Saturday, April 15, 2017

Capitalism meets Democracy (or at least government) in the 21st century




Since you are reading this on a computer it is safe to say that, as ruggedly independent as you think you may be, you overwhelmingly make buy choices over make choices. As a result you trade your property (time and money) for what for you, you hope, is someone else’s property (time or material goods) that is of at least equal value to you. Since you don’t (nor do any of us) have the means to assess, enforce, (freedom to) the quality of these transactions you are protected by a blizzard of standards and regulations (freedom from) that allow us all to conduct these transactions with piece of mind.

You go out most days and earn your daily bread.  When you actually buy the bread you can be sure that it is the pound of bread you expect it to be because we have a Bureau of Weights and Measures that has long since set a standard we all agree to and accept without question. We can be certain it is the advertised grain and not sawdust because we have an FDA inspection system that oversees both food and medicine so that we can consume these with almost perfect confidence.

When you buy a prescription, that drug has survived a gauntlet of regulatory hurdles, so that your doctor can help you make an informed decision as to the safety and effectiveness of that drug for your condition.  Furthermore, you can be certain that you are getting the amount of the drug that is printed on the label.

Contrast this with the recent experience with the unregulated herbal supplement industry.  In 2015 the New York attorney general reported that several large retail chains were selling health supplements that did not contain any of the supplement (Echinacea, for example) that was supposed to be in it.[1] [2] Whether they work or not an individual is getting cheated out of their property if they are not getting what is labeled on the bottle.

The regulatory environment we live in is far more ubiquitous than this and even effects (intrudes) in our life without transactions. The government has something to say about the air we breath, the water we drink, and the food we eat and it does all these things to our benefit. For those who say government doesn’t do anything for me try breathing the unregulated air of Beijing, or drink the unregulated water of a Mumbai slum, or eat the unregulated food from a Mogadishu street vendor.

In summary up to this point, as labor divides we overwhelmingly make buy choices and surrender to the salutary servitude of the fruits of others’ labor. As we depend more on the goods and services of others, we surrender to the salutary servitude of a massive regulatory system that ensures without us thinking about it (freedom from) that the most basic interactions we have with the world and with the market are fair. I would say that this is a most fundamental characteristic of civilization.



All that said, I can understand where the ultra-libertarian feels that the statement, “The government has something to say about the air we breath.” is positively Orwellian. And as much as the ultra-liberal may cheer the regulatory framework that engulfs us it may be a fundamental part of the discontent we all feel toward the civilization we have been born into. In a future post, I may look more closely at this particular source of discontent. For now I only hope to give a way of looking at the world we live in that may be helpful for you to see where you stand in it.













Sunday, April 2, 2017

Capitalism meets Democracy (or at least government)






Locke envisions governments being formed to protect property.  His examples suggest that these groups form for protection against the people on the other side of the forest or river; but in this day and age what do we mean - Canada?

Yes all nations have standing armies to collectively protect themselves from real or perceived threats from other nations. However, on a day-to-day basis threats to our property are much nearer to home. There is, of course, the threat of common crimes such as assault and robbery for which we trade freedom to (personal retribution) for freedom from (involving the police and the judicial system). However, threats to property which are much more ubiquitous arise from the division of labor. Let us go back to Adam Smith’s bow and arrow maker to see how this might originate.

Let us say that the bow and arrow maker agrees to provide a certain number of arrows to the hunter in return for a specific quantity of venison. Let us then imagine that the meat that the hunter provides is mostly gristle or rancid, or simply less than promised. Or we can imagine on the other hand that the arrows weren’t straight or the heads weren’t sharp, or the feathers fell off.  In either case one or the other lost value of their property in the exchange. Initially, they might resolve the dispute between themselves. However, and especially if the dispute were settled through violence, this throws the individual back to the state where the “enjoyment of it (his freedom) is very uncertain, and constantly exposed to the invasion of others” who happen to be the ones with whom he is most closely associated. In addition to being bad for those involved this defeats the purpose of the group which is to allow the individual to enjoy his freedom from both the threat of violence and the capriciousness of the solution (Might makes right regardless of facts.) Furthermore, since this threatens group cohesiveness it is bad for the integrity of the group and makes it more vulnerable to threats from outside.

One can imagine then that very early on the group recognized a higher authority –tribal elders or a chief – to arbitrate such disagreements and render a decision that the group accepted as an acceptable resolution of the dispute.  Whether such individuals or tribunals rendered fair judgments most, some, or none of the time is irrelevant. These primitive institutions did their job if they minimized intragroup violence and their pronouncements were accepted by the group as binding.

This is my speculation on government’s first step into (interference in) the market place. I acknowledge that neither Smith, Locke, nor I have any appreciable factual knowledge of the governance of pre-historic man. That said throughout history we have evidence of markets that function as Smith said, governments that function with the purpose that Locke said, and the interaction between markets and government that function as I have speculated and that is what we have today. We choose buy (vs. make) and trade our property (time and money) for what we expect is of equal value to us. We depend on government to give us piece of mind (freedom from) that that trade lives up to our expectations.

In my next entry I will bring these ideas into the 21st century to see how markets, government, and their interaction affect us today.