entails buying those specific parts, one could argue that it is an illegal tying agreement. Of course, getting that case through court would involve finding the right judge, as it is a slight extension to what has traditionally been considered a tying agreement, but the logic is the same, so provided a judge could be found willing to extend the law (or with a grudge against you -- or a Spitzer type looking for headlines), you could find yourself a criminal.

Which is why I say even if the law has not yet been used in this way, if a specific abuse has not yet occurred, if it is allowed by the law, then we need to worry about it. If we rely on "common sense" to rein in the courts, to prevent the law from being taken to its logical extremes, we will always be disappointed. Sooner or later a judge will have a "common sense" understanding that differs from ours, or the "right people" will no longer be in office. Someone with ambition or a desire to crusade will take that law and run with it, and suddenly our "common sense" limits will vanish. Depending on "knowing it when you see it" or line drawing to prevent us from going down slippery slopes is a losing proposition9.

But what makes this whole argument so absurd is that there is not any need for these antitrust laws at all. We have introduced a massive amount of arbitrary power into the government, given the state the ability to prosecute pretty much at will, introduced an arbitrary law that the corrupt can use to extort whatever they want from whoever they want, and all to stop a problem that does not exist.

I won't go into great detail, as I discussed it in several essays I have already cited, but the basic issue is that, in a free market, monopolies can only exist if they provide either exceptional quality at a reasonable price, or ordinary quality at a very low price. In other words, if they are so efficient no one can compete, and thus consumers wish to buy from no one else. There is simply no other way to maintain a monopoly for any length of time. Granted, for short periods of time, market circumstances might allow monopolies to exist which are not efficient, which charge higher prices than would exist in a more competitive market, and earn profits above the normal rate of return, but those profits are the reason they fail to last. In one way or another, the promise of high profits will bring in competitors, who will find ways to steal part of that market share. And without government protection excluding other firms, there is nothing to stop them, meaning monopolies will not last. And thus, these laws are pointless.

Or would be, if not for one factor. The state. When the state becomes involved, it is possible for monopolies to exist, but, for the most part, state created monopolies, such as utilities, at one time phone companies, the one time cartel of television networks or of airlines, were excluded from antitrust legislation. And so, the few true monopolies were beyond reach of these laws. And even if there were not, the best solution would not have been new laws under which to prosecute, but to simply remove the government rules which created them.

And so, in the end, I simply can't find a reason for these laws. They do little or no good, and at the same time cause considerable harm. In short, they simply have no point. Yet, as they are perceived as being limits on "the fat cats", and support other expressions of populist envy10, I doubt they will ever go away. For some reason, laws backed by envy tend to remain, enjoying support even of those who otherwise claim to oppose big government.

===========================================================

1.  See  "Beware Populist Deception", "Protectionism, "Protectionism Right and Left", "Deadly Cynicism""Don't Fall For Populist Interpretations of ObamaCare", "Bad Economics Part 17", "Moral For Me, But Not For Thee" and "Life Is Not Fair - And Trying To Make It So Makes Things Worse".

2. See "Fear of the "Big"", "The World's Oldest Myth", "Bad Economics Part 6", "Stupid Quotes of the Day (January 17, 2012)", "The Little Guy Can't Compete", "Small Business Fetish" , "Bad Economics Part 19", "The Libertarian Left", "Economic and Political Power Revisited", "Power - Political and Economic", "Greed Versus Evil" and "Fiscal Discipline".

3. As described in "The Best Historical Example".

4. See "The Political Spectrum" , "Rethinking the Scopes Trial", "Mistaken Perceptions of the Industrial Age",  "Child Labor and the Industrial Revolution" and "Four Elections".

5. See "The Inflation Engine", "Recipe For Disaster", "Wolf or Sheep", "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Stupid Quote of the Day (January 7, 2012)", "Explaining Past Crashes", "Stupid Quote of the Day (January 7, 2012)", "Julius Caesar, Elliot Spitzer and Andrew Jackson" and "The Endless Cycle of Intervention".

6. To demonstrate why I say "market" is a meaningless term, I present my argument from "Competition":
Let us look at a second situation which is a monopoly but which no one ever considers as such. Any given resort, or vacation destination, is a monopoly. There is only one Disney World, or Caesar's Palace, or whatever resort you choose. As such, it would seem that such resorts could charge "monopoly prices", and yet no one ever argues such natural monopolies overcharge, or should be regulated. And the reason is obvious, there are many imperfect substitutes for the same service. If Disney charges prices too great for the market to bear, visitors would go elsewhere. However, the situation is, viewed objectively, no different from many supposed natural monopolies. There is no exact substitute for Disney world, there is no direct competitor, so it should be seen as a monopoly, and yet it is not. Which shows how what is and is not a "natural monopoly" depends very often on what one chooses to define as such. And what is "true competition" and "defective competition" also depends on what axes a given economist or regulator has to grind.
And later in the same essay:
And all of these examples bring me to my point, which is, monopolies, for all the fear they inspire in regulators, are truly almost a fictional beast. As I showed with Disney World, or Coca Cola, it all depends on how one defines the market whether a firm is a monopoly or not. Coke has a monopoly on Coke, and Disney has a monopoly on Disney world, but we see them as competing with close substitutes. So why do we consider a cable TV provider a monopoly when we can also view him as competing with broadcast TV or satellite? It is just a matter of choice to make "cable TV" the market rather than "all televised media". Thus, what is often considered a monopoly may, when viewed in another light be nothing of the kind, which makes fears of "monopoly pricing" seem largely overblown.
There are additional concerns, also mentioned in that essay, which I shall discuss later in this essay, as well.

7. For a discussion of both the term "fair", and the similarly meaningless terms "want" and "need", see  See "A Question of Fairness", "Protean Terminology", "Semantic Games", "The Most Misleading Word" and "Luxury and Necessity".

8. As I am going to go through these arguments in less detail than my earlier essay, allow me to quote at length from  "Competition"  on the problem of trying to remedy monopolies, specifically "natural monopolies" through government intervention:
Before moving on to look at monopolies in general and natural monopolies in particular, let me deal with one objection that is sure to come up. In a situation such as I describe, where there is but a single provider of a given service, even when substitutes are available, the situation itself allows the seller to price above the market rate, and this should still be viewed as a situation with defective competition and demands government intervention. To which I reply that the argument contains two major errors, as well as an false conclusion.
First, the idea that there is a single market price, which exists independent of a given circumstance, which is the proper price at which a good should sell is a falsehood, akin to the idea that there is a way to distinguish between wants and needs, that there is a proper amount of any good to be produced, a correct price during a crisis, or many of the other technocratic assumptions which underlie the many efforts to establish a scientifically organized economy. The market price is nothing more than the given price for a good at a moment in time, meaning that whatever the circumstances, the price charged is always the market price. Some may argue that the given price is not fair, or would be different given stronger competition, but that in no way makes the price wrong. Fair is a meaningless term, and a bad foundation upon which to base economic reasoning. And as for the other argument, prices would obviously be different were circumstances to change, that is a truism, but that does not mean that those alternate circumstances are right, or the present ones wrong, it simply means that price varies given different market conditions.
The second error is to see limited competition as somehow rendering the market price invalid, or the competition defective.  I will grant that excluding competitors who provide identical, or closely similar, services is a tremendous benefit to a seller, but there are many such benefits. A good reputation, brand recognition, successful advertising, inept rivals, all can provide a competitor with a tremendous advantage, yet we accept some as part of competition and call other illicit and defective competition. The problem being no one knows precisely what proper and improper denote when it comes to competition. And with good reason.  If our situation of an apartment owner providing only one cable service is illicit, then how does it differ from, say, a restaurant chain which provides only one brand of soft drinks? Or a car marker which ships from the factory with one only one -- or even only a few --brands of radio, or only a certain brand of tires? If one is allowable, then why not all? And, if none are allowed, why not? No one is being deceived or forced. The choice is to buy the package or not. One knows up front what he is getting, so where does the illicit competition arise?
But all of that may be wasted effort, as whether or not one agrees with my first two arguments is irrelevant given that the conclusion drawn from them is invalid as well. Whether or not the basis of the argument is true -- though I argue it is not -- the conclusion simply does not follow. Or, at best, it follows only if one can prove a number of points, points which I fell have been shown time and again to be completely false. For, even if we could find an objective market price, and show that it differed from the price charged, and even if there were some way to rationally prove the situation fit some definition of defective competition, it simply does not follow that such a situation demands intervention, nor is it clear that government involvement would in any way ameliorate the situation. 
The most obvious reason that regulation, most often found in the form of government established rate committees, at least where supposed natural monopolies are concerned, is not useful is, as stated above, there simply is no correct price. The market price is just that, the price on the market at a given moment, there is no fair market price, or true price. And so, when a rate committee is established, they do not set the rates at the market value, or at what the rates would be but for the existence of monopolies, they simply choose an arbitrary rate. Admittedly, they establish it based on pressure form both the industry and consumers, as well as any others concerned who might have some political pull, but it is still just an arbitrary number. It is no more or less fair than what the monopoly would charge.
Actually, it may be worse in one way. The monopoly would tend to charge a rate which would maximize profit, which considers both the costs involved in production, as well as the desires of consumers -- even including the implicit competition I mentioned earlier -- and so would tend to provide the service at a rate which both create a good rate of return while providing services at a cost the consumers considered satisfactory for services provided. Government rate bodies sometimes fail to take many of these factors into consideration, and due to political considerations, often set the rate too low, which results in numerous problems, such as inadequate returns to maintain physical plant requirements or, in extreme cases, even reducing returns so much that the monopoly can no longer function. And that ignores the fact that, by setting rate too low, the rate commission actually discourages any efforts to break the monopoly, as the returns will discourage potential competitors. 
Which leads well into the bigger concern with government regulation. Once the government recognizes a natural monopoly and begins establishing rate commissions and the like, the government basically establishes the monopoly by force of law. After all, what firm wants to enter a market where prices are set by the state? And even if some did, are they able? In most areas of endeavor where prices are regulated, entry is regulated as well, making it difficult or impossible for new firms to compete. Not to mention that government regulated rates tend to produce substandard returns, discouraging anyone form competing, as mentioned before. All of these factors combine to make it unlikely that any firm would want to compete in a market deemed a natural monopoly, even if they found some way to do so[FOOTNOTES REMOVED]
9. For arguments against relying upon good people and line drawing see  "Slippery Slopes" ,  "The Right People, The Wrong People and "Just Plain Folks"" ,  "The Inherent Disappointment of Authoritarianism" ,  "The Case for Small Government"  and "In Praise of Contracts" . For a discussion of the problems of "know it when I see it" beliefs see  "The Problem of Pornography"  and  "I Knew I Was On To Something" . Finally, for a discussion of the problems of "common sense" and other pragmatic approaches (as opposed to consistent, theory-based approaches) see  "The Lunacy of "Common Sense"", ""Seems About Right", Another Lesson in Common Sense and Its Futility", "A Look at Common Sense", "Res Ipsa Loquitur", "In A Nutshell", "Harming Society", "The Shortcomings of Pragmatism", "Pragmatism Revisited", "Pragmatism Revistied, Again", "The Plural of Anecdote is Not Data", "Rules of Grammar and Pragmatism", "The Problem of the Small Picture", "Keyhole Thinking", "Impractical Pragmatists", "In Defense of Zero Tolerance, or, An Examination of Law, Common Sense and Consistency", "No Dividing Line", "The Consequences of Bad Laws" and "Questions of Law and Questions of Fact" .

10. See "Moral For Me, But Not For Thee""The Triumph of Good""Greed", "Greed Part 2", "Perverting Self Interest", "Bad Economics Part 19", "Those Greedy Bankers", "The "Lucky" Rich",  "Envy Kills", "Envy And Analogy" and "Brief Discussion of Envy".

===========================================================

POSTSCRIPT

During my ill-fated year in law school, my moot court case involved a suit for access to an apartment complex by a cable company. Most of the case involved a recent bill granting cable access to apartments (which was unfortunately amended during the time I had the moot court course), but I noticed that a number of arguments could also be made premised upon antitrust arguments. Now, the case did not fit the traditional antitrust pattern, as my supposed client was the county cable provider, with something like 98% of homes in the county, and the defendants were a small apartment complex and a very minor cable provider, which had less than 1% of the county's customers. However, thanks to the many nebulous twists and turns of antitrust, I thought we could argue that, as renting an apartment forced one to use that specific provider, it could constitute an illegal "tying" agreement. Unfortunately, I left law school before we argued our case, so I never got to see if I could pull it off. But the fact that such an absurd argument could be made just goes to show how elastic antitrust laws are. (I like to amuse myself by realizing that, had it been a real case, and had we won, the defendant could have turned around, pointed to our 99%+ market share and sued us for antitrust violations as well. Of course, utilities are often excluded from antitrust, as are most government created cartels and trusts -- "The Difference Between Public and Private, Or, The Real Monopolies and Cartels" -- so we might have won, but it is funny to think how both sides can often argue the other is violating antitrust laws, and, paradoxically, both can be simultaneously correct.)  

For an earlier discussion of this same topic, see "Competition" and "Who Does It Harm?". I also mention a few of the lessons I learned from moot court in "An Impossible Argument to Lose"

POSTSCRIPT II

I have written on antitrust a few times in the past. For those curious about my earlier thoughts, they can be found, in addition to the links in the article itself, in my posts "Saving Us From Lower Prices", "Put Your Money Where Your Mouth Is, Or The Logical Implications of Price Gouging Laws", "Capitalism and Its Consequences", "People Prove My Point", "How Much Does Government Cost?", "Competition", "Best Practices and Resistance to Change, Bureaucracy and the Free Market", "An Examination of the Economics and Sociology of Government Spending", "A Short Follow Up on Monopolies" and "A Perfect Example". Not all of the articles deal exclusively with monopolies and cartels, some deal with competition or government intervention in a more general way, but all do have some relevance to the topic.


Monday, May 27, 2013

"United States" is Plural

It may seem a small thing, just another example of my tendency to play "grammar nazi", but I think there is a greater significance to a specific, and quite common, error, than most people realize. And that error is the tendency almost everyone exhibits (including myself, at times) to make "United States" singular.

Read the constitution,look at how "United States" is used. In every case, it is treated, properly, as plural, emphasizing that it is a union of independent states. Now, look at how we use the phrase today, how it is almost always used as a singular noun. It may just be laziness, but I tend to think it is, instead, that we have forgotten that the "states" part is plural, that we are a union of many states, and we have come, instead, to see "United States" as nothing but a name, without any greater meaning, and have completely forgotten that there is any greater meaning.

As I wrote in "In A Nutshell", this tendency to forget that each state is supposed to be a sovereign, independent nation, is one of those errors that has lead us to our present troubles. Both because it makes difficult any efforts at true federalism, and, perhaps even more troubling, because so many constitutional safeguards depend upon the states acting as states, struggling to assert their own interests. Without the states acting as anything more than administrative units or provinces, the protections in the Constitution, at least many of them, fail to work.

But, significant as I think this error is, it doesn't merit a lengthy discussion. It was just an interesting observation I thought worth sharing.

Friday, May 24, 2013

Selfishness as Reason - "Wants", "Needs", "Fairness" and Other Guises for Arbitrary Decisions

It is the one point which divides my philosophy most clearly from the Objectivists, and the point which caused me to eventually stop describing myself as a member of that group. It is the belief that one can use reason to determine objectively whether a given desire is better than another. I suppose, on the surface, it might sound reasonable, or it might sound utterly absurd, depending on one's tendency toward positivist thought -- as that is what it is, no matter what Objectivists might think -- the premise is actually an expression of a philosophy Rand once ridiculed, that holdover from the early 20th century, Postivism. You can see it most clearly in Rand's discussion of art, in which she argues that rational men would find value only in certain kinds of art, while all other modes are dismissed as inferior. She is speaking not just of her personal preferences, but is stating that, if one is guided by reason, he will of necessity share the same valuations she does, and will assess these art forms in an identical manner. In other words, she is positing her own preferences as the only rational choice.

Since many Objectivists seem to take these argument seriously -- even if most people who do not idolize Rand can immediately see the problems with such propositions -- allow me to spend a few moments demonstrating the problem with such arguments, as well as providing a few examples to make sure that everyone realizes I am not taking on straw men here, many Objectivists really do believe exactly what I claim.

For example, many, many years ago, back when I used to comment regularly on the Townhall pundit pages, but after I started this blog, I had an article that was actually posted on the pundit pages. ("Absolute Values") It was unusual to have a blogger show up among the paid professionals, so I was rather flattered. Unfortunately, I had not thought through how badly many conservatives responded to the phrase "subjective values", and so, though I was writing entirely in an economic context, I ended up defending myself against endless unrelated criticisms.

However, one criticism I heard was on topic, but was rather absurd. An Objectivist accepted that humans may have differing scales of value, but argued that rationally there was one preference that was better than another. I replied with what I thought would be an obvious counter argument, asking which was more rational wearing red or blue? And I was surprised to hear that there actually was a rationally preferred color of dress. My reader did not know, as it was context dependent and so on, but she kept arguing that everything, down to preferring a given color, pattern or fabric, could be rationally established.

Worse still, a handful of other Objectivists chimed in with their assent.

All of which should go to show that Objectivists really do take things to extremes even greater than I have alleged. They really do believe there is some absolute hierarchy of wants to which we all should rationally subscribe. It is not just Rand's attempts at being an art critic, or pushing her taste in dance and music, they really think reason alone can tell us absolutely everything. In a way, they make the positivists that they malign look sensible, as I never heard of a positivist going that far in their claims for rationality.

Having taken the Objectivists to task, I should be fair and point out they are hardly the only ones to make this error. The specific form may be unique to Rand and her followers, but the general error is held by a number of other, and many more mainstream, groups.

In fact, you can see the other exemplars of this error if you look at the way in which I realized the flaw in Rand's theories. Prior to discovering Rand and Objectivism, I was a very bright teenager, in the most advanced classes, interested in literature and art, and thus, almost of necessity, was also a thoroughly convinced Communist. Not just your run of the mill, "we should all share our stuff", slogan chanting Communist, but one who read Marx and Lenin, as well as the more extreme fringes such as Bakunin and other anarcho-communist thinkers. Thus, when I cam to Objectivism, it represented a tremendous break with my old beliefs, and, as with most who undergo a sudden, radical shift of beliefs, I embraced the new philosophy with a nearly fanatical devotion. As a result, for quite a while, nothing could have convinced me anything Rand wrote was mistaken.

But fanatical as I was, I was also the same youth who was always fascinated with asking "why" and "how", and so the same curiosity that had led me to Rand, and left my mind open enough to allow her to convince me of the errors of my communist beliefs, also led me to avidly consume all the works suggested by Objectivist newsletters, and, among the many thinkers I read, I found Ludwig vonMises.

This may sound strange to Objectivists, as they idolize vonMises almost as much as Rand, but there was one point in vonMises writing, a point which he used quite effectively to undermine communist and socialist planning, that also caused me to rethink my devotion to Objectivism, and that was, quite simply, the Austrian school's emphasis on the subjective nature of valuation.

On the surface, there is nothing inherent to vonMises' theories that contradict Objectivist belief. Individual human desires can be thoroughly subjective, and yet there can be a proper, rational hierarchy of values. However, once I began to read vonMises' arguments against Communist, and even mainstream, belief in planning using these objective values, it made me ask by what definition one could determine these "rational" values? How did Rand's claims differ from a commissar taking his own biases and declaring them the proper values? Yes, we could say that, if one wanted to achieve X, then pursuing Y might be beneficial or detrimental, and that would be rational, but how could we say choosing to pursue X, or pursuing X in preference to Y was rational or irrational? The arguments, as I already demonstrated, simply did not make sense.

All of which is a rather lengthy way to point out that, being fair to all involved, Objectivists are hardly alone in this error. Everyone from Communists to Socialists1 to mainstream regulators2 to many social conservatives3 to FairTax4 advocates to Objectivists seem to embrace this error in some form. And when they do, as I plan to demonstrate, they tend to do so by using a specific set of words, words which have no clear definition, no inherent meaning, but words which carry strong connotations, and thus serve as perfect vehicles for hiding one's biases while gaining popular support.

Which brings me to my main point. Despite the fact that we hear the term "fairness" so often, or hear its equivalents, such as using tariffs to "level the playing field", using death duties to "balance out inequities" and the like, the terms themselves really mean nothing5.

Well, to be accurate, "fair" has one meaning. In a situation in which one can act with completely arbitrary power, and then chooses to act in a manner which provides the same benefit to all, I suppose that could be called "fair". But unless you are discussing children doling out Halloween candy, or taking turns riding on a shared bicycle, there really is little meaning to the word. Economics is not a realm for "fairness", because it is a field dominated by self interest. Not that everyone is concerned only about money6, that is a myth. But one will always act in a way which advances whatever his interests may be, be it getting rich, feeding his children or clothing the poor. Whatever he wants, he will act in such a way as he trades something that he values less for something he values more. And so will everyone else. Thus, all trades are "fair" and "unfair" simultaneously, depending on how you look at it. If I give you a hat I don't want for money, I think I won, and you lost. On the other hand, you value the hat more than the money or you would not trade, so you think you won and I lost. And thus, all trades are neither just or unjust, they simply are. And all of the economy is based on the same foundation. No matter how complex, how elaborate, that is the basic nature of trade, of wealth, or reality. To try to change it is to end up making things worse all around7. And thus, "fair" is meaningless when describing the marketplace. And yet it is used, and used often, because it is a useful term for some.

The same is true of "needs" and "wants"8. Theory after theory of government is predicated explicitly or implicitly upon this fictitious distinction, as well as the arrogant belief that the masses can't tell the difference while some elite can9. How often have we heard that the free market is to be rejected because it panders tot he lowest common denominator, making trinkets while people starve? Or that it creates wasteful, throw away flimsy goods when it could produce substantial items satisfying our true needs? Or even that it prints comic books while ignoring scientific and literary works? We even hear a hint of it in the complaints that teachers and firefighters earn so little while actors and sports stars (or sometimes CEOs) earn so much10. The implication always being that we ignore our true needs in favor of ephemeral wants.

The problem with this argument is that needs and wants mean nothing. Or if they have a meaning, it is only in context, not in the absolute sense they are used in such arguments. There is no need without a goal, and goals are arbitrary. We cannot say men "need" something in absolute sense, they need it only to achieve something, and that something to which they aspire is once again in the realm of arbitrary values. There is nothing which is an absolute need, there are only needs that fulfill desires, and thus to distinguish between needs and wants is silly, futile and essentially meaningless. Yet, again, it is done all the time, and again, it is because it is useful to some.

And how is the misuse of these terms useful? Because it clothes the arbitrary whims of individuals in the garb of higher aspirations. When I say that man should do X because I want him to do so, it sounds selfish. if I say he must for his own good, or because it is fair, or fulfills his true needs, then I sound enlightened. And that is why these terms, meaningless as they are, enjoy such wide popularity, they make our petty desires sound elevated, our resentment and envy sound like justice. We are not striking at those who have more than us, who enjoy more success, have more wealth, we are fighting for justice, we are helping the sheep like masses recognize their true needs.

In short, it makes us appear to be other than the resentful, jealous mob that we are.

Of course, not everyone is motivated by such personal resentment. Some actually buy into the sham arguments of others. Some because they believe the claims, others because the claims match their own envious inclinations, but still not everyone is acting out of their own pettiness, some are swept along by the disguised pettiness of others. However, whatever the motive, the fact remains that these terms, no matter how noble they might be made to sounds, are rarely, if ever, anything but a subterfuge, behind which lurk motives afar more base than the selfishness so often attributed to businessmen11.

===============================================================

1. I know Communist and Socialist were once used interchangeably, in fact Marx and Lenin treated them as identical. Even now many do not distinguish between the two. However, as many have taken socialist to mean "less authoritarian communist" or sometimes "a mixture of regulation and freedom, just one falling closer to the regulatory end than we are", I figure I will use the term in that more loosely defined sense. As the precision of these two terms is not important for this essay, it doesn't seem a problem in this instance to adopt the common usage.

2. As I argued in "Liberalism, Its Origins and Consequences" , all modern regulatory states pretty much rely upon the same basic premises as more authoritarian states, and one of the three fundamental beliefs is that there is some objective, absolute set of valuations. See also  "The Inherent Disappointment of Authoritarianism",  "The Right Way", "Some Thoughts on "Summerhill"", "The Life Coach Culture", "The Great "What If?" - Advertising, Gullibility, Education, Capitalism and Socialism"  and "Absolute Values".

3. Not all social conservative fit this mold, as some want to apply social pressure rather than state power to solve social ills. (See "Government Versus Culture - A Forgotten Distinction", "If You Wear a "Kick me" Sign, Don't Complain About Getting Kicked", ""...Then Who Would Do it?"" and "Three Approaches to Social Conservatism".) On the other hand, there is a spectrum of social conservative positions, and many do want to apply, to one degree or another, an amount of force to prevent individuals from engaging in acts they deem undesirable, but which fail to violate individual rights. Thus, these groups clearly fall within the category of those who think there are fixed values, and more, believe these values must be coercively enforced. (See  "Hard Cases Make Bad Law" , " In Loco Parentis " and "The Case for Small Government" .)

4. The FairTax claims one of the major benefits is that it promotes savings and investment, which is based upon the claim that we "spend too much." This is a common error, but one that falls in the category being discussed, assuming there is some objectively correct amount of savings and spending. See "To Correct Debra Saunders", "Debt", "Living Beyond Their Means", "More Thoughts on the FairTax" and  "The FairTax's Liberal Assumptions" .

5. See  "A Question of Fairness", "Protean Terminology" and "Semantic Games", as well as a passing mention in "Two Thoughts on Taxation" and "A Passing Thought". I also discussed the whole issue of the market and fairness at some length in "What Is Fair? or, How Game Theory Leads Us Astray".

6. For a discussion of this myth see "Bad Economics Part 16",  "Greed Versus Evil" and  "In Praise of Contracts" . For a discussion of the strengths of the free market see   "Competition", "The Other 99%", "The Benefits of Inequalities of Wealth",  "Planning For Imperfection" , and "Production and Consumption".

7. See  "Life Is Not Fair - And Trying To Make It So Makes Things Worse" , as well as "The Price of Equality", "The Threat of Perfection" and "Utopianism and Disaster" . A similar point is also made in  "Third Best Economy" .

8. See  "The Most Misleading Word" and "Luxury and Necessity". 

9. See  "Liberalism, Its Origins and Consequences" , as well as  "The Weakest Gun Control Argument", "Seeing People As Stupid", "Arrogance and Gun Control", "Appealing to Arrogance", "The Path of Least Resistance", "The Essence of Liberalism", "Our View of Our Fellow Citizens", "Those Other People" and "Man's Nature and Government".

10. See "Why Do They Earn So Much For Playing a Game?" and "A Little More On CEO Salaries".

11. I try my hand at showing that the "selfishness" of which so many are accused is nothing more than a behavior to which we all ascribe in several posts. See  "Moral For Me, But Not For Thee" ,  "The Triumph of Good" , "Greed", "Greed Part 2", "Perverting Self Interest", "Bad Economics Part 19", "Those Greedy Bankers", "The "Lucky" Rich",  "Envy Kills", "Envy And Analogy" and "Brief Discussion of Envy " .

===============================================================

POSTSCRIPT

I found something odd. When I tracked down the article on archive. org, I read through the comments and could not find the debate I mentioned. Now, I know it grew out of that article, but I also recall I was taken to task in the comments to a few articles, so it likely was on another article from that day or the next few days, but I lack the determination to actually track it down. Still, it is interesting to go back to double check a reference and find what you thought would be there is missing.