free market

Deep Libertarian Thoughts on Free Market Exchange

rafifarber Libertarian Halacha, The Jewish Libertarian Blog ,

Instead of seeing exchange as one event of give and take, see it as two distinct events: A gives B something. B gives A something. Two people are separately giving to each other. The reason for it is all in your head. Forget the reason. Just look at what’s happening. Two people are freely giving to each other, connecting, and benefiting.

We look at the event too much as a give and take, and that is what trips us up into thinking one is taking advantage of the other, or there is a more powerful and less powerful party to the transaction. But if we just observe what’s happening, we can get rid of all that. One person gives. The other person gives. The result is peace.

The only difference between charitable giving and a market exchange is that in an exchange, there are two givers, and they each have a reason for giving. In a charitable donation, there is only one giver, and only he has a reason for giving. The other party is passive.

The reason for a market exchange is a shared interest between the two. It’s what connects them. This puts market exchanges above simple charitable giving on a moral sphere, because the market connects humanity, while giving does not necessarily do so. It can, but giving does not have to connect giver and receiver. An exchange necessarily does. The market necessarily does. It requires reciprocation. Charitable giving does not.

Then why is charitable giving a mitzva? The only reason I can think of is a גזירת הכתוב. Which means there is no rational reason, which makes sense considering there is a Rabbinic limit to charitable giving at 20%. Any more and giving is considered a sin.

Rav Sa’adaya Gaon, at the beginning of אמונות ודעות, the Book of Beliefs and Opinions, pretty much the first complete work dedicated to Jewish philosophy ever written circa 800 CE – Sa’adya observes that if everyone stole from everyone else, there would be no productivity and all of humanity would starve.

That extends to charitable giving. The more people that give without reciprocity, the less production you have. The market requires production from both sides of the exchange in every exchange. Otherwise the exchange is not made. The more charity you have in the world, the less wealth, because charity does not require both parties to produce. It is unilateral. At a certain saturation point then, charitable giving harms humanity. Rabbinically, that point is 20%.

Visually too, indirect exchange through a monetary medium necessarily connects humanity, not just via the two making the exchange itself, but due to the nature of the monetary medium it forces the receiver of money to exchange with yet another person in the future.

If you see the specific good in the exchange as the point of a cone, and then the money as the funnel, the funnel of the cone sits over the seller of the good, who is the receiver of money. The point of the cone sits over the buyer. The buyer gives money to the seller. The cone opens up to a third person, because the money received must then be exchanged with another person. Otherwise the money is worthless. The buyer is in effect pointing the seller in the direction of someone else – anyone else really, urging him to further exchange and add wealth to humanity using the money he has just given the seller.

A quote from Chef, starring Jon Favreau, demonstrates this. The chef is talking to his son, who tried to lazily give a burnt sandwich to a customer:

“I may not be the best husband in the world and I’m sorry if I wasn’t the best father. But I’m good at this, and I want to share this with you. I want to teach you what I learned. I get to touch people’s lives with what I do. And it keeps me going and I love it. And I think if you give it a shot you might love it too. Now, should we have served that sandwich?”

How the free market redistributes wealth VS how the government does

rafifarber Economics, The Jewish Libertarian Blog

Back in 2008 when I was still a Bill O’Reilly fan and a mainstream “neoconservative” type guy who loved the idea of spreading freedom with very powerful explosive devices throughout the world, I still didn’t like Barack Obama. It was on the Glenn Beck Program, who I am also no longer a fan of at all, that I heard some recordings of Obama talking on some radio show in Chicago about the failures of the Civil Rights movement in how they did not go far enough when they backed off from demanding court-ordered “redistributive measures”. Or something to that effect.

I specifically remember the word “redistributive” rolling off Obama’s silver tongue like a drop of glue-based dew on a glistening fake house plant shining in Vaseline basking in the artificial light of a sun lamp. It sounded so seductive and scary.

Go Glenn! I’d say.

Here’s how government redistributes wealth:

Government, benevolent and friendly and wanting to help the poor, seizes money by force from anything productive. Politicians take the money and start a welfare agency. The welfare agency provides paychecks for its bureaucrats, all of whom are friends of the politicians who seized the money. The benevolent welfare agency with the big heart runs out of money providing paychecks to all the bureaucrats running it before it hands out any stolen money to poor people, so the welfare agency lobbies for more money, which they use to expand the welfare agency and give more paychecks to more buddies of legislators, all of whom have huge hearts and went into the business of government bureaucracies to help poor people because they are so selfless. They run out of money again before they start doing anything, so they lobby Congress to steal more money from anything productive so they can do their job of eating paychecks more effectively, with huge big hearts of love and giving and benevolence.

With production down, there’s less stuff, making everything more expensive and hurting everyone’s standard of living. Then we are told that in order to increase our standard of living, the government needs more money.

A few months later, a welfare agency bureaucrat flips a quarter to a beggar on Capitol Hill, quintupling the amount of money given to the poor by the welfare system. The bureaucrat goes home all proud of himself for being such a selfless and giving human being and cashes his next paycheck.

The government runs out of money again, so they call on Ben Bernanke to print it, in the name of stimulating the economy.

Government thereby redistributes wealth from productive people to Congress’ best friends who out of the goodness of their souls, got jobs at a government welfare agency.

Here’s how the free market redistributes wealth:

Rafi and Natasha are paying 115 shekels a month in internet bills. Rafi and Natasha, those money grubbing selfish bastards with nothing but their own wallets on their minds all the time, look for a way to save money. All 115 shekels are going to the private money grubbing selfish internet company, which does nothing but think about how it can squeeze more money out of their greedy, miserly customers all day, every day.

In a fit of pure selfishness and miserliness, Natasha calls Angloprotekzia, a selfish miserly money grubbing company that thinks about nothing but itself all day. This company, purely in order to extract money from its customers, not thinking of the poor at all, provides a service of private negotiation with other private companies, and promises to lower Rafi and Natasha’s internet bills. In exchange, Angloprotekzia gets half of the savings.

In other words, they lower your bills in return for a commission.

Angloprotekzia, smelling the opportunity for money, cash-register heart beating and dollar signs filling its greedy eyeballs, calls the internet company and gets them to lower the bill from 115 shekels a month to 24 shekels a month, saving Rafi and Natasha 91 shekels a month that they can now use to sit there and count again and again, reveling in their money. Or invest. Or buy something with, whatever.

Previous score: Netvision 115, Rafi and Natasha 0.

New score: Angloprotekzia 45.5, Rafi and Natasha 45.5, Netvision 24. Total = 115 shekel.

Money wasted: 0.

Say it with me. Let it roll of your tongue…Redistributive.

 

3 for 1 book sales are now illegal in Israel: Yay Government!

rafifarber Economics, Israeli Politics, The Jewish Libertarian Blog

Stuff like this would never have bothered me a few years ago, not that I ever buy new books. I would have just glanced at the title, shrugged, and moved on with my life. But now these stories hit a real nerve.

The subtitle:

“3-for-1 deals at book stores will become a thing of the past in move designed to protect author’s income.”

So the government is going to decide for us what a good price for books is. They already do this with gasoline and interest rates. This piece of legislative thuggery was drawn up by Likud MK Limor Livnat, who voted for the Disengagement by the way, and is the “Culture and Sport” Minister because, well, the government needs to be in charge of that aspect of our lives as well. God forbid culture and sport be managed by the people. Likud is also, technically, the “free market laissez faire right wing” party.

The reason it is being passed is this:

The bill follows the entreaties of leading authors and publishers saying that the competition between the major bookstore chains – Tzomet Sfarim and Steimatzky – undercuts author royalties and threatens the viability of publishing houses. According to a statement put out by the Prime Minister’s Office, “the law is designed to protect the author’s income.”

So the free market is competing to lower prices for consumers like you and me, and the big guns are going to the government to make competition illegal.

According to the bill, stores will not be allowed to discount the price of a book for 18 months following its publication. Therefore, the logic goes, people will be forced to buy the book at a higher price, thereby “protecting the author’s income”.

Well, this is genius. That should work well.

But there’s another possibility, with a likelihood of something along the lines of absolutely certain: Sales of new books will plummet at Tzomet Sfarim and Steimatzky when consumers can no longer find good deals on them. Authors’ royalties will fall through the floor. Tzomet Sfarim and Steimatzky’s sales will plunge in general,  chains will go out of business, unemployment will go up, and people will cry to the government to bail out the bookstores, or better yet, pass a national “support Israeli literature tax” to give the industry a boost so authors don’t starve because nobody is buying their books. Sales of 18-month old books will skyrocket, but at an even lower price than new books were selling for at 3 for 1 deals because the chains will be trying to get rid of them in liquidation sales to make room for the new books that they can’t sell at a discount.

What will happen then is that the same thugs will complain to the government that the liquidation sales are killing author’s royalties, so those will be illegal too, and then the stores will just have to either burn them, or simply not take in new books, which will hurt author’s royalties as the books won’t even be available at Steimatzky anymore.

Livnat’s legislative bullying goes farther still:

The bill also states that for the first 18 months authors will receive a minimum 8% royalty for the first 6,000 books sold, and royalties of at least 10% for all books sold after that number. For the next seven years, publishers will be obligated to pay authors at least 16% royalties on profits from their books.

So the government also feels that it should force retailers to pay a certain amount to the authors, because God only knows what awful things could happen if they were left alone to decide the rates between themselves privately by contract. Such a thing cannot be done.

Netanyahu, Mr. Free Market Privatization, had this gem to quip:

“As the People of the Book, we are committed to maintaining the income of the authors who create our cultural treasures. The law creates the right balance between the aspiration that books not be a luxury item and that everyone be able to enjoy the experience of reading, and the need to protect authors and their works.”

Protect those authors Bibi! And when sales drop and they complain some more, I expect a subsidy or a tax or whatever it is that you’ll do to protect the industry from the consequence of your government interference with yet more government interference, thereby making it even worse. Maybe cut Barak off from first class flights to France, or maybe cut every MK’s salary 50%? How about getting rid of the entire Office of Culture and Sport and firing Livnat?

This isn’t about protecting authors. It’s about power and flexing muscle. That’s what it’s always about. Always.