Some Iron Laws of Political Economics

Mancur Olson, in his book The Logic Of Collective Action, highlighted the central problem of politics in a democracy. The benefits of political market-rigging can be concentrated to benefit particular special interest groups, while the costs (in higher taxes, slower economic growth, and many other second-order effects) are diffused through the entire population.

The result is a scramble in which individual interest groups perpetually seek to corner more and more rent from the system, while the incremental costs of this behavior rise slowly enough that it is difficult to sustain broad political opposition to the overall system of political privilege and rent-seeking.

When you add to Olson’s model the fact that the professional political class is itself a special interest group which collects concentrated benefits from encouraging rent-seeking behavior in others, it becomes clear why, as Olson pointed out, “good government” is a public good subject to exactly the same underproduction problems as other public goods. Furthermore, as democracies evolve, government activity that might produce “good government” tends to be crowded out by coalitions of rent-seekers and their tribunes.

This general model has consequences. Here are some of them:

There is no form of market failure, however egregious, which is not eventually made worse by the political interventions intended to fix it.

Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.

Although some taxes genuinely begin by being levied for the benefit of the taxed, all taxes end up being levied for the benefit of the political class.

The equilibrium state of a regulatory agency is to have been captured by the entities it is supposed to regulate.

The probability that the actual effects of a political agency or program will bear any relationship to the intentions under which it was designed falls exponentially with the amount of time since it was founded.

The only important class distinction in any advanced democracy is between those who are net producers of tax revenues and those who are net consumers of them.

Corruption is not the exceptional condition of politics, it is the normal one.

102 thoughts on “Some Iron Laws of Political Economics

  1. How depressing. This makes it sound as though this is an unsolvable, inherent aspect of democracy. I hope that’s not the case, as dictatorships, no matter how benevolent, also have their share of problems.

  2. >How depressing. This makes it sound as though this is an unsolvable, inherent aspect of democracy.

    Yeah, well, welcome to reason 43b why I’m an anarchist.

  3. “The equilibrium state of a regulatory agency is to have been captured by the corporations it is supposed to regulate.”

    I’m not sure I buy this one. The whole concept of “regulatory capture” has always seemed to me to be mostly activist rhetoric used to justify ever-increasing power for bureaucrats. Some sort of weird symbiosis seems like a more accurate description–for ever obvious bit of industry bias (e.g., allowing saline-plumped chicken to be called “natural” since salt is natural), there’s a countervailing bit of idiocy that serves solely to empower the agency at the expense of the industry (e.g., the Cheerios thing).

  4. @esr

    I’d argue that anarchy is just as utopian as democracy that does not suffer from the problems depicted by Olson. It is not, as Johnny Boy says, so much an unsolvable, inherent aspect of democracy as it is an unsolvable, inherent aspect of power–and so long as human beings exist, so will power, distributed (as with all things in human society) along a power law.

    It’s just the way it is. The pressures that form around power are as inescapable as the forces of selection that generated the specific range of gene sequences we think of as human beings. The best we can hope for is relative stability, with the occasional reform/house cleaning. We are very lucky, from the perspective of history, to be living when and where we are.

    And it’s not all bad. Government moves very slow; given time private innovations help to minimize the impact of regulation. Scroll down this to the part about the chilean bakers.

  5. The only important class distinction in any advanced democracy is between those who are net producers of taxes and those who are net consumers of them.

    Just to be sure I understood this, would the meaning be intact with the word I’ve added below?

    The only important class distinction in any advanced democracy is between those who are net producers of tax revenues and those who are net consumers of them.

  6. >It’s just the way it is.

    That used to be said of slavery and despotism, too, using exactly the same arguments you just did. They were false then, and I think they’re false now.

    But arguing about anarchy is not a useful thing for commenters on this thread to be doing, so please don’t continue. Our time would be better spent discussing the Olsonian analysis of interest-group politics in as value-free a way as we can manage.

  7. >Just to be sure I understood this, would the meaning be intact with the word I’ve added below?

    Yes. In fact I will edit the posting as suggested.

  8. Nothing here seems unreasonable. While remaining a democracy, what measures would you recommend to minimize these effects or their consequences?

  9. >While remaining a democracy, what measures would you recommend to minimize these effects or their consequences?

    I have a prescription, but I think I’ll wait a bit and see if any of the regulars can come up with it.

    >This one failed my smell test even before I thought of the counterexample of Norway.

    Norway will only look like an exception until the capital windfall from the oilfields is spent. You have to be observing on timescales of half a century or so before the true, merciless bite of these consequences becomes clear.

  10. Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.

    This one failed my smell test even before I thought of the counterexample of Norway.

  11. esr, I’m sure you know this, but the topics in your post are studied in an economic sub-discipline called “public choice”.

  12. I think that any collection of human beings, regardless of the initial organizational form of government (or lack thereof), will eventually succumb to the interest group pressures described by Olson. No solution is possible, except to “reset” the system to back to the initial state from time to time.

  13. A democracy will fail when the citizens realise they can vote money out of the treasury.

  14. The problem, Eric, is that over the timescales of the effects, you also have a shift in the people involved in the democracy. Over time, freedom decreases. You know the parable of the frog who fails to jump out of the gradually-heating water, right? Well, the problem here is that the first frog has time to have a baby frog, who never knew cool water.

    I view it as entirely an education issue. People need to realize that democracy doesn’t *solve* the problem of government. It just turns it into the least bad kind of government. Government is *still* the enemy of the people. It’s just the least bad enemy when it’s a democracy.

  15. >A democracy will fail when the citizens realise they can vote money out of the treasury.

    That’s a descriptive claim about one failure mode. Olson’s analysis, and public-choice economics in general, are generative; they nor only make strong predictions about multiple consequences, they provide insight into causation.

  16. Ok, I can’t let this one go unchallenged. It just smells so bad, although I’m sure you’ve got justifications for every point here. But lets get started:

    1: No form of market failure not made worse by interventions

    That’s an incredibly broad statement. I don’t know how you could show that a lack of intervention would have been better in every case in the history of government.

    It’s going to be possible to show that any course of action, given enough time, leads to a dip in some measure at some point in time. But isn’t that the case for any action or inaction? Any suggestion that taking the opposite action at some defined point in the past would lead to a better result must be highly speculative given the chaotic and self-referencing nature of the systems involved.

    I’m especially skeptical since this form of analysis/speculation lends itself very easily to selection bias.

    When I hear arguments justifying this kind of claim, they’re usually of a narrative form. If a narrative of any action is formed saying “This event led to this which caused this then made this and this is the end result, which is worse than the starting point”. To say that the first point was the mistake and that therefore not doing that would have led to a better place is very narrow. And just because a narrative can be formed to show what you want doesn’t prove that it’s the case.

    The problem is that the narrative is linear, whereas I’d claim the system is more of a network, with no defined beginning, no defined end, and no single point of failure – each of the steps on the failing narrative could just as easily be used to justify *further* intervention. “If we’d stopped this occurring then the measure would be up at this point”, the failure was a lack of intervention, not the original intevention.

    So, I’m deeply skeptical of this claim.

  17. >Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.

    I think this is true given static territory and technology. However, the cleptocracy can often be seen to lag behind new value creating technological innovation and the existence of an open frontier, to which productive people can escape, has historically produced a better production/plunder ratio, not just in the new places they settle but also in the places which they have left behind.

  18. >That’s an incredibly broad statement. I don’t know how you could show that a lack of intervention would have been better in every case in the history of government.

    Actually, formally proving a result nearly that strong is much easier than you’d think. Read David Friedman’s Price Theory, with particular attention to his demonstration that under very general criteria for efficiency (Pareto or Marshall measures qualify) even an omnipotent bureaucrat-god with perfect information must produce a less efficient outcome, with higher deadweight losses, than a free market.

    If you combine this with the Arrow’s Theorem analysis of the non-composability of utility functions, my Iron Law seems a nearly unavoidable consequence.

  19. >the existence of an open frontier,

    An alternate explanation is that the interest-group scramble did not take hold as the primary form of politics in the U.S. until the New Deal, thirty years after the closing of the frontier, so you’re mistaking historical contingency for causation.

  20. >Actually, formally proving a result nearly that strong is much easier than you’d think. Read David Friedman’s Price Theory, with particular attention to his demonstration that under very general criteria for efficiency (Pareto or Marshall measures qualify) even an omnipotent bureaucrat-god with perfect information must produce a less efficient outcome, with higher deadweight losses, than a free market.

    I can’t find the demonstration you’re referring to, could you please be more specific?

  21. >I can’t find the demonstration you’re referring to, could you please be more specific?

    Chapter 16, I think, though it has prerequisites in earlier ones.

  22. That used to be said of slavery and despotism, too, using exactly the same arguments you just did. They were false then, and I think they’re false now.

    I’ll respect your request not to discuss the merits of anarchy, but I did want to respond to this point specifically: could you turn the logic of this around and, instead of using it as a defense of anarchism, use it as a defense of democracy? IE, say that Mancur Olson may be observing something that seems to be an inescapable feature of democracy, but they said that slavery and royalty were inescapable features of life and that turned out not to be true. Who’s to say there isn’t a democratic system that could be designed to avoid Olson’s problems?

  23. > Although some taxes genuinely begin by being levied for the benefit of the taxed, all taxes end up being levied for the benefit of the political class

    I’m not as widely read as some of the commenters here, so I cannot make educated or scholarly remarks on economics, however, I entirely agree with this. :)

    As I see it, the whole notion of democracy as we know it today is nothing but a kind of benevolent dictatorship by a privileged few who get their legitimacy from a voting system that is flawed in the extreme, yet hailed as near-perfect by this interested group who keep close tabs on power. Hence it is no surprise that the political classes have absolutely no compunction in biting the hand that feeds them through taxes: namely the common people. Special interest groups who corner the benefits are the logical and natural product of this system.

    Voting between two (or three) parties once in 4 or 5 years does not give people any power whatsoever. Let us all work to get rid of that ridiculous notion once and for all. It makes me sick when people keep on and on about how voting is a moral duty, high responsibility, the ultimate expression of democracy, people’s power etc. etc. Absolutely makes no sense in a practical sense. One vote in one million or even ten million equates to what kind of power? Even if that one vote counts in some miniscule way, do we truly have a genuine choice of leaders? What about the ignorant masses who vote on sentiment and short-term considerations who negate the vote of the genuinely concerned citizen?

    True democracy is when each and every citizen has a share in actual decision making and responsibility which will only lead to proper allocation of resources for a nation. Unfortunately true democracy is a myth because it is an unworkable solution. The democracy we see in major nations today is wolf in sheep’s clothing

    Let us hope for a day when governments or at least their near-total grip on economic power of the people simply dies a natural death – without bloodshed, without any revolution but as a logical consequence of the flaws.

  24. Ok, only read chap1 of the book, but loving it.

    I have a question though:

    Your analysis suggests you’re thinking long term large scale so that no individual entity or action is relevant (is that right?).
    Is it possible for a single entity to dominate the landscape enough that it skews that assumption over a significant period of time (say 10 thousand years).
    Is it possible for such an entity to occur through a free market (or self-interested manipulation of such a market)?
    Would such an entity act to make the market non-free or at least non-beneficial for the majority.
    Would it therefor be beneficial for a ‘government’ of some form to intervene with this entity with the aim of keeping the original assumptions valid?

    I’m thinking that this entity would itself become a de-facto government, with all inherent problems, making an ungoverned free market as problematic as a government, in a spiral that cannot be free of ‘government’ intervention.

    I’ve not thought this through yet, but I’m new to thinking accurately in this way, any help?

  25. @esr: The solution is obvious. Remove the trough and you won’t have any pigs, lipstick or no, feeding at it.

  26. >Chapter 16, I think, though it has prerequisites in earlier ones.

    Ch16 shows that a free market can be as efficient as a bureaucrat-god.

    It’s not possible for a free market to be more efficient than a bureaucrat-god: the powers Friedman ascribes to the b-g allow the b-g to choose the same outcome as the free market.

  27. It’s not just corruption and interest group politics either, even if you somehow manage that there is still the problem that governments are made up of individuals. A large part of the problems governments cause are from those individuals acting on their personal beliefs rather than thinking systemically about what the actual causes of problems are and the systemic effects of their actions will likely be. Unfortunately, I can see no way to counter this, which is why I am a libertarian – governments will **almost necessarily** screw-up whatever they try to do.

  28. Things have gotten worse because the range and sheer number of interventions by the government has increased over the decades, not because the competence or corruption has really gotten significantly worse (at least not as a percentage of government interventions).

  29. @esr: The solution is obvious. Remove the trough and you won’t have any pigs, lipstick or no, feeding at it.

  30. esr wrote:

    >An alternate explanation is that the interest-group scramble did not take hold as the primary form of politics in the U.S. until the New Deal, thirty years after the closing of the frontier, so you’re mistaking historical contingency for causation.

    I wasn’t actually referring to what happened to the United States after the disappearance of the frontier, so much as the effect that an open frontier had on European nations. Whenever people have had the option of leaving for greener pastures, government has had to behave more responsibly or lose its most energetic and productive people.

    You can look at government as an industry that provides certain services at certain costs. In any industry, where the customers cost of changing providers is high, and the cost of new providers entering into the market is high, the cost/benefit ratio of the product being provided is gong to suck. So the entire market for government services gets more competitive (better for the customers) whenever the cost to move to a competing jurisdiction (or to start your own) is lower.

    This effect can overpower the effects Olsun is discussing – if you are robbing Peter to pay Paul, and Peter leaves town, you have to switch over to robbing Paul to pay Paul and the inherent dysfunction of the cleptocracy becomes obvious to everyone.

  31. re: Norway.

    Cultural capital can hold off the inevitable for a good while, but sooner or later actions will come into line with incentives. (IIRC, the change in rates at which people claim long-term disability in Noway is quite troubling, but I may be mixing my Nordic countries…)

    The most likely remedy I see for this (barring Eric’s preferred anarchism, which I think has other problems) is strong Federalism; leaving most of these social welfare schemes to the state level and allowing free movement between them. This provides a negative feedback of sorts (perhaps, in a sense, softening anarchism by applying it at a less granular level?) as people and resources move to more efficient states, and the mere threat of this acts as a check on all but the blindest parasites.

  32. > The whole concept of “regulatory capture” has always seemed to me to be mostly activist rhetoric used to justify ever-increasing power for bureaucrats.

    Actually, the term and the concept are used to explain and describe (in pejorative terms) some of the behavior of bureaucrats. No one uses it as an argument for giving them more power.

  33. >@esr: The solution is obvious. Remove the trough and you won’t have any pigs, lipstick or no, feeding at it.

    DING DING DING DING! Somebody got it.

    The way to solve the structural problem of interest-group politics is to reduce the expected payoff from gaming the political system to epsilon. Abolishing government would be one implementation of this fix. Are we clever enough to come up with others?

  34. > Are we clever enough to come up with others?

    Well, here’s one possibility: http://hanson.gmu.edu/futarchy.html

    Prediction markets are a severely underutilized tool. I’d still rather just have an ancap society, but futarchy does seem almost crazy enough to work. In such a system I’d distrust voters to vote for sane values, but you’ve got to fix that problem anyway if you want any hope of getting a stable ancap society established.

  35. One of my favorite Paul Graham essays discusses the problem of government corruption:

    After Credentials:
    http://paulgraham.com/credentials.html

    He wrote: “History suggests that, all other things being equal, a society prospers in proportion to its ability to prevent parents from influencing their children’s success directly. It’s a fine thing for parents to help their children indirectly—for example, by helping them to become smarter or more disciplined, which then makes them more successful. The problem comes when parents use direct methods: when they are able to use their own wealth or power as a substitute for their children’s qualities.”

    Government corruption can be prevented — but only by a majority of the citizens rising up and putting a stop to it. But a population smart enough to do that would also be smart enough to live their lives peacefully and constructively without being forced to do so. In other words, that population would be smart enough not to need a government at all. In any real, modern population of human beings, the majority will have the wool pulled over their eyes by special interest groups and won’t know it or at least won’t know what to do about it.

    Government is for the stupid. Smart people already spend their lives trying to make the world a better place, and those kinds of people don’t need governing.

  36. @esr

    I think Olson said elsewhere that he believed there was a cycle to these things; where new nations that start fresh the way that the US did do well for a while as the “trough” is too smile to entice very many interest groups, but as pressure builds and the size of the trough increases, the returns increase drawing in more and more interest groups until the whole thing collapses under its own weight and you start fresh again (with the “collapsing under its own weight” being a rather prolonged and chaotic process).

    I don’t know that “abolishing government” is a real answer. You may, in theory, successfully destroy the existing institutions that are in place, through violence or otherwise. But what will stop new centers of power from forming around individuals capable of organizing and arming large enough groups of people? (I’m sorry I know you said you preferred not to debate the merits of anarchy; I’m trying to limit it to responding to specific things you are saying)

  37. >It’s not possible for a free market to be more efficient than a bureaucrat-god: the powers Friedman ascribes to the b-g allow the b-g to choose the same outcome as the free market.

    Wrong. You’ve failed to understand the implications of revealed preferences in a market; there is information required for maximum efficiency that the bureaucrat-god cannot have because it is only elicited by market transactions.

    In fairness to you, Friedman doesn’t make this point very explicit in Chapter 16; I’d have to reread Price Theory to be sure he nails it down elsewhere. It’s the basis of Hayek’s calculation-collapse argument from 1938, so it’s not exactly breaking news.

  38. > Daniel Franke Says:
    > > Are we clever enough to come up with others?
    > Well, here’s one possibility: http://hanson.gmu.edu/futarchy.html

    What makes futarchy different from anarchy? Maybe I missed something. If we started with an anarchy, and then we asked every adult to vote on what public projects were worth doing, would that then be a futarchy? This is the first I’ve heard of futarchy.

  39. Futarchy still leaves a single organization with a monopoly on the use of force, i.e., a government, responsible for implementing the policies that prediction markets determine are likely to succeed.

  40. >Smart people already spend their lives trying to make the world a better place, and those kinds of people don’t need governing.

    Alas, this isn’t universally true. Some smart people are sociopaths. It’s not common, because the sort of minimal brain damage that produces sociopathy tends to also lower IQ in its victims, but…

    I know at-least one high-functioning sociopath who I judge is nearly as bright as I am; fortunately, he has deduced that simulating neurotypical ethical behavior is in his long-term interest and does it quite effectively, enough so that I’d actually trust him further than I do most neurotypicals (he creeps out my wife a bit, though, which is reasonable; her instincts are correct in warning her that he is potentially dangerous). Unfortunately, he is exceptional; most sociopaths as bright as himself are (a) highly toxic people, and (b) attracted to politics, where sociopathy is extremely adaptive.

    Whether the “governing” these people need requires an actual government (or the anarcho-capitalist functional equivalent of one) is a separate issue.

  41. > Some smart people are sociopaths.
    > most sociopaths as bright as himself are (a) highly toxic people, and (b) attracted to politics, where sociopathy is extremely adaptive.

    If you define “smart people” to mean something like “those people who are bright enough to see the long-term practical value of cooperative behavior” then that definition would include your so-called “sociopath” acquaintance and would exclude most other “sociopath” individuals. That was the sense in which I said that smart people don’t need governing.

    In other words, I’m claiming the true definition of intelligence is long-term survival capability, as opposed to the ability to score high on a puzzle test (IQ test).

  42. >In other words, I’m claiming the true definition of intelligence is long-term survival capability, as opposed to the ability to score high on a puzzle test (IQ test).

    There’s a level on which I’d love to agree with this, but no. It both clashes with folk definitions of the word “intelligence” (absent-minded professors, anyone?) and immediately leads to a falsification of your original claim. By this definition, a criminal or despot who dies at an advanced age with lots of children didn’t need governing, no matter how many people he killed in order to gold-plate his lair.

  43. > esr Says:
    > By [your] definition, a criminal or despot who dies at an advanced age with lots of children didn’t need governing, no matter how many people he killed in order to gold-plate his lair.

    Your despot made the world a worse place for his children to live in, in the long-term, even though they prospered in the short-term.

    I have difficulty discussing morality with people because I feel ultimate effects must be considered. If you are nice to everybody you meet your entire life, but you ask several of them for loans, and you die without paying those loans back but only because you were too poor, is that morally the same as intentionally not paying the loans back because you had evil and theft deeply hidden in your heart? The intent is different, but the result outside of your heart is the same.

    Your despot must have scarred the society that his children lived in to “gold-plate his lair”. This could have all kinds of repercussions on their personalities (if they grow up spoiled and lazy) and physical well-being (if there is a revolt against the powerful family). This was stupid behavior for the despot. In general, raising children to want to make the world a better place is healthy for those children and is the optimal survival strategy even if they turn out poorer for it sometimes.

    As intelligence goes to infinity, morality becomes meaningless, or at least needs to be more clearly defined. Every action a sufficiently smart person takes is a selfish action, and also a cooperative action, in sort of a Zen sense if I understand that term correctly.

  44. (But you’re absolutely right I’m stretching the popular definition of intelligence.)

  45. >Your despot made the world a worse place for his children to live in, in the long-term, even though they prospered in the short-term.

    Still not buying it. You’ve uttered what Garret Hardin called a “panchreston”; it’s not falsifiable, so it’s not predictive.

  46. I do admit to a circular definition in my original claim. I’m saying that smart people don’t need governing because (a legitimate) government’s only purpose is to force people to behave as if they were smart. Which does not embarrass me because my failure of logic highlights the pointlessness of government.

    But I thought you of all people would agree with what I said about the morality of the despot. If he was sufficiently intelligent, he would see that raping the society he lived in to provide for his children would risk causing a long-term result that would be inferior to the result likely to be achieved by peacefully providing for his children using more traditional means such as getting a job.

  47. >Which does not embarrass me because my failure of logic highlights the pointlessness of government.

    I won’t accept faulty arguments even for conclusions I agree with.

  48. Does anybody really think we are going to disband or get rid of the government? Not going to happen in the real world. And it would be unconstitutional, as the government is required for example to defend the country.

    The real lesson here is seems to me is that entitlement programs, however socially beneficial they may be, are unsustainable, as they sooner or later bankrupt the country. They start small and reasonable, put political pressures see to it that sooner or later they get expanded, such as when President Bush added a prescription drug benefit to Medicare.

    Social security, medicare, medicaid, etc., might just be the ruin of us yet.

  49. To help me understand. You believe a person who makes the world a worse place for their children to live in in exchange for some money and luxury can still be considered “smart”? I would consider that person to lack intelligence regardless of their IQ score. Do you disagree that the genes leading to that person’s character traits have poor survival characteristics?

  50. >Do you disagree that the genes leading to that person’s character traits have poor survival characteristics?

    I think your argument is flawed on several levels, all of which are irrelevant to the Olsonian analysis of collective action, which is why I’m not going to get dragged down that rathole.

  51. Restricting the franchise could make a difference. I don’t see any way for the West to do this, but China doesn’t have to follow us to universal sufferage democracy. They could let every-one vote in local elections, require passing a simple examination in arithmetic for voting in regional elections, and reserve voting rights in national elections to those who pass a stiff examination in Public Choice Theory and the tendency of democracies to eventually self-distruct.

    Another idea is a court of preference and restraint that has the power to strike down factional laws. It could calculate the loss to the public good caused by laws that favour a special interest over the public good and award some fraction of this to the person who brought suit. The usual problem with the incentives in this area is that the person who sues to block a law that benefits a concentrated interest at the expense of a diffuse interest is that the plaintiff gets their actual damages which are quite small. We need them to be rewarded in a way that recognises the aggregate benefit they bring to the country. This would create a counter-vailing concentrated interest.

    The Court of Preference and Restraint would obstruct populist policies. This is why I think restricting the franchise is important. We can suggest institutions that act as a check on the tendency to decline that Olsen identifies, but unless the electorate is sophisticated enough to understand the long term importance of such institutions they will remove them to remove the obstacle they present to the electorates short term enthusiasms.

  52. >Another idea is a court of preference and restraint that has the power to strike down factional laws.

    That’s the sort of creative suggestion I was looking for.

  53. I’m not sure just how much impact it would have (and it does seem politically impossible to implement) but the franchise only extending to those who pay more in taxes than they receive in government funds might help.

    This might be game-able via collectives…I’d have to spend some time analysing it. You might have to average it across families or something.

  54. >I’m not sure just how much impact it would have (and it does seem politically impossible to implement) but the franchise only extending to those who pay more in taxes than they receive in government funds might help.

    That one used to appeal to me, too, but it has has a nasty failure mode well explored by F.M. Busby in the background of the Rissa Kerguelen SF novels. The permanent political class forces people onto welfare in order to contract the franchise to the point where “Voters” become a closed nomenklatura.

  55. Since you are interested in the idea of a Court of Preference and Restraint I’ll dump my draft on you. You’ll notice that I’m attempting to be realistic. Instead of dreaming up an institution that achieves good results because it is manned by good people I’m trying to think psycho-historically: what are the dynamics of the social system. But this leads me out of my depth. I’ve not developed the idea beyond blog-comment quality.

    If you create an offical post, the holder of the office will exercise his powers, to avoid being seen to be redundant. If you create parliament to make laws, parliamentarians will give you plenty of laws. If you establish a patent office, it will issue plenty of patents.

    If you have a Court of Preference and Restraint, whose sole power is to strike down laws that grant preferences and enact restraints, what dynamic does that create? I think the natural tendency of bureaucracy to expand into empire could be useful here. If the legislature tired of passing crass laws that immediately got struck down, and started being clever about it, would the Court of Preference and Restraint accept being put out of business? I think it would develop its jurisprudence, and come up with new reasons for seeing a law as a preference or a restraint and striking it down.

    The other issue is precedent. The legislature is always trying to get new preferences permitted. That is its job, to sell preferences in exchange for campaign contributions :-) So the pressure on the Court of P&R is permit this, and permit that, and gradually more and more preferences become permitted. That is the dynamic we have already seen with the Supreme Court expanding the commerce clause, and then feeling bound by precedent and unable to contract it.

    Consider though if precedents sunset. One is hurt by a tariff. One sues in the Court of P&R to get it struck down. The government pursuades the court that it is in the national interest. Is one stuck forever? The court could be established such that a continuing preference may be relitigated after 10 years.

    Notice that preferences and restraints are often justified by the benefits that their proponents claim will follow. If the issue is relitigated ten years later, the speculation that the benefit will follow is trumped by evidence that it did not.

    So the Court of P&R will in time be swamped with current cases, rehearings of 10 year old cases, second hearings of 20year old cases, third hearings of 30 year of cases, etc.

    The dynamic here is decided by the presumption in pending cases. If a law is suspended pending the hearing of initial challenges, the government has a dilemma. It can expand the Court of P&R, so as to get its new laws heard and into action. This enlarges an institution dedicated to limiting the governments power. Or it can free up court time by conceding less important older cases. Perhaps there will be a equilibrium point with a modest sized government.

    Another role for the Court of P&R could be to require legisation to come with a statement of purpose, and permit two torts that could lead to a law being struck down. 1)Pointlessness. 2)Ineffectiveness. For example, the government might introduce a 55mph speed limit, saying it is to make drivers drive more slowly. This gets sued for pointlessness and struck down. So the government tries again saying that it is to save 1000 lives a year in reduced road traffic accidents. Now it serves a substantial purpose, so it survives initial scrutiny for pointlessness. Later though it becomes vulnerable to suit for ineffectiveness. If it is not actually working it could be struck down. This provides a counter to the tendency of government to just try harder, 50 mph,45 mph, regardless of whether polices have their intended consquence.

    Returning to Olson’s economic theme, government sometimes justifies tariff barriers using the infant industry argument. Milton Friedman points out that the infant industries never grow up. Imagine though that the infant industry argument were a justiciable part of the legislation enacting the tariff. The government needs to protect its law against the tort of pointlessness, so if has to promise that the infant industry will grow up. Ten years later some-one can issue a writ to strike down the tariff for ineffectiveness, pointing out the the industry is still sickly and in need of protection.

    Would this actually change anything? I’m thinking of the copyright clause with its limited times. The current US Supreme Court has neutered the limit by letting Congress legislate a limit as large as it wants, but part of the problem is that the Supreme Court is a general purpose court. It can abandon its role in upholding economic liberty and still retain its self-respect by being the criminal court of appeal for Federal criminal cases. Indeed empire building is a problem. You might hope that the Supreme Court would uphold the Tenth ammendment, but letting Congress pass lots of Federal criminal statues expands the role of the Supreme Court and gives it a more normal criminal court role.

    A Court of Preference and Restraint, lacking general jurisdiction, might be jealous of its sole role in striking down factional laws, and be reluctant to cede any of its limited ground to other branches of government.

  56. Pete, I edited your critical comment by mistake so I deleted the botched version. Please resubmit.

  57. >Does anybody really think we are going to disband or get rid of the government? Not going to happen in the real world. And it would be unconstitutional, as the government is required for example to defend the country.

    The constitution is the document that defines our government (or should). Saying that getting rid of the government is unconstitutional is like saying that abolishing monarchy conflicts with the divine right of kings.

  58. >>It’s not possible for a free market to be more efficient than a bureaucrat-god: the powers Friedman ascribes to the b-g allow the b-g to choose the same outcome as the free market.

    >Wrong. You’ve failed to understand the implications of revealed preferences in a market; there is information required for maximum efficiency that the bureaucrat-god cannot have because it is only elicited by market transactions.

    From Friedman’s Price Theory:

    One way of putting this that I have found useful is in terms of a bureaucrat-god. A bureaucrat-god has all of the knowledge and power that anyone in the society has. He knows everyone’s preferences and production functions and has unlimited power to tell people what to do. He does not have the power to make gold out of lead or produce new inventions. He is benevolent; his sole aim is to maximize welfare in Marshall’s sense.

    The bureaucrat-god quite specifically does have the required information.

    There are two distinct concepts both referred to as “free markets”. [FM1] a free market is a market free from government intervention. [FM2] a free market is a market that satisfies the preconditions of the Welfare Theorem. Only [FM2] guarantees efficiency; [FM1] may fail to be efficient due to externalities, asymmetric information, or transaction costs.

    You are arguing for something stronger than just the standard Welfare Theorem. I think that certain government interventions can make [FM1] look more like [FM2] (e.g. consumer protection laws); your Iron Law states that this is impossible. But I see nothing in Price Theory that supports your law unless you are conflating [FM1] with [FM2].

    (I got the idea of [FM1] / [FM2] from your “flerbage” essay (liked the idea/thought the execution failed))

  59. >The bureaucrat-god quite specifically does have the required information.

    I think you have misinterpreted David’s intentions here, but rather than arguing the point with you I’ll ask him. It’s a minor point, anyway – the difference between “greater than and equal to” or “greater than” – and in any real situation a planner does not have anywhere near perfect preference information, so calculation and deadweight losses will be quite large and the stronger result obtains.

    The distinction between FM1 and FM2 buys you something useful, in political-economics terms, only if the “externalities, asymmetric information, or transaction costs” introduced by government intervention to fix market failures are reliably much less generative of deadweight losses than the market failures themselves are. Friedman would say – and I would agree – that this is essentially guaranteed not to be the case by the fact that “good government” is an underproduced public good.

    On a practical level, consumer-protection “laws” issued by Underwriters’ Laboratories and enforced by insurance companies are observably more effective and efficient than OSHA/EPA/CPSC regulations.

  60. >The distinction between FM1 and FM2 buys you something useful, in political-economics terms, only if the “externalities, asymmetric information, or transaction costs” introduced by government intervention to fix market failures are reliably much less generative of deadweight losses than the market failures themselves are.

    This depends on how strong a claim you are making with your “Iron Law”.

    1) If you are claiming the government intervention is always less efficient than accepting market failure, then I only need “sometimes”, not “reliably”.

    2) If you intended to make a weaker “on average” claim, then I only need “on average” rather than “reliably”. If you treat the set of government interventions as a sort of “investment portfolio”, then a diversification strategy can turn “on average” into “reliably”.

    >On a practical level, consumer-protection “laws” issued by Underwriters’ Laboratories and enforced by insurance companies are observably more effective and efficient than OSHA/EPA/CPSC regulations.

    My federal-alphabet-soup-fu is a little rusty, but I believe those three are meant to protect workers/environment/consumers?

    Private worker insurance schemes are known to report a lower number of accidents because there is an incentive to under-report accidents. They will be “observed” to be more efficient because the true costs are hidden and fall mostly on the workers.

    I can certainly see how US federal agencies might be less efficient than the private alternative. But most western democracies have a much lower tolerance for corruption than your federal government.

  61. I think this post is good, but not enough, some important points are missing. This is exemplified in this sentence:

    “Corruption is not the exceptional condition of politics, it is the normal one.”

    A normal one for people having no moral or ethical scruples. But is it necessary and natural for every society, every culture, all the time, to be amoral and unethical?

    What if democracy _itself_ corrupts the moral/ethical character of the population? Thus providing not only the external condition for corruption but also the internal cause of it: widespread amorality and unethicalness? And investigation of this part of the problem is what I find to be missing here.

    I would find it plausible that democracy corrupts morals and ethics, not only because it provides external conditions for it, but also by it’s direct effect on the human psychology.

    Democracy is built on the assumption that one person’s opinion worths the same as the other ones. Meaning: the faculties that generate the opinion (reason, knowledge, and what I find particularly important here: conscience, moral imagination, sense of integrity etc.) are assumed to be equal.

    Or at any rate, they are NOT assumed to be UNequal, the previous statement in this weaker form at least is certainly true. Even when one doesn’t believe in strong democracy (assumed equality of these faculties), to be a supporter of democracy, one must necessarily believe at least in the weaker version of it: the differences, if there are any, are so unknowable and uncertain that assuming equality is a better guess than assuming any difference.

    At any rate, the result of such egalitarianism necessarily means that moral/ethical examples are eroded. There are no kings or aristocrats whom public opinion pressures to be very moral/ethical BECAUSE they are hereditary kings/aristocrats (i.e. a lot of public trust and respect was invested into them at the moment of their birth and they are obliged to repay that), and therefore, there are no kings/aristocrats to serve as moral examples for the people to look up on, to imitate.

    Simply put, there is no group of people in a democracy, who are supposed to be, expected to be, demanded to better than others.

    In a democracy, if you are no worse than then average, you are considered good, because there is no higher standard or example of the good.

    It means, of course, that the natural gravity of the built-in bugs of human nature (Xtians call it original sin, Buddhists call it the ego illusion, an evolutionary scientist might call it evolved features that were useful for primates and cavemen but are dangerous for us) slowly drags the whole population downwards, there is a slow race to the bottom, to be more and more amoral and unethical, because there are no higher examples or standards to provide an upward pull, countereffecting the the effect of this gravity…

  62. “Are we clever enough to come up with others?”

    Von Mises came up with one a few generations ago. If you keep asking what exactly is the difference between a government and a self-regulating industrial association, ultimately, the only thing you will find is the right to secede from it. (To fork the project, so to speak.) Thus, grant the right to secede to every territory of any reasonable size – state, county, city, perhaps even a village – and the problem of government solves itself. It’s a better way than eliminating governments (anarchy), because it lets those people have governments who want one and let’s those who don’t want one not have one.

    Which is a nice theory, but I don’t know what would keep the city-states from attacking each other. Historically, I know that the best periods of history (Ancient Greece, Reneissance Italy) etc. were based on many small governments. They were good periods, but with lots of war. Anyway, it’s yet another suggestion.

  63. “Another idea is a court of preference and restraint that has the power to strike down factional laws. ”

    Hmmm… another suggestion: a hereditary king with no positive powers, but with unlimited negative i.e. veto power. He can make no laws or rules but can veto any of them.

    Without positive powers, he cannot turn into a tyrant. Being hereditary, he looks for the long term: he wants to leave a well-functioning country to his children, esp. if his and their salary is the function of the national GDP or HDI or something, so he is incentived to care for the long-term well-being of the country on a whole, vetoing every special-interest law that would harm it.

  64. A hereditary king with no positive powers? I don’t think that Shenpen is making another suggestion, I think he is homing in on a weakness: how do you choose the judges for the Court of Preference and Restraint? What stops the government packing the bench with judges who will permit the expansion of government power?

    A hereditary king with no positive powers is loyal to the long-term well-being of the country rather than simply being loyal to the founding ideals of the court. That sounds good, but I think it is actually bad. If the king believes in socialism he will trash the court to permit it. If one conceives of a constitution as a system of checks and balances one wants the persons in each part to be loyal to their narrow function.

    Perhaps the career path for judges in the Court of P&R could be active judging from 40 to 60 followed by supervision from 60 to 80, with supervision including the slection of new active judges. That might lead to a rigid and ossified court, which is what I regard as most interesting because then historians get to see how the mechanisms play out in the long term.

  65. Shenpen:

    Thus, grant the right to secede to every territory of any reasonable size – state, county, city, perhaps even a village – and the problem of government solves itself. It’s a better way than eliminating governments (anarchy), because it lets those people have governments who want one and let’s those who don’t want one not have one.

    Which is a nice theory, but I don’t know what would keep the city-states from attacking each other.

    I think this is a stronger variant of the Federalism solution which merely insures for the people the right to transfer between smaller governmental units (craeating a market for liberty?), reserving for the central government only the powers it absolutely requires (national defense,…?). Unfortunately, the 16th and 17th amendments to the US Constitution seriously impaired, if not destroyed, this in the US.

    Surprisingly (to me), if I follow my logic to its conclusion, the EU may actually be well-positioned – the combination of free movement of people and a weak central government should produce a ‘race to the bottom’ in terms of governmental activism.

  66. > Your analysis suggests you’re thinking long term large scale so that no individual entity or action is relevant (is that right?). Is it possible for a single entity to dominate the landscape enough that it skews that assumption over a significant period of time (say 10 thousand years). Is it possible for such an entity to occur through a free market (or self-interested manipulation of such a market)? Would such an entity act to make the market non-free or at least non-beneficial for the majority. Would it therefor be beneficial for a ‘government’ of some form to intervene with this entity with the aim of keeping the original assumptions valid?

    It would be beneficial for the troll-kings to come in and fix things. However, that’s not likely.

    You don’t get to assume a beneficial and independent govt in that situation. Instead, it’s likely that the bad entity has also worked its way into govt to, at the very least, protect itself, and, more likely, to advance its goals.

    Regulatory capture happens. Theories that assume otherwise are wrong, no matter how attractive their conclusions.

  67. > You believe a person who makes the world a worse place for their children to live in in exchange for some money and luxury can still be considered “smart”?

    Yup, and it’s clearly true.

    First of all, they may not know that they’re making things worse for their children.

    Second, their children don’t live in the average world, they start out in the situation created by their parents. Making things worse on average doesn’t imply that all things are worse in the specific. In other words, that money can be used to improve their children’s lot in life even though getting it reduced the overall quality of life.

    Note that competition matters in genetics. Even if they make things worse for their children, they win the genetic race by making things even worse for their children’s competitors.

    > I would consider that person to lack intelligence regardless of their IQ score. Do you disagree that the genes leading to that person’s character traits have poor survival characteristics?

    The problem with that “consideration” is that the global “make things worse” effect is shared, negligible, unreliable, and too far out in the future (short of global thermonuclear war) . Meanwhile the benefits of direct help to one’s children are specific, significant, and immediate. As a result, it’s a genetic win to help one’s kids regardless of the effect on the world.

  68. “When you add to Olson’s model the fact that the professional political class is itself a special interest group which collects concentrated benefits from encouraging rent-seeking behavior in others”

    I think I both intuitively and based on practical experience agree with it, still, it would be nice to see some more formal (preferably logical rather than empirical, as these things are hard to measure) proof or evidence for this statement, as this is a very important one. As this statement predicts a lot and pretty grave things – it predicts the following:

    Let’s say society consists of only two groups, the blue ones and the green ones. (Kudos to those who catch the historical reference in this.) It would make a lot of sense if the blue ones and the green ones would agree to leave each other alone, make no demands on each other, but just engage in voluntary trade etc.

    This statement predicts that the political class will urge the blue ones and the green ones to mutually steal for each other. Not at the same time, of course, but the political class will probably divide itself to blue-cronies and green-cronies and will take turns in exploiting the other one. The result will be mutual exploitation: the blue ones will pay taxes that will be given to the green ones as cash handouts, in turn, the blue ones will get some sort of regulation that reduces competition, meaning the green ones will have to pay higher prices. The result is mutual exploitation.

    The important point is that in the long run, both lose: they shift the same amount of wealth to and fro, but generate less wealth, because they have to put effort into lobbying + into evading the rules disadvantageous for them, and without these rules, they both could invest this effort into wealth-generation.

    Both would gain by an “I’ll leave you alone if you too leave me alone” settlement. We could expect that people in the long run recognize their own interests. As this doesn’t happen, this statement predicts that it’s the political class itself that generates the strife between the blue ones and the green ones. It’s this class that prevents this sort of settlements.

    That’s a very grave accusation, that’s why this statement requires some really good proofs.

  69. >This depends on how strong a claim you are making with your “Iron Law”.

    Try this: For every government intervention to fix any market failure that can be fixed at all (important qualification, some can’t be fixed by any means), there is a market solution with lower deadweight costs. That is, political fixes may contingently work sometimes, but at a deadweight penalty relative to the optimal (market) solution.

    >My federal-alphabet-soup-fu is a little rusty,

    I was thinking of a more specific case where it’s actually possible to do something like apples-to-apples comparisons; electrical-equipment safety (which, basically, is UL’s patch) versus building codes.

    >But most western democracies have a much lower tolerance for corruption than your federal government.

    That depends on how you intend the term. If corruption = outright violations of law, such as requiring bribes or kickbacks, the U.S. is pretty clean. See this 1996 table from the World Bank, which is pretty representative of other rankings I’ve seen; in the G8 only the UK and Germany fare better, and those not by much – and the total count of “western democracies” below and above the U.s. is about equal. Significantly, all countries with substantially better rankings than the U.S. have much smaller populations and/or are far more culturally homogenous.

    In stating the Iron Laws, however, I meant “corruption” in a broader sense that includes not merely criminal conduct but unethical self-dealing and influence-peddling. Having lived in Europe and South America myself, my sense is the the dispersion in that measure is much narrower. That is, it is endemic everywhere – but countries within the Anglo-Saxon tradition of the “night watchman” state (including the U.S, Great Britain, Canada, Australia, and New Zealand) do somewhat better than those outside it.

  70. >A normal one for people having no moral or ethical scruples.

    No, I intended a much stronger claim – that corrupt self-dealing shades imperceptibly into the normal process of political logrolling and vice-versa. It is not that “the people” or “the politicians” lack ethics and scruples, it’s that the ethical distinctions among (a) looting the treasury for the benefit of favored-interest-group-of-the-week, (b) looting for the benefit of political allies, (c) looting for the benefit of friends, and (d) looting for the benefit of self are genuinely difficult.

    It’s like the old joke with the punchline “We already know what you are, now we’re haggling over price.”

  71. i posted here recently my variation of Parkinson’s Law: “parasites will expand to fill the niches available”.

    but last night my current reading (Xenophon’s 4th century BC “The Persian Expedition) reached a wonderful quote, himself quoting at the time the response to his own ribbing of a Spartan general re the popular joke at the time that they were raised to believe that a successful theft was not just a measure of success but a matter of aretist pride:

    ” ‘Well,’ said Chirisophus, ‘what I have gathered about you Athenians is that you are remarkably good at stealing public funds, even though it is a very risky business for whoever does so; and your best men are the greatest experts at it, that is if it is your best men who are considered the right people to be in the government. So here is a chance for you too to give an exhibition of the way in which you were brought up.’ ”

    Athens. The wellspring of modern democracy. And even then infested with parasites.

  72. Saltation: But there is another factor – over time, parasites adapt to become less damaging to their hosts. I have seen this in action among politicians, right here in Crook County, Illinois. The present generation are much less prone to outright thievery than their predecessors.

    ESR: that factor tends to limit the collapse into total kleptocracy. Politicians as a class learn from experience not to go too far.

    ESR: “The equilibrium state of a regulatory agency is to have been captured by the corporations it is supposed to regulate.” That statement is too narrow: “corporations” should be replaced by “entities”. Labor unions and professions are notoriously successful at regulatory capture, too.

    ESR: “Although some taxes genuinely begin by being levied for the benefit of the taxed, all taxes end up being levied for the benefit of the political class.”

    Taxes are (generally) levied to pay for the expenditures of government, some of which are made for the direct or indirect benefit of the political class, but not all. Even in Chicago, the streets get paved, potholes get fixed, trash gets picked up, water comes out of the taps, sewage is drained away and treated, the streetlights come on at night. Not enough for the taxes we pay, but a respectable amount – the skim is less than 25%, IMHO.

    ESR: “…looting the treasury for the benefit of (a) favored-interest-group-of-the-week, (b) political allies, (c) friends, and (d) self”… a, b, and c are usually the same, and what benefits them will surely benefit d.

  73. “that factor tends to limit the collapse into total kleptocracy. Politicians as a class learn from experience not to go too far.”

    Only to the extent that the political class gets feedback to the effect that they have gone too far. The disadvantage of sitting atop a three hundred million person pyramid is that you end up a long way from such feedback, in a way that the local county police commissioner is not.

    (I find myself wanting to call myself a “feedbackist” instead of “little-l libertarian”, but at least some people have some clue what a “little-l libertarian” is.)

  74. >That statement is too narrow: “corporations” should be replaced by “entities”

    Amendment accepted.

  75. >Even in Chicago, the streets get paved, potholes get fixed, trash gets picked up, water comes out of the taps, sewage is drained away and treated, the streetlights come on at night.

    Aaaand…given the choices between cutting essential services and cutting payoffs to themselves and their clients, what does the permanent political class do?

    Look to California’s recent history for the answer.

  76. @Saltation

    “Say then, my friend, in what manner does tyranny arise? –that it has a democratic origin is evident.

    Clearly.
    And does not tyranny spring from democracy in the same manner as democracy from oligarchy –I mean, after a sort?

    How?
    The good which oligarchy proposed to itself and the means by which it was maintained was excess of wealth –am I not right?

    Yes.
    And the insatiable desire of wealth and the neglect of all other things for the sake of money-getting was also the ruin of oligarchy?

    True.
    And democracy has her own good, of which the insatiable desire brings her to dissolution?

    What good?
    Freedom, I replied; which, as they tell you in a democracy, is the glory of the State –and that therefore in a democracy alone will the freeman of nature deign to dwell.

    Yes; the saying is in everybody’s mouth.
    I was going to observe, that the insatiable desire of this and the neglect of other things introduces the change in democracy, which occasions a demand for tyranny.

    How so?
    When a democracy which is thirsting for freedom has evil cupbearers presiding over the feast, and has drunk too deeply of the strong wine of freedom, then, unless her rulers are very amenable and give a plentiful draught, she calls them to account and punishes them, and says that they are cursed oligarchs. ”

    http://classics.mit.edu/Plato/republic.9.viii.html

    Plato. Getting shit right for 2400 years and counting.

  77. “Unfortunately, the 16th and 17th amendments to the US Constitution seriously impaired, if not destroyed, this in the US.”

    Actually they just certified the change. The War for Southern Independence killed effective federalism.

  78. “I’m claiming the true definition of intelligence is long-term survival capability”

    In fact, some of the confusion in the modern world is coming exactly from the fact that up to about 1900 or so, one needed pretty much the same skills and attributes as any primate or caveman in order to survive and to be successful, both in a social prestige sense and even in a reproduction sense. But not anymore. In the last 2-3 generations, socially inept Aspie geeks like me, who’d be monks in 1500AD, expensive slaves teaching Greek grammar in 200AD, and plain simply dead in 20 000 BC, are considered more and more successful, and, even winners, like Bill Gates. This creates some confusion – normal people see someone looking like a big loser driving better cars than themselves…

    So the statement is slowly becoming true, but only recently.

    BTW this also explains the Flynn effect: more and more geeks are reproducing.

  79. >>How depressing. This makes it sound as though this is an unsolvable, inherent aspect of democracy.
    >
    > Yeah, well, welcome to reason 43b why I’m an anarchist.

    Ditto. Excellent essay!

  80. What would, in an anarchy, prevent any gangster with sufficient firepower to declare himself an absolute ruler over a territory?

    Let me make a methodological suggestion: don’t commit the same mistake Socialists do: don’t expect any change in human nature itself. Expect people to behave like they always did before. Well, unless you have a very good reason to think otherwise. Hint: hoping that one day everybody will suddenly get enlightened and accept the NAP is NOT a very good reason.

    In other words, just learn from history. And the general pattern in history is that we find some less violent gang of thugs, and pay them protection racket money in order to protect us from other thugs. These less violent gang is called “government” and pretty much everything else is attempts to try to get them behave less thuggishly. We try all sorts of things, such as trying to instill a sense of noblesse oblige in them (aristocracy), or try to control them directly (democracy) or try to limit their power (constitutionalism), there are many recipes. But the basic recipe – find a less violent gang of thugs to protect you from other thugs – never changed. Exactly why would it anytime soon?

    I understand that anarchy is an ideal, but be careful about working for ideals. The results are often… less than ideal. Eliminating still relatively civilized governments could lead to petty warlords taking over. You know, nature abhors a vacuum and for vacuums of power it’s doubly true…

  81. @Shenpen:
    i thought you were off in la-la land, and only increasing with every “assessment” and subsequent extrapolation, creating chains of extrapolations on a series of wildly untenable assumptions where each and every one is wildly at odds with reality, to the point of insanity, and was wondering how the hell to say so without upsetting you.

    and then saw that you were quoting plato.

    which merely underlines my every reaction to plato. he’s an idiot.

  82. Rich Rostrom: > But there is another factor – over time, parasites adapt to become less damaging to their hosts.

    no: SOME parasites –and typically the most successful– follow this pattern.

    for unarguable examples of cases where this pattern has not occurred and the damage continues excruciatingly, look at various highly-social–culture countries. mugabe, for example. or jong il.

  83. ESR: Aaaand…given the choices between cutting essential services and cutting payoffs to themselves and their clients, what does the permanent political class do?

    Look to California’s recent history for the answer.

    Or recent Chicago history. OT1H, Daley-controlled “TIF” districts divert $millions from the general budget into unaccountable slush funds for the benefit of the politically connected. OTOH, the Chicago Police Department is seriously undermanned and underfunded. However, it’s not an either/or situation, except at the margin. The majority of spending still goes for actual services. I also suspect that looting is somewhat resource-constrained as well; but we don’t have minutes of the insiders’ meeting where grifts are approved or rejected.

    My prediction for California is that the constitutional limitations on taxation will somehow be bypassed. I suspect it will be done by way of an initiative. Recently California voters were tricked into approving an initiative which was touted to remedy the eminent domain abuses highlighted by Kelo v. New London, but was in fact created to preempt any such restrictions. It was concocted and advanced by a coalition of local governments and connected developers. Sometime in the next two years an initiative will be pushed through which is touted to have some useful effect, but is deliberately phrased so that the California courts can construe it to void the present limits on taxation.

  84. Saltation: “Mugabe… or [Kim] Jong-il.”

    Both of those are single instances, not classes. A class evolves by selection – an individual cannot.

    BTW, in Korea, as in China, the family name comes first and the personal name(s) comes after. Kim Jong-Il is the son of Kim Il-sung.

  85. @esr, you ask: “…are we clever enough to come up with others?”

    First, do everything you can to starve the beast, after that….

    All income/payroll tax revenue is tax payer directed. Those paying the bills choose the services.

    We need effectiveness and success metrics for every law and a constitutional amendment that 1) requires their inclusion and 2) sunsets laws that do not meet these metrics (over some period of time). I’m thinking of the Extreme Programming idea of “write the test before you write the code.”

    I see congresscritters as welfare recipients that get larger monthly checks, so I think they should be encouraged to do real work once in awhile. I favor term-limits that prevent legislators from serving consecutive legislative terms.

    It is difficult to fire government employees, so firing them should be the norm. An “up or out” system (like the military) for everyone on the taxpayer’s dime or “term limiting” government service are possible approaches.

    You are only eligible for elected or appointed office if none of your immediate relatives (spouse, parents, siblings, or children) hold elected or appointed office.

    Deferred compensation impedes capitalism by fostering future interest groups that subvert the creative destruction of the originator of that deferred compensation. You save for your own future and/or secure a your own family/social/charitable network that will care for you in your old age. All retirement plans have to be contribution-based where employees have their own account. My preferred option would be for employers to contribute directly to an employee’s IRA (or Roth), so the silliness of rolling over on job changes and maintaining employer specific 401k plans will go away.

  86. This dovetails to a considerable extent with the analysis of neo-Marxist James O’Connor in The Fiscal Crisis of the State. State capitalism depends on the state socializing an ever-growing share of the operating costs of the corporate economy. And since a basic law of economics is that when you subsidize something people want more of it, you wind up with the corporate economy’s demand for subsidized inputs growing exponentially, outstripping the state’s ability to provide them. Eventually the system dies of positive feedback (input shortages, clogged infrastructure, bankrupt government), just like the victim of gigantism who dies of too much growth hormone.

  87. @Saltation,

    “creating chains of extrapolations on a series of wildly untenable assumptions” – these aren’t assumptions but observations that were more or less generally accepted back then. (I.e. these are enthymemes, not syllogisms!)

    And I think they fit surprising well to what we can observe in the last 2-300 years.

    “Oligarchy” corresponds to XIX. century “Gilded Age” Capitalism, whose advantage was that it promised wealth and better living for everybody, and it could deliver on the promise. The disadvantage was that it turned the general culture into a too materialistic direction, where getting wealthy becomes the No. 1 purpose of living. Thus eroding its own Pre-Capitalistic conditions, without which it cannot function properly: when businessmen no longer feel obliged to live and act like gentlemen (i.e. like former nobles), and when money-making is stripped from it’s religious roots (see Max Weber), the people begin to respect them less and less. Slowly, the image of the businessmen in the public mind turns into someone who is just like everybody else, perhaps with a little bit more smarts and courage, but nothing more.

    Then the public opinion turns into an egalitarian direction: nobody is seen to be better than others, thus, nobody is considered to deserve much more than others. Thus the people begin to see the current distribution of wealth unfair and a desire for more and more democratic “spreading the wealth around” arises. This leads to increased democracy (increased democratic control over the market). See f.e. Schumpeter.

    The second stage is that the increased appetite of the masses turns democracy into a populist dictatorship i.e. tyranny. This often happened fast (Lenin, Hitler etc.), in the West, we can observe it happening more slowly.

    This doesn’t look so off the mark to me. Again, these are not strict syllogisms, they are enthymemes.

  88. This whole line of reasoning starts from a false premise. For the individual citizen the optimal outcome is to have sufficient resources to live a decent life. The maximum chance of attaining this is not achieved by an optimally efficient financial system. It is a system where some resources get wasted in the redistribution of wealth. Redistribution requires rules, i.e. laws and government.

    The central problem then becomes how to arrange government in a way that keeps the waste within reasonable limits. There certainly is a level where the waste is so large that the benefits of redistribution are lost. We had this situation in Sweden some 20 years ago, but our political class managed to clean up its act. We saw the same happen in the UK in the Thatcher era.

    I don’t claim to have all the answers for why a cleanup was at all possible, or why it actually happened, but one important factor in both these cases were that there was an effective political opposition. In the UK they have the wonderful term “the Queens loyal opposition”. It is the job of the opposition to make a big fuss when the government is about to do stupid things and to shut up about the good things the government is doing. This can be ruined by the opposition criticizing everything the government does (happens a lot of the time in Sweden), or by the opposition colluding too much with the government (happens a lot in the U.S.).

  89. “For the individual citizen the optimal outcome is to have sufficient resources to live a decent life.”

    Now this is when you have to get a little bit philosophical. As this statement is not self-evident at all. It seems to be based on the assumption that the only condition for living a decent life is having sufficient material resources. This is almost obviously false – if a decent life can be measured by not needing artificial crutches such as sleeping pills and antidepressants, it it was true, income would have a strong negative correlation with the consumption of these, but it doesn’t have. Nor do many extremely wealthy people like David Hasslehoff or Amy Winehouse seem to be able to live a good life, unless we consider alchololism a good life, which I suppose we shouldn’t.

    So, to me, it would make more sense to put it this way: the conditions of living a decent life are sufficient material resources + proper incentives that develop the necessary psychological characteristics to live a good life in us.

    This is hard to nail down, it’s no hard science, but there are some rules of thumb.

    Working hard for everything you get tends to develop good characteristics (ambition, effort, foresight, cautiousness, reasonable risk-taking etc.).

    Getting anything for free tends to develop the bad ones (laziness, entitlement etc.)

    Offering exchange to others in order to get what you want develops good ones (empathy, a sense of brotherhood, so to speak. Via exchange, we recognize others are very similar beings to us.).

    Throwing lots of stuff into a common hat and then fighting with other interest groups to get as much as possible out of it develops the bad ones (envy, strife, hatred, alienation generally, social tensions, a lack of a sense of brotherhood).

  90. Shenpen: “It seems to be based on the assumption that the only condition for living a decent life is having sufficient material resources.”

    No, this is not what I meant. Sufficient resources is only one condition for a good life. I agree with most of what you have said concerning the development of personal characteristics, but in my experience the traits you ascribe to offering exchange do not ring true.

    No matter how good traits you develop, there is always the risk that you end up destitute through sheer bad luck. There is no insurance in the world that will cover all the possible alternatives, and in any case, insurance companies are not physical persons and have no potential for empathy. If they can avoid paying, they will. (This is part of an efficient market system).

    From the system point of view, the most efficient way of treating people becoming destitute is to have them die off (this happens a lot in places without good social security coverage). From the individuals point of view, it is highly undesirable that you should succumb just because you had some bad luck. To me, as an individual, it is worth a rather hefty insurance premium to avoid this risk. The only insurance company that may provide me with a policy that will cover me no matter what happens is the government of the place I happen to live.

    Your arguments are that this is inefficient and that it produces bad effects (strife, lack of brotherhood etc). I agree that it does, and it is a problem. However, the alternative is worse. I have seen too many people fall into destitution through factors beyond their control; illness, global financial crisies, unreasonable ex-spouses, unfair competition, frivolous lawsuits. Some have lost everything because they kept high moral standards and refused to weasel away their assets when things went bad.

    I want to live under a system which keeps these people afloat until they can recover, and so do most people who have experienced such a system. We recognize that our system has severe flaws, and that we are taken advantage of by some people, but rather than throwing the baby out with the bathwater, we want to mitigate the problems with our system. Not replace it with a different one.

  91. > Saltation: But there is another factor – over time, parasites adapt to become less damaging to their hosts. I have seen this in action among politicians, right here in Crook County, Illinois. The present generation are much less prone to outright thievery than their predecessors.

    I don’t measure thievery by the amount of money that the thief keeps after expenses, I measure it by the amount of money taken from me. By my measure, Chicago’s pols have gotten worse.

    Note that the parasite factor isn’t one-sided. The host+parasite adapts so the combo is more survivable. That doesn’t imply that the parasite is less damaging. A stronger host can easily produce the same result, as can a host that produces more of what the parasite lives on. These factors are at work in Chicago.

  92. >If you have a Court of Preference and Restraint, whose sole power is to strike down laws that grant preferences and enact restraints, what dynamic does that create?

    You are basically suggesting a bicameral legislature. Bodies intended to be “houses of sober second thought” have historically been captured by the politicians they regulate and become mere rubber-stamping organizations. Been there, done that.

    I would suggest converting all taxes into one kind of tax (I’m fond of the FairTax myself) and passing a constitutional amendment barring any increase in tax rates. That would guarantee that the size of government remains constant relative to the size of the economy as a whole.

  93. Rich Rostrum: >>Saltation: “Mugabe… or [Kim] Jong-il.”
    >Both of those are single instances, not classes. A class evolves by selection – an individual cannot.

    an attempt to separate “winners” from the fundamental sub-cultural movements (“classes” as you doubly-amusingly choose to relabel them), of which they represent no more than the near-arbitrary most-successful-on-THIS-throw-of-the-dice parasites/flotsam, is a remarkably consistent tell-tale.
    “four legs good, two legs BETTER”
    A: “NOBODY could regard that as REMOTELY related the culture of the pigs who suborned parasitically the fundamental whole-population culture, and from whom a particular ‘leader’ chanced to be temporally and temporarily presented as ‘leader’.”

    >BTW, in Korea, as in China, the family name comes first and the personal name(s) comes after. Kim Jong-Il is the son of Kim Il-sung.

    there are lots of roberts and lots of kims — i went with the most-dismissive most-recognisable short-form possible for each. sorry if this potential implication of ignorance re (most) asian cultures triggered any status-neediness receptors in you.

    Shenpen: seriously, take a longer, deeper, look at history.

    Andy Freeman: >>> Saltation: But there is another factor – over time, parasites adapt to become less damaging to their hosts.
    >I have seen this in action among politicians, right here in Crook County, Illinois. The present generation are much less prone to outright thievery than their predecessors. … by my measure, Chicago’s pols have gotten worse.

    good point. even ceteris paribas (sp), local cycles exist.

    more generally though, your point that local parasitism varies reminds me that my original point ONLY stands ceteris paribas. in a wider, multicultural, context:

    the (macro)cultures where parasitic behaviour is highly prevalent are demonstratedly poorer than those with lower extant parasitic behaviour, with a broadly linear correlation with the trust any given individual will (and, interactionly, can) blindly grant another individual not to screw them over. that is, the more an individual can safely trust another unrelated (in any first-order sense) individual not to shaft them/their-net-benefit in favour of personal benefit, the richer that total culture tends to be.

  94. “that is, the more an individual can safely trust another unrelated (in any first-order sense) individual not to shaft them/their-net-benefit in favour of personal benefit, the richer that total culture tends to be.”

    It’s more than just a lineral correlation, it follows from transaction costs, or one aspect of transaction costs: how much does it cost to reverse a transaction that hasn’t played out the way we wanted it to. (I.e. we were screwed over.) If it costs much, we want to make business with people we can trust. Or a trustworthy third party must guarantee the transaction, this is how governments were born. (Or, at any rate, justified.)

  95. quite.
    notealso that even in western cultures, in most commercial contexts it is extremely costly (not just in cash but in time) to attempt to reverse a transaction (ie, via legal recourse)

  96. “>@esr: The solution is obvious. Remove the trough and you won’t have any pigs, lipstick or no, feeding at it.

    DING DING DING DING! Somebody got it.

    The way to solve the structural problem of interest-group politics is to reduce the expected payoff from gaming the political system to epsilon. Abolishing government would be one implementation of this fix. Are we clever enough to come up with others?”

    “Abolishing government” is an oxymoron, because “abolish” is a collective force.

    The only “solution” is exponential growth (mis-allocation), peak, and exponential decay, which is precisely how nature has “solved” it:

    http://www.coolpage.com/commentary/economic/shelby/Bell%20Curve%20Economics.html

    There is no static (sustainable steady-state) “solution” as that would be no-contrast, no existence, anarchy (disorder), and thus no nature.

  97. >Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.

    Its “usually” not “always”; which actually makes the problem even worse when the economy slows down, as it eventually does.

  98. >Are we clever enough to come up with others?

    Well the Swiss did. Small-territory direct democracy that can only remove laws, not make them.

    Justification: the whole problem with government is that you can’t just say no to a law that harms you, right? Saying no is only collective. So you can say OK it is collective, but first of all direct democracy, I am not waiting that maybe one of the big parties will pick up my issue – I want a ballot now and want the voter directly to think about the problem and not lump it together with 143 other problems and choose a party. Second it should be a small number of voters, who can be easier to conviced that some law harms them. The third is, it should be a defensive weapon against interest groups and not hihackable by them.

  99. Yes, democracy is inherently flawed. As Oswald Spengler put it, democracy is the rule of money by means of media.

    The solution is simple. Follow the divinely ordain laws of the revelation of the Qur’an. This means following an elected Caliph who must follow these laws as a condition of his legitimacy.

    This means instituting a system of demurrage on all standing wealth, or a negative interest rate of 2.5% called zakat, which is one of the pillars of Islam. The proceeds are redistributed to the most needy. Military and infrastructure is supported by voluntary donations or private or charitable groups rather than taxes collected at gunpoint.

  100. >Follow the divinely ordain laws of the revelation of the Qur’an.

    You misspelled “Barbaric superstitions invented by illiterate goat-fuckers.”

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