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“A Response to the ‘AntiTax’” Debunked

Recently, an organizer named “Drake” from the LPMC-Ohio wrote an OpEd criticizing the AntiTax. The criticisms can be characterized as misleading or misinformed at best and bordering on deceptive-by-omission at worst. This article would have been better done as a “Here are several questions for Andrew to answer” sort of piece, rather than its current format. Here is the link to his OpEd if anyone wants to review his arguments in full. He made 8 basic arguments outlined here:
  1. Cities already invest
  2. The math doesn’t add up
    1. The Real Inflation Rate
    2. Taxes Raise Automatically with Inflation
    3. Real city budget and reserve totals
    4. Organizations generally prefer specific dollar values taken out instead of percentages of earning:
    5. Hedge funds normally charge more, and make less
  3. Cities can and do raise taxes/Cities can compete with increased spending, not just reduced taxes
  4.  Investing in infrastructure and the like can get better returns than the stock market
  5. This whole model assumes no population growth or immigration
    1.  Success in this way will also raise property value, which raises the tax burden
  6. Public choice theory.  The larger the amount of money, the stronger the incentive to take over
  7. Good times make weak men
    1. “At the end of the day, this system is essentially welfare”
  8. Differences with a sovereign wealth fund

Let’s take them on one at a time:


Objection: “Cities already invest”
Answer: This assertion is misleading at best, deliberately deceptive at worst. His claim stems from a line-item on Lockhart, TX’s balance sheet from its 2020 operating budget, where the city had an “investment” return of $119k on approximately $17m in reserves. Right away, this characterization should send up some red flags for anyone who passed 6th grade algebra, as this ROI comes out to be less than 1%. As I have claimed repeatedly, the cities basically let their reserves languish in savings accounts, which every good libertarian knows return essentially 0% due to the Fed’s zero-interest rate monetary policy, and this figure is negative when compared to inflation. We can confirm that this is in fact the case by simply looking at pages 160-164 of the 2021 Budget where Lockhart outlines its exact investment strategy in detail.  See below.
Far from being “a pretty big hole in the argument”, this ends up proving my point that what is being characterized as “investment” is actually just a glorified savings account, which isn’t even coming close to beating inflation. In the context of what I offered in my numerous public appearances on the subject, where I suggested investments like the SP500 and crypto, claiming “the cities already invest” is misleading at best and deceptive at worst, as just reading a few more pages would’ve informed Drake that this was not actually the case.

Objection: “The Math doesn’t add up: The Real Inflation Rate”
Answer: His argument here appears superficially sound. However, what he’s neglected here is that inflation rates, which here means, “prices rises” instead of “money printed”, are in no way geographically homogenous. This is due to what is called the Cantillon Effect. The price rises that result from money printing affect the physical places where the money is actually spent. This is why housing prices in California and New York have gone through the roof, while prices in other markets have grown at or even below inflation. This geographical characteristic of the Cantillon Effect is seen most clearly in the top 20 wealthiest counties in the United States, all of which are within 75 miles or less of a Central Bank branch because those are the geographical areas that physically get the printed money first. For a rural or suburban township, the price rises will be substantially more muted the farther away they are from the money spickets. This is why my paycheck only rose 0.7% from inflation last year (and a further 7% for being good at my job and seeking responsibilities, but that’s irrelevant) because prices only rose about that much in my specific area. 
This is partly why I used smaller numbers for my inflation estimates, but there is another even more important reason that I did so. Why should government workers get inflation adjustments at the full rate when private sector workers often do not? As a libertarian who is 100% in favor of additional budget cuts on top of the AntiTax and classical tax cuts+shifts, that inflation rate seems to be the easiest thing to cut. I would happily limit those salary adjustments to 50 basis points per year, inflation rate be damned. I imagine that 99% of the LPMC would agree with that sentiment and even view it as moderate. 
 
Objection: “The Math doesn’t add up: Taxes Raise Automatically with Inflation”
Answer: To answer this objection, first, I would like to forward everyone to Hoppe’s WMBD strategy which Pete Q and I have talked about at length. In it, Hoppe suggests that all property tax increases be forced to be put to a vote by property owners, excluding public employees due to their inherent conflict of interest. I’d be shocked if there was even one LPMC mayor/city councilman who didn’t support that suggestion. For my example, to make the math simple, I assumed the LG would raise their tax revenues to match inflation. Given that, statistically, there are 350ish nominal libertarians for every municipality in the country, assuming there are 1-2 MC libertarians on the city council, I see this assumption as being generous as I can’t imagine any Ron Paul clones voting for any spending increases, and can easily see them fighting tooth and nail to restrict inflation adjustments like I suggested earlier. Like Yarvin says in his Open Letter to Ron Paul Supporters, “The sort of change Obama is talking about making [to DC] is cosmetic at best….With Ron Paul, the bonesaw is a given.” There’s no such thing a liberty that works on autopilot. There is such a thing as liberty that is actively-managed by Ron Paul-styled libertarians in public office. The AntiTax is a system that is tailor-made for libertarians to use as a swiss-army knife for liberty. It is not meant to be run by Bernie Sanders and AOC.
Second, case-and-point, actually, taxes when down from 2019 to 2020 as shown on their financial tables (page 25). Why Drake did not check this before writing this point is beyond me. Not only did the taxes in Lockhart not go up with inflation, but they actually went down overall, which proves my point about the competitive forces being extremely high in suburban and rural governments. It’s fairly simple to ignore incentives and focus on facts. How one ignores both facts and incentives is beyond me. See below.
  
Objection: “Real city budget and reserve totals”
Answer: Here, I will quickly point the reader to the table of expenditures and revenues. The expenditures for 2020 are about $12.9m and the net position (reserves) was $16.9m, 92% is able to be freely used to cover any and all expenses Lockhart might have. 8% is locked up for future debt obligations. Therefore, the sum total of investable funds exceeds the expenditures, meaning they have slightly less than 16 months of taxes on hand. Lockhart is doing very well to say the very least. If only they were actually investing that sum in the SP500 or Crypto. This is why Drake’s calculations are incorrect. Moreover, he is assuming that no taxes ever get added to the fund. As I said to Dave Smith in my talk with him, I fully intend on adding tax revenues from decriminalized drugs (all the way up to and including heroin) to the AntiTax fund as a means of accelerating the obsoletion process. Having an AntiTax fund sitting there will be a very effective means of convincing the powers that be (and their voters) to end the prohibition drugs…and then turn around and drop a WMD of socialism (think Colorado’s 13” taxation/regulatory dildo they shove up every pot dispensary’s ass) on the (now legitimate) drug dealer’s asses, which will be far more effective at dropping drug production and consumption rates than prohibition. The same strategy could be used for all other vices as well like gambling and prostitution. Obviously, socialism isn’t anywhere close to an ideal for Misesians, but we can probably agree that it’s preferable to prohibition and throwing people in cages, especially when we’re able to channel the worst of its tax increases into tax cuts through the AntiTax.
 
Objection: “Organizations generally prefer specific dollar values”
Answer: 1) Source? 2) Retirees generally prefer a 3-4% rate of withdrawal from their retirement accounts to live off of because that’s much more stable. The AntiTax is modeled after a retiree’s 401k account with the minor difference being that retirees die and states don’t (yet). It doesn’t matter at all if the market does well one year to the next as this AntiTax is only a substitute for direct taxation. If it falls one year, then it simply substitutes less. However, due to compounding interest, it will always average more and more cuts. The worst-case scenario is the status quo, so there’s no actual downside compared to where we are now.
 
Objection: “Hedge Funds normally charge more and make less”
Answer: This is actually a decent point. I will address the “make less” argument first. As someone who has been winning every year in the markets since 2014, when I did my wealth management internship at Merrill-Lynch, I’m well-aware of just how easy it is to beat your average financial manager. What Drake neglects in this criticism, however, is that state and federal laws require the public funds to be managed by licensed professionals, and even if they didn’t, Hell would freeze over before I let the average politicians “invest” the funds because we all know how that would end up. Even if they were all Misesian city councilmen, I would still insist on do the work since there’s no guarantee that they won’t all lose to AOC’s and Bernie’s in a few years. Thus, I’m happy with letting the managers do the work. Moreover, as I mentioned in my article, bringing in professionals creates an additional layer of defense against the evil socialist Left by handing the banksters some easy money to make fees off of. Do I love the banksters? No. Are they good at their jobs? Not really, but they’re good enough. Do I trust them to do the right thing? Also, no. In fact, I wholeheartedly expect them to do the evil crap they always do and lobby the government for more money to manage and to also fund the campaigns of the opponents to toxic Leftists, who want to “invest” the funds in socks for hobos. Thus, I expect them to do the evil thing, which, in this case, works out to the benefit of the AntiTax funds.
As for the “charge more” argument, you may have a point here, but there is a multitude of money managers out there and I’m betting that we can leverage the fact that, unlike the rest of their clients, governments are (sadly) immortal and we can get better rates from the managers, given that they don’t have to worry about their state client dying and handing its fortune off to its spendthrift kids who will withdraw all the money and squander it. I’d say that’s worth more than a few bases points reduction in AUM. If they outperform the SP500 benchmark, then I consider paying them an extra 10-20% of the difference between them and the SP500 to be a good problem to have.
 
Objection: Cities can and do raise taxes/Cities can compete with increased spending, not just reduced taxes.
Answer: I’m way ahead of you… Give me some credit. I’ve been developing this concept for 4 years now. It’s a full framework of thought, not just a simple sovereign wealth fund with a catchy name. Here’s a thread I wrote to answer this question two months ago. My method will be substantially more popular amongst the voters than the alternatives and will make the AntiTax untouchable as far as public-choice theory goes. This channels the archotropic spending impulse into something more productive, more resilient, and more anti-fragile.
 
Objection: Investing in infrastructure and the like can get better returns than the stock market.
Answer: While sometimes true, this is a recipe for corruption and graft and I’m stunned a Misesian wouldn’t see that coming a mile away. There have been sad cases of urban wealth funds in Europe being squandered by corrupt do-gooder leftists and crooks (but I repeat myself) because they didn’t prohibit “investing” their funds in assets within their jurisdictions. These funds would often get “invested” in politicians’ friends’ businesses, buy overpriced real estate from, jobs programs for local unions, etc…, so yeah, we’re not doing that. Prohibiting that kind of corruption and graft is one of the reasons I’m fundraising for lobbying for state-level regulations. 
Donate here: www.MisesGOP.org/donate to help us prevent the Left from investing taxes in socks for hobos.
 
Objection: This whole model assumes no population growth or immigration. Success in this way will also raise property value, which raises the tax burden
Answer: As a right-winger, I consider population growth to be a good problem to have. Unfortunately, that’s not what I expect to happen since I am installing tens of thousands of these funds in every red state in the nation, not just one fund in Lockhart. I agree Leftist immigration would be a problem if there was only one of these funds around, but with 10,000+, there simply aren’t enough leftists to invade that many states and rural areas, whom the Left hates with a burning passion, seeing them as backwards hicks and hayseeds. I like living in red rural America for exactly that reason: Leftists hate living here, try to move away as fast as possible to the big blue urban 3rd-world liberal shitholes they call “civilization”, and no amount of money is going to change that. And again, there simply aren’t enough lefties to invade 10,000+ suburban and rural municipalities in Red America.
As for natural population growth, that’s pretty baked into the cake already and the birth rates are publicly available. Needless to say, population GROWTH is not at all the problem our country is facing. That would be population DECLINE, which doesn’t even begin to factor in all the kids the Left is sterilizing, abusing, and traumatizing, which will certainly drive the birth rates even more pitifully low. Frankly, while I categorically oppose abortion and the sterilization of children in all circumstances (unlike the LP), I enthusiastically support the Left not reproducing. I think it’s healthy and unequivocally for the best if Leftists never reproduce. Now, if only we could get them to stop reproducing ideologically in public schools, then victory would be a generation away, but that’s irrelevant to this discussion.
 
As for the second part of this objection about property prices going up due to the lowering of effective tax rates on them, I consider that a good problem to have. If that somehow brings in more revenue, then that’s totally fine as it would simply get re-funneled into the AntiTax, further accelerating the obsoletion.
 
Objection: Public choice theory.  The larger the amount of money, the stronger the incentive to take over
Answer: Well, at least you recognized that this was a weak argument. See the earlier thread
 
Objection: Good times make weak men
a.      “At the end of the day, this system is essentially welfare”
Answer: “Tax cuts are welfare.” I expect that sort of argument from the Left. This is my first time hearing it from a Misesian though, and, same as I would with a Leftist, I’m not going to bother debunking it. Regardless, if future generations squander it, then that’s on them. I think this system is pretty anti-fragile, robust, and resilient with its wide distribution, intense competitive forces, multiple layers of industrial-complex lobbying defenses, restricting voting on tax hikes to property owners, and spending-reinvestment channels, so I’m not particularly concerned if a few of them fail here and there because the vast majority of them will obey their incentives properly and will succeed. That’s the beauty of competition and the free market, which doesn’t quite apply to local governments, but might as well given how intensely competitive they are. I’m sure that a few of the 10,000 Lichtensteins won’t make it, but that’s fine because there are thousands more that can pick up the slack. 
 
Objection: Differences with a sovereign wealth fund
Answer: The comparison of local SWF’s with intense competitive forces to national SWF’s that have negligible competitive forces is sloppy at best, certainly disingenuous, and dishonest at worst. The AntiTax is a system meant to be managed by right-wingers and libertarians. This is a local-level system that puts the greatest amount of accountability on the system possible. If the Misesians can’t manage the AntiTax in towns with a few thousand very right-wing people, who are already ultra-predisposed to low time preferences for power and cheer when politicians say “taxation is theft”, then there’s zero hope for ancapistan. 
Let’s circle back to earlier when I said there was no such thing as “liberty on autopilot”, which is a mindset a lot of Rothbardians are prone to, and one Late Rothbard profoundly disagreed with. Hans Hoppe has made a name for himself saying exactly the opposite. If you’re looking for a system of liberty that you can just “set it and forget it”, then you can forget about liberty. Liberty MUST be actively managed and Leftists must be ostracized and physically removed. If you don’t intend on being extremely careful and responsible with your own rights as well as taking responsibility for the rights of the rest of your rural/suburban community, instead of just shrugging them off and saying “not my problem”, which I see MANY self-described Rothbardians being prone to do, then you’re kidding yourself and ancapistan is a pipe dream. 
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A Brief Introduction to the Archotropism Framework (Part Two): The First Law of Archotropism

 
Picking up from where we left off. The problems of Archotropism begin where its value does. As we established in part one, the act of aggression—of coercing another person to do one’s bidding—can have value to good and bad people alike. Humans throughout time, culture, and creed usually always view benevolent aggression as justified. Couple this with the fact that they usually define “good aggression” as “When I’m the one doing it” and “evil aggression” as “when someone else does it to me” and you have a real problem because no one is the villain in their own story. This is why the great 20th-century Christian thinker CS Lewis wrote,
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. This very kindness stings with intolerable insult. To be "cured" against one's will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.”
Not to get all religious on you guys, but that is Evil’s dirty little secret: Evil thinks it’s the good guy too. Once more from CS Lewis, “A moderately bad man knows he is not very good: a thoroughly bad man thinks he is alright. This is common sense really. You understand sleep when you are awake, not well you are sleeping.” So what does this mean? Well, it means that, from this, you can assume that nearly all humans on the bell curve in between good and evil will value aggression to one degree or another and nearly all of them will see it as "good" aggression. Evil people will certainly value it far more, on average, than good people. Humans in the middle of the bell curve will obviously place a moderate value for it. That all adds up. There are seven billion of us and all of that low, medium, and high demand for aggression aggregates.
That is where the state enters the picture. Just as any act that has value is worth doing to the degree where that act is MOST valuable, the same is true of aggression. As we discussed earlier, hierarchy is an efficiency mechanism that naturally arises from human nature in order to make valuable processes more efficient, and therefore, more valuable. The state, therefore, is the result of this same efficiency mechanism, naturally arising of omnipresent human incentives to maximize the value of aggression, much to the dismay of free marketeers, who wish it to be otherwise. Moreover, we can say with praxeological certainty that since the state exists to the extent that the act of aggression is maximally valuable, that the size and scope of the state are therefore tethered to that value! What this means in practical terms is that merely making a law prohibiting aggression will not suffice in altering the value of aggression any more than making a law prohibiting alcohol, prostitution, drugs, etc…, altered the value of those acts of producing those goods and services. All such a legal injunction on aggression (let’s call it a “Non-Aggression Principle”) would do is create a black market of suppliers for the service of aggression, which would behave like the current crop of black markets and consolidate itself into cartels of violent criminal suppliers of aggression and… Oh. That’s what we have right now. Praxeological descriptions of anarchy invariably turn out to be descriptions of the status quo.
This underscores the axiomatic truth of the statement that only power can control power. Law and principles are not required to create a free society. All that is required is for enough power to be in the hands of people on the far end of the moral bell curve. We can prove this by seeing it as a cost to the remainder of the power that is in the hands of evil people. For, if the evil people seek to use their lesser power of aggression against the more powerful moral minority and their protectorate, then they will incur a punishment that makes the value of the act in terms of risk turn negative. Thus, in order to reduce the size and scope of the state, it is not simply a matter of repealing laws, but of making the state’s acts of aggression less and less marginally valuable. That is much easier said than done…
That’s the main crux of the problem. How does one make aggression valueless for all potential aggressors? Well to answer that question, we must ask another question about the nature of aggression’s value. How is the value of an act of aggression measured? As noted earlier, aggression carries a dual-incentives with it: the first is the one-sided value of the coercion itself, which incentivizes the aggressor to aggress. The second is the disincentive for the victim to be aggressed against (to guard oneself against such acts) by the aggressor. Thus, we can clearly see that the value of any particular act of aggression is relative. Specifically, the value of an act of aggression by an aggressor is relative to the difference in power between the aggressor and the victim. Logically, this makes sense as we see that it is always the strong that prey upon the weak and never the other way around.
The greater the difference in the relative power levels between the predator and his prey, the less risky the chances of the predator suffering critical injuries when the prey tries to defend itself. A lion is at very minimal risk predating on a gazelle because gazelles can’t fight back. A lion is at substantially higher risk of predating upon a human because humans have family members that can avenge the human prey’s death, not to mention high-tech weapons that can be used to turn the lion into prey from a distance. A criminal on the street might fair well against an old grandma, snatching her purse and making a run for it. The same criminal would be a fool to try to snatch a wallet from the average cop. The grandma is probably unarmed, can’t hold onto her purse very easily, and can’t give chase. The cop, on the other hand, is well-armed, is trained to fight, and has legal immunity to brutalize any criminal for basically any reason. A tin-pot dictator feels pretty comfortable telling his soldiers to open fire on some unarmed villages in the middle of nowhere. The same dictator wouldn’t dare shoot at the US Military, who would likely respond by drone bombing his palaces (and mistresses) for fun.
Now, enters the First Law of Archotropism, and the discussion of our main topic can begin. The First Law of Archotropism states, “The value of power is relative, not absolute. Therefore, the value of power can neither be created nor destroyed. It may only be transferred from one wielder to another or transformed from one form into another. The sum total value of power is always conserved.”
From this thought process, we can draw our newest a priori law of praxeology: “The Law of Pseudo Demand”, which forms the economic basis for all acts of aggression. The Law of Pseudo Demand states, “The value of any act of aggression is equal to the marginal utility an aggressor stands to gain from the act, multiplied by his chance of success, minus the marginal utility he stands to lose should he fail, multiplied by his chances of failure.” To be clear, in this definition, value, marginal utility, and both sets of chances are all subjective. Applying the Law of Diminishing Marginal Utility to the examples I gave earlier, it is self-evident that a predator will prioritize acts of aggression with greater value over acts of aggression with lesser value. A lion will value predating upon a gazelle more than a human. A criminal will find more value in mugging a little old lady rather than mugging a cop. Welcome to Austrian Economics (Sociopath Edition)! The more powerful you are, the more you’re able to aggress without fearing repercussions and the less everyone else who is weaker than you is able to aggress against you.
Now, let us return to the crux of the problem we spoke about earlier. How does one make aggression valueless for all potential aggressors? Let’s frame this question in terms of the Law of Pseudo Demand and the Law of Diminishing Marginal Utility. How do we make all acts of aggression have zero or negative value, ensuring that they won’t be valuable enough to be acted out? To do so would mean, firstly, that one would have to find a way to make every potential victim equal in power to (zero value) or more powerful than (negative) every other potential aggressor. Secondly, one would also have to deal with the marginal utility part of the equation as well, making every aggressor stand to lose exactly as much as he would stand to gain or stand to lose even more than he stands to gain. Essentially, you have to make every person as powerful as the state and we all have to be equally wealthy. Sorry (not sorry), Lefties, but equality is impossible.
My condolences to libertarians as well. This basically puts the nail in the coffin of any nation without aggression as it guarantees that any and all acts of aggression will always have value. We can’t hope for equality, nor can we hope for a world where every common man has a Mark of Cain guaranteeing the Almighty God’s seven-fold vengeance upon their aggressors. Unfortunately for the libertarians, the problem of aggression’s relativity of value is actually even worse than that. In another seemingly paradoxical way, given that it is a risk vs reward prospect, and acts of aggression can have asymmetrically bad consequences if risks aren’t mitigated properly, it actually incentivizes predators to work together against prey rather than compete with each other for a kill. Think about it logically. You’re the big tough guy on the block and a petty thief, who lives in a place with plenty of powerless potential marks and little in the way of security. There’s only one of you, which doesn’t exactly scale very well, but it still puts food on the table, drugs in your veins, and hookers in your bed. One day, another half dozen thieves individually (not as a group) move into your neighborhood. Do you fight them all individually for control of your turf? Actually, no. That’s risky, they’re tough, and there’s only one of you and plenty of marks to go around anyway, so it doesn’t suit your interests to fight them for control of your turf. What does make sense, on the other hand, is joining forces with them and combining your predatory talents to make your sociopathic enterprise scale upwards better. Perhaps y’all could afford some accountants to keep track of who has paid their protection money and who hasn’t for you because numbers aren’t any of your strong suits. Perhaps your new gang could jointly hire a journalist or a pedophile economist or two to write articles for you about how you’re helping raise aggregate demand which helps the economy, so your sociopathy isn’t so bad after all. You can specialize in doing what you do best, working together with your new crew, and hire employees who specialize in other professions to help you make your profession more efficient. However, the single most important implication of this incentive for aggressors to work together instead of work against each other is that Ayn Rand was wrong about competing police forces in an anarchy necessarily wanting to kill each other for territory. That's not their incentive.
This can also be proved to oneself simply seeing the Law of PseudoDemand as aggressors on one side (the positive side to which value is transferred) and victims on the other side (the negative side from which value is transferred). If the predators are fighting with each other over who gets to predate on the victims, then that substantially raises their costs of risk because one of them certainly won't make it and neither probably wants to find out who it will be. One of them will be on the victim side of the equation and that’s a very unenticing (and unprofitable) prospect. Thus, they're naturally disincentivized to conflict, albeit not perfectly so. However, if they join forces, then not only is their cost of risk reduced, but their chances of success against their victims increase too. Thus, we’ve all heard the saying that "power naturally prefers to coexist with power", rather than to compete. Power naturally forms itself into monopoly due to its relative value structure, unlike the rest of the market which has a positive-sum value structure and, therefore, spreads itself out.

To Be Continued…
 

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A Brief Introduction to the Archotropism Framework (Part One)


Why does the state exist in the first place? Why do the masses so fervently demand its existence? Is it really just because they’re propagandized and lied to? Or, is there some fundamental incentive of human nature that the masses are responding to, the value of which, the state is attempting to supply to them? Why have states been the default for most of human history? In the Archotropism Framework, I seek to answer these questions, which I feel have been neglected in Libertarian and Free Market Economics discourses for decades. I’m not seeking to justify the state’s existence or its perverse practices. Rather, armed with a grounding in Austrian economics, I seek to understand the enemy, and the spirit that animates it. I seek to understand its incentives as it sees and understands them, perhaps even better. Perhaps, in understanding why society always seems to turn towards rulers (aka “Archotropism”) and why it turns towards a state-derived aggressive order, we can find a solution to it and generate, for ourselves, an incentives-based strategy that will enable future generations to live free.

“Humans act using means over a period of time to achieve ends.” It’s such a simple statement, and yet, it encapsulates all of economics in one statement. It follows logically then that humans will prioritize the pursuit of their ends based on the ends’ order of importance—a hierarchy of values as Jordan Peterson would call it. In psychology, this is called Maslow’s hierarchy of needs. As this writing is not about free-market interactions, but of the compulsory class of interactions (aka “aggression” which the state holds a monopoly on) I will not delve too deeply into that part. Production arises as the result of voluntary transactions where each party values the goods or services of the other more than their own goods or services and decides to trade with the other. Aggression arises, however, because the act itself has value (obviously only to the aggressor). To the aggressed against, the act has a negative value. This act can be basic predation or criminality, but it can also be benevolent. An aggression could be both a criminal forcibly extracting money from a victim or it could be a father trying to enforce sobriety on an addicted member of his family. Obviously, in both cases, the person being aggressed against does not want the interaction and has their freedom to choose overridden by the aggressor. However, for the aggressors, society may oppose the first and be sympathetic to the second. Regardless, the incentive for each is the same: each sees value in the act, and therefore, does the act.

What is critical to avoid in this discussion is confusing ideology with incentives. While society may ethically oppose the first and condone the second, the fact that each incentive still exists regardless of what society thinks of it is why the actions of aggression get performed. People can believe that taking money from their neighbors is morally wrong, but that belief doesn’t at all stop them from voting for it to be done by their state on their behalf. For humans, if the incentive is there, then the action will get done. As humans with needs that demand to be met, this behavior is actually very rational, even if the decision is not reasoned to, or even a fully conscious decision. If the action has moral opposition, then it is only a matter of humans rationalizing the action. People behave their incentives, not their ideas. They behave the incentives that they observe and then post-hoc rationalize them if need be. Again, we prioritize acting out our incentives based on our perceived subjective values. When it comes to human aggression, it is only a matter of what order that subjective marginal value of aggression falls in on one’s hierarchy of values at any given time.

This creates a seemingly contradictory situation in life, where nearly all civilized people agree that aggression by others against themselves is “wrong” because it has a negative value to them. However, they also agree that aggression is acceptable when they’re doing it because they have come up with XYZ reasons why it is acceptable that make sufficient sense to them in achieving their values. While some might call this behavior hypocritical, as I have explained, it is not. On the contrary, it is actually being quite consistent with one’s values—his incentive-driven values, not his ideological values. Therefore, simply trying to educate people morally/ethically against such actions is not likely to succeed in diminishing the frequency of their occurrences because moral education does not change the value of the incentive of the action, which is always situational and subjective. This seemingly paradoxical incentive-driven behavior is mirrored in the state, where voters simultaneously want to exert control and taxation over others while also seeking to minimize and evade such taxes and controls upon themselves.

Now, we can answer the question of why the state exists in the first place. Recall from earlier that humans use means over a period of time to achieve ends, of which, one end is always power because power has value. Now factor in that humans are economizers who seek to achieve the most ends using the least amount of means and over the least amount of time. From this, we can conclude that any action that has value is worth doing to the extent that it is most profitable, and no more and no less. Thus, in order to maximize the value of actions, humans engage in activities such as collectivization, division of labor, and specialization, which lower the costs of means and time in achieving desired ends. In one word, they create "hierarchies". Hierarchies enable humans to maximize value by ceding decision-making power to competent leaders to organize collective use of the means of production to more efficiently achieve ends. As such, all hierarchy is an inevitable human behavior as it is an economizing behavior that makes the most efficient use of means in terms of achieving ends. The same is true of the means of predation and aggression. The state is the hierarchy that naturally forms to economize and maximize the value of predation over a given territory. As acts of aggression will always have value and the acts of hierarchy will always have value, putting them together, we yield that the existence of hierarchies for aggression (i.e, “states”) are inevitable.

The state exists to supply its citizens with the value of aggression against other people and to lower the costs incurred from that aggression in terms of time and means, using economizing behaviors such as collectivization, specialization (primarily for aggression), division of labor, and applicable economies of scale. It provides them with the perceived value of aggression against their countrymen: control over their behaviors and (sometimes) direct predation of private property in terms of wealth redistribution. Put simply, the state’s main service is to provide orderly aggression (sometimes called an “aggressive order”) as a service to its citizens to supply their demand for its value. Unfortunately, that’s where the value ends and the problems of Archotropism (defined below) begin. To be continued in part two…

 

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Popular Liberty
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A Brief Introduction to the AntiTax Framework

By Popular Liberty 04/27/2021

Since the beginning of states thousands of years ago, states have funded their statecraft services through direct, usually annual, compulsory payments, which are called, “Taxes.” The AntiTax Framework seeks to make that classical system of compulsory taxation obsolete by gradually replacing it with a systematized framework of economic and archotropic incentives and disincentives based upon the concept of a sovereign wealth fund (hereafter referred to as “SWF” or as “SWF’s”), similar to what exists in Nordic social democracies. The basic proposal of the AntiTax Framework is that a state will create for itself a network of SWF’s, managed by the state’s multitude of counties and municipalities (hereafter referred to as an “LG” or as “LG’s”). 

There are over 3200 counties in the 50 states, DC, and the US territories, and each county has at least one, if not several municipal governments in it, all of which are under a constant state of natural selection pressure, competing and cooperating for power and influence. Being in a state of constant natural selection pressure, LG’s must compete very hard with each other to balance their quality and scope of statecraft services with the costs to the taxpayers of providing those statecraft services. If an LG does not balance the quality of service and costs, it will quickly lose business and individual taxpayers to its more responsible and competitive neighbors, who will gain from the irresponsible LG’s loss. Therefore, LG’s are incentivized to plan for the future, to receive and to carefully monitor feedback from the taxpayer, to provide higher quality to cost ratios of statecraft services relative to its neighboring LG’s, all relative to the total demand for such services from the population of taxpayers. This states in stark contrast to higher levels of government who face very little interstate competition from their fellow states due to the substantially higher costs of moving from state to state. The states that are competitive compete mainly for business taxpayers to move to their states by offering superior economic and regulatory environments. This, in turn, incentivizes workers from other states to “follow the money” of these employers and move to their state. Noteworthy examples of competitive states are Florida, Montana, North Carolina, Tennessee, and Texas.

From the list above, Texas and Florida are two large swing states that already delegate substantially more of the balance of power in their states to their LG’s, which can be proven by each state’s ratios of state vs local spending. Collectively, LG’s in Florida spend about 31% more money than their state government. In Texas, the number is 26%. Thus, these two states are the best candidates for introducing the AntiTax Framework in as they have already decided that it is in their best interests to delegate the resources and power of statecraft decision-making to their LG’s to encourage them to compete and experiment with their statecraft policies and services in order to provide the better quality of service at lower costs to each state’s business and individual taxpayers. The AntiTax Framework leverages this mindset and extends it by offering LG’s a new tool in their toolkit of competition.

Example One: Higher Time Preference Strategy

As mentioned before, the goal of the AntiTax Framework is to gradually make classical taxation obsolete by substitution and replacement, not by abolition. To illustrate this on a micro-scale, let’s imagine a single LG starts an AntiTax fund and seeds the fund with 1,000,000 from its reserves. In a normal year, the LG also raises and spends $750,000 in taxes and raises its taxes annually to match inflation at an average of 0.5%/year. The management of the fund is delegated to licensed and experienced investment professionals who meet the AntiTax Framework’s licensure and experience qualifications, who will receive compensation levels commensurate with the wealth management industry’s standards (usually 1-2% AUM and 10-20% above S&P500’s performance, assessed annually). They are all free to manage the portfolio as they see fit, within the confines of the state and federal investment laws and regulations. Since LG’s will certainly negotiate for lower management fees using their unique status as immortal governments, we will use the lower numbers of 1% AUM and 10% in an example. In an example year, say the fund manager grows the portfolio by 10% and the S&P500 returns its average of 10%. Then, the fund manager will only be compensated 1% of AUM as his return did not exceed the S&P500, leaving a net-total of 9% ROI to the AntiTax Fund. LG’s may add or remove taxes from their AntiTax funds as they see fit and agree to with their respective fund manager(s). It is up to each LG to be as competitive as they can be in order to maintain and grow their population of tax payers. For this example, let us say that the LG has elected to remove 3% AUM per year regardless of performance and to add no further taxes to the fund. Assume this same performance and actions are repeated for 24 more consecutive years. Thus, the output for the fund is as follows in Figure-1:

Thus, In the first year, the AntiTax cut taxes by almost 4%. Over 25 years of the fund, the higher time preference LG generated an extra $1,711,752 in tax revenue, with the AntiTax cutting the felt tax burden, slowing the rate of increases in taxes immediately, and turning the growth rate negative in Fiscal Year 16, while the LG’s spending levels still continued to increase. It ended with the AntiTax making up 14.36% of the LG’s revenue and continuing to provide small cuts every year. It is worth noting, that this is a static analysis which assumed the economy doesn’t grow from annual tax cuts.  Economic growth could be used to either add more funds to the fund, increasing its growth rate, or to pay for more direct cuts, assuming spending levels don’t increase.

Example Two: Lower Time Preference Strategy

To illustrate another example, let’s imagine a lower-time preference neighbor of the first LG also starts an AntiTax fund and also seeds the fund with 1,000,000 from its reserves. In a normal year, the LG also raises and spends $750,000 in taxes but only raises its taxes annually to match half of inflation to be more competitive at an average of 0.25%/year. The management of the fund is delegated to licensed and experienced investment professionals who are compensated the same way as the previous example. In an example year, say the fund manager grows the portfolio by 10% and the S&P500 returns its average of 10%. Then, the fund manager will only be compensated 1% of AUM as his return did not exceed the S&P500, leaving a net-total of 9% ROI to the AntiTax Fund. For this example of lower time preference management, let us say that the LG has elected to remove 1.5% AUM per year regardless of performance and to add no further taxes to the fund. Assume this same performance and actions are repeated for 24 more consecutive years. Thus, the output for the fund is as follows in Figure-2:
Thus, in the first year, the AntiTax cut taxes by almost 2%. Over 25 years of the fund, the higher time preference LG generated an extra $1,081,832 in tax revenue, with the AntiTax cutting the felt tax burden, slowing the rate of increases in taxes immediately, and turning the growth rate negative in Fiscal Year 8, while the LG’s spending levels still continued to increase. It ended with the AntiTax making up 11.09% of the LG’s revenue and continuing to provide small cuts every year. Again, it is worth noting, that this is a static analysis which assumed the economy doesn’t grow from annual tax cuts.  Economic growth could be used to either add more funds to the fund, increasing its growth rate, or to pay for more direct cuts, assuming spending levels don’t increase. It is also worth noting that the AUM fees for the asset managers were substantially larger in the LTP. This provides a direct incentive for the asset managers to lobby their LG clients for lower- and lower-time preference policies, providing needed counterbalance against any HTP impulses from the public. The total tax burden on the public was almost 4% lower than its higher-time preference neighbor, giving it a slight competitive advantage. 

The competitive advantage of this fund is seen most when compared to a similar LG without an AntiTax fund. Assume each of the previous LG’s had a mutual neighbor with the same time preference as the HTP LG, but did not start an AntiTax Fund. Immediately, it would have a 2-4% competitive disadvantage in its costs, while having no advantage on its quality of services. By the 25-year mark, that cost-disadvantage would be over 14-16% with its neighbors, likely resulting in it losing most or all of its tax base to them. The sales pitch to the taxpayers alone would be impossible to contend with. On one hand, a taxpayer has the option of an LG where his taxes go up every year no matter what. On the other hand, a taxpayer could live a few miles away in an LG where his taxes will stay relatively flat or go down every single year and he will receive the same level of statecraft services that he would’ve received in the other LG. The choice itself is compulsory because the taxes are not. 

 

 

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