Category Archives: Politics

Private Defense … on the High Seas!

Leave a reply

The Economist asks, “what happened to Somalia’s pirates,”

But the main reason for the drop in maritime hijackings seems to be that ships are now far better defended against attacks. Armed guards, now carried by more than 60% of vessels, have been essential in discouraging them. Pirates are playing it safe by first scouting for guards, whereas previously they opened fire to intimidate crews; seeing arms on board is a big deterrent. Higher cruising speeds in pirate-infested zones and rerouting also have helped, as have razor wire, high-pressure hoses and citadels—secure spaces on ships from which crews can call for reinforcements.

Also, The Economist links to a short blurb on mercenary naval forces, which shipping companies can hire to protect their convoys.

Omitting the Non-Omittable

3 Replies

Historically, how does private policing compare to public policing? Gene Callahan answers this question by looking at a homicide rate time series for England, pointing out that roughly 800 years ago the crime rate was roughly “20 times today’s rate.” He notes that the decline in the homicide rate coincides with a continuous growth of the state. He admits that correlation is not causation, but he thinks it’s fairly clear that the correlation is not mere coincidence. I sympathize with the argument, but it suffers from an omitted variable bias, and in fact the number of omitted variables is probably very large. Further, what did directly cause the decline in crime could be things that would coincide with both public or private security. But, in the end, I say all of this as someone who believes that public security has provided society a net benefit.

I’m of the opinion that private security makes sense in a world where the distribution of force is relatively equitably distributed, such that the costs of violence are, on average, too high. This means that private security hasn’t been viable for most of human history, and it’s not obvious that it’s possible today. This implies that the state, so far, has most likely been the most efficient means of maintaining peace. While its present viability is not obvious, I do think the case for the superiority of private security is pretty high, but only by making one very likely erroneous assumption. I think the kind of justice and the means its enforced by would be very different from present day. An immediate change, I think, would cause a cultural shock. If we do away with the assumption that people will deal with this shock, then private security can’t work until institutions — including culture — develop to that point. This implies a transition over a large number of years.

But, it’s not difficult to see how Gene’s comment is not convincing to the anarchist. Consider the following possible causes of the long-term decline in homicides,

  1. Better communication technology, allowing more crime to be reported to the authorities;
  2. Faster means of transportation, allowing the authorities to more quickly respond to reported crimes;
  3. Better, more expensive weaponry, giving authorities an advantage with economies of scale — individual criminals may not be able to afford them;
  4. Growing economic wealth gradually increased the opportunity cost of crime, shifting the supply of crime to the left;
  5. Better non-violent home protection systems, including homes that are more difficult to break into, home alarms, et cetera;
  6. Criminals typically have non-random backgrounds, meaning that improvements in wealth also reduce the size of environments which are more likely to induce criminality;
  7. Changes in weapon technologies make it easier for non-skilled users to fire more lethal weapons, making it easier to stop assailants (raising the cost of crime);
  8. Various things that are extremely counter-intuitive that we may not recognize. I have in mind, as an example, Donohue’s and Levitt’s work on the relationship between abortion and falling crime rates. I understand that there are convincing arguments that show a number of problems with their methodology. But, my point is that there are things that are extremely non-obvious, and in fact until someone is creative enough to come up with a novel causal relationship we may even be convinced that there is no causal relationship whatsoever.

I can think of a lot of other plausible explanations for declining homicide rates in England. But, if you assume that private security is possible, none of these things are factors which are preferable to state security, but not to private security. That is, if we strictly model the security industries, the list is entirely composed of variables exogenous to the model. They are all changes with positive externalities, which affected the provision of security. If we assume private security was possible in 1200, then the time series may show exactly the same relationship. In fact, if private security is really more efficient than public security, then we’d see a superior trend.

There are a lot of anarchists that strongly believe private security is possible. If a lot of the reasons for a decline in crime are unrelated to actual institutions of justice, then it’s not difficult to see that the use of the trend line to argue in favor of public security is not convincing. I suspect that the issue that many anarchists have with Steve Pinker’s The Better Angels of our Nature. (In Pinker’s case, though, I think most are underestimating the book.) But, it’s not obvious that all increases in world peace have been caused by the state itself, rather than concurrent cultural, economic, institutional changes which bestowed upon society the benefit of greater peace. Maybe increases in the cost of weaponry, especially when we consider military-grade weaponry, induced economies of scale, by increasing the initial cost of warfare (weaponry, military training, deployment, et cetera). This forced governments to wage larger wars, but at much fewer intervals, and at higher costs (in price and, especially, in human life). These are all externalities that private institutions of justice would also benefit from, if they were possible.

It’s also worth considering that most modern-day anarchists don’t care about what was possible 800 years ago. They care more about what kind of institutions are possible today, or even in the near future. And, so, while there is a high probability that the state was absolutely necessary for most of human history, it doesn’t take away from the likelihood that none of the major factors that reduced the crime rate would cease to exist in a world of private justice. That being said, there are also many anarchists who believe that the state was never necessary. These people are even more likely to dismiss Gene’s argument, and even a weak version of Pinker’s. Although, to these people I’d show the differences in income growth rates between historical stateless, or relatively stateless, societies and societies with centralized governments. The latter, without a doubt, has, to date, shown the most possible results. In any case, what I’m trying to say with respect to Gene, is that it’s not clear that the evidence is so evidently in favor of public security.

On a tangentially related note, the case for the state became clearer to me in a short conversation with a professor on Daron Acemoglu’s and James Robinson’s Why Nations Fail. I mentioned my disagreements with the authors’ assumptions on the benefits of centralized states. He asked me if I knew what they had in mind when they made the claim, and in that exact moment I realized that the benefit they have in mind is that as the number of governments decrease, the probability of inter-state warfare falls. This also means that there are less governments to fight over extractive institutions, which may otherwise suffer from even stronger temporal rigidities. Maybe this already seems obvious to you, but I think the point was poorly articulated in the book. The authors, for example, cite tax increases as evidence of stronger, more inclusive political institutions. And, they fail to acknowledge that Somalia, during its years as an economically growing, virtually stateless society, actually did relatively well (in pace of improvement). They make other assumptions, as well. At one point they make the claim, at least in my interpretation, that relatively centralized governments are necessary prerequisites for vibrant urban trade centers. The claim was made with regards to early cities. But, maybe other factors — such as factor endowments, geographical location, et cetera — invited greater merchant activity, which in turn made extractive institutions like state bureaucracy possible. The way they present the case for centralized governments is not as strong as it could be.

But, look at the case for centralized governments this way. When there are many small geographical jurisdictions, with the assumption that the market is till too uncompetitive to fully discourage war and conquest through private security, the probability of war grows. As governments come to control larger quantities of land, forcing many governments to cease existing, there is a lower probability of border conflict, and war in general. In this sense, the centralized state can be seen as a net benefit. I feel that this is actually what Acemoglu and Robinson actually have in mind. I think it’s a strong argument.

Coming back to the main point on omitted variables, it’s not at all obvious that the decline in England’s homicide rate is directly attributable to the provision of public security. In all actuality, it’s more likely that the market for security benefited from a long list of positive externalities, mostly associated with economic and technologies improvements. But, there are strong arguments for the existence of the state, such as institutional concerns, that would enrich the debate if they were more regularly addressed.

Against Half Baked Legalization

4 Replies

I’m an advocate of drug legalization. I believe that drug prohibition has not worked to curb drug consumption, and, in fact, that it has driven drug consumers to more harmful substances (see, for example, Mark Thornton’s, “What Explains Crystal Meth?“). I question the legitimacy of forcefully limiting drug consumption, in the first place. I’m also of the opinion that if drugs were legalized, competition would drive the quality of drugs up. This includes gradually making them less dangerous, or developing better substitutes. But, are all changes towards full legalization equally as good? Half steps may actually make the path towards legalization more difficult than they otherwise would be. California provides a perfect case study.

In 2010, a ballot initiative was introduced to legalize marijuana. Specifically, the law would allow persons 21 and over to hold up to 28.5 grams of marijuana and the ability to grow small amounts of the plant at home for personal use. It also would open the drug to taxation and wholesale commercial production, by licensed firms. More information on the initiative is available on Wikipedia. Prop 19 failed to pass the elections, with 54.5 percent of Californian voters choosing “no.”

According to one poll, 52 percent of Americans support the legalization of marijuana. If we take this as a cross-country mean, my guess is that the statistic for California is marginally greater than or equal to 52 percent. So, why did Prop 19 fail at the ballot? One explanation is that there was insufficient advertisement of the initiative, implying that those who did vote were a non-random sample of Californian voters — that is, the voting population was biased against marijuana. I think this probably has some truth to it. It’s also true that California has a significant population of conservatives, so the typical belief that California is a relatively liberal state may not always be true. But, another major impediment to the initiative’s passing was the fact that California growers, who supply the medical marijuana industry, opposed the legalization attempt.

California has a large market for marijuana. Much of it is legal, thanks to the legalization (Prop 215) of medical marijuana in 1996. California dispensaries are supplied, in large part, by local growers. A more comprehensive marijuana legalization threatened to depress the price of the plant, for two major reasons,

  1. It was expected that the number of suppliers would increase;
  2. The legalization of limited personal production would have decreased demand for suppliers’ product.

Current cannabis growers are not interested in competition or falling prices, because it means a loss of market share and profits. Thus, in California, they put a lot of money, time, and effort into blocking the passing of Prop 19. Had the marijuana industry been behind the initiative — or, even, neutral —, I’m sure Prop 19 probably would have passed.

This brings up the question of whether we should be careful when proposing incremental legislation, with the long-term objective of full legalization. In California we see that the legalization of marijuana created a new marijuana industry, and the profitability of this industry created an incentive for the industry to oppose further legalization. I don’t know the details of how California’s growers opposed Prop 19 very well, but, whether indirectly or directly, the creation of the industry created the opportunity for rent-seeking, and this has hurt the chances of full legalization. Now, public opinion has to change to a sufficient degree to overcome the industrial opposition, and Californians have to deal with the risk of voting for diluted future propositions, with terms that may be more favorable for current cannabis growers.

In other words, it may be a superior strategy to just wait for the right time to push for full legalization, because in our current environment there’s too much of a risk of unintentionally creating entrenched interests that actually hurt your long-term objectives. It’s really too bad, because marijuana is one of those goods where it no longer makes much sense to prohibit it. In California, I don’t think it’s a stretch to claim that over 50 percent of residents have consumed weed (I’d put the figure closer to ¾ of total residents). It’s already accepted in our popular culture. By now, in my opinion, a progressive society would have fully legalized it. But, a premature medical use legalization has put at risk short term legalization for the sake of a very limited gain — you’re almost just as well off continuing to buy the drug illegally, since the prices and quality are about the same.

This is something other states should definitely consider when they start to discuss the legalization of marijuana in their own legislatures. In some states, such as Colorado and Washington, the time may be ripe to just try full legalization (although, maybe not). But, in other states the odds may not be so favorable. In these states, it may be worthwhile just to wait for the right time, rather than opt for half baked measures that may make legalization more difficult in the long-run.

Expatriate Venezolanos and Maduro

4 Replies

Yoani Sánchez, author of one of my favorite books on Cuba, linked to a picture (below) of protesting Venezuelans in Madrid’s Plaza de Colon. They are demanding a recount of votes, in reference to the recent Venezuelan elections where Chávez’ hand picked successor Nicolás Maduro narrowly defeated Henrique Radonski. Maduro received 50.6 percent of the vote, compared to Radonski’s 49.1 percent. There’s a lot of talk of fraud and many people are asking for a recount,

Venezuela Recount Madrid

I understand, and sympathize with, the motivation to accuse Maduro’s campaign of fraud. There are a lot of reasons to oppose a candidate who so far promises only to continue Hugo Chávez’, in my opinion disastrous, policies. But there are many people with many reasons to support these policies, and therefore both Chávez and Maduro. Sánchez posts a picture of anti-Maduro protests in Madrid, and I’ve heard stories of similar things occurring in the United States. But, are these really representative of Venezuelan voters? Expatriats are people who tend to leave Venezuela because they disagree with the policies there, so are they really a random sample? I doubt it.

I think we should push for political honesty, especially in countries with crippled political institutions. At the same time, we should admit that not everyone shares our worldview, and that there are plenty of Venezuelans who do support Maduro. In fact, there are plenty of Venezuelans who may feel better off thanks to Chávez’ policies. The following point is important for U.S. politicians and our foreign policy. What do we gain from being antagonistic? Why alienate Maduro and defeat any opportunity for compromise, that may even lead to better policies by part of his government?

Besides, given Venezuela’s political institutions, there’s some probability that Radonski also practiced unfair campaigning. If we’re going to accuse Maduro, we should be equally critical of Radonski (who also has an incentive to accuse his opponent of fraud, since the vote was so close and he’s just as interested in the position as Maduro) — it’s amazing that Randoski doesn’t seem equally as shady to people asking for a recount. This seems to me to be a case of ideology goggles.

Let’s Talk Probability

Leave a reply

My first bachelors degree was in political science, so I’m familiar with international relations theory. Before my obsession with economics, I was also intensely interested in military history, which includes the politics that drive belligerence. What I know can be encapsulated in a simple rule of thumb: the simpler the theory of motivation is, the more critical of it you should be. War, and the factors which motivate it, is a complex phenomenon, and simple theories tend to abstract from factors which can be equally important in deciding the outcome of some event. With this in mind, I want to play armchair strategist. Just remember that whatever I write in this post is likely to be oversimplified. But, it’s okay to have fun.

What do you think the probability of a renewed Korean War is? (Maybe I read too much Larry Bond as a teenager.) Consider the following,

  1. North Korean instability: Around 2009–10 I began researching on North Korea (although, my first real foray into North Korea was when I wrote the Wikipedia article on the Ch’onma-ho — it may have been changed since I last edited it, in 2006), mostly interested in a rising middle class and the regime’s response to a changing distribution of wealth and power. From what I know, there is substantial evidence that suggests of significant instability within the regime, which began under Kim Jong-il’s regime. Kim Jong-un has inherited these problems. This may be one reason that he has taken such a bellicose position, trying to consolidate his power by creating an issue of contention bigger than himself;
  2. Park Geun-hye: She seems to be her father’s daughter. He father was Park Chung-hee, dictator of South Korea between 1963–79. She has made it clear that the ball is in North Korea’s court, and from what I’ve read she has given orders to the South Korean military general staff to pursue a full-scale conflict if the North commits even a small military provocation (e.g. should it decide to launch a small raid, or sink a South Korean boat, et cetera). She is not interested in being the bigger woman, because it would mean a loss of face for her — someone identified, probably through her father, as an ardent believer in reunification;
  3. North Korean nuclear weapons: There seems to be some disagreement over the status of North Korea’s nuclear program, but there is a general consensus that at some point they will dispose of the technology. This means that North Korea is currently relatively close to it, or has some primitive nuclear technology that may or may not be a potential threat in the case of war. But, if war is postponed, this threat will become clearer and more concerning over time, and it may make reunification impossible until the regime collapses and is replaced by a somewhat more pluralistic form of government;
  4. China: China has historically been an important force in limiting South Korean ambitions. However, the world has changed since 1953. China has much more to lose and much less to gain by supporting North Korea. If S. Korea were to launch an invasion, I don’t think China would do much about it, except maybe pout. In fact, we could sway China to “look the other way” by making some concessions, namely in the area of our Pacific deployments and our foreign policy concerning Chinese ambitions in the South China Sea. Besides, China’s relationship with N. Korea is straining;
  5. N. Korean resistance: What would a war look like? I don’t think it would last very long, and I don’t think it would be too costly. From what I understand, N. Korea does not have the fuel to conduct major war games. I’ve heard stories of tanks abandoned on the side of the road, because of a lack of fuel. Any war would be fought in their territory, even if they were to launch some kind of offensive at the start. The terrain there makes mechanized warfare more difficult, and it makes it easier to defend through the use of fixed artillery and cannon emplacements, but if S. Korea (with the help of the United States and, probably, the rest of NATO) has air superiority then I’m not sure what kind of resistance the N. Korean military could really pull off. Its mobility would be restricted by fuel shortages and, maybe more important, American and S. Korean air power. The biggest threat of the war, apart from a hypothetical nuclear warhead, is Seoul’s proximity to the border. Seoul, I believe, is within range of N. Korean heavy artillery batteries. These will probably be mostly destroyed or forced north, but they can still do quite a bit of damage in civilians areas of high density (although, artillery attacks on big cities have, historically, not been too successful);
  6. War-weary U.S.: I don’t think the Obama administration is interested in fighting a major war. He has been intent on ending our deployments in Iraq and Afghanistan — however slowly (which is not necessarily his fault) —, and despite his support of NATO intervention in Libya, it’s clear that the U.S.’ support of S. Korea runs a bit shy from a full-scale conflict. On the other hand, a reunification of the peninsula, I think, would look good for him. Further, most people, except libertarians and pacifists, would probably, more-or-less, support the war. He could restrict American involvement to a ground defense of S. Korea (not following the S. Korean army into N. Korea), a systemic bombing campaign and other forms of air and naval support — this would limit U.S. losses in the war (and force S. Korea to take the brunt of the human loss, aside from N. Korea).

I don’t know much about Russia’ relationship with N. Korea, especially now. This is one factor, out of probably dozens (if not hundreds or thousands) of others, that I can’t really internalize in my analysis. Of course, war isn’t the only option. Some other options,

  1. Status quo: Either S. Korea and the U.S. lead some kind of cooling down process, where they make concessions to N. Korea or devise some kind of barter package, or N. Korea backs down and agrees to some barter packages;
  2. Chinese led regime change: The N. Korean government goes through some kind of restructuring, probably led and influenced by the Chinese government. This might not be as great as a reunification, but I think it’s still an improvement over the status quo. It might also help avoid war, not just now but in the future. A more stable N. Korean regime will probably be more willing to cooperate with international authorities and might, in the far future, be more willing to discuss a peaceful reunification.

The only other thing about war that I’ll say is that there’s some probability attached to it occurring, and I think current conditions suggest that this probability is higher than usual. What do you think?

Edit: And just a few days later, we can see just how low a probability these types of discussions actually lead to accurate conclusions.

Democracy and Capitalism

4 Replies

The merits of democracy are in dispute. Most people probably believe that democracy is the best institutions of governance that we have to choose from. Of these, the majority seek improvements on the margin: a stricter adherence to some intertemporally flexible constitution of rules (e.g.public choice theorists, see Democracy in Deficit), a greater concern with social justice, et cetera. Some have much deeper criticisms of democracy and have in mind much more radical improvements in governance — see, for example, The Myth of the Rational Voter and “The Irrelevance of Economic Theory to Understanding Economic Ignorance.” A minority even take a backwards-looking perspective, arguing that institutions like monarchy are superior to democracy, because those with long-term interests in the survival of their dynasty are more likely to implement less extractive policy.

One major, if not the, leader of the school of thought that supposes monarchy to be superior to democracy is Hans-Hermann Hoppe. Two “must read” pieces of his on this topic are “The Political Economy of Monarchy and Democracy, and the Idea of a Natural Order” and “Time Preference, Government, and the Process of De-Civilization.” I’ve commented on Hoppe’s thesis before, and I’ve clashed with some readers, but while reading Sebastian Edwards’ Left Behind, I ran across a very concise argument as to why Hoppe is wrong,

Left Behind (Edwards)It is important that property rights are protected for all citizens and not only the elite. In that regard, a greater degree of democracy will tend to encourage efficiency and productivity growth.

— p. 13.

While there is reason to grant the notion that for-life rulers have an interest in preserving power, it’s a non-sequitur to jump from here to the conclusion that monarchic policy is therefore better harmonized with the rest of society’s ends. The truth has historically been the exact opposite, largely because conservation of power rarely requires fast paced economic growth. In fact, growth brings change, and change is oftentimes counterproductive for the ends of an absolutist regime. Daron Acemoglu’s and James A. Robinson’s Why Nations Fail gives specific examples — although, as an aside, I think the book contains a few contradictions —, but the logic is somewhat intuitive. Economic growth typically brings about changes in the distributions of wealth and power, away from absolutist institutions.

To “prove” his argument, Hoppe compares tax rates between the two kinds of institutions. “Compares” may be too strong of a word, because it’s actually an assertion. But, even if democracies, on average, implement higher tax rates, taxes aren’t the only policy relevant to economic growth. While in absolute terms the number of protected industries has probably risen, by merit of economic growth and an increase in our productive power, as a ratio economies ruled by democracies tend to be relatively freer. We don’t necessarily need to construct an intertemporal comparative static, we have plenty of current regimes that fit the two roles. Economically weaker nations, with more absolutist regimes, usually do not levy income tax and other duties on their citizens. Instead, they rely on tariff walls. Tariff revenues are usually more lucrative, because their populations are so impoverished that local tax collection doesn’t accrue sufficient income. We hardly consider these regimes more optimal than democracy, despite their “favorable” tax structures.

The reason why democracy correlates so well with economic growth and modernization is because it’s a relatively pluralistic liberal institution of governance. What this means is that in democracy a greater proportion of society can take part in governing, meaning that the institutions of law and justice reflect the ends of a greater number of people. Whereas in monarchies and other less pluralistic governments it’s easier for one group to extract wealth from another, in democracy this is much more difficult, and in fact more people are protected from these kinds of predation (although, this isn’t to say that it doesn’t happen). For democracy to be superior it isn’t necessary to assume that people have better intentions. It’s that the institutions themselves are more reliable for the defense of a set of rights that people are interested in protecting.

Does democracy cause higher growth? This is a difficult question to answer. There is plenty of evidence that suggests “no.” Plenty of modern democracies in emerging markets have not brought with them greater prosperity. In part, I think that many specific versions of democracy are incomparable, because there exist institutional differences. What this suggests is that growth isn’t aided by democracy per sé, rather it’s helped by gradual institutional innovation that builds checks and balances, while increasing participation in deciding how society should be governed. It just happens to be that in the United States, Great Britain, France, et cetera, these new liberal institutions were democratic in nature. Many governments try to mimic the organization, but without the prerequisite institutional progress.

Democracy has its shortcomings. Anything that is the product of the human mind will be imperfect, and there will always be room for improvement. This is why the public choice and sister movements command a wide following. Many people want institutional changes within the framework of democratic organization. Others want more dramatic transitions. I think we ought to let society decide for itself. But, democracy is not a step back. It’s true that maybe there was a small probability that an alternative pluralistic system of governance could have arisen in democracy’s place, but I’m not sure how it matters. Democracy came about because of a striving for pluralism, and it’s this pluralism that helps people defend themselves and improve their standards of living. Within this context, democracy was absolutely crucial for the development of modern civilization.

Choice in Currency

8 Replies

(Note: I can’t get Twitter embed to work, so a link will have to do.)

http://twitter.com/EsperanzAguirre/status/322066471138242560

Translation: Banks should go bankrupt and people should choose the currency they want their wages or rents to be paid in.

Esperanza Aguirre was the president of the Community of Madrid. Aguirre was taught by Pedro Schwartz at the Complutense. Schwartz enjoyed some recent popularity after his debate with Paul Krugman.