Do markets require infinite (constant) growth?

A popular trope about market-based economies is that they would require infinite growth, putting them in inherent contradiction with a natural world of (limited) resources. Jonathan Cobb has a video on YouTube that makes this case.

He states that as the production of goods and services increases, the change in supply would tend to force down market prices and likewise the return of capital. He states this is a feature of a capitalist economy, but the criticism is indeed directed at the market system generally, not just an economy predominantly of wage labor. As he states, deplenishing returns cause firms to seek new, untapped markets, playing into what he calls the “growth imperative.” Eventually, firms must employ the military might of nation-states to conquer new markets.

Cobb is correct that an unencumbered market system does tend to experience falling profits. If that meant a market-based economy is doomed to crash as access to new markets is slowed or severed, that would be a mortal criticism of the market process, but a series of false premises critically wreck the argument.

Before getting to those, I should mention that on its own terms, the argument is fallacious. The idea is that because the firms that make up a market economy require constant growth (according to Cobb), the market system itself would too. However, this is not necessarily the case. From Wikipedia, “The fallacy of composition arises when one infers that something is true of the whole from the fact that it is true of some part of the whole (or even of every proper part).” It could be the case, as is true in any actually existing semi-free economic system, that firms come and go, developing and replacing products and supplanting competitors in the process. While reaching the same customer base, relatively more successful firms and start-ups can and have continuously taken the place of less successful ones.

But couldn’t it be that at some point, maybe in an isolated community, all the companies have so saturated the economy with goods that profit margins are extremely low or non-existent? First, as a consumer, what would be wrong with that? But if that were the case and consumer product prices were so low, capital would be freed up to develop new goods that people couldn’t afford otherwise. That’s nothing catastrophic and utilizes the same market size.

About the False Premises

I think I’ve debunked the argument on its own terms, but I spotted a few unstated premises that should be examined too.

One false premise is that firms are acting with perfect or practically perfect knowledge. For profits to have reached zero, firms must have a full account of consumer demand, supply volatility, and a thousand other concurring factors of an industrial economy. In reality, the future is unknown to some degree, so there is a certain element of risk. Better entrepreneurs can forecast future consumer preferences or changes in production factors. If the market were fixed in size, there would still be room for firms to profit from better forecasting future market conditions.

A second false premise is that market conditions are unchanging, that time stands still. All else remaining equal (that is, if no products were developed, no customers or competitors were born or died or moved, consumers didn’t changed their tastes, no additional savings or investments were secured, no technology was created or became obsolete, and no knowledge or research was discovered), profits would tend to fall to zero as supply of a good increased. (It could never reach zero profit, for the reason I mentioned in the paragraph above.) Still, the price of the end consumer product would tend to fall at a slower rate than the cost of resources necessary to manufacture that product. As capital saved or formerly used for less profitable purposes became available, more capital-intensive stages of production (like the earlier stages of production) could expand in the place of less capital-intense ones, allowing for the cost of the factors of production at each earlier stage to fall to a greater extent than later stages. In basic terms, the production costs would fall more quickly than the product price, leaving the possibility for profit to expand as prices fell.

Recasting the ‘Growth Imperative’

I believe I’ve show how the argument about a constant need for new markets is self-defeating and contains faulty premises. But perhaps the growth imperative instead is about an ever-present need to expand profits. This would be no better. A well-operated for-profit firm pursues wealth maximization. The concepts of profit and wealth are related, but not the same. Firms must demonstrate to investors that their resources are being put, according to consumer preferences, to the most urgent uses. They are concerned with the risk and uncertainty of its activities, which profit maximization ignores. In some cases, for-profit firms determine that forgoing some short-term profit would be better in the long run, anticipating that the proportion of assets to liabilities would increase.

The mindset that people want to improve their standard of living isn’t limited to a market economy. If this is the argument, it’s really a misplaced argument in favor of stagnation (euphemistically called “sustainability”) and placing some other value over the life of human beings.

The consumption of goods doesn’t destroy matter, but transforms it. We make the most of the world around us by using the judgement of our free minds to transform matter (in forms often thought to be useless previously) into resources for our betterment. Falling prices, product innovation, and resource economizing are not bugs of a free(d) market system, but a feature. I’m the first to concede that these are not fully utilized features, but that is because of systematic efforts veering those benefits to people with political pull.

Speech against Haltom City panhandling ordinance

I attended my local city council Monday in Haltom City (TX) to oppose a proposed panhandling ordinance. My major points were that the favorable portions of the law would be redundant to existing laws, the penalty is excessive, less-restrictive enforcement attempts have not been tried to achieve the city’s purported goal of reducing traffic, and it would be a blatant censorship of free speech. Despite no one from the city presented any evidence of higher accident rates, thefts or assaults at intersections where panhandlers frequent, the ordinance passed its first reading unanimously.

The text below is my pre-prepared remarks, but I didn’t read it verbatim.

I am here to speak against the proposed ordinance. The parts of the ordinance that I would think are acceptable, like restrictions on impeding traffic, posing a threat to people or trespassing, could be enforced with existing laws, but the rest is troubling or redundant.

The proposition says solicitation harms tourism and development. However, the city has prohibited or made other forms of trade that encourage tourism like food carts and street vendors more difficult, leaving only panhandling.

The proposition also says that solicitation “greatly increases traffic congestion and distracts drivers.” There has been no evidence provided to support this, and the police chief last week during the workshop didn’t mention how widespread this was or even if other less restrictive measures like the enforcement of existing laws against obstructing traffic or breaching the peace have been used to address the problem. (Update: the police chief during his presentation did provide sources for the nationwide demographics of panhandlers, so I revised my speech to reflect that.) I believe this ordinance would unintentionally add to traffic congestion when a patrol vehicle’s red and blue lights are active while writing the citation, more so than someone holding a sign.

The punishment is also out of proportion. The fine could be up to $500 plus court costs, which I believe would amount to 10 days of behind bars (as courts are required to give $50 credit per days served) as the likelihood of financially desperate paying the fine shouldn’t be expected, which will increase jail costs.

If someone asks for change for a ride at a bus stop, that would be illegal: 10 days in jail. To hitchhike after running out of gas would be illegal. Are the charities and local clubs we often see outside of Kroger’s going to think to get advanced written permission from the store manager as they would be required?

Most importantly, this ordinance has serious constitutional issues. Passing out campaign literature would be allowed, but holding a sign at a traffic signal asking for donations or for employment wouldn’t be. You can’t reasonably say they are fundamentally different forms of expression or pose any additional traffic problems. The ordinance would strip people of their free expression based on the content of their message and is overly broad to achieve the expressed intent of reducing traffic and improving public safety. And so far, the city hasn’t provided any sufficient evidence I think a court would accept to justify the double standard.

If you don’t like panhandlers, then don’t support them, and they will go elsewhere. You’re even free to hold a sign asking people not to donate. We do have people in our community who support them, and you would be violating our conscience to participate in that exchange by passing this ordinance.

Fallacy of libertarian white nationalism

A generally entertaining character on Free Talk Live, Christopher Cantwell, has seemingly fallen into the void of white nationalism, even if he doesn’t identify as a white nationalist. He recently parted as a co-host of the nationally syndicated radio show following a strife arising from what Cantwell believes is a blindspot in libertarian thinking (or should I say, from his perspective, the purposeful omission of a subject that makes libertarians uncomfortable, racial genetics).

My understanding is that Cantwell’s public interest in how race impacts public affairs was prompted by the recent migrant influx from predomintly Islamic practicing countries to western Europe. He believes that inheritable genetic differences among races (like those reported to influence intelligence) play a significant factor in the likelihood of people to oppose government expansion. In some cases, he said he would be willing to accept government intervention to prevent the immigration of ethnicities of people who on average score lower on intelligence tests.

The conclusion that immigration should be restricted has no merit on moral or practical grounds, but neither does the premise that genetic factors amoung human beings play any practical differences in their disposition to adopt libertarianism. White nationalists don’t make this argument, but given the strongest form of their argument for intervention (that genetic traits were the only factor that make ethnicities score higher average intelligences than others), it would make no difference to libertarians who wanted to advance freedom. (This presumption about genetics playing the only or even a significant factor is silly as average IQ scores have risen about three points per decade in the United States for the past century, a rate far too quick to be accounted for by genetic adaptation.)

What’s overlooked is that libertarianism isn’t a complicated idea. If anything, its detractors call it overly simplistic. Its lessons are elementry and uncontroversial to our basic relationships with other ordinary people. For most ordinary people, their well-being in adulthood followed from how successfully they applied their non-aggressive intuitions. If so, why isn’t everyone a libertarian?

When you think when people come closest to ratifying basic tenants of libertarianism (that they don’t have a good reason to hit peaceful people or to take their things), it’s before they were steamrolled by the state education cartel to accept obedience to authority. Everything around them incubated them in a status quo bias, where they learn that the state is the means to live at the expense of others, a mass induced Stockholm syndrome. It’s later, presumembly when they are as intelligent, that people can come to make exceptions to the basic libertarian creed.

When we are young, our curiosity peaks, but conversly we are at our most vulnerable to the reigning institutions that instil conflicting values either that make it difficult to see how non-aggression can be applied universally or that tend to undermine non-aggression. These interlocking instituions hostile to libertarianism are erected on the values of dependence and obedience.1 It’s not coincidental, if they’re to maintain their perceived authority.

Immigration intervention would only serve in time to further instil the values hostile to libertarianism. If the concern is with generous government welfare programs, which bar most new legal immigrants from receiving federal means-tested benefits, support for them tends to be swayed by how quickly immigrants assimulate economically into the wider culture, acting as a counter-veiling force on government expansion. Increasing the time that immigrants are inelligible for means-tested benefits (thus prompting quicker economic integration) would seem to be at least as politically viable and more compatible with libertarian principles that restricting immigration.

We need the full market integration of people of all classes and ethnicities if they are to hone the skills like abstract thinking that intelligence tests measure. Anything but would set us all back.

Footnote

  1. I credit Roderick Long for developing this line of thought, but I don’t have the original article where I recalled this from.

Does technology reduce opportunities for labor income?

I was thinking about a question posed to someone on social media about whether advances in technology are compatible with a prospering market economy. It was conceded that innovation is a net-positive, but it’s commonplace to see examples of how machines are replacing labor income.

The question though is based on a false premise: that there is a fixed amount of work to be done. Yet, forever and always, there is in a practical sense a limitless demand for labor. Goods and services are demanded. The reason people don’t work is because their marginal productivity, as assessed by employers, is below the legal minimum wage or because, from the laborer’s perspective, the value of leisure on the margins is of more value than the income from working.

For workers who have developed a non-transferable or highly specialized skill, it could be immediately jarring. Even then, that creates entrepreneurial opportunities to find customers who prefer more specialized craft production rather than the more mass produced ones, or it would allow those laborers to be break free of centralized work processes. Depending on the circumstances, their incomes could increase as they would be receiving a greater portion of the product’s purchase value, even if the overall value has fallen as supply is expanded.

What needs to be guarded against are those technologies being closed off behind the corporate paywalls of intellectual property and other monopoly privileges of artificial scarcity.

Ahmed Mohamed and his 4th Amendment audit

Whether Ahmed Mohamed, the Irving high schooler who was detained for bringing an improvised clock to school, was acting as he claims to impress with his engineering skills or was deliberately trying to provoke a response from school officials with his devise, what he did essentially was conduct an audit of his school’s respect for the his rights to be secure in his person and property.

Possessing something that a government official believes is suspicious is not a crime, and Mohamed never portrayed the improvised clock as anything other than a benign experiment, even according to police statements. Despite no articulable suspicion or probable cause that he had committed a crime or had intended to, he was nevertheless detained and questioned against his will for more than an hour. The police and school officials failed to respect Mohamed’s rights, so taxpayers will likely be on the hook for a hefty settlement.

First and second amendment auditors have gain a following for their videoed encounters with law enforcement. In the same fashion, their detractors call them provocateurs too, but these documented experiences have helped to educate the general public about people’s rights for free speech and self-defense. I hope Mohamed’s unfortunate experience brings the same enlightenment.

Commenting on culture and politics from the conviction of enlightened individualism — since 2007