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How To Go Broke Fast

May 3, 2009

Arnold Kling writes:

I tend to agree that for libertarians the “voice” option is looking bleak. I prefer exit options. But by the same token, I do not want to move to New Hampshire (see Jason Sorens) or to a seastead (see Patri Friedman). I think that perhaps the best positive approach for libertarians right now is to support institutions that compete with government.

Commenter fundamentalist suggests:

Congressman do not respond to voters; they respond to money. Politicians have an audio frequency range that responds only to cash. In addition to supporting civil society as Arnold suggests, libertarians need to finance libertarian candidates for office. We are great at financing think tanks, but we need to finance politicians. Educating the public is a fools errand; buying politicians is the key. And in order to buy politicians, we need to have more wealth, so use the Austrian Business Cycle Theory to invest wisely and avoid market crashes. The process of success is simple: become wealthier, buy politicians, support civil society. The implementation is a little more difficult.

Let’s briefly trace the logic of why this method is doomed, as it is a good example of the dominance of structural issues over policy tweaking.  Suppose each day, a bill comes before the state legislature which costs $1 to each of the 15 million people in a state, and benefits an industry by $10M.  (A transfer with 1/3 loss).

The industry will, of course, be willing to spend up to $10M to get the bill passed, because that’s how much they make.  So you will have to spend close to $10M to outbid the industry to bribe the same legislators.  If the legislators offer themselves for $9M, the industry can pay the price, and still book a million-dollar profit.  Whereas every dollar you spend (except one) comes straight from your pocket.

In other words, it’s like you are bidding with a $1 subsidy while the industry is bidding with a $10,000,000 subsidy.  It’s a rigged game that will soon leave you penniless, no matter how wealthy you start.  That’s the merciless logic of concentrated vs. dispersed interests in democracy – in order to get even one tenth the subsidy in the auction as your opponents, you need to organize 1,000,000 people who stand to benefit by only 1$ each.  To get a  larger subsidy than the industry, you would need to coordinate with 10,000,000 – two thirds of the entire state.

Perhaps someday technology will lower coordination costs enough to make this feasible, but for now, it’s impossible.  Bidding within the system, whether by getting politicians elected or bribing existing ones, is at a massive inherent disadvantage in fighting special interests.  What we need is competitive government based on attracting citizens, rather than the current system where the few take turns robbing from the many.

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3 Comments
  1. nobody.really permalink
    May 6, 2009 3:22 pm

    I largely share this view. Note, however, that the dynamic is one of concentrated vs. dispersed interest, not democracy. I expect we could find the same dynamic in feudal France, and in corporate bureaucracies today.

    Indeed, democracy provides the possibility for a limit on the system. Democracy provides the opportunity for a populist to gain power by crusading against “corporate welfare,” and then clamp down on the practice. Or at least a few of the practices. At least for a while.

  2. May 10, 2009 8:43 pm

    Why isn’t investment already dominated by ABCT adherents if it’s so successful at making good picks?

  3. Ormond Otvos permalink
    March 31, 2011 3:55 am

    No, I think we’re past the point of no return. No matter how many people you think you can interest, crooked psychologists can interest more in the other direction.

    For examples, start by thinking of some very popular position that is illegal. Single payer, cannabis, women’s equal rights, peace. Then think of how the corporations that profit from each have constructed strawmen and made them memes.

    You lose every time. Short of social breakdown, the algebra is the same. Maybe some weird consciousness will result from stuffing weird people with internet-based ideas, but that route seems blocked also.

    Entertainment unto death. Civilizations do die, you know, and this is what it’s like to live in one that’s dying.

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