Ron Paul’s Farewell Address: The Internet Can Stop Big Government

You explain the problem pretty well yourself when you say that we have to think in the framework of libertarianism.

Thats like saying you will believe in Jesus once you let him into your heart.

Your argument is totally absurd.

So many people in Africa are dying of AIDS, malaria, and other diseases that have long been cured in western society, near apocalyptic levels of death by European standards, yet the population is growing and commerce is going on. Are you suggesting that this situation is "quite nice"?

When you eat at a restaurant that isn't expected you'll probably live, but if you die you'll just be a statistic. Is that any way to run a society?

Briefly searching around the net, the food safety in China does seem very scary.

http://en.wikipedia.org/wiki/2008_Chinese_milk_scandal http://www.nytimes.com/2012/08/18/opinion/chinas-corrupt-foo...

You can only "vote" for a company with your dollars if you have choices, not if they assume a de-facto monopoly.

At least in theory you can vote for your government and effect change that way. This is why they serve a critical function.

Corporations are profit driven. Governments are election driven. These two dynamics can work together to create a reasonably good outcome. Libertarianism promotes corporate interest in isolation of regulation, leading to a run-away system of chaos and virtual anarchy.

Let's analyze this situation with some economic rigor. What you're invoking is Coase's theorem. The idea that if you create property rights in what would otherwise be externalities, and let people transact freely in those property rights, the end result will be an optimal allocation of rights that maximizes value.

Now, I'll get to the punchline before going further in depth. It's deeply ironic that libertarians invoke Coase's theorem in this context, because Coase himself used smoke pollution as an example of a situation that called for regulation rather than the creation of property rights.

You see, there is an important assumption underlying Coase's theorem: transaction costs are zero. But in the environmental context, transaction costs are not zero, and in fact they totally dominate the relevant transactions. A polluting coal plant might cause $1,000 of health damage to each of 100,000 people, and it isn't worth any of their whiles to litigate such injuries. Yet the cumulative impact of such activity is large--the coal plant is essentially "stealing" $100m, but getting away with it by stealing a little from a lot of people at once.

Multiply that by the hundreds and thousands of pollution sources that have a measurable impact on each person, and what you get is an unworkable system. And Coase himself recognized this and said as much in his papers.

Your argument implies a lack of faith in a single person or a small group of people to effect change. Do you believe that only government has the ability to keep our water clean?

That's a very bold statement that needs some justification.

Take climate change. For the moment, I don't care if you believe in it or not: just take it as a given, because something like that is certainly physically possible.

Let's say for years many countries polluted the atmosphere with CO2. Over time, it substantially changes the planet's climate and causes untold trillions of dollars of damage to billions of people.

How do torts handle this? For one, who does the suing? Do we allow class action lawsuits with billions of people? What about countries that don't allow class action lawsuits?

What if one heavily-polluting country has for years funded propaganda opposing accurate science, and when chickens come home to roost it still insists that carbon emissions had nothing to do with warming climate? What if the legal system refuses the huge payoffs that would be required? What if the will happens to be there but the country just can't afford to pay for the damages it caused?

Is it even fair to levy taxes or fines on people to pay for something that's been going on for generations? After all, why should our descendants be forced to suffer because of our present day callousness and shortsightedness?

Should people who benefited from climate change be forced to pay more? How does one deal with the fact that everyone, to varying extents, helped cause it? Is it only people who were totally off the grid and carbon free who should get to receive compensatory payouts?

It's impossible in many cases to identify the source of pollution. For instance, suppose I'm a farmer and acid rain is damaging my crops. The source could be polluters hundreds or thousands of miles away. Proving that any specific polluter was the source of the pollution that hit my farm is simply not feasible.

The tort approach in essence says it is OK to pollute as much as you want as long as your pollution will be dispersed enough so that no particular victim can trace the pollution on their land back to you.

Another problem with it is that cleaning up pollution can be very expensive, so that it would not be uncommon for those polluters who can actually be identified sufficiently to be sued to not have enough money to cover the damages they cause.

The tort approach simply cannot deal with the problem. As Friedrich Hayek (one of the leading libertarian economists) noted in his book "The Road to Serfdom": "Nor can certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created, does not prove that we should suppress competition where it can be made to function".

I understand libertarianism and I very much appreciate that it is built on a foundation of reason. However, being an imperfect being, a wise man tempers his reason with empiricism.

Represent an economic transaction with {M, X, V}, where M is currency, X is some good or service, and V is violence.

For a music cd, there's three parties involved, though the third is sometimes not explicitly accounted for.

1:{-M, +X, 0}

2:{+(1-p)M, -X, 0}

3:{+pM, 0, V}

(aside: money, you see, plays a nice role of making it a 3-tuple instead of an infinite-tuple)

The first two elements of a tuple have the constraint that they must sum to nullity across all the other parties involved. You can't make labor or goods appear out of thin air.

Violence, however, doesn't have that constraint. You can always throw in more violence, and it's always a positive amount.

(Why doesn't 3 just set p = 1? It certainly could, but that isn't the optimal proportion to maximize sum(M). The incentive structure breaks down: Laffer bites with a vengeance. So there's some other optimal p 0<p<1 that maximizes sum(M) over all clients--what that value is is simply an empirical question.)

So let's look at a market of violence, with multiple suppliers:

1:{-(q+r)M', 0, 0}

2:{+qM', 0, V'}

3:{+rM', 0, V''}

where q + r = p' and M' is the total value that 1 provides at p' where p' maximizes M'.

This satisfies the required constraints, but it's not a stable equilibrium. q+r is that same optimal value p from before, but with a twist: it's not set by only one agent trying to maximize sum(M) but by two trying to maximize their own. There's no reason for 2 not to go for (q+e) instead of q, and the same is true of 3. Taking only q and r as varying qualities, and you rapidly end up at q + r = 1, which means no one gets anything.

In practice, what happens is that 2 and 3 have their own separate transaction since they can foresee that upcoming equilibrium:

2:{0, 0, V'}

3:{0, 0, V''}

That itself is unstable: assuming that V' > V'', the new equilibrium is

2:{0, 0, V'}

Leading to

1:{-p'M', 0, 0}

2:{+p'M', 0, V'}

But you're always fighting over stuff and, moreover, people. In all the cases I can think of, violence-suppliers would look at all the people it can extract value from, look at each other, and then combine forces to extract the most value from people. The only time they'd fight each other is if someone miscalculated who had more capability to deliver violence. But either way, violence suppliers would either combine forces or get destroyed, ultimately leading to a monopoly and making violence a profit center.

Unfortunately, it looks like nobody explained this to criminal gangs. They obstinately use violence against each other, especially when no one gang has a near monopoly...

You like the drug war? NDAA? Patriot Act? Massive debt and unfunded liabilities? Corporate welfare and bank bailouts? Constant war and policing of the globe? Secret kill lists? FBI raids of dairy farmers? Rendition and torture? Please explain to me how voting for Obama or Romney (and thus their support of those policies) is not crazy in comparison to Paul's policies. After you do that, I'll continue this conversation, but not before.

Like Bill Gates, the richest American? Oh wait, he didn't inherit that money. Ooops.

With all respect, this is not "extension", but rather "gross distortion".

> It prevents most of the money in circulation from accumulating in the hands of a very small number of individuals.

What if such accumulation was just? Would it still be wrong? If yes, then why? If no, then what's the problem? Shouldn't we worry about making game rules fair, rather than making sure outcomes are "equalized"?

The problem is, owning a company worth $5,000,000 doesn't mean you necessarily have $2.5 mil in spare cash laying around.

For this reason, estate taxes encourage businesses to go public so that they can convert the value of their business into liquid assets enabling their estate to easily pay taxes. Or, if going public isn't an option, often the estate needs to sell the business to a larger corporation.

End result is, these smaller $5 - $20 million dollar corporations disappear when the founder dies and they morph into bigger, lifeless enterprises. That's not to say all small businesses are great places to work, but if you ever talk to people that work for founder ran enterprises vs. shareholder ran enterprises there is often a significant difference in quality of life and in how the owners treat their workers.

Estate taxes kill small businesses and also raise very little revenue.

Murder requires intention. Don't be silly.

The Bureau of Labor Statistics, supposedly no partisan outfit, says the dollar has lost 95% of its purchasing power since 1913: http://www.infoplease.com/ipa/A0001519.html .

So Paul's claim isn't far off.