Dr. Thomas Woods on Nullification

Great video on a much needed political instrument.

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An Epistemological Problem with Anarchism

Libertarians have always been known as opponents of government intervention. However, the popularity of the idea that government is an aggressive institution per se and that it should be abolished and replaced with, among other alternatives, private courts and law enforcement agencies, has been growing among libertarians. The following will demonstrate that government is not an aggressive institution per se, that its existence is a necessary condition for the long-term maintenance of civil society, and that, by extension, its absence, also known as anarchism, is neither sustainable in the long-term nor desirable.

Lets begin by clarifying some terms. A government is an institution, equipped with factors of production, that monopolizes the use of force over a given geographic area. By "monopolize" it is meant to control something (in this case, the use of force) to the exclusion of all others. "Monopoly" will be further used to mean "exclusive control." The geographic area within which a government monopolizes the use of force is called its jurisdiction. Force (also known as coercion) refers to any act that, borrowing from Gennady Stolyarov, disrupts the physical integrity of a person's body, property, or obstructs a person's ownership of his or her property. A punch that leaves the recipient with a black eye is an example of a forceful act.

There are two kinds of forceful or coercive acts: initiatory and non-initiatory (or retaliatory) acts. An act of initiatory force is any act that involves starting the use of force against another; it means using force against one who has not himself started the use of force against another. If Smith is minding his business and has not initiated the use of force against another within society, and Jones approaches Smith and punches him in the face, then Jone's act of force is initiatory. An act of retaliatory force is any act that involves using force in response to and against an aggressor, someone who has committed an act of aggression, i.e., either an act of initiatory force or an act whereby the actor threatens to initiate the use of force. Within the category of retaliatory force we have emergency force, a type of retaliatory force which involves the use of force against another (i.e., an aggressor) who has either initiated the use of force or has threatened to initiate the use of force, where recourse to the government (in particular, the police) is impossible if the government exists (we will see what this means shortly).

A society is merely a group of people who live in close proximity. A civil society is a group of people, living in close proximity, who generally refrain from initiating the use of force or threatening to initiate the use of force against each other, i.e., aggression. A civil society is a society governed by the non-aggression principle, a normative proposition which asserts that "All acts that involve initiating the use of force or threatening to initiate the use of force are immoral and should be prohibited." The importance of an emphasis on force rests upon the fact that only by force may one violate the moral rights of another. A moral right is an legal sanction to commit a specific act in the absence of interruption that one should possess (as opposed to a legal right which is a legal sanction to commit a specific act in the absence of interruption that one does possess). Each and every non-aggressing human being possesses moral rights, the three most broad moral rights being those to life, liberty, and private property. According to Craig Biddle,

The right to life is the right to act as one’s life requires—which means, on the judgment of one’s mind. The right to liberty is the right to be free from coercive interference—so that one can act on the judgment of one’s mind. The right to property is the right to keep, use, and dispose of the product of one’s effort—which one does by acting on one’s judgment.

A Hypothetical Scenario

The epistemological problem of anarchism referred to in the title may be best understood through a hypothetical scenario. Let's say that Jones is resting on a bench in Central Park (assume Central Park is privately owned, so a special "anonymous" someone won't wet him/her/itself - you know who you are), adjacent to Smith with whom he shares the bench. Now lets say that Adam approaches the bench in a van, exits the van, apprehends Jones (coercively of course), announces to Jones that he is under arrest for having committed an act of theft against him, informs Jones of his legal rights, throws him in the van, and drives away. Let's assume that none of the three men has met another before, nor has any man heard news of another before. Consider the epistemic condition of Smith, an individual among others, after this event transpires. He, along with a few other people, has just witnessed an arrest of one man by another man. Can he determine if Adam's act of force against Jones is initiatory or retaliatory? Smith is confronted with a profound disjunctive proposition: Either Adam's act of force is initiatory or retaliatory. Is he capable, in this epistemic state, to determine which of the disjuncts is true?

Of course, the answer is undoubtedly no. Why? As stated earlier, an act of force is initiatory if its use is started by one agent against another. An act of force is retaliatory if its employed against another who has either initiated the use of force or threatened to initiate the use of force. Thus, in order to determine if Adam's act of force against Jones is either initiatory or retaliatory, Smith would have to know if Jones aggressed against someone or not. If Jones aggressed against someone, then Adam's act of force is retaliatory; if Jones did not aggress against someone, then Adam's act of force is initiatory.

We must ponder a further question before we answer the first. Does Smith know if Jones has aggressed against another previously or not? No, because it is assumed that each man has been unaware of the existence of the other until the coercive incident. Thus, Smith cannot possibly know if Adam's act of force is initiatory or retaliatory because he cannot meet the necessary conditions for the possession of such knowledge. This is the epistemological problem before Smith.

Smith neither knows if "Adam's act of force is initiatory" or "Adam's act of force is retaliatory" is true. Adam may be a righteous retaliator or a kidnapper. This fact demonstrates that if its not proven that an act of force is going to be retaliatory before its committed, then such an act, when it occurs, is indistinguishable from an act of initiatory force. In this case, Adam's status (either he is an aggressor or a retaliator) is not self-evident to Smith.

A logical conclusion from the above event is that Adam is a threat (a potential violator of moral rights) and as such is a hazard not only to Smith but to his local community. Consider the following argument. Adam is an individual who uses non-emergency force without first demonstrating to the local community that his act of force will be retaliatory. An individual who uses non-emergency force without first demonstrating to the local community that his act of force will be retaliatory is a potential violator of moral rights; therefore, Adam is a potential violator of moral rights. Furthermore, a potential violator of moral rights is a hazard to the local community; therefore, Adam is a hazard to the local community.

Limited Government as the Solution

Naturally, the question "how can a local community deal with Adam as a hazard?" arises. Since any individual who uses force as Adam does is a threat, the pressing question is "how can a local community deal with private threats, with the hazard of private, non-emergency force, i.e., force employed by individuals without governmental approval and without prior public knowledge of its nature and, therefore, indistinguishable to society's members from aggression?" Private force is force employed by any person or persons without expressed governmental approval (we'll see what a government is later). We see that it is not enough that Adam prove to himself that his act of force is going to be retaliatory. What makes him a threat is the fact that he fails to prove to those within his local community that his act of force is going to be retaliatory. If the members of civil society consider it to be a value, then ipso facto they will do what is necessary to protect it against both violators and potential violators of moral rights like Adam. If the consequent is false, then so is the antecedent.

The solution then to the hazard of private force is to ban it, with the exception of its emergency form; the members of civil society must organize to prohibit private, non-emergency force. As an important side note, if Rick is attacked by Chris, then Rick possesses the moral right to employ emergency force against him without proving to the pubic that his use of force is going to be retaliatory because Rick's attack puts Chris in a situation where such an obligation cannot possibly be fulfilled without harmful consequences, i.e., without having to focus on something other than self-defense (he would however, in a civil society, be forced to prove to others after the incident that his use of force was emergency-based, not initiatory). In such a situation, recourse to assistance may be impossible. But by organizing to ban the use of private, non-emergency force, the members of civil society retaliate against the hazard of private, non-emergency force. Acting against the hazard of private, non-emergency force, in this case, is a retaliatory act, not an initiatory one. The hazard of private, non-emergency force arises from the nature of society, and by organizing to ban its use the members of civil society act in response to it.

Yet while private, non-emergency force should be banned, it should also be noted that force is still an instrument that needs to be used, even in civil society. History lucidly demonstrates that the existence of civil society does not preclude the existence of aggressors; there always have been willing users of aggression and there will continue to be such people in the foreseeable future. The only efficacious method of protecting one's moral rights from aggression is through retaliation - force. Murderers, rapists, and thieves - users of aggression - can only be stopped with countervailing force. Thus, the next question that must be answered by advocates of civil society is "how can the individuals of a local community:

1.) effectively ban private, non-emergency force and simultaneously
2.) employ retaliatory force in a way that effectively protects the moral rights of individuals within that local community?"

The answer is by permitting some within civil society to use force, including the force that's required to effectively maintain a ban on the use of private, non-emergency force, within a well-defined geographical area on the condition that they will sufficiently demonstrate, publicly and before they use force, that their coercive acts will be retaliatory ones. Those individuals who are allowed to use force under such conditions are collectively referred to as government. All or most of a particularly small community could preside over the granting of a conditional permission to a capable individual or individuals to use force against an aggressor or to use force to maintain a ban on the use of private, non-emergency force. However, as a community increases in population size, in population density, and spreads out over a broader area, the presence of most, let alone all community members becomes impossible. In order to cope with this problem, the community must refer the presiding to representatives, again on the condition that they will ensure that anyone who wishes to use force must prove publicly that their act of force will be retaliatory. In this situation, government becomes not only those who are permitted to use force but those who preside over the granting of conditional permissions on behalf of the citizens who cannot preside over them. As populations grow, the referring as described above will be performed by more and more individuals, making government larger and therefore more capable of mitigating the problems of population growth. Eventually, population growth may even warrant a division of a jurisdiction.

But nevertheless, a rights-respecting government protects the moral rights of its citizens by retaliating against those who initiate the use of force or threaten to initiate the use of force. Those who use private, non-emergency force or threaten to use such force ipso facto are threatening to initiate the use of force, therefore, the government contributes to the protection of moral rights when it retaliates against those who employ or threaten to employ such force. In order to simultaneously ban private, non-emergency force and employ force on behalf of its local community, a government must monopolize the use of retaliatory force. And in all cases, a rights-respecting government is transparent and accountable to the people within its jurisdiction; cedant arma togae was once said.

Now, even with a government in place, Smith could not know with certainty that, say, if the police arrest Jones from the park bench that the police are employing retaliation rather than aggression. A government, or government employees, are quite obviously capable of employing aggression. However, with a proper, limited government in place, there is significant evidence to suggest that police activity is retaliatory activity, particularly when those who enlist within the police department demonstrate via training and oaths that they are committed to the proper use of force. If police departments continue to employ force in a proper, retaliatory style over time, then the reputation of said departments and the inductive inference that police activity is probably retaliatory activity are both reinforced.

The Libertarian Anarchist Argument from the Non-aggression Principle Against Government

Many libertarian anarchists, especially those who agree with the above description of moral rights, aggression, and retaliation argue that government is antithetical to civil society. Their arguments range from appeals to economics, to history, and to morality. The following is a formalized version of perhaps their most popular argument, the argument from the non-aggression principle, famously offered by former libertarian anarchist Roy A. Childs against Objectivist Ayn Rand. Again, the non-aggression principle is an ethical or "ought" proposition which asserts the following: All acts that involve initiating the use of force or threatening to initiate the use of force are immoral and should be prohibited. The libertarian anarchist argument from the non-aggression principle proceeds as follows:

-Legend:
P = premise, C = conclusion, number (ex. P1m) indicates the order in which the proposition appears, m = minor premise, M = major premise

P1m -All institutions that monopolize the use of force within a geographical area are institutions that prohibit other individuals and institutions from employing force within that same area (of course, with the exception of emergency force in this case)
P2M -All institutions that prohibit other individuals and institutions from employing force within the same area are institutions that initiate the use of force
C1 -All institutions that monopolize the use of force within a geographical area are institutions that initiate the use of force

P3m -A government is an institution that monopolizes the use of force within a geographical area
C1P4M -All institutions that monopolize the use of force within a geographical area are institutions that initiate the use of force
C2 -A government is an institution that initiates the use of force

C2P5m -A government is an institution that initiates the use of force
P6M -All institutions that initiate the use of force are things that are antithetical to a civil society
C3 -A government is something that is antithetical to a civil society

The following propositions are false:
-P2M, C1P4M, C2P5m, C3
The following propositions are true
-P1m, P3m, P6M

The forms of the sub-arguments within the broader libertarian anarchist argument are all valid. Unfortunately, for the libertarian anarchist, each sub-argument contains a false premise, which ultimately dooms the conclusion of each to falsity. A valid form (such that its impossible for the conclusion to be false while the premises are true) and true premises are necessary conditions for the existence of a sound argument. In order for the libertarian anarchist argument to properly represent reality, it must be sound, not merely valid.

A Critique of the Primary False Proposition within the Anarchist Argument

1.) P2M -All institutions that prohibit other individuals and institutions from employing force within the same area are institutions that initiate the use of force.

This is false. Its often objected by many libertarian anarchists that, within a geographic area in which the use of force is monopolized by the government, the government, as part of its monopoly of the use of force, prohibits individuals or institutions from competing with it with regard to the use of force to protect moral rights. This is true - if the government monopolizes the use of force within a geographical area, then it prohibits all others from competing with it with regard to the use of force to protect moral rights. However, these same libertarian anarchists go on to argue that if the government prohibits all others from competing with it with regard to the use of force to protect moral rights, then the government initiates the use of force, thereby making it inherently antithetical to the non-aggression principle and, therefore, anathema to civil society.

The reason why it is not true that if the government prohibits all others from competing with it with regard to the use of force to protect moral rights, then the government initiates the use of force - the reason why "All institutions that prohibit other individuals and institutions from employing force within that same area are institutions that initiate the use of force" is false is because by prohibiting competition with regard to use of force in the protection of moral rights, the government (a limited one with the purpose of protecting moral rights) retaliates against the hazard of private, non-emergency force.

How does society, how does a local community know if, under libertarian anarchism, a competing protection agency actually uses retaliatory force when it uses force? Under a rights-respecting social system where the government monopolizes the use of force, its monopoly is conditional - its granted to it by society's members on the condition that it use its monopoly only to use retaliatory force and only to protect moral rights. After the individuals of the government demonstrate to the local community that they are both capable of and willing to use force only retaliatorily and only in the protection of moral rights, then its reasonable to assume that future coercive acts committed by the government will be retaliatory, rights-protecting ones. Each member of government can display such a capability and willingness through a number actions such as (as members of the police and the military do today) taking oaths, agreeing to certain terms of employment via legal documents, undergoing appropriate training, etc. A vigilant citizenry of course will, without intermission, scrutinize their government in order to ensure that it continues to use force only in a retaliatory way and only to protect moral rights; there's nothing inconceivable about a corrupt and inefficient government being overhauled by disillusioned, liberty-loving citizens.

However, how can a local community obtain such an assurance under libertarian anarchism? Its conceivable that under libertarian anarchism, a private protection agency could voluntarily prove to society's members that it intended to use force only in a retaliatory way and only to protect moral rights. However, the problem is that under libertarian anarchism, the condition that one demonstrate, before using force, that one's use of force will be retaliatory and employed in the protection of moral rights, does not exist as a law, i.e., as an enforced rule of social conduct. Solving the dual social problem of simultaneously protecting moral rights against the hazard of private, non-emergency force and enabling the use of retaliatory force to protect moral rights in general requires a solution that is illegal under libertarian anarchism. In order to protect themselves from the hazard of private, non-emergency force, a local community must ban the use of private, non-emergency force. Meanwhile, citizens must use force to protect themselves against aggressors like murders and thieves. The only effective way to perform both is to, as argued above, vest some within a local community with the conditional monopoly of force as articulated above. Unfortunately, the granting of such conditional monopoly is criminal under libertarian anarchism, for under libertarian anarchism it is illegal to prohibit competition with regard to the use of force to protect moral rights. Consider the following argument:

-The granting of conditional monopoly of the use of force is something that involves banning the use of private, non-emergency force and, therefore, banning competition with regard to the use of force to protect rights
-Something that involves banning the use of private, non-emergency force and, therefore, banning competition with regard to the use of force to protect rights is something that is illegal under libertarian anarchism
-The granting of conditional monopoly of the use of force is something that is illegal under libertarian anarchism

Since proposition P2M is false and the entire libertarian anarchist argument is valid, the libertarian anarchist argument is unsound.

In summary, the epistemological problem with libertarian anarchism is that it allows private, non-emergency force, i.e., force employed without a prior demonstration that it will be retaliatory and employed in the protection of moral rights. Such force is, by definition, not proven to be retaliatory, ergo it must be inferred by society's members, whom such force thereby threatens, that such force is aggressive. Society overcomes this problem by creating an institution called government which allows the people to retaliate against the hazard of private, non-emergency force as well as employ force to protect moral rights in general.


-Biddle, Craig. "“Immigration and Individual Rights” by Craig Biddle." The Objective Standard: A Journal of Culture and Politics. 2008. Web. 14 July 2010. http://www.theobjectivestandard.com/issues/2008-spring/immigration-individual-rights.asp.
-Watkins, Don. "Epistemological Anarchy." Diana Hsieh: NoodleFood. 22 Dec. 2005. Web. 14 July 2010. http://blog.dianahsieh.com/2005/12/epistemological-anarchy.html.

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Why the Poor Should Pay Higher Interest Rates

Try as I may, I've found that its become increasingly difficult to convince "I have a right to healthcare" folks that they're wrong. I've produced a few adherents, but in terms of conversion rates its been an abysmal attempt. I enjoy the formal disproving process, but it would be nice to produce some influence.

Adding to the amalgam of illegitimate rights-claims is the alleged right to credit, the idea that such a thing as a moral entitlement to loanable funds exists. Of course, the belief in such a notion lies behind everything the federal government has done within the last 40+ years to promote homeownership, particularly among the poor.

At the same time, left-collectivists have been lamenting the fact that poorer borrowers often pay higher interest rates than wealthier borrowers on loans of similar maturities. Intuitively, this seems unjust: shouldn't wealthier borrowers pay higher rates given that they are more capable of paying them than poorer borrowers? Does this not prove that the market allows for the existence of exploitative, financial arrangements? Hardly.

A comparison of two credit transactions with similar maturities, one involving a wealthier party and one involving a poorer party, will help to legitimize the disparity. Let's assume that Simple Loan Inc., an institutional saver/creditor, unveils its willingness to offer $10,000 loans to potential borrowers. In other words, Simple Loan is willing to form loan contracts with potential borrowers. A loan contract is a voluntary agreement between two parties where one party, the creditor or lender, agrees to transfer ownership over an amount of money to the other party, the borrower, in exchange for a promise (usually expressed in written form) from the borrower to receive the exact same amount (the principal) back on a future date plus an additional amount (the interest) as a fee to compensate the lender for the time he/she spends without the principal.

Now, a lender in a loan contract cannot know with complete certainty that his respective borrower will repay him with the entire principal and interest fee. The future, as far as specific human conduct is concerned, is uncertain. We can only form probabilistic conclusions with statistics and inductive reasoning regarding repayment. Thus, if Jack borrows $10,000 from Simple Loan, Simple Loan cannot know with certainty that he will reimburse them. He can either repay or not repay; to use probability jargon, these are "mutually exclusive events."

Using the probability calculus, the situation involving Jack and Simple Loan would look as follows:

P(reimbursement v non-reimbursement) = P(reimbursement) + P(non-reimbursement) = 1,

meaning "the probability of reimbursement plus the probability of non-reimbursement equals 1." The sum of each is 1 because the probability that either will occur is 100%. Moreover,

P(non-reimbursement) = default risk (r),

the default risk being the probability that Jack will fail to reimburse Simple Loan.

The trouble for Simple Loan, and any lender for that matter, is quantifying the default risk associated with a potential borrower, including Jack. This is done by mathematically assessing Jack's ability to remunerate the loan. While Jack's ability to repay is expressed in quite a few ways, it's done so essentially through his productivity. The more productive Jack is, the more money he'll have, hence the greater probability he'll repay; the less productive Jack is, the less money he'll have, hence the lesser probability he'll repay.

Let's assume that Simple Loan's credit assessment of Jack unearths that he is fairly productive and, as a result, earns $100,000 annually. He pays his bills on time and has not failed to repay past loans. Let's further assume that given all of this information, Jack and Simple Loan agree to a $10,000, 7% simple loan contract.

Now assume that Adam is interested in borrowing money from Simple Loan as well. However, according to his credit assessment, he is approximately half as productive as Jack, earning only $50,000 annually. He's been shown to be delinquent at times when it comes to paying his bills and has delayed the repayment of his debt in the past. Given all this information, Simple Loan may agree to extend a simple loan of $10,000 to Adam, but only at a 10% interest rate. Is such discriminatory lending justified? Absolutely.

The reason why Simple Loan is justified in charging Adam with a higher rate than Jack for a loan of the same amount and maturity is because the default risk associated with Adam, who is less productive and therefore poorer than Jack, is higher than the default risk associated with Jack. This means that the probability that Adam will fail to reimburse Simple Loan is greater than the probability that Jack will fail to reimburse Simple Loan. Risk, any risk, is bad. If the risk associated with an investment increases, then the probability that the investment in question will yield a profitable return decreases.

The argument for such discriminatory lending is simple: Risk is a bad thing. Things that are bad ought to be mitigated. Therefore risk ought to be mitigated. The default risk associated with a risky borrower can be mitigated by increasing the interest rate charged to the borrower in question. In this case, the difference between Jack's rate and Adam's rate is an example of a default risk premium. A default risk premium is an increase in an interest rate charged by a lender to a borrower as compensation for incurring greater default risk on a debt instrument. Thus if Jack's rate is 7% and Adam's rate is 10%, then the default risk premium in this case is 3% (default risk premium = Jack's rate - Adam's rate). With a default risk premium attached to Adam's rate, Simple Loan can mitigate the default risk associated with Adam, i.e., the probability of a loss, by increasing the probability of a profitable return. The mathematics of Jack's loan and Adam's loan would look as follows:

The equation demonstrating the return on a simple loan is:

FV = PV(1 + i), where

FV = future value or the amount earned by the lender
PV = present value or the amount initially given by the lender to the borrower (also known as the principal)
i = interest rate or price of temporary ownership of the principal

If,

PV = $10,000
i = 7%
r = 3% (default risk premium attached to Adam's loan), then Simple Loan's return on Jack's loan (should he reimburse) would look like this:

FV = PV(1 + i), $10,700 = $10,000(1 + 0.07)

Simple Loan's return on Adam's loan (should he reimburse) would look like this:

FV = PV(1 + (i + r)), $11,000 = $10,000(1 + (0.07 +0.03))

The addition of a default risk premium may prima facie seem opportunistic, but after thoughtful analysis it should be understood that a default risk premium benefits both the lender and the borrower. The benefit to the lender is obvious; it allows the lender to mitigate against default risk and earn a higher return. However, a premium benefits the borrower as well by enabling the borrower to become creditworthy. Without default risk premiums, most lenders would refuse to lend to riskier borrowers. Default risk premiums effectively incentivize lending to such borrowers. Thus, default risk premiums increase the potential for positive-sum transactions.

Furthermore, default risk premiums increase the potential for third party benefits as well. By incentivizing lending to riskier borrowers such as small, fledgling businesses, such premiums increase the amount of financial capital and, therefore, the potential for profitable investments. Risky businesses that otherwise would not have financial capital now can acquire capital and use it to acquire more labour (i.e., create jobs), acquire more or better capital goods, or invest in R&D - business decisions that all serve to increase productive capacity and therefore the broader economy.

Risk is an omnipresent phenomenon. Default risk premiums allow lenders to cope with risk, risky borrowers to get their hands on financial capital, and other economic agents to benefit from investments in riskier firms. Abolishing such premiums reverses these trends, making lenders unnecessarily conservative, risky borrowers unnecessarily cash-starved, and third parties unnecessarily less well-off.

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Ron Paul: Treasury Bills Are The U.S. Governments Last Bastion

via RonPaul2008dotcom

Crisis of Capitalism, The Critique

via HowTheWorldWorks

Finally Back from Camp Smith....