Below are the first ten blog entries of the Bootleggers and Baptists series on the Inverted Logic Blog. Going forward collective volumes of the series will be published for every ten blog posts, composing a volume. These volumes include supplemental essays and addendums written within the timeframe of the corresponding blog posts.
Staying within the structure of methodological individualismit is important to see how Smith’s Pin factory example (p.54-55) exemplifies the coordination of a group of economic agents. All working in unison towards the common goal of producing pins. All of these individual works comprise the overall assembly line. The totality of all the adjacent departments related to manufacturing makes up the internal structure of the firm. Any social institution whether it be a hobbyist club, social club, buyers club (e.g. Sam’s Club, BJ’, Costco), government, business, trade association, private governing bureau/authority (e.g. homeowners association), charitable foundation, research institute, study group, etc. are comprised of multiple individuals forming the group. It is flat-out erroneous to speak of the entire organization without any consideration for its members. The collective action of all the group members acting harmoniously to achieve the same ends is much more complex than treating these collective efforts as lumped together aggregate.
Each member of an organization has their internal objectives, thoughts, feelings, and desires. It can be said that all the active participants have their utility functions (p.25-26). Meaning that to some extent their wants, needs, and desires align with the overall group goals. For example, very few people like their jobs, but they voluntarily consent to the terms of employment because of their desire to earn money. Whether it is for the intrinsic satisfaction of possessing money or what currency can be redeemed for. Keeping within the theme of a Smithian analysis of social institutions, it is important to note that more than tangible goods are exchanged through interaction with others. We exchange ideas, culture, skills, knowledge, friendship, guidance, sympathy, morality, and moral support among other forms of desirable forms of social currency. Political activities tend to be a form of social association that is frequently marred by corruption and various forms of abuse. However, is the dynamic of politics overtly a zero-sum game? Not necessarily. As it can be viewed as a form of exchange, individual actors engage in various exchanges for mutual benefits (p.25). One example being logrollingthe practice of lawmakers trading votes/favors.
The intangible exchange of social commodities cannot be understated in formulating effective working relationships. One crucial assumption of Smith’s Theory of Moral Sentiments (1759)that we seek the “approbation” of others. In other words, we seek to praise and approval from others. We are constantly seeking the acceptance of our peers. Being well-liked on the individual level wields a significant amount of social currency. If the ability to seek acceptance and cooperation is applicable on the individual level, couldn’t it also apply to the harmonious relationships between groups of people? After all the scope of social and economic interactions operates on a continuum of scale, what is applicable on a minuscule level should also work on a larger scale. The principle is a general maxim governing social interactions, therefore it should be transferrable. One of the best ways to overcome cultural barriers is through finding a form of social exchange desired by both parties. It does not mean that it must take the form of economic exchange. It possibly manifests itself in alliances and treaties among nations. Special agreements, pacts, contracts among nonpolitical social units. Most often it takes the form of economic trade between foreign nations. The necessity of unilateral trade agreements is refutable. Consumer sovereignty is the true impetus of international trade. Despite the bluster and theatrics of vociferous diplomats and other garden variety elected representatives.
Why voluntary association over other coercive means do we yield harmonious interactions? There isn’t a magic bullet answer to this question. However, some insights from Public Choice pioneer Gordon Tullock may help elucidate a potential variable that sheds some light on this occurrence. It is the ability to choose our partners in voluntary social arrangements that reduce the instance of Prisoner’s Dilemma. If our trading partner is not being cooperative, we can easily do business with someone else. Because of the mobility of free association (which is purportedly protected under the First Amendment) we do not need to be held captive by aggressive or hostile social relations. Due to this consideration, it is easy to see the original sentiment behind antitrust laws, but much like all laws, they suffer from loopholes and other issues. Even from the standpoint of the definition of a monopoly. One of the common attributes of monopolistic market behavior is assessed by is market concertation. However, this is problematic how do we determine which market is categorically correct for the assessment of market concentration? Nevertheless, we can freely choose our partners whether in trade or other forms of social situations it reduces the occurrence of the perverse incentives to be noncooperative. Sullying our reputation deprives us of the esteem that Adam Smith surmised we all crave.
Considering that trade is one of the forms of association that fosters cooperation. Even if free trade is not the key to world peace, it still makes us less apt to raise the sword to our geographic neighbors. To repudiate the previous administration’s trade policy, international trade should be encouraged. It is only natural to perceive David Ricardo’s concept of comparative advantage as an extension of Smith’s pin factory. The premise of comparative advantage is that it can make production global and explains why we tend to import higher-order goods to produce commodities domestically. No one climate can best produce glass, grapes, and corkwood in the Cognac region of France. However, all of these components are required for assembling a commercially produced bottle of Cognac brandy. This specific region in France has some of the best grapes in the world for brandy production. The climate is wholly inappropriate for cultivating and harvesting the wood used in the stopper placed in every Cognac bottle. To avoid placing great restrictions on our ability to manufacture sophisticated goods, we need to trade with other nations. We can only truly achieve this through peaceful relations. Free trade in itself helps to facilitate peaceful relations.
Below is Adam Smith’s famous Pin Factory example detailing the benefit of a specified Division of Labor. This single paragraph has evolved to be one of the most heavily referenced tropes in all of political economy. Detailing the advantage of job specialization over having one person complete production from start to finish. The proliferation of job specialization is what has allowed for technological advancement and the development of more complex goods.
“…TO take an example, therefore,’-‘ from very trifling manufacture; making, but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), _ nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head ; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; mad the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day…”(Wealth of Nations, 1776, p.54-55)
See Interactive Pin Factory at Adam Smith Works (ClickHere).
Public Choice founder Gordon Tullock in his paper Adam Smith and the Prisoner’s Dilemma (1985) applies a game-theoretical lens to the Smithian assumption of “the discipline of continuous dealings”. In other words, the famous game theory trope of the Prisoner’s Dilemmaactually substantiates the idea that vendors are less likely to cheat customers if there is the chance of repeat business. Often in a Prisoner’s Dilemma, there is a strong incentive for defection, as we do not know how the other person will respond to our cooperation. It’s possible that we sustain a loss due to being double-crossed by the other player, even if the reward is greater if both parties choose to cooperate. In situations where the is a degree of asymmetry in the behavioral information and risks of losing is too high, cooperation is not likely.
Tullock shrewdly points out that market transactions differ radically from most Prisoners Dilemma scenarios in one crucial way. In commerce, our partners are chosen and can change at any given time (p.1074). Meaning that not only is trade less static than the typical Prisoners model, but the characteristic of fluidity also alters the rules of the game. If our trading partner is opting to be non-compliant, we can always choose to do business with someone else. Versus being limited to only one partner who may or may not have an adequate incentive to be cooperative. Also, unlike the controlled experimental conditions under which most Prisoner’s dynamics are observed, in commerce the relationships are ongoing (barring death, bankruptcy, or termination of the relationship) (p.1075). Under such conditions maintaining a positive reputation as a trading partner is much more crucial. Engaging in dishonesty or uncooperative behavior could be the death knell of that relationship.
Due to the desire to establish credibility among other firms and potential customers the “… prisoner dilemma vanishes..”(p.1076). If a firm is not cooperating with its customers and suppliers this will impact future interactions. The Masterpiece Cake Shop case is a classic example of this. Yes, the Cake Shop owners were well within their First Amendment rights to not bake a cake for a gay wedding due to religious convictions. However, that does not mean that their decision was a prudent one for the longevity of their enterprise. The bakery received a massive amount of bad press and poor reviews from socially conscious consumers. Resulting in a substantial loss in revenue. Providing the shrewd observer with an allegory conveying the importance of working with your customer base rather than against them. Ultimately, bad press can be the kiss of death for any mom-and-pop establishment.
Consequently, unfettered trade is uniquely insolated from the occurrence of Prisoners Dilemmas due to being able to choose trading partners for extended periods of time. Tullock details a scenario that reflects the typical cartel arrangement among competing firms in a specific industry. If there are five domain firms and one decides not to comply with reducing production there is not much the other participating firms can do (p.1076). Providing some insight into why most price-fixing agreements have a proclivity of failing. There is no safeguard preventing participants from reneging. The inability to choose our partners also explains the issue surrounding international relations. As we cannot choose our “neighboring countries” (p.1077).
Tullock also describes how to trust in business is established. It goes beyond merely providing a superior level of service or a high-quality product. In society, we are judged on a multitude of criteria, even when some of these characteristics do not pertain to the nature of our business. A business person may attend religious services or engage in philanthropy to cultivate the image of being a “safe partner” (p.1077). In the process of establishing one’s self as a “safety partner” what they really are doing is conforming to societal norms. This is precisely what fostering a good reputation entails. Through conforming to societal norms you are presenting yourself as a trustworthy person, who given a Prisoner’s contingency you will be more apt to cooperate (p.1077). Whereas an individual of a more subversive disposition would be more likely to defect. The true irony is that the customer is able to better trust the vendor than the vendor is the customer. Why? The high degree of costs involved in vetting and validating the integrity of the customer (p.1078). Outside of the customer writing a bad check (if anyone still writes checks anyone more) or is caught stealing it is difficult to monitor the myriad of patrons flowing in and out of the store.
Another consideration arises from the observation of the Public Choice pioneer that penned the cited paper. What if a firm or vendor already has a sullied reputation? It is insurmountable difficult to mend a shattered public image. Those with a poor reputation will “rationally respond” by continuing to engage in off-color behavior and practices (p.1079). From a prima facie standpoint, this self-defeating behavior may appear to be anything but rational. However, due to the high costs of repairing a damaged reputation, it is most effective to continue down the path of poor business practices (p.1080). Once trust has been broken it requires a lot of time and effort to win over the hearts and minds of the public.
Considering all of Tullock’s observations, it would appear that Smith’s notion of “the discipline of continuous dealings” is an enduring maxim of economic exchange. If we are accessible to multiple trading partners and are not held hostage by a monopoly, the potential for a Prisoner’s Dilemma dissolves (p.1081). Tullock also notes that with more potential vendors there is “improved” market information (p.1081). Meaning that proprietors will be much more knowledgeable about industry trends and intricacies of the product market. This partially due to having to keep one leg up on the competition. A bigger impetus for this accumulation of market knowledge is observable trends present in daily transactions. Hence why prices serve as the great information bridge between vendors and patrons. It can also be assumed that in a highly competitive market that customers are also savvier in markets where there are many vendors to choose from. As they are too beneficiaries of the follow of market information.
Some additional thoughts regarding the Marijuana industry’s response to the emergence of Delta-8. It is irksome to hear invested interests claiming that a competing product is unsafe. Sure, it is well within their right to free expression to do so. Doing so in the context of political advocacy takes on a completely different tone. Any concerns expressed by Cannabis trade associations regarding public health can only be seen at best suspicious, if not outright spurious. If a similar rate of taxation and the same regulatory requirements that Marijuana sales are subjected to were applied to Delta-8 it would provide Cannabis sellers and producers with an anti-competitive advantage. Because the overall psychoactive effects of the compound are less intense than Marijuana. Subjecting it to similar regulations could effectively put many Delta-8 producers out of business. There may be some individual that prefers this neutered variant of Cannabis, however, this would be a very shallow niche market.
The true travesty of the thinly veiled advocacy of the Marijuana industry is perplexing. It is mirroring the same public health campaigns championed by alcohol producers when states were initiating legalizing recreation pot. Back in 2016, the Beer Distributors PAC of Massachusetts funded and advocated for an anti-legalization initiative. It wasn’t that the beer industry was really concerned about public health, rather they were concern about their bottom line. From a shortsighted perspective is a rational response to competition. This approach is morally and economically flawed. You beat the competition by producing a better product not using political channels to erect more barriers to market entry. If you can’t beat them, join them. Many beer producers have started producing “beers” infused with Cannabis. Some notable examples include Hi-Fi Hops from Lagunitas and Ceria (from the creators of Blue moon). Why can’t Marijuana producers just jump on the Delta-8 train and ride it out until the DEA invariably crackdown on it? If producers are able to manufacture a wide array of edibles and extracts they can figure out how to synthesize Delta-8. No need to engage in false posturing under the guise of “public health”.
The federal prohibition of Marijuana much like most laws and regulations is subject to loopholes. One of the previous attempts to circumvent federal cannabis laws came in the form of designer drugs. Manifested in the development of novel molecular compounds that mimic the pharmacological effects of cannabis intoxication. Many of these manufactured chemicals resulted in adverse psychological and physical consequences. Due to the fact that these various THC derivatives were not directly restricted, for a time science was outpacing the law. Since the development of the first synthetic cannabinoid molecule in 1995 (JWH-018), there has been a vast proliferation of new molecules to replace the ones prohibited under federal, state, and local law. Essentially making this cat-and-mouse game of the late-2000’s-the the 2010s an all-out arms race. This is understandable considering the profits that can be made on the designer drug market. The synthetic cannabinoid epidemic from a few years back was a monster created by the “good intentions” of state intervention. If recreational Marijuana had never been illegal, there arguably would not be a market for such unstable chemicals.
The story of Delta-8 THC is nevertheless a byproduct of a blind spot federal regulation. However, so far the results have not been as detrimental as the development of synthetic Marijuana in clandestine laboratories. There are two different THC structures that exist that can be derived from cannabis. The Delta-9 THC subtype of Tetrahydrocannabinol is commonly found in recreation, medical, and black-market Marijuana products. Whereas Delta-8 is isolated from “hemp-derived CBD” and provides the user with a reduced state of inebriation. Not to mention it is not subject to the same degree of taxation, regulations, and restrictions as legal recreational and medical Marijuana. One glaring difference between how the two compounds are regulated is it is illegal to ship marijuana even in states where retail purchases are illegal (it is still illegal at the federal level). In stark contrast, Delta-8 products can be effortlessly purchased from online vendors. (At one point the author found a vendor on Amazon selling Delta-8 products). The discrepancy between how Delta-9 and Delta-8 variants of THC are treated under the law is due to a loophole in the Hemp Farming Act of 2018 (H.R.5485). The law permits the sale of plant byproducts below 0.3 % Delta-9 THC and does not exclude the sales of hemp goods with high concentrations of Delta-8.
Bootleggers and Baptists: We Must Regulate Delta-8!
Naturally, a loosely regulated alternative to Marijuana is going to incite the ire of the cannabis industry. It is certainly a lot less hassle to buy a serviceable substitute online than have to go to a dispensary. Meaning there is a potential loss of business for the storefronts and the vendors manufacturing/cultivating the materials for pot-related goods. The purveyors of Delta-8 have another adversary lurking in the background that would serve as an unlikely ally to the Marijuana industry. That would be the very regulators that place legal restrictions on cannabis. Setting the stage for another classic example of Bruce Yandle’s concept of Bootleggers and Baptists. A coalition formed by two unlikely factions sharing the same political goal. Per Yandle’s account of this phenomenon the “Baptists” provide the moral justification for the policy goal and the Bootleggers are the ones that benefit from the outcome. In regard to the regulations governing the sale and production of Marijuana, the regulators are something of a nuisance to the cannabis industry. The cultivation and sale of Marijuana require compliance with a multitude of state laws and licensing requirements. The overlap in common interests is peculiar at first glance. One only needs to remember that those selling and cultivating Marijuana are hoping that the regulators will level the playing field with equitable restrictions. Preventing business from being diverted to companies producing and selling this pot alternative.
The Advocacy of the Baptists:
The first rumblings of the need for clear regulations pertaining to the production of Delta-8 came from the Oregon Liquor Control Commission. One of the state’s compliance specialists claims that “15 to 30 %” of the constituents used to convert CBD to Delta-8 are unknown. From a “safety” standpoint testing for impurities and standardization of production could ensure product quality. There is always the lingering concern of producers that will take shortcuts that will lead to the Delta-8 being less safe. Providing insight into why regulators in Oregon have recently begun the process of formulating regulations for Delta-8.
The Misgivings of the Bootleggers:
As can be expected cannabis producers are not pleased with the prospect of competing against an unregulated product. It appears as if the Bootleggers are attaching themselves to the public safety argument posited by regulators. The Michigan Cannabis Manufacturers Association has expressed concern over the safety of Delta-8 products. Categorizing this product as an “immediate health risk” to consumers. Any credulous observer would perceive this statement as a concern for public health. Marijuana producers and sellers stand the benefit through reducing competition in the hemp/pot market. Looking to impose regulations and taxes on Delta-8 is merely asking for anti-competitive measures to compensate for business lost to firms selling this new product. This is nothing more than a form of rent-seeking. Publicly advocating for specific policies that you benefit from can only be viewed as a form of rent-seeking. Suggesting that competitors should be regulated is tantamount to asking the government for a subsidy.
If the direct feedback from social interactions can help facilitate morality and positive social relations, how can this be done on a larger scale? Corporations, nations, communities, coalitions, etc. are institutions comprised of many individuals. Staying within the framework of methodological individualism, we assume that the collective action of a single institution represents the unanimous will of all the individual agents affiliated with the organization. In a sense, the collective action “speaks” for the group. How does social distance influence the interaction between various institutions, nations, collectives, etc.? Per the insights in Smith’s book The Theory of Moral Sentiments (1759), a person’s socialization and moral development are shaped by their peers. How would we go about socializing an entire culture? What factors enable us to peacefully co-exist with our neighbors? There certainly are not any clear-cut answers to these vast questions. The best we can do is hone in on the variables that help support human flourishing and social stability.
Some people assert that a common cultural identity is a cohesive glue that keeps the fibers of society together. There may be some veracity to this opinion as possessing a common culture can reduce the potential for conflict. However, there are some profound issues with holding culture as the variable that unites mankind as a whole. For one, commerce is global. Anyone in the business world cannot merely associate with people sharing the same cultural experience. In theory, you can, however, you would be severely limiting the potential reach of your business. Due to globalization and technological advancements, clinging to cultural identity has become more futile. Another consideration is that associating with people of a similar cultural background (closer social distance) is detrimental to our ongoing moral development. Demonstrating the fallacy of nationalism from both practical and moral perspectives.
If the cultural distance is inevitable what is one way we can bring people of various cultures together? Many people may suggest the use of international treaties. The parameters of such an agreement serve as nothing more than a compulsive obligation. Outside of state-sanctioned compulsory inclusion (which is not limited to treaties, but also pertains to sections of The Civil Rights Act of 1964), there is also social pressure to force the association between different cultural groups. We see this in the aggressive push for multiculturalism. The intentions of some proponents may be laudable, however, too often it is utilized as Trojan Horse for political opportunists. It should also be mentioned that does not arrive at cultural diversity through voluntary association. But rather from a form of informal social cohesion. While Smith may point out that conforming to this new norm would be an example of our peers shaping our moral development, this simply is not the case. Most of this rhetoric comes from the deepest fringes of academia. These norms are enforced through immense social pressure by a small minority of people who are out of touch with the real world. Cultural diversity is not something that can be forced by legal statutes nor by social cohesion. Rather it exists through the voluntary movement of people, which is a spontaneous phenomenon that cannot be artificially manufactured.
It is evident what fails to bridge the gulf between different cultures and societies. However, what can succeed at this seemingly insurmountable task? Here is where the themes of The Theory of Moral Sentiments (1759) and the Wealth of Nations (1776) converge. The social arrangement that keeps the appropriate distance for peaceful relations between strangers is commercial societies (p.13). Please keep in mind that this is not the recipe for sustained and eternal peace. No thinker has been able to formulate a tried-and-true solution for eradicating violent conflicts. Our propensity for violence may be an unfortunate proclivity of human nature that cannot be contained by reason or by institutional means. Providing validation of David Hume’s assertion that we are essential “slaves to our passions”. Voluntary trade may reduce the frequency of armed conflict between nations. In commerce, we do need to maintain a certain level of professionalism (self-command) to establish an effective working relationship (p.14).
To perceive free trade as a magic bullet would be a complete fallacy. For one, if it was the key to enduring peace, world peace would have been achieved back in 1776. Ultimately, Smith viewed trade as a potential source of tensions between nations. It has been argued that Regan/Thatcher-era proponents of Neo-Liberalism overstated the role free trade plays in facilitating peaceful relations. If the tides of economic nationalism are not stifled international trade continues to serve as a weapon against rival countries (p.4). The growth of military strength tends to coincide with an expansion of the division of labor (p.5). Economic development reduces the perceived costs of entering armed conflicts (p.2 &5). Smith contended that the root of international conflict was power imbalances among nations (p.34). The prospect of an imbalance of economic power in global trade is the core assumption behind mercantilism. Exemplified in the rhetoric surrounding trade imbalances.
Even though Smith did see trade as a potential source of tension, does that mean that free trade could not reduce the social distance between different culturally distinct nations? No. It may not be the cure for global conflict, but it can reduce the instance of it occurring. There is something of a reciprocal relationship between social stability and economic advancement. The “violence trap” of the feudal era stymied economic growth due to instability in property rights (p.41). Coping with the constant upheaval of violent conflict is destabilizing enough to inhibit economic flourishing. While the prosperity of neighboring countries may conjure the envy of less fortunate nations, Smith suggested that the better-off countries should act as a model of what to aspire to. Rather than an adversary to hold in contempt (p.31). The rise of government and free trade may not conclusively prevent war, per Smith’s treatises that balance power and foster respect among nations helps reduce the instance of armed conflicts (p.32). Such agreements help align interests among different countries. From an economic perspective, unilateral trade agreements help balance the concentration of economic power among trading partners. Loosening the barriers to international trade not only broadens the market for domestic production but also works to reduce hostilities (p.33). Providing the power gap isn’t too wide and nationalistic sentiments can be dispensed with.
“By opening a more extensive market for whatever part of the produce of their labor may exceed the home consumption, it encourages them to improve its productive powers, and to augment its annual produce to the utmost, and thereby to increase1 the real revenue and wealth of the society. These great and important services foreign trade is continually occupied in performing, to all the different countries between which it is carried on. They all derive great benefit from it, though that in which the merchant resides generally derives the greatest, as he is generally more employed in supplying the wants, and carrying out the superfluities of his own, than of any other particular country. To import the gold and silver which may be wanted, into the countries which have no mines, is, no doubt, a part of the business of foreign commerce. It is, however, a most insignificant part of it. A country which carried on foreign trade merely upon this account could scarce have occasion to freight a ship in a century. (Wealth of Nations, p.358-359)”.
While voluntary exchange may not bring about world peace, it does help close the gap between different nations. Resources that could theoretically be dedicated to warfare are reallocated to production for the global consumer market. Providing a practical example of Frédéric Bastiat’s Broken Window Fallacy.War does not generate wealth, but rather rearranges the disposal of resources. Wealth may be correlated with the advancement of military technology. The development of military technology does not necessarily generate wealth. Beyond free trade re-directing resources from armed conflict to the consumer market, there are also other intangible effects. When we engage in trade with foreign countries we are also exchanging culture and ideas. Attending a business meeting in Japan, American executives may consume food that they are not accustomed to. May even learn some of the subtleties of Japanese business etiquette. Through their Japanese counterparts providing the social ques imperative in business transactions in Japan. Talk about challenging a person’s impartial spectator. The American businessmen walk away with more than a new business partner. They are also exporting cultural traditions, new business practices, and even new types of food when they arrive back home. When we have more familiarity with another culture we are less apt to fear them. In turn meaning, we are less apt to bomb them. Closing the cultural gap requires not only a certain degree of openness but also an effective working relationship.
In my previous blog post, I address the role of social distance in moral development. Per Paganelli’s interpretation of Smith’s TMS(1759), we reduced our self-command when we are around people we are emotionally attached to (p.12-13). Much of our moral development arise from socialization. Making our self-restraint a combination of learned behavior and social conformity. The schoolyard may be the proper environment for individuals to fine-tune their social awareness. Does our moral development stop once are no longer school age? I would suggest not. If anything it a continual and lifelong process that is always in progress. If anything as we grow older, the expectation of others and social norms become much more intricate. Some of the basic principles learned on the playground are social conventions that are applicable in any social dynamic. The etiquette learned in the schoolyard is too rudimentary to comprehensively cover all the social nuisances of professional situations.
For instance, what is the proper attire for a job interview? How do I politely reject my boss’s dinner invitation? These are just a few examples of social scenarios of greater complexity that cannot be learned even in High School (arguably even in college). The reserved awkwardness of new hires fresh out of college exemplifies this deficit in workplace social skills. Outside of there being a likely age gap between the new employee and the rest of their co-workers, they are afraid of making a faux-pas. They are deathly afraid of being the person who takes the last of the breakroom coffee without making more (this individual is universally hated). They do not want to be disliked by their new pool of peers. To not look like a self-absorbed young person, it going to take time. The new employee will go through an acclimation process. The primary drive of this adjustment is going to be the feedback of their co-workers.
I would go so far as to even suggest that each new social environment requires some duration of social learning. The phrase “.. reading the room..” comes to mind. For example, even if an individual has worked as a salesperson for twenty years, as soon as they take a job at another company they now become the “new guy”. A new job entails new co-workers, a new boss, new corporate policies, new corporate culture. Despite this individual’s extensive experience they still need to go through an adjustment period. This seasoned salesperson now has to learn to adapt to the personalities, culture, and rules in their new work environment. Even in social situations where we are familiar with the location and the people, various factors lead us to constantly adjust to the feedback from others. If you were attending a dinner party at your brother’s house (only family members were in attendance) you would still have to mold yourself to the social conditions of the moment. You will taper your behavior to the dispositions of the other dinner guests. Social settings are dynamic and even the slightest change to one variable can profoundly alter the course of events. To a certain extent, we are always fine-tuning our Impartial Spectator to maintain social harmony. Social situations much like all complex systems have a loose structure with a set of informal rules. Although there is a resolute structure the one altered variable can drastically change the trajectory of the interaction. As the expression goes “high school never ends”, actually we never leave the playground.
Adam Smith is arguably one of the most misunderstood thinkers in all of philosophy. The public reduces the corpus of his work to a one-dimensional caricature of The Wealth of Nations (1776).Such characterizations of Smith’s work are carelessly painting with a broad brush. It can be suggested that when to draw new insights from Smith’s work we should be even more cautious. So much has been written on the body of his work, as Donald Boudreaux keenly points out, it is difficult to formulate any new meaningful insights (p.487). This issue is only compounded by the fact that new interpretations of Smith’s work run the risk of misrepresenting his brand of moral philosophy. Which is equally as shameful as representing a shallow representation of his insights.
One development springing from modern interpretations of Smith’s philosophical ideas comes from professor Maria Pia Paganelli. Back in 2010, she wrote a paper entitled The Moralizing Distance in Adam Smith: The Theory of Moral Sentiments as Possible Praise of Commerce.In her paper, professor Paganelli analyzes smith’s emphasis on the impact of relational distance and moral development. As Smith points out in The Theory of Moral Sentimentsbecause we are subject to “self-deception” due to our immense self-love (Paganelli [TMS III.4.2–6], 2010, p.6). Due to human nature, who wants to view their conduct in a negative light? In many regards, the moral tuning of our impartial spectator occurs due to social influences (Coase, 1976, p.5-7) It exceedingly difficult to admit when we are wrong. Never mind disclosing an outrageous oversight or a profound moment of weakness. Both are humiliating and are the kind gaffs we attempt to bury. The true interest insight from Paganelli is the fact that Smith contended that if our relationship is too close to a person, we do a poor job of shaping their moral development.
Surely, this does not apply to parents? After all, aren’t parents one of the greatest impetuses of moral development of children? Per Paganel’s research Smith’s TMS does emphasize that socialization is a byproduct of the impressions of others (p.7). It is unquestionably true that our emotional attachment to an individual has the potential of skewing our impartiality. The more emotionally attached we are to a person there is greater the aptitude we will perceive the course of events from a similar perspective (p.8). Paganel points out that Smith believed that parents were too “partial and indulgent” of their children to be the prime mover in facilitating their moral maturity (p.9). There is some qualitative validity to this observation. Anecdotally we have all heard a parent proclaim “… not my child..” in regards to the potential of their son or daughter engaging in unruly behavior. Most parents want to hold their children in high regard and implicitly view them as a genetic extension of themselves. To acknowledge the unpleasant truth little Johnnie is capable of stealing Mr. Johnson’s car is excruciatingly painful on two accounts. First, there is the discomfort of acquiescing your child’s capacity to engaging in morally abject behavior (despite years of the parents’ efforts to socialize their child). The second and more damaging pressure point is a sense of having failed as a parent. This extension of yourself is presenting you with challenges that could easily be interpreted as a sign of personal failure.
The emotional distance to aid children in developing moral precepts also cannot be too far. Helicopter parents fail to help their children erect a strong moral foundation. Smith also observed the same being true of children that are sent away to boarding schools. A parent being too aloof can have the same effect as being too indulgent, a child with a lack of respect (p.9). This phenomenon parallels what happens in foreign countries with opposing interests. If there is too much social distance between the two nations, factions will form (p.10). Creating a self-congratulatory echo chamber where there is not any room for negotiations or compromise. Rather the ire is driven by unconstrainted passions shouting the valiant chants and battle cries of nationalism. Too often nationalist fervor results in actual battle cries. Firmly illustrating how social distance has an impact on both the micro and macro scale of social interaction. Achieving the precarious balance of the correct social distance between various groups and individuals is key in achieving stable relations.
According to Smith what is precisely the correct amount of social distance? It is too herculean of a task to determine this balance at the level of nations. If this could have been achieved in a philosophic treatise back in 1759, wars would become a relic of the eighteenth century. Smith does suggest that the best platform for moral development is a child’s peers. Through a child adjusting themselves to the expectation of their fellow playmates, they gain a sense of self-command (p.11). Above all, we tend to have better deportment around strangers than we do our own family (p.12). This goes right back to the concept of social distance. When we are closer to someone on an emotional level we exhibit less self-command. One example would be a small business that attempts to foster a family-like dynamic. Most observers’ prima facie impression would be that such an ethos would create a “hospitable work environment”. Even though the idea of a workplace that creates a culture of close-knit comfort may sound endearing, it possesses a lot of pitfalls. For example, if an employee makes an error the business owner may take it personally. Since the business proprietor is not constrained by the formality of a corporate environment, they are free to curse and scold the offending employee. Like how a parent censures a misbehaving child. Demonstrating how the voice of the impartial spectator becomes more salient when others are in the room. A CEO of a company has their conduct limited to the expected deportment that the employees and board of directors find to be acceptable. Behavior outside of these norms will result in disapproval.
Over the past year, the COVID-19 pandemic has completely turned society upside down. Plagued by uncertainty the entire planet was alarmed in went into full panic mode. Leading us to the immediate question of how do we contain a novel virus when its origins are shrouded in mystery? Many of these reactionary policies may have modestly slowed down the spread of COVID-19, however, most of the state-sanctioned restrictions ended up causing unforeseen problems. The shelter-in-place orders resulted in the highest recorded rate of job loss since The Great Depression.The economic ramifications of various lockdown measures go beyond the immediate consequences. There was a November 2020 study conducted by USC projecting an overall GDP loss of $3-4 Trillion over the next two years.
Lengthy book treatments could be composed to fully detail all of the intricacies of the economic carnage of COVID-19. Unfortunately, the fall-out of the pandemic reaches well beyond the economic repercussions. Our overall health has been impacted. Not necessarily by the direct symptoms of COVID-19, but by a result of the lockdown orders. People have been less active leading to weight gain, which may lower an individual resistance to the virus. While physical health may be most salient to us because it can be observed by the naked eye, what about mental health? It is well documented that social isolation is a contributing factor to depression. A multitude of stories has been published describing the psychological struggles of Americans during the pandemic. The hardnosed statistician may be quick to dismiss these narratives as being purely anecdotal. However, many of the risk factors for suicide have been magnified since the beginning of the pandemic. There has been a notable increase in the suicide rate from 2019 to 2020.
The pandemic has also fractured relations between us and our fellow citizens. Clinging to our inner circles to avoid spreading COVID-19, we begin to become more tribal. The trust we once held for our neighbors has become eroded over the past year. Anytime someone sneezes we give them the side-eye. Fostering a climate of distrust and paranoia. This distrust has manifested itself in actual hate crimes and discrimination. Some reports estimate that hate crimes against Asian-Americans increased by 150 percent in 2020. What does this have to do with COVID-19? Quite a bit. It is speculated that the outbreak originated in the Wuhan province of China (p.2). Leading some to erroneously blame people of Asian ancestry for the spread of the virus. Creating friction between various communities across the country and only serving to make an already tumultuous situation worse. Asian Americans much like all other Americans have been grappling with the stresses of the pandemic. Adding racial tensions to the mix only serves to create more division and distrust. We need trust to have a stable society.
Could a voice from the past help us navigate these difficult times? Provide us direction in helping us heal from the carnage caused by a global pandemic? I would argue yes. That voice of reason comes from no other than The Enlightenment-era moral philosopher Adam Smith Many readers are probably thinking to themselves “… isn’t this the guy that told us to follow our self-interest. In other words, to be selfish?”. In a sense, yes. However, limiting the body of Smith’s work to the following passage is nothing more than a caricature of his overall contributions to economics, never mind moral philosophy.
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their interest. We address ourselves, not to their humanity but their self-love, and never talk to them of our necessities but their advantages. (The Wealth Of Nations, Book IV, Chapter II, p. 456, para. 9)”
The above paragraph may be the most famous one ever written by Smith, but it does not wholly define his breadth of work. Smith believes that markets and morality were inseparable, and you could not have one without the other. At the crux of voluntary trade is interaction. If we treat each other poorly and do not foster a good-working relationship trade cannot take place. To foster strong relationships, we as a society need a firm moral backbone. Morality provides us with the precepts to facilitate just and fair interactions despite conventional wisdom, this is crucial to success in business. If you are not running your enterprise justly your client will eventually find out and choose to do patronize another vendor.
Business ethics and social morality are intimately interconnected, one cannot exist without the other. That is why the two great works of Smith were meant to be read in tandem. The Theory of Moral Sentiments (1759) addresses social morality and The Wealth of Nations (1776)details the inner mechanics of economic exchange (catallactics). Both books dovetail together so well, reading one leaves you with a missing piece of the puzzle. COVID-19 has unquestionably harmed society economically and socially and both books contain the wisdom to help us get back on the right track. I am a great admirer of economist Don Boudreaux, but I do have to take issue with his recent assessment of Smith’s possible perception of the impact of social isolation resulting from COVID-19. Dr. Boudreaux states that Smith could certainly empathize with and rationally understand the distress caused by social isolation. I do not disagree with his inference, but I would surmise that Smith would want us to draw lessons from his work. To apply the concepts in both books to help us as a society overcome the hardships imposed by COVID-19. His work was not intended to be confined to the postulations of lofty ivory tower discussions, but also for practical application. What good is moral philosophy if it is never put to practical use? Why not look to the works of Adam Smith for guidance and solutions to help us navigate the uncertainty that is the COVID-19 pandemic?
Most of us that have a rudimentary understanding of economics, are familiar with the concept of the Law of Diminishing Returns. It is quite evident that this premise is unquestionably applicable to physical goods. Does this enduring economic law also apply to intangible commodities? It is salient once a person has exhausted the optimal quantity of solid objects. This is conspicuous in the disutility of engaging in hoarding behavior. While the optimum number of chairs a person should furnish their home with is debatable and depend on several factors, it is obvious once a person has amassed too many. Once an individual has so many chairs that it makes restricts accessibility to certain rooms in the house, becomes a fire hazard, or the homeowner can no longer contain all of the objects they own within the confines of the physical structure of their house- then it is problematic. Then rightward shift from the equilibrium point is universally expressed. There is no foreseeable value in obtaining more or maintaining your current collection of chairs. The assessment of whether you have too many chairs is no longer a matter of aesthetic preferences, but a matter of physical limitations. It is easy to determine once we obtained too many physical goods.
The saturation point is much more difficult to answer when about intangible goods (human capital, intellectual property, etc.). However, it could be argued that the Law of Diminishing does apply to human capital. The ultimate marketplace for human capital is the job market. Often we hear the term “saturation” be used to describe the labor market. Several factors can contribute to the overabundance of human capital available to employers. Periods of high unemployment leave firms with the ability to hire, a large pool of applicants to choose from. The saturation could be referring to a glut of similar skill sets or credentials. If history majors are a dime a dozen, but math majors are hard to come by, who is going to stand out in the job market? If everyone has basic Microsoft office skills, but there is one candidate in the resume heap that has an advanced certificate in Excel, needless to say, this will catch the eye of any hiring manager or human resources representative.
Degrees and certificates are not so much human capital as documentation of skills and formal education. Couldn’t the soaking point of specific forms of human capital also be relevant to soft skills? Well, why not? If can be applied to credential and soft skills then it must apply to more innate qualities. Such as personality types. Pre-employment personality tests not only qualify if a candidate is a good match for a specific job role but also help to bring more balance to team dynamics.
Going beyond even the job market or potential job prospects, human capital is integral in determining an individual’s overall trajectory in life. While other factors such as opportunity, motivation, and timing have a lot to do with success. Without the proper skills, most people will not rise above a certain point of attainment. One of the most coveted, but arguably overrated attributes in the panoply of human capital is general intelligence. General intelligence can only get a person so far. There is no one single factor that leads a person to success, but rather a multitude of different variables. The sum of the parts is greater than the whole certain applies. Providing some validation of Scott Adams’s postulations regarding complementary skills. No one needs to a virtuoso, but it is better to be reasonably good at many related skills than to fully master one. General intelligence is the archetypal example of being a master of one domain. We all have heard the platitude “… jack of all trades, master of none…” so frequently that it is deeply ingrained in our subconscious. However, this old saying has little applicability to the real world. It isn’t the smartest or the most diligent among us that succeed. Then again, the village idiot and the local ne’er-do-well burnout aren’t the ones rising to the top either.
Malcolm Gladwell’s book Outliers (2008) presents an intriguing example of why general intelligence alone will not ensure success. Gladwell details the near-tragic trials and tribulations of Christopher Langan. A man who is a bona fide genius. Despite his expansive and impressive intellect he never had the opportunity to thrive as a universally praised academic. Langan boosted an IQ of 195 shadowing the IQ of Albert Einstein forty-five points (p.70). As impressive as it sounds to have an IQ of 195, there is one important point to remember. A veteran scientist with an IQ of 130 is equally as likely as a colleague with an IQ of 180 to win a Nobel Prize (p.80). Meaning that Lagan’s intelligence while awe-inspiring could even be viewed as being superfluous. If a person with an IQ thirty points lower than Langan can be a Nobel laureate what value does the extra IQ points effectively bring to the table?
Despite Langan’s intimidating intellect he failed to even obtain an undergraduate degree. This was due to a string of unfortunate shifts in his vicissitudes. One notable incident transpired when he was enrolled at Montana State, he had car troubles and could not make his morning classes. He had a neighbor who offered to give him rides in the afternoon to school. Regardless of how much cajoled and begged the dean he was not allowed to change his class schedule and was forced to withdraw from his program (p.94-95). Langan’s foil must be Robert Oppenheimer who worked on the development of the atomic bomb during World War II (p.97). Here was a man who as a student attempted to murder his tutored (p.98). Not only did he get away with it, but later on after he completed his graduate program he managed to get on the prestigious Manhattan Project. It is evident his past transgressions did not dampen his career in any way. What truly separates both these men from one another? Both men were exceptionally bright, but one man couldn’t even convince his dean to do something as innocuous as changing his class schedule. Another got away with attempted murder. The difference was that Oppenheimer had a greater degree of practical intelligence (p.101).
The comparison between these two men illustrates that not only is there a ceiling in the benefits of having high general intelligence. There are also limitations if the only skills you have are related to general intelligence. Without practical knowledge, a robust IQ is tantamount to be a weight. We all need the precepts requisite to tactfully navigate the world. In the absence of this scaffolding, our intelligence is of little use and only serves to weigh us down.
The moral argument for a right to suicide is firmly grounded in property rights. To many readers the very notion that suicide and ownership of tangible objects are interconnected is farfetched. Upon a superficial assessment of the premise, it is easy to jump to this conclusion. Once we get to the philosophical taproot of the concept of ownership the overlap between the two concepts becomes much more apparent. Fastened to the pillar of natural rights, the right of ownership is crucial in establishing all other rights. The ability to retain, transfer, and exclude others from one’s property lays down the framework for all other negative rights we cherish. For example, if a dinner guest offends us with an off-color joke at our house, we have the right to ask them to leave. The right of excludability. If the dinner guest is aware, we are offended by specific kinds of jokes, they fully consent to the conditions of the dinner party by opting to attend. Due to this variety of informal rule creation, there is no need to implement laws prohibiting offensive speech. Individual property owners can decide what types of jokes or language will be tolerated in their household.
The basis for ownership of tangible items goes back to an even deeper principle of self-ownership. If we do not own ourselves how can we possibly possess physical property? Either in the title or tangible form. The philosopher who bridges the gap between self-ownership and ownership of objects, locations, and intellectual property is no other than the great John Locke. At the most rudimentary level, we must own ourselves before we can possess any additional property. The extent to which this self-ownership is applicable is debatable. We can legally own ourselves. We have autonomy over (in most cases) our corporeal vessel that holds our inner organs. An individual can also exert control over their mind. Where does the right of an individual to own one’s self arise from? This merely the abstract pontification of an out-of-touch philosopher? Most who have read Locke would staunchly disagree with the prior inference. Locke developed a concise explanation linking self-ownership to an unwavering natural right.
In Locke’s Second Treatise of Government (1689)he further expounds upon the natural basis for self-ownership. Arguably laying down the nascent substrate for the ethical arguments against slavery later on in the 19th century. The right to self-ownership is the result of divine providence. In Locke’s view, God gives us life and we are born free. For those who have more of a secular view of the world, it could state we are born free by our humanity. There is no grand authority that we must oblige by involuntarily transferring self-possession to as a result of cohesion.
“…Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his person: this nobody has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. (p.11)..”
Locke establishes that no one person has the right to own another human being. The implications of the above quote go beyond the abstract conceptualization of self-ownership. Due to a person owning themselves they also possess the fruits of their labor. If you work and toil to harvest lobsters in the icy waters off the coast of Maine, whatever you catch is rightfully yours. Providing you are not capturing so many lobsters that you are preventing others from having a chance to obtain the seafood delicacy. Nor are you procuring so many they will go to waste (p.12-15). Through self-possession and possession of our labor and the results of our labor, the natural rights argument for property ownership is pithily conveyed.
John Locke was correct about all people being born free and having possession of overall commodities, lands, and intellectual property that they have rightfully obtained through their labor. Where he went astray was asserting that natural rights are inalienable. Regardless of whether we procure these rights from god or as a result of our personhood, you can alienate these rights. Whether or not it is ethically justifiable is completely contingent on the consent of the individual. We have a natural right to free speech for example. While at work we temporarily or indefinitely suspend (for the duration of our employment) our right to unfettered speech as a condition of employment. There is nothing illegitimate about this arrangement because it expresses a form of tacit consent. If you truly disagreed with the rules of the company you otherwise would not accept the job offer. Agreeing to conditions of employment can operate as a form of selling our natural rights. If we truly own ourselves and possess all of the natural rights we are guaranteed in the Constitution, why couldn’t we sell the title to our rights to other people? That is effectively what we do when after signing an employment agreement. Our natural rights cannot be transferred or relinquished unless we willingly agree to conditions or arrangements that nullify these rights.
One particularly controversial example of this concept was formulated by the Austrian economist and political theorist Walter Block. Dr. Block postulates that voluntary slavery is not incompatible with individual freedom. Such a position sounds antithetical to liberty, however, understanding the context is key. There is a difference between being forced at gunpoint into slavery and choosing to be a slave. Why would anyone choose to be a slave? They or a family member may owe an astronomical amount of money to a private individual and the only means of making restitution on their debts would be a lifetime of unpaid servitude. It highly unlikely that anyone in modern times would consent to such an arrangement. Being able to sell one’s self to another person demonstrates an unfettered view of self-ownership. The laws prohibiting voluntary slavery are essentially are equally as unjust as keeping involuntary slavery legal. We can’t say that we truly own ourselves if we cannot do as we please with our bodies. That includes opting to sell ourselves into slavery.
The question becomes how does the argument for voluntary slavery apply to suicide? Logically it is predicated on the very same principle of self-ownership. If you truly own yourself and no one else has possession of your body and mind, then you have a right to kill yourself. As jarring as this statement maybe it is nevertheless true. If we truly possess an object or an idea we can do as we please with it. We can sell the item or bit of intellectual property, or we can dispose of it. Nothing is stopping us from purchasing the latest iPhone at full retail price and then upon receiving the device, abruptly throwing it into a trashcan. While by the assessment of convention sensibilities such an action would irrational or foolish, no one has a right to prevent this behavior from occurring. Regardless of the perception of others, the notion of ownership prevents others from intervening. Some may criticize this example because it is comparing a replaceable item with the irreplaceable essence of human life. This critique is a fair one, however, that does not make this a false analogy. The operative condition is the concept of ownership not what the individual is choosing to dispose of. Regardless of the origin of where we obtain our natural rights from we do own ourselves. Much like anything else we own we have a right to dispose of ourselves. This is not making a moral judgment about the act of suicide in-of -itself. Nor is this a tacit endorsement of suicide. However, legality is no measure of morality. Nor is pressure to conform to societal norms. If we legalized heroin use and prostitution tomorrow, these activities would not necessarily be moral. But they would be legal. While these activities may be immoral, inferring an individual’s right to poison their body or engage in infidelity is also immoral. Immoral on a grander scale. When victimless crimes have codified sanctions, they are generally backed by the threat of incarnation, fines, or state violence.
The decision to commit suicide is a deeply personal decision that should not be felt in the hands of doctors, psychologists, and especially nor legislators. Attempts to intervene in suicide attempts are naturally transgressive against the individual’s property rights. If indeed, we truly possess self-ownership.
The act of suicide is an action unconscionable to most people. Committing suicide violates one of the most basic tenants of human biology, the innate drive for self-preservation. Human beings are wired to avoid death at all costs. This proclivity towards instinctively evading peril is physiologically manifested in our internal fight-or-flight response. If our biologically ingrained will-to-live isn’t compelling enough to make the prospect of suicide perplexing, there are also normative reasons for finding the practice baffling. Some of these cultural norms have developed out of divine prescriptions. In the Abrahamic religions, for example, there are textual prohibitions against suicide. This divine restriction is even extended to instances of medically assisted suicide for the terminally ill. However, the philosophic obligation to live is not limited to a purely religious context. There are philosophical; traditions that shun suicide as an abdication of duty. One of the most salient examples of this is presented in the corpus of Immanuel Kant’s work. It can be argued that we have a duty to our family, friends, co-workers, and community to not kill ourselves. Some people love us deeply and count on us. How could we be so egotistical to not consider the radius of the fallout from such an act? The externalities of one person committing suicide stretch well beyond the victim.
Then again, this reason could be easily inverted. Who has the authority to mandate that suicide is a selfish act? God? Perhaps. Does divine prescription or other moral conventions give us a moral duty to intervene in suicide attempts? A resounding majority of people would unequivocally say, “yes”. Many would go so far as to advocate for codifying measures in formal statutes and ordinances to safeguard those with suicidal inclinations from harming themselves. This is substantiated by the fact that most states have laws that require mandatory involuntary hospitalization for suicide attempts. However, much of the conventional wisdom that surrounds the subject of suicide is quite perverse. Beyond the stigma that is attached to it, societally we have the wrong perspective on it. If people can subjectively determine the value of goods that they choose to buy daily, why can’t they do the same with their quality of life? Couldn’t we also extrapolate the same concept of marginalism to an assessment of individual wellbeing? Even the parameters set in place in jurisdictions where medically assisted euthanasia is permitted are too restrictive. The doctor tasked with ascertaining whether a terminal cancer patient should be able to end their own life is draconian. Involuntarily transferring this right to an authority figure by a matter of jurisdictional law. Who would be a better judge of the patient’s quality of life, than the patient? The judgment of the physician at best a partial informed inference. Lacking the all if qualitative sensations of anguish characterizing most terminal illnesses.
While medical-assisted suicide may be legalized in some regions for those at the end stages of palliative care, it remains taboo to permit suicide for those suffering from psychological distress. This discrepancy in logic is quite puzzling. In recent years there has been a plethora of campaigns to have mental illness be publicly recognized as an illness. Generally done so in a top-down and highly pedological manner (naturally the experts curing the ignorance of the commoners). Generating a myriad of various pithy slogans so succinct they could fit on a bumper sticker. There is some glaring hypocrisy in these initiatives. While yes, I agree that mental illness is an illness. In most cases, there is even a biochemical basis for the mental illness. For example, serotonin deficiencies resulting in depression. If there can be a terminal stage of physical illness, why wouldn’t there be a terminal stage of mental illness? Who would determine this arbitrary line in the sand? This unpleasant and inconvenient fact is conspicuously absent from the mental illness is an illness movement. That is unfortunate because the tendency of sugarcoating serious issues does little to solve significant problems. Trivializing this mental health movement to caricature of what it could be. Reducing it to a mere humanistic feel-good movement. Nevertheless, if as a society we aim to treat mental illness on an even field with physical illness, it is only reasonable we allow those with mental illness to commit suicide if they see it fit. This may sound callous or even cruel. The same could be said for forcing someone to live who does not want to.
Public goods are commodities that are nonrivalrous and nonexcludable. Nonrivalrous meaning that the use of the commodity by one person does not prevent another consumer from utilizing the resources. Non-excludability entails that nonpayers cannot be restricted from using the commodity. Either due to the cost of preventing free-riders from enjoying the goods being extraordinarily high or a physical impossibility. However, does the conventional notion of public goods formulated by Paul Samuelson retain its veracity. Sure some goods are nonrivalrous. Most nontangible subscription services would count as being nonrivalrous resources. Having more subscribers will not deplete the amount services provided to new customers or club members. Television services and the more modern example of streaming services would be examples of nonrivalrous goods. Similar services such as internet services operate in a grey area because there are rivalrous and nonrivalrous aspects of providing internet access. On one hand, the internet is seemingly infinite. The on-ramp to a vast see of information, communication, and entertainment. On the other hand, “… the computer networks on which it depends (its “physical layer”) accommodate a finite amount of traffic..”. Meaning that from the standpoint of the capacity of the physical hardware that facilitates internet access the consumption of one user could restrict the use of another.
Many of the clear-cut examples of non-rivalrous goods utilize subscription fees or club dues to exclude free-riders. The chink-in-the-armor of the standard public goods definition is the very notion of non-excludability. Why? There are two main reasons for the concept of non-excludability being a blind spot. The ability to restrict free riders from using a good or service is only constrained by “human ingenuity” (p.4). Technological advances can lend themselves to reducing the costs of making a good excludable. A prime example of this being the invention of barbed wire making it cost-effective to fence off a private property in the American great plains (p.4). In effect, such advances in technology make public goods categorically fluid (p.4). Potentially making any commodity a prospective private or club club. Access to navigable waterways, roads, courts, and defense are all examples of goods that we unquestionably perceive to be public goods. However, this status is tentative and subject to change once people implement effective barriers to accessing such goods.
The second flaw in the non-excludability argument is that government provision does not impede consumption by free-riders. Even though “… the specific nature of the goods it is institutional context…” (p.280) defense services are considered a public good. Due to the high cost/ impossibility of excluding a single household, it would be a public good in the traditional sense. The private provision of defense services would provide positive spillover effectsfor free-rider neighbors who refuse to subscribe to these services. These freeloaders would benefit from the protection their neighbor paid for potentially shielding their household from harm. The scale of excludability maybe the problem. It may be impossible to single out a household from defense services, however, it could be done in a slightly larger unit. For example, homeowner’s association’s having contracts with specific defense companies. Per the HOA agreement drafted for every potential homeowner entering the community, the parameters of the subdivision’s defense plan are detailed. Including the fact that the HOA dues cover defense services. Under signing the agreement, the single homeowner consents to the arrangement. If they do not, they can purchase a home in a subdivision with different rules. Similar to the typical amenities currently provided by HOA in North America, prevalent examples being community pools, parks, basketball courts. Shifting the mechanism for excludability from a centralized government to a smaller-scale voluntary club arrangement.
Through the institutional re-arrangement of the scale of collective units purchasing defense services, excludability could theoretically be achieved in the private market. However, the federal government fails to provide any degree of excludability for the public goods of defense. It’s not just the nature of the good being provided, but rather the scale at which it is distributed. In the current system, the provision of defense is distributed in a generalized top-down fashion. With no real variance in the quality of defense services. Whereas more upscale HOAs may have different defense packages than the run-of-the-mill subdivisions. Analogous to the difference in amenities at higher-end hotels. The top-down approach still allots services to free riders, those who do not pay taxes. Individual citizens who evade taxes or are otherwise not contributing to the tax pool still receive defense services.
Even if excludability could not be achieved in the private sector, why does is this criterion a crucial indicator that the state must produce or manage the resource? If state intervention fails to properly produce private goods, how can we expect such measures to adequately manage common-pool resourcesand club goods that are incorrectly labeled as public goods. Often many “public goods” are rivalrous or excludable.
In The Enterprise of Law (1990), Bruce L. Benson describes the commons problem impacting state provision of legal services (courts, corrections, law enforcement, etc.). The provision of law is generally viewed as being a public good, hence why is distributed by the government. The assumption is that the establishment of law would be nonrivalrous. However, due to various factors frequently it becomes that the provision of law is a depletable service. The courts and the deployment of law enforcement officers are done on a “first-come, first-served” basis (p.97) implies that these services are rivalrous. There are only so many police officers available to address the home break-in you just reported. This indicates limitations on the manpower at the disposal of the local police department. Meaning that other consumers (tax-paying citizens) are preventing you from using these services. This problem is only compounded by the fact that it is estimated that 80 percent of what officers are tasked with is not outside of their job description (p.98). Also, that there over 99 percent response rate to false alarms with security systems (which 95 percent of all alarm triggering are false alarms) (p.99). Unless fines are implemented to address the occurrence of false alarms, the residences and businesses’ guilt of this offense do not bear the negative costs. Much like using police officers as social workers, these examples of misallocating resources prevent police officers from being utilized to their full capacity. Making this analogous to the scenario of overgrazing detailed by Garrett Hardin in his seminal 1968 paper. This commons problem does not happen in isolation. Frequently many of the frivolous laws that divert the attention of the police from violent crimes are passed by legislators or lawmakers. For example, laws that criminalize victimless crimes such as prostitution (p.98). Operating only to exacerbate the existing commons problem with the allocation of policing resources.
It may be fair to suggest that Thier’s Law and Gresham’s Law are not necessarily opposing ideas. Rather they are both rule-based phenomena. Essentially, the nature of legal tender laws dictates which variety of money (higher-valued money or lower-valued money) is hoarded. How can we be so sure? Let’s take Thier’s Law for example. Let’s take the below definition of the monetary concept from an outstandingly well-written undergraduate thesis on cryptocurrency.
“Thiers’ Law, named after French historian Adolphe Thiers, asserts that in the absence of legal tender laws forcing them to accept both currencies, sellers will choose to transact with the currency of higher perceived long-term value. (P.9)”
In the context of this very description of the concept, the mention of the “absence” of legal tender laws comes into play. Meaning that given there are no rules coercively forcing us to accept the two currencies of varying degrees of intrinsic value at the same nominal value. Giving the observant reader the impression that the occurrence of Thier’s Law is the byproduct of the rules governing monetary exchange. In contrast, Gresham’s Law has always implied the existence of legal tender laws. The overvalued money with the distorted nominal value would never be assigned such a value by the market. Such a proclamation could only come in the form of government fiat. Gold and silver (bi-metallism) are of equal nominal value because the king says so. Regardless of the edicts of royal decree individual market participants are going to respond accordingly to the irrational rules set forth by the king. That would be to use the less valuable silver in day-to-day transactions and save the gold.
In terms of formulating effective rules, one needs to have a panoramic understanding of the potential consequences. Even the downstream outcomes are not easily foreseen. Providing some validation of F.A. Hayek’s notion of the Pretense of Knowledge. No one person, organization, or collection of governing institutions has all of the information required to plan for every scenario. Making it foolhardy to enact inflexible rules that operate as if the definite outcomes can be methodically calculated. Treading down the path of the socialist calculation debate is fruitless as the refutations on both sides of the aisle have already been exhausted. The fall of the Soviet Union alone should serve as a historical anecdote of the fallacy of planned economies.
It should be noted that information asymmetries and unforeseeable outcomes are a natural consequence of having limited information. Explaining phenomena such as cobra effects, because certain repercussions cannot be known until it is too late. These distorted outcomes as the result of flawed rules can happen on a much smaller scale than that of the national economy or a country’s legal system. Something as mundane as a birthdate cutoff to participate in youth hockey can spur some surprise inequities in the trajectory of young hockey players. This example springing from the pages of Malcolm Gladwell’s 2008 book Outliers gives us some keen insights into the potential for implicit flaws in rule formulation. Gladwell details the observations of psychologist Roger Barnsley (p.22-23) upon perusing the program of the Canadian national youth hockey championship. Barnsley noticed that the majority of the players had birthdays ranging between January and March. Is it possible that there is a certain qualitative factor distinguishing children with birthdays earlier on in the year? If we examine the zodiac symbols of those born in January and February there are characteristics that are conducive to success. However, there is little scientific merit to astrology anyhow. Barnsley had another explanation for this discrepancy between Canadian Hockey players born in January versus July.
Barnsley astutely directs us towards the factor of birthday cutoffs for eligibility to play youth hockey in Canada. This fact was substantiated when Barnsley discovered that roughly 40 percent of all elite hockey players were born between January-March, 30 percent between April-June (p.23) Demonstrating the role of the individual player’s birthday in determining success. Having a January first cutoff, privileged prospective players born in the earlier months of the year (p.24). The main difference being that the boys born in earlier months were more physically mature. In turn, received more attention from the coaches lending this dynamic to an early delineation between talented and untalented players (p.25). Due to the difference in age eligibility cutoffs in American youth football and basketball leagues, they did not exhibit the same distortions in the distribution of talent (p.26). Engendering a Matthew Effect or what is otherwise known as an accumulative advantage. Adam Smith even points to the concept of accumulative advantage in The Wealth of Nations. Explaining how in a sense the poor pay the price for the poor decisions of their forefathers.
Many proponents of meritocratic social arrangements may scoff at the idea of making rules that are fair. However, if the rules are providing a lopsided advantage to one group, are the results truly the result of superior performance or the distortion created by the rules? Few would ever view the occurrence of instances of regulatory capture or rent-seeking as a triumph of free-market competition. Rather just the opposite, it is an example of interest groups bending the rules to suit their own needs. Careful consideration needs to be made in how we set and enforce rules to avoid distorted effects that handsomely benefit a few and harm a great many. Gladwell succinctly sums up this point very eloquently:
“Because we cling to the idea that success is a simple function of individual merit and that the world in which we all group up and then we choose to write society don’t matter at all.” (p.33)
While variables such as luck, talent, ingenuity, and hard work can all have a role in success, we cannot forget that how the rules are written can also have an inseparable impact on outcomes. Even rules that are inadvertently written in a manner to favor one group over another without consideration of merit is a flawed rule. Marred by an unforeseeable blind spot that nevertheless has generated distorted outcomes. These outcomes are not truly the byproduct of talent or work ethic but by technicalities that create illusory perceptions of actual skill.
If Gresham’s Law applies to retain human capital in the job market, is it possible that Thier’s law (p.9) could also be applicable in certain contexts? On money, when legal tender laws forcing vendors to accept both forms of money at nominal value, economic agents will choose to transact with the higher valued currency. Presenting an axiom that is the opposite of Gresham’s Law, “ Good money drives out bad money”. Typically in the arena of monetary economics, the divide between advocates of Gresham’s Law and Thier’s Law is a sharply delineated dichotomy. Most proponents of one will not defend the possibility that the principle could apply to the circulation of money.
However, in terms of the circulation of human capital these concepts are not necessarily opposed. Employee retention is the byproduct of several highly qualitative attributes that are generally specific to a certain firm. In corporate vernacular, the term “culture” is thrown around so frequently that it has become a buzzword deeply embedded in the American psyche. Companies such as Google, go to great lengths to demonstrate that they have a flexible, open, and innovative corporate culture. The veracity of the claims is ultimately judged by the perceptions of the individual employees. One employee may adore working at Google, while their colleague completely despises the company’s ethos. Making the ebbs-and-flows of human capital even more complex. Employee retention at the individual level is based upon a multitude of various factors. The aggregated collection of the opinions of all the individual employees regarding their work-life satisfaction tends to paint a fuller picture. If while perusing Glassdoor, you happen to see a company with eighty-five two-star ratings, chances are this is not the petty slander of a few disgruntled employees. This is why oftentimes companies will periodically send out surveys to their employees in an attempt to measure overall morale throughout their organization.
Putting aside the highly individualized variable of career satisfaction metrics for an entire firm, if there is a pattern of talented employees leaving, there is a retention problem. Sometimes this may be isolated to a specific department even if the firm as a whole has no issues keeping competent and productive workers. Certain companies and even job roles select for specific attributes that may not be conducive to attracting skilled and reliable labor. Some industries are notorious for high turnover rates, one salient example being the hospitality industry. I remember a few years back, being in between jobs, so I briefly worked at a call-center. For me, this was an income stream until I found something else, for many of the people in my training class it was a lifelong career path. This path was a volatile one. Staying only a few months at one company and then abruptly quitting, generally with no notice. Upon receiving a new job offer, I gave my supervisor my two-week notice and he was astonished by the fact I even bothered to take this step. After only six months, only five people (including myself) out of the twenty-five in my training class remained. Industries and job roles with high turnover may be more willing to retain employees with fewer skills or with a poor performance history, due to the outflow of higher-skilled employees. Perfectly mirror the effect described in Thier’s law, instead of money, the commodity that is flowing out of the firms is quality human capital.
The question becomes how can these opposed ideas transpire concurrently in the same labor market or even the same company. The answer to this question is predicated upon a “rules of the game” type logic. Each company and each interior department within a firm operate as governing bodies directing the task of workers. Meaning both varying capacity function as “ruler-makers” within the company. Think of corporate policy as being analogous to the federal government, while the department formulated rules are similar to state law. Clearly, in most cases, corporate policy supersedes department policies. If these rules are too onerous or unjust there is little a qualified and skilled employee could other than leave. Either accept and abide by the rules set forth or resign. Resignation being a clear withdrawal of consent on the part of the employee. One relevant example of this is companies still drug testing for marijuana in states where it is legal. Granted, it is an organization’s prerogative to make employees refraining from drug use a contingency of employment. However, if enough high-caliber job candidates take to smoking cannabis they may be in a bit of a quandary. A few years back the FBI ran into this problem due to their “drug-free” employment policy.
If the rules governing the management of a firm are too oppressive, people with options are going to find another job opportunity. What the company is left with are those who lack the skills, ambition, and conscientiousness required for productivity. The employer is left with the staff that clings to their jobs for dear-life as odds are they do not carry too much value on the job market. Much how department policies such as catering to senior and skilled workers can impose an effect similar to Gresham’s Law the opposite is also true. If you create rules that disincentives tenure and self-development, odds are you will lose a lot of great workers. The kind of workers that can be a game-changer in managing strategic customers. As we have observed with the call-center example, frequently due to the oppressive rules, low pay, and dismal work environment people with potential tend to leave these positions. Leaving you with the unskilled and the desperate who are locked-in to the role due to their circumstances. Keeping this dynamic in mind, it is a wonder why people expect quality service whenever they call tech support.
The premise behind Gresham’s Law is that money of a higher intrinsic value will be hoarded while the money of a lower substantive value but legally recognized as having the same nominal value will be circulated throughout the economy. Succinctly put, “..bad money drives out good money…” pithily sums up this economic phenomenon. However, is this occurrence solely confined to the commodity of money? Doesn’t the observations convey in Gresham’s Law applicable to other goods? For example, unless a baseball card collect is presented with an astronomically large monetary offer, odds are they will be unwilling to part with a limited-run rookie card of a legendary major league player. This scenario reflects many of the assumptions regarding commodity value implicit in Gresham’s Law. Generally, rare collectibles are held on to, while mass-produced memorabilia is readily available at the local garage sale or swap meet. Most collectors will hang on to the items that are considered valuable unless another interested party can provide a commodity in exchange that exceeds the perceived value of the collectible held by the hobbyist in possession of the coveted item.
However, how does Gresham’s Law interact with the intangible commodity of human capital? A firm or a business unit within a firm would want to retain top-level talent and let go of the mediocre/poor performers. Before we can delve into this analysis we must distinguish what human capital is. Human capital is the economic value that the employee brings to the firm. Typically through their experience, education, certifications, knowledge of company procedures and policies, position-specific “tribal knowledge”, critical thinking skills, and other pertinent soft skills. For readers who have never worked in a corporate environment before tribal knowledge is the informal and unwritten knowledge of best practices of how to perform within a specific job role. It stands to reason that a potential employee possessing all of these attributes would be a hot commodity on the job market. If currently employed by a company would be an employee of a high value.
If human capital is valued in a similar sense to other commodities such as money, how do businesses act in a manner to retain this high-quality talent? The answer most human resources representatives would give is that their organization creates an environment that fosters career advancement. Stressing the perks such as tuition reimbursement, possession of company stock options, and opportunities for placement in vertical job positions. While these factors may play a role in some employees choosing to work long-term for the same company, there is another variable that HR will not be forthright about. That is oftentimes exceptional employees with a high degree of human capital end up getting pigeonholed to the same role. Oftentimes these individuals are blocked from transferring to other business units or positions within the company by the request of middle and executive management. The reason behind limiting this MVP’s potential is quite pragmatic, the business unit cannot afford to lose this individual. Their skills and knowledge are essential to the day-to-day operations of the business. It would be nearly impossible to fill the void if they were to get promoted or transition to a lateral position within the firm. In the corporate world, this individual may be referred to as a subject matter expertor colloquially known as a SME.
It should be noted that the desperate attempts of management to relegate this individual to the same job role has the propensity to backfire. Why? Because this individual gets fed up with their limited job prospects and ends seeking career advancement at another firm. In a free market for employment, a high-quality employee has many prospective options when it comes to their career. If a firm stubbornly, confines them to a shallow career path they will simply look for employment at another company.
“…When there is no probability that any such repeal [of a tariff in a foreign country] can be procured, it seems a bad method of compensating the injury done to certain classes of our people to do another injury ourselves, not only to those classes but to almost all the other classes of them. When our neighbors prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may no doubt encourage some particular class of workmen among ourselves, and by excluding some of their rivals, may enable them to raise their price in the home market. Those workmen, however, who suffered from our neighbors’ prohibition will not be benefited by ours. On the contrary, they and almost all the other classes of our citizens will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favor of that particular class of workmen who were injured by our neighbors’ prohibition, but of some other class…” (Bk. 4, Ch. 2)
The Biden Administration’s commitment to free trade is questionable at best. The extent to which he will champion laissez-faire policies is a difficult determination to make in the nascent period of his presidency. Biden being a centrist is more concerned with appeasing the median voter than taking principled policy positions. Only time will tell whether or not he will capitulate to the anti-market sentiment of the vociferous and passionate populous wing of the Democratic party. Epitomized in the heated rhetoric of elected officials such as Elizabeth Warren and Alexandria Ocasio-Cortez. However, there may be some light at the end of the tunnel. Free trade may not necessarily be dead in the water. Despite the multitude of flawed policies that have so far been supported and promulgated by the Biden Administration they may have done one thing correctly. Repeal some of the Trump-era tariffs. Arguably one of the most disturbing aspects of the Trump administration was his hostility towards foreign trade. Biden has taken one small step to repair America’s tarnished image in the arena of international trade. This attempt at redemption has manifested itself in an unlikely form, the abolition of the importation tariff on Scotch Whisky.
The previous statement is not wholly accurate. The United States agreed to relinquish all tariffs on goods imported from the United Kingdom. Responding to the UK’s lift all of its tariffs on US imports back in January. Scotch Whisky is one of Scotland’s most highly esteemed exports. Making it an iconic symbol of the UK’s presence in the arena of global trade. Considering back in 2012 the United States was estimated to be the largest export market for Scotland’s prized spirit, it stands to reason that the tariffs were detrimental to United Kingdom’s economy. Even in light of the Trump tariffs the United States still maintained this position as top consumer nearly a decade later in 2020. Despite the United States remaining big-time scotch imbibing nation the tariffs still sent shock waves throughout the industry. It projected that since the 25 percent tariff was imposed back in 2019, Scotch producers lost an aggregate “$682 million (£500 million)” in sales. In 2019, the United States imported $2.07 billion worth of distilled spirits from the U.K., the majority of it being scotch whisky. The year 2020, delivered a two-punch blow to Scotland’s whisky producers. The COVID-19 pandemic also eroded profit. Leading to an overall 23 percent dip in global scotch sales. The US tariffs have been attributed to a 32 percent decline in overall whisky exports. As recent as last month the losses incurred by the tariffs have been described as “unsustainable” for some producers.
The United States did not escape with impunity from retaliatory tariffs being imposed by the United Kingdom. It should not be ignored that the UK is a significant trading partner of the United States. Approximately 20.3 percent of all agricultural exports from America to the UK were alcoholic beverages. The United Kingdom slapped a 25 percent tariff on American whiskey after Trump applied tariffs on steel imported from the UK. As predicted by several experts and commentators American whiskey serves as a salient target for reciprocal tariffs. The United Kingdom was previously viewed as the largest market for bourbon exports. Since the application of the tariffs overall exports declined by 35 percent. Overall, bourbon sales in the United Kingdom decreased by a staggering 50 percent. The United Kingdom did relax tariffs on American Brandy, Rum, and Vodka. However, the UK and other European Union countries will continue to maintain tariffs on American whiskey as a result of a “two-year trade war on steel and aluminum”.
The question become what was the impetus behind this fatuous trade dispute between the US and the UK? It all came to a head in 2019, after a 16-year dispute between aerospace rivals Boeing and Airbus. The UK applying tariffs on up to $4 billion worth of goods over subsidies received by Boeing. The United Kingdom started to ratchet down the conflict by easing tariffs on some US goods and Biden reciprocated by lifting tariffs on UK imports. While Biden is not a perfect free trader, this was a shrewd decision on his part. Not from the standpoint of political strategy, but the point-of-view of sound economic theory. The words once-famous uttered by Ronald Regan ring true here: “If you want more of something, subsidize it; if you want less of something tax it”. Here is the crux of the idiocy of protectionism. Proponents seek to limit imports to encourage domestic consumption-based out on a sense of nationalism. However, they ignore the fact that their hostility towards foreign goods may stir the ire of lateral trade partners. Resulting in defensive actions that will result in the decreased consumption of American goods globally. Wouldn’t a proud nationalist prefer to see American goods consumed all across the world? After all, the two best-selling whiskies globally in 2019 were Jack Daniels and Jim Beam. This was not the byproduct of using taxation to punish Americans who enjoy drinking imported whiskies, but through many years of savvy marketing, product consistency, and rightfully earned brand recognition.
Observation: The concept of comparative advantage operates as a natural extension of the division of labor. If it is most efficient for each worker and firm to focus on what they are most proficient at producing, this naturally gives way to vocational specification. The more specification within the division of labor the more complex and advanced the economy. As technological innovation drives the consumer demand for intricate technologies, the need for specialization within the workforce becomes more pressing. An advanced technological product such as a smartphone could not possibly have all of its components harvested, processed, and manufactured by one firm. Generally, the constituents of such a device are produced by multiple companies. These parts serve as the higher-order goods in the production of a smartphone. It would be naïve to assume that all of the companies that possess a comparative advantage at crafting these components all reside in the same country. If we look to Leonard Read’s iconic essay I, Pencilit becomes evident that even a commodity as simple as a pencil requires the services of companies across the globe to be satisfactorily produced. Demonstrating that the principle of comparative advantage extends the division of labor to an international scale. It is impossible that one nation would possess all the conditions necessary to efficiently make one product of any degree of complexity. Never mind a gadget as elaborate as a smartphone. Providing another concise yet realistic reputation of the obstinate justifications for protectionism.