Wednesday, June 18, 2008

The Critical and Fundamental Nature of Economic Freedom

It is an increasingly flimsy secret that I am a strong Free-Market Liberal, and a civil liberties nut. I have tried to keep my opinions on these topics out of Foggofwar--I had hoped Foggofwar would tie me down to a topic I was less feverishly passionate about, such that I would not be destroyed by the apathy of my audience--but the threads on that anchoring are beginning to unravel. So I will share this thought with you today.

I was walking back from work, listening to The Protomen as I do (quite literally) every day--they have a truly epic rock opera on the individual's stand against tyranny for the sake of safety. And I realised--the greatest losses of liberty occur when the government exploits a tragedy or fear, and whittles away at one's liberties for his own safety. I then realised that, in the realm of economics, the exact same process occurs. The US government has terrified its citizens of foreign countries (Japan in the 1980's and then China more recently), of robber barons, of outsourcing, of multinational corporations, of investment banks, of oil, of pharmaceuticals. Besides the fact that most of the true pain caused by any of these alleged ills comes when each exploits poor government regulation, the government's use of such ills to remove your civil liberties is an evil equal in scope and magnitude to tis use of the ills of terror to strip you of rights to privacy, speech, and justice within the courts.

Today, I will not touch on the pragmatic superiority of economic freedom to regulation (as this argument can stand alone without it, and also, that it is a more complicated subject that I understand less, and leaves a fair number of exceptions, like Tragedies of the Common, Freerider problems, imposed externalities, etc). I intend to argue only the following:

1) Economic Freedom (freedom of property) is a fundamental freedom, like speech, privacy, justice, etc. I intend to derive this from common law and moral intuition.

2) Economic Freedom is critical to the preservation of other freedoms, those which some might call more fundamental. I intend to derive this from a "tyrant government" hypothesis, and support it with examples from real life.


Economic Freedom is a fundamental freedom
. Some would argue differently. There are some freedoms as granted to us by the constitution that we may not consider fundamental rights of the individual simply for being an individual. For example, the right to bear arms (the 2nd amendment) may well not be a fundamental right, but is a means to an end of giving the American population a threat of force in the case that the federal government stops obeying the will of the people. We might say in this sense that the right to arms is not fundamental. So we must ask: is the freedom of your property a fundamental right, or a means to an end (that end almost certainly being a functional economy--something that Deng Xiaoping realized, despite a Communist-style denial of individual liberal civil liberties)?

In some ways, it seems we treat it as a means to an end. We certainly regulate the economy, hoping to achieve a universal outcome. But I am here, of course, to argue that such an approach is a violation of a fundamental human right.

So, the moral intuition. Let us agree for a moment that your right to not be punched on the street is a fundamental one, something we can all agree on. How does the government treat someone who punches you on the street? The government jails them. This is because the government uses force to enforce that others respect your fundamental rights. Now, let's say your jaw was broken. Will the government automatically cough up money to fix it? No; you would have to sue your assailant separately.

Now let us think of theft. I don't mean armed robbery, I mean a minimally offensive form of burglary--let us say that you leave your purse on a chair, and you get up for a moment to wave down a friend. If someone comes by and steals that purse, what does the government do to punish him? It jails him, just as if he had punched you in the face. Now, of course, the police would then re-deliver your purse to you. But if he lost it in a river? The government would not pay for your purse, you would have to sue your thief in court. Just like the punch to the face, treated exactly the same way. You do not simply sue a man for stealing from you and leave it at that, you throw him in jail, because he has violated a fundamental right to freedom of property.

I believe this comparison is a (rather simple) argument that it is morally intuitive that your property is yours on the same fundamental that your privacy, your expressions, and your body are yours--and those who violate the integrity of these things you possess are thrown in jail. Therefore, I believe that your property is an order-of-magnitude equally fundamental right to speech, property, and body integrity (if I had to rank the most fundamental rights, I believe others would certainly come before property).

I believe, equally importantly, that this is outlined rather clearly in the government's founding documents. The Declaration of Independence, of course, names "Live, Liberty, and Pursuit of Happiness" as the three basic rights of the individual, derived from "Life, Liberty, and Property" (from the First Continental Congress of 1774). In the Constitution, the government has the ability to levy taxes (but a very limited number of measures on how it can spend them, which it conveniently ignores for many expenditures), and regulate interstate commerce--but the Federalist Papers make it clear that this line is not designed to allow the government to force anyone to do what said government wants with their money--I am thus not arguing that most regulation is blatantly unconstitutional, but that it violates the spirit of the founding documents of this country.

Why is regulation a violation of this right? It does not take your money (like taxes, do, but let us call them a necessary evil), it simply restricts what you can do with it. But let us apply this to other realms: "You have freedom to speak your mind, except for criticizing the central government, talking about Falun Gong, talking about the Tiananmen Square Incident, or talking about Tibetan Independence." Sound familiar? Well, it's how the Chinese deal with their right to free speech. Just a few restrictions with what you can do with it, really. Mostly, you can talk about what you want. I think this example (I could make others) should make it clear that serious "restrictions" on your freedoms--especially those designed to protect you from your own bad decisions, or keep you from undermining the state, as most economic regulations are--mostly gut out the entire point of the freedom. If one does not consider the Chinese to have freedom of speech due to these few restrictions, then I do not think one can consider Americans to have freedom of property, due to serious limitations of how one can use his own property.

I thus believe that economic freedoms are fundamental, and that the United States undermines said freedoms.

Economic Freedom is critical to the preservation of other freedoms, those which some might call more fundamental
. Ironically, it is economic liberals (I believe FDR started this craze) that argue that freedoms mean nothing without the means to exercise them. What does this mean to me? Freedoms mean nothing without property. And property means nothing when the government can take it away on a whim--that is, if the government can simply snatch your property from you, then you have no freedoms. Why? Let us consider the case in which you criticize the wrong member of government. That member can use current regulatory laws to strip you of property--perhaps not as harsh a punishment as jailing, but certainly a tool to keep you in line, to keep you from mustering the courage to criticize. Hypothetically, the federal government could easily use its rather broad interpretation of eminent domain to force you to sell that house you like so much for sub-market if you forget to give a donation to your senator's campaign fund this year. Decent argument, you say, but where are the examples?

In 2002, a Mr. Cory Booker ran against Sharpe James for the position of Mayor of Newark (an excellent film, Street Fight, outlines the corruption of Mr. James in the battle). He was doing surprisingly well in the polls against a man who held the position for 16 years. But Mr. Booker started seeing a pattern--most companies that supported him openly were getting visits from the City Health Inspector, and being shut down. You see, it turns out that in Newark, as well as most cities, Health Codes are so thorough and superfluous that approximately every single company in the city is violating them in some way. Most of the time, inspectors say "you violated this, fix it," or ignore the trivial stuff. But when it is cast into the lawbooks, inspectors have the power to crush companies they do not like. In this 2002 election, that is exactly what happened. Mayor Sharpe James sent the City Health Inspector, over and over, to companies that held rallies for Booker, or even put his campaign poster in their window. Mr. James used the power of regulation to deny these companies their very right to speech, their right to dissent--but he did it in a completely legal way. In 2007, he was convicted of corruption, but it was for spending public funds on property for his mistress--nothing of his use of health inspections to take down those that dissented came up in the courts, because what he did was completely legal.

Other examples flourish. Richard Nixon, who started the EPA, reportedly used his very hard-line appointee for the position to coerce companies to give money to his campaign--campaign managers would mention that "Tricky Dick is putting a tough guy in charge of the EPA--you're going to want a friend in the Oval Office." Such extortion used the threat of economic punishment to violate the freedom of speech of the owners and operators of these companies--but despite Nixon's resignation for Watergate, such extortion was never brought upon him, because it was completely legal.

These are just a few examples of how the government can use--and uses--regulation to corrupt other freedoms of American citizens. Such behavior is unacceptable, and can only truly be stopped if the power of regulation is removed from the hands of these politicians. Thus, economic freedom is critical to the preservation of (arguably) more fundamental freedoms, like freedom of speech and dissent.

I thus ultimately argue that the excessive regulations imposed on the market of the United States not only violate a fundamental freedom of property for the American people, but also give the government, local and federal, the power to use economic pressure to tyrannize their opposition and coerce neutral parties into support, undermining not only free speech but the entire political process. Restrictions of economic freedom (which we gently call "regulation") create violations both in the freedom of property and in other freedoms more explicitly granted by the constitution.

Most of you reading this probably do not believe that, in general, security is more important than liberty. You do not believe in wiretapping to keep us safe from the terrorists, you do not believe in torture to learn more about terror operations, and you do not believe in a suspension of Habeas Corpus to "more rapidly" deal with terrorist threats. And these restrictions of your freedom address a much more serious threat than economic woes--terror threatens your life. Even if you do not agree with me that the free market is a pragmatically more optimal economic solution, it is inconsistent to believe that the government should not restrict your freedoms to protect your life from terrorists, and yet that the government has a mandate to restrict your freedoms to protect your job security from robber barons, multinational corporations, oil companies, and pharmaceutical companies. Such a stance (typically liberal) is at least as inconsistent as the opposite conservative one (I know you guys are out there, too). Even if you argue that the working class is in danger from the free hand of companies, it is not an excuse to restrict the freedom of Americans to use their property as they wish, just as threats from terror are not an excuse to restrict the freedom of Americans to use their speech as they wish.

And therefore, I believe it is intuitive and logical that economic freedom is a critical and fundamental freedom to the American people--fundamental in that it is something that should not be violated for its own sake, critical in that its violation leads to greater powers that the government can use to restrict your other freedoms.


Charles said...

As I am sure does not surprise you, I am more of the opinion that the market is useful as a means to an end, rather than being an expression of a fundamental right. I agree with more of this post than I think you expect, but I disagree with your ultimate position.

I agree that there are fundamental economic rights. I think the criminal law is a terrible place to look for what a fundamental right is, though. They'll jail you for selling alcohol to minors, too, and I don't think that plausibly violates fundamental rights. Criminal law is full of the sorts of "secondary rights" you're describing the second amendment as being about - things we set up because they make society run smoother, not because we think they're key to personhood.

The founders are a much more plausible place to look for what fundamental rights are, and I agree that they valued property rights among the fundamental rights. I also agree that there *are* fundamental property rights, but I think they're narrower than you claim they are here.

I think most of the founders would have used a Lockean labor theory of property to explain why property rights exist. I own a piece of land because I cleared it from the forest, I own a sword because I smithed it, I own a dog because I bred and trained it. I'm in agreement with them (and presumably with you) that you have a fundamental right to the creation of your labor.

Where I disagree with how I understand their opinion of property, is that I think that right to your labor attenuates as you move away from the act of creation, both temporally (much like Intellectual Property, I think the fundamental right to Physical Property also should time out) and "socially". By socially I mean that I don't really believe you can trade fundamental rights around. If I agree to do an ad for you, you don't buy my right to free speech, I just agree to let you use my speech for a bit. Similarly, when the farmer sells you some wheat, you don't get a fundamental right in the wheat, you just get to sort of borrow his right to it. By the time it shows up in the store as bread, any fundamental rights involved in his labor are long gone. (The baker's fundamental rights in baking are less far gone, of course, although in most grocery stores, the baker was probably several steps back in the chain, too.) I think that by the time you're regulating the general market, most of what you're regulating is at the "rights we give you because they make society run smoother" level, rather than the "fundamental rights" level.

Furthermore, many of the regulations you're complaining about exist to protect my economic rights, in the sense that they're there to makes sure I actually get what I'm paying for. Neither I nor most of the public has the time or the interest in vetting every restaurant we eat at, every toy we buy, and every plane we fly in to make sure it individually has a good reputation for being safe, healthy, etc. We delegate that task to the government, and in general, since we started delegating that task to the government, things have gotten noticeably safer and healthier. You can make assertions about how the market would have fixed those problems anyway, or that those problems weren't actually so bad as to be worth the money that gets spent on them through regulation, but I think it's a hard argument to say "it's a violation of your fundamental right to property for the government to make sure that when you buy a product, it meets the societally determined minimum standards for that product, because you might really want to buy something that doesn't meet those standards." It's slightly more convincing from the other side ("it's a violation of my right to *sell* my property to say I can't *sell* something that doesn't meet society's minimal standards"), but I think that's a limitation I can live with, much like you can't yell "Fire" in a crowded theater, or giving a speech to get a crowd to go take mob vengeance on some criminal.

I am also not particularly impressed with your tales of government corruption as grounds for not regulating things, and think they're little more than trying to scare people about the government so they'll do what you want. I'll concede that health, building, and housing inspections are ridiculously overregulated, and that it's error to design a system where everyone is in violation all the time. But the fact that some corrupt mayor managed to use this to lean on his political opponents doesn't impress me. If he's that corrupt and that in charge of the city, he could as easily have leaned on the companies involved by putting roadblocks on their streets to test for drunk drivers 24/7, or taking away all their on-street parking, or just sending police to follow their customers around. Those are all perfectly legal, too.

The Nixon example probably *isn't* perfectly legal, at least not if it was as blatant you're making it out to have happened. "Give me money so that you don't get bad results from my agencies" is bribery/extortion, and against the law. It's certainly not always prosecuted, and I'm not going to claim that the government is perfectly honest. But saying "sometimes the government is corrupt, so we shouldn't give the government power!" can be said about any exercise of government power, and I don't think it's particularly more convincing in the regulation case than in any other case. (Nor do I think the market is resistant to concentration and abuse of power, but that's a different argument for another day.)

P.S. -- I believe that your property is an order-of-magnitude equally fundamental right to speech, property, and body integrity kind of gives away your biases on this issue. :-)

Erik Fogg said...

I think this is an excellent reply. I have a few objections or questions:

1) "Similarly, when the farmer sells you some wheat, you don't get a fundamental right in the wheat, you just get to sort of borrow his right to it. By the time it shows up in the store as bread, any fundamental rights involved in his labor are long gone."

If you're only borrowing the right to the wheat, why does the farmer have no rights to the wheat when it arrives to the market? I am assuming you want to say that the farmer doesn't have rights to that wheat when he has sold it to you, but if that's the case, wouldn't you then have the rights? Or the inverse; if you don't inherit rights to the wheat when you buy it, you're only borrowing those rights, does the farmer keep those rights indefinitely? I personally think that I inherit the rights to the wheat when I buy it--it becomes my property because I bought it from the man that made it... I don't think something is not my property simply because I did not personally build it... such a statement would mean that 71% of our country (in a "service" sector) has zero property at all, which I think is intuitively defeating. But I think this is an issue of clarity and not position, I just don't know what your position really is.

2) "and in general, since we started delegating that task to the government, things have gotten noticeably safer and healthier." It should be noted that there is a strong correlation between increased regulation and smoothness, but also a very strong correlation between time and smoothness, as well as GDP/capita and smoothness. I think it is entirely unclear that anyone has proven to me that one of these is definitely the cause. I cite the "smoothness" of Western Europe, which exists at the same time and almost the same GDP/capita, but also has car-burning riots every weekend and double-digit unemployment, as examples of higher-regulation economies. It's a small comparative case-study, but has more scientific controls than simply saying "with more regulation, the economy has gotten better, therefore regulation caused it." I also object to your idea that if you want information about something, you have to inspect it yourself. Information has value, and you could pay companies for a digest about other companies/institutions/products, they will have done the research for you, in much the same way as the government does, except that A) you are not forced to do so, and B) it would certainly be a more efficient process. Information is out there more than ever before, and I think therefore we have less of a need for safety regulation than ever before, because it is just so damn easy to know what you are getting yourself into. People know to be wary of used car dealers and civil court lawyers not because either of these professions are illegal, but simply because the information is virtually ubiquitous. With so much information about, I don't know if you're arguing that the populace is either too dumb or too lazy to be trusted to make decisions for itself, but either way, I disagree.

3) Your note that corrupt mayors can crush companies or unions in other ways does indeed mean that the government has far too much power in other realms, not that it doesn't have too much in the realm of regulation. I think the founders had it right in their deep skepticism of government power--it leads to tyrrany. If something can be done without giving one man or a group of men the power to imprison others, to throw them away and take away their rights--then it should be. I think that using the lever of "taking away a man's very rights and imprisoning him" is necessarily an extreme one, and should be a last resort behind other forms of incentive. I think we are very quick to use it.

4) "But saying "sometimes the government is corrupt, so we shouldn't give the government power!" can be said about any exercise of government power, and I don't think it's particularly more convincing in the regulation case than in any other case." Certainly not more convincing, no, but equally convincing? Certainly. I don't think that economic rights are more important than others, but I think they are the rights we are most comfortable with pretending we don't have, and most comfortable ceding to the state, and therefore, I think this argument has more abuses here than in some other areas (though possibly not all).

Charles said...

1) We need to be careful with the term "property" here - its casual usage fails to distinguish between when property is a Fundamental Right and when it's just a Convenient Social Mechanism. My claim is that your property generally falls into the second category. When the farmer sells the wheat, he is generally relinquishing his Fundamental Right, and sending the wheat out into the Convenient Social Mechanism realm, rather than transferring the Fundamental Right to someone else. As I said, I don't really believe that Fundamental Rights are transferable. (NB: I would qualify that slightly in cases where, rather than just sending some wheat off into the general stream of commerce, the farmer is specifically tracking where the wheat goes and who gets it, and wants it to go to a particular person for whatever reason, but I don't think those caveats are relevant here.) Being in the Convenient Social Mechanism realm doesn't mean you have no rights to the wheat when you buy it, but it means those rights aren't, in my opinion, fundamental in the same way that free speech is. I can't buy your right to Free Speech, I can't buy your Right to Vote, and I can't buy your Fundamental Right in property you've made.

As to the service industry question: speaking as someone in the service industry, I certainly generate things that I would claim I have a Fundamental Right in on a regular basis. But they're IP that I proceed to release immediately into the market, in exchange for money, so I don't think there's anything *physical* I have a Fundamental Right to, as opposed to a Convenient Social Mechanism right to.

2) I think this is disingenuous. If someone identified an error in a computer code and said "aha, I can fix it this way", and then the error went away, you would be unlikely to say "well, maybe someone else's changes to the code fixed it, not you" unless you were already looking for a reason not to believe that the fix worked.

Correlation doesn't equal causation. But when someone says "This is a problem. This problem is caused by people having bad incentives. I am going to fix it by giving them incentives to behave in a good way. Look, now it is illegal to behave the bad way, and the problem is getting better." they're not just relying on correlation to support the position that their change fixed it, they're claiming to have identified the cause of the problem and addressed it.

It's certainly still possible that something else fixed the problem, but saying "well, all you have is correlation, I want something more" is ignoring the fact they're giving you something more - an explanation of the cause and effect mechanism that relates the two events, and a test case of their cause and effect mechanism that went as predicted. You may not *like* the fact that regulation makes things safer, because it bothers you ideologically, and that may make you question their explanation, but unless you can come up with a good alternate chain of causation, just saying "well, maybe it was something else! Look, these other things are correlated too!" isn't very convincing.

I'm not sure what your point about Europe is here - neither unemployment nor car riots seems to go to the point about regulation making products healthier or safer. It may to go whether or not the cost of that increased health and safety is too high, but that's a different point entirely from a claim that "regulation doesn't actually work to do the thing you want."

As to your claim that the market could do it instead, given the new information technologies: well, maybe it could. I'm not convinced by that argument - my response to similar arguments tends to be "well, maybe the market can enforce contract law, too - you just assemble a list of who breaks their contracts, and people don't deal with them any more. so why do we need contract law?" Most people taking your side of things don't actually seem to want to get rid of contract law, because they don't trust the market *that* much. But maybe the market's capabilities have fundamentally changed since the regulations were initially enacted, and it would be possible for the market to do a better job now than it did then. If so, I expect that over time, the regulations will in fact disappear.

But even assuming the market can now support the increased safety issues without regulation, I'm not saying that the populace is too lazy or to dumb to do it via the market, I'm saying they have decided not to do it that way. *You're* the one saying "hey people, we're doing this wrong! Get your heads on straight and do it the right way!"

The government is not some mysterious force that acts of its own accord to oppress the people and interfere with the market - it's the voice of the people, mediated through their representatives, deciding how things should be done. If you want to convince them to change their mind, more power to you, but I object to being told that the collective decision to delegate responsibility for an issue to the government rather than the market is either stupid or lazy.

3&4) These seem like they are making basically the same "government is tyranny, only the market is freedom!" point. I think you totally fail to recognize the times when the market *isn't* freedom. Some of those regulations you are so down on are there to prevent market abuses like "put out or lose your job," or "if you try to organize a union, we'll fire you." The market tends to concentrate power with capital, and the problem that generates lack of freedom is concentration of power, not markets or governments per se. And yes, there are competitive forces in the market that tend to spread power out again. There are also forces in the government that try to address corruption - I note that of your two corrupt officials examples, one was impeached and one went to jail.

I do tend to agree that we are too quick to criminalize things that should be dealt with in other ways. I also agree that there are areas (like the building codes area) where we over regulate. But I think you are conflating the two (there isn't a lot of criminal prosecution for building code violations), and, as laid about above, I think that the "fundamental property rights" you're worrying about infringing are mostly secondary "convenient social mechanism rights" that I'm comfortable infringing for a better social mechanism. Sometimes, like in the housing code issues, the regulations are *not* making a better social mechanism, and that's a fair critique. But if you want to convince me that a regulation is in error, you are generally going to have to argue about the actual effects and consequences of the particular regulation, rather than attacking regulation in general as evil and oppressive. (You can attack it generally as interfering with a well established social mechanism that works pretty well, and thus needs to be implemented carefully, if you like. :-) )

Anonymous said...

At risk of beating this post further into the grave...

"Economic Freedom (freedom of property) is a fundamental freedom, like speech, privacy, justice, etc."

Most of your examples of suppression of economic rights (aka, "regulation") were focused on corporate bodies, where as the rights to speech, privacy, justice, and other "inaliables" are primarily directed to individual citizens. The example companies under health inspection scrutiny don't even have any sort of fundamental, constitutional rights to speech or privacy (careful shooting me down on this statement). Surely their constituent members and owners do, but it doesn't sound like those individuals had any rights (including property rights) taken away by the government in that situation.

I am much more interested and alarmed in eminent domain abuses, seizure of property, and what I perceive as the leaching away of property ownership through temporary licensing and renting of both tangible and "intellectual" property.

Erik Fogg said...

I will get to Charles second, there's a bit more to chew there.

Bryannewbold: "The example companies under health inspection scrutiny don't even have any sort of fundamental, constitutional rights to speech or privacy"

Your response is to my statement that economic freedom is a fundamental freedom, like speech or privacy. I should note first that I did not at any point say "economic freedom is a form of free speech or privacy," and do not mean to. I think property rights are a completely separate right of their own, and so I'm not sure if your response is trying to address that point or something else entirely. But simply because a man is not losing his first ammendment rights does not mean he is not losing another right, and the latter is all I intend (and need) to show.

Second, in the case of the Sharpe James election, these men certainly did lose their right to free speech. Free speech does not exist if you have to pay the government for it. It's not "Free" if the government will come shut down your business (and thus annihilate your income) if you say it. That is clearly and unambiguously a violation of free speech by a corrupt mayor, made possible by excessive regulatory powers invested in him by the city.

Anonymous said...