The Probability Broach, chapter 12

We’ve previously seen that in the anarcho-capitalist North American Confederacy, everything is cheap and everyone is rich. There’s no hunger, no poverty and no homelessness. In this chapter, L. Neil Smith makes his most direct attempt at explaining how this can be.

His character Ed Bear narrates that all it took was getting rid of government and all the taxes and other burdens it imposes. When they did that, people immediately became much wealthier, with no downsides. The advanced technology they have is a distant second-place explanation for their prosperity:

“Things aren’t unnaturally cheap. Win, we simply don’t tolerate a parasite that takes half your income and then builds more taxes into everything you buy! You people have been trying to get by on a quarter of your productive capacity—an eighth, when you count the costs of regulation—while the State eats up the rest! It’s a wonder you’ve survived at all!”

Last week, I responded to the preposterous claim that government “eats up” more than three-quarters of people’s productive capacity. If that were true, government spending would have to account for a large majority of GDP. It simply doesn’t.

Smith claims that “the costs of regulation” count for a significant fraction of the costs we pay. And it’s true: Regulation does create costs.

Safety gear makes window-washers more expensive to hire. Sanitary rules make restaurants more expensive to run. Trucking companies have to have rest periods every fourteen hours or so, forcing them to hire more drivers (rather than just buying cheap amphetamine pills). Pollution rules mean that chemical manufacturers can’t dump their waste in the nearest river. Pharmaceutical companies have to run large, expensive clinical trials to make sure that drugs work and are safe before they can sell them.

But he avoids the obvious followup: What are the costs of non-regulation?

You can’t just look at one side of the ledger and assume all the money you spent on compliance is wasted. What dollar value do you place on having clean air to breathe, clean water to drink, healthy food to eat that isn’t tainted or adulterated, and roads that aren’t littered with the smoking wrecks of unsafe vehicles? What’s the monetary value of workers not being killed on the job, or consumers being able to trust that the products they buy won’t poison them, or burn their house down, or do nothing at all?

L. Neil Smith describes government as a “parasite”, which is a telling analogy for how he sees the world. A parasite saps its host of energy for its own benefit, providing nothing in exchange.

This description only works if government is, literally, worthless – if it does nothing valuable, provides no services, confers no benefits. If government creates any value, then abolishing it isn’t a straightforward, no-brainer conclusion. It’s a matter of comparing the harms it inflicts to the benefits it provides, to see whether it’s a net positive in people’s lives. Smith doesn’t want to do that kind of cost-benefit analysis, so he insists every dollar paid in taxes just vanishes into a black hole.

But this is obviously false, whether he wants to admit it or not. Government does do useful things: roads, bridges, canals, water pipes, sewer systems, trash pickup, schools, fire departments, post offices, trading standards, stable currencies, and all the other infrastructure that our civilization depends on.

These things are built and maintained by tax dollars, with government as the coordinating mechanism to channel and focus the collective power of society. No single person could fund it all themself, and if millions of sovereign individuals tried to collectively organize these projects without hierarchy, they’d get bogged down in endless arguments over what should be done and who should do it. In Atlas Shrugged, I called this the “Hume’s Meadow” problem, after a thought experiment by the great skeptic.

Somehow, none of this reasoning makes an impression on L. Neil Smith and libertarians like him. They have a blind spot to all the ways that government improves their lives. They believe these valuable institutions just spring up out of nowhere when we need them.

Then they look around, wonder what government has ever done for them, and grumble that their tax dollars are going to waste. It’s Monty Python’s “what have the Romans ever done for us” skit, except it’s not being presented as parody, but as a straightfacedly literal argument in political theory.

In the very best case for an anarcho-capitalist, private companies would step in to provide the same services. They’d own the roads, the bridges, the sewers, and so on. But even if that happened, why wouldn’t these for-profit businesses squeeze people for at least as much revenue as the government takes in taxes?

Free-market competition isn’t going to help here. It’s not as if you’re going to have multiple road networks (or multiple sewer pipes!) connected to your house. And even if that somehow happened, why wouldn’t the companies that owned them conspire among themselves to fix prices so that they could all make more profit? There’s no law against that in this world!

After their lunch, Ed and Win follow up on the next lead in their case:

Laporte University, Ltd. is the local push-back-the-barriers joint where Bertram’s people shared facilities. The Confederacy draws no distinction between applied science and pure research. Those who can, do. They also teach. Those who can’t, maybe they wind up in Congress like back home.

Dora Jayne Thorens didn’t belong in Congress, unless you prefer the delicate way they put things in Victorian novels. A six-foot platinum blonde with a figure that should have won her a staple through the navel, she was also chief of paratronics research.

Win is the one narrating this leering paragraph, and I’d say the text was trying to depict him as a crudely sexist ogler, except it seems clear this is the author’s predilection being expressed through the character.

There’s no plot reason she had to be a beautiful woman (I puzzled over “a staple through the navel” until I figured out it meant she looks like the centerfold model of a man’s magazine). It’s just that Smith wants to populate his utopia with gorgeous blondes for himself to write his drooling fantasies about.

“Mr. Bear?” She looked at Ed, and then at me.

“We’re both Mr. Bear, Ed and Win. Did you lose this felt-tip recently?”

“I’ve got a deskful just like it. Is this what detectives do these days? It’s certainly service.”

Win says he found the pen in a desk drawer in the United States of America, and a light dawns. Dr. Thorens runs off, shouting to her colleagues that they’ve done it.

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Image credit: Bernard Gagnon, released under CC BY-SA 1.0 license

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The Probability Broach, chapter 12

Over lunch, Ed and Win Bear are debating the merits of their respective governmental systems. Win protests half-heartedly that his world isn’t all that bad:

“We must be doing something right, the U.S. is the most prosperous—”

“Slum in your world.”

“The poorest American’s rich, compared to other countries!”

“And the poorest Confederate’s rich, compared to most Americans. All your taxes and regulations freeze old wealth, and make new fortunes impossible—except for those with political pull. The rich fend off the law, while those below get picked clean by your IRA.”

“IRS, though I’ll concede there isn’t much practical difference.”

First of all, how does Ed Bear know anything about Win’s United States? He’s never been there or even seen it. He might argue on behalf of his own society about why it’s better, but how can he feel qualified to criticize someone else’s?

On top of that, this feels like a Gish Gallop, where one party in a debate throws out dubious assertions too rapidly for the other side to counter them all.

Taxes freeze old wealth? Including progressive tax systems, which tax the rich at higher rates and use the revenue to fund safety net programs for the poor? How does that preserve old wealth?

This is a bald-faced assertion that programs whose goal is to decrease inequality actually increase inequality. I’d argue the point, but there’s nothing to argue. Smith doesn’t even try to justify it; he just makes the assertion and leaves it hanging. It’s like Ayn Rand asserting that regulation makes coal mining more dangerous (somehow).

Now, I’ll grant it’s true that there’s such a thing as a regulatory moat: big companies that lobby for government licensing and burdensome regulations in order to suppress competition. The big players can afford the costs of compliance, while smaller competitors can’t. But the solution isn’t to have no regulations at all!

In fact, Smith’s own argument proves the point: large corporations will do anything they can to shut out competitors. In our world, laws restrain them from doing that, however much they might want to. In an anarcho-capitalist world, nothing prevents them from using dirty tricks or outright violence. They could hire an army of Pinkertons, or whatever the NAC equivalent is, to threaten competitors with a gun duel if they don’t leave town. Under the anything-goes customs of this society, that’s perfectly allowable.

This goes back to the common libertarian misunderstanding that a free market is a self-sustaining state of nature. Actually, markets require laws and regulators to protect their existence and keep anyone from tipping the playing field too far in their own favor. Just as a sports game needs rules and referees to keep from degenerating into a brawl – and it doesn’t invalidate this point that referees are occasionally corrupt or unfair – markets can only exist when authorities uphold the preconditions for free and fair commerce.

“Tell me, how long does an American work to buy a car?”

“He can’t, any more. We used to spread it over a couple of years, why?”

“Win, a Confederate hoverbuggy represents about three weeks’ earnings—don’t look at me that way! How about a home?”

“Nowadays, forget it. Ten years ago, maybe five years’ wages. Actually, you’re talking a forty-year mortgage, even with—”

“I paid my house off in six months. And Win, this meal you’ve kindly provided is an expensive one. Meep’s got decorators to pay, after all. We could’ve eaten under the corner for the same price in copper!”

It’s also cheap because the NAC has no food safety inspections or labs analyzing ingredients or safety, of course. Getting rid of those undoubtedly saves money. But who do you call if you get sick from that cheap lunch?

It’d be one thing to argue that we have too much regulation, which creates inefficiencies that make goods more expensive without adding adequate value in return.

Smith isn’t arguing anything so modest. He’s saying that if we scrapped all government, the payoff period of a mortgage would fall from thirty years to six months, and the cost of a car would fall from several years’ earnings to several weeks.

In other words, he expects us to believe that state-imposed overhead makes up something like 98% of the cost of a house or a car. And he generalizes this to all goods, claiming that taxes and the cost of regulations accounts for a huge majority of the prices we pay for everything.

There’s an easy, back-of-the-envelope way to check this. If it were true, government spending would have to account for a massive majority of GDP. (Because all that money the state steals from hardworking citizens presumably goes somewhere, and isn’t just put in a pile and burned.)

The real value, as of 2023, is around 36% for the United States. That’s broadly in line with most industrialized countries. Even if you assume that all this taxing and spending creates no value (a dubious point we’ll discuss next week), it’s clearly not the case that it overwhelms the economy to the point of crowding out all else.

“How come everything’s so fucking cheap? Don’t your workers have to eat? Or is everything automated?”

“Automation doesn’t help: it always takes more people to create and maintain the machinery, and a healthy economy’s real problem is chronic labor shortages. Things aren’t unnaturally cheap. Win, we simply don’t tolerate a parasite that takes half your income and then builds more taxes into everything you buy!”

Wait, what?

It’s hard to understand Smith’s argument, but he seems to be saying that automation doesn’t make the economy more productive, because it takes the same amount of labor to maintain the machines that make stuff as it would have to make that stuff by hand.

This is screamingly, unbelievably wrong. An assembly line with industrial robots can’t make cars faster than if each employee was a blacksmith hammering out the parts?

Of course automation makes us more productive. Why else would anyone bother with it? Why have we been inventing labor-saving technologies since at least the Roman era? This is an elementary failure, not just of political understanding, but of basic reasoning.

My best guess is that this bizarre assertion is the fruit of Smith’s ideologically driven one-reason worldview. He doesn’t want readers to conclude, incorrectly in his opinion, that the North American Confederacy is superior only because it has more advanced technology. (Because then a different society with the same technology would be just as good to live in.)

He wants readers to conclude that government and taxes are the only source of evil, and that every other good or bad thing about a society traces back to whether it has them. But to flatten a society down to the point where that’s the only thing that matters, he has to do violence to elementary logic.

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Other posts in this series:

• The Probability Broach