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Category: Economics

Marx, Gandhi and David Friedman are the same in one thing: all have failed to provide a transition path to freedom

Our fundamental equality arises from being animals of the same species. And yet some of us govern others. These are the Mafia with the capital M. The Government.

How did they get this role and power? We the Hobbesians have it to them.

To fight the Mafia has been the dream of Marx, Gandhi and David Friedman. They all had/have one goal – to make the state wither away, so humans can achieve the intrinsic equality that nature has given all of us.

But they have all failed, and failed miserably in getting rid of the Mafia.

Why is that so?

Because there is really no method consistent with human history other than using the government itself as a pathway towards a government-free society.

We need a transition path, which takes us incrementally to the stage where we can hand everything back to the markets, to ourselves.

What that essentially means is designing markets and institutions to allow people to manage their own affairs without recourse to the government.

This is a non-trivial task. We know that it was the advent of big government (kings, emperors) that incrementally led to modern civilisation. So government has played a key role in human advancement, even as governments have been the most vicious oppressors of the people.

There is an underlying “value” that government provides. We need to be able to solve the game theoretic problem that will allow us to achieve the same (or more) value through markets.

The fact that markets have solved such problems on their own is a positive sign (e.g. Hernando De Soto (ref. The Mystery of Capital); and James Tooley (The Beautiful Tree). But there is insufficient understanding of the detailed mechanisms by which markets can be enabled to solve such problems.

The task of philosophers and economists is therefore a detailed and technical one: how to design institutions to make government redundant. That can’t be done through exhortations but through hard intellectual work.

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Against intellectual property? – a placeholder post

I’ve been reading Michele Boldrin and David K. Levine’s Against Intellectual Property. They identify the excesses of IP and provide a transition pathway towards a system that both rewards inventors/ writers and minimises harm.

This is a placeholder post for relevant information. I’ll form my views after further analysis.

My current (tentative) view is that 1) patents are highly problematic; 2) copyrights etc. are OK for a very few years (not more than 2 years).



The Case Against Intellectual Property by Michele Boldrin and David K. Levine [PDF]

Ideas Are Free: The Case Against Intellectual Property

The Libertarian Case Against Intellectual Property Rights by Roderick T. Long

Against intellectual property

Our Intellectual Property Laws Are Out of Control

Intellectual Property Law Works, Until It Is Stretched


The Morality of Intellectual Property Rights

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Liberty > Ideas > Wealth. The must-read interview of Deirdre McCloskey


Why did you decide to write a trilogy about the bourgeois?

As a socialist when young I thrilled to anti-bourgeois writing. The thrill is common among young members of . . . the bourgeoisie. It is of long standing. When Balzac  wrote Le père Goriot, in 1834, he thought it was funny to have his pathetic protagonist be  a retired manufacturer of vermicelli, which as you know sounds funny in French or  Italian—little worms. And so forth, down to the Wall Street movies. (By contrast, I just  saw a brilliant movie, Joy, about the inventor of the easy-wringing mop, Joy Mangano,  which treated entrepreneurship and invention and business with respect. It is unusual.)

As I learned much later—really, not until my 30s—more about the economy I realized  that the merchant and imprenditore and inventor and banker are essential to how an  economy works for the poorest among us. The drum-beat of often idiotic criticism of the  people who make the economy work for us all began to irritate me. I wanted always to  help the poor—it is why I was originally a socialist. But I gradually realized that a rich  economy helps the poor much, much more than any redistribution from the bosses  could.

Then early in the 1990s, age 50, I was reading on an airplane a book by John Casey called Pagan Virtues, and it hit me that I should write a book called The Bourgeois Virtues: Ethics  for an Age of Commerce, a full-scale defense of “capitalism” and the bourgeoisie, aimed at  people like my earlier self who believed it to be evil (even as they enjoyed the food and  housing and education provided by it!). I expected the trilogy to be one book. But when  in 2005 I reached 500 pages (the first book resulting came out in 2006) I was only 1/3 of  the way through my outline! So I had eleven more years to study and write, and two  more books, a trilogy!

What then are the virtues and the strength of the bourgeois?

The strength is its creation of the modern world, and its honoring of ordinary people. A  society of aristocrats (or bureaucrats) and peasants (or watchers of game shows on RAI),  is essentially uncreative. It cannot, and has not, made enough of the ordinary goods and  services for a dignified life for the mass of people. It turned out—no one anticipated it  in 1700, and very few in 1800—that letting the bourgeoisie free, as in the French  Declaration of the Rights of Man, or in the U.S. Constitution, enriched us all. It is the “Bourgeois Deal”: “You allow me, a bourgeoise, to try out trade-tested betterment in cars  and plumbing and forward markets, without protection or subsidies or regulation  or licenses or socialism, and in the third act of the social drama I’ll make you-all [voi]  rich.” And she did. We were once all living on $3 a day (in today’s prices). Now we  live on $87 to $127 a day, the Italian and American averages according to the so-called  Penn Tables, the best estimates available.

Why do you speak of the “Great Enrichment”? How rich are we today? And how has it  changed our lives?

The real amount of stuff we Italians or Americans enjoy, you see, has increased since  1800 by a factor of 30. That’s nearly 3,000 percent! Such a change can be called “great”  without violating the norms of language. In previous times—the Quattrocento, for  example, or the Song Dynasty in 12th-century China, or the glory of Greece, or the  heights of Egyptian civilization—one might have seen a doubling of the real income of  ordinary people, for a while (and then a drift back to the usual human condition of $3 a  day). But a doubling is only 100 percent—as against from trade-tested betterment since  the year 1800 fully 3,000 percent, achieving nowadays in OECD countries $80 to $140 a  day. And it’s even more (much more) if we take into account the better quality of many  modern goods and services—better travel, better medicine, even better economics. A  three thousand percent increase in goods and services available to the average person,  and to the poorest among us as well, solves a lot of social problems. In 1800 most  Italians were illiterate, for example. Now very few are. Life expectancy worldwide has  since 1800 doubled, and especially in the past few decades. Now many people go to  university. In 1800 hardly anyone did. And on and on.

Who are “we”? Aren’t there around the world still many many poor people?

Yes, there is still out of the 7 billion people on the planet a “bottom billion,” as the  economist Paul Collier points out. We must help them help themselves. Charity, such  as transfers from north to south in Italy, results merely in corruption and too many  governmental employees. The better plan is to encourage people to adopt equality  before the law and social dignity—in a word, liberalism—and let them make themselves  well off.

But as Collier also points out, forty years ago the horribly poor of the world were a  bottom 4 billion, out of a lower world population, of 5 billion. The level of poverty has  fallen in the last few decades like a stone. It is falling in China, since 1978, and in India,  since 1991. That is, China and India adopted liberal economic principles, and let  people trade and invent, and have grown spectacularly fast. Poverty is falling much less  slowly in, say, Brazil and South Africa, to mention two countries I know and love and  wish fervently would see the light.

Why and how have we become so rich?

We are rich because of the liberalism I mentioned, defined as equality before the law and  equality of social dignity. Read again the Declaration of the Rights of Man (and Woman, dear!). It says it. Liberalism was a new idea in the 18th century, tried out on a big scale  in the 19th century, in places like Holland and Britain and the USA and then in Belgium,  France, and at length in Italy. And now it can enrich the world—where it is not  undermined by uncontrolled corruption and excessive regulation and full-blown  socialism (namely, the condition and policies of the present-day Italian state).

What liberalism did was let ordinary people, as the British say, “have a go.” They  massively did, giving us the millions of trade-tested betterments we see all around  us. Large plate glass. Air conditioning. Clean food. Big newspapers. If more people  are inspirited to innovate, of course, we get more betterments. It is why the gloomsters  who say that betterment is finished are mistaken. As now-poor countries become  enriched, more and more innovators will emerge from them—which is how they are  going to be enriched. We in the already-rich countries will benefit from their new ideas,  the way we benefited from Olivettis when Italy became relatively well off or from  Toyotas when Japan did.

 What then is the power of ideas, which ideas you think of and how could they be carried out  from a certain period in some certain countries?

There are two levels of ideas (and it is ideas, not the investment in capital that follows  from the ideas, that made us rich). One is the level of trade-tested betterments, such as  reinforced concrete and window screens and antibiotics. Bravo. But what encourages  people in the mass to have such ideas is liberalism, that equality before the law and  equality of social dignity. To be sure, liberal societies are imperfectly so. The liberal  society of the early 19th-century USA had, after all, millions of slaves. Women could not  vote until the 20th century. Gays in northern Europe were assaulted freely by the police  from the 1880s until the 1970s. And so forth. But compared with the old guilds and  aristocracies and serfdoms of earlier times, liberalism was much freer, and inspired  ordinary people to open a corner grocery store or invent the radio.

Why can’t the usual economics explain this enrichment for you?

The usual economics, whether “Samuelsonian” (that is, conventionally bourgeois) or  Marxist, supposes that capital makes us rich. It doesn’t, as the disasters of foreign aid to  poor countries have shown. Capital is necessary, of course. You can’t have buildings  without bricks and concrete. But so is oxygen in the air necessary. And night and  day. And the Sun. These are not original causes in any useful sense.

Pouring more capital into a country or region does not have a “multiplier” effect. We do  not need an “original accumulation of capital.” Prosperity does not “trickle down” or  trickle up. What we need are ideas for trade-tested betterment. If we have them, the  capital will follow. For example, early cotton textile factories in Britain did not require  much capital, and what they needed was provided by retained earnings and small loans  from friends. And so what is wrong with conventional economics is that it focuses on  the intermediate cause and ignores the originating cause, the human creativity released  by letting masses of ordinary people to have a go. In a word, liberalism.

You wrote of the bourgeois equality: what is this equality and what does it refer to? Which  are its practical basis and its theoretical fundamentals?

Another word for liberalism is equality, which is what I have in mind. Not the equality  of result, but the equality of opportunity. Not “French” equality, as we may call it in  honor of Rousseau and of Thomas Piketty, but “Scottish” equality in honor of Adam  Smith and Milton Friedman. As Smith put it, what we need is “the liberal plan of  equality, liberty, and justice.” Look at his words. Smith was an egalitarian. So am I. So  is liberalism.

Are liberalism and the bourgeois strictly connected?

Yes. It is an old, and correct, cliché of European history that the revolutions of 1789 and  then of 1848 were bourgeois. But in freeing itself, the bourgeoisie freed us all. Letting  businesspeople make money is, obviously, only successful for them if we like their  products and want to buy them at the prices the businesspeople are willing to sell them. That’s what I mean by “trade-tested” (in the phrase I prefer to the misleading  word “capitalism”). Trade-tested betterment made us rich.

Have they got the same enemies? Which are the worst?

Yes. The “clerisy,” as I call it, the intellectuals and artists (and journalists!) who come  from la Borghesia but hate their fathers.

Which are the worst?

The clerisy such as Lenin and Mussolini and Hitler, the murderers of millions in the  name of Revolution against the bourgeoisie, against property, against the spontaneous  order of the market that made the poorest among us 30 times better off.

Why do you think they have found such a great hostility in history?

That is hard to answer. Partly it is because trade-tested betterment did not pay off  quickly, and the utopian thinking characteristic of Christian Europe promised instant  betterment, the Land of Cockaigne bursting in, candy growing on trees, whiskey rivers.

And why, in spite of this attacks, have they managed to prompt this great enrichment?

Because the high clerisy did not always get its way. The two worst inventions of the  clerisy in the 19th century were nationalism and socialism. (If you like these perhaps  you would like to try their combination, national socialism.) But the best invention of  the previous, 18th, century, liberalism, was so powerful—if slow—in its effects that the  clerisy’s sneering at the bourgeoisie did not prevent bourgeois entrepreneurs of all sorts  from succeeding. An Italy that nurtured anarchism and then communism also nurtured  Fiat and Olivetti.

Do you think liberalism is still a recipe today, also for stagnating economies such as  the European Union?

Yes. If we want economic growth we cannot propose, as the Italian Parliament did in  July, 2016, to regulate by licensing them the cookers of pizza. Licensing, regulation and  other forms of socialism “lite” are catastrophes for market-tested betterment.

And what kind of liberalism are you thinking of?

The kind that worked to enrich the poor of the world, 1800 to the present, enriching  your Italian ancestors and my Irish, Norwegian, and English ancestors.

What is the bourgeois like today? Has it still got many opponents, that is, do you still find  anti bourgeois attitudes in western countries?

Yes: after each crisis there arises some new version of socialism (syndicalism,  environmentalism). People grow up in loving families, mostly. And so they think that a  country of 80 millions can be run as though a loving family. It can’t. Much better to  have cooperation and competition on the enormous scale that we have in liberal  economies.

Do you think in some way corruption or some arrogance contributed to bourgeois attitudes?

And not the corruption and arrogance of Lo Stato? They are human sins, but no more  common in business than in the police force or in the Parliament.

Do you think we’ll get richer (as a world)? Are you optimistic for the future? Why?

Yes, I am optimistic. The whole world will become as rich as Italy or the United States,  and we will have a brilliance of world culture that will put the Renaissance in the  shade—world music, world cuisine, world science, world entrepreneurship, all manner  of world discovery and creativity pouring out of, for example, sub-Saharan Africa, as it  is beginning to pour out of China and India.

What is humanomics and what is it useful for?

Humanomics is merely a new economics, retaining all its mathematics and its emphasis  on the virtue of Prudence, with an addition of the other forms of argument (literary,  philosophical) in scientific method, and the addition to the account of behavior the other  human virtues expressible in a commercial society, added to the understanding of the  economy: Temperance, Courage, Justice, Faith, Hope, and Love. These, with Prudence,  are the seven principal virtues of the Western tradition (St. Thomas of Aquino discusses  them in detail), a merger of the four pagan virtues and the three Christian or  “theological” virtues. All seven, and the lesser virtues derivative from them (honesty,  piety, ecc.), play a part in the economy, and need to be acknowledged and theorized and  measured.

You talk with great passion of “ordinary people”: what is their power for you?

I am a democrat, a Christian libertarian. I am not a “conservative,” if that means looking  down on ordinary people. I don’t, or try not to. My statist friends left and right do look  down, and wish to govern the poor. I wish to remove the chains on the poor.

I have read very interesting and ironic self-definitions of yourself, how would you define  your positions/theories? You said you are not a conservative but a Christian libertarian

As I just said.

Is it true you turned Christian after the crossing?

Yes. By changing gender in 1995 I had brought my soul and my persona closer together.  I realized, without fully articulating it to myself, that that I needed to go further in such  unification. I became in 1998 a progressive Anglican.

In your articles there is a great sense of humor. Do you think some more of it would be  useful also for the economic scientists who seems sometimes a little detached from reality?

It’s not so much detached from reality as you think. But, yes, a sense of humor, unless it  is at other people’s expense, keeps us all from lofty arrogance.

You work in an almost totally male environment: was it difficult for you?

Not when I was a man! Now it is sometimes funny, sometimes irritating. If the  conversation turns to how few women there are in economic science I sometimes  remark, “Well, I did my part!” The women laugh and the men become uncomfortable!


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There is absolutely no scope for prior consent in a liberal political party

In 1998 I started a draft article, called “From Economics to Action“. I never got to review/ finalise this article due to many reasons. But the key question remains: how does one get from the theory of liberty (economics) to actual liberty. This is something for which there is no manual, no guide, not even preliminary thoughts on how it can or should be done.

Over the past 18+ years I have done many things and learnt a few things in this direction. One day I may finally finish that article.

But this one can say: it is no trivial task to bring liberty to any country. The task of bringing liberty to the a country like India involves – at a minimum – the following skills:

  • high level of knowledge of the principles and policies of liberty, and of liberal governance. This basically means having an open mind to innovations from across the world; it means having a research bent of mind. The liberal has an mind that is constantly open to new learnings. Most “liberals” do not understand the basics of governance; they have an extremely shallow level of knowledge and do not pay attention to detailed incentives of the democratic/ bureaucratic system. Their policies amount to hand waving, and are essentially worthless for ensuring real change.
  • high level of communication skills. This involves the ability to write/ speak and otherwise explain ideas to the general public, including to the experts. The range of messaging is quite vast and diverse; but there needs to be high level of proficiency in these skills, if an liberal political movement is to take root.
  • high level of management skill and attention to detail. This is a key requirement which involves the ability to creating various organisations and ensuring they are compliant with relevant laws. It involves attention to the detail of how funds are managed, audits/ tax compliance, etc., and how website/ social media is managed, etc.
  • high level of respect for others. This involves complete trust in others unless they prove to be untrustworthy. This also involves the commitment to building democratic processes and institutions, but being careful not to disable individual enterprise in this process.
  • working towards a long term goal – of building the kind of DNA that will grow the organism (e.g. a liberal party) into a viable outfit for the future. This involves building systems that will foster innovation and initiative at all levels, even as everyone is held to account for their actions. It involves finding and building leaders.

The package of skills needed to start and run a political liberal movement does not exist in any single individual. So the key skill involved is the capacity to find and bring together people with the relevant skills, so the organisation, as a whole, has the relevant skill set and capability.


In this post I will raise a few points regarding building the DNA of a sustainable liberal political party.

A  party usually will have a representative body at the top, a National Executive (NE). The role of the NE is to oversight the development and growth of the party. Its job is to ensure that overall systems are in place.

It, however, has no business in the day-to-day affairs and actions of the party or its members. It is like the Board of Directors of a company, that meets periodically to agree to the broad principles, but after that the company acts. It doesn’t revert to the Board for advice. There is no micro-management by the Board. There can be no micro-management by an NE.

For instance, the NE must retain total control over the party’s ideology and manifesto. It must set systems in place for the selection/ election of office bearers. It must have a system to investigate disciplinary matters where any member acts in violation of the ideology and manifesto.

But it can have no role in prior approval of political actions taken by any individual member.

In any event, we are talking about a party of liberty, not a “high command” where everything is micro-managed.

The way of liberty is to fully empower all members to act. Members should not be held back with a leash, even on a matter that potentially violates the party’s manifesto. NE members can raise any concerns or provide advice, but they cannot pre-approve (“licence”) any action. They have no preventative role, only a punitive role should an action violate the party’s constitution or manifesto.

The NE are not puppet masters, and individual members are not puppets. They are free citizens who must be free at all times to act according to their best understanding of a particular situation.

Liberty involves experiments. It involves taking risks. No one knows what will happen when someone takes an action. Even the best laid plans of people can be laid waste; and totally unexpected success can be achieved from unplanned and random action. This is the nature of the world. We can never know in advance about the results from any action.

NE members cannot be a control freak who want zero risk. They cannot start imagining consequences and risks and block action. They are not Gods. They do not know the future.

The liberal party’s constitution must allow total freedom of voting to its parliamentary members except on a few critical bills.

This freedom must seep into every part of the party’s operational DNA. No one is required to seek any prior “approval” to act. By all means people should feel free to discuss their idea and seek improvements/ inputs. But EVERY individual member must be respected and treated like an adult.

Each action is an experiment. Let there be an infinity of experiments – each of these consistent with the party’s ideology and manifesto. Let there be freedom in the party that claims to bring freedom to the people.

Freedom also implies accountability. Therefore, every member should be accountable for his/her actions. But there is absolutely no scope in a free society for PRIOR CONSENT from any “wise” people.

Only through internal freedom can members of a liberal political party understand freedom and bring freedom to the people. If they become control freaks then the party will never grow.

Growth is ALWAYS related to the level of liberty.

Of course, if any FINANCIAL implication arises, there is a need for prior consent. But for saying something or doing something that doesn’t involve taking money from the party’s kitty, there is absolutely no need for prior consent.

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Mises against anarcho-capitalism

For my record, that Mises was vigorously against Rothbardian anarchism.

  • “A government abdicates if it tolerates any non-governmental agency’s use of violence. If the government forsakes its monopoly of coercion and compulsion, anarchic conditions result.”
    -Ludwig von Mises, Planned Chaos
  • “Liberalism is not anarchism, nor has it anything whatsoever to do with anarchism. The liberal understands quite clearly that without resort to compulsion, the existence of society would be endangered and that behind the rules of conduct whose observance is necessary to assure peaceful human cooperation must stand the threat of force if the whole edifice of society is not to be continually at the mercy of any one of its members. One must be in a position to compel the person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society. This is the function that the liberal doctrine assigns to the state: the protection of property, liberty, and peace.”
    -Ludwig von Mises (Liberalism)

I’m informed that “Mises wrote against anarchy throughout his life. He thought Rothbard was wrong.”

Just a reminder of two of my notes on this subject:

Rothbard’s foundational error about classical liberalism and his mistaken belief in anarchy

The absurd dreams of libertarian anarchists


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