Sunday, December 31, 2006

Of Aristocracy and Markets

My wife and I watched Emma together the other night. We have seen Pride and Prejudice several times already, but this was the first time she had seen this of Jane Austin's classics. I then headed over to Librivox to download the audiobook (for free!).
In one of the early chapters Emma and her "project" Harriet are discussing a farmer whom has shown interest in Harriet. Emma's disdain for this farmer's activity in the market - his seeking after profits- etc. is telling. As an aristocrat she sees all activity in the market as "dirty" and "low."
Why this distaste for the market?
Emma later acknowledges that the farmer may do well in the market, and even become wealthy, despite his illiteracy.
So, it isn't the wealth.
Rather, it is the source of that wealth.
The aristocracy inherit their wealth. They have land. Who granted them these lands? The king. Hence, nobility enjoys the derrivatives of a government grant of monopoly on land. The nobility are privileged, and quite frequently without merit.
People are always more protective of their privileges than their rights. When the privileged observe others enjoying some of the same things formerly available only to themselves due to their privileged status they become indignant. The market provides just such an opportunity to those of lower classes. Hence, the disdain for the market and those that profit from it.
Today's nobility are those who enjoy status and wealth outside of the market. These include those who have received monopoly privilege in one way or another. The rest of this class are those intellectuals whose learning is of limited practicality on the market, especially those in the social sciences and humanities. These intellectuals seek out positions within the government bureaucracy. They seek access to the privy (private) rooms of the king - hence privilege. They know that they have what they have unfairly. But they do not want it taken away from them.

These also have a static view of the world. Because their lives are consumed with aquiring the very limited access to the king, they constantly concerned about appearances, and favor, and position. All of their competing is done outside of the marketplace. It is all political competition. There is only a limited amount of time in a king's day, and there is a limited amount of wealth. Thus the two most important measures of wealth to these individuals are static and unchanging. They see the marketplace's creation of wealth as a threat to their wealth. They do not understand that the market creates new wealth which does not threaten old wealth in any way. The market tries to provide for more with less. Landed aristocracy has the result of providing fewer people with more. These two institutions are diametrically opposed, both in the historical context and in the modern context.
This helps to explain why government officials want to control and restrict the market.

Saturday, December 30, 2006

On divisiveness in politics

Duane Shank has a nice little piece over at God's Politics blog, where I have re-entered the fray.

His comments are in italics, my responses follow.

"voters appeared to send a message that they were fed up with divisiveness in Washington"

Here is where the voters are mistaken. Divisiveness in Washington is the best thing we could hope for. The less politicians agree about things, the safer we all are. Our checks and balances were set up to work best when politicians disagree with each other.

"The political world in Washington has become so bitter that simple friendships between Members of Congress of different parties are almost non-existent. President Ford belonged to an earlier era where there could be vigorous disagreements, but still strong friendships across the aisle."

If politicians across the aisle from each other are having such a hard time being civil with one another it is because they are arguing about things they shouldn't even be dabbling in. If they were focused on preserving the citizen's rights and enforcing contracts there wouldn't be much to disagree about.
When government is used to redistribute wealth, to play favorites by protecting some industries and not others, to create monoply power for some, to create privileges without merit, then people start to get ugly at one another.
People are always more protective of privileges than they are of rights.

The great assumption that Sojourner's makes, and the same mistake has been made by the Religious Right, is that government can be a vehicle for good, for social justice beyond the protection of rights and enforcement of contracts. This simply can not happen. The incentives facing government decision makers and the feedback mechanisms holding them accountable only work for a limited set of functions. Charity lies wholly outside of this set, it belongs to the Church and the Church alone.

Friday, December 29, 2006

The Other Essay

I am not currently engaged in any large research projects. Next semester I am enrolled in classes which will require a great deal of research. Perhaps the most challenging project I completed recently was a paper on the Putney debates among the Levellers during the English Civil War.
I enrolled in British History to 1688 my first semester back in school because I wanted to learn more about the development of the common law and the institutions which came to support classical liberalism. I was satisfied with the course, and intrigued by the story of the Levellers. I sought out more of their story.
What I discovered piqued my interest even more. History, as we are told now in the 21st century, is written by the winners. Different periods of history are revisited and reanalyzed frequently, depending upon who is winning in academia at the time. Both libertarians and Marxists had revisited the Putney debates in their time, yet in their zeal to promulgate a teleological narrative consistent with their respective philosophies the eventual victors each made the mistake of letting earlier historians do their investigation for them. Thus the debate among historians centered on a single document, Agreement of the People, which was important for being among the first attempts at a written, unalterable constitution.
What these narratives neglected was the other central document concerning the Putney debates, Case of the Army Truly Stated. In three of my six sources the Case of the Army Truly Stated was not even cited, while the Agreement of the People was cited every time. The Agreement is available through several internet sources, such as: The Case is not available online and the only copy I was able to procure was hidden in an unlit isle on a shelf in the basement of Duke University’s Perkins Library on microfilm.
My curiosity drove me to this document. What was it? Why was it difficult to find? The transcripts of the Putney debates made reference to this document, so why did the historians ignore it? I felt like I had discovered a lost piece of evidence, deliberately buried, because it did not fit with popular theories. It complicated those zealous teleological attempts at proselization.
This also complicated my research, because I had no precedent to follow, or to disagree with, concerning this document. My explication would be new, fresh, and juvenile. I am not a trained historian, and such an important work required time resources I did not have available. My work would prove incomplete, confusing, and somewhat uninformed.
The bulk of the paper which I presented was my interpretation of the Case of the Army Truly Stated and a contrast / comparison to Agreement of the People. This work was largely original, though I gave credit to Richard Maybury, author of The Uncle Eric Series, a set of books that teach classical liberalism to young adults, for the models I employed in making my argument.
I thoroughly enjoyed interacting with these original sources. Today’s university experience is fraught with musty texts which teach down to under qualified or lazy students satisfied to swallow and regurgitate what is given to them. I was appalled to discover that I might never read Adam Smith’s Wealth of Nations even as an Economics graduate student. Shall we merely take what is given to us without question? How are we to arouse the creative, curious, and productive spirit within students to inspire the creation of new wealth of knowledge?
I spent a great amount of time with my instructor, Professor Chad Ludington, discussing my paper, both before and after its presentation. I felt, and he agreed, that within it there lay the potential for a paper worthy of scholarly publication. I have a new section in my library dedicated to materials which may be useful in completing this work someday, while I am most concentrated on developing proficiency in using economic models for the time being.
It is an important work for the resurgence of classical liberalism. The Levellers’ story arises in Murray Rothbard’s For a New Liberty, and Dr. Anna Ebeling’s lectures at the Foundation for Economic Education. I hope that someday I can revisit this story and complete my work on it, or at least hand it off to someone who can truly do it justice.

Scholarship Application Essay, aka My Vision

I left university in 1997 to take a position working with at-risk children at Agape Corner Boarding School in Durham, NC. I became a 7th grade math teacher and house staff, responsible for cooking and other chores, and sharing a room with the students. I remained at Agape Corner for the next seven years teaching several subjects at multiple levels including math, literature, grammar, history, bible, Spanish, ethics, high school biology, and economics. I also was given administrative responsibilities including co-principal and acting principal positions. I was responsible for evaluating and recommending curriculum, student discipline, facilities management, and recreational development.
I was first asked to teach economics in 2003, and was provided with a textbook. I had no background in the subject and began reading the book in preparation for my classes. I was enchanted. The models provided by economics shed new light on all that I had previously studied and taught. I was particularly amazed at the relationship economics has to ethics and law, and the insights gained into history. When teaching history through the lenses of law and economics, “following the money” and the power instead of the battles, my students showed renewed interest. I became enthusiastic about the subject, and enjoyed sharing my excitement with my classes.
I realized that we were learning concepts which were extremely practical and powerful which I had not learned in my primary education, though I attended an excellent college prep school and had two years of university. I wondered how many others had never learned the principles economics and common law had to offer and began to develop a vision for teaching practical economics in a new way, reaching new populations. I needed more formal education to achieve my goals.
I applied and was re-admitted to NCSU in the fall of 2005. Sometime during that year I learned of the Accelerated Masters Program, and decided to pursue it. I intend to demonstrate initiative and competence by excelling in this program in order to improve my chances at gaining admittance to a top rated school for a Ph.D. in law, ethics, or economics. I plan to take the highest level courses for which I am qualified and to consistently challenge myself. Beyond the core curriculum I have interests in the theory and philosophy of economics as well as the history of economic thought.
The catallactic methodology of Austrian Economics meshes well with the pacifistic renunciation of force embodied by the Christian Ethics of Dietrich von Bonhoeffer, John Howard Yoder, and more recently Stanley Hauerwas, whom I sat under informally for a semester at Duke University. The unique nature of American institutions owes largely to the development of common law and constitutionally limited government in England. I believe a systematic approach for those adhering to the peculiar Christian ethic as described by the above theologians, informed by Austrian Economics (which has struggled, and will ultimately fail in my opinion, to identify an ethical imperative for its foundation), and the institutions of common law which have their foundation in the Anglo Judeo-Christian heritage, most particularly the book of Judges, is possible.
My long term vision is to have access to teach at any mainstream university and to write extensively in academic forums on the relationships among these various disciplines. I would also like to develop a workshop or seminar to share the useful principles of this system with the many people who have never had any formal education on these models. Finally, I would like to engage the population at large through journalism, books, and other media outlets.
My dedication to this pursuit is demonstrated by the courses I have opted to take since returning to school, and my recognition on the Dean’s list all three of these semesters. I strive for excellence, and to make the educational experience as fruitful for those around me as for myself.

Monday, December 25, 2006

Jesus Loves Me...

The song we all grew up with:
Jesus loves me this I know,
For the Bible tells me so...

But, that's not how I know Jesus loves me. I know He loves me because the Holy Spirit confirms it in my Spirit. Just reading it in the Bible doesn't confirm it to me.
I suppose its semanitcal. Or epistomological. There's two sorts of knowing. There's the knowing in your mind, and there's the knowing in your spirit. I can know in my mind that Jesus loves me by reading the Bible. I can know I am loved by a friend if they tell me so. But I don't feel loved just by their telling me. Feeling loved requires so much more. It requires time and experience. Love must be proven. It this sense I know I am loved because I am not forsaken, I am accepted, I receive gifts, and comfort from. The only way I can know that Jesus loves me in this sense is if I open my spirit to Him, to allow myself to be loved by Him. To be romanced by Him.
So, yes, I know that Jesus loves me, and I'm glad the Bible confirms it, but I really know it because I have fellowship with Him in the Spirit.

Sunday, December 24, 2006

Auberon Herbert - Libertas in Excelsius

Each man shall be free, whoever he be,
And none shall say to him nay!
There is only one rule for the wise and the fool -
To follow his own heart's way.
For the heart of the free, whoever he be,
May be stirred to a better thing;
But the heart of the slave lies chill in its grave,
And knows not the coming of spring.

Auberon Herbert, brought to my attention by Murray Rothbard in Man, Economy, and State, was the founder of voluntaryism. He has been called an anarcho-capitalist, but he refused the title himself, due to the connotations the term carried at his time.

To follow one's own heart is to have the free will given to us by God. To be restrained from exercising this will is slavery. As believers we do not wish that any should be forced unto slavery. Yet, we know that their hearts are wicked, and for them to follow their own will is for them to end in misery. What is our role, then? Shall we force them unto Christ? Anathema! They must choose to follow Him of their own will, once they have heard His call. How should we devise public policy? To maximize the opportunity to exercise free will within the limits of allowing all others to exercise free will. In other words, do unto others as you would have them do unto you. Statism constructs an artificial conscience, a social conscience. But this is paganism, and slavery. Under such a system each person is bound to do what is best for everyone else and not for himself. The individual is sacrificed, and the mass takes on a new identity. This is what was happening at Babel. The masses were unified in opposition to the liberty God wanted them to live under.

Do not be aggregated!

Then forward your heart set, each lad and his lass,
Till to humble and great it is known
That each man shall rule, be he wise man or fool,
His own self, his one self, alone!

Tuesday, December 19, 2006

What to do about Iraq

I propose bringing home all of our troops from every foreign post immediately and disbanding all federal branches of the armed forces, relinquishing arms to the individual state and local militias.

I don't believe US involvement in foreign affairs is productive. Never, not once, have the citizens of this country gotten out of a foreign conflic what they have been forced to put into it.

This is the only self-consistent solution derived from an ethical imperitive. All other "solutions" are derived from political agendas.

"But, what about the suffering people in other countries? Shouldn't we stand up for them?"

Yes, Christians should. Wicked rulers should be resisted. Force may be used. But only the least possible amount of force necessary to halt the aggressor. After that, force is relinquished. Only Christians are capable of this ethic. Everyone else would demand revenge.

Revenge only gives birth to the next war. WWI gave birth to WWII.

"But, our society isn't governed by Christians!"
True, but Christians should only support public policy up to the point that it agrees with their ethic, and after that oppose it.
We ought not to impose our ethic on others, but we also ought not to compromise ourselves.

"But, such a solution will leave us vulnerable to attack."
The entire strength of the armed forces, and with the the most admantly patriotic, most skilled at arms, citizens will be back on American soil. To attack would be foolish.
To plead for security over liberty is not consistent with the ethic Jesus taught.

Monday, December 18, 2006

Christian Bashing

It is okay to bash Christ. That's what the world does to Jesus, it bashes Him. Jesus tells us to expect to be bashed for identifying ourselves with him. For following Him. There's no reason unbelievers shouldn't bash us. They don't have the Holy Spirit, so how can they be good? How can we ask them to be good when they don't have the Holy Spirit, and we know that even we can't be good without Him?
We should not be surprised, offended, or shocked when the world bashes Christians or Christ.
We should be more surprised when they do not bash us of Him.
We should not expect secular institutions such as television stations, stores, corporations, or government to act morally when they do not have the Holy Spirit.

Thursday, December 14, 2006

Cell Phone Blues

"I want out of my contract now!"
Now, there's a way: Resellular.

The Church

We can see that the only read way to have a lasting impact on our world is through the Church. By being the Church - practicing the peculiar ethic Christ demonstrated for us, and enables us unto - we achieve much more than by competing for the opportunity to manipulate the political mechanism. Christians have all sorts of ideas on issues, but when we approach Christ, we find that there is but one ethic, one model to emulate.
We can take different positions on what the government should do, because the government is outside the church. It is not a part of Christ's ethic. It is not our means to achieving His commands. The Church is. When He commands us to love our neighbor, He does not say to do this by paying our taxes and politicking for wealth redistribution to the poor. No, He commands us to personally care for our neighbor. There is no room for an "I gave at the office - I paid my taxes" attitude amongst those who are spiritually renewed. Neither is there room for believers to demand charity of unbelievers. How can they love if they have not accepted the love of Christ? They are spiritually dead. Any "good works" they perform are out of guilt or alternative motivation. It is not for them to love their neighbor, and it is not for us to command them to. It is our responsibility, only.

Wednesday, December 13, 2006

Imitating and knowing Christ

There is a clear difference between knowing about Jesus, and actually knowing Him. If it is our ethic to immitate Him, it is essential that we also know Him. It is difficult for me to immitate George W. Bush. I could repeat a few of his phrases, dress like him, and do my hair like him. I could possibly study his policy decisions in the past, and make statements about what he would say given different sets of circumstances. But in none of these things am I immitating him. To imitate someone is to pick up their habits. Habits, by definition, are actions done without thinking. I have internalized a great many of my father's habits. Some vices, and several virtues. In the case of paternitiy we say that the progeny has "come by" such habits "honestly." I want to spend enough time with Jesus that I pick up His habits.

Many books are written about ethical dilemmas. Often the end is to derive a set of rules, with defined conditions and "correct" responses to said conditions. Confucianism may be the most elaborate collection of such an ethic. But this method is patently pagan. Who gets the glory from such an ethic? Only the one who can keep all the rules. But, who can even know all the rules? It is exceedingly difficult. Government positions in China were rewarded to those students who could best demonstrate mastery in knowing and keeping these rules.
As Christians, we are released from a plethora of precepts. We have but one law, to imitate Christ. He receives the glory, both from our successes and our failures at imitating Him. We no longer have to keep a list of rules ready in our minds to avoid mistakes. Instead, we learn by imitation how to behave. By developing habits, we don't think about what we are doing. We don't consider each circumstance seperately. We act out of our renewed mind.
This also is economising. We like specialization of labor because there are gains to be realized in making an activity mechanical. Even stuffing envelopes becomes faster and more efficient the more one does it. The same is true for behaving virtuously, when we can respond immediately out of habit to a situation we respond more quickly, and with less moral scruple than if the instance had to be considered individually.

Saturday, December 09, 2006

My Industrial Organization Term Paper, read it if you dare

Northern Securities Company vs. United States

In 1903 the Supreme Court ruled in a 4 to 5 decision that the Northern Securities Company (NSC) had violated the Sherman Act of 1890. This came as something of a surprise to the key personalities of the NSC because it violated good law, good economic theory, good trade, and good common sense. But perhaps they should have known better. Railroads in America had always been highly politicized, with one exception. The Great Northern Railroad (GN) of James J. Hill, the only transcontinental railroad to be built without federal subsidies, without wooing hordes of bureaucrats, was also the only transcontinental railroad never to declare bankruptcy. And it was this railroad that President Theodore Roosevelt pressured the U.S. Department of Justice to prosecute for antitrust violation.

Railroad History
Building a railroad in the second half of the 19th century was a highly profitable venture. The government loaned railroads the money to build, and gave them the land to build on, plus the surrounding territory, for free. Builders were also free to contract out supply functions to other firms which they also owned and to overcharge the railroad, thereby insulating personal profits from the required repayment of the loans. They could build anywhere they wanted, and thanks to an artificial incentive structure, building in the mountains was more profitable than on flat land. Since railroads were paid for the number of miles laid, there were incentives to build winding, indirect roads.
Winding, indirect, mountainous routes define the romantic relationship many Americans have with railroads. History frequently romanticizes those aspects of our past which were mistakes. The wasteful behavior of those who were building the railroads for immediate gain resulted in grossly inefficient lines defined by high fixed costs. One such railroad was the Northern Pacific (NP) which, though running closely parallel to GN, and serving many of the same locations, was 115 miles longer from St. Paul to Seattle.
Hill’s GN was built in a completely different manner than these others. Hill bought the bankrupt St. Paul and Pacific Railroad with the long term goal of opening trade to the Orient. He did not seek out government favors, but looked to satisfy the needs of his customers. He built slowly, deliberately, exploring various possibilities “to get the shortest route on the best grade with the least curvature .” He developed a region, helping settlers get started, before moving on. He built many spurs on to his railroads, serving otherwise out of reach locations, and encouraged the use of new agricultural methods in these areas to make them more productive. Other lines were prohibited from building spurs by their charters until later. Hill’s success earned him the title of “Empire Builder” and the respect of those who dealt with him. He discovered the key to free entrepreneurship: you only get ahead by helping someone else to get ahead, too.
Hill’s closest competitor, NP went bankrupt, like all the other railroads. Not only were federal subsidies used to build these railroads, but the public was forced to bail them out, too. Collusion among railroads was not illegal before the Sherman Act. Multiple lines serving the same market frequently established agreements regarding prices. Pooling encouraged efficiency improvements such as development of spurs and standardization of gauges and other equipment. However, collusive high rates often attracted new firms into the market, as we would expect. Many of these firms built new lines anticipating a buyout by the incumbents.
The balance between collusion and competition was volatile to say the least. Rates were unpredictable and often more expensive between locations that were closer together, but not served by competing lines. The literature suggests that “what the majority of the electorate wanted in 1887 was simply stability of the railroad collusions.” Railroad customers became frustrated with the volatility in rates and pushed congress for regulation of the industry including fixed, although higher, rates. This seems unlikely. I’m more inclined to believe that the industry incumbents pushed for regulation to help protect their investments. It also seems that railroads continued to court lawmakers who helped protect their interests at the expense of paying customers. At any rate, in 1887 the Interstate Commerce Commission (ICC) was formed, making collusion the law, adding policing costs to the public subsidization of the industry, and establishing the first of many independent federal agencies.

The Sherman Act
The Sherman Act was passed in 1890. It made illegal, “every contract in the form of trust of otherwise, or conspiracy, in restraint of trade or commerce,” and monopolization, “or attempt to monopolize.” The Sherman Act has been found to lack a common law foundation. Robert Bork states that,
Congress intended the courts to implement… only that value we would today call consumer welfare… The policy the courts were intended to apply is the maximization of wealth or consumer want satisfaction. This requires the courts to distinguish between agreements or activities that increase wealth through efficiency and those that decrease it through restriction of output.

Richard Posner agrees,
The framers of the Sherman Act appear to have been concerned mainly with the price and output consequences of monopolies and cartels, whereas the common law… had a miscellany of objectives mostly unrelated and sometimes antipathetic.

This foundation becomes relevant when we examine Justice Holmes’ dissent later.
Hilton contends that the, “writers (of the Sherman Act) were uniformly hostile to the idea of generating competition among the railroads.” So when NP went bankrupt and Hill moved to consolidate it with the GN, and to complete the route by also buying the Chicago, Burlington, and Quincy (CBQ) line in 1901, he and his partners, J. P. Morgan and Edward H. Harriman, believed they were acting within the confines of the law. Harriman had attempted to keep the CBQ from Hill, and already owned the Union Pacific (UP), but was convinced by Morgan to work together by forming NSC. Harriman shared Hill’s vision for efficient railroads, making improvements to the UP line, and increased efficiencies helped both the UP and GN to cut rates.
Hill’s vision was farther reaching than most could understand. He saw himself as competing not against other railroads between Superior and Seattle, but against water shipping enterprises running from Chicago through the Suez Canal to the Orient, where he wanted to introduce American grain and other products. Thus the acquisition of the CBQ was essential to completing the route and establishing efficient carriage overland from Chicago to Seattle, and then by his own steamboat line to Japan and Hong Kong, which once completed opened up broad new markets to a wide variety of American produced goods.

Northern Securities vs. U.S.
Teddy Roosevelt may be another example of a romanticized mistake. As a charismatic leader he strengthened central control of government and encouraged imperial expansion of U.S. power. He also surprised American industry by taking on the role of “Trust Buster” to gain public approval. Thus NSC found itself under prosecution by the U.S. Department of Justice for violation of the Sherman Act. Roosevelt so desired a defeat of Morgan and Hill that he chose Oliver Wendell Holmes Jr. as his nomination to the Supreme Court just before the proceedings. Holmes’ later defection was a disappointment to the President.

The Defense:
NSC argued that their behavior did not fit the description of cartelization or monopolization as described by the Sherman Act. They believed that the Sherman Act was meant to be a codification of earlier common law. It defined monopoly according to the common law tradition, meaning a government franchise with barriers to entry. Attempts to monopolize were applications to the government for enfranchisement. Ironically, this is what Hill had been fighting against in the other railroads. The common law never found mergers to be in restraint of trade because they were not contracts, but transfers of ownership. The intention of the law-makers was relevant to the application of that law. If the law were to find NCS guilty it would declare itself too vague and without clarification, no mergers could ever happen again.
Railroads enjoyed a special protection under the law, and thus were exempt from prosecution under the Sherman Act. Since none of the other railroad combinations have been prosecuted, this combination would also be legal. If the NSC combination was illegal then so were all the combinations under jurisdiction of the ICC, retroactively. (When this failed, it nearly had the effect of destroying the ICC, would that it had!)
Economically speaking, intentions and market power of firms were irrelevant. A combination might destroy competitions without restraining trade. NCS argued that the combination was an aid to commerce and not a restraint. Granting the federal government power to regulate interstate commerce in all situations where commerce might occur would return the economy to a mercantilist state, and rob States of the sovereignty. That contracts were implicitly restraints on trade does not necessitate that they were injurious to public welfare.
NCS also questioned the procedure of the prosecution, saying the Sherman Act did not apply to transportation, only to transported goods. If the parties involved were both already involved in an industry, the Sherman Act would not apply to them. (This seems to mean that the Sherman Act was designed to prevent vertical integration rather than horizontal.) Congress did not have the power to grant monopoly privileges, though it did have the power to regulate commerce. Commerce meant intercourse, which Congress might only regulate, and only on commerce directly, not incidentally. State law did not apply to interstate commerce, though it did apply to intrastate commerce. Supreme Court precedent only judged on acts which restrained commerce directly, not indirectly.

The Prosecution:
The government’s argument stated that the Sherman Act was not a codification of the common law, but a new measure of monopoly defined as suppression of competition. Actual possession of monopoly power and method of combination don’t matter, if the combination would tend to bring about such power, and the very existence of the power to restrain trade constitutes a restraint. Monopoly could mean ownership of a controlling portion of stock.
The words “in restraint of trade or commerce”, were not confined to unreasonable acts, but extended to any and all direct restraints of trade or commerce, even if reasonable or only partial. Any combination that avoided the effects of competition might be prohibited. Railroads were not exempt from the Sherman Act.
The Sherman Act was not primarily a criminal statute, so both restitution and punishment might be sought. Congress might limit contracts in order to protect competition. An agreement or contract in the technical sense was not at all essential. Commerce also included transportation, or the means to commerce. The goal was to keep the channels of commerce open and free from restraint. The federal government could and should police industry for antitrust behavior. Government acquiescence of previous combinations did not justify this one.

The Court:
Justice Harlan delivered the majority opinion. They decided that if NSC were allowed to proceed all railroads might eventually be consolidated and the public be placed at the mercy of the holding corporation. The evidence showed a violation of the act of Congress, in so far as it declared illegal every combination or conspiracy in restraint of commerce among the several states and with foreign nations, and forbade attempts to monopolize such commerce or any part of it. This combination was, within the meaning of the act, a 'trust;' but if not, it was a combination in restraint of interstate and international commerce; and that was enough to bring it under the condemnation of the act. The mere existence of such a combination, and the power acquired by the holding company as its trustee, constituted a menace to, and a restraint upon, that freedom of commerce which Congress intended to recognize and protect, and which the public was entitled to have protected. If such combination be not destroyed, all the advantages that would naturally come to the public under the operation of the general laws of competition, as between the Great Northern and Northern Pacific Railway Companies, would be lost, and the entire commerce of the immense territory in the northern part of the United States between the Great Lakes and the Pacific at Puget sound will be at the mercy of a single holding corporation. The court was not impressed by the scheming method of a trust. The Sherman Act was not limited by a test of reasonableness.

Justice Holmes wrote a scathing dissenting opinion recognizing the amount of politicking that had led up to this case. He wrote, “Great cases, like hard cases, make bad law… because (public) interest appeals to the feelings and distorts the judgment.” Yet even his opinion may have been bent by a dogmatic dedication to the common law. He looked for precise definitions of words instead of applying economic principles, and he accepted the defense’s definition of monopoly. He concluded that the majority opinion went too far in making any combination liable under the Sherman Act and importantly resisted the atomization which occured under the perfect competition model.

This case preceded an era of centralization of government power and regulation over the lives of its citizens. The court’s decision makes antitrust regulation arbitrary due to its broad reading, and resulted in large firms holding back innovation for fear of prosecution. It also set the precedent for an attack on John D. Rockefeller and Standard Oil just a few years later. When the law is vague and subject to an unpredictable power, entrepreneurs become more risk adverse. The ICC was “left in the unenviable situation of being established to facilitate something which had become unambiguously illegal.”
Application of the perfect competition model to legal measures of competition and monopoly power were in the vanguard. Posner demonstrates that even if the model were accepted it would be difficult to demonstrate whether a merger would create monopoly power unless the various possible average cost factors were known. It is quite possible that a merger could result in expansion of supply and lower prices even if the resultant firm were to act monopolistically. The fallacies of this economic methodology in a dynamic marketplace and in relation to entrepreneurship are scarcely recognized or accepted today. Political power prefers to take a static view of the world, reserving the only opportunity for change to its own fancy.
The subsidization of railroads in America had created a monopolistic situation with limited entry to the market. The result was bankruptcy due to inefficiencies in these railroads. The solution offered was to enforce collusion, making the railroads more monopolistic by virtue of control by a single entity, the ICC. When yet another subsidized railroad failed, the NP, the only free railroad in the country, the GN, stepped in to improve efficiency and lower rates. For this, NSC was accused of breaching antitrust laws. Interestingly, Morgan and Roosevelt were later able to enter into a now-famous “gentleman’s agreement” whereby GN and NP were able to act together. It seems that political control over the factors of production was the goal all along.

Friday, December 08, 2006


I used to be a Zionist. I also used to be a conservative. My theology required that there be a rapture, and that the Jews have a homeland in Palestine before the rapture. I believed a lot of these things, and it was odd to me that other Christians did not.

But then I discovered liberty. The kind of liberty that set me free from homage to the government. Conservatives believe in the government. They believe in power. When I gave up government, I realized I also had to give up the government of Israel. I believe that the Jews are God's chosen people and He still wants to acomplish some things through them, but not necessarily through the state of Israel.

Wednesday, December 06, 2006


Current best picture of me. Put that marker away.

Saturday, December 02, 2006

Advice for Young Men

From Vox Day and Dr. Helen:

As I see it, the objectives for any young man these days should be as follows:

1. Make absolutely 100% certain that at least until you are in your early/mid thirties, you don't get married, don't get any woman pregnant and if whatever legal jurisdiction you are in has or gets palimony laws, you don't get involved in any 'relationship' with a woman whereby she can lay claim to your assets or future income.

2. Get your career on track

3. Live abroad for a while - if you don't do it in your twenties, you probably won't do it until you retire, if at all.

4. While you're living abroad, get a foreign passport and bank account. Choose a country that is not overly compliant with your current jurisdiction and if possible make sure the bank account is non-interest bearing so you don't have to declare it on your tax forms. Never transfer money to or from that account.

5. Never go near a woman who is a feminist, a divorcee, claims she has been abused or is otherwise weird or has a victim mentality.

6. Unless you are religious or want children, don't even consider marriage. Seriously, there are tremendous potential costs and comparatively few potential benefits for men in marriages without those two elements, given that so few women now view marriage as a prerequisite to a full and intimate relationship. And given the current child support laws, even the motivation of wanting children is unreliable. If you're only popping the question because she's pressuring you, well, all I can say is enjoy your slide into Gamma Male Hell.

Good advice.