The Errors of Galambos

A number of years ago (six and a half, as of this writing) I wrote this article for posting in a Yahoo! forum devoted to Volitional Science.  I post it here, at this time, for historical reasons and to make it available to Galambos's students who may not be members of that forum.

The Errors of Galambos

Introduction

For a number of years I have thought about Galambos's ideas while reading more from other sources - primarily Austrian economics (which Galambos mentioned favorably, except in the context of epistemology).  Some of what I read served to support what Galambos said and some clashed with it.  In re-evaluating Galambos's ideas I came to the conclusion that he had made errors - in fact, significant errors - and that this forum is the place in which to discuss them.

Although I believe that Galambos made significant errors, my understanding of the world has certainly been enhanced by his teachings, and I believe that he may have long-term significance, assuming that his ideas are ever published or referenced in other publications.

Error #1 - The Definition of Property

The definition of property is constrained in that it applies only to "volitional beings," having been modified from applying only to "man" (SIAA, pg. 21).  Galambos was queried a number of times as to the test which could be applied to determine membership in this class, and he answered it simply by suggesting that a being could be blocked in its path and its choice to turn one way or another would indicate that it exhibited "volition."  Interestingly, if one blocks a plant and gives it the time, it will choose another route, but Galambos never discussed the killing of plants as problematic.

My view is that property is an attribute of all life, and that the cell wall is the first fence (it is possible that others will extend the concept into the realm of bio-chemistry or even chemistry, but we shall see that such an extension does not meaningfully impact the ideas I will express).  Each living thing values its own property as its existence and procreation depend on it.  Expanding our view to non-volitional beings makes the definition truly universal.

Why did Galambos not include plants?  I believe it is because the entire food chain then becomes one of property acquisition through destruction (he would have called it plunder) - a conclusion unacceptable to someone building a morality upon property.  Viewing all property in a positive light means that some living things must be excluded from the definition or we will have to admit that our entire existence is based upon the destruction of this positive value.

Error #2 - The Enshrinement of Property as the Central Concept in an Absolute Morality

If the definition of property is to be expanded as suggested above, what happens to an absolute morality based upon property?  My view is that it crumbles, and we must accept the fact that an absolute morality, if it exists, cannot be based upon property.  Von Mises clearly comes down on the negative side of the question - there is no absolute system of values (_Theory and History_, pg. 36) - and I mostly agree.  The only sense in which I may disagree is that there may be an objective (or absolute) system for man, but it is unknowable, just as the objective universe is unknowable.  However, through market action (the employment of the scientific method in daily life), we may approximate an implementation of this morality.  I believe that this implementation would be much as Galambos described.

The central concept of life is value - the relative subjective attraction to something ("something" is meant to cover the complete range of concepts which Galambos included in property).  Values are not rational (although not irrational, either) - one does not decide to like something or dislike it (Bernard de Mandeville, Fable of the Bees (Liberty Fund, 1988), Introduction, pg. lxxix).  Values alone, without constraint, would produce an unthinkable range of actions.  People would take what they wanted and civilization would be impossible.  It is the cost of achieving values which constrains action, and which brings about rational behavior through the act of choice.  If the apparent costs exceed the expected benefits, the action will not be taken (of course, people make mistakes in their estimations of either or both).  Costs come in at least 2 flavors - psychological, as in doing something which violates one's personal belief system (conscience) or the belief system of respected individuals; and material, as in jail time, shunning, fines or, in a free society, restitution.

If one is able to transfer the cost of achieving values to others, he generally does.  I call this latter behavior "political."  Political behavior exists at all levels of society and can be extremely destructive - no one in this forum needs to be made aware of that fact.  The basic point is that it is merely an avenue that may be chosen to achieve values - more income for the farmer, more hiking destinations for the environmentalists, more countries that have governments like ours that can be identified as great accomplishments.  The groups involved in this behavior generally perceive that they cannot achieve their values through market action or that the cost of doing so would be too great, and choose the lower-cost political approach.  As long as this option is available it will be chosen - by your family, your friends, your customers, your employer, etc.  Calling them "immoral" is more likely to alienate them and label us as "out of touch" or "looney" than to change their behavior.

Note that the killing of animals and plants for food, or the imprisonment of animals as pets, draught animals and food factories produces a net value.  We do these things because the only value the subject being provides is in the use we make of it - even as a "friend."  Our fellow human beings have been shown to produce greater value as friends and workers than as food or slaves.  For that reason and that reason alone cannibalism is non-existent and slavery appears primarily only in cases where immigration law makes it economic.

In the final analysis, the concept of morality is made unnecessary by market action.  Over time market action, acting through a discovery process (Hayek's words), will produce the institutions of property protection.  Whether or not they will match any pre-conceived morality is questionable.  In fact, I believe it is an internal contradiction to proclaim a market-regulated morality as both Galambos and Rothbard did.  What we can predict is that the institutions will reflect the values of their customers.

As a final aside, individuals are free to maintain any morality that they choose - Christian, Islamic, Utilitarian, etc.  However, it is the market where the benefits and costs of adherence to these ideals will be valued.

Error #3 - "There is no such a thing as a small interference with property!"

Sure there is!  If your neighbor's kid uses your pool without permission will civilization fall?  If a close friend is late for lunch or, god forbid, forgets it, do you banish him from the moral island?  If someone who provides you great value - say a customer or a teacher - treats you shabbily, do you end all contact?  Of course not!  You evaluate the situation (not necessarily by putting it in a spreadsheet) as to what you will gain by concealing or denying your displeasure against the loss incurred by speaking out or simply terminating the relationship.  This fact explains why "great" people can do the most horrible things and still retain the loyalty of those around them.  The more value they provide their associates the more they are willing to put up with abuse (Kay Nolte Smith, an objectivist author, wrote Elegy for a Soprano, an interesting novel on the subject).

Error #4 - The Protection of Primary Property is Antecedent to the Protection of Secondary Property

Galambos took what he perceived as an injustice (the lack of credit for his first-stage optimization work) and elevated it to the central problem of mankind.  That primary property protection is of value cannot be denied.  There is hardly a day that goes by in which a major story does not appear (Verizon vs. Vonage comes to mind) concerning intellectual property.  At the same time that the market is pursuing solutions to the problem there are also antagonists on the left (Richard Stallman of the Free Software Foundation for instance) and even within the libertarian community - just look at the diatribes against it by Stephan Kinsella on the Ludwig von Mises Institute blog (http://www.mises.org/blog) or read his paper, "Against Intellectual Property" (http://www.mises.org/journals/jls/15_2/15_2_1.pdf).

To expand on the libertarian intellectual property issue, they largely have a problem with it because a) intellectual property is not scarce in the economic - that is "rivalrous" (more than one person may use it at a time) - sense and b) property has moral implications which include the "right" to destroy someone in defense of it (they feel uneasy about the idea of killing someone who has, for example, recited a poem without permission of the author).  My response to "a" is that economics might be better served by orienting itself to value - a well-established Austrian concept - rather than scarcity.  To "b" I say that defense may incur costs and that killing with impunity is not part of any market system I expect to exist.

In any case it is clearly more difficult to protect primary property than secondary or primordial property, and it will only be protected when its protection can be supported by the institutions which are already successful in more mundane spheres (for instance a company which registers land titles may expand to register innovation titles).

Error #5 - Intellectuals Do Not Like Capitalism Because It Does Not Make Them Millionaires

This item is not a 100% error, as I believe it is half right (but maybe not the more important half).  Einstein described the "economic anarchy of capitalist society" as "the real source of the evil" ("Why Socialism?" in Ideas and Opinions, Albert Einstein (Bonanza Books, 1954), pg. 156).  F.A. Hayek wrote extensively on the idea that the spontaneous order we find ourselves in is the "result of human action but not of human design" (The Fatal Conceit: The Errors of Socialism, The Collected Works of F.A. Hayek - Volume I, W.W. Bartley, Editor (University of Chicago, 1989)).  Einstein's complaint is one that is shared by many intellectuals - that without specific design the market will not reflect the values they cherish (which may include things like income equality and free health care) and that human intervention will provide superior results.  These complaints are voiced primarily as declarations of "market failure" (the "digital divide" and the lack of "universal" health care come to mind) and generally lead to political pressure to rectify the "problem."  Possibly, making them millionaires would undermine these views, but my guess is that they would just be a new class of movie stars, and we all know their views, with a few exceptions, on markets.

I have learned in discussing the free society with people of, shall we say, "interventionist" leanings that the one thing that must be made clear is that market outcomes are not predictable and could be distasteful to them.  I believe that it has been a mistake of "capitalists" to claim that any specific reduction in state intervention (like California's "de-regulation" of the utilities) will produce lower prices.  It is entirely possible that the intervention has previously created a below-market price (as in flood insurance) and the reduction will produce higher prices which will impact the consumer negatively.  What I do believe is that the more free the market, the more prices will reflect the values of consumers.

Conclusion

There are other errors that are implied by those listed above, but the readers of this forum are certainly able to work them out for themselves.  I will be happy to respond to questions as time permits.

There is a history to all of this, and a lot of it consists of observing Galambos and arguing or discussing ideas with other FEI students.  What a shock it was to find out that other well-intentioned and intelligent people who heard what I heard disagreed with me on points that I thought were made so perfectly clear.  Agreement even on what was coercive seemed to be beyond possibility with some individuals, and it made me wonder if there was any hope of planet-wide agreement - in a generation or ever.  That led me to completely embrace Galambos's statements about self-interest - that primary property and freedom would never be embraced other than if it was in the self-interest of its consumers.  Such a market system could not be governed by a higher morality as that would imply a priesthood exempt from market forces.  So, in that process Galambos's strategy for success eliminated his concept of morality - or any extra-market value system - from my mind.

Galambos's contributions, if ever recognized outside the diminishing circle of his students, will be primarily in his strategy of building the free society as opposed to fighting for it, and in the independency tests that could provide a foundation for a primary property industry.  In the context of building such a society credit and insurance (possibly to be credited to Piet Bos) will certainly play major roles.  The connection between credit and cooperation may be made by the astute (FEI-educated) reader in Robert Axelrod's The Evolution of Cooperation which Dr. Thomas J. McQuade gave to me many years ago.

Galambos was an important person to everyone who knew him - however slightly.  His personality was so powerful and overwhelming that it made clear thinking difficult and opposition unthinkable.  I would not give up those years (1975-1982) for anything and count as friends a number of people I met at FEI.  My intent is certainly not to destroy Galambos, but to attempt to rectify error and suggest new ways of thinking which can lead to a society which is close, if not identical, to the one he described.

Brian J. Gladish
2007 April 22
Carlsbad, California

Does Legal Polycentrism Have a Circularity Problem?

Recently, Michael Wiebe wrote a paper criticizing legal polycentrism, the view that multiple competing protection agencies would offer results superior to that of a government monopoly.  In the abstract, Wiebe states:

To show that competition between protection agencies would have beneficial  consequences, polycentrists often cite results from price theory about market competition.  But there is a circularity problem here: markets presuppose a legal framework; hence before polycentrists can employ price theoretic arguments about market competition, they must first show that the legal requirements of markets are satisfied, that is, that property rights and contracts are enforced.

The implication is that property rights and contracts are not respected unless there is a legal entity -- one assumes, the government -- to enforce them.  It also seems to imply that prices cannot be set without this legal entity, meaning that money cannot exist without it.  This latter implication contradicts Menger's theory of the origin of money.  Of course, there are people who dispute Menger's view, but one suspects that Wiebe is not one of them.  Just as money comes into being prior to legal frameworks, so does respect for property rights and contracts.

One can imagine the first traders, crossing mountains with desirable goods from their home villages to be traded for items to be returned to and traded in those same villages.  These traders must have been confident of their ability to protect themselves and their property, either personally or with the help of more skilled defenders hired for the purpose.  They also must have had some idea of acceptable behavior, each one pursuing his own idea of legality.  There was no one that assured them that their property rights were going to be respected or their contracts enforced unless it was through their own resources.  Participants in black markets face the same challenges, each having his own idea of appropriate behavior.  These are examples of individual-based legality -- maximal legal polycentrism.

Interestingly, it seems to be more the lack of property rights and contract enforcement that brings protection agencies to the fore.  For instance, Eugen Weber's "The Western Tradition" contains the assertion that the Catholic Church began to supplant Roman officials as judges in property cases, because the latter were so corrupt.  Realizing that the police cannot protect them or their property, many neighborhoods have organized supplemental Neighborhood Watch programs.  Private arbitration is frequently part of contracts in order to avoid the risks of courtrooms where juries are generally ignorant of contract law or dismissive of property rights.  And as to the enforcement of the contracts between protection agencies and their clients, there is always the risk of violent overthrow by customers if withholding payment or changing suppliers is not an option.

The idea that informal institutions do not scale up is belied by eBay's feedback system, which rewards and punishes both buyers and sellers on an international scale.  Admittedly, there are problems with identifying those who, after defrauding buyers or sellers, close their accounts and then open new ones under different names.  eBay, of course, relies on governments to police these issues as they hold the monopoly of enforcement.  The credit reporting companies are also a large-scale reputation monitoring system that has clearly grown to supply a history of behavior to supplement the limited ability of one person to evaluate another in a single interaction (Robert Axelrod's The Evolution of Cooperation documents the increased advantage of cooperation in the prisoner's dilemma game when future interactions are expected, which credit reporting companies support by maintaining a history of interactions that is supplied to future,  currently anonymous, users.).  Even if the ability to scale up informal institutions was limited in the past, who can doubt that there are entrepreneurs ready to step in with modern technology to accomplish the task?

The fact is that polycentrism already exists and has existed on many levels.  We have the example in ancient times of the Roman state operating side-by-side with the Catholic church.  Gangs have their own rules operating within a hierarchy of jurisdictions, setting their own prices for illicit goods while existing outside the legal framework.  Inmates in prison establish illicit "hustles" in order to live better without any legal framework to protect them.  Money and trade evolved in POW camps where rules evolved subsequently to remedy "problems."  Lastly, on the nation-state level we see governments with different laws who, while not controlling common territory, do resolve problems of fugitives and differences in law, generally without violence.

Near the end of the essay, Wiebe advises the abandoning of the idea of privatization and then refers to the problem of organizing violence in society.  We may ask a question similar to Hayek's: The question is not of planning for protection but who shall plan?  Who shall organize the violence?  The central planner or the consumer by purchasing or refusing to purchase?  As the state disintegrates and expresses less and less interest in the protection of property rights and contract enforcement, individuals will have no choice but to plan for themselves.  At that point the situation may be saved by existing companies expanding their protective services or new companies with fresh approaches and technology.  At that point, whether there is an evolution into a new freer society or a reversion to another statist nightmare depends on the resources available to those who are committed to avoiding the latter.

In Wiebe's defense, it is clear that a society that has no respect for property rights or contract will not directly evolve a peaceful and private marketplace for security.  No such market system would spring into existence from a state of nature.  It is for this reason that no classical liberal or libertarian feels the need to respond to assertions that Somalia is a libertarian paradise.  An evolution in our knowledge -- the comprehension of the value of property and contract -- is required.

Also, there is no proof possible that such a market system would be stable.  It is possible that if humanity evolved a market system for protection it would devolve into despotic chaos, but that is no worse than the current situation (Robert LeFevre said it best [paraphrasing] -- "Don't worry, if you get rid of government and it isn't working, be sure that there will plenty of people ready to start one up again!").  If, however, as von Mises frequently suggested, the great majority of people value peace and prosperity, we might expect an evolutionary process in which the prey have more resources for protection than the predators have for looting.  If this situation comes to pass, stability can appear.

Finally, Wiebe states that his contention that there is a circularity problem does not constitute an impossibility proof.  He does seem to believe that there are statements about markets that must be proved in order to take conjectures about them seriously.  This justificationist approach does an injustice to market processes that are evolutionary and require no argument.  After all, if legal polycentrism comes into existence in a free society, it will not be because it has been imposed, but because it has arisen through those processes.  Libertarians who argue market outcomes through logic are displaying a lack of imagination and failing to realize that having a hammer does not turn every problem into a nail.