Free Thoughts Blog

Virtue ethics–which I introduced in my last post–is an approach to moral philosophy that starts with good lives and good character instead of right action. Given the power of the state has over the environment in which we live and the rules we live by, virtue ethics has quite a lot to say about politics.

Let’s start by reviewing terms. (I went over all of these in much more detail in my first post on virtue ethics, so if you need more of a refresher, that’s the place to go.)

Virtue ethics is about how to be good people and how to lead good lives. A life is good when it fulfills its purpose, its “telos.” The telos of human life is eudaimonia, or flourishing.

In order to fulfill our telos, we need three things. First, we need virtues of character. Second, we need the practical wisdom to act well when motivated by those virtues. Third, we need enough goods (resources, health, education, etc.) to have the opportunity and capacity to develop virtues of character and practical wisdom.

So how do we apply those–telos, virtues of character, practical wisdom, and goods–to the state?

Without society, of course, there is no state. If we all lived as hermits, we wouldn’t need a state, nor would we really need one if our only contact with each other came in tiny groups. A state becomes necessary–so the argument goes–when enough of us interact regularly that we need (or would benefit from) some form of imposed order. (What order we want imposed may, of course, be limited to just protection of our rights.)

In other words, if we want a state, we want it because we think it will make society better. Thus the telos of the state is a well-functioning society: one that increases our ability to achieve eudaimonia. It’s a society that, by being a part of it, each of us has a better chance of living a good life than we would elsewhere.

There are two senses in which we might think about the telos of the state. First, if we create a state at all, we create it to fulfill some purpose–just like any other tool. The telos of a knife is to cut. The telos of a hammer is to pound nails. The telos of the state is what we made it to accomplish: a well-functioning society.

Yet “the state” doesn’t exist as a thing in itself. Instead it’s a collection of people authorized to behave in certain ways and with certain authority over the rest of us. So the second way to think about the state’s telos is to look at those people. A doctor is a human, and so has the telos of humans generally: achieving eudaimonia. But “doctor” is also a profession with a purpose of its own: promoting health. Thus the telos of a doctor, when he or she acts in her capacity as a doctor, is health. The profession of doctor brings its own set of situational virtues that don’t necessarily apply outside of doctoring.

Agents of the state, then, have the telos of their profession, which will be closely tied–if not identical–to the telos of the broader state-as-tool. These virtues govern what it means to be a good politician, a good bureaucrat, a good public servant, and so on.

This second sense of the state’s telos addresses a potential concern raised by methodological individualism. This is the claim that social phenomena are nothing but the aggregate actions of individuals, and it’s a position libertarians generally accept. Thus to talk about “the state” having virtues or a purpose or needs would seem to violate methodological individualism. But if we instead talk about the telos of those agents vested with the authority of the state, then we’re talking only about individuals, and so avoid the violation.

Still, I think it’s probably easier and clearer to just talk about the state’s virtues and the state’s goals, and just assume that what we really mean is the virtues and goals of those individual agents.

Okay, so now our state-as-virtue-ethical-entity has a telos. It exists to enable the well-functioning society. To fulfill that purpose, it needs to act in accord with the virtues, do so with practical wisdom, and have the goods needed for both.

The state’s “virtues” will be those traits crucial to the well-functioning society. Justice is an obvious one. A state that is not motivated by justice and does not seek to create justice in the world will not be a good state. But justice isn’t alone here. A good state will also be fair. It will respect its citizens. And so on.

But even if the “state” has a virtuous character (i.e., all the people who make decisions about what it’ll do are of right character), it will also need the practical wisdom to take right action (i.e., action that is actually in accord with the virtues). As I’ll discuss two posts from now, understanding practical wisdom as it applies to state action is one way to approach Hayek’s knowledge problem. Even if the state has the proper motivations, it lacks the knowledge–and thus the wisdom–to realize its goals. No matter how virtuous economic planners are, they lack sufficient information to adequately plan an economy. A socialist state can never possess practical wisdom.

Finally, a state needs whatever goods are required to act in accord with the virtues that apply to it and with the aim of achieving its telos. For example, if one of the state’s proper duties is the provision of police and courts, then it will need some way to pay for them. Otherwise, it won’t attain (that portion of) its telos.

All this leaves many questions on the table. What does it mean to say a society improves our chances of eudaimonia? What sorts of virtues should motivate the state? How far should the state go in guaranteeing the flourishing of its members? How many goods should it give us, and of what kind? How does a state act out of practical wisdom, and how is practical wisdom different for a state than it is for its members? And does seeing the state from this virtue ethical perspective support libertarianism?

I’ll take a look at those next time.

This is the fourth and last in a series of posts on the socialist calculation debate. Here are parts one, two, and three.

In previous installments we looked at some of the problems that one might face in trying to plan an entire economy mathematically, with reference to a set of price-optimizing equations.

Let’s grant though that we could solve all of these problems—we have computers to solve the equations; we can generate a good enough approximation of the set of equations itself; and we can solve the problem of pricing capital goods.

Still, the planners don’t have the data they need about consumer preferences to put into the equations. Recall that in part III, Soviet economist Leonid Kantorovich simply took as a given the menu of consumer goods and the quantities that had to be supplied for each. He then developed optimization methods that would allocate labor efficiently. Assuming, again, that the list of goods was correct.

As it turns out, that’s a very big problem.

IV. Consumers’ Preferences

F. A. Hayek’s distinctive contribution to the socialist calculation debate, over and above that of Ludwig von Mises,[1] was essentially to ask where the data might be found to do economic calculation about consumers’ preferences themselves. (And by extension, producers’ preferences.)

Who has that data? The simplest answer is that everyone has a tiny little piece of it. It’s dispersed among all of us, because each person has a list of consumption goods that they may desire to varying degrees in varying circumstances, as various needs and opportunities arise.

Whenever the needs and opportunities align just so, a given consumer good rises to the top of our list. And we act to acquire it. When we do, prices will emerge.

Yet prices only tell us a part of the story — they tell us that buyers and sellers were able to agree at a given time and place. Often, prices can signal an opportunity, as when a supplier discovers that he or she can undercut the current market price and realize a profit.

But prices in themselves say nothing about other possible agreements that might have arisen in other circumstances. They also say very little about the future: As soon as a price occurs, it’s history. The entrepreneur who discovers that he or she can undercut the current market price still has to get to market. That takes time, and when they get there, the market price may have changed. That’s a risk that entrepreneurs have to take. Consumer demand is fickle and inherently hard to predict.

It’s also very likely that you can’t articulate beforehand just what your list of preferred consumer goods really looks like, including how much you would buy of various goods at various prices. No one really can.

Your list also probably changes very rapidly. Every unexpected event alters your preference set to some degree. Every disaster, every unexpected discovery, every windfall, and every loss. Every new product you didn’t know about before. Every old product that disappears from the market. Every single change upsets everything — all in a hierarchy of values that you can’t even begin to articulate in the first place. 

Weirder still: There are items on your “list” that you don’t know about and never will.

It sounds very strange to put it that way, I know. But we have all had an experience that demonstrates it. We’ve all at one time or another walked into a store, discovered a product, and then bought it — all while having known nothing about it in advance.

Here we must start speaking of a “list” of consumer demands only for want of a better term. If it were to be drawn up comprehensively, such a list would include an infinite number of products, past and present, that aren’t generally available on the market, that are unknown to any of us, and that are therefore of unknown subjective value. Until the opportunity arises, and we act, and only then do potential entrepreneurs get a glimpse into consumer demand.

Much like the concept of a “good” — covered in part two — the concept of a consumer demand hierarchy is a conceptual crutch. It’s not a real thing at all. Markets reveal preferences, but in a sense they also make preferences, because consumers choose only among those options that are available to them, and because we can only speak then, in retrospect, about their having acted as if there were a hierarchy of wants.

Consumers have preferences, no question. They act on those preferences. But can they articulate them? Not in the way that we would need to do planning.

As a result, socialist calculation can’t ever really get off the ground. At least not without some kind of incredibly reliable and thus very probably dystopian brain scanning technology. While we’re at it, we’d need a complete knowledge of all upcoming natural disasters, technological changes, fads, and cultural phenomena that will arrive in the near and distant future. This though is an impossibility — if we knew what technologies or cultural developments the future held, we would have them right now, and they wouldn’t be “future” developments at all.

But without them, we can’t reliably model of consumer preferences over time. And without that, we can’t predict the value of capital goods over time either.

V. And Equilibrium, Too.

Recall that socialist calculation proposed to head straight for the Walrasian general equilibrium — a state of efficiency that markets have never actually reached. Even if socialism only got part of the way there, it might still be better than a market. Right?

Well, yes. It might be, although that’s not altogether clear from the outset.

It’s illuminating to consider now why markets don’t reach equilibrium.[2] Scientific socialists argued that markets were inherently inefficient — all this groping about, trying to find the right prices and quantities by trial and error, and so much attendant waste. In this they were certainly correct, given the assumptions they were using.

There’s another answer, though, and a much more complete one. As Hayek writes:

[I]n order that all [the plans of various people in an economy] be carried out, it is necessary for them to be based on the expectation of the same set of external events, since, if different people were to base their plans on conflicting expectations, no set of external events could make the execution of all these plans possible. And, second, in a society based on exchange their plans will to a considerable extent provide for actions which require corresponding actions on the part of other individuals. This means that the plans of different individuals must in a special sense be compatible if it is to be even conceivable that they should be able to carry all of them out. Or, to put the same thing in different words, since some of the data on which any one person will base his plans will be the expectation that other people will act in a particular way, it is essential for the compatibility of the different plans that the plans of the one contain exactly those actions which form the data for the plans of the other.

In the traditional treatment of equilibrium analysis part of this difficulty is apparently avoided by the assumption that the data, in the form of demand schedules representing individual tastes and technical facts, are equally given to all individuals and that their acting on the same premises will somehow lead to their plans becoming adapted to each other. That this does not really overcome the difficulty created by the fact that one person’s actions are the other person’s data, and that it involves to some degree circular reasoning, has often been pointed out. What, however, seems so far to have escaped notice is that this whole procedure involves a confusion of a much more general character, of which the point just mentioned is merely a special instance, and which is due to an equivocation of the term “datum.” The data which here are supposed to be objective facts and the same for all people are evidently no longer the same thing as the data which formed the starting-point for the tautological transformations of the Pure Logic of Choice. There “data” meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term “datum” made those propositions necessary truths. “Datum” meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in a society the concept has undergone an insidious change of meaning. (F.A. Hayek, “Economics and Knowledge,” in Individualism and Economic Order.)

In short, I need to know all of what I know, as well as all of what you know. But I don’t even know all of what I know: My brain’s not big enough to hold and analyze a copy of itself. No one’s is. And much economic activity aims, ultimately, not at acquiring wealth or goods, but at acquiring knowledge about what people might want.

As a result, Austrian economists in particular reject economic equilibrium as a yardstick with which to measure the real world. Still, though, equilibrium gives us an idea of how economic interests attempt to interact with one another, and so — up to that point — it’s useful. But the ways in which we fall short of equilibrium are much more interesting: They are both the reasons for economic action and also the proper study of economists.

VI. Beyond the Market

As we’ve seen, a social order that proposes to surpass the market will have to accomplish many things. First, it will have to solve the problem of economic knowledge outlined above as well or better than existing economies, or perhaps better than what an ideal free-market economy might do.

But if we value individual autonomy, we may also have to take steps to preserve it. It might be found, for example, that we could create autonomous economic production agents — hyperintelligent robots, say — that could go around brain-scanning people and then making stuff and distributing it according to rules of utility maximization.

This process might work better than markets. But we might feel less than okay about it when the robots come and level the house we thought we owned. “It’s more efficient to build a factory here,” they say, “and your compensation will take the form not of a cash payment, but of the greater overall utility to be found in our system.”

If you prefer, the problem can be stated in cartoon form.

The system of private property certainly doesn’t protect individual autonomy perfectly. People routinely experience degrading conditions under every economic system mankind has ever implemented. Still, security of property title does a great deal of good work in this area that we might not want to abandon even if it did realize greater efficiency.

It also seems unlikely that trans-market social orders will be able to dispense with the principle of specialization and gains from exchange. As long as individuals and regions have varying production capacities of different goods and services, comparative advantage will be a real thing, and reassignment of goods — trade, in our world — will be a necessity for maximizing welfare. Perhaps in the technologically unimaginable future that reassignment won’t commonly happen through voluntary exchange at market prices, but it will have to happen somehow.

As a blueprint for the future that’s not much to go on, I know. It doesn’t point to scientific socialism, or to much of anything else. Future social orders may end up being very different from our own, but I don’t think it likely that they will move beyond markets in one form or another. And sure, they may tell themselves they have surpassed the market, but we know what that looks like.

Notes

[1] It’s wrong to claim, as some have done, that Ludwig von Mises discounted or neglected the problem of incentives in socialist societies. Although focused most of his attention on certain aspects of the calculation problem, in the very same article that began this series we also read:

The problem of responsibility and initiative in socialist enterprises is closely connected with that of economic calculation. It is now universally agreed that the exclusion of free initiative and individual responsibility, on which the successes of private enterprise depend, constitutes the most serious menace to socialist economic organization… Since we are in a position to survey decades of State and socialist endeavor, it is now generally recognized that there is no internal pressure to reform and improvement of production in socialist undertakings, that they cannot be adjusted to the changing conditions of demand, and that in a word they are a dead limb in the economic organism.

As I so often find with Mises, that’s very prescient for a guy writing in the 1920s.

[2] Given that the concept of “equilibrium” depends on the concept of “goods,” a concept that we have already shown to face severe limits, what follows may be true for more than one reason.

George H. Smith has written a new book. For readers of Libertarianism.org, this is welcome news indeed. With his weekly “Excursions in the History of Libertarian Thought,” George shows off his enormous knowledge of intellectual history, and teaches all of us a great deal.

If you enjoy “Excursions,” think of The System of Liberty as a marthon session. George has arranged the book around conflicts within classical liberalism. This allows him to do what we strive for here at Libertarianism.org: show the libertarian intellectual tradition not as a monolithic single “school,” but as a big tent of ideas with significant overlap, but not total agreement. But, George notes,

Although much of this book deals with the internal problems of classical liberalism, and although I believe that liberals failed to resolve some of these problems, my sympathies with this school of thought will quickly become apparent to readers. In their search for answers to difficult questions, the classical liberals may not have been successful in every respect. But they did have many successes, both theoretical and practical, in their effort to justify and explain individual freedom, and we owe them an incalculable debt for many of the freedoms we enjoy today.

The System of Liberty explores natural rights and utilitarianism, anarchism, state sovereignty and self-sovereignty, positive versus negative liberty, the role of the state in education, charges of “social atomism” and “social Darwinism,” and methodological individualism. And it does so with George’s typical clarity and voluminous knowledge of the literature.

If you’re a regular read of “Excursions,” you owe it to yourself to check out The System of Liberty, too. Nobody does the history of political thought quite like George H. Smith.

The controversy surrounding the Guantanamo Bay detention facility is one that ebbs and flows throughout our national discourse. Going unmentioned for months at a time, some timely issue pertaining to torture or due process or our current war on terror will bring Guantanamo back into the national spotlight for but a few fleeting moments, only to be forgotten again in exchange for more timely issues. Currently, we are a time of more flow than ebb. The recent rash of hunger strikes occurring at Guantanamo—in which as many as 45 detainees are refusing to eat, thirteen of which are being force-fed—has brought the secretive detention facility back into national headlines, if only for a few moments. Given the timeliness, I would like to take the opportunity to explore Guantanamo Bay in a more philosophical manner than is usually done. Most libertarians, I believe, think Guantanamo Bay is somehow morally bad. But even though many libertarians might harbor this disposition (present company included), we might remain unable to articulate why it is we feel this way. In this essay I try to state clearly why I think the Guantanamo Bay detention facility is morally bad.

Here is one reason to believe that Guantanamo is morally bad: it is morally bad because it stands in defiance of both national and international law. Internationally, detention practices at Guantanamo remain in violation of several statutes of the International Covenant on Civil and Political Rights (ICCPR), a multilateral treaty adopted by the United Nations General Assembly on December 16, 1966, and enforced from March 23, 1976 forward. While there are many statutes composing the ICCPR, it remains a relatively uncontroversial fact that detention practices at Guantanamo stand in defiance of several requirements of the multilateral treaty, namely articles seven, nine, and fourteen. Moreover, it could also be argued that detention practices at Guantanamo stand in defiance of national law as well, particularly the guarantee of due process secured through the Fifth and Fourteenth Amendments, though this is a much more controversial claim.

But even though the Guantanamo Bay detention center is in defiance of the law, it is not morally bad because so. This is because actions and institutions cannot be morally wrong solely because they are in defiance of the law; such a view would commit us to absurd conclusions. For example, suppose there was a law requiring every parent to kill off their children until they were left with only two offspring. If a parent with six kids refused to kill four of them off—in defiance of our hypothetical law—have they done a morally bad thing? Hardly. We don’t even need to delve into the realm of counterfactuals to prove this point: were the actions of Harriet Tubman and other abolitionists, who sought to free slaves by providing passage to the north in violation of the Fugitive Slave Act, morally wrong? Again, obviously not. As such, we cannot commit ourselves to the position that actions and institutions are morally wrong because they are in defiance of the law. By implication Guantanamo is not morally bad because of its questionable legal status.

It might be true that Guantanamo is morally bad because torture happens within the facility. After an inspection the International Committee of the Red Cross (ICRC) concluded that the institutional infrastructure present within Guantanamo “cannot be considered other than an intentional system of cruel, unusual and degrading treatment and a form of torture.” Reported practices included humiliating acts, solitary confinement, temperature extremes, and forced positions. Although the U.S. government has denied allegations of torture, released prisoners have corroborated the ICRC report, claiming that beatings, sleep deprivation, prolonged hoodings, along with other torturous practices occurred. It is due to the presence of these inhumane practices within the facility, it might be argued, that gives Guantanamo its suspect moral status.

We cannot say that Guantanamo is bad because of the alleged torture taking place there, even though we might have problems with specific instances of torture occurring. Here is why: most people believe that torture, in some cases, is morally justified. Consider the banal ticking time bomb example: we know that a nuclear bomb is going explode in New York City in one hour, and we also know, without doubt, who planted the bomb. We also do not know where the bomb is located. Would we be justified in torturing our bomber to learn the location of the bomb? Most would say yes. As a result, torture is not always morally wrong (though oftentimes it is). Now consider the relation between this corollary and Guantanamo: suppose it was true we knew for a fact that every instance of torture happening in Guantanamo was of the type that we could confidently predicate as morally just. But even so, torture is still happening in the facility.

Under such circumstances—where only justified torture takes place in Guantanamo—is there still something morally problematic with the detention camp? I think so. If the above counterfactual is too difficult for the reader to imagine, or if the reader believes that torture (as many libertarians do) is never justified, then consider this: imagine that, in some possible world, every fact about Guantanamo remained the same, except no torture whatsoever took place there. There was still the detention camp; still filled with both civilians and those picked up off of the battlefield; and they were still denied basic due process of law, being kept in the facility for years upon years with no chance of defending their innocence in front of a legitimate, unbiased court. Under such conditions, is Guantanamo now morally good, or at the very least not morally bad? Doubtfully. Something still seems off to most of us—suggesting that torture is not the rasion d’être of the moral badness.

It might be true that Guantanamo is morally bad because it refuses to give its detainees the full extent of due process given to other individuals tried within the U.S. criminal justice system. It is not the case that detainees in Guantanamo receive no due process of law; indeed, both Hamdi v. Rumsfeld and Hamdan v. Rumsfeld did much to improve the legal rights of the accused, requiring that enemy combatants be able to challenge their status in front of military commissions, and also setting certain—though still meager—standards with which these commissions must adhere to. But even so, the military commissions detainees are given access to lack a certain standard of fairness we might want to be present: according to Human Rights First, for instance, the Military Commissions Act of 2009 allows for the introduction of coerced statements in proceedings; the use of evidence derived from statements obtained through torture if “use of such evidence would otherwise be consistent with the interests of justice”; and it allows for defendants to be tried ex-post facto for conduct not considered to constitute a war crime at the time it was committed. This list deficiencies, the reader should be reminded, constitutes a mere proper subset of all the problems inherent within the current military commission system.

Even though detainees at Guantanamo lack access to as robust a conception of due process as we receive in the U.S., it is still not clear why this is such a bad thing. Here is one reason why refusing due process to detainees is morally problematic: due process constitutes an institutional check on the epistemological problems we face when imprisoning individuals. In seeking out terrorists and other enemy combatants to imprison within the detention facility, the U.S. uses specific criteria that certain individuals must satisfy in order to be considered someone who ought to be locked up. We hope that when individuals are sought out to be detained, such a task is done in good faith; that those carrying out such a mission are careful to not wrongfully lock up those who do not deserve to be locked up, and, moreover, before anyone is selected for detainment, it is made sure that they actually do satisfy the relevant criteria. But even so, mistakes can be made.

One of the functions of due process, then, is to help remedy these mistakes—to make sure that detainees actually ought to have been detained, by virtue of them having instantiated the relevant properties. This determination, obviously enough, is litigated in court when determining whether someone is guilty or innocent. When detainees are denied their day in court then these epistemological worries go unaddressed, leaving it indeterminate whether detainees really ought to be in the detention facility or not. As such, denying due process is morally bad.

While due process’ ability to remedy the epistemological problems of justice we face is important, it is not sufficiently important to make the lack of due process morally bad. Consider this example: suppose the U.S. had a policy of locking up in Guantanamo every individual who Googled the term “Islamic extremism.” Also suppose that every such individual put away in the detention facility was given a brief hearing to determine whether they actually did Google the illicit term. Even so, in the trial, the accused were not allowed to challenge the content—that is, the constitutionality or justness—of our hypothetical law. Even with the presence of this non-robust conception of due process, is Guantanamo Bay still morally bad? I think so, though perhaps we are closer to the truth of the matter than we were before.

The problem here is that due process does more than simply remedy potential epistemological problems, though it certainly does that. Due process also allows litigants to challenge the content of specific laws—it allows our detainees to question whether what is being done to them is just, or whether what is being done to them is constitutional. Not merely if laws are being carried out correctly, but if laws that are being carried out should even be carried out in the first place. When this second, substantive feature of due process is present, then we begin fleshing out why due process is so important a thing, and also why the lack of due process in places like Guantanamo is so bad.

When detainees are granted the ability to (1) determine whether they have actually violated specific laws that we claim they have violated and (2) challenge the content of the laws they are being charged with violating, then we begin approaching fairness. Obviously enough, the ability of detainees to exercise these two important features of due process is contingent on their ability to have a day in a fair court, not merely to show up to what seems like a one-sided military commission. By implication, lacking these two essential features is a morally bad thing. Since the Guantanamo Bay detention facility does lack these two features we can thus conclude that it is a morally bad place, answering our original question as to why the detention facility strikes us as morally problematic.

The New Yorker has an article on the revival of anarchism, and it’s pretty good. While focusing mostly on the ideology of the Occupy Wall Street movement, author Kelefa Sanneh does manage to work in some nice references to more libertarian forms of anarchism, such as the anarcho-capitalism of Murray Rothbard.

While the essay contains some history–including the debate between Karl Marx on one side and Pierre-Joseph Proudhon and Mikhail Bakunin on the other–most of it focuses on the work of David Graeber, an anthropologist, prominent Occupy member, and author of Debt: The First 5,000 Years. Graeber represents the most visible form of anarchism today, and one that’s decidedly non-libertarian. That is too bad, because so much of the anger Graeber-style anarchists have for the current system fits nicely within critiques of statism and corporatism made by both anarchist and mainstream libertarians.

Like many in the Occupy movement, Graeber does not seem to think much about “how things will work if we get our way.” The state’s bad, these anarchists say. So are markets. Coercion is terrible, as well as money and debt. And even voluntary leadership roles aren’t any good. All we’re left with are prohibitions: “no parties, no leaders, no demands,” as Sanneh puts it.

And that’s the problem with the sort of anti-market anarchism Graeber represents. While much, if not most, of his criticism of the state and big business hits the mark, this sort of anarchism offers us no meaningful, practical alternative. Society, if it is to operate at any scale, demands organization and coordination. One way to do this is via some entity that “upholds the claim to the monopoly of the legitimate use of physical force in the enforcement of its order,” as Max Weber put it. We call that the state.

Or it can be done–and these two need not be mutually exclusive–via emergent orders. People naturally fall into groups, naturally develop decision-making processes, and naturally settle on systems of exchange. We call this the market, and it’s what you get when you let folks interact freely and respect their innate sense of “mine” and “thine.” (An innate sense Graeber seems to lack, Sanneh tells us: “Like many anarchists, Graeber doesn’t think property damage is violence.”)

Graeber would have us banish both the state and markets. In part, these Occupy anarchists believe that, without the state to prop it up, the market would naturally fade away as people no longer felt compelled to participate. They say that the natural state of man is socialism, and it is only statism that makes capitalism possible.

But these anarchists also want to speed the market–and, in fact, civil society–on to an early death. Graeber “proposed a grand debt cancellation, to remind the world that debt is merely a promise–that is, a plan, and one that can be changed.” Here we see the Occupy-style anarchists eager to throw the moral baby out with the capitalist bathwater. Debt is a promise, and “keep your promises” is one of our most baseline moral rules. What’s more, we keep promises not just because doing so is right or virtuous, but because if we don’t, then people will come to assume we won’t. And if this happens throughout a society–if debts are routinely cancelled, for instance–then parties won’t be willing to risk future agreements. A society lacking the expectation that we’ll keep our promises is a society destined for failure.

Toward the end, Sanneh brings up the other kind of anarchism, the libertarian kind, represented by Murray Rothbard.

Rothbard was an anarchist, but also a capitalist. “True anarchism will be capitalism, and true capitalism will be anarchism,” he once said, and he sometimes referred to himself by means of a seven-syllable honorific: “anarcho-capitalist.” Graeber thinks that governments treat their citizens “like children,” and that, when governments disappear, people will behave differently. Anarcho-capitalists, on the contrary, believe that, without government, people will behave more or less the same: we will be just as creative or greedy or competent as we are now, only freer. Instead of imagining a world without drastic inequality, anarcho-capitalists imagine a world where people and their property are secured by private defense agencies, which are paid to keep the peace. Graeber doesn’t consider anarcho-capitalists to be true anarchists; no doubt the feeling is mutual.

It’s of course worth pointing out here that many pro-market anarchists believe that, in the absence of state involvement in the economy, and without business being able to turn to government to protect them from competition, income inequality would dramatically decline under anarchism. It wouldn’t go away entirely, because liberty upsets patterns, but it also likely wouldn’t be “drastic,” especially if we consider the enormous benefits markets bring to the world’s poorest residents.

The difference between Graeber and Rothbardian anarcho-capitalists is that the latter have baked into their philosophy a respect for lifestyle pluralism. Rothbard certainly assumes that, in the absence of a state, we’d still have markets–even global ones. He’s probably right. But Rothbardian anarchism would allow for the legitimacy of alternative choices–provided, of course, they are choices and the not violently enforced preferences of “leaders.” Rothbard says we all have rights and as long as we respect those, anything goes.

The philosopher Robert Nozick called this a framework for utopia, and it’s a powerfully moving vision. All of us can choose the sorts of lives we want to lead, and live them without the threat of coercion, provided we afford the same right to everyone else. Many of us will choose market capitalism–perhaps because it so clearly works better at enriching us than other systems–but we don’t have to. Graeber’s utopia–“a kind of decentralized socialism, with decisions made by a patchwork of local assemblies and cooperatives”–can exist peacefully alongside Rothbard’s capitalism. That’s what anarcho-capitalism tells us it offers. Not a utopia, but a utopia of utopias.

Graeber, on the other hand, wants his vision for all. Any choice we might make to live differently is simply illegitimate. How Graeber would enforce his vision? Would he ban “capitalist acts between consenting adults,” to use Nozick’s phrase? It is unclear. But if he’s serious about it, he’ll eventually have to resort to violence–and likely a monopoly on violence. And then we’re right back to Weber’s “monopoly of the legitimate use of physical force in the enforcement of its order.” In other words, we’re right back to the state. In this sense, the anarcho-capitalists are right: the Occupy anarchists aren’t really anarchists at all.

But, then, neither are most libertarians. Anarchism is certainly one kind of libertarianism, but then Nozick wasn’t an anarchist, nor was Hayek, nor Friedman, nor Locke, nor Rand. Still, even for the many libertarians–and non-libertarians–who reject anarchism as a political goal worth aiming for, the philosophy of anarchism has value. An anarchist stance (a true anarchist stance) takes no aspect of the state for granted. Every last bit must be justified.

This flips the typical approach to thinking about the state and puts us back in the shoes of enlightenment thinkers like Hobbes who thought any state had to be justified. Now, most people take the existence of the state–usually a rather big state–as the default position. It’s then up to anyone who wants to shrink it–even if they don’t want to shrink it to nothing–to argue for each reduction. Anarchism says that freedom, the absence of coercion, is the default, and that anyone wanting to introduce state coercion must present arguments for why it’s better than the alternative. And they must do this at every step of the way.

What separates anarchist libertarians from non-anarchist libertarians is that the latter believe there are some steps the state can successfully clear. What unites both groups is the belief that the current state has taken far more steps than it legitimately should have.

This is the third in a series of posts on the socialist calculation debate. Parts one and two appeared earlier.

Many early socialists denied that their utopia even needed economic calculation: The habits and morals of mankind would simply change, they declared, and each of us would come to feel in our very souls what we should do, in whatever economic circumstances might arise. That was heady stuff, but not at all practical. As a result, some of the more hard-nosed socialist theorists turned to calculation. But it should be remembered that the theory of economic calculation always far outstripped the practice.

Even in the Soviet Union, and even despite talented economists like Leonid Kantorovich, mathematical planning was rarely more than window dressing on what amounted to an elaborate, politically driven wish list.

Planners bickered, formed factions, falsified, cheated, stole, and – when all else failed – they allegedly lifted consumer prices directly from the Sears Catalog. But they didn’t calculate, whether in money prices, or shadow prices, or hours of labor, or anything else. In some ways this is a stronger indictment of the Soviet system than even the existence of the gulag: It shows the Soviets weren’t eating their own dog food.

One may wonder, then, how much of the socialist calculation debate amounts to the good guys being completely gulled by the other side. When real socialists do not calculate, how can we call it “socialist” calculation?[1]

As I’ve stressed before, though, we study socialist calculation because it is a kind of outline or a shadow to the market economy. Socialist calculation attempted to obtain consciously all of those things that markets tend toward through unplanned human action, through the so-called invisible hand. Examining socialist calculation makes the actions of the invisible hand more visible.

One such action is finding the value of capital goods. Ludwig von Mises was the first to stress the peculiar difficulty of this task under socialism.

Mises noted that consumption goods would be distributed in a planned society according to whatever criteria its leaders thought proper: presumably these criteria would be very egalitarian, perhaps with special consideration to individuals’ needs, although in practice a planned society could use whatever criteria its leaders wished.

Yet these distributions, whatever they were, would have great difficulty taking into account consumers’ varied and ever-changing preferences: We can’t give everyone a set of dentures and expect them all to be made equally happy.

Exchange would probably arise, regulated or not, with money or not, and it would likely be beneficial even in a planned society – but only for consumption goods. Capital goods, remember, would never be allowed to go to market. They’re owned collectively.

But how does one determine which capital goods go to what use? Whenever possible, we will want them to produce the consumer goods that have the highest consumption values, of course. But which kinds of capital goods should be preferred, and how are they to be used, and when? And how do we know when to stop using them here and start using them there? When a raw material goes through several stages of production, with choices of different later end products and/or intermediate processes, how do we know where to direct the intermediate goods – if not with price signals from the (sadly non-existent) capital goods markets?

Mises writes:

One may anticipate the nature of the future socialist society. There will be hundreds and thousands of factories in operation. Very few of these will be producing wares ready for use; in the majority of cases what will be manufactured will be unfinished goods and production goods. All these concerns will be interrelated. Every good will go through a whole series of stages before it is ready for use. In the ceaseless toil and moil of this process, however, the administration will be without any means of testing their bearings. It will never be able to determine whether a given good has not been kept for a superfluous length of time in the necessary processes of production, or whether work and material have not been wasted in its completion. How will it be able to decide whether this or that method of production is the more profitable? At best it will only be able to compare the quality and quantity of the consumable end product produced, but will in the rarest cases be in a position to compare the expenses entailed in production. It will know, or think it knows, the ends to be achieved by economic organization, and will have to regulate its activities accordingly, i.e. it will have to attain those ends with the least expense. It will have to make its computations with a view to finding the cheapest way. This computation will naturally have to be a value computation. It is eminently clear, and requires no further proof, that it cannot be of a technical character, and that it cannot be based upon the objective use value of goods and services.

Because capital is heterogenous—better at some things and worse at others—a mere reference to the exchange values of consumption goods is not enough to tell us where different capital goods should go.

The Soviets did make some theoretical efforts here. In particular, Leonid Kantorovich proposed mathematical techniques for optimizing the allocation of labor and capital goods to best fulfill a given set of production quotas. Inputs would be “priced” in terms of the gained or lost amount of product that would be had in pursuing one course of production rather than another, in a process known as shadow pricing.

His approach, though, is inapplicable to an economy for two reasons that have nothing to do with math. (Mathematicians, who understand such things better than I do, agree that his math is just fine as far as it goes, and it’s now an important part of many different optimization techniques in engineering.)

First, Kantorovich held that capital goods’ value was to be determined by the value of the labor that they saved, and by no other criteria. Like all good communists, Kantorovich was ultimately committed to the labor theory of value, at the very least for determining the efficiency of capital goods. (But you can’t please everyone: That he did not use the labor theory of value in directly formulating all of his shadow prices rendered Kantorovich a dangerous heretic to some Soviet commentators!)

Still, as Mises and many others have argued, the labor theory of value simply doesn’t work. One hour’s labor varies greatly in its productive value, not just as a function of the capital goods that back it up – a problem we could solve by looking recursively at the labor required to make the capital goods that amplify a laborer’s productivity – but also as a function of skill, serendipity, workers’ enjoyment or lack thereof in labor, and many other factors.

Nor does labor find anything like an egalitarian reward in the eyes of consumers. One may spend many hours in very difficult labor, all to no valuable end. Or one many stumble onto a million-dollar discovery in a moment of idle reflection over a beer. There just isn’t any correlation between labor and subjective value. In a slightly more just world, there might be. But not in ours. This is also why mainstream economics has rejected the labor theory of value.

Second, Kantorovich’s method was limited by the fact that it took the schedule of consumer goods to be produced as if it were a given. Which in Soviet society, it was. Given how? Given by the political and economic authorities. And not, in other words, by actual consumer demand.

And yet the search for what consumers really want is one of the biggest parts of the information discovery process performed by the market. One may very well optimize for labor under a given set of output constraints. But the discovery of the proper constraints themselves – that is, the discovery of consumers’ real demand schedules – is a process that, in a free market, unfolds in coordination with the allocation of labor and capital goods. At best, Kantorovich solved half the problem, but only by pretending that the other half didn’t exist.

As one reviewer put it:

First and most important, the planner takes as given by “the political and economic” authority and specified social needs the aims of society in the form of final demands. The shadow prices and standard effectiveness are not “regulators” of the economy but only means to the effective realization of goals… In general, the planners start and end with the final demands determined outside the planning system.[2]

Emphasis added. And yet it is the very function of an economy as we now understand it to discover such goals, not to presuppose them or to conjure them out of thin air. Further, as we will see in the next post, there are never really any “final” goals at all, only provisional ones.