Socialism and risk

Some time ago I ran across a video of Ben Shapiro responding to questions by a professed socialist. The discussion involved a hypothetical pencil factory, and the socialist asserted that the workers should distribute the profits and “own the benefits of their labor.” Shapiro responded that they get the benefits of their labor in the form of wages. The socialist countered that there was a disparity in bargaining power, then made the crucial claim that “without labor, all you have is a factory full of wood, graphite, yellow paint and aluminum.”

This last point is very illuminating. It apparently did not occur to the socialist to ask the question “where did the materials to make pencils come from? Why are they in the factory in the first place?” Nor did he seem aware of the possibility of the workers opening their own pencil factory and becoming owners themselves. This helps illustrate several key points regarding capital, risk, property, government, compensation and what nobody.really refers to a “rents.”

1.) There was risk involved in starting the pencil factory. Whoever undertook to procure a factory, buy the raw materials and hire a work force took risks: that he might not be able to obtain the raw materials at a reasonable price; that someone would open a competing pencil factory across the street; that the demand for pencils might decrease; that his business might be regulated out of profitability, etc. The owner took these risks for the possibility of economic return. He put capital at risk, and if no one were willing to do so, there would be no need for the labor of the factory’s employees. Pension funds, venture capitalists, small business owners seek to profit from the same principle: there is value in reasonable risk-taking, without which there would be essentially no progress. Since progress is concerned with future conditions and the future is unavoidably uncertain, progress involves risk; no risk, no progress. Do not allow people to profit from assuming risk; no progress.

2.) The government plays a role in risk. It can provide incentives for incurring risk, such as allowing deductions for investment losses, or it can coerce people into taking risk, by for example taxing capital that is not invested. The government also plays a role in exacerbating risk (e.g. regime uncertainty) and mitigating it (e.g. protecting property rights.)

3.) The concept of property gives a good illustration of the interaction between capital, investment risk and government. Farmland can either be cultivated or left in its natural state. In order to make farmland productive, resources, including labor, must be expended on it with a degree of uncertainty that such resources will be lost. There will be uncertainty regarding weather, losses due to pests and disease, collapse in market prices, etc. One remote risk is that after the land has been fertilized, planted, irrigated, weeded etc. some one will move onto the land and harvest the crops for his own benefit. We are not usually concerned about this risk because the government protects property rights. The essence of property is the right to exclude others from it. If there were no such concept of property, the person who undertakes to cultivate, plant and tend the land would have considerably less incentive to do so; the concept of private property mitigates certain risks and therefore, as above tends to promote progress. Land owners, secure in their property interest have incentives to advance the capacity of their land to produce, and therefore to develop improved processes, the very essence of progress. The government by protecting property rights mitigates certain risks. The same applies to enforcement of contracts.

4.) Markets are effective mechanisms for matching risk taking with results of such risk taking. Individual market participants are much more efficient at matching economic opportunities with risk tolerances than are government functionaries.

5.) People may be compensated both for their labor, and for their adoption of risk. The notion that risk is an economic entity is illustrated by the existence of insurance, in which people are willing to pay to lessen their risk of particular perils. Appropriating the property of someone who acquires it through accepting risk has no greater legitimacy than appropriating the property of laborers. However, there is in fact wealth that is derived in excess of the risks incurred or labor expended. If the government agreed to make good the losses of a hedge fund, guaranteeing them risk-free investments, but that hedge fund was allowed to keep any profits it made, it might be reasonably argued that something was off-kilter. This is the classic unfairness of socializing risks and privatizing profits. A similar concept seems to affect people’s views of inheritance and windfall taxes, although in the case of the former, there is a philosophical issue regarding the right of decedents to provide for their heirs. In the abstract, at least, it seems to be non-controversial to “distribute” rents, i.e. that wealth that devolves upon a person with little or no labor, exchange for value, effort or risk. 

Can we prevent mass killings?

Highly publicized shootings in mosques, synagogues, high schools and work places have naturally led to questions of whether there is any way to end these events. The title of this essay was deliberately chosen. It intentionally was not titled "Can we end mass shootings?" The answer to that specific question is "probably not," since it is conceivable, and even likely that highly motivated and clever perpetrators would eventually be able to defeat any systems and strategies meant to deter them. this essay is also not limited to shootings, since there are other methods of mass killing, e.g. ramming with automobiles, arson, poison gas, stabbing, bombing, etc, that are logically of as much concern as killings perpetrated with a firearm. One particularly illustrative case is that of Eliot Rodger, who killed six people near the campus of the University of California, Santa Barbara in 2014. Of the people whom he killed, he shot 3 and stabbed three to death. It makes no logical sense to parse the killings by the weapon used.

In addressing the question, it may helpful to divide the motives of shooters into two simple categories, those in which specific people were the planned targets, and those in which they were not. A mafia hit, for example would fall into the first category, as would a killing seeking revenge on a particular individual. These are occasionally mass casualty events, as when a former spouse kills his or her family. In general, those killings, multiple casualty or otherwise, that involve a specific target seem easier to understand, because there is at least a nexus between the victim and the perpetrators perceived grievance.

The second category, those killings that do not involve a specific target may themselves be subdivided into two classes: those in which the killings are the direct goal of the perpetrator's act, e.g. a bank robber killing strangers during his get-away, and those in which the killing of strangers is an end in itself. This latter category includes acts of terrorism and most school shootings, and the type that seems to cause the most popular angst. These seem to be, to degree irrational or capricious. The ultimate goal of such acts is not the neutralization of the victims, but the psychological response that the wider community will have to the killing. In essence, these mass killings are a malignant form of communication. What is intended to be communicated is the disdain, loathing, and grievance that the killer feels toward amorphous groups. Adam Lanza, the Newtown school shooter, was quite explicit that he loathed humanity in general.

The observation that the more vexing type of mass killing is a form of communication is useful, because often it is not the first time that the perpetrators have attempted to communicate their psychological motives. They leave social media trails, videos, manifestos, etc. They undergo psychiatric treatment, and describe fantasies that others may find disturbing. In other words, they raise red flags. The question thus becomes, are these red flags specific enough to identify and intervene before killers shoot, burn, bomb, etc. innocent strangers.

Many of the pre-event communications of killers such as Eliot Rodger, and the Columbine killers, contain similar characteristics, the most obvious being an explicit hatred of people that the killer does not even know. When we consider the capabilities of artificial intelligence, which at base is simple a sophisticated and objective method of finding patterns, it seems plausible that we can in fact identify traits associated with psychopaths and mass killers. Algorithms target advertising based on social media entries, create implicit psychological profiles of consumers, citizens, potential voters etc., and do so with reasonable effectiveness. The question then arises whether such technologies could be used to examine a person's writings, psychological history, family history, discipline history, social profile, etc., to assess the risk of that person becoming a mass killer.

Even if it were practical to use personal data to assemble risk profiles for individuals, (and given the similarities between the pre-killing communications of known mass killers, it seems that there would be a reasonable degree of sensitivity if not specificity), the uncomfortable issue of profiling arises. What we would be doing in effect is profiling people to assess their risk of committing mass murder. This creates social, political, moral and ethical issues. Even if we could identify potential killers before they act, there may be a heavy price in doing so. It would seem, at least to a first approximation that we can prevent some mass killings by identifying potential killers before they act, but are afraid to let the profiling genie out of the bottle. Thus we focus on guns, and religion and violent video games, etc. There is a price we are reluctant to pay, so we console ourselves with cosmetic, but ineffective alternatives.

Demonization

A post below expresses the observation that identity politics is behind most of history's great atrocities. The Holocaust, Trail of Tears, Cambodian Killing Fields, Armenian Genocide, Holodomor, Rwandan Genocide, etc. had their genesis in the notion that it was legitimate to demonize certain groups and therefore kill them. It is discouraging therefore, in the aftermath of a mass shooting, to find political opportunists advocating the demonization of others; the NRA, civil libertarians, Republicans, firearm owners etc. It is puzzling how the irony of the argument seems to evade its proponents, that demonization of others is consistent with the logic and motives of the shooters. It takes a measure of hatred to kill strangers for indiosyncratic grievances and it likewise takes a measure of hatred to demonize strangers because of their beliefs and political views.

It should be obvious that the way to address a crime in a grieving community is not to further divide that community and feed us-versus-them antagonism. Appeals to hatred are not effective means of conciliation, nor of understanding tragedy.

To be certain, when one confronts a political opponent in a restaurant, the confrontation is directed at demonizing the person, not any ideas they may have or interests they support; one does not publish the addresses of ideas in hopes that mobs will harass them, nor try to get ideas fired from their jobs These are personal affronts directed toward persons, not ideas. These tactics are tactics of demonization and the lineage of this tactic is an unhappy, and frankly evil one. Demonization must be recognized for what it is: targeted hatred. It should be called out and deligitimized as a political tactic.

Prediction

In 20 years it will be generally accepted that the business models of Google and Facebook were unethical from the outset.

Stability and Dissent

Some facts about the world we live in are so obvious that we do not notice them, and consequently do not contemplate their implications. One such fact is that all stable systems have process that oppose change; i.e. that tend to return the systems to states of equilibrium when perturbed. This is true of all types of systems: economic, chemical, social, biological, physical, etc. Stable systems remain so even of the point of equilibrium changes, because the restorative process remain effective. One consequence of this fact is that systems for which the restoring effect is eliminated tend to become unstable, and an area where this is particularly dangerous is in political systems.

Regimes, typically of authoritarian or dictatorial inclination, that suppress any form of opposition or dissent become unstable and eventually fail. This is readily observed in history, which gives examples of the French Revolution, the Soviet Union, Khmer Rouge, the Third Reich, etc. Political dissent is a mechanism that tends to restore perturbations in political systems, and thus act to stabilize them. This does not mean that political methods of persuasion cannot be used to change the points of equilibrium, for example from more conservative to more progressive and vice versa, but to assert that the system will tend to excess and instability in the absence of an effective method of dissent. Dissenting views, even if highly unfavored in particular eras are likely to contain elements of wisdom that are crucial to long term survival of effective polities.

A similar concept applies not only to political systems but to individual ideologues. The hard-liners,, the Pol-Pots, and Robespierres, and Che Guevaras and Trotskys are the ones who come to bad ends, easily being outmaneuvered by more pragmatic rivals. Fanatacism does not lend itself well to stability, and the inability to accommodate dissent is a regularly fatal flaw in political movements.