Economics In Short Lessons: If You\'re Paying, I\'ll Have Top Sirloin

Don Boudreaux today linked to an old but excellent WSJ article by Russell Roberts. The article is a simple, classic example of how "splitting the bill" is a disastrous way to pay for things:

Suppose the tab is split not at each table but across the 100 diners that evening across all the tables. Now adding the $4 drink and dessert costs only 4¢. Splurging is easy to justify now. In fact you won't just add a drink and dessert; you'll upgrade to the steak and add a bottle of wine. Suppose you and everyone else each orders $40 worth of food. The tab for the entire restaurant will be $4000. Divided by the 100 diners, your bill comes to $40. Here is the irony. Like my neighbor at the theater, you'll get your "fair share." The stranger at the restaurant a few tables over pays for your meal, but you also help subsidize his. It all "evens out."

But this outcome is a disaster. When you dine alone, you spend $6. The extra $34 of steak and other treats are not worth it. But in competition with the others, you've chosen a meal far out of your price range whose enjoyment falls far short of its cost.

The fact that we pay taxes for things other people use, and they pay for things we use does *not* mean that it all evens out, even if everyone pays the same amount!. When our consumption decisions are decoupled from their cost, we end up consuming too much, whether it be health care, public transportation infrastructure, or groundwater. This might be an interesting argument to present to the anti-consumption left.

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Does anyone else just get

Does anyone else just get sick of arguing? My bloody brain aches.

Joe, One vote is

Joe,

One vote is statistically insignificant. There is no realistic chance whatsoever that your single vote is going to sway an election one way or the other. Hence, your one vote is worthless. Therefore you have no incentive to vote wisely, if you vote at all. That's a feature of any system where the voting population is significantly large.

Increased technology does make it easier to coordinate dispersed interests--but it also makes it easier for concentrated interests to exert pressure. If one is going to unfreeze the conditions and start positing future change, one must look at it on all sides. Concentrated interests have a fairly strong incentive to develop better ways to exert pressure. Dispersed interests have a fairly weak incentive to do so. I find it hard to believe the dispersed interest is ever going to win out. Moreover, the poor are, I imagine, about the last group going to be able to exploit these better ways of finding information. The rich, I imagine, will be about the first.

Joe - yes, I think the ancap

Joe - yes, I think the ancap guy comes out ahead, because the state sucks so utterly much. Basically, there are two conflicting forces. On the one hand, you have the fact that anything done by the state is far more expensive than the same thing done privately (for reasons both theoretically well understood and backed up empirically). An order of magnitude difference is fairly typical, although the average may well be less. On the other hand, you have the redistribution effect. So while people may lose on net due to the previous inefficiency, it could be that poor people win.

So the question is, how do these balance? As others have pointed out, its not so clear that we really redistribute that much to the poor. Laws tend to favor those with power, who are the rich. And because government is *so* much more inefficient than private provision, there would have to be substantial redistribution to make up for it.

There is another factor on the ancap side, and that is that government does not merely do things poorly, it takes away people's choice. What I mean is that Bob (our theoretical poor person) does not get to choose his type of police, fire, educational, etc. service today. Even if the state was efficient at the one-size-fits-all service it provided, Bob would still win by moving to ancapistan and getting to pick custommized packages.

So long as it is a true

So long as it is a true commons it is perfectly rational for each person to overuse the resource.

You obviously have a different definition of "rational" than I do - not better, not more accurate, just different. I happen to think that for someone who does know about something like the Tragedy of the Commons or the Prisoners' Dilemma to ignore that knowledge and pursue narrow self-interest as you suggest is just about the least rational act imaginable.

I have witnessed the dinner example in action quite a few times. Whenever I have been at a dinner where the check is agreed to be split evenly at the start and there are more than around 10 people everyone ends up ordering larger orders.

That's hardly scientific (i.e. rational) is it? A sample of one? I've gone out to dinner a few times myself, and I see a different pattern. Maybe it has more to do with who we each befriend than with revealing some fundamental secret of the cosmos. Personally I'm rather glad that my friends don't think "like so lost" is a cogent point.

Patri, Suppose as a thought

Patri,

Suppose as a thought experiment, we start with two people, one in a welfare state and the other in your brand-new ancap state. Both people work the same job, and that job isn't one that is highly valued in either state. So both are at the bottom of the income scale. First, I would think it highly unlikely that they would start with the same wages; welfare states often have minimum wage laws which would presumably be absent in your ancap state. So the odds are that the person in the ancap state actually makes less money. But let's ignore that and suppose that salaries are equal. So our two guys are making about $12,000 per year (minimum wage full time, roughly). The person in the ancap society pays no taxes at all. But he has to pay for his kids education on his own, pay for his own health insurance, pay tolls for roads, pay for his police and fire service, buys his own disability insurance, and fund his own retirement. The guy in the welfare state pays no income taxes but does pay social security tax and sales tax. His goods also cost more after producers pass along their various taxes.

Do you really think it likely that the guy in the ancap society comes out ahead in all of this? It seems pretty likely to me that the services the person in the welfare state gets are going to cost less than what he pays out in taxes (unless you postulate a world of pretty steep sales and business taxes). Indeed, if he pays more in taxes than he gets back, then he's not living in a welfare state at all. So I guess my question is why you would expect the children of the person in the ancap state to be better off than the children of the person in the welfare state. The former, I would think, will have _less_ money to invest than the latter. I suspect, in fact, that the number for the former will be pretty close to zero. That's probably true for the latter, as well. So the child in the ancap society starts, at best, from the same place as her parent while everyone else moves ahead. When does this get any better?

Jeff Darcy, you are like so

Jeff Darcy, you are like so lost.

Human beings are self interested for the most part. They are acting rationally on their own behalf. That means them and theirs. Those that don't are eventually eliminated in one way or another. Any purely altruistic acts have a strong natural selection pressures against them. I'm not just talking genetics, but also socially replicated behavior. That doesn't mean they will be eliminated. There are complex mitigating circumstances.

The rationality of your acts also depends on the social norms in existence. If you are chimp living with a bunch of other chimps and you shake some bananas out of a tree it is irrational for you to expect the other chimps to let you gather your bananas. Even though if ever chimp acted as if those bananas were owned by you and did so for every other chimp it would save everyone a lot of labor. So rationality depends on context.

If you are living in a society where no one owns a common resource then the natural result is going to be overuse. That will be the result with every actor behaving rationally. Now they may realize this and appoint someone acting owner but then you don't have a commons anymore do you. Instead you have an owned resource. So long as it is a true commons it is perfectly rational for each person to overuse the resource.

Nothing about good economics requires that the participants act rationally in the sense of Star Treks race of Vulcans.

I have witnessed the dinner example in action quite a few times. Whenever I have been at a dinner where the check is agreed to be split evenly at the start and there are more than around 10 people everyone ends up ordering larger orders. I don't know why but it is more controlled with fewer people, perhaps because they can be kept track of easier.

My personal strategy in this case is to first insist that the check not be split evenly. If I lose then I try to ordering last, and I make my meal "average". If I am forced to order towards the the beginning I decide on two meals, one cheaper and one more expensive. If there are lots of high rollers before me then I get the fancy meal. If not then I go for the lower one. Not foolproof but at least I don't get stiffed every time. I almost invariable end up with a more expensive meal with very large groups.

Scott, I don't think that

Scott,

I don't think that people vote especially well either, and I'd be happy to submit either of the last two presidential elections as evidence of that claim. :cry2: And while one vote may be worthless as our current system is configured (I'm not convinced of this claim, but we'll go with it for now), it need not necessarily be that way. The single transferable vote does make it far more likely (not certain, but pretty close) that my vote actually does go to elect someone. It also provides for much more accurate representation, since I'm no longer locked in to voting for one of the two people who happen to be running from my district. It's also not clear that it would any longer be rational to be ignorant, since my vote will be likely to matter to someone's election.

Dispersed interests are possible, I think, only because we still vote according to an 18th C, federalist model. Make all seats open and, in this age of instant, worldwide communication, I can find others who share my interests. Those same sorts of technologies also allow candidates to raise money easily from dispersed interests, particularly when the group is broad (see Howard Dean). In short, I'm not so sure that the problems you cite are insurmountable.

But as inequalities began to

But as inequalities began to compound from one generation to the next, as the great-grandchildren of those who were less successful in the economy found themselves starting hopelessly behind, you would get one of two things.

What I would expect is for the poor to be very behind the very rich, but very ahead of where they would be in other countries. Taxes have a huge negative effect on the ability of the poor to save over the generations and become rich. Yeah, being able to earn 2% a year more interest matters a lot more in absolute terms to someone with $1,000,000 in savings than to someone with $10,000. But the latter person is still accumulating wealth a hell of a lot faster than in a big-government country!

If they choose to leave the economy because they can't stand their relative position, despite their absolute position...fine, but why should society be sad for enriching them?

Like most such disputes, I suspect this hinges on different expectations, not different goals. You seem to think desperately poor would exist under ancap. Except for the physically or mentally disabled, I find that extremely unlikely. There may be poor - but they'll be less poor than they were wherever they came from, and than they would have been if they stayed.

Brian, _My best friend has

Brian,

_My best friend has been in Afghanistan recently, and though being attached to the US gov’t he had to worry about small bands of Al Qaeda firing weapons at him and his, basically Afghanistan is running as it always has, minus the oppression of the Taliban. Who cares if there are warlords with weapons? The salient point is they’re not doing anything. Weapons qua weapons are no threat. They are not platonic forms that cause war and strife by their mere presence. (I imagine I’m mixing philosophic metaphors. Oh well.)_

I don't mean to sound petty here, nor am I looking to play the 'my friend is more important than your friend' game. But I know people who've been to Afghanistan, too. My boss at West Point took a semester of leave to assist with planning the war there. Some of my former colleagues are back there now, as are many of my student's spouses (UNCP is just 40 miles from Ft. Bragg). It's true that things aren't too bad for soldiers there now. Al Qaeda takes some potshots here and there, but it's pretty stable--_where we have soldiers_. But the fact is that we have soldiers in only a very small portion of Afghanistan (mostly Kabul).

The truth is that the Taliban once again controls a sizeable portion of Afghanistan and the newly elected government there has very little ability to project its will outside of the areas patrolled by American soldiers. I'm not just playing leftist anti-war naysayer here. I'm not even anti-war; I supported invading Afghanistan in 2001 and might well have supported invading it on humanitarian grounds earlier than that. Nor am I saying that things might not get better there; I hope that they do. But to the extent that they are getting better, it's because at least some warlords are taking official positions in government or the central government is asserting its will over greater areas of the state. Many areas of Afghanistan are still pretty much lawless, though. Those places are still, I submit, not exactly places to which anyone I know would want to emigrate. And they're probably not the places where your friend was; again, there is order in the places where American troops are stationed.

"I find this to be a curious

"I find this to be a curious claim, or at least potentially a curious claim, though it’s one that I’ve heard in various forms here the past few weeks. If you mean that over all of recorded history, the poor have been politically weak, then I’ll grant that. I’m not at all sure that it’s true today, though. One of the great knocks against democracy (from Locke through Madison, de Tocqueville and Mill) is that democracy accords too much political power to the poor. The poor, after all, outnumber the rich, usually by a significant margin."

Yes, but I don't think the poor--or the rich for that matter--vote particularly well. One vote is worthless after all, and hence probably poorly cast; rational ignorance. So I doubt voting helps out one group over another significantly. Perhaps the rich, since they probably tend to be smarter and vote in their self-interest more wisely.

What truly affects redistribution, so far as I can tell, is the public choice theory of concentrated interests vs. dispersed interests. The rich have more money and thus can more easily form a concentrated interest group, and in so doing, bilk the majority out of money. Or they capture a regulatory agency. Or advertise for their candidate. Or something along those lines.

The Madisonian and De Tocqueville and Mills version of democracy is insightful, but probably quaint, given the advent of public choice theory.

Scott, _The poor are

Scott,

_The poor are historically politically weak; it seems unlikely that they will be gaining much from a government._

I find this to be a curious claim, or at least potentially a curious claim, though it's one that I've heard in various forms here the past few weeks. If you mean that over all of recorded history, the poor have been politically weak, then I'll grant that. I'm not at all sure that it's true today, though. One of the great knocks against democracy (from Locke through Madison, de Tocqueville and Mill) is that democracy accords _too much_ political power to the poor. The poor, after all, outnumber the rich, usually by a significant margin.

Federalism, in fact, was meant in some part to help counteract that very tendency. By keeping people divided into multiple competing factions, it would be less likely that the poor would band together and demand radical redistribution.

For the record, I'm not a big fan of federalism. Jonathan points out that some on the left have discovered its virtues; at least in the blogosphere, that seems to be true, though I suspect that this is more a matter of political expediency than it is deep philosophical commitment.

I will agree, and I think that this is Jonathan's point, that it's not always the case that legal entities collude to form larger, more oppressive entities. But I'm not convinced that this is such a good thing, either. It's true that fighting wars is more costly than peaceful cooperation. But that sure hasn't prevented them from happening. And I think that, historically, the smaller and more homogenized a group becomes, the more likely it is that the group will begin to vilify its neighbors. I worry that this kind of balkanization will lead to greater conflict rather than to less.

Patri, I don't mean to

Patri,

I don't mean to suggest that we shouldn't experiment, and I'm sorry if I gave that impression. I'm a Millian; I think that experiments in living are very important. Nor do I accept (1). I don't know of much of anyone who thinks that the current system we have in place is perfect. I do have worries about (2), and I'm not sure that the sorts of experiments that you have in mind would relieve that worry (I find the notion of dynamic geography pretty intriguing, though).

My worry is that it is probably the case that we could make just about any economic system work (for a while) provided that we begin with a small number of homogenous, self-selected, ideologically compatible people. That's why, for instance, northern Europeans are able to make socialism work pretty nicely. I've no doubt that it's possible to build a relatively small anarcho-capitalist society and I suspect that it would work pretty well for a generation or maybe even a couple. But as inequalities began to compound from one generation to the next, as the great-grandchildren of those who were less successful in the economy found themselves starting hopelessly behind, you would get one of two things. Either the desperately poor will pick up and move to an alternate redistributionist society (in which case anarcho-capitalism will succeed only b/c someone else is picking up the slack), or you'll have a revolt of the poor. I'm no Marxist, but I do think he has a point; once a large portion of society sees itself as hopelessly oppressed (whether or not that's true), it has little to lose by revolution.

You're right that, on the grand scheme of things, one more small experiment, even if it fails disastrously, is not going to add all that much to the sum total of misery in the world. And your proposal has the virtue that, at least in generation one, everyone involved is a volunteer. If things go awry, they can blame only themselves. I have worries, though, about subsequent generations who get affected (though I suppose that as long as there is at least one rich welfare state still around, maybe this wouldn't necessarily be a disaster).

Joe - The idea that we

Joe - The idea that we shouldn't even experiment seems to hinge on two things to me: either 1) we must have such a great system now that it can't be improved, or 2) the costs of experimenting must be very high. It sounds like you believe both of these, while I am quite convinced they are both false.

As for (1), given the amount of waste in government, and the strong negative correlation between government spending and wealth, it seems obvious to me that a system that was more effective at limiting government than our current democracies would make the world a better place. I don't know if such a system is possible, but given that we've only really understood the relevant science (public choice economics) in the last 50 years, I'm certainly not ready to give up!

And as for (2), why would the failure of a small anarchy be so tremendously disastrous? It seems to me that the obvious thing to do is to experiment with it on a small scale, and slowly scale up. That will tell us a lot about how stable it is. The world already has plenty of nuclear powers, it has horribly tyrannical governments, it has countries like North Korea that sell weapons to anyone - how is one little anarchy gone wrong going to be any worse? Remember that the key here is *small*. The experiments with communism in the 20th century were horrible because they failed on such a massive scale, making tens of millions starve. I'm talking about only thousands, tens of thousands, hundreds of thousands of people.

Also I'm not sure what exactly you mean by "liberalism", but I am certainly open to many ideas about how to improve government. What I want is more experimentation with more unusual systems, and I think that requires a drastic lowering of the barrier to entry to the government industry, as I have proposed. Then we can see what works and what doesn't, instead of hanging out online bs-ing about it.

"Touche. Actually, I don’t

"Touche. Actually, I don’t think that the first part is all that hard to do; I’m happy to sacrifice some efficiency for other sorts of values (like securing certain basic positive rights). I think that’s an improvement of market outcomes. Of course, we will probably disagree as to what “improvement” means in this context. But I wouldn’t regard, say, efficiency as the ultimate criterion for markets. I’m not wedded to Pareto superiority; I might well be willing to take an arrangement that makes someone worse off provided that it makes enough other people enough better off."

I think what you're referring to is Kaldor-Hicks efficiency, as opposed to Pareto, which is what I meant when referring to market outcomes. I think Pareto optimality is an interesting but fairly useless concept.

If you're trying to show that governments have positive redistributive effects, I find that doubtful. The poor are historically politically weak; it seems unlikely that they will be gaining much from a government.

"As for the second part, the difference between our accounts is that deliberative democracy does provide some mechanisms for at least minimizing the sorts of damage that corrupt politicians can do. But by ruling out state coercion, I don’t see that you’ve any tools left in the chest."

For one thing, getting rid of government gets rid of politicians entirely, so that's an abuse we don't have to worry about under anarchy. But we do have a mechanism for minimizing corruption in the private market--consumer choice. How effective that would be is debatable, but it's not an absurd idea.

"Free market capitalism requires full (or something close to full) disclosure of relevant facts if it is to succeed (if I’m remembering M. Friedman correctly here). I don’t see how an anarcho-capitalist system can make this more likely to happen. Granted, no system can make it completely likely....Without full disclosure, one cannot rationally invest. I just don’t see any way of guaranteeing (or even making more likely) the sorts of basic structure necessary to ensure free market capitalism without some sort of centralized authority."

But information is once again a scarce resource, one that there is an efficient level of. To get to the conclusion that the government regulation of information is going to be an improvement over the private sector production of information, one needs a proof showing that governments will on average work to improve market outcomes. No such proof exists. Quite a bit of evidence points in the opposite direction.

If you are arguing that free markets need perfect information to function--which you may or may not be doing, I cannot tell--then that is completely wrong. The reason markets are desirable systems is indeed because information is not perfect in any one actor, as Hayek famously argued.

"At best, we can conclude that too much government is a bad thing."

We can also conclude that no matter how small the government starts, it inevitably swells, and does not seem to shrink. Hence some of us are anarchists. Minarchy might be nice--but I think it extremely unlikely that it would last long.

As for Somalia, the country

As for Somalia, the country has experienced a fair bit of economic growth,
particularly in telecommunications, with no central government. This
review
of this book is interesting. Not to say that it's paradise, but it's not hell either.

Patri, Fair enough. But if

Patri,

Fair enough. But if the argument is over "anarchism might work," well, then doesn't that also raise the bar for you? There is, after all, a significant chance that liberalism will work, as well. Indeed, I don't think that it's much of a stretch to say that liberal states are working significantly better than nonliberal ones. So if there is some evidence that liberalism is already doing a reasonably good job, then isn't your burden to show not just "there is a significant chance that anarchy will work" but rather "there is good reason to think both that anarchy will work better than liberalism AND that even if anarchy fails, that failure won't be all that bad." I might be willing to be persuaded of the former. I think that the second part is the hard part. If anarchy fails (particularly if it fails in the way that most non-anarchists suspect that it will), then the consequences of that failure would be tremendous. So why is the burden on me to show that anarchy won't work rather than on you to show that it really will?

All,

Thanks for rehashing what must be old arguments for most of you with a newcomer.

Joe - one would have to be a

Joe - one would have to be a naive anarchist to argue that "anarchy
will work!". We ain't like that around here - and neither are major
proponents of anarchy like David Friedman. Hence your point about
examples of anarchy somewhat misses the mark, because most of us claim
only "There is a substantial chance that anarchy could work, and a
working anarchy might produce significant improvement in its residents
lives". I freely admit there is a substantial chance than anarchy
*won't* work, soo pointing it out doesn't disprove my view. I merely
think there is enough of a chance to make it desirable to try out.

It's great to get into the nitty-gritty deals, both in theory and
practice, of why we think anarchy might work. Just understand that
because we are making such a limited claim, in order to disprove it
you need to prove the very difficult proposition "anarchy cannot
work", not merely "anarchy will probably not work".

Brian, But I think that

Brian,

But I think that there is plenty of prima facie evidence that governments that don't govern at all haven't been all that successful either. At best, we can conclude that _too much_ government is a bad thing. I wouldn't disagree with this; no liberal would. We're all for various types of freedoms. You'd need a Christian fundamentalist redistributionist to argue for regulation of all parts of society. I haven't met many of those, though I suppose some must exist.

Scott, _When you can figure

Scott,

_When you can figure out how to effectively run a monopolistic government in such a way as to improve market outcomes, and how to keep the not-always-so-virtuous politicians from defrauding me, I’ll become a statist._

Touche. Actually, I don't think that the first part is all that hard to do; I'm happy to sacrifice some efficiency for other sorts of values (like securing certain basic positive rights). I think that's an improvement of market outcomes. Of course, we will probably disagree as to what "improvement" means in this context. But I wouldn't regard, say, efficiency as the ultimate criterion for markets. I'm not wedded to Pareto superiority; I might well be willing to take an arrangement that makes someone worse off provided that it makes enough other people enough better off.

As for the second part, the difference between our accounts is that deliberative democracy does provide some mechanisms for at least minimizing the sorts of damage that corrupt politicians can do. But by ruling out state coercion, I don't see that you've any tools left in the chest. Even if people are, by and large, rational, it still requires only a few non-virtuous souls to inflict tremendous damage. (Case in point: it took very few corrupt folks to bring down Enron, just as it took relatively few corrupt soldiers torturing prisoners to completely undermine U.S. moral authority in international affairs).

A state, however, can attempt to compensate for both sorts of abuses by tightening regulations. Complain about regulation all you want, but I think that a great many of those regulations are the direct result of a handful of individuals who refuse to abide by any sort of moral decency. Free market capitalism requires full (or something close to full) disclosure of relevant facts if it is to succeed (if I'm remembering M. Friedman correctly here). I don't see how an anarcho-capitalist system can make this more likely to happen. Granted, no system can make it completely likely. But state regulation can at least make it _harder_ to practice deceptive policies. What do you have other than exit? Other than denying Ken Lay any future employment, what can that accomplish? It's not all that much consolation for all the folks who lost their pensions. Without full disclosure, one cannot rationally invest. I just don't see any way of guaranteeing (or even making more likely) the sorts of basic structure necessary to ensure free market capitalism without some sort of centralized authority.

Joe, "Anarchy" is a loaded

Joe,

"Anarchy" is a loaded word and that's why I try not to use it. I don't want "anarchy" if it means a state of nature. I want political and cultural institutions that take us out of the state of nature give rise to prosperous, peaceful, autonomy-respecting societies. People have thought up many ways out of the state of nature - empire, monarchy, social democracy, liberal democracy, etc. My tentative conclusion is that the best way to rise out of the state of nature is to make governments compete with each other. So I don't want "anarchy"; I want governments. Lots and lots of them. But I want them to compete for my patronage. I believe this method of rising out of the state of nature would be much preferable to others human societies have tried thusfar. I base my beliefs on how people tend to act and how people empowered tend to act, history, and observations of the world around me. A better term to describe what I desire is "polycentric legal order".

When you’ve figured out how to keep the private protective associations from colluding and then tyrannizing me and how to keep the not-always-so-virtuous capitalists from defrauding me and do these things without any centralized ability to coerce certain behavior, then I’ll climb on board. Otherwise, this looks a lot like wistful utopianism.

I'm not sure why you think we believe capitalists are always virtuous. I certainly don't. Protection from fraud is, I believe, a service most people would desire. I obviously believe that a polycentric legal system would provide that service much better than monopolistic governments. In fact, when the not-always-so-virtuous get hold of the monopolistic legal system, that's when the ease of fraud becomes extraordinary. Ask any of the poor who suffer from the most from redistributive effects when the money supply is increased - what recourse do they have?

You imply that nobody has figured out how to keep private protective associations from colluding and tyrannizing. Certainly, the "stability problem" for polycentric law is the biggest point to overcome in convincing anyone of a consequentialist bent for its virtues. But just because you haven't heard the arguments doesn't mean that people have not made them or that nobody has "figured it out".

The positive argument against the tendency for collusion lies in the distinction between public goods and private goods. Most suppliers of private goods find it difficult to collude in the market - apples, cars, CT scanners, etc. There is too much incentive for colluders to cheat in order to get market share. Most successful collusion involves government intervention - licensing, union privilege, corporate welfare, ec. In the political economy, collusion is a private good. Monopoly systems allow small participants to capture the entire legal apparatus because it is an all-or-nothing fixed-sum game.

The purpose of polycentric law is to create a system in which law is a private good. Suppliers of private goods find it difficult to collude. Monopolistic law, on the other hand, makes it easy for suppliers to collude. It's an uphill battle to fight collusion from government. From your perspective, I would think that corporate welfare, bans on gay marriage, and vice laws are evidence of this. Under polycentric law, it is an uphill battle to collude. Private legal organizations might try, but they would have to partake in expensive wars instead of profitable peace. They might even succeed periodically, as the provision of public goods does happen privately today, but the odds are stacked against them.

Even if this all sounds theoretical, the basic argument for polycentric law is the same as the argument for federalism. As the left has, at least on the surface, found positive qualities in federalism after the last election, it should be at least conceivable that they can extend the same arguments for distributed power. Seeing the benefits of allowing different legal systems to co-exist and operate more independently seems to be gaining favor. The recent events in the Ukraine, Lebanon, etc, the breakup of the Soviet Union, the stalwart defiance of Taiwan against China, demonstrate that the tendency is at least not in favor of different legal entities continually colluding into larger and larger entities. The polycentric legal order called "the world" is certainly not tending towards collusion.

I'm not sure why you bring up Marx and the "end of history". Denying human progress doesn't win any arguments. Liberal democracy is progress over the political systems that were widespread 300, 500, 1000, and 3000 years ago. If we wanted to create political institutions that defied the most basic of human tendencies, such as "from each according to his ability to each according to his need", certainly that could be called "utopian". But polycentric law doesn't defy what I see most people do around me - engage in cooperative behaviors due to self-interest. It rewards cooperators and punishes defectors better than any of the other systems created by man because it makes law a private good. It is a check against tyranny for the same reason.

As Brian said, I don't expect a polycentric legal order to arise anytime soon, nor anytime in my life. Societies change slowly through the evolution of knowledge provided by the billions of autonomous individuals and data they gather. The cultural institutions are simply not there. A positive-sum worldview is vital and exists in large quantities in Anglosphere culture; it exists in small quantities elsewhere (usually in those "failed states"). Part of the reason I blog is to spread the positive-sum worldview.

We periodically get into these "anarchy" discussions, and I'm not sure they're very fruitful except when argued with minarchist libertarians. At least they're almost on the same page. In the meantime, I would rather argue for the baby steps - Raich v Ashcroft for example. And if I could convince a few lefties here and there merely about the downsides to price controls and protectionism, I will feel at least somewhat fulfilled.

Joe, Additionally,

Joe,

Additionally, libertarians can point to the fact that among western governments, those that have governed least have had the most success- economically, militarily, and culturally. THat is certainly prima facie evidence that statism is the problem and not the solution, at least from where I'm sitting. :cool:

"Ah, yes, it’s the end of

"Ah, yes, it’s the end of history and all that. This strikes me as being just as naive as Marx in the other direction. If we could just fundamentally alter human behavior, all of my nice a priori theoretical work would play out so nicely…"

I think that's unfair. None of us is speaking of altering human behavior--most anarcho-capitalist arguments take place within the domain of traditional neoclassical economics, which is arguably the best way we have of describing human behavior.

"When you’ve figured out how to keep the private protective associations from colluding and then tyrannizing me and how to keep the not-always-so-virtuous capitalists from defrauding me and do these things without any centralized ability to coerce certain behavior, then I’ll climb on board. Otherwise, this looks a lot like wistful utopianism."

No. Utopia is not an option. If you want a perfect world, it's best to shop elsewhere--we're not peddling it.

The question of whether or not private associations would collude and tyrannize is something we try to answer; you may disagree with our arguments--but they don't involve fabricating some magical change in human behavior.

When you can figure out how to effectively run a monopolistic government in such a way as to improve market outcomes, and how to keep the not-always-so-virtuous politicians from defrauding me, I'll become a statist.

Joe, My best friend has been

Joe,

My best friend has been in Afghanistan recently, and though being attached to the US gov't he had to worry about small bands of Al Qaeda firing weapons at him and his, basically Afghanistan is running as it always has, minus the oppression of the Taliban. Who cares if there are warlords with weapons? The salient point is they're not doing anything. Weapons qua weapons are no threat. They are not platonic forms that cause war and strife by their mere presence. (I imagine I'm mixing philosophic metaphors. Oh well.)

Your claim that Western traditions are independent of the state is question begging. It strikes me that there is pretty much a one-to-one correspondence between liberal states and a tradition of strong property rights. When the correspondence is that good, it’s safe to assume, I think, that there are probably some causal mechanisms at work there. Some examples of successful anarchy would be nice here, particularly if the examples came from, say, the current millennium.

Which one of us is begging the question? Are you suggesting that since there is a one-to-one correspondence of liberal states with strong property rights that there is some sort of post hoc ergo propter hoc going on? Which is the post and which is the propter? I say the property rights, you say the liberal state. Being that strong property rights have demonstrably preceded strong and/or liberal states (Iceland, England, Norway, Sweden, Denmark), I believe I am on the right side of this one.

Ah, yes, it’s the end of history and all that. This strikes me as being just as naive as Marx in the other direction. If we could just fundamentally alter human behavior, all of my nice a priori theoretical work would play out so nicely…

I agree with you somewhat- human behavior being what it is, there is an inherent demand for something like a state, and so we eventually get it. We're hardwired for it. Yet, we're also hardwired to reject authority (jealousy and the tendency to form reverse-dominance heirarchies). We're hardwired not to kill each other, but also hardwired TO fear and loathe the alien 'other'. Humans are a bag of contradictory impulses that come in large part from our EEA of small hunter-gatherer bands.

Being that social means were developed to overcome our natural aversion to killing each other as well as our natural inclination to reject dominance heirarchies, it doesn't seem like a stretch to say that we can probably come up with social means to overcome our statist tendencies and our wills-to-power. In fact, thats what the market is all about.

Economists aren't naive, in fact political economists *bank* on self interest and all sorts of antisocial behaviors. The point is that a liberal market order harnesses antisocial behaviors into driving ever greater cooperation, despite our bastardly intentions. Noting that is not naive or utopian, that's acknowledging one of the greatest accomplishments of human society.

When you’ve figured out how to keep the private protective associations from colluding and then tyrannizing me and how to keep the not-always-so-virtuous capitalists from defrauding me and do these things without any centralized ability to coerce certain behavior, then I’ll climb on board. Otherwise, this looks a lot like wistful utopianism.

I could easily and snarkily respond that I'll climb on board the social democracy train when you've figured out how to keep the public defense apparati from colluding and tyrannizing me and how to keep the not-always-so-virtuous politicians from defrauding me/defenestrating me/etc, and do these things without any decentralized ability to check certain behavior. Otherwise, social democracy looks like a lot of wistful utopianism.

But I'll leave that for Scott. THat's his bag.

Seriously though, why wait until all the problems are solved to start working on the problem? Research, experiments, trials & errors are the orders of the day, and have been ever since the enlightenment. A liberal society did not come from a bureaucrat's pen or a sovereign's decree; it's not going to come from a congressman's bill or an executive order, neither. However, the means to the liberal project (for now) exist in our own hands, so we should not leave them idle...

_Few of us argue that

_Few of us argue that anarchy is preferable in all situations–David Friedman himself argued only that certain situations might result in stable anarchies–change should be gradual–and those anarchies might be preferable._

_And the talk of anarchy, anarchy, is also a bit disingenous. I’m not advocating pushing the “no government tomorrow” button, nor is Jonathan, Scott, Dave, Doug, etc. I’m advocating the continued liberal project of reducing arbitrary power as much as possible, while giving as much autonomy & liberty to individuals as possible, such that a free & liberal society can flourish. We may never be rid of the state (sans some sort of post/transhumanism to eliminate the statism urge) but we can approach anarchy at least asymptotically…._

Ah, yes, it's the end of history and all that. This strikes me as being just as naive as Marx in the other direction. If we could just fundamentally alter human behavior, all of my nice a priori theoretical work would play out so nicely...

When you've figured out how to keep the private protective associations from colluding and then tyrannizing me and how to keep the not-always-so-virtuous capitalists from defrauding me and do these things without any centralized ability to coerce certain behavior, then I'll climb on board. Otherwise, this looks a lot like wistful utopianism.

I like Sweden. Great

I like Sweden. Great country. Great people.

:beatnik:

Qwest, I was just responding

Qwest,

I was just responding to your claim that those who support government will be the ones to perform the most brutal acts after the collapse of government. Presumably you meant to imply that those who support gov't are all secretly wicked unlike all the virtuous capitalists out there.

Brian,

Somalia might be a bit better these days, but it's not 1992, either. Nor, I think, is Afghanistan as peachy as you make it out to be. Much of the country is still under the control of petty warlords who haven't surrendered their major weapons caches. It's possible that Afghanistan will work out nicely. I think, though, that there is a reason the Taliban came to power in the first place. There was no central government in place after the Russians finally left (well, there was, but it quickly collapsed), and the competing warlords were creating intolerable conditions. For most, the Taliban seemed better than what came before it. At least with the Taliban you know who it is that's trying to kill you. Before the Taliban (and in parts of the country, still today), you never knew who was going to shoot you.

I think it a bit troubling that libertarians' best example of anarchy is almost 1000 years old in a tiny corner of the world with just a few residents. More troubling still is outright dismissal of more recent instances of what sure look like anarchy as red herrings. You can't just ignore examples you don't like.

Your claim that Western traditions are independent of the state is question begging. It strikes me that there is pretty much a one-to-one correspondence between liberal states and a tradition of strong property rights. When the correspondence is that good, it's safe to assume, I think, that there are probably some causal mechanisms at work there. Some examples of successful anarchy would be nice here, particularly if the examples came from, say, the current millennium.

Joe- It was I that lambasted

Joe-

It was I that lambasted lefties for their Sweden stat fetish.

However it is not ludicrous to point to 11th century Iceland, because no one is comparing 11th century Iceland to the US. The comparison is living proof vs. the "it can't work in real life" hypothesis. It did, so it can. Of course, you get into other questions about scalability and cultural intuitions, etc etc, in which a comparison would be objectionable.

A liberal society is possible for anyone with the proper cultural institutions, but surely not "ones that have been molded by the government." Unless you're willing to concede that by 'government' you mean 'small social units where human hardwired social ability allows consensual government to occur'; western civil society most certainly has NOT been molded by Sovereigns and powerful monarchs, dukes, counts, etc. The enlightenment came from both the distilled work of millions of Romans, Greeks, etc that came before and academics/scholars who did not wield nearly as much power as they do today (so if you think academics aren't politically influential now...). It was an organic outgrowth of ideas on top of a native tradition of bottom-up reverse dominance heirarchies that placed an emphasis on individual worth, behavior, and rectitude as the pillar of society.

Hence it is silly to suggest that we got to where we are due to anything analogous to the state that liberals properly disdain (the social-democratic welfare/redistributive state, or any state that presumes comprehensive power over society). The culture and society we live in is the result of human action, not human design is one of the fundamental insights of the 20th century.

And the talk of anarchy, anarchy, is also a bit disingenous. I'm not advocating pushing the "no government tomorrow" button, nor is Jonathan, Scott, Dave, Doug, etc. I'm advocating the continued liberal project of reducing arbitrary power as much as possible, while giving as much autonomy & liberty to individuals as possible, such that a free & liberal society can flourish. We may never be rid of the state (sans some sort of post/transhumanism to eliminate the statism urge) but we can approach anarchy at least asymptotically....

"I must confess that I’m

"I must confess that I’m curious why you think that you have to overthrow society. There are plenty of places in the world that have seen a complete collapse of central government. Political scientists even have a term for them: failed states. Sometimes the rest of the international community attempts to restore centralized government, but often enough, they are just ignored. Interestingly, though, anarchy never seems to work out very nicely. I’m reminded here of the late moral philosopher, R.M. Hare, who quipped that “only those who have not experienced anarchy become anarchists.”

As it stands, I was only quipping. Few of us argue that anarchy is preferable in all situations--David Friedman himself argued only that certain situations might result in stable anarchies--change should be gradual--and those anarchies might be preferable.

I never mentioned Sweden to

I never mentioned Sweden to my knowledge, but there is another Scott around these boards.

Afghanistan is nothing of

Afghanistan is nothing of the sort. I believe that is primarily why nobody hears anything from A-stan these days is that A-stan is pretty much quiet and people are going about their lives.

The original warlords were first grouchy and tetchy, but in the face of a deliberate policy of "benign neglect", most have figured out that (a) they dont want to fight anymore and (b) trying to cooperate is better than fighting (positive vs. negative sum). Sure there are problems, but there are problems everywhere. The war is over and organized violence is no longer the status quo in A-stan (which was the case when the centralized Taliban controlled the country). Afghanistan isn't a state to begin with, its a cultural affinity region. Trying to impose one (aside from letting one form naturally) has always been a recipe for disaster.

Somalia is also not nearly as bad as people claim it to be. Not very nice, but schools are working, telephones work, electricity works, people are fed, and trade goes on. I don't want to live there, but it seems working about as well as when the government was there; this time the militias are just being honest and upfront with the charges rather than institutionalizing corruption.

But talk of Somalia and Afghanistan are red herrings. The reason people in liberal societies say we can do it without the prop of the state is because, by and large, we *do* do it without the prop of the state. Western traditions of civil society are independent of the states that ride on top of them; indeed the states that westerners have reflect that tradition rather than shape it (ideally; the increasingly all-encompassing and illiberal western European states/EU is doing its level best to change that). Westerners have gone through a lot of trouble to get this far, it's not much to ask that the extraneous parts of the state be pared away (just as in the 18th century absolute monarchism was pared away to constitutional monarchy, then parliamentary or federal democracy).

Why would you go on a

Why would you go on a killing spree if there was no central goverment? theres been 3 of them in the last 2 weeks and as far as i can tell theres more central government now than ever in history. why wait ?

David, So then

David,

So then libertarianism is possible only for people who have already had their intuitions developed through centuries of life under a government? Besides, all due respect to Professor Friedman, but is 11th C Iceland at all relevant to what anarchy would look like today? The population of Iceland at the time was low enough that people barely had any contact with one another. Those conditions hardly hold today. I think it was Scott who not so long ago blasted liberals for comparing the U.S. with Sweden. If that sort of comparison is useless, isn't 11th C Iceland verging on the ludicrous?

I would argue, by the way, that no one has a tradition of private property outside of some kind of society. Iceland had such a tradition because its citizens brought it with them from a place where there was already a government in place.

And for the record, I think it's probably an oversimplification to say that Somalis had no tradition of private property. Theirs might not have been all that robust, but I don't think that they had, say, communal toothbrushes.

Sorry, by the way, for the double post. I meant to cancel the first one. :oops:

You're exactly right. I

You're exactly right. I can't wait for government to collapse so that I can go on my long-awaited killing spree. I know that most of my liberal friends are planning the same sorts of things. That's why we spend so much time arguing that no one ought to have assault weapons; we're secretly hoarding them in our basement bunkers.

Seriously, though, my point is that there actually are places where government has collapsed, and it's not like people are running of to get a piece of the action. I'm thinking here about, say, Somalia ca. 1992 which clearly had a complete collapse of central government or Afghanistan (outside of Kabul) today. What seems to result is not peaceful libertarian utopia, but warlords and genocide.

I guess that I'm wondering what makes people confident that anarchy will result in _The Machinery of Freedom_ and not _Black Hawk Down_?

Joe, you are confusing

Joe, you are confusing anarchy with chaos. Somalia never had a tradition of private property, the result when the government collapsed was chaos. When a bunch of Danes moved to Iceland they had a strong tradition of private property and customary law. The result was 300 years of very orderly, peaceful society.

My point is that there

My point is that there actually _are_ examples of this sort of thing, and that most of them aren't exactly places most of us are interested in being. Somalia in ca. 1992 had a complete collapse of central government. Afghanistan right now (outside of Kabul) is pretty much there, too. Government collapse doesn't seem to work out in nice peaceful, rational libertarian paradise. It seems instead to result in warlords and genocide. I'm just wondering what inspires such confidence that anarchy results in _The Machinery of Freedom_ and not in _Black Hawk Down_?

I'm curious as to what would

I'm curious as to what would happen without government and am eagerly awaiting its downfall into anarchy. I don't care if theres less or more or no order for that matter, Joe. I wanna see the rubber meet the road as it were, and find out how it plays out. I don't care what the outcome is, i just wanna see it happen. It'll be fun watching the goverment paycheques dry up like a watering hole on the savanna. My contention, which of course will prove correct, is that the ugliest behavior will be perpetrated by former said paycheque receivers(all goverment apologists BTW).

_Being rationally

_Being rationally self-interested individuals, no one of us would dare to overthrow society. That would be providing a very large public good–one none of us individually has an incentive to produce._

I must confess that I'm curious why you think that you have to overthrow society. There are plenty of places in the world that have seen a complete collapse of central government. Political scientists even have a term for them: failed states. Sometimes the rest of the international community attempts to restore centralized government, but often enough, they are just ignored. Interestingly, though, anarchy never seems to work out very nicely. I'm reminded here of the late moral philosopher, R.M. Hare, who quipped that "only those who have not experienced anarchy become anarchists."

I'm just wondering why you (collectively) are so convinced that any sort of anarchy will end up with the nicely ordered society predicted by economists (who hail largely from affluent, very liberal societies, I've noticed) and not with the utter misery and horror of the only places I can think of that have actually experienced a collapse of government? I wonder how many west Africans or central Asians are interested in hopping on the anarchy train?

Sorry if this sounds overly bitter. I've been puzzling over this question for several weeks now and just wanted to see what the smart (if misguided :razz:) folks here could do to resolve my worries.

However, when we scale it up

However, when we scale it up to a nation of millions, it’s virtually impossible. Case in point: Every democratic nation, ever.

If your pessimism about coordination were well founded, there wouldn't even be democratic nations. In actual fact, coordination on very large scales is possible. It's a different kind of coordination than one might have in a small dining room, since it cannot rely on every participant communicating with every other, but it is possible nonetheless. Case in point: every nation (democratic or not) and every computer network ever.

The assumption is that most people will not exhibit that kind of rationality (benevolence, really, because those who do exhibit it will get burned as a result). Case in point: Every democratic nation, ever. Whenever possible, it’s better to partition resources privately, preventing the need for that kind of benevolence.

...and when it's not possible? The examples are all around you, from the air we breathe to the sunlight that falls upon our faces. Would you seriously make those private too, assuming that you could? That's not a recipe for liberty; it's one for the severest kind of oppression by the first person who gains control over some key resource like feudal lords had over land. There will always be a commons. Failing to account for that is failing to account for reality, and dooms any such philosophy to irrelevance or failure.

There still seems to be some

There still seems to be some confusion over the libertarian argument with respect to "the commons". The best way to solve commons problems is to not have a "commons". Now that isn't always possible - most of my house is a commons for those of us living in it. The next best solution is to keep the commonality as small as possible - again, the common areas in my house are shared by only three people, with only three people we can effectively use social pressures to prevent abuse, not ideal, but quite workable.

Make common areas private (internalize costs) where possible, and where that is not possible, localize the commonality to the smallest group possible.

The example in the original

The example in the original article assumes only a very narrow, shortsighted, unaware-of-game-theory kind of rationality.

It assumes that with 100 participants, it's very difficult to coordinate cooperation. I think that's a fairly reasonable assumption, but it's conceiveable that they could work something out. However, when we scale it up to a nation of millions, it's virtually impossible. Case in point: Every democratic nation, ever.

The libertarian argument (cited by BB) for reducing the role of government rests on an assumption that people will exhibit a much more sophisticated kind of rationality that prevents them from spoiling the commons.

Quite the opposite. The assumption is that most people will not exhibit that kind of rationality (benevolence, really, because those who do exhibit it will get burned as a result). Case in point: Every democratic nation, ever. Whenever possible, it's better to partition resources privately, preventing the need for that kind of benevolence.

The argument for reducing the role of government is that activist governments in general, and democratic ones in particular, create vast new commons ripe for despoiling. Case in point: Every democratic nation, ever.

In a free society, there are really only two commons--air and water--and I think it's appropriate to regulate their use by some means (not necessarily by a monopoly state). Everything else can be partitioned privately. But with an activist government, anything can become a commons.

I'm personally planning to

I'm personally planning to board the SS Mayflower and head another planet. But "drink up, me hearties" sounds like a good plan in the meantime.

Drink up me hearties, yo ho!

Drink up me hearties, yo ho!

Being rationally

Being rationally self-interested individuals, no one of us would dare to overthrow society. That would be providing a very large public good--one none of us individually has an incentive to produce.

So we're just going to go start our own society, out on the ocean somewhere, where we can reap more of the benefits.

There are no right-wingers

There are no right-wingers here, Matt. I call 'em drumsticks, but whatever you call 'em they're quite distinct from the right wing.

So, right-wingers, which of

So, right-wingers, which of you are willing to overthrow society and impose actual selection pressures?

Out of curiosity, who here do you consider a 'right-winger'?

If you repeat the Commons

If you repeat the Commons situation over and over again, with small groups of commons-users and serious penalties for spoiling the commons, you'll eventually sift through to find the people capable of rationally choosing cooperation to ensure their own (and everyone else's) best interests. That's basically how we wished free-market economics worked.

But the procedure requires many test populations (as a single large group will be dominated by the easiest and most-probable strategies, which results in the destruction of the Commons) and penalties for people who choose poorly. This is completely and utterly different from the way we've structured our political and societal systems.

So, right-wingers, which of you are willing to overthrow society and impose actual selection pressures?

I think people (e.g. DM, UP,

I think people (e.g. DM, UP, BB) are being more than a bit disingenuous with the varying definitions of "rational" behavior. Rationality is a process, with outcomes varying according to what information is available or considered. In the Prisoners' Dilemma, defection is rational in the context of zero knowledge about one's opponent. Add a little knowledge of one's opponent, or game theory, and cooperation or "tit for tat" become the more rational choices. You can even go infinitely deep into "if I know that he knows that I know..." thinking, with the "rational" choice changing at each step (though I consider this an example of the gamesmanship fallacy I've referred to elsewhere).

The example in the original article assumes only a very narrow, shortsighted, unaware-of-game-theory kind of rationality. The libertarian argument (cited by BB) for reducing the role of government rests on an assumption that people will exhibit a much more sophisticated kind of rationality that prevents them from spoiling the commons. Sorry guys, but you can't have your cake and eat it too. Choosing different "horizons" of rationality in each instance according to mere convenience is intellectually dishonest. If you want to choose a particular horizon in a particular case, justify that choice and show why it's the most (heh) rational one to have chosen for that instance. Otherwise what we're engaged in is mere sophistry.

The Hypocrisy of Unfettered

The Hypocrisy of Unfettered Democracy
Brandon Berg comments on a Catallarchy post tonight with something that every thoughtful member of our Republic should read, and read, and read again.

So…wait a minute. Isn’t

So…wait a minute. Isn’t it a standard laissez-faire assumption that people will act rationally and with foresight, despite abundant evidence that they don’t?

No. The assumption is that people have stronger incentives and are better equipped to act rationally when dealing with their own affairs than when voting on public policy. It is the opposite assumption--what I call the "democratic paradox"--that I find puzzling. Democratic interventionists typically argue that people who cannot be trusted to make their own decisions in the marketplace can nevertheless be trusted to make those same decisions for everyone at the ballot box. Huh?

Now, when the subject is taxation, we admit that they’re irrational?

No. The problem is that the behavior described by Dr. Roberts is perfectly rational. If I only have to pay 1% of the cost, why shouldn't I order the steak and lobster?

Why isn’t that same admission made when we’re talking about other kinds of freeloading, such as overgrazing or pollution?

Overgrazing is the canonical example of tragedy of the commons, and it's frequently touted by us laissez-faire types as an argument for minimizing the public sphere. Many, if not most, of us do acknowledge that there is a similar issue with air pollution, although some libertarians do tend to downplay the issue of air pollution due to justifiable skepticism regarding the magnitude of the problem and the claims of the environmentalist left.

To respond to the original post...I think that the left-wing answer to this argument would be that demand for expensive medical procedures is fairly price-inelastic, and that cheap, preventive care reduces medical expenses in the long run by avoiding the need for more expensive procedures down the road. Similarly, they could say that it's cheaper for people to overuse public transportation than for everyone to own and drive private cars. And a common argument for government schools is that it's cheaper in the long run to educate the poor now than to deal with the thuggery of the uneducated later.

This is not to say that there aren't perfectly good responses to these claims, nor that this argument wouldn't be effective against the more blatantly porkish items in the budget. But I don't think that leftists--who believe fervently that the market will not supply enough of certain goods--will find it very convincing in the general case.

By the way, there's no such thing as an anti-consumption left. It's only private consumption that they oppose.

"No. If they had foresight

"No. If they had foresight and behaved rationally then we wouldn’t have public goods, or public choice to talk about. Rationality is a simplifying assumption in economics."

Often justified on the basis that rational behavior is far easier to predict than irrational behavior. Although the behavioral economics field is making inroads into mapping systematic irrationalities--to one of my co-blogger's delight.