Here is the first installment of the book-non club that I felt somewhat challenged by @Undisciplined and @siggy47. Doing so puts me out of my comfort zone for two reasons.

For one, I was never much interested in economics until I started getting into Bitcoin, and it is not usually my first choice for my wind-down evening reading. I think some of the first exposure I had to thinking about this was when I read Gradually then Suddenly, by Parker Lewis. Prior to that, I was in a doom-scrolling on Twitter/shitcoining phase of my journey (yes, a sinner i was). Matthew Kratter recommended this book in one of his videos. All that to say, I consider myself a true-beginner in this field.

Secondly, book clubs online are hard. Instead, this will just read like a report on what I retained, with some questions to follow.

The author, [David D. Freidman] is also a writer of historical fiction and poetry, which is in part why I have undertaken to delve into his theoretical writing. He is a deep thinker, whose ideas I would like to properly engage with before delving into his fiction.

Chapters 2, 3 and 5 are not summarized below since I felt they were secondary to the main points being driven at in this part of the book.

The poemThe poem

I think the poem printed at the beginning of Part I, referenced here illustrates the contradiction, meticulously explained by Freidman throughout the following chapters, in claiming to put the needs of the masses before one’s own. The two stanzas are seemingly contradictory, yet uttered by one man, which is a commentary on the duplicity of politicians, regulations and institutions purported to protect the commoner.

In Defense of PropertyIn Defense of Property

In this first chapter, Friedman introduces one important theme that recurred throughout Part I, namely that he is repeatedly arming his reader with counter-arguments against Marxism. I quite enjoy this, since I can count on at least one relative for being a reliable and consistent Marxist interlocutor at family functions. If you can relate to this dilemma, then you might enjoy Part 1.

Friedman begins by getting into some of arguments as to why private property is the keystone of a free society. Here’s a succinct and crucial point he makes:

The desire of several people to use the same resources for different ends is the essential problem that makes property institutions necessary.

He goes on to explain

• how private property institutions create the potential for an individual to use her resources to reach her own ends, or otherwise cooperate with another whose ends align with her own;
• secondly, that institutions of public property are intended to keep property held by political institutions.

An important quote on the second point:

since the function of politics is to reduce the diversity of individual ends to a set of common ends (the ends of the majority, the dictator, the party in power, or whatever person or group is in effective control of the political institutions), public property imposes those common ends on the individual. “Ask not what your country can do for you; ask rather what you can do for your country.” Ask not, in other words, how you can pursue what you believe is good but how you can pursue what the government tells you is good.

He illustrates in a case study on how print and broadcast media exemplify the difference between these two types of property institutions. He thus concludes:

Under public property, the values of the public as a whole are imposed on the individuals who require the use of that property to accomplish their ends. Under private property, each individual can see his own ends, provided that he is willing to bear the cost.

Something else that stuck out to me from this discussion is that “free speech may be free, but printed speech is not.” This argument helps us to understand why you get such a wide-variety of opinions expressed in decentralized media like in print and on substack and the opposite is true for public domain media like radio. I liked this point especially because it made me think about bitcoiner stuff, like Stacker News, Nostr and decentralized payment systems. I found it to be a neat formulation for an argument I hadn't considered too deeply prior to reading.

Robinhood Sells OutRobinhood Sells Out

Freidman shows how terrible an analogue Robin Hood really is for government welfare programs. I have always assumed this would be the stance of such a self-described anarcho-capitalist as Freidman, but I have never seen it spelled-out in this way. Here are a few reasons he states as to why programs like Social Security achieve the opposite of their intended effect:

• On average, the poor tend to start working and paying into these programs earlier than the rich, who are more likely delay work in favour of going to school. Assuming an interest rate of 5%, the value of the amount saved by the student would be two-thirds more by the time they retire.
• Higher income people have greater life expectancy, meaning they have more years of pay-outs at the end of their life.
  Freidman estimates that someone who starts working at 24 and dies at 72 will receive about twice as much benefit compared to someone who starts work at 18 and dies at the age of 70, but notes that he is not aware of anyone having done an actuarial analysis on this.

Natural, Artificial and State MonopolyNatural, Artificial and State Monopoly

He discusses the differences between natural monopoly, artificial monopoly and state monopoly. He gets a little more granular with his analysis here, which I found to be a little harder to follow as a layperson. He describes how natural monopolies do not interfere with the workings of the market in a laissez-faire context. Railway is one often misunderstood monopoly. In the late 19th century shipping was actually quite competitive. Where companies tried to cartel together to fix rates, the arrangement would quickly break down when a company party to the agreement broke rank and offered discounted rates or an external company moved in to take advantage of high prices. State monopoly, he argues is more historically prominent in the context of the US.

More on State MonopolyMore on State Monopoly

shows how state monopolies function to keep prices artificially high and illustrates this using several examples. He shows how the Interstate Commerce Commission came in and eventually (over the course of 31 years) started setting rates, expanded its authority to cover other forms of transportation and prevent those undercutting railroads. He cites the Civil Auronautics Boards as a similar example, as it quickly gained the power to regulate airline fare, allocate routes among airlines and to control the entry of new firms in the airline business. He cites one case of a deregulated intrastate air route that was able to maintain prices that were half that of comparable interstate trips anywhere in the country. He gives occupational licensing as his final examples of state controlled monopolies, a discussion which includes construction trade/craft unions and medical associations.

The political logic is as follows: the consumer needs protecting from certain products and services, so the government creates government institutions (i.e. unions/associations). Producers of said products/services, having a much greater stake in the operation of these institutions, eventually take them over. Hence,

It is in the interest of physicians to keep down the number of physicians for exactly the same reason that it is in the interest of plumbers to keep down the number of plumbers; the law of supply and demand drives up wages.

And does this lead to higher quality services? Spoiler. No it doesn’t

Refusing to license the less qualified 50 percent of physicians may raise the average quality of physicians but it lowers the average quality of medical care. It does not mean everyone gets better medical care but that half the people get no care or that everyone gets half as much.

The reason this consistently happens is not accidental. It is because those with the power to regulate these industries repeated make calculated decisions about whom to protect. They consistently protect the industry members who know and are deeply invested in the effects of the regulation. The consumer seldom know they are being hurt and would not know they are being protected.

ExploitationExploitation

takes another few jabs at the Marxists who claim that the capitalist exploits the so-called real producers, the labourers. He uses this argument as an opportunity to explain the productivity of the capital invested. The Marxists claim that any money earned by the capitalist beyond what their initial investment is is exploitative of the labourers. He counters this by showing how having money today, i.e. the wages earned by the labourers, is more valuable to them than money received later. The capitalist bears this cost, since he too would rather have that money today instead of having it tied up and released slowly over a period of time. Therefore, what he earns is not exploitation, but his reward for the contribution of his capital.

Killing NeedKilling Need

In the last chapter of part 1, he explains how dangerous the idea of state-sanctioned notion of need is marshaled in the service of curtailing an individual’s freedoms. He argues that need ought to be eliminated from the vocabulary of political discourse. In accepting the concept of needs we thereby outsource the determination of those needs to someone else i.e. the government. It is yet another justification for making the poor pay for things (e.g. Medicare) for which they would probably not buy willingly because they do not think them worth the price.

QuestionsQuestions

If you made it this far, I would be wondering what you thought of the following:

• Some bitcoiners hyperbolize about “fiat collapse,” but isn’t it more reasonable that they expect deregulation of the state monopolies on currency, monetary and fiscal policy?
• Is there a contradiction in being pro-free-market capitalism and anti-shitcoining? Is it not similar to the concept of the marketplace of ideas, where all ideas face trial by fire?
• What’s your best corollary for the argument that “free speech is free, printed speech is not” in today’s digital media environment?