AMA
ask me anything
What is your favorite memory of growing up as the son of Milton Friedman?
I described the experience in an earlier post.
I can’t think of a single favorite memory. Candidates might be getting the sliding handicap on our ping-pong games down to zero, my father telling us stories on the long drive from Chicago to New Hampshire every year, arguing with him about many things, always as intellectual equals, pointing out to him (long after I was no longer living with my parents) that a system of competing private issuers would, to first approximation, produce what he had described as the optimal behavior of the stock of money and having him agree.
I vaguely remember that you argued somewhere that an unregulated competitive banking system would, under some conditions, produce the optimum quantity of money as defined by Milton Friedman (i.e., the quantity that produces a zero nominal interest rate). Did you make such an argument and if so, can you repeat it and/or point to a reference?
Yes. In a competitive industry, competition drives economic profit to zero. If we assume no operating costs and perfect competition, issuers will have to compete away seignorage, either by issuing money whose value increases at the real interest rate or paying interest on checking accounts.
I was wondering what your thoughts on the Austrian Economic Calculation Problem are.
The problem with it, viewed as a bright line proof of the impossibility of central planning is that, as Coase pointed out, the argument applies to a firm as well as to a government, since a firm is doing the same thing on a smaller scale. If coordination was impossible except through the market the only workable economic system would be agoric, with no employers or employees, just individuals contracting with each other.
Viewed as a problem the argument is correct but the implication (Coase) is that the optimal firm size is determined by the balance between that problem and the costs of market transactions.
Was there any History book that you found particularly enlightening?
It is not exactly a history book, but Market and Hierarchy by Oliver Williamson had an account of the inside contracting system in the 19th century that persuaded me that a pure agoric system, no employees, everything coordinated by market transactions, was not as good an idea as I had thought.
The Machinery of Freedom is why I call myself an anarcho-capitalist. For those of us who prefer that kind of book to one more ideological, like Rothbard’s writings, are there any thinkers (libertarian or not) that you would highlight?
Ronald Coase, whose work, especially on the theory of the firm, provided the theoretical background that Williamson was working from. For modern libertarian authors, I think highly of Michael Huemer. Other thinkers I find interesting are G.K. Chesterton, a libertarian of a somewhat odd sort, and George Orwell, who might have made it to libertarian if he had lived another decade or two.
Do you think any of these views are irrational to hold, why or why not?
Billionaires are some of the best humans on earth due to their economic productivity and philanthropic contributions.
Your claim is true of many billionaires, assuming that the criterion is effect on others not moral virtue, but not all. Some got their fortune by controlling a government. Some made their money legitimately but use it in ways that make the world worse.
Governments are the most dangerous threat to the human species and create the highest risk for humans to go extinct.
That is tricky, because while I can describe plausible ways of replacing government’s useful functions with private institutions I do not know that they would work, have described circumstances in which they wouldn’t. So government might be very bad but better than the alternative.
It’s 60%-70% likely (or greater) that pausing or even regulating AI is worse for humans than not pausing/regulating AI.
As I put it in Future Imperfect about technological changes we might prefer to avoid, this train is not equipped with brakes. If we could pause AI progress it might be desirable but trying to pause it is, for reasons you offer in your comment, likely to be a mistake.
what are your thoughts about HR 25 The FairTax Act, which has been unable to get out of the Ways and Means Committee each and every year since 1999, if memory serves.
The act proposes replacing all current federal taxes with a national sales tax combined with a “sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines,” which looks like a basic income. The incentive effects look very much like those of an income tax, the income being taxed when you spend it rather than when you receive it. The most notable difference is that you don’t get taxed on purchases for investment. As stated it would be harder than the income tax to use to subsidize things, which is an advantage, but very likely, over time, goods and services the government approved of would be declared tax exempt or subject to a lower rate.
No particular reaction pro or con — would want to think about it more.
What do you think are the most promising areas of pursuit to advance liberty? What has the best bang for the buck (all bucks included like time, effort, explicit money, etc.)? Are the answers different for those with meaningful power (e.g., big following, positions of authority, large resources) versus those without (e.g., the young, middle & lower income/wealth, the common man)?
The answers are also different for individuals with different talents and interests. I discussed the issue in a post.
I’d like to hear your thoughts on consciousness.
Good question; consciousness may be the most important feature of reality that I don’t understand. I discussed it in an earlier post.
In your debate with Bob Murphy at Porkfest, you alluded to the fact you used the efficient market theory to bet on Microsoft and Apple because you had knowledge which the market didn’t. You said this with a large grin on your face, so I guess your bet paid off. Can you elaborate on what you knew that others didn’t? Or share any more details about that story?
For Apple, what I knew was that the graphic interface of the Macintosh was a large improvement on the command line interfaces other computers were using. I had been using my own computer for some years, a TRS-80 clone. One of the operating systems available for it used a sort of fake graphic interface and I had seen a video about work with graphic interfaces at Xerox PARC. It was clear from conversations with colleagues at Tulane Business School that sophisticated non-techies knew none of that. Most investors at the time were non-techies. I concluded that Apple stock was underpriced. Last time I checked, my Apple stock was worth more than a thousand times what I paid for it. That was partly luck — Atari and Commodore were also bringing out machines running a graphic interface on the same processor — but I thought Apple was a better bet.
Microsoft was a more complicated argument. Pretty early, the dominant word processor and spreadsheet on the Mac were Microsoft Word and Excel. Microsoft had no advantage on the Mac over other software companies, a disadvantage relative to Apple, and it was a much smaller market than IBM compatibles, so why were they putting so much effort into Mac software?
I could see that graphic interfaces were the future; probably Bill Gates could see it too. A graphic interface requires substantially more processing power than a command line interface. The Mac ran on the Motorola 68000, which before that had powered multiuser machines. IBM compatibles didn’t have enough horsepower to run a graphic interface; when Windows first came out it didn’t run, it crawled.
Processors were getting faster, so eventually that would change. I concluded that Gates was using the Macintosh as the test bed to develop software optimized for a graphic interface so as to have it ready to port over to the much larger market of machines running his operating system when they became capable of supporting the interface. That was very clever and I like betting on clever people.
Have you ever individually picked stocks or other assets and did you beat the S&P 500?
Yes and yes. Described above.
I wonder what you currently think about the analogies and disanalogies between individuals’ property claims and states’ territorial sovereignty claims. Also, how important is it what the actual historical facts behind each claim are, as opposed to the Schelling point of how people think about the claims today?
It is only an issue for land claims, which are a problem; other property claims can be based on the right of the initial producer to own and transfer. I discussed my least bad solution to the ethical problem of justifying land claims in Chapter 57 of Machinery. From a practical standpoint private property in land makes us much better off and it makes sense to limit challenges to existing holdings to facts recent enough so that we can verify them. State sovereignty claims against other states can be defended the same way, but sovereignty claims against individuals make us worse off, since coordination by contract usually works better than coordination by hierarchy for coordinating large numbers of people.
[SCA]: Oh traveler from the Orient to many lands, you have seen much of cookery, I believe. I have frothed egg whites with bundles of birch twigs and with willow, but I am curious whether there is some better contrivance that you prefer?
Not something I have experimented with. The Maghreb is south of Frangistan not east, so not the orient.
What is your current opinion of JD Vance and if it has evolved.
I liked his book, concluded from it that he was intelligent, thoughtful and intellectually sophisticated, with views some of which I disagreed with. His behavior since adds to that the conclusion that he is willing to be strikingly dishonest in pursuing political objectives.
One can, with a little effort, interpret that as what I have described in past posts as virtuous fraud, dishonesty in service to good objectives, in Vance’s case going along with Trump in order to become Trump’s political heir and use the resulting political power to make the country better and improve the lives of the sort of people he grew up among. That is possible but I think a more likely explanation of his behavior is that he is morally corrupt, willing to do whatever is necessary to get power.
If we develop AGI, so that capital is a perfect substitute for labor, would that affect your views on anarcho-capitalism? If the value of labor goes to zero, then people without capital can’t afford powerful enforcement agencies and will be neglected in disputes with people who own capital and therefore can afford more powerful enforcement agencies.
That would probably increase income inequality but also greatly increase income. Richer people can afford to buy a higher quality of rights enforcement but it does not follow that they would buy it from different agencies — the same producer can sell both high priced and low priced products. The argument that efficient legal rules tend to be libertarian should still work, since while poor people put less (dollar) value on what they own, what they own is also of less value to someone who might want to steal it.
One big issue is whether artificial intelligences are treated as property or people. If as people, then only the pre-AGI AI provides an opportunity for human investment of capital. I discuss some of this in How Can AI Make Us Worse Off?
If memory serves me right, you have previously mentioned that you find it understandable if citizens of (now previously) monocultural nations such as Sweden want to prevent the immigration of people from other cultures. That sounds to me like you say that the Swedish state has a legitimate right to restrict immigration. If that is true, is that not at odds with wanting to abolish the state, which I believe you do?
That is a respect in which a state might be capable of producing benefits. On the other hand, in the world as it is states have mostly increased the problem by subsidizing immigration via welfare. In an A-C system people would be able to get the same benefit by creating proprietary communities. Even without that, we observe quite a lot of spontaneous cultural segregation, ethnic enclaves; Chicago used to be, I think still is, a patchwork of them.
What are your thoughts on the idea of completely abolishing zoning laws? What would your response be to the argument that undesirable structures (businesses, garbage dumps, etc) will be set up next to people’s homes if zoning is done away with, and thus we should keep at least some (albeit limited) zoning laws
I think the problem mostly solves itself; residential real estate is too expensive for garbage dumps and pig farms and the sort of businesses that make sense to locate near houses such as grocery stores, barber shops, or local restaurants are probably a plus not a minus. If it is enough of a problem it can be controlled by restrictive covenants put on by a developer before selling houses.
As in other cases, the question is not whether there is imaginable state action that would produce benefits but whether the ways in which the power is likely to be used will.
Currently, the U.S. national debt is approximately $38 trillion, excluding unfunded obligations. I’ve read that unfunded obligations, mostly for Medicare and Social Security, amount to about $103 trillion for current beneficiaries and over $162 including all future obligations. It seems to me that all this debt is the greatest economic problem the country faces. Here’s my AMA (Ask Me Anything) question: How would you advise the next President and Congress to address this problem once you become the economic advisor?
1. I am not going to become the economic advisor.
2. Run a budget surplus instead of a deficit. Do it by drastically cutting expenditures.
I’ve gathered that you’re not a consequentialist, but I’m not sure what ethical framework you subscribe to. Are you some flavor of moral anti-realist (and if so, which one)? If you are, how do you ground your libertarian ethical beliefs? Do you treat them as intuitions and leave it there?
I am a moral realist and intuitionist but less confident about both than Michael Huemer is. I think consequences are important but not the only thing that is important.
2. Don’t you think you’ve partly conceded the minarchist claim by allowing for national defense? Or do you have a plausible hypothesis that any benefits you get from having a state (national defense, disaster relief, etc.) are necessarily outweighed by the negatives?
I have offered ways in which a stateless society might be able to defend itself, conceded that under some circumstances it would be unable to, in which case minarchy is the least bad alternative.
3. What do you think is the best critique of The Machinery of Freedom, or of libertarianism in general, preferably something accessible online (a specific essay/post/article rather than just a general argument)?
The best critique of the core argument for a stateless society is Jim Buchanan’s review, discussed in Chapter 55 of Machinery. I liked Scott Alexander’s friendly but critical review and the later supplement.
4. Why does your X account post about your Substack entries so early? I like reading your replies, but the early alerts are a bit annoying.
I put up my posts to go out at noon PST every third day. Substack provides an easy way of mirroring then to other sites, including X and FB. I didn’t realize that the post appeared on X before I had it timed to go out on Substack, am not sure there is an easy way to change that.
How can you be so confident in anarchy when every sector of the economy is so unique and complex. It’s impossible to say that anarcho capitalism would be preferable in the face of a bunch of market complications / failures.
Market failure comes from situations where an actor does not bear the net cost of his actions, which is sometimes true on the private market but rarely by much, almost always true on the political market, where actors — voters, legislators, regulators, … — rarely bear a significant fraction of the net cost of their actions, It is impossible to be certain of almost anything, but market failure is the exception on the private market, the rule on the political market.
I assume, based on what I gather of your worldview, that you support full drug legalization (i.e. you think it should be legal to manufacture, transport, sell, possess, or take any drug).
Correct.
If my assumption is correct, I haven’t seen you write much about it. How important an issue do you think drug legalization is?
It is an important issue, largely because drug law enforcement does a lot of damage. The world might be better if all the presently illegal drugs didn’t exist but that is not an option.
If you knew that cryonics was certain to work* for you, would you want to sign up?
* "work" defined for this question as you sign up, and some day later you legally die into a state that today most people would call "dead," while being put into biostasis. Years later more advanced technologies repair everything that needs to be repaired, and you are revived with all your memories, personality and subjective experience of yourself into a world with much more advanced medical technologies, which give you an expected further lifetime much, much longer than current lifetimes.
Yes.
If your answer is “Yes,” then how likely to work* does cryonics have to be for you to want to sign up for it?
10% is sufficient. But it is expensive, and that might not be sufficient if I was substantially poorer.
What do you think of behavioral economics? Are there any results in the field you think are especially important to know?
I have not seen any. I think it might be useful for macro, since macro theories often involve many people making the same mistakes, but I do not know that anyone has used it for that.
What is your take on alcohol consumption? Should we abstain completely or is it okay to be a moderate drinker?
I consume almost no alcohol, but obviously many people find it of value.
Robin Hanson has gotten in another round of arguments about prediction markets and the concept of insider trading. … What, if anything, do you think makes insider trading in a market bad or inappropriate?
The purpose of a prediction market is to produce information, which it does better if people with information participate. Insider trading makes it a less enjoyable and more expensive game for the outsiders; one could imagine a “prediction” market that existed for entertainment and banned insider trading although it would be hard to enforce.
For the stock market, there are arguments both ways, so a firm issuing stock should be free to specify whether and to what degree it forbids insider trading in it, in particular by its employees.
Do you think it makes sense to be pessimistic nowadays about the results of interactions between very different groups with very different beliefs and values?
It is a problem where decisions are being made politically, hence for everyone, and more decisions are made politically now than in much of the past. In a laissez-faire context groups that find it a problem can and do self-segregate, with obvious examples the Amish and Haradim.
Is it annoying for you if people bring copies of your books to meetups to ask you to autograph them?
No.
Why do you think there was such a strong cultural consensus around freedom of speech as a value in the U.S. in the 1990s and 2000s, and so much more skepticism and hesitation about it since then?
Possibly because cultural and political divisions have become stronger. If you think someone’s views are obviously wrong and horrible, you are less likely to think they should be tolerated.
But speakers were being shouted down in universities well before 1990.
As a libertarian, what is your view on censorship, whether localized or on a large scale?
I disapprove of preventing other people from saying or writing things. On the other hand a school has to decide what books it will have in its library or assign its students to read, which sometimes gets labeled censorship.
What are your thoughts on Mutualism? Specifically, the American Mutualism of Benjamin Tucker and similar thinkers?
Their heart was in the right place but their economics was confused. I discussed them in this post.
In swordsmanship and the like, how have you had to change your footwork in a spar due to age? In drill?
I quit fighting fourteen years ago, partly because aging was making me more fragile, most immediately because surgery to remove a meningioma had left me with a metal plate in my skull. I don’t think I changed what I was doing before that. I was fighting much less by then, was not competitive with the top people in the area who were both younger and much more active than I was.
If you could put just one Icelandic saga into the curriculum - let’s be realistic here and say a home school high school curriculum, since inclusion there is totally politically possible - what would it be?
If the objective is to show them the Icelandic legal system, probably Njalsaga. If the objective is to get them interested in the literature, have some chance they would read more sagas, I would choose something shorter and simpler. Jomviking saga is one possibility — Buni and his ship of young warriors should appeal to teen readers. Audun and the Bear (The Tale of Audun from the West Fjords in The Complete Sagas of Icelanders) is short and a good story. My favorite is The Tale of Sarcastic Halli, if you don’t mind a few sodomy jokes. But I would want to reread all three before deciding.
How did you deal with tantrums when you were raising your kids? How did you discipline your kids according to your principles?
I put the first question to my wife, whose memory is better than mine. Her answer was that it was occasionally a problem with our son when he was very little and that the solution was reason if he seemed amenable to reason, otherwise confining him to his room until he was fit for civilized company.
The rule for dinner was that if one of them didn’t like what we were having he could have anything else that was nutritionally adequate and didn’t require any effort from us to provide. Bill ate a lot of fruit yogurt.
What do you consider are the most important insights that the economic analysis of law provides?
It provides a way of thinking about all of law, as a system of incentives to be judged on the behavior it produces, but I can’t think of particular insights that are most important. Applications I have found particularly interesting are optimal punishment and the tort/crime puzzle, why we have two different legal systems doing essentially the same thing. Also, it sometimes lets us see that two apparently different legal questions are essentially one.
From a pure economics point of view (in line with Hidden Order) does it make any difference for economic efficiency if two countries or regions have a common currency or not?
Not any more, now that I can use a card to pay a bill in pounds or Euros from a dollar account. Multiple currencies used to increase transaction costs but computers do arithmetic fast and cheap.
Feel free to add additional questions today as comments on this post; I can edit it to add my response.
Additional questions added
What are your top five books you would recommend to others? Purposefully broad.
Depends on the others. For economists it would probably include Marshal’s Principles and Ricardo’s Principles. For most people it would include The Selfish Gene. Possibly The Lord of the Rings and the four volume collection of Orwell’s Letters and Essays, if I can count a multi-volume work as one book. Rudyard Kipling’s Verse Definitive Edition. Kim.
Since all actions have minor impacts on others, why not set a practical threshold above which intrusions count as aggression/violence? Does this address libertarianism’s oversimplifications?
The threshold will determine when you feel entitled to use force against someone, so you want a way of setting it that others will accept. Also, whether it is desirable to do something that imposes a cost on someone depends not only on the amount of the cost but also on the cost to you of not doing it and how difficult it would be to get consent.
To follow up on the cryogenics, where do you place the probability at the moment?
I discussed that question in Low Probability Gambles.
If you reflect back on your life and your opinions and ideas, is there anything where you turned out to be completely wrong and changed your position?
At least two things — my view of the nature of oughts and of the need for at least a minimal state.
What is your argument against seatbelt laws (assuming that the law would save lives and enforcing the law will not create any tax burden)?
That individuals should be free to decide what risks to their lives they take.
Do you have an opinion on Houston’s success or lack thereof without zoning?
My impression is that it is successful but I do not know much about it.
We agree drug laws are an important issue! And once again, even while you were stating this, you wrote very little about them. Why so little to say?
I don’t think I have anything new and interesting to say about them.
Which active economists do you still follow closely, if any?
None.
If I viewed economics as the study of the economy and its main use as studying the current economy, that would be a reason to follow economists who were doing that. I view economics as an approach to understanding behavior, am interested in work that either improves the tool, rare, or applies it to something new. Mostly I am interested in using the tool myself to understand things.
My web page, with the full text of multiple books and articles and much else
Past posts, sorted by topic
A search bar for past posts and much of my other writing
I have edited into the post answers to questions put here on the day of the post. Will probably do another AMA in a year or so, perhaps make it the first post of the year.
As a moral libertarian, I grapple with the 'flashlight problem' (e.g., photons from your light invading my property as a NAP violation). I call this the 'Threshold Problem' and propose resolving it historically: Since all actions have minor impacts on others, why not set a practical threshold above which intrusions count as aggression/violence? Does this address libertarianism's oversimplifications?