Citizen Thiel

A new year brings a new New Zealand media and Twitter zeitgeist.

Tired:

Low-skilled immigrants from China and the Pacific are ruining our economy. They’re hurting New Zealand’s productivity stats, they’re making New Zealand a low-wage economy, and they’re stealing all the houses. We need to focus on getting higher skilled migrants, and especially ones from places with not-scary last names that sound more familiar. We wouldn’t need to think about maybe having some terraced housing close to downtown in a city of a million people if the low-skilled migrants went away.

Wired:

Rich, highly skilled and highly connected American tech immigrant investors who buy properties none of us could afford anyway are totally the problem. Why would anybody give citizenship to a rich entrepreneur who’s invested millions in Xero and who can help build connections between the NZ tech sector and Silicon Valley? That’s totally corrupt.

Here’s another one.

Boring 2016:

Democracy totally sucks because it managed to elect Trump. How can we build a system that protects rubes from their own voting behaviour?

2017’s new hotness:

Peter Thiel is an awful dangerous extremist because he said that democracy often doesn’t yield the policy outcomes he likes. Doesn’t he believe in democracy?

Last year’s take on immigration really was pretty tired. Next week, the New Zealand Initiative will be releasing a report showing just how tired it was – and how out of line it was with the evidence. But 2017’s isn’t an improvement.

Here’s a better alternative on the Thiel question: the government was right to grant New Zealand citizenship to Peter Thiel in 2011.

I make the case for it over at The Spinoff. Enjoy!

I don't like Thiel's support of Trump, but that's all well after 2011. And his support for seasteading was great.

If we take a potted intellectual history of Seasteading, it would look like this. Chicago University economist Milton Friedman said that people were too optimistic about the government’s benevolence and competence, and so government needed to be kept to fairly limited roles. His son, David Friedman, a law and economics scholar at Santa Clara University, said his father was too optimistic about the potential for constraining government to doing only good things: anarchism was the more sensible approach. And Patri Friedman, David’s son, then said his father was too optimistic about the chances of government ever relinquishing control: we need to take to the seas.

Patri helped set up the Seasteading alternative, in which people could set up a wide variety of different ways of organising society could be attempted on the high seas. Think of a Seastead as being like a body corporate, but with complete freedom to set whatever rules it wanted – about everything. And its residents, if they didn’t like how things were panning out, could simply unmoor their boat from the Seastead and float on over to an alternative. Each of us gets to choose which store to shop at or which neighbourhood to live in; Patri wants us to have the same ability to choose which kind of governance arrangement to live under. It could be a socialist commune or it could be far more laissez-faire. But it would be the government you chose because it was right for you.

I’m sure you can quickly come up with a half-dozen different obvious problems, but the Seasteading Institute has done a fair bit of thinking about them. And, ultimately, you really don’t have to believe it will work. The only people who will try it are those who do – you don’t have to agree with them, and that’s the beauty of it. And Peter Thiel provided some of the funding to help things along. It’s a long-shot, but it’s interesting. Imagine what we could learn about the merits of different policy arrangements if this kind of experiment really got going.

I supervised Brad Taylor's Masters thesis at Canterbury; he went on to do some work with the Seasteading Institute to flesh out the details. He's now a lecturer over at South Queensland. Here's his piece with Patri on seasteading.

Update: Here's the government's response on Thiel's citizenship.

Competitive Governments on the Ocean

Patri Friedman and Brad Taylor make the case for Seasteading in the latest issue of Kyklos.

We argue that those advocating the reform of current political systems in order to promote jurisdictional competition are in a catch-22: jurisdictional competition has the potential to improve policy, but reforms to increase competition must be enacted by currently uncompetitive governments. If such governments could be relied upon to enact such reforms, they would likely not be necessary. Since existing governments are resistant to change, we argue that the only way to overcome the deep problem of reform is by focusing on the bare-metal layer of society – the technological environment in which governments are embedded. Developing the technology to create settlements in international waters, which we refer to as seasteading, changes the technological environment rather than attempting to push against the incentives of existing political systems. As such, it sidesteps the problem of reform and is more likely than more conventional approaches to significantly alter the policy equilibrium.

I love this line of work. Milton Friedman said that good government is best-case thinking; we need to constrain government. David Friedman said that constrained government is best-case thinking; we need market-based anarchy. Patri and Brad say that market-anarchy is best-case thinking; no government will cede territory to let it happen.

They aim a cannon at public choice theory:

Public choice theory tells us that we have bad rules because we have bad meta-rules. This merely shifts the question one level higher, however: why do we have bad meta-rules? This question has received much less attention from public choice theorists.² Constitutionalists generally fail to extend their dispassionate critique of policy choice to the constitutional level (Farrant, 2004), arguing that current decision-making rules tend to produce bad policy outcomes yet expecting the same flawed institutions to produce good constitutional rules (Witt, 1992).

And, they give a solution to Caplan's Tiebout capitalization problem:

... dynamic geography addresses the concern of Caplan (2001b) that Tiebout competition is undermined by the fact that governance quality is capitalized into real estate values. When land is tied to a particular jurisdiction, reductions in the quality of governance will immediately lower land prices. This means that landowners have no incentive to exit bad jurisdictions, since they have the choice between putting up with low-quality governance and taking a capital loss when they try to sell. Fascinatingly, however, this is not the case on the ocean. Since floating real estate can be moved between jurisdictions, its value is not permanently reduced by a property tax increase, because there is the alternate use of moving the real estate to a new jurisdiction. This restores the property of a well-functioning market, where resources go to their highestvalued use. Floating real estate will move to the jurisdiction where it is the most valuable whenever the value difference is greater than the cost of moving it. This cost will be substantial, yet based on the cost of moving oil platforms, is likely to be a small fraction of the value of the real estate. Thus, exit remains a check on government power on the ocean.

Harford argues for experimentation and failure as a way of figuring out what's best. Friedman and Taylor argue Seasteading provides a mechanism for polities to fail gracefully:

Unfortunately, political instability tends to be accompanied by bloodshed, producing a tradeoff between peaceful stability with high levels of rent-seeking and violent instability with low levels of rent-seeking. Seasteading allows us to have political instability without bloodshed (Chamberlain, 2009). If rent-seeking becomes too harmful in an ocean polity, the population will gradually float away. This allows the polity to die without being overthrown violently. Dysfunctional governments would no longer take up valuable land, but would wither and die based on the preferences of citizen-consumers.

Where David Friedman looked to saga-era Iceland as example of anarchist order, Patri and Brad look to the Bajau Laut's pagmunda moorages.

The biggest challenge remains existing territorial governments; should Seasteads prove too successful as competition, we could easily imagine the French sending in dive teams with explosives or the Americans sending in a carrier group. Patri and Brad reckon business models focusing on relatively innocuous applications like innovative medical tourism will not only avoid annoying existing governments but could also build support for Seasteads from within those countries' existing voter bases: would you really support bombing the place that's working out nanobot alternatives to the hip replacement surgery you're going to need in a few years? I still worry this might be a bit of best-case thinking; the Americans can always fabricate an incident whipping up support for a bombing run if they want to.

But I still reckon Seasteading the best value play around. The odds on its all panning out still aren't great. But the upside gains are potentially very very large.

And bloggers' influence grows...

Brad posted a design student's cool idea: a park bench where you have to pay to sit.

Tyler linked to it.

Now China is implementing it, perhaps.

High chance they heard of it from Marginal Revolution. And so Brad has helped to change the world. Up the Blogosphere, where we can't stop seven hundred different kinds of costly policy stupidity, but we can encourage very small changes at the margins.

Templeton Essays

My paper inbox today has the announcement of the 2010 Sir John M. Templeton Fellowships Essay Contest. This year's topic:

"Everyone wants to live at the expense of the state. They forget the state wants to live at the expense of everyone." - Frederic Bastiat (1801 - 1850).

Assuming Bastiat is correct, what ideas or reforms could be developed that would make people better aware that government wants to live at their expense?

My student Brad Taylor won the student division of last year's contest; I strongly encourage folks who did well in my public choice classes to enter the contest.

Evening roundup

• Brad Taylor provides data on death rates associated with use of different drugs and the frequency that such deaths are reported. Big surprise: methadone has more deaths per user than does heroin. Most overreported relative to deaths? Cannabis: 0.07 deaths per 10,000 users; 92 press reports. Most underreported? Methadone: 94.5 deaths per 10,000 users; 10 press reports.


• Ben Barton says there's no correlation, or perhaps a slight positive correlation, between research quality and teaching quality, at least in law schools.


• Too many students are going to college.

  Bryan Caplan: There are two ways to read this question. One is: "Who gets a good financial and/or personal return from college?" My answer: people in the top 25 percent of academic ability who also have the work ethic to actually finish college. The other way to read this is: "For whom is college attendance socially beneficial?" My answer: no more than 5 percent of high-school graduates, because college is mostly what economists call a "signaling game." Most college courses teach few useful job skills; their main function is to signal to employers that students are smart, hard-working, and conformist. The upshot: Going to college is a lot like standing up at a concert to see better. Selfishly speaking, it works, but from a social point of view, we shouldn't encourage it.

Illiberal Anarchy

Brad Taylor and I (mostly Brad) have been working on a paper arguing that a market-based anarchy could well be rather illiberal. Assume that we're in Caplan's "sweet spot" for a feasible and desirable system of market chosen law: the network coordinating the protection agencies and allowing for dispute resolution amongst them is strong enough to keep out rogue agents but not strong enough to form a cartel. Further, specify that most people have weakly liberal preferences: they're happy for folks to do their own thing so long as there's no cost imposed on others, but it's only a weak preference. Next, specify that there exists a group with strong meddlesome preferences with a real willingness to pay to have those preferences imposed on others. Finally, the group with preferences deplored by the meddlesome minority have a smaller aggregate effective willingness to pay to enjoy their preferred lifestyle than the meddlesome group has to stop them (though their willingness to be paid to stop exceeds the meddlesome group's willingness to pay).

What happens? The meddlesome folks offer to subsidize the purchase of protection agreements that include their preferred meddlesome clauses banning the sanctioned behaviour and, if the meddlesome willingness to pay is high enough and the sanctioned group small enough, banning those protected by non-compliant agencies from entering their properties. The weakly liberal majority take the contracts if the discount is sufficiently large and if the loss in utility from not being able to transact with the sanctioned group is sufficiently low. Nothing in the process violates rights, but the outcome is hardly libertarian.

In states of the world where most folks have weakly liberal preferences but a few folks have strongly meddlesome preferences, majoritarian democracy produces more liberal policies than does market-based anarchy. Markets are better at satisfying dollar-weighted preferences than is politics. Where most folks have weakly meddlesome preferences but a few have strongly libertine preferences, market-based anarchy produces more liberal outcomes than democracy. We then worry that democracy has a tendency to produce broad-based weakly meddlesome preferences (which I think typically runs through fiscal externalities) while a market-based anarchy would promote the creation of public or club groups through churches or sects able equally well to coordinate for the production of public bads like meddlesome activity.

John Humphries Humphreys (sorry!!) has had a go at our paper - excellent!

His first critique: we're using a teleological rather than a deontological norm for judging how free a society is. Guilty! But imagine, as a libertarian with some libertine preferences, weighing up where to move. If you move to Country A, all the laws are perfectly libertarian, but if you engage in some activity you like but they don't, you lose all opportunities for transacting with others. In Country B, there are a lot of stupid laws but there's still more space for you to live your life as you like. Country A is the libertarian monastery where you can do what you want, but if you're not up for vespers at 5 you're shunned; B is the world we're in.

Note that we didn't say that the meddlesome folks would pay the drug users to stop using drugs -- that would be the trivial solution and, in that case, he'd certainly be right: utility rules. Rather, if you're willing to pay $10,000 to defend your right to use drugs but if you'd only be willing to accept $100,000 in exchange for giving up your right to use drugs (ie income effects can matter), then somebody willing to spend $50,000 to make sure your neighbours will have nothing to do with you if you do use drugs makes you worse off and your neighbours better off. Yes, we're invoking a somewhat thicker description of liberty than a pure deontological standard. But would you really move to the libertarian monastery?

Brad notes as well that we need not invoke thicker concepts of liberty in cases where the network's members have sufficient consumer-driven willingness to pay for meddling, in which case libertine agencies simply are declared rogue and their members are treated as criminals. This is a case that Cowen worries about in his initial article, and it is not a case of the network simply becoming the state, though this latter argument may be somewhat semantic. In the Caplan-Cowen debate framework, the network becomes the state when it is strong enough to become a cartel: strong enough to declare any protection agency rogue and strong enough to punish any member that transacts with the rogue agent. In this case, it's still a coordination equilibrium as no member agent wants to deal with the rogue agency because of side payments from the meddlesome group.

Humphries Humphreys is right that folks can conjure up all kinds of scare stories, including the rich jerk buying up all the land around your house and forbidding your exit. That seems a pretty implausible fear. But in the real world, there are lots of folks who seem perfectly willing to expend real resources to make sure that you don't do things in your own house that have no effect on them. I don't think it's crazy to worry that these folks might get more influence under market chosen law. We're not conjuring up completely imaginary boogey-men here. Just hit the "paternalism" keyword on the right hand side of the blog...

Second, Humphries Humphreys worries about realism and how likely this 'worst case' might be. He's certainly right that there's no cause for concern if the minority affected is relatively large. The costs of losing transactions opportunities with a large group are very large indeed. But not so for a relatively small group. In terms of our Figure 3, Humphries Humphreys would be arguing that the region in which democracy dominates anarchy must be smaller. But the logic of the argument is such that there must be a region where democracy dominates. In the part of world-space where we currently live, with lots of folks having low intensity meddlesome preferences, anarchy produces more liberal outcomes. But there are other parts of the space.

Finally, Humphries Humphreys notes Taylor's argument that voluntarism encourages tolerance. Of course, this is true among the majority who currently have weakly meddlesome preferences. In the current paper, we're worried about the high preference intensity illiberal folks and the disproportionate influence they can have under anarchy.

Now, would all this have me refrain from pushing the button that would cause government to disappear after a 5-year delay? Well, I was only about 45% likely to push the button to start with; the worries here push that down to about 40%. [All stated probabilities are purely notional as no such button exists and, if one did, I surely would not be allowed access to it.] My biggest worry is that Caplan's sweet spot seems a pretty narrow space and the historical record isn't exactly replete with stable desirable anarchies. Heck, even outfits that ought to have been able to protect themselves outside the state fared rather poorly absent state protection.

Congrats Brad!

Brad Taylor, alumnus of my undergrad Public Choice class and currently completing a Masters in Politics at Canterbury, won this year's Templeton Foundation essay contest. In 2007, he won the APEE essay contest.

Congrats!