This highlights well some of the conversations I have with folks who want to replace fiat currencies with cryptocurrencies. Sure, one can design a better monetary system, but that doesn't mean people are going to want to use it.
You have to incentivize and enable people in order to get them to change.
M-PESA and the similar mobile money telecom products are doing more for digitizing and disrupting fiat currencies than cryptocurrencies are currently. Bitpesa is having some success as a bridge between the two, but it's going to be a struggle for any cryptocurrency or token to surpass the usability of digital currencies tied to the devices they already use and th kiosks / storefronts around them.
It's actually similar to a cryptocurrency in a lot of ways. Decentralized, based on a common algorithm (the design of the 1000 Shilling note), with a price eventually stabilizing on the mining (counterfeiting) cost.
> You have to incentivize and enable people in order to get them to change.
It's also possible the incentive will come by itself: if advocates of commodity money (money with an inflexible supply/stock) are right, inflation will occur in traditional currencies sooner or later. No better incentive to store your value in bitcoins than seeing the value you have in traditional currency slowly erode.
Time will tell whether this will be what introduces regular folks to cryptocurrency. If I were living in Argentina or Venezuela, it wouldn't take much convincing to get me to store at least part of my savings in cryptocurrency.
I figure cryptocurrencies work like collectibles, which also naturally deflate. Compare artworks or antiques or old wine.
What I've never quite understood is how those things align with investment. If I have $1000, can I predictably make more money by buying $1000 worth of art than $1000 worth of stock? If so, why? Buffet's "you can fondle the cube, but it will not respond" would seem to stand, but at the same time artworks and so on seem to only be getting more expensive.
If stuff gets cheaper to produce, and there's a fixed stock of money, I see no other outcome than deflation. In this case prices simply reflect that goods can be produced more efficiently.
So, if USD inflation is, say, 5% and bond yields also 5%, then you would indeed make no money by holding USD-denominated bonds. But I would argue the problem is with USD inflation in this hypothetical, since bonds also yielded 5% during the international gold standard and yet we had 2% deflation.
I would also argue that money is a sort of collectible; the only difference is that it's highly liquid. A painting might very well increase in value, but if you need to sell it quickly (as opposed to waiting six months for the right buyer) you can easily end up losing money -- if you can even find a buyer on short notice.
you're comparing a phone sms based payment method to bitcoin. you're missing the charactistic that gives it its killer use case: digital scarcity. the uncensored payment method on top of scarcity is just icing on the cake.
This article ignores the fact that no one in Somalia uses the shilling any more^. In fact no one really uses money any more. Most banking and financial transactions are done using mobile credit, similar to Kenyas M-PESA.
This has significant advantages for Somalis. Mohamed in Mogadisho can ask his cousin Mohamed in Minnesota to pay for his meal and all Minnesota Mohamed has to do is transfer the money on his phone.
Why would Somalis go back to the shilling? If anything they'll just go back to the USD which has been the staple far longer than anything else.
^Ok I'm being excessive. It is in use but its use is made redundant by access to mobile technology. Those at the poorer end of society still depend on the shilling but even the nomadic pasturalists these days have mobiles and conduct their trade using mobile money.
Edit: One has to wonder if the new TFG in Somalia is re-introducing bank notes to try to damage the hold that the big Telcos have on Somalias financial institution. Considering some of the Telcos are in bed with Al Shabab It's probably in their interest to curtail their power.
I think the article is in violent agreement with you (at least the latter half of it). It in fact argues just that - they shouldn't go back to the shilling, precisely because nobody uses it (and instead they should go dollar/mobile/etc).
I'm sure you read this as well after it loaded, but the article does mention that in urban areas most payments are mobile. It's the rural areas using conferfeits.
> As I pointed out in my old post, there's an old and nagging question in monetary economics that has never been satisfactorily answered: why is fiat money valuable?
I've always been surprised by questions like this. Why is (say) gold valuable? The gold supply fluctuates unpredictably depending on gold strikes and without any consideration for creation of underlying economic value (so is inherently inflationary, except for gold strikes). The big gold strikes of the 19th century were each associated with economic boom/bust. But the underlying utility of gold is low.
Some people complain about a central bank "controlling" the money supply (let's not forget that you "create" money when you use your credit card and "destroy" it when you pay your bill), so monopoly there. That's a fiat too.
In terms of value, the shilling case makes more sense if you think of money in its role of signalling (there are lots of bananas available right now so the price is going down -- don't bother to go harvest some more until the price goes up) rather than as a store of value. That's why people don't worry about counterfeits. Presumably the actual measure of wealth there is not monetary -- perhaps land, more likely some kind of family/community strength.
As robots drive the marginal price of goods and services very low and humans live on UBI, the signalling role will become more significant than the wealth role.
Money: medium of exchange, store of value, unit of account.
Intrinsic utility doesn't really enter into it; the value of money is inherently social, because it relates to other people. You're either going to exchange it for something now, exchange it for something in the future, or hypothesize an exchange to put a numeric value on something concrete, a number you can compare with other numbers.
Right, which is why you need the total money supply to grow/shrink roughly in proportion to the total aggregate wealth (whatever that is -- an ill-defined, poorly understood social construct which we all "kinda" know).
This is what gold bugs (and their bitc equivalents, and...) don't understand: their money supply changes randomly and completely out of phase with the actual economy, with empirical evidence of disastrous consequence. Great in theory, dreadful in practice.
Accounting has a magical provision for this at unusual sequence points (i.e. asset sales): goodwill. When the asset denomination (i.e. cost) is out of whack with what is thought to be the underlying value, the delta is magically stuck in a bin called "goodwill" which then depreciates, slowly smushing it into the overall money supply.
Very interesting comments. I've been thinking a lot about UBI and the one thing I still can't work out is if we are going to just have to print tons of money to be able to make it actually universal (meaning not for people < $50K). Some will still be creating real value for their income so how much is that money devalued by the amount that is given for free via UBI? Will this just cause massive inflation? (I guess I should take some economic theory classes somewhere..)
Consider that in many western economies, inflation has been perilously low for a decade or more. Japan, Europe, and the US all have extremely low inflation today. This leads to some problems we don't usually hear economists worry about--namely that debt-financed personal investments like a home mortgage or a student loan become much more onerous to people who have taken on that debt in the last 20 years. Since such debts tend to have fixed payments over fixed periods, a reasonable rate of inflation would ensure that the real cost of paying off those debts goes down over time, and even if everything else gets more expensive, you still end up with more discretionary income over time, even if your real wages never go up compared to inflation. But with 1% or lower inflation, those debts become a decades-long constant drag on an individual's discretionary income, which may never grow. For real assets, such as homes, inflation also ensures that homeowners actually accrue equity over time, in addition to shrinking debt payments.
All of that is to say, we could do with a couple of decades of 3-4% inflation. Implementing UBI very likely would trigger some inflation, but if there's one thing central banks know how to do and have the power to do, it's clamping down on inflation. Other economists have proposed less direct methods of giving money, from burying caches of cash (to create employment and stimulate investment), to dropping money from helicopters. Sure, those examples were tongue-in-cheek, but you can kill two birds with one stone by using government money to invest in rebuilding infrastructure, building high speed rail, curing cancer and diabetes, paying for more and better public education from pre-K through college. That money pays off in multiple ways: more people have jobs, you stimulate moderate inflation and wage growth, and in the end you have all new infrastructure, new treatments for disease, and a better educated population. Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing...
Yet I fear we are all headed the other direction on these things.
It sounds from your post like you have borrowed money to buy something (a home, perhaps) and are hoping that inflation will make it easier to pay back that debt. Your arguments work exactly in reverse for someone who is saving money for future large purchases and for whom inflation would be a disaster.
Without inflation, the working class is able to accumulate savings and better their lives. They don't need to put their money at risk in the markets or negotiate raises at work just to keep from falling behind.
Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing...
Maybe, maybe not, but all of these things can definitely be had by having a strong, stable currency that does not lose value.
The "go into debt and then have inflation devalue your debt" system creates a divide between people who are eligible to go into such debts, and people who are unable to and thus see their savings eroded by inflation. It would be much better to have stable consumer prices and to keep debt manageable by maintaining low interest rates.
My argument has nothing to do with my personal financial situation. You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero. And the actual data shows people accumulating more debt, and savings are going down. Too much inflation is bad, but so is too little inflation. We've now had 10 years of far too little inflation.
”You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero."
Yes; their savings maintains its value even if it does not earn interest. Inflation would destroy the value of what they have saved. Perhaps people are not saving as much as they would like because they know that inflation will ruin them, so they spend their money earlier than would be prudent.
We have had significant inflation in the past 10 years; the prices of just about everything at the supermarket have soared upward. That we can buy technology like computers and phones cheaper does not make up for this.
> Since such debts tend to have fixed payments over fixed periods, a reasonable rate of inflation would ensure that the real cost of paying off those debts goes down over time,
That's a dangerous assumption for someone to make. Better to consider the debt something used to map asset expense to future earnings (like a company maps dept payment & depreciation to expected asset lifetime).
The system in the US is messed up because there is a foolish bias towards home ownership. I'm not saying owning a home is inherently bad (I own one myself, but I paid cash), just that it is assumed to be inherently good, which is not. In fact it remains economically disastrous.
I'm not saying people should assume inflation will grow. I'm saying more inflation now would help the overall economy grow. I agree with you that there's too much of a push to home ownership (and student loans for that matter). But the fact is that many many people are overburdened with debt, and there are two ways out: slightly higher inflation for a few years, or near-zero inflation for a couple of decades.
Don't forget that the marginal cost of goods should decline, and even plummet. In the long term with robotic farmers, robotic harvest, robotic transport and robotic production the production cost of a shirt will be pennies and there is no reason why the purchase price should be much above the interest stream on the purchases on the robots.
This is a big reason why the productivity numbers aren't as poor as they appear: the number of labor hours required to purchase a shirt or a TV has fallen. You can see that in the massive inflation numbers on labor-intensive industries that haven't been automatable (cf the late Baumol). But when you average them together it looks like productivity hasn't grown as it is denominated in hrs/$
> let's not forget that you "create" money when you use your credit card and "destroy" it when you pay your bill
Can you elaborate on that? My understanding is: when you swipe your credit card, Visa loans you money and pays it to the merchant. When you pay your bill, Visa gets money from your bank. How is that creation or destruction of money? Seems like value is conserved to me.
It's the second of June and you have $100 in your pocket.
Case 1: You hand me $100, I hand you a widget. I put that $100 in the bank, and over the course of the month go to the ATM five times, take out $20 bucks each time, and spend it. The money supply in Palo Alto is the same all June long.
Case 2: You use your credit card to give me $100; I hand you a widget. You still have $100 in your pocket while I have $100 in my bank account I can go spend. For the month of June the money supply is $100 larger. At the end of the month you pay off your bill and the money supply shrinks back to its prior level.
Macroeconomists and central banks use various definitions of "the amount of money" (with names like M0, M1 etc) to measure different things, just as there are different measures of unemployment, inflation etc, all designed to adjust / smooth / emphasize different phenomena. Like different filters in a circuit: https://en.wikipedia.org/wiki/Money_supply
This is why I am always infuriated by politicians who use microeconomic analogies when discussing macroeconomic things like government debt and trade policy. I just assume they aren't as ignorant as they sound, which may be foolishness on my part.
I believe the parent poster was mentioning the modern ability of commercial banks to actually create money through loans. There are many places to read about it, I quickly found http://positivemoney.org/how-money-works/advanced/how-commer... but there might be better sources
Isn't the bank is still on the hook for its liabilities? It might be playing a dangerous game, but it's betting against a bank run (which are rare) and on itself having enough liquid cash on hand to handle withdrawals during reasonable circumstances. We all know banks invest our cash (in loans and tons of other vehicles) in order to earn their profits (and our interest.)
edit: Visa doesn't loan the money, participating bank does. and when bank loans the money, most likely it is money that bank doesn't have, i.e. created money.
I crazy idea I had was using counterfeiters to mint money.
Make it so that the manufacturing cost of a $100 bill is $100 minus the amount you want the counterfeiter to make, so for $1 say $99. Include tons of security features, use silk, gold, diamond dust, whatever. Then just let the market do it's thing.
Have money testing machines that shred fake bank notes at sight. You may or may not want to keep punishments for using fake bank notes. You just want to keep a little bit of pressure to keep the manufacturing costs so high that you control monetary supply. (Now that I think about it, supply of bank notes != monetary supply. You'd have to physically print A LOT to shift the value of a currency notably.)
There are a ton of reasons why this wouldn't work or wouldn't be a good idea. For one, a complete waste of resources. Also, you wouldn't have as much control over the money supply. And advances in technology change the production rate and profits from printing rapidly.
All of those caveats also apply to Bitcoin, of course.
That is similar to have e.g. gold coins as currency. That is inefficient because it is hard to create enough of the currency for the economy to function optimally. It is also quite expensive.
I wouldn't say that it's easy. You at least need some tungsten, uranium-238, rhenium, platinum, iridium, osmium, or chengdeite (Ir3Fe) most of which are nearly as expensive to obtain as actual gold. Any other material that is denser is probably also radioactive, and only available from nuclear fission reactors.
Os 22.59 kg/L $13k/kg $294k/L
Ir 22.56 kg/L $22k/kg $496k/L
Pt 21.45 kg/L $29k/kg $622k/L
Re 21.02 kg/L $69k/kg $1450k/L
Au 19.30 kg/L $40k/kg $772k/L
W 19.25 kg/L $50/kg $960/L
U 19.1 kg/L $150/kg $2900/L
The obvious choice for counterfeiters would be tungsten. A gold bar that has been hollowed out and filled it with tungsten is detectable with ultrasound. Counterfeit tungsten coins with known dimensions can be detected by measuring electrical resistance, or by doing a "ring" test, which is striking the coin with a hard object and listening to the sound it makes. The difference between the sound of a gold coin and a tungsten fake is clearer than the difference between a genuine B20 bell-bronze crash cymbal and a cymbal made from cheap brass. The gold coin will ring, while the tungsten coin will barely sustain a dull thunk.
The other noble metals are available in extremely limited supply, and usually comparable in value to gold or platinum anyway.
Devices that test for the density of gold coins are already cheap and widely available. Using a Fisch device and dropping the coin onto a countertop is just as easy as using the counterfeit detector marker, checking the watermark and color-shift inks, and looking at the security strip under a UV light.
This is precisely what is happening in Somalia (as noted in the article), although in the inverse: the value of the money fluctuates (down) with the cost of production.
This is hardly a crazy idea, it's basically a de facto commodity-backed currency. It's not functionally different from a bond that can be exchanged for X weight of tobacco, corn, gold, etc.
Except for the fact that shredding makes it also a lottery system: Attempts to exchange the bond result in either redemption at face value or nothing, with the probability being equal to the proportion of fake bills in circulation. Assuming, of course, that the bank has a monopoly on counterfeit-detection devices (they don't).
If the central bank is buying counterfeits with the new currency, won't that encourage the creation of more counterfeits just so they can be exchanged?
But the article also claims that the central bank would have to buy the counterfeit (and legit) currency at a premium, so that it's worth it to the citizens to exchange.
The premium looked pretty small and I would imagine the buyback would probably exclude anything that wasn't in circulation at the time it happened shortening the time table for something that needs to be shipped in.
Once there's an established currency it becomes practical to make notes that are worth a lot more than they cost to produce, which is a direct cost saving for the same amount of currency in circulation and gives a currency that's more practical (don't have to carry as many notes around). And having the money supply under deliberate control should lead to more consistent inflation which makes it easier for individuals and businesses to plan/budget etc.
Maybe I'm slow but I'm missing the proof-of-work aspect here? The article certainly doesn't mention it. Are you (gwern) referring to the work of the counterfeiters?
The bank notes are valued at what it costs to make them (paper, ink, shipping, plus small margin). If you want to do the work it takes to make one, you can make one and the note will be accepted on the market.
The article doesn't use the words "proof-of-work" -- it's the person who posted it to HN who gave that title. But I see the analogy.
A proof-of-work currency (1) prevents uncontrolled inflation or devaluation, (2) should be difficult to generate the currency (i.e., a lot of work), (3) but easy to check the currency (i.e., check that the work was done).
The Somalias presumably have a threshold of quality at which they'd accept a fake shilling. I'm sure they wouldn't accept a blank piece of paper. They probably wouldn't accept a black and white photocopy. At some point, the quality is good enough[a] that they'd accept it even knowing that it was not produced by the government.
That satisfies the basic idea of proof-of-work: (1) It prevents out-of-control inflation, (2) involves a fair amount of work (professional printing), (3) but you can decide at a glance if it's good enough to accept it.
I always hated fiat currency, but I think I've come to grips with its necessity. The one thing a gold standard currency can't seem to do is control demand for it, thus its value can skyrocket.
When you think of currency as a commodity, under a spiking demand their is no way to control supply so you get deflation.
Rampant deflation maybe more destructive than inflation unless negative interest rates were to become socially acceptable, which I don't think is realistic.
Without negative interest rates deflation makes repayment of loans impossible and rewards hoarding which will continue the deflation cycle.
The thing I really dislike is how the US economy is based on credit and consumption. The Federal Reserve probably basically regulate how fast money is printed so it has value, which is then often used to import goods from for example Japan or China. These countries then buy treasury bonds.
Money as a concept is interesting, and many of our conventions for thinking about it don't stand up well to scruitany. A few realisations I've had over the past few years:
1. Prices are ratios. A price is the ratio of how much X you will exchange for some Y. "Two dollars per dozen eggs" is the ratio of dollars to eggs. (William Stanley Jevons observed this in the 19th century.)
2. Money is, generally, the most universal exchange medium, within a given region. In this article, Somalia utilises both US dollars and Somali shillings.
3. Most currencies take their names from either units of weight or of quality: Weight: Pound, peso, mark, shekel, livre, penny, denarius (and dinar, dinero, etc., subdivision of 10), dirham (also drachma, from dram). The Japanese ryo.
For quality: dollar (referring to the high-quality silver of Jochimstaller, Germany), franc (Francorum Rex), ducat (from ducato, related to duke). References to royal imprimateur are common: royal, real, crown, kron, kroner, etc. Guilder, Guinea, gineih, zloty (from gold). Toponyms (afghani, bolivar, etc.) are also common, and refer to the authority of the issuing nation. Sterling (star-like silver). Ruble and kopek both refer to the cutting off of slivers of silver from a bar. Rupee again refers to silver.
There are some exceptions, of course. Scudo and piaster refer to shape, as do yuan and yen. Florin refers to the flower inscription (arguably a mark of quality or merit).
4. Whilst Gresham's Law applies -- poorer quality coin of a given denomination will drive out higher quality, there is also quite frequently a flight to higher-quality alternative currency. So: in Somalia, the Shilling is used for general trade, but dollars for larger transactions, where both value and acceptability matter.
5. Many regions and periods have seen what were effectively multi-currency systems. With stable rates of exchange between copper, silver, and gold, the English currency Adam Smith describes (at ... great ... length) in Wealth of Nations is actually one of three independent currencies largely used for different types of transactions: copper for retail, silver for wholesale, and gold for finance. The farthing (four-thing -- one fourth of a penny) was nearly 1/1000th the value of a pound sterling (240 pennies, or 960 farthings). Twenty pounds was a good income for a labourer. If you consider a farthing as essentionally a dollar, then those 20 pounds are an annual income of about $20,000.
6. There are multiple drivers for currency value. Clamshells (the origin of "clams" as a term for money) were used in the US for small transactions. Obtainable (with some work), exchangeable, relatively easily accounted for. Convention, agreement, assurances of legal currency, mandates for tax payments in currency, standards for international exchange, commodities trade (think oil), etc., all play a part.
7. Virtually all currencies, specie or fiat, devalue over time. Again, Smith addresses this ... at length.
As an aside: I've been waiting for Libertarians to declare Somalia to be heaven on earth. I wonder why they've never picked up on the obvious real-world example of a nation with no central state government with a monopoly on violence?
You probably haven't looked that hard. Somalia case studies are ubiquitous in libertarian (anarchist-leaning) circles. The general claim seems to be that, yeah, stateless Somalia is way worse than high-functioning governments like the United States, but better than its neighbor states and better than it was before it became stateless.
Leeson's article is probably the best on the topic:
People actually argue that Somalia is better than it was back when it had a functioning government? Have they talked to anyone who grew up or lived through that? Nobody I've talked to from Somalia (I grew up in Minneapolis, a good chunk of my classmates from elementary and uni were Somali), nobody thinks it was a good change. The amount of death and fear is just staggering.
That article reads a little tone deaf, a lot of the data ignores an entire 10 year period of total fucking chaos.
It is very common for foreigners to hate their homeland. People who move from Kuba tend to say it sucks. I moved from America to Prague and I tell everyone that America sucks. My Russian friends say Russia sucks. The Ukrainians I know say Ukraine sucks. The Kyrgyzstanies I know say Kyrgyzstan sucks.
I live among foreigners, and the only ones that I've met that actually like their home country are rich ones from totalitarian regimes who somehow benefit from the regime. And as far as I can tell, public opinion of a regime among expats is strongly tied in both directions to how that regime effects them and their families financially, though even well off people such as myself, who have chosen to move away, often find it in their hearts to hate their home country.
The rich Saudis who come to Prague to study all thing Saudi Arabia is heaven on earth. The Russian who's family lost everything in 1998 [1] think that Putin should be hung from a lamp post with his own intestines.
I think that there is basically no knowledge to be gained from talking to expats about their home countries. After-all 75% of Turks in Belgium voted for totalitarian dictatorship at home [2].
>It is very common for foreigners to hate their homeland. People who move from Kuba tend to say it sucks. I moved from America to Prague and I tell everyone that America sucks. My Russian friends say Russia sucks. The Ukrainians I know say Ukraine sucks. The Kyrgyzstanies I know say Kyrgyzstan sucks
Exactly. It's also very typical for the average person someone on HN would mingle from that comes from other countries to say their country sucks (someone heavy on US culture, or who aspires to be a SV entrepreneur, etc is not the typical example of the average citizen of most countries). So just because someone knows people from a country, it doesn't mean their opinions represent what people from that country generally believe. Even ex-pats living in a foreign country tend to meet and mingle with quite specific demographics.
Cab drivers (and similar working class people) can often tell you more for the general sentiment in a country that people you naturally gravitate towards for making friends.
I had a similar objection to the various "arab spring" analysts, who take people with celebrated english-speaking blogs and twitter accounts (which by that fact already are a small minority in their country) as representative of the general sentiment etc. The guy who aspires to be an Egyptian blogger (and who participates in internet culture heavily) is probably more westernized and quite different than the average folk who might ask for heavier islamic laws etc. That's obvious, and still pundits are then surprised when such incidents (arab spring etc) take a turn for stricter regimes.
The person you're replying to didn't say that the citizens hated their homeland, he/she said that they preferred the older Somalia before it was state-less.
I'm not choosing either side of this discussion, simply clearing something up.
I don't think I would enjoy Cuba, Russia, Ukraine or Kyrgyzstan either.
I'm an expat from Sweden and I think Sweden is fantastic. It's just not the place for me at this point in my life. My friends from the U.S. are also very fair in their descriptions - there are things about their country they love, other things they hate.
You could just as well say that people still in their countries are suffering from Stockholm Syndrome.
Almost every single one of my Somali peers loves Somalia, and would much rather go back, except they can't because of the fear of getting shot to death / starving.
Though sometimes this is half-jokingly in the context of "oh god it's -10F, why do people live here? I was tricked into coming here instead of Toronto".
It's kind of amazing that around here when someone says "yeah my Libertarian Paridise home-country is actually a shithole because people keep getting machete'd to death by roving gangs", someone else strokes their chin and thinks "hmm, I'm not sure I buy it, maybe there's a survivorship bias in there"
Most of the metrics which he's looking at which improved under southern Somalia's anarcho-capitalism happened because of an increase in remittances. I don't think anybody's arguing that if Somalis didn't have legions of relatives abroad sending them money the humanitarian disaster would have been even worse.
The security implications of living with a system of competing warlords (or 'insurance companies', in ancap terminology) are also massively glossed over.
>The general claim seems to be that, yeah, stateless Somalia is way worse than high-functioning governments like the United States, but better than its neighbor states and better than it was before it became stateless.
I think you have to have a pretty strong a priori bias in favor of libertarianism to see that as a favorable statement. It also looks a bit self-serving, as there seem to be more Somali refugees in Kenya and Ethiopia than vice-versa.
Functional hospitals, schools, universities, utilities and services. No crime, no warlords and no bandits. Economic stability and religious freedom.
Sure, Barre was a dictator, there was state sanctioned violence but for the average Somali on the street life was better in contrast to what followed which was:
Anarchy, random violence, war lords, checkpoint extortion, no services, no schools, no hospitals, no utilities, telecommunications were monopolized and the owners became defacto rulers who maintained anarchy to ensure tax-free profits. Massive increase in maternal mortality, reduction in life expectancy etc etc.
No one is saying Barre and the regime was great, but in comparison its pretty clear it was superior.
At the risk of heading even further down this rabbit hole, I'd observe that there are very many significant differences between Somalia and the United States and that the existence of government is just one small part.
>I'd observe that there are very many significant differences between Somalia and the United States and that the existence of government is just one small part.
Could it be that "the existence of government" plays a big role in there being "very many significant differences between Somalia and the United States"?
I haven't forgotten the UK. It's where I come from. Unfortunately the saying: "The past is a foreign country, they do things differently there." applies.
So I sometimes try to avoid mentioning it, and especially anything to do with Brit royalty.
"that the existence of government is just one small part."
I dont think you can qualify government as "just one small part".
America would not be in the same place today without the decisions taken over time by its leaders. The same decisions would not be made under a different system of incentives for a leader like a monarchy/anarchy
It wouldn't be the same place, but it would still have enjoyed the highest natural-resource to population ration of any nation in history. Coal, Iron, Oil, Natural Gas, Gold, Wood, Water, Arible land, Uranium, Aluminium, Copper, all in great supply. The only comparable nations I can think of are Australia and Brazil, and their relative wealth is rather well explained by the overall wealth gradient nearing the equator:https://en.wikipedia.org/wiki/Geography_and_wealth
I keep reading that on HN, but after hanging around libertarians for a lifetime, I've never met a single one who said that. Usually Somalia comes up in the context of someone wanting a bigger government and dismissively telling libertarians "Why doncha just move to Somalia? Huh?"
But less government tends to lead to no government, or right back to where we are today depending on how strongly held one's beliefs are. Good luck finding two people to agree on what exactly should be cut on the road to "less".
From my perspective, the libertarian vision "less government" looks a lot like "no government." Just defense and contract enforcement, right? With ridiculous notions like environmental issues being handled by courts.
What many libertarians want is decentralization. As much as possible. They probably want to get rid of all powerful Federal Government but local governments (as small as possible) and confederations are usually fine.
Speaking as someone from Poland/EU, which is heading in the opposite direction...
Many people seem to be complaining about certain absurd EU regulations that were forced upon us.
I, for one, am extremely happy - centralised government has saved us from a lot of absurd ideas the local policymakers had. Also, we have one extra level of courts, where you can go when your government breaks law.
Not to mention all the benefits for commerce and travel - knowing that other EU states have similar laws and standards helps a lot.
And now we will soon have "separate but equal" restrooms in Texas.
I find state rights advocates to be the worst™ people in the world. They advocate for state rights when it suits them. Absolutely hypocritical bunch.
We've decided as a nation that there are some rights and responsibilities that we have regardless of where we live within this nation. How many times do we have to fight for civil rights?
You're making the strange assumption that the federal government will always be be more in line with your own political views than your state government. After all, at the end of the day a hard-right state is less bad for liberals than a hard-right country, because only in the first case can they try to find a job in California.
Yes, he's assuming the government will not be terrible to live under. But saying "at least with local government, terrible governments will be localized" is a copout. Can we have non-terrible governments? If so, it makes sense to try and ensure everyone has one.
To me this is like telling "Government will be right for everyone this time, if we tweak the parameters right". Applying rules of Empiricism to large scale governing will just make things worse as long as people have very different world views.
Besides, locality has inherent advantages such as familiarity, cultural similarity and accountability. So at least some local governments will be probably suitable for your liking.
I've lived in a small, rural town in Texas and a big city in New Jersey. While the dynamics of local power are very different, I never felt like anybody in power was accountable to me (I am a nobody).
The power of two or three wealthy families is readily visible almost like a movie in a small town. The power structure in a bigger city from what I can gather is a little bit more complex since there are more players. However, I don't think "the powers that be" in a local level are any more accountable to the governed in a localized setting than in a national setting.
I mean think about the last HOA you lived in and tell me you felt the power structure there was "fair".
Just to be clear, injustice at the state level is still injustice. Oppression of minorities at the state level is still oppression. Dragnet surveillance at the state level is still a blow to privacy.
The state rights advocates like I said are the worst. States are too big. What we should focus on is the individual.
Has it ever occurred to you that communism and socialism, that usamericanos fight so heavy against, might just be some red shawl on good ol' local patriotism? One huge middle finger to any foreign involvement what-so-ever, the propaganda scrawled to it, more or less un-important.
If some foreign power burned every village to the ground in my country, killed about a fifth of the people, i would do everything to join the opposition, and tell everything to make my opposition to this "foreign devils" more outspoken.
Especially if those "Foreigners" support old colonial powers, that already rubbed the face of my father and grandfather in the dirt.
Satanistic, atheistic, communistic, decadent, drug-using, spartanic, ludist, nuclear armed country of Anti-USA, count anyone in after he has met US-Foreign Policys.
If the US-Sentiment would condemn the wearing of green hats as some outrageous ideology, half of the world would look like a leprechaun inhabited Ireland tomorrow.
North Korea is an absolut monarchy not a communist country, even if they say so, they also say they are a people's democratic republic and it's clear they're not.
To me Somalia and the attempts at "communist" systems demonstrate what I find to be a flaw that actually is common to both philosophies. As both purist libertarian and purist communist philosophy share a skepticism of authority, leadership, and power / social structures (even if the end goal is different).
Yet humans naturally gravitate towards tribalism. Which means at some point, naturally, leadership and power structures will emerge from any group. Whether it be the warlord-oriented chaos of Somalia or the often awful authoritarianism Lenin-inspired states seem to drift towards.
Since power naturally corrupts, I'd rather see people focused more on systems and practices that mitigate corruption at the top, e.g. proper checks and balances, transparency, etc. Wishing power structures away is unfortunately going against human nature, in my opinion.
You're implying that there's a possibility for a regime that starts from commumist ideas not to become a monarchy or oligarchy. Can you point out a real-life example where that didn't happen, please?
What about revolutionary Catalonia? Besides that, I think it's disingenuous to claim that it is a problem with the Communist idea; Marxism is a method of analysis, and that analysis can be applied to itself to find out what the problems were, and what is necessary to move past them.
It's also worth noting that almost all the states you are referring to as monarchies or oligarchies are founded on the principle of Marxism-Leninism. Perhaps this isn't the best way. Left-Communists agree with that idea. Or perhaps anarcho-Communism is a better idea.
There are many schools of thought within Communism. It's unwise to dismiss it, in my opinion.
Let's say I had a software vendor who coded everything in Brainfuck and, historically, had only produced applications that had failed catastrophically.
Now, let's say they try to sell me an application that they haven't written yet. But it'll be fine, they say, because they've decided not to use Brainfuck though they won't divulge what they will use.
Exactly how unwise would I be to dismiss them? I mean they might produce Utopian software next time. But is it really wise to assume so?
I don't think that's a valid analogy; firstly, you yourself can involve yourself or be privy to the academic discussions about the future of Communist ideology, Slavoj Zizek for example writes about it, as do a few modern day Marxian economists right up to Cockshott et al. and even incorporating neo-Ricardians. Secondly, the software product hasn't been made yet, and you can decide what changes will be made. And finally, there's not just one software product (ideology), there's many of them, each with either small differences or completely different in architecture.
Don't assume, get out there and take a look if you're interested. But if you're not interested, there's no need to draw up strange analogies as if they discredit a whole massive field of literature and research going back to the fall of the USSR and even before that from internal resistance (such as from Orwell, Einstein, the leftcoms and anarchists) within the USSR. Even Lenin recognised the differences in ideology, famously allowing a funeral procession for anarcho-Communist Peter Kropotkin to continue, despite his supporters being vocal opponents of the Bolsheviks. And what of the Mensheviks, too?
There is too much to dismiss, at least in my opinion. Though I admit that if we want to continue with Marxism-Leninism, a specific variant of Marxism which is a specific variant of German Socialism which is a specific variant of Communism, then we should investigate that. If not, then we shouldn't dismiss the rest of Marxism, the rest of Socialism and the rest of Communism, anarchism, egoist anarchism and even post-left (Stirnerite) anarchism, or even Georgism or social democracy. If you're going to start dismissing Communism, where do you stop with it?
I'm not implying it, i'm just stating that North Korea is not a communist country, even if they say so. I'm not english native but i thought that my writing was quite straight and clear in this case , but well you can try and twist it to suit your ideology all you want.
I have never quite understood why libertarians think that is the precise optimum for the amount of government activities and their "theft" of my money via taxation.
Don't libertarians understand or accept that there are market failures that government is needed to solve? Or do they think that in every case government makes more bad than good when trying to solve market failures? Or is it just that freedom of individuals is more important than fixing market failures (In which case I must wonder by what logic it is important for a government to stop me being killed by another person but not at all important to stop me being killed by a market failure? I end dead in both cases...)?
There are a lot of literature about this. But to answer to your question, whole concept of "Market failure" is considered a myth. Just two articles among many:
David Friedman doesn't deny that market failures exist, but he points out that the exact same economic phenomenon happens with government, and there's no inherent reason why government is more or less susceptible to it than markets.
>In which case I must wonder by what logic it is important for a government to stop me being killed by another person but not at all important to stop me being killed by a market failure?
Many forms of libertianism are deontological (based on principles, e.g. "natural rights"[1]) rather than utilitarian (based on ends). A libertarian might believe that if they obtain something either by finding/making it or accepting it from someone else, potentially in exchange for providing some good/service to that other person, then they have a natural right to that property. This means they'd view it immoral for anyone else to take it off them without their consent, and hence oppose taxation. Some Christians are also libertarian for this reason: they take "Thou Shalt Not Steal" as an absolute, not making exception for people acting on behalf of others.
Such Libertarians generally support only "negative rights", not "positive rights". A negative right means the right to have other people not interfere with you (e.g. hurt you or take your property), while a positive right is a right to have other people do something for you (e.g. feed you when you're hungry or pull you out of a river when you're drowning). Many concepts of "market failure" only make sense when assuming the existence of positive rights: that the other people/the market owes you something or should work towards some specific end. Libertarians would hence not necessarily consider these a failure: from that perspective, the immoral thing is someone killing you, not necessarily you dying per se, if no-one is actively trying to harm you. There are also some forms of market failure, however, "negative externalities", that many libertarians do believe in, and the proposed solution is to strengthen property rights (so e.g. class action lawsuits are allowed against any kind of polluters, and unlike the BP lawsuit the government cannot cap the payout).
Libertarians don't posit a precise optimum. They are generally of the opinion that the optimum is quite a bit lower than what we have right now.
> Don't libertarians understand or accept that there are market failures that government is needed to solve?
The only credible "failure" I'm aware of is the need to internalize of public externalities, which can be achieved in a number of liberty-friendly ways. See, for example, the Coase theorem.
Libertarians recognize that these models are not exact, but they do suggest that we can do better.
Perhaps you could list some of the market failures you are thinking of?
Which only holds when transaction costs are negligible, i.e., never. Which was precisely Coase's point in that work - he showed that mathematically, it doesn't matter what initial distribution you put on something (his example was radio broadcast frequency allocations), since the final Pareto-optimal distribution is independent of initial conditions. This is the Coase theorem. But as soon as you include transaction costs, the theorem fails to hold, and initial distribution is important.
A few obvious market failures:
* Microsoft monopoly in the late 90s
* Too little being done to reduce CO2 emissions, since emission costs are externalized and delayed
* Broadband providers in the US
* EpiPen pricing
* Essentially every Health and Safety regulation ever exists to fix a market failure. In the small government world, employers see no cost of workers dying of lung cancer in their 60s from breathing asbestos, etc.
MS had better products than everyone else. It was a market success.
> * Too little being done to reduce CO2 emissions, since emission costs are externalized and delayed
This is within a libertarian government's purview. Negative externalities should be regulated since it's protection of citizens.
> * Broadband providers in the US
Government authorized duopolies / monopolies, not a market failure.
> * EpiPen pricing
Result of current laws, not a market failure.
> * Essentially every Health and Safety regulation ever exists to fix a market failure. In the small government world, employers see no cost of workers dying of lung cancer in their 60s from breathing asbestos, etc.
Companies have an incentive to avoid harming their workers. It has a significant negative impact on their reputation and workers could seek civil damages.
I'm not a libertarian and agree with you on all points except...
> * EpiPen pricing
My understanding was that part of the problem with the EpiPen was a monopoly due to patent issues. Patents are monopolies created by the government, so the market failures they cause are in fact government failures.
I agree. But the flipside is that without patents, no-one would be spending money on drug development, since there would be 100% probability that someone straight-up copies your drug that you spent 5 years and $50 million to develop, and can then sell profitably at a lower price and capture the market.
I think we can all agree that drug patents in particular are a necessary evil. On other patents (in particular software) I'm a lot more skeptical. And that's not to say "Big Pharma" isn't trying to abuse the system to maximise their profits.
Necessary evil: yes, to some extent. I didn't say "get rid of all patents", just that they can cause market failures.
I could imagine some models to make them less evil, for example by having a scheme that forces companies to grant fairly priced licenses to their competitors. Or, for drugs whose availability is in society's general interest, a government reimbursing the development costs. For both of these one would need a fair way of determining development costs, but as far as I understand pharma research already has a detailed paper trail to make sure their patent applications are bullet-proof.
> Which only holds when transaction costs are negligible,
That's why I said these models are not exact. They still work ok; instead of being Pareto optimal we're epsilon-Pareto optimal. With some form of small government managing large-scale many-party contracts, we can bring the overhead of Coase-style externality management down very low.
> Too little being done to reduce CO2 emissions,
Again, via Coase, we could find an approximately correct internalization incentive via increasing the purview of trespass law. Polluting would involve the purchase of easement rights. This would be very hard to organize with no government, but feasible with a small government.
> Microsoft monopoly in the late 90s
The government didn't solve this problem, they contributed to it. One of the reasons MS got so huge was federal procurement contracts. The MS monopoly got busted up because other companies (namely Apple) started making better computers, and now we also have Google and Linux in the fold in a major way.
> Broadband providers in the US
This is the fault of regional government line leasing rules, which prevent competition by only allowing one company (maybe 2) to service a building at a time. If the government were behaving optimally, either from a social good or profit-making perspective, we would have more ISPs per building in most places, leading to actual competition.
> Essentially every Health and Safety regulation ever exists to fix a market failure. In the small government world, employers see no cost of workers dying of lung cancer in their 60s from breathing asbestos, etc.
This was fixed because of legislative pressure by labor unions, not out of the charity of the government. If the government decided they weren't responsible for this, unions would just have taken a different approach. Probably just some sort of insurance contract internalizing the risk of contracting a work-related injury or illness.
> I could go on.
Please do; nothing you've said so far has been very compelling.
To me, probably the most important market failures rise from information asymmetries. Not only the textbook cases where you know something I don't, but would understand if you told that to me (lemon markets for cars), but the ones where I am so dumb compared to you that even if you tried to explain me, I would not understand (monty hall problem as an extremely simple example). Even further, the issues where you manipulate me to want things that are bad for me, are a kind of information asymmetry.
The problem is that the latter concepts do not seem to enter mainstream economics or libertarian mindset. People (including me) are manipulable and stupid. And having no control how much stupid people are going to be manipulated for benefit of others, would end up very bad very fast.
Besides externalized costs, which is gigantic issue that is not easy to solve. These problems are also clear market failures:
Large scale goals with large public benefits but which come at high costs will not be achieved without high level cooperation. For every individual market participant, the public education system, the public highway system, the public energy system, etc. have costs far exceeding their means. Yet every market participant benefits enough that they are happy they exist. The level of cooperation needed requires organization at the scale of at least local government.
Dealing with external factors, such as other nations -especially if they're hostile- or natural threats. Individual market participants can not muster armies (unless they are at the scale of governments), cant bargain with foreign governments on equal terms and will not provide (preventive) care for disasters/diseasese/etc. Would microsoft or walmart vaccinate everyone?
I had a longer response written out, but my phone browser crashed and I have to go soon. This will be brief.
> externalized costs
Coase theorem and strong trespass law.
> Large scale goals with large public benefits but which come at high costs
Assurance contracts.
> public education system,
Private schools perform better across the board. If public schools didn't exist, I would expect to see more parochial and charity schools.
> public highway system
Replacing the IH system with privately operated toll roads is well within the reach of US investment banks, and it would be a safe bet. Plus they would be incentivized to actually do repairs quickly, unlike on public roads. Wins all around!
> public energy system,
Sure, this is a hard good to privatize due to line easement requirements. There are ways around this, but I think practically libertarians would agree with the government managing things like water pipes or electrical lines. This will become less of an issue in the near future as being off-grid on solar becomes practical for more people. (Or if we end up with small-scale community nuclear, like some are working towards.)
> Yet every market participant benefits enough that they are happy they exist.
If you think they'll still be happy after being made aware of how much they're paying (instead of it being obfuscated via taxes and respending) then there's no problem.
> armies
PMCs and military insurance. This would almost certainly be more efficient than the current bloated military we have in the US.
> disasters/disease
Insurance again.
> Would microsoft or walmart vaccinate everyone?
Does the government vaccinate everyone now? (No, they do not.)
I'd really appreciate it commenters stopped bring this up in every time someone mentions Somalia or libertarians. It was hardly clever the first 15 times.
Nobody is claiming Somali is a paradise. It's comments like this that destroy civil discourse with Reddit tier quips.
As someone with a curiosity in anarchism as a potentially useful form of government I find these discussions useful. To not look at real world examples is disingenuous, you can simply learn things that will and won't work in a world with limited government. If the evidence contradicts your assertions then you can either change your assertions or realize that your ideal form of government has certain tradeoffs that you and society may be uncomfortable with.
The Bush Administration, under Paul Bremer, tried to build The New Iraq as the ideal capitalist state. They even implemented many things that could never get full traction in the US, like very low, flat taxes [1]. I can't say that I followed much of it closely, but at least Iraq was inspired by right-leaning principles and ideology.
What libertarians would probably want first in Iraq is to let ethnic and religious groups to have the control of their own territory and abolish or weaken the central government as much as possible. Honestly this approach would at least alleviate the current turmoil there. Consider Syria, Iraq and Yemen for this.
> What libertarians would probably want first in Iraq is to let ethnic and religious groups to have the control of their own territory and abolish or weaken the central government as much as possible.
Except for the Kurds, that doesn't seem to be want the groups in Iraq want. I wasn't aware that libertarians were generally in favor of imposed religious- and/or ethnicity-based balkanization against the will of the people.
I suspect that would actually work against libertarianism, also, because greater ideological uniformity in the constituency would support more authoritarian government (light touch is a way of accommodating divergent interests which would be eliminated).
AFAIK, Libertarians are not Utopians. If there is a choice, they prefer decentralization and secession. Underlying reason is not important (Ethnic and religious, or ideological).
Besides, from what I know, in large sovereign states and large democracies minority or ruled ethnic and religious groups always suffer. Because they will be imposed the ruling groups culture, language and curriculum. If they want, they should have at least a degree of self control and identity.
I don't know enough about libertarianism, to be honest. (I'm not sure many people do.) But, is libertarianism something that only works when all tenets are followed? Or, does it work in piecemeal and incrementally? Like, for example, is there a priority list of things that should be implemented first and the set of measurable, expected results?
This is probably not the best place to ask these types of questions, but 'libertarianism' seems to come up on here so often, I had to ask.
Perhaps it is better to read some introductory literature on this. Rothbard - Hoppe, Rand or Nozick (All are different schools in libertarian thought AFAIK)
> let ethnic and religious groups to have the control of their own territory
This is literally what ethnic cleansing means, and is of course the opposite of any kind of liberty - it creates a place where you can't walk down the street without being of the right ethnicity/religion.
Oh that is such a stretch. Ethnic cleansing occurred in large, well established states already. "as small as possible" can go much smaller than what you have in mind.
Are implying that, for example, if Catalonia, Bask or Scotland become a country situation will be ripe for killing Spanish or English man living there?
"ethnic and religious groups" are the key words there.
This is essentially what had to be dismantled in Northern Ireland - it was under the control of one "group" usually defined as Protestant. Transferring it to a situation under human rights law where all religions could live with equal protection under the law (including protection from the state and police by means of human rights law) was critical to ending the conflict.
None of the Catalan, Basque (this is the usual English spelling, are you perhaps thinking of the Russian Басков?) or Scottish independence movements have ethnic cleansing ambitions, although these are usually attributed to them by their enemies.
Construction and definition of a nation state is a complex issue not reducible to glib remarks about "liberty".
If you ask me, situation with norther Ireland is not really solved. Same for Quebec or heck Belgium or Italy.
If one group have ethnic cleansing ambitions they will do it anyway. This whole "equal protection and human rights" rhetoric is laughable where on group seriously oppresses other. It is better off that all groups live in more autonomy and if one is not happy, moving to another place is better than living under threat.
Of course, this is not the "liberty" people are longing for, but it is the preferable choice.
Vanuatu has what libertarians claim they want: no income tax; small government; happy people. The 800-strong army doubles as the police force. Not much in the way of government services, so the libertarian can pay all they want for their own garbage pickups etc. Yet they're not moving there in droves...
You should read more intelligent libertarians, because Somalia has been thoroughly analysed in libertarian thought.
Start with Kevin Carson, "Somalia — Is That Really All You Got?" for a good primer on libertarian/anarchist thought on the subject: https://c4ss.org/content/2859
Fair, but I would argue that the Somaliland government is about as existent as the one Somalia also technically has. It exists, but doesn't do anything.
But please correct me if you disagree! I really appreciated your comments down below, particularly your question about whether re-introducing bank notes is an effort to diminish the influence of the Telcos.
A Somalilander here, Somaliland has a fully established government which is elected by popular vote. In fact, it has one of the most sophisticated and modern voter registration system which uses bio-metric data to detect double voters. Something a number of other African or even first world (i.e. US/EU) can't guarantee.
Somaliland is extremely safe, you can go about your daily life without a hint of any problem. You can walk down the street in the middle of the night without worrying for your safety.
Keeping peace is everyone's business, citizens take ownership of it.
Aside from that, it is a very poor country, but everyone is happy with what little they have.
I am driving around the entire continent now, and a friend said I must visit Somaliland, so it's on my radar when I eventually make it up that way (I'm moving South on the West Coast now)
Panama only ever had its own currency for a few years beginning in 1941. When Panama separated from Colombia, it used dollars. An anti-American president was elected and proposed a national currency. No one accepted it. He was soon deposed later. Panamanian coins are the same size, weight and composition of U.S. coins and are minted by the U.S. mint. Panama retains the Kennedy-size half dollar and did not adopt the new US $1 coin.
Rattling off a list of tangentially related facts doesn't make the point I made untrue. Sovereignty is relinquished with control of currency. Democratically opposed austerity can be imposed from those in charge of the currency.
Panama wouldn't exist in its current form without the influence of the United States on its history, so it's position as a vassal country with a pinned currency may be the only one it can occupy with any stability.
Why restrict it to the nation then? Why not city currencies? There are lots of countries - like India and China - where the gap in income between regions is larger than between countries.
It's a weird concept money, and I wonder what the right level is. I doubt it is optimised at the country level, but then a "better" notion like demographic similarity may be impractical, even if better, e.g. one currency for Northern Italy and one for Southern may be difficult to sell even if preferable, and ditto a unified Basque/southern French currency, or an eastern seaboard Yuan and a country China currency.
As a Londoner I suspect we'd all benefit from having different monetary policy in London and the rest of the UK. The argument I've heard is that fiscal and monetary policy have to be applied together, so it makes sense to have currency controlled at the same level as taxation.
You have to incentivize and enable people in order to get them to change.
M-PESA and the similar mobile money telecom products are doing more for digitizing and disrupting fiat currencies than cryptocurrencies are currently. Bitpesa is having some success as a bridge between the two, but it's going to be a struggle for any cryptocurrency or token to surpass the usability of digital currencies tied to the devices they already use and th kiosks / storefronts around them.