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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 actio

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 5y ago
As part of that problem it also takes no real account of marginal utility (the strong basis for progressive tax).
- pjscott 5y 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 5y ago
    Well, if you include poor people everywhere, governments are massively hurting them via immigration restrictions. With no gain to balance.
  - cma 5y 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...
  - jokethrowaway 5y ago
    Poor generally have better technology available compared to the past (thanks to capitalist-driven technological advancements), so they may have more comfortable lives than in the past. Given the massive increase in inequality (which is often driven by government policies, see quantitative easing, covid lockdowns) it does seem like our current system is favouring the ultrarich.
pjscott 5y ago
That sounds a bit off. Presumably something is worth more to you than what you pay for it -- otherwise you wouldn't buy it. If someone drives up the price of something by making it artificially scarce, its value to you hasn't gone up; the only thing that has gone up is the purchase price, which has been brought closer to the subjective value you place on it, reducing your gain from the trade. (Also it's not obvious to me what this has to do with libertarianism, at least of the sort discussed in this book.)
- visualradio 5y ago
  If there are 5 wells and an owner of 1 well poisons 4 of them, they are able to charge more for the remaining clean water, and possibly acquire money for a commodity which was previously available for free, by increasing scarcity. In a private government concerned only with maximization of income of its owners or investors such pathological outcomes are possible. In the U.S. idea of a republic it is usually thought there should be a public government concerned with the maximization of happiness of residents, something which many libertarians or anarcho-capitalists do not agree with.
  - unishark 5y ago
    In page 60 or so the document talks about how to impose laws and security without a govt. There's also a section on non-government approaches to make polluters pay. Presumably the owner of the well would end up much poorer for their actions than when they started.
  - BurningFrog 5y ago
    Destroying other people's property is bad, yes.
- nonameiguess 5y ago
  This is called consumer's surplus, where there is a single market clearing price but the subjective value placed on a good by each consumer is not actually that exact price, so those who place greater value receive a surplus. There is also producer's surplus, as the producer may have been perfectly willing to sell for a lower price, but the market clearing price happened to be higher than that. This is why companies often attempt to engage in some form of customer segmentation or price discrimination, to take some of that consumer surplus and capture more of it as producer's surplus. The entire basis of welfare economics and the ethical argument in favor of markets at all is that, at least under conditions of pure competition and in the absence of externalities, market clearing prices will always settle on a Pareto optimal point where the net surplus of all parties to the transaction is maximized. We obviously don't actually have those conditions, but what Dr. Friedman is attempting to do is figure out from theory and history ways we might be able to via better systems of law and property than what we currently have. He is actually a frequent commenter on Scott Alexander's blog and has been for a decade, and is quite a joy to read and converse with. His arguments are well researched, well backed, and compelling. The only blind spot seems to be with respect to climate, where he continues to assert that we cannot even know whether the sign of the change will be negative at all as equatorial regions become unlivable but tundras fertile, which is maybe true over a long enough span of time, but seems to me like saying we cannot know for sure Thanos isn't right and killing off the half the population now won't make the world better off in a thousand years and forever thereafter. It doesn't seem like a good argument in favor of letting it happen.
tlb 5y ago
> any action which boosts the relative exchange price of an asset can be claimed to create value, even if the action is purely destructive Usually, only actions which increase (price * quantity) are claimed to create value. For example, no one is claiming that the current US gasoline pipeline shutdown is creating value. Price increases, quantity decreases, everyone is sad except maybe a few margin traders who got lucky.
- visualradio 5y ago
  If an oil pipeline breaks and destroys available sources of potable water, it may increase price * quantity for companies selling bottled water, but the price increase is due to increased rent paid for access to clean water, due to an increase in scarcity caused by environmental degradation. Additionally NIPA consider interest payments on debt financed speculative asset purchases and late fees paid to banks to be output. And in talks with local governments, property investors regularly claim that any project which might increase speculative land prices creates value when asking for tax abatements.

cma 5y ago

As part of that problem it also takes no real account of marginal utility (the strong basis for progressive tax).

pjscott 5y 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 5y ago
  Well, if you include poor people everywhere, governments are massively hurting them via immigration restrictions. With no gain to balance.
- cma 5y 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...
- jokethrowaway 5y ago
  Poor generally have better technology available compared to the past (thanks to capitalist-driven technological advancements), so they may have more comfortable lives than in the past. Given the massive increase in inequality (which is often driven by government policies, see quantitative easing, covid lockdowns) it does seem like our current system is favouring the ultrarich.

pjscott 5y ago

That sounds a bit off. Presumably something is worth more to you than what you pay for it -- otherwise you wouldn't buy it. If someone drives up the price of something by making it artificially scarce, its value to you hasn't gone up; the only thing that has gone up is the purchase price, which has been brought closer to the subjective value you place on it, reducing your gain from the trade. (Also it's not obvious to me what this has to do with libertarianism, at least of the sort discussed in this book.)

visualradio 5y ago
If there are 5 wells and an owner of 1 well poisons 4 of them, they are able to charge more for the remaining clean water, and possibly acquire money for a commodity which was previously available for free, by increasing scarcity. In a private government concerned only with maximization of income of its owners or investors such pathological outcomes are possible. In the U.S. idea of a republic it is usually thought there should be a public government concerned with the maximization of happiness of residents, something which many libertarians or anarcho-capitalists do not agree with.
- unishark 5y ago
  In page 60 or so the document talks about how to impose laws and security without a govt. There's also a section on non-government approaches to make polluters pay. Presumably the owner of the well would end up much poorer for their actions than when they started.
- BurningFrog 5y ago
  Destroying other people's property is bad, yes.
nonameiguess 5y ago
This is called consumer's surplus, where there is a single market clearing price but the subjective value placed on a good by each consumer is not actually that exact price, so those who place greater value receive a surplus. There is also producer's surplus, as the producer may have been perfectly willing to sell for a lower price, but the market clearing price happened to be higher than that. This is why companies often attempt to engage in some form of customer segmentation or price discrimination, to take some of that consumer surplus and capture more of it as producer's surplus. The entire basis of welfare economics and the ethical argument in favor of markets at all is that, at least under conditions of pure competition and in the absence of externalities, market clearing prices will always settle on a Pareto optimal point where the net surplus of all parties to the transaction is maximized. We obviously don't actually have those conditions, but what Dr. Friedman is attempting to do is figure out from theory and history ways we might be able to via better systems of law and property than what we currently have. He is actually a frequent commenter on Scott Alexander's blog and has been for a decade, and is quite a joy to read and converse with. His arguments are well researched, well backed, and compelling. The only blind spot seems to be with respect to climate, where he continues to assert that we cannot even know whether the sign of the change will be negative at all as equatorial regions become unlivable but tundras fertile, which is maybe true over a long enough span of time, but seems to me like saying we cannot know for sure Thanos isn't right and killing off the half the population now won't make the world better off in a thousand years and forever thereafter. It doesn't seem like a good argument in favor of letting it happen.

tlb 5y ago

> any action which boosts the relative exchange price of an asset can be claimed to create value, even if the action is purely destructive Usually, only actions which increase (price * quantity) are claimed to create value. For example, no one is claiming that the current US gasoline pipeline shutdown is creating value. Price increases, quantity decreases, everyone is sad except maybe a few margin traders who got lucky.

visualradio 5y ago
If an oil pipeline breaks and destroys available sources of potable water, it may increase price * quantity for companies selling bottled water, but the price increase is due to increased rent paid for access to clean water, due to an increase in scarcity caused by environmental degradation. Additionally NIPA consider interest payments on debt financed speculative asset purchases and late fees paid to banks to be output. And in talks with local governments, property investors regularly claim that any project which might increase speculative land prices creates value when asking for tax abatements.