Category: Economics

Bitcoin Value Questions

Does Bitcoin offer something of value today?  Does it have the potential to be more valuable in the future? Here are some thoughts how you might be able to answer yes or no to these questions.

I.

The first point is a question of how currencies have value. How does the US dollar have value? In a very concrete and practical sense, the dollar is valuable due to legal tender laws, where any legitimate transaction that occurs in the US must accept US dollars as a form of payment. Moreover, US taxes must be paid in dollars. However, that’s not a majority of the dollar’s value.

The US dollar has value because people believe it will be accepted in the future. That’s why the dollar is valuable in countries outside America where users are presumably not under US legal tender laws. Why do people believe it has value? Partially it’s derived from the practical points made above combined with the size and scope of the US economy; if dollars are used in the United States, often by legal mandate, and if the US economy is large and vibrant, it will need lots of dollars. The US economy, even if it struggles, won’t be gone overnight, so you can bet in five or ten years, there will be plenty of transactions that need to occur in dollars. There’s also the point that trade with people in the United States mean dollars cross borders pretty easily. This creates a self-fulfilling prophecy; since people know there are Americans and traders who will accept dollars, other people accept dollars too, knowing they will be accepted in the future.

That accounts for the demand side of dollars. On the supply side, there is at least implied trust in the US central bank, the Federal Reserve. This may rub Ron Paul fans the wrong way, but I think it’s somewhat undeniable. People in the US and outside see the inflation track record of the American dollar and agree that it’s unlikely to be really poorly managed. Perhaps that’s just because alternative central banks are even less trustworthy, perhaps it’s because the Fed has a reputation of being stingy about inflation. It’s hard to say. What is undeniable is that the US dollar is widely used and held throughout the world.

II.

Does Bitcoin have a role to fulfill in the market when the US dollar serves as an excellent international medium of exchange and store of value? Yes. Bitcoin is inherently digital, meaning you just need some information, on a computer, in your head, or written on paper, in order to use it. Dollars require a bank, and if international, they require a bank that reports to a local government which may or may not allow foreign currency holdings.

This means today Bitcoin offers some advantages over American dollars in certain situations without any scaling updates to the Bitcoin network that we’ll discuss later. Such areas include international transfers, domestic currency mismanagement, and anonymous transactions.  International transactions because all you need is an internet connection, not a bank or Western Union office. Bitcoin transactions have fees, but they can be lower than international wire fees. Domestic currency mismanagement is Bitcoin’s clearest use case. Venezuela has experienced hyperinflation as its currency is worth less than World of Warcraft gold. Bitcoin has become highly useful as it does not lose its value over time like Bolivars. Bitcoin also saw a spike in India when they unanimously outlawed large denomination cash bills. In another interesting case Zimbabwe actually uses the US dollar (after hyperinflation destroyed the currency last decade), but because they cannot print it, liquid cash is scarce in the country, so Bitcoin is highly valuable since it is more easily imported than dollars.

Finally, Bitcoin is of course useful for illicit activities, such as the fabled Silk Road dark net trading site.  Not much to add here, except to point out that another cryptocurrency, Monero, may actually fill this niche better if you’re just looking for confidential transactions. More on other cryptocurrencies in the final section.

III.

However, if you are in a developed country, it’s unlikely Bitcoin is better than your national currency in terms of ease of use, acceptance by merchants, quickness of transactions, cost of transactions, etc. Certainly people who believe in Bitcoin politically can pay these increased costs and use it anyway, but that’s essentially paying for a political statement.

Bitcoin may be a better long term store of value than a state currency, e.g. the US dollar. It is governed by an algorithm as opposed to a committee. Algorithm changes are difficult and slow, and there is currently a cap on the total number of Bitcoins that will ever be created. If the US hits the Fed’s estimated inflation target of 2%, then the value of any currency owned by residents will halve in about 34 years.  However, Bitcoin is volatile, and buying it as a store of value uses it as an investment. Some Bitcoin investment today is certainly speculation. And if a decent chunk of the Bitcoin price is caused by investment/speculation instead of current usefulness, then a better store of value/investment could rapidly pull the money out of Bitcoin. Perhaps some investment is acceptable, but doing more radical actions, like putting your life savings in something that can lose its value relatively quickly isn’t a good idea.

We should keep in mind that there are people even in developed countries that have limited access to banking and credit. Large commercial banks are notorious for charging fees to customers who specifically don’t have the cash to spare on those fees. Bitcoin may be a way for those with poor access to banks to “be their own bank” and hold their savings securely without needing a national bank. Perhaps transfer fees are too high to make this practical, but at the very least, this is a potential market for Bitcoin, if scaling issues can be solved.

There is one other use case where Bitcoin is clearly superior to even a developed world currency. That would be a tax-free asset and currency. It’s not particularly difficult to purchase Bitcoin and then launder it through another cryptocurrency or through CoinJoin (an anonymization protocol) and make the money untraceable. Assuming Bitcoin’s basic use cases of international transactions and troubled currency refuge continue to grow, Bitcoin offers a big tax haven. I should note, of course, that this is plainly illegal, and I suspect the more tax evasion an individual undertakes, the more likely they are to be scrutinized by authorities.

IV.

We’ve established Bitcoin has explicit use cases and therefore offers value today. We’ve also established that some of these uses cases may grow in the future. What about threats to Bitcoin’s value?

If a significant use case of Bitcoin is illicit transactions and tax avoidance, then I would claim Bitcoin is a direct threat to the state, even in developed countries. As stated in “What is Postlibertarianism? v2.0“, widespread adoption of cryptocurrencies could mean the end of taxable transactions, and possibly the end of the modern state. I’m not interested in making a judgment about whether this is good or bad, but I think the threat to states is undeniable (if still very far away).

The obvious next question: if states have an incentive to stop Bitcoin, can they do it? In cases where Bitcoin has solid use cases, as in Venezuela and Zimbabwe, it seems highly unlikely. Bitcoin was built to be censorship resistant; deleting a node does almost nothing to the network, as all nodes are peer-to-peer and you can quickly switch to talking to another node or two or fifty. To shut down a Bitcoin payment network in a country, you’d likely have to shut down access to the outside internet. However, with new developments in the Bitcoin space, even partitioning a country’s internet from the outside won’t work anymore; Blockstream is currently broadcasting Bitcoin blocks from geostationary satellites (yes, really) to most of the world. Their goal is total global coverage. However, you can only receive the blockchain, not send transactions with this technology. So recently, Nick Szabo and Elaine Ou introduced a protocol for sending and receiving Bitcoin transactions (and block headers) over HF radio.

In reality, Venezuela hasn’t made Bitcoin illegal anyway. It seems unlikely that Nicholas Maduro’s ineffective government could substantially threaten the internet. China, while having the Great Firewall and having shut down Bitcoin exchanges, has not made the possession or use of Bitcoin illegal. These technologies are really only a just-in-case scenario. However, if you do live in a country with no internet or interaction with the outside world (North Korea), you still might not be able to use Bitcoin; no internet, no distributed systems, no censorship resistance (although the North Korean government itself uses Bitcoin to avoid international sanctions).  While I have to concede this point, it’s also important to acknowledge that technological advancement has enabled South Korean soap operas to be smuggled across the border; in the future Bitcoin may find a way into the Hermit Kingdom as well.

However, North Korea is one of the worst-case situations. In almost any other country, cheap computing technology and simple internet infrastructure has taken hold in an irreversible trend. And that’s all that’s really needed to use Bitcoin.

…Probably. What if a high trust societies made Bitcoin illegal? What if the United States and Europe made it illegal to own or transact in Bitcoin? I don’t think this is likely, as democracies tend be very slow when it comes to legislation, especially regulation where financial markets can make a lot of money. Moreover, institutional investors have already created legitimate companies in the US and Europe and so there would be lobbying, deliberating, compromising, etc. Japan has already recognized Bitcoin as an official form of payment, and if nothing else, the US making Bitcoin illegal would create an odd situation for American citizens living in Japan and vice versa.

But let’s say it happens.

It’s undeniable that Bitcoin’s value would drop. If you were already using Bitcoin for illicit activity, you might keep using it, but it might expose you to additional legal risk where it didn’t before. However, if you were using Bitcoin as an investment/speculative vehicle or as a way to send international transfers, an illegal Bitcoin is significantly less appealing because it would expose you to legal risk that you wouldn’t otherwise have to deal with at all. Bitcoin’s growth proposition wouldn’t be zero, but it might be pretty grim, and perhaps relegated to countries with weak state legitimacy (and where widespread mistrust of the state means ordinary activities are criminalized anyway).

However, like I said previously, I find this scenario unlikely. Moreover, the Bitcoin network isn’t just waiting for governments to act, it is constantly under development with a large technical community.

V.

Can Bitcoin scale to take on more roles and use cases? Can it upgrade to become more censorship resistant? Definitely.

One big item we’ve talked about before is the Lightning Network. The idea behind the LN is pretty simple: you can create payment channels by putting some Bitcoin in escrow through a time-locked transaction that is signed but not posted to the blockchain. This channel can be continually updated with new transactions representing different payments back and forth across the channel until the channel closes by posting the final “net” transaction to the Bitcoin blockchain (read more about it here). This uses the blockchain as a settlement layer, and saves on transaction fees since only two transactions are ever posted to the blockchain (to open and close the channel) even if lots of payments occur.

There is another interesting aspect of this technology, which is that you can use a LN channel as an initial hook into a larger network. So if you (Person A) already have a channel open with Person B, you could pay Person C without opening up a new channel as long as both B and C have a channel between them already open. A pays B, then B pays C, and everyone updates their current balances on two payment channels, but no one needs to post anything to the blockchain, so no transaction fees are needed.

This is pretty good for scaling. However, it is somewhat negative for privacy. The most efficient way any Lightning Network will exist is through large central hubs. This is because end users will want to open a single payment channel (since it’s cheaper and ties up fewer funds), so they will want to connect to a hub everyone else is connected to. A hub that doesn’t stay available all the time would be unhelpful if you want to make instantaneous payments at any time, so the trend will be towards large, continuously available hubs. These hubs will also need access to lots of liquid cash as they will have lots of funds tied up in open channels, while also needing to have liquidity available to open new channels at any time.

This will lead to hubs with lots of cash and thus corporate backing. These large hubs will best be able to scale lots of LN instant payments while keeping LN node fees low. However, a central payment hub would have lots of information about its users, users who are using a single Bitcoin address for all of their transactions. Thus each address would have much more information leaked to the LN hub nodes, which you could track across time.

Of course, if you wanted more anonymity, you could just use a regular Bitcoin transaction; any service or individual who has a Lightning address must by definition have a Bitcoin address. This seems a reasonable tradeoff: instant transactions that can be tracked over time vs anonymous transactions that you pay a higher fee per use.

VI.

Another impressive project is Drivechain.  This project would allow for sidechains in the Bitcoin ecosystem. These would be soft-forked in (that means no network split), and these sidechains would not need to impact the mainchain. The sidechain could run its own nodes independent of the Bitcoin chain, although in practice we would expect Bitcoin nodes to watch the sidechains since we would imagine sidechains would only exist if there was significant value added there. The way these work is that Bitcoin would be sent to an escrow account watched by the sidechain. That would allow those coins to appear on the sidechain and be governed by any rules the sidechain wants.

Interesting sidechain ideas include Hivemind (decentralized Bitcoin prediction markets) and MimbleWimble (homomorphically encrypted confidential transactions). Needless to say, there is an enormous amount of potential here. Drivechains would allow limitless innovation, allowing new blockchain rules to flourish while maintaining the network effects and avoiding the coordination failure of multiple currencies or blockchains.

However, there are risks with this approach. One risk is that money stored in the sidechain is sitting in an escrow account on the mainchain. Mainchain nodes don’t have to watch the sidechain, and so if incorrect transactions are posted trying to withdraw money from the sidechain, it’s up to the miners to enforce the correct rules. As long as miners believe sidechains enhance the value of Bitcoin, there shouldn’t be a problem.  But if we don’t get to that point quickly, drivechains could be a short-lived experiment ending in grand theft. I’m hopeful this is not the case though, and sidechains would offer such a massive increase in the value of Bitcoin that several will survive and grow.

VII.

Let’s take a moment to elaborate on the implications here.  The creation of a MimbleWimble sidechain or the addition of the related idea of Confidential Transactions to Bitcoin would be game changers for Bitcoin privacy. Tax avoidance with Bitcoin would become simple, easy, and possibly unstoppable. Combined with improved scaling or the essentially limitless use cases for Bitcoin sidechains, there will be a combination of high demand and availability of Bitcoin with widespread privacy.  Even if governments can continue to collect tax revenues, their ability to combat Bitcoin would be completely diminished.

The interesting corollary is that governments aren’t really getting in the way of Bitcoin. Maybe they’ll crack down on it in the future, but for now there isn’t a lot of indication for heavy regulation. In the US, electoral politics means there will be a deregulatory environment for the next year, maybe three.

Finally, the Bitcoin and cryptocurrency space is not done developing. Sidechains offer the potential to incorporate all sorts of new rulesets and innovation into Bitcoin. The potential here is literally unknowable. For these reasons, I believe Bitcoin has the potential for significant value.

I would also of course like to point out that this is just some blog on the internet so take my advice as policy speculation and not investment speculation. There are plenty of other financial risks to Bitcoin I don’t have time to cover. This includes that if you lose your private keys, your money is gone forever. It includes that there could be an unknown flaw in the Bitcoin code that could be exploited, losing money and crashing the price of Bitcoin. It includes that government agencies could compromise developers and pay them off to put in code that helps to destroy the network. Bitcoin is risky and speculative. The fact that it has a lot of potential does not guarantee that it will have value in five years.

VIII.

A final note on other cryptocurrencies. There are many other cryptocurrencies, and I’m doubtful on all of them for two reasons. (1) If Drivechain is successful, most use cases for other coins will be gone. (2) As it is, even if other chains have cool features, they don’t have the network effects of Bitcoin. Collective action failures mean that better features may be passed over if it involves transaction costs distributed over many individuals; in other words, it will be nearly impossible to get users, vendors, developers, and miners to switch over to a different cryptocurrency. In the long run, we’d probably expect one or two cryptocurrencies to dominate. This may be Bitcoin or it may be something else, but today, Bitcoin is the clear market leader. To bet on another cryptocurrency is to bet against the market and to bet against the large ecosystem that Bitcoin has built. This seems very risky.

Thanks for reading, and if you enjoyed this, feel free to donate to the Bitcoin address on the sidebar!

 

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Free Market Assumptions in Healthcare

I’ve encountered an unexpected concept when debating and discussing healthcare solutions in the United States.

Healthcare in the United States contains both public and private actors, but it’s most important characteristic for a libertarian critique is its lack of price signals. Healthcare is not purchased in an open market. Patients select healthcare providers based on reputation and what their insurance covers, but most patients do not choose their insurance provider. That is usually done by their employer or the government (in the case of Medicare and Medicaid). Conversely, healthcare providers do not charge patients, they charge insurers where prices can differ by provider and by procedure. EconTalk recently had Christy Ford Chapin on to discuss the history of American healthcare and I would highly recommend the episode.

The libertarian position (and mine) is that healthcare could be improved with prices. There are many ways to do that, you do not necessarily need patients to pay those prices, but you need them involved in the decision making process. Otherwise, there is no downsloping demand curve, and therefore there is no incentive to improve efficiency in the market. Thus, we see higher prices over time instead of the usual results of technological innovation: higher diversity of choices, higher quality goods, and lower prices.

This post is not a defense of whatever Republican healthcare bill is now being floated to replace or repeal Obamacare. This is only an argument that having known prices and price transparency would allow for demand and supply curves in the health care market. Such a characteristic could be part of a host of possible healthcare policy landscapes, and I’m only saying that a landscape that has prices is likely better than one that does not. Today, and for most of the history of healthcare in America, the healthcare industry has not been governed by an openly priced market.

Such a libertarian critique is separate from the argument that a “free-market” system with prices would hurt the poor. This is a valid critique that could be addressed with direct cash grants or other form of government subsidy that avoids having healthcare prices set by the government (refundable tax credits, health savings accounts, etc).

The remarkable argument I’ve heard is that if we allowed healthcare to be purchased in a market with prices, it would fail because you “can’t have” a free market in healthcare. It’s hard to nail down exactly what these people imagine would happen, but it seems that they believe prices themselves would not obey the laws of demand and supply. I will now list some arguments I have heard, some of them several times, and why they are incorrect. Certainly these arguments are poor and perhaps I am wasting time with them, but apparently they are common enough that I have run into them several times and therefore must be addressed.

“Healthcare Demand is Inelastic”

This is by far the most common point I’ve heard. It’s not usually stated in economic terms, but more like “if you are in need of emergency medical care, you’ll pay any amount, and this breaks normal market assumptions”.  However, I’ve also heard it stated that evidence of competitive markets working in elective procedures (Lasik or plastic surgery) does not apply to regular medicine because of demand inelasticity.

Firstly, the assumption that demand for medicine as a good is totally inelastic (i.e. quantity would not respond at all to price) is obviously wrong. That would imply there are no unnecessary procedures done ever.  Yet we all are aware that because doctors are often paid per procedure, they are often incentivized to conduct tests because there is very little downside (i.e. it costs neither the patient nor the doctor anything to run the extra test). If there is no elasticity, then there is no room for reducing the amount of procedures done by doctors. I doubt that.

Nonetheless, let’s grant the assumption, or at least let’s say that demand elasticity is very low.  That means at higher prices, you’re likely to consume a similar amount of medicine. That sounds more reasonable; if you’re sick, it’s not your choice.

Ok well…so what? We can have competitive markets with marginal revenue very close to marginal cost even if demand elasticity is low. Gasoline is a classic example of an inelastic good, yet the gasoline market is highly competitive. Prices work without issue here. Again, we’re not saying that poor people would be really happy with prices, we’re just saying that prices would exist if patients could purchase healthcare in a market.

Another related point is that if you have a medical emergency, you’re not really in a position to negotiate prices. This, however, is not just due to demand inelasticity, but also monopoly pricing.  If you’re injured, you can’t just go to a different hospital, so the ER you arrive at is pretty much the only place you can go. This is a fairly good argument for government intervention in the ER. However, insurance is also a pretty good solution; if you won’t be able to make a choice in the moment, you buy insurance so that when the moment comes, you are already prepared. There is no economic reason that medical emergency insurance could not be purchased in a free market. Additionally, medical emergencies are a small part of the medical industry. The vast majority of medical procedures are not emergencies, and so for most situations, monopoly pricing is not an issue.

“Knowledge is imperfectly distributed in medicine”

Again, the fact that market actors have imperfect knowledge does not mean a market cannot exist. It may mean there are market failures, but government interventions are subject to government failures which may or may not outweigh the benefits of trying to fix the market failure. Moreover, this proves way too much, as it implies that you can’t have any market with imperfect knowledge, yet all markets suffer from this, and plenty are functioning just fine. In fact, I’d argue that prices are the single best way to spread knowledge.

Imperfect knowledge is usually fixed through regulation, like accreditation or inspections. You don’t have the knowledge to know that your airplane doesn’t have mechanical problems. Nonetheless, you are quite capable of comparing the prices of different airplane tickets, and you’ll likely respond to market forces when purchasing a ticket. Certainly imperfect knowledge is an argument for regulation, and I’m sure I’d disagree with plenty of people on how much regulation is necessary, but there is no world in which it then makes sense to argue that imperfect knowledge precludes a functioning price system.

“People are irrational”

First, people don’t have to be economically rational, nor do markets have to be free from regulation in order to create accurate economic modeling. To make the claim that economic analysis can’t be done with healthcare because the market is not perfectly competitive, or actors are not perfectly rational, again proves too much; economic analysis would be “fatally flawed” in all markets. The only question that needs to be asked is whether it’s possible patients might call two different places for a quote on a chest CT or an MRI. If some of them would do this, there would be competitive pricing, even if most don’t know what an MRI actually does.

“Healthcare is too expensive for a market to function”

This point sort of ignores the thesis that we are arguing, as all I’m trying to say is that prices can exist in the healthcare market. However, this is related and while it’s a bad argument, I want to address it briefly.  Healthcare is pretty expensive, although I suspect that it would be cheaper if market prices were used. The obvious answer to me would be to imagine if the government gave a large amount of money to an individual to pay for their healthcare for a year. That would fix the endowment issue where the poor are excluded from the market. In this hypothetical, my thesis suggests that there would be a variety of options for healthcare spending, such as paying out of pocket, buying a high deductible insurance plan, subscribing to a doctor network, etc. All of these would be examples of functioning markets in healthcare. Additionally, if recipients were allowed to roll over funding into the next year, they’d be incentivized to find good deals this year.

My thesis is not that the government should stay out of healthcare, but that interventions that keep prices in place are preferred.

“Morally, patients should not have to pay for healthcare”

Again, this isn’t really an argument against my thesis, but I have heard it. It’s a bad argument, so I’ll address it briefly.

If we take a consequentialist utilitarian moral standpoint, there is no a priori humanitarian reason why patients should not pay for part of their healthcare. In other words, if patients paying for part of their healthcare creates benefits for all of society, including almost all patients and future patients, then the moral thing to do (from a utilitarian perspective) is to have patients pay for some of their healthcare.

So would there be benefits if patients paid for healthcare? Well, first you have to establish that prices can exists. We’ve done that for the theoretical, but how about the empirical?

Empirical Data

The first point is that in the area closest to healthcare where there are transparent prices, elective procedures, we see functioning markets with costs going down over time.  Highlights include:

1. For the top ten most popular cosmetic procedures last year, none of them has increased in price since 1998 more than the 45.4% increase in consumer price inflation (the price for the hyaluronic acid procedure wasn’t available for 1998), meaning the real price of all of those procedures have fallen over the last 18 years.

2. For three of the top five favorite non-surgical procedures in 2015 (botox, laser hair removal and chemical peel), the nominal prices have actually fallen since 1998 by large double-digit percentage declines of -25.2%, -43.8% and -23.5%. That is, those prices have fallen in price since 1998, even before making any adjustments for inflation.

3. Most importantly, none of the ten cosmetic procedures in the table above have increased in price by anywhere close to the 93% increase in medical care services since 1998. The 23.2% average price increase since 1998 for last year’s top five most popular surgical procedures, isn’t even close to half of the 93% increase in the cost of medical care services over the last 18 years.

However, there are some doctors who just take cash for normal, non-elective procedures. These would be procedures where there is “inelastic demand”. What happens to these doctors? Do they go bankrupt immediately? Is everyone confused and bewildered? Not really, it just works like any other market. They post their prices online, and people come and pay for their procedures directly, without insurance. The Oklahoma Surgery Center is one of the more well known health centers with this approach:

The Surgery Center would charge $19,000 for his whole-knee replacement, a discount of nearly 50% on what Villa expected to be charged at his local hospital. And that price would include everything from airfare to the organization’s only facility, in Oklahoma City, to medications and physical therapy.

And once that happened, lots of groups were incentivized to send their patients there, making other Oklahoma hospitals compete.

While no organization keeps track of how many cash-based medical centers have cropped up nationwide in recent years, Smith and Lantier say they’ve witnessed an explosion. In Oklahoma City alone there are roughly three dozen centers that are all or partly cash based, specializing in everything from radiology to oncology.

The RAND institute ran an RCT in the late 70s that found patients who cost shared saw a reduction in unnecessary procedures. Obviously it’s pretty old, but I’m doubtful human nature has changed that much from the late 70s; if people have an opportunity to save money, they will do so. Healthcare policy should utilize that.

More recently, in 2008, Oregon had a Medicaid experiment, where several people were given access to Medicaid based on a lottery. Thus, a study was conducted to determine what the affects were of having access to Medicaid. As you would expect, patients with Medicaid coverage were much more likely to utilize healthcare generally, and more likely to go to the ER. The price of medical care went down when this group was enrolled in Medicaid, and consumption of medical care went up. This supports the notion that healthcare has a downsloping demand curve…just like every other market that has ever existed.

Finally, there was a study done in 2015 looking at the healthcare system and it’s lack of prices. It found that transaction prices, that is prices negotiated between hospitals and insurers, still accounts for much of the differences in private inpatient healthcare spending. It also found that even after controlling for several different variables, hospital monopoly power was responsible for higher prices. This seems to indicate to me that if we had significantly more price transparency in a functioning market, hospitals and patients would respond to those incentives, creating incentives for lower prices and better, more efficient care.

Conclusion

This isn’t revolutionary by any means, but there’s seems to be plenty of empirical and theoretical reasons that if we had transparent pricing systems in the healthcare industry, it would function similarly to prices everywhere else in the economy. Certainly the use of insurance complicates things, but the way we use medical insurance is a result of the unique way we created the medical payments system as detailed in the EconTalk episode mentioned at the top of the post. There is no technical reason we need to retain that system, and I think transitioning towards more procedures having known prices would be beneficial, whatever that system would be.

 

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Urbanization and Free Markets

I’m not an environmentalist. I find global warming problematic because it will likely make living on Earth more expensive for humans. Preservation of natural resources is not inherently important to me because I don’t find it morally wrong to consume these resources at high levels. Nonetheless, it could be valuable to preserve natural resources if there is a tragedy of the commons where resources are underpriced by the market and are thus being inefficiently overconsumed. I also think humans tend to enjoy at least visiting and observing pleasant natural land and seascapes, but it only makes sense to preserve them to the extent of which the value of observing these natural areas outweighs their economic value in improving human lives through development.

Unfortunately, I find a lot of the arguments for urbanization tend to emphasize the environmental benefits. These types of arguments will not do well in convincing libertarians that they should also promote urbanization. The goal of this post is to present an argument for libertarians, classical liberals, and free market economists on why they should be interested in urbanization and urban policy.

Cities

Cities are a vital part of human civilization due to specialization, economies of scale, and network effects. You can’t build a hospital with specialized departments and research facilities in a town of 100 people. You can’t make an engineering startup in a town without stores that sell specialized equipment. You can’t teach specific niche courses in cryptography if your city can’t support a university large enough to have advanced Math and Computer Science departments.

Cities also provide more for their inhabitants to consume due to economies of scale. Cities have more diverse food and cultural entertainment like museums, concerts, or festivals. These experiences are also in constant competition, spurring innovation. We think of cities as being more expensive than living in the country, but that’s somewhat misleading; diverse experiences are available in cities rather than rural areas because they can only be provided cheaply in cities. The selection of products is much narrower in less densely inhabited areas. In cities, supply chains can focus on getting tons of varied products to a single location where everyone lives, rather than transporting fewer standardized products across a giant area. The internet is a mitigating factor to some of this, but it’s also true that you can’t get continued technological innovation without concentrating innovators in cities!

There’s another important point about cities from a libertarian or postlibertarian perspective: they offer anonymity and individuality. Cities pack enough people into an area that you can make choices about your social interactions. Unlike a small town where your personal relationships are limited by geography to the few people in the town. It is far more likely you can meet with others that share your obscure interests in a large city rather than a small town. You’re not forced to conform to what your few neighbors believe are acceptable social behavior or beliefs. Diverse cities allow for varied cultural norms, and I’d argue increased tolerance.

The policies and discussions surrounding urbanization and urban planning have mostly been driven by those on the political left. Their political enemies, the Red Tribe (for more explanation, see section IV of I Can Tolerate Anyone Except the Outgroup), is often identified by its opposition to rich urban elites. Libertarians themselves have streaks of this disdain for progressive cities and yearning for an idealized Jeffersonian yeoman farmer nation, where everyone lives on their own separate plots of land and does as they please. But postlibertarians and the Grey Tribe should not cede urban policy to the left so easily; cities are largely vital for the economic reasons I’ve put forward. While today they are often bastions of progressive politics, cities are too important to be left to be governed by the ideas of a single political group.

Dense Cities

Since there are benefits to people who live in cities as described above, it seems to follow that denser cities might emphasize those benefits to a greater degree.

The economic argument seems to make sense here: if cities concentrate people, denser cities should concentrate logistical costs. That means less investment cost in infrastructure per person and less cost to deliver a larger amount of physical goods to the same people. There should be better economies of scale for transportation when cities are packed together. Another interesting benefit might be that with locations closer together, fewer people would use cars, so there would be less total hours wasted in traffic for a city of similar size but lower density. Perhaps this would be offset by longer total transportation time since walking is slower than driving. Certainly it seems that fewer people would die in car accidents at least.

Another benefit specifically for libertarians might actually be fewer road square footage per person. Roads are expensive, are often centrally managed by the city, and so don’t respond to price signalling. Optimal road work is thus not easily achievable, leading to poorly timed construction (overabundance of construction due to road opportunity cost not being priced) or not enough road repairs (too little construction due to no consumer payment for roads). Narrower streets specifically would essentially privatize space in a dense city, space that is highly valuable.

There is also a little bit of anecdotal evidence for cultural benefits of dense cities too. For example, we might expect denser cities to have more people from an odd subculture willing to meet than the population of the city might suggest (due to close proximity). As an example, let’s use Slate Star Codex’s series of local meetups earlier this year. If we expected SSC meetup populations to be based solely on total population, we’d see it match the US Census’ Core Based Statistical Area ranking: New York, Los Angeles, Chicago, Dallas, Houston, Philadelphia, Washington, Miami.

If we expected denser cities to show the social/cultural benefits to a greater extent than spread out cities, we should expect the SSC meetup populations to more closely match the population density of top cities. Unfortunately there’s no exact definition for a dense city. The simple way to define it is total population within a city’s political borders divided by the land area under that polity. However, cities usually extend beyond the political boundaries specifically because those municipal governments get in the way. If we go by this definition, the top US cities should be New York, San Francisco, Boston, Chicago, Philadelphia, and Miami. Now this actually matches the top SSC American cities pretty well, with the exception of Miami which didn’t meet the 10 person minimum despite being in the top seven cities in both total population and density. Another way we can represent density is through the number of high density areas in each metropolitan area. This yields in order: New York, Los Angeles, Philadelphia, Miami, Boston, Chicago, San Francisco.

There are obviously other factors at work in the SSC meetups including culture of the city (Silicon Valley/startup culture is probably the best predictor of SSC readers, as we see small Silicon Valley towns like Mountain View on the list) as well as a number of English speakers (explains why dense foreign cities are not high on the list), and college degrees. This last point is interesting. This article discusses how denser cities only seem to realize productivity gains in high human capital situations. Finance, technology, and other professional industries requiring higher education stand to gain from higher density cities. One question then is whether college graduates are attracted to dense urban cores or whether urbanization simply occurs around where college graduates tend to be (around universities?). To me it seems that cities clearly predate modern universities and college graduates. The establishment and growth of cities seems fairly organic, emergent, and spontaneous.

Too Dense?

This brings us to the next point: cities don’t require urban planning to exist. Humans are completely capable of decentralized self-organization of urban areas, and cities existed and continue to exist without strong municipal governments, zoning laws, building codes, etc. Nonetheless, with close quarters comes externalities, and so governments arguably have a lot of benefits to offer residents of cities over not having governments. Yet, as urban economist Issi Romem writes, American cities tend to expand outwards, and those cities that don’t expand geographically see large cost of living increases. Relatedly, as this Forbes piece points out, many of the highest density cities in the world (Dhaka, Delhi, Karachi, Mumbai)  are also relatively poor. Cities can be rich, but density doesn’t seem to be a requirement for being rich. In the U.S., most new housing comes from urban expansion, not density increases. This seems to beckon that it is not only cheaper to expand at the outside of cities than it is to expand the interior of cities, but more desirable to residents. Given the benefits of cities and density, how could this be?

One possibility is that it could be more expensive to bring goods into a city center than we thought. Maybe economies of scale don’t work as well due to increased traffic. I don’t have much evidence for that, but I guess it’s possible. This seems unintuitive though, as living in the suburbs means dealing with much more driving and traffic anyway.

However, some goods don’t need to be transported into the city…like housing. Once it’s there, it is consumed slowly over time. Yet rent is fairly correlated with density.  I don’t have good data on it, but I took at look at padmapper.com in a couple cities that I knew the general density of. I took the price slider and noted where the high priced places were compared to the low priced areas. It wasn’t a perfect correlation, but it did match my general feeling that more density was associated with higher prices. So if we assume that a housing market is in equilibrium, differences in price for dense and non-dense areas indicate on the demand side that there are plenty of people who would prefer to live in urban dense cores over suburbs given the same price.

Next, on the supply side, differences in price between dense and non-dense areas indicates higher marginal cost in dense areas compared to less dense areas. So what is driving that cost?

Certainly more complex tall structures are needed for dense living, although part of that cost is spread over many more inhabitants. Additionally, there is more reliance on public transportation infrastructure than is needed in the suburbs, which might lead to higher taxes to pay for it. However, other infrastructure costs are lower per person in the city than in the suburbs (lower fixed costs to build water, sewage, electrical, internet, and roads because they scale largely with horizontal distance, which is minimized in a city). Additionally, if cities are supposed to help make people more productive then we might hope similar tax rates would bring higher revenue in dense cities than suburbs.  It’s hard to know then whether tax burdens should be higher in cities, but it seems colloquial wisdom believes they are (high density cities don’t seem like low tax areas). I did find this 2005 paper from Harvard indicating that multi-family buildings (apartments) had a higher tax incidence than individual family homes. Moreover, as Stephen Smith at Market Urbanism pointed out, much of that local tax money goes to roads and schools, things denser urban dwellers likely use at lower rates than suburbanites. Finally, the federal mortgage interest tax credit further makes housing cheaper for suburbanites over urban core residents.

Free Market Perspectives

So while it’s possible to say that it simply costs more to live in a dense city, it’s also true that government seems to cost a lot in cities. Perhaps that’s a necessary part of living in cities, but if we leave urban policy as the sole domain of the Left, there will be no counterbalancing philosophy that understands market forces. Without that check, government will cost more than its benefits.

Moreover, raising tax revenue and providing services are not the only functions of municipal governments: they also create regulations, which are another way they contribute directly to the cost of living in cities. Here it seems there is little nuance to be had: most high productivity cities have far too restrictive housing regulations. This has reduced the ability of labor to relocate to more productive areas of the economy, and according to this NBER paper, has allowed for massive missed opportunities in economic growth. And this makes intuitive sense; over time, technology should allow us to build denser and denser cities more cheaply, yet new housing in some of the most productive cities has not kept pace with demand. The explanation must be regulatory hurdles on new housing.

Such an outcome squares well with the common opposition to urban development known among the urban policy community with the pejorative NIMBY (not in my backyard), and it applies not just to housing, but to any development in a city. Elected municipal governments are responsible to the people who live in the city at present, not to possible future citizens. While this may seem just, it is emphatically a net negative in a utilitarian calculation; improvements in human lives should not be discounted based on where that human lives. Policy that makes it harder for people to move to a city to make it denser, when those people want to move there, creates worse outcomes than we would otherwise have.

Finally, let’s take a step back: I’m not saying that people have to live in dense urban cores; people should live wherever and however they would like to. I’m saying that governments can mismanage urban policy in ways that prevent people from moving to where they would actually want to go. Bad policy changes the nature of cities and reduces the potential benefits they can bring. Because urban policy tends to rely significantly on some state intervention, I find that there is not a plethora of free market urbanists. Nonetheless, cities are an important part of the modern human experience and they will continue to be in the future. Libertarian perspectives have much to offer urban policy and it would be a shame to abandon it to the left.

 

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Metacontrarian contributed to this post.

A Few Thoughts on Bitcoin

I have been aware of Bitcoin’s existence for a while, and while I was excited about it a few years ago, it had somewhat dropped off my radar. Perhaps because over the past few months, Bitcoin has seen a big increase in value, I started to revisit it and analyze it as a technology. My experience has been nothing short of breathtaking.

A few years ago, Bitcoin was pretty cool. I even wrote a paper about it, discussing the huge potential of the technology and decentralized, autonomous transactions could totally upend the banking industry. But back when I first got into Bitcoin, I was also interested in Austrian Economics, which I’m largely over now. Their focus on control of the money supply and dire warnings about the Federal Reserve weren’t really borne out by the rather mundane economic growth of the last few years.

Nonetheless, the Bitcoin community has been working on without me, and it has paid off: you can now use Bitcoin to purchase from all sorts of retailers, including Dell, Overstock.com, Newegg, and more. You can also buy all sorts of internet specific services, which to me seems like the clearest use case. These include Steam credit, VPNs, cloud hosting, and even Reddit gold.

The price has jumped up to over $1000 at the end of April 2017 (that’s over $18 billion in total market value of all Bitcoins), and it was briefly even higher a month ago on speculation the SEC would allow for a Bitcoin ETF. The ETF was rejected, but the potential of the currency remains. And technologically, Bitcoin is far more impressive than it was, most notably with a concept called the Lightning Network.

This technology would allow for instantaneous Bitcoin transactions (without having to accept risky zero confirmation transactions). These transactions would have the full security of the Bitcoin network, and would also likely allow massive scaling of the Bitcoin payment network. Drivechain is another project with great potential to scale Bitcoin and allow for applications to be built on top of the Bitcoin blockchain. It would create a two-way peg, enforced by miners, that allowed tokens to be converted from Bitcoin to other sidechains and back again. This would allow experimentation of tons of new applications without risk to the original Bitcoin blockchain.

Hivemind is particularly exciting as a decentralized prediction market that is not subject to a central group creating markets; anyone can create and market and rely on a consensus algorithm to declare outcomes. If attached to the Bitcoin blockchain, it also wouldn’t suffer from cannibalization that Ethereum blockchains like Augur can suffer from.

Mimblewimble is another interesting sidechain idea. It combines concepts of confidential transactions with (I think) homomorphic encryption to allow for completely unknowable transaction amounts and untraceable transaction histories. It would also do this while keeping the required data to run the blockchain fairly low (the Bitcoin blockchain grows over time). It would have to be implemented as a sidechain, but any transactions that occur there would be completely untraceable.

And there are even more cool projects: Namecoin, JoinMarket, the Elements Project, and of course other cryptocurrencies like Ethereum, Monero, and Zcash. This really makes the future of Bitcoin and cryptocurrencies seem pretty bright.

However, we’ve skipped a big point, which is that most of these cool innovations for Bitcoin can’t be done with Bitcoin’s present architecture. Moreover, the current number of Bitcoin transactions per block has just about maxed out at ~1800. This has resulted in something called the Scaling Debate, which centers about the best way to scale the Bitcoin blockchain. Upgrades to the blockchain must be done through consensus where miners mine new types of blocks, institutions running nodes approve of those new blocks, and users continue to create transactions that are included in new blocks (or else find another cryptocurrency). Before any of that can happen, developers have to write the code that miners, validation nodes, and users will run.

Right now, there is a big political fight that could very briefly be described as between users who support the most common implementation of the Bitcoin wallet and node (known as Bitcoin Core) and those who generally oppose that implementation and the loose group of developers behind it. I certainly am not here to take sides, and in fact it would probably have some long term benefits if both groups could go their separate ways and have the market decide which blockchain consensus rules are better. However, there is not much incentive to do that, as there are network effects in Bitcoin and any chain split would reduce the value of the entire ecosystem. The network effects would likely mean any two-chain system would quickly collapse to one chain or the other. No one wants to be on the losing side, yet no side can convince the other, and so there has been political infighting and digging in, resulting in the current stalemate.

There will eventually be a conclusion to this stalemate; there is too much money on the line to avoid it. Either the sides will figure out a compromise, the users or the miners will trigger a fork of the chain in some way and force the issue, or eventually a couple years down the road another cryptocurrency will overtake Bitcoin as the most prominent store of value and widely used blockchain. A compromise would obviously be the least costly, a chain split would be more expensive, but could possibly solve the disagreement more completely than a compromise, while another cryptocurrency winning would be by far the most expensive and damaging outcome. All development and code security that went into Bitcoin would have to be redone on any new crytocurrency. Nonetheless, Litecoin just this week seems to have approved of Segregated Witness, the code piece that is currently causing the Bitcoin stalemate. If Bitcoin’s stalemate continues for years, Litecoin is going to start looking pretty great.

Obviously it’s disappointing that even a system built on trustless transactions can’t avoid the pettiness of human politics, but it’s a good case study demonstrating just how pervasive and pernicious human political fights are. Ultimately, because cryptocurrencies are built in a competitive market, politics cannot derail this technology forever. And when the technology does win out, the impact on the word will be revolutionary. I just hope it’s sooner rather than later.

 

Bitcoin featured picture is a public domain image.

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What is Postlibertarianism? v2.0

When I started blogging here about 18 months ago, I knew that I was having trouble identifying myself as exactly “libertarian”, despite that being my primary blogging perspective for years before that. I’ve mapped out important parts of this “new” position in previous posts, but now I think it would make sense to put everything in one place. This post is labeled “2.0” since former postlibertarian.com blogger Joshua Hedlund defined it pretty well in 2011. This is a more in depth analysis.
Continue reading What is Postlibertarianism? v2.0

The Alternative to Trump

I’ve made a couple posts detailing that Trump’s populist ideology has no real ideas, and the ideas it has are pretty universally terrible. So how do we go about opposing Trump?

After Trump won the nomination, I thought I was going to have to write a big post about picking up the pieces on the right after Trump’s loss. Turns out, Hillary Clinton was a much worse candidate that even I suspected, and now it’s the left that needs to look at themselves. I’ve got some ideas that could help them (and at least one that advances my own agenda).

However, even I have to admit that the reality is not that dire for Democrats politically, nor progressives ideologically. At last count, Hillary was winning the popular vote by 2.5 million. It seems quite possible that if they had nominated someone who was more palatable to independents and moderate Republicans in Michigan, Pennsylvania, and Wisconsin, Democrats would have done fine. No platform overhaul necessary. In fact, had Obama been able to win a 3rd term, I’d bet a lot of money he’d have won it, were he facing Trump.

However, Democrats are doing poorly in most state-level races, including the House. In light of this, and since people are talking about refurbishing left-wing ideas anyway, it’s at least fun to discuss  ways to improve the Democratic Party. Bernie Sanders stated that Democrats have to go beyond identity politics to focus on progressive ideas. I agree with this on its face, but I’m sure what Bernie really means is we should make the welfare state bigger and envelop not just retiree pensions and retiree healthcare, but universal healthcare, childcare, and free college-level education. He also seems to pair this with a strong regulatory state and reduction in some individual rights such as free speech connected to campaign financing. Rather than focusing on groups of people as representatives of ethnicities or genders, I think it’s fair to say Sanders thinks we should focus on wealth and socioeconomic status. In political coalition terms, Sanders wants to focus on revitalizing and expanding the New Deal Coalition, bringing back the white working class voters who supported Trump. This isn’t a crazy idea, but it does seem like trying to fight fire with fire, or rather, populism with populism.

Let’s take a look at a favorite libertarian tool, the Nolan chart:

The Nolan Chart splits the usual left-right spectrum into two separate political spectrums of economic and personal liberty. Theoretically, you could have as many axes as you want, with respective Nolan hypercubes.
The Nolan Chart splits the usual left-right spectrum into two separate political spectra of economic and personal liberty. Theoretically, you could have as many axes as you want, with respective Nolan hypercubes.

Sometimes this chart will be drawn with “Populism” instead of “Authoritarianism” in the bottom quadrant. “Personal freedom” and “economic freedom” are often more intertwined than this chart would like to admit, and both the left and the right can be all over this chart. When Ron Wyden argues against NSA spying and against harsher sentences for drug offenses, he’s definitely high on the personal liberty access on the left. But when Democrat Chuck Schumer supports the Patriot Act, the prohibition of aerial drones, and the banning of Bitcoin, he’s a lot lower on the personal liberty axis. Likewise, Republicans can vary from very libertarian leaning, high up on the right side (Ron Paul) to low down on the right side, ok with regulated markets and curtailing personal freedoms (Donald Trump). The problem with the new Bernie Sanders approach for the Democratic Party is that it challenges Trump for the lower middle of the Nolan chart, meeting him head-on, while ignoring the top middle of the chart. Even if there were enough voters just in that lower quadrant, The Economist points out that recently left-wing parties have struggled with populist victories, losing to right-wing populists in a litany of countries.

Rather than fighting populism with populism, I suggest a flanking maneuver for the left, countering a view of government solving most problems with a view of more personal freedom, more efficient markets, but also a government focused on solving market failures. A tolerant market welfare state, or a neoclassical liberalism.

 

I’m not the only one who has advocated something like this; Scott Alexander has an excellent Something Sort of Like Left-Libertarianism-ist Manifesto. I would really recommend reading his article on this, as the following arguments are just poor restatements of Scott’s more eloquent  points.

Markets convey valuable information and coordinate action across millions of actors with differing preferences. To quote from Hayek’s famous essay, “The Use of Knowledge in Society”:

The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

Markets are really good at solving this problem of distributed knowledge. They can then get the most efficient allocation of resources, and even direct future production towards the creation of goods most demanded by consumers.

But markets don’t solve every problem. They don’t solve the “initial” allocation of resources, when some market actors are endowed with few goods or capital. Thus, while it’s important to allow these people specifically to trade what resources they have (likely low-skilled labor hours) in the most lucrative way possible, they still won’t be able to end up with much since they didn’t start with much. In other words, some people aren’t highly skilled and may never be. Despite a nice efficient market, they might end up with few available resources. Markets also don’t solve (by definition) externalities where market transactions harm unseen third parties (pollution is the usual example).

A solution here is to create a welfare system that assists low productivity workers, while leaving as much of the market as untouched as possible. We can thus solve the problem and also continue to take advantage of the distributed knowledge and allocation abilities of markets. To be clear, most welfare programs are pretty good at giving assistance to the poor, but in the United States, they come with far too many market regulations and exceptions. Most of the most popular Bernie Sanders ideas emphatically do not leave the market untouched. His $15 minimum wage advocacy has little empirical support. Rather than punish companies for hiring low-productivity workers, we should be either subsidizing wages for low-income earners, or giving a small basic income. The cost would not then be forced upon companies that hire low-skilled workers (the opposite of what we want), but distributed among society generally (the whole point of the welfare state). The government negotiating for Medicare rates of specific procedures and the exclusive use of government bonds for the Social Security trust fund are two more examples of welfare that shun a market based approach.

Interestingly, this pro-market-and-pro-welfare approach is actually somewhat familiar in Bernie Sanders’ favored Nordic countries. While their budgets are larger than the US, in several measures, their regulatory burden is more favorable and laissez- aire, and some indices also give them stronger contract and property rights than America.

There are other benefits to this low regulation approach too. Specifically, rather than banning things we don’t like, such as the use of coal to produce electricity or drinking alcohol, we simply tax them to disincentivize their use. As Scott states, this leaves us more options. Obviously, there are some benefits to doing things the state wants to ban; otherwise people wouldn’t be doing them. Coal is burned because it’s so cheap. The problem is that its burning has externalities. If the state increases the cost born by those who burn it to better reflect the pollutants it releases, energy from coal could still be used, just not to the same extent. This is a good thing! We should encourage behavior when the benefits exceed the costs. If the state can help create better incentives, individuals will make better choices themselves without blunt bans from the government.

This neoclassical liberal approach also means an opposition to Trump’s (and Bernie’s) protectionism and anti-immigration stances. If workers are concerned about their situation in the information economy, we need to liberalize their education opportunities, or even subsidize low productivity wages. But we can’t respond with trade barriers and stifle technological progress. The defense of classical liberal values, like tolerance, the rule of law, privacy, and freedom of expression, is also fundamental to this political position, especially as all these values all under threat by Trump.

I don’t really expect Democrats or the left generally to take this approach, but perhaps I can convince a few here and there that it would make sense. Caring about what happens to the unfortunate in society is something libertarians don’t always do well, but markets still have a vital part to play in improving society. Ultimately though, over the next four years, libertarians and progressives will have to work together on some issues, such as defending civil liberties. Hopefully, progressives will realize that libertarians are allying with them for the very same reasons they opposed them during the Obama administration, and had they listened then, our problems would not be so dire now.

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The Election Doesn’t Change Trump’s Bad Policies

The Trump Issues

In the Trump election aftermath, many on the left have discussed how best to approach this new challenge. Many have talked about trying to understand the concerns of Trump voters. This is a worthwhile undertaking. The people who voted for Trump have several worries spanning cultural differences, economic hardship, and perhaps even existential fear for the country as a whole. First, let’s go over those concerns.

The first, and perhaps most important concern for Trump voters was that the alternative was Hillary Clinton. This blog had an extensive discussion on Hillary’s shortcoming including her flaunting of the law, her foreign policy, her defense of Obamacare, her tax increases, and her slant towards government power in every sphere. I would argue some of these flaws are also present in Trump, but many Trump voters could at least hope the Trump unknown would deliver something more to their liking than the known failure of a Hillary presidency.

Granting all of Hillary’s problems, why did they think a Trump unknown was worth risking? Broadly, one area we did know where Trump stood was on the culture wars, and for that he was initially hailed as a hero against the left. I think the left has to shoulder a huge part of the blame here, because people have been trying to tell progressives their culture is intolerant for years.  See: Scott Alexander on tribalism and tolerance in 2014, Clarkhat on Gamergate in 2014, this blog last year, another blog, and Robby Soave did a good job summing it up after the election. I don’t think there’s much to add here.

On economic hardship, the more stereotypical Trump supporters (Trump won older voters, rural voters, and uneducated voters) have something to complain about as well. If you want to be depressed, please read this ridiculously long piece called “Unnecessariat “ (or skim this American Conservative piece for some key points). The takeaway is that Trumpland is hurting because it has been economically abandoned, not just culturally isolated. With services dominating the economy, the prospects for those living outside of cities has diminished as well. We are seeing increased suicides, drug addiction, and hopelessness in these areas.

Finally, combine these worries with media that feeds panic about disasters and internet echo chambers, and you get stark existential panic about entirely separate threats.

Cracked had an interesting piece on Trumpism and how we got here, and what caught my eye was the idea of urban culture slowly making its way out to the country. Cracked claims that older, less educated, rural folks saw the abandonment of Christian traditional culture in these hedonistic wonderlands of coastal “liberal” cities and thought there would be dire consequences for the nation. Low and behold, they see: “Chaos…Blacks riot, Muslims set bombs, gays spread AIDS, Mexican cartels behead children, atheists tear down Christmas trees.”

The Trump Solutions

The problem is that many of these perceptions are just wrong. We are healthier, less likely to be murdered, and safer than ever before. Maybe we blame clickbait media, maybe we blame gullible people for believing it, but living in cities just isn’t that scary.

Last year, I met an acquaintance who had grown up in a smaller town in the South, but was now moving to another state near a major urban center. He found out I had grown up in his destination city, and despite having just met 5 minutes prior, he peppered me with bizarre questions about whether I thought it was safe to live there. I assured him that it was a major metropolitan area where millions live and work without a problem every day. He made it seem like he was moving to Afghanistan. Look, I’m sure it was pretty hairy to live in New York/Miami/Chicago/LA in the 80s, but crime rates have collapsed over the last 25 years. The amount of people murdered in the first season of Daredevil in Hell’s Kitchen likely exceeds the total number of murders in all of Manhattan last year. Our perspective is all off. And if we are imagining that law and order is collapsing, our solution is going to vastly over-correct.

That’s part of a bigger point I’ve already made: Trump’s political victory doesn’t mean his supporters have any good ideas about improving the country, or even their own situations. It just means enough people thought there were enough problems for more voters to cast a ballot for Trump over Hillary in Michigan, Wisconsin, and Pennsylvania. For instance, I think there is a real basis for complaining about the intolerant left-wing culture that has grown more bold over the last 10 years. But the Trump response has been his own version of intolerance, just copying the left and doing nothing to improve the situation.

On the economy, Trump’s plan is at best a mixed bag. Experts are mediocre at predicting economic growth, so figuring out the best economic policies to help growth may also be difficult. Trump and his supporters might blame globalism for their woes, but putting tariffs on imports and striving to shut down commerce with some of our largest trade partners will hit the poor the hardest. Price increases on low cost imported products will harm low income earners much more than upper middle class households with savings and easier means of substitution. Maybe in the long run this will spur some industrial investment, but I think it’s just as likely to speed up automation. In 4 years, many economic problems scaring Trump voters could easily be exacerbated.

More to the point, the government can’t reverse the decline of manufacturing jobs in the United States. Short of seizing control of the economy via a 5 year plan, the world has changed. Manufacturing jobs peaked in the early 80s (BLS), and while globalization has accelerated the trend, it didn’t start it. Of course, “globalization” isn’t really an entity either; decisions that changed where firms do business were made by millions of individuals looking at cost-benefit analyses and comparing prices. The government didn’t say “move these factories to Mexico”, the government said “Technology is making it easier to communicate and do business in other countries, so we will reduce taxes and import quotas to make it easier for businesses and shareholders to do things they already want to do”. Trump can’t come back and order companies to make bad business decisions unless he wants a Soviet-style command economy with capital controls.

The United States has such a strong economy due to many factors, including its large, diverse, and skilled working populace, an abundance of natural resources, heavy investment in research and capital, and strong and interconnected financial markets. Our consumer market is the largest in the world, our trade dominates the globe in both goods and services. International economic institutions from the New York Stock Exchange to the World Bank and International Monetary Fund are based in (and often dominated by) the United States.

Trump’s push to cut us off from strong trade ties will certainly harm the American centrality to the global economic system. Obviously, to many Trump fans, this is a bonus, not a problem. But long term decline in American trade would likely be connected to more sluggish growth as native industries are protected from competition; for example, Apple has pushed innovation in the smartphone market since 2007 which radically changed the status quo of what phones could do. It has had ripple effects throughout the economy as the spread of widely accessible powerful mobile computers has changed everything from transportation to social interaction to navigation and even shopping. But we should remember that the smartphone revolution was made possible by cheap global supply chains, and without them, we are likely to see stagnation.

And those older, rural, lesser educated Trump voters? No one is going to want to hire them unless the economy is clicking and demanding more workers. Sluggish growth with no competition bred by protectionist policies won’t help them.

Maybe Trump’s tax cuts and deregulation pushes will jumpstart the economy enough to overcome his bad trade polices. It’s possible, but I’m not betting on it. If it doesn’t work, in four years we will simply have the same economic problems just with tons more debt. That’s a big risk he’s taking. And it’s made more risky by Trump’s plan to expand the police state and start deporting at least two million people  (not to mention increasing military spending from the $500 billion a year we spend already).  The ACLU has gone into detail about the difficulties we face if Trump attempts to carry out his campaign promises. It’s very difficult to deport millions of people without doing away with probable cause; how do you find and arrest only the people here illegally? If they aren’t caught by the police while engaged in crime, then by necessity the police must come to them, requiring sweeps of entire residential areas, stopping people with no probable cause at all. At the very least this is grossly expensive, and more likely it will harass and catch thousands of innocent American citizens in a dragnet. And none of this even touches on registration of Muslims, continued mass surveillance, and use of torture.

In four years if the economy hasn’t improved much, debt has accumulated, and the police state has been vastly expanded, will Trump admit his policies haven’t worked? This seems unlikely as Trump has never really apologized for any stances he’s taken or mistakes he’s made. It seems far more likely that he’ll use this built up police state to harass his political enemies.

If Trump is willing to place trade barriers and dramatically reduce the world-leading $2.4 trillion worth of goods imported, how much will he be willing to use government subsidies to pay companies to “invest” in the United States? Does this sound like government direction of the economy? If things aren’t going well, will he seize more control of the economy?

I should note, I haven’t even brought up Trump’s extensive conflicts of interest, where representing American diplomatic interests may run counter to his profit-seeking ones. I also haven’t mentioned that someone who is extremely thin-skinned will be in charge of the nuclear launch codes. Many of the concerns of Trump voters don’t make much sense, many of the policy solutions of Trump and his voters are bad and would make things worse, and on top of that, Trump is irresponsible, incompetent, authoritarian, and many other things I’ve argued before. Continued opposition to Trump’s policies is vital over the next four years.

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Against Trump

In my last post, I made the case for why voting for a main party was far more likely to be a wasted vote than a vote for third party.  I made this argument on the basis of the presidential voting system itself, regardless of any voter’s actual policy preferences.

Nonetheless, if you think Hillary Clinton or Donald Trump have the best policies or ideology, at best my argument should make you indifferent between voting for one of those candidates or leaving it blank (I advocated that one should still vote because of the often overlooked importance of local elections). If you prefer Donald Trump, this post will be my argument for why you shouldn’t. This is not an endorsement of Hillary Clinton, and I hope to write a post against her candidacy next. But there is a third option. I’ve already laid out the case for why it is more practical to vote for a third party rather than waste your vote on the Democrats and Republicans, but this post will show why you should prefer Gary Johnson’s moderate-limited-government-libertarianism to Trump.

Trump: The Troll

The most basic foundation of Trump’s appeal is his fervent opposition to the cultural left, especially the social justice movement and political correctness. In some sense, it doesn’t matter what he says; because he has said ridiculous and outrageous things, he has provided a “safe space” for people who can’t stand the recent domination, real or perceived, of left-wing outrage politics. The cultural left has created a tough situation for their opponents: if you don’t agree with them, they label you as a misogynist, fascist, and white supremacist. The alt-right was a fairly typical human response: they took the insults as a badge of honor.

So what has the left done about Donald Trump? A pretty common response (New York Times, Huffington Post, Vox) is to call him racist! Take a look at these accusations from that Huffington Post article:

  • He attacked Muslim Gold Star parents Khizr Khan and Ghazala Khan. His attack didn’t address their criticism, but suggested Mrs. Khan didn’t speak because of her religion.
  • The Justice Department sued his company in 1973 for not renting to black applicants, and there are stories from employees alleging that he was racist
  • He didn’t condemn David Duke’s support until the next day
  • He questions whether Obama was born in the US
  • He tweeted a picture of him eating a taco bowl to show he loves Hispanics
  • He condoned the attack by his supporters of a Black Lives Matter heckler at a campaign event
  • He claimed Judge Gonzalo Curiel was biased because of his Mexican heritage (Curiel was born in Boston).

These are all awful, insensitive, and moronic actions, but calling them racist or Trump a racist for doing them tries to equate Trump to the level of the KKK. If Trump is fundamentally appealing because he doesn’t back down from outrage tactics, and his supporters are tired of the left screaming that every deviation from progressive orthodoxy is white supremacy, then calling Trump racist is the worst thing you can do. And honestly on many of these issues, Trump is professionally trolling, going just over the line on what is acceptable to draw the outrage.

For example, Trump says he responded to the Khans because they criticized him first, which is true. His response was characterized by an attack on Ghazala Khan and an assumption about her actions due to her faith. This isn’t directly saying that Muslims are inferior, even though there is an implication. But if we just call this out as being “racist”, we really lose out on our argument demonstrating just how awful this episode was for Trump. In fact, Trump supporters can point out that many Islamic countries treat their women poorly and so this is worth questioning. By doing this, we let Trump deflect just how abysmally he managed that political catastrophe; instead, we should be discussing that Trump had no actual response to Khan’s accusations of his unconstitutional policies, and instead had to resort to unfounded assumptions and speculation. He would rather make up things about a family whose son died serving this country because he felt insulted than suck it up and avoid any more fallout. The sheer political incompetence is unspeakable, and the unconstitutionality of many of Trump’s policies remain unanswered.

Many other examples I listed also let Trump get away with absurd positions by jumping immediately to racism. His run-in with the Justice Department is important, but was also over 40 years ago. Was it his fault or his company’s, and does he still have those opinions? The idea of a government agency forcing him into a settlement on allegations of racism is also exactly the conspiracy narrative Trump wants. It seems likely he knows who David Duke is, but I’ve continually overestimated Trump’s abilities in other areas. And just having terrible people endorse you doesn’t automatically make you a bad person too. Trump likely supported the story Obama was born in Kenya because Obama’s father was originally a Kenyan national. It seems pretty easy for Trump supporters to argue he would have demanded a birth certificate of any person whose parentage was outside the US. Calling this racist really lets Trump change the subject to how PC culture is bad, when really we should be focusing on how much of an idiot you have to be to waste so much political capital on a conspiracy theory that was obviously wrong. There were plenty of grounds to criticize Obama’s policies, yet Trump decided to focus on discrediting his legitimacy through a conspiracy theory rather than actual ideas.

Calling it racist when Trump condoned an attack on a protester at his event is sort of the epitome of political correctness gone wrong: it implies that as long he condones violence against protesters of all races at his campaign events, it’s ok. The problem is not the race of the victim, the problem is that he’s condoning violence against people who disagree with him.  His statement against Judge Gonzalo Curiel is almost blatantly racist, as even Paul Ryan states, yet Trump could have easily cited Sonia Sotomayer’s “wise Latina” quote as evidence for why he believed a judge’s ethnicity could influence their opinions. If we get outraged about this, we fuel the perception that social justice not only has a monopoly on outrage politics, but that when the exact ideas that are promoted by the left are used by the right/conservatives/whatever-Trump-supporters-are, only they are attacked. It seems to be targeting of tribes, not even of ideas.

And that’s the point. Trump engages in a motte-and-bailey doctrine where he says things that obviously imply bigotry or outright harming non-Americans, but then if you call him on it, he deflects or calls it a joke. This is an annoying tribalistic tactic (often employed by social justice warriors and also Ann Coulter) where a group will make a ridiculous claim, but really support a weaker version of that claim (see part IV here). As Scott Alexander says, social justice warriors seem to imply ridiculous things like “men can’t be part of a discussion on gender”, but when challenged, they state more defensible positions like “men shouldn’t interject into safe spaces for women”.  Trump says some Mexicans coming over the border are rapists, with the implication being that the average illegal immigrant is a violent criminal. But if you call him on it, he’ll say that he also said “many of them are good people!” which is technically true. He also didn’t say 2nd amendment supporters should shoot Hillary Clinton, but he left it open.

Trump is in part successful (and especially appealing to the alt-right) because he meets social justice warriors with their own methods, and it’s hard to pin him down on anything because his entire presidential run is a giant troll. Of course, I really dislike many of the tactics of the social justice movement and the outrage tactics of internet culture wars. I’ve gone on the record about why I think their ideas and methods are bad. I understand the appeal of fighting fire with fire. But it won’t solve our problems. All of the criticisms aimed at the social justice movement still apply to Trump. We should be trying to elevate our society and discussions, not give in to the temptation to debase them. Collectivism is evil in all its forms, left-wing, right-wing, and bi-partisan.

Many Trump supporters have bought into his campaign as the only way to fight the social justice left. They are wrong on many levels; trolling can’t beat trolling, flip-flopping and incompetence can’t beat Hillary’s political machine, protectionism can’t beat markets, and nationalism and authoritarianism can’t beat freedom. In fact, by allowing Hillary Clinton, one of the weakest presidential candidates in recent history, to continue to dominate this election, Trump has handed the left one of their biggest political victories and squelched one of the biggest opportunities for American conservatives.

And Trump is not the only way to fight back against the worst methods and ideas of blue tribalism. One can oppose collectivism without sacrificing principles or lowering the level of dialogue. As I go through the following deep flaws that Trump has, keep in mind that Gary Johnson has none of them.

The Unknown

What does Trump actually believe? It’s almost impossible to know. These are just the positions I could find so far. I don’t think this list is comprehensive, but I want it recorded somewhere. Many of these are from this ABC news post, this CNN article, and this extensive NBC news article if they’re not otherwise cited.

  • He used to think pretty highly of Hillary Clinton and even invited the Clintons to his wedding, and now apparently thinks they are terrible.
  • Trump declared that he thought Obama was the founder of ISIS, and when pressed on Hugh Hewitt’s radio show, he doubled down. Then after a full day of focusing on this point, he abruptly tweeted that it was sarcasm.
  • Trump was going to self-fund his campaign and not fund raise. But he’s gone back on that promise and is now taking money from whomever will give it to him. He was so short on money, he hadn’t even bought TV ads until the last week of August.
  • Trump started out ok with taking Syrian refugees, and then reversed his position and now wants to send them back.
  • Trump initially stated that Japan and South Korea should defend themselves, including with nuclear weapons. Now he says that’s preposterous and he never said that. How do you suffer amnesia about advocating the biggest change in US nuclear policy in history?
  • Trump has relentlessly hammered Clinton for supporting the Iraq War in 2003. It turns out in 2002, he backed the Iraq War too. Also, when asked about Mike Pence’s support of the war, he said it didn’t matter to him. But it still matters that Clinton backed it.
  • Trump made headlines stating he wanted to be a “neutral guy” in the Israel-Palestine conference (a big change from US policy which has held a strong alliance with Israel), and then said Israel was being treated like a second-class citizen later on.
  • Trump has also called the Libyan intervention a total disaster, but he in fact backed this intervention as well. When shown a video of his previous support, he acknowledges it and says he only wanted a “surgical” strike.
  • Trump was originally pro-choice and is now pro-life and even advocated that there should be “punishment” for women who get abortions. Admittedly in that interview, Chris Matthews did a good job of cornering Trump and not letting him get away with dodging the question, so maybe Trump doesn’t actually believe that. But that’s my point: we have no idea what this guy is going to do.
  • Trump advocated the use of torture especially against ISIS and suspected terrorists. When dozens of military advisers pointed out he would effectively be telling people to commit illegal acts, he stated “if I say do it, they’re gonna do it.” The next day Trump said he would be bound by laws just like any president, and then proceeded to call for waterboarding and torture in subsequent speeches.
  • Like abortion, Trump used to have a very different view on gun laws and actually supported an assault weapons ban. Now he’s a strong 2nd amendment supporter. Except in classrooms. Unless it’s a teacher in a classroom. What?
  • Trump was against raising the minimum wage, then for it, then said he wanted to leave it to the states, now says it should be over $10 and left to the states.
  • Trump has been for a single-payer system in the past and has praised Canada’s and Scotland’s system. But he hates Obamacare. But maybe he still likes the mandate. But he doesn’t know what he’d replace it with. His current website’s plan is a pretty good free market approach, but what would he actually pursue?
  • Trump was going to increase taxes on the rich, then said he would cut everyone’s taxes by huge amounts in an online proposal (that this blog looked at), then reduced the amount he would cut, and now it’s a pretty standard small income tax cut with an additional tax break for childcare
  • Trump seems to have called for a renegotiating of U.S. public debt similar to a debt restructuring for an insolvent firm. He seemed to have no idea that U.S. treasuries are so cheap to borrow with because they are never defaulted on. He even indicated that the U.S. can always print more money. Then he seemed to walk it back and say he wouldn’t renegotiate the American debt.
  • Last December Trump called for “a total and complete shutdown of Muslims entering the United States until our country’s representatives can figure out what is going on.” In May, this changed to a “suggestion”. Then he added the idea of banning people from places with a “history of terrorism”, then added there would be “extreme vetting” (so not an outright ban?). Trump and his people also added that there had been “no change” in their policy since December.
  • Trump has stated that he would deport 11 million people currently residing in the US illegally. This is significantly larger than the current population of New York City. Then he said he would deport them all, but bring back the “good ones” legally. Buzzfeed even reported that Trump stated off-the-record that deporting all 11 million is just a starting point for negotiations. Just a couple week’s ago, Trump seemed to abandon deportations altogether. Now it seems they are in full force again.

I should also note that Trump said he would call Bill Gates and get him to shut down the internet if need be. I didn’t list that here because I don’t think he ever repudiated that position so it’s not a “flip-flop”.  Trump also suggested Ted Cruz’s father was involved in the Kennedy assassination. Even on Trump’s most common talking point, his “wall” on the border with Mexico is obviously not true because, as John Oliver points out, it will cost far more than Trump says it will, and there is no way we can force Mexico to pay for it. Adding a tariff on Mexican imports does not force Mexico to pay for anything, it forces American consumers to fund the wall.

This is related to questions of Trump’s temperament; it appears that on many of these interviews, Trump has either never thought about the issue presented to him, lied about his position last time so he can’t remember what his position was, or just honestly changes his position because he’s not smart enough to have foreseen the objection, but wants to appear knowledgeable and so says that was his position the whole time.  The bottom line is that on virtually every issue, even the core issues he’s maintained, we have no idea what he will do.  On top of all this, Trump is capricious and easily offended. He has consistently filed lawsuits against press organizations that have criticized him, regardless of their ineffectiveness and potential attack on free speech. Do we want someone who has no principles, who has no idea where he stands on issues, and can be easily manipulated by his political enemies (“I don’t have thin skin”) to be in charge of our country’s national defense? The Supreme Court is an important issue in this election, but what makes us think we can trust Trump to actually pick from among the names he has mentioned before when he has changed his mind on everything else?

On many issues, he has taken positions not just worse than Gary Johnson or Hillary Clinton, but positions worse than any president in history. Will these be the positions he takes or will they change? Will any of his positions that sound reasonable stick around once he is president? We don’t know.

The Incompetence

Trump has a record of questionable business acumen as well as straight-up fraud. He certainly has done well in the real estate market, but in other ventures he’s been mostly a flop.  He has also widely exaggerated his net worth by constantly trying to tout his own brand. And, by admission of its own employees, Trump University had no interest in teaching any of its customers, only in selling them the most expensive seminars it could.

His political campaign has also been questionable. We will get to policy in the next section, but for now let’s just talk about Trump’s job as a politician, which is to get people to vote for you.  As I noted in May, Trump was one of the worst candidates the Republicans have had as far as political appeal.  He won the Republican presidential primary with only 45% of the vote. By itself, a number that low isn’t unprecedented, but when combined with the fact that most of his primary opponents have decided against endorsing him, he was one of the least liked Republican candidates among Republicans in recent memory.  He’s also only averaged above 40% in FiveThirtyEight’s polling average and above 44% in RealClearPolitics’ average for a couple weeks in July. He has never really pivoted to the general electorate. Trump has had several changes in his campaign management due to apparent incompetence. He will be the first presidential candidate since Nixon to not release his tax returns, and he has just started airing TV ads. That’s correct, Gary Johnson was outspending Trump on TV time until September.

Trump’s response to his abysmal appeal has been to suggest that all polls that don’t show him winning are rigged. In fact, Politico even published a column entitled “What if Trump doesn’t accept defeat?”  As already mentioned in this piece, he got into a very public spat with the parents of a Gold Star soldier who had given his life in 2004. He also said that “there must be some form of punishment” for women who get abortions, and then Ben Carson said that Trump wasn’t expecting that question. Trump wasn’t prepared for a question about abortion in a political event while running for President? You cannot be serious.

What is Trump’s plan in office when foreign heads of state ask him obvious questions he should know the answer to? What is he going to do when people don’t automatically like what he has to say? He has failed in essentially every venture that wasn’t real estate or a reality TV show. The inability to make changes for a better long-term strategy combined with the need to retaliate over every perceived insult disqualify Trump from being Commander-in-Chief.

The Policy

As I’ve stated, it’s hard to nail down what Trump believes on anything.  It often appears like he has never thought about policies or the implications of policies until objections are brought up to him.

One aspect that had been central to Trump was a hardline stance on immigration and deporting illegal immigrants. As of a couple weeks ago, he appears to have flipped on that and now flipped back, but his website still has language that appears to indicate serious criminal charges for anyone living here illegally. Even if Trump has become less focused on deportations, his immigration policy comes with absolutely massive costs, both fiscal and legal. As noted by John Oliver, his “wall” on the Mexican border will likely cost several times as much as he’s claimed, not to mention the hidden costs of wasting construction time and resources on building a concrete wall literally in the middle of nowhere.  If this project ever does happen (which it won’t), it will cause the cost of construction and related services to go up as resources are pulled into a giant wasteful wall. Moreover, as Trump’s website acknowledges, most illegal immigrants don’t sneak over the border; they cross with legal visas and overstay them, and so this wall will do almost nothing to stop illegal immigration.

There are also effects on American citizens as well who are forced to deal with questionably constitutional Border Patrol stops where people are pulled over with no reasonable suspicion or probable cause. Trump has also focused on crime caused by illegal immigrants, despite the fact that crime rates are much lower among this segment of the population than among American citizens. Terrorism, as noted by this blog, is so unlikely that the threat of terrorism via immigration is not even worth addressing.

Moreover, there is a self-evident free market argument for immigration; if the economy would work more efficiently without immigrants, they wouldn’t be coming. Specifically in the United States, immigration helps to expand our workforce while European economies shudder under high levels of retirees and low birthrates.  The OECD has also found that because immigrants come to work, they are productive enough to pay more in taxes than benefits they get out. Trump’s arguments for making H1-B visas harder to give out and more expensive just creates an incentive to ship jobs overseas rather than keep them here. Overall, it seems better for Americans (and likely the global economy) to keep immigrants coming here than to ship the jobs overseas.

There is certainly an argument that we haven’t seen this level of immigration in the United States in a while, even on a percentage scale. Immigrants now make up 13% of the population, but that’s still less than was common during the late 19th century. There’s also the true point that most immigration prior to the ending of national origin quotas in 1965 was from Europe.  Yet, since this is essentially a cultural and not an economic argument, at best this still argues that we should have open immigration–just from some countries and not others. It also doesn’t offer resistance to other forms of open immigration, such as for advanced degree holders (especially graduates of American universities).

We also have to acknowledge that there really are serious obstacles for potential immigrants right now…which has only resulted in illegal immigration. Trump acknowledges the economic burden of an over-regulated economy, but then proposes tons of new regulations on immigration. Using the state to pick winners and losers in the economy is a dangerous thing to do.

Trade is the other area Trump has been most outspoken on. Here, unlike immigration, there is no cultural argument, there is only economics. And it’s clear that when it comes to trade economics, Trump has no idea what he’s talking about. He would add tariffs to goods, making them more expensive for average Americans and cutting into middle-class purchasing power. He would start trade wars with China, and attempt to reverse foreign governments subsidizing their own exports which directly deposits foreign tax revenues into the pockets of American consumers. The protectionism he advocates is essentially an argument for the global economy to leave the US behind and to ensure that new technology and innovation is happening elsewhere while our economy stagnates and our lack of dynamism and competition gets even worse.

Why is Trump suggesting this? Bryan Caplan points out in The Myth of the Rational Voter that voters are subject to many biases, most of which you can find in Trump’s policies. This includes, among others, an anti-market bias and an anti-foreign bias, where voters tend to underestimate the benefits of market systems as well as underestimate the benefits of interacting with foreigners. But despite these biases, free trade is immensely good for the economy. Tariffs being some of the most regressive taxes we have, freer trade is also a big tax break for poor Americans relative to the rich.  Trade, along with immigration, is one of the best areas in which American policy can directly improve the world.

The Authoritarianism

Let’s take a quick history detour: in 1972, five men were arrested for breaking into the DNC’s Headquarters in the Watergate Complex. They had been sent by the Nixon reelection committee, and the Nixon administration immediately sought to cover up their involvement. Nixon actually ordered the CIA to block the FBI’s investigation into the burglary, claiming national security issues.  The administration hoped that would prevent any further prying, but as more details came out, a Senate select committee was established in February 1973 to investigate a possible cover-up, and a special independent investigator was appointed by the attorney general.

When a Senate hearing uncovered that there were tapes of all Oval Office conversations, the Senate and special prosecutor subpoenaed the tapes, which Nixon refused to turn over, citing executive privilege. When the prosecutor persisted, Nixon actually ordered the attorney general to fire him, and the attorney general resigned in protest. Solicitor General Robert Bork eventually complied, but under political pressure, Nixon appointed a new special prosecutor. Edited transcripts were released in early 1974, which showed Nixon in a poor light, although they did not fully incriminate him. The new special prosecutor subpoenaed specific tapes which Nixon again refused to turn over. The case went to the Supreme Court which ruled unanimously that Nixon had no unqualified privilege of immunity from investigation, and that he had to turn over the tapes. Nixon did. They revealed clear wrongdoing on his part, and the House Judiciary committee recommended impeachment on several counts. Knowing he would soon be impeached and likely removed by the Senate, Nixon resigned.

There was a backlash against the office of the presidency after Nixon, but we have fully reversed that trend today. The Bush and Obama administrations have undertaken naked power grabs that have helped create an imperial presidency beyond anything Nixon ever dreamed of. Many libertarians have been warning about these massive power expansions for years. Now in the face of the Trump administration, we’ve created all the tools a tyrant would need to run amok.

As Conor Friedersdorf notes in The Atlantic:

  • The president can order American citizens killed in secret.
  • The president can detain prisoners indefinitely without charges or trial.
  • The president can order drone strikes at will in countries against which no war has been declared.
  • The president can start a torture program with impunity.
  • The president can conduct warrantless surveillance on tens of millions of Americans.

To that I would also add that if deemed a troublemaker, the government has plenty of options to attack you without disappearing you. We know at least the DEA and IRS have used NSA information gained through mass surveillance of Americans, and then obscured this source by finding another stated reason to stop a suspect. The enormous amount of statutes on the books means it’s almost certain average people break laws every single day, and so these law enforcement agencies can always find probable cause to arrest you. Then they can stack up charges to force a plea deal, all at the discretion of prosecutors.  As it stands right now, there’s a strong case that the criminal justice system is biased, slow, and unfair, and that it deprives individuals of their rights. But now imagine Trump in charge of the DEA, FBI, intelligence services, and the military.

Trump administration could be even worse than Nixon; given Trump’s continual flip-flopping, his trolling, his total unpreparedness for obvious challenges, and his terrible policy ideas, we don’t actually know if Trump understands how government works. Many of his fantastical policy ideas on his website go beyond the usual politicians’ wishlists; it’s unclear whether he would even try to sell his agenda to Congress, or just try to implement it with executive authority, or indeed if he would understand the difference.

For example, nestled in his immigration policy is a call to end birthright citizenship. Does Trump acknowledge what that would require? As Rand Paul has noted, the 1898 case US v Wong Kim Ark declared that children of legal immigrants were automatically citizens. It seems that Trump wants to overturn this case, which would require a constitutional amendment. It’s possible Trump wants only to stop birthright citizenship of illegal immigrants (he keeps changing his positions on everything), but does he want to do this with a law, or a legal battle? Does he realize that the president can’t pass laws unilaterally? It’s also worth wondering what Trump believes he can actually do on abortion. We’ve already discussed his bewildering stance that women should be punished for getting an abortion, a position basically no one else has ever advocated for. But does he realize that he would need to pass a constitutional amendment to achieve that goal?

Another example, he declared on a debate stage that if he told the military to commit war crimes they would do it. That’s not only against US law, that’s against international law. If he thinks that he can do things as president that are already illegal, what makes us think he would be waiting for Congress to do anything? How about shutting down parts of the internet? In Trump’s own words: “Somebody will say, ‘Oh freedom of speech, freedom of speech.’ These are foolish people.” How about banning people based on their religion? Do we think Trump will wait for Congressional approval of obviously unconstitutional ideas? Or will he just order that they be done without thinking, just like everything else in his campaign?

The ACLU has released a 27 page memo on things Trump has said that are blatantly unconstitutional. It makes an excellent legal case against Trump’s ban on Muslims entering the country as well as his mass deportation of illegal immigrants. The magnitude of individual rights violations from deportations specifically would be staggering, as there is no way to arrest millions of immigrants without also arresting regular American citizens and legal residents as there is no way to tell them apart. Arrests would have to be done without probable cause and largely based on racial profiling with likely hundreds of thousands of law abiding people caught up in the dragnet. The police state necessary to accomplish such an action is likely beyond even the secret police organizations of former communist nations.

The ACLU memo also makes an important point concerning Trump’s promise to “open up the libel laws”: there are no federal libel statutes. What exactly Trump would do were he to be president and then find out that there are only state libel laws, I have no clue. But imagine the powers of the Justice Department in the hands of someone who has a history of abusing eminent domain and using the power of the justice system to silence critics. He has already blacklisted media outlets he doesn’t like and banned them from his campaign events. As Damon Root of Reason notes: “Just like a crybaby advocate of political correctness, Trump wants to hollow out the First Amendment in order to make a ‘safe space’ for himself.”

It’s not hard to see the abuses of the Nixon administration repeated under a hypothetical Trump one. But in 1974, when Nixon lost his appeal to the Supreme Court, he still turned over the tapes. I don’t know if we realize how vulnerable our constitution was in this moment. Constitutional power is not something physical; as Abraham Lincoln proved, the Supreme Court has no enforcement arm. In retrospect, if Nixon had just wanted to maximize his political power, it seems that his best plan would have been to not release the tapes and accept whatever political fallout that was. Maybe he would have been forced to resign, maybe not, but he only risked being in the same situation that actually happened. Trump has arguably already promised to do more unconstitutional things than Nixon ever did, and he’s less popular than Nixon ever was before Watergate. If in a similar situation, would Trump comply with the Supreme Court? With Congress? He’s already calling the election rigged before it’s even happened, and he doesn’t seem to believe polls that report him far behind Clinton (which he is). If he found himself thwarted by the other branches of government, would Trump allow the rule of law to occur, or subvert it using his executive authority? Would he even care that his actions were unpopular given how unpopular he already is?

Most of the problems in this section also apply to Hillary Clinton, and it is likely she would continue to abuse government power just like the Bush and Obama administrations. But while Trump may be running against Hillary, I’ve already made the case that your only decision in voting is whether to waste your vote on a main party, or help get a third party better ballot access. Gary Johnson specifically has been an outspoken critic of the advances of government power and the growing authoritarianism centralized in the presidency. If you want to stand against the increasing authoritarianism of the federal government, there is no way to justify voting for Trump over Gary Johnson.

Trump has many problems as a candidate: he is inconsistent, incompetent, and he reduces our ability to have real discussions. His policies are bad, but his authoritarian threats should give us the greatest pause. Would you vote for Richard Nixon today if Nixon told you he was going to abuse executive authority to preserver his own power? If he continuously attacked free speech and criticism, if he promised to arrest millions of people living in the US, do you think voting for him would be a good idea? Well, it’s not a hypothetical, all of these policies are literal quotations from Trump himself. You shouldn’t vote for Nixon, and you shouldn’t vote for Trump.

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Picture credit: Gage Skidmore, modified by postlibertarian.com (grayscale), licensed under BY-SA-2.0.

Rawlsian Rebuttal to Inequality Concerns

This was stolen from a comment on this week’s EconTalk with Richard Epstein.

The concept of the rich getting richer and the poor getting poorer is oft-repeated, although according to my Google results, many of the top hits are articles disproving it. Despite this, sources from the Washington Post to Gawker to Thomas Piketty have talked about inequality and its negative consequences.

On EconTalk Russ Roberts stated the following:

I want to create a Rawlsian veil of ignorance…where we’re going to imagine different states of the world, but you don’t know where you’re going to be in those different states.

First state of the world is 1900. You might end up being a rich person or a poor person. The next state of the world is 2016.  Again, you might end up being a rich person or a poor person. I think most people alive today…would prefer to have a random shot at a 2016 life than even actually to be in the upper 10% or 5% in 1900.

This is a fascinating application of the Rawlsian veil of ignorance, an excellent moral and political philosophy tool. As Russ states, under a veil of ignorance, we take a society and imagine that we could be randomly assigned the life of anyone in that society. Usually this is used comparatively to accept or reject certain layouts of society.  For example, I’ve personally heard economists discussing surveys based on the Rawlsian veil of ignorance where most citizens would choose to live in a more equal society than they think they live in.  Interestingly, most people underestimate the level of inequality in most western countries compared to the actual level of inequality, and would choose societies more equal than what they estimate society to be. The implication is that people’s own revealed preferences when they put themselves in the position of an outsider is to advocate for more income redistribution.

However, there are some links between economic growth and inequality; it may be hard to have one without the other.  If that’s the case, an important question to ask is whether you’d want to be in a poorer economy with low inequality or a richer economy with high inequality. Russ’ thought experiment does this pretty well. It’s also worth comparing today’s economy with the 1970s or 80s. Would you choose to be randomly placed in more equal 1980 or less equal 2016?  Today cars are safer, communication is better, food costs less and more varieties are available, and life is better in immeasurable ways.

What if you were guaranteed to be in the top 50% of the world in 1980? What if you were guaranteed to be in the top 50% of the US in 1980? What level of wealth would you need to guarantee before you stopped risking being a poor person today?  It’s an interesting question, and uses our own intuition to counter the notion of the “rich getting richer and the poor getting poorer”.

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Efficient Advocacy

It’s incredible how simple and yet revolutionary the principles are behind effective altruism as well as the ideas behind GiveWell and the Open Philanthropy Project; if you want to help people, don’t just donate to a charity that is looking to cure a rare disease, donate in a way that can do the maximum amount of “good” per dollar.  That often means donating to a problem that affects many people, that has known, measurable, positive solutions, and that has lots of room for additional resources to combat the problem.   If you don’t know about those organizations, you should definitely check them out.

Of course, there is an obvious elephant in the room when it comes to effective altruism: politics is complex, unscientific, and unpopular. In fact, GiveWell largely sidesteps the political sphere, ignoring a big swath of human activity which has tremendous impacts on society.  Of course, they have good reason to do this; it allows them to focus on doing good things without harming anyone’s tribal identities or alienating their donor base. Moreover, it’s hard to get good unbiased data on what political policies would actually provide benefits; if there was, politics wouldn’t be so divisive.

However, I don’t have a donor base, and I have slightly different feelings on which policies would be most effective than the average American or even the average effective altruist.  I wanted to see what would happen if we could assume away some of the unknowns about political policy.  Let’s assume that the postlibertarian philosophy this blog espouses is correct: markets are pretty good at allocating resources efficiently, government policy can help address some economic areas where markets might not work (inequality, externalities), giving the state power is generally a bad thing and must be justified, and individuals should have robust protections from their government. We aren’t assuming away the current political landscape of the US, we’re just assuming we’re right.

So what would a libertarian trying to maximize efficiency in advocacy do? Do you try and emulate the Koch brothers and create or fund political organizations that change policy outcomes? Do you focus on viable candidates? How much do you accept the political process as given? Do you focus on political reforms (proportional representation), education (IHS, Economics of Library and Liberty), or do you try to work on making your own rules (crypto, seasteading, space exploration)? Let’s leave those hard questions for another time, and focus on perhaps the most mainstream approach to politics: how should you prioritize the importance of various political issues? People usually have specific issues they care about that determine which candidate they’d like to back, and the Open Philanthropy Project even has a U.S. policies page.   But which issues are actually the most important? Continue reading Efficient Advocacy