All Hail Stephen N S Cheung! 張五常 所有冰雹

A chief crafter of the econo-legal school of Ronald Coase is one Stephen N S Cheung.  Both Coase and Stiglitz cited Cheung in their Nobel Prize acceptance speeches.

Cheung is another one of that crop of Hong Kong born adepts who rose through the ranks on merit, crowning his achievements with a phd from UCLA.  There is a federal warrant for his arrest in the USA, or anywhere in the world where he can be nabbed, for failure to appear.

But there is also one for Marc Rich, another fellow who worked against state policy and benefitted the American economy to no end.

Not only is Cheung a brilliant economist, he also made money in business, something not seen since Thales. He had two gigs that I know about, one an "antique" store and another was the serially launching of restaurants that he would then flip for a tidy profit.  The federal warrant is on a tax-evasion question, but he is notorious for the antique store, called Thesaurus, although as part of a settlement he was dropped from any suits.

Now, for one whose second language (perhaps fourth or fifth, I don't know) is English to name a store selling fake antiques "Thesaurus" is to demonstrate a wickedly funny command of the English language.

A year or two before the "fraud" was exposed, I had wandered into the store and was delighted to see very good copies of ancient art selling for $30,000, such as a Tang tricolor horse.  Since I tend to find the best sources in the world, I had the same thing in my house, but I paid about $75.00, retail.  I asked the clerk, a kind woman, how come the price was $30,000 when I can get them for $75.00.  She earnestly assured me they were antiques.  I believe she believed it.

One of my favorite lines to hear as a buyer is "one of a kind - how many do you want?"

I want to pause and note an interesting phenomena.  Grass is slang for marijuana.  Selling marijuana is illegal in USA.  Some people offer "grass for sale" meaning marijuana.  If the police catch someone selling marijuana, regardless of what they call it, the police will make an arrest.  It has happened that a person has offered grass for sale, and the police make an arrest, only to find it is in fact grass, that is, lawn trimmings.  The fellow offering "grass" was perpetrating a fraud on stoners.  It can be risky business, but the courts have ruled that selling grass, at any price, no matter the implications, is not illegal.  But note, the activity on the part of the wise guy selling "grass" as marijuana to stoners is clearly intentional fraud.   Cops and courts don't care.  Keep that in mind.

The antique thing is so confusing at times.  The Code of Federal Regulations requires new armoires built from old wood be identified as antiques for Customs declaration purposes.  And then, they are duty free, since they are antiques.  Well, no one would call such a thing an antique, but such a designation requires that the Chinese Antiquities Export Bureaus stamp documents and affix their wax seal on new furniture of old wood to be exported from China and imported into USA.  I have a Mongol armoire, of my design, so marked up, in my living room.  Whole lotta antique importing going on.

When I was importing rugs, the Chinese wove some new rugs thin and of old designs and washed them in tea, and called them "imitation antique" rugs.  Just so.  And I saw some gwailo retailers selling the same for $10,000 when $1500 was a fair price.  Don't blame the Chinese, they marked the rugs proper.

I was in Gump's admiring another Tang horse copy, and the clerk earnestly assured me it was an antique.  In this case, it was the fair price of $75.00, as is my experience at Gump's where everything is fairly priced.  So there was no financial "fraud" going on, just a clerk who was somewhat uninformed.  I merely pointed out that an antique going for $75.00 was unlikely, plus China was not allowing real antiques out of the country.  I left it at that, assuming he would seek clarification from a buyer eventually, and be fully schooled.

But back to Stephen N S Cheung.  As I understand it, the fellow is obliged to remain in China, as Marc Rich is in Switzerland, for fear the US Feds will nab him from some compliant country.  For what?  Some dispute over taxes?  At 76 years old, I can imagine he has better things to do with his time than fight the Feds.

But to me where he is most interesting is in his experiments in retail fraud.  I mention in a free market that excess wealth is very unlikely, what with competition and no support for usury.  It is possible to become a billionaire legitimately at the small biz level, as Ty Warner did selling BeanyBabies, but then one has the problem of keeping it.  Gandhi recommended the "one-generation industrialist," that is one who is so talented ought to give it all away, rather than burden his bewildered children.  (Our laws on charitable organizations permit the impression that "it is all given away" when in fact it is kept in the family: Rockefeller Foundation.)

The free market will redistribute excess individual wealth soon enough anyway.  Right now we have 5th & 4th party taxpayers mulcted to support a vast army of 3rd party "law enforcement" to involve themselves in disputes between 2nd and 1st parties, such as an aggrieved Microsoft millionaire who got taken for $30k while trying to acquire an antique at a retail store.  Why not let that 5th and 4th, who are now obliged to pay for the 3rd parties, decide for themselves if they care?  I suspect they would not.  By paying $30,000 for a $75 dollar horse figurine,  the excess wealth of the Microsoft centimillionaire is being distributed far and wide as he pursues imagined entitlements (I should own Chinese antiquities).  It seems to me that $30,000 is about the right price to learn that Chinese antiquities, indeed all antiquities are most valuable in situ, so they can be related to all of the other finds in situ.  Once removed, fantastic knowledge disappears.  Sure, buy a good copy, but incalculable harm is done when the real thing is carried of to grace the coffee table of some millionaire.

Let me argue Cheung was teaching the world about the harm done by the antiquities trade, as he was redistributing wealth. Talk about multitasking!  Now my opinion matters only as far as my pocketbook, but the opinions of all pocketbooks collectively would be condign punishment for Cheung, even if it came to be no one cared about the Microsoft centimillionaire's plight.  It would be about as controversial as someone selling lawn trimmings to stoners.  If upon revelation of his selling fake antiques, far and wide in Seattle people proclaimed "All hail Stephen N S Cheung!" so be it.

Under a free market there is also the very real possibility the Mr. Cheung would find himself so shunned by the rest of us he could only find relief through settlement with his aggrieved customers.  This is along the lines of the law of Moses, familiar today in Sharia law.

Sure is cheaper than the crazy system we have now.

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A New Term: Obama Counsel

Poker players say if you cannot tell who the mark is within three minutes of joining the game, it is you. What with the relentless bad moves on Obama's part, and the withering constant backlash, it is clear Obama is to take the blame for all of the Bushes disastrous policies.  Further, he is to be the one who introduces new disasters, such as self-directed political murder, so by the next election, it is part of our landscape.

At the Wannsee conference, where the Nazis sorted out the final solution, one big issue was how things appeared to the rest of the world.  The Nazis at least cared about what people thought.  Not so the United States. Our Catholic candidates openly advocate murder, with no fear of contradiction from the Bishops.  I have no doubt that some bishops are appalled, but the advice is to say nothing.  The bishops are told to view it as a matter of prudential judgment.

What to call the circumstance in which a leader is fed relentlessly bad advice, for the benefit of others?  It is nothing new, in Obama's case it is a matter of scale, not kind.  Never before has a leader been so ill advised, and apparently so unaware.  For lack of a better term, how about "Obama Counsel."

Obama has as many people as Clinton did to manage and spin the message, Obama even had some of Clintons people.  But every day, what we get is one nutty move after another.  Why, one might think it is on purpose!

Update: You cannot go more than a few hours before there is another outrage laid to Obama.  This is meant to incite rage.  To resume...

I said apparently unaware.  It is possible that Obama is under the impression that he is on his way to re-election based on success after success.  He may be oblivious.  It is certainly possible that his handlers, the people who would make a Bill Clinton get re-elected, are doing Obama dirt.  But I doubt it.  Obama has been to Brazil to see the oil fields to which he will be USA's industry ambassador and centimillioniare to keep his mouth shut after Hillary wins.

The Bishops too have been taking horrendous advice.  I recall reading an article in the 1980s where an advisor to the Canadian bishops recounted with glee how he stage managed the Canadian bishops offering Marxist platform as their social agenda.

The Archbishop of Seattle included a lawyer notorious in false accusation work in a committee to come up with a means to defend the church against false charges.  After setting up the archbishop with Obama counsel, she turned around and got millions in settlements.  Touche!

The Vatican is tangled in a bit of a scandal having to do with banking.  It may just be the powers that be tormenting the Vatican, but it may be God smiting the Vatican for engaging in usury.

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Ekokook Innovation

Now this is the kind of thing we'd be inventing if we did not have wars.  It is pretty cool.


EKOKOOK by faltazi

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Pirates Go Legit

In Vietnam a year or so ago I saw shops specializing in fixing old cameras, really old, like 1920s.  Repairing luxury brand goods is a booming business in Shanghai and Beijing.  Someone is building an empire doing the same in SEAsia.

Sounds like a depression era business, being an agent fedexing rich peoples luxury goods to be repaired  overseas.

And who, or course, would be the experts doing this?  People who are expert at copying.  There is not enough money in piracy, but a lot in legitimate repair.  Let the free markets rule.

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Church, Change, Small Business

The poet Blake wrote in times of great ferment and I share his disinterest with people with big plans to change the world.

“He who would do good to another must do it in Minute Particulars: general Good is the plea of the scoundrel, hypocrite, and flatterer, for Art and Science cannot exist but in minutely organized Particulars. And not in generalizing Demonstrations of the Rational Power.”

Blake, 1821

The Pope has some ideas on how to change the world, which very much interest me.  In his 2006 Lenten address Benedict XVI said, inter alia,

 many forms of charitable work intended to promote

 development have arisen in the Church: hospitals, 

universities, professional formation schools, and small 

businesses.

Remember in school when you were given a list and asked what does not belong in the list:  Shovel, spade, trowel, cookie.    What is out of place in the Pope's list?  Did you say "small business?"

It seems out of place, but in a profound way, not.  Each deals with minute particulars. At each a person presents himself with a specific problem and seeking a particular solution.  At the small business level we do good to others in minute particulars, as is true in hospitals and schools.  (And where not, the hospitals and schools are dreadful.)

As Benedict says:

My venerable Predecessor, Pope Paul VI, accurately described 

the scandal of underdevelopment as an outrage against 

humanity. In this sense, in the Encyclical "Populorum 

Progressio," he denounced "the lack of material necessities 

for those who are without the minimum essential for life, the 

moral deficiencies of those who are mutilated by selfishness"

and "oppressive social structures, whether due to the abuses

 of ownership or to the abuses of power, to the exploitation of

 workers or to unjust transactions"

Yes, and recently this blog has been addressing those mutilations and abuses.  Like Marxists, the Church has its facts straight.  Now, just to get the prescriptions straight.

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Rent the House From Which You Were Evicted.

This makes me ill.  The very people who should be sitting in prison for a very long time for massive conspiracy to commit fraud, that resulted in the 2008 meltdown, and the real estate crash with it, those very people who took billions in bailouts, will now be allowed to buy those houses from the Fed government (me and you).

We will get get pennies on the dollars.  They will get market rate rents, and a man who has proven who many suspected all along to be very evil, Warren Buffett, is in line to pick up a couple of hundred thousand houses.

President Obama, who likes to inveigh against Wall Street (while taking record sums of Wall Street cash as campaign contributions), is on board with the plan. “The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, are very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials,” Diana Olick reported for CNBC on January 9, 2012, in a piece entitled “White House wants to convert foreclosed houses to rentals.”


If you got jammed up and could only afford to make payments $1000 a month instead of $2000 a month, you were foreclosed.  It would work this way, you will rent your home from Buffett for $1000 a month.  And he is paying $250 a month.  Kaching!  Why not let you buy it for $250 a month?

When there is no rational limit on abusing the taxpayers, it in no way will ever be limited.

“A pilot sales program will be starting in the very near future, according to administration officials,” Olick reported. “They are working on what the market potential is, what pricing would be, how government can partner with private investors, and who has the operational experience to manage so many properties.”

Why not let single owners manage single properties?

In his original August 2011 RealMoney article, Roger Arnold wrote:

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies — the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

The FHFA’s plan for bulk REO sales will open up vast new vistas for federal officials and bureaucrats to strike special sweetheart deals with Wall Street partners, with lucrative payoffs as they transition from “public service” to private-sector management.

There is a means to sort this out. We once had it, it was called the rule of law.  Bankruptcy for the banks. Adverse possession on the part of squatters.  But the rule of law is over in the USA.  The lawyers, the bankers, the clergy, the academics, bureaucrats, military, medicine, labor, they have all been bought and paid for.  There is no loyal opposition.  It is all "get me some."   Murder.  Spying. Confiscation. War.  Smaller portions, same price.  Shortages happening.

Obama is there to front the thieves and in time Hillary will come and "save the day."  Until people realize things are not better.

Hunker down, get a business going.

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Beanie Baby & GlassyBaby

In my book I talk about how Ty Warner took a fad of Beanie Babies and managed it into mania which made him a billionaire.  Glassybaby has done something along these lines, although with votive cups, an item with far less reach than a child's doll.

Beanie Babies is a case study in how a small business can make someone a billionaire.  It is extremely rare, but there it is.

The case was unique in that it maintained small business elements while the owner become a billionaire.  I think the ten points in this wikipedia outline are comprehensive, but I think point ten is wrong.  These people never took any risk, they just already knew, or tested to make sure.

Risk: Every previous strategy that Warner developed was a risk, and he succeeded in going against the norm

Ty tried to shut it down from boredom in 1999, was obliged by demand to keep it going in 2000, and finally quit.  The manufacturer who made the dolls is still in business, selling the dolls directly.  Why not?  Who cares?

I criticized Glassybaby IPR efforts here, and I received a sales pitch from Kosta Boda from Amazon.com which reminded me of GlassyBaby, and I have two reflections on small business.

1. Business & Charity.  Never conflate your business with charitable giving.  It is a form of emotional blackmail, and has no long term benefit.  It is an instance of self-aggrandizement.  Sure, donate from your business if tax rules and impulse require, but make it a case of the left hand has no idea what the right hand is doing.  The best example of how to do this is demonstrated by Arthur Court, where his long-time support of the Nature Conservancy is a throw-away line, and only after you dig deep in the website.

2. The money you are giving away is far better spent on the business.  Instead of business petering off as one makes more of the same beanybaby (or votive) of yet another color,  the money should be put into R&D of new designs and building a nationwide market, to compete with Kosta Boda.  The business should be about the business, not charity.

Of course business is about the owner and what will be will be.  But as I have argued elsewhere on this blog, the employees should be thinking in terms of not that they are employees, but the owner is a client for whom they are selling services.  And their services are not exclusive.

Back in the late 1960s the Schoenfeld family began importing neckties.  From there they hit the dress blue jean craze, grew to 300 million in sales and crashed into receivership, and all their top people started their own businesses, Shah Safari, Union Bay, Fresh Squeeze, Generra, International News, and so on.  Unemployment is voluntary.  Every employee at every company should be lookong to serve the company he is working at, even the one he plans to start.

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Personalism, Anarchy & Christians

It took about 1800 years for Christians to decide slavery was an evil that must be stamped out, and Moslems about 1200 years.  The USA is the only modern country that still provides for slavery in its constitution.

Today we see the kind of defense of the state we once saw in the defense of slavery.  Perhaps it will take another 1800 years for Christians to realize the state is evil (in the theological sense of “no good.”)  And if Moslems take a mere 1200 years, it will no doubt emerge as the leading religion 600 years before the Christians.

There are Christians who abhor the state, one in fact on her way to be proclaimed a saint, Dorothy Day, of the Catholic Worker movement.  Althugh she used the word anarchy to describe her goals, those around her sanitized her words.

The founders of the Catholic Worker movement preferred to use the word personalism instead of anarchism because of the confusion of the word anarchy with chaos.

I say yield not an inch to those who would destroy your argument by confusing your listeners with their definitions.

Dorothy Day wrote

“Kropotkin wanted much the same type of social order as Father Vincent McNabb, the Dominican street preacher, G. K. Chesterton, Hilaire Belloc and other distributists advocated, though they would have revolted at the word anarchist, thinking it synonymous with chaos, not ‘self-government,’ as Proudhon defined it. Distributism is the English term for that society whereby man has sufficient of this world’s goods to enable him to lead a good life. Other words have been used to described this theory, mutualism, federalism, pluralism, regionalism; but anarchism–the word, first used as a taunt by its Marxist opponents, best brings to mind the tension always existing between the concept of authority and freedom which torments man to this day.”

Just so.

Kropotkin traced the source of this problem to the factory system of production. One man, because he owned the factory and the machines, could profit by the work of many laborers, without having to actually produce anything himself. 

Hang on, management is productive work. The problem is usury and its effect of concentrating power in the hands of the few.

The workers, by contrast, produced all the wealth of the society, but were allowed to keep almost none of it, because they did not control the means of production, (namely the factory and the raw materials). 

Here is the error in thinking, the workers did control the means of production for it was their hands on those means.  What the workers did not control was the bankers, because the workers had no means for suing the bankers for fraud.  The bankers owned the cops, and the cops protected the bankers.

Individual artisans could not make things as cheaply as factories could, so they were forced to go out of business and seek work in the factory, for a wage. Under this system, a small minority were allowed to attain fabulous wealth, while the vast majority of people endured grinding poverty, malnutrition, hellish working conditions, and a polluted environment.

Hang on,  artisans make different things than factories, of a different quality (usually better.) the grinding poverty, etc, was the result of the triple whammy of farm finances laid waste by usury and property rights laid waste by the courts, and economies organized for war.

One thinks of the decline of the family farm as a recent phenomenon, but Kropotkin was aware of it over 100 years ago, and warned of its dangerous implications for society. In The Conquest of Bread, he blamed the poverty of peasant farmers on three groups: “We know in what a wretched condition European agriculture is. If the cultivator of the soil is not plundered by the landowner, he is robbed by the State. If the State taxes him moderately, the moneylender enslaves him by means of promissory notes, and soon turns him into the simple tenant of a soil belonging in reality to a financial company.”

Right, I just said that...  so let’s not get confused as to where the problem lies...

“The modern ideal of a workman seems to be a man or a woman, or even a girl or a boy, without the knowledge of any handicraft, without any conception whatever of the industry he or she is employed in, who is only capable of making all day long and for a whole life the same infinitesimal part of something: who from the age of 13 to that of 60 pushes the coal cart at a given spot of the mine or makes the spring of a penknife, or ‘the eighteenth part of a pin.’ Mere servants to some machine of a given description; mere flesh-and-bone parts of some immense machinery; having no idea how and why the machinery performs its rhythmical movements.

If that was the case at the time Kropotkin was writing, it certainly is not the case today.    People change their jobs with distressing regularity, and many are fighting to keep or get such a job.

He conceded that, from the standpoint of the profit motive alone, the division of labor made sense. Goods could be manufactured in mass quantities much more cheaply in big factories than in small workshops. But, Kropotkin insisted, it was not in the best interest of society for individuals to be treated this way.

Kropotkin was good at reporting, but short on prescriptions.  But here he misses a crucial point: factories make cheap products, not products more cheaply.  A factory bangs out a cheap wire basket, not a handwoven reed basket cheaply.  Enough people will pay more for a handwoven reed basket to keep that work viable.  But no farm, no reed basket.  If you get this point wrong, you quickly go off the rails.

Besides its being hurtful to the human spirit, Kropotkin saw a purely commercial disadvantage in the division of labor. He noted that where small factories did exist, either using running water to turn a wheel, or obtaining power by some other method, they were often the source for new inventions and technologies. When the workers were familiar with the entire manufacturing operation, and understood what was going on, they were able to perceive ways to improve the system.

A good call on Kropotkins part, the result of him actually working with peasants in a small factory.  But "intellectual property" laws forbid the emergence of new ideas at the rate a transforming society needs.

The only valid reason for the existence of huge factories, in Kropotkin’s analysis, was for the production of huge commodities like locomotives and ocean liners. Everything else that a free people might need could be produced in small factories and workshops, for local consumption, not for trade or export. 

Boeing is 3000 subcontractors and their “big factories” are really just assembly plants.  Everything a free people need IS produced in small factories.

Instead of competition between manufacturers driving the prices down, and tempting them to mistreat workers for the sake of their profit margin, each cooperative would (to the absolute best of its ability) produce its own food, clothing, shelter, and luxury items. Each local group could have its own set of small factories to meet its own needs. Clothing could be made, from raw material to finished garment. Homes and furnishing could be made. Metals could be smelted and tools could be forged. In short, there was no barrier to total self-sufficiency, and therefore no need for speculators, middlemen, or brokers.

A middleman manages bringing buyers and sellers together, so they have a value.  The largest factories do not make locomotives, they make the small consumer items, like the iPhone.

Dorothy Day described Kropotkin’s vision of cooperatives in The Long Loneliness: “Kropotkin looked back to the guilds and cities of the Middle Ages, and thought of the new society as made up of federated associations, co-operating in the same way as the railway companies of Europe or the postal departments of various countries co-operate now.”

A better way is for co-operatives like REI, PCC, Group Health, and so on.  But upon whose ears do such prescriptions fall?  Change must be nonviolent, or it is no change, it is the same old thing.  Change must be back to that which worked, or adapt what is working now.  It cannot require that people change, or people be “smart” or somehome limited to certain people.  Change is possible only if people voluntarily change.  Or more precisely:

The second reason was that Peter Maurin had recognized that the revolution was primarily a matter of personal transformation, not mass conversion. Everyone must make their own unique break with the dominant culture.

Just so. And how did the Catholic Worker prescriptions work out?

(T)he communal lifestyle of the Catholic Worker did not attract large numbers of people. Kropotkin expected whole towns and cities to be reorganized into free communes. Instead, handfuls of people came together in semi-permanent communal groups. Hundreds or even thousands of the poor were helped each year, but the vast majority did not stay and join in the work. For these reasons, the houses of hospitality did not replace government. Kropotkin’s voluntary associations, by performing all the worthwhile tasks of the state, were supposed to make the state superfluous and obsolete. When there was no need for a government, it would be disbanded. What happened was just the opposite. Throughout the century, the size and power of the state continued to grow.

Yes.  The state exploits resources worldwide, say in the Congo.  It takes some of its ill-gotten gains and gives it to the Catholic church to pass out in the form of welfare to blacks in USA, which results in genocide in both the Congo and USA.  The state has demanded the Church obey state rules if it takes state money.  The Church claims it cannot do this.  The Church believes it will win this fight.

I think it will lose the fight.  if so, the Church will be reviewing its alliance with the state.  That could be good news.

It must see what Catholic Worker Maurin saw, no cooperation with the state:

While other papers, monthly, weekly, and daily, displayed the ‘blue eagle’ of the National Recovery Administration, he would have no part in cooperating with the state.”

Just so.  The state is the arm of the powers that be that when replaced with human institutions we see peace and prosperity.  We'll get there one person at a time.  if not, the journey is better anyway.

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Adidas vs Nike

Nike puts far more into marketing and R&D than Adidas.  It shows.

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ExImBank Back At Wasting

Re-authorized by congress, the EXIMBank is busy wasting money and distorting markets again.  Here is a new initiative:

During the summit, Chairman Hochberg gave an overview of Ex-Im's Small Business Initiative. The initiative was launched in 2011 with the goal of increasing the number of U.S. small businesses that export American-made goods and services. This is an integral part of President Obama's National Export Initiative to double U.S. exports by 2015.

By definition a USA small business has not penetrated the entire USA market.  Selling overseas is more difficult and more risky.  For a small Ohio business to choose to export to Kota Kinabula than sell to Atlanta is a foolish business decision.  But that is what we get.

And this Small Business initiative was started in 2011.  Weren't we just told that the ExImBank has done so much for so long for small business.

When Hillary is president she can eliminate the ExImBank.

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How Coase & Friedman Rose to the Top

The heart of our economic problems is our willingness to give power to people who use the power incompetently or maliciously.  People who understand this are nonetheless are trapped in false dilemma: “we must transfer power to others, if we can just get the right person in office.”  Never in the history of mankind has the right person been in office.  Never.  There may be a reason for that.  The reason is we are not suppose to give our power over to the state.

The rationale for giving our power over to the state is to get others to fight our battles for us, an unviable plan.  The powers that subsequently be use their aggregated force on their subjects, until they get so abusive the subjects escape to anarchy and another master emerges.  Le Roi est mort, vive le Roi!

The project of the powers that be is to get policy right so as to extract the most with the least effort, which necessarily means bad public policy.

I talked about why bad public policy emerges. Now I’d like to look at how. As part of this series, I want to look at a specific example of bad policy being developed for the powers that be.

A short history up to the 1930s:

Free markets are the natural condition, and they reemerged in the west largely compliments of Anglo-Saxon common law.  As capitalism emerged, that 800 year tradition was a stumbling block to free markets, free markets being the bane to capitalism.  Some judges actually upheld the law.  

If someone built a coal fired plant and dirtied mom’s laundry, in a relatively free market political economy mom could sue the coal fired plant and get an injunction to stop and damages for the laundry.  The plant would have to burn anthracite and put in filters.  This would make its products not too expensive, just more expensive.  But there would be no pollution.

If we had stayed with that, in free markets with property rights and natural law, there would be no pollution.  This is not some theory, it was the law in earlier relatively free markets.  If automobiles makers found their cars stopped for pollution, cars today would simply collect all that exhaust, filter it, and there would be a solid exhaust puck you would sell when you filled up for another tank of gas (for in that form it would have some industrial use.)   The old system worked, but it militated against the huge corporation.  So the capitalists had to get rid of the law. 

What happened over time, and you can read about this as one theme of many in Horwitz’s book, the Transformation of American Law, is judges, since they are politicians, would begin to rule for the power plant against mom, under the newly emerging utilitarian regime, that the common good for the most people is paramount.  But this gave us pollution.

(Now I do know we have pollution control laws on the books for London circa 1200 having to do with smoke from cooking fires so thick that breathing got difficult.  A law was passed, but industry offered charcoal which was cleaner.  Smoke comes from water content and impurities, and colliers turned wood into light, clean charcoal. The law was unnecessary.)

The pollution that came from industrialization was termed an externality.  How to handle externalities when there was now no rational limit to pollution? Well, tax it.  Note, please, that taxing it does not get rid of the pollution.  It in fact allows it to continue.  The progressives love cap and trade not because it ends pollution, but they get to make money trading in pollution.  The progressives get to put a halo on making money harming the environment.

Pigou was the leading economics thinker up to the 1930s when Keynes took over.  The Pigou economic plan of taxing externalities delighted the progressives because it gave them something to play with, public policy   But taxing externalities was too inefficient and made for huge government which adds to something called transaction cost. 

So how to make it easier for the powers that be to aggregate ever more power, without having the property rights holders interfering with lawsuits and the taxing of "externalities?" One evening there was a big meeting in Chicago, in which the ideas of one Ronald Coase were discussed.

Here is a description of the big Coase meet.

http://istanbulsunset.blogspot.com/2006/11/addendum-coase-friedman-story.html

Milton Friedman's son is an economist in his own right, and the work of Coase is explained by he who learned about Coase from his father.

As son of Friedman explains the key problem Coase is solving:

A court, in settling disputes involving property, or a legislature in writing a law code to be applied to such disputes, must decide just which of the rights associated with land are included in the bundle we call "ownership." Does the owner have the right to prohibit airplanes from crossing his land a mile up? How about a hundred feet? How about people extracting oil from a mile under the land? What rights does he have against neighbors whose use of their land interferes with his use of his? If he builds his recording studio next to his neighbor's factory, who is at fault? If he has a right to silence in his recording studio, does that mean that he can forbid the factory from operating, or only that he can sue to be reimbursed for his losses? It seems simple to say that we should have private property in land, but ownership of land is not a simple thing.

He is referring to the bundle of rights, the old concept of intangibles that come with property rights. All of this had been worked out over 2000 years and in place for about 800 years before the capitalists figured out a way to over come it...

Here is David Friedman's explanation of Coase's solution.

The Coasian answer to this set of problems is that the law should define property in such a way as to minimize the costs associated with the sorts of incompatible uses we have been discussing--factories and recording studios, or steel mills and resorts.

So, change the definition of property and old protections no longer apply to the new situations, situations that are not new, just open to a new approach by virtue of a change in definitions.  If we pull all the aggrieved together and work out a solution in which everyone makes more money, then that is the solution we need.  There is a reason these people are also called monetarists.  One problem is to be aggrieved, you have to be a money-maker.  Mom and her laundry don't count.

It took all night for the crew at Chicago, brilliant minds all, to realize this was the answer for overthrowing 800 years of anglo saxon law.  Now the best part is Coase’ s ideas were like stem cells, extremely basic and undeveloped.  Most of his ideas were actually developed by others claiming to be following Coase. Coase never developed the Coase theorem, a follower did.  Why would anyone credit Coase with their own ideas? Coase ran the Law and Economics journal at U Chicago and attended academic conferences and advised people on what to write to get into the journal.  In academia, it is perish or publish. Not only did he drive the content, his contributors were liberal with their credit to Coase.

These ideas got their blank slate to test in Chile after Allende. Based on Chile, their ideas went global.  I've spoken with a Congolese priest who quoted Friedman, the good results are so well known.  The victors write the history.

With the Allende coup we had murder, deaths squads, etc and USA favoritism. No telling what would have happened without the Allende coup, but we do know what happened with the Allende coup.  It will not serve to say "under socialism, Chile would have suffered" because we will never know what would have happened under socialism in Chile, because they never got socialism in Chile. Perhaps under socialism, like under communism, Valparaiso would have become the Hong Kong of the East Pacific.  And we do know Allende was elected peacefully.  The trouble started when the capitalists grumbled, not when Allende was elected.

We also know plenty of places where the economy improved without a coup, murder, deaths squads, etc and USA favoritism.  And Chile is now rather tightly woven with USA's fate.

I prefer the ideas that have economic advancement without murder, coup, death squads, disappearances...  every country has problem people.   The economies who advance without the violence and accommodate the disaffected are the ones whose systems interest me.

Every plan people come up with requires that people change or some people need be eliminated or it is limited to the some how elite: religion, philosophy or intelligence.  No one’s plan for change has yet worked.  Any plan must be what has already worked.

The trick is not find a way to change human nature, the trick is to withdraw the consent for the state to aggregate power.  As I pointed out 1 Samuel 8 is the first of many instances where people clamor for oppression for themselves.  Part of our work is to undue the damage done. We can take heart observing places like Switzerland, Hong Kong, Andorra, Singapore, San Marino, Iceland, the Vatican, etc, where the state is nearly nonexistent and in that measure malefactors find little purchase from which to leverage their evil.  And where the state is nearly nonexistent, self-government flourishes.

It all there...  under the wreckage of capitalism.  No matter what you urge or idea to help others, or yourself, the first step is to withdraw your Consent to be governed by the state.

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Non-Disclosure Agreements and Profit Maximization

If you truly desire cold-blooded maximization of the profit potential of your idea, it is available only outside of the Intellectual Property Rights system.

Before I get to that, let's restate a point people miss: The idea that the low labor rates in 3rd world countries is a factor in international trade is strictly the result of social conditioning.  People believe it because they have been told it, over and over. If labor was the reason we go overseas, how come Burkina Faso is not our #1 source.  You can get people for six cents a day there...

What matters is cheap management, not labor.  Management costs cover everything except the cost of labor.   Here is the insidious element in believing in cheap labor as a factor: if cheap labor matters, then you are necessarily engaging in exploitation.  This idea lowers your spirit to the level of exploiter, which draws you into the orbit of intellectual property rights.  What follows hence is non-disclosure agreements, non-compete agreements, intellectual property rights registrations, lawyers, lawsuits, suspicions, barriers to entry, ad nauseum.  The orbit is degenerative.

The fact is in most countries we deal with labor rates are at par or higher.  And where they are lower, they are merely nominally lower, not lower as a material factor.  In fact, it is almost impossible to sustain a business that does depend on cheap labor.

So the crazy thing is people assume cheap labor is a factor, proceed apace, get sucked into the evil orbit of intellectual property rights regime, and then go neanderthal in their sensibilities, and who knows what happens after that.  Vote republican?  Ideas have consequences.

As I have mentioned elsewhere, if you have a smashing new idea,  get any IPR so that you may immediately open source it and then encourage your factory to sell it everywhere to everyone as much as possible, at 5% above the price they quote to you.  You make money off your idea commensurate with your promotion of the idea.

Why would a factory do this?  The question comes from the trapped in a degenerative orbit outlook.  But here is the simple answer: because they want more business.

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