Why do firms exist? Three answers.

Legal: A compelling one, though not necessarily an interesting one from an economic point of view is that the legal system favors them. That is, firms can write contracts that regular people cannot. Firms are subject to limited liability and a different set of bankruptcy laws, can play accounting tricks to avoid taxation especially through debt instruments etc. This is a common-sense view but it seems like it could be historically falsifiable: By the weight of evidence that there was time rate compensation before the 18th century.

Uncertainty: A more classic answer is Frank Knights’s view, who claims that it is a way of dealing with uncertainty. Specifically, he says, under perfect knowledge, there would be no firms. With uncertainty, the focus of economic activity shifts from “doing” to determining what must be done and how it should be done. This task involves forecasting what consumers want and this is the role of the entrepreneur(the firm owner). In effect, the entrepreneur will guarantee the wage of his employees and reap the potential losses and rewards from his ability to forecast. This view does have limitations: just because entrepreneurs have better judgment and knowledge doesn’t explain why they start firms, indeed they could just outsource their forecasting services to other people. However, this explanation is usually paired up with a behavioral explanation. That is, employees don’t want to face the uncertainty and so prefer the certain payment to the uncertainty inherent in forecasting.

If we imagine this from the point of view of forecaster/entrepreneur, a natural question arises: When would one prefer to hire rather than simply compensate employees as a function of profit? It seems like the more competent the forecaster was, the more they would prefer to give employees time compensation. At the same time, as employees confidence in their boss increases, they would prefer to shift to proportional compensation. However the forecaster would then have to decide between two competing values, stability, and higher profits. If he splits the profits, the downside and upside will be bounded, if he chooses the profits…

Transaction costs: Coase has the modern answer to the question. Coase says that it is fairly clear that if an entrepreneur could simply buy all the goods at a competitive price, there would be no reason to produce them internally. So why might the entrepreneur not have access to a competitive price? There could be many reasons, Coase calls a “transaction cost” whatever it is that creates a barrier to the agent from accessing the price system. However, even if the price mechanism could be accessed, imperfections in the price system would also create an incentive to create your own product, for instance, if the good is being provided by a higher price than what it would cost if it was made within the firm.

Ends through truth

We have some end we want to attain. Regardless of what that end is(even if it is truth), we must take into account hazards in the way to getting there.

Suppose we suspect that getting closer to the truth, will in fact lead us to pursue our ends better. However the truth level required to pursue our ends better is level 3 and we are currently at level 1. To get to level 3, we must first pass through level 2 truth.

The state of level 2 truth however is dangerous. We suspect that going to level 3 by passing through level 2, will in fact lead us through a period where we can potentially be stuck. As a stylized illustration, imagine the following:

We are on a cliff if we fall off the cliff we die. However, it so happens that there is a spot on the cliff where a small jump can take us to another area where we suspect life will be better. So far, we are operating on the belief that “we instantly die if we go to the edge of the cliff”. The implication of this belief are twofold: 1) We don’t fall off the cliff because we are scared of going to the edge of the cliff. 2) We can’t move on to the other area where we want to go. Let’s try and apply our level’s of truths to this situation:

Level 1: “we instantly die if we go to the edge of the cliff”
Level 2: “We don’t instantly die if we go to the edge of the cliff”
Level 3: “We can jump to the better area by jumping off the edge”

So the problem is to be able to go to “level 2” as a transitional stage. The problem is that going to level 2, may lead us to be less careful around the cliff and cause us to fall down the cliff. Clearly, falling down the cliff will kill us and we will never be able to get to level 3.

In other words, to get to the truth we must be able to make our actions invariant to the truth. If we can somehow change our beliefs to level 2, but NOT increase the risk of dying then this is what is needed to get to level 3. It is vitally important that we don’t base our behavior on our beliefs until the beliefs reach a sufficient level.

So EVEN if you value truth, one should worry more about behavior. To reach truth you must have the right behavior, and sometimes, marginal progress towards truth may cause an absorbing barrier which stops the way towards the truth.

This is also why cultural attitudes are very important. If a culture makes their behavior contingent on beliefs, it will be very difficult to convince them to change their beliefs. If on the other hand, behavior is independent of beliefs, say how many atheist Jews treat it, then a culture can make progress towards truth without feeling the need to resist it.

In sum: The problem of belief that sometimes payoffs are not monotonic in truth value. To determine this non-monotonicity, we need the cost of error. If the cost of error is high, it is non-monotonic, if the cost of error is low, then it is monotonic.

Value hierarchy

If someone has a lack of strict hierarchy in values they may exhibit seemingly inconsistent behavior. Take for example, the case where somebody has to choose between three objects, {a,b,c}. It so happens that the best one in value 1 is “a”, on the other hand the best one in value 2 is “b”.

So to break the tie, the decision maker chooses a third value, value 3 and applies it to the winners of the first round, {a,b}. It turns out that “a” is the best in value 3 so the decision maker chooses “a”.

Now suppose that the choice was between {a,c}. Once again, “a” comes out on top for value 1 but this time, “c” comes out on top for value 2. So once again the decision maker breaks the tie by applying value 3, this time “c” comes out on top.

Conclusion: If “b” is available, the choice is “a”, if “b” is not available the choice is “c”.

Socrates vs the experts

Academic: I think we should listen to experts.
Socrates: That is indeed an interesting proposition, let us explore. What is an expert?
A: An expert is somebody knows better than non-experts.
S: And who is an expert?
A: Well those people who know best.
S: Yes but to listen to experts we must know who knows best, how do we know who knows best?
A: Well an expert knows what the best decision is.
S: And how do we know what the best decision is?
A: The best decision leads to the best consequence.
S: But what is the best consequence?
A: Well the expert knows that.
S: This doesn’t seem to get us any closer to identifying who the experts are. Suppose we have some person, Larry, he spends his whole life studying pandemics. However, when the decisive moment comes, he makes the wrong call. Is this person an expert?
A: Well no, an expert makes the right decisions, at least on average.
S: I don’t find that particularly helpful. You seem to want to evaluate expertise based on the results. Yet the results come after the decision. Let us try a different approach, if an illiterate person was right about something and the literates were not, would this mean the illiterate is an expert?
A: Well no expertise can only come from careful study.
S: I agree with you, and I think it is not helpful to define expertise after the fact. We must define it before the decision.
A: Very well then, an expert is the person who studies a topic.
S: Good then, that seems more reasonable. However, notice that in this definition, an expert may NOT know the best decision. Indeed, it may be that the literature on this topic is of no real value. Said otherwise, the expert simply has knowledge with no predictive capability.
A: Hm… and?
S: Well an expert can be wrong, and may even consistently make worse decisions than the illiterate.
A: Absurd Socrates! I agree with your reasoning but the conclusion is untenable!
S: It is my role to give you reasonable arguments, it is your role to temper yourself such that reasonable arguments can move you. My work is done, yours is not.

Some musings on free speech and caused ethics

I spent a bit of time re-reading the original Mill essay again last winter and I’ve been thinking about freedom of speech. Why did he use the concept of the “marketplace of ideas”? I think the answer is straightforward he was arguing that the exchange of speech should be seen the same way other economic exchange is seen.

And how is economic exchange seen? The most relevant difference between economic and non-economic exchange is that they are intention-neutral. That is, it doesn’t matter to us WHY the butcher is selling meat or WHY the purchaser of meat is buying meat. We only need to note that someone has some asset, and they wish to transfer it to another person. It so happens that the marginal cost of transferring can be very low in speech.

Though the metaphor is specifically about ideas, I would guess most people find it intuitive to also include information within the domain of ideas. However, Mill was quite clear that there are exceptions, that is, incitement:

If we accept Mill’s argument we need to ask “what types of speech, if any, cause harm?” Once we can answer this question, we have found the appropriate limits to free expression. The example Mill uses is in reference to corn dealers: he suggests that it is acceptable to claim that corn dealers starve the poor if such a view is expressed in print. It is not acceptable to make such statements to an angry mob, ready to explode, that has gathered outside the house of the corn dealer. The difference between the two is that the latter is an expression “such as to constitute…a positive instigation to some mischievous act,” (1978, 53), namely, to place the rights, and possibly the life, of the corn dealer in danger. As Daniel Jacobson (2000) notes, it is important to remember that Mill will not sanction limits to free speech simply because someone is harmed. For example, the corn dealer may suffer severe financial hardship if he is accused of starving the poor. Mill distinguishes between legitimate and illegitimate harm, and it is only when speech causes a direct and clear violation of rights that it can be limited. The fact that Mill does not count accusations of starving the poor as causing illegitimate harm to the rights of corn dealers suggests he wished to apply the harm principle sparingly.


Note here that he focuses on the immediacy of the threat. I think the idea here is to use Seneca’s advice on dealing with anger. If the audience is in a position to instantly react negatively then the speech can cause harm. However, if they are in a position where they can delay the expression of their anger, it will not be.

The greatest remedy for anger is delay.


Scenario: Suppose that every time you tried to speak to somebody, a loud noise started playing so that they could not hear you. Is your right to free speech being violated?

  • You can’t express yourself to people who want to hear you
  • The source of the noise matters. If the noise is intentional and for the purpose of drowning you out, then it is very different to if the noise is simply the state of nature… perhaps you are mute or there is a thunderstorm.
  • My intuition tells me that the noise violates both the rights of the listener and the speaker.

So what is the legal right to free speech, I would represent it in the following way.

  1. A has a right to speak to B
  2. B has a right to listen to A
  3. C is stopping A and B from exercising their rights
  4. ==> A and B have a right to stop C

I think 1&2 is the right to free speech and 3 is a descriptive premise that shows how the right implies the use of force. Of course, this is neutral about enforcement mechanisms (cops/bodyguards, etc).

Note here that you can be FOR 1&2 subject to the circumstances. You can say I want 1&2 should be true IF there is no immediacy to the threat(like Mill does). Or you can make a distinction based on location, you don’t have that right in some areas but you have it in others.

The immediacy of the threat does imply that the right to free speech is not content neutral. That is, there may be circumstances where one has a right to some speech but not a right to some other speech. That is, if there are people ready to lynch X, you have a right to speech that stops the lynching but not right to speech that encourages the lynching.

So far we have have been setting the limits of what it means to be for free speech in the way Mill perceived it. On the other hand somebody is NOT for free speech when the proposition depends on the content of the speech BEYOND this immediacy.

If there is a pandemic(like there currently is), incitement can take a different form. Incitement looks like encouraging people to go out. However, this does not mean that downplaying the evidence is also incitement. For the simple reason that one can downplay the evidence but still say that the risk is of going out still greater than the gain. In other words, there is no necessary connection between accepting the content of the speech and acting.

In practice, the court’s application of the immediacy principle will likely use two criteria. Content, what exactly was said(this may include tone) and the intention of the person saying it, in this sense, however, clearly if one THOUGHT he was diffusing the situation but was really escalating it, there would probably be difficulty in applying this second standard.

Function and caused ethics

Suppose that there is a vendor who sells bad tomatoes. If everyone KNOWS the vendor sells bad tomatoes, they will simply not buy them. If however, they do NOT know, they will often be scammed. This is more interesting than it appears, the market place is encouraging us to share information, we should often discuss the quality of tomatoes. If we BLOCK a bad vendor from selling tomatoes we don’t need to have a culture of tomato discussion.

A very similar role is played by free speech, if we don’t want to have bad ideas parading, we should create a holistic community that does not leave people behind. By setting ourselves a constraint that we must allow the free exchange of ideas, we will also set ourselves a constraint about what kind of culture we are living in, one of discussion and debate. This right simply cannot work with a closed culture. Much like how creating a law where slaves have to be black, encourages a culture of racism. In other words, the ideas don’t have to be right or moral. The cultural outpouring will simply be that people try to articulate ideas in public.

This brings out a weird under-discussed notion of ethics. The notion of caused ethical frameworks(my own terminology). Say for instance the Christian ethic gives us an imperative “Respect your elders”. A lot of people seem to take this to the first degree. I take this to be a consequence of a good society. That is, a good society will cause people to respect their elders. Let us take an example.

In Greek/Med culture, I find that there is this respect for elders that I find is lacking in other cultures(even from myself). The elders are assumed to be wise. I think this respect actually occurs because it IS true that they are significantly wiser and this is caused by the way education is treated.

Greeks/Meds don’t use education to create a hierarchy. In America/France, education is seen as a ladder to climb your way up to the seats of hierarchy, after you have your seat, you drop education and move on to other things(jobs, hobbies, etc). This creates a culture where a 30-year-old man or woman in the US has about as much wisdom as an 80-year-old person(with the older one having watched more tv).

Naturally, this decreases the incentive to listen to old people, respect has to come from some rule that says “respect your elders” it isn’t “We respect our elders BECAUSE they are wise”.

This isn’t about levels, this is about differentials. An old French person may be wiser than an old Greek person, but the differential between an old French person and a young French person will be lower than the differential between an old Greek and a young Greek. Said otherwise, in Greek Culture, elders are relatively wiser. This differential seems to me to be what is meaningful.

This stems from the fact that education isn’t really seen as something FOR hierarchy, it is just something that is good. Young people get a minimum level of education for work purposes, and then gradually learn as they get older. It is relatively easy for an old person to be significantly wiser than a young person.

To illustrate, let us guess that reading makes you wise. If it so happens that the culture is such that people read lots of books when young and fewer books when older, this will mean the differential is low. If the reverse, the differential is high. As such the Christian norm of “respect your elders” entails a cultural attitude, one of enjoying wisdom when you are old, and enjoying pleasures when you are young.

The speciesism argument

The argument is as follows: If

1) ALL human beings have a set of characteristics, X and

2) At least one animal has one characteristic that is also in X

èTherefore X cannot be used to demarcate between animals and humans.

X here can be used to represent characteristic. For example, we may say that X is the “ability to feel pain”. In that case we can say that Dolphins also feel pain, therefore pain cannot be used as a criteria to discriminate between animals and humans. This can also work with two characteristics, say the set could be {ability to feel pain, swim}.

It can also work in the reverse manner. Say that X is the ability to reason, one could try and claim that chimps may be able to reason but they cannot reason as well as humans. But then the proponent of the argument can argue,  “the best reasoning chimp can reason better than the worst reasoning human” and then claim that using X implies we should treat some chimps better than some humans.

Of course many people will bite the bullet on this accusation. They will say,” well… if that chimp has it and that human does not, then that chimp should not be treated differently than humans”. An alternative method may be that they will select X in such a way as to exclude X chimps, so if the best chimp can reason at 5/10 and the best human at a 4/10, they will set the standard at 6/10. This leads to a somewhat absurd conclusion that which humans get to be treated as humans depends on the performance of animals.

Let us give another example: Suppose that some woman is trying to decide who to choose as her husband. She could pick factors like kindness, clever, etc. I think those are less controversial, but suppose she chose “kinder than average”. In other words, the standard does not depend on the intrinsic characteristics of the person but on his ranking in the population.

This may not appear to be common but quite a few standards would implicitly have ranking criteria. Of course one could argue that the criteria “has a yacht” isn’t inherently a ranking criterion, maybe there is just a strong preference for Yachts, but it seems to me that most people understand that Yacht is the new “car”, and standards evolving in the way they do, imply a ranking.

Most people have an intuition that having a standard which is set FOR the purpose of discriminating is deeply unjust, especially to the humans who happen not to meet it. Some people want to claim that the reason we have this intuition is because we are against hierarchy of any form. Others want to argue that we seek equality and a hierarchical standard causes people on the lower end to be harmed.

So if we can’t set the standard for that purpose what is the standard for? One plausible answer is that we have already decided how to discriminate without the standard, and the standard is merely an attempt at an articulation of why we have discriminated.

The Disney factor                                                                         

Going beyond the accusations that the argument makes, the argument itself is flimsy for the reason that it begs the question that it is a specific characteristic which demarcates between species. Just because dolphins have characteristic A and apes have characteristic B, humans can still be the only beings humans who have characteristic A and B. Of course if that isn’t enough, it probably is quite easy to come up with a characteristic that only humans have, for example contemplating God or contemplating morality or even just the ability to imagine or tell a story. In other words we can appeal to “personhood”, it just so happens that the only beings who are persons are humans.

We can see the intuitive appeal of personhood; we can call it the Disney factor. Many westerners grew up watching animations of different species that are designed to create empathy from the viewer. It is natural that fans of such animation would intuitively create a correspondence between those animals and animals in the real world. Where they are right is that IF the animals in Disney movie were real, it would not be acceptable to kill them. This seems to me to be a vision shared by meat eaters and non-meat eaters alike. That is, if it were true that an ape of the kind found in Tarzan, that can exhibit moral agency then we would obviously extend our moral code to them. Similarly, if a Superman (an alien from another planet) came on the planet, and he exhibited all the same contemplative capacities as humans have, then we would also extend our morality to him.

So it seems clear that the argument, fails, or at least if it did not fail, the argument would apply to specific non-human species (such as the apes in Tarzan or Superman) and expand our moral circle.

Socratic dialogue: Is taxation theft?

Dio: Socrates there is this meme that often gets spread, they say taxation is theft, do you think there is any merit to it?

What is theft?

Socrates: I don’t know, I have never thought about it, so let us explore slowly. Begin with theft, what is theft?

D: Why it is the act of stealing property of course.

S: And what is property?

D: X is said to be the property of Y if Y controls the rules of it’s usage.

S: A bit abstract for me, could you give an example of stealing property?

D: Well sure, say Athena has a bike and Bob takes the bike, without her consent.

S: And why is this theft?

D: Well you see Socrates, while before, Athena was setting the rules for how the bike is to be used, but now Bob is setting them.

S: So it is theft if Athena has the right to set the rules but Bob sets the rules?

D: Yes of course, with the caveat that the rules Athena can set are ONLY for her property.

S: Let us recapitulate. You said that:

  1. +X is said to be the property of Y if Y controls the rules of its usage.
  2. +Theft is when X is the property of Y but Z is setting rules for X

What is a tax

S: With one side of the equation down let us go to the other, what is a tax?

D: Well Socrates, a tax is a compulsory contribution to state revenue.

S: I see you, and does theft also involve a compulsory contribution?

D: Indeed Socrates but the nuance is when the contribution is to state revenue.

S: Revenue seems like an obvious concept, so what is a state?

D: Well Max Weber’s definition is that it is an institution that has a monopoly on the legitimate use of violence in a certain geographic region.

S: Hm, interesting, so presumably if there is a region where there is competition for violence, this implies that it is not a state?

D: I think that is the idea.

S: What are the limits of this? What if I fear in my neighborhood so I hire a bodyguard for security? Isn’t it the case that the state has competition for violence?

D: Hm, good point Socrates… but perhaps we can imagine that the bodyguard is allowed by the state, and hence a part of it.

S: So if the bodyguard was somehow illegal, maybe he is part of the mafia, then a tax is no longer a tax?

D: Well… this is difficult; it looks like the state would become illegitimate or it would no longer be a state, both seem defensible.

  1. X is said to be the property of Y if Y controls the rules of its usage.
  2. Theft is when X is the property of Y but Z is setting rules for X
  3. +A state has a monopoly on the legitimate use of violence
  4. +A tax is compulsory revenue to the state  

Tax vs theft

S: Is this enough to answer the question yet?

D: I’m not sure Socrates

S: Does something being taken away from you forcefully mean you no longer control the rules by which it is set?

D: Well yes Socrates.

S: Well so far it all seems very straightforward.  Taxation => Compulsory takings => Athena cannot set the rules on her property => theft

D: Something seems to be missing.

S: Indeed, perhaps it is not so simple. Taxation on somebody’s property may be theft, but taxation itself may not be theft.

D: Yes indeed, perhaps you can tax things other than property!

S: Good point, we can just say that what was taken from Athena was never hers, to begin with. In such a situation it seems like taxation would not be theft. She was just the holder, a guest of the state.

  1. X is said to be the property of Y if Y controls the rules of its usage.
  2. Theft is when X is the property of Y but Z is setting rules for X
  3. A state has a monopoly on the legitimate use of violence
  4. A tax is a compulsory revenue to the state  
  5. +Taxation of property is theft
  6. +A tax without property in existence is not theft

What is property?

D: So it seems clear that taxing a physical asset that you own is theft

S: Yes but what about income? Suppose Athena’s employer agreed to pay her 100 dollars this month before she got paid, Bob comes in and takes 50 before Athena ever receives it. What do you think?

D: Isn’t she entitled to it?

S: Suppose that it is in the contract she signed with her boss, that 50 would go to her and 50 to state revenues. It seems like it was never hers to begin with.

D: Hm therefore income BEFORE tax isn’t property.

S: Indeed it seems like the process of taxing it is what transforms income into property.

D:  But what about wealth then?

S: Well it seems like wealth is what we call income that previously arrived. In other words, wealth IS somebody’s property prior to being taxed.

D: Hm very hard to see the intuition here Socrates.

S: It is simply a question of when something becomes your property. A simple heuristic is when the law accepts that you are the one who will sets rules for it.

D: So for wealth they have already accepted that I set rules for it, but for income they only accept it after I tax it?

S: Indeed, so it seems taxing wealth IS theft but taxing income is not.

D: I find this very perplexing. And why can’t we just say that something is your property as long as you pay taxes on it? If you don’t pay the taxes, you lose your right to your property?

S: Well isn’t that a rule? “You can control the rules as long as you obey this one rule”. I think that implies that it is not your property.

D: I have never thought of it that way Socrates… but what about taxing income is it totally morally neutral then?

S: Well… if in order to consent to exchange something with a second person, we are dependent on a third person to approve it and get between us, this seems more analogous to slavery, we have a master who must approve.

  1. X is said to be the property of Y if Y controls the rules of its usage.
  2. Theft is when X is the property of Y but Z is setting rules for X
  3. A state has a monopoly on the legitimate use of violence
  4. A tax is a compulsory revenue to the state  
  5. Taxation of property is theft
  6. A tax without property in existence is not theft
  7. +Income before tax is not property
  8. +Wealth is always property
  9. +Taxing wealth is theft
  10. +Taxing income is analogous to slavery

One more man

D: Interesting take Socrates but isn’t there another case? What about if we live in a democracy?

S: Hm interesting direction, let’s see, we already established that it was theft when Bob took Athena’s property by force. But what if Bob had a friend? Is it still theft?

D: Well yes, two good for nothings doesn’t change the nature of the thing.

S: And if Bob had two friends? Maybe she knows them?

D: Socrates… it doesn’t matter how many they are or who they are.

S: What if they have criteria such as say a super-majority for robbing Athena?

D: Come on Socrates, it doesn’t matter how they are organized.

S: Hm interesting, well what if they decide not only to take property from Athena but also how much property to take from each other? In addition, they decide they want to spend that property to buy everyone ice cream.

D: Again Socrates it doesn’t matter how they organize between them. It is still theft.

S: So as long as Athena doesn’t set the rules for how that property is used it is automatically theft?

D: Sounds reasonable to me.

S: Hm what if Athena is part of that group of thieves? That is, she gets to vote.

D: Well Socrates, as long she sets the rules for her own property then it may not be theft, but it entirely depends on her vote.

S: Hm so if she consents and THEN the group votes on how to use her property then it is not theft?

D: Indeed.

  1. X is said to be the property of Y if Y controls the rules of its usage.
  2. Theft is when X is the property of Y but Z is setting rules for X
  3. A state has a monopoly on the legitimate use of violence
  4. A tax is a compulsory revenue to the state  
  5. Taxation of property is theft
  6. A tax without property in existence is not theft
  7. Income before tax is not property
  8. Wealth is always property
  9. Taxing wealth is theft
  10. Taxing income is analogous to slavery
  11. +Theft does not depend on the internal organization of the thieving organization,
  12. +Theft does not depend on the size of the thieving organization or the identity of its members.


D: I must say Socrates; this conversation went into places I wasn’t expecting. It looks like Taxation implies theft but only if it is the taxation of property.

S: Indeed and as we have seen the lines of what property IS, are not always clear.


Three concepts of freedom

This is my take on the notes from the above picture which was made by Quentin Skinner whose talk inspired me to write this post.

Freedom is said to have two components

  1. The POWER to act in pursuit of a given option
  2. Self-realization(Greek), Dependence(Roman), Interference(English)

The first is uncontroversial. Well… there are some moderns that question it but it becomes kind of absurd. Sen or Cohen would question the first one, it is a bit silly. For instance they would say “I can’t walk on water” therefore “I am not free to walk on water”. Classically though most traditions leave the first alone and work with the second.

The Greek: Actualization

The Greek concept was started by the teleology of Aristotle. It was later picked up philosophers like Hegel and Rousseau.

This conception was about self-realization. That is, can I realize my true goals? Can I be who I really am? Freedom entails that the answer is yes. As such even an oppressive state can be considered freedom enhancing, as long as the nature of its people is being realized. Aristotle himself thought that some people self-actualize by being slaves. In other words, one can be a slave AND be free, as long as it is in their nature to be slaves.

This concept requires a “nature”, that is, something yearning inside that wants to be expressed. The tradition also gave rise to other similar traditions, like the concept of “Natural law”. Today I think the people who still work with it are religious political theorists, one I recently read is Pierre Manent.

The English: Interference

This view is the most modern so we have its history much more closely documented. It evolves gradually with each thinker adding something to it.

Hobbes was the founder of this conception, his is a very narrow view. In his view, interference is ONLY direct physical intervention on the body. In other words if I point a gun at you and ask you to give me your money, I am not interfering with your freedom in fact, Hobbes says “that your choice is done VERY willingly”. An alternative formulation is: “Absence of external impediments to motion”. Fear and Liberty are not mutually exclusive. This definition is pure brute force, only the physics, a definition that is transmutable to animals without any adjustment.

Locke then came and said that definition is sufficient but not necessary. You can also not be free if you are coerced(threats, bribes, promises). That is, if you try to give me incentives to do things and I am not pursuing things for my own will, then I am not free.

Bentham soon joined in: your will can be bent in two ways: Promise of reward(which would leave you no worse off than before the promise) and threats with penalties. He says that ONLY the second kind interferes with freedom, if the threat is credible(probability), serious(payoff), immediate(time).

Finally, Mill shows up and says your OWN will can also destroy freedom. He lists two ways, 1) Passion destroys freedom but it does give “license” to an action. 2) Inauthentic, if you only do something because civil society pressures you do it, and hence not free. This list was appended by Marx 3) False Consciousness and others such as Foucault/Freud, 4) Other possibilities

This view was articulated very clearly by Berlin, in his two concept of liberty, where he views this tradition as negative liberty, Berlin is still cited today, as having the most complete version of this tradition. Most moderns are still within this tradition, some recent examples are: Ian Carter(the measure of freedom) or Mathew Cramer(the quality of freedom)

The Roman: Dependence

This kind of concept is much less articulated by philosophers. It was an idea that emerged bottom up from the Roman times, merely by observing slaves. This wasn’t a time for academics, it was a practical concept.

In this view, if you have a boss or are dependent on the will of somebody else, you are not free. Dependence is about inter-connectivity this makes it a much more neutral term. Romans would never dream of saying “Maximize liberty”. Instead, it is a concept that must be combined with common sense.

Part of this view is that to be free you must only depend on your own actions. This also implies a legal philosophy, no arbitrary power. A power is arbitrary if there is someone who can operate it with impunity without tracking your interests. In effect, you are at the mercy of this power. Of course, this doesn’t imply that dependency is binary, instead, there are numerous dimensions on which you could be dependent.

Although Hayek is often lumped into the classical liberal tradition, I think he is in fact a Roman, this is because the way he articulates how the law should be done, he puts into focus the fact that agents can predict the behavior that will emerge. In other words, the power is NOT arbitrary, it is codified and predictable, an agent is only dependant on his own actions because he can take the reaction of society as automatic. I would consider Taleb to be the modern person who propounds this view.

Is economics value-neutral?

Suppose George is choosing between vanilla and chocolate. If George chooses, he will choose vanilla. However, if George were to compare his own happiness with vanilla and his happiness with chocolate, he would prefer chocolate.

So why is George choosing vanilla instead of chocolate if chocolate brings him more happiness? In general, economics has two answers. One is imperfect control. That is, maybe the self that is choosing at the moment is not the same as the self who is evaluating later on. Said otherwise, there is temptation or there is some other psychological dimension that is keeping him from choosing what makes him happiest.

The second answer is that George doesn’t have full information. It may be that chocolate has some healthy properties that vanilla doesn’t have and the taste is secondary to George himself. That is, his real values are health>unhealthy and taste comes as a (lexicographically) second place. There may also be social effects, it may be that if he eats chocolate, Amy will want to befriend him but not if he eats vanilla.

So if it is true that George would prefer chocolate but he would choose vanilla. We might recommend that we take away the choice of vanilla from George’s set, as long as the choice set itself doesn’t affect his happiness. If this isn’t a simple binary decision but a question of how much vanilla and how much chocolate, then we might recommend that we tax vanilla.

Notice that while all this time I was discussing George’s values, at no point did I discuss my values. The conclusions I have come to are independent of my own values, I or Mussolini or Genghis Khan would have come up with the same economic conclusion. So when economists say that economics is value-neutral this does not mean that economics does not take values as inputs. It is simply that it doesn’t take in the values of the person doing the economic analysis.

Games and play

I read this fun paper yesterday, it uses some old work to explain what it means for something to be “play” and then says that some scientific communities are in fact playing. I want to point out some difficulty with trying to define a “game” as being in relation to “playing”. It is easy to define play but as Wittgenstein pointed out, it is much more difficult to define a game. One can’t articulate necessary or sufficient conditions to link “play” and a game. Let us try to have “play” as a sufficient condition for a game:

Definition 1: Something is a game if agents are engaged in “play”

Counterexample: Suppose kids are playing with water guns but unbeknownst to them, one of the water guns is a real gun.

Clearly, the kids are engaged in play, but the game isn’t really a game because its consequences are real and much more dangerous than they realize. In other words, one can be engaged in play when it is NOT a game. See also the movie, Funny Games.

Let us try “play” as a necessary condition:

Definition 2: Something cannot be a game unless agents are engaged in play.

Counterexample: Suppose cavemen with no knowledge of table football stumble upon one. They start a match whilst tinkering with it to understand what it is and how it works.

This example is less clear-cut but it seems to me that we cannot claim they are playing because they don’t know the possible consequences. For all we know they are simply trying to find the mechanism to open some door and want to see if this device is key. Perhaps they think this is a very important idol that must be respected for some reason. Yet the table football remains a game.