Astral Aviary

December 31st, 2008, sometime in the afternoon.

I had a very happy thought that day and I want to record it now. I plan to revisit it later in greater detail.

Here’s what happened. Many years ago I had read a book about the mathematics of life. The basis of the author’s idea was category theory and it seemed that the author (I forget both the author’s name and the book’s title) was aching to say something about protein folding — a very important problem in the biophysics of life — but couldn’t quite summon up the nerve to do so. I let the thing sit the back of my mind, never sure what to do with his ideas, since I certainly did not know what he was struggling to say and caategory theory is over my head. Then this month I read the recent and excellant book, Entanglement, and over a period of several days an idea came.

Entanglement deals with the phenomenon, expressed in various formulations, of supra-luminal influences when two or more particles “entangle.” That means that no matter how far apart the particles are, they can be far outside the light cone in fact, they continue to keep in “contact.” No information can be exchanged of course via entanglement (physicists really hit that one hard so don’t even begin to fantasize about it!). Moreover, since there is no supra-luminal information transfer, unlike real, everyday computing, thermodynamics plays no part in QM computation, though it does form the basis, the very essence indeed, of quantum computing. This fact cannot be stressed enough — QM computation takes place outside of what in normal physics is considered real. Heinlein expressed the idea using the term “irrelevance,” a cute word which unfortunately has not caught on.

What gradually occurred to me is that it is possible the problem of protein folding — which quickly leads to combinatorial explosions of the most severe degree — may only be the possible via quantum computing. (Note: From an information theoretic point of view, it may in fact be an NP-complete problem.) If this is true, then life itself (because life wouldn’t get far without protein folding!) is the result of irrelevant QM computations which are then fed back into real space-time via physically realistic (speed of light or slower) mechanisms, whatever they may be.

Reality is where life exists, “irrelevance” is what makes life possible. Is that cool or what? And all of this actually makes sense, in a broad, general kind of way.

I doubt I am alone in these ideas and most emphatically do not claim priority. Even if they are well-known, and I looked, a lot of work needs to be done regarding them. But still, just in case they are new, finally I would have an original idea that was worth something. What a feeling!

Time’s up. Now back to the real world.

As scientists working in the framework of Public Choice Theory, we need only show where History II, the hypothetical transformation laws, takes us and at what point they break down. Just as an engineer applies physics and mathematics to the designing a bridge to withstand all reasonable physical occurrences (but never all conceivable ones), so too we can design our institutions to withstand severe social changes but, people being who and what they are, we cannot hope to make them withstand all possible contingencies. Uncertainty can never be exorcised away from any market. In analyzing the social situation, uncertainty acts like a conserved factor. When it disappears from ne part of the system, it reappears in another. There is no uncertainty in that!

How does this works in practice? One of the primary appeals of the totalitarian state is its vow to eliminate the uncertainties of the free market. And to do so, officials of the state act to increase their power without limit. Now as actors they function under the same knowledge constraints as the rest of us. They cannot know the future in detail. Hence, they will argue that the bounds of their power must never be fixed but must fluctuate as conditions change. Thus the laws are subject to a constant threat of change through state intervention, though the cause itself might not occur. A new legal uncertainty replaces the prior economic one, and this new uncertainty acts to undercut what remains of the free market for goods and services, because it is impossible to isolate economics from politics. Rapidly decreasing economic growth and shrinking time horizons are the result. The agents of Leviathan have transformed the problem (made it worse in fact), but despite their vow have not solved it.

This may help explain why welfare states are so frequently led to war when their avowed aims are the opposite. The welfare state must placate the most powerful rent seeking groups. It does not have the power to neutralize them. This reinforces already serious economic rigidities causing increasing friction at home and trade wars with other countries. There is less to go around but more demands to “redistribute.” The government officials are now in an impossible situation. To remain in power, they must satisfy both the rent seeking groups and those left out. Since a free market economic solution is ruled out, only a political one can do the job. If a higher unifying goal, one of pressing importance can be formulated, it will permit the government to make some reforms and placate the excluded. Few solutions are more satisfactory to the above than war (though various “moral equivalents” are likely to be tried) And, one might add, few entail greater uncertainty.

So, what to do? That rent seeking sets severe limits on practical reform has already been emphasized. Other routes to reform must be considered. While I retain fondness for the idea of libertarian “communes,” perhaps modeled after “Atlantis,”⁵⁶ implementing a constitution for these communes is a non-trivial matter. It should be obvious that it would be a difficult problem to establish and maintain these communities. They would have a hard enough time if they fail, but Lord help them if they succeed. Obviously, tax consultants and lawyers would be prominent and essential members to the “commune.” If things work out (in theory they should) these communities would serve as true experiments in social contracts and could yield a wealth of empirical data, but I cringe when I think of the difficulties. It can be done. It may have to be done if civilization is to survive. But anyone who thinks it will be easy or “fun” is kidding himself.

[Editor’s note: I still like the idea, but people contemplating joining such communes need to be aware of all the risks – e.g. an energized and ruthless state, eager to demonstrate the effectiveness of a “Waco solution” to the “Atlantis problem.” That may sound extreme, I obviously thought so when I originally wrote this piece, but that is exactly what happened less than a decade later to a non-libertarian, religious commune.]

There is little more that can be added in terms of practical suggestions. No one wants to encourage fatalism, but one of the facts that we must face as adults is there is little that can be done to change or improve the world. For the foreseeable future, freedom will be found (and likely for only precarious periods) where enforcement and knowledge costs are prohibitively high or where there are such clashes of rival power groups and institutions to enable it to survive at the boundaries. These freedom “oases” would be similar to those that existed when the state and church conflicted during the Reformation. Precarious as they would be, nevertheless, they might permit cooperation to survive until such time as the rulers wearily decide to let the people go (i.e. attack some other group.) Historically, such has been a typical pattern. For those with iron nerves and a love of adventure, not to mention a slightly masochistic bent, this could prove exciting. For the rest of us, it is depressing. Freedom will be viewed much the same way as we now view polygamy; something that is socially tolerable so long as it is kept out of sight and practiced only by a few. Of course it is immoral and in no way to organize a society, but we’ve got our own lives to worry about, so we’ll ignore it.

The above analogy is not written as a defense of polygamy.

Long range prospects are slightly more encouraging. Perhaps, if some measure of scientific and technological progress continues, it may be possible for the disaffected to flee to comets and asteroids, there to build independent colonies that would, at the start anyway, be no threat to the statists on earth and thus, presumably, be left alone. Coercive regimes (there will be a lot of them) might even encourage such migrations as a way to get rid of trouble-makers. “Really out of sight, really out of mind,” as one might say. This too has happened before. I am not saying that this is what will happen, only that it might. It is one of the more optimistic scenarios.

[Editor’s note: This scenario, a recapitulation of the peopling of North America projected onto the solar system, remains a possibility though I am increasingly unwilling to give it much credence. This would likely be a post-Singularity (currently re-scheduled to happen ~2029) scenario, i.e. possible only when advanced AI joins with advanced nanotechnology for truly exciting stuff, which is what the Singularity is. But it is a large question if in fact the Singularity will happen. Forces, economic, political, religious, and social are coming together to ensure it doesn’t. The “re-primitivization of the world” is happening so rapidly, it is certain to be a horserace as to which comes first – Singularity or new Dark Age?

Manned space travel, almost but not quite a government monopoly, has as its simplest measure the cost of getting a pound into orbit (“halfway to anywhere” in terms of energy costs). This cost has shown no signs of decreasing over the decades which is exactly what one would expect. It may have increased in real terms. The space tourism industry, the lone exception to that monopoly, can currently send multi-millionaires into orbit for a few days or sub-orbit for a few minutes. Big deal. Not meaning to demean a great technical accomplishment, but it has a long way to go. Sending the interplanetary equivalent of the Mayflower mid-21^st century (see Robert Heinlein’s wonderful novel, Farmer in the Sky) to a distant solar system homestead is a long shot. Analogies are suspect in any event and this one is far more than most. Should interplanetary colonization occur, there is every reason to believe it will be quite different in form from what took place over a period of four centuries when people from Europe (primarily) came to the Americas. Those who remember the past too strongly are likely to be blinded to future possibilities or something like that.

There is such a thing as living in too interesting times.]

If it does happen, once established these independent polities would be difficult to control. Attempts by the central authorities of Earth to do so would prove disastrous and lead to revolts that would be impossible to suppress. Again, Heinlein considered such possibilities in two of his novels, Between Planets and The Moon is Harsh Mistress. Alfred Bester did the same in The Stars My Destination. Perhaps a Renaissance will then occur and lead to a liberal (classical) spirit similar to the reaction against the interminably hideous religious wars that followed the Reformation. Ultimately, a mature civilization might arise and political leaders would come to view the prospect of using force as an absurdity much like the Catholic Church would view a proposal (now) to burn heretics in Rome. It took a while to get there but it did happen.

But my focus is on America of here and now. Granted if such a future does transpire, then the death of America the nation would not necessarily mean the death of America the idea, but that would be cold comfort to us.

* * *

Some of the ideas and possibilities expressed here are remote both in time and in their abstractness. Some are only too close and concrete. It has not been possible up to now to tie them to our personal lives. This is always the danger of philosophy. Instead of deepening our lives, instead of bringing about a love of thinking, it gradually disengages from us to become the sole concern of the academics and college students. This tends to bring contempt to ideas and reasoning, leaving us with a feeling of: What does it mean to me? The question is valid and because ultimately the science of politics and economics has meaning only when it touches the individual, it is to the individual we must turn. As noted at the start, this was the basis for the subjectivist treatment of the social sciences, from Menger to Shackle, from von Mises to Buchanan and Tullock. We start with the individual and worked up. Now it is time to return.

Let us summarize. The engine of society is the ideas and values at its base. These values and ideas have consequences. The state is a market for them. Given knowledge of the market rules, we can make near-term (and in some cases, long-term) predictions about the state of that market. What I want to do is move away from the market in the abstract and examine the effect of these ideas and values on our lives. In other words, to understand the moral implications of Public Choice Theory. It was never my intention to write this essay as only an intellectual exercise. When preparing it, I wondered how I could impress upon the reader the dimension of the disaster coming to engulf America. More often than not, I found the business distasteful and kept putting it off until it could be avoided no longer. What can we hope to do except hope it doesn’t affect us? It was like writing about a third world bus accident. It was something impossible in our daily lives to relate to. We consider it briefly and move on. What more can think or feel?

We must go deeper than science and philosophy into the secrets of the heart which only art can reveal.

* * *

It was philosopher/film director Terrence Malick who achieved the perfect metaphor for the transformation that is about to occur in America, and accomplished it with the skill and grace of a supremely talented poet and painter. The film is Days of Heaven (1978). The theme is the costs that ideas and values entail when put into action and who bears those costs. The story is set in the wheat fields of a huge farm in pre-World War I Texas (1916) and concerns four people, one in particular: Bill, a young steel worker from Chicago who is frequently in trouble with both the law and his employers. It is he who initiates the events that bring about his own destruction and of those around him. It is his resentments and frustrations that lead him to justify an act of deception and desperation that is at the center of the film’s tragedy. “Some people,” says the narrator of the film, Bill’s pre-teen sister (possibly half-sister, we are unsure) Linda, “got more than they need, others need more than they got. It’s just a matter of getting us all together.” This is the principle by which Bill acts. He and his lover Abby (in keeping with the mythic structure of the film, they hide the nature of their relationship by passing themselves off as brother and sister) and Linda arrive at the farm in Texas having fled Chicago. There Bill learns the owner\farmer is dying. Said to have only a year (“maybe a year”) to live, he finds himself strongly attracted to Abby. Bill, noticing this, persuades Abby to accept the Farmer’s marriage proposal, figuring it certain that when he dies, she will inherit the farm thus enabling them to live easy the rest of their lives. She reluctantly agrees to this scheme but over the months the farmer’s condition does not worsen, “it just stays the same,” and Abby’s feelings for him grow. Naturally, the situation grows tenser as the sense grows that no good can come from this. There is a confrontation between Bill and the farmer, and Bill leaves. Lonely for Abby, however, he returns to the farm in late-summer 1917. It is at that point that the farmer learns the truth of the relationship between Bill and Abby. At the film’s climax, all Biblical hell is unleashed. There is even a plague of locusts and a conflagration that destroys the farm. Bill kills the farmer in self defense. The three again are on the run, but they are tracked down by the authorities (who believe Bill murdered the farmer) and Bill in turn is killed.

At the film’s conclusion, we see Abby putting Linda in a boarding house and then walking to a train station to hitch a ride with soldiers heading to the front. The final scenes show Linda walking with a friend, likely along those same railroad tracks, while around them the death-throes of turn of the 19^th century America take place and a new America is born. It is in these final images of a world that now seems as remote as ancient Egypt that the film effortlessly transcends itself. The loss of America’s 19^th century dream of freedom and happiness is mirrored in the lives of these four characters whose love for each other was fatally mixed with the deceptions and resentments of envy that could not be contained once released.

Americans, like everybody else, are slow learners. World War I was a big mistake and, of course, nobody learned anything from it. It is never explicitly stated in the movie though it is strongly implied (great art is like that) that such catastrophes are the norm in history and America, for all its Exceptionalism, is no exception. The movie is at root a retelling of the Biblical tale of Abraham and Sarah and is intended to be a timeless statement of prophecy. Many critics did not understand this. Let me emphasize: Days of Heaven is not a naturalistic movie.

I do not want the reader to conclude form the above synopsis that Malick is a libertarian any more than that he is a Biblical scholar. He is far too accomplished and sensitive an artist to engage in such didacticism. In any event, don’t fret about the artist – focus on the art. What is crucial to our understanding the film comes directly from his artistic integrity and nothing else; the tension between what could be and what is. Like Rand, Malick has great respect for the potential of human beings and never lets the failings of his characters detract from his valuing of them. Like Rand as well, justice is an integral part of his cosmos. Moreover, while the vision of both artists is secular, they make it clear that when we fail morally, we will find ways to punish ourselves that are, if anything, more horrific than the gods could devise. And if the punishment is not borne by the guilty, it will be borne by the innocent. Yet, like Rand again, his universe, Malick’s cosmos is not malevolent. It is indeed a magnificent existence that is worthy of man and man is worthy of it. The beauty of Abby touches all around her. There is good in her that is not to be denied. There is good in all of them. Despite their failures, they were not born to fail. Despite their choices, they were not destined to choose evil. As human beings, the survivors came to accept their choices and the resulting costs. As human beings, we must do no less. The film warns that for all time though we do not have to make the same choices, given a similar situation, if we do the costs will be as grim.

Unlike Rand, Malick’s view of life is tragic, but life itself still has enormous value.

* * *

There is a question here, a difficult and interesting one, on how to define morality in social terms. In other words, how can we enable the private moral rate of return to equilibrate to the social rate of return? That is, to what extent can people be punished for their actions in service of Leviathan and the ideas that make Leviathan possible? Since I have maintained there is a degree of determinism to the dynamics of the transformation from majority-vote democracy to totalitarian state, it would appear that the extent to which I hold people responsible has been significantly diminished. In the case of complete determinism (assuming it makes sense to speak of such a think in a human context), it would be monstrous to be an advocate of punishment. It would be like whipping a person for growing old.

I know of no easy resolution to the matter. Certainly we cannot hold an entire nation accountable for the sins of its leaders, though in war that is how we act and must act. That seems to be nothing less than collective guilt on a vast scale, every bit as vicious as the crimes we are seeking to punish. Suppose you had to judge a person caught in the maw of Leviathan? Arguing from the point of view of partial determinism, would you deem that individual guilty? And what of his superior? We don’t want to yield to the “I only followed orders” defense, but a degenerate state posses problems of such complex jurisprudence that the problem of punishment must be restricted if it is to be made manageable at all. We also want to do everything possible to provide incentives for people to resist Leviathan, granted how difficult that is to do. I suggest the following: for state crimes, only those individuals can be pushed who created and/or interpreted the political laws of the state. This would place the burden of guilt on the intellectuals and the apparatus of enforcement. This view acknowledges that it is too much to ask of people caught in such situations to, in effect, act irrationally, i.e. seek martyrdom when survival itself is difficult enough. It does not free the bulk of the subjects from censure, but admits that in the majority of cases, these functionaries are more pathetic than evil. They would be placed in the odd position of being neither forgivable nor punishable.

When, Bill, Abby, and Linda fled the farm, Abby confided to Linda that “she didn’t care whether she was happy or not, only that she did what was right.” This implies, again in agreement with Rand, that our happiness is vitally dependent upon our moral base. When the base weakens, we can expect our happiness to crumble as well. It is in moral terms that Abby attempts to understand what has happened and seek out a resolution in the time remaining. Similarly, I maintain that most people if they want to understand what is taking place in America should seek out an understanding in moral terms. While my respect for the Public Choice Theory is unqualified, in some ways I wonder how great an improvement it is to Bastiat’s aphorism quoted way back in Part I or Rand’s grim summation (speaking through her character Francisco d’Anconia in Atlas Shrugged) of the moral consequences of rent seeking in Part VI. Both statements have the advantage that no amount of economic or political theory can match. They speak in clear, concise, and precise moral terms. The issues are presented explicitly and a choice is offered. Rand’s great achievement as a philosopher was to recognize the need for such a moral base for a free market society when everyone before her had considered it superfluous or in bad taste. In her art, she quickly found that it is necessary to go to the metaphysical level, to pronounce man worthy of life, and that the future was his whenever he chose to claim it. Morally, nothing less would do.

For Abby, by doing the most moral of actions in the limits of her knowledge and the constraints, she performed a remarkable feat. Considering her appalling situation, this is an outstanding act of moral courage.

It is in these moral terms which speak directly to the individual that we find the greatest danger of statism. Well before the GULAGs are established and the nation goes to war, it is in our lives and relations to others that the tragedy occurs. The many subtle (and some not so subtle) cruelties of status and privilege, the hidden resentments, the unacknowledged fears, the dreaded choices, are all part of the mix and combine to give our lives a feeling of unending frustration and hopelessness. We become a nation of hurt people seeking revenge upon an enemy, any enemy. We come to depend upon an absurdity that somehow this raw mass of emotion will lead to a better life — if only others would believe and obey. We seek to affirm a cosmic order that cannot even be defined. This is a hooligan’s version of Historicism, a joke masquerading as civic involvement. And we come to dread above all the man who asks questions. Questions upset us and force us to look at ourselves. They force us to perform that most despised of acts, growing up. This process of hiding from reality has names, such as “Peter Pan politics” or the “Politics of Cultural Despair,” but however it is designated, the meaning is clear: the flight to Leviathan is a flight from reality and self. We become adrift somewhere far from earth in the Platonic realm where concepts of processes, like the state, market, and society, are things, like rocks and rutabagas, things that we can crush whenever the displease us. It is no wonder that in the end, losing happiness and the knowledge of good and evil, we are expelled from Eden.

Divesting punishment from moral censure makes sense if it allows us to shift the burden of choice back to the individual and leave it there. It would be presumed that having defined a moral code, punishment must be mandated for violations. That view is unrealistic when we deal with the state as a market. Instead of searching for moral perfection, we instead seek to discover moral certainty (difficult enough). We accept that we live in a society of diffuse knowledge and that most behaviors of which we disapprove will be prohibitively expensive to detect let alone stop. Instead of saddling people with guilt to ensure compliance, we concentrate on the most evil actions in the state and leave to you the problem of censure. We concentrate on the incentives and constraints of the state as a market and accept the fact that we cannot make people over into our own image and instead work only to achieve our own happiness.

This view is hopeful. It leaves the market alone to encourage the best behavior and rewards those engaged in forming moral capital. It extends the traditional libertarian view of victimless crimes by acknowledging both society and individual. It opens the possibility of a consistent understanding of anarchy and utopia: a state with no forced rules. So while people can be censured for their reliance on the state as both a substitute for their mind and self-esteem, the runaway state is bad enough without us joining in to make it worse. Enough bitterness and unhappiness lie in the future. When we accept statism, we become statists. A truism that means ultimately we lose our humanity, our morals being the first to go. Seeking to be something we are not, we deliver ourselves to forces impossible to control. We become killers of souls, then killers of men. The inhumanity of our actions are the consequence, we become inhuman long before. Paraphrasing Bertrand Russell, there is something feeble and a little contemptible about a man who cannot face the perils of life without the help of the state.

[Final Note: Despite everything, particularly the length, I think the essay works for the most part and to a degree I take pride in it. Where I did not have the answers, which was most of the time, I think the questions remain interesting Granted, the writing needed to be trimmed, the word choices improved — I noticed the longer the essay went on, the more editing was required — but that was it. For those interested in the references, let me know and I will supply you with them.

I particularly like the bit about “Peter Pan politics” and the “Politics of Cultural Despair.” Great phrases (I forget where I first came across them) and applicable today more than ever, now that Peter Pan has been elected President.]

Given the inexorable logic of rent seeking, reform will come only after catastrophe. Anyone who believes that ideas and their consequences are overcome simply by showing them to be false is in for a huge disappointment. Ideas are overcome and defeated if and only if there are institutional incentives to do so. They never “go away,” as such. This conclusion follows when we realize that (once again) the state is a market, a market of actors and institutions, values and costs, resulting in successes and failures like any other. It is only in the costs of clearing the failures that a political market differs from an economic one.

Throughout this essay we have seen how social entrepreneurs use market rules to establish rent seeking groups which entice more rent seekers to enter into the market and so on. In Part II, of this essay it was stated that a capitalist market “creates” its own future. Suppressing the details, in any market “A” the rules drive the evolution of “A.” Putting it somewhat enigmatically: A causes A or A creates A. Outside of a market context this statement makes no sense. But given the dynamic nature of markets, with its feedback loops, it provides us with a sophisticated basis for analyzing the flow of knowledge and causation in a society. Causal analysis is difficult in markets, of course, but not impossible. We have to be aware of the degree of reciprocal causation, however, which often makes it appear the cart is pulling the horse. Any market creates its future by rewarding the entrepreneurs most likely to fulfill the nature of its rules. It does so by encouraging the behavior/ideas most appropriate to those rules and penalizing the behavior/ideas that are inappropriate. Given a few generations, a poorly designed market can transform a nation of angels into a breeding ground for monsters.

* * *

It was Bertrand Russell who first classified totalitarian movements (the really unconstrained vision) into the groupings of Romantic and Rationalistic. I am going to use his terminology in analyzing the contemporary monsters which are beginning to roam the American political landscape. Let us consider the Romantic first. The Romantic is fundamentally agrarian as opposed to urban. He is characterized by a profound distaste for industrial civilization, a highly emotional longing for a pastoral or “simpler” life, a morbid reaction of awe/dread to basic biological features (e.g. race, gender, and the like), and an intense aversion to abstract thought and deliberation, culminating in a lust for action for action’s sake. Violent action in particular is viewed as a kind of therapy, a way to achieve completeness, a means of getting in touch with primitive feelings that enable one to be more “authentic.” To the Romantic, the mind is an encumbrance at best and the enemy at worst.

One characterization deserves mention. The Romantic is fascinated by the visual image. It is only the raw, vital impact of the visual image that can said to be real and to impart truth. Truth is all about feeling. Concerned about world hunger and wondering what can be done to alleviate it? Fret no more. A picture (or better yet a movie) of a starving child tells you all you need to know. How superior to a dreary discussion of property rights, fertilizer, crop management, distribution chains, acreage yields, and so forth. Any use of the mind to analyze a social problem, which means weighing the tradeoffs, is guaranteed to reduce the Romantic to tears of frustration and rage. Above all else, he wants to feel and act upon those feelings. Politically, Romanticism is characterized by a constant probing for weakness of the surrounding society and one’s enemies – followed by a blitzkrieg like swiftness of attack when such a weakness is discovered.

The Rationalist is more complex. The Rationalist is fundamentally urban as opposed to agrarian. While hatred drives the Romantic, fear moves the Rationalist. The need is not so much to destroy industrial civilization as to control it. The Rationalist has no objection to the mind at least in its more perverse forms: endless (and costly) reports, commissions, studies and the like that invariably go nowhere and accomplish nothing are his hallmark. Action terrifies him because he might have to take responsibility for it. So he sees everything, including the Romantic ironically, as a means to manipulation to achieve power and avoid responsibility. Like the Romantic, the Rationalist cannot conceive of any social good except that which results from his intervention. The Rationalist is more cautious than the Romantic, however, always seeking to keep the front of respectability.

Historically, the Romantic conquers first and the Rationalist takes over the wreckage. Both despise the autonomous man who does not need them and seeks only to render them impotent over his life. Both abhor the concept of cost, i.e. the realization that there are no free-lunch solutions, only tradeoffs. Neither will tolerate any limit to their power and both will inevitably come into conflict. Despite the fact that they can use each other most effectively against common enemies, once their common enemy (whoever it happens to be at the moment, but typically what is left of democracy) is eliminated, final war between them is certain.

Ideologically both are pragmatic.

My money is always on the Rationalist. The problem with the Romantic is that, given his premise that only the visible is real, he desperately needs a charismatic figure to inspire him to action, someone who combines political astuteness with psychological cunning. This Leader must appear incorruptible, fearless to the point of possessing a death wish, and be able to communicate to all levels of the populace. As one would expect, gifted Romantic leaders are in short supply historically — for which we can all be grateful. Compared to Romantics, however, Rationalist rulers breed like rabbits. Just when you think you get rid of one, along comes another. Hitler is the ultimate Romantic; Stalin the ultimate Rationalist.

Chairman Mao, a figure who combines aspects of both is perhaps the perfect totalitarian statist, and observation which may explain his continued appeal to revolutionary movements.

[Editor’s note: Indeed, “perfect” Chairman Mao’s legacy continues to awe public intellectuals left and right. China with its fascist economy and merciless government is an inspiration to both “liberal” Thomas Friedman, who wants America to be “China for a day,” and “conservative” David Brooks, who views China as the coming “America of collectivism.” Certainly for those who obsess over contemporary issues such as Global Warming (not happening), “sustainable” economies (meaningless), and what might be termed “soft energy” (e.g. wind power and the like — disastrous), China, which is steadfastly ignoring all these matters, has become the path to our future. Chairman Mao, whose malignant reign produced a corpse count in excess of both Hitler and Stalin and was an inspiration to Pol Pot and North Korea, remains the goto guy for contemporary statists.

As I write this, post-election day 2008, it is obvious that the president-elect is a Rationalist of the first order. He also, like Mao, is able to preserve a Romantic sheen (“. . . lower the level of the ocean” and the like) and not lose credibility. Thus this individual will be a formidable leader, a political force for some time to come.

As for the current president, nobody knows if he is a Romantic or a Rationalist or anything to any degree and I refuse to speculate.]

In contemporary American politics, the Romantic wing is composed of fervently anti-technological groups (who apparently view industrial civilization as a personal affront) along with groups who have the traditional obsessions with racial and sexual status. The Rationalist wing meanwhile busily formulates plans to control the entire economy, endless plans, differing only in terminology. Yesterday it was “re-industrialization.” Today it is “sustainability.” Who knows what tomorrow will bring to increase our burgeoning vocabulary? It goes almost without saying that this obsession with economic control is madness, on the order of believing by flapping your arms fast and hard enough you can ascend into the stratosphere. As with all would-be rulers in democracies, both movements simultaneously are compelled to pander to, while deeply resenting the power of entrenched rent seeking groups (unions, retirees, subsidized students, and so forth). The reason is clear: both need the traditional rent seeking groups, as neither Romantics nor Rationalists can hope to radically reorganize society as long as they stand in the way.

A necessarily grim resolution of this conflict lies in the future. [Editor’s note: Perhaps near future.]

And what of America? Ideologically, the Rationalists dominate. Barring the appearance of a major charismatic and Romantic figure in American politics, the Rationalists will a generation hence assume the power they lust for. Admittedly, they will have to reach a distasteful accommodation with the rent seeking groups, but at some point the costs of failing to reach an accord will be so large that it they will have to do so. The result will be our old friend Socialism and the throughway to Leviathan will be wide open. The Rationalists will win because the Romantics have no program and Americans are likely to remain stubborn enough to insist upon one. Besides, most Americans do not hate technology nor are they so lacking in self-esteem that they must forever beg the government compensation for biological accidents. The Rationalists are also on the right track in appealing to American’s traditional determination to get things done. It’s almost as if they are determined to show the world how to do statism right. If the Rationalists can continue to neutralize the Romantics, or if need be hide behind them, their victory is assured.

It might be objected that the situation in a mixed economy will become so chaotic that no one will win, but I find that possibility unrealistic. Recall that markets always exhibit the tendency to equilibrate. Someone must win out for the simple reason that no people will tolerate a chaotic situation indefinitely, a few years at most. In any event, Americans have long abhorred disorder (another reason the Rationalists are good bet.) It is not a victory all will cheer. However, at some point most will accept it.

* * *

Between prediction and prophecy, synonyms to most people, a great gap falls. The former is a crucial element of science, inseparable from its laws and methodology, the arbiter of science and superstition. The latter is essentially an act of moral intuition, a statement of human destiny coupled with a warning of what we should never try to do. This essay has concerned both, but in truth predictions themselves are subject to fine distinctions. Karl Popper explained the difference as follows: “It is not always been realized, however, that two different kinds of predictions can be distinguished in science, and accordingly two different ways of being practical. We may predict (A) the coming of a typhoon, a prediction which may be of the greatest practical value because it may enable people to take shelter in time, but we may also predict (B) that if a certain shelter is to stand up to a typhoon, it must be constructed in a certain way, for instance, with Ferro-concrete buttresses on its north side.”⁵⁵

Popper called this second type of prediction, “technological.” Unfortunately, the first were labeled simply “prophecies,” which is a term I would strongly object too given the definition above. Public Choice Theory falls naturally into the role of technological predictor. There is no reason why the two notions in the Popperian sense cannot be combined, however, which is what I have attempted in this essay. In fact, there is no reason why the two cannot be integrated with the even more technical use of the term by Lakatos, but this is getting complicated enough. Doing so has enabled me to offer the risky conclusion that unless we design our institutions to be sufficiently strong, the strength being measured in one way by the efficiency of the knowledge feedback mechanisms in politics and economics, the typhoons of social change will ultimately sweep these institutions away. The only difference between our concerns and Popper’s analogy is that our “typhoons” can come from the result of human, i.e. state action. There are no “outside” metaphysical forces (such as dialectical materialism) beyond our control to do us in.

In other words, Public Choice because of its concern with the universal laws of human action may properly be viewed as a social technology, a statement which need not cause alarm. Public Choice Theory is not “social engineering” as the repellant phrase is usually understood. A technology is after all only applied science. By applying Public Choice Theory to our rules and institutions, we are using it as a technology of design, no different in principle between deciding whether to build a house with brick or with straw. We are not ruling people’ lives, we are seeking only to strengthen our institutions. We are able to do this because being a science, Public Choice puts in our hands an immensely powerful device known as the “principles of impotence,” in analogy to the principles these principles define fundamental limits to our ability to control phenomena. In the physical sciences, examples are the Second Law of Thermodynamics or the limiting velocity of light. They are what unify science and technology in a given domain. As Popper stated: “It is one of the most characteristic tasks of any technology to point out what cannot be achieved”⁵⁶

[my emphasis].

I have chosen to carry this notion one step further by adding the traditional idea of prophecy, i.e. moral predictor, to the mix. The idea being that there are actions in a society we can prove that we must never attempt to do, e.g. order the whole of it along some moral direction imposed by others, because the results are certain to be disastrous. The presumption is that we do not want disasters, that such are bad. Though this analogy between the worlds of physical science and the worlds of action is subject to all manner of criticisms, I think it is valid. Public Choice is a science, and just as a technology cannot be detached from its science, so too a science cannot be detached from its philosophical foundations, in this case the whole of the Aristotelian tradition.

* * *

Historicism can be many things but it can never be a technology. In fact, Historicists simply ignore the matter. For its believer, Historicism is a secular theology and is more interesting to the psychologist than a political scientist. The main appeal of Historicism has been its promise to eliminate uncertainty. Under the guidance of an all-knowing leader (Rationalist or Romantic or cadre of them), the terror of the future is banished. It solves the problem of history, the problem of politics integrated over time, simply by denying there is one. If we take it seriously, this denial would be a serious challenge to political scientists. It might put them out of work. So how might Public Choice Theorists respond?

Well, what is the goal of historical studies? Explaining the events of the past and predicting the trends of the future is a good start. Anything else? Well, history as commonly understood might be divided (like everything else) into two parts. History I is the utterly novel, unpredictable events that are the primary concern of the historiographers. These are the accidents, the great men who come out of nowhere, the disasters that in principle are impossible to predict. History II on the other hand is the set of hypothetical transformation laws that, given the initial conditions of a society (defining and identifying of which is a difficult problem in itself), would enable us to trace the evolution of society and predict into the future. It is unnecessary to predict that evolution “for all time,” and such is impossible in any event.

The question now arises: is any aspect of History I reducible to History II or the reverse or neither? Philosophers of history would consider the question meaningless and we might well agree with them. Historiographers would argue that History II as such is impossible to formulate coherently and that History I is all there is. My sense it that most practicing historians assume a form of what might be termed historical agnosticism and steadfastly ignore these questions are ignored. The view propounded here, however, is that History II is not meaningless and neither version of History can ever be reduced to the other but only a kind of fusion can be said to have an objective status, one independent of our perceptions, languages, and so forth. It is because of History I that our predictions can never go far into the future, but that in no way invalidates the usefulness of History II. Derived form Public Choice Theory, History II is scientific history. And as a scientific and moral predictor, it enables us to agree with a modified version of Santayana’s well-known aphorism: those who forget the past are doomed to repeat some horrid variant of it.

To be continued

When force is the standard, the murderer wins over the pickpocket.  And then the society vanishes, in a spread of ruins and slaughter.

– Ayn Rand (1905 – 1982)

It was Marx who first raised the possibility that capitalism and its related institutions might be self-destructive and in doing so envisioned two mechanisms that might bring it about.  The first was a cloudy Hegelian dialectic progressing from primitive communism to capitalism to the final stage of utopian socialism.  The second, more down to earth, argued that capitalism would lead to increasing impoverishment until finally it would be destroyed by the outraged proletariat. The first had the disadvantage of encouraging fatalism (and even giving the capitalist some grudging credit for making the socialist paradise possible) but it was irrefutable.  The second formation had the advantage of encouraging political action and it was vulnerable to economic analysis and historical data, i.e. it was refutable.

We could criticize both these formulations but in fairness to Marx, a philosopher should be judged as much as the questions he raises as the answers he gives.  Despite the fact that the Marxian programme is a failure, its economics catastrophic, and its politics reprehensible, the question raised about the durability of capitalism is a serioius one and for this Karl gets high marks.  In this century, Joseph Shumpeter (1883 – 1950) argued from a non-Marxian perspective that capitalism is indeed self-destructive.  Capitalism will collapse because it cannot overcome the hostility of the intellectuals and the indifference (not neglecting guilt) of those who benefit most from it.  I am abbreviated his intriguing argument, but I do not believe distorting it.  This essay, in fact, complements Shumpeter and confirms him.  Traditional majority vote democracies are simply too weak to support capitalism.  Both will be swept away by whatever historical storms blow through because rent seeking which is endogenous to democratic states will have rotted the institutional foundations well before.  Granted, some semi-capitalist countries will take longer than others to collapse, a fact which can be explained by the now labored concept of moral capital.  Granted as well there is always the factor of luck, good or bad.  But the conclusion stands.

America, despite those who believe in its exceptionalism, is not an exception.  This country has approached the closest to the free market ideal, but has never been free of the rent seeking that is now out of control.  Economic disaster or social upheaval (the nation appears to go through both every two or three generations) is nothing new, of course.  Anyone who prophesizes those events is certain to be proved correct.  What matters for our purposes however, is how people will view these events, how they will understand them, respond to them, explain them to others and integrate them into their beliefs.  A man (or a nation) can suffer misfortune and carry on, his belief in his personal worth and his confidence in his abilities unshaken.  Or he can come to dread the future and be overwhelmed by a feeling of injustice, leading him to demand the state “do something,” anything, if not to benefit him than to punish those responsible.  The ideas that form the basis of the first response entail capitalism.  The ideas that form the basis of the second entail the absolute state.  When rent seeking comes to include a majority of the population, we can then be confident that the next crisis will bring to the fore those ideas that are the foundation of the totalitarian state.  It will then only be necessary for social entrepreneurs, shall we say, to capitalize upon them.

All this sounds unduly pessimistic and frankly subversive to the possibility of reform.  Unfortunately, and make no mistake about this, reform will come to the rent seeking state only when there is overwhelming incentive to achieve it.  Traditional majority vote democracies do not provide such an incentive.  Democracies head down the road to disaster because it is rational for their citizens to do so.  It would be wildly irrational (i.e. unprofitable) to do otherwise.  Why should the average voter rush out to study economics or Public Choice Theory?  When possible good would it do him?

Perhaps, if we are inclined to appeal to luck, we could opt for some Americanized version of Historicism (the Exceptionalism argument!), the label Karl Popper (1902 – 1994) gave to the belief that there is a mystical and/or transcendent element of history that is confined to peoples and states.  This would permit us to conjecture that somehow things will work out because the Public Choice theorists are barking up the wrong tree.  There are no universal laws of human action and thus the dialectic of disaster has no basis.  The idea of Historicism (of which Marxism is a variant) is interesting and important.  Methodologically it is the antithesis of Public Choice.

* * *

Americans like most people view their nation’s history as distinct. On the whole they have placed great faith in the durability of its institutions and have been most of its history optimists.  No matter what travails the nation goes through, the consensus has been we will muddle through and be the better for it.  This attitude is hardly confined to the man in the street.  Martin Gardner has it, so does the Supreme Court.  What the idea boils down to is that there is a “noumenal” America which is eternal and perfect and there is a “phenomenal” America subject to human failings and limitations.  Traditionally, Catholics have had similar thoughts regarding their church, a fact which outside critics frequently fail to understand and appreciate.  In short, given the proper guidance, the noumenal America will always be counted on to triumph in the end.  This view might also be termed the “Essentialist” view of history – the essential America will somehow prevail, even if the phenomenal America goes down the tubes.  As a result, Public Choice Theorists and Historicists will never agree on any point.  They will without fail argue past one another and that will be that.

Historicism is a form of Idealism with America the Idea (for example) inhabiting the happy land of Platonic forms and Hegelian dialectics.  The primary appeal of Historicism is emotional, however, not intellectual.  Historicism flourishes in periods of great uncertainty and declines in periods of confidence.  It is the security blanket of a people who refuse to grow up.  It anoints the state as the last bastion against the terror of uncertainty.  It denies the reality of human time, that uncertainty is implicit in the future.  Just as organized religion came to supplant magic as the provider of security against the uncertainty of death, the state comes to supplant religion as the provider of security against the uncertainty of life.  Human beings evidently cannot tolerate too much uncertainty and the above may suggest why modern totalitarian states pass through a pronounced religious phase where exact analogues of religious institutions (the Catholic Church is a popular model) are copied and given new meaning.  This phase ultimately descends into secular despair, but at the beginning the state is God.

The appeal of Historicism allows us to understand why Leviathan does not require the populace to become goose-stepping sadists.  The root cause of totalitarianism is not hatred or war-lust (though they certainly help), but civic demoralization.  The latter is both necessary and I conjecture sufficient.  Those writers who place their hope in a populace that is more anti-statist than the intellectuals are mistaken.  Even the basic assumption of their argument is questionable.  Most Americans are perfectly willing to tolerate statism so long as they are the beneficiaries and oppose it only when the rewards go to someone else.  The problem is that even if all Americans were adamantly opposed to statism, they have been so corrupted by rent seeking that consistent intellectual opposition is not only difficult, it is financially suicidal.  Can anyone really expect a rising executive of an automotive manufacturer to oppose government loans or quotas for the auto industry?  And what would happen to him if he did?  With status attitudes infecting so many in the business world (another by-product of rent seeking), how many would rebel?  Modifying Lord Acton’s aphorism, absolute rent seeking corrupts absolutely and absolute corruption yields the absolute state.  This last follows because there is no way to justify rent seeking except on the basis of status.  And one implication of a status society is that the beneficiaries of rent seeking are in some fashion superior to those left out.  Thus they are the natural rulers of Leviathan.  Historicism serves as a catalyst and re-enforcer of these attitudes.

How long does America have?  Little.  The last chance to back off from the abyss was during the Johnson Administration and we all know what happened then.  Though I am uncomfortable with prophecy, here is may assessment based on the rate of growth of taxation versus productivity and the consequent increasing governmental control over the economy:

1.       America will be in its gravest economic crisis or at war or both in 5 to 10 years (1990-1995).

2.       It will experience severe social disorders in 20 to 15 years (1995-2000).

3.       It will experience monetary collapse in 15 to 20 years (2000-2005).

4.       It will be a dictatorship in 20 to 25 years (2005-2010).

The American dictatorship will be characterized by forced labor on vast public works projects, by extreme repression, censorship, and mass executions/imprisonments.  These details follow as they are common to Leviathan in all its forms.

[Editor’s Note: Regrettably, I stand by this prediction though it appears I was a decade off (recall this was written in 1985). For the record, I let the original time-line stand.  It is the progression that matters.  All one needs to do is add a decade to the above numbers and things look fairly accurate from this vantage point (2008).

* * *

When I began planning this essay, my thought was to explain as briefly as possible the main features of the Public Choice school, to show how its ideas tied in with contemporary libertarian thinkers (e.g. Nozick, 1938 — 2002), and how the phenomenon of rent seeking in democracies could be derived a naturally within Public Choice Theory, the crucial ideas being externalities and the “free rider” problem.  Indeed, I had originally intended to subtitle this essay, “How Not to Solve the Free Rider Problem.”  As the essay took shape, however, it became clear that much more was involved than an analysis of the transfer of resources form one group to another.  It seemed to me that the Public Choice theorists had either not grasped (unlikely) or were reluctant to state the full extent of the long-term costs and implication of rent seeking.  With the exception of Mancur Olson, no seemed quite up to sounding the alarm.  Of course, these men were scholars first and, unlike me, are understandably reluctant to indulge in alarmist rhetoric even when justified.  Nevertheless, given “2 + 2,” it seems appropriate at some time to say “4!”  Of course, Public Choice is much more than an explanation of rent seeking.  It is exciting intellectually to see political science moving towards a general theory of markets, a theory with immense philosophical and moral implications.  But if the outstanding political problem out time is keeping the state within bounds, then enough is known now to conclude the worst.  Rent seeking unites politics and economics together in a destructive process that ultimately envelopes our wealth, our hopes, our futures, our lives.  This is a staggering result.  The consequences, whether we are libertarians or not, are grim indeed.  At the very least it means that those reform ideas you read about in Reason and the like are a waste of time.

[Editor’ note: As I write (2008) the above statement is even truer than it was in 1985.  What a joke that once great publication and libertarianism in general has become!]

Consider the current libertarian panacea for the national debt, social security, etc. – selling public lands.  Should such a sale take place (it won’t), we can confidently conclude on the basis of Public Choice Theory that it would solve nothing.  As the money flowed in (assuming ideal circumstances), the rush to spend it and the surge of counter claims upon that wealth stream would rapidly result in a situation as bad if not worse than if nothing had been done.  This is, in fact, exactly what happened when the “Windfall Profits” oil tax passed (in the late 1970s).  The situation is analogous to what happens when a new expressway opens up.  Because of the poor to non-existent pricing mechanisms, the expressway simply draws in marginal traffic, shifts the congestion around and results in a situation worse than it was before.  Similarly, since the “pricing mechanism” in democracies is so inefficient (far worse than the public realizes) any increasing in tax revenue will be disastrous: the more that is brought in, the more will be spent.  The system is locked in.  Rent seekers will continually demand more funds and favors because it is enormously profitable for them to do so.  Rent seeking only results from inadequate pricing but works to undermine what little of it there is.

Even worse for would-be reformers, Public Choice theorists have succeeded in accomplishing a feat no one anticipated: they have shattered both the anarchist’s and the statist’s dreams.  For the anarchist, the myth of the exogenous state, the state imposed form without by historical accident and thus dispensable is no more.  The problem of externalities can only be solved politically and the solution necessitates a state in some form.  This is the endogenous state, the state that arises spontaneously in any social setting.  That state is a market phenomenon.  It can never be wished away.  Externalities must be internalized, one way or another.  The anarchist’s notion of a society without rules is self-contradictory.

Similarly, the fantasy of a small group of elite intellectuals ruling everyone’s life for the betterment of all has been replaced by the unyielding reality that such a result is nonsense.  Such an elite group would by its mere existence attract competitors for its power with whom the power must be shared, or the elitists is grave danger of being overthrown.  Over time, the elitist group will be isolated, their power increasingly boxed in, the society ever more rigid.  The only way they can break out (and only temporarily) is by massive purges, internal to the government or external to the society at large.  The statist always ends as the prisoner of his own power.

These results, grim as they are, need not be viewed as a cause of despair, however.  They instead return us to earth and let us work within the confines of reality, instead of floating off to the realm of wishes and daydreams.  There is nothing in Public Choice Theory that precludes either Nozick’s or Rand’s version of utopia.  Both can fit quite well within the Wicksellian state.  Nor does Public Choice imply that democracies are horrible places to avoid at all costs.  Just as democracies are an improvement over one man/party dictatorships, so too the Wicksellian “super-democracy” is a huge advance of the simple majority vote ones.  Perfection, no.  Perfectibility, yes.  In any event, we don’t have to achieve utopia to survive and be happy.  The social and international record of democracies is good, far superior to the socialist states.  Stable societies that are peaceful, prosperous, and free can be created.  We need only change the underlying decision rules and we are there.

But that modest “only” encompasses entrenched institutional barriers of enormous power and durability.  So strong, in fact, that for the foreseeable future, freedom can only survive at the margin of the state.  The day of freedom’s rebirth is not at hand.  It is much earlier than you think.  Because democracies reward among other things irresponsibility, that is what we will get.  As one might expect, irresponsibility will over time be extremely costly.  Such a result will be tragic if nothing is learned.  As Karl Popper once write, “it is very hard to learn from very big mistakes.”⁵⁴  In a grim way the statists are right: we are “bound” together.  There is no place to run or hide from the reality of markets.

If this view is correct, we can sum it up neatly by giving what might be called the Iron Law of Markets: Markets Equilibrate.  Depending on the rules, some will quickly, some slowly.

Corollary: when markets cannot equilibrate peacefully, they will do so violently.

To be continued

In every environment, those who are best fitted for that environment are most likely to thrive, survive, and multiply. There is evolution in the zoo as there is in the jungle, as those animals that are able to adapt to cages and keepers outlast those that cannot. So also with cultural evolution and evolution in human societies. Every society, whatever its institutions and governing ideology, gives greater rewards to the fittest – the fittest for that society. What it takes to be favored varies from society to society, but no society rewards those who are least fit to thrive under its arrangement.

– Mancur Olson

Is Austrian economics by itself a true research programme (in the sense of the MSRP?) For that to be the case, it must not only possess the structure, which Rizzo clearly shows, but must be able to predict novel facts or show a problem shift (new problems for further research.) Moreover, it must be able to transform the anomalies (e.g. the increasing severity and duration of the “bust” phase of the business cycle or the persistence of wage/price control) into evidence. It is my opinion that Austrian economics become a true research program only when it is joined to the study of political decision making. Certainly it makes little sense to keep the two separate as long as we hold the individual is indivisible, not a random stack of disjointed actions. This new extended research program need not be a given a new name since one already exists: Public Choice. There is not overestimating the importance of this. For the first time, the study of political decision making has begun the crucial and irreversible move from philosophy to science. It is a true turning point in the history of the humanities. And judging from the current state of the world, it has happened not a moment too soon.

* * *

With the machinery in place (at least as much as space would allow), we are now in a position to deal with the central problem of this essay: the evolution of the state, its nature and growth. We reject the notion that the state is bad if and only if its leaders are bad. While popular and implicit in every newspaper editorial and every political speech, the implication that all we have to do is figure out how to prevent the “bad” people from getting into power and leave it to the “good” people (however defined) to run the show is void and without merit. We also reject the corollary that people have some measure of intrinsic evil. That some become evil, there is no doubt. That each person has a capacity for evil it is certain. But that is all that can be said. To populate metaphysical evil as an explanation for Leviation is to render any hope of understanding void.

Olson’s proclamation, quoted at the beginning of this part of the essay, is perhaps the most powerful realization one can make about generalized markets. Markets are filters, bringing out the behaviors most suitable to their rules. The state is a market and just as we do not blame people for the deleterious effects of price controls (we blame the controls and urge their abolition), we accomplish nothing by denouncing people when the rules of the game do everything to encourage the behavior we deplore. In any market in which the private rate of return is unable to equilibrate to the social rate of return, the results will be disastrous. It means the breakdown of cooperation, but it does not mean the end of human action. Quite the contrary.

Now a society, says von Mises, is concerted action and cooperation. In short, when cooperation fails, society fails. Studying the rise and fall of cooperation, including the market ruled and the condition of the society should have implication for the evolution of the state. We need not concern ourselves with the particular form that evolution results in – if our concern is Leviathan then Leviathan, the absolute state, is all we need demonstrate. In terms of a prediction, this state should manifest itself at the point where the rules self-destruct, where cooperation vanishes and coercion is the only glue that binds the society together. To do so, we will require a general theory of cooperation at the least. Can such a theory be formulated?

Robert Axelrod, professor of Political Science and Public Policy at the University of Michigan, has begun to develop just such a theory. In his book, The Evolution of Cooperation, he asks how cooperation can come into being and remain stable when in the short run it is always more profitable to defect, i.e. to cheat or steal? Here’s an example. Suppose that you have made contact with another person, a possible trade partner. You know nothing about this person except that you want bread and he desires some mutually agreed upon form of payment, such as precious metals? “You arrange a mutually agreeable trade with the only dealer of that item known to you. You are both satisfied with the amounts you will be giving and getting. For some reason, though, the exchange must take place in secret. Each of you agrees to leave a bag at a designated place in the wood and to pick up the other’s bag at the designated place. It is clear to both of you that you will never meet or have further dealings with each other again.⁵²

This is the classic problem of game theory known as the Prisoner’s Dilemma. The dilemma results because in the above exchange it is to the advantage of each of the two parties to leave an empty bag. Of course, if both do that, both lose. However, if both cooperate, i.e. perform the trade, both will gain. The “best” result, of course, is to leave an empty bad and gain a full one. The issue poses by the Prisoner’s Dilemma is this: given this structure of exchange, does the logic of the exchange prevent cooperation?

In the one time transaction as described, the answer is “yes.” However, what happens if both parties desire more trades, perhaps indefinitely into the future? The result is different. By studying these iterated Prisoner’s Dilemmas using a variety of cooperative strategies, Axelrod demonstrated that patters of cooperation can emerge in a number of unlikely (and even hostile) environments and remain stable. The key to this surprising result turns out to be the incentives and constraints associated with the exchange and how the participants viewed the future. The most successful strategies turned out to be those that where “nice”: i.e. the participants refused to be exploited. When both participants valued the future highly (Axelrod introduced a parameter “w” to function as a rough measure of that future valuing), stable exchange emerged with both parties benefiting. When this was not the case, the “mean” strategies won by devouring the weaker ones, but it should be noted that in the long run, they (i.e. the “meanies”) were dead as well, having no more victims to exploit.⁵³

Axelrod demonstrated how patterns of cooperation emerged when one group of strategies “invaded” another, e.g. when a group of “nice” traders invaded a much larger population of “meanies.” Though this remains a wide open area of research, the results presented to date are encouraging. They imply that the formation of cooperative order can be achieved under difficult circumstances (indeed, near chaotic conditions in this case) and result in many unforeseen benefits (such as stable patterns of trade,) that could not be foreseen given the initial conditions and strategies.

Though Axelrod does not put it this way, it is clear that what he is studying is the formation of moral capital – the creation, through time, of complex social structures whose foundation is cooperative exchange. What he is formulating is essentially an “invisible hand” argument showing how traders guided only by their rational self-interest, can bring about positive results which, to later generations, will be experienced as institutions. He does not argue that this is the way civilizations naturally arise, a far more difficult question, only that the formation of moral capital is a spontaneous phenomenon – it does not need an outside force to bring it about. Axelrod also investigated the case when cooperation breaks down, particularly when time horizons are drastically shortened. His results imply that only a strong central force can then maintain any semblance of social order.

Oh my.

Assuming the validity of his arguments, we ask what factors could cause the shrinking of the time horizon? What could lead people to value the future less, to dread uncertainty so much that the cooperative order breaks down? The answer must reflect both sides of the problem. Just as a dread of the future leads to a breakdown in cooperation, so too a breakdown in cooperation leads to fear of the future. We need then a theory of non-cooperative games/structures. This is where Olson’s analysis of rent seeking is valuable. Because the majority of the citizens not only do not understand the process but are also in no position to stop it, organized groups in democracies can extract huge sums from those outside the group. Diffuse costs plus real benefits plus little incentive for those outside to oppose the rent seeking (unless they are part of a rival group), leads to an almost irresistible tendency for the rent-seeking group to grow in influence and numbers. I do not know if a game-theoretic model of this process has been devised, however.

[Note: Some of the work of mathematician John Nash (A Beautiful Mind) addresses the business of non-cooperative games. Unfortunately, I was unaware of it at the time I wrote this and have not since made up the gap in my knowledge to comment intelligently upon such games.]

We now combine the ideas and approaches of Axelrod and Olson to give the following updated version of Hayek’s dialectic: Hypothesis

1. Assuming a society based on cooperative strategies, can a non-cooperative strategy become established other than through the central apparatus of coercion, i.e. the government? Arguments can be made that the answer is “no,” and that is my conjecture. However, this is an open subject. Olson thinks the answer is affirmative and Axelrod (as far as I know) has not addressed the problem.

2. Once established, can rent-seeking groups be dislodged? Yes, but because of the slow and inefficient processes of a democratic state, it will be extremely difficult to do so. So difficult, in fact, we lose little by treating rent seeking like a ratchet, a process that moves in only one direction. Only in the case of highly visible and persistent success will the rent-seekers be in danger of losing their political power.

3. Given the spreading nature of rent seeking, are there any factors that can stop it? There are. First, violence, internal (revolution) or external (foreign conquest). Second, nations that are either so small (e.g. Switzerland) or so homogenous that they approximate the Wicksellian ideal, may be able to disperse the rent seeking into general Public Goods or at least make the perverse effects of rent seeking more amenable to reform. Third, nations such as England and America that have accumulated large reserves of moral capital over centuries may be able to flirt near the edge of disaster for generations before plunging in.

4. Assuming no outside intervention or internal upheaval over time, the non-cooperative structures will evolve into fixed institutions with supporting ideologies. This latter point is vital and forms the basis of Olson’s remarkable explanation of the rise of racialist ideologies and caste systems. Rent seeking groups must generate “reasons” why other groups must be kept out. These “reasons” must be understood on purely emotional levels as they can bind the group together without deliberation and argument. To put it in the language of Public Choice, institutional hatreds exist because they are vital to the rent seeking group in overcoming the “free rider” problem.

5. The need for security increases as economic stability decreases. Rent seeking shifts the burden of economic uncertainty to the future and onto outsiders, but cannot eliminate it. Decreasing security will become the greatest fear and concern of rent seeking groups. A trigger event, defeat in war or economic collapse (or both) may drastically shrink the time horizon. In the language of cooperation theory, the “w’ parameter will approach zero, making social cooperation increasingly difficult, a tendency which the entrenched ideologies reinforce. Recall Hypothesis 1: the absolute state then becomes the only institution that can re-establish a semblance of cooperation.

The costs of containing rent seeking in a democracy are prohibitive. Moreover, as Olson points out, an additional danger comes from the need for moral/ideological justification by the rent seeking groups for their actions and power. These two tendencies reinforce each other. Ideas are not static entities held as the exclusive property of a given group. They are dynamic, impossible to isolate or control. Rent seeking will disrupt cooperation by undermining the value of the future and by splitting humanity into favored and dispossessed groups, destroy the common and unifying concepts (citizen, person, and so forth) at the base of the constitutions, and replace them with status, privilege and the like. What remains is the Moloch state that consumes its people in the firm conviction that it is for their own good.

By understanding the nature of moral capital, how it grows and decays, we can in a sense both agree with the “democratic socialist” and refute him. We can agree because the dynamics of transformation from democracy to totalitarianism sketched above are complex and subject to any number of circumstances that cannot be foreseen. Sometimes defeat in war is a blessing, if the “nice” conquer reintroduces cooperation while the war destroys the power of the entrenched rent seeking groups. This is indeed what happened in Japan, German, and to a lesser extent, France. Yet, the “democratic socialist” is refuted nonetheless. These temporary and accidental reversals are not a solution and will not stop the destruction of cooperation. Rent seeking in democracies is a progressive tax on moral capital that is al but impossible to repeal. Given a nation free of foreign invasion and one that is large and diverse, a reasoned guess is that rent seeking will engulf the democracy in the time it took to accumulate the peak amount of moral capital. The “democratic socialist” is free to count on luck to save him, but he is whistling past the graveyard when he does.

It is crucial to understand how different this is from the Marxist dialectic. Unlike the Marxist, we are dealing with individual actors acting rationally (i.e. in accordance with the rules) within the scope of their own knowledge and are not dealing with obscure Ideas that somehow drive men’s minds into an unyielding future. There is nothing pre-ordained in this progression. Given sufficient knowledge, determination, and institutional reforms, the disaster can be avoided. But knowing the primary shared values of the populace, values that act as a filter for politically possible decisions and actions, and given the fact that markets themselves act as filters, selecting against those who are least able to adapt to the rules and rewards, the costs of reform will rise continuously and thus a measure of determinism is achieved.

To the dismay of both the libertarian and the “democratic socialist,” the greatest tragedies will be inflicted on those nations, such as England and America, who have over the centuries accumulated huge reserves of moral capital and will find that the initial path to socialism will barely make a discernable difference to the daily life of the citizenry. Echoing Lord Keynes, it is doubtful the kind of subtle effects and erosions caused by rent seeking will be noticed by one in a million. Certainly any protest to the trends will be viewed as reactionary; any call for expansion as enlightened. With visible costs so minor and visible gains so large, there will little opposition other than the “it is unjust to benefits them; benefit my group instead” kind. The spoliation will not occur until near the end, when it is of course too late to do anything about it. How much longer America has before that stage is reached will be dealt with in the conclusion of this essay.

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To conclude this segment, let us consider the future of Public Choice as a research programme. It is always difficult to predict what problems and methods will be used by scientists but it is mostly harmless to try. I believe the “positive heuristic” for Public Choice will be cooperation theory. Like economics, cooperation theory has action implicit in it structure. Its “agent-based morels of competition and collaboration” have already proved to be extremely fruitful. I conjecture it is only a matter of time before cooperation theory absorbs and replaces economics, analogous (and yes, analogies are always suspect) to the replacement of classical/Newtonian physics with Relativity and Quantum theory.

This exciting intellectual possibility, of course, is contingent upon some measure of freedom being preserved in the coming generations. Is there anything in the writings of Public Choice that can give us optimism? I believe there is. The work of the Public Choice theorists demonstrates that human institutions can be understood and improved. If they cannot be expected to achieve perfect, at least they can be made to function with reasonable efficiency and justice. No one drives a perfect car, but most of us get there most of the time nevertheless. The Wicksellian state is far from contemporary political reality, but the difficulties in achieving it are no longer technological. Aspects of it even today could be implemented on the world-wide web. More modestly, Tullock and Olson feel that extensive education could reduce rent seeking, at least education could hardly make the situation worse than it is. Finally, Buchanan suggests that reform may be possible once the situation gets bad enough. Unfortunately, Olson has shown that idea has drawbacks. The catch is that special interest groups simply will not abandon their influence except under a dictator of unmitigated power, just the result we are trying to avoid.

Possibly the most promising approach in the near-term comes from Axelrod’s analysis of how small groups can establish cooperation in an environment of “meanies,” provided they can survive. One might call this the “Atlas Shrugged” option. Small communities may be able to apply Public Choice/cooperative techniques and thus serve as an inspiration to others. This approach is not only practical: the cooperative structures engendered might evolve into a Nozickean type of Utopian structure for society, at least locally. But let he reader be warned – the risks and costs of these ideas are certain to be significant the more rent-seeking takes hold.

To be continued