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Liam's Blog on Philosophy and Governance

A Simple Version of Anarcho-Capitalism

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Here is how I believe anarcho-capitalism will work:

  • Rights Enforcement Agencies (REA) will provide insurance policies protecting people and their property. If person A harms person B, person B will be reimbursed by his/her REA. Since person B’s REA has now lost money, it can hire a private security firm to force restitution from person A. If person A has an REA, then both REAs can either fight to the death or come to an agreement via arbitration.
    • If they decide to fight to the death, they will lose market share and waste capital. This will result in the growth of market share of peaceful REAs. The only possible exception is in an oligopoly.
    • If they decide to go to arbitration, this will create a common law system as various judges preside over cases between various agencies.
    • Also, keep in mind that most REAs will have reinsurance and most reinsurance companies will issue policies to multiple REAs. There will also likely be REA funds that allow people can own fractional ownership of a basket of REAs. Both of these factors will reduce the likelihood of violent conflict between firms.
  • Either the REAs or reinsurance providers will securitize their insurance policies and sell them on financial markets. Security companies can then buy bundles of these policies, probably grouped by geographic region, and provide free security services to lower the expected payout. This would provide preventative security services so that crimes don’t happen in the first place.
  • A common law system would develop wherein an REA that represents a victim can claim restitution from an REA that that represents an offender, provided it can be proven in court.
    • If a victim does not have an REA, in the spirit of transferrable tortes, he/she can hire an REA to take the case to court, retroactively adding them as a client, at a cost. Most likely the REA will take a large portion of the settlement.
    • If an offender does not have an REA and they are forced to give restitution (or threatened as much), they can make a case against whoever forced them to do so wherein they are the victim.
  • According to the FBI, there were 2,450.7 property crimes per 100,000 in the US in 2016. There were 7,919,035 property crimes total and $15.6 billion in total damages. Therefore, it would cost (2,450.7 / 100,000) * (15.6 billion / 7,919,035) = ~$48 per year for property crime insurance.
  • Also according to the FBI, there were 386.3 violent crimes per 100,000 in the US in 2016. There were 1,248,185 violent crimes total and 1.4 percent of them were murder. According to this seemingly reliable website, the average life insurance policy in the US is for $153,000, so assuming that other violent crimes get a payout at 10% the rate of homicide, it costs ( 386.3 / 100,000) * (.986 * 15,300 + .014 * 153,000) = ~$67 per year for violent crime insurance. Disclaimer: these numbers are on the low end, but even with higher numbers the cost is manageable for even low-income people.
  • Similar systems have existed historically such as in Iceland, Ireland, Somalia, Ghana, and Papua New Guinea to name a few (listed are relevant books that shed light on each respective example if you are interested in learning more — the article linked is written by yours truly).
  • National defense would likely be provided by volunteer militias, as in the case of the Karen State, treaties, as in the case of small nations, and assassination markets (more on this tricky subject in another article).

And that’s all folks. I wrote this off the top of my head while doing back of the napkin calculations so please feel free to give feedback and suggest corrections.

Most of this is taken from the very intelligent people linked in the article, but I think a few insights are my own — although it is more likely that someone has thought of all of this before.

Why I’m Bullish On Ethereum

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In a previous post, I laid out the problem with bitcoin and other crypto-currencies. In summary, even if a crypto-currency is “decentralized”, there are pinpoints of centralization in the software development process and when it interplays with financial markets (i.e. when trading dollars for BTC). My thesis is that, over time, these pinpoints can cause major problems. Due to the constantly deprecating nature of technology, even if we solve the issues pertaining to exchanges and financial markets, there will still be relative centralization in the development process due to the need for constant updates.

I am not an avid follower of Bitcoin, but I am aware that this has become somewhat of an issue. There have been many schisms in the development process and it has been extremely hard for developers to make important changes. Also, a grossly large amount of people keep their BTC in coinbase and other exchanges, which defeats the purpose of Bitcoin altogether.

That being said, all hope is not lost. Ethereum, I believe, has a much better model. To understand why, let’s first look at the US Dollar (USD).

The USD somehow has value, although it is literally a currency made out of thin air by the US government. If I made “Liam Dollars”, which were just arbitrary green pieces of paper that I cut out, I wouldn’t be able to get anybody to use them. But despite massive money printing on the part of the federal reserve, somehow, the value of the dollar is relatively stable.

How can this be?

Well, it’s actually quite simple. The US dollar is backed by violence. If you create wealth in the United States, you are obligated to pay US taxes. If you don’t pay taxes, the US government will arrest you. Since taxes must be paid in dollars, there is automatically a huge demand for dollars to pay said taxes.

Similarly, many currencies around the world are pegged to the dollar, thereby creating demand for dollars by taxation and commerce in other countries.

But it doesn’t stop there. Another huge driver for USD is oil. Most oil contracts are negotiated in dollars. In fact, it has been speculated that the US has toppled regimes in the Middle East simply because they attempted to switch oil contracts out of USD. Since oil is a multi-billion (or maybe trillion?) dollar per year commodity, this also creates massive amounts of demand for USD.

Now think back to Econ 101. The higher the demand, the higher the price.

This makes sense. A currency, just like any other commodity, has a value that corresponds to its supply and demand.

So let’s apply this to Ethereum. With the advent of smart contracts, Ethereum is enabling applications and other crypto-currencies to be built on top of its blockchain.

Just look at the Ethereum Alliance‘s member list: big banks, big oil, and big tech. Massive amounts of very important applications and other crypto-currencies are being built on top of the Ethereum blockchain– and this creates demand for Ether.

Smart contracts create demand for Ether in the same way that oil contracts, pegged currencies, and taxes create demand for USD. And since I perceive that the amount of people building on the Ethereum platform is growing, I am, therefore, bullish on Ether.

That being said, I still think that Ethereum is subject to the criticism in my original article; however, it is much safer because its demand is more entrenched. Bitcoin also has some cool projects, such as Rootstock, that aim to bring smart contract functionality to its blockchain.

Although I like to talk about the shortcomings of crypto-currencies (and there are many problems with even Ethereum), I, on net, like the concept and am even in the process of developing my own currency token on the Ethereum (and maybe eventually, Bitcoin) blockchain. More on this at a later date.


Note: when talking about demand for USD, I did not mention the most obvious one: that US vendors are forced to accept USD and therefore it must be used for commerce in the US.

 

Bitcoin: Doomed to Fail (#Tbt)

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I originally published this article May 2014 on Liberty.Me. I am republishing this in its unmodified form because I believe my analysis still stands on solid ground today. However, I no longer fully endorse everything in this article. The original can be found here.

For my first article here on Liberty.me, I decided to write something controversial (to encourage discussion, of course).

I would like to preface by saying that I think Bitcoin (BTC) and other CryptoCurrencies are awesome! Unfortunately, when you have something so awesome, people often get obsessive and exaggerate how great it actually is. I will admit that I chose this title mostly for shock value, however, there is considerable truth to it. My hope for this article is to bridge the intellectual gap between libertarian supporters and opponents of Bitcoin.

1. Bitcoin cannot last forever

Bitcoin relies on several different cryptographic algorithms. The first being the Elliptic Curve Digital Signal Algorithm (ECDSA), which is used to generate the public/private key pairs, and the second is the SHA-256 hashing algorithm (SHA-2) which is used for mining. I will admit, that this is a stellar choice of algorithms; Elliptic Curve Cryptography is one of our most promising frontiers of asymmetric encryption (“asymmetric” meaning that the key to decrypt data cannot be easily derived from the key to encrypt data or vice versa) and SHA-2 still is a very secure algorithm with few known problemsThere is no way that anybody could cryptographically exploit bitcoin now, in 2014.

In the future, however, this is simply not the case. Keep in mind that modern computers have only been around for 50-60 years, and the internet has only existed for 20-30 years. These technologies are still in their infancy, and to think that we have developed the end-all solution to world currency is ridiculous.

Not convinced? Allow me to explain how Bitcoin might begin to fail:

With the advent of quantum computers, ECDSA will be easily broken. This means, that people with your public key, will be able to generate your private key. Luckily for BTC users, the public keys are hashed. A hash function takes an input and then generates a seemingly random output of a fixed size. This means that there is no way to easily reverse the output of a hash function to get the original input. Furthermore, quantum computers — as far as we know — cannot pwn hashing in the same they do with asymmetric encryption. Unfortunately, although protected initially, public keys are revealed after they are used. Or in other words, in the not-so distant quantum computing era, BTC users will have to change their public keys after every transaction.

Despite this critical security flaw, all hope for BTC is not lost. There are several ways to deal with it:

  • Everyone could just remember to change their keys after every transaction
  • Companies could provide wallet services that automatically cycle addresses
  • We could change bitcoin to use quantum resistant algorithms

The first is obviously a bad idea because it is inconvenient and people will forget to do it.

Two and three lead me to my next point.

2. Bitcoin is becoming increasingly centralized

With Bitcoin’s inevitable rise in popularity, there will be a large amount of political pressure to control it. Imagine that the aforementioned public key vulnerability became exploitable due to advances in technology. All people would be forced to make a change. They could either use new wallets that rotate addresses or they could update the Bitcoin protocol to use new post-quantum encryption algorithms. Either way, they are being forced to change their software and this opens Bitcoin up to backdoors, new vulnerabilities, and it won’t change the fact that new advances in technology will perpetually require such changes to be made.

There are many examples of massive vulnerabilities going unnoticed in open source software and backdoors being discovered in critical security software. I’m not saying this is necessarily going to happen to Bitcoin, however, its continually deprecating nature as a currency (due to exponential growth in technological advancement), will make this very likely.

But let’s get back to regulation and how the government might increase its influence over Bitcoin. Currently, many people are already starting to use cloud Bitcoin wallets because they are easy and secure. It may not seem like it, but we are certainly seeing a shift (with all software, not just BTC) towards the cloud. This shift would be further exacerbated by the public key vulnerability, that would force people to either download a new protocol compliant wallet or use a cloud service. I highly doubt most people are going to spend the time to audit the source code and integrity of their new wallet while simultaneously making sure that wallet usage is distributed evenly among all potential wallets so as to prevent one group of “wallet developers” from getting too high of a market share (thereby insuring the decentralization of Bitcoin).

What is really going to happen is that most people will download an “official wallet” developed by the more or less centralized group of developers who proposed the change or they will choose one of many cloud wallets. The problem with cloud wallets is that governments can easily regulate them, just like they regulate banks. In fact, the government will most likely provide banks with exclusive cloud wallet rights. With a well engineered plot, the government could easily take control of the majority of Bitcoin wallets. This is especially bad, because unlike a 51% attack, this would allow them to make whatever changes they want to the Bitcoin protocol.

Not to mention, as the difficulty of mining and value of Bitcoin increases, so does the demand for mining equipment. We have already seen a huge increase in the cost of bitcoin mining with dedicated ASICs (application specific integrated circuits– which are essentially computer chips that are made solely for the purpose of mining BTC). Right now, you can get a return on your investment if you dish out several grand for an ASIC mining rig (GPUs don’t cut it anymore), but soon enough, there will be no way that the lay-person can mine. This is yet another chokepoint in the Bitcoin network that is almost guaranteed to occur.

(I’m not even going to mention the danger of mining pools)

What’s even worse, is that when the quantum computer finally emerges, it’s capabilities will likely surpass those of ASICs by using algorithms such as Grover’s Search. This will give even more power to the elites who already control most of the mining companies.

But this could never happen, right? Wouldn’t the people see it coming and not let the government ruin their money? It’s open source! No. Why didn’t democracy prevent the creation of the federal reserve? History repeats itself, except with different technology. I won’t even bother speculating as to the ingenious ways that the government will propagandize their control of Bitcoin. The worst part is that even if all of us decide to band together to fight this atrocious take-over of the Bitcoin network, it likely won’t be enough. Even if 49% of people oppose these changes, they will still occur.

Centralization is inevitable.

3. Bitcoin isn’t the best

Bitcoin is, technologically, one of the least advanced cryptocurrencies. There are many more sophisticated Alt Coins that surpass Bitcoin in anonymity, speed, and security. Entrepreneurs and activists are constantly innovating on top of the BTC protocol in hopes of snagging a piece of its market share. Remember that the internet has only been around for a few decades and we already have something as revolutionary as the blockchain. After 10, 20, or 100 years, Bitcoin will be to other crypto-currencies as MS-DOS is to Windows 8.1. It will be archaic and outdated.

This is the fundamental problem with a technology based currency. It’s not that it doesn’t have “real value” or “intrinsic value”, the problem is that it cannot and will not move at the same pace as other technology. Bitcoin is only valuable if the protocol is being up-kept and made relevant, otherwise, it will fail. Given enough time, it will either be corrupted or abandoned all together.

BUT……..

The downfall of Bitcoin is not going to be in the near future. It probably will not even be in our lifetimes (I’m just speculating, but I bet it would be in our children’s lifetimes). We have an incredible opportunity in this day and age to utilize this technology to overturn the government monopoly on money. The government cannot control it (yet), cannot manipulate it (yet), and cannot regulated it (well) (yet). This is sort of a call to action. We need to get as much momentum behind the alternative currency movement as we can before we lose our edge. If you use alternative currencies, such as Bitcoin, good! If you don’t, you should start! This will be an incredible tool, while it lasts, for resisting government control over economic transactions. If you are concerned about the issues that I mentioned, study computer science and cryptography and then contribute to Bitcoin. We need bright, well-intentioned people to do this, otherwise it will fail sooner than you think. If that is not an option, spread the word, and be a dedicated participant in the community.

If we can use Bitcoin to bring about a paradigm shift in the global economy and unshackle ourselves from the bondage of fiat currency, then even though it will eventually no longer be in use, it will not have failed after all. I hope that this unifying goal can bring together all libertarians, whether they like Bitcoin or not.

Please note: I know that many Bitcoin advocates acknowledge that these events will occur, and this article is not directed towards them. I wrote this article as a sanity check for bitcoin advocates who get a little carried away with their BTC-worship. Bitcoin is great, but it is not perfect! Similarly, I would like to demonstrate to its opponents that despite these setbacks, Bitcoin is an amazing tool that can change the world.

Also, I define the failure of Bitcoin to be when either it has zero purchasing power or it is controlled by the government.


Notable Comment:

“Wonderfully challenging piece.” — Jeffrey Tucker

Appearance: Read Rothbard (12/31/2016)

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December 2016 has been a lot of firsts for me. My last post was my first ever debate… and now I would like to present to you my first ever podcast appearance. Today, I had the pleasure of joining the folks at Read Rothbard and we had an amazing discussion about the movie Ex Machina and how artificial intelligence relates to libertarianism.

Click here to go to the official show notes page.

4 Suggestions for Facebook’s “Fake News” Program

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Today, Facebook announced that it will be flagging “fake news”. While its not entirely clear where Facebook is going with this, I do have some concerns.

In Facebook’s announcement, it says,

We believe providing more context can help people decide for themselves what to trust and what to share. We’ve started a program to work with third-party fact checking organizations that are signatories of Poynter’s International Fact Checking Code of Principles. We’ll use the reports from our community, along with other signals, to send stories to these organizations. If the fact checking organizations identify a story as fake, it will get flagged as disputed and there will be a link to the corresponding article explaining why. Stories that have been disputed may also appear lower in News Feed.

What most concerns me about this is the power that it gives to news organizations. Facebook is going to be giving a select number of organizations the ability to unilaterally discredit and suppress content.

Given this, I have a few suggestions that can turn this potentially dangerous system into one that could actually be quite beneficial (in order of importance):

  1. Don’t suppress disputed stories. Disputes are not always going to be correct. We can inform people about dissenting viewpoint, but should not prevent them from sharing these stories if they choose to do so. If disputed stories appear lower in the News Feed, this will turn into a subtle form of censorship.
  2. Don’t give a popup warning about disputed content. This does too much to discredit an article in the eye’s of a lay person. Instead, there should be a little icon somewhere by the link that indicates that the content is disputed. An interested user can click on the link to read the rebuttles if they so choose. If there must be a pop-up, it should be when an article is about to be shared– not when it is about to be read.
  3. Allow anyone to dispute stories. Any organization should be able to submit a dispute. Given point 1 & 2, an individual dispute should be less impactful. This eliminates the need to reserve it’s creation for only highly vetted organizations. Debate is important and it’s really easy to get caught in an echo chamber. If everyone had the ability to see both sides of any story, this could be a really positive feature.
  4. Allow users to subscribe to disputers. If a user trusts a certain organization, they may like to be alerted when they click on an article that it has disputed. The difference between this and point 2 is that this system is opt-in and only has user-selected bias. However, this would need to be implemented in a manner that does not push the subscription of certain disputers harder than that of others.

With these changes, I believe that Facebook could make great strides in allowing users to get multiple perspectives while shedding these issues of censorship and bias. Instead of following Poynter’s priciples and claiming to offer objective unbiased fact checking, Facebook should embrace bias and view it as a necessary lens for getting a wholistic picture of reality.

Thank you for reading! Let me know what you think in the comments. Also, please share this article to help encourage Facebook to make these changes. They are currently on the fence about point 1, and we need to nudge them in the right direction.

The Incompatibility of Feminism and the Minimum Wage

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In this article, my goal is to convey why feminists cannot logically support current minimum wage legislation. For the purposes of this argument,

A feminist is someone who:

  1.  Opposes systems which disproportionally advantage men over women; and
  2.  Believes that the wage gap exists

This may not truly represent what it means to be a feminist, but it is fair to say that most feminists meet both of these qualifications. If you are a feminist who does not meet these qualifications, then this article does not apply to you. It is, however, easier to refer to this bundle of beliefs as “feminism” for the sake of making a concise argument.

The wage gap is the belief that, on average, women get paid 77 cents for every dollar a man makes while doing the same work.

A libertarian is a person who, among other things, opposes the minimum wage and does not believe that the wage gap exists.

The Case Against the Wage Gap

Libertarians claim that if you control for all factors— including hours worked, life choices, and field of study— you find that women get paid the same amount as men for the same work. But Libertarians take things one step further. Not only do they believe that the wage gap does not exist, they believe that it cannot exist.

They prove that it is in a firm’s best economic interest to pay women the same as men:

Wage Gap Irrationality Proof

> Imagine that women earn 30% less than men.

> Instead of offering a man $100,000, a company could offer a woman a job for $80,000 and save $20,000

> It is in every company’s interest to maximize profits and, therefore, they would all do this until the average wage of women equaled 80% that of men.

> Once the wage gap was reduced to 20%, companies would offer jobs to women for $90,000 in order to save $10,000 by the same logic.

> Women would then make 90% of what men did and the process would repeat itself until the market reached perfect efficiency and the wage gap was eliminated.

While this is objectively the best way to maximize profits, it only applies to a world in which sexism does not play a role. The libertarian viewpoint that the wage gap cannot exist depends solely upon the notion that firms would rather make profit than be sexist. Let’s call this assumption the “Conjecture of Efficient Markets”.

The Feminist Perspective

Since (according to condition 2) Feminists believe that the wage gap does exist, they must also believe that it can exist. Unless they disagree with the logic presented in the Wage Gap Irrationality Proof, they must, therefore, object to the Conjecture of Efficient Markets.

In other words, since Feminists cannot prove that it is economically rational to pay women less than men, they must believe that the wage gap exists because business owners value it more than profit. Let’s call this belief the “Theory of Patriarchal Pervasiveness

The Minimum Wage

Libertarians oppose the minimum wage and my argument is that Feminists should too.

According to condition 2, feminists believe that the wage gap exists. Therefore, on average, they believe that when a man gets paid $16/hr, a woman gets paid ($16 * .77 =) $12.32/hr.

But this is where it gets good, so let’s recap:

A feminist is someone who:

  1. Opposes systems which disproportionally advantage men over women; and
  2. Believes that the wage gap exists

Libertarians do not believe that the wage gap exists because of the “Wage Gap Irrationality Proof” and the “Conjecture of Efficient Markets”

Feminists reject the “Conjecture of Efficient Markets” because they accept the “Theory of Patriarchal Pervasiveness”, which is the belief that companies would rather maintain the wage gap than increase profits.

Now imagine that the minimum wage increased to $15/hr and notice that 15 is greater than 12.32— making the woman’s wage illegal. A rational person might suggest that the business owner should increase the woman’s wage to $15/hr. This would maximize profits because $15/hr is cheaper than the man’s wage of $16/hr and would give the employer a gain of $1 per hour compared to an employer who only hired men.

But, as we had previously established, feminists believe in the Theory of Patriarchal Pervasiveness. Therefore, they believe that businesses prioritize maintaining the wage gap over maximizing profits. Reflect back to the example in the Wage Gap Irrationality Proof. They were in the same situation. They could have hired a woman for more than the wage gap and made the difference between the two genders’ wages in profit, but (according to feminists) they were so sexist that they refused to do so. Why, then, would they do it after a minimum wage hike?

According to the feminist Theory of Patriarchal Pervasiveness, they won’t. Since they won’t be willing to pay women more than the wage gap, they won’t hire them at all.

Before the minimum wage hike, women at least had the option to work, and afterward, all of their job prospects became illegal.  Feminists must, therefore, believe that this would create massive unemployment among low-income women. Men, on the other hand, would not be affected since their wages are above the minimum level. Is it a coincidence that men like Bernie Sanders have pushed for a higher minimum wage than Hillary Clinton? If women are unemployed, I guess they can “get back in the kitchen”. Since this is a system that disproportionately favors men over women, it violates condition 1 of feminism and is, therefore, an inconsistent policy for them to support.

Until the wage gap is eliminated, feminists should refrain from supporting minimum wage legislation. According to their own beliefs, even raising the minimum wage first and fixing the wage gap after would adversely affect millions of women across the country.

#incoherentideologyproblems

Hello

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I don’t have much to say at this time, but I wanted to start this blog because I’ve been squatting on this nice 3-letter domain (they stand for my initials) and I’ve had some thoughts that I’ve wanted to share.

I don’t want to use Medium because I like to have control over my content. I am a programmer so I could make my own site, but I don’t feel like it.

I have another website coming out soon, so keep checking back for updates (it will be really cool!)

Thanks for checking out my site and I hope to see you in the comment section!