A Persian Cafe, Edward Lord Weeks

Thursday, 26 December 2013

A discussion of tacit consent to the state

Suppose you live in a moderately large community - perhaps around 10,000 people - with a smoothly functioning market economy but few trade links with the outside world. A rich person then pays every doctor in that community a large subsidy to treat every other patient in that community, on condition that they refuse to treat you.

It is in the interests of every individual doctor to accept the subsidy, since the extra income from the subsidy significantly exceeds the revenue they would get from having you on their books. The result is that it becomes uneconomic to treat you, since this would require a whole new doctor to be trained, and the subsidy is only available to people who will not treat you.

In this case, you would not necessarily end up going completely without treatment - there would probably be some level of medical training which it would be economic for someone to obtain this and then treat you. (That is, providing there is no occupational licensing). Still, it is obvious that this rich person's actions have made you worse off, and probably quite significantly. Yet from a natural rights perspective, it is hard to see how you could have any kind of a claim against them.

Aside from being a potential weak point of natural-rights based ethics, this has potential real-world significance. Peter Steinberger, amongst others, has argued that actively accepting benefits from the state implies consenting to it, and provides numerous examples of activities he sees as fulfilling this condition. In many cases this seems intuitive, but there is an obvious counterargument for the philosophical anarchist: that the state has actively prevented citizens from obtaining these benefits except through the state, and therefore when it provides them with there benefits it is merely compensating them, rather than actually making an implicit offer of contract. This is actually a surprisingly wide-ranging objection. The state will not allow me to go about enforcing vigilante justice, and will not allow anyone else to do it on my behalf, so when I call the police to bring to justice a man who has stolen from me, I am merely calling upon the state to do what it is obliged to do - I am in no way consenting to anything. The state does not ban private healthcare, but it regulates it to such an extent that it can hardly be seen to be respecting my rights or those of my prospective doctor, and so when I go to the NHS for medical advice I am merely exacting recompense rather than seeking benefits. Even if I claim unemployment benefits, it is unclear that I accept any duties since state measures like the minimum wage, national insurance, and income tax all violate my natural rights and make it harder for me to obtain work.

But what if the state did not restrict me from obtaining these services other than through itself? I can't think of any indisputable examples of this offhand, but a strong example is education, where there are essentially three options - state schooling, private education (which is similar to the situation described in the opening paragraphs of this post) and homeschooling. Does the fact that, by providing free schools and so making it uneconomic to run affordable private schools, the state obstructs my obtaining of private education, make using state education for one's children invalid as an expression of tacit consent? My suspicion is that it doesn't: in the classic example of invalid tacit consent ("I propose that we move next week's meeting to Tuesday. Anyone who objects to this, chop off your arm. Oh good, everyone agrees!") the objection is not that chopping off one's arm is costly or difficult (that said, how many businessmen do carry around knives ready to chop off their arms at a moment's notice?) but that one has a right to keep one's arms. If the statement had been "Any employee who objects, raise your arm. Also, if you do then you must move into a different, smaller office," then objecting would have been costly but would not have entailed unjust loss, and so the tacit consent would have been valid. So sending one's children to a state school (obviously, since they were a minor at the time, the question of whether an individual himself/herself went to a state school is irrelevant) could reasonably be described as consent to the state. Except for two problems which are a problem for basically any theory of tacit consent to the state.

The first could be overcome if there were greater awareness of political philosophy among the general public, but is currently an obstacle to, I believe, every existing state: for consent to be valid, at least one of these two conditions must be met:
  1. There is intent to be bound to that consent.
  2. All consenting parties may reasonably be expected to realise that their action entails consent.
Suppose you own a historic mansion, and are in the habit of giving guided tours around it. My joining such a tour does not of itself imply that I agree to pay you for it; however, if you have a notice by the door indicating that there will be a charge, then I may reasonably be expected to pay even if I would rather not.

If someone intends to be bound to obeying the state, then sending their kids to a state school is probably unnecessary to achieve this. Hence, it is the second condition which is more likely to be useful for demonstrating that people consent to the state. But I think it is fair to say that the vast majority of people do not realise that sending kids to school can entail consent, and given that it is not clearly stated anywhere that "sending your child to a school owned by Her Majesty's Government implies that you agree to obey the laws set down by Her Majesty's Government" this is rather a problem for the validity of tacit consent.

That problem is tough but not impossible to overcome. The real problem with tacit consent is very similar to the problem with benefit theory: the idea that the state can obtain consent by providing benefits presupposes that the state had a right to provide those benefits. This in turn presupposes that the state had a right to the resources with which it provided those benefits, which presupposes that the taxes with which it gained the resources had been consented to by the people of the nation. Thus there is an infinite regress unless you have a situation in which either the state legitimately held assets without acquiring them from an outside source, or the taxed population consented in advance of receiving benefits. But no-one seriously believes the state began as anything other than a local warlord, which rules out the first option, and no-one seriously believes in an explicit contract with explicit consent, either present or historical, as the second option requires. Therefore tacit consent cannot provide a basis for political obligation in any existing state.

Thursday, 19 December 2013

A taxation policy proposal

The higher your income, the more the state taxes - not just in absolute terms, but as a proportion of your income. This is generally agreed to be because richer people have a lower marginal utility of wealth: an extra £1000 a year is worth less to you if you're already earning £50,000 per annum than an extra £100 a year if you're earning £5,000 per annum.

But income isn't the only thing which affects the utility you gain or lose from changes in your income. For example, if you are on the political left then you are likely to view your tax payments as an excellent chance to help those worse off than yourself; if you are a libertarian, you are more likely to regard them as tantamount to theft. All else being equal, a libertarian will lose more utility from being taxed than a leftie taxed the same amount. It follows that libertarians (and perhaps to a lesser extent right-wingers) ought to receive tax breaks.

Monday, 16 December 2013

Against the minimum wage

The basic economic argument relating to the minimum wage is that a minimum wage is fundamentally no different to any other price control, and so just as the economic policies of the current Venezuelan government have caused a shortage of toilet paper, a minimum wage will lead to a shortage of jobs (or an excess supply of labour, the two being the same thing), i.e. unemployment. In the labour market situation represented by the graph below, P0 and Q0 are the wage level and employment level in equilibrium, with OQ0 being both the number of people seeking work at the prevailing wage and the number of jobs that businesses can profitably provide at the prevailing wage. Hence the only unemployment in this situation is "frictional unemployment" - people who are between jobs, but will find employment. The imposition of a minimum wage at the level marked leads to OQ2 people offering their services, but only OQ1 jobs being offered, with resulting unemployment of Q1Q2.

In practice this may be difficult to measure. Employers will generally be more likely to cut back on employing new people than to get rid of existing employees, and if a minimum wage impedes the starting-up of new businesses which would initially be unable to pay the minimum wage then this will not show up in a straightforward analysis of hiring patterns of businesses. Nevertheless, one can find empirical evidence for it: for example, in the absence of a minimum wage there is no particular reason why young people should find it harder to gain employment than older, more experienced people - they can simply demand a lower wage to account for their lower productivity. A minimum wage denies them this ability and so we should expect to see abnormally high youth unemployment in places with higher minimum wages - as indeed we do.

There is, however, a theoretical model with quite contrary implications. It rests upon an assumption of an uncompetitive labour market, with an essentially monopsonistic (monopolist = one supplier, monopsonist = one buyer) employer. (Another assumption running through all of these models is that all workers are equally productive; that said, the models would work just as well if we were to allow for different productivity between workers and simply assume that the most efficient workers are employed first. However, the model would become a bit more complicated and I'm trying to keep things simple).

The Marginal Revenue Product is the productivity, in terms of revenue created, of the most recently employed individual; the Average Revenue Product is the average productivity, in terms of revenue created, of all individuals. One of the fundamental theorems of microeconomics is that the profit-maximising firm will employ up to the point where the profit from the last worker (i.e. Marginal Revenue Product) is equal to the
cost of employing that worker (i.e. the wage level). In this model, in equilibrium the firm will employ OQ1 workers and derive OP2 in revenue from each, but due to its monopsony of labour will be able to get away with paying only OP1 in wages, thus extracting an abnormal profit of P1P2 from each worker. However, if a minimum wage is imposed at the level marked, the idea is that the company will, rather than cutting employment back to OQ3, instead accept the reduction to its abnormal profits. Furthermore, in the initial situation the limiting factor on employment was that few people were willing to work for the wage being offered, whereas now that the wage is higher, they will seek jobs. The company will still be able to profitably employ these, and so employment will actually increase.

Personally I find this model unconvincing. Firstly, as bad as the labour market is, it is nothing like a monopsony. Secondly, I fail to see why the firm wouldn't just cut employment back to OQ3.

The more common argument in favour of a minimum wage is that "Yeah, the standard argument applies, but unemployment wouldn't increase much, and would be outweighed by the gains to those who keep their jobs." To this, I would first point to the fact that we measure unemployment separately from normal unemployment, and secondly to these posts by Bryan Caplan. Advocates of this view tend to cite a paper by David Card and Alan Kreuger from 1994 which found a moderate increase in employment. In contrast with many other opponents of the minimum wage, Caplan believes the paper to be very high quality, but due to the sheer weight of counter-evidence it fails to provide enough evidence for him to change his beliefs.

Or course, all of this leaves aside various other arguments against the minimum wage. In particular, I'd recommend this Steve Landsburg piece as a moral argument.

Tuesday, 3 December 2013

Grieg is Lovely

My very favourite piece of music for the piano is Wedding-Day at Troldhaugen (if I am ever engaged to a woman who refuses to have that piece played at some point in the wedding or reception, I'm calling the wedding off), and Grieg is most famous for the Peer Gynt suite (perhaps more cynically, specifically for Morning Mood and In the Hall of the Mountain King), but there's so much more out there. At this very moment I am listening to Twelve Songs, Opus 33. Varen (Last Spring), but really you could listen to almost anything from his lyric pieces or Norwegian Peasant Dances and just feel content with life.

Worthy of special mention: Arietta, the Holberg suite, Haugelat (Tune from the Fairy Hill), Du Fatter ei Bolvergenes evige Gang (The Poet's Heart), and probably a whole load more which I have yet to discover.

Unfortunately my book of Grieg pieces is currently at home in Birmingham - my brother is actually learning pieces from it - but I've asked for a new copy for Christmas. I'm now actually slightly hoping not to receive a copy, just so that I have an excuse to buy myself an even bigger book of Grieg pieces.

Perspective on Anarcho-Capitalism

One way I often like think about the goal of anarcho-capitalists is not so much that we wish to abolish government, as to create a free and competitive market in governance. Many functions of the modern state - defence, legal service, healthcare, disaster insurance, education - will continue to exist in the absence of the state providing civilisation remains. I personally think that it is unlikely that these goods really need to be provided by the same organisation, or even that it is efficient for this to be the case, but hey! It's possible!

Besides which, if someone wants to live in a socialist society then why shouldn't they, so long as they don't force anyone else to be part of that society? I don't personally want any government above me, but if people truly do want governments then why, in a state of nature, should they be prevented from banding together and forming one above themselves?

Even if you don't have a government, then I think it is pretty much inevitable that one will be subject to rules. Rules are not inherently necessary for a stable society, but I think it is fair to say that:

  • A stable society requires people to have the ability to plan ahead.
  • For people to be able to plan ahead, it is necessary for behaviour to be predictable within certain bounds.
  • These bounds must either be determined ahead of time in some way - essentially becoming rules - or must be the same over time.
  • While rules are not metaphysically necessary for behavioural norms to persist, they are an obvious and usually successful way of achieving this.
Sets of rules and enforcement procedures - governances, one might say - would in an anarcho-capitalist society be the products of governance firms, or governments. We already have these governments, but unfortunately the market for them is neither free nor competitive. There are massive costs to switching between providers, the link between payment by consumers and performance by firms is virtually non-existent, and there is little to no possibility for a firm to fail and go under, freeing up resources for a competitor.

This, along with some generally accepted empirical premises, should lead us to a few conclusions.

Firstly, since free and competitive markets are possible, it is likely that a stable anarcho-capitalist society is possible. There may be some difference between the current products of government and other products currently produced by functioning markets which makes this particular competitive market impossible, but then the onus is on the statist to demonstrate this. I may at some point write a debunking of various potential arguments of this type, but I'm rather too tired and alcohol-laden to do it properly right now.

Second, since the vast majority of new products in competitive markets - somewhere in the region of 90% - fail, we should expect most prospective governances in a anarcho-capitalist system also to fail. If a firm offers a bundle of goods (we'll say personal protection, protection of property and prosecution of any trespassers against the individual) for £2500 per annum and another offers the same or better services for £2000 per annum, then that first firm will fail as surely as we are enriched by international trade.

Given this explicit admission that I expect 90% of rights-protection agencies (or DROs) to fold within a few years of starting up, do I regard anarcho-capitalism as a terrible system? No. You see, there is rather a difference between failure for a governance and failure for an existing state. For a governance, failure simply means that it fails to provide the same value for money as its competitors - it is perfectly possible that purchasing a firm's services would make a consumer massively better off (in terms of consumer surplus) and yet the firm is still not efficient enough to survive. However, a state possesses a monopoly on violence and, more to the point, people are forced to pay for its services whether or not they consume these services. Hence, failure for a state means not only that it is failing to provide value for money, but it is producing so little value for the money which it extracts that people are willing to take on severe personal risk and cost  in order to overthrow this state.

I believe that, subject to the market test of anarcho-capitalism, almost every state currently in existence would fail. Hence, I believe that anarcho-capitalism provides a reasonable prospect for a better society. That said, if a small group of people were to form a single anarcho-capitalist society tomorrow, I would be sceptical of its chance of success. What I would wish to see would be numerous groups, each trying to create their utopian vision of the perfect state and society, with those which succeed to a greater extent attracting immigrants and imitators. That, I believe, is the way in which the truly good society is to be achieved.