Need some opinions on unregulated business

[TheMarketAnarchist]

I've been a libertarian for a number of years and I consider myself a staunch anarcho-capitialist. But one thing that I've never been able to resolve is how to stop exploitation (environment, people, etc) in a true free market. I'd like some of your opinions on how this might be addressed. Let me give you some examples:

Currently, we have several companies that are basically destroying the environment in several African countries and decimating the regional or local economies. If they were unregulated, would this behavior not increase?

What about labor exploitation? While I don't agree with the assessment most people have about Walmart being a slave labor company, let's use it for our example. So Walmart pays its workers slave wages and they toil away long hours working for little money. Right now, we can say that they choose to do so because, if they didn't like it, they could go elsewhere and earn a higher wage or upgrade their skills to get a better job. But what happens in an unregulated market where Walmart gets together with every other retail giant and price fixes labor costs? At that point, the laborers only option is to upgrade their skill but then they aren't making enough to pay for the education required to do that.

I truly believe a free market capitalist society is the only way we'll ever be profitable. But issues like this are ones that have kept me puzzled for a while. Can anyone offer some insight?

Thanks!
TMA

[Hawker]

I think you misunderstand the purpose of a free market.  Its to get the best return on capital.  The environment doesn't appear on a balance sheet.

[ALPHA.]

I think you misunderstand the purpose of a free market.  Its to get the best return on capital.  The environment doesn't appear on a balance sheet.

Of course it does. A damaged environment can have a long-term impact on expenses and profit.

[Hawker]

I think you misunderstand the purpose of a free market.  Its to get the best return on capital.  The environment doesn't appear on a balance sheet.

Of course it does. A damaged environment can have a long-term impact on expenses and profit.

Sure it can.  And as you sip a pina colada in your Caribbean yacht, you will no doubt find ways to ignore those long term impacts.

[FredericBastiat]

Just prohibit monopoly privilege. By evening the playing field, it's probable that the likes of Walmart couldn't manipulate pricing for long. Of course, if everybody conspired to financially hamstring their neighbor, not even the best of governments could stop it. A society is only as good as as the individuals it comprises.

Laws make for good suggestions, they don't stop crime, they don't make people more charitable, more meek, benevolent, friendly, caring or otherwise. However, making laws that give special privileges or authority to one class of individuals over another only exacerbates the problem.

[ALPHA.]

Prohibit monopolies through a monopoly on force?

[FredericBastiat]

Prohibit monopolies through a monopoly on force?

Prohibit is perhaps a strong word. Can I just ignore your "monopoly" and just do what I want with my stuff? If so, you don't have monopoly privilege. If however, you can constrain me thru government licensing, regulation and other agencies that can manipulate what I can do with my things on my property, then monopoly exists. So no monopoly on force either.

[Explodicle]

Environmental exploitation and other externalities: insurance.
You buy insurance against bad things like someone poisoning the water supply. These insurance companies then offer to buy their own insurance for this event on the open market, but below your price so they will make a profit at very low risk. Someone takes them up on their offer and stands guard at the water supply to tilt the scales in his favor. The more insurance companies and more guards competing, the more cost-effective your purchase. If for some reason I benefit by poisoning the water supply (say I own a polluting factory), I can sell insurance to the middlemen at a loss to control the price and thus ward off vigilantes. If my loss on insurance is less than my benefit from polluting, I am basically paying off everyone who buys insurance.

This works a LOT better in theory because of real-life transaction costs and a limited number of participating firms. I'm currently exploring ways to use Bitcoin to reduce this problem.
http://en.wikipedia.org/wiki/Coase_theorem
https://bitcointalk.org/index.php?topic=47122.0

For labor, it's a prisoner's dilemma for the Walmarts of the world to all collaborate. I suspect this collaboration happens in practice partly because those companies have a lot of influence in government. But that's kinda the standard libertarian excuse for everything.

[JeffK]

I think you misunderstand the purpose of a free market.  Its to get the best return on capital.  The environment doesn't appear on a balance sheet.

Of course it does. A damaged environment can have a long-term impact on expenses and profit.

"Long-term" lol


For most businesses, long-term considerations include anything not on this quarter's report.

[Vitalik Buterin]

Government is bad because it's a monopoly more than for any other reason. You can think of the world as a free market anarchy where all the land is legitimately owned by 193 landowners that allow you to live on the land under certain conditions. A few are genuinely criminal, but with most once you hit the age of majority if you don't like it you can leave, and if you don't like all of them you can go live on a raft in international waters where no law affects you at all (well, if you start attacking cruise ships, you'll get arrested quickly, but that's legitimate self-defense not any kind of coercion). So why do we see all these harmful effects from oversized government? Because government is non-competitive, and in practice most of us don't have the choice of going to another country over disagreements about the level of taxes, public services, personal freedom, etc. A corporation or cartel that has a monopoly on food and shelter will have the exact same negative consequences as a government monopoly on land. Secondly, both megacorps and governments suffer from the same economic calculation problem with regard to internal affairs, which makes both inefficient once they cross a certain size threshold.

All this brings me to my second point - why we are here (the Bitcoin forums). For most of us, it's not just getting fedgov out of our money, or creating a new, better gold standard, it's also about getting rid of the need for banks, credit cards and Paypal - it's about getting big business as well as big government out of where it doesn't belong. With the internet, there is an unprecedented opportunity to decentralize the economy and massively reduce worldwide power and wealth inequality. Self-employment will go up, and small businesses will become more and more powerful. The world will become less hierarchical and based more on peer-to-peer mechanisms: the free market, crowdsourcing, democracy, etc, and we will all benefit.

[Phinnaeus Gage]

I think you misunderstand the purpose of a free market.  Its to get the best return on capital.  The environment doesn't appear on a balance sheet.

Of course it does. A damaged environment can have a long-term impact on expenses and profit.

Wait till you see this: http://www.youtube.com/watch?v=4EUAMe2ixCI

I watched it the other day, and thought it was awesome.

[Explodicle]

In my kind of anarchy everyone has guns and nobody is afraid to use them. You could try to get away with dumping nuclear waste in a river or fixing wages but that will net you a lot of enemies wanting to blow your head off, so exploitation would not occur because the profit obtained from it would not even come close to paying for the cost of making enemies with public legitimacy.

I'm concerned that the game might not play out like that. Pulling a gun on someone for whatever reason is a huge risk, and without an incentive most people would rather let "someone else" do it. Unless someone pays the guys with guns, they would rather free ride.

There's also the issue of minor or ambiguous aggression. We all pollute to some extent, at what point will you pull a gun on me for it? Will the other people with guns agree with you? There are very large gray areas.

[Hawker]

In my kind of anarchy everyone has guns and nobody is afraid to use them. You could try to get away with dumping nuclear waste in a river or fixing wages but that will net you a lot of enemies wanting to blow your head off, so exploitation would not occur because the profit obtained from it would not even come close to paying for the cost of making enemies with public legitimacy.

Its one thing to have a silly fantasy that lots of nutters with guns will make the world a better place but why not take a look at reality.  Guns are slightly better than bows, arrows and lances in modern warfare.  Its been all about air power and ballistic missiles since World War I and even if you have everyone trained to use guns, you are essentially helpless against modern armies.

[JA37]

In my kind of anarchy everyone has guns and nobody is afraid to use them. You could try to get away with dumping nuclear waste in a river or fixing wages but that will net you a lot of enemies wanting to blow your head off, so exploitation would not occur because the profit obtained from it would not even come close to paying for the cost of making enemies with public legitimacy.

I'm concerned that the game might not play out like that. Pulling a gun on someone for whatever reason is a huge risk, and without an incentive most people would rather let "someone else" do it. Unless someone pays the guys with guns, they would rather free ride.

There's also the issue of minor or ambiguous aggression. We all pollute to some extent, at what point will you pull a gun on me for it? Will the other people with guns agree with you? There are very large gray areas.

Not to mention collateral damage.

[Explodicle]

I'm concerned that the game might not play out like that. Pulling a gun on someone for whatever reason is a huge risk, and without an incentive most people would rather let "someone else" do it. Unless someone pays the guys with guns, they would rather free ride.

If nobody wants to contribute to ending the exploitation then we can assume it wasn't such a big exploitation to begin with, as it hasn't inspired hate on anybody. And assassination markets are possible in anarchy so there's no need to go do it yourself, you could just contribute to the growing bounty on the evil CEO's head.

An assassination market is just an extreme and barbaric form of insurance as I described above. There is no need to instantly escalate to killing people when the EXACT same mechanic can be used to finance private security.

There's also the issue of minor or ambiguous aggression. We all pollute to some extent, at what point will you pull a gun on me for it? Will the other people with guns agree with you? There are very large gray areas.

People won't get killed for minor or ambiguous aggression because the killer will not have public legitimacy, so it's likely that he may get killed right back for doing it. I wouldn't pull a gun on you if I didn't think it was 100% safe, meaning that I would first need almost unanimous support from the general public.

You will never have 100% support for anything ever. Even if everyone agrees that I should stop polluting, I could have my own hired guns.

And that's completely ignoring the fact that minor and ambiguous aggression still does need to be prevented anyways, even without consensus. We should not underestimate the number of people who don't understand the science and economics of pollution.

[EhVedadoOAnonimato]

Currently, we have several companies that are basically destroying the environment in several African countries and decimating the regional or local economies. If they were unregulated, would this behavior not increase?

This happens on typical Tragedy of the Commons scenarios, where an agent can externalize part of his costs. If property rights are respected, the owners of those properties being damaged by such companies could stop them or demand something in exchange.
The important thing is that every agent internalize all its costs.

But what happens in an unregulated market where Walmart gets together with every other retail giant and price fixes labor costs?

"Getting together" to "fix prices" doesn't work if there is freedom of entry. Doesn't matter who's getting together or what prices we're talking about, if a competitor can always enter the market proposing better prices, such cartel cannot stand for long. The wider the gap this cartel tries to create, the stronger the incentive for someone to enter the market or even some participant of the cartel to leave it. Cartels like this need the use of force (normally masked as "regulation") to stand for long*.

This is particularly strong on the labor market, since competition among employers is wide. Wallmart doesn't compete only with other retailers, but with everybody that's looking for non-skilled labor. Labor is finite, but the demand for it is virtually infinite due to the constant state of unsatisfaction of the human being (there's always something that can be done to better satisfy us).


*And even in some coercion scenarios, some interesting examples of "market solutions" may arise. I've known places where it was forbidden for some business to propose prices lower than a certain floor. Two things used to happen: some participants would propose better prices "under the table", and some would add "extras" to their services, for example a gas station that also washes your car for free if you fill your tank there.
IMO, trying to coercively set prices like that is much less effective than regulations that prevent or completely forbid the entry of new participants in a market, like the regulation that simply stopped MtGox from operating in France. These regulations are stronger "cartel keepers". The alternative to them are black markets, but for some sectors they are not really an option, particularly those sectors which strongly depend on contract enforcement, like banking. Most people are not willing to ask "the Mafia guy" to mediate their contracts...

[JA37]

As I see it, there's no need to resort to a middleman insurance system to prevent this things. Taking out the root of the problem directly is just cheaper, cleaner and more efficient. Eventually my system would cost $0 because the threat of death will be deterrent enough to stop all "evilness" in its planning stage.

Just like the threat of death has completely eliminated murders in the US? Nobody murders there, right, knowing that they will pay for it with their lives?

[Hawker]

...snip...

even if you have everyone trained to use guns, you are essentially helpless against modern armies.

Never heard of Vietnam, Afghanistan, etc?

Yes.  An American Army hog tied by the delusion you can win the hearts and minds of people who's country you are occupying gives up in disgust when people don't show them some love.

Contrast the Russians in Chechnya or Israelis in Palestine.  Bombs and missiles by the ton - and they both won.

As I said, people with guns are essentially helpless against modern armies.  For a short while they can make nuisance of themselves with shoot and skoot tactics but unless they are backed by a state providing modern ordinance, they will be eliminated.

That's why I don't understand people saying they want to dissolve the state in their own country.  It just means that a foreign country gets your land and its resources while you get to choose between the graveyard and subservience.

[deuxmill]

If it's free then people will buy from wherever they want. If they want to protect the environment they buy from eco friendly companies . IF they don't want they buy from non eco . And you do as you please , you want to protect the trees , preach about it. It doesn't work the environment is screwed . The environment is screwed we adapt like we did before.

[Explodicle]

An assassination market is just an extreme and barbaric form of insurance as I described above. There is no need to instantly escalate to killing people when the EXACT same mechanic can be used to finance private security.

As I see it, there's no need to resort to a middleman insurance system to prevent this things. Taking out the root of the problem directly is just cheaper, cleaner and more efficient. Eventually my system would cost $0 because the threat of death will be deterrent enough to stop all "evilness" in its planning stage.

The need is that people don't want to live in a society where they will tolerate your pollution one minute, and kill you the next. The marginal cost of generating externalities would be either 0 or your life! That's extremely unstable. You say "resort" to middlemen as if violence shouldn't be our last resort.

And that's completely ignoring the fact that minor and ambiguous aggression still does need to be prevented anyways, even without consensus.

How do you decide what minor stuff needs to be prevented? Just by living you are polluting, you know...

The market for insurance decides, not me, and not some nut with a gun. An insurance market gradually increases the pressure - starting with peaceful means - to reduce your externality as the interference worsens. At least destroy the power lines to a polluting factory before killing its owner! Your proposal is even worse than pollution taxes, since those DO address minor pollution.

We should not underestimate the number of people who don't understand the science and economics of pollution.

I'm not. I never said this system would actually work with the current level of stupidity in the world.

So when does it start to work? Without a plan for a gradual transition, a proposed system is impractical. Shall we wait until everyone is an educated nerd like us?