Law and Economics (lecture 18 of 32)

June 24, 2004 9:35 PM by David J. Heinrich | Other posts by David J. Heinrich | Comments (1)

These notes are from the lecture Law and Economics, given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them. This lecture was given by Prof. Hoppe.

When We Have No Problems, When We Do: Garden of Eden

• When there is a super-abundance of goods, there are no problems with conflicts over resource-use.

• Scarcity is necessary for conflicts.Only because of this can you argue in the first place.

• If we have scarcity of resources, we need to resolve conflicts.

• There are two scarce things in the Garden of Eden:
  • Standing room.
  • One's body.

• We need rules for the use of scarce resources; if rules do not exist, there will be conflict.

• Property rights are exclusive control rights assigned to specific scarce resources, to avoid conflict.

• Rules for the Garden of Eden:
  1. Each person has a right to their own body and for nothing to be done to them against their will.
  2. Each person can move anywhere that someone else isn't already occupying.

Real World Austro-Libertarianism

• Rules:
  1. Self-ownership over your own body.
  2. Origianl appropriation (homesteading): first-use, first-own; mixing of your labor with the land.
  3. Production rule -- he who uses his body and some originally appropriated goods to transform them and produce a good owns that good.
  4. Right to exchange and contract your ownings for someone elses on a voluntary, non-coercive manner.

• Alternatives as objections:
  • Slavery? Not universalizeable -- not everyone could possibly accept it.
  • I own what you appropriated, but you don't own what I appropriated -- not universalizeable.
  • Universal Communism -- we all "own" eachother. If I only own 1/20 of myself, then I need the consent of everyone else -- the permission of everyone else -- to do anything. However, "everyone else" could not give their consent, as they would only own 1/20 of their body, and would have to obtain consent, ad absurdium.
  • Likewise for all other rules.

• Our rules fulfill both requirements -- they are universalizeable and they allow mankind to survive, from the very first man on Earth.

• Justifying our rules by a second requirement:
  • Problems of "conflict" with animals or non-human entities are extra-moral (amoral) problems, technical in nature.
  • What is necessary to say, "here we have a moral problem"?
    • Must be capable of having a propositional exchange.
    • Must be capable of reasoning with them, arguing.
    • Both entities must be rational:
      • Demonstrate rationality by engaging in or attempting to do so.
      • Anyone who argues we can have a moral problem without engaging in rational argumentation contradicts themself becaus they are engaging in a rational argument; also, you can't demonstrate a moral problem without argument.
      • The a priori of argumentaiton.
      • Argumentation ethics.
  • argumentation ethics -- if you can argue for anything to be moral without making argumentation, you are contradicting yourself.
  • a priori of argumentation
    • Self-ownership -- otherwise, you have no right to open your mouth in the first place. Only because of this can you argue in the first place.
      • Objection: Doesn't show that we should argue rationally.
        Response: if we shouldn't, then you should shut your mouth.
      • Objection: Haven't shown that we have a right to use our body.
        Response: Non-sense, by making said argument, you're asserting such.
    • Original appropriatioan: The only alternative to it would be through declaration. If X can declare X owns erything, so can Y, and this is no solution to the problem of conflict over resources.

• You cannot own the market value of your property:
  • You only own the property itself.
  • Reducing the market value of other's property by competition is not aggression.

• You can homestead an easement:
  • If Y appropriates property and sends out smoke, nearby settlers appropriated dirty property, and can't complain.
  • You can only complain about it if you homesteaded clean land, and someone later starts polluting.

• You cannot make inter-personal utility comparisons:
  • This is because utility is just an ordinal ranking.
  • If one persons gains and so does another, you can say that both are better off. Ex ante, this is the ex anti result of any consentual agreement, exchange, contract, etc.
  • If X gains and Y loses, you can't say whether or not they're better off overall.

• Following our rules always results in a situation where both trading parties are better off ex ante (Pareto-superior).

Chicagoean "Rules"

• Coase/Posner argue we should avoid the more serious harm:
  • Whatever increases wealth is just.
  • Whatever decreases wealth is injust.

• Consider if A rapes B. Chicagoeans would analyze it as such:
  • A is not restrained, but rather this is a reciprical nature of problem.
  • A harms B by raping her.
  • B "harms" A by preventing A from raping her.
  • The question is to see which harm and to restrain that harm.

• If Ford tried to retire, we could enslave him and force him to work.

• We can enslave those who want solitude, because that is a criminal thing that reduces net wealth.

• This humbuggery means there is no stability in property rights:
  • If property rights are instable, the Chicagoean goal of wealth-maximization can't be achieved, because no-one knows something is their property. [my thoughts begin here]
    1. The Chicagoean system would produce very high time-preferences.
    2. Essentially, society would quickly revert to barbarism, resulting in mass-starvation and death.
    3. This is because, as no-one would be secure in their property -- as any wealth-maximizing hoodlum could grab their wallet if they thought they could produce more wealth with it -- people would have a much greater preference for future consumption as opposed to saving. Once something is consumed, no-one can take that consumption away from you.
    4. Hence, consumption would increase enormously and investment would decrease enormously.
    5. There would be no investment in new technologies, or maintaining current thing.
    6. Individuals would essentially be consuming their capital.
    7. Hence, society would regress to barbarism.
    8. The effects would not be so severe if only courts could decide who was the better wealth-maximizer, but there would still be much instability in property rights; hence, the Chicagoean goal of wealth-maximization would not be fulfilled
  • Hence, the Chicagoean system is self-defeating and self-contradictory, as it clearly does not result in the achievement of its own goals.
  • Taking the Chicagoean's goal -- wealth-maximization -- as a given, it is clear that the way to do this is by the aforementioned libertarian principles. The problem with Chicagoeans seems to be that they are compartmentalizing to just one situation, and not considering the overall societal effect their plan would have.