Musicians don’t understand economics

The EU’s copyright directive is going to require paying for links and will require the creation of expensive and error prone copyright filters. This means that search engines will have to start charging for searches. Google will either become a subscription service or will charge per search, or they will simply block all access to their services from the EU and exclude any site hosted in the EU from search results.

Most musicians are in favour of this. They imagine that they’re going to make more money. They will be disappointed. The money from the tax will go to politicians, who will spend it on vanity projects, expensive lunches and so on, not on musicians. And since everyone will have to pay for searches they will have less money to spend on music. Also, are people going to be able to find music when they have to pay searches or can’t do them cuz Google has declined to provide its services to EU countries? Anyone who thinks this is a good idea should read Bastiat, or Hazlitt or Reisman.

EU copyright directive

The European Parliament voted in favour of the EU copyright directive, which taxes links and requires sites with user submitted material to have a program to filter copyrighted content. Taxing links will make it more difficult to comment on news. It will drive traffic away from news sites. And a filter for copyrighted material won’t be able to distinguish between using material for commentary and ripping it off wholesale. In addition, once content filters are in wide use politicians will want to use them to suppress content they dislike. An article on this disaster ends with the sentence:

Exactly how the legislation will be interpreted will be up to individual nations, but the shift in the balance of power is clear: the web’s biggest tech companies are losing their grip on the internet.

This claim is wrong. Implementing filters for copyrighted content and paying taxes for links will be a massive expense. A large company may be able to eat the cost of developing the necessary programs and paying the link tax. In general, a small company will not be able to pay such costs. Many small companies won’t be started at all because the EU just massively increased the capital requirements for starting any online business. Increasing regulation favours large businesses over small businesses.

Hoppe’s argumentation ethics

Hoppe’s argumentation ethics are an attempt to justify libertarianism. Hoppe starts by criticising Ludwig von Mises’ approach to ethics:

According to Mises there exists no ultimate justification for ethical propositions in the same sense as there exists one for economic propositions. Economics can inform us whether or not certain means are appropriate for bringing about certain ends, yet whether or not the ends can be regarded as just can neither be decided by economics nor by any other science. There is no justification for choosing one rather than another end. In the last resort, which end is chosen is arbitrary from a scientific point of view and is a matter of subjective whim, incapable of any justification beyond the mere fact of simply being liked.

In the following I outline an argument that demonstrates why this position is untenable, and how the essentially Lockean private property ethic of libertarianism can ultimately be justified. …

The argument then runs as follows:

First, it must be noted that the question of what is just or unjust — or for that matter the even more general question of what is a valid proposition and what is not — only arises insofar as I am, and others are, capable of propositional exchanges, i.e., of argumentation.

Second, it must be noted that argumentation does not consist of free-floating propositions but is a form of action requiring the employment of scarce means; and that the means which a person demonstrates as preferring by engaging in propositional exchanges are those of private property.

Furthermore, it would be equally impossible to sustain argumentation for any length of time and rely on the propositional force of one’s arguments if one were not allowed to appropriate in addition to one’s body other scarce means through homesteading action (by putting them to use before somebody else does), and if such means and the rights of exclusive control regarding them were not defined in objective physical terms. For if no one had the right to control anything at all except his own body, then we would all cease to exist and the problem of justifying norms simply would not exist. Thus, by virtue of the fact of being alive, property rights to other things must be presupposed to be valid. No one who is alive could argue otherwise.

This argument sounds plausible, but it is flawed in ways that will lead those who hold it make serious errors. First, the argument is justificationist – it purports to show that a particular position is true or probably true or something along those lines. All justificationist arguments are false for reasons I have described in previous posts [1,2].

Another problem is that many people don’t agree ethics is about argument. Some people believe it is ethical to beat a person up with a bike lock, or to run people over with a car. Such a person might be willing to take a break from using physical violence to talk, but unless you change his mind all he’s doing is taking a break. Worse, most people think it is necessary to initiate the use of force in some ’emergency’ situations that don’t involve the use of force. For example, people who support the welfare state think it is acceptable to threaten people who don’t want to pay taxes to support the welfare state with prison and to use violence against them if necessary. If you can’t change the minds of those who are taking a break from using physical violence directly or through the state then your argument is pretty useless since almost all people are in that category.

Many people also see ethics as an emotional issue. You’re ethical if you feel the right sort of emotions. For example, many people say that if you feel like the US should have universal health care you’re an ethical person and otherwise you’re a scum bag. Any reasons you might have for thinking universal health care would be disastrous are irrelevant.

Lots of people also won’t concede that private property is necessary for rational argument. They think rich people control the media and can say absolutely anything they want. In reality, the mass media have to stick to a very narrow set of ‘respectable’ opinions or they will lose customers and money. Other people think that some private property is okay, but the government has to set limits on it.

The only people who will buy Hoppe’s argument are those who reject the positions in the previous three paragraphs, i.e. – people who already support unrestricted capitalism. Hoppe might say in reply that the rejection all of those positions have been justified by Misesian economics. Although Mises’ economic ideas are true the epistemological ideas Hoppe advocates as a justification are wrong. Hoppe’s argument solves no problems and can’t reach any target audience other than people who already agree with him.

Hoppe’s argument is a rationalist argument in the sense explained by Peikoff in Understanding Objectivism Lecture Seven. Hoppe focuses on an abstract idea without tying it to reality. Hoppe starts with a premise that differences must be settled by argument and pretends he can prove a conclusion from it. Where does this premise come from? Nowhere. Why should we use argument as opposed to hitting people with bike locks? No reason is given or even referred to. We’re just supposed to accept it with no explanation or context.

A better argument along the same lines would say the following. I think that differences should be settled by argument, not by violence or emotional presuppositions. I also think that free markets are required for people to be able to undertake arguments properly. People have to be able to live to make arguments and to try out ideas to settle arguments and this requires unrestricted capitalism. You could then have a discussion about these points. Instead we get a very brief statement of each of these points and a lot of filler about how this is a justification when it’s not. We can only get moral progress through discussion not by trying to concoct a gotcha argument in a few pages. Moral and political knowledge is created by guesses tempered by criticism, just like other kinds of knowledge, see Elliot Temple’s squirrel essay.

Misunderstandings are common

It is common for people to misunderstand written material, including material that is apparently written in plain English. Consider, for example, this paragraph from Ayn Rand’s essay “The Argument from Intimidation”:

The essential characteristic of the Argument from Intimidation is its appeal to moral self-doubt and its reliance on the fear, guilt or ignorance of the victim. It is used in the form of an ultimatum demanding that the victim renounce a given idea without discussion, under threat of being considered morally unworthy. The pattern is always: “Only those who are evil (dishonest, heartless, insensitive, ignorant, etc.) can hold such an idea.”

And then look at the mess Adam Lockett made of interpreting it:

Having a conscience is about making moral judgements about your thoughts and behaviour. You may sometimes feel bad as a result of judging that your behaviour or ideas suck, but the key idea behind conscience is the judgement not the emotion. You have moral self doubt if you don’t have confidence in your ability to make moral judgements. So not having moral self doubt is not the same as lacking a conscience. Rand was strongly in favour of judging your own conduct and the conduct of others:

The precept: “Judge not, that ye be not judged” . . . is an abdication of moral responsibility: it is a moral blank check one gives to others in exchange for a moral blank check one expects for oneself.

There is no escape from the fact that men have to make choices; so long as men have to make choices, there is no escape from moral values; so long as moral values are at stake, no moral neutrality is possible. To abstain from condemning a torturer, is to become an accessory to the torture and murder of his victims.

The moral principle to adopt in this issue, is: “Judge, and be prepared to be judged.”

In other words, Rand was in favour of a person having a conscience and standing by his ideas unless they are refuted by argument. Rand was also in favour of selfishness in the sense of having regard for your own interests. Adopting a standard that opposes acting in your own self interest means that you sometimes have to act in a way that is immoral by your own standards. And if you can’t consistently act morally by your own standards, then you will have moral self doubt to some extent. So seeing self interest as legitimate and good will help you avoid moral self doubt and have a strong conscience.

Suppose that you avoid moral self doubt and you engage in an argument. It is possible that your initial position will be refuted and you will adopt a new idea. But since your ideas have improved that’s not a loss in any relevant sense. Looking on it as a loss is a bad idea and will lead you to stick to ideas you ought to discard. If you engage in an argument and your position isn’t refuted that’s okay too. You can still learn something about what kinds of mistakes people make and about how to explain your own position. So a selfish person who engages in an argument without moral self doubt wins regardless of whether his position survives the argument.

A person who tries to win using an argument from intimidation loses an opportunity to engage with a different set of ideas than his own. The loss and the fact that the intimidator sees it as a victory are both kinda sad.

The specific claim mistake

Sometimes a person will make a request that sounds reasonable if you don’t look at it closely. Consider this tweet, which is about George Reisman’s essay “Why Nazism Was Socialism and Why Socialism Is Totalitarian”:

His request for me to pick a single claim sounds reasonable, but it is irrational.

Suppose that I take position X and you say that position X is wrong. I don’t know what you think is wrong with X. So if you reply to position X by saying that you want me to pick some specific part of position X for you to refute, then you’re asking me to do something for which I don’t have the relevant knowledge.

There is another problem with asking me to pick a part of position X for you to refute. In general, position X isn’t just an unrelated heap of facts. Rather, position X is an explanation: an account of why something is true. It could be the case that position X makes some specific false factual claim, but that a close variant of position X doesn’t make that factual claim. For example, in his essay on why Nazism is a variety of socialism, Reisman writes:

But what specifically established de facto socialism in Nazi Germany was the introduction of price and wage controls in 1936. These were imposed in response to the inflation of the money supply carried out by the regime from the time of its coming to power in early 1933. The Nazi regime inflated the money supply as the means of financing the vast increase in government spending required by its programs of public works, subsidies, and rearmament. The price and wage controls were imposed in response to the rise in prices that began to result from the inflation.

Let’s suppose that the Nazis didn’t inflate the money supply until 1934, so that factual claim is false. That wouldn’t matter much because it would just change the timing of the inflation, not its results. So a refutation of Reisman’s position would involve explaining why some particular claim is wrong and that explanation would have implications beyond the specific claim you refuted. So the refutation won’t just be about a single claim.

People before profit

Once in a while socialists say stuff like we should put people before profit:

This doesn’t make sense.

How does a business make a profit? A business uses stuff to provide other stuff to its customers. A factory owner uses machines, workers, people who do quality assurance and so on to make items for people to buy. A shop uses floor space, checkout machines, checkout operators, shelf stockers, customer service representatives etc to provide a place where people can buy goods. If customers pay the business more money than was required to buy the stuff used by the business, then the business makes a profit. A customer will pay the business some money if the customer judges that the stuff he is buying is better than the other stuff he could buy with the same money. So if a person buys from shop X, then he prefers the way shop X uses all the available resources to the other ways those resources could be used are being used in products that are currently being sold.

So profits exist where a business is satisfying the preferences of its customers better than all the alternatives the customer knows about. So profits are a sign that a business is helping people. If a business doesn’t make a profit, then it is using resources in a worse way than some of its competitors as judged by customers.

So “people before profits” doesn’t make much sense since profits are a result of satisfying the preferences of people. Also, the examples of socialism in the tweet are odd since building societies and the Co-op both make profits.

UPDATE –  The “socialism can’t be found in books” idea is bad. If you can’t explain a system of political economy how are you going to implement it? You have objective record of what you wanted. Without such a record you can’t tell whether you’ve implemented your ideas properly. Nor can you tell whether your ideas are producing different results than you expected. Having no written description of your ideas also makes it almost impossible to convince anyone who disagrees with you to change his mind. This means that the main way of spreading and implementing your ideas has to be coercion.

Harris on Hoarding

Sam Harris thinks some people are too rich. Elliot Temple has already criticised this essay, but I want to pick up on one issue. Harris writes stuff like this:

Happily, not all billionaires are content to hoard their money in silence.

and this:

But even in the ideal case, where obvious value has been created, how much wealth can one person be allowed to keep? A trillion dollars? Ten trillion? (Fifty trillion is the current GDP of Earth.) Granted, there will be some limit to how fully wealth can concentrate in any society, for the richest possible person must still spend money on something, thereby spreading wealth to others. But there is nothing to prevent the ultra rich from cooking all their meals at home, using vegetables grown in their own gardens, and investing the majority of their assets in China.

Let’s suppose that a person chooses to keep a very large amount of cash. Why does that matter? Let’s say this person takes $1 billion, buries it in his backyard in a locked chest and then flushes the key down the toilet. What will happen? There will be less money. Since there is less money consumers may decide to spend less on goods and services. The people providing those goods and services will then have to charge less, but the price of other stuff will fall too. The composition of the goods being bought will change too since the hoarder is buying less stuff. So there will be fewer orders for the items the hoarder would buy and this may have consequences for how much of that item gets made. But this is all business as usual – if customers don’t want X then don’t make it.

The amount of money in circulation isn’t important. What matters for your life isn’t having money per se. What you actually want is command over the resources you can buy with the money. What makes people better off is more stuff.

In reality, rich people don’t bury a load of money in their backyards cuz they’re not idiots. Rather, they invest money and keep some cash on hand in case they should need it. Under some circumstances, a person may choose to keep more cash. For example, if a person thinks the government may start coming after him for more taxes, he may keep more cash so he can spend it quickly on items that won’t be taxed. Harris advocates taxing rich people heavily. So Harris’s writings on rich people may help bring about the problem he fears.

Harris doesn’t mention any of these problems with his position because he doesn’t know about them. Would he start talking smack about quantum mechanics without knowing anything about it? No. He would think that’s stupid. But somehow he decided it wasn’t necessary to learn economics. Don’t act irrationally like Sam Harris, learn something about how markets work before you say stuff about economics.

Capitalism by George Reisman

The theory of money and credit by Ludwig von Mises