Luciano Pesci's Blog

It's Been a While...

2011-08-31T22:16:00.000-07:00

Welcome (back) to the center of the Universe. In the interm since my last post I have moved back to Utah, completed my MA in Economics, started a student research organization and changed jobs. I have become a student of Krav Maga with my wife (Nicole) and brother (Nico), and have started a new PhD program in Economics. It has been a busy period since my last post but I intend to continue to use this blog to give you a window into my soul...or at least a key hole for you to peer into my genius. See you soon.

Utah Bans Smoking

2009-03-30T16:45:00.000-07:00

In January of this year Utah followed states like New York and California in banning smoking in bars and clubs, adding to its already Draconian list of prohibitions against the State’s minority. Utah, for example, requires memberships to gain access to bars, has a total monopoly on the sale of liquor (though this is also the case in several other states) and has many other inconsistent laws relating to the combinations and amounts of alcohol you can be served at a restaurant. These laws, which are justified as necessary for the protection of society, burden the clubs and the patrons through loss of time and the costs of compliance without detailing what that protection actually accomplishes. Furthermore, the system discourages individuals from frequenting clubs, bars and restaurants and spending money, which is a genuine cost to society in the form of lost opportunities for economic exchange. This seems like a strange situation considering that Utah is the single strongest Republican supporter in the Union and promotes an image of pro-business.

So why do these laws have such broad support? The motivation can be found in the philosophical and social beliefs of the State’s majority, members of the LDS faith. Before I continue I wish to make a few things clear. First, it is not my intention to deride the LDS church for its beliefs or to make comments on the merits of those beliefs. Second, I do not believe that economic considerations are strictly superior to philosophical and social beliefs. Instead I want to use Utah (and other states) as an example of how an overwhelming majority can legislate morality by creating laws that only apply to the minority.

California and New York pursue similar legislation in the supposed pursuit of public safety via gun laws. While the motivation is not religious, as it is in Utah, it certainly is philosophical and it has similar ends: it discourages free-market exchanges that have a social cost in the form of lost opportunities (and the taxes generated by those exchanges). Whether the gains to society in the form of a “safer” or more “moral” society outweigh the costs of lost exchange is an empirical question that I suspect would be impossible to accurately measure, but one thing is certain: the minority is legislated against simply because the majority have the power to do so and not necessarily because of any “factual evidence.”

Citizens of New York (and especially of NYC) believe that places like Utah are dangerous because of the free access to guns, while citizens of Utah believe that NYC is dangerous because of free access to alcohol and other “immoral” indulgences. But somewhere in the middle is probably the truth: too much access to either guns or alcohol will allow for some form of increased costs to society through negative externalities. But does this mean that the best solution is to create virtually insurmountable obstacles for free exchange in these markets? Put another way, is the amount of drunk-driving or gun related injuries/deaths in either state so great that it warrants total prohibitions at the expense of those who enjoy using guns for hunting and sport or social drinking? I certainly have not seen any evidence that would lead me to believe this is the case, but slowly, year by year both Utah and New York (and California) seek to impose the will of the majority through further legislation.

And this gets back to the real issue: the dangers of a majority tyranny. When you have an absolute majority, “evidence” or “justification” need not be consulted when making decisions. Instead, emotions and beliefs act as the modus operandi. Genuine opposition is a good thing because it forces you to explain and justify your beliefs with evidence, making the motivation and purpose of your pursuit clearer to everyone (including yourself). And it requires that those passing laws be forced to share in the effects or costs (through compromise) which change peoples’ incentives and create a better environment for legislation. Many of my LDS friends in Utah consider the state of gun-rights in California and New York to be “excessive liberal tyranny” but wholly support their own state’s prohibitions of alcohol and tobacco. But Utah and California/New York are two sides of the same big-government coin; each believes that the best way to protect society from itself is through legislation, each kowtows to the demands of a portion of the populace, and each bases that legislation on the philosophical beliefs of its majority while turning a blind eye to their lack of evidence.

Pyrrhus and Cineas

2009-03-01T06:36:00.000-08:00

Pyrrhus has to be one of my favorite figures from the Classical world. For those who are not up to speed on their Greco-Roman history, Pyrrhus was the King of Epirus (the western Greek state which was the home of Olympias, the mother of Alexander the Great). He was arguably one of the era’s most brilliant generals and repeatedly defeated the Romans during their 3^rd century war against the Greek colony of Tarentum in southwestern Italy. It is from his name that we derived the notion of a “Pyrrhic victory”; when congratulated by his men following a bloody victory over Rome he reportedly said, “another victory like that and we will be finished.” Despite his brilliance in battle he was a tragically humorous character.

After quitting the war in Italy Pyrrhus was drawn into a conflict in the Peloponnesus where during the siege of Argos two strokes of misfortune befell him. The first occurred after his men had taken the city gate by surprise and began pouring into the town, only to become cut off from the main force when one of their war elephants became stuck in the gate. After the elephant was removed (by being cut apart alive) the city was taken. As Pyrrhus rode through the streets of Argos in triumph the second misfortune occurred; an elderly Argive woman stuck him in the head with a roof tile, knocking him from his elephant at which point the unconscious King had his throat slit by an Argive.

But it is another story about the Greek King that I wanted to share. Prior to his departure for Italy Pyrrhus was asked by his philosopher/advisor Cineas what he hoped to gain through his war with Rome. Pyrrhus replied that with a victory over Rome the entire Italian peninsula would be open to conquest. Cineas baited the King and asked what would happen after all of Italy was under his control. Pyrrhus responded with detailed plans for conquest of the grain-rich island of Sicily. Again, Cineas asked what would follow Pyrrhus’ conquest of Italy and Sicily. Pyrrhus, who supposedly did not see what the philosopher was trying to demonstrate, stated that he would continue the war into North Africa where he would take Carthage and with it control of the world (i.e. the Mediterranean). Once the entire world was his, asked Cineas, what would the King do? Pyrrhus replied that he and Cineas could relax, drink and enjoy good conversation. Cineas challenged the King to tell him what stopped them from such enjoyments now and which would save them from the war, bloodshed and suffering that would inevitably result from the conquest. Pyrrhus, unable or unwilling to answer, pursued his war with Rome anyway.

Cineas’ challenge to the King contains a few interesting morals that I think are worth analyzing. First, was Pyrrhus conscious about what he actually wanted? If he was then the war was unnecessary, since nothing stopped him from drunken philosophical debates at home. If he was not conscious of his wants was it due to ignorance or intentional self-deception? It is an important point, considering the consequences of his campaign, and I think it is a valid warning for moderns as well. How often do we pursue a goal for which there may be other, more obvious, solutions? And if we continue unabated is it because we have not stopped to think about our own wants, or because we know that once analyzed our goals become less appealing (and are based on the desire to fulfill other tactic desires).

It is my opinion that Pyrrhus craved the kind of glory that other Hellenistic Kings had gained through conquest, but deflected a discussion on the merits of this desire by stating that his goal was a peaceful empire and a life filled with wine and friendship. However, when a historical point such as this is reduced to a psychological analysis historians claim that “you can’t put someone on the couch two thousand years after the fact.” But I believe we can garnish any moral value we want within the narrow details of the story, so long as we recognize that they are evidence of our own concerns and biases (and not necessarily those if the story’s characters). Most modern historical writings ask questions that are pertinent to the period within which they were written and use the past as a model for analysis. I think this is why I have such a love for history, since it affords me the opportunity to reason about modern problems by looking for an analytical cipher in the past.

Is citizenship a Public Good or a Cartel?

2009-02-25T09:44:00.000-08:00

Is citizenship a public good or a cartel? I am not sure there is a right answer, but it seems worth asking. In the U.S. there are three basic ways to become a citizen: birth, marriage, naturalization. For the overwhelming majority it is birth that grants citizenship, so this is a quasi-involuntary act of exchange; you are given citizenship in exchange for certain rights and obligations, which represent the benefits and costs of citizenship, respectively. It is my opinion that detailing the benefits of citizenship are much more difficult than detailing the costs, so let’s start there: what are the costs?

First, as a U.S. citizen you must abstain from accepting citizenship in another nation (no dual citizenship recognition), serving in a foreign army that is at war with the U.S., committing treason, and accepting a political office in another nation that requires you to swear an oath of allegiance. All of these represent opportunity costs to you (maybe you could make a lot money as a foreign politician, a traitor or a mercenary). But you can always renounce your citizenship to the U.S. Attorney General or any Consular Office so if you are still a legal citizen you have made a demonstrated choice that you place a higher value on your U.S. citizenship than on any of the alternatives.

What about taxes then? Some have argued that taxes are a “patriotic” cost to your citizenship, but this doesn’t seem logical since you would have to pay taxes anywhere (except for maybe Andorra, the European ski town/tax utopia where there are no explicit taxes) but again, if you really valued the savings a specific country offered you could simply renounce your citizenship and move there, and probably even pay for the process with the saved taxes. So for me taxes represent a sunken cost to citizenship; you pay them anywhere and even if you renounce your citizenship the IRS is not going to return them. But what about national debt? This seems to be a clear cost, since it directly affects the economic conditions of your life, especially if you are going to be among the generation that finds it can no longer deficit finance.

What about the specter of conscription? For virtually all of America’s history conscripts filled the armed forces during times of war. Only recently has there been an aversion to the system (due in large part to its association with an unpopular war and a socio-political movement that abhors any war, justified or not). So is this a cost? I think so, but considering how well the all-volunteer system is working (and the economic arguments against conscription) it is hard to imagine that it would return as anything less than a last resort (does anyone else remember all the claims that it would have to be reinstated for Afghanistan and Iraq way back in 2003/2004? It couldn’t be that it was just a political maneuver during a campaign year, could it?). So while it is a very real potential cost, its present value must be heavily discounted given the future expectations of its likelihood.

While there are certainly other potential and real costs to citizenship, these seem like the most obvious, and so I want to return to my original question: is citizenship a public good or a cartel? The markings of a public good are that once it has been created the consumption (or possession in this instance) does not simultaneously prevent another person from possessing it (i.e. it is non-rivaled). Similarly, for it to be a public good you cannot exclude those who have not “paid” for it from enjoying its benefits (non-excludable). Of these two criterions citizenship clearly meets the first, but the second is less clear. Noncitizens in the U.S. are often granted some of the same rights and protections as citizens based on one reading of the 14^th amendment; as were enemy combatants in 2004. However, there are also extensive measures in place that seek to limit entry to the country to noncitizens, which is a hallmark of a cartel.

Well then, which is it, a public good or a cartel? I think it is both. The government “of the people” erects fences, monitors the boarders, places restrictions on passports, and weighs down the visa and naturalization processes with a torrent of paperwork and long timetables as a means of limiting entry. Similarly the INS is in place to deport those “free riders” that are in violation of immigration law. These are analogues to the types of collusive restrictions that cartels place against new entrants. Similarly, the U.S. government holds a monopoly on legitimate violence and can use it to punish violators with impunity, thereby enforcing the collusion.

So while you are allowed to voluntarily withdraw from the collusion, to do so you must abandon your rights and privileges. This begs the question: are they really yours? Stated another way, do you actually own your citizenship? My Micro Theory 1 professor, Walter Williams, once said that the true measure of ownership is the ability for you to sell something. So can you sell your citizenship? The answer is absolutely not. But why not, if it is in fact yours? One counter argument could be that your act of selling jeopardizes the value of everyone else’s citizenship, but this doesn’t hold since the same argument can be made about homeownership. If I sell my house at far below the “market value” then I drag down the price for the next seller, since realtors use previous sales as a measure of “comparability.”

Furthermore, there seems to be a strong economic argument in favor of selling citizenship, which would allow the most productive individuals to move to a society that values them most, as expressed by their respective prices (see the work of Gary Becker for more on this point). The driving force behind globalization, free trade and today’s higher standard of living is the opening of markets to transfers of capital (physical as well as financial). Yet capital is only one of the inputs of production. Why shouldn’t we allow the creation for a similar market that exchanges the more important factor of production: labor? So long as it is a voluntary system, who is hurt by this market? Each individual chooses their citizenship in the world and is free to purchase or sell accordingly. Do guest-worker programs or free trade zones accomplish this already? I would argue that they do not, and that they are simply a half measure, which is inherently less efficient than an open market.

So the system of citizenship seems inconsistent. A citizen can voluntarily withdraw without any compensation, but to stay they must burden the associated costs. As I claimed before these costs include opportunity costs and the possibility of being called to sacrifice your life in protection of the state (among others). But these costs are not adequately signaled by a price that could be earned by selling their associated benefits. If citizenship were free to be sold we could obtain a single measure that explicitly stated these costs and benefits. Furthermore the implications of the system are intriguing; consider how such a market would affect wars given that individuals could engage in citizenship swaps before any major conflict, giving some ex ante measurement of its anticipated costs. But it wouldn’t just affect war; such a market would affect every aspect of the system.

This last sentence raises another important question: what would be some potential consequence of such a market? Certainly there would be a strong incentive for nations to sure up their boarders as a means of protecting the value of their citizenship, which could be a good or bad thing based on your immigration philosophy. Similarly, we can expect that a black-market in counterfeit citizenship would plague the most valued nations where the prospective payoffs are high. But such illegal markets already exist for high value goods (caviar and U.S. dollars are the most obvious examples). And human trafficking is already a problem for the U.S. and many western European countries, so black-markets should not preclude legitimate market exchange. Furthermore, it would break the cartel of citizenship and reduce the problems associated with free riding, since entry and exit are allowed.

By now you are probably wondering if I would sell my citizenship given the opportunity? I seriously doubt that any price could entice me to sell, given that most of the benefits I derive from being an American are non pecuniary. First off, my family is here so a life of isolation abroad does not seem to have a reasonable pecuniary compensation. Second, I place a lot of value on the protections granted to me by the U.S. constitution and its arm of enforcement, the U.S. military; placing myself on the potential receiving end of America’s military might cannot be offset by money (even if I felt I was moving to a staunch ally of the U.S.). Finally, I have a nationalistic attachment to the U.S., even if that is simplistic, irrational or economically counterintuitive. But just because I wouldn’t sell my citizenship that doesn’t mean I want to limit someone else’s ability to sell theirs.

Allow me to introduce myself....

2009-02-24T16:50:00.000-08:00

Welcome to the new center of the universe! Now that my gratuitous welcome is out of the way, allow me to set the ground rules for this blog. First, I am a graduate student at George Mason University where I am pursuing my JD/Ph.d. in Economics and Law. Second, I consider myself to be a novice, so please feel free to offer me guidance on any of the many erroneous statements I will inevitably make over time. Third, I am not an avid member of any political party (though I would consider myself more right-leaning then anything, but this is a gross oversimplification of what I consider to be my complex political opinions). Fourth, I am an avid gun enthusiast and hold very entrenched beliefs on gun ownership (basically, if you disagree with me and I disagree with you it is highly unlikely that either of us will convince the other of the merit of our opinions, so I suggest we use our time together to dialogue on more constructive topics). And finally, I...uh...well...hmm...I guess that is actually all I wanted to say.

Consider yourself warned...and welcomed.