Cafe Hayek: Lose the Teleological Mindset

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October 05, 2008

Lose the Teleological Mindset

Don Boudreaux

(HT Bob Higgs)

Posted by Don Boudreaux in Complexity and Emergence, Government intervention in housing, Myths and Fallacies, The Economy | Permalink

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"All politics is redistributive."

Yep. Excellent article. Thanks for the link.

Posted by: Randy | Oct 5, 2008 5:58:43 PM

Here is another prescient article (circa 2005) from that hilarious, libertarian writer Bill Bonner. I think it is taken from his book, Empire of Debt: Rise of an Epic Financial crisis

For years, we have been working on Greenspan's obituary. As far as we know, the man is still in excellent health. We do not look forward to the event; we just don't want to be caught off guard. Maybe we could even rush out a quickie biography, explaining to the masses the meaning of Mr. Greenspan's life and work.
We see something in Alan Greenspan's career - his comportment, his betrayal of his old ideas, his pact with the Devil in Washington, and his attempt to hold off nature's revenge at least until he leaves the Fed - that is both entertaining and educational. It smacks of Greek tragedy without the boring monologues or bloody intrigues. Even the language used is Greek to most people. Though the Fed chairman speaks English, his words often need translation and historical annotation. Rarely does the maestro make a statement that is comprehensible to the ordinary mortal. So much the better, we guess. If the average fellow really knew what was being said, he would be alarmed. And we have no illusions. Whoever attempts to explain it to him will get no thanks; he might as well tell his teenage daughter what is in her hotdog.

Alan Greenspan is the most famous bureaucrat since Pontius Pilate. Like Pilate, he hesitated, but ultimately gave the mob what it wanted. Not blood, but bubbles. Greenspan's role in the empire is more than that of a Consul or a Proconsul. He is the Prefect. He is the quartermaster who makes sure empire has the financial resources it needs to ruin itself.

Posted by: Oil Shock | Oct 5, 2008 6:24:07 PM

Although I think we're ignoring the role of excessive rent seeking by would be retirees here, the empire definitely sucks too. We all want to be independently wealthy, to "save enough money to live on the interest". The ceaseless pursuit of this goal is Capitalism now.

It's not about productive entrepreneurship, and it's not about free capital markets where producers reorganize capital to increase its utility. It's about seeking rents wherever we can and creating them if we don't find enough.

Or maybe it is about entrepreneurship, but the entrepreneurs are creating innovative, new rents.

Posted by: Martin Brock | Oct 5, 2008 7:15:30 PM

It was a good article I just was left wondering if the author is an anarchist or an authoritarian. That he didn't define but surly his words suggest he must be one or the other.

Posted by: muirgeo | Oct 5, 2008 7:40:35 PM

If his other articles are any indication, the author is a libertarian anarchist ;-)

http://www.depressedmetabolism.com/category/society/

Posted by: megapolisomancy | Oct 5, 2008 7:56:30 PM

Don, Russ, MesaEconoguy, anyone,

As you are well aware, I am no graduate or even a formal student of economics. My input has always been strictly from the street level figure it out from the bottom up school of economics...hell I can't even grace what I know or input as economics just plain things I do to find customers and satisfy them.

With that said: Let me simply ask, what would constitute a market failure? Is it possible for a market to fail? I mean the market itself, if you choose to answer do not answer about criminality, as I understand crime. I am not playing "gotcha" with this question, I am simply reflecting my own thoughts in which I see no way for a market to fail except that one the party with the goods can not deliver or the party with the payment can not deliver. Otherwise, how would a "market failure" occur? But, could we consider it a "market" if the transaction involved fraud?

Posted by: vidyohs | Oct 5, 2008 9:04:16 PM

I am sorry, in my last paragraph above change the words "can not deliver" to read "does not deliver".

Posted by: vidyohs | Oct 5, 2008 9:07:31 PM

How is this profound? We have know this at least since Condorcet.

Posted by: TO | Oct 5, 2008 9:24:06 PM

Vidyohs,

My thinking on "market failure" is along the same lines. Its a political concept.

Posted by: Randy | Oct 5, 2008 9:44:39 PM

The ceaseless pursuit of this goal is Capitalism now.

I thought it was democracy, or at least American socialism.

Vidyohs

The market is where people buy and sell.
It is our economic ecological system.

Mother nature doesn't like cheaters.

If a few people cheat, it's not so bad, but when most people try to cheat reality, the market will not sustain them for very long.

People sought security through political management of the economy. Through guarantees of wages, insurance, medical care, employment, income, and retirement.

Instead of putting their faith in freedom and values of self reliance and productivity, they turned to their government...and ate their future.

Listen carefully to Martin, he speaks a different language, but many have been saying the same thing all along.

Cheap money, easy credit, and political promises are beginning to reveal their true value.

Posted by: Sam Grove | Oct 5, 2008 10:03:06 PM

vidyohs and Randy,

I tend to look at markets as a function of nature. That being said, there is no ability for a market to "fail"; nature itself never "fails", rather it just "is".

What can best be described as failure in a market is the failure of human constraints and expectations placed upon the market. As we attempt to "tame" the market, we create a very real set of unintended consequences. The reality is that those consequences often have subtle effects far beyond our comprehension. In the short term, we may win the battle. In the long term we find ourselves in an arms race against our own machinations.

Posted by: colson | Oct 5, 2008 10:22:13 PM

vidyohs,

Although I've never heard this explicitly said in any of my econ courses, a market failure always has the cost of the last unit sold not equal the price of that unit. For example, in a monopoly situation the price of the last unit sold is above the cost. With a negative externality, the (social) cost of the last unit is above the price. In a perfectly competitive market the marginal cost equals the price (this is what economists call efficient). Now that I think about it, under this standard answer, one could say a market is either perfect or there exists a market failure*. Boy, that seems like an impossibly high standard, did I sleep through a very important lecture?

*There are situations with price discrimination where a market can be efficient without being competitive.

Posted by: Rolo Tomasi | Oct 5, 2008 10:58:47 PM

Did your econ prof quote Keynes?

Posted by: Sam Grove | Oct 5, 2008 11:36:26 PM

With that said: Let me simply ask, what would constitute a market failure? Is it possible for a market to fail?

Posted by: vidyohs

Let me help you here vidyohs. A market failure is said to occur when a market left to itself does not allocate resources efficiently. In this case the finance industry failed to do its job of allocating capital properly and of maximizing efficient use of credit while minimizing risk. They invented all sorts of complicated financial products all on their own that did the opposite of what they were supposed to. They got all the rules and regulations they wanted abolished. They created a financial WMD and they detonated it. Then they insisted the government bail them out. When Henry Paulson for Goldman Sachs says he needs $700 billion... and already they are asking for more.... then you know you've had a market failure.

From The Big Picture

Here is an oddly interesting observation: Over the entire history of human finance, the underlying premise of all credit transactions -- loans, mortgages, and all debt instrument -- has been the borrower's ability to repay.

From 1 million B.C. up until the present, repayment ability was the dominant factor.
...

....
The historical basis for making a loan for a home purchase was several simple factors: Employment history, Income, down payment, credit rating, assets, loan-to-value ratio of the property, and debt servicing ability. But for some crazy reason, those factors went away during the housing boom.

That may sound simple, but it becomes even more stark when viewed over a time line.

<-1 million B.C. --------------------------- 2002-07 ---2008->

Except for that 5 year period, the entire history of human finance was rather reasonable about the basis for making loans in general, and extending mortgage loans in particular.

Makes you wonder, doesn't it.

..... there is a specific reason for this change: During that 5 year period (02-07), the basis for mortgage lending was NOT the borrowers ability to pay -- it was the lender's ability to securitize and repackage a mortgage.

Barry Ritholtz

Posted by: muirgeo | Oct 6, 2008 1:26:49 AM

George, I think you'll appreciate this:

DiLorenzo on Hamilton's Curse.

Posted by: Sam Grove | Oct 6, 2008 1:42:53 AM

People like muirgeo represent nothing less then an existential threat to the capitalism-lite we enjoy in the United States. If he had his way we'd become a carbon copy of the "workers paradise" of North Korea.

Posted by: Crusader | Oct 6, 2008 1:55:30 AM

Paging muirgeo! Muirgeo to the mirror please! (Not that he'll recognize himself -- that would require self-awareness.)

Posted by: Russell Nelson | Oct 6, 2008 2:16:04 AM

Aschwin de Wolf starts out with this observation:

"All politics is redistributive."

But I didn't see any follow-up to it.

Since the case for redistribution ultimately rests on the assumption that it reduces inequality, the opposite-most conclusion, that it didn't reduce but increased it, would utterly demolish it.

So, that's where the discussion should go.

Posted by: dg lesvic | Oct 6, 2008 4:28:25 AM

Muirgeo,

You're out of your league, sir. You speak without knowledge.

Posted by: Don Boudreaux | Oct 5, 2008 4:24:11 PM

Posted by: vidyohs | Oct 6, 2008 6:07:09 AM

Quote from muirgeo: "Let me help you here vidyohs. A market failure is said to occur when a market left to itself does not allocate resources efficiently. In this case the finance industry failed to do its job of allocating capital properly and of maximizing efficient use of credit while minimizing risk. They invented all sorts of complicated financial products all on their own that did the opposite of what they were supposed to. They got all the rules and regulations they wanted abolished. They created a financial WMD and they detonated it. Then they insisted the government bail them out. When Henry Paulson for Goldman Sachs says he needs $700 billion... and already they are asking for more.... then you know you've had a market failure."

I will not argue with fools. I will not argue with fools. (My new Mantra.)

Posted by: Keith | Oct 6, 2008 7:46:30 AM

Let me help you here vidyohs. - Village Idiot

I spat out my coffee laughing when I read this.

Posted by: Methinks | Oct 6, 2008 8:50:16 AM

Vidyohs,

For what it's worth, I don't think there's such a thing as "market failure". "social cost" is an extremely subjective calculation. "Inefficient allocation of resources" can also be bastardized. For example, as justification for manipulating the market, the SEC claims that we've had a market failure because failing banks have been sold off by market participants and that has made the portfolios of some people who hold these stocks decline in value. Does it seem reasonable to you that selling a company you think is failing is an inefficient allocation of resources?

Decisions produce both favourable and unfavourable outcomes. That's a natural fact of life. I've always found that unfavourable outcomes(like housekeepers don't live in the same mansions as their employers. oy!) are called "market failures" and everyone just ignores the market when the outcome is favourable (lower prices, better quality, etc.). Worse still, I find that government induced failures in nominal markets are blamed on the market, not government intervention.

To go one step further....markets are flexible and government is not. When an unfavourable outcome happens as a result of trade-offs in a free market, participants can quickly adjust their expectations and behaviour. When a government program fails, there's no adjustment. Government is intransigent, markets are not.

Posted by: Methinks | Oct 6, 2008 9:25:53 AM

Methinks,

That's the best input I have received so far. Thanks.

However, here is why I am not yet satisfied: Underneath the obvious I am still reading (hearing) failure of individuals in some form or another in doing due diligence in negotiating but that in the end the market delivered exactly what was negotiated in an honorable and acceptable fashion; or one party or the other committed fraud and did not deliver what was negotiated therefore a crime was committed. Plus I am reading (hearing) what I understand as lazy or sloppy thinking on the part of most of the populace, which is I think the more apt explanation for what is carelessly called "market failure". The term serves an agenda.

To my simplistic view there is no true market if one of the parties has intentions of cheating. This would be no more than an act of theft, which a market is not. It would be like calling a mugging in the alleyway a market transaction. Two parties, goods moved from one to the other, but definitely not a market.

To further explain my thinking look at the followup post "Lazy Fare" and the article Don referrenced which was written by the lady law professor, in which the professor cites the lead paint of children's toys brouhaha of the recent past. She calls it a market failure because the importer did not have an inspection system set up to monitor the safety worthiness of the toys.

If we assume that the importer actually negotiated paint content with the Chinese manufacturer and did not check for compliance, in my mind that is criminal negligence on the part of both parties. The Chinese for cheating on content and the importer for not checking for compliance. But, do we know if paint content was part of the negotiations at all? Did everyone just make assumptions that paint containing lead was verbotten and the parties all knew it? Did the Chinese cheat, I don't know. Did the importer commit a criminal act of negligence, I don't know.

Regulating paint content is not a market regulation, it is a safety regulation applied to manufacturers of paint.

Maybe I am just being obtuse, too obtuse, or very obtuse.

Posted by: vidyohs | Oct 6, 2008 10:21:56 AM

"Plus I am reading (hearing) what I understand as lazy or sloppy thinking on the part of most of the populace,"

Methinks,
That was not directed at you or the general patrons of this Cafe, but towards those whose life's are directed by conventional wisdom and enculturation.

Posted by: vidyohs | Oct 6, 2008 10:24:45 AM

Muirgeo, you need to look deeper into these things. I seems that you only look for confirmation of your bias and no deeper.

Yes there is greed, yes, people operating without moral principles cheat when they can.

But in order to comprehend the full picture, you can't stop with confirmation of your bias.

We all know here that government has been HEAVILY involved in economic matters, especially since Herbert Hoover, but also fairly extensively before then.

So when you try to lay blame on "lack of regulation" and "inadequate government oversight", we all understand that you are just blowing liberal/progressive hot air.

If you are willing to look at the fuller picture, you will understand that high finance and government are, and have been, seriously intertwined for a very long time and that there is no solution to that problem to be found in "more, better regulation".

You might as well try to abolish human self interest.

Posted by: Sam Grove | Oct 6, 2008 12:21:22 PM

This makes sense - most people have a slave mentality. They need to be ruled, told what to do.

Posted by: USB_Interface | Oct 6, 2008 2:53:37 PM

I agree with methinks on "market failure". The entire market never fails, it's individual business that make bad decisions, other businesses take opportunity of those mistakes. Evidence right in the banking industry. BofA, Wells Fargo, Citibank and many regional banks are not in trouble because they had good management and are now taking advantage of the mistakes of their competitors. I'd call that a market doing it's job.

Posted by: USB_Interface | Oct 6, 2008 2:55:22 PM

The entire market consists of businesses and consumers. It can't really succeed or fail as an entire unit. It can only be allowed to work or not work by the government. Even in the worst of times(1930s, late 70s), smartly run businesses survived. That's the way it's always been. There is no substitute for intelligence.

Posted by: USB_Interface | Oct 6, 2008 2:57:21 PM

A free market is an area of an untold number of plans.

Central planning is putting all our fates in one basket.

Posted by: Sam Grove | Oct 6, 2008 3:32:33 PM

Sam - it's just that muirdiot doesn't want to admit that he prefers central planning. He attempts to discredit un-central plans by citing some examples of failure. But how does he account for Microsoft, Google, Intel and a whole host of wildly successful companies not conforming to his "central planning"? He can't, it induces cognitive dissonance and he goes mad.

Posted by: USB_Interface | Oct 6, 2008 3:39:41 PM

Sam, that's awesome. I'm adding that to my Quotable Sam Grove list of quotes.

UBS,

Sam - it's just that muirdiot doesn't want to admit that he prefers central planning.

It's worse than that. He doesn't know the difference between central planning and not central planning. For the past 18 months he's been flailing around screaming essentially that he's not at all for central planning because he's for central planning. See, it's not central planning if it's not called central planning. Very simple. I don't know why we libertopian types aren't fooled by that the way he is.

Posted by: Methinks | Oct 6, 2008 5:06:16 PM

Methinks,

That's a very good point. I've seen that very same tactic every time I converse with these folks. They toss out the standard collectivist sentiments, and when called on it, the response is, "oh, I'm not calling for communism, socialism, fascism, etc.", as if the denial itself has meaning. I've always wondered why they would be ashamed of it. But now that you mention it, it seems more likely that they're not really ashamed at all. Its just a tactic they've been taught to use.

Posted by: Randy | Oct 6, 2008 5:35:44 PM

Randy,

I've observed the same tactic used by the likes of Obama and his ilk. They know exactly what they're doing. However, I find that most people are sincere in their belief that it's not communism, socialism, central planning, etc. because it's not explicitly labeled as such. Often, when you point it out to them, they are stunned by the realization. Then there are the Muirdiots of the world. They don't get it even if you draw them a picture. Repeatedly.

Posted by: Methinks | Oct 6, 2008 5:49:12 PM

I meant it to be:

A free market is an arena of an untold number of plans.

Posted by: Sam Grove | Oct 6, 2008 9:55:19 PM

Yes, muirgeo has claimed that he's not collectivist, and he has also mentioned 'planning' in regard to a nation, society, etc.

I still think he's a victim of educational fads.

Posted by: Sam Grove | Oct 6, 2008 9:57:14 PM

I think that "market failure" is used, euphemistically, in 2 basic situations:

1. An individual, dissatisfied with what he has in life and not wanting to accept any responsibility for his situation, uses the term to imply that his dissatisfaction is something more than a personal problem and needs others to resolve it.

2. A busybody, dissatisfied with the decisions made freely by others and assuming that he could have decided more wisely, uses the term to justify his actions as something more than "troublesome meddling".

Also, "market failure" could possibly be used (in a realistic sense) in regards to public goods, but that's not really accurate unless you expect a public good to be purchased via the free market alone.

Posted by: Christopher Renner | Oct 7, 2008 12:03:25 AM

I've got a market failure for you: Muirdiot is a practicing doctor.

V.I. Lenin would consider the fact that he wasn't executed by firing squad or committed to the Gulag long ago a "market failure".

Oh, the world is just full of "market failures". Government can fix them all.

Posted by: Methinks | Oct 7, 2008 12:09:07 AM

OK considering your arguments on collectivism, socialism and communism above who of you believes the Untied States is or ever was a communist regime? Who believes Canada, Norway or France are communist?

Posted by: muirgeo | Oct 7, 2008 1:06:29 AM

Mixed economies. In some degree socialist.

Commonwealth. Take the amount of product, divide into the amount controlled by government, and that's how much a country is communized.

Posted by: Sam Grove | Oct 7, 2008 1:46:01 AM

I think that "market failure" is used, euphemistically, in 2 basic situations:

That's not bad, Christopher, but I would condense those two into one:

A market failure is when the market performs in a different way than somebody's idea of how it should.

Posted by: Hans Luftner | Oct 7, 2008 1:56:41 AM

Thanks Sam.. so in other words you are just making up definitions as you go along with complete disregard for the historical and politico-social definitions of these things as scholars might define them. Thanks for making my case.

Man if you are an argument against private education. Just where were you indoctrinated?

Posted by: muirgeo | Oct 7, 2008 2:45:27 AM

Hi everybody, I am a very infrequent poster. However, in this case we can rely on James Hanley from over at postiveliberty.com

My understanding of it is that market failures occur when there is a prisoner's dillemma situation. i.e. if it is beneficial to cheat on a contract/ agreement, market failures occur. Hence in the current crisis, market failure occurred because allowing people to borrow without collateral provuded an incentive for people to cheat. whether or not the bailout was the right answer is an entirely different issue about which i will say nothing. the people pver at positive liberty say it much better than I do.

Posted by: Murali | Oct 7, 2008 6:03:57 AM

The link didnt go through

here's the URL: http://www.positiveliberty.com/2008/08/the-limits-of-non-coercion-ii-collective-action-problems.html

Posted by: Murali | Oct 7, 2008 6:25:29 AM

"My understanding of it is that market failures occur when there is a prisoner's dillemma situation. i.e. if it is beneficial to cheat on a contract/ agreement, market failures occur."

Political solutions to such problems (real and imaginary) will generate even more free riding.

Also, the textbook prisoners' dilemma is a poor representation of cooperation problems in the real world.

See: Social contract, free ride

Posted by: megapolisomancy | Oct 7, 2008 1:12:57 PM

so in other words you are just making up definitions as you go along with complete disregard for the historical and politico-social definitions of these things as scholars might define them.

I'm not making up definitions, I know what Communism is in history, I'm trying to get down to essentials.

Communism is about a collective economy where the means of production are not 'owned' by anyone, but are managed collectively. Socialism is the path to communism in that the state takes on the chore of impos.. excuse me, establishing the communist society at which point the state is supposed to whither away leaving the people happy in the workers' paradise.

Progressive government is about collectively controlling a portion of the product of the producers for 'the common good'. In essence, such government 'communizes' said product.

George, quickly now, don't look it up.

Are you familiar with Fabian socialism?

Posted by: Sam Grove | Oct 7, 2008 2:21:32 PM

when there is a prisoner's dillemma situation. i.e. if it is beneficial to cheat on a contract/ agreement, market failures occur.

But if the cheaters use political means to get away with it, then it is a captive market.

It always appears to be beneficial to cheat on an agreement if one believes he can do so without suffering consequences.

The market is not a promise that people won't attempt to cheat, or that people won't be cheated. But when cheaters become known, people will stop dealing with them.

The problem always and everywhere is the availability of information.

The problem of government and market is that cheaters cheat. That's a problem with life.

The problem specifically with government is it becomes an opportunity for everyone to cheat by postponing consequences until they mount up into catastrophe.

The market is that which muirgeo does not comprehend.

Posted by: Sam Grove | Oct 7, 2008 2:32:04 PM

But if the cheaters use political means to get away with it, then it is a captive market

No disagreement with you there

It always appears to be beneficial to cheat on an agreement if one believes he can do so without suffering consequences.

Of course, and if such a situation really arises, the there will be cheaters who get away with it. Arguably, the financial cirsis (+ the bailout), and the melamine in milk incident are clear examples of such situations which have arisen and in at least the melamine incident, there are clear victims of cheaters.

The problem specifically with government is it becomes an opportunity for everyone to cheat by postponing consequences until they mount up into catastrophe.

So then the role of the government ought to be to provide rules of the road where cheating is disincentivised. And, presumably, we who enjoy the benefits of such a government ought to pay the requisit taxes for it. (oops I said the T word!!)

The market is not a promise that people won't attempt to cheat, or that people won't be cheated. But when cheaters become known, people will stop dealing with them.

No, the market is not a promise that people wont attempt to cheat. However, the market consists of individual transactions and contracts where people expect the other side not to cheat. (That sounds a bit weird but I hope you understood what I was trying to get at)

However as libertarians (and not anarcho capitalists), you can imagine a minimalist state, a la Nozick, which enforces contracts and protects rights. This means that government should have a role, at the very minimum, in punishing cheaters, as well as protecting the cheated when their rights have been violated.

We can further argue that protecting people from having their righs violated would include having some regulatory bodies. (oops I used the r word). In theory, it makes wonderful sense that cheaters will be discovered and they will lose their share of the market because people stop dealing with them. However, there can be ghastly human costs (in terms of lives and health) to the cheated.

Lets use the milk melamine issue as a case in point. The milk producers are the cheaters. The human cost has been a loss of lives. Babies have become seriously ill, or even died because of the melamine. In fact, there was a similar problem in New York also dealing with bad milk. It is unconsionable to let manufacturers get away with such criminal negligence. Yet, without any measures to punish cheaters, thats what we are doing. Furthermore, it cannot be that society should react to these predatory behaviours only after babies have died. Adding melamine was a widespread practice spanning many companies in China as well as a few in New Zealand. Would you have parents trying out brand after brand killing off their children one by one until they find a safe brand?

Without any method of detecting cheaters before their cheating actually harms someone, we are proviing people with an incentive to cheat. And in today's fast paced world, it is increasingly easier for cheaters to get away with their money before they are detected. Hence, to cut the rant short, there have to be regulatory bodies like the FDA in order to ensure compliance.

While libertarians may wish that such a body was privately owned, there are 2 reasons why it may not be feasible.

1. I dont really see a profit motive in the company such that it could be made private.

2. Without the executive clout to enforce compliance, we are back to square one. The consumer will have to test between the approved product and the unapproved product, and in the process risk death and injury, in order that it learns that the approved products are safer.

Even after the products have been on the shelf for sometime, there are still negligent, ignorent or maybe just desparate parents who will buy the untested products, thus providing a significant market for these tainted products. That 50% of americans are creationists is strongly indicative that people either do not understand the theory and have only a vague idea of what it is, or that people refuse to believe even if they know what it is about.

This is not taking into account downstream manufacturers who obtain their milk from china, but do not report so. i.e. this is a clear example of a market failure and regulatory bodies like the FDA will in all likelihood have to be set up by the government.

Another situation where there is a market failure is when it pertains to the commons. Air pollution is an example. Air is part of the commons. Yet, getting catalytic converters etc and other air pollution treatment mechanisms is more expensive and it would be irrational for individual companies to buy a converter becaues the individual marginal contribution to easing pollution is negligible but their costs are not. Collective action problemsare a very clear situation of market failure.

Also, the textbook prisoners' dilemma is a poor representation of cooperation problems in the real world.

Yet, cooperation problems do exist and the market is either non responsive, insufficiently responsive or responds so slowly that there is significant damage to environment and health.

Hence, ther is a clear and present need for regulation (egads!) and oversight. (which is somewhat different from a managed economy.)

Posted by: Murali | Oct 7, 2008 11:35:46 PM

Actually, why not have cheaters pay for it?

1. I don't really see a profit motive in the company such that it could be made private.

I guess you've never heard of liability and insurance. Why are there insurance companies? Insurance companies impose requirements on coverage. Requirements such as product safety.

No they are not. In an early pollution case, an fruit tree grower sued a railroad company for damages to his crop caused by passing trains. the courts ruled that would couldn't allow private property rights to stand in the way of progress. That is a failure of government.

As for automotive pollution, it was the government that put private mass transit out of business by building highways all over the place.

But the main flaw in your argument is that we have all the government that you describe and more, AND, we have all the problems that you describe plus many more.

PLUS! We have a government that promotes crime by prohibiting recreational drugs thus creating a highly lucrative market for criminal behavior.

So then the role of the government ought to be to provide rules of the road where cheating is disincentivised.

But government itself creates a powerful means of cheating thereby creating powerful incentives for those with the will and the means to do so. Not only that, but in order to attain power, exclusive interests sought to gain support from the public by:

1. inviting them aboard the gravy train
2. arousing fear of "others" thus keeping them divided from general interest.

This is an inevitable consequence of political power due to the incentives inherent in such a system.

This has resulted in a government that taxes (oops!) us to project military power all over the world (130+) countries creating many enemies.

Every solution that you mention has not prevented every problem that you mention.

PLUS! The power to tax is absolute and enables the political class to feed itself at the expense of the productive class thereby reducing our ability to address the various problems that will always present themselves by ourselves or via voluntary associations such at UL, Consumer's Union, etc.

I'd also like to point out that it was the government's Rural Electrification Program that led to the abandonment of windmills all over the country.

It was the government's Department of Agriculture that promoted the use of fertilizers and pesticides leading to much pollution of waterways.

And so on.

I do not agree that taxation and executive power are either necessary or desirable, in fact, I think they (and central banking) are what brought us to where we are today, militarily involved around the world and poised on the brink of bankruptcy.

Every solution you propose already exists and has tempted us into a real mess. How big of a mess, we shall soon see.

Posted by: Sam Grove | Oct 8, 2008 9:29:09 PM

I am reminded of the drug warriors' claim that if we legalized recreational drugs, people will be able to obtain them anywhere!

Posted by: Sam Grove | Oct 8, 2008 9:38:14 PM

There are any number of pretty theories of government. What most of them have in common is an attitude that government institutions are independent from society and human failings.

Political government did not arise from a commandment from God, perfect, rust free and stain resistant. Political power arose from prehistory and is an exaggerated remnant of tribal humanity, it is a manifestation of human adaptation to tribal hierarchy.

It is, at core, primal and brutish.

It rules by threat of extinction.

It is interesting that the liberal mind, so often opposed to guns, cherishes the power that guns deliver to them via government.

We will order society.
We will threaten those who do not obey our edicts with extinction.
We will write our edicts down and make them law.

It is good to be king.

You can call it what you want, it is pretty much as I described above.

Posted by: Sam Grove | Oct 8, 2008 9:59:39 PM