Why Silicon Valley needs Washington DC
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I'll also address one of Lee's comments: "Now, maybe you'd like the government to have a smaller role in these issues to start with." In some cases, it wasn't an option for government to have a smaller role to begin with. Consider spectrum allocation. Today, we're getting to the point where radios can mediate spectrum usage issues amongst themselves. We aren't there yet, but we're getting there. I think long-term we need to modernize our regulations to accommodate these advances. But for the vast majority of the wireless age, this technology did not exist. There simply was no practical alternative to government regulation, in one form or another.
[1] On the ERISA revisions of the late 1970's:
Employee Retirement Income Security Act of 1974 (ERISA) – With the passage of ERISA in 1974, corporate pension funds were prohibited from holding certain risky investments including many investments in privately held companies. In 1975, fundraising for private equity investments cratered, according to the Venture Capital Institute, totaling only $10 million during the course of the year. <In 1978, the US Labor Department relaxed certain parts of the ERISA restrictions>, under the "prudent man rule,"[21] thus allowing corporate pension funds to invest in private equity resulting in a major source of capital available to invest in venture capital and other private equity. Time reported in 1978 that fund raising had increased from $39 million in 1977 to $570 million just one year later.[22] Additionally, many of these same corporate pension investors would become active buyers of the high yield bonds (or junk bonds) that were necessary to complete leveraged buyout transactions.
VC money more often comes from highly successful past ventures, not grandma's retirement savings plan (which are terrible investments anyway). How many ex-Facebook equity holders are building their own companies? How many ex-Paypal before them? It's simply dishonest to attribute Silicon Valley's wealth to DC and the Fed's easy money. Most of that money heads to Wall Street, the most government regulated industry in existence, fueling rampant corruption with examples too numerous to list. The inflation the easy money inevitably brings causes the average middle-class investor to invest greater and greater portions of their income into the markets and their retirement accounts, feeding Wall Street account managers, the federal government, and ultimately, the bubble-prone stock market these investors need just to break even on their savings.
Silicon Valley does not need DC, it is hindered by DC. The democratic, lobby-based, "law-for-sale" system is systemically disadvantaged to the classic survival of the adaptable. While the Valley develops our next innovations, DC puts bandages on debt limits while the other powers of the world seek reserve alternatives to our hemorrhaging currency. Please, do not talk about government success. It does not exist.
Private action in a free market suffers from numerous issues: free rider problems, collective action problems, problems involving positive and negative externalities, problems involving information asymmetries, etc. These are well-developed areas of economics that libertarian-minded policy folks tend to ignore, but which simply cannot be ignored. Most government programs, from environmental protection (negative externalities) to Social Security (irrational hyperbolic discounting), are rooted in one of these economic phenomena.
> VC money more often comes from highly successful past ventures, not grandma's retirement savings plan (which are terrible investments anyway)
See the sibling comment about private equity fundraising after changes in ERISA. Some VC money does come from people taking money from past ventures and putting them into new ones. But the bread and butter of VC involves raising money from limited partners, specifically pension funds, mutual funds, etc. The other major sources tend to be endowments, banks, insurance companies, and sovereign wealth funds.
See: http://fisher.osu.edu/supplements/10/12707/LPReturnsJanuary2... (p. 1).
We're all (more or less) coders here, right? What happens when we tinker with a big, complex, undocumented system that nobody really understands? Government as a concept isn't so much tinkering as it is a blindfolded child refactoring by typing with his elbows.
Economics is not the study of capital, it's the study of trade - which incidentally is so natural we even observe it in the animal kingdom.
Few libertarians would deny the need for at least occasional collaboration, but that is not the same as government. Governments are universally wasteful of resources, susceptible to corruption, resistant to changing needs, and have a nasty habit of claiming absolute moral authority on things...which in turn has a nasty tendency to start wars. It is, objectively, a limiting and archaic system that does us all a great deal of damage.
With what? You're an economist, not an MMA fighter.
> In fact most would, leading to a nice little equilibrium where head clubbing is not a worthwhile strategy. They may even form a protection racket, and call it "Police".
Right, so the nerds get together and beat down the MMA fighters and create laws against "murder" and "theft" and pretty soon you've got government. We're living in your nice little equilibrium.
A) you don't know that, B) everyone else would be an MMA fighter?
> Right, so the nerds get together and beat down the MMA fighters and create laws against "murder" and "theft"...
Premise construction
> ...and pretty soon you've got government.
Magic
> We're living in your nice little equilibrium.
Conclusion
I can't even accuse you basing your argument on a logical fallacy, because there isn't an argument present.
Since bureaucrat-gods don't exist, you need to at least argue that the problems of externalities and such will be lessened by public action. But I don't believe that argument has been made - it's usually just assumed away.
The usual statist objections to pure market action are total myths, not to mention weak and tangential objections. I'd love to argue the market with a hardline Marxist because at least they take a true thrust at market action rather than just nibbling.
>free rider, externalities
How is it a problem to anyone that a persons actions benefit others without deriving some monetary value for the benefit? No one is coerced, no rights violated. This is the only standard for judging these matters. No person should be forced to pay for a benefit for a transaction they did not agree to. Collective defense, for example, does not suffer because some people don't pay to play --- forcing equal patronage only serves to undermine the entire relationship between buyer and seller. More: http://mises.org/daily/2769
>collective action
Kickstarter.
>Information assymetries
Information is a value that is open on the market, as all values are. Not sure if the product your buying is safe? Buy insurance for it. Or, take the time to do your research and make comparisons. That time spent has a value. Decide which you are willing to give up: that time, or the cost of the insurance. Value is a dynamic and multifaceted concept. http://mises.org/daily/1135
The usual libertarian objections to modern economics are usually wishful thinking.
Then why doesn't Silicon Valley exist in some place without an effective government?
And even Blueseed has, as part of its pitch: Silicon Valley is the best place in the world to scale a company, and once you’re large enough there are legal channels available to move into Silicon Valley proper. We will provide you with the resources and contacts you need to make the transition. [1]
Minutiae aside (it was a short post for a reason), the fact this idea is not considered crazy and has a bit of traction is extremely relevant to the discussion as a whole.
Does it? As I see, the idea is choosing a location to take maximum advantage of the benefits of Silicon Valley including those provided by government while avoiding particular restrictions, particularly related to immigration, related to government.
Insofar as hacking government -- which this is -- being considered a potentially-viable startup proposition is relevant to the discussion, its relevant as evidence that government has utility to Silicon Valley even though it poses constraints, not evidence that Silicon Valley doesn't need government.
(And, while I think that it is a fact that the idea "has some traction", I'm less convinced that it is a fact that it is "not considered crazy". An idea can be considered crazy and have some traction.)
The argument is not that the government doesn't provide utility, it's about recognising the possibility that there may be other, better ways to deliver the same or better. Ways that do not, for example, divide societies by political leaning; lead to absurdities like irrevocable entrenchment of power in one guy in a big white house; give rise to further insanity such as giving the power to write anti-corruption laws to those most at risk of being corrupted.
This is the best way to build roads? Really? This is the best way to do anything??
You are free to make that argument, but asserting the conclusion and asking leading questions isn't an argument.
FWIW, we've already, extensively tried the idea of not having a State with a monopoly on force and instead managing the world through private property rights and contractual relationships without the State imposing limits on such relationships to address power imbalances, etc., it's called feudalism.
One thing we - especially us on HN - have excelled at these past decades is the manipulation of information. This system was designed when paper was a luxury and literacy a specialist skill; we solved democratic decision-making the day we cracked UIDs and radio buttons.
Governance is like software: it takes information (capital, data, views, problem definitions, etc) in, transforms it, and spits information out (capital allocations, laws, etc) out. Tasked with rewriting the current, proprietary, overly ceremonious, deeply coupled, trillion line leviathan that only runs on a single ancient hardware architecture and has a man page that is not only out of date but is purposely deceptive...would we declare it perfect and go home? Would we dare be so arrogant as to keep it closed source and prescribe our opinions on the world?
Or would we open source it, and see what amazing shit starts to happen?
Odd, I was reading a history book the other day and took note of this passage:
"The other wrong lesson [the philosopher William James] thought people took from On the Origin of Species is, in effect, the flip side of the first. It is the belief that evolutionary science can lay a foundation for norms–that natural selection serves as a kind of "bottom-line" arbiter of merit. This is the doctrine of "the survival of the fittest," .... It makes the logic of evolution the logic of human values: it suggests that we should pursue policies and honor behavior that are consistent with the survival of characteristics understood to be "adaptive," and it justifies, as "natural," certain kinds of coercion."
My own explorations are currently dealing with the latter by deliberately presuming that half of my ideas won't get implemented and making sure the rest are functional despite that.
Ah yes, big government. We would never had the ingenious ability to tar and pave roads without your bloated schemes to pocket large percentages for politicians.
Politicians ladies and gentleman are the big problem in Washington. They are expensive, and if you look at their net incomes year over year astoundingly they continue to make absurd profits regardless of the functioning American economy or not.
If politicians were willing to volunteer their "Services" then I would agree with the sentiments. However, as long as they are able to be bought relatively easily, it allows more corruption and extortion to take place. There is a libertarian solution to everything, and in every instance a free market perspective should be applied to government officials who can't seem to cut the fat out of their vicious diet.
Oh my..
I must have missed the part of your argument where you conclusively prove that the "libertarian solution" is the best option in this instance.
http://www.dailypaul.com/268271/but-who-would-pave-the-roads
There's many different solutions, but of course you are a liberal who prefers to be spoon fed. It's as if you automatically assumed the government solution is the best option sigh
Roads are payed for already by ticket fines,
and freight/shipping deliveries.
Almost all of the federal money for road construction and maintenance comes through the Federal Highway Trust Fund (HTF). It's a standard PayGo operation, but the entirety of their budget comes from taxes. Primarily the $0.184/gallon tax on gasoline and a $0.244/gallon tax on diesel. The remainder from an additional tax on tires and on the sales of industrial vehicles.
> The only thing that will be different is that we will have MANY different roads that will compete with each other.
LOL
http://www.youtube.com/watch?v=qMq3w7RVnvc [Seinfeld - The Pothole]
Touting the road system as a government success. Please.
This is reversing the burden of proof. You are the one who wants to alter the status quo, you should have to prove why your solution would be "better".
From my perspective, I can get anywhere I need to, and anything I need can get to me, consistently, reliably, and at the cost of a tiny fraction of my income. Seems fine to me. I see no reason to radically alter the system, and doing so introduces obvious risks I am not willing to accept. So not only is the burden of proof on you, it's a very heavy burden.
As for giving the stores a portion of the tolls, that doesn't help, because you're still trying to recover all the costs of construction from a subset of the people who benefit from the road. Think about the math: say drivers benefit X from the road and stores and developers and employers benefit Y. Total social benefit is X + Y. With tolls, your incentive to build roads is F(X), insensitive to Y. So whether Y = 10x or 0.5X doesn't change your incentive to build the roads at all. In other words, the incentives aren't aligned with the social benefits.
Roads as with anything have a symbiotic relationship with the nearby community. If there are no places people want to go along a route then people won't use it or pay tolls conversely if there is no road to get to a business no one will go there either.
Up until Glass-Steagall was repealed Goldman-Sachs was a relatively well run bank that was entirely privately owned and all the partners there made sure people weren't doing crazy subprime stuff because it would negatively impact the bottom line over the next decade or more.
Nassim Taleb talks about "skin in the game" as a requisite for moral decision making. Perhaps libertarians would say that you can't perform in a managerial role at a company without having some meaningful skin in the game. Would people find a way to dodge that? Sure. But companies who did dodge it would tend to be short-term greedy, not long-term greedy and as a result they would tend to go bankrupt faster thus ridding us of the unpleasantness of their existence.
This highlights the bizarre statist-libertarian cognitive dissonance where they hate on government but then argue that lawyers and lawsuits are the solution to everything.
You need to understand that libertarians are not against mediation or even courts. If someone commits fraud, or pillages the environment, there are plenty of ways of punishing them without government. Appreciate the value of reputation.
I'm against government taking over too much because I think it's generally a sub-optimal solution. It takes such a huge public outcry to get anything done it's incredible. Egregious problems can get solved eventually but smaller ones are perpetuated in the law, probably indefinitely. Or at least until the next revolution.
When businesses fail all their policy and code and whatever is wiped out. Companies that don't generate profits fail, which causes their policy to disappear and people aren't subjected to failing policy forever.
The self-correcting nature of business (even if it's still sub-optimal) to me seems somewhat preferable to the nature of government which is to grind on -- successful or not -- until people are so fed up with them that something has to change.
Further I'm not a huge fan of financially supporting people flailing about in misguided and asinine programs. The drug war is actively costing me (and everyone else) money when it should have been clear 15-20 years ago that the policy wasn't working and couldn't work. I'm not saying that businesses don't make stupid short-term decisions but they tend to fail faster. Enron did massively stupid stuff but it was founded in 1985 and had died by 2004. It's lifetime was less than the drug war is today, and the drug war might go on another 10 years if we're unlucky.
At it's peak Enron's market cap was $60b. In 2013 we've budgeted $25 billion at the Federal level.
Er, but the self-correcting nature of business is simply the result of the fact that the nature of business is to grind on -- successful or not -- until people are so fed up with it that it is forced to change.
It is no different than government in that respect.
Businesses start and fail all the time and none of it requires guns or marches or any of that. Which is to say that it's largely peaceful. Something that I'm ardently in favor of.
Since the corporate form is a government intervention into the free market to protect select players for notional public benefit, presumably, it wouldn't exist at all in libertarian-land, assuming, of course, there is even a small dose of consistency with libertarian rhetoric.
On the other hand, you could just dispense with any kind of consistency and...
> Perhaps you'd have only LLCs where the limitation of liability is actually rather small
How is supporting government intervention to protect select players (even if it is "just LLCs") from liability to the unconsented harms they do others "libertarian"?
> Up until Glass-Steagall was repealed Goldman-Sachs was a relatively well run bank
Glass-Steagall wasn't exactly libertarian, either, so I'm not sure what the point here is.