Ends and odds

Having passed the meaningless milestone of “code complete” on my unsupervised thesis (I hope no one was under the impression that UR is my only plot to capture the world—ha! In fact, there is a completely separate technical track), and having discovered that my daughter can indeed read (at least, she can read the word “schoolhouse”), I feel entitled to take this Thursday off.

(UR recommends the Glenn Doman method for early reading. The Domans are definitely not quite right in the head, but their method definitely works. It was also applied to me as a small child in Winnipeg, and you see the result.)

I do wish to note, however, that I’ve found the key to world peace. The key is 119–1830–0128–0886. No, this is not Peter Thiel’s account number at UBS. What is it? The answer, next week on UR. Or possibly the week after.

For those who absolutely need some kind of fix, however, I’ve had a couple of conversations with UR readers. One, which most probably missed, is a conversation about cryptographic sovereign security with Devin Finbarr, in an Arnold Kling thread.

Another, which everyone missed because it was in email, is a conversation with Porphyrogenitus, beginning with this post. Since he of the purple genitals has not enabled comments, I was compelled to respond via email, thusly:

Excellent point. The real answer is much more subtle than the slogan implies.

First, “separation of information and state” is most easily understood as an agenda to be enacted under this particular State. I trust you have no objection to this.

But as a general principle, which applies to all sovereigns good or bad, the relationship between public opinion and public power is one of mutual attraction. It is a mistake to see either as a fixed pole toward which the other gravitates. The relative stability of each must be considered.

If power is weak and unstable, power will gravitate toward public opinion. Public opinion will indeed itself become a vehicle of power, which will end up in the hands of those by professional necessity control public opinion. The result is the mind-control state we have now.

If the state is under a stable and physically secure center of authority, however, its subjects will seek, as part of their daily power-craving routine, to curry favor from that state, rather than wrenching its popularity away. The latter, after all, is no longer a potential route to power. In Anglo-American history, you have to go back to the Elizabethan era for a pure case of this, although it is also arguably represented in the job security of the present civil-service state.

Thus, the stronger the state’s physical security, the more popular it becomes. For example, one of the governments that receives the highest popularity ratings from its citizens is the PRC. Of course, flagrant abuse or incompetence will nullify this effect, but we do not expect these either.

And thus, a state that has extremely high physical security (cryptographic command chain over the military, etc.), has no need to manipulate public opinion. It will be popular without any such manipulation. Thus, the objective of separation is maintained.

I admit that this “island of stability” has no clear historical parallels, but the chain of reasoning behind it is short and seems solid. It has not existed in the past because the technology that enables it did not exist. Political theory must always bow to military technology.

He of the purple genitals replies:

I certainly don’t have an objection to the principle of Separation of Information and State being applied to the current government. Considering how The System corrupts both ends of its structure—being corrosive not only of good government, but of academe at all levels, the “intermediary institutions” that transformed from beneficent societies into NGOs that exist to petition the government for “more”, which then write grant proposals and build networks of influence to get the “more”, and journalism (“current history”—I’ll take one ink-stained wretch who didn’t go to J-School over 10 J-School “Professional Journalists” any day), I’d have to be demented to object.

One thing you haven’t focused on *as* much in all this is how The System (I love sounding like a hippie) corrodes business as well, which is surprising given your background (as a former Progressive and Misesian-influenced person). The dirty little secret, the aunt kept hidden in the attic, being that while Progressives will castigate “big business” and “corporate influence”, in practice they are all too eager to form “public-private partnerships” with it, preferring large corporations because they’re easier coordinate in manageable numbers, and the companies themselves are seduced happily into this, as they benefit from the Regulation Raj Government’s snuffing out potential competitors (at least at home. They then get their lunch eaten abroad, and seek protected internal markets). Progressive mouthpieces castigate this way of doing things when the Outer Party is in office, but when the Inner party is in power those same mouthpieces (Krugman, Less Through, and their like) laud “public-private partnerships” and rhetorically promote the Corporatist State (which includes all the elements of the previous paragraph, plus unions and big business) with fine-sounding sophistic pablum.

Breaking The System through “Separation of Information and State” would certainly be desirable. However, as you yourself point out, it is possibly a near impossible task in the near term. Nothing lasts forever, though, and these apparatchiks seem to be in a race to hypertrophy and collapse, with only things like the “Tea Parties” reining them in. That can only slow them temporarily, be it for months or years. It might (or might not) be better to simply do what we should have done with the car companies: Let them fail. Let The System go bankrupt, and into receivership. In the near term, though, it’s more likely to be a spontaneous uncontrolled collapse rather than your controlled, reactionary liquidation, a “Mad Max” outcome that only the Anarchists could desire (and only until they lived, or died, in “Beirut: 1985, the LARP”). A lot of work still needs to be done convincing people to put an end to it in a controlled way before it collapses. There is no “Bankruptcy Court” for countries, other than the IMF, and their remedies aren’t the droids you’re looking for. It is race against time, and your horse is well behind.

The problem with the concept of Separation of Information and State is this: If enough support builds to enact it, either by a Constitutional Amendment which they would actually feel compelled to obey, or simply from enough pressure that they were compelled to terminate this corrosive feedback loop, you may as well use that support to terminate the current system wholesale with an Amendment nullifying the Constitution and sending the United States into receivership without the intermediary step of Separation of Information and State. Because that’s what it does: terminate the current government, and they will resist it just as ferociously as they would resist an Amendment abolishing the USG.

As for my part, I’m not entirely convinced of the worthlessness of democracy, but I do want authoritah to be married to responsibility and accountability. Our current rulers have managed to subvert this entirely. They have authoritah but displace responsibility, becoming effectively unaccountable, which is the worst possible combination. I also don’t think it would be wise to terminate the United States. I do agree that it is desirable to devolve power to the local level by creating a structure productive of the principle of subsidiarity, rather than one promoting centralization.

Unlike you, I don’t have a program to replace The System that I am convinced would be both stable and desirable, and it would be improper for a reactionary to dismantle a structure, however flawed, without a program for renewal. Since you have one and I do not, and for the sake of fun lets follow closely along your model while departing somewhat and build a NeoFeudal structure. Personally, like Larison, I have more fondness for historical East Rome than for the Feudal West, but perhaps unlike him I think a more NeoFeudal structure is the best fit for the new structure you envision.

One of the problems I see with your system is that the built-in safeguard could be circumvented. If any one stockholder gained 50.1% of the shares through a Nanosecond Buyout or other sort of takeover, he controls the State outright. He alone elects the Board and therefore the CEO, which could be either a spineless toady, or himself. Then he can rule as Hitler (since you mention it), or as King Leopold, and the safeguard is neutralized. It would be more difficult but not impossible for one person to gain 50.1% of the shares of a State, but a claque could, and at the Federal level it would be very difficult, but a cartel or cabal might. Also if a badly-run micronation is subjected to a hostile takeover by an investment group organized by a T. Boone Pickens-type, which think they can manage it better, what’s to prevent recalcitrant Board Members from withholding the passcodes, BG Ripper syle? Interdiction might, but only if it was enforced, which requires an enforcer. NeoFeudalism, rather than 3,000 completely separate countries, would allow this without over-centralization.

Aside: I’m not sure that the PRC is as stable as it appears; intel-type reports suggest a lot of “risings” and riot-type events in China, though mostly on the outer fringes rather than the Han Core—in which the vast preponderance of the population lives. Anyhow it’s hard to tell, and the government is certainly much more popular than it was 20 years ago, and it’s very possible to have the support of 70% of the people, but with a quarter being restive, due to still-existing corruption or simply dissatisfaction of the non-Han populations at being ruled by ferrin infidel debils. I don’t foresee any of this toppling the PRC any time soon, but it may lead to successive reforms (good or ultimately, like most of ours ended up being, bad).

Our Counties need Counts, but they probably won’t have that name. Most have Sheriffs, though, or a similar Peace Officer. On the day of Receivership, authority would be vested in the County Sheriff—who probably doesn’t want it all, but that is a good thing, because then most of them will content themselves with enforcing the law and maintaining order, doing as little other administrative work as they can. Shares in each County will then be sold, and the County’s owners will elect a Board to select a Sheriff (possibly the current occupant) as its CEO.

States need “Dukes”, but they can maintain the title of Governor. Shares in the State will also be sold, and to keep things from degenerating, no Sheriff can own Shares in the State their County is a part of (they can own shares in other States). The Governor’s job will be to insure cross-county cooperation on trade (via negotiations rather than top-down mandate, see below) and that the “right of pursuit” of fugitives across County lines is enforced (no “Bo and Luke Duke” escapades). The county the State Capital is in will be the Governor’s “Demise”. The Governor will also be responsible for State-wide defense (perhaps not every County has da bomb; plenty of rural Counties probably couldn’t afford such, but rural Bugtussle, Hooterville, and Pettycoat Junction Counties might pool money to afford it collectively in order to maintain their distinct way of life) and for interaction with the Federal Government. The Governor cannot own shares in any County within her State.

At the Federal level, shares will also be sold, and no Governor or Sheriff will be allowed to own these shares (to prevent it from devolving into a “Holy Roman Empire” with “Electors”, or into a Kingdom of Poland). A Princeps will be selected by a Board picked by the Stockholders, but probably for historical reasons maintaining the title President would be wise. After all, much of his job will be Presiding. The Federal Capital will be moved to Manhattan, serving as his demise, with the 5 boroughs plus the rest of Long Island and possibly Yonkers forming his “State” (or, if you prefer, San Francisco, perhaps renamed Menciopolis, as the capital, and the Bay Area Counties forming the Federal “State”). The President will then have an incentive of restoring it as the world financial capital and ultimately an industrial and shipping hub. Washington DC will be maintained as a historical attraction, and also fall under the President’s rule. America’s overseas territories will be Counties in the Federal State (I think quasi-nations like Micronesia will also opt for this status, rather than being left to the tender mercies of, say, China, but who knows). The President cannot own shares in any of the Counties of the Federal State, or in any of the member-States of the Federation.

I would hope that free trade be the norm within this Federation; technical details (like how goods are to be transported, standards and the like) would be negotiated at the Federal level, as treaties rather than from some sort of central legislature. The States, being sovereign, would negotiate these as treaties are under international law. They would also negotiate with their Counties likewise. Such treaties could not bind any State (or County) that does not approve it. The Federal Government would be responsible for continental defense and maintain a navy and air force of appropriate size. Apparently unlike you, I don’t think foreign policy goes away and things take care of themselves, at least not unless the whole world becomes Menciopia at once. Without the USN, for example, things like piracy will rise. It is already, as order lapses, just as it did under Late Republican Rome. You can’t count on other nations stamping it out and protecting your trade, just as the fledgling United States couldn’t. There are times when monsters need destroying, or at least deterring and punishing when they aren’t deterred. Most ground forces would be of the “Army of the United States” type rather than “United States Army”. They would be units seconded to Federal control in time of war by the States, which would call up troops from the Counties, according to the prerogative of all Feudal lords. As under traditional Feudalism there would be limits to this, and the local lords would be able to withdraw their forces from service after a time, only continuing to keep them in the field if they saw fit. I don’t think it would be desirable to “Set everyone up the bomb” for every trifling offense for which a punitive expedition might be called for; there has to be an intermediary mechanism (of course, in the final resort, there is always the power of the atom; all States would have it, as well as the Counties and the Federales.

and adds, in a later communication:

Thus, the stronger the state’s physical security, the more popular it becomes. For example, one of the governments that receives the highest popularity ratings from its citizens is the PRC. Of course,flagrant abuse or incompetence will nullify this effect, but we do not expect these either.

A lot of things happen that people don’t expect, though. A misgoverned state under your system would presumably become unpopular with its customers and potential customers, causing the Board to replace the Management, and if that didn’t happen, the Stockholders to replace the Board as the share price drops. Misgovernment is always a possibility; many corporations today do it, and have in the past, and not *just* because the normal rules of corporate governance have been corrupted (which they have been). There will always be faddish management theories and bungling, if not outright villainy.

If the place is well governed it will of course be popular, but that’s almost a tautology. There are a number of ways in which your system might devolve, a couple of which I mentioned in my previous mail. Technology handles physical security, yes, making it stable in that way, but that’s not the only, or even most dire, vector of decadence.

In general I do not particularly disagree with any of this. In particular, I am not at all unsympathetic to revivals of “feudal” or other classical, medieval or antique political structures. After all, my designs are no more than a reinterpretation of classical political thought to match the 21st-century environment.

I would say the main difference is that I believe it is possible to achieve a much higher level of sovereign stability now than in previous eras. The feudal European order was extremely effective and resilient, and if it was re-established in any way it would start out young and supple. But had it been perfectly stable, it would still exist. So why not shoot for perfectly stable?

I do want to object to one objection, which is the argument against rogue shareholders. Yes—in a sovereign state physically secured by end-to-end cryptographic security, 50.1% of the shareholders can use their power to brutally abuse the other 49.9%. There is nothing at all that can prevent a hostile takeover. Any such mechanism would itself constitute a dangerous exception to absolute proprietor sovereignty. If an individual buys 50.1% of the shares, he controls the sovereign.

The more general question is whether large shareholders are likely to use their unlimited majority powers to either screw small shareholders, or screw everyone (through irresponsible management).

The latter question can be answered easily: no. We know that the answer is no because we know that a crazy person can buy a publicly listed company, today, and intentionally run it into the ground in some deranged manner. And how often does this happen? Never. Apparently even rich crazy people tend to get separated from their riches before they make it to this stage.

I am reminded of an episode in one of the few good books I read in an undergraduate class, the autobiography of Yukichi Fukuzawa. Fukuzawa is serving as an interpreter for one of the first major Japanese embassies to Europe. He is perfectly conversant with European culture, albeit through diligent study in late Tokugawa Japan, but the bigwigs in his party are not.

Unfortunately I do not have my copy of Fukuzawa handy, but one of his bigwigs, visiting the Netherlands, is amazed that foreigners are allowed to buy land in Amsterdam. He asks his Dutch interlocutor: what if a foreigner bought a large area of land in the middle of the city, and erected a fortress? Would the government permit this?

The poor Dutchman, of course, is reduced to asking: why would they do that? Indeed it is almost impossible to convey to the ignorant samurai why they wouldn’t. He has basically failed to understand the entire concept of Europe. In fact, in order to explain why they wouldn’t, you more or less have to explain the entire concept of Europe.

Unfortunately, while Europe existed, the joint-stock sovereign does not. Therefore, the reality can only be observed through thought-experiments, such as comparisons to nonsovereign corporations today.

As for preventing shareholders from screwing each other, this is a more difficult problem in theory but I think an easier one in practice. There is no physical way to prevent 50.1% of the shareholders from ganging up on the other 49.9%, and effectively stealing their shares. Therefore, this problem must be solved politically—i.e., through the usual old-fashioned means. Fortunately, I don’t think it is a very difficult political problem.

One of the interesting facts about the US corporate governance system is how badly it works. Shareholder input is hardly ever relevant, in practice, to corporate governance. Partly this is because the system is ancient and creaky, but mainly it is because any significant degree of irresponsibility is very rare in any corporation of significant size. (And note that any sovereign is significant by definition.)

But the existence of the system is still very relevant, because it establishes that Schelling point and ensures that corporate governance is, if not always stellar, always sane and responsible.

So one can imagine all kinds of crazy insider attacks against the neocameralist state. However, responsibility does not have to be perfectly enforced by physical mechanisms—it is sufficient that responsible people prevail and dominate in all conflicts. The result is an organization consisting largely of responsible people, which cannot be made to do irresponsible things.

If one individual holds 50.1% of the shares in any sovereign, that individual will be very wealthy, and as a result very favorable to responsibility and order. Causing trouble by screwing minority shareholders is a tactic that can only be profitable if taken to the endpoint of dispossessing them, which may in fact be unprofitable because said individual now owns 100% of a lawless state with a very bad FICO score. Selectively defaulting on external obligations, though a strategy available to all sovereigns, is not one pursued by well-managed sovereigns.

But if these shares are distributed, the problem of coordinating all the good people who hold them to act in some kind of evil way (perhaps the A-P shareholders could dispossess the Q-Z shareholders), is quite impossible. The very suggestion, of course, is improper. Difficult to recruit 50.1% of supporters for an improper suggestion.

On balance, it is better for sovereign shares to be widely distributed. The system is stable because shareholders cooperate nonrivalrously, and their Schelling point for agreement is responsibility. But any system containing an election can be no better than its electors. It is certainly possible for sovereigns to enforce by-laws about who may hold shares, and block the votes of shares held in violation of these laws. However, as long as the distribution of shares is reasonably broad, and most shareholders are prudent people whose interests do not conflict with those of effective government, their shared interest should point toward responsibility.