This examines what we have done to the Iranians over the past 50 years by imagining what it would have been like here if they had treated us as we did them. It is a convincing condemnation of American imperialism.

I do not undertake to promote welfare, for I propose to extend freedom.

My aim is not to pass laws, but to repeal them.

It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution … or have failed their purpose … or that impose on the people an unwarranted financial burden.

I will not attempt to discover whether legislation is “needed” before I have first determined whether it is constitutionally permissible.

And if I should be attacked for neglecting my constituents’ “interests”, I shall reply that I was informed that their main interest is liberty, and in that cause I am doing the very best I can.”

– Barry Goldwater

Japan has for a long time prohibited the display of vulvas or penises. So even in Japanese pornography, the genitals have to be blurred. The idea is that the genitals are obscene and by prohibiting their display society is protected. But  Japanese pornography has come up with other things to replace the titillation that the ‘obscene’ genitals would otherwise provide. For example, Japanese porn is dominated by ‘chikan‘ pornography, in which unsuspecting women are molested, groped, and raped (although I should note that in all cases this is simulated; all women are consenting actresses). In one particularly outre form of pornography, bukkake, a bunch of men stand around a woman and masturbate until they reach orgasm and they cover the woman with their semen.

If this all sounds sick to you, then I agree with you. Much of Japanese pornography denigrates women and encourages illegal and obscene behavior. This is unlike most American or European porn which deals mostly with one on one sex. One could argue that the Japanese culture is different from Western culture, and that is true. But the extreme forms of pornography found in Japan are not found in other Asian cultures; even in Thailand and Hong Kong, where pornography flourishes, the most common form of pornography is simply sex between one man and one woman. By prohibiting the display of genitals, Japan has unwittingly encouraged abnormal sex acts, because the consumers of porn want to be titillated and aroused and more bizarre behavior is necessary to do that if the genitals cannot be shown.

So by attempting to prevent obscenity, the Japanese censors have encouraged even more obscenity. Not a very effective or useful policy, if you ask me.

Why did I do all these things? The main reason is that I am scared of lawsuits, and doing these things reduces the probability of someone getting hurt and suing me. If someone does get hurt, I can point to all the fixes and improvements to show that I am a responsible landlord. So there is no need for government inspections or enforced building codes to encourage me to keep my building in good shape.

This is all well and good. But in this city where my apartment is, there is a requirement to have all apartments inspected once a year or when a new tenant comes in. The inspection costs $40 per apartment and the inspector checks to make sure there are smoke alarms. He doesn’t check to make sure they are working nor does he check anything else. The problem with this (besides the cost and uselessness of the inspection) is that the inspection gives tenants a false sense of security. If there were no city inspections (and the city advertised that), prospective tenants would be more likely to check things themselves (or bring along someone who would no how to do so). Landlords would also be more likely to compete based on safety and having the building up to code. And, rents would go down because landlords would have one less expense.

When I was looking for an apartment building to buy, I found one that was priced right and was in good structural condition. But when I had it inspected (by an ASHI certified inspector–I should point out that ASHI is a private group and there is no public regulation of inspectors), my inspector found dangerous wiring, a major gas leak, and other serious safety problems. There had been a city inspector there within the previous month. If my inspector had not noticed the gas leak, it is quite possible the building could have exploded, perhaps killing a tenant. Eliminating the city inspector could possibly have avoided a false sense of security and encouraged the landlord to be more conscientious.

The laws are complicated and it is often difficult to understand when a certain person is covered as an ‘investment advisor’. But the key question is why we need these laws in the first place? I propose that almost every single person or corporation prosecuted by the SEC under these laws could have been successfully prosecuted under much simpler laws. The others did nothing unethical or harmful and should not have been prosecuted.

For some concrete examples, I point you to the website of the Missouri State equivalent of the SEC.  Peruse their successful consent orders. In the vast majority of the cases, whether or not securities laws were violated, outright fraud was committed, with the tortfeasors (wrong-doers, in legal speak) lying about what they would do with the money, lying about their credentials, or lying about the risks or the likelihood of gains of their investment proposals. In some cases the wrong-doing involved simple theft of a client’s assets. In all of these cases (probably 70% of all enforcement actions by the SEC and its state equivalents), the wrong-doers could have easily been punished in a libertarian society with only one law: “do not harm another’s property”. Theft violates this, as does fraud, because it is implicit theft.

What about the other cases? 20% seem to involve investment advisors or brokers having violated the requirement that (in the case of brokers) they act in a suitable manner with clients’ funds, or that (in the case of investment advisors) they act in a fiduciary manner with clients funds (acting in the best interest of the client). In a libertarian world these would also be illegal. Why? They break the contract between a client and investment advisor or broker. Even if no actual contract is signed, there is an implied contract–no one would entrust their money with someone if they did not want that person to act in their own best interest. So there exists an implied fiduciary duty, for a broker or advisor to act in the client’s best interest. Because current law does not require brokers to act as fiduciaries, repeal of the law would actually result in  greater protection for investors.

Perhaps you have a problem with an implied contract? It can be difficult for people who are not familiar with the law, but implied contracts are quite prevalent in the common law. For example, if I own an apartment building and rent out an apartment, even if the lease says nothing (or if there is no lease), there is an implied guarantee of habitability and an implied guarantee of peace and quiet enjoyment. This is because no one would logically enter a contract without such guarantees, so they are presumed in all such contracts. This same logic should apply to investment advisors.

And what of the last 10% of SEC and state security regulators’ enforcement actions? Simply put, they are bogus and unethical. In these cases ‘investment advisors’ are prosecuted solely for failing to ‘register’ or follow a variety of other picky regulations. In other words, there are no investors harmed. The SEC has even gone so far as to try to impinge upon the 1st amendment right to free speech with respect to stocks–luckily the Supreme Court has not yet given in to the SEC in all respects (see, for example, Lowe v. SEC).

The one problem for this argument is that the government had nothing to do with that. Take cars, for example. Think of a number of important safety features such as airbags, traction control, anti-lock brakes, and daytime running lights. All of these were initially introduced and became popular in the free market. The insurance companies have pushed hard for a number of these features because they work in saving lives and reducing injuries (saving the insurance companies money). While airbags did become mandatory here in the USA, by the time that happened they were already ubiquitous. Furthermore, side-impact airbags have become common even without a government mandate. Government regulation has had no effect on improving car safety. Oh, and the safety ratings you see on cars? Those come from two sources: a group of insurance companies (they need to know which vehicles are safe so they can charge less to insure them) and the government. Guess which performs the more rigorous tests? The insurance companies. Strike two for government.

Now onto electricity. Have you ever looked at the bottom of any electrical appliance and seen a circle with “UL” in it? If so, you have witnessed the joys of free-market regulation. Back in the early days of electricity, many appliances caused fires. The manufacturers of the faulty products wanted to improve their products so as to sell more. The fire insurers wanted to reduce fires. So an entrepreneur founded Underwriters Laboratories to inspect and certify products that met certain safety standards. The UL symbol remains a mark of distinction today. In the case of electricity, just as with automobiles, the government has been slow to do anything and has accomplished little. While OSHA technically oversees UL and its competitors, it serves no useful purpose because UL is motivated enough by greed to do its job well. A company such as UL could be bankrupted with just one high-publicity failure of a UL-certified product. OSHA, however, is has no such intrinsic motivation to do a good job.

Oh, and your city’s electrical code? Those are all taken verbatim from the national electric code written by the national fire prevention association, composed of insurance companies (damn corporations! always looking out for our safety . . .). It was the insurance companies who developed such great ideas as grounded wiring, romex wiring, ground-fault circuit interrupters (GFCI), and arc-fault circuit interrupters (AFCI). Local cities, when they depart from the actual NEC, insert stupid provisions such as Chicago’s requirement that all wiring be in steel conduits–the sole reason for this requirement is to provide extra work for the union electricians who donate money to the city’s politicians. So people spending money on electrical work are forced by the government to waste it on conduit and labor when the extra money could have paid for such great (and new and non-government mandated) safety features such as AFCI.

It is the same with plumbing codes and other building codes. The government does nothing but enforce them (spottily). In the absense of government the most important parts of the codes would be enforced by the insurers and by independent building inspectors (such as the ASHI-certified inspector who inspected my house before I bought it).

This will probably strike most of you as sensible. But think about it–I am considering changing where I may spend the rest of my life, where I will raise my kids, not based on job considerations, or the location of family, or the location of our ‘dream house’, but based largely on taxes! This is absurd that taxes have such a large impact. Just think of all the other decisions in peoples’ lives that taxes distort.

I am the proud owner of a small apartment building. Why did I buy it? Because it was economic for me to do so. But apartments in Saint Louis are priced in such a way that if it were not for the tax code it would not make sense for me to waste my time fixing toilets. I would be much better off investing in stocks or in P2P loans on Prosper.com. But the tax code offers a loophole whereby a small property owner like myself can cut a couple thousand dollars off of his tax bill each year by owning property (this is largely due to the depreciation deduction). Also, any sizeable capital gain when I sell can be indefinitely deferred with a 1031 exchange. So I manage a property even though my talents are better suited to analyze stocks or invest in loans. Solely because of the tax consequences.

Speaking of 1031 exchanges–they cost money, usually a couple thousand dollars. If capital gains were never taxed then these would not exist and those who spend time on them would do something productive. The same is true for IRAs and 401(k)s and HSAs and 529 plans. All these tax deferral schemes have significant administrative costs. Eliminate the taxes on investment income and the economy as a whole would have a lot more money to invest elsewhere. Imagine the cost savings to investors who could invest in any mutual fund rather than the typically high-fee fund found in 401(k) plans. Imagine all the time that would not be spent setting up these accounts and what people could do with that time (for example, I spent over 12 hours trying to find the best HSA plan–I like either hsabank.com or shawneehsa.com).

Even more importantly, think of the savings in time and energy to investors in the stock market of not having to worry about whether gains are short- or long-term capital gains. Think of the savings in costs to brokerages and banks of not having to send out 1099 forms.

Let me leave you with one piece of information: the Tax Foundation estimates that in 2007 the cost of tax code compliance in the US will be $300 BILLION. That is a high cost, and it doesn\’t even include the cost of uneconomic decisions made by taxpayers like myself simply to lessen their taxes.

There are many other areas where taxes distort incentives. I will return to this topic in future posts.

One could argue that the reason those policies exist is because of the government regulation, and that would be correct. But the regulation is no longer necessary (if ever it was necessary) to prevent insider trading. Who is harmed in insider trading? Anonymous traders who sell to those with insider knowledge, certainly. Also, the companies involved, such as investment banks, suffer a loss of reputation when their employees trade on insider information. That loss of reputation is a definite, if neither concrete nor easily quantifiable, tort. It is a theft. Therefore, firms that discover employees who trade on insider information would fire those employees and then sue them for damages–a reasonable amount would be treble the unjust profits of the insider traders.

What about the firms themselves? What if they made a decision to trade on insider information? A small consultant on a large acquisition could easily justify the cost of reputation in light of potentially huge profits. But the trading on inside information also harms anonymous traders in the stock and stock options of the traded companies. So it would be in the best interests of the stock exchanges to prevent insider trading. If they did not do that, their reputation would suffer and traders would use an exchange that banned insider trading. The exchanges (such as NYSE and NASDAQ) would thus formally prohibit insider trading and would be liable if to the outside traders if it happened.

Overall, the market would regulate itself, insider trading would remain infrequent, and those employees of the SEC could go find productive jobs. The world would be a better place.

[originally published 30 May 2007]

But what is expensive is regulation. To sell any wine in the USA the federal government has to approve its label. What if you make a lot of different wines or limited edition wines? Well then you will have to wait to sell them or sell them with a previously approved generic label. So rather than saying a wine is a Chardonnay-Semillon mix, the label could only say ‘White Wine’.

Also, a number of state and federal permits are required to make wine. There are the normal local permits for any food/drink establishment, but then there are special alcohol permits as well. Then there is the alcohol permit to be able to serve alcohol on the premises. Then, if you want to ship out of state, you have to know which states you can ship to. Also, depending on where you are located you may be required to not sell on certain days or before certain times or to not sell above a certain number of bottles to any one person.

What if you want to sell through grocery and liquor stores to grow sales? In almost all states, you are required to sell through a licensed distributor. And there are only a few distributors in each state, all with lots of political influence, the prices they charge are high. So even if your winery became big enough so that it could save money by cutting out the middle man, it is forbidden to do so. Luckily, Wal-Mart and Costco are fighting these laws in a number of states.

What if you want to show people how to make their own wine? They would do the work but you would oversee it and deal with all the unpleasant cleaning and maintaining of the equipment. Sound interesting? It is illegal, even if those who make the wine only consume it themselves. Why? They are not licensed.

Is it not wonderful how the government protects us?

[originally posted May 24, 2007]

[originally posted May 23, 2007]

[originally posted May 20, 2007]

Your article completely dances around Paul\’s point: the rest of the world considers the U.S. to be thuggish and imperialist. I know it is comforting to regard the anti-American terrorists as sub-human lunatics, but what would you do if China had major army outposts in the U.S. and in many surrounding countries and allied itself with repressive regimes throughout the world (as we do with Pakistan, Saudi Arabia, Egypt, and others and as we did with Iraq during the Iran-Iraq war)? I know what I would do in such a situation–I would regard China as an imperialist aggressor and I would take up arms against it. So it does not surprise me that Bin Laden and his followers see us as the enemy and that they have taken up arms against us.

You would do well to remember that this nation was founded by revolutionaries who fought against a government far more benign than our \’ally\’ Saudi Arabia. So to me or to anyone who understands human nature it is perfectly natural that our actions abroad have caused resentment and anger. Of course, attacking civilians is despicable. To insinuate as you and Giuliani do that Paul and others who believe as he does somehow condone the September 11 attacks is churlish and reeks of the most despicable demagoguery

But why do I purposely think on death? Because death focuses my mind. If I remain aware of my mortality, I will concentrate my energies while alive on those things that matter. And those things do not include going out to movies, watching TV, hanging out with friends, or even drinking good wine (although eating good chocolate is something that matters!). What many people seek, to leave some sort of legacy or have some effect upon the world, also seems to me trivial and meaningless. Whether in 100 years, 1000 years, or in 1 million years, any man\’s work will be destroyed by the ravages of time. Wait a billion years and the universe itself will die out and nothing created by humans will remain. If all human works are evanescent, why strive to create them? What good even world domination and universal worship if all will forget in but a few thousand years’ time?

No matter what happens after death, I cannot but conclude that the only meaning in life is to be found in goodness, not greatness. While any man can live a grand life and change the world, few can say as they lay dying that they became what they could be. Flowers and trees do not need to strive to be complete, but humans must strive and suffer if they are to hope to be truly human and truly good. And just as a plant or animal has innate qualities, so do humans. And to lead a good life one must use those qualities to the fullest.

In his trilogy, The Lord of the Rings, JRR Tolkien described death as “The One’s gift to mankind.” One of the key subplots in the trilogy is the love and eventual marriage between Arwen (an elf) and Aragon (a human). For Arwen, to choose marriage with a human means that she must renounce eternal life and become mortal. And yet she chooses it. The reason why such a choice can be rational is easier if we compare life to a game–what is more interesting and worthwhile playing: a game with no way to win or lose or a game in which winning and losing are both possible? Most would say the second kind of game. Without mortality there can be no real winning or losing–just eternal playing. It is the finite nature of the game that gives it meaning, just as with our lives.

So what does this have to do with this blog? Simply, my own mortality is the impetus behind this blog. What use working a normal job and having normal hobbies when I know what is right and what is wrong and I have the qualities to be a revolutionary? Whether I succeed or fail, I fight because the fight is just.’,

[originally published 19 May 2007]

[originally published 15 May 2007]

That being the case, it is not very hard to reach the conclusion that government is theft because it involves coerced taking of property and money. Therefore, government is wrong and perpetuating it is a sin. The statist response to this is to argue in a Locke-ian maner that the government arises by the choice of the people for a social compact that provides them with certain services at the expense of certain freedoms. This is a fallacious argument that is easily refuted by a mild reducto ad absurdum: imagine a group of people getting together and deciding by majority vote to enslave one of the group. Is this right? Of course not. So it cannot be right for the majority to take from a minority even if the theft is less severe than total slavery (which is the theft of body and freedom). For Locke’s social compact theory to be ethically tenable, individuals would have to have the ability to withdraw from the compact. Try not paying your taxes and you will quickly find out that you cannot withdraw from the social compact.

Another possible response to my argument that Christians must be anti-government is to quote Jesus when he said, “render unto Caesar that which is Caesar’s, and render unto God that which is God’s.” It is important to keep in mind that this was in response to the Pharisees’ attempt to trap Jesus by asking him if it was okay to pay Roman taxes. If he had yes, he would have been seen as supporting the oppressors of Judea. If he said no, the Romans would have seen it as an act of rebellion and he would have been executed before his work was done. The most cogent explanation of this is that Jesus meant exactly what he said, but what he said is not what most people think he said. He said that you should give to the government that which belongs to it. But the key question is what belongs to the government? If it is wrong to steal then it is wrong to tax, in which case nothing belongs to Caesar. Examined from the other side we come to the same conclusion–if we give to God everything which to him belongs, then we give everything to him and nothing is left for Caesar. This explanation sense because by speaking in this manner Jesus was able to subvert the Roman order without directly seeming to oppose them.

I am not the first to interpret this passage in this way. See wikipedia for more info.

[Originally posted 10 May 2007]

Next time you feel good about your local police, take a look at the following US map of botched SWAT raids on innocents, many of which resulted in deaths.

[originally posted 5 May 2007]

Elections are not single-shot events. They are repeated every few years (though not with the same people). In a repeating event even one vote can matter because the votes in one election influence the views in the next election. So think of voting not as a way to get your candidate into office but as a way to influence the candidates’ positions and the type of policies debated in the next election.

So if you support smaller government, vote for the most libertarian candidate available (among republicans, that is Ron Paul). Even if he is too radical for you, that is okay, because your support for him will influence other politicians to move only slightly against big government in the next election. And it will influence those politicians who get into office. Seeing a candidate who calls for abolishing the IRS get 5% of the vote might persuade those who do get into office to be slightly less profligate in their spending, if only to attempt to appease those who voted against them.

And now a couple quotes:

Johann Goethe: “None are more hopelessly enslaved than those who falsely believe they are free.”

Barry Goldwater : “Extremism in the defense of liberty is no vice; moderation in the pursuit of justice is no virtue.”

[originally posted 5 May 2007]