Rothbardix - Technology for liberty and justice.

Technology for liberty and justice.

Sunday, November 05, 2006

financial mechanisms for political coordination, part one

The unprecedented economic growth experienced by humanity has created an extended order that is exquisitely sensitive to disruptions. The essential need for stability for productive economic activity grows from the practical need to ensure the welfare and survival of many hundreds of millions of human beings. Highly complex economic arrangements have been developed in human society, and must be safeguarded in order to ensure individuals a high standard of living.

This essential need for stability to enable economic activity reinforces the natural resistance to political change among those concerned with human welfare. However, the specialization of labor in modern society has extended to a specialization in political control by ever-increasing numbers of individuals. The moral and ethical imperfections of political control are such that, all too frequently, those who are most efficient at exercising political control are those who are most indifferent to human suffering and unconcerned with human welfare in general.

The extension and expansion of political control in virtually every aspect of human society is abetted by present social and economic norms such as paper money and income taxation, and is resisted by uncoordinated and relatively weak forces in society. Even where present policies can be recognized as having significant negative consequences in the future, political actors are able to obfuscate facts and create confusion in order to realize their personal short-term objectives.

There are few clearer examples of this fact than in the marketing of international aggression. Political actors know that they are able to provoke mass populations to support enslavement and mass murder in the name of war, thereby securing and enhancing the position of political classes. Herman Goering described the phenomenon clearly in the following conversation with Gustav Gilbert during an intermission in his trial at Nuremberg (recounted in Nuremberg Diary, with thanks to

We got around to the subject of war again and I said that, contrary to his attitude, I did not think that the common people are very thankful for leaders who bring them war and destruction.

"Why, of course, the people don't want war," Goering shrugged. "Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece. Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship."

"There is one difference," I pointed out. "In a democracy the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars."

"Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

The political actors that initiate and promote aggression and conflict often recognize that their statements need not closely reflect reality, given their short-term desire to maintain political control and the inability of subject populations to hold political actors to account for their actions. Given the clear motivations among political actors to initiate, perpetuate, and promote aggression and conflict, those who are concerned with human welfare must seek new means to counter the incentives that political actors have directing their actions toward large-scale destruction.

The effectiveness of markets in aggregating information suggests that economic mechanisms may be useful in addressing this problem. In particular, financial markets are able simultaneously to aggregate large amounts of information about present conditions as well as best estimates among market participants of future conditions.

Additionally, new information technology may be examined for its applicability to this problem. A key issue is the extremely large number of individuals whose opinions must be incorporated into collective decision regarding political matters, given the need for broad-based agreement to secure the legitimacy of political decisions.

Democratic elections are widely used to legitimize governments in the modern world. Elections have a demonstrated ability to establish a political order that is widely supported, and the mechanism of democratic electoral choice can control excesses that are present in other systems of government. However, the democratic system of government suffers from several faults, which are increasingly apparent in modern society:

  • a failure to incorporate the future costs of present actions into decisions, and
  • an inability to quantitatively correlate commitments and actions with basic principles and standards.

The first flaw is, in industrialized Western societies, leading to a demographic crisis based on an inability to incorporate future financial projections into political decisions. The second flaw is leading to an unmooring of political systems, notably in the United States, from the basic principles of liberty, justice, and common decency on which societies are based.


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