This is a classic example of an externality: That is, the positive and negative consequences of a decision are not fully borne by the person making it; or put another way, the person who bears the consequences of a decision lacks the authority to decide. Under such circumstances, decisions that optimize the utility of a rational individual may result in suboptimal utility for the system as a whole. Maximum rationality and efficiency require that all the costs and benefits of the decision of any particular actor be included in the bottom line that actor uses to calculate personal utility.

Externalities result from authority. Authority enables one actor to maximize her personal utility, while making socially suboptimal choices, by imposing the negative consequences of her choices on other actors with less authority.

A hierarchy is a mechanism by which an actor at one rung of authority is able to shift cost and effort downward, while appropriating the benefits from others’ efforts. In a hierarchy, the authority of those above is substituted for the experience-based judgment of those in direct contact with a situation. The judgment of the person best qualified to do a job is always subject to interference from someone with less knowledge, whose primary interest is in living off the surplus effort of those below.

When authority-based rules are allowed to interfere with the experience-based judgement of those actually in a situation, the result can only be a net reduction in efficiency and rationality. So the question is, how does such a suboptimal state of affairs continue?

The answer, to put it bluntly, is that it makes us easier to milk. The self-interest of those in authority lies not in optimizing the efficiency of the system as a whole, but in maximizing their own extraction of rents from it. Their interest is in maximizing the absolute size of their slice of the pie, even if doing so results in a smaller pie overall.

Those in authority cannot afford to do the most efficient thing — stop interfering with the judgments of those who actually know what they’re doing — because they know their interests are diametrically opposed to ours.

Efficiency is possible only when the skills and experience-based knowledge to do a job, the full decision-making authority to use one’s own judgment, and the full internalization of the rewards of one’s own activity, are all united in the same actor. But severing these things one from the other is the most basic structural presupposition of our economic system.

Economic privilege — authority — exists so that those at the top can live off the unearned wealth created by others. Those on the bottom who produce the actual wealth cannot be trusted with the discretion to use their own judgment, because they have no rational interest in maximizing the extraction of rent by their superiors.

Hierarchies exist in situations where those engaged in an activity have a fundamental conflict of interest with those who direct and profit from that activity.

Shevek, the anarchist protagonist of Ursula LeGuin’s The Dispossessed, came to the conclusion that hierarchy is a way to do as efficiently as possible what ought not to be done at all. A hierarchy is a machine — basically a steam engine straight out of the factory age — for compelling people to do what they have no direct rational interest in doing, for the benefit of those with whom they have a fundamental conflict of interest.

We anarchists want to eliminate authority as the mechanism by which some people live at other people’s expense and impose their judgment on others. We want to create a society in which all decision making authority is possessed by those with the judgment to do the work, and all common social action results from agreement and voluntary cooperation. We want to create a society in which no one is compelled to work to feed a class of rentiers, and in which all effort receives its full reward.

“Authority is the Enemy of Rationality” on C4SS Media.

The American government has some of the most disingenuous accounting practices imaginable.  Every cost they estimate is really a logarithmic function, and they cannot keep the United States Post Office from losing about $5 billion a year.  They systematically sap the value of Federal Reserve notes through inflation and cannot be trusted to leave funds appropriated for Social Security in the designated account.

They literally take money from those worst off in society for retirement, supposedly for their own benefit, remove the money from that account, leave an unfunded liability, and then use the money on something more politically expedient while the weakest lose their coerced investment and are reimbursed unwillingly by those who remain productive.  What a racket!

As an institution, one should be extremely skeptical of both the practical ability of the government to be able to deliver quality results and the motivations behind the actions of state actors.

Many of the people who argue for the necessity of the state believe that humankind is essentially petty and cruel and thus make the case for a centralized political system to maintain order, peace, and prosperity.  But if humankind is all of those naughty things, then how are the people in government any different?  If people are profit-seeking and brutal, then they don’t become magnificently well-intentioned and public-spirited after joining the state.

Conversely, centralized power might even attract the cruelest in society, and any government would thus become infinitely more dangerous if the humankind were inherently evil.  I am far from the first to point this out.  Hayek famously wrote about this in The Road to Serfdom in the chapter “Why the Worst Get on Top.”  This idea is also central to the economic study of public choice theory.

Worse still for libertarians, the right has thoroughly embarrassed itself with its mercantilist defense of BP after the Deep Horizon Disaster and further sullied the reputation of markets in the process.  The juxtaposition of free market rhetoric and the fascistic reality of their position is responsible for an ever-increasing amount of damage to the perceived credibility of market liberalism.

In the haste to defend their mythological and hollow admiration of markets, the GOP’s ranks have closed around BP, in an effort to prevent a guilty-by-association wave of anti-market eruption from the political left.  Their smoke screen dooms liberty’s message and begs the question:

“How is defending an aggressive company a virtue for a free marketeer?”

I know the feeling. As a market-oriented thinker there can be pressure to defend every single market interaction.  “Walmart did what?  Oh, well, they have a right to, even though that’s ridiculous.  This is really a problem of state-granted corporate privilege.  In a freed market without a state these incentives and interactions would not actually exist, and this poor behavior would be very unprofitable…”  This isn’t always so convincing to the uninitiated, but libertarians walk a tightrope on issues like this.

This debate in the popular and mainstream media sources truncate the acceptable lines of argument between the fascist right, who are currently blocking legislation to raise liability caps, and the cries for more well-intentioned but economic progress-strangling regulation from the left.  There is a better way though, with a free market and without a state.

I’d argue that one should react with a “don’t hate the player, hate the game” attitude with regard to this incident.  BP, like all market actors, respond to the forces of supply and demand mostly outside of their control in order to internalize economic gains for their staff and investors.  However, with this statist anti-market and dangerous liability cap, firms like BP and their shareholders are are predictably incentivized to be less cautious than they would be without state protection.

With unlimited liability for civil damages through torts (private non-criminal damages suits) and a freed market, BP and all companies would be positively incentivized to keep the likelihood of negative (and expensive!) externalities to the most minimal amount conceivable.  This is precisely the kind of ‘regulation’ libertarians support.

This one change against caps on liability would make business extremely responsible and would do so without all of the inflexible bureaucratic regulations which produce sluggish and impoverishing economic conditions.  Unlimiting torts will make the world freer, safer, and more sustainably productive.  This is but one step on the road to the ideal of a stateless society, but if you are currently arguing for justice as a result of BP’s actions, please don’t forget to include this essential point.  Without this necessary reform, any new laws reacting to the Deep Horizon Disaster will only be polishing brass on the Titanic, and it will only be a matter of time until the perverse incentive structure strikes again.

But global warming advocates don’t have a monopoly on the political abuse of science.

It’s funny how the same libertarians who gleefully pounce on “junk science” when it serves an agenda they regard as inimical, are so fond of it themselves when it confirms their own prejudices.

A good example is Rachel Carson’s alleged responsibility for millions of deaths from malaria, as a result of her role in banning DDT. The neocon FrontPage magazine accused her of “ecological genocide,” and a character in a Michael Crichton novel went so far as to say she killed more people than Hitler. The JunkScience.Com (!) website even has a malaria death clock featuring Rachel Carson’s face.

Unfortunately, it’s one of those things everybody knows that just ain’t so. Here are some of the holes in the received version of the story:

1)  The various national bans on DDT all left a loophole for mosquito eradication when other available means were inferior to DDT. Controlled use of DDT for mosquito eradication is entirely legal.

2)  DDT was already losing its effectiveness for mosquito eradication in the 1960s because mosquitoes were becoming resistant to it.

3)  DDT had numerous side-effects that outweighed its limited effectiveness as a pesticide. Most importantly, and like most synthetic pesticides, it also poisoned the rest of the food chain above the mosquitoes. This meant, among other things, that it killed off mosquitoes’ natural enemies, so that it took larger and larger amounts of DDT to achieve the same results as before. In the process, it also caused significant collateral damage. For example, by killing the parasitic wasps that previously kept down the population of thatch-eating caterpillars, DDT indirectly caused an epidemic of collapsing roofs. Another example:  it poisoned geckoes who ate the mosquitoes, and who in turn poisoned the cats who ate the geckoes, thus resulting in an epidemic of rats.

The canard can be traced back at least to a campaign by Roger Bate, a right-wing economist who worked for a variety of industry think tanks. He personally conducted funding pitches around the corporate world, selling his propaganda campaign as a stiletto between the ribs of the environmentalist movement. “The environmental movement, he said, “has been successful in most of its campaigns as it has been ‘politically correct.’” DDT offered the potential of using the environmental movement’s erstwhile advantages against it, he crowed:  “the correct blend of political correctness ( . . . oppressed blacks) and arguments (eco-imperialism [is] undermining their future).”

Reason magazine science reporter Ron Bailey was an early and enthusiastic adopter, regurgitating the urban legend in most of its particulars in 2002 (he linked to an article based almost entirely on Roger Bate’s work).

Picking and choosing evidence to believe based on what its truth would entail, rather than whether it’s valid or not, is a bad thing—regardless of which “side” it comes from.

In the case of anthropogenic global warming, the reflexive opposition of many libertarians is just as cavalier with the truth as the folks crowing over Climategate accuse global warming advocates of being.

That such libertarians feel compelled to take the strategic position they do in regard to global warming speaks volumes about their basic view of the world. It’s a view of the world that shares a lot in common, ironically, with that of the average liberal Democrat.

The reasoning process goes something like this:

If global warming is real, all is lost for libertarians, because the need for statism follows as a direct implication. If global warming is real, it will prove the liberal Democrats are right: the free market has led to disastrous results at least in one particular, and the state is necessary in at least this one case to correct market failure. In other words, given the premise of global warming, libertarians of this stripe see the big government argument as something that follows legitimately from it, as a matter of course. So global warming cannot be happening. QED.

Funny. I’m fairly friendly toward the anthropogenic global warming thesis, and I don’t see global warming as a market failure at all.  I see it as a government failure. If we removed all the government-created externalities that promote consumption of energy and transportation inputs, and protected the fossil fuels industry from full liability for torts committed in the course of its operations, global warming would never have arisen as an issue in the first place. The free market is not the problem, it’s the solution.

But maybe some libertarians see the free market as something that needs protection from the truth.