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Winning The Long Peace
Submitted by Patri Friedman on Thu, 2008-05-15 17:46.The most important long-term action to prevent terrorism is to close as many as possible of the open political wounds that allow mass murderers to think of themselves as fighting for a cause, transforming largely ineffective psychopaths into potentially very effective terrorists.
Serious long term work on finding peaceful, equitable solutions to issues like Israel, or the bloody borders of Islam, or Maoist insurgency in places like Nepal should be thought of as parallel to Cold War efforts to restrict Soviet bloc power: a long haul project to be passed forwards through generations. The policy of containment was never designed to be an overnight success.
This long-term peace building process is based on the understanding that a political situation which produces effective terrorists anywhere is a problem everywhere. A clear example of this is LTTE ("Tamil Tigers") who are held responsible for the invention of suicide bombing and are currently experimenting with using light planes as bombers. It is clear that terrorist R&D is conducted globally, not locally, because they are united by technique and not by ideology. But one cannot hope to stamp out a technique of war - only to remove the perception of just cause and turn these people back into ordinary criminals.
Any individual "cause" could eventually give rise to the leadership, will and technical capability to hit America, particularly if supported by hidden nation state backers. It took 60 years for Arab anger about Israel to contribute to the US taking a serious blow, but it did eventually happen.
"The Long Peace" is an alternative model to the "Long War." The "Long War" envisages defeating terrorism by depleting terrorist resources until they no longer function effectively. However, given the relatively low start-up costs of a new terrorist group this seems likely to be a fruitless long-term strategy. The "Long Peace" suggests an alternate model: focus on converting the passive support base of terrorists by multi-decade programs to settle the conflicts which give rise to terrorism, coupled with active outreach on issues like global poverty, AIDS and the environment to get the US the broad popular support that it will take to finally win the war on terror.
Vinay Gupta, Winning The Long Peace. He has some great, concrete proposals for how the US can constructively contribute to world security:
A first concrete instance: what if American embassies the world over issued extremely hard identity credentials to people - US citizens or otherwise?
This is a function typically strongly associated with conventional nation states, but in this age of ICT, there are no technical problems in issuing a biometric identity card to any person who asks for one...Obviously such an identity credential has many positive security implications.
Outsourcing certain kinds of regulations and research is the legislative equivalent of pegging a currency to the dollar. For example, a developing world country could state that their banned chemical list will be the same as the US list of 20 years ago except in the case of new urgent discoveries.
Winning with good products instead of bombs - now that's the American way! Unlikely to ever happen, but I bet it would be far more effective. As Vinay says:
There is no human intelligence network like a population which genuinely supports America and has a vested interest in America's continued prosperity and survival.
Ronald Reagan's Farewell Address
Submitted by Patri Friedman on Thu, 2008-05-15 15:20.I was 12 when Reagan left office, old enough to remember the excitement of having met him the previous year, but not yet interested enough in politics to understand why he was special. Via TSI board member Joe Lonsdale's blog post, I just came across the text of his farewell address, and finally got, on an emotional level, what an unusual friend to liberty Reagan was.
For example, this passage is something we could use to remember in these dark days for America's reputation:
It was back in the early '80s, at the height of the boat people. And the sailor was hard at work on the carrier Midway, which was patrolling the South China Sea. The sailor, like most American servicemen, was young, smart, and fiercely observant. The crew spied on the horizon a leaky little boat. And crammed inside were refugees from Indochina hoping to get to America. The Midway sent a small launch to bring them to the ship and safety. As the refugees made their way through the choppy seas, one spied the sailor on deck and stood up and called out to him. He yelled, "Hello, American sailor. Hello, freedom man."
A small moment with a big meaning, a moment the sailor, who wrote it in a letter, couldn't get out of his mind. And when I saw it, neither could I. Because that's what it was to be an American in the 1980s. We stood, again, for freedom. I know we always have, but in the past few years the world again, and in a way, we ourselves rediscovered it.
On convincing by example:
Once you begin a great movement, there's no telling where it will end. We meant to change a nation, and instead, we changed a world.
Countries across the globe are turning to free markets and free speech and turning away from ideologies of the past. For them, the great rediscovery of the 1980s has been that, lo and behold, the moral way of government is the practical way of government: Democracy, the profoundly good, is also the profoundly productive.
A prediction that was vindicated by history:
Nothing is less free than pure communism, and yet we have, the past few years, forged a satisfying new closeness with the Soviet Union. I've been asked if this isn't a gamble, and my answer is no because we're basing our actions not on words but deeds. The detente of the 1970s was based not on actions but promises. They'd promise to treat their own people and the people of the world better. But the gulag was still the gulag, and the state was still expansionist, and they still waged proxy wars in Africa, Asia, and Latin America.
Well, this time, so far, it's different. President Gorbachev has brought about some internal democratic reforms and begun the withdrawal from Afghanistan. He has also freed prisoners whose names I've given him every time we've met.
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My view is that President Gorbachev is different from previous Soviet leaders. I think he knows some of the things wrong with his society and is trying to fix them.
Good advice for people, as well as nations:
We'll continue to work to make sure that the Soviet Union that eventually emerges from this process is a less threatening one. What it all boils down to is this. I want the new closeness to continue. And it will, as long as we make it clear that we will continue to act in a certain way as long as they continue to act in a helpful manner. If and when they don't, at first pull your punches. If they persist, pull the plug. It's still trust but verify. It's still play, but cut the cards. It's still watch closely. And don't be afraid to see what you see.
On America's frontier origins and Seasteading:
The past few days when I've been at that window upstairs, I've thought a bit of the "shining city upon a hill." The phrase comes from John Winthrop, who wrote it to describe the America he imagined. What he imagined was important because he was an early Pilgrim, an early freedom man. He journeyed here on what today we'd call a little wooden boat; and like the other Pilgrims, he was looking for a home that would be free.
I've spoken of the shining city all my political life, but I don't know if I ever quite communicated what I saw when I said it. But in my mind it was a tall proud city built on rocks stronger than oceans, wind-swept, God-blessed, and teeming with people of all kinds living in harmony and peace, a city with free ports that hummed with commerce and creativity, and if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here. That's how I saw it and see it still.
Thanks for the vision Ron. America's lost its way a bit, but we're working to build your shining city on the high seas.
UPDATE: You can watch or listen to the whole thing here.
The world of tax-free hedge funds
Submitted by Patri Friedman on Wed, 2008-05-14 13:24.AKA "Ivy League Universities"
Receipts = $2 billion of operating revenue + $7.3 billion of investment income + $0.6 billion of gifts to the endowment = ~$10 billion.
Operating costs = ~$3 billion.
Profit = $10 billion – $3 billion = ~$7 billion.
This explains why Harvard’s net assets increased about $7 billion in 2007, from about $35 billion to about $42 billion.
Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.
The trick is that this hedge fund can’t remit earnings to investors, and has to keep them in the company’s account, renaming these retained earnings as an “endowment”. So how do the insiders extract value from this business? One way is by giving themselves cushy jobs that pay a ton of dough.
[Source: Jim Manzi]
To be fair, the fact that it can't remit earnings to investors, but must keep them in its endowment and use them to further its mission is very significant from a social standpoint. Sure, it's making tax-free profits, but those are tax-free profits that can only be spent on education and research. Which is somewhat different from private profits that are spent on consumption, or corporate profits that are partly returned to investors for consumption.
Still, I definitely don't buy the idea that money Harvard spends is better for society than corporate profits which are reinvested. I mean, sure, Harvard may invest in things which are not profitable but yet still socially beneficial (perhaps because benefits are widely dispersed). But they also invest in things which are not profitable because they have less social benefit than their cost.
The freedom to not try to make a profit lets you do things that accomplish enormous dispersed good, or are wasteful. I see no reason to think that the average result gives the world more utility than investment in private corporations. I'd guess less, actually. So the favorable tax treatment is actually encouraging malinvestment.
It's a movement to the frontier, not a retreat
Submitted by Patri Friedman on Sat, 2008-05-10 23:18.There was a lot that Murray Rothbard and Milton Friedman disagreed about, but one thing they both agreed on was the pointlessness of libertarian "retreatism". Kevin has a good post at Polycentric Order explaining what is wrong with this viewpoint (emphasis mine):
I recently read an article by Murray Rothbard in which he expressed great contempt for groups of libertarians (and, presumably, anarchocapitalists since his version of libertarianism strongly espoused anarchy) who would go off to form a separate community.
...
Retreating, in the long term, accomplishes nothing for the philosophy and movement of anarchy. It does free one individual, to the extent that they can pull it off. But they then become invisible.
That ain't my style.Forming a separate community under anarchic principles at sea is an entirely different sort of approach. It's based on an old axiom: Nothing sells like success.
Think about it. A seastead that was successful, autonomous, and connected to the world via internet and trade is newsworthy.
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It would show people, rather than merely telling them, what motivated individuals can accomplish in the absence of government. I suspect that this would cause two complementary outcomes. First, especially early in the experiment, it would attract like minded people to try the same thing. As with any new frontier, some would make it, some would fail. But the frontier would again exist, and humans historically make the most advances when there is a frontier.
As part of revising the book draft, I've been working on the "Why?" section lately, and adding a lot more about the importance of the frontier. Here's an excerpt from the new section:
We cannot call merely dreamers or whiners those who see problems in society, have specific proposals for how to build a better society, and who would (if given the opportunity) join a group of like-minded people to create such a society.
These visionaries deserve better, for they are the pioneers of social innovation, who band together to start new communities with new rules. They are much like business entrepreneurs, but launching new social systems rather than companies, which makes them a key part of the evolution of human society. They still exist in the modern world, and they still have plenty of ideas about what ails society and how it might be cured. But there's a problem.
What we lack is a place for them to experiment. The original intention of the founders of the United States was for the states to serve as such experiments. But the idea of federalism is long dead, since nowadays most of government is implemented at the federal level, and even the states are far too large for easy experimentation. The main alternative, frontierism, is suffering from the lack of any modern frontier - every bit of land on the globe has been claimed by an existing government.
So society's valuable pioneers are left expressing their ideas uselessly in bars, blogs, and books, proposing better systems that will never be. Many turn their talents to business or academia, where good ideas are (sometimes) rewarded. A few become successful activists, and have some tiny positive impact on our fundamentally broken political systems. Most get frustrated and burn out, and then learn to focus on their own lives, where they can make a real difference. But deep within them still lurks the urge to blaze a new path, their pioneering spirit dimmed but not forgotten.
Them's our peeps, and they've had it rough. But we got their back.
(sorry if I seem a bit seasteading-obsessed in my posting lately. It's been taking up a big chunk of my life and mental space. Which is a good thing, even if it does make me a bit repetitive.)
Mobility matters
Submitted by Patri Friedman on Wed, 2008-04-30 12:21.But how would we get to limited government?
a) The leaders will wake up one day and decide to give it to us.
b) Lots of people will one day wake up and demand it.
c) Competition for strong central government will emerge.
I vote for (c). Even though the Free State Project looks like a long shot, and Seasteading looks like an even longer shot, they are interesting.
...
This suggests that the real technological fix for libertarians would be enhanced mobility. By the way, I once heard Robert Metcalfe say that the ultimate killer application for the Internet would be teleporting, so that your physical location is not a constraint. If that were possible, would government rents go way down?
This is exactly right. As evidence, note that capital is more mobile than labor, and gets lower tax rates. If we can increase the mobility of labor, we will decrease tax rates on labor. So while seasteading is a long shot, at least it's pointed in the right direction.
Also, its main obstacles are technological - and humans are damn good at solving engineering problems. I predict that if it doesn't work out, it will be for social or political reasons, not engineering ones.
Seasteading press coverage
Submitted by Patri Friedman on Tue, 2008-04-29 00:39.Check out today's Reason article Homesteading on the High Seas: Floating Burning Man, "jurisdictional arbitrage," and other adventures in anarchism:
Despite the seemingly radical idea he's championing, Patri sees himself as a practical guy: "Starting a new country is actually a much less hard problem than, say, a libertarian winning a U.S. election," he says. He says that most of his competitors in the libertarian/anarchist autonomous entity business have been too ambitious, citing efforts from Sealand (the abandoned offshore fort-turned-free-state "which sort of worked" until it was devastated by fire in 2006) to more dramatic failures like Freedom Ship (current estimated cost >$11 billion, construction not yet begun) and the Aquarius phase of the Millennial Project ("colonizing the galaxy in eight easy steps!") to Minerva Reef (an uninhabited dredged island "invaded" by neighboring Tonga and eventually more or less reclaimed by the sea).
Learning a valuable lesson from his predecessors, Friedman is an incrementalist. "I want to talk about what to do this year, not how to colonize the galaxy." One way to start small, he says, is to hold a kind of floating Burning Man, called Ephemerisle, an idea inspired by childhood pilgrimages with his father to Pennsic, a Society for Creative Anachronism medieval reenactment held outside Pittsburgh, and college stints at Burning Man.
"There aren't that many people who are wiling to drop their lives and move to the ocean." Instead, he says, "it could start as a one week vacation, but then unlike Burning Man it could grow and eventually become permanent." Friedman hopes to hold the first Ephemerisle next summer, inviting many types of floating vessels to join him in international waters. Even an ordinary cruise ship might be enough to get started, since the cruise industry has proven that "providing power, water, food, and internet on the ocean is not only possible but can be profitable." But some of Thiel's grant is going toward figuring out the best way to throw up some small, cheap seasteads to provide a little non-state infrastructure and get things rolling (or floating, as the case may be).
Also some interesting discussion on this Marginal Revolution post about seasteading, to which I responded here.
If you're interested in following our progress, check out my Captain's Blog over at TSI.
Economic Creationism
Submitted by Patri Friedman on Mon, 2008-04-28 14:00.Evolutionists have it easy. Sure, maybe half of the US disbelieves this solid scientific theory, which has zillions of weird implications many of which have been proven true and would be ridiculous things to explicitly design.
But I bet "half" pales in comparison to the number of people who believe in what I shall henceforth call "Economic Creationism": anything that contradicts old, well-established economic truths. Examples of Economic Creationism include the Broken Window Fallacy, confusing money and wealth[1], and protectionism (disproven by Ricardo's theory of comparative advantage). Often these fallacies come into play when thinking that a government intervention will somehow "Create" value out of nowhere.
These evolutionists think they know what it's like to have to deal with people holdin up crazy theories they disproved a hunnerd years ago? Look, while regular 'ol Creationism is uncool in most intellectual circles, Economic Creationism can be found in the hallowed pages of the New York Times. If done in an appropriately Bush or corporate-bashing way, it gets you respect - even though it's pure bullshit.
And evolutionists complain just because some wacky state like Kansas will occasionally try to legislate Creationism? Folks, almost every law in every state in the entire country is based on legislating Economic Creationism! There ain't hardly nothing else ever legislated!
Shit. Like I said, the evolutionists got it easy.
[1] Sadly, an example can be found in the wikipedia entry I just linked to for the BWF, where it says: "Another interpretation is that (in a more modern society) the money wouldn't go to the baker or the cobbler, if the shopkeeper was doing well enough for that money to go into a vault that wouldn't be used for a long time." The idea that removing money from the economy removes value from it is a classic confusion of the two. If all money disappeared, we'd still have all our stuff (which gives value), we'd just have to take a little time to reinvent money so we could easily trade stuff again.
Basic references on democratic failure
Submitted by Patri Friedman on Wed, 2008-04-23 17:05.I'm working on the new edition of my Seasteading book. The beginning of the "Why?" chapter:
While we hope that some readers will immediately see the appeal of seasteading, we expect others to be mystified as to why anyone would want to go live on a floating platform in the ocean. Until you understand "Why" we believe this to be the best path towards a better future, the details of "How" are likely to be of little interest. Thus we will attempt to answer the following basic questions:
1. Why should we seek to create new societies at all? What’s wrong with the ones we have? Do they really need more than a little incremental reform?
2. Why seastead - is the ocean really the best place for these experiments?
3. Why settle the ocean using the particular approach recommended here?However, our treatment of them will vary widely:
1. This we will mainly punt on, as the mission of chronicling and diagnosing the general problems with democratic politics is too broad for us, too distant from our core message, and well covered by others.
Given that I'm punting on this, what is a good basic set of references to argue that the current pinnacle of societal organization (modern democracy) has serious systemic flaws? Presumably many such references will be libertarian, but if possible I'd like some ideological diversity. The first two books that come to mind are Bryan Caplan's MRV and my dad's MoF. But that's far from a complete set. Thoughts on more?
Introducing The Seasteading Institute
Submitted by Patri Friedman on Tue, 2008-04-15 22:18.
Mountain View, CA, April 15th, 2008. The Seasteading Institute today announced that it has been established in order to establish permanent, autonomous ocean communities to enable experimentation and innovation with diverse social, political, and legal systems. It will continue and expand on the work of Patri Friedman and Wayne Gramlich, authors of "Seasteading: A Practical Guide to Homesteading the High Seas".
"The public sector is simultaneously the largest industry in the world and the least innovative, with a barrier to entry and lock-in on its customers that dwarfs any private monopoly", says Patri Friedman, TSI's Executive Director. "The world needs a new model of politics where a diverse ecosystem of providers offers a variety of institutions that evolve to serve their citizens. The open oceans, Earth's last frontier, are the ideal place to nurture this vision of a better world. By making it safe and affordable to settle this frontier, we will give people the freedom to choose the government they want instead of being stuck with the government they get."
To help launch the organization, entrepreneur and philanthropist Peter Thiel has pledged $500,000 to The Seasteading Institute, saying: “Accelerating innovation is rapidly transforming the world: the Seasteading Institute will help bring more of that innovation to the public sector, where it’s vitally needed. Decades from now, those looking back at the start of the century will understand that Seasteading was an obvious step towards encouraging the development of more efficient, practical public sector models around the world. We’re at a fascinating juncture: the nature of government is about to change at a very fundamental level."
The Institute will initially focus on three major areas:
- Community: Building a network of potential residents who are inspired by the possibilities of seasteading and have the skills and resources to establish vibrant new communities.
- Research: Exploring the core requirements for seasteading to be safe and affordable, such as structure design, political feasibility, and infrastructure (power, heat, food) and advancing key seasteading technologies through independent research and partnerships.
- Engineering: Proving that the mission is viable by building a safe, cost-effective, gorgeous seastead, based in the San Francisco Bay and able to travel in the open ocean.
For more information, see the Institute's website, www.seasteading.org.
Contact:
The Seasteading Institute
info@seasteading.org
http://www.seasteading.org/
(The Seasteading Institute is a California nonprofit corporation that is in the process of applying for recognition of tax exemption under Section 501(c)3 of the Internal Revenue Code.)
How to make money as an investment bank, part 2
Submitted by Patri Friedman on Fri, 2008-03-28 11:55.This one comes courtesy of JP Morgan Chase. Have employees that figure out how to game your automated mortgage approval system (Zippy), by following these simple steps, described in a leaked internal email called "Zippy Cheats &
Tricks":
1. Lump all of an applicant's compensation as the applicant's base income, rather than breaking out commissions, bonuses and tips.
2. Do not disclose use of gifts for down payments.
3. If all else fails, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want. Do the same for assets.
The story was first broken by The Oregonian, and further described in The Big Picture:
Anyone with even a modicum of experience in the mortgage industry will confirm the rampant disregard for lending standards and the corner cutting and shortcuts that were all but official corporate policy during the boom years. There was headlong rush to originate, process and securitize mortgages -- and the ability to repay the loans be damned. (Predatory Borrowing my ass!)
Exactly how deeply this attitude was in the business of making loans was revealed by this memo.
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It provides a rare glimpse into the corporate mentality that has been a key factor in the current mortgage crisis. (A Chase spokesperson denied that Zippy Cheats & Tricks was official policy; thus we are reassured that this was only "unofficial policy).
Reminds me of the dotcom era fraud. In both cases, the heady euphoria of a bubble led to corner cutting and fraud. it's a good warning to be careful about investing in something new and exciting until more sober heads are prevailing. Unless you plan to get out before everyone else - and let the devil take the hindmost.
How to make money as an investment bank, part 1
Submitted by Patri Friedman on Fri, 2008-03-28 11:35.- Generate worries about your solvency
- Notice that the value of your debt has decreased, because of worries you may go bankrupt
- Notice that your debt is an obligation, therefore a decrease in its value is an increase in your firm's net value
- Declare a profit
Thanks to Lehman Brothers for the idea, as described in Lehman's Debt Shuffle:
For several quarters, all the investment banks have been taking gains on their liabilities. Say you owe $100 to your friend. But you run into severe problems and your friend starts to figure you can only afford to pay back $95. If you were an investment bank, the magic of fair value accounting dictates that you could get to reduce your liability. What’s more, that $5 gain gets added to earnings. Because investors thought Lehman was more likely to default, its liabilties fell in value and Lehman garnered earnings from this. How much did Lehman win through losing? $600 million in the quarter. How much was its net income? $489 million.
Lehman and all the other investment banks are following the accounting rules on this, but that $600 million is hardly the stuff of quality earnings.
As an equity holder, I don't think I'd feel too reassured about the firm's financial status by the "profit" of an increased chance of going bankrupt. As a holder of put options, though, I'm eagerly anticipating further such "profits".
Peter Thiel on bubbles and globalization
Submitted by Patri Friedman on Thu, 2008-03-27 15:06.This Hoover piece is a fascinating view of Thiel's views on globalization and bubbles, and the importance of macro (that is, thinking about the world economy and what it is doing - not the bogus field of macroeconomics):
Because we find ourselves in a world of retail sanity and wholesale madness, the truly great opportunities exist in the wildly mispriced macro context -- rather than in the ever-diminishing spreads on esoteric financial markets or products. Indeed, one could go even further: What is truly frightening about the twenty-first century is not merely that there exists a dangerous dimension to our time, but rather the unwillingness of the best and brightest to try and make any sense of this larger dimension.
From a contrarian perspective, one could be more optimistic if others were not so naively "optimistic."
Here is a key passage, but you should really go and read the whole thing:
In recent years, the pace and amplitude of these booms has accelerated tremendously, in complete contradiction to the widespread notion that markets are becoming more smooth and efficient over time. During the last quarter century, the world has seen more asset booms or bubbles than in all previous times put together: Japan; Asia (ex-Japan and ex-China) pre- 1997; the internet; real estate; China since 1997; Web 2.0; emerging markets more generally; private equity; and hedge funds, to name a few. Moreover, the magnitudes of the highs and lows have become greater than ever before: The Asia and Russia crisis, along with the collapse of Long-Term Capital Management, provoked an unprecedented 20-standard-deviation move in financial derivatives in 199824 the Nasdaq at 5,000 in 2000 was farther from equilibrium than the Dow at 350 in 1929, perhaps the greatest previous distortion; no 10-year government bond yield ever fell to 0.44 percent in all of history, until this happened with jgbs in 2003; as measured by the buy/rent ratio (or any number of other indicators), U.S. real estate prices in 2005 were more distorted than in 1929<, 1979, or 1989, or at any other time in history; and no emerging market had ever reached a p/e of 62, as China’s Shanghai a Shares index did in 2007. It has not been a good time for those investors who are merely sane.
Consider the strangeness of the American context. One would not have thought it possible for the internet bubble of the late 1990s, the greatest boom in the history of the world, to be replaced within five years by a real estate bubble of even greater magnitude and worse stupidity. Under more normal circumstances, one would not have thought that the same mistake could happen twice in the lifetimes of the people involved. One might be tempted to invoke extraordinary psychosocial explanations — for example, that all of this was driven by baby boomers who destroyed their minds on drugs in the 1960s and therewith merit the dubious distinction of being America’s Dumbest Generation. But when one surveys the many other bubbles that have proliferated throughout the world, one realizes that this cannot be the whole truth.
The most straightforward explanation begins with the view that all of these bubbles are not truly separate, but instead represent different facets of a single Great Boom of unprecedented size and duration. As with the earlier bubbles of the modern age, the Great Boom has been based on a similar story of globalization, told and retold in different ways — and so we have seen a rotating series of local booms and bubbles as investors price a globally unified world through the prism of different markets.
Nevertheless, this Great Boom is also very different from all previous bubbles. This time around, globalization either will succeed and humanity will achieve a degree of freedom and prosperity that can scarcely be imagined, or globalization will fail and capitalism or even humanity itself may come to an end. The real alternative to good globalization is world war. And because of the nature of today ’s technology, such a war would be apocalyptic in the twenty-first century. Because there is not much time left, the Great Boom, taken as a whole, either is not a bubble at all, or it is the final and greatest bubble in history .
I have very mixed feelings about this viewpoint. On the one hand, predictions of extremes seem to always be wrong - the world, so far, has shown a very strong aversion to either utopia or apocalypse, despite numerous predictions of both. On the other hand, as a techno-optimist, I find a lot of plausibility in scenarios of both Singularity and Apocalypse. We have clearly nowhere near exhausted the limits of technological advancement, and enormous prosperity seems quite plausible. On the other hand, the flipside of technology is Murphy's Law of Mad Science - the IQ needed to destroy the world decreases by 1 point every cycle of Moore's Law. The probability of apocalypse temporarily decreased when the Cold War ended, but until we get off this rock, I don't see how anyone can deny that the long-term trend is up.
Alternate business structures
Submitted by Patri Friedman on Fri, 2008-03-21 16:43.In Paul Graham's latest essay, You Weren't Meant To Have A Boss, he applies evolutionary psychology to organizations and discusses how people are naturally ill-suited for working in large corporations. There is a similar libertarian argument about government, which views The State as The Tribe writ large, with people's intuitive belief that the state can work well deriving from their hard-wired expectation of a tribal-sized group. Anti-market biases such as those Bryan Caplan has documented, or Arnold Kling's "Folk Economics" have a similar origin.
As an employee, i've spent the past few years working at, and thus observing, a large corporation. And as an anarchist, a mechanism designer, and a dreamer, I can't encounter a large heirarchical system without wondering whether it could be done better. So, like Paul, I've pondered alternate organization schemes:
A large organization could only avoid slowing down if they avoided tree structure. And since human nature limits the size of group that can work together, the only way I can imagine for larger groups to avoid tree structure would be to have no structure: to have each group actually be independent, and to work together the way components of a market economy do.
That might be worth exploring. I suspect there are already some highly partitionable businesses that lean this way. But I don't know any technology companies that have done it.
It seems to me that there are some clear advantages, if the business is seperable, in seperating it, in resisting the empire-building temptation. Especially if there are alternate suppliers for what some of the units create - that way you stay open to using a different supplier if they are better, and keep competitive pressure on the unit. In a lot of cases, this is just not possible - businesses can be highly interdependent, with some functions that are very speculative or don't have clear bottom-line contributions. But I think this could be done a lot more than it is.
Let's take, for example, a hypothetical technology company. This company has a core business which generates a lot of money, and results in it creating a lot of generally useful infrastructure. As a result of this, it has a variety of small, speculative projects which make use of this general infrastructure. These projects are organized in the standard ways: employees are employees of the main company. Their career path and rewards depend somewhat on the success of the project, but not like a startup.
This seems, to me, like a pretty bad setup. The project's employees are far less invested than if they were at a startup, yet they are basically doing a startup-like job. Why not structure it that way? The big company could invest and provide the general infrastructure along with some cash, the employees could get equity and control, and you get a more "natural" structure.
To be fair, problems of scale are good problems to have - you only achieve them by succeeding wildly. But just as it's worth thinking about whether there are radical alternatives to democracy which might better meet our needs as citizens, it's also worth thinking about whether there are radical alternatives to large corporations which might better meet our needs as employees, consumers, and investors.
I killed libertarianism!
Submitted by Patri Friedman on Fri, 2008-02-29 17:25.Arnold Kling suggests in TCS that the way to libertarianism is carefully structured civil disobedience. I think this is an absurd idea, as does Ken Silber. Bryan Caplan weighs in with a short post I totally agree with that ends:
Libertarian ideas have been ably defended by an army of smart, thoughtful people for decades. And yet only a tiny minority remains convinced. Clearly these ideas are not "compelling enough" to win out in political and legal competition
Ken Silber makes the absurd reply "My advice: try harder.", which is so wrong-headed I want to scream. It's like if your friend is complaining about not being able to knock down a concrete wall with his head, and you say "My advice: try harder".
Brian Doherty mentions the discussion on Hit & Run, which has some wonderful comments, like:
jj: We can't get 20,000 people to move to New Hampshire to promote freedom.
How are we going to get millions to act is ways that will get
themselves jailed?ithaqua: "[W]e would be counting on a civilized society not to engage in severe repression." Two words: Waco, Texas.
But my narcissistically favorite part is a response to my reply on Caplan's post:
Patri Friedman writes:
And if they aren't compelling enough to win in public discourse, you
aren't going to get a social movement together to promote them via
civil disobedience. (And even if you did, the movement wouldn't work,
as Silber points out. So Arnold's strategy is doubly absurd).Libertarians need to suck it up and accept that their case is
hopeless in existing large countries. They can either accept that
statism is inevitable, or get involved in a frontier (seasteading /
spacesteading / cryptoanarchy...)greg newburn writes:
when future citizens read about that long-dead philosophy,
"libertarianism," they will be taught that the end began with patri
friedman's comment, above.
Look, I know it feels good to think you are fighting against the state, standing up to the man, even though the odds are long, you're gonna make a difference. It's a load of bullshit. Well, sort of.
What I mean is, if you enjoy doing that sort of thing, great. Just don't fool yourself into thinking that you are accomplishing something besides giving yourself enjoyment. That's a slight exaggeration - there is some value in keeping the dream alive, spreading ideas, etc. But inaccurately estimating the effects on the world of your actions will only hurt us. And most of what I see people do and propose are totally hopeless wastes of time.
Ron Paul is a perfect example of this principle. To the degree to which he increases support for libertarianism (or any of the individual, sensible ideas he campaigns on), his campaign has a positive impact on the world. But many of his supporters seemed to think he had an actual chance to get nominated, and made their donations of time and money on that basis. And that's just crazy. He never had the slightest chance, and any decisions made under the illusion that he did were bad decisions. And I think Arnold's proposal is similarly hopeless.
I think we should be very leery of hopeless efforts, and more self-aware of what we are doing and why. Yeah, it's good to keep the dream alive. On the other hand, it's brutal and wearying to keep fighting for a dream that never comes. I'm just saying, know when you're saving some embers and when you might actually be able to fan a flame. And know that it's almost always the former, unless you are at a really unusual leverage point. Think about how previous similar proposals may have failed and why before you put significant effort into something.
Yeah, it totally sucks that one vote doesn't matter, and one person can't make a difference in politics. But pretending it ain't so don't change 'nothin. The same theories which tell us why government sucks also tell us that it isn't worth our time to do anything about it. In fact, you might say that what the theory says is that government will suck because it isn't worth our time to do anything about it. It blows my mind that libertarians, the very group that ought to have the best understanding of this problem, still fall constantly prey to it and get mad when I point it out.
Arnold's proposal (like Ron Paul's candidacy) doesn't plausibly explain how it changes any of the sad facts about the world that make government suck. Contrast this with the Free State Project, Seasteading, or Anarcho-Capitalism. It's not clear that any of them are actually possible, but at least there are real reasons why each of them might substantially affect the systematic factors that lead to sucky government.
Sorry for the rant. Really, I just view y'all as a potential market for floating condos, and so I get bitter about anything that distracts you from that prospect, especially if it gets you to cough up any cash :). More generally, I deeply, passionately want to live libertarianism, not just talk about it, and so I get angry and frustrated about memes that I think reduce the chance of that happening.
Culture matters
Submitted by Patri Friedman on Fri, 2008-02-29 13:46.Food at Google's Mountain View campus (free for all employees) is delicious, healthy, quick (as it's buffet-stylt) and the cost (to Google) is comparable to a restaurant meal.
I find it quite ironic that if Charlie's Cafe was a restaurant, I would (were I not a Google employee) go there all the time. Yet this fabulous service is provided by a tiny department of a huge corporation whose focus is in a totally different area. How can it be that a group with such indirect incentives does so much better than the restaurant business, which has direct monetary incentives to make good food?
Culture is the best answer I can come up with. Google has long prided itself on its food and how it takes care of employees, and the cafes are considered to be a key benefit and an important part of the culture. Still, I find it pretty surprising that this factor is strong enough to outweigh the indirectness of the financial incentives. It's something worth thinking about for those of us who tend to assume that financial incentives are the bedrock of motivating employees.
Why I am not a libertarian
Submitted by Patri Friedman on Tue, 2008-02-19 20:57.I'm halfway through Unqualified Reservations' Why I am not a libertarian, and loving it (although I wish it used the big-L convention, since it's more about why he is not a Libertarian). The criticism of Beltway libertarians is perfect:
In my opinion, the practical problem with grounding libertarianism in the ideals of the American Revolution is that Americans no longer hold those ideals, and Europeans never did. Both, today, follow a moral code which is essentially socialist. It is true that this is the natural consequence of "education" at the hands of a government which is essentially socialist. It is also irrelevant. The consequence is the reality. You cannot explain to people that they ought to believe in, say, freedom of contract as a fundamental human right, when in fact they don't. As Hume, again, pointed out, ethical axioms are not debatable.
The response of many libertarians, especially those who for some awful, unimaginable reason seem to have congregated in the watershed of the Potomac, is often to borrow a trick from the Fabian Society, and try to steer Washington gradually and moderately in the direction of smaller and freer government.
They should know better. As we'll see shortly, the monotonic growth pattern of the State is not a coincidence. It is one thing to surf that wave. It is another to paddle out through the breaker. When we look at the results of 25 years of Beltway libertarianism, we see hardly any substantive policy achievements. I'm sure there are some. But I can't think of any.
...
I mean, why in God's name would anyone come to the conclusion that the US political system is in some sense reformable? Talk about the triumph of hope over experience. And all the energy, and money, and time, that the Beltway libertarians put into trying to apply a single smudge of lipstick to some flap of flesh in the remote vicinity of this hog's maw is energy, and money, and time uninvested in putting the beast to sleep. Moreover, since the official story of Washington is that it represents everyone, it fits all sizes, it contains multitudes, a few decorative pseudolibertarians may be just the right camouflage for it to weather another century's storms.
...
Perhaps I have dug deep enough in this rich seam of defeat and despair. But in case I haven't, let's observe that the United States once had a healthy and functioning libertarian Constitution, with Ninth and Tenth Amendments that were anything but inkblots. 220 years later, we have... what we have now. Does this inspire you with great confidence in limited government as a durable and effective engineering principle? Suppose, by some miracle, libertarians elect Ron Paul, and he actually succeeds in reforming Washington and restoring the 1787 interpretation of the Constitution. And how many years would this last? Why would we expect different results on the second go?
This is exactly why I think Ron Paul is a dead-end (except inasmuch as he educates and converts people), working with the Republicans is a dead-end, working with the Democrats is a dead-end, and democratic attempts at libertarian reform are hopeless. Americans are not libertarians and constitutional democratic minarchism demonstrably evolves into a welfare state. You think it's an accident that Hong Kong, pinnacle of laissez-faire, was to some degree a dictatorship?
Instead of wasting your time on national politics, your best bet is to go sign up for my seasteading announcement list, and then go focus on your own life.
Subprime Slideshow
Submitted by Patri Friedman on Fri, 2008-02-15 20:17.The subprime mess seems to be sort of a mixed example for libertarians. On the one hand, bad stuff happened in an unregulated industry because buyer weren't wary enough - this is evidence against libertarian claims that investors can take care of themselves. And the AAA rating on toxic waste is evidence against the ability of private ratings agencies to give accurate ratings for reptuational reasons. On the other hand, the bad stuff happened partly because buyers didn't think about incentives and moral hazard - some of the principles which makes us skeptical of regulatory solutions. Those who issued these loans didn't service them - of course they will tend to overstate ability to pay. The bond rating agencies get paid (as I understand it) by bond issuers, not investors, so of course they're going to tend to overstate bond quality.
But that's not what this post is about. This post is mean to direct you to a subprime slideshow, some nice gallows humor illustrating moral hazard with this real-life example.
Evolution of Morality
Submitted by Patri Friedman on Sat, 2008-01-26 15:55.One of the main reasons I am a consequentalist (rather than believing in natural rights) is that I suspect that intuitive morality is an evolved module meant for my genes' good, rather than a window onto absolute truth. I have very strong feelings about right and wrong. I also have very strong feelings about how much fun it is to eat a bowl of chips that's in front of me. Given my skepticism about the correctness of the latter feeling, it seems hypocritical to not be equally skeptical about the former feeling.
So the parts of my intuitive morality that disagree with others I treat as a personal preference about the type of society I would like to live in, rather than that which everyone ought to want to live in. Hence I think arguments about the negative consequences of those different moral codes are much more worthwhile than arguments about whose morality is right. (Although I often slip into the latter, sadly.)
It used to be that the only book I knew on the subject was Matt Ridley's The Origins Of Virtue. But it looks like there are now several more:
- Moral Minds: How Nature Designed Our Universal Sense of Right and Wrong
- Primates and Philosophers: How Morality Evolved
- The Evolution of Morality
- Hardwired Behavior: What Neuroscience Reveals about Morality
So, yeah. If you believe in evolutionary psychology, and you also believe your moral intuitions reflect a window onto objectively correct natural rights, then unless you have an argument for why objectively correct natural rights should exactly correspond to the intuitive moral sense produced by evolution, you have some cognitive dissonance to resolve.
You are not a rational creature. You are a moist robot, designed by little gnomes living deep inside you to carry out their fiendish goal of survival and reproduction. Not to be happy. Not to be unbiased. Examine your instinctive behaviors with your conscious mind whenever possible, to make sure they are actually serving your goals, not just the gnomes'.
It's not an accident that nice places to live have high tax rates
Submitted by Patri Friedman on Mon, 2008-01-21 18:36.In a comment on Agorist Opportunity, Micha writes:
Meh, I wish the FreeStaters all the best, but it's not realy something I can personally get all that passionate about...Apart from the obvious costs of picking up and moving to a new state (which could be significantly, albeit not entirely, reduced by Patri's Dynamic Geography), it's also important to take into account the greater importance culture plays for most people than mere cost of living with gov't bureacracy.
He then quotes Nick Gillespie:
Fewer tax and regulatory hassles and, most important, a tremendously lower cost of living are, in the end, probably not that important to people.
Rather, I suspect the number of opportunities, for businesses and consumers alike, and something we might dub as "action"—a rough metric of buzz, restaurants, cool shops, weirdness, culture of all sorts—are far more important to most people in deciding where to live and work.
I think many people would agree that Manhattan is one of the best places to live in the country, although it's a bummer that it has such high tax rates. Many people would also agree that California is a lovely state, although it's too bad that it has such high tax rates.
This correspondence between tax rates and good places to live is no accident. It is exactly what the model of government as a stationary bandit[1], or my theory of Dynamic Geography, predict. Government works partly by exploiting fixed populations. The more the population likes its fixed location, the higher the rent that government can expropriate from them without driving them away.
For those of us who like culture and "action", this sort of sucks - it means that part of the value of anyplace cool will be taken away by the government. On the other hand, as a confirmation of my theories it is to some degree a confirmation of my solution - if we can somehow make a vibrant, productive economy on the ocean, we can, finally, have "action" without bandits exploiting it. That, in my very biased opinion, is what the let-down Ron Paul supporters should be devoting their energy to. And what, in at most a couple years, I will be focusing on.
[1] Apparently by someone named Mancur Olson who thought it was a good thing. Which it was, compared to what came before. But we can do better.
Dreams, Violence
Submitted by Patri Friedman on Mon, 2008-01-21 17:49.Today is a good day to read this speech. Good stuff. I have very mixed feelings about one topic, however:
In the process of gaining our rightful place, we must not be guilty of wrongful deeds. Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred. We must forever conduct our struggle on the high plane of dignity and discipline. We must not allow our creative protest to degenerate into physical violence. Again and again, we must rise to the majestic heights of meeting physical force with soul force.
On the one hand, it seems noble to fight violence without violence. There is less risk of getting carried away and overreacting, which increases violence and rights violations.
On the other hand, when violence is being used against you, to refuse to use violence as a tool is to put yourself in a significantly weaker position. I think it is naive to let the misuses of violence blind us to our uses.
From my libertarian perspective: is it right to shoot the city fire marshal who says you need a permit for your new outdoor lights? I certainly don't think so, and I'd consider anyone who did that a homicidal maniac. But what about the DEA agent who shoots and kills your son while looking for his pot stash? In my worldview, that man is a murderer, pure and simple. And it's a murder that will clearly not receive justice through normal channels, thus a classic case for vigilantism. Besides being justice for the death, it will improve the incentives for future situations. Surely DEA agents, like any other criminals, respond to incentives.
The authority of the state is backed by violence. To use that tool too easily is to become the enemy. But to relinquish it completely is unconditional surrender. We must walk the line with care.