Armchairs, comparative advantage, gold etc

Mycroft won’t be pleased with this Kinsella post (follow the links, particular the one on “armchair theorizing”).

A year or so back, in a comment on a blog that no longer exists, I said that one should be wary of people with utopian ideas. I was referring to Marxists, but it could just as well apply to any political philosophy including libertarianism. While I didn’t know it then, Karl Popper expresses the sentiments well with “those who promise us paradise on earth never produced anything but a hell.” That is what Kinsella writes about. A political philosophy is not complete unless it takes into consideration “real world” scenarios – what threats are “imminent,” is a threat of violence (“I will kill you”) punishable and so on. So the practicability of the “woulds” in the theories – of contract, crime and punishment etc – have to be demonstrated (King calls it the “WouldChuck” fallacy).

Well, Kinsella concludes-

I tend to think these are pretty much continuum problems that are problems of application of abstract or general principles of justice to concrete, fact-bound situations, and therefore difficlt to answer from the armchair once and for all; there may not even be an “objective” right decision in many cases. For this reason I tend to think that just as neighbors build fences on borders, and would not build a house right on the border because of the gray area of ownership at the border; so people would tend to act, and to develop social guides to conduct (rules), that push people away from the gray areas and into the clearer areas. This is all perfectly reasonable. Then, someone who took risks in the gray areas has no one to blame but himself; much like it’s unwise for a woman to walk naked in central park at midnight: she is not to blame, but the inherent riskiness of this behavior tends to dissuade people from doing it.

I still think laws have to be objective in nature – a conspiracy to commit a crime is not a crime, its a very vague concept. Imminence has to be the criteria here, the same imminence that one would use in the case of self defense.

A Cafe Hayek post on comparative advantage makes interesting reading-

Suppose that, until today, the maximum number of fish Suzy could produce each month was 200. Suppose also that the maximum number of bananas she could produce each month was 100.
The corresponding numbers for Sam are 50 fish and 50 bananas. Suzy has a comparative advantage in producing fish while Sam has a comparative advantage in producing bananas. The reason is that each fish costs Suzy 0.5 bananas to produce while each fish costs Sam 1 banana to produce, and each banana costs Suzy 2 fish to produce while each banana costs Sam 1 banana to produce. It’s easy to see that Suzy will gain by agreeing to buy bananas from Sam at any price lower than 2 fish per banana. Likewise, Sam will gain by agreeing to sell bananas to Suzy at any price higher than 1 fish per banana. Mutually advantageous gains from trade clearly are possible.

A similar example is that of a consultant who is able to earn 1000 bucks per hour and who has to handle a leaky faucet. Assuming it takes him an hour to do the job, his “cost” for fixing the problem is the opportunity cost – the 1000 bucks he would have earned if he had worked instead of fixing the faucet himself. A plumber would have charged 100 bucks for the same work. The man would save 900 bucks by not fixing the faucet. When each does whatever it is that they are good at, comparatively, “both” are better off.

The Mises blog linked to this post at the Adam Smith Institute by an author who’s intersted in the Misean view on fractional reserve banking. As is well known, Rothbard termed it a “fraud.” What did Mises say about it? I have no idea, haven’t found the time to read either TMC or Human Action. If anyone is interested, Lawrence White’s book on “free banking” in 19th century Britain is available from IEA. And this section at has books and journal articles by Mises, Hayek, Rothbard and many contemporary Austrians on banking, money etc.

Also read George Selgin’s interview on free banking that Sauvik linked to the other day. (Both Selgin and White have commented on the ASI post I refer to above.)

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  • yet_another_hindu_infidel  On November 20, 2009 at 11:27 am

    Mutually advantageous gains from trade clearly are possible
    again, that depends on whether you look at it from an economic angle or a variety of angles. cause then all the protectionism and the nuclear stockpile start making sense to us. no?

    • Aristotle The Geek  On November 20, 2009 at 4:22 pm

      Oh yes, then it makes perfect sense—looking at economics from a non-economic angle. A thief, a fraud and a politician are not interested in “mutual advantage,” only in advantage to themselves at the cost of others. So they wouldn’t trade, they would “take.” Chodorov is so right.

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