no third solution

Blogging about liberty, anarchy, economics and politics

Comments on Comments #8

March 5th, 2008

I’m back.

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At the Liberty Papers, Brad Warbiany asks about the likelihood of an-cap models disintegrating into mini-feudalism, and whether there is any reason to believe that private security firms wouldn’t behave towards one another the way that drug cartels and mafiosos behave towards one another, at present.

The obvious response, as I see it, is “so fucking what if it does!” Isn’t that what we’ve already got, right now? The State is essentially the same as a mafia, writ large.

The longer answer is, probably not:

These criminal organizations trade largely in the black market, which is itself a creation of legislative fiat. The dark side of this, is that government has reduced or eliminated the incentive for peaceful adjudication of disputes. (More on incentives, below) If A defaults on a $1000 coke debt to B, B has no legal recourse against A. He might steal his valuables or his car, or he might try to “make an example” of A, and injure or kill him, to create a disincentive for others to default in a similar manner.

The “turf war” question is a little more cloudy, but I still think it’s rooted in government. When an organization B sets up in A’sestablished turf, it threatens A’s already precarious profitability, which is determined essentially by A’s ability to monopolize a particular geographic area, and circumvent and/or infiltrate the law-enforcement’s attempts to shut it down. B threatens A’s profitability by undercutting prices, by becoming potential informants, by disrupting the normal flow of contraband, etc.

There are tremendous risks involved in illicit trading, and a network must be created through which an organization hopes to thwart or circumvent some of these risks. Staking out a “home turf” is one means of minimizing the risk involved: if the organization has sufficient knowledge, control, and oversight of a particular locale, they are more likely to notice any anomalies, like mysterious cars on stakeouts, newcomers who threaten the stability of their model, and so on. The racket of “protection from rival gangs” is not so much about protection, but about control and intimidation of the subjects, who learn not to interfere with the criminal enterprise’s operations.

Right now, these gangs need an effective monopoly in order to operate profitably. Moreover, the state creates strong disincentives for honest men to enter the drug trade, because they can make as much (or more) in some other line of work. So the system is set up in such a manner as to funnel the moderately intelligent, but not-so-savory individuals into a market which can only be maintained through an extra-legal monopoly, which can only be protected (like any monopoly) with violence.

CVS and Rite-Aid pharmacies are often on adjacent corners, selling practically the same items. I’ve never seen a gun battle between them. Coca-cola and Pepsi don’t have showdowns, and neither do we see Ronald McDonald and the Burger King facing off in a duel. Get rid of the monopolistic model, and you’ll likely eliminate the violence.

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In the latest edition of the Carnival, Logan Flatt questions my characterization of his post:

However, I am puzzled. Because my article talks about the way things are (a.k.a. reality) and doesn’t strongly advocate one extreme or the other my article is “Spam”? That doesn’t seem to be a balanced stance given that reality reflects a blend of both market and government. One can readily understand that my article implies that government is causing the market more harm than good, and therefore, less government and more market is better. I prefer subtlety over a sledgehammer. Practical? Yes. Spam? No.

Let me qualify my characterization: When I say “spam,” I don’t mean that your article is crap, just that it doesn’t meet the established criteria which are readily available to anyone who consciously chooses to submit to the carnival. What I mean is that the article appears to have been submitted without consideration for the subject matter or rules of the carnival in question.

I agree that your article certainly reflects reality, and I praise your analysis as spot-on. But your entry clearly is in opposition to the spirit of this carnival’s rules: your blogpost had nothing to do with anarchy.

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Shaun says, of his blog:

The main stance of the Rebirth of Freedom Foundation is certainly a market-anarchy approach. =)

My apologies, Shaun. I’ve never visited the RoF before, but I’ll add it to my list of blogs to check out in the future.

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I asked why Nextel hasn’t gone out of business yet, and I have at least one sympathetic reader. Andrea says,

OMG I hate Sprint/Nextel with a passion. Just ask Brad how much I bitch about that company. I used to have a blackberry but I got rid of it because it was the size of a brick and I constantly got made fun of. Brad’s brother used to hold a chair ottoman up to his head and say “hello?”

Hilarious. I am also using a 4-year old phone, because Nextel is the only company which doesn’t offer (nominally) free phones to their contractees, also, the rest of my family uses it, so it’s convenient. But the conveniences is more and more becoming a pain in the ass.

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In #7, Angelica comments:

And I love my big gubmint healthcare (I live in Taiwan) and social safety nets are OK by me..

Angie, the problem with big gubmint healthcare is primarily that it’s provided at the point of a fucking gun. Oh, and it’s metaphysically impossible!

Angelica, who was irate over a recent ban on street vendors selling bacon-wrapped hot-dogs in California, has not shed her statist robes! She dodged most of my questions, but she did respond with a tale of really big restaurant rats. Even still, she is halfway there:

I suppose in theory there could be some third-party inspection firm who can certify the sanitary condition of restaurants. But in practice, this have not happened.

But still so far away!

I have a simple rule of thumb for when government intervention is necessary — is it a pressing need that is not met by the market? In this case, the name of the market failure is asymmetrical information. With street food, those who indulge are under no illusion as to the risks they are taking and thus there is less asymmetrical information and less of a case for intervention.

Oh, and David. If you are ever in Taipei, swing by and I’ll see that you get a beer on the house.

Thanks for the invite, Angelica — Asia is on my long list of places to visit sometime in my life, but the travel expense and the requisite time away from work is, at this point in my life, too much. Chile and Peru are ahead of Asia on the list, because there, I’d be able to go snowboarding in July, and anything that breaks up the 8- or 9-month hiatus I take every year merits serious consideration.

The assymetrical knowledge problem exists wherever and whenever one agent knows more about the circumstances than the other agent could realistically obtain. To be frank, there is no more informational assymetry in dealing with a Restarauteur than a street vendor. One’s assessment of the risk involved in those respective circumstances may vary, but that doesn’t mean that the information is any less asymmetrical in one or the other of them.

I like to go back to the source of the “pressing need, not met by the market.” Some people used to say that lighthouses were just such a pressing need. Some people argue that fire protection is a pressing need. Those people were wrong. And there is no “pressing need” to eat food prepared at a restaurant, and I might also add that the presence of brick and mortar should not, to a reasonable person, preclude the risks associated with eating food one has not procured and/or prepared oneself.

As far as inspections are concerned: local newspapers and television news crews routinely “investigate” local restaurants and expose the filthiest among them. There are many examples of private certifications, e.g., Good Housekeeping’s “Seal of Approval,” Underwriter’s Laboratories, J.D. Power and Associates customer satisfaction ratings, Consumer Reports, A.M. Best ratings, etc. Hell, a private company certifies (annually) the structural integrity of the Ambassador Bridge, which is itself a privately owned enterprise and the largest land border crossing in terms of commerce, between the U.S. and Canada. That, Angie, is a pressing need.

But there is no private firm which rates the quality of food-service estabilshments, as Angelica deftly notes. Why not? In many western countries, there does exist a regulatory authority governing food-service establishments. As long as such authorities exist by mandate, and are publicly funded, it is probably not possible to profitably operate a restaurant rating company, because the largest competitor has nearly unlimited access to capital, and is backed by the force of law which requires restaurants to “subscribe” to its services..

And of course, there’s word-of-mouth. Government regulation in the U.S. didn’t prevent me from getting violently food-sick two years ago. I ate dinner on Saturday, woke up violently ill early Sunday morning, and missed work on Monday and Tuesday. There will always be accidents and oversights. I don’t eat there anymore, and neither do my friends. A few more incidents like that could be serious trouble. Any restaurant which continually sickens its customers will find itself in quick financial distress. Eventually, the incentive to “cut corners” will be destroyed by the disincentive to go bankrupt. Until that time, caveat emptor. Of course, you could always ask to see the kitchen — any restaurant owner worth his salt should be willing to show you his kitchen during business hours. I’d be leery of any who refused. If you’re mildly concerned, listen to the word-of-mouth and recommendations. If you’re scared, cook your own food, have friends over for dinner instead of going out.

The lesson here is that just because the market doesn’t provide a particular service, we shouldn’t take that to mean that the market can’t provide that service. This is the empty rhetoric of the State, which generally crowds out private initiative, and then points to the lack of private initiative as justification for more taxation, regulation, and legislation.

Comments

3 Comments

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  • Logan Flatt, CFA says on: March 5, 2008 at 11:28 am

     

    Ah ha! But, by me not following the rules of the carnival I am demonstrating anarchy, am I not? ;-)

    Logan.

  • Francois Tremblay says on: March 8, 2008 at 11:53 am

     

    No… you’re not. Anarchy doesn’t mean no rules, it means no rulers. ;P

  • Logan Flatt, CFA says on: March 14, 2008 at 8:22 am

     

    Touche, Francois, touche.

no third solution

Blogging about liberty, anarchy, economics and politics