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Re: MACHAN'S BOMB-THROWING, GUN-NUT LIBERTARIANISM
I do enjoy reading your postings, you flame so much better than most.
That said, I think you fail to acknowledge a real phenomena. Increasing
returns is a phenomena that hinders the use of html in email, a phenomena
that hinders competitors to html in web browsing, hinders competitors to
discusses the theory.)
The problem is that the body of theory that supports increasing returns
theory, while theoretically sound (even brilliant in the writings of Brian
Arthur) is a body of theory which lends itself to justifying actions which
are motivated by corruption and avarice. Tarriffs are almost never
motivated by sound reasoning about economics, they are motivated by
corrupting influences, yet increasing returns theory offers a pretense to
cover the actions of the corrupt.
Despite that, we should not attack the theory, which is mathematically well
founded, as it will make the attacked look good. Instead we must settle for
the more difficult and more accurate argument of saying, ``yes, increasing
returns occur, but you impose tarriffs (or fail to enforce anti-trust laws)
because you got a campaign contribution and are corrupt.''
John Robert BEHRMAN wrote:
> Tibor MACHAN's piece appeared in THE HOUSTON CHRONICLE last week. In it
> he asserts Microsoft's or any corporation's virtually sovereign right to
> conduct business free of any and all government interference. It is not
> clear whether such interference is feckless or just loathsome. But, I
> would hate to be in Microsoft's shoes when they walk into Washington's
> Juvenile Hall for white-bread corporations having violated their old
> The WALL STREET JOURNAL echoed these sentiments with words to the effect
> that, short of selling munitions to Iran or Iraq, Microsoft or any firm
> at any time should be free to engage in monopolistic practices. This is
> a defense of Microsoft today which has nothing to do with digital
> technology, since it applies just as well to Standard Oil a century ago.
> The argument makes no useful distinction between "technical innovations"
> and "innovative marketing" practices.
> The "increasing returns" from technological progress have long been seen
> as providing a "positive feedback" throughout the economy with benefits
> far outweighing temporary "monopoly rent". This argument was used from
> Hamilton's day through the 1920's to justify a high industrial tariff
> together with all the federal police and a very big civil war required,
> in part, to enforce it. Since the 1930's the increasing returns argument
> has been used to justify massive federal outlays and financial
> guarantees for dams, power plants and other TVA-type construction. Now
> comes MACHAN and some other Libertarians with a clever argument that
> "increasing returns" justifies waivers, exceptions, or repeal of almost
> all common carriage regulation and anti-trust regulation.
> Here are the flaws in this truly nutty but, indeed, novel line of
> First, "increasing returns" are hard to seperate from just bad
> accounting in very large organizations with a military-style "table
> of organization" but little or no understanding of the marginal
> cost and marginal revenue of whatever they do. Such organizations
> may be large private corporations, publishhing houses, movie
> studios, defense contractors, public utilities, or communist-style
> "bureaux". However, the plain, old accounting fallacy common to
> excessively large firms is the same regardless of its
> religio-political or aesthetical setting. And, its main
> consequences, Stalinist giantism, political corruption, and
> financial instability are always and everywhere the same. No
> Microsoft apologist has come close to demonstrating "increasing
> returns", a very challenging exercise in mathematical economics or
> engineering, not poetry. And, pretending such phenomena exist when
> and where they do not is simply dangerous, hugely so.
> Second, "increasing returns" from technological progress, as it was
> very popularly known a century ago, are nothing like "innovative
> marketing" practices. Such practices are remarkably free of any
> novelty at all, save for changing fashions in the
> literary-political apologies offered for them. They are generally
> "bunko" or "con artistry" when associated with minority races or
> religions, rather than with precious heirs of the Anglo-American
> overclass or "financial institutions" deemed "too big to fail".
> Today, such practices are often associated with debt "pyramids"
> debt and speculative "bubbles", but these are far from new either.
> >From an old-fangled, conservative, and authentically Hamiltonian or
> genuinelly "German Liberal" perspective, it is infuriating for this old
> fart from Texas to see the hoary "infant industry" argument tarted up as
> a justification for Stalinist Giantism or Bubblenomics by folks who
> claim to admire Thos. JEFFERSON. Neither he or Aron BURR accused
> Hamilton or List of anything so outrageous as that. They simply argued
> for small-scale farming and for large-scale agricultural imports and
> exports. Of course, they were evasive on the Slave Trade and their plans
> for Texas.
> That brings us to the other problems with MACHAN et alia:
> Firstly, collecting tolls, tariffs or monopoly rent involves vast,
> detailed extension of the police power of the state. Some such
> powers are traditionally justified here by seperatng them from
> monarchy (republicanism), by some procedural limitations
> (anti-federalism), and by representative democracy
> (constitutionalism). Placing such power in the hands of some outfit
> with no more than a Letter of Marque, now called a Brand Name, is
> simply off the wall since, whatever Microsoft has, presumably some
> sort of "proprietary standard", that is not a Letter of Marque and
> Reprisal, entitling it to collect prizes or indirect taxes, nor a
> Letter of Patent, granting it a claim to royalty for a limited
> time. In short, there is no basis at all for excepting Microsoft
> from rules of domestic commerce all but the few "chosen
> instruments" of some sovereign country obey at home and even these
> obey when operating on or across the high seas.
> This seems like a quaint, arcane argument, but it is not: For one thing
> "global markets" were not invented by lawyers and lobbyists about a
> decade ago. They have sort of been around since the fifteenth century
> with a much more pervasive influence on our domestic economy one and two
> centuries ago than today. For another, the principal concern of the US
> military and diplomatic corps in several parts of the globe today, and
> even more tomorrow, is assertion of intellectual property rights and
> collection of royalties for American firms. This interesting tasking of
> our armed forces will probably supercede protection of "strategic" US
> and UK concession, largely mining, rights overseas as soon as Saddam
> Hussein gets a clue or a bullet.
> So, if the USGovernment is to "trade off" its traditional interests in
> "open markets" and "human rights" in China, say, in order to uphold a
> "single issue" like Microsoft's bogusly novel marketing practices on the
> Pacific Rim and, say, task the USNavy to protect Taiwan which does a
> somewhat better job of paying Micrsoft's royalties than the PRC, then it
> is not reasonable to treat Microsoft like some sort of sovereign power
> in its own right equal or superior to the United or even Several States.
> Secondly, monopoly rent on any scale from the neighborhood crack
> dealer on up, requires force or, politely, police power to collect.
> There is nothing the least liberal about this today and never has
> been. In the present case, it entails the collection of
> "protection" money from OEMs who do not want to be trashed by
> Microsoft as well as policing Microsoft's interest in "owning the
> desktop", which is to say reducing everybody in the software world
> to the status of sharecroppers, serfs, slaves, or, if caught
> installing the wrong software, poachers. If that is Liberty, my
> folks were obviously on the wrong side in not just the Civil War,
> but every other war this country ever fought and, in the case of
> the South, lost.
> Let us all then learn a few hard lessons:
> In the absence of traditional regulation and a government which holds
> businesses large and small to the same rules, rules which reserve the
> armed forces, police powers, and everyday responsibility for public
> health and safety to the state and its lawful agents, to its
> subdivisions, to its lawful or, at least, lawyer-ridden
> instrumentalities, and, yes, even to its often tedious clap-trap, what
> you get is not the Second Coming of Ayn Rand or any other sort of
> libertarian utopia. You get a war of all against all, a situation where
> a few "millionerds" live in armed compounds like elite
> concession-holders in Haiti, like the dons of Mafiya Capitalism or or
> the warlords of Market Leninism.
> Those are awful regimes. Even those few who benefit from such regimes
> abroad take great care to send the better portion of their haardest
> currency or brightest children to the U.S. despite our crushing tax
> burderns, out-of-control bureaucrats, tree-hugging protesters, predatory
> lawyers and other right-wing calamaties. Those folks abroad have no end
> of privately-owned guns and military-grade computers or telephones. But,
> they do not feel very safe and, indeed, should be very afraid, not least
> of the United States.
> But, they send their money and kids here because, frankly, even enemies
> of the United States have more respect for our institutions, save for
> what right-wing international sees as our "feminized" military, than our
> own Bomb-Throwing, Gun-Nut Libertarians. That is too bad for all of
> those enemies and for the few American men and women under arms who have
> to remind clever fools all across the literary-political spectrum, from
> time to time, that we ain't all Micro- or any other sort of softies