December 15, 2002
John Williamson Defends His Version of the Washington Consensus

John Williamson defends his version of the Washington Consensus:


Speech: Did the Washington Consensus Fail?: ...Let me remind you of the ten reforms that I originally presented as a summary of what most people in Washington believed Latin America (not all countries) ought to be undertaking as of 1989 (not at all times): 1. Fiscal Discipline. This was in the context of a region where almost all the countries had run large deficits that led to balance of payments crises and high inflation that hit mainly the poor because the rich could park their money abroad. 2. Reordering Public Expenditure Priorities. This suggested switching expenditure in a pro-poor way, from things like indiscriminate subsidies to basic health and education. 3. Tax reform. Constructing a tax system that would combine a broad tax base with moderate marginal tax rates. 4. Liberalizing Interest Rates. In retrospect I wish I had formulated this in a broader way as financial liberalization, and stressed that views differed on how fast it should be achieved. 5. A Competitive Exchange Rate. I fear I indulged in wishful thinking in asserting that there was a consensus in favor of ensuring that the exchange rate would be competitive, which implies an intermediate regime; in fact Washington was already beginning to subscribe to the two-corner doctrine. 6. Trade Liberalization. I stated that there was a difference of view about how fast trade should be liberalized. 7. Liberalization of Inward Foreign Direct Investment. I specifically did not include comprehensive capital account liberalization, because that did not command a consensus in Washington. 8. Privatization. This was the one area in which what originated as a neoliberal idea had won broad acceptance. We have since been made very conscious that it matters a lot how privatization is done: it can be a highly corrupt process that transfers assets to a privileged elite for a fraction of their true value, but the evidence is that it brings benefits when done properly. 9. Deregulation. This focused specifically on easing barriers to entry and exit, not on abolishing regulations designed for safety or environmental reasons. 10. Property Rights. This was primarily about providing the informal sector with the ability to gain property rights at acceptable cost.

The three big ideas here are macroeconomic discipline, a market economy, and openness to the world (at least in respect of trade and FDI). These are ideas that had long been regarded as orthodox so far as OECD countries are concerned, but there used to be... claim[s] that developing countries came from a different universe which enabled them to benefit from (a) inflation (so as to reap the inflation tax and boost investment); (b) a leading role for the state in initiating industrialization; and (c) import substitution. The Washington Consensus said that this era of apartheid was over. Some of the most vociferous of today's critics of what they call the Washington Consensus, most prominently Joe Stiglitz (whose recent book, for example, specifically endorses gradual trade liberalization and carefully done privatization), do not object so much to the agenda laid out above as to the neoliberalism that they interpret the term as implying. I of course never intended my term to imply policies like capital account liberalization (as stated above, I quite consciously excluded that), monetarism, supply-side economics, or a minimal state (getting the state out of welfare provision and income redistribution), which I think of as the quintessentially neoliberal ideas. If that is how the term is interpreted, then we can all enjoy its wake, although let us at least have the decency to recognize that these ideas have rarely dominated thought in Washington and certainly never commanded a consensus there or anywhere much else except perhaps at meetings of the Mont Pelerin Society...

Posted by DeLong at December 15, 2002 06:41 AM | Trackback

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Comments

Well, the problem with the Latin American economies, whether connected to the Washington Consensus or not, has been a recurring cycle of financial crises (especially featuring hyper-inflation) that well pre-dates the 1989 implementation timeframe that Williamson emphasizes.

The largest single problem I know of is the large external debts of every Latin American nation which have always been denominated in currencies other than their own. This structure almost guarantees a "run on the bank" at some point when the country's "competitive" currency policy threatens to become SO competitive in terms of trade that it threatens their ability to make payments on external debt. I don't know that controls on capital flows are the answer to the problem, or not, but the problem is a country-killer.

I did find this comment to be a telling difference between a conservative and liberal perspective: "If one regards poverty as an affront to human dignity, then one will care not simply about the level and growth of income but about its distribution as well."

From this conservative's perspective, the emphasis is wrong. Poverty is an affront to human dignity, but the emphasis should first and foremost be on policies that raise the bottom level of income distribution by the largest amount in real terms over time. As a libertarian, I think policies that afford everyone the most equal opportunity for success are also the ones that do the best job of raising the bottom level of income distribution, and that a natural by-product of that is a less dramatic distribution of income and wealth.

But I don't understand the enormous emphasis placed on income distribution. For one thing, an analysis of places that have tried to force equal distribution (communism and socialism come to mind) shows that the people in command of the forcing end up with a highly disproportional share of shrinking national income.

More typically, countless articles are written that measure economic success by income distribution, when it's actually more important to look at the real increase of the bottom income groups.

PS: Please don't criticize this as "trickle down", it's not.

Posted by: Anarchus on December 15, 2002 08:45 AM

"But I don't understand the enormous emphasis placed on income distribution."

This is one of the unfortunate results of John Rawl's writings. The late philosopher was well meaning but grossly ignorant of economic matters. He influenced a lot of his followers to emphasize sharing over making the economic pie bigger for everyone. The unwittingly destruction caused by Rawls will take years to undo.

Posted by: David Thomson on December 15, 2002 11:18 AM

He influenced a lot of his followers to emphasize sharing over making the economic pie bigger for everyone.
Oh please. First there are many spheres of human activity where it is relative and not absolute wealth which is important (e.g. political influence) - that is, it's the way the economic pie is shared, not how big it is that matters. Secondly, when the pie is shared so unevenly (in 1997, 20% of Americans possessed 80% of its wealth, and it's probably worse now), most people would benefit by redistribution, rather than making the pie grow 1% more (e.g. 3% rather than 2%). And thirdly, a more even distribution of wealth, could well increase economic growth ten or twenty years down the line. E.g. a sizable part of the population might have fewer medical problems or receive better education, and thus be more productive in the long term.

Posted by: Andrew Boucher on December 15, 2002 02:36 PM

This part is mostly false: "And thirdly, a more even distribution of wealth, could well increase economic growth ten or twenty years down the line."

Economic growth is generated by bright, energetic talented people creating wealth. Look at the two wealthiest people in America: Bill Gates and Warren Buffett. Did they inherit their wealth? No, they both started out as middle-to-upper people who were driven and talented and created tons of wealth and economic growth, none of which they can take with them after they expire. We need more of them, lots more of them.

More even distribution of wealth doesn't generate better conditions in the long-term if it's accomplished by taking money from the most talented people and given to the masses. It's an appealing idea, but it's been tried countless times in the last hundred years and it doesn't work.

Posted by: Anarchus on December 15, 2002 05:00 PM

To those of you hostile to redistribution, we don't even need to argue about Sweden. How about the US in the fifties? This was a period when the top marginal tax rate was extremely high, probably comparable to what is in the European social democracies today. And yet economic growth was high and the benefits were more spread out through the income distribution than today. A lot of conservatives even look back on that period as America's golden age...

And do you really think Bill Gates would have just stopped working if he had to pay a higher tax rate? After all, if his primary motivation was the increased spending power confered by having more money, he would have stopped long ago, since he's earned far more than he could ever possibly spend.

Posted by: RC on December 15, 2002 06:29 PM

RC: maybe the question should be: how many more bill gates's would we have if the marginal tax rate were lower?

or, how many more bill gates's would we have produced in the 1950s if the marginal tax rates weren't over 50%?

as for the so-called golden 1950s, marginal tax rates aren't the only thing that impacts economic growth, but they are important.

Posted by: Anarchus on December 15, 2002 08:32 PM

Anarchus, could you make your argument a bit more hypothetical?

Posted by: zizka on December 15, 2002 11:18 PM

Bill Gates, middle class? What evidence is there for that? His father, AFAIK, was one of the most powerful lawyers in the Seattle area.

Bill Gates, creator of wealth? Certainly he *concentrated* wealth in the pockets of shareholders and employees of MS. That does not allow the inference that he *created* wealth. Given the clear inferiority of MS's products and the attendant decrease in productivity, the notion the Gate's created wealth is dubious.

Warren Buffett, creator of wealth? Again, what's the evidence for this?

And what is the evidence that higher marginal tax rates on those with extremely high incomes would have discouraged the likes of Gates?

"As a libertarian, I think policies that afford everyone the most equal opportunity for success are also the ones that do the best job of raising the bottom level of income distribution, and that a natural by-product of that is a less dramatic distribution of income and wealth." Uh huh. Would you care to cite some empirical evidence? What constitutes "equal opportunity for success?" How does "equal opportunity for success" square with funding for schools based mostly on local property taxes?

Best,

Posted by: Stephen J Fromm on December 16, 2002 01:26 AM

"Given the clear inferiority of MS's products and the attendant decrease in productivity, the notion the Gate's created wealth is dubious."

Inferior compared to what; Apple or Linux? Not in any way.

And productivity has gone down? I thought the productivity numbers were suprisingly high.

The larger point though is correct. Bill Gates in no way created value equivalent to what he is worth - many of the people working for him did, and it disproportionately went to Bill. And without the natural network effect of software compatibility, this wealth could have been spread more evenly throughout other software developers.

Posted by: theCoach on December 16, 2002 04:20 AM

"As a libertarian, I think policies that afford everyone the most equal opportunity for success are also the ones that do the best job of raising the bottom level of income distribution,..."

As a Libertarian, I think that, regardless of what system does the best job of raising the bottom level of income distribution, it is just as wrong for a government to forcibly take money from one group and give it to another, as it is for a private individual (i.e., a criminal) to forcibly take money from one group, to give to another.

I have no problem at all with everyone in the country, or world, exerting social pressure on the rich to give more money to charity. (Now that he's gotten started, Bill Gates seems to be doing pretty well in that area, I think.) But extortion is wrong...regardless of whether it's done by individuals or governments.

Posted by: Mark Bahner on December 16, 2002 08:59 AM

I have to say that this looks more like an apology for the Washington consensus than a defence of it, and that Williamson (a really nice bloke on the few occasions I've met him) is wearing rose-tinted glasses in his characterisation of what did or didn't command consensus views in Washington. Either that, or he went slightly out of the loop when he left the IMF for the IIF and forgot quite how nasty, arrogant and dogmatic a lot of the people actually designing the programmes really were.

Particularly, I'd like to see some -- any -- evidence that the IMF ever took the sequencing debate seriously, or any evidence that anyone paid more than lip service to the case for capital controls.

Posted by: dsquared on December 16, 2002 09:03 AM

"Bill Gates, creator of wealth? Certainly he *concentrated* wealth in the pockets of shareholders and employees of MS."

Did they steal any of that money? Unless they stole something, whoever paid them for all the software they've sold must have thought that they were gaining themselves. (Unless you think all those people bought MS software as charity for MS.)

Posted by: Mark Bahner on December 16, 2002 09:04 AM

Mark,
He certainly used the force of the US Government to make sure that people would not resell copies of his software under intellectual property rights laws (and lobbying to keep those laws beneficial to those with the rights), and to stop people from reverse engineering aspects of the software.
Is your position one of principle or one of efficiency?

Posted by: theCoach on December 16, 2002 11:03 AM

"Is your position one of principle or one of efficiency?"

Which position are you speaking of? My position that Bill Gates and MS didn't steal from anyone...that people voluntarily spent money on MS products?

If that's the position you're speaking of, I'd say it's principle, since I don't know what the (economic) efficiency consequences are.

"He certainly used the force of the US Government to make sure that people would not resell copies of his software under intellectual property rights laws (and lobbying to keep those laws beneficial to those with the rights), and to stop people from reverse engineering aspects of the software."

Yes, I consider those to be the same as using the force of government to keep people from stealing one's property. I've got no problem with asking the government to use force to keep people from stealing one's possessions.

IMPORTANT NOTE: Bill Gates and MS *did* steal at least one program that I'm aware of. They stole the old "Stacker" hard disk compression software. The company that wrote Stacker sued, and collected $300 million from MS, as I recall. Good for the Stacker folks! I certainly approve of that.

Posted by: Mark Bahner on December 16, 2002 02:02 PM

"Bill Gates in no way created value equivalent to what he is worth - many of the people working for him did, and it disproportionately went to Bill."

It "disproportionately went to Bill?" How? Did he or his "goons" put a gun to someone's head either to come to work at Microsoft, or not to leave Microsoft? If Bill Gates didn't put a gun to anyone's head, I don't see how what he earned was "disproportionate." How do you make that judgement?

Posted by: Mark Bahner on December 16, 2002 02:14 PM

"Did they steal any of that money? Unless they stole something, whoever paid them for all the software they've sold must have thought that they were gaining themselves. (Unless you think all those people bought MS software as charity for MS.)"

You got that exactly right: they *thought* they were gaining something. Software is amazingly overpriced, and MS clearly has a monopoly. Have you read anything about network effects?

Just because they *thought* they were gaining something doesn't mean they *were* gaining something (or at least very much).

"Yes, I consider those to be the same as using the force of government to keep people from stealing one's property. I've got no problem with asking the government to use force to keep people from stealing one's possessions." This completely elides the differences between material possessions and information.

I maintain that Microsoft has created very little wealth. How many important software developments were first pioneered by Microsoft?

Best,

Posted by: on December 16, 2002 03:22 PM

'I maintain that Microsoft has created very little wealth. How many important software developments were first pioneered by Microsoft?'

None. However, note that Apple didn't pioneer a thing either; the entire software industry makes its living ripping off academic researchers.

Microsoft, was full of extremely good businessmen, whether they used illegal tactics or not. Apple, by contrast, was full of extremely bad businessmen; their fundamental error was treating computers as luxury items.

Posted by: Jason McCullough on December 16, 2002 03:42 PM

"You got that exactly right: they *thought* they were gaining something."

So 100 million Frenchmen ;-) really CAN be wrong, eh?

"Software is amazingly overpriced,..."

Heh, heh, heh! I love people who are able to determine the "proper" price for items. Perhaps you should get a government job, controlling prices for software. If software is "overpriced" why in the world do people buy it?

"...and MS clearly has a monopoly."

The dictionary definition of "monopoly" is "one seller." Even for desktop computers, there is Linux and Apple.

"Have you read anything about network effects?"

Yeah, is that something like: "I can't find this software available for Linux or Apple." Or, "None of these drivers work with Linux or Apple."

"Just because they *thought* they were gaining something doesn't mean they *were* gaining something (or at least very much)."

Sort of like, "I *thought* investing in this Standard & Poor's Indexed Mutual Fund was a good idea!" Welcome to the real world...where the only certain things are death and taxes. (Hopefully, death to be eliminated before I'm too close to it.)

"I maintain that Microsoft has created very little wealth. How many important software developments were first pioneered by Microsoft?"

How many important automobile design features were pioneered by Toyota? Microsoft didn't invent the spreadsheet, wordprocessing programs, or Internet browsers...but their individual programs for each of those is close enough to the best, and they're tightly integrated.

It's simply beyond believable for anyone to say that Microsoft hasn't done SOMETHING right. Why in the world has Microsoft's founders, its employees, and its shareholders made so much money?

This reminds me of a personal story: Not to drop names, but I'm moderately related to a billionaire. This guy was in the publishing industry, selling some very popular hobby magazines. In the early 1980's he sold them *all,* for a couple hundred million, to concentrate on writing magazines for personal computers. Personal computers...in the days of the Tandy TRS (aka "Trash")-80. I thought he was the biggest fool in the world. I think he tripled or quadrupled his wealth in a decade. Some guys have all the luck! ;-)

Posted by: Mark Bahner on December 16, 2002 05:02 PM

"However, note that Apple didn't pioneer a thing either; the entire software industry makes its living ripping off academic researchers."

Yeah, right. It's a shame how those academic researchers are chained to their desks, and they and their universities are prohibited from making any money with the inventions.

"Microsoft, was full of extremely good businessmen, whether they used illegal tactics or not."

Well, if they truly stole ideas (like they did for Stacker), that considerably reduces their business acumen, I'd say.

Posted by: Mark Bahner on December 16, 2002 05:08 PM

"Yes, I consider those to be the same as using the force of government to keep people from stealing one's property."

The difference here is that a person would not really be stealing anything from you. The 'principle' part goes out the window, as your fellow libertarian, Will Allen, has implied. IP is around to provide an economic incentive for people to create it, and its rationale comes from its practical benefits. But if we are talking about results, then the libertarian platform goes out the window...

Posted by: theCoach on December 17, 2002 03:38 AM

Well, if my name is injected into the debate, I guess I will join in. Intellectual property IS a creation of government, for the use of an idea is fundamentally different from the use of other types of property. There is nothing morally definitive about a 17 year patent protection period, while any attempt to forcibly transfer citizen A's money to citizen B, for B's solely personal benefit, when such use of violence cannot be said to be required to prevent the greater forms of violence, anarchy or tyranny, is clearly simple thuggery, regardless if a majority acquiesces to it. If citizen A has 15% of his wages taken via implicit violence, and it is given to people who prefer playing golf or watching T.V., instead of engaging in activity that results in people voluntarily giving then money, then citizen A has been deprived of 15% of his wages by violent, golf-playing, T.V.- watching, thugs, and citizen A cannot use that 15% himself. If citizen A writes a catchy tune, and some other citizen uses that tune to sell beer, A has not been prevented from using that tune himself.
This isn't to say the state should not offer protection for intellectual property; a modern economy could not thrive absent such protections (how extensive the protections shaould be is an extremely debatable point), therefore some degree of implicit state-sanctioned violence can be said to be required to forstall the greater violence that likely results from economic decay. However, Disney's attempt to extend copyright protection for decades beyond the death of the work's creator is plainly as thuggish as Warren Buffett's receipt of social security benefits (perhaps Buffett gives it to charity; it is the honorable thing to do when forced to participate in thuggery). Actually, Disney is more thuggish, since not only is their attempt to use violent state power for purely personal enrichment, without any reasonable relationship to the need to prevent greater, more illegitimate, uses of violence, as thuggish as a 72 year old billionaire receiving part of the 15% of wages forcibly taken from the billionaire's fast food workers, Disney is actively lobbying for the access to such power, while Buffett had nothing to do with creating the property transfer scheme he benefits from.
Could I envision a property transfer scheme which might not be as thuggish as others, or perhaps not thuggish at all, given what might happen absent such a scheme? Sure, and publicly funded education, for example, might pass, IF it could be shown that absent such transfers, a sufficiently large enough percentage of the population would grow up so devoid of reasoning ability and knowledge that tyranny or anarchy might threaten. However, publicly funded, often well funded, education entities have often (although they have often done the opposite, as well) done such a poor job of performing their role, particularly among those who are supposed to be the greatest beneficiaries, that it does call into the question the legitimacy of publicly funding them. To continue to use force to maintain a reactionary regime, which is plainly wedded to failed methods, is thuggishness of the worst kind, like LBJ's and McNamara's use of the draft to pursue a war by means which they knew would guarantee failure. Teachers unions are, on whole (certainly they have some outstanding individual members), among the more hideously reactionary entities in our society, and they use state power in a way that does great damage to people who they ostensibly are supposed to serve.

Posted by: Will Allen on December 17, 2002 09:01 AM

Re JM's comment that "None. However, note that Apple didn't pioneer a thing either; the entire software industry makes its living ripping off academic researchers.

"Microsoft, was full of extremely good businessmen, whether they used illegal tactics or not. Apple, by contrast, was full of extremely bad businessmen; their fundamental error was treating computers as luxury items."

I have absolutely no sympathy for Apple. My point is that MS is collecting rents.

MB comments:

(1)"Heh, heh, heh! I love people who are able to determine the "proper" price for items. Perhaps you should get a government job, controlling prices for software. If software is "overpriced" why in the world do people buy it?"

That's silly. I'm not saying the government should control software prices. I'm saying that most people buying software have no understanding whatsoever of software and are willing to pay too much for it.

(2) "The dictionary definition of "monopoly" is "one seller." Even for desktop computers, there is Linux and Apple." Sure. Substitute "quasi-monopoly" or "near monopoly" for monopoly. My point still stands.

(3) "How many important automobile design features were pioneered by Toyota? Microsoft didn't invent the spreadsheet, wordprocessing programs, or Internet browsers...but their individual programs for each of those is close enough to the best, and they're tightly integrated.

"It's simply beyond believable for anyone to say that Microsoft hasn't done SOMETHING right. Why in the world has Microsoft's founders, its employees, and its shareholders made so much money?"

It's not unbelievable at all. It just takes a market with many ignorant consumers and high barriers to entry. Ask yourself: what's MS's profit margin? What's Toyota's profit margin? And why is this so?

WA's comments:
(1) "Intellectual property IS a creation of government, for the use of an idea is fundamentally different from the use of other types of property." Agreed.

(2) "This isn't to say the state should not offer protection for intellectual property; a modern economy could not thrive absent such protections (how extensive the protections shaould be is an extremely debatable point), therefore some degree of implicit state-sanctioned violence can be said to be required to forstall the greater violence that likely results from economic decay." While I think maybe violence is a little too strong a word here, I agree. If you look at the constitution, the government has the right to grant copyright and patent in order to further the creation of ideas. That this entails granting the creators of ideas exclusive licenses is *derivative*.

Best,

Posted by: Stephen J Fromm on December 17, 2002 09:39 AM

Will, I am glad I goaded you into the debate. I do not know if this is really answerable from you perspective, but do you favor your views for practical, pragmatic reasons, or out of a first principle against violence, or some relative combination of the two?

Posted by: theCoach on December 17, 2002 10:10 AM

I am very uneasy when I hear people confidently state what degree of protection should be afforded intellectual property to afford optimum results; I don't think anyone has a very good handle on this very complex question, although there are arguments, such as eliminating patents on drugs, or extending copyright for decades beyond the death of the work's creator, that are clearly ridiculous.
As to my use of the term "violence", in regards to what implicitly lies behind all actions of the state, it is done deliberately, in order to contest the lazy notion that ANY action by the state is benign in nature. Ultimatley, it is the threat of incarceration, or death, by violence that lies at the heart of ANY activity of the state. The person who describes himself as a pacifist while advocating anything other than anarchy (and such people would soon perish if anarchy were to ever prevail) is intellectually dishonest, often ludicrously so. The fundamental purpose of any state is to achieve a near-monopoly on violence, and to apply violence to those deemed legitimate targets. The question of government then is, ultimately, what is one willing to kill people for? I disagree with those who are willing to kill out of a desire for "fairness", since "fairness" is a hopelessly nebulous quality, entirely dependent on which vantage point that one, or a majority, is making an observation from. I prefer to avoid killing until that time it can be shown that the killing is required to avoid still greater amounts of killing, partcularly that which accompanies tyranny or anarchy. Thus, I am willing to kill to enforce traffic laws, since a effective transportation is required to have a functioning society, but I am unwilling to kill to see Disney have copyright extended to life plus 80 years, or to have Social Security and Medicare benefits extended to Warren Buffett, or to fund the operation of military bases that are uneeded for national defense. Of course, many activities of the state aren't as easy to classify as these, which allows room for considerable debate of a reasonable nature. The fact that there is room for reasonable debate, however, cannot not mask the implicit and unavoidably violent nature of all state activity, which should give pause before the sphere of state activity is expanded.

Posted by: Will Allen on December 17, 2002 10:15 AM

Coach, as you might derive from my post above, it is a mixture of principled and pragmatic reasons which drive my perspective, as it must be for any political outlook. To paraphrase Richard Posner, the person who cries "Let justice be done, even if the heavens fall! usually is not actually being confronted with the heavens falling, and if he were, he wouldn't spout such nonsense. My first principle is that violence is only legitimate when it is needed to prevent still greater violence. Since much of what the state engages in violence for is unrelated to the prevention of greater violence, I find much of what the state engages in to be illegitimate. I am also pragmatic enough, however, to realize that there are wide areas of legitimate disagreement as to what is required to prevent the most pernicious froms of violence, tyranny and anarchy, and thus it is not always clear as to what constitutes legitimate state action, and thus a majority (I do favor representative govenment) will sometime violently impose it's will on a minority in a way that the minority believes illegitimate. To guard against majority overreaching, I think the founders of this nation were quite wise in their system of checks and balances and federalism, although that system allowed some groups to prey upon other minorities (e.g. Jim Crow-era lynchings) in a particularly illegitimate manner for a very long time. Nothing is perfect in this Vale of Tears, but it is preferable to have a state which is held in check by clear limits, defined by clear reading of law, than a state which becomes only limited by simple majority will, for a majority cannot morally legitimate violence which has a illegitimate purpose (not being required to prevent greater violence) and the state is ultimately the most brutally violent entity in any society. We would be better governed if people would hesitate more prior to applying the whip, and my desire is to persuade people to actually think about whether what the advocate, in terms of implicitly violent state action, is truly a legitimate use of violence.

Posted by: Will Allen on December 17, 2002 10:46 AM

WA: I agree that actions of the state are implicitly backed by violence, though one shouldn't equate "violence" with "killing".

"The fundamental purpose of any state is to achieve a near-monopoly on violence, and to apply violence to those deemed legitimate targets." While of course state power can be abused (as you point out, correctly), I claim this is a good thing: the state of nature is unbelievably violent. We cede to the state a monopoly on the legimitate use of violence in order to secure our joint safety. (This is a notion that extends as far back as Aeschylus's _Orestia_ [spelling?] trilogy, AFAICT.)

Next comes the question, what are the legimitate uses of the force of the state? I would include taxation with possibly redistributive effects. The bottom line is that it is the *state* which defines property.

Best,

Posted by: Stephen J Fromm on December 17, 2002 11:53 AM

Well, to deny the use of state power to collect taxes is to advocate anarchy, and to erect the straw-man which states that the advocacy of a far more limited state is equivalent to the advocacy of anarchy is all too common. I never disputed that the state was necessary, what I disputed was the use of state violence to achieve goals that had nothing to to do with avoiding tyranny or a state of nature, which as you rightly note, can be even more violent than what government engages in, although it is hard to envision a state of nature that is MORE violent than what Hitler or Stalin accomplished through use of government. To pass a law (note the use of the word "law", not "requests" or "suggestions") is to implicitly threaten with death those who fail to observe it, and subsequently refuse to submit to the sanctions that follow the failure to observe. Again, the basic function of the state is to kill people who won't toe the line. This is an ugly little fact that is no less true or necessary for it being ugly, which leads to P.J. O'Rourke's memorable question; "Would you kill your Grandmother to pave I-95?". O'Rourke answered in the affirmative, as I probably would also. I would not kill anyone, however, to build the Texas Rangers a baseball stadium, or to subsidize the profits of Archer Daniels Midland, or to transfer income to folks who had the ability to satisfy their basic material needs through voluntary transaction.

Posted by: Will Allen on December 17, 2002 01:02 PM

"The difference here is that a person would not really be stealing anything from you."

If you spend 2000 hours writing a book, and I take the MS Word file you've made, and sell 10,000 copies on the Internet for $5 a download, have I stolen anything from you? I think I have. Without your permission, I've taken the file that represents 2000 hours of your time.

Similarly, if I take computer code, I'm essentially taking other people's hard work, and using it as my own. I don't think that's wrong...IF they give their permission to do that (as with open source software). But I don't see any difference between taking a person's computer code without permission, and taking the hypothetical MS Word file without permission.

"The 'principle' part goes out the window,..."

I don't see the "principle" going out the window, at all. Either way--taking the MS Word file for a book, or taking a computer program file-- someone is taking something without permission.

"IP is around to provide an economic incentive for people to create it,..."

Yes, just like laws against stealing any other property are around as an incentive for people to acquire that property. That's precisely why Zimbabwe is going down the toilet, and the former Soviet Union went down the toilet, and why everywhere that doesn't protect property rights goes down the toilet. For example, it wouldn't have made much sense for me to buy my Beemer, if there was no law against someone stealing it. (I would have just stolen a Lexus, anyway. ;-))

"But if we are talking about results, then the libertarian platform goes out the window..."

Complete BS...at least from a historical perspective. In fact, countries are wealthy in almost a direct proportion to how libertarian they are, or have been.

The countries that are farthest from libertarianism (e.g., North Korea, Cuba, Afghanistan, Iraq, etc.) are poorest. The countries that have historically been closest to libertarianism (especially the United States, which was founded by men who were closest to the Libertarian Party, of all modern parties) are richest.

Libertarianism isn't some untested, pie-in-the-sky philosophy. It has ALREADY proven itself to be the greatest wealth-generating political philosophy in the history of man.

Posted by: Mark Bahner on December 17, 2002 02:04 PM

'Yeah, right. It's a shame how those academic researchers are chained to their desks, and they and their universities are prohibited from making any money with the inventions.'

Um, Mark, virtually the entire modern personal computer is a ripoff of the work of the old Xerox Alto lab. Windows NT is just an overgrown Mach kernel (developed at CMU) with a GUI design taken from Xerox's work. Ethernet cards are taken from Xerox. *All* of the internet was government researched and produced. Web browsing was invented at CERN.

It's not a bad thing that private industry is using the fruits of college researchers (why would it be?), but the computer industry does remarkably little of its own research. Try to think of something MSFT invented; it's pretty hard.

'I have absolutely no sympathy for Apple. My point is that MS is collecting rents.'

Yeah.

'Complete BS...at least from a historical perspective. In fact, countries are wealthy in almost a direct proportion to how libertarian they are, or have been.'

Europe, socialist hell on earth according to libertarians, is right after the US and Japan on the income list. I think you're confusing "libertarianism" with "existence of any property rights at all" for your comparision.

Posted by: Jason McCullough on December 17, 2002 02:57 PM

Europe and Japan are going to be fascinating to observe over the next two or three decades, as they deal with large welfare states that inhibit economic flexibility (if ya' think the U.S. Social Security issue is a political third rail, the Western European welfare states are third rails on steroids) and rapidly aging populations. Will they allow immigration to bring in needed young talent? Or is their statist culture such that ambitious, talented, people would prefer to come to the U.S.? I think the U.S. would be wise to open the door to any Europeans (along with anybody else) who are willing to come here, and forgo state assistance (I know, Constitutional issues would arise), for the opportunity to live in a much more free economy. Of course, this implies that we do not adopt euro-sclerosis ourselves, but a nation can never have enough talented, smart, driven, people, and it is the interests of the United States to attract as many such people to re-locate here as possible.

Posted by: Will Allen on December 17, 2002 03:18 PM

"Um, Mark, virtually the entire modern personal computer is a ripoff of the work of the old Xerox Alto lab."

Leaving aside that this assessment is a complete CROCK...

...show me where the Xerox Alto lab had 40 gigabyte hard drives, CD/RW drives, 512 Meg RAM, and a processor with 10's of millions of transistors, running at GIGAhertz...

...how exactly is the "Xerox Alto lab" run by a university? The university of Xerox?

"It's not a bad thing that private industry is using the fruits of college researchers (why would it be?), but the computer industry does remarkably little of its own research."

Well, that's pretty amazing...considering that Microsoft spends $5 BILLION every year on research:

http://research.microsoft.com/research/theory/jehkim/articles/koreaherald.html

And Intel, in 2000, spent $3.891 BILLION on research and development (up a whopping 530 percent from R+D spending in 1991):

http://www.intel.com/labs/about/

And IBM has the largest industrial research organization in the world:

http://www.research.ibm.com/about/

If these companies are spending over $10 BILLION a year on research and development, why in the world aren't they developing anything new?

Posted by: Mark Bahner on December 17, 2002 04:16 PM

"I think the U.S. would be wise to open the door to any Europeans (along with anybody else) who are willing to come here, and forgo state assistance (I know, Constitutional issues would arise),..."

Constitutional issues would arise from NOT providing state (sic, I assume this means "government" as in the federal government) assistance?

The "Constitutional issue" is that every single penny of federal government assistance to anyone is absolutely unconstitutional:

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents."

James Madison, 1794, on a bill to provide $15,000 to French refugees.

http://www.city-net.com/~davekle/wew_cac.html

Or, another quote from that piece:

"I cannot find any authority in the Constitution for public charity. . . . [and to approve such spending] would be contrary to the letter and the spirit of the Constitution and subversive to the whole theory upon which the Union of these States is founded."

Franklin Pierce, 1854, on a bill to help the mentally ill

Posted by: Mark Bahner on December 17, 2002 04:40 PM

Isn't there a corallary to Godwin's Law that says any appeal to the Authority of Franklin Pierce ends all argument?

Posted by: theCoach on December 17, 2002 07:03 PM

>>Europe and Japan are going to be fascinating to observe over the next two or three decades, as they deal with large welfare states that inhibit economic flexibility (if ya' think the U.S. Social Security issue is a political third rail, the Western European welfare states are third rails on steroids) and rapidly aging populations. Will they allow immigration to bring in needed young talent? Or is their statist culture such that ambitious, talented, people would prefer to come to the U.S.? <<

Will, your media have been serving you abominably badly here.

First, whatever the Economist would like to imply, the population of Europe is aging at a rate of one year per year, same as anyone else unless they happen to be travelling at 99% of the speed of light.

Second, you might not have noticed, but you and Jason McC have been talking about "wealth" and "income" as if they were interchangeable terms. They aren't. Per capita income in the US is much higer, but per capita wealth in Europe is not really all that much lower than in the US. The obvious corollary of this (and of the trade deficits which the US has been running) is that Europeans have steadily been increasing their financial claims on the US economy over time. A lot of the solution to any European pension problems relies on simply clipping coupons and dividends on US investments rather than reinvesting the cashflow, and this is a problem for the US as well.

Third, you might not have noticed, but the European Union recently committed to increase its population by millions with the accession of eight former Communist and two Mediterranean states. Combined with massive immigration from the Balkans and North Africa, I think that your statements about European immigration policy are simplistic. The last time I looked, the UK was taking significantly more immigrants than the US as a percentage of the native-born population.

Posted by: dsquared on December 17, 2002 11:23 PM

Gosh, nearly missed this one:

>>This is one of the unfortunate results of John Rawl's writings. The late philosopher was well meaning but grossly ignorant of economic matters. <<

Rawls joins Chomsky and Derrida on the currently rather exclusive but fast-growing list of people whose books David "Intellectual Integrity" Thomson has lied about reading!

Posted by: dsquared on December 18, 2002 05:36 AM

Of course, to speak of "Europe" as a single entity is a misnomer, so I plead guilty to gross over-simplification.

Posted by: Will Allen on December 18, 2002 07:26 AM

'If these companies are spending over $10 BILLION a year on research and development, why in the world aren't they developing anything new?'

Excuse me; the hardware companies have been researching like gangbusters. I should have said "software industry," as this was brought up related to MSFT, and my contention is that the software industry gets a large supply of free research from the academy and government.

Again, I'll ask: if MSFT is so damn innovative, can you name a single thing they've researched? Something OS-related would be especially nice, as that's where their supposed advantage is.

Posted by: Jason McCullough on December 18, 2002 02:33 PM

"Isn't there a corallary to Godwin's Law that says any appeal to the Authority of Franklin Pierce ends all argument?"

I quoted James Madison and Franklin Pierce.

I could have also quoted Grover Cleveland, who vetoed hundreds of Congressional spending bills because, "I can find no warrant for such an appropriation in the Constitution."

I would gladly trade 1000 G.W. Bushes, Bill Clintons, Ronald Reagans, or Franklin Roosevelts, for a single James Madison, Grover Cleveland, or Franklin Pierce. Madison, Cleveland, and Pierce actually attempted to *honor* their oaths of office, to "preserve, protect, and defend the Constitution of the United States."

Posted by: Mark Bahner on December 18, 2002 02:36 PM

There is no question in my mind that Bill Clinton is the finest President we have ever had. He has the enormous advantage of witnessing the dramatic changes that have allowed for an end to slavery, segregation, imperialism, manifest destiny, etc. Roger Bannister was once a real fast miler, but his times do not hold up so well.
The Constitution is a different item than it was. Or would you not follow the Supreme Court interpretations of it, that were explicitly called for in the document itself.

Jason, Microsoft has been a hotbed of innovation in software. I do not understand what you are looking for- do they have to change the medium from 1s and 0s? They have done a ton of work on windows-based operating systems, messaging systems, memory management, hardware abstraction, automatic configuration, speech synthesis, speech recognition, database design, data-mining, ultra-low bandwidth video compression, compilers, type systems, internet software, next generation IP, object recognition, language integration, UI design...
of the top of my head that I have had some recent exposure to. What are you looking for?

Posted by: theCoach on December 18, 2002 08:07 PM

Jason, Microsoft has been a hotbed of innovation in software. I do not understand what you are looking for- do they have to change the medium from 1s and 0s? They have done a ton of work on windows-based operating systems, messaging systems, memory management, hardware abstraction, automatic configuration, speech synthesis, speech recognition, database design, data-mining, ultra-low bandwidth video compression, compilers, type systems, internet software, next generation IP, object recognition, language integration, UI design...
of the top of my head that I have had some recent exposure to. What are you looking for?

An example of a MSFT technology that was "sufficiently innovative" above what was known in the academy or at other companies. I mean, every single item you list above came out of the academy first (excepting autoconfig, possibly, which I know little about):

Messaging is based on the open SIP protocol.

Memory management algorithms have been an academic topic for years, and they outright say in documentation which they use; they're not new.

Database design & data-mining are all based on academic algorithms.

Type systems: MSFT has added nothing to the theory of programming languages.

Until very recently, they weren't even the first company to get these things out the door, either, and in very few cases was their solution technically better than that of their competitors.

Posted by: Jason McCullough on December 19, 2002 03:17 PM

Jason,
How about COM, MTS, or .NET(CLR)?

You are simply wrong about databases - there are tools everybody uses, but it is the putting together of all the data that mattered. Have you ever tried to use mySQL?

Posted by: theCoach on December 20, 2002 04:02 AM

COM - slight extension of RPC.
MTS - no idea.
.NET - complete ripoff of Java.

Databases - I agree that MSFT is pretty good at usability (the point of your MySQL contrast, I assume). Usability, however, is not one of the things people normally mean when they say "MSFT is innovative."

Mind you, this is coming from a MSFT contractor.

Posted by: Jason McCullough on December 20, 2002 04:38 PM
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