What the mutualist world looks like

Without introduction:


From here. I'm particularly interested in her discussion of open-ended toys. Hard to believe kids played before branding.

While you're watching this, keep in mind that what she is doing is going to be a criminal activity next month. By criminal, I mean fines of $100,000 per violation up to a total of $15,000,000 and incarceration of up to 5 years.

Also, these are amusing:



and



I don't know of any evidence to support his claims that Big Box retailers were behind this, but se non vero e ben trovato (even if it is not true, it is well conceived). From what I can find, this legislation was passed on the recommendation of US PIRG, Public Citizen, Fear, and Shameless Pandering. If Walmart is the bootlegger to that Baptist cabal, well, all the more shame to be heaped on the Naderites' heads. It works out for those larger companies and retailers in much the same way that the large meatpackers were aided by the moral cover provided by Upton Sinclair's The Jungle and the resulting meatpacker's competition reduction act Meat Inspection Act. It makes it more expensive for small producers, and turns potential torts against retailers into a federal law enforcement problem. The costs are socialized, dispersed, and hard to see; they consist of unemployed small producers and their employees, fewer selections for consumers, and higher prices. The gains are privatized, concentrated, easily seen; they consist of higher profits for mass producers. The professed goal -- greater safety for children -- is probably nonexistent and possibly thwarted, since this works to increase the market share of the same mass producers who were responsible for the problems in the first place.

The products recalled in 2007 were already out of bounds of the Federal Hazardous Substances Act, so rather than enforce that law, we made a new one that grants lots more power to the state. To think that the people behind this drew votes away from Al Gore ....

Nth best, Posner-inspired

There are people out there who believe in this simple model:










This is a decision tree that says there are two choices: transactions with no problems -- no institutional failures, no externalities, a perfect market transaction -- and those that must be regulated. Of course, any regulation can be justified after the fact. If nothing else sticks, you can always invoke asymmetric or imperfect information, the last refuges of scoundrels.

But Posner makes an interesting point in Economic Analysis of Law that is rarely acknowledged by fans of regulation. He says,

Monopoly, pollution, fraud, mistake, mismanagement, and other unhappy by-products of the market are conventionally viewed as failures of the market's self-regulatory mechanisms and therefore as appropriate occasions for public regulation. This way of looking at the matter is misleading. The failure is ordinarily a failure of the market and of the rules of the market prescribed by the common law [emphasis added]. Pollution, for example, would not be considered a serious problem if the common law remedies, such as nuisance and trespass, were efficient methods of minimizing the costs of pollution. The choice is rarely between a free market and public regulation. It is between two methods of public control -- the common law system of privately enforced rights and the administrative system of direct public control -- and should depend upon a weighting of their strengths and weaknesses in particular contexts.

We can diagram this as:










But wait: it would be rare that a transaction would have a single institutional (market) failure, would it not? In fact, many if not most transactions are subject to multiple failures. The problem for the knee-jerk regulator is that they don't all work in the same direction. As I argued here, they may frequently cancel:

The state ownership of oil and the corresponding ease with which OPEC should be able to cartelize should raise the price, while externalities imply an artificially low price - which dominates? We know that the cost of our interventions in oil-producing regions is not accounted for in the price, but the risk premium brought about by the unstable regimes and regions that happen to possess the oil and our interventions in them is. Now add Hotelling into the calculus, and figure that the cartel members are going to cheat to drive prices downward, while federal taxes and regulations (not all of which are rational or efficient) raise the price.

So our decision tree now has four branches: no failure, self-canceling failures, common law, and regulation.









We can also add in the self-enforcing means open to private actors as suggested by Second Best Economist Dani Rodrik: repeated interaction, reputation, and collective punishment.













And since we're differentiating between types of self-enforcing agreements, why not differentiate between regulations? There are at least four; regulating inputs (as in the original Clean Air Act which mandated scrubbers), regulating outputs (as in mandating the use of MTBE in boutique fuels), taxation (alcohol) or user fees, and cap & trade (exemplified by sulfur dioxide markets created by the 1990 Clean Air Act).














This now looks like a rich spectrum of responses, many of which are open to private actors and therefore anarchists. I think it should be apparent now why I believe that regulations -- especially of the inputs or outputs -- are frequently a simplistic, unimaginative response to the particular class of institutional failures, real or perceived, known as market failures. True, not all are appropriate in a given situation, but it is rare to find a politician or state enthusiast who even recognizes that there are other options.

Bookends

I have been reading Timothy Egan's The Worst Hard Times: The Untold Story of Those Who Survived the Great American Dust Bowl, a book about life in the Dust Bowl. It has been a nice bookend to other information I have read on the Depression. This includes Howard Zinn's People's History of the United States, John T. Flynn's The Roosevelt Myth, Jim Powell's FDR's Folly, and Friedman & Schwartz' A Monetary History of the United States. Egan's book provides a human perspective on momentous times.

My own personal theory, to which I have seen allusions but not the definitive book (surely someone has written it) is that the Depression was the effect of society absorbing the final shift from the agrarian economy. Putting a plow behind an internal combustion engine-driven machine meant you didn't need all those people working on farms. But neither were they finding employment in the cities.

Although Egan alludes to the state's complicity in the conditions that produced those hard times, and at the end acknowledges the bad long term effects of FDR's intervention, FDR, Hugh Bennett, and farm policy are definitely the heroes of the story.

The state's complicity lies in first running the natives out, then establishing incentives to farm the land rather than use it for grazing. The long term effect has been to establish farm subsidies which are detrimental. On the one hand, price supports result in the overproduction of commodities such as cotton, which the government then buys and dumps, further depressing world markets, and further impoverishing African farmers. On the other hand, other convoluted policies such as sugar price supports, ethanol incentives, and ethanol import tariffs, are intended to support corn prices, further impoverishing Mexican peasants. It is a sad reflection on people who worship FDR's policies as the salvation of impoverished American farmers while ignoring the ill effect of those policies on the impoverished farmers in the rest of the world.

Some anarchists claim that defense is the tough problem; I doubt it. I think that The Depression is a tougher problem. The benefit of Egan's book is that it highlights the real stories of real people. In the context of those times, when it seemed reasonable for the state to encourage homesteading and farming prior to the closing of the West, when the prospect of prolonged drought seemed dim prior to 1932, when the invoice for the social cost of their actions was not yet due, what happens to those people in the absence of the New Deal?

Still, one cannot help but think that Egan has absorbed just a little too much of the high school version of those events. The high school version is that the farmers were too dumb to know what they were doing, so FDR hired some smart men who invented and taught contour plowing and the use of trees for windbreaks, and then they paid the farmers to let some fields go fallow. It is an unusually common myth, as seen in this example:

In response to the urgent need for soil and water conservation programs to halt farmland destruction, the Soil Conservation Service was established in 1935. SCS employees set up demonstration plots and taught methods such as contour plowing, terracing, and strip-cropping to retain water on the fields and reduce runoff and erosion. Windbreaks were planted to break the force of the prairie winds, tillage methods were changed to reduce exposed soils, and vegetation or stubble was retained on the fields after the growing season to provide protective cover. With these methods, damaged lands were reclaimed and the dust storms were brought under control.

Also, in the free market banking system of the day, banks ripped everyone off, so FDR instituted banking reforms and federal deposit insurance. The truth? It's a little more complex.

First, the New Deal: FDR ran on the New Deal platform, which was to undo all of the Hoover Administration errors. According to FDR, those consisted of deficit spending, excessively high taxation, and too much government (Flynn). When he actually took office, the first thing they did, of course, was to raise taxes, increase spending, and run a deficit just like Dr. Keynes said they should.

Despite similar conditions in Canada, not a single bank failed there (Powell). In fact, prior to the Federal Reserve Act, the US weathered several similar periods with almost no bank defaults. The FRA was supposed to have made the government the lender of last resort, but the act was truly established to serve the needs of the bankers (Kolko).

Another Hoover policy which FDR had vowed to overturn but then repeated was the destruction of food supplies in the farming states even while people starved in the cities (Flynn and Powell). It is a question of that which is seen (starving farmers helped by the payments) and that which is not seen (starving city dwellers and destroyed crops): the former have much more impact in an era when newspaper photos and newsreels hold sway.

Today, the collective effect of those actions is an agriculture policy which enriches large corporations, leads to a substantial amount of water overuse and water pollution, reduces the quality of our food, and impoverishes poor farmers around the world who have to compete with subsidized American farmers.

Second, there is the problem that conservation measures had been around long before FDR took office. Contour plowing in particular had been around since at least ancient times

Contour farming was practiced by the ancient Phoenicians, and is known to be effective for slopes between two and ten percent. Contour plowing can increase crop yields from 10 to 50 percent, partially as a result from greater soil retention.

Or at least nearly the birth of the Republic

In 1808, Jefferson transmitted a refinement of his design to a Monsieur Sylvestre in France, for the benefit of the Society of the Seine.

The deep tillage could heavily erode the steep terrain of Jefferson's plantations, though, and he discovered that contour plowing around the curvature of the hills, rather than cutting furrows straight down-slope toward neighboring streams greatly reduced erosion.

He wrote to Tristam Dalton in May 1817 about his son-in-law Col. T.M. Randolph’s development of this method, laying off the plow lines in advance using a (wooden) rafter to measure and strokes of a hoe to mark the contours.

Plowing across slope on hilly terrain put a severe strain on the plowman and Col. Randolph modified the plow, fusing two separate shares against their flat sides at a right angle.

Plowing one way with the sod thrown down slope around the hill to the end of a furrow, the plowman would flip over the plow bottom and head back in the other direction with that sod thrown down slope as well. This eventually developed into a widely used "hillside plow."

Jefferson sent Dalton "a bit of paper cut in the form of the double share, which being opened at the fold to a right angle will give an idea of its general principle."

Jefferson's farms, including Monticello, had been losing soil into Chesapeake rivers for years and these new methods resulted in substantial improvements: "Let me beseech you" Jefferson wrote to others, "to make a trial of this method."

These techniques were not unknown to moderns:

As he had always been a voice for the working class, Villa would continue in this facet as the owner of a large piece of land. He attempted tremendous agrarian reform on his land. First, he studied the new, American techniques of contour plowing and crop rotation. His agrarian reform went one step further to include not only the crops, but also the people who tended the crops. Villa remembered the unfair economics used by the hacienda owners and made refreshing changes.

Pancho Villa died in 1923, less than a decade before Egan's story begins.

Egan relies on an article, "Small Farms, Externalities and the Dust Bowl of the 1930s" by Zeynep K. Hansen and Gary D. Libecap, published by the NBER. Among other things, the article discusses erosion as an example of several kinds of externality. In one, suspension, fine particles are blown into and then suspended in the air. To the farmer, this was an internal cost, but the fine particles in the air caused health problems to humans and livestock. Saltation and creep are externalities in which the topsoil from one farm is deposited on another farm, not only killing the wheat but also burying the downwind farm's erosion control stubble. In the article, they note that prior to the creation of the SCS,

The two leading erosion control methods in the 1930s were strip cropping with strip fallow and windbreaks of trees or brush. Both provided barriers to lower surface wind velocity and carrying capacity, but the former was more prevalent because trees could not be grown in many parts of the plains. Strip fallow also had the advantage of building up soil moisture and roughness, which reduced erodibility, whereas tree windbreaks actually absorbed moisture from surrounding ground.

This is interesting because it shows that (1) Dust Bowl farmers did practice conservation before FDR saved them, and (2) one of the fables from the high school version, FDR's commitment to using trees to block the wind, was not only a failure, but potentially could have worsened the situation. Egan also describes the tree idea as a failure.

Further in the article, they explain,

To completely combat regional erosion, all of the cultivated acreage in a topographical area of similarly erodible soil would have to be included in a "wind erosion unit" of 50,000 to 500,000 acres or more. The optimal farm sizes for addressing wind erosion and production, however, were not the same. Most estimates by agricultural economists and extension agents in the 1930s of appropriate production sizes for the region suggested two sections of land, 1,280 acres, depending on location in the plains. Few scale economies could be realized beyond that size. Nevertheless, in the 1930s, most farms were smaller than the prescribed levels for optimal production. The Great Plains was covered by hundreds of thousands of small farms. This condition was largely a legacy of the Homestead Act that limited claims to 160 to 320 acres when the region was settled between 1880 and 1925.

This is the same opinion reported by Egan of Hugh Bennett, the first director of the Soil Conservation Service. The area covered by Egan's story was formerly the domain of Plains Indians who thrived on grass-fed buffalo. The first whites to successfully live on the land ran the XIT cattle ranch. It was government policy to replace both with small claims farmers. According to their report written for Roosevelt,

"Mistaken public choices have been largely responsible for the situation," the report proclaimed. Specifically, "a mistaken homesteading policy, the stimulation of war time demands [World War I] which led to over cropping and over grazing, and encouragement of a system of agriculture which could not be both permanent and prosperous."
[...]
[Egan, continuing to quote from the report] "The Federal homestead policy, which kept land allotments low and required that a portion of each should be plowed, is now seen to have caused immeasurable harm. The Homestead Act of 1862, limiting an individual to 160 acres, was on the wesern plains almost an obligatory act of poverty."

Since the government subsequently wanted farms greater than 500 acres, and most farms of that period were smaller, Hansen and Libecap conclude that the farms were too small. This is consistent with other rationalization schemes of that era in which it was thought that efficiency required government-directed coordination.

Accordingly, collective action among farmers was necessary to address wind erosion. In commenting on strip cropping and recognizing the externalities involved, Charles Kellogg of the Bureau of Chemistry and Soils stated: "Such a practice, to be most effective, must be adopted on a community basis. Isolated farmers following this practice are not greatly benefited if the adjoining land is allowed to blow badly." The large number of small farms on the Great Plains, however, raised the costs of coordination. Indeed, Roland Renne of the Montana Agricultural Experiment Station (1935, 426-9) noted: "Dealing with thousands of different owners slows up the adoption of a planned land use program..."

They try to make a case that small farmers face different incentives than large farms:

Private motivation to invest in strip fallow was reduced when farmers did not internalize the externalities. The problem was accentuated for small farm owners. Each farmer had to consider the benefits of strip fallow with the opportunity costs of lost production. Because small farmers captured fewer of these leeward effects, they were less likely to have any fallow rotation, leaving their land in cultivation and their fields exposed to wind.

It might at first appear that there should be little difference in the proportion of land fallowed on a large or small farm since large farmers would face a correspondingly higher opportunity cost. However, a family faces about the same need for income (fixed cost) no matter how large the farm. Hansen and Libecap find that the proportion of land dedicated to conservation was proportionally larger on large farms.

Dissappointingly, they neglect to account for the possibility that adjoining farmers could coordinate through private mechanisms, in much the same way as the Animas Foundation and Malpai Borderlands Group pioneered the grassbank concept. They make passing references to "mixed incentives" to participate voluntarily and to transaction costs, but do not explain what those are. This could be the loss of reputation that might result from buying out a smaller, less profitable, and more harmful farm in a community where bidding in a bankruptcy auction brought threats of violence. Part of the problem may be that the Dust Bowl and the Depression occurred at the same time; had the Dust Bowl occurred separately, there might have been enough money to buy them out without the concurrent bankruptcy and bank failure problems.

I think this is a case in which there was little appreciation for the problem beforehand, and the immediate crisis was solved in conjunction with deep-pocketed and politically motivated politicians. Afterward, everyone is aware of the problem and at least several solutions, but now the state has become associated with the solution and becomes inseparable from it. Before: ignorance, no state. Afterward: knowledge, solution, and state.

Before	After
Ignorance	Knowledge
Problem	Solution
No state	State
Voluntary	Coercion

The frame then becomes that the state and the solution are one and the same when in fact the knowledge and the solution are independent of the state. We forget how often we have ignorance/no-state/before and knowledge/no-state/after, and also how often we have ignorance/state/before and ignorance/state/after. Celera's being the first to map the human genome is an example of the first (the state eventually joined the party), the S&L meltdown of the 1980s is an example of the second (the 1980 S&L Act signed by Carter precipitated the fiasco by expanding the federal insurance and then encouraging them to invest in local real estate (very non-diversified) and high-risk assets like art, creating a predictable problem), and most agriculture policy is an example of the third (nobody seems to know there is a problem or what to do about it).

As Egan describes the Dust Bowl era, farmers were ready for someone to show them a solution; if that happened to be a government agency that would also come in with money, they weren't going to turn it down. That doesn't seem to be the case: One telling fact that comes from the NBER paper is that the voluntary federal programs largely failed, while the coercive state programs succeeded.

Given the mixed incentives to participate in erosion control, the response to calls for voluntary collective action was limited. Indeed, the SCS noted a lack of voluntary farmer participation in the erosion control programs outlined in the demonstration projects.

Later,

More direct and coercive government intervention came in 1937 with inauguration of Soil Conservation Districts (SCDs) that had the authority to force farmer compliance and the resources (subsidies) to cover the costs of erosion control. The SCDs were local government units and required state legislation for establishment.

Oddly, according to Hansen and Libecap, "Kansas, Oklahoma, and Texas, at the center of the Dust Bowl, enacted wind erosion laws in 1935", but Egan fails to note those changes.

I am frequently accused of being too theoretical. For example, I think that this episode in America might have gone differently if the state had stayed out. People who favor state intervention will pooh-pooh the Malpai Borderlands grassbank initiative, inevitably pointing out that no private action did actually occur at that time, and that the farmers failed to join in the voluntary programs. I say that they are not going back far enough: what about leaving the ranchers and before them the Indians alone? Those are actual policies of the state that created the conditions for the environmental and social disaster. That is not a theoretical, paper claim: even Hugh Bennett agreed that the Homestead policy was a mistake. The Nature Conservancy and not the federal government pioneered the use of prescribed fire to maintain the health of the grasslands. Grass-fed buffalo are being reintroduced to the grass-fire-buffalo ecosystem as a sustainable food source. It turns out that laissez-faire would have been the best policy. But I am the theoretical one?

Local, Action: Association

In 1831, Alexis de Tocqueville and a French companion toured the 24 United States to investigate their jails in preparation for a reform of French prisons. What we got out of the deal was Democracy in America, a very comprehensive review of the state of the nation at that time, a glance at the country prior to the full onslaught of finance, managerial, and state capitalism (that and a kick-ass C-Span series). One of the more memorable themes of the book was the notion of Americans as association joiners:

Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate. Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States.

In America I encountered sorts of associations of which, I confess, I had no idea, and I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely.

This strikes me as the kind of society in which I would like to live. It is a society in which people form ad hoc associations to deal with problems as they arise, perhaps even creating new institutions for addressing the more serious institutional failures (I'm going to adopt Glen Whitman's semantics). That's a long way from the usual strawman offered as "what libertarians want", a strawman which is usually labeled "hyperindividualism" or "You're On Your Own".

Recently, I came across a Slate article critical of de Tocqueville written by Theda Skocpol. Actually, it's an article critical of people who look at that period as one free of what Skocpol might characterize as beneficial federal government influence. At first, I was intrigued since it seemed to support some of my suspicions, but upon reflection I decided that there were some problems with it.

First, she overlooks the reasons why government was involved in such things in the first place. Sure, the postal service and postal roads are explicitly mentioned in the Constitution (Article I, Section 8, "The Congress shall have Power To lay and collect Taxes...To establish Post Offices and post Roads"). However, it does not follow that because they could, they should. Nor does it follow that because you can plausibly argue that outcome X was the result of action Y that X was an actual and significant outcome of Y. Nor does it follow that Y was necessarily undertaken for X in the first place. Plausibility is not all.

With respect to the first of those objections, it should be pointed out that Thomas Jefferson argued (Virginia Protest, 1825) that federal road subsidies were an infringement of state sovereignty:

But the federal branch has assumed in some cases, and claimed in others, a right of enlarging its own powers by constructions, inferences, and indefinite deductions from those directly given, which this assembly does declare to be usurpations of the powers retained to the independent branches, mere interpolations into the compact, and direct infractions of it.

They claim, for example, and have commenced the exercise of a right to construct roads, open canals, and effect other internal improvements within the territories and jurisdictions exclusively belonging to the several States, which this assembly does declare has not been given to that branch by the constitutional compact, but remains to each State among its domestic and unalienated powers, exercisable within itself and by its domestic authorities alone.

If the state is capable of such things, what reason is there for the federal government to do them? If the state does not desire them, by what theory does the federal government prove the inhabitants are wrong? Not democracy.

With respect to the second objection (still on the first problem, that of why the federal government was involved), that the subsidization of coaches, mails, and newspapers was neither the "non-zero-sum" game nor the Congressionally-directed system that Skocpol describes, I think this seems naive. As Kelly Olds argues, the postal system in place at the time was an extensive patronage system.

Giving out the postage revenues to groups with political power became the Post Office's second function. Measured monetarily, it was the Post Office's primary function. Thomas Jefferson, suspicious of the Post Office, had written:

I view [the Post Office] as a source of boundless patronage to the executive, jobbing to members of Congress and their friends and a bottomless abyss of public money. You will begin by only appropriating the surplus of the post-office revenues; but other revenues will soon be called in to their aid and it will be a source of eternal scramble among the members, who can get the most money wasted in their states; and they will always get most who are meanest [Jefferson 1892-99: IX, 324-25].

The government resisted subsidizing the Post Office until the 1850s, partly out of fear of that which Jefferson prophesied.

The means by which the system was internally subsidized was that some routes were run at high profits and those were used to support the unprofitable routes. The activity was not directed by Congress, but a result of the way the USPS did business and therefore a benefit to the executive. The constituents favored by the system included coach companies and later railroads, newspapers (as Skocpol points out), representatives with franking privileges, rural voters, and the 1796-1804 Ezekiel Armstrong cycling teams. The reason for the patronage was not to bring general improvement to the country so that people like Alexis de Tocqueville would be amazed at the transportation and literacy in America; they were subsidized so that their purveyors could make money, privileges (jobs) could be handed out, and politicians could win votes. It was not so different then as now; the Halliburtons of that day had their Cheneys, too.

But given that mail, coaches, and newspapers were indirectly subsidized by the granted monopoly, does it follow that people were more informed or that travel was better as a result? More chartered mail coaches does not necessarily mean more or better passenger travel. More coaches who used shunpikes did not benefit turnpikes. More franked junk mail and speeches from congressmen does not mean a more informed populace (in fact, in an age devoid of alternative news sources, we could argue the opposite).

Olds also points out that the use of stamps and intra-city delivery were both originated by private mail companies and later copied by the USPS; for the favor, Congress forced many of them out of business during the 1839-1845 period in which the USPS was granted much of the extensive monopoly powers it protects today. To me those indicate that the system was overpriced and underserved compared to what it would have looked like in a competitive environment. If Congress really intended to increase rural travel and mails, those two things could be directly subsidized while the rest of the system ran privately and more efficiently. Today, I would argue that even the rural service is a red herring: a friend of mine once saw a UPS truck in Beaverhead, NM; you would be hard-pressed to find a place more rural.

The second problem with Skocpol's argument is that it overstates the magnitude of the federal government's involvement in the development of early roads, literacy, and associational tendencies. Skocpol's key claims are that the America De Tocqueville observed was largely the creation of a centralizing nation and the centralizing tendencies:

Social historian Richard D. Brown emphasizes that the Revolution, political struggles over the Constitution and the Bill of Rights, and deepening popular participation in national, state, and local elections served to spur associational life. So did religious and cultural ideals about self-improvement, and growing awareness of extralocal commercial and public affairs through widespread newspaper reading.
...
In retrospect, it is obvious that what social historian Mary P. Ryan has dubbed the pre-Civil War "era of association," from the 1820s to the 1840s, coincided with the spread of adult male suffrage and the emergence of competitive, mass-mobilizing parties: first the Jacksonian Democrats, then the Whigs, and finally, the Free Soilers and the Republicans.

Daniel Klein has written extensively about private roads in America (see this collection). Of the three periods (the turnpike era, the plank road era, and the western road era), the first is the most relevant to the subject at hand. I am citing from "The Voluntary Provision of Public Goods? The Turnpike Companies of Early America."

Not counting the land grants involved, only four states subsidized roads, and of them only Pennsylvania did so substantially. The charters were means for getting private capital to take over the maintenance of the roads because the municipal governments could not afford it. Tolls were sufficient to keep the roads up, but not enough to make the roads extravagantly profitable. Nevertheless, participation in stock purchasing was surprisingly widespread.

In fact, it seems that many of the roads were the results of the actions of ad hoc societies. As Klein explains it,

The town meeting was a central institution in which all important residents were expected to participate. Sly ... says that in the early 1800s "[t]he town meeting was ... at the highest point of development." The turnpike meetings were well attended and stock pledges were made publicly. For example, Wood ... says the Fifth Massachusetts Turnpike "was formally organized at a meeting held in the inn of Oliver Chapin, probably early in 1799, and sixteen hundred shares were issued with a par value of $100 each. Meetings with attendances of 50 and 100 people have been recorded [Connecticut Courant, March 19, 1798]....

Turnpike promoters relied of course on the most basic form of selective incentive, person-to-person solicitation. In an 1808 letter regarding the formation of the York and Conewago Canal Turnpike, the writer tells ..."

Further, putting to question the Skocpol's assertion that Jacksonian and Tocquevillian era newspapers were the result of mid-century federal investments in road building and post offices, Klein goes on to note newspaper campaigns conducted in 1798, 1804, and 1805. It appears that Skocpol had it backwards: voluntary associations and use of newspapers to convey information about private road companies pre-date the era she is citing as being a result of federal road-building and paper subsidization.

Rather than weakening de Tocqueville's observations, the existence of roads and the history of how they came to be financed reinforces them. Local townspeople noted the potential for the public benefits of a road (increased land value, incomes, access to cultural goods such as theatre, and buggy racing), so they formed organizations to obtain a state charter and raise funds. Despite or perhaps because of Virginia's objections, the federal involvement was extremely limited in those early years. Though the land grants and eminent domain provisions are troubling, this is much closer to the libertarian's understanding of how communal goods can be provided than the caricatures and strawmen normally offered.

A note on those land and eminent domain grants: the land granted was typically land already commonly used as a trail, path, or road. It probably had value for little else (that's why it was used for such). Granting it to a company for the purpose of improving it doesn't bother me much, especially when the company receiving the title is widely owned by the citizens who stand to benefit and who probably asked for the charter as townsman in the first place. The eminent domain powers were apparently not abused: they seem to have used them in conjunction with the voluntary fundraising efforts, i.e. persuasion and trade: "We'll give you stock in return for the title to this part of your land." That is a far cry from today, where a government merely announces they are going to take part of your land in exchange for a take-it-or-leave-it settlement, sometimes for the purpose of transferring it to someone who had the money to negotiate with you directly but didn't want to be bothered (and now that I think about it, I'd cut a break on the price of some land for the opportunity to not have to talk to Donald Trump). I think I'll have more to say on this in a future post on localism.

The Slate article also understates actual outcomes of the America described by de Tocqueville and tries to paint increasing centralization as either benign or beneficial. Mutual associations and the excludable goods associated with them, i.e. insurance benefits, are probably among the best-known examples (well, at least to me, an obviously biased sample). From Mancur Olson (The Logic of Collective Action), we would expect successful societies, i.e. the ones we have heard of, were able to provide something to the members (benefits, prestige, self esteem) that could be withheld from non-members. For this privilege, members would have had to contribute their money, time, and perhaps social capital. As David Beito shows in From Mutual Aid to the Welfare State, these societies continued to be vibrant and active until the government agencies took over the roles they served, i.e. the excludable goods lost their value.*

The penchant for association also worked into the managerial revolution described by Chandler (The Visible Hand). As they were beginning to recognize that rails and other businesses were no longer Mom & Pop operations carried on by partners and their sons, the various professional disciplines (managers, engineers, accountants, researchers) began to form professional associations. Among these, for example, were societies dedicated to promoting the ideas of Frederic Winslow Taylor with its rigidity and emphasis on central planning. These included the Efficiency, Scientism, and Technocracy movements, advocated the idea that all of man's problems could be solved "scientifically" by central planning and were taken seriously at the time both in the US and abroad. Lenin and Mussolini were fans, and many of the repealed provisions of the Second New Deal were an attempt to apply the theory.

Skocpol reads the period thusly:

In short, the early American civic vitality that so entranced Alexis de Tocqueville was closely tied up with the representative institutions and centrally directed activity of a very distinctive national state. The non-zero-sum nature of U.S. governmental and associational expansion becomes even more apparent when we consider that most of the big voluntary associations founded in the 19th century prospered well into the 20th, often building toward membership peaks reached only in the 1960s or 1970s and in full symbiosis with public social provision.

The Grand Army of the Republic spread in the wake of state and national benefits for Union veterans of the Civil War, for example. The Fraternal Order of Eagles was so active in promoting state and federal old-age pensions that the Grand Eagle himself received an official pen when FDR signed the Social Security Act of 1935.

The same mutual aid societies that brought health insurance, unemployment insurance, and pensions went into decline as a result of Social Security and other federal programs. To characterize them (by their association with the FOE) as prospering (as I'm sure many other organizations did) is surely misleading; at best, it was not the "non-zero-sum nature of U.S. governmental and associational expansion" asserted. Though some of the mutual associations themselves bought into the idea of using "free" money from the government to extend benefits universally, support for social legislation was not without internal controversy. Again, Beito is the better guide to the inner workings of mutual aid and service organizations:

There is reason to believe that a relationship existed between the emerging welfare state and the decline of fraternal services. Most notably, the first signs of benefit retrenchment began after 1935, the year the Social security Act became law. Officials of the homes for the elderly and orphans of the SBA cited Social Security and other welfare programs as justification not only for rejecting applications but for closing down entirely. In 1939, Malcolm R. Giles, the supreme secretary and comptroller of the Loyal Order of the Moose, urged the council to consider restricting sick benefits to members under age 65. As justification he stressed that these individuals were eligible for aid under the Social Security Act. The same year Norman G. Heyd, the chairmen of the Moosehaven Board of Governors, reported that Moosehaven had the smallest population since 1931. He asserted that the major reason "for this decrease is undoubtedly the operation of the old-age pensions in most of the states.
...
[M]any fraternalists still voiced opposition to the expanding welfare state, although they were far less influential than in the past.
...
Bina West of the WBA also condemned New Deal programs. ... West ridiculed suggestions that Social Security was just an expanded form of cooperative insurance or represented a culmination of fraternal principles. She charged that the trust fund was not a true reserve but instead a mere "bookkeeping entry." The premiums used to finance the program, she asserted, could be used by the government for "any purpose, good or bad." [>coughLBJcoughVietnamcough<] As with compulsory health insurance, West worried that Social Security would pose a threat to American practices of mutual aid. "Is there any beautiful ritualism or human tenderness in a government bureau?" ... Even fraternal supporters of Social Security, such as Giles, shared these concerns. While Giles praised Social Security as proof that "imitation is the sincerest flattery," he cautioned that government was incapable of approximating the warm handclasp from a fellow member or the "friendly visitation of fraternalists to a stricken brother."

Side note: It is also worth pointing out that unemployment benefits, popularly thought to be a creation of Progressive or New Deal eras, were actually a mutual aid benefit long before, and were also offered by states prior to federal involvement. The federal government was a johnny-come-lately, not providing substantially higher benefits at all. Also, lest it be supposed that fraternalism died as a result of the Depression, it should be noted that many societies had bounced back from early hard times and by some measures fraternalism actually showed an increase during the 1930s, but a rapid decrease after 1940. Given the second rapid expansion of the federal government in Johnson's Great Society, it seems perhaps significant that Skocpol chooses to select that as the period at which the big voluntary associations reached their zenith, having declined ever since.

It seems worthwhile to mention also the labor movements that achieved success prior to the period of federal involvement. Union involvement as a percentage of the workforce peaked in the 1950s and as an absolute number peaked in about 1972. Some would argue that unionism has been in decline because of rather than in spite of the NLRA: the purpose of government involvement was not to support the workers but to support the employers who wanted a union that was interested in form, contract negotiation, and business, not workers' rights. This is indeed a symbiosis, but not of the type Skocpol implies.

Skocpol also never notes the rise of mutualism and syndicalism elsewhere in world as the 19th century progressed. I'm only a novice student in this area, so I'll leave the heavy lifting in this area to people like Kevin Carson, Zhwazi, Shawn Wilbur, Joel Schlosberg, Wally Conger, and Brad Spangler. In any case, there was certainly a growing reaction - Le Chatelier-like - to the rise of the nation-state. In America, the nation-state grew out of both the European model and the town hall meeting, giving rise to a reaction that was highly individualist, i.e. Emerson, Thoreau, Spooner, and others. In Europe, the reaction placed more emphasis on class consciousness, the influence of both the experience with feudalism, its remnants (the aristocracy in England, the Junkers and monarch in Prussia, the remaining monarchs in Austria and Russia), and Marx, giving a reaction that was highly communitarian (Owenism, Fourierism, syndicalism). These are hardly supportive of a "civic vitality" that desired to be "closely tied up with the representative institutions and centrally directed activity of a very distinctive national state." If anything, these are movements that are interested in civic vitality but resistant to centralism and long-distance bureaucracy.

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* Hmm, that's interesting. Is a good provided by a fraternal organization with wide membership a "communal good" even though it is excludable?

Running on glue and tar

My wife and I have been discussing where the world is going to go in the post-Peak Oil era. I for one am optimistic, but concerned about the transitional period. I think that we (humanity) will develop a variety of responses to the problem(s), and that we will be better off in the end, but I am concerned about the rate at which the transition will occur. There may be upheaval and pain in the interim, regardless of who is in the White House or what policies we follow to get there.

In the comments on Matthew Yglesias recent post on gouging, we see a response to higher fuel prices that I think is indicative of lazy, uncreative thinking. Simply keep piling on one supposed remedy after another. This is creative thinking in much the same way that fixing your mistakes after rushing through a job is productive work. (for my previous thoughts on gouging, see here, here, and here).

Some things seem to escape the attention of people who think like this. For example, the crimes committed by a gas station owner can be determined by looking at his prices compared to his competitors' as follows:

• higher: gouging
• lower: predatory intent
• equal: collusion

In this environment, it might be worthwhile to keep a lawyer on staff, nicht war? And since the laws are subject to change, a lobbyist might be useful. If everyone has to have lawyers and lobbyists, that creates a competitive advantage for larger businesses. I think I can assume that people who are against gouging are also against large businesses, so why don't they understand or acknowledge these problems?

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Then, I was reading about heterodoxy, Cowen, and Veblen, looked up Veblen, got side-tracked by Giffen Goods, and finally came across an essay in The Nation by Sasha Abramsky entitled, "Running on Fumes". He raises the idea that gasoline is a Giffen Good, one that poorer people will come to spend more on even as its price rises because they are locked into it.

Sasha says,

Indeed, the very fact that some commentators, such as the Cato Institute's Jerry Taylor, so glibly assume (or, at least, assumed pre-Katrina) that an oil price shock can be painlessly absorbed shows just how invisible the country's poor have become to much of its pundit class.

Since Taylor's offending comments are neither quoted nor referenced, I can only guess that Taylor said something like, "let the price mechanism work" in response to calls for price controls. The month prior to Abramsky's piece, Taylor wrote about fuel prices in NRO. I would recommend reading both before proceeding with the rest of this post.

Back?

It is of course debatable whether the price mechanism will work well with regards to energy. In the comments on James Hamilton's Peak Oil in America post, Stuart Staniford claims that recent empirical research indicates a short-term price elasticity of -0.05. An older survey indicates that the long term price elasticity is around -0.8 and the short term is around -0.2. In any case, this is for a general population, not the poor, so it is only indirectly relevant to the point. If these two articles can be taken as accurate, the indicated decrease in elasticity (magnitude) indicates that it will be harder to curtail gasoline use as price goes up than it was in 1979-1983; I would assume that it would be harder for the driving poor, but perhaps not so much for the urban poor who have access to other options. (I graph oil use vs. oil price here, but have not updated it since October 2005. Note how much reduction was achieved 1979-1983.)

Near his conclusion, Mr. Abramsky claims that the decline of the rural area about which he is writing is preventable, but

prevention involves the sort of innovation the Bush Administration, besotted as it is with laissez-faire triumphalism (not to mention oil-industry campaign cash), has been reluctant to embrace.

Did you just experience a self-administered lacto-nasal enema upon reading -- in a single sentence -- that the Bush Administration favors laissez-faire policies and that laissez-faire and oil-industry campaign cash are not mutually exclusive?

Indeed, this seems to be common in discussions of gouging, Peak Oil, current pricing, and related issues. Are Mr. Abramsky and the commenters on Matthew Yglesias' blog really claiming that the oil industry enjoys laissez-faire trade policy? That seems so absurd on its face that I cannot believe it needs rebuttal.

The oil industry came of age in the Progressive Era. Oil production had steadily increased and prices decreased for the entire history of the industry through the antitrust prosecution of Standard Oil. As the automobile caught on and demand heated up, Progressives were excited to be able to subsidize a competitor to railroads. Then, as the US got involved in World War I, businessmen eager to be freed from antitrust regulation jumped at the invitation to participate in the Commodities Section of the Petroleum War Services Committee and the Oil Division of the United States Fuel Administration. Dominick Armentano points out in Antitrust and Monopoly, that A. C. Bedford, president of Standard Oil of New Jersey, was appointed as chairman of the War Services Committee. Their experience of cooperation and "supervised competition", and the concurrent worldwide embrace of central planning (think about what was happening in Russia, Germany, Italy, and even England in the period between wars), paved the way to the corporative-creating National Industrial Recovery Act. When that was struck down, the Connally Hot Oil Act of 1935 was passed without hearings to maintain stability in the oil industry. It allocated state production quotas and provided a means to enforce restrictions on interstate transshipment in excess of those quotas.

The military has been tied in to oil production or at least the Middle East arguably since Eisenhower placed troops in Lebanon in 1958 and Kennedy defended Saudi interests in 1963. More recently, in 1980 Jimmy Carter announced the Carter Doctrine, stating that the US would defend its oil interests there. You have the obvious Bush wars since then, with Clinton lobbing a few bombs and establishing bases in Saudi Arabia in between.

In addition to regulatory and military support, we also have regulatory intervention and distortion. As James Hamilton has pointed out, one reason for the increase in gas prices during the tight markets in 2005 was the fact that the national market is segmented by EPA requirements and refineries cannot easily switch between the various boutique fuels favored by - you guessed it - Mr. Abramsky's fellow travelers. Finally, we have people who insist that we need to increase gas taxes so that we, like Eurotopia, will have gasoline prices near $10 per gallon.

Any guesses as to whether The Nation favors those higher fuel prices? I searched for "carbon tax" on their site and got 78 hits; the first one says, "A carbon tax would be simple --" The author goes on to add that

And as Charles Komanoff of the Carbon Tax Center argues, at least part of the proceeds of the tax could be rebated to poor and middle-income households through the income tax system, neutralizing any inequities. The unrebated balance could be used to subsidize alternative energy research and production. Given the historical successes of government funding of basic research in computing and medicine, there's every reason to believe the products of this work would be very promising.

Another two-fer: not only do we learn that the simple tax now has lots of other little simple ancillaries, like using the simple income tax system to rebate for gas, but we also discover that the government's funding of basic research has a proven track record. They don't explain exactly how we figure out the difference in rebates between subway-riding New Yorkers and rural Californians, so perhaps it is not as simple as they first insist. Nor do they actually compare the government's track record in conducting research to anything else, like privately funded applied research. Now, I think it's possible that government gives the private sector a good run in basic research, but recall that the human genome was first decoded by a private company in 1/10 the time and budget as that proposed by a government agency. But the private sector is much better at applied research, which is what was meant by "subsidize alternative energy research and production." So they call for applied research based on the government's track record in basic research? Nice sleight of hand.

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A greater protest must be registered over Mr. Abramsky's nearly complete silence on the century of other Progressive policies that have pushed the poor out of town and into the oil-based lifestyle. Once again, we can refer to Gabriel Kolko's Railroads and Regulation and The Triumph of Conservatism for an understanding of the politics underlying regulation in the Progressive Era. The tongue-in-cheek, short version is that competition was largely working for everyone except the capitalists themselves. Competition was forcing costs down so far that they were all headed for bankruptcy, so they tried cooperative arrangements. When those failed, they turned to the federal government to act as the cartelizing agent. Though Kolko doesn't specifically address it, it is easy to see that the electric power industry faced the same logic of high capital costs, low marginal production costs, and the resulting expansion, competition, system building, bankruptcy, and "need" for regulatory intervention. This eliminated the "destructive competition" in rails & utilities by constraining competition and innovation. The whole point of regulatory oversight was not consumer protection, as the unsophisticated, narcissistic state-worshipper would have you think, but rather stabilization for the industries so they could go back to peace, quiet, and regular dividends. That is why deregulation and people like Craig McCaw and Michael Milken were so upsetting to AT&T in the 1970s and 1980s, and why electric utilities are so resistant to deregulation today.

The same public who first wanted to give land grants and rights of way to railroads and canals in order to get rid of private turnpikes, and then wanted to constrain railroads because the average voter didn't understand the logic of the capital-intensive industry they had spawned, and now didn't like the fact that their regulations created a de jure cartel, wanted roads. They joined the Good Roads movement and fought for public subsidies for bicycles and then cars. When Louis Brandeis brought Harrington Emerson to the stand in the 1910 Eastern Freight Rate Cases to argue that every industry could be rationalized with and every consumer benefited by Taylor's Scientific Management, the public caught the bug for the Efficiency Movement and Technocracy Movement. They wanted to centrally manage everything. The goal was, as Herbert Croly put it, to produce "Jeffersonian ends with Hamiltonian means".

As outlined above, the Progressives in WWI and FDR's cabinet in the Depression and WWII supported a state-industrial oil policy to further rationalize oil production and distribution. In conjunction with the Good Roads and subsidization of the automobile (which gave rise to the Golden Age of manufacture and its corresponding anomie and unionism which many Progressives yearn for), the stage was set for moving out of high density urban areas and to the suburbs.

The push to suburbia has also been helped over the years with some uniquely Progressive policies. Rent control in New York City, for example (I once read that poverty-stricken Walter Cronkite lives in a rent-controlled building). The aforementioned utility subsidization, including the TVA and REA, which replaced farmer-owned windmills with investor-owner utilities. More recently, to "preserve their character" (a euphemism for "preserve their property values"), many cities (bastions of Right Wingerdom, like San Francisco) have banned urban development, forcing people out of town to find affordable housing. To pay for a wide variety of programs, some of which used to be privately provided by the working classes for themselves, cities have raised property and sales taxes (Santa Fe, for example: there's a reason you need to make $10/hour to live there, and it mostly has to do with California millionaires moving into the City Different; most of them are not exactly Goldwater Republicans). While the upper and middle classes were leaving the city to live in clean, quiet neighborhoods, these policies were all pushing the poor even further out of town.

In the specific case Mr. Abramsky addresses in his essay, the size of those towns probably needs to be smaller. They were dependent on mineral extraction and timber, both repeatedly attacked by people like Mr. Abramsky, but probably not by Jerry Taylor. Indeed, it's probably a safe bet that when people like Jerry Taylor raised the issue about the impact of stopping resource extraction on the workers, people like Mr. Abramsky glibly dismissed it, saying that the economy could easily absorb the jobs lost. But I will go further than either of them and point out something both should agree to (if they want to be logically consistent with their probable core values): continuing to live in a non-agricultural rural area is inherently energy intensive, and we should not continue to subsidize it if we really think Peak Oil is a concern.

I recently came across a site (probably something on Gristmill dealing with global warming) that claimed all of the skeptics of (Kyoto?) never provide any suggested solutions of their own. Does Mr. Abramsky offer a suggested solution for the poor people he exploits for his article? He offers a vague mention of mass transit, a system that works well in high density areas like Europe and the Northeast Corridor, but probably not in Northern California. He seems to imply that George Bush is personally responsible for the lack of mass transit despite the fact that ridership is higher than it was under Clinton.

Abramsky makes a quick offer to help them pay for oil, thus furthering the addiction that has them in this situation in the first place, and contributing to a 150 year legacy of trapping people in a state-underwritten prison. The latest insult in that legacy has been the ethanol subsidy, a Carter-era program with bipartisan support for all the wrong reasons: it reduces imports, it supports "family farmers", and it is "renewable". First used to replace lead (Pb) and reduce pollution, it actually increases certain types of pollution. The subsidies for "family" corn farmers mostly end up in the pockets of ADM. And the renewability, touted by Progressives, is having growing implications for poor people. As I noted in my review of Joshua Tickell's From the Fryer to the Fuel Tank, "Some bio-cheerleaders ... claim that a large scale shift to biofuels won't affect food prices, but that is almost certainly wrong. The amount of land required to make a dent into our petro-fuel usage would easily require both the fallow fields and some land currently used for food production. Demand up, price up, QED." Given recent headlines, I'm going to claim prescience, but I think every clear-headed person could figure this out on their own. Even Noam Chomsky figured it out in hindsight.

Finally, Abramsky also mentions the possibility of subsidizing efficient vehicles, something that has been going on for several years with mixed results*. In other words, we get some paeans to Progressive programs and a demonstration of how much good Mr. Abramsky can do with other people's money to prove that he cares. Some of his explanations are wrong, some suggested solutions are demonstrable failures, and one at least will probably make things worse (subsidizing oil? Really?!). At no time does Abramsky recognize or even seem to be aware of the contribution of his intellectual predecessors to the creation of the problems of today's poor. Instead, he turns the tables, claiming that those problems were caused by people like Jerry Taylor and policies like laissez faire and implying that anyone who doesn't accept his vaguely defined solutions is responsible for the misery and possibly death of the poor. "Laissez faire means you don't care."

Now, Mr. Abramsky is correct to question the effect on the poor, but he has come to exactly the wrong conclusion. His essay is nothing but rhetorical sleight of hand intended to impugn Jerry Taylor and anyone who dares suggest that the price mechanism is a better mechanism than any other so far identified to coordinate oil supply with oil demand. Mr. Abramsky is like George Washington's doctors who kept letting his blood, and upon remarking how sick he appeared -- probably the result of too much blood letting -- tried more blood letting.

Note that I did not say the price mechanism is the best means. Again, thinking negatively (what is that? perhaps not what you think), there may be a solution of which I have not heard yet, but until then the price mechanism is the least worst solution. Price controls are predicted by theory to create shortages, and the theory is confirmed by empirical data. A shorthand way of explaining this is the gas lines in the 70s and in Baghdad today. Surely, if the poor need gasoline, then some at high prices is better than none at any price? Ridiculing the least worst answer, or insulting the person who acknowledges it, is like accusing your doctor of murder for informing you that you will inevitably die.

Furthermore, Mr. Abramsky never seriously looks at the total effect of the price mechanism. It not only curtails demand, but it stimulates supply. Note the implications of this chart in The Economist, from the article "Venture Capitals". Furthermore, note an idea from this episode of Nova: "If you look at companies, like SunEdison, who are helping retailers put up solar panels on their roofs, you're suddenly seeing a linkage of the capital markets -- which have traditionally been very reluctant to get into solar energy -- with the retail sector. That's how you do things in America. You link the technology to the capital, and that's where the rubber hits the road." In America, the capital markets respond to a problem, while in other countries, the politicians respond. The former have to spend their own or their clients' money and are held accountable, the latter not so much.

"So what", you might say, "I don't care who produces the solution, so long as there is one. And so long as it benefits the least well off."

Well, here's so what. I'm vaguely familiar with the theory of functionalism. It says that institutions exist because a society needs them; institutions serve a purpose, a function. When I first heard of it, I immediately thought that it seems circular and lacks a mechanism to describe change; this appears to be an ongoing criticism of the theory. In any case, proponents of this theory use it to justify the existence of government agencies: obviously we must need them if they exist. If you evil bastard libertarians abolish some of those agencies, people will suffer.

That is true as far as it goes. It doesn't go far enough, though. There are two problems with it.

First, I have always believed that there are two problems faced by people who desire change: one is describing a desirable and reasonably realistic future. That is what I like about Kirkpatrick Sale. The second is to describe the path, how to get from here to there. The problem with simply saying "abolish such-and-such program" is that it doesn't describe what we reasonably expect to replace the functionality of that program or how the private institution that replaces the program will spontaneously evolve. For one thing, we don't know what it will look like or how it will evolve: if we did, we'd be in favor of planning. For another, "spontaneous" does not mean "instantaneous", and "evolve" does not mean "appear out of thin air".** So they are right to think that people would suffer if all we were saying is "abolish such-and-such", but we aren't: we are saying, "abolish such-and-such and allow some time for a better solution to evolve." Clearly, though, we need to do a better job of understanding and then explaining how institutions evolve.

The second problem with the functionalist-statist analysis is that it is usually based on an ignorance of history. Remember, if the existence of an institution implies a need for it, what answered that need before the government agency? This is a problem with the change mechanism in functionalism - if the agency sprung from nothingness, either the need must not have existed before, or the agency didn't spring from nothingness. So how does functionalism account for how or why would such a change occur? No answer seems to be forthcoming (but I admittedly have only a kindergartener's view of functionalism). In many cases, though, the solution to the riddle is that a private institution answered the need until it was co-opted by the government. As David Beito has documented, that was the case with much social insurance. The victor (the government) also gets to write the history and teach it in the schools it owns, so few people know about institutional arrangements that probably haven't existed for generations.

Let me bring this full circle.

Sasha Abramsky and others are claiming that laissez faire is not the answer to the problems posed by high gasoline prices for poor people, they are claiming it is the problem. I'm going to consider this patently false until someone can successfully convince me that oil policy is and has been laissez faire. Even stipulating to that claim, though, their recommended solutions of subsidizing the addiction would only prolong the problem and -- given that agencies rarely die once created -- would make the problem worse if oil prices should fall. They are refusing to face the possible fact that this area of California, like the Corps of Engineers' New Orleans, should not be as heavily populated as they were in the cheap-energy past. However, had laissez faire actually been practiced instead of the heady policy brew we have endured for the past 100+ years - regulating railroads and utilities, protecting them against innovators, encouraging suburban expansion, promoting efficiency in energy production at the expense of efficiency in distribution, reliability, and end use, then perhaps the poor people described in Mr. Abramsky's story wouldn't be locked into the lifestyle they are. People like Mr. Abramsky spent taxpayer money on the system that got them into this mess, now he has 100 ideas on how to spend more to keep them in the manner they have come to expect: poor, dependent, and hopeless. Ecologists refer to this approach of endlessly proposing the same solutions to the unintended consequences caused by an earlier round of similar interventions as "parachuting cats."

Given the power to enact their vision, they would systematically destroy every last vestige of spontaneous, private order in an effort to build community values. But such governments have a tendency to collapse of their own weight. When they do, the survivors look around and note that the community was kept together only by the fear of the increasingly necessary police state. There is no community spirit in such a place. Look at what the inhabitants of Russia have been enduring after the collapse of their system. Listen to this article on NPR about the lack of community values in Albania. No, really, listen to it. Generations of socialist theory have wiped out everything they knew about civil society. In America, de Tocqueville marveled at the Association phenomena; in Russia, people wished for their neighbors' barns to burn down.

That is why I prefer private to public institutions. I don't believe in market "magic"; too often have I been a disappointed consumer. Private solutions may not be perfect, but neither are state institutions. Too often have I also stood in DMV lines.

Cooperatives and associations are more democratic than an agency run by career bureaucrats. Furthermore, even Hirschman now acknowledges that Voice works only when Exit is a viable option. As a result, on average, private institutions are flexible and responsive and will evolve; public agencies are rigid and arrogant and will stagnate.***

Nobody resents an association they neither belong to nor pay for, even when that institution stands for something they loathe, but everyone hates paying for those parts of the government they oppose (agriculture? military?). Those who oppose democracy distrust private organizations and vote to suppress them (think Red Scare, Alien and Sedition, Palmer Raids, Radio Caracas Television). Those who genuflect to democracy cannot understand why people would vote for what they would call "undemocratic" programs and politicians. To comfort themselves, they develop theories of conspiracy, brainwashing & propaganda, or false class consciousness. They then begin to support politicians who promise to thwart those poor demented creatures, the opposition; in the end, the democrats line up to vote for the fascists, who proceed to replace private institutions with state institutions. The democrats are surprised when the anti-democrats take control of the machine and use it in surprising ways, perhaps even contrary to its original intent.

A public policy and agency require no imagination or creativity; simply - and I mean simply - propose a blunt mechanism for addressing whatever problem vexes you, then either declare victory or ask for more money and authority. The clever politician does both at once. Opponents can always be demonized as unpatriotic, asocial, and dangerous. A private institution requires work, creativity, conviction, persuasion, and innovation. It promotes civic values. Think Wikipedia, an institution created by libertarians (yes, Virginia, Jimbo Wales is one of those people). That is why I think that government is the intellectually lazy man's solution, and why it endangers the poor man whom he seeks to save.



* Yes, the Prius is great, but I get 46+ mpg with my non-hybrid. Somehow, the powers that be decided that hybrid was better than diesel, even though diesel fuel can be made easily from waste oil and renewable oil. I would argue that this is rather short-sighted, but not atypical. Also, several years ago I remember reading about the skyrocketing price of Suburbans in Arizona due to a shortage of them; apparently, the state was subsidizing a version with an alternative fuel modification (LNG or propane), but you could still run it on gasoline, so people were driving in from out of state and taking ownership of a friggin' Suburban at taxpayer expense for the purpose of saving gas. Personally, I think that if there is a role for the government here, it is to fund an E-prize as Lovins et al describe in The Oil Endgame. Remember, however, that the E-prize is named after the Ansari X-prize, a privately funded prize that has been moderately successful.

** In case you think I'm exaggerating about the strawmen used by anti-libertarians, look at what this says about libertarianism: "Libertarians believe (like Marxists believed back when there actually were Marxists) that if the government just shriveled away, a paradise would naturally spring into existence." Spring? It took hundreds of years to kill some institutions that themselves had to evolve over hundreds of years; only a fool would think they could be replaced overnight. Similarly, only a fool would think that "stroke of the pen, law of the land" equates to "problem solved". They are generally surprised to find out about "unintended consequences". Other than that, Midas' claim that things claimed by libertarians have never existed exposes the breathtaking ignorance of actual history usually found in people who read only popular history books. He could try starting with Homage to Catalonia or The Machinery of Freedom and work his way up from there.

*** Size is also important: I will take a small, decentralized public institution to a large corporation. Centralization and the distance between the top of the hierarchy and the end users or customers are also factors.

Freedom Rides

On the way home last night, I listened to Terry Gross' interview of Raymond Arsenault, who has just written a book about the 1961 Freedom Rides. Like most people born after that era, my perspective is limited. However, when you really dig into what they faced from the perspective of the time it was happening, you can't help but admire people like that. It seems these days that the title of "hero" is bandied about for all manner of people; it particularly bothers me when it is given to people who happened to die with no knowledge of what was about to be unleashed upon them. I think that undermines the idea of heroism and reduces it to a meaningless term.

You want to see the face of a hero? It's not pretty.

























This is Jim Peck, who required 52 stitchesJim Zwerg after being beaten by a mob for riding a bus [Peck was also beaten for same, but this ain't him]. I found this image from the badly in need of editing article on Wikipedia. It took me to something that nearly brought tears to my eyes.

The image was on the website of David Frankhauser, a professor of biology and chemistry at University of Cincinnati Claremont College. Frankhauser was part of the second wave of Freedom Riders. He was arrested for sitting in the Coloreds Only waiting room in Jackson, Mississippi, and subsequently spent time in the infamous Parchman Farm prison. His story is told here, and I highly recommend a visit to the page [where you can also read about Peck].

The method of non-violent civil disobedience is nearly irrational. The idea is generally credited to Gandhi, who developed the philosophy while trying to end oppressive taxation (notably of the Salt Tax), foreign rule, and widespread discrimination. The idea is to put yourself on the truly right side of the law (the side opposite the government, and in the case of Jim Crow, opposite violent gangs) and invite arrest, notoriety, beatings, and perhaps death in the process. Who would voluntarily do it? Especially given the high risk and potentially low payoff?

To listen to the rabid partisans, you would think that change only comes about at the hands of benevolent, powerful politicians. Note here that positive changes were brought about by private actors, despite the politicians. Segregation and Salt Taxes were the work of politicians, and creatures of the law, and change was inconvenient for the politically powerful.