In a freed market, who will stop markets from running riot and doing crazy things? And who will stop the rich and powerful from running roughshod over everyone else?
Here's a pretty old post from the blog archives of Geekery Today; it was written about 14 years ago, in 2009, on the World Wide Web.
Q. In a freed market, who will stop markets from running riot and doing crazy things? And who will stop the rich and powerful from running roughshod over everyone else?
A. We will.
Sheldon Richman put up a nice piece last week for The Goal Is Freedom called Regulation Red Herring: Why There’s No Such Thing as an Unregulated Market. (Incidentally, while you’re reading Sheldon’s piece, be sure to check out the illustrative photograph of the Federal Trade Commission building’s awesome allegorical statue of government restraining trade.)
Sheldon’s point, which is well-taken and important, is that if
regulation is being used to mean
making a process orderly, or regular, then what radical free-marketeers advocate is not a completely unregulated market. For something to even count as a market, it has to be orderly and regular enough for people to conduct their business and make their living in it and through it. Government interference only seems necessary to regulate a market, in the positive sense of the word
regulate, if you think that the only way to get social order is by means of social control, and the only way for to get to harmonious social interactions is by having the government coerce people into working together with each other. But, as Sheldon argues:
Ludwig von Mises and F. A. Hayek pointed out years ago that the real issue regarding economic planning is not: To plan or not to plan? But rather: Who plans (centralized state officials or decentralized private individuals in the market)?
Likewise, the question is not: to regulate or not to regulate. It is, rather, who (or what) regulates?
All markets are regulated. In a free market we all know what would happen if someone charged, say, $100 per apple. He'd sell few apples because someone else would offer to sell them for less or, pending that, consumers would switch to alternative products.The marketwould not permit the seller to successfully charge $100.
Similarly, in a free market employers will not succeed in offering $1 an hour and workers will not succeed in demanding $20 an hour for a job that produces only $10 worth of output an hour. If they try, they will quickly see their mistake and learn.
And again, in a free market an employer who subjected his employees to perilous conditions without adequately compensating them to their satisfaction for the danger would lose them to competitors.
What regulates the conduct of these people? Market forces. (I keep specifyingin a free marketbecause in a state-regulated economy, market forces are diminished or suppressed.) Economically speaking, people cannot do whatever they want in a free market because other people are free to counteract them. Just because the government doesn't stop a seller from charging $100 for an apple doesn't mean he or she can get that amount. Market forces regulate the seller as strictly as any bureaucrat could—even more so, because a bureaucrat can be bribed. Whom would you have to bribe to be exempt from the law of supply and demand?
It is no matter of indifference whether state operatives or market forces do the regulating. Bureaucrats, who necessarily have limited knowledge and perverse incentives, regulate by threat of physical force. In contrast, market forces operate peacefully through millions of participants, each with intimate knowledge of his or her own personal circumstances, looking out for their own well-being. Bureaucratic regulation is likely to be irrelevant or inimical to what people in the market care about. Not so regulation by market forces.
If this is correct, there can be no unregulated, or unfettered, markets. We use those terms in referring to markets that are unregulated or unfettered by government. As long as we know what we mean, the expressions are unobjectionable.
But not everyone knows what we mean. Someone unfamiliar with the natural regularities of free markets can find the idea of an unregulated economy terrifying. So it behooves market advocates to be capable of articulately explaining the concept of spontaneous market order—that is, order (to use Adam Ferguson's felicitous phrase) that is the product of human action but not human design. This is counterintuitive, so it takes some patience to explain it.
Order grows from market forces. But where do impersonal market forces come from? These are the result of the nature of human action. Individuals select ends and act to achieve them by adopting suitable means. Since means are scarce and ends are abundant, individuals economize in order to accomplish more rather than less. And they always seek to exchange lower values for higher values (as they see them) and never the other way around. In a world of scarcity tradeoffs are unavoidable, so one aims to trade up rather than down. The result of this and other features of human action and the world at large is what we call market forces. But really, it is just men and women acting rationally in the world.
— Sheldon Richman, The Goal Is Freedom (2009-06-05): Regulation Red Herring
That last point is awfully important. It’s convenient to talk about
market forces, but you need to remember that remember that those
market forces are not supernatural entities that act on people from the outside.
Market forces are a conveniently abstracted way of talking about the systematic patterns that emerge from people’s economic choices. S if the question is, who will stop markets from running riot, the answer is: We will; by peacefully choosing what to buy and what not to buy, where to work and where not to work, what to accept and what not to accept, we inevitably shape and order the market that surrounds us. When we argue about whether or not government should intervene in the economy in order to regiment markets, the question is not whether markets should be made orderly and regular, but rather whether the process of ordering is in the hands of the people making the trade, or by unaccountable third parties; and whether the means of ordering are going to be consensual or coercive.
The one thing that I would want to add to Sheldon’s excellent point is that there are two ways in which we will do the regulating of our own economic affairs in a free society — because, as I have discussed here before, there are two different kinds of peaceful
spontaneous orders in a self-regulating society. There is the sort of spontaneity that Sheldon focuses on — the unplanned but orderly coordination that emerges as a byproduct of ordinary people’s interactions. (This is spontaneity in the sense of achieving a goal without a prior blueprint for the goal.) But a self-regulating people can also engage in another kind of spontaneity — that is, achieving harmony and order through a conscious process of voluntary organizing and activism. (This is spontaneity in the sense of achieving a goal through means freely chosen, rather than through constraints imposed.) In a freed market, if someone in the market exploits workers or chisels costumers, if she produces things that are degrading or dangerous or uses methods that are environmentally destructive, it’s vital to remember that you do not have to just
let the market take its course — because the market is not something outside of us; we are market forces. And so a freed market includes not only individual buyers and sellers, looking to increase a bottom line, but also our shared projects, when people choose to work together, by means of conscious but non-coercive activism, alongside, indeed as a part of, the undesigned forms of spontaneous self-organization that emerge. We are
market forces, and the regulating in a self-regulating market is done not only by us equilibrating our prices and bids, but also by deliberately working to shift the equilibrium point, by means of conscious entrepreneurial action — and one thing that libertarian principles clearly imply, even though actually-existing libertarians may not stress it often enough, is that entrepreneurship includes social entrepreneurship, working to achieve non-monetary social goals.
So when self-regulating workers rely on themselves and not on the state, abusive or exploitative or irresponsible bosses can be checked or plain run out of the market, by the threat or the practice of strikes, of boycotts, of divestiture, and of competition — competition from humane and sustainable alternatives, promoted by means of Fair Trade certifications, social investing, or other positive
pro-cott measures. As long as the means are voluntary, based on free association and dissociation, the right to organize, the right to quit, and the right to put your money where your mouth is, these are all part of a freed market, no less than apple-carts or corporations. When liberals or
Progressives wonder who will check the power of the capitalists and the bureaucratic corporations, their answer is — a politically-appointed, even less accountable bureaucracy. The libertarian answer is — the power of the people, organized with our fellow workers into fighting unions, strikes and slow-downs, organized boycotts, and working to develop alternative institutions like union hiring halls, grassroots mutual aid associations, free clinics, or worker and consumer co-ops. In other words, if you want regulations that check destructive corporate power, that put a stop to abuse or exploitation or the trashing of the environment, don’t lobby–organize!
Where government regulators would take economic power out of the hands of the people, on the belief that social order only comes from social control, freed markets put economic power into the hands of the people, and they call on us to build a self-regulating order by means of free choice and grassroots organization. When I say that the libertarian Left is the real Left, I mean that, and it’s not because I’m revising the meaning of the term
Left to suit my own predilections or some obsolete French seating chart. It’s because libertarianism, rightly understood, calls on the workers of the world to unite, and to solve the problems of social and economic regulation not by appealing to any external authority or privileged managerial planner, but rather by taking matters into their own hands and working together through grassroots community organizing to build the kind of world that we want to live in.
All power to the people!
Actually I agree with Sheldon completely – in fact, a potential problem of “free markets” is that they will be too strict, and result in oppression. For example, maybe the guy selling $100 dollar apples doesn’t just go out of business, but is permanently shunned and nobody ever buys anything from him again, and he starves to death.
I remember a friend of mine did web design work and worked for some pay-site like scriptlance.com. He told me that just completing one successful project and getting a good rating made him ranked above 90% of the people selling their web design services. It’s hard to escape the implication that if he had gotten a poor rating on his first project, he would not have gotten the chance to prove himself after that…
Discussed at darianworden.com /#
DarianWorden.com» Blog Archive » Essential Freed Market Reading:
Roderick T. Long /#
Except that a lot of trade would, or could, quite likely be anonymous or through portals like PayPal where a lot rests on the reputation of the intermediary rather than of the parties.
I thought reputation was paramount in free markets? For example, websites like the one I mentioned forbid users with bad ratings from signing up again. It’s not hard to see how this would work in real life – people identified with fingerprints, bioscans, etc as a condition of taking part in the “free” market, and excluded if they are unwanted for any reason.
Richard Williams /#
Interesting. @ Rad Geek: Is your left-libertarianism distinct in any meaningful way from mutualism or anarcho-syndicalism? The basic principles–free association, workers’ self-management, horizontal organization, etc.–all seem to be intact based on how you describe the “freed market”.
Rad Geek /#
Well, I am a mutualist, and a syndicalist (=), so the short answer is no.
Not all left-libertarians identify as mutualists (I personally tend to be on the pinko end of our particular ideological continuum), but some of us do, and I’m one of ’em.
(=) Probably, anyway, at least in one sense of the word. There’s the various distinctions to keep in mind between syndicalism as a revolutionary strategy, syndicalism as an end-goal, more and less minutely blueprinted versions of what worker control of the means of production is supposed to look like in practice, etc. (On which, I strongly favor the less-minutely blueprinted versions over the more-minutely blueprinted versions, I think that syndicalist organizing is a necessary part of revolutionary strategy but not the whole of it, and I’m happy to say that a fairly robust sort of worker self-management is one of my end-goals for what I would hope a free society might look like.) In any case, I’m a member of the IWW, working for the OBU and the General Strike, and I believe that in a free society we would see a big shift away from production organized by employer-employee relationships and towards production organized by worker self-management in unions organized on principles of grassroots participatory democracy.
Richard Williams /#
Well, I agree with pretty much everything you say about syndicalism. While I do not necessarily consider myself a mutualist, I DO consider myself an anarchist-without-adjectives a la Voltairine de Cleyre or Rudolf Rocker.
The reason I ask is that the more I read by authors who identify themselves as left-libertarians or left-Rothbardians, the more I become convinced that there is substantially more potential for cooperation between them and libertarian socialists than between libertarian socialists and people like (for example) Lew Rockwell. The key difference between the two seems to be the question of property rights–Lockean property versus possession–and since both systems embrace the ideal of free association anyway, it seems perfectly reasonable to assume that it would be possible for communities based on Lockean property and communities based on possession to coexist side-by-side. Do you have any thoughts on the matter?
Roderick T. Long /#
Yeah, but there’d be plenty of people who wouldn’t like all that screening, and in a free competitive context there’d be a market to supply them.
There are people who are highly risk-averse and who are willing to surrender a fair bit of privacy/anonymity in order to ensure that those they deal with do the same. There are likewise people who are highly attached to their own privacy/anonymity and would be willing to take the risk of others who are likewise. And there are various shades in between. I don’t see why there wouldn’t be markets willing to cater to all of these, as well as various savvy entrepreneurs trying to figure out how to negotiate mutually agreeable transactions across different markets.
Just like airline security: there are passengers who’d be willing to be strip-searched and cavity-searched so long as everyone else was too; there are also passengers who’d be willing to fly a plane where nobody was even metal-detected so long as they weren’t either. Under our current system neither of those groups is allowed to have what they want; a one-size-fits-all solution is imposed on everybody. Under a freed market I’d expect to see hyper-secure and hyper-lax airlines competing.
Roderick T. Long /#
And that opposition itself is really a spectrum rather than an either-or.
Richard Williams /#
Well, sort of. There is a clear dividing line between the two, though. A property rights system that enables the capitalist mode of production, wherein the means of production is owned by someone other than the actual producers, is Lockean; a similar system that does not do this is possessive. Whether the capitalist mode of production would predominate if Lockean rights were consistently applied is debatable; however, it seems hard to deny that the Lockean system makes this mode possible.
In the same way that no-state makes false-advertising “possible.” If it’s — as you say — debatable whether Lockean titles would allow for the systematic or statistically significant emergence of capitalist production and accumulation then there’s no substantive distinction to be made. After all what we’re arguing about here are suppression mechanisms. Nobody in this discussion wants such hierarchies to reemerge.
Those of us who support strict Lockean titles are simply more sketched out by putting courts, mobs and/or vigilantes in charge of making, applying and enforcing arbitrary distinctions in the infinitely complex context surrounding use/occupancy/abandonment/borrowing/loaning/service providing.
Richard Williams /#
If that’s true, then there’s even less difference between us than I thought.
That said, though, I’m not convinced that Lockean property wouldn’t result in the reemergence of the capitalist mode of production. If it doesn’t, then that’s great; no problem. However, by using use/occupancy as a standard for property rights, we eliminate the risk of such reemergence entirely.
In short: Why risk using Lockean titles when there’s a perfectly workable alternative that, when enforced, makes the capitalist mode of production impossible by definition?
Soviet Onion /#
Pure usufruct has the downside of preventing certain transactions from being graduated and using graduated measurements for the value of property in time (interest, renting versus buying and such), that don’t necessary lead back to a “capitalist system” that reduces people to dependence on that over the long term for their livelihoods, with no side options (basically a plantation economy). This leads to sub-optimal readings of people’s preferences (you either want it enough to buy it or you don’t even make the attempt) and preclude an entire swath of harmless exchanges from ever happening, thus decreasing the total wealth of society in the long run.
Usufruct also seems to presume a social order in which people are basically tied down to the same house or plot of land and not moving from place to place on frequent basis, because that would logically result in a tragedy of the commons full of dilapidated condos that nobody ever bothered to clean. Even Kevin Carson has admitted that he’s not sure how motels could logically work under an Ingalls-Tucker property regime.
Roderick T. Long /#
I actually don’t think motels are that much of a problem for the use-and-occupancy standard, since the landlord isn’t really “absentee”; tenants come and go, while the landlord keeps the place maintained, has it cleaned daily, provides utilities, etc.
One major objection to use-and-occupancy is that ordinary cases of rental have something important in common with motels: although opponents of absentee landlordship often talk as though nobody would ever rent if they could own, there are plenty of cases where it’s just more convenient to rent (as with a motel, albeit on a longer term). To take an example: suppose I’m offered a one-year visiting professorship in Sargasso City. So I need an apartment there, but just for a year. I’d have to spend a lot more money to buy an apartment than to rent one, and I don’t want to have an apartment there permanently, nor do I want the hassle of trying to sell it at the end of the year. So I’m perfectly happy to sign a rental contract, and my prospective landlord is too; and now some third parties come along acting like a state and demanding the right to interfere.
There’s a continuum of cases from motels through ordinary rentals; it seems to me there’s a presumption in favour of letting the parties involved decide where to draw the line.
As opposed to an apartment complex or house you build adjacent to your own?
But that’s precisely what Lockeans are arguing for. If the agreement the original property owner is proposing is too sketchy, don’t agree to it.
Jeff Davis /#
I’m skeptical about that. Maybe Hyper-Lax Airlines would exist, but there’s no guarantee that it will fly to where I want to go. So I’m stuck with four options: (1) take collective action to pressure Hyper-Secure Airlines to relax its security measures, (2) start up my own airline, (3) don’t go on my trip, or (4) put up with it. The first option only really works if the population of people who want hyper-lax security is big enough that it’s worth it for Hyper-Secure Airlines to change its security policies, thus alienating all those customers who want hyper-security. The second option … well, maybe some entrepreneur will come along and start up a new lax airline to service my route, but again, that assumes there is a big enough demand to make it worth all that effort (and the barriers to entry in air travel are huge compared to, say, selling apples). So I either put up with an ordeal that I find profoundly objectionable, or I cancel the trip. Neither option is the end of the world, but it seems to me that there are other, non-market ways to organize society that would result in better outcomes.
Richard Williams /#
Mutual credit cooperatives (Credit unions? People’s banks? Whatever; a rose by any other name would smell as sweet) would allow people to extend payment over a period of time while keeping interest rates low enough to cover cost of operation and nothing else.
On motels: what Roderick said. The owners of the motel would be the people who run it, and they would be charging occupants for the services provided (maintenance, etc.), not for the rooms themselves.
Richard Williams /#
That’s an interesting problem, and I’ll need to reflect on it some more. However, I’ll offer this tentative solution: You could make an agreement with the original owner of the apartment to pay however much is necessary to buy the apartment for a year, at the end of which you would vacate the apartment and would therefore no longer be using it. At this point, use ownership would be transferred back to the original owner since, in the absence of anyone else using the apartment, he could legitimately claim to be using it as a store of his labor.
I’m not a Lockean because I think that once the labor stored in capital or improved land has been compensated in full (determined by agreement), then only use can determine ownership. There is no inherent connection between labor and becoming the owner of the land upon which you labor – if one does, it is for other reasons, i.e. because that will be their personal property, like a home. If nobody values one’s labor, then one cannot claim that it demonstrates their ownership of the land or resources involved.
In the case of a motel, I would suspect that people would pitch in to finance the construction of motels in their own communities, where it is seen as in their best interest, and then the only payment the travelers would make would be for the services. Alternatively, whichever group of people makes an ‘investment’ in motels, would be paid back by the travelers’ fees initially until the agreed-upon (with the people who had done the work) value had been paid off, although this might cause problems with travelers waiting for it to be paid off before using it. Or perhaps construction workers would be given other incentives. Either way, I don’t see how charging rents indefinitely in exchange for the one-time act of building the motel (separate from the amenities) can be justified.
Borrowing/renting could still exist in this framework: you would pay the lender the cost of their stored labor (again, by agreement, with factors such as free competition and social pressure keeping it from being oppressive), and then you would be the owner of the thing until the time that you had agreed you would leave/stop using it (and of course you would have to compensate them again if you damaged it, but it would still be yours while you’re using it). However, I would also argue that if one, say, builds an apartment complex, thereby restricting people’s choices as to where to settle, they are not entitled to tributes – then it was just wasted labor. This will no doubt become irrelevant in an anarchist society, even if it were Lockean-leaning, but is something to keep in mind when we think of how to address current property distributions.
I always found that Sheldon was particularly good at making points for the free market, points that even anti-market people could relate to, and here he goes again with this post. Good work. It is already translated into french.
Roderick T. Long /#
Well, yes; I’m a Lockean, after all.
Roderick T. Long /#
That’s fine by me, but how is “buying the apartment for a year” different from, well, renting it?
Richard Williams /#
I’m not certain that it is, or even that it should be.
The goal of possession is to ensure that labor is not exploited and that the product of a person’s labor ends up in the hands of the laborer, not the hands of a capitalist. However, the original owner of the apartment isn’t trying to exploit your labor; he isn’t claiming that anything you make while in the apartment is really his. So, I don’t see why an advocate of possession (like myself) would see a problem with this arrangement.
Roderick T. Long /#
Well, in my experience most advocates of the occupancy-and-use standard do reject absentee landlordship.
If you accept it, where do you draw the line so as to stop short of the labour arrangements you regard as illegitimate? Suppose that instead of charging a flat fee, the landlord simply asks you to agree to pay some percentage of your earnings for that year. Would that be legitimate?
Richard Williams /#
Hmm. That situation is verging upon exploitation… I seem to have overlooked an important function of the occupancy-and-use standard. In addition to rendering wage slavery and exploitation of producers by the owners of capital impossible, it is also designed to ensure that the creator of a house (for example) receives no more than the actual value of his labor (meaning the at which the house can be sold on the market). This serves to decrease the likelihood of excessive accumulation, which, over a long enough period of time, could pose a threat to liberty. The situation that I proposed (wherein you buy the apartment for a period of time) doesn’t seem to avoid this issue, though.
If an ownership standard is going to effectively serve the purpose of ensuring that each person receives in proportion to the amount of labor contributed, it needs to avoid situations like the one I proposed earlier; however, it also needs to have the capacity to serve the needs of those who, like yourself in our hypothetical situation, would prefer to rent rather than buy.
I need to give this some more thought. I believe you’ve provided me with a subject for my next blog post. Thanks for that. ;)
Is it really the Lockean system that makes the mode possible or the failure to apply it consistently? As crazy as this might sound from a professed mutualist, the problem with capital in capitalism, it seems to me, arises precisely when it is not rented and labor is rented instead.
Ah, but which market? The price will no doubt vary over time. If I build nice house in a shitty abandoned neighborhood it’s not going to be worth very much to me right now, but if my investment inspires others to fix up the surrounding houses then the price will rise over time. (Building the house isn’t enough, it being occupied additionally and perhaps most significantly improves the neighborhood.) If I can charge rent then I have a strong reason to make the initial investment in the abandoned neighborhood. If I can’t charge rent then my labor is comparably wasted there as opposed to elsewhere, or at least inefficiently reimbursed for the wealth creation I’ve taken part of.
The only options I can see left for reclaiming the abandoned neighborhood are to either need to rally a huge simultaneous collective investment in the neighborhood and/or leave the house(s) empty for a few years. Suboptimal to be sure. And even then you’re getting far less money back then you would for comparable parts and labor tearing down and replacing a fully functionable house in a good neighborhood.
Richard Williams /#
Interesting argument. However, a society characterized by a consistent application of Lockean property could still run across the issue of ownership of capital enabling a person to rent it out multiple times while still retaining ownership, thus deriving much more wealth from it than could be derived by simple sale of the capital to a cooperative of workers. As a result, the workers’ labor would still be exploited to some degree. Admittedly, this is a side issue that is relatively unimportant next to the elimination of wage slavery that your argument entails.
The best way to resolve the question of whether consistent application of private property leads to a better result than possession is to put each into practice. Overthrow the State, eliminate its universal standard of inconsistent Lockean property rights, and let individual communities decide for themselves which system they wish to adopt.
Richard Williams /#
The price for which a house can be sold on the market is based on certain expectations–how long the house will last, what the quality of living inside the house will be, etc. If no labor is expended on the maintenance of the house, the value of the house steadily drops over time, consistent with expectations that the house will eventually be rendered unlivable.
The point is, whatever the market price of the house is now–or tomorrow, or a year from now, or whenever the owner decides to sell it–is the actual value of the labor put into the house.
I can’t help feeling that I’m missing an important part of your objection, but I’m not entirely sure what it is. If I am, call me out on it, alright?
Roderick T. Long /#
It seems to me that the charge of exploitation in either the rental case or the labour case should depend on what the available alternatives are. If there’s a scarcity of workers’ cooperatives, it might make sense to regard workers as exploited when they’re compelled by circumstances to work for an employer. If it’s difficult to become a homeowner, it might make sense to regard tenants as likewise exploited. But as long as the other options are available, so that the choice to become a tenant or an employee is based on personal convenience rather than systematic economic necessity, I don’t see what’s exploitative about it. (If I pay my hot dog vendor twice as much as the guy across the street charges, because I don’t feel like walking across the street, am I exploited?)
So the real question is: what explains the scarcity of workers’ cooperatives and the difficulty of becoming a homeowner? As far as I can see, the principal explanation has to do with various government interventions that are inconsistent with Lockeanism. So I can’t see that Lockeanism is the problem.
Of course you may reply that Lockeanism doesn’t guarantee that homeownership and workers’ cooperatives will be readily available. Well, sure, that’s true, in the same sense that it’s true that anarchism can’t guarantee that society won’t descend into a Hobbesian war of all against all. No social system can actually “guarantee” anything; all we can go by is likelihoods — and from what I can see, the likelihoods favour the consistent application of Lockeanism as a reliable way to make workers’ cooperatives and home ownership readily available. (Perhaps ironically, no one has done more to show this than Kevin Carson — himself an occupancy-and-use guy rather than a Lockean.)
Roderick T. Long /#
P.S. – I meant what I said above to apply to ease of access to capital generally, not just to home ownership.
I’m sympathetic to your consequentialist argument but it seems to prove too much. After all, can’t all instances of selling low be objected to on the grounds that the seller was “inefficiently reimbursed” now that it is clear that the market has changed (If she had only known!)? And why should suboptimality be anything more than a secondary consideration? Plenty of things are suboptimal yet we can reject them on other grounds, e.g. murdering all of one’s enemies may be quite optimal and efficient.
But doesn’t this run up against the insight that the market value of a capital asset in a free market will tend to equal the discounted value of the rentals plus the scrap value?
I certainly hope my argument doesn’t come across as one about wage “slavery”. After all, working for someone differs from slavery in extent, duration and voluntariness. Such hyperbole hardly seems necessary, IMO.
But surely not all alternatives are acceptable if only they are voluntary or available in an environment of alternatives, are they (e.g. voluntary slavery)? It strikes me as necessary but not sufficient. I also suspect that to some degree the availability of alternatives themselves might depend on what is deemed acceptable.
Richard Williams /#
I’m not entirely sure what you mean by “scrap value”–do you mean the value of the additional labor put into the house for the sake of maintenance? If so, why do you think the market value would tend to equal this plus the rentals? If this is true, though, then yes, it would eliminate any remaining objection I might have to your consistent version of Lockean rights–although I would still want to see them put into practice alongside possession rights to see which really works better.
Does it? When I say wage slavery, I’m not referring to a situation in which people have the opportunity to work for themselves but instead choose to work for a capitalist (for some strange reason). I’m referring to a situation in which they have no choice but to work for a capitalist or to starve (or any of a number of other unreasonable alternatives). There is the fact that the wage laborer gets to choose his/her employer, but does that really make much of a difference?
Exploitation occurs whenever someone receives more or less than their labor’s due. So, if the owner of a house rents a house valued at $150,000 out to 10 people in a row at $20,000 dollars each time, each of those ten people are being exploited out of $5000 minus the value of the labor used to maintain the house. (This is a voluntary exchange, of course, so it’s not as big a deal as either of the two cases you outlined, the first of which I would regard as wage slavery. Still, an exploitative exchange does divorce labor from its proper reward [or, in this case, grants too great a reward for too little labor], which I’m sure you’ll agree is a bad thing and something that should be avoided if possible.) That said, if what Neverfox is saying (as I understand it) is true, the value of the labor used to maintain the house would tend to equal about $5000, so there would be no exploitation at all.
No social system can actually “guarantee” anything; all we can go by is likelihoods
I agree completely. The reason that I favor possession is that I believe it would be more likely than Lockean property to make worker-owned cooperatives and homes readily available while making exploitation less likely. However, based on Neverfox’s arguments, I believe I may have underestimated the potential of consistent Lockeanism.
Charles, that’s one of the best posts I’ve ever read.
The point is that in that situation forbidding rent forces them to sell low. If someone has options and yet chooses to sell low then they’ve evidently been reimbursed in the form of whatever subjective convenience selling low in their context provides for them.
In your example the point wouldn’t be that the seller sold early, the point would be that the seller was forced to sell early. My example is a little trickier because the seller can still sell at any instant in time, but is being forbidden from selling (in a certain sense) over time.
And I was disagreeing with the utility of that model.
Yes, ultimately any house’s value will decrease to zero over long enough time. But that’s a strike in favor of Lockeanism because it proves that the value I can wring from my labor by renting it is finite. So why don’t we take the integral of the various rent prices charged over the years and call that the actual value of the labor put into the house?
Of course there’s uncertainty to such evaluations when you’ve just built the house and that element of risk (plus plain ol animalistic time preference and the labor in maintenance) makes up the difference between the rent one could end up charging and the price you might charge for the whole thing.
However in the common situation I presented the opposite is true. The value of the house is partly dependent upon the investment in the surrounding neighborhood (which is partly dependent upon the occupancy of the house). The price that the owner can charge for outright purchase or for rent varies over time and can go up dramatically in the semi long term if there’s occupancy.
This is true all the time if you look at apartment complexes or condos, the owner may want to ultimately sell all the units, but getting tenants first drives up the price so dramatically that the owner is willing to extend a bunch of leases.
(I should note that all this talk about the economic nuances of rent, condos, homeownership and gentrification leave me feeling more than a little greasy and class-traitory. But as loath as I am to admit it, these relations are obviously not inherently tied to their role in our present context and the associations this poor kid consequently has with them.)
Richard Williams /#
Okay. In light of the insights generated from this conversation, I’ve come to a somewhat surprising and probably controversial conclusion–actually, two conclusions, the first of which leads me to the second.
First, the common interpretations of Lockeanism and possession both suffer from some major inconsistencies.
Second, once those inconsistencies are ironed out, there is literally no difference between the two property systems.
I’ll start with possession.
Earlier in this conversation, I somewhat equivocally submitted the idea that occupancy and use rules would allow this scenario:
However, Roderick immediately pointed out that this scenario was, for all practical purposes, no different from the Lockean idea of rent. I recognized this as the truth and, worrying that this scenario could result in exploitation (labor receiving either more or less than its due), effectively said, “Well, maybe not.” I wasn’t sure why not, though; as far as I could tell, a consistent interpreatation of use and occupancy rules would allow for the scenario I outlined, whether most advocates of possession recognized it or not.
In later comments, arguments by Neverfox and William refuted my claim that Lockean rent was exploitative. Any discrepancy between the value of a house sold on the market and the value gained by renting the house over a long period of time can be explained as resulting from a combination of labor added to the house for the sake of maintenance and external changes that cause the house’s subjective value to rise. As William said,
The same argument could be applied to capital generally as well.
So, a) a consistent interpretation of possession allows for an arrangement indistinguishable from Lockean rent and b) this arrangement is not exploitative.
Neverfox’s blog post shows that, contrary to the common interpretation of Lockeanism, Lockean property rights do not result in the capitalist mode of production if they are applied consistently. To give an overly simplified version of the argument, if employees are responsible for crimes they commit using company material, then logically they must also be responsible for products created using company material. So, even if a society were to regard a cooperative of workers as not owning the capital used to produce their products, they would still have the right to own those products as long as they paid the owner of the capital for the use of his products. Possession allows an identical arrangement in which the workers pay the creator of capital for the capital over a period of time rather than up front, and the argument used for house/apartment ownership earlier can also be used for capital ownership.
So, a) a consistent interpretation of Lockeanism leads to workers receiving the full product of their labor and b) this system is practically indistinguishable from the system resulting from possession.
Maybe I missed some crucial point; if I did, I’m sure someone will point it out. As far as I can tell, though, this indicates that the only difference between consistent Lockeanism and consistent possession is one of terminology–which isn’t really a difference at all.
Roderick T. Long /#
Fine, but in the context we were discussing it was being assumed that workers’ cooperatives, for example, aren’t exploitative. So if workers’ cooperatives were freely available as an alternative to wage employment, it seems to me that would undercut any charge that wage employment was exploitative.
EXACTLY. (Though with a little imagination it’s not hard to identify some non-strange reasons why someone might want to do that.)
This seems to me to stretch the meaning of “exploitation” unduly. The concept of exploitation seems to imply that someone’s weakness or disadvantaged situation is being exploited. If someone isn’t weak or in an especially disadvantaged condition, but simply chooses, for their own reasons of convenience, to enter into an arrangement in which they receive less than what you consider their labour’s due, how is anyone exploited? If I give the local hot dog vendor a bigger than usual tip, have I been exploited?
I don’t understand how “proper reward” is being determined here. It seems to me that forcing someone to buy or sell at a price different from what they’ve mutually freely agreed to is exploitation.
I haven’t read Neverfox’s blog post yet, so apologies for replying to the one-line summary rather than the real thing. But “responsible for” and “rightful owner of” seem like different concepts. If I’m a doctor performing surgery on you, I’m certainly responsible for the alterations I produce in your body, but that doesn’t mean I own them.
Discussed at www.eridu.org.uk /#
Liberty Alone » Blog Archive » We are the market:
There is a great deal to respond to here so I may take this to my blog since I need something new to write about anyway. But here are a few replies:
No, I mean the depreciated value of a capital asset after it has been used, i.e. after it has provided some capital service.
Capital with market price C, yielding K units of services per year for n years, with a scrap or salvage value S, market value of K equal to R and an interest rate r, would have this relation:
C = RKa(n,r) + S/(1+r)^n where a(n,r) is an ordinary annuity of one.
This relation obtains, assuming competitive conditions, because of arbitrage between purchase and lease markets.
Yes, but then we need to distinguish between active and passive uses of capital. I’ll say more on that, I think, in a follow-up.
I’m not so sure I can jump on board with that perspective. I’m mostly unclear on your use of the word “forced”. Do you mean “forced” like “aggressively forced” or just “fewer options”?
It looks like your example presupposes that the investment needs to or would take place at all: that the investor somehow stumbled into this situation where he thought he could sell over time and now he’s being told something else.
The seller isn’t being forced to sell as much as she would be assessing her options in a different context. That may mean the house doesn’t get built. That may be emotionally hard to swallow (who doesn’t want to see a neighborhood revitalized in principle?) but, like Roderick’s hot dog vendor example, am I forced to buy a hot dog from one vendor because the other vendor closes down? I have a hard time seeing fewer options as aggression but I’m not sure if that’s even what you mean.
Yes, this is exactly what I was getting at above with the capitalized value of the asset.
Ah, and this is where I want to spend some more time fleshing out an answer. Stay tuned.
Fair enough given your clear definition of exploitation. What I should have said is that lack of exploitation in the landscape of choices doesn’t make all of the options necessarily juridically valid (for other reasons), thereby it seems that pointing out the option is superficial, if that is found to be the case. If you will forgive the heavy-handedness of the analogy, it seemed like your argument was that if only you provide alternatives to say voluntary slavery then voluntary slavery doesn’t need invalidating on its own merits. That is probably a stronger interpretation that you intended. I should add that I don’t mean this analogy to claim that employment contract is an involuntary slavery contract. But only that if the former has juridically invalid elements as the latter does, then pointing to alternatives seems irrelevant; just point to the invalid elements and be done with it. Of course, it’s clear that it’s not obvious that the employment contract does contain inconsistent elements and thus my “research”.
No need to apologize. I’m used to having my readers be few and far between. I’d be honored if you read it, however. I expect that I’ll learn a thing or two.
I agree that they are different concepts. However I’m really saying that when there is a question of who is the “rightful [first] owner of” something newly created, the answer can be provided by knowing who is “responsible for” creating it and that will require an examination of the contractual landscape, i.e. who hired what. In other words, not all responsible actions create homesteaded property titles (because that depends on meeting the other conditions for homesteading, like being unowned) but all homesteaded property titles link back to responsible action.
When there isn’t a question of new, previously unowned property in need of an imputed owner, such as in your surgery example, then there isn’t a problem. In that example, the “product” is a service; the patient and doctor are not entering into a business or firm together but rather a customer-provider relationship. This distinction between product as new property and product as service is made clear primarily by the later titling of the product as something to be sold or treated de jure as a new piece of property needing a new imputed owner.
A nose after a nose job or house after a paint job doesn’t fit the criteria of new, previously untitled property but a car coming off an assembly line does; it’s not just considered a collection of titles to previously-owned car parts and steel. Nor does it matter (wait for the pun!) who owned the matter the product is made of because it seems to me that if two people come together in a partnership to build something, one owning the tools and the other owning the materials, they both own the result even though only one owned the matter that went into it. What seems to me to be the best explanation of what’s happening here is that they were both part of the same “conspiracy” to create something that is then involved in an act of homesteading by both of them, as the joint party that created it in a clearly intentional act of first use.
Discussed at www.velcro-city.co.uk /#
Links for 15th June 2009 | Velcro City Tourist Board:
If you are interested in reading and assessing some of David Ellerman’s research concerning responsibility as it relatives to property, here are links to “The Market Mechanism of Appropriation”, “Hume Implies Locke” (this one gets a bit heavy) , “Towards a Modern Theory of Property” (this is higher level and gets into the employment discussion), and “On the Role of Capital in “Capitalist” and in Labor-Managed Firms”.
I would love to hear your Austro-Athenian take on his work sometime and if you think there is libertarian promise here or just a dead end.
Well obviously in this discussion we’re talking about “aggressively forced” because the disagreement here is a distinction in implementation between suppressing usury-seeking towards infinite accumulation through the coercive force of uniform law (or mob vigilantism) versus through non-coercive realities internal to the market.
If you want to outlaw rent then you’re advocating aggressive force against those who voluntarily engage in such between themselves (while still consenting and retaining agency, we can nuance, over every moment in time).
If by “you” you mean me, I certainly don’t care to outlaw rent. But in the wider context of the debate about rent that has gone on for decades in the individualist anarchist movement, I have to think you beg the question against the anti-rent libertarian to say that they want to “outlaw” it or are “advocating aggression”. Isn’t that a bit unfair? Even if, in the end, they are mistaken, the arguments I hear and read (e.g. Tucker) certainly seem to be coming at the question from the point of view of finding support within libertarian thought properly understood (from their perspective) such that it would place the practice of usury or rent outside the law.
I think that’s one reason it didn’t strike me as obvious when you mentioned force because from the sincerely libertarian anti-rent perspective, I imagine, the lack of a rental option is a reality “internal to the market” as they see a properly (moral?) market.
I sympathize with the anti-rent advocate’s situation because whenever I talk about my concerns with the way the employment contract as they relate to property rights is interpreted in our current legal system, I’m sometimes accused of wanting to “outlaw” non-coercive voluntary activity. But my sincere purpose is not to do that and if I ever thought I was in danger of doing that, I would dump it fast. But my intention is to determine exactly if one can derive an indictment of the traditional master-servant employment contract from libertarian principles. If I can’t find that link, so be it.
That “you” wasn’t directed. I appreciate the distinction between what’s moral and what’s legally enforced in a system even if I think it’s an area hard to fully sketch out for anti-rent arguments, but I guess I’m used to dealing with anti-rent arguments that are ultimately consequentialist and don’t care if it’s initially non-coercive and voluntary in circumstances as the fear is that it will lead to capital accumulation to the point of being de facto statism. The argument seems again and again to be one of suppression mechanism, whether to outlaw it through force or move to the position that said problem of accumulation isn’t actually emergent in a freed market that has instances of rent.
Sheldon Richman /#
First, thanks for the plug and analysis of my article.
Second, this is a great and badly needed discussion.
Thanks, Rad! Thanks all.
Richard Williams /#
The price for which the product of one’s labor can be exchanged on a market free of coercion is the proper value of one’s labor. Your hot dog example could not be called exploitation because it was the result of such a market exchange.
At first, I thought that the differences between the price for which something is exchanged on the market and the total income it generates when rented out over a long period of time might be an indication that some form of exploitation results from rent. However, that discrepancy has been explained. So, in conclusion, you’re right. Exploitation, as far as I can tell, is impossible in a truly voluntary exchange where no coercion is present to distort the results of the exchange.
I certainly hope that my earlier argument against rent didn’t come across as an argument that it should be outlawed through force. If an anarchist society were to “outlaw” rent, the only way they could do so would be by mutual agreement–essentially, a bunch of anti-rent anarchists would get together and form a community, saying, “If anyone wants to join our community, they must be opposed to rent.” Later, if any of them changed their minds and decided rent was okay after all, they could either convince the other members of their position or secede from the community to form their own community (or not).
Exploitation, as far as I can tell, is impossible in a truly voluntary exchange where no coercion is present to distort the results of the exchange.
Of course people like Kevin Carson argue that current property regimes and the dominance of hierarchical big-box retailers and huge corporations is due to past coercion like the enclosure of the commons and such. I don’t know if that’s true or if it’s just wishful thinking on Kevin’s part, but it is an interesting argument and a subtle critique of what you’ve said.
But the problem is the distinction and interaction between communities. Separate definitions of property make trade between systems impossible, and they do create serious issues when it comes to abandonment. If an anti-rent community borders a lockean community then what of the house that a lockean landlord is seeking to rent again to new tenants. By the anti-rent community, the title to the house has been ABANDONED. And hence it can be homesteaded.
The problem is part of the more general problem that we live in a world without frontiers or unclaimed property. Every last inch of the Earth has been partitioned and assigned in title. And our mass society is such that even if we were to dissolve all existing titles, it would simply be impossible to return to the sort of context that the early individualist anarchists were speaking to.
Richard Williams /#
I agree with Carson that some of modern exploitation is the result of past coercion. However, I also believe that its continuation is dependent on continuing State coercion, such as (but certainly not limited to) the enforcement of a universal property standard that does not allow communities to decide what property systems to use for themselves.
Not necessarily. The items being traded would simply have to be governed by the rules of the community from which they came. An anarcho-communist community could trade with an individual in an individualist anarchist community; all members of the anarcho-communist community would have to agree to the trade, of course, but it would certainly be possible. Where the issue is Lockeanism vs. possession, trade doesn’t differ enough between the two systems to cause problems.
I actually don’t think that this particular situation would be that much of a problem. If the anti-rent community were using possession as its property standard, it would most likely regard either the landlord or the tenants as the rightful possessor of the house, so there wouldn’t be any occasion on which the members of that community would be justified in seizing said house even by its own standards. If it were a Lockean community that had just decided rent was a bad idea, then they would regard the landlord’s claim of ownership as legitimate anyway. However, in the inevitable case of a situation arising where competing property systems are truly in conflict, the parties involved could always resort to third-party arbitration.
Roderick T. Long /#
That’s what I don’t see. In both cases, some stuff that A owns has been rearranged by B with A’s permission, and without A having surrendered title to the stuff. In neither case does there seem to me to be any “new, previously untitled property” coming into existence.
You miss my point. The house sits fallow for a year or two (or even just months) after being last rented. The original owner and individual who labored to create the house is now several steps back in the possession ladder and the former tenants make no claim to ownership.
Richard Williams /#
“The house sits fallow for a year or two (or even just months) after being last rented. The original owner and individual who labored to create the house is now several steps back in the possession ladder and the former tenants make no claim to ownership.”
Even in this case, I would regard the original owner as the rightful possessor(and, therefore, the person with the right to exclude others from the house) in the absence of any other possessor. However, other advocates of possession may not agree with me.
In the event that an individual from the possession-based community moved into the house without the original landlord’s permission, the two communities would have three options: violence (a very unlikely choice for obvious reasons), third-party arbitration, or the creation of a property standard that both communities regard as relatively fair to be used in resolving present and future property disputes between the two communities. Much as individuals came together into communities that enforced either Lockean or possession property in order to resolve ownership disputes between each other, so could communities come together in federations to enforce some mutually acceptable standard to avoid having to resort to violence or repeat arbitrations.
I got essentially this same question from Stephan and I admit that I don’t have a fully worked out argument for the difference. It seems plausible to me that there is a difference to be found however and I’m working on thinking of ways to clarify it. In the meantime, I’ll be waving my hands about mostly. But here are a few potential starting places and intuition pumps:
The most literal and empirical perhaps is simply to appeal to the fact that we seem to actually treat the car like a new piece of property in a way different from the new nose. Our institutions literally title the new car. I don’t like this argument as much because it can be argued that it is too positivist and its conflated with the state.
Next, one can look at the opposite end of the spectrum. If you give me use of your car (no explicit limitations), I can proceed to disassemble it and return a pile of scrap to you, you aren’t likely to be satisfied with the knowledge that you still own all the parts. I suppose you could argue that I should have been explicit and thus you really must be satisfied in a legal sense with the outcome, but like debates over caveat emptor, it isn’t a cut and dry conclusion. In other words, I think we intuitively see certain transformations as being different enough as to consider the old property in the parts as abandoned and the property in the new emergent concept (the car) to be acquired. The weakness of this argument however is that the same could be said of the nose. Yet, at least it puts the “rearrangement” idea on the defensive, I think.
Finally, and this is the one I think most promising, there are differences to be found in the broader context by looking at the intention behind the contracts and the implicit boundaries of the firms involved.
For example, let’s say that you and I decide to start a birdhouse business together. I own some wood and nails and you own a hammer. We “rearrange” my wood and nails and then take them to the market to sell. No contract makes any explicit reference to ownership of the birdhouses to one of us or the other, however there is clear intent that the endeavor is cooperative and that we are, to any reasonable interpretation, a “firm” or “partnership” in the birdhouse business. Who would you impute the ownership of the birdhouse to should a dispute arise in the marketplace?
If, however, I decide that if you want something done right, you better do it yourself, I might instead rent then hammer from you. This would clearly signal that we are not in a partnership but rather I am your customer and no more. I go on to build the birdhouses with your hammer and my wood and nails. In this case, I think it is clear that ownership of the birdhouses (in the absence of any explicit transfer to the contrary) should be imputed to me alone. To make the previous example more similar, let’s say that our partnership involved me doing all the hammering and you directing how I should use the hammer so as not to break it. Likewise, in the rental case, you might tell me what I am or am not allowed to do with it.
I think this intuition pump shows that there is something more than just identifying who owns the atoms and molecules that make up the final product. I think one has to more closely examine the contractual landscape and the cooperative intention: Are we signaling merchant-customer or partners? Some of this same kind of thinking is involved in the long history of differentiating independent contractors from master-servant relationships and partnerships. They can all be seen has sharing enough similarities to be lumped together, yet we seem to “see the cat” as the Georgists would say, when push comes to shove.
If this is right, when a firm is indicated, I think it serves as a sort of sink for previous property rights for the parties involved internally that are essentially destroyed in the “heat of the kiln” of production and that the (net) property that flows across the boundary must be have a fresh owner imputed. In other words, firm boundaries create new opportunities for homesteading. This seems to appeal best to our intuition about the two scenarios and allows us to best deal with the intention to cooperate jointly as differentiated from merely trucking and bartering.
Taken together, I think these hand-wavings might help eliminate the weaknesses of each taken alone. What do you think? Do I have something? The start of something?
If I may interject, isn’t Richard saying that different pieces of property would tend to fall in one or the other legal jurisdictions which would tend to settle the matter in a more definite direction depending literally on spatial-temporal data (e.g. Lockean PDA X only answers calls in the East side of 31st street)? I think the discussion is in danger of you both talking past one another without a clearer picture of how you both view property dispute resolution and enforcement in general. I don’t want to assume that you both have the same conception of dispute resolution in anarchy but what that conception is is likely to drive your conclusion about the question at hand.
Richard Williams /#
Exactly. Two groups–a community and a private defense association (which, as far as I can tell from what I’ve read, are very similar concepts; a community is basically a customer-owned PDA) would negotiate some manner of determining which had jurisdiction over pieces of property, with an agreement based on location being one of the most likely outcomes simply due to its practicality. Thus, an anarcho-communist community and an individualist anarchist (or even anarcho-capitalist) PDA could live side by side and engage in trade without either resorting to violence.