Re: A question to Daniel Ust

From: Smigrodzki, Rafal (SmigrodzkiR@MSX.UPMC.EDU)
Date: Mon Nov 05 2001 - 14:25:46 MST

 Daniel Ust wrote:

Rafal SmigrodzkiR@MSX.UPMC.EDU wrote:
>Is there in your opinion any conceivable situation where
>the economic interaction of free people, without fraud,
>"third party" intervention, direct coercion, but acting within
>a legal system respecting property rights, could have
>undesirable consequences, necessitating a coercive
>intervention on behalf of some of the persons involved?

It could have undesirable consequences because the future is uncertain.

#### Exactly. Even what we think is right and good can turn out to be wrong
in a longer time-frame. So all assumptions and social ideas have to be
frequently reexamined and chnaged if new data requires it.

Whether such conditions would necessitate "coercive intervention" is another
matter.  Wouldn't one want to err on the side of freedom and reason?

### Always. Freedom and reason are right at the top of my "good" list.


Also, such coercion would have to meet the standard that it makes the situation better and does not have other unintended consequences. An example of the latter would be where the initial intervention leads to wreckless behavior on the economic actors in the future because now they come to expect intervention to correct problems. (This is kind of what has happened with international bailouts in the 1990s. Investors in the US came to expect the IMF to bail out Mexico, the Asian tigers, and now Argentina. This is perhaps not the best example, since it's arguable that the initial interventions have, on their own, wreaked much havoc.)

### I fully agree here. -----

The lesson of history and economics is that government intervention does not make the uncertainty less. In fact, it tends to increase it. Why so? The introduction of coercion into social relations lessens the need of parties to work together and deal rationally with one another. Coercion then becomes a potential solution to any disagreement -- whether over prices, wages, ownership, "immoral" but victimless behavior. (This reflects the situation of all societies right now. People see government as a means to bludgeon others into submission. As Hoppe notes in _Democracy -- the God that Failed_, government is a great decivilizing force.)

### Again, yes, to some of it, except there would be no civilization without governments.

-------- >Or is such situation in principle and in practice absolutely >impossible and ruled out by the very foundations of your >moral system?

It's ruled out by my moral system, yes, but I am willing to entertain the question from an economic and sociological perspective.

### Now here I am a little bit confused - intervention can be entertained as a question but is ruled out by basic moral considerations? Does it mean that your answer to my first question is a principled "No" and any discussion is only an intellectual pastime?


>I could imagine a few such situations, and I can >weave a (hopefully) coherent web of inferences >and arguments, starting with the basics of my >moral convictions and the knowledge I have >about the functioning of the world. I am very >curious about your views here.

I am equally curious to hear your "inferences and arguments" here. (That said, I'm busy searching for a job right now, so I might not be quick to respond. You might also want to look over my web site for more of my views.)

### OK, here we are - let's imagine there is a new planetary colony, New Freedom, where free yeomen till their initially equal parcels of land and pay only minimal taxes to support a freely elected constabulary. As is usual, some farmers are more ingenious and hard-working than others and in the emerging cash economy earn enough to buy land and hire some of the less smart ones to work there, for a smaller, market-determined pay but without the hassle of running a business. Soon the land owned by the big farmers and their offspring covers a greater and greater fraction of the available land. Since having more land gives you a better credit position, the rich can easily survive periods of bad weather and famine, while some of the average farmers are eliminated by chance - a few hectares of crop eaten by locust, a desperate need to feed the family, a quick sale of land, and before you know, there is an underclass of landless laborers, unable to compete with large farms, unable to buy land (you need to have money to buy land but since most money in this economy comes from land, you need land to buy land). This works like a ratchet. The landless people are willing to work for a pittance, as there is a large supply of them (it's much easier to produce a few humans than a new plot of land, so barring pestilence, war and famine, there is more people than land), they have no choice (there is no industry on this backward pimple of a planet) and they can only work for the large landowners, as the small farmers do not need hired hands or couldn't afford it. Every ten laborers you have working for you means you can buy out another small farmer who is in trouble. The freely elected constabulary will not do anything because no crimes are committed. An oligopoly controlling land forms spontaneously, stifling competition, slowing progress, ruthlessly destroying its opponents. The rich soon form a hermetic aristocracy, buy control of the government, and change the name of the colony to New Colombia.

This process, the concentration of a crucial and non-expandable resource in the hands of a few percent of the population, has occurred many times here on Earth. What starts as a relatively non-coercive system (neolithic farmers easily switching to a hunter-gatherer existence) becomes a slave or feudal state. You can name Rome, England, Russia, France, Latin America and many others as examples. Only revolutions and technical developments break such states, forcing some redistribution of inherited wealth, as opposed to earned wealth (a very important distinction - I am in favor of the inherited wealth redistribution but largely against redistribution of earned wealth), and allowing the formation of a democracy, which is likely to be the first political system refraining from beheading thinkers opposing it.

So this is my example - unregulated land market in an agrarian society will result in the destruction of freedom, virtual abolition of the market and a coercive intervention is warranted to prevent this from happening. Of course, merely killing the rich is a bad idea - those who do the killing soon get rich, too, until the next peasant revolt. Instituting progressive land taxation is an option, thus protecting the smaller economic units although in the long run the development of a technical economy is even better, allowing relaxation of controls on land ownership (if land stops being an important source of wealth, oligopoly control is no longer an obstacle to development). By the way, I am against subsidizing small (or any other) farms, the way it's done in Europe and to a lesser extent in the US.

What do you say?

Rafal Smigrodzki, MD-PhD

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