10 ms·

The Machinery of Freedom (1989) [pdf]

62 points by olalonde 6y ago

cevans01 6y ago
Excellent book. I also recommend his recent "Legal Systems Very Different From Ours". It really makes you wonder to what extent our law may be in a local minimum.
- visualradio 6y ago
  Skimming the book there are number of issues which stand out. With regards to 'selling the schools', in many places the charter school money just goes to tax exempt private landlords the charter school is leasing the building from without any substantial increase in benefits for students. The section on taxes ignores state and local property tax and portfolio effect caused by deductions and expenses in federal income tax. The chapter on money seems bad. Money is credit not a commodity. The simplest way to create money is through an equity loan not issuing gold certificates for gold bars. When someone wishes to take out a loan in 1M new-dollars on security of an estate worth 1M USD, the new dollars are a new unit of currency initially issued at a 1:1 ratio to USD which then floats. The U.S. colonies did not originally have any gold. Issuing public money on security of estates allowed the colonies to provide a medium exchange for farmers without precious metals, raise revenue from interest payments without taxes, and economically develop despite mercantilist policies by Great Britain. During revolutionary war and war of 1812 the U.S. printed money and treasury notes to pay for existentially necessary expenses because taking out large loans in external currency which could not be paid off within 20 years or inflated was considered unethical to future generations. Gold standard has caused lots of problems historically. Just going back to gold standard and depending upon private banks for money is not really solution. If a country does not have gold and residents are not allowed to domestically provide money as a public utility, on ideological grounds that anything 'public' is bad, this could prevent a country from developing if foreign lenders decide they can gain more through usury than by financing productive development, and could also prevent a country from financing defensive war during invasion.
visualradio 6y ago
The problem with libertarianism is the subjective theory of value, the idea that everything is worth what the purchaser will pay. Under this framework any action which boosts the relative exchange price of an asset can be claimed to create value, even if the action is purely destructive. A gain in relative exchange price can be achieved without engaging in production merely by increasing scarcity of alternatives. In other words by increasing the marginal unhappiness felt by dispossession of an asset, by destroying the productivity of the commons and quantity of freely available alternatives, without increasing happiness for anyone. If a government creates money to purchase assets and services at subjective prices it could be promoting unhappiness rather than happiness. At least at the interface between the public sector and private sector (taxes, spending, public loans & grants) some other ideas are needed.
- cma 6y ago
  As part of that problem it also takes no real account of marginal utility (the strong basis for progressive tax).
  - pjscott 6y ago
    You can make a reasonable utilitarian argument for some kind of redistribution, progressive tax, welfare, etc., based on poorer people having greater marginal utility of money. The book's reply, in the "Robin Hood Sells Out" section (starting on page 15), is -- and I'm making way too short a summary here -- that in practice the system we have doesn't really do this overall. Governments help poor people and hurt poor people, and the author argues that (at least in 1970's USA) the poor are overall more hurt than helped.
    - eru 6y ago
      Well, if you include poor people everywhere, governments are massively hurting them via immigration restrictions. With no gain to balance.
    - cma 6y ago
      I don't think social security has worked out to be regressive the way he proposes in the robinhood section. The real returns chart here shows it is progressive between low middle and high earners considering four different scenarios: https://www.crfb.org/blogs/fact-or-fiction-social-security-regressive https://www.crfb.org/blogs/fact-or-fiction-social-security-r...
missedthecue 6y ago
While I'm not an anarchist, I find that David D Friedman has some remarkably compelling ideas. I encourage anyone to read a book of his or listen to a lecture on YouTube.
- Ar-Curunir 6y ago
  Anarcho-capitalism ≠ anarchism
  - HeckFeck 6y ago
    Some ancaps prefer the term 'voluntaryist' to describe their position. Though I think it is fair to call Anarcho-capitalism a form of anarchism because it posits no state and no rulers, though laws would still exist.
    - ultrastable 6y ago
      anarcho-capitalism isn't really anarchism, in the sense that anarchism is historically opposed to wage labour & private property because it represents a form of coercion. I don't just mean this in a normative sense - whatever you think of the merits of either, anarcho-capitalism doesn't have much historical or theoretical continuity w/ anarchism.
      - HeckFeck 6y ago
        It depends where you land on the semantics vs etymology debate. Well, we'll agree not to coerce anyone to adopt a particular definition. ;)
    - jokethrowaway 6y ago
      I like the voluntaryism rebrand. When you talk about anarchy people mainly think of anarcho-communists (because historically they had the name first). Semantically an - arkhos just means "without rulers"
    - Ar-Curunir 6y ago
msgilligan 6y ago
The PDF is the 2nd edition. There is a 3rd edition on Amazon: https://www.amazon.com/Machinery-Freedom-Guide-Radical-Capitalism/dp/1507785607/ https://www.amazon.com/Machinery-Freedom-Guide-Radical-Capit... I haven't read it, but I think I'll read the 3rd Edition.
blackbear_ 6y ago
I think the biggest problem of free markets is that they a great way to optimize the wrong thing. Anything that cannot be valued in money will be ignored (e.g. the environment), and what can be measured will fall victim of Goodhart's law, promoting narrow short-term interests over broad long-term issues.
- someguyorother 6y ago
  As an optimization mechanism, failures of the market can be either one of two things: - It optimizes the wrong thing, or - It fails to optimize what it intends to optimize. Externalities fit into the former category. Business cycles and some types of path dependence (e.g. Keynesian demand deficiency) fit into the latter.
  - gatestone 6y ago
    The book is not juridically or economically naive. Externalities are considered. The book is also not about moral philosophy and a priori concepts of property and freedom. Friedman is utilitarian, trying to figure the "machinery", like right property institutions and laws for difficult things like pricing carbon exhausts.
- jokethrowaway 6y ago
  The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. Long term issues are factored in the market. People will have different options about long term issues. Eg. If people think that global warming will be a problem for my house in 50 years that risk will be factored in the price of my house. If that risk doesn't materialise I may undersell my house. Long term prediction are definitely not easy and the market reflects that difficulty.
  - blackbear_ 6y ago
    > The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. It is much harder than that. You can certainly sue a local company for obvious pollution (which is must be visible in the short-term), but who to sue for the dying coral reef, melting glaciers, bee extinction, or the increase in the incidence of lung cancer? We can measure these things, but who pays for them, and how much? Even Friedman agrees (implicitly) this issue is above free markets, via carbon pricing, meaning that: > Who gets away with it depends not on real costs but on politics.
gatestone 6y ago
This is my Bible.
- gatestone 6y ago
  The best quote: ”The concept of property is fundamental to our society, probably to any workable society. Operationally, it is understood by every child above the age of three. Intellectually, it is understood by almost no one.”
objectivistbrit 6y ago
This book offers some of the most cogent arguments for anarco-capitalism, so I want to give a brief illustration of what an Objectivist counter-argument would look like. (For the uninitiated, Objectivism is a philosophical system that agrees with libertarianism on some points and disgrees on others. It's difficult to summarise all of the differences because modern-day "libertarianism" is quite a vague term. However, Objectivism is definitely opposed to the anarcho-capitalist wing of the libertarian movement. For the curious, [1] is a good basic introduction to Objectivism, and [2] contains a slightly more technical introduction.) Page 62 of David Friedman's book: > In such an anarchist society, who would make the laws? On what basis would the private arbitrator decide what acts were criminal and what their punishments should be? The answer is that systems of law would be produced for profit on the open market, just as books and bras are produced today. There could be competition among different brands of law, just as there is competition among different brands of cars. > In such a society there might be many courts and even many legal systems. Each pair of protection agencies agree in advance on which court they will use in case of conflict. Thus the laws under which a particular case is decided are determined implicitly by advance agreement between the protection agencies whose customers are involved. In principle, there could be a different court and a different set of laws for every pair of protection agencies. In practice, many agencies would probably find it convenient to patronize the same courts, and many courts might find it convenient to adopt identical, or nearly identical, systems of law in order to simplify matters for their customers. It's precisely this point that every pair of protection agencies needs some kind of prior agreement that prevent normal market dynamics from applying to dealing between protection agencies in such a system. In normal markets any firm is free to walk away from any deal with any other firm, and find an alternative. This freedom to walk away and find an alternative offer is what gives both sides negotiating leverage. This might be difficult -- if a startup makes iPhone apps, they will find it difficult to avoid dealing with Apple, but they do have options -- they can switch to making Android apps, convert their apps to purely web apps, petition Goldman Sachs to fund the next generation of iPhone-killing smartphones, and so on. However, if Bob's Local Small Town Protection Agency (with 50 employees) is signing a deal with WalMart Mega Protection Agency (with 2 million employees), Bob has to agree to whatever terms the WalMart agency sets. If he does not, if there is ever a conflict between one of Bob's clients and one of WalMart's clients, the WalMart agency can simply send their vast army over and force Bob's agency to submit. Assuming that Bob and WalMart both realise this when negotiating their deal, both will also realise that Bob effectively has to agree to whatever terms WalMart sets. The takeaway of all this is that it is not logically possible to have a system where "every chooses their own 'brand of law'". The reason is that since anyone can hypothetically interact with anyone else, whatever legal system you choose to adopt will have to "interface" with every other legal system, on terms that are ultimately set by naked force. Or: no matter which "personal legal system" you choose, you're locked into the same "meta-legal system" as everyone else, one with a very odd structure. One million scientologists demand that anyone who criticises scientology be heavily fined? You have to pay the fines, unless your agency is able to fend off the scientologists. One hundred thousand Salafists declare that they will kill anyone who criticises Islam? Unless your protection agency is able to shut them down, you have to remain silent. (The logical endpoint of these dynamics is that everyone subscribes to a few very large protection agencies, and anarcho-capitalism ends up looking something like medieval feudalism, where everyone ultimately relies on a few powerful "dukes" and "kings" for protection.) > In such a society law is produced on the market. A court supports itself by charging for the service of arbitrating disputes. Its success depends on its reputation for honesty, reliability, and promptness and on the desirability to potential customers of the particular set of laws it judges by. This creates an enormous incentive for protection agencies to covertly lie, smear, and destroy the reputations of competing agencies via whatever means available. [1] https://theobjectivestandard.com/what-is-objectivism/ https://theobjectivestandard.com/what-is-objectivism/ [2] https://objectivismindepth.com/introduction-to-objectivism/ https://objectivismindepth.com/introduction-to-objectivism/

62 points by olalonde 6y ago

Excellent book. I also recommend his recent "Legal Systems Very Different From Ours". It really makes you wonder to what extent our law may be in a local minimum.

visualradio 6y ago
Skimming the book there are number of issues which stand out. With regards to 'selling the schools', in many places the charter school money just goes to tax exempt private landlords the charter school is leasing the building from without any substantial increase in benefits for students. The section on taxes ignores state and local property tax and portfolio effect caused by deductions and expenses in federal income tax. The chapter on money seems bad. Money is credit not a commodity. The simplest way to create money is through an equity loan not issuing gold certificates for gold bars. When someone wishes to take out a loan in 1M new-dollars on security of an estate worth 1M USD, the new dollars are a new unit of currency initially issued at a 1:1 ratio to USD which then floats. The U.S. colonies did not originally have any gold. Issuing public money on security of estates allowed the colonies to provide a medium exchange for farmers without precious metals, raise revenue from interest payments without taxes, and economically develop despite mercantilist policies by Great Britain. During revolutionary war and war of 1812 the U.S. printed money and treasury notes to pay for existentially necessary expenses because taking out large loans in external currency which could not be paid off within 20 years or inflated was considered unethical to future generations. Gold standard has caused lots of problems historically. Just going back to gold standard and depending upon private banks for money is not really solution. If a country does not have gold and residents are not allowed to domestically provide money as a public utility, on ideological grounds that anything 'public' is bad, this could prevent a country from developing if foreign lenders decide they can gain more through usury than by financing productive development, and could also prevent a country from financing defensive war during invasion.

visualradio 6y ago

The problem with libertarianism is the subjective theory of value, the idea that everything is worth what the purchaser will pay. Under this framework any action which boosts the relative exchange price of an asset can be claimed to create value, even if the action is purely destructive. A gain in relative exchange price can be achieved without engaging in production merely by increasing scarcity of alternatives. In other words by increasing the marginal unhappiness felt by dispossession of an asset, by destroying the productivity of the commons and quantity of freely available alternatives, without increasing happiness for anyone. If a government creates money to purchase assets and services at subjective prices it could be promoting unhappiness rather than happiness. At least at the interface between the public sector and private sector (taxes, spending, public loans & grants) some other ideas are needed.

cma 6y ago
As part of that problem it also takes no real account of marginal utility (the strong basis for progressive tax).
- pjscott 6y ago
  You can make a reasonable utilitarian argument for some kind of redistribution, progressive tax, welfare, etc., based on poorer people having greater marginal utility of money. The book's reply, in the "Robin Hood Sells Out" section (starting on page 15), is -- and I'm making way too short a summary here -- that in practice the system we have doesn't really do this overall. Governments help poor people and hurt poor people, and the author argues that (at least in 1970's USA) the poor are overall more hurt than helped.
  - eru 6y ago
    Well, if you include poor people everywhere, governments are massively hurting them via immigration restrictions. With no gain to balance.
  - cma 6y ago
    I don't think social security has worked out to be regressive the way he proposes in the robinhood section. The real returns chart here shows it is progressive between low middle and high earners considering four different scenarios: https://www.crfb.org/blogs/fact-or-fiction-social-security-regressive https://www.crfb.org/blogs/fact-or-fiction-social-security-r...

missedthecue 6y ago

While I'm not an anarchist, I find that David D Friedman has some remarkably compelling ideas. I encourage anyone to read a book of his or listen to a lecture on YouTube.

Ar-Curunir 6y ago
Anarcho-capitalism ≠ anarchism
- HeckFeck 6y ago
  Some ancaps prefer the term 'voluntaryist' to describe their position. Though I think it is fair to call Anarcho-capitalism a form of anarchism because it posits no state and no rulers, though laws would still exist.
  - ultrastable 6y ago
    anarcho-capitalism isn't really anarchism, in the sense that anarchism is historically opposed to wage labour & private property because it represents a form of coercion. I don't just mean this in a normative sense - whatever you think of the merits of either, anarcho-capitalism doesn't have much historical or theoretical continuity w/ anarchism.
    - HeckFeck 6y ago
      It depends where you land on the semantics vs etymology debate. Well, we'll agree not to coerce anyone to adopt a particular definition. ;)
  - jokethrowaway 6y ago
    I like the voluntaryism rebrand. When you talk about anarchy people mainly think of anarcho-communists (because historically they had the name first). Semantically an - arkhos just means "without rulers"
  - Ar-Curunir 6y ago

msgilligan 6y ago

The PDF is the 2nd edition. There is a 3rd edition on Amazon: https://www.amazon.com/Machinery-Freedom-Guide-Radical-Capitalism/dp/1507785607/ https://www.amazon.com/Machinery-Freedom-Guide-Radical-Capit... I haven't read it, but I think I'll read the 3rd Edition.

blackbear_ 6y ago

I think the biggest problem of free markets is that they a great way to optimize the wrong thing. Anything that cannot be valued in money will be ignored (e.g. the environment), and what can be measured will fall victim of Goodhart's law, promoting narrow short-term interests over broad long-term issues.

someguyorother 6y ago
As an optimization mechanism, failures of the market can be either one of two things: - It optimizes the wrong thing, or - It fails to optimize what it intends to optimize. Externalities fit into the former category. Business cycles and some types of path dependence (e.g. Keynesian demand deficiency) fit into the latter.
- gatestone 6y ago
  The book is not juridically or economically naive. Externalities are considered. The book is also not about moral philosophy and a priori concepts of property and freedom. Friedman is utilitarian, trying to figure the "machinery", like right property institutions and laws for difficult things like pricing carbon exhausts.
jokethrowaway 6y ago
The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. Long term issues are factored in the market. People will have different options about long term issues. Eg. If people think that global warming will be a problem for my house in 50 years that risk will be factored in the price of my house. If that risk doesn't materialise I may undersell my house. Long term prediction are definitely not easy and the market reflects that difficulty.
- blackbear_ 6y ago
  > The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. It is much harder than that. You can certainly sue a local company for obvious pollution (which is must be visible in the short-term), but who to sue for the dying coral reef, melting glaciers, bee extinction, or the increase in the incidence of lung cancer? We can measure these things, but who pays for them, and how much? Even Friedman agrees (implicitly) this issue is above free markets, via carbon pricing, meaning that: > Who gets away with it depends not on real costs but on politics.

gatestone 6y ago

This is my Bible.

gatestone 6y ago
The best quote: ”The concept of property is fundamental to our society, probably to any workable society. Operationally, it is understood by every child above the age of three. Intellectually, it is understood by almost no one.”

objectivistbrit 6y ago

This book offers some of the most cogent arguments for anarco-capitalism, so I want to give a brief illustration of what an Objectivist counter-argument would look like. (For the uninitiated, Objectivism is a philosophical system that agrees with libertarianism on some points and disgrees on others. It's difficult to summarise all of the differences because modern-day "libertarianism" is quite a vague term. However, Objectivism is definitely opposed to the anarcho-capitalist wing of the libertarian movement. For the curious, [1] is a good basic introduction to Objectivism, and [2] contains a slightly more technical introduction.) Page 62 of David Friedman's book: > In such an anarchist society, who would make the laws? On what basis would the private arbitrator decide what acts were criminal and what their punishments should be? The answer is that systems of law would be produced for profit on the open market, just as books and bras are produced today. There could be competition among different brands of law, just as there is competition among different brands of cars. > In such a society there might be many courts and even many legal systems. Each pair of protection agencies agree in advance on which court they will use in case of conflict. Thus the laws under which a particular case is decided are determined implicitly by advance agreement between the protection agencies whose customers are involved. In principle, there could be a different court and a different set of laws for every pair of protection agencies. In practice, many agencies would probably find it convenient to patronize the same courts, and many courts might find it convenient to adopt identical, or nearly identical, systems of law in order to simplify matters for their customers. It's precisely this point that every pair of protection agencies needs some kind of prior agreement that prevent normal market dynamics from applying to dealing between protection agencies in such a system. In normal markets any firm is free to walk away from any deal with any other firm, and find an alternative. This freedom to walk away and find an alternative offer is what gives both sides negotiating leverage. This might be difficult -- if a startup makes iPhone apps, they will find it difficult to avoid dealing with Apple, but they do have options -- they can switch to making Android apps, convert their apps to purely web apps, petition Goldman Sachs to fund the next generation of iPhone-killing smartphones, and so on. However, if Bob's Local Small Town Protection Agency (with 50 employees) is signing a deal with WalMart Mega Protection Agency (with 2 million employees), Bob has to agree to whatever terms the WalMart agency sets. If he does not, if there is ever a conflict between one of Bob's clients and one of WalMart's clients, the WalMart agency can simply send their vast army over and force Bob's agency to submit. Assuming that Bob and WalMart both realise this when negotiating their deal, both will also realise that Bob effectively has to agree to whatever terms WalMart sets. The takeaway of all this is that it is not logically possible to have a system where "every chooses their own 'brand of law'". The reason is that since anyone can hypothetically interact with anyone else, whatever legal system you choose to adopt will have to "interface" with every other legal system, on terms that are ultimately set by naked force. Or: no matter which "personal legal system" you choose, you're locked into the same "meta-legal system" as everyone else, one with a very odd structure. One million scientologists demand that anyone who criticises scientology be heavily fined? You have to pay the fines, unless your agency is able to fend off the scientologists. One hundred thousand Salafists declare that they will kill anyone who criticises Islam? Unless your protection agency is able to shut them down, you have to remain silent. (The logical endpoint of these dynamics is that everyone subscribes to a few very large protection agencies, and anarcho-capitalism ends up looking something like medieval feudalism, where everyone ultimately relies on a few powerful "dukes" and "kings" for protection.) > In such a society law is produced on the market. A court supports itself by charging for the service of arbitrating disputes. Its success depends on its reputation for honesty, reliability, and promptness and on the desirability to potential customers of the particular set of laws it judges by. This creates an enormous incentive for protection agencies to covertly lie, smear, and destroy the reputations of competing agencies via whatever means available. [1] https://theobjectivestandard.com/what-is-objectivism/ https://theobjectivestandard.com/what-is-objectivism/ [2] https://objectivismindepth.com/introduction-to-objectivism/ https://objectivismindepth.com/introduction-to-objectivism/