Law is emergent and undesigned. Law isn’t created; it evolves. Legislation is created and designed. Legislation is not law and law is not legislation. The distinction between legislation and law is one that deserves far greater emphasis than it gets.The modern state has gotten enormous amounts of unjustified and dangerous power by convincing large numbers of people of the truth of three false propositions – namely, that (1) only the state can supply sound money; (2) only the state can supply and enforce law; and (3) rules promulgated by the state are necessarily or by definition law.
The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups—Henry Hazlitt
Thursday, April 03, 2014
Quote of the Day: Differentiating Law and Legislation
Monday, November 18, 2013
Typhoon Yolanda: From Natural to Man-Made Calamity; Spontaneous Order Thrives!
But there is another reason the looting had abated."There is nothing left to loot," said Pedrosa. [Note: Christopher Pedrosa is a government aid worker]
Rusty Lacambra, 42, is joining the exodus along with his wife, two sons and niece. On Monday night he hitched a lift in an army truck bound for the airport to wait with hundreds of others hoping for a free flight on a cargo plane to Manila."My house is destroyed," he said. "Even if you have money there is no food to buy. There is nothing here.
the whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary
“If you want to make it fast, the government can open every airport in the Visayas then the [United Nations] and other entities can come in immediately,” Abdul Mutalis, of the private Putera Malaysia club, said.“People are hungry. People need help,” he said, adding that the slow delivery of relief is prolonging the suffering of the typhoon survivors.“We have to expedite [the delivery of aid] if we want to help them now. Action speaks louder than words,” he said.For the last 20 years, Mutalis’ club has been responding to disasters, including the 2004 tsunami in Indonesia and the 2011 earthquake and tsunami in Japan.“This is the mother of all disasters. There’s no word I can use right now (to describe this Philippine tragedy),” Mutalis said.
The possibility of a rapid repair of their disasters mainly depends on whether the country has been depopulated. If its effective population have not been extirpated at the time, and are not starved afterwards; then, with the same skill and knowledge which they had before, with their land and its permanent improvements undestroyed, and the more durable buildings probably unimpaired, or only partially injured, they have nearly all the requisites for their former amount of production. If there is as much of food left to them, or of valuables to buy food, as enables them by any amount of privation to remain alive and in working condition, they will in a short time have raised as great a produce, and acquired collectively as great wealth and as great a capital, as before; by the mere continuance of that ordinary amount of exertion which they are accustomed to employ in their occupations.
Leyte’s natural disaster tragedies (Typhoon Uring 1991, Typhoon Yolanda 2013 and 2006 Southern Leyte mudslide) have hardly been random: Destitution, steep cultural dependency on political solutions and geographic vulnerabilities account for as a deadly cocktail mix when confronted with Mother Earth’s tantrums.
Remember it is in the vested interest of the private sector to be charitable.This is not only due to self esteem or social purposes but for sustaining the economic environment.Think of it, if retail store ABC's customer base have been blighted by the recent mass flooding, where a massive dislocation- population loss through death or permanent relocation to other places- would translate to an economic loss for the store, then, it would be in the interest of owners of store ABC to "charitably" or voluntarily provide assistance of various kind to the neighborhood in order to prevent such dislocation from worsening, or as a consequence from indifference, risks economic losses.Hence, such acts of charity is of mutual benefit.
To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection — the comparative increase of population and wealth — of those groups that happened to follow them. The unwitting, reluctant, even painful adoption of these practices kept these groups together, increased their access to valuable information of all sorts, and enabled them to be 'fruitful, and multiply, and replenish the earth, and subdue it' (Genesis 1:28). This process is perhaps the least appreciated facet of human evolution.
The spontaneous order arises from each element balancing all the various factors operating on it and by adjusting all its various actions to each other, a balance which will be destroyed if some of the actions are determined by another agency on the basis of different knowledge and in the service of different ends.
The distribution of food, water and medicine to typhoon survivors here picked up speed on Thursday after a barrage of criticisms from aid workers and the Philippine and international press forced the Aquino administration to bring order to its response to the calamity caused by Supertyphoon “Yolanda.”
Monday, October 07, 2013
Quote of the Day: Almost all social order emerges undesigned and unplanned
Sadly, most people are apparently just incapable of understanding that almost all social order emerges undesigned and unplanned. Most people are and seemingly will remain naive secular creationists, ignorant that the forces of natural selection and evolution are constantly at play in society, and that these force are usually only thwarted or distorted by attempts to engineer society from on high. And (here’s an irony) this sad ignorance of the nature of society afflicts even – perhaps especially – those people who have no difficulty understanding that very complex, beautiful, and highly functional non-social orders (such as biological order and the order of the cosmos) emerge unplanned and undesigned.
Wednesday, December 05, 2012
Quote of the Day: When We Reify the Model, We Misunderstand the World
We reify the model, and misunderstand the world.People need to understand that this is exactly the *same* insight that dawned upon Ludwig Wittgenstein — mental constructs made of “given givens” which are given to one mind fail to capture the imperfect networks of imperfectly coordinated common patterns of orienting our self in the world via language — and these ‘given given’ entities mislead us about the source of significance or meaning — we go looking for significance in ‘given given’ entities, eg Plato’s essences, Russell’s logical atoms, Frege’s senses, Kripke’s direct references, Lewis’s possible world entities.When we reify the mental construct we’ve built of ‘language’ using logic and meaning entities, we misunderstand the real world of the social phenomena of language.In the economic case, we lose sight of networks of price relations in the world as found social tools already existing in the world for orienting our doings in coordination with other people. Social tools which aren’t always perfect and don’t always guarantee perfect coordination.In the language case, we lose sight of networks of shared practices of going on in the world involving speech and written words as found social tools already existing in the world for orienting our doings in coordination with other people. Social tools with aren’t always perfect and don’t always guarantee perfect coordination.Prices and language are external social network realities with an existence and reality far beyond the closed system of any single individual’s formal mental model of the price system or the language system made of of ‘given givens’ or stipulated ‘meanings’ and their formal relations.The lesson of Mises’ socialist calculation argument and Wittgenstein’s private language argument is that we can’t recreate this social thing that lies outside us in a fully surveyed formal system of “givens”, we can’t recreate it and we can’t replace it, what we do is make use of it coordination our social doings within this larger *socially* given network of relations, which we don’t receive as ‘given given’ entities like a hat in a box, but as networks of significance we are constantly orienting ourselves within and internalizing, in the first instance without any real explicit articulated fixed rules of going on together in a coordinated way. We acquire usefully and commonly coordinated practices via imitation, trial and error, training, absorbing the culture, practice, getting advice from others, etc.
Thursday, November 15, 2012
Video: I, The Pencil: The Movie
Monday, November 12, 2012
Essay of the Day: Tom Palmer: The Origins of State and Government
What exactly is a state? The canonical definition was offered by MaxWeber,who defined the state as “that human community which (successfully) lays claim to the monopoly of legitimate physical violence within a certain territory.”In fact, it cannot be the case that all wealth is attributable to the state.Historically, the existence of a state apparatus required a pre-existing surplus to sustain it in the first place. The state,in other words, would not exist without wealth being produced before its emergence. Let’s explore that a bit furtherWhy do people have wealth? Charles Dunoyer, an early libertarian sociologist, explained that “there exist in the world only two great parties; that of those who prefer to live from the produce of their labor or of their property, and that of those who prefer to live on the labor or the property of others.” Simply put,makers produce wealth while takers appropriate it…
State formation represents a transformation from “roving bandits” to “stationary bandits.” As the economist Mancur Olson wrote, “If the leader of a roving bandit gang who finds only slim pickings is strong enough to take hold of a given territory and to keep other bandits out, he can monopolize crime in that area—he can become a stationary bandit.”That is an important insight into the development of human political associations.The state is, at its core, a predatory institution. Yet, in some ways, it also represents an advance, even for those being plundered. When the choice is between roving bandits—who rob,fight, burn what they can’t take, and then come back the following year—and stationary bandits—who settle down and plunder little by little throughout the year—the choice is clear. Stationary bandits are less likely to kill and destroy as they loot you and they fend off rival bandits. That is a kind of progress—even from the perspective of those being plundered..
What are the incentives of the rulers? Overly simplistic models posit that rulers seek to maximize wealth, or gross domestic product. Scott,however, argues that the ruler’s incentive is not to maximize the GDP,but to maximize the “SAP,” the state-accessible product,understood as that production that is easy to identify, monitor, enumerate, and confiscate through taxation: “The ruler. . .maximizes the state-accessible product, if necessary, at the expense of the overall wealth of the realm and its subjects.”
State systems of social control—from military conscription to compulsory schooling—have thoroughly permeated our consciousness.Consider,for example, the passport. You cannot travel around the world to day without a document issued by the state. In fact, you can no longer even travel around the United States without a state-issued document.Passports are very recent inventions. For thousands of years, people went where they wanted without permission from the state.
Modern states also claim to be the sole source of law. But historically,states mainly replaced customary law with imposed law. There is a great deal of law all around us that is not a product of the state,for law is a byproduct of voluntary interaction. As the great jurist Bruno Leoni argued, “Individuals make the law insofar as they make successful claims.” Private persons making contracts are making law.
The evolution of freedom has involved a long process of bringing power under law. The imposition of force has none the less left a powerful imprint on our minds. Alexander Rüstow, a prominent sociologist and a father of the post war revival of liberty in Germany, meditated on the origins of the state in violence and predation and its lingering imprint: “All of us, without exception, carry this inherited poison within us, in the most varied and unexpected places and in the most diverse forms, often defying perception. All of us, collectively and individually, are accessories to this great sin of all time, this real original sin, a hereditary fault that can be excised and erased only with great difficulty and slowly, by an insight into pathology, by a will to recover, by the active remorse of all.” It takes work to free our minds from our dependence on the state
Sunday, November 11, 2012
Zimbabwe’s Economic Recovery Prompted by Spontaneous Dollarization
So how did Zimbabwe go from economic ruin to an annual GDP growth rate of 9.32 percent in 2011, with estimates of relatively strong growth rates through 2013? As I predicted in early 2008, the answer is simple: spontaneous dollarization brought an end to the horrors of hyperinflation.
While these achievements are cause for celebration, there are still problems in paradise: Robert Mugabe continues to hold the reins of power; Zimbabwe’s “Ease of Doing Business” ranking is a dismal 172nd out of 185; and “change” is, in short, hard to come by. In addition, the government’s external debt is now close to $12.5 billion and lending rates between Zimbabwe’s embattled banks are as high as 25 percent. To top it off, the Zimbabwean government is attempting to force banks to buy its treasury bills at significantly discounted rates, after its debt auction flopped in early October. Talk about ruling with an iron fist.
Friday, November 02, 2012
Post Hurricane Sandy: Signs of Spontaneous Order in New York City
The traffic in the blackout areas of Manhattan is lawless in the most literal sense: the traffic lights aren't working, so the law cannot be applied as usual. But "lawless" doesn't seem to be a fitting description; the driving seems better-behaved than usual. We're so used to seeing people act under a system of government rules that it's easy to assume that without the rules, everything would descend into chaos. But perhaps free people are generally capable of acting decently on their own. Of course, that's never going to be universal; but then, people break the law too. In fact, a dense set of rules tempts people to see how close to (or how far across) the borderline of legality they can go without being penalized. In the absence of governmental laws, people might focus more on other kinds of laws: social norms and ethics.
Thursday, August 09, 2012
China’s Spontaneously Driven Economic Reforms
Paul Gregory, research fellow at the Hoover Institution, says that China’s economic miracle has been a product of spontaneous order.
At the Econolog Mr. Gregory writes,
China's private enterprise reforms began first in agriculture in 1978 and spread from there. Agriculture accounted for most of Chinese output and most of the labor force when Mao died in 1976 and the reform period could begin. The freeing of agriculture from collective farms is the most important untold part of the Chinese growth story.
Agricultural reforms began spontaneously from below, even before the "Reform" Party Congress of 1978 that installed reformer Deng Xiaping in power. A Chinese reform official later admitted: "In fact, reform wasn't discussed. Reform wasn't listed on the agenda, nor was it mentioned in the work reports." What became known as the "contract responsibility system" was sparked spontaneously by eighteen peasants from Xiaogang village in Anhui province. They secretly divided communal land in November 1978 and agreed to farm their plots individually, each contributing their share of the state quota. The state got its due and the peasants kept what was left over. The peasants' separation of their land from the collective farm was illegal, highly dangerous, and done without the approval of regional officials. Why did they take the chance?
Kate Zhou explains that the peasants had seen their parents and children die from starvation during the 1958-1961 famine of the Great Leap Forward. They understood they had to take care of themselves. The contract responsibility system spread like wildfire from village to village and from province to province, notably without endorsement by or encouragement from regional or national authorities.
As agricultural production soared, Deng Xiaping and his CPC realized that they should not resist something that was working. By 1982, more than 90 percent of rural dwellers worked under the contract responsibility system, but they were allowed only one- to three-year contracts on their land. It was only in 2003 that the state gave out longer-term leases.
The spontaneous reforms in agriculture meant that new supplies of food products needed markets and that markets needed infrastructure. Rural dwellers created a private trade network, and, within one year, most state food stores were out of business. Rural entrepreneurs then created new businesses, such as hotels, services, private restaurants, and small-scale manufacturing, through the three Fs (friends, family and fools). They bribed local officials to register their companies as "township and village enterprises." They created fake "red hat" enterprises, that is, private companies masquerading as state companies, and sham collective enterprises, or they used state enterprises to issue receipts and open bank accounts. Large private manufacturing firms developed first in predominantly agricultural provinces. China's largest agribusiness was founded by brothers who left the city to found their company in rural Sichuan. Rural entrepreneurs built the largest refrigeration and air-conditioning companies in China.
Read the rest here
That was then. Today’s conditions have been different.
Further in the article, Mr. Gregory points out some very important factors
-Today Chinese economy has been roughly split 50-50 between state owned and privately owned enterprises
-State companies use political means of “higher taxes, stricter regulation, and bureaucratic meddling” to “drive out private competitors”
-State banks discriminate in terms of lending where “only four percent of their loans to private businesses”. Thus, the recourse of private businesses has been through the informal or shadow banking systems. Ironically, transacting with unofficial credit markets “can be a criminal offense punished by long jail terms or worse”
The implication of the above is that much of China’s present day economy remains influenced by political forces. This means we cannot trust statistical figures to show real economic growth as they may likely be manipulated for immediate political goals.
This also means that a substantial segment of the nation’s resources have been utilized inefficiently which entails of massive wastages and of capital consumption.
Ghost cities, empty malls and stadiums are evidences of these.
While it may true that the private sector may have been outperforming the state owned companies, the latter’s substantial share extrapolates to the crowding out of the private sector.
Also, political authorities through state owned enterprises have used politics to undermine their private sector counterparts.
And in order for the private sector enterprises to survive and compete they have gone beyond the ken of authorities through the underground/informal economy (e.g. shadow banking). But doing so means having to take upon greater legal and regulatory risks.
All these goes to show how China has been discriminating against the private sector while favoring state owned enterprises.
Ever wonder why China has been a hotbed for 'fake' and or inferior goods?
Apparently globalization has been a key dynamic in forcing the reluctant hands of China's political authorities to liberalize.
And so far the good news has been that political trends appear to signal the emergence of the entrepreneurs as a political force.
This seems evident in the realm of China’s financial markets.
Over the past few months China authorities has undertaken a flurry of liberal oriented reforms; particularly China has recently eased on restrictions on Exchange Traded Funds (ETFs), has lowered transaction fees on share trading, has proposed to ease delisting rules, and seeks to increase the participation of foreign investors into China’s equity markets by expanding the Qualified Foreign Institutional Investors (QFII).
Nonetheless political trends will determine if China’s economic miracle will continue, put to a halt or reverse. All these will rest on China's appetite for economic freedom.