The Circle Bastiat
Shoppers stop to look at a display while shopping at Dadeland Mall, in Miami. Carden argues that status-seeling drives capitalism, but that isn't necessarily a bad thing. (Lynne Sladky/AP)
How status-seeking drives capitalism
With every passing day I believe more and more that status-seeking drives a lot of human action. Contrary to popular wisdom, I think this is weighs in favor of free markets rather than against them. A complete discussion requires a lot more space than I have here, but I don’t think status-seeking based arguments against free markets stand up to to closer inspection.
Intervention changes the margins on which people can seek status, and while this remains untested empirically–to the best of my knowledge–I think it is at least plausible that the cure will be worse than the disease. There is more to this than the well-worn law of unintended consequences. Yes, [insert policy here] will likely worsen the problem it is enacted to address. At a different level, the moral calculus changes when we substitute the political arena for the free market. Some people support policies in spite of their consequences in order to signal their status: they vote for protectionism because they care about American workers, they vote for welfare, minimum wages, and rent control because they care about the poor, and they vote for various environmental policies because they care about the planet.
As Bryan Caplan points out in The Myth of the Rational Voter and as Thomas Sowell has discussed in a variety of books and articles, people are usually insulated from the consequences of the policies they support and therefore have weak incentives to change their beliefs when the policies fail. Briefly, if we take seriously the claim that modern pathologies are the products of social constructs, power relations, false consciousness, and other things, moving social decision-making out of the ambit of voluntary interaction and into the political sphere will most likely reinforce the very social forces and factors that produced all that is wrong with the world today.
Relative to market exchange and other forms of voluntary interaction, political decision-making in a status-seeking society frays the social fabric. Yes, there are probably people who will spend themselves into frenzies over the next few weeks in elaborate displays of conspicuous comfort and joy. Christmas probably isn’t the best example because it is a religious holiday that does lend itself to moral elitism, but keeping up with or ahead of the Joneses generally confines itself to a material status race and doesn’t go far beyond that. If I have a nicer car than Jones, I can content myself with the conviction that Jones is just a loser and nod off peacefully in my $2000 recliner, secure in the conviction that I have better stuff than he has. The harm isn’t really that great compared to status-seeking in the political arena.
The implications of status-seeking change when you place moral weight on the issues over which people are competing for status. Take charity, for example: if the possibility of a transfer changes people’s incentives sufficiently, then the entire value of the transfer might be dissipated by people waiting in line for $0 food, clothing, shelter, etc. and by others devoting their productive energies to attempts at persuading others to give.* A digression is in order lest I be misunderstood: charity is great, but not all charitable endeavors are created equal. There is an opportunity cost associated with using resources for one charitable purpose and not another, and careful economics can help us maximize the bang we get from our charitable bucks. I explain further here.
Status-seeking over moral goods and in a political environment encourages people to view one another with outright moral suspicion. If I recycle and Jones doesn’t, or if I give to the Salvation Army but Jones doesn’t, or if I drive a Prius but Jones doesn’t, then our relationship changes relative to a world in which we are seeking status over mere material goods. In these cases, the implicit message is not that I am more successful than Jones but that I am virtuous and Jones is morally suspect. This is doubly true if we are talking about voting to make recycling, charity, and high gas mileage mandatory. When status-seeking occurs on these margins, the social fabric tears because the signal is no longer simply that I’m a better breadwinner than Jones. The signal is that I’m a good human being while Jones is…something else. Jones isn’t just a lousy breadwinner. Jones is dehumanized.
There is a lot of truth in the claim that people are motivated by the search for status, but I don’t think it works as a criticism of free markets. There’s a lot of important research to be done here, and a lot of important contributions to be made to the public debate. Here, for example, is Robert Frank’s recent New York Times article on Black Friday, and here is Tyler Cowen’s response. Here’s Don Boudreaux on the market opportunity that the critics of Black Friday are missing. If you’re shaking your head because your neighbor just spent a ton of money on fancy new toys, take heart. It could be much worse.
*-Project idea for someone looking for a paper: estimate the rate of return on the Salvation Army holiday bell-ringing campaign
Protesters affiliated with the Occupy Wall Street movement play drums outside New York City Mayor Michael Bloomberg's personal home at 17 East 79th Street, New York. Tucker argues that unlike the anti-war protests of the Vietnam era. the Occupy Wall Street protests have no clear demands or direction. (Eduardo Munoz/Reuters)
The difference between OWS and Vietnam
The Occupy protesters imagine that they stand in a great tradition of American radicalism, willing to stand up to the man and risk arrest in order to achieve their goals. The most obvious case of such a mass movement would be the anti-war protests of the 1960s. They started small and grew and grew until they became mainstream and actually affected a dramatic policy change. The U.S. military pulled out of Vietnam, implicitly conceding defeat and mourning the long history of calamity.
But consider the gigantic differences. The Vietnam protest movement had a clear goal. It wanted to end the war. It had a clear enemy: the politicians and bureaucrats who wanted the war to last forever. It had a clear message: this war is wrong. It had an intense motivation: the protesters were terrified of being drafted to kill and be killed. This is what standing up to power is all about.
So far as anyone can tell, the Occupy movement has none of this clarity. Ten thousand articles have been written on these people and there is still no consensus concerning what the issue really is. The goals of the movement are posted here and there, but not everyone among the protesters agrees with them. The motivation is just as amorphous and varied: unemployment, sinking job prospects, sinking incomes, blowback from the bailouts, the desire to slum around in a decadent sort of way, and the destructive urge to trample down the pea-patch of life itself.
Worse, from my point of view, is that the movement isn’t really standing up to power. It is standing in for power to urge that the state take on more responsibilities and control people’s lives even more than it does already. They imagine that they are demanding human rights, but the main agenda as listed in public websites amounts to a list of ways for the government to violate human rights, or at least intrude aggressively upon them.
Raising the minimum wage, for example, amounts to a limitation on the rights of workers to negotiate their own employment contracts. The minimum wage says: you have no right to offer less for your services than the state gives you permission to offer. Thus, the minimum wage not only promotes unemployment; it restrains the human right to associate on any terms of a person’s choosing.
Likewise, the demand to nationalize health interferes with the rights of doctors and patients to negotiate their own contracts. The demand for tariffs interferes with the rights of people to peacefully trade with anyone from around the world, and effectively entrenches the nation-state as the only permitted geographic range of economic associations.
The imposition of new taxes takes people’s property. This is property acquired through their own labor which is then forcibly taken by the state to use for political purposes. This demand is a prescription for further impoverishment.
The push for refunding domestic infrastructure denies private entrepreneurs the opportunity to use their resources and talents to rebuild on a for-profit basis and in a manner that that can actually be maintained. There is a reason that state infrastructure always seems to be crumbling: it is built by the state with all the inherent economic irrationality of most state projects.
The real problem with the OWS movement is its political naiveté. The protestors imagine that by attacking free enterprise and the capitalist system they are upholding the rights of the common man. The exact opposite is true. The only real alternative to free enterprise is an economy owned and administered by society’s most ruthless and cruel elements, who always seems to gravitate toward statist means.
If OWS is successful, it will wake up to a world that is lorded over by federal bureaucrats and jack-booted enforcement thugs. The entire world will be run like the Post Office, the TSA, the IRS, and the Customs Bureau. This has nothing to do with freedom and nothing to do with human rights.
For this reason, the OWS protest is not really a threat to the establishment. So far, its message has been that the state needs to be truer to itself, that the worst aspects of both the Democratic and Republican platforms need to be implemented with a vengeance. This is a movement the state can come to love. Indeed, the White House has drawn closer and closer to this movement, saying that Obama “will continue to acknowledge the frustration that he himself shares.”
Again, the contrast with the Vietnam protests of the 1960s cannot be starker. The White Houses hated these people. The politicians of both parties were terrified of what “people power” meant in those days.
If we had the equivalent movement as it relates to economics today, it would be calling for an end to the Fed, privatization of education, privatization of health care, the right to global free trade, an end to state robbery of persons and their businesses, and a right to keep what you own. In short, a truly radical protest movement would be calling for a consistent and authentic capitalism as a corollary to the peace agenda in international politics.
Now that would be radical.
Regards,
Jeffrey Tucker
The Euro sign is seen in front of the European Central Bank in Frankfurt, central Germany in this file photo. The definitions of "inflation" and "deflation" of money can vary, Bylund argues. (Bernd Kammerer/AP/File)
Different definitions of 'inflation' and 'deflation'
While (re-)reading one of the chapters of Mises’s Theory of Money and Credit, I noted my underlining of the very clearly formulated definitions on page 240. Mises defines inflation as:
an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.
Austrians commonly refer to only the first part of this definition – the increase in the quantity of money – without the specifying statement that inflation is only that part which is not offset by an increased demand for money (which, indirectly, seems to suggest a “soft dismissal” of monetarism rather than the hard line that would otherwise follow).
The same seems to be true for Mises’s definition of deflation:
a diminution of the quantity of money (in the broader sense) which is not offset by a corresponding diminution of the demand for money (in the broader sense), so that an increase in the objective exchange-value of money must occur.
Now, it would not be fair to say that these definitions as formulated by Mises back in 1912 in any sense were final. And it is far from impossible that Austrian thinkers before and since then have used idiosyncratic and different variations of these definitions, but presumably with a common core of their meaning.
But what definitions are there? I am interested in finding out what other definitions of inflation and deflation are available in Austrian works. Please post the definitions you are aware of in the comments section (direct quotes with page references, please).
Occupy Seattle protester Jeff Engels holds an American flag as he stands on the University Bridge as other demonstrators shut it down behind him in Seattle. Galles argues that, understanding of rights as freedoms from others’ abuse has been giving way to “positive rights” — rights to be given things, which is contrary to the original understanding of justice. (Elaine Thompson/AP/File)
Social justice is not necessarily justice
There was a time when people understood justice far better than we do today. Aristotle’s definition was “Justice is to give every man his own.” Cicero’s was almost identical. America’s Declaration of Independence reflected that tradition in asserting inalienable rights to “life, liberty and the pursuit of happiness.”
What does that traditional American view of justice consist of? It is almost entirely a matter of defending “negative rights” — freedoms from encroachment on our inalienable rights. Government is to protect citizens from others’ encroachments on our rights (e.g., by defending property rights against force and fraud), yet citizens are also to be protected from government encroachments. Such rights, which can be held by everyone at the same time, are best illustrated by the Bill of Rights in the Constitution.
However, over time, that understanding of rights as freedoms from others’ abuse has been giving way to “positive rights” — rights to be given things (e.g., housing, food, education, income, etc.). Unfortunately, creating positive rights to be given things via government requires that other people’s negative rights be violated, since the government has no resources it does not first take from others, regardless of whether they consented. Further, not everyone can have such positive rights at the same time, as acquiring the resources to provide someone what they did not acquire through voluntary arrangements reduces the ability of those taken from to acquire those same things.
In recent times, the erosion of negative rights to create positive rights for some — violating the traditional understanding of justice — has used the language of “social justice,” which rhetorically hides the evisceration of the traditional meaning of universal justice (e.g., a government of equal laws rather than the favoritism of men) by keeping the word justice, but adding a new modifier.
Leonard Read, one of history’s most prolific defenders of liberty, recognized this battle between negative rights and positive rights, and the huge but hidden transformation it involved, for what it was. And in “Justice Versus Social Justice” (in his 1973 Who’s Listening?), he analyzed the conflict, starting from Aristotle’s definition of justice, in powerful terms.
Since the battle is still being played out, with the real justice represented by negative rights on the losing side, Read’s understanding is an invaluable part of shifting the scales back in that direction, and merits close attention.
What is justice? “Justice is the end of government. It is the end of civil society” (James Madison, Federalist 51)…
[J]ustice and so-called social justice are opposites…to promote the latter is to retard the former.
[O]nly individuals experience justice or injustice… Justice cannot be rendered to everyone in general, only to each one in particular.
[J]ustice prevails in personal relations, that is, in the absence of injustice. Understood in this manner, justice is indeed the end of civil society.
Government in its ideal concept can have no other end than a common justice, for this is the end of civil society of which government is the arm or agent. The Goddess of Justice is blindfolded; if she peeks, she cheats…This is the meaning of “A government of laws, not of men.”
I have a moral right to my life, livelihood, liberty. Is this just? Yes, if one can concede a similar right to every other individual. I can! Try it in reverse: I have a moral right to take the life, livelihood, liberty of another. Just? Only if I can rationally concede the right of murder, theft, enslavement to everyone else. I cannot concede this right to anyone; thus, it is neither good nor just.
The institution of freedom, if properly defined, suffices to render justice to each individual. John Stuart Mill said: “The only freedom which deserves the name, is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”
We now come to what is euphemistically referred to as social justice, though it is in theory and practice the very opposite of justice…a device that politicians and social planners find convenient to gain votes and power.
Social justice has no case except the lust for position; it has no rational content and simply manifests the little-god syndrome.
In the practice of so-called social justice, the individual is ignored…Social justice is the game of “robbing selected Peter to pay for collective Paul.” This form of political behavior seeks the gain of some at the expense of others… it is the thwarting of justice that begs our censure.
Test social justice…to perceive the difference.
If you would not condone others coercively taking from you to feather their nests, you could not, perforce, take from them to feather your own.
Social justice involves…depriving others to gain one’s ends.
Social justice promises to reward the idle by punishing and restraining those who have exercised creative energy.
So-called social justice is man’s greatest injustice to man, antisocial in every respect; not the cement of society, but the lust for power and privilege and the seed of man’s corruption and downfall.
[S]ocial justice in no way fits the claim of its advocates: an expression of mercy and pity. These virtues are strictly personal attributes and are expressed only in the voluntary giving of one’s own, never in the seizure and redistribution of someone else’s possessions.
Morally and ethically motivated citizens can condone a philosophy of so-called social justice only if they fail to see its terrible injustice.
If people thought as carefully about the massive misrepresentation that is entailed by claims of “social justice” as Leonard Read, we would not be so far down the path to eviscerating justice in the name of a “new and improved” justice. Yet, having moved down that path, the only route to improvement is to recognize the rhetorical cheat and reverse course. Leonard Read’s contrast between justice and social justice is a good start toward real progress in that direction — progress that entails undoing the “progressive” political redefinition (or better, mis-definition) of justice.
In this file photo, a A Federal Housing Administration (FHA) representative speaks to an audience of real estate professionals. Falling housing prices may force the FHA to seek federal bailout money to keep afloat, French argues. (Nicole Hill/Christian Science Monitor/File)
The Federal Housing Administration may need bailing out
Another of FDR’s New Deal creatures is on the verge of needing bailed out. Spawned as part of the National Housing Act of 1934, the Federal Housing Administration (FHA) insures loans made by banks and other private lenders for home buying and building. Of course, FHA is not really engaged in a legitimate insurance business. As Murray Rothbard explains,
Insurance properly applies to risks of future calamity that are not readily subject to the control of the individual beneficiary, and where the incidence can be predicted accurately in advance. “Insurable risks” are those where we can predict an incidence of calamities in large numbers, but not in individual cases: that is, we know nothing of the individual case except that he or it is a member of a certain class.
Rothbard goes on to explain that if the adverse event is within the control of the individual beneficiary, moral hazard becomes an issue. Insurable risks are homogeneous and the number can be determined by an actuarial. On the other hand, events on the market are heterogeneous, not random at all, but instead influence each other, and thus, not insurable at all.
Not to mention, no legitimate insurance company would remain in business maintaining reserves against claims of only two percent.
With the housing market crash continuing on government time, it should be no surprise that the FHA’s cash reserves have fallen to such a level that the odds are 50-50 the agency will run out of money and be looking to the Treasury to keep its doors open. Nick Timiraos reports for the Wall Street Journal,
The audit, to be released Tuesday by the FHA, estimated that the value of the agency’s reserves stood at $2.6 billion as of Sept. 30, down 45% from an already low $4.7 billion last year. The drop reflects the impact of rising home-loan defaults amid falling home prices, which together generate greater losses on the sale of foreclosed homes.
The FHA insures $1.1 trillion in mortgages. Federal law requires the FHA to have reserves above 2 percent, meaning the agency is supposed to have over $22 billion in reserves on hand. It has just over 10 percent of what’s required.
Timiraos writes that a 9 percent drop in housing prices next year will send the agency to the Treasury needing $13 billion. A 20 percent decline will require $43 billion from Treasury.
Robert Shiller predicts housing prices will drop 10 to 25 percent between now and 2014, swamping any 3.5 percent down payment FHA requires.
In this file photo, Gan Golan of Los Angeles, dressed as the "Master of Degrees," holds a ball and chain representing his college loan debt, during Occupy DC activities in Washington. French argues that skyrocketing tuition and poor job prospects make it unlikely that most recent college graduates will be able to repay their student loan debts anytime soon. (Jacquelyn Martin/AP/File)
How student loan debt cheapens a college education
Matt Wirz writes for the Wall Street Journal that the bond vigilantes may not be sniffing any price inflation but players in the student debt market are deeply discounting the job prospects for recent college grads.
The assumed default rate on students loans has moved from 25% to 30% upward to between 30% and 40%. Failure to graduate is the most important factor in whether a graduate pays back a loan. Over 20% of Americans between the ages of 20 and 24 without a college degree are unemployed. The rate is 8% for those of the same age with degrees.
Investors also take a dim view of buying the ever increasing debt of a perpetual student. “When you see a guy in a loan made in 2005 that is still in school, you throw that away,” said investor Rubin Bahar, of Eagle Asset Management.
So what are the best bets when buying student debt? Technical schools. Students pay the least for their education with the potential to make good money after graduation in only a couple of years.
By that arithmetic, technical colleges come out on top, Mr. [Daniel] Ades said. “We’re in a skills based economy and what we need is more computer programmers, more [nurses],” he said. “It’s less glamorous but it’s what we need.”
Meanwhile the nation’s law schools continue to over-supply the nation with lawyers. Law students are borrowing an average of $68,827 at state schools and $106,249 a private schools only to add to the glut of barristers.
In this file photo, Joe Minter pickets in front of the Jefferson County Municipal building in Birmingham, Alabama. Alabama's Jefferson County filed for bankruptcy court protection in the biggest municipal bankruptcy in US history. Commissioners for the county voted 4-1 to declare bankruptcy after meeting behind closed doors for two days in a last ditch-attempt to restructure its debt out of court. (Marvin Gentry/Reuters/File)
Does Alabama bankruptcy signal a municipal bond meltdown?
Last December Meredith Whitney told a 60 Minutes audience that a municipal bond meltdown was coming. Ms. Whitney has been under attack ever since.
All year long financial commentators have been asking Meredith, “show us the defaults!”
The largest municipal bankruptcy in history was filed yesterday when the county commissioners of Alabama’s Jefferson County voted 4-1 to file Chapter 9. Melinda Dickinson reports for Rueters,
The bankruptcy filing by the southern U.S. county will add to concerns about the risks in the $3.7 trillion U.S. municipal bond market, which was hit recently by the high-profile debt crisis in Pennsylvania’s capital of Harrisburg.
Jefferson County, which includes the city of Birmingham, owes $5 billion surpassing Orange County’s filing in 1994. JPMorgan held more than $1.2 billion of the county’s sewer debt as of May and negotiated aggressively to avoid bankruptcy.
On August 1, tiny Central Falls, Rhode Island filed BK, citing pension costs it can’t afford.
While Jefferson County was throwing in the towel, officials were declaring a state of financial emergency in Flint, Michigan. This is the first step toward the state of Michigan taking over the city’s finances. This seems to be a trend as Mathew Dolan writes for the Wall Street Journal,
Three other Michigan cities—Pontiac, Ecorse and Benton Harbor—as well as Detroit’s school district are run by emergency managers. Flint, the state’s seventh-largest city by population, would be the largest municipality under state control.
Down the road from Flint, Detroit mayor Dave Bing is playing chicken with union members. The municipal unions have until November 21st to agree to $42 million in concessions or Detroit’s finances will be run from Lansing.
Retired city workers collected 25% of the Detroit’s $1.2 billion general fund this year in pensions.
Out west, the City of North Las Vegas has had it’s bond rating cut twice by Fitch Ratings. NLV bonds started the year at AA- but are now rated A with Fitch calling the city’s outlook ‘negative’
In order to see what a municipal default looks like, Michael Lewis visited Vallejo, California, a city that declared bankruptcy in 2008.
“Eighty percent of the city’s budget—and the lion’s share of the claims that had thrown it into bankruptcy—were wrapped up in the pay and benefits of public-safety workers,” writes Lewis.
And while the police and fire departments in Vallejo has been cut in half, in August a judge approved the bankruptcy plan for Vallejo, with its creditors ending up with 5 cents on the dollar, while public employees received something like 20 and 30 cents on the dollar.
This is what it looks like when a government can’t use the printing press to default slowly.
A screen shot of the Ally Bank logo, from ally.com. The bank is considering put its mortgage unit up for bankruptcy, raising questions about the financial health of the bank as a whole (allybank.com)
Ally bank considers throwing mortgage unit into bankruptcy
[Editor's note: The story headline and summary were corrected to reflect that Ally was considering the move.]
Ally, that bank with the annoying or cute commercials, depending upon your perspective, is considering throwing the company’s residential mortgage unit (ResCap) into bankruptcy, according to the Wall Street Journal.
ResCap has lost over half a billion dollars over the past two quarters and has $2.3 billion in debt coming due between now and the end of 2013, nearly four times the cash the company has on hand as of September 30th.
Some may remember that Ally is the old GMAC, which was allowed to become a bank in December of 2008 and tap $17 billion in bailout money. As the NYT reported at the time, becoming a bank was “a crucial step that will help ensure the survival of the company.”
Some view a ResCap BK filing as unlikely. “Legal observers warn that the gambit is seen as a last resort for a good reason, in part because bankruptcy can be unpredictable.” “There’s a reputational hazard,” said Harvey Miller, a veteran bankruptcy lawyer at Weil, Gotshal & Manges. “Once you put a subsidiary into bankruptcy, people start to wonder: How safe is the parent? How safe are the other affiliates?”
Meanwhile, the work of Ran Duchin and Denis Sosyura is highlighted on Zero Hedge. The researchers from the University of Michigan looked at a sample of 529 public firms that were eligible for the government’s Capital Purchase Program, a key part of TARP.
What Duchin and Sosyura found was that banks at signed up for CPP took on more risk than banks that didn’t.
“Overall, the analysis of banks’ investment portfolios suggests that CPP participants actively increased their risk exposure after being approved for federal capital. In particular, CPP recipients invested capital in riskier asset classes, tilted portfolios to higher-yielding securities, and engaged in more speculative trading, compared to nonrecipient banks with similar financial characteristics.”
More bailing out of the bailed out dead ahead.
A U.S. Airways jetliner taxis past several Delta airplanes on the tarmac at Logan International Airport in Boston in this file photo. Under the current airfare pricing system, two passengers can pay wildly different fares for the same flight. (Elise Amendola/AP/File)
Airfares: $365 difference for the same trip?
This is inspired by examples I’ve seen in Tyler Cowen and Alex Tabarrok’s principles book and the supplementary blog.
Over the weekend, I flew US Airways from Memphis to DC and back. On Friday, I took a plane that stopped in Charlotte and continued on to DC. I didn’t even get off the plane in Charlotte before proceeding to DC.
For fun, I decided to check out one-way fares on this route. Suppose Carl needs to book a flight from Memphis to Charlotte and Murray needs to book a flight from Memphis to DC. Both are traveling tomorrow morning. What will they pay?
Travelocity shows that Carl will pay $279 to take US Airways flight 1730, departing from Memphis at 7:35 AM and arriving in Washington DC at 12:47 PM with a connection in Charlotte. Murray will pay $645 to take US Airways flight 1730, departing from Memphis at 7:35 AM and arriving in Charlotte at 10:12 AM.
You might notice something odd: Carl and Murray are going to board the exact same plane in Memphis. Murray is getting off the plane in Charlotte. Carl is staying on that plane until it gets to Washington DC. Murray is paying $366 more than Carl even though he is taking a shorter trip on the same plane.
Questions:
A. What gives? How can we explain this kind of pricing behavior?
B. This is the kind of thing that inspires moral outrage and righteous indignation about “corporate greed.” Can we turn this argument around, though? In other words, how might we respond to Murray when he arrives at the customer service desk angry about having been gouged by the airline? For the record, I suggest that you never take this approach with an angry customer.
Obligatory disclosure: I didn’t get any valuable consideration for mentioning any of the products mentioned in this post.
A bust of Thomas Paine atop his monument in New Rochelle, N.Y. libertarian guru Andrew J. Galambos' intellectual property views were so extreme that he paid royalties to the descendants of Paine every time he used the word "liberty," which he claimed was coined by Paine. (Joe Sohm Visions of America/Newscom/File)
Was the most fervent believer in intellectual property rights an IP thief?
I’ve written before about the quirky scientistic California libertarian guru Andrew J. Galambos, and his extreme, crazy IP ideas. ((See Galambos and Other Nuts; also Galambosian IP Recursion; “Ideas Are Free: The Case Against Intellectual Property.”)) Galambos believed that man has property rights in his own life (primordial property) and in all “non-procreative derivatives of his life”—the “first derivatives” of a man’s life are his thoughts and ideas—these are “primary property.” Since action is based on primary property (ideas), actions are owned as well; this is referred to as “liberty.” Secondary derivatives, such as land, televisions, and other tangible goods, are produced by ideas and action. ((See also On Andrew Galambos and His Primary Property Ideas, by Alvin Lowi, Jr.))
In other words, man has “primary” property rights in his thoughts and ideas, and secondary property rights in tangible goods. Thus, as ideas are the primary form of property, Galambos claimed a property right in his own ideas, and required his students to agree not to repeat them. In Against Intellectual Property I note that Galambos
took his own ideas to ridiculous lengths dropping a nickel in a fund box every time he used the word “liberty” as a royalty to the descendants of Thomas Paine, the alleged “inventor” of the word “liberty”; and changing his original name from Joseph Andrew Galambos (Jr., presumably) to Andrew Joseph Galambos, to avoid infringing his identically-named father’s rights to the name.
A version of this “primary property” idea–elevating property rights in ideas to an even higher and more fundamental status that in scarce resources–is espoused by Ayn Rand, who incredibly said, “Patents are the heart and core of property rights.” Likewise, Objectivist IP attorney Murray Franck approvingly repeated the following quote: “intellectual property is after all the only absolute possession in the world,” and Objectivist law professor Adam Mossoff argues that “All Property is Intellectual Property.” ((See Kinsella, Objectivists: “All Property is Intellectual Property”; also my “Ideas Are Free: The Case Against Intellectual Property” and IP Needs A World of Scarcity.)) And my friend and neo-Objectivist libertarian philosopher Tibor Machan has said: “it would seem that so called intellectual stuff is an even better candidate for qualifying as private property than is, say, a tree or mountain.” ((See my post Owning Thoughts and Labor; also New Working Paper: Machan on IP.))
So it is interesting that I came across a much earlier use of the phrase “primary property” in a very similar context, in a 1950 article about the patent controversy by Machlup & Penrose. ((See Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. p. 11, and n. 35.)) As they note, in the debate about patent and copyright in the late 1700s:
others went as far as to say that a man’s property in his ideas was more sacred than his property in things material …
This was one of the main arguments Stanislas de Bouffler used in presenting the patent bill to the Constitutional Assembly in December 1790:”If there is for man any genuine property it is thought, … and the tree which grows on a field does not so incontrovertibly belong to the owner of the field as the idea which springs from a man’s mind belongs to author. Invention, the source of the arts, is also the source of property: it is primary property, while all other property is merely conventional ….”–Augustin-Charles Renouard, Traité des brevets d’invention (3d ed.; Paris, 1865), pp. 89-90 (first published, 1825).
It seems to me that not only are Galambosians prevented from spreading their own views because of their bizarre self-imposed IP restrictions–now they cannot even claim credit for these bizarre ideas, leading to an infinite recursive Galambosian loop.
Previous
Become part of the Monitor community
36K on Facebook | 12K on Twitter | 2,250 on YouTube