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The Massachusetts Resource Curse?

In the field of the economics of development, one of the most fundamental questions is about the so-called resource curse . Basically, the idea is that countries with high endowments of natural resources tend to have worse governance and lower rates of economic growth (this thesis is not uncontroversial empirically, I should point out). The list of reasons why this might be true is long, but one of the primary problems with natural resources is countries endowed with them are spared the hard work of developing a prosperous market economy and can simply fund their activities with the sale of oil or diamonds.

We tend to think of this as a phenomenon that afflicts developing countries, but there's no reason that it couldn't apply to the United States just as well. To wit, Massachusetts lawmakers are now proposing a tax on college endowments:

more stories like this


Now, I should start by pointing out that Massachusetts is one of the richest states in the United States, a fact much beloved of left-leaning economics commentators trumpeting the superiority of their system. The fact that they are in this kind of fiscal crisis is a disgrace.

But if you're a Massachusetts lawmaker, this is perfect. Universities have huge fixed and relatively unmovable assets (buildings, stadia, etc.). Greg Mankiw (jokingly?) suggests that Harvard move to sunnier fiscal climes:




Now, this isn't terribly likely to happen, though frankly I'd love to see it. When resources are fixed geographically, it's very difficult for governments to commit not to plunder. (Maybe Patri should try to get Harvard to move to a seastead.)

You see this elsewhere in America. New York can get away with crummy government service for decades because the financial industry is stuck there (one of the dark sides of economies of aggregation). I had high hopes a few years ago that the internet would help to break this trend, but I turned out to be mostly wrong, at least so far.

But nevertheless, even with fixed endowments, there's only so far the government can go. Felix Salmon claims that "Right-wingers always say that if you tax people or institutions with money they won't pay more tax, they'll just move; they're rarely proved right."

Well, maybe. I haven't seen any academic economic work on internal migration in the United States, but something sure as hell is driving people away from high tax states. Housing is probably the major driving force, but at least anecdotally, taxes are a contributing factor :

The San Francisco Business Times noted recently that Bay Area millionaires are starting to take their gold out of the Golden State. The paper writes: "The Bay Area's wealth boom is producing an explosion of millionaires--in Nevada, Wyoming and perhaps Canada. Advisers to the well-heeled say 'wealth migration'--taking the money and running--is behind a surprising drop in the number of Bay Area millionaires."

The annual loss of millionaires from the Bay Area--home to Silicon Valley--knocks this extremely rich and fertile place down near the bottom of the new millionaire list, putting it in the company of Detroit, Pittsburgh and Cleveland. Of course, the middle class has been fleeing California for years. High house prices have been the main culprit. Long commutes and deteriorating public services play a part. But the flight of millionaires is very 21st century. The cause? You guessed it. Taxes.

Continues the San Francisco Business Times: "'I'm hearing from more California baby boomers, I need to get out,' said Diane Kennedy, a Phoenix accountant and financial adviser to the wealthy. 'You can still make a lot of money in California. The problem is, then you have to pay taxes on that money,' said Kennedy, who recently helped a California client with annual income of about $1 million save $96,000 annually by making his home in Jackson Hole, Wyo. his primary residence.

Felix Salmon may think "people respond to incentives" is a right wing concept, but I don't. And even Harvard may find that when pushed far enough, it might have to go slumming down in Charlotte or Houston, like the rest of America has been doing at a high rate for years now.

If you thought seasteading was crazy...

I've been catching up on the Econlib podcasts lately, and recently listened to Edward Castronova on Virtual Worlds. He makes a number of striking claims during the podcast, but in particular, Edward thinks that there is a very real possibility that virtual worlds will provide competitive pressure on governments. I know what you are thinking, doesn't the virtual world have to be hosted in meatspace where a government can get to it? Sure it does, but that doesn't mean it has to be centralized. Castronova points out that file sharing networks have to be hosted in meatspace, yet they are extremely difficult for governments to get a handle on.

I think seasteading has more promise, but this is an interesting possibility.

Italy Publishes Every Citizen's Income

Here's a shocking new low for personal privacy in a developed country:




I think my favorite part of the article was this:



I'm in a hurry to hand over my medical files to the government, let me assure you.

Missouri is #1

Today Dave Roland from the Show-Me Institute gave a talk on eminent domain abuses in Missouri at my school, Lindenwood University. He has previously worked for the Institute for Justice on, among other cases, Kelo vs. New London, so we were pretty excited to have him. One interesting thing I found out was that Missouri has the dubious distinction of having the worst laws on this issue in the country, at least in terms of how they are interpreted, and of having the highest number of eminent domain abuses per capita among the 50 states. And I thought San Francisco was the home of socialism. Apparently St. Louis holds its own in this battle.

The Tension Between Rules and Discretion

I have to confess, I'm a bit confused by the juxtaposition of two arguments I've been hearing from the libertarian blogs lately. David Friedman has been criticiszing the failure of the Texas authorities to follow proper procedure in the FLDS case. Meanwhile, there's been criticism of these fools who took a kid away from his parents after he was accidentally served hard lemonade:





There's an obvious tension here, and it's not clear there's a "libertarian" answer to the problem. The rule of law (as exemplified by Friedman's writings) is great, but if you're going to bang away about the importance of procedure, you can't be outraged when "just following orders" leads to zero tolerance stupidity.

For the record, I tend to agree with Will Wilkinson about the somewhat odd libertarian positions I've been reading regarding the FLDS raid. Children are not the chattel of their parents, and a legitimate state role is protecting them from abuse. For me, one facet of freedom from abuse is "the legitimate ability to choose the life one will lead as an adult." It's not an ironclad rule and would take discretion to enforce, but life is messy like that.

Housing Becomes More Affordable

I'm not a macro person, but I tend to regard this as quite good news, and not just because Dean Baker disagrees.



I tend to think a quick adjustment, wringing out the bubble and bringing housing back to its natural level would be the best thing that can happen. Thoughts?

Walking pharmacies

Commenting on this entry.

Athletes start out with greater and worse physical endowments. One man's body may simply produce more testosterone than another man's body. What is, in principle, wrong with the second man artificially topping up his testosterone to match the first man's? What, for that matter, is wrong with the first man's artificially increasing his testosterone even further? If his unusual natural endowment is okay and presumably would be okay if it were even more unusual, then why wouldn't it be okay for him to use artificial means to achieve the same end?

The question - is it a competition between athletes or a competition between drug companies - has an analogous question - is it a competition between athletes or is it a competition between parents/grandparents/great grandparents, who supply the genetic code? When parents start consciously enhancing the genetics of their offspring, then this will be just as artificial as an athlete shooting up before a contest. But now compare this scenario to the present: how is the genetically manipulated offspring of parents any less worthy of participating in an athletic competition than the unmanipulated offspring?

Yes, I know that shooting up is unhealthy for the athletes, but that's a separate objection. I'm addressing the objection I see here.

I do have an idea what's going on, why the objection. It's not that athletes are hurting themselves with drugs. Sports injuries have always been the price of participation in sports. Sporting is dangerous and it can destroy lives. Always has been, for the simple reason that sports stretch people to their limit.

And it's not that people who shoot up are "cheating". It is cheating, after all, only because it's against the rules, and it's against the rules only because people are uncomfortable with it. So it's the discomfort that makes drug users into cheaters; it's not some pre-existing fact that it's cheating that makes people uncomfortable with it.

People object to it because people who shoot up are no longer human, or no longer merely human. The same would be true of genetically enhanced athletes. People who are perfectly happy to acknowledge the greatness of an athlete who has obviously superior inborn genetic endowments to their own, are less happy to acknowledge the greatness of an athlete whose superior "endowments" were purchased from a laboratory, because the mystical bond of common humanity is lost once the enhanced ability comes from a needle rather than from the parents' gametes.

And meanwhile, Americans cheer on other Americans because of the mystical bond of common Americanness.

It's the same reason in both cases. To be more specific, in both cases it's a question of origin. Where do the enhanced abilities originate? Where does the athlete hail from?

The homestead principle, short version

Ownership of something is the right to stop others from doing something with it. Therefore if something is initially unowned, and I start using it, then no one has a right to stop me from using it. If I am using something, and someone takes it from me, then he has stopped me from using it, which he has no right to do. But if he has no right to take it from me, then I have a right to prevent him from taking it from me. It is therefore my property. QED This is a short deductive proof that use establishes ownership.

To explain further, the act of using something creates an asymmetry between two people. In the moment before either person was doing something with it, neither person had a right to stop anyone else from doing something with it. When one person started doing something with it, this created an asymmetrical situation which could only logically be resolved one way. Here are the candidate resolutions:

1) After the use begins, neither the user nor the non-user own the item.

2) After the use begins, the user and the non-user both become owners of the item.

3) After the use begins, the non-user becomes the owner.

4) After the use begins, the user becomes the owner.

Both (2) and (3) cannot be the case, because if either were the case then the inability of a non-owner to stop something from being used is rendered meaningless.

Both (1) and (3) cannot be the case, because it was deductively proved above that the user gains ownership. Thus, (3) cannot be the case for two separate reasons.

This leaves only (4). Now, at first glance it is always possible in a situation like this that all the possibilities are ruled out, which would in turn demonstrate that the very concept of property is incoherent. However, I see no disproof of (4). (1) through (3) are disproved, but (4) is not, and since it is the only remaining possibility, it must be true.

This also affords us a richer understanding of property rights. For, if I start using something, then the basis of my ownership is that others do not have the right to stop me from using it and therefore I have the right to stop them from stopping me from using it. But what if they are able to do something with it that does not interfere with my use of it? Then I have no right to stop them. So my property right in the property is limited in scope: I only have the right to stop others from using it in a way which interferes with my use of it.

Admittedly, physical things being what they are, this generally ends up being a comprehensive right to exclude, because it's generally not easy for two people to use the same thing for different ends. If I'm using a shoe as clothing, then the shoe is pretty much off-limits to everyone else.

There is more to be said, but I'll stop here. Some topics:

a) Use isn't limited to immediate, active use. Thus I am always using my car even if I am not driving it at the moment.

b) While use creates a property right, the maintenance of the property right need not rely on continued use.

c) The owner is obligated to mark his property so that others can see that it is owned and not free to take. If he fails, his property right is extinguished.

Prison Fact of the Day

Most of this NYTimes article on incarceration rates is old news to everyone here I'm sure. But this part was new to me at least:


I had always assumed that we convicted and sentenced more individuals, but apparently not, it's "just" that our sentences are longer.

The one example they give of an average sentence is this:


In the last twelve months, I've twice been the victim of property crime (a burglary and an attempted car theft), so I'm pretty unsympathetic to the complaints of thieves. And I'd like to see more sentencing statistics, which are pretty hard to find across states. But I thought I'd throw the question out there: With the obvious, and gigantic, exception of drug offenses, are longer sentences for "ordinary" and indisputable criminals like burglars and arsonists a black mark on the American justice system?

Routine Libertarian Question Begging

Micha reposts this libertarian parable. In the comments, Scott links us too a response . Read them both if you haven't already for a bit of context.

The parable is a sort of standard story that libertarians tell to illustrate how the state is coercive. In Richard's response (he's actually responding to a similar story from Kling), he concludes:

There are good pragmatic reasons to favour some libertarian policies. But the moral ideology ("taxation is theft") is obtuse.

I completely agree, but for different reasons. Why does he think "taxation is theft" is obtuse? He quotes himself:

A well-ordered society is governed by the rule of law. This means that there are institutional processes to govern certain classes of action. The outcome of a just
institutional process -- whether it be a guilty verdict, or minimum wage legislation -- has a different normative status than the corresponding action of a neighbour who takes it upon himself to unilaterally impose his will on others.

I don't think any libertarian would disagree with that statement. Richard just misses the point - the libertarian theory of justice. Libertarians, at least of the sort we are talking about here, would simply claim that our current institutional processes are unjust and thus dodge Richard's criticism. The libertarian theory of justice is usually claimed to flow completely from the non-aggression principle (NAP). This is highly misleading, however, as Richard inadvertantly makes clear in the post he quotes himself from:

To claim ownership of a resource is to prevent others from making free use of it. If another attempts to use the resource in the same way as you do, you can call it "theft" and initiate force against them (or have the police do so on your behalf).

Thus it seems the NAP alone forces us to conclude that property is theft. And we thought Proudhon was a socialist. But this isn't the full libertarian story. A complete statement of the NAP, at least as I understand it, looks something like this:

It is always and everywhere immoral to initiate force against a person or his or her property.

Notice that the NAP presupposes property. There is another principle at work here which has to do with acquiring property coming straight down the pipe from Locke: the homestead principle (HP). For this reason I call this sort of libertarianism Lockean libertarianism or neoLockeanism. It rests on these two principles, as far as I can tell. Some versions try to derive the NAP from the HP, but that is unimportant fo For completeness, here is the HP as I understand it:

The only just way to acquire unowned property is by mixing one's labor with it.

These two principles together seem to be the foundation of neoLockeanism, though to digress, one important libertarian conclusion doesn't seem derivable from them: that voluntary exchange is always moral, or at least always just even if it is immoral. The NAP gives us that force or coercion is bad, but it doesn't give us that voluntary is good or even just. Perhaps I have screwed something up here (let me know if I have), but this isn't the point of this post anyway, so I'll let it go.

So Lockean libertarianism rests on these two principles, but do they hold water? The NAP is intuitively appealing and not all that controversial among ethicists. All deontologists (Kant) and virtue theorists (Aristotle, Aquinas, Hume) would accept it in some form while most utilitarians would reject it. Two out of the big three ain't bad. I say "in some form" above because the theory of property you accept may affect the NAP in some way, but the general idea runs across both classes of theories. I suspect even Richard accepts it in some form, with caveats for the formation of property.

The HP, on the other hand, has it's problems. For one, I still don't know what "mixing my labor" with something means. Labor isn't literally a substance that is mixed with other substances. Metaphors may be useful in communicating a complicated concept, but in this case we have all metaphor and no concept. Intuitively we have an idea of what it means, but without an actual definition, we'll argue endlessly about what actions count as labor mixture and how much property can be acquired by them - even with the "Lockean proviso," which is just as vague.

The problems with the HP don't end there, however. It is often asserted among libertarians but rarely defended. Locke himself tried to ground it in the existence of God. Ultimately, he assumes it anyway because God owns us by "maker's right" which allows him to argue that we have to take care of ourselves by acquiring property through the HP. I don't know what "maker's right" is outside of the HP. Rothbard is content to assert the self-evidence of his foundations without an account of what self-evidence means. Ultimately, he's waving his hands. Hoppe's argument is an attempt, but it doesn't work for a variety of reasons, on of which is that it isn't incoherent to argue with your slave (for fun, of course). Nozick also assumes the HP, but - and correct me if I'm wrong because I'm going off memory here (this applies for everyone else's views above as well) - he acknowledges this and points out that a rigorous account of property might substantively alter his conclusions, but he ignores the issue to get to other things.

As far as I know, no one has actually given a solid defense of the HP, let alone a clear exposition of what it actually is. I haven't read every libertarian theorist, so I might have merely missed it, but I have my doubts (but by all means, correct me if I am wrong).

In the mean time, let's forget about the HP principle and see what happens to the libertarian's favorite conclusion. The striking thing is that we know longer know if taxation is theft because we don't have an account of property. It seems the neoLockeans were begging the question all along.

So in the end, I agree with Richard's conclusion wholeheartedly - not, like him, because I think the neoLockeans misunderstand institutions, but because I think neoLockeans assume their pet theory of justice.

If one holds a markedly different theory of justice, say something like Hume's, governments seem almost by definition to have a legitimate property right. This doesn't automatically give us the social contract theory as the justification for government, but it does imply that governments are voluntary. Time permitting, I'll have more on this relatively soon.

Now, if this doesn't start a shitstorm, I'll be very disappointed in you guys. Or is my assumption that most of you are neoLockeans is wrong?

edit: Micha agrees that Richard misses the point.

edit: After reading Micha's post again, I think I need to make myself a bit more clear. I agree with just about everything he says. In particular, social contract theorist beg the question too; and Nozick, given his assumptions, doesn't really justify the state. At this point in my argument, it would just as question begging to say that taxation is theft as to say that it isn't. What social contract theorists and neoLockeans alike need to avoid the fallacy is a theory of justice/property. Until an adequate one is presented, we just don't know whether taxation is theft or not under any (or all)
circumstances. Time permitting, I plan on presenting a Humean take on this, but it may have to wait until the final weeks of the semester have passed.

More on FLDS










First They Came for the Polygynists

Whatever you might think about whether or not the government should be able to remove children from abusive family situations, everyone ought to be disturbed by the fact that they can presumptively do so (400x) based on nothing more than a falsified phone call. I feel like a broken record, but it bears repeating: police are not supposed to be used in petty disputes between citizens, whether these are personal or ideological.

Sunday School Art

A Sunday school teacher in Florida has been arrested for pasting kids faces onto porn.

"A volunteer Sunday school teacher is facing child pornography charges, after investigators say he took photographs of young girls and pasted their faces to sexually explicit pictures of adult women."

I'm having a hard time wrapping my mind around what he was thinking let alone what the DA is thinking with regards to the charges. Is it really kiddie porn? It's not like he snapped pictures of naked kids.

Certainly this guys creepy and pontentially a danger but I'm not sure he actually violated a law here, or even harmed anyone.

If he did violate a law then it's a pretty broad one. What next? If you pencil in boobs on a kids picture you end up a felon and on a sexual predator list?


Obama: I'll raise your taxes even if it lowers revenues

Speaking of taxes and incentives
, what's the opposite of a supply-sider? That is, what do you call someone who wants to raise taxes in order to lower revenue?

Well, the good Senator Obama, who I have incredibly heard described as a left-libertarian, came right out and said he's for tax hikes even if they lower government revenue. Here's a transcript of an exchange on the capital gains tax during Wednesday's much-maligned debate:





That's Senator Obama, who doesn't know, or apparently even care, whether or not his tax proposals actually raise money. Because they're fair, don't you see.

I'm not actually sure that that supply-side effect is real with the capital gains tax, by the way: Some or all of the measured effect could very well be just timing for tax avoidance. But it's just crazy to suggest that you don't even care about the revenue implications of tax policy.

Mike Bloomberg: Supply-Sider?

Via the New York Sun comes this, regarding a proposal to make hedge funds and private equity firms pay local business income taxes on profits generated by investments in these firms. To quote the mayor, Michael Bloomberg, "We'll see in terms of less taxes that the companies pay and less income taxes from people who work in those companies." New York City gets an unbelivable windfall from the presence of financial firms in the city, and Mayor Bloomberg is not stupid enough to jeopardize it, especially heading into a possible recession, when firms might be more willing to ditch the high rent city for greener financial pastures. Good for him.

Even more interesting to me was this, a defense of tax avoidance:

Mr. Bloomberg said yesterday that people have a right to structure their affairs to minimize their tax bills, so long as they follow the law. "In fact, the law wants you to do that. That's how we use tax law to incentivize people," he said.

Of course, one would expect Nurse Bloomberg to defend using taxes to "incentivize", being so fond of meddling. Still, it's a bit heartening to see someone actually say that you don't have a moral obligation to fork over as much money as you have in your bank account.

I actually don't think that there would be a supply-side boost to cutting income taxes in the United States, at least in the short term. But for a locality, there might very well be. Participation constraints bind much more strongly on smaller government units like cities than they do on the nation.

But what do I know? I'm actually continually amazed at the resiliance of New York City's dominance in the financial sector. If you had asked me ten years ago, I would have said that internet communications would have meant a decrease in the importance of physical location in the service economy by now, but that hasn't been the case so far.

Why I may be an Austro-Keynsian


It's interesting that Horowitz departs from the standard Austrian
to avoid Caplan's substantial theoretical critiques of the Austrian
integrated into a general theory of fluctuations, which takes into
account both Keynes and Schumpeter.



Introducing The Seasteading Institute

Mountain View, CA, April 15th, 2008. The Seasteading Institute today announced that it has been established in order to establish permanent, autonomous ocean communities to enable experimentation and innovation with diverse social, political, and legal systems. It will continue and expand on the work of Patri Friedman and Wayne Gramlich, authors of "Seasteading: A Practical Guide to Homesteading the High Seas".

"The public sector is simultaneously the largest industry in the world and the least innovative, with a barrier to entry and lock-in on its customers that dwarfs any private monopoly", says Patri Friedman, TSI's Executive Director. "The world needs a new model of politics where a diverse ecosystem of providers offers a variety of institutions that evolve to serve their citizens. The open oceans, Earth's last frontier, are the ideal place to nurture this vision of a better world. By making it safe and affordable to settle this frontier, we will give people the freedom to choose the government they want instead of being stuck with the government they get."

To help launch the organization, entrepreneur and philanthropist Peter Thiel has pledged $500,000 to The Seasteading Institute, saying: “Accelerating innovation is rapidly transforming the world: the Seasteading Institute will help bring more of that innovation to the public sector, where it’s vitally needed. Decades from now, those looking back at the start of the century will understand that Seasteading was an obvious step towards encouraging the development of more efficient, practical public sector models around the world. We’re at a fascinating juncture: the nature of government is about to change at a very fundamental level."

The Institute will initially focus on three major areas:

  • Community: Building a network of potential residents who are inspired by the possibilities of seasteading and have the skills and resources to establish vibrant new communities.
  • Research: Exploring the core requirements for seasteading to be safe and affordable, such as structure design, political feasibility, and infrastructure (power, heat, food) and advancing key seasteading technologies through independent research and partnerships.
  • Engineering: Proving that the mission is viable by building a safe, cost-effective, gorgeous seastead, based in the San Francisco Bay and able to travel in the open ocean.

For more information, see the Institute's website,


The Seasteading Institute


Original press release can be found here

Revolutionary Fractal Constitution and Political Theory - What?

An ad that google keeps on putting on my gmail page is for a M C Williams' book on "Revolutionary Fractal Constitution and Political Theory."  I'm extremely skeptical, but my curiosity has been piqued.  Anyone know anything about it? Or care to speculate?  link

The ebook is only $3.50 for anyone who is bit more curious than I.

Replacing the Federal Government

A few days ago, I asked the question, "If the US federal government [were to] collapse, what consensual institutions [would] fill the vacuum? Is the fed's monopoly so tightly held that these institutions cannot begin to form today? Or are there some, like private schools, which can begin to operate in the current environment and be ready for growth once their government subsidized competitors fail?"

I gave a partial answer:

Protection against criminals - The majority of criminal law is handled by State governments, not the feds.

Pensions - If social security disappears in part or in full, there are near infinite investments and charities to support people in their retirement.  

Health Care - If federal legislation on employers becomes unenforceable, insurance companies will have to start serving [individual policy holders as] their customers. There will be some evolution of existing insurance companies, and competitors with new models will arise, but I doubt doctors will stop their practices overnight because they hear on CNN that Medicare is not paying its bills. They will look for other revenue streams.

Currency - I have trouble imagining that financial companies will simply give up if the currency is so effectively debased that their customers are reluctant to accept dollars. I expect that they will compete with each other to offer accounts denominated in foreign currencies or other inflation-proof instruments.

Transportation - The road, rail, and air network is worth incredible value to businesses and individuals. So much of this industry is already semi-private, that I don't imagine it being unable to deal with the loss of subsidies and controls from the government. And I am committing an error of collectivism calling it "an industry"--we are talking about a market of competing companies, some of which will be so dependent on old business models that they go bankrupt and some of which will survive and prosper with new models. "The transportation industry" already exhibits that inherent resiliency of anarcho-capitalism--there is no systempunkt.

FDA, USDA - As soon as these two regulatory bodies close their doors, we would be left with the reputation of the drug company (or even their specific product) or food supplier as an indication of quality. How long would it take before independent labs start offering certifications? Is there any way for them to get a slice of a similar market today and move into drug or food certification when the federal monopoly ends?

With the exception of blatantly coercive acts--waging offensive wars, intimidating other states or individuals, confiscating property--is there a single function of the federal government that couldn't be replaced? If not, why wait?

Sports franchise owners are liars

From today's Washington Times:

NFL commissioner Roger Goodell is concerned the economics of the league's collective bargaining agreement with its players association, extended just two years ago, aren't working.

"The thing we are starting to realize is that [the CBA] has swung considerably toward the players," Goodell said yesterday at the opening of the NFL's annual spring meeting. "In the economy we have now, that can really [have] a significant impact on clubs. We have rising costs. The economics of operating a team are extremely thin margins.When you shrink the margins, at some point in time the agreement becomes untenable. We have to be very cautious here, and the players need to recognize those risks and the tremendous costs."

And yesterday, from

Stephen Ross was approved as the new 50 percent owner of the Miami Dolphins and Dolphin Stadium for $1.1 billion.

So let me see if I understand. The NFL's position is that its economics are untenably bad, and yet apparently only half of a franchise is worth $1.1 billion. Sure.