Tag: economics

When does anarcho-capitalism fall back into an equilibrium of (micro) states?

~ elityre ~ 1 Comment

When I wrote up some notes about Moldbug’s political philosophy last year, it seemed (when you strip away a bunch of flavor-text and non-load-bearing details) to reduce to a proposal to impose market discipline on governments by having them compete for citizens. I ended with the question “wait, how is Yarvin’s proposal any different than Anarchocapitalism?” They sound like they’re basically the same.” (I have since removed that line from the post, but it’s still there in the revision history.)

A few weeks ago, I read most of David Friedman’s The Machinery of Freedom and incidentally, I now know the answer to that question

The character of the overall political system—whether anarcho-capitalism degrade back into a collection of microstates— depends on the geographically-localized economies of scale to rights protection.

If rights-protection doesn’t benefit from large geographically localized economies of scale, we could end up with an anarcho-capitalist equilibrium of many different rights protection companies serving a similar local, and competing to better serve their customers, and generally relying on arbitration to settle disputes peacefully.

But if it’s a service that is sufficiently more efficiently provided in bulk to all of the individuals in a geographic area, rights protection companies will effectively be small, profit driven governments, who retain sovereignty in their domains.

I had previously thought that the degree to which right-protection services are excludable was also a factor, but thinking through the second and third order incentives, it doesn’t.

Excludability 

Consider fire protection. Fire has the important property that it spreads. If my house is on fire, that poses a danger to the houses of my neighbors. And because it’s easier to put out a fire when it is small, firefighters protecting my house, would be incentivized to fight even fires that start in my neighbor’s house, because it might spread to mine and be even harder to fight.

Accordingly, putting out my house has a positive externality on my neighbor. Putting out fires is a public good.

This poses an obstacle to private fire departments, who want to charge for their services: there’s a free rider problem. If most people in a neighborhood subscribe to a fire service, the remainder can safely forgo subscribing, because they’re protected by their neighbors subscription. 

Contrast this with other subscription services: if I pay a company to do my laundry, that does not automatically wash the clothes of my neighbors.

So a first key question is: are the dynamics of rights protection more like fire-fighting or more like a laundry service? How much is crime a public bad?

It could go either way, depending on the dynamics of crime fighting.

Maybe the generally efficient way to prevent crime is to install strong locks and surveillance systems in homes and businesses. If so, those kinds of interventions largely protect those specific buildings, without protecting nearby areas.

Alternatively, maybe the most efficient way to prevent crime is to find, catch, and arrest a small number of criminals who commit most of the crimes. In which case, crime-protection services are a public good with externalities on everyone, not just subscribers.

In that condition: the first order incentives are for a small number of people (those with the highest willingness to pay) subscribing to rights protection services, and effectively subsidizing their benefits for everyone else.

But this is an unstable situation. The various rights-protection agencies might reasonably respond by demanding a fee from everyone who benefits from their services. And if they’re in the business of demanding fees from people, they’re also incentivized to demand fees from people who aren’t paying for their services.

Effectively the rights-protection agencies, with their specialization in conflict, would just become a local government.

This is not the end of the story however: the possibility of rights protection agencies imposing fees/taxes on non-subscribers, imposes an incentive for those non-subscribers to subscribe to some other rights protection agency, for their protection from the other rights protection agencies!

This gets us back to the anarchocapitalist equilibrium of multiple rights protection agencies, competing for customers, who are incentivized to settle conflicts via arbitration (because destructive conflicts are wasteful).

But there is still a freerider problem, just on another level of abstraction: between the different rights protection agencies, each of which would prefer to save the expenditure in preventing crime, and free-ride on the work of the others.

But maybe market incentives work that out just fine? Some rights protection agencies will offer more proactive and effective crime prevention, for those that pay more. This will have some positive externality on everyone else, who pays less for less proactive policing. The market failure caused by that externality is very likely smaller than the massive inefficiencies of government.

Localized economies of scale

But, there’s still a question of the degree to which rights protection has localized economies of scale. 

For instance, it seems plausible that there are efficiencies to protecting the rights of the tenants of a  whole apartment building, rather than contracting with some of the tenants individually (but not others). That allows you to secure the entrances and exits, and will justify the costs of e.g. keeping a unit of police officers stationed in the building for faster responses.

So it might make sense to bundle rights protection and living space: you pick where you want to live, in part based on what kind of rights protection comes bundled, rather than contracting with a rights protection company separately from a domicile company.

But if there are economies of scale at the scale of an apartment building, might there also be economies of scale at the level of a few square miles? It seems possible. It seems likely that big fractions of the total cost of keeping an area safe are fixed costs, and the variable costs of insuring the safety of marginal people in that area is small.


If so, most (though maybe not all?) rights protection companies would not bother to offer their services outside of the geographic areas that they protect. 

If this is the case, then you get something much more like Moldbug’s patchwork of small sovereign states, governed as a profit-maximizing company, each of which maintains a monopoly on the legitimate use of force in their domain.

My guess is that whether this is the equilibrium in practice depends on the total costs of preventing crime, which depends in turn on how prevalent crime is. If there’s a lot of theft and assault such that it is important to actually deploy force to protect against those crimes, there’s probably stronger economies of scale, because it’s easier to establish a membrane and maintain peace and order within that membrane.

But if crime is mostly exceptional and force is only occasionally deployed to prevent it, it might not matter as much if your clients are geographically localized.

A patchwork would still be pretty anarcho-capitalist

The fact that these states would be small in area is still a huge improvement over today’s states, because that makes it more feasible to vote with your feet, by leaving one patch and moving to a nearby one. Close to the same forces of market discipline obtained as under more traditional anarcho-capitalism, which should get most of the same results most of the time.
Also, this patchwork world is compatible with some areas that function along the classic anarcho capitalist vision of multiple rights protection agencies all operating in the same local area. It might be somewhat more expensive, but there’s no reason why that couldn’t be an option offered to consumers to prefer that for some reason.

First pass on estimating how much I benefit from structural racism

~ elityre ~ Leave a comment

Suppose I wanted to estimate, quantitatively, how much I, personally, have benefited from historical and contemporary structural racism.

I’m interested in this question because I’m at least somewhat sympathetic to the argument that, if I personally benefited from oppressive systems, then there’s some fraction of “my” resources to which I don’t have a legitimate claim. 

(It’s not obvious how I should respond to that situation. A first thought is that I should donate that fraction of my wealth to racial justice charities. In the ideal case those charities might function as an offset, effectively compensating for the harm done. At minimum, disowning that fraction of my resources correctly aligns the incentives. If every person followed this policy <link to deontological principles>, there would be no incentive to enforce white supremacy in the first place. I would prefer not to live in a condition of being incentivized to turn a blind eye to racial injustice, and score moral points by condemning it after the fact. Though depending on the size of the numbers that might entail large moral or personal tradeoffs, and I’ll have to think more about how best to act.)

So how might I go about calculating the personal benefit that I’ve derived from the oppression of blacks in America?

These are some of my first pass thoughts.

Framing the question

Some of the ways that I could possibly have benefited:

  • I was born to a wealthier family, because my parents and grandparents were afforded privileges and advantages at the expense of black people.
  • I had better access to education for being white.
  • I had better access to jobs for being white.
  • I had way lower risk of staying out of prison, including for spurious or trivial offenses.

…and I think that’s about it? (I welcome additional suggestions)

Given my specific, highly unusual work history, I find it pretty implausible that I, personally, benefited from racial privilege.

(It’s possible that my community is more racist than I imagine, but eg I find it pretty hard to imagine Anna or Critch or Oliver turning down my earnest help in the counterfactual where I have black skin. But maybe I’m overstating the degree to which most white people will tend to take black people less seriously, taking their errors and mistakes as stronger evidence for incompetence.)

My educational opportunities seem basically mediated by the wealth of my parents.

So it seems like this question reduces to estimating what fraction of my parent’s relative wealth depends on 0-sum privileges at the expense of black people and to calculating the expected risk of being unfairly imprisoned as a white vs. black person.

A note on what I’m looking for

I’m not just looking for advantages or privileges that I benefit from, that black people lack. I’m looking for places where I derived benefits at the expense of black people, or other racial groups.

It’s straightforward that there barriers to black advancement that I’m just completely free of. My life was clearly made easier by being white.

But those barriers might be in the form of transfers of value, effectively theft from black Americans to white americans. In that case white americans or a subset of white americans come out ahead in absolute terms, from the existence of structural racism. And some of those barriers might be in the form of destruction of value. In this case, the white Americans (or some white Americans) come out ahead in relative terms, because the diff between whites and blacks is bigger, but not in absolute terms.

Economics, in particular, is not in general 0-sum. That there are privileges that I have and others don’t might be bad for them, but that doesn’t necessarily mean that it is good for me.

One way to frame the question: We can consider a hypothetical world where there wasn’t any systemic racism. In that world, would I have been poorer than in actual history, because in actual history I derived direct and/or indirect benefits from white supremacy? Or would my personal wealth have been about the same (adjusted somewhat for having greater purchasing power in an overall wealthier society), but black people, on average, would be richer. 

In the first case, I’m benefiting from structural racism. In the second case, structural racism is still a massive evil perpetuated in my society, for which I bear at least a little responsibility, but I’m not a beneficiary.

I care about this distinction, because it informs whether the wealth that is legally mine, is legitimately mine to do with as I want, according to my own morality, or not. If my parents gave me some advantages in life, and I capitalized on those advantages to create value in a mostly free market, I consider myself to have a moral right to my share of the gains from trade. But if my advantages are 0-sum, and came, unjustly, at the expense of other racial groups, even if I didn’t choose to opress them, my ownership of that wealth is far more suspect. 

I’m not sure how I should respond to that possibility. Maybe I should give away whatever fraction of my wealth is illigitmately earned, ideally finding some way to reinvest it in the communities from which it was stolen? That might turn out to be unrealistic / infeasible, but it seems like I should owe some extra responsibility if I am the beneficiary of an ongoing theft.

Family Wealth

First of all, it is possible that my parents are financially worse off, on-net, for the existence of structural racism in America. The economy is not, in general, a 0-sum game. Typically, everyone benefits from more people having more economic opportunity, because those people are more productive and society as a whole is wealthier.

It’s plausible that, over the course of the 20th century, rich Southern whites were deriving benefits from oppressing and extracting value from blacks, but that most whites in most of the US were made materially worse off, not better off by this. (In fact, most people are not very literate in economics. It may be that even the whites actively perpetuating white supremacy didn’t benefit on net, and would have been richer if they had created a fairer and more Just society.)

I need to find not just places where my parents or grandparents had advantages that black people mostly lacked, but 0-sum privileges that they were afforded at the expense of black people.

My personal situation: 

My mother was born and grew up in Boston. My maternal grandparents were Jewish, second-generation immigrants from Poland. My grandfather worked as an engineer, including for military contractors.

My dad was likewise born and raised in the Northeast. I don’t know as much about his parentage. Also a third generation immigrant, I think, from Ireland.

Both my mom and dad went to college, then moved to New York city, and worked in the computer industry, doing sales. They’re well off now, in large part because when they were a young couple, they were both motivated by money, and made a lot of it for their age, but they were also judicious: mostly living on one salary and saving the other.

Did they have an advantage securing those jobs because they were white? Would a black man have been handicapped in how much he could sell because of racism?

[Edit: I talked with my dad about his early corporate experience. From 1981 to 1992, he worked for a company called Businessland, selling computers. When he started in, Boston, 2 out of about ~150 people who worked for the company in that region were black. 10 years later, in the early 90’s, when he was a sales manager in New York, about 25% of the ~120 people in that region were either black or hispanic.

He relayed to me that hiring a black person in the 80’s was generally seen as a big risk, and that Boston, in particular, was extremely racist, with segregated neighborhoods that felt and expressed antipathy for each other. New York was better, both because NYC is a uniquely diverse melting pot, and because by the 90s, overt racism had declined.]

Probably the answer to both of those is “at least a little”. But the jobs they held were not sinecures. Sales in particular is a domain in which you can measure performance, which is why salespeople get paid on commission. Someone who was as driven as my dad, but black, would surely have faced discrimination, but how much less would he have made?

But there’s a key point here which is that my parents did work for their wealth. That there were barriers deliberately and emergently placed in front of black people, to make it harder for them to get ahead, doesn’t illegitimate my parents’ wealth accumulation. 

I already know that being black in the United States is a severe handicap. But I want to know in what ways those handicaps were transfers of value from one person to another, not just destruction of value. 

Avoiding prison

Thinking about this one a little further, I expect to see the same dynamic as above, except more strongly. It’s manifestly unjust that a black person goes to prison for smoking marujana, and a white person doesn’t. 

And that’s on the tip of the iceberg of ways that the criminal justice system extorts black / low class people.

But all of those are examples where white people are being granted the rights due to them in a Just society, while black people are being denied those rights. Not a situation where white people are benefiting from special extrajudicial privileges above what is due to them by law. 

(Admittedly it is technically illegal to smoke marujana in some places, but only technically, and I’m not tempted to say that white people are “above the law”, in that case. The law, in that case, is a farce, used to penalize marginalized people).

It’s obviously unjust to have a society which claims, but doesn’t follow through on, equal treatment before the law. That’s obviously evil. 

But I don’t think that I benefit from that evil. Again, my risk of going to prison is lower than that of a black person, but that’s not because I’m externalizing a conserved quantity of “expected years in prison” onto someone else. If we reformed society so that it became Just, there would be many, many fewer black people in prison, but my own risk of going to prison wouldn’t change. If anything, it would go down somewhat, since “injustice anywhere is a threat to justice everywhere”. As a Jew, and as a human being, I should expect to be safer in a just society than in a society that maintains Justice for only a subset of its population.)

Conclusions from first thoughts and next steps

My tentative conclusion is that because of explicit, unjust discrimination, it is much harder to be black in America than to be white, and that was especially true in previous centuries, most Northern whites didn’t actually benefit from that discrimination, especially those who were primarily accumulating wealth via economic production instead of privileged access to rents.

But these are only first pass thoughts. My next step is to collect and read some books about racial wealth inequality and white privilege, to build up a more grounded list of ways that I might have benefited from structural racism.