Elon Musk seems engaged in resistance against government controllers, those whom people softly, politely, and incorrectly call “regulators.” A Wall Street Journal story recently explained how, not content to publicly cross swords with the untouchable Securities and Exchange Commission, the famous entrepreneur has also refused to obey injunctions of other regulators, “ignored enforcement attempts,” and refused government inspectors access to his large factory in Nevada (Susan Pulliam et al., “Elon Musk’s War on Regulators,” April 28, 2021). The subtitle of the article reads:
The Tesla and SpaceX chief courts conflict with an alphabet soup of government agencies—and generally gets away with it.
It is not sure that Mr. Musk is defending a principle of private property and economic freedom. He has not shied from government subsidies. “99.9% of the time,” he tweeted, “I agree with regulators.” But whatever his motives, his resistance is refreshing. If he pursues it successfully, libertarians and other lovers of individual liberty will be indebted to him.
The reason is that resistance to mounting regulations and controls creates a disincentive for Leviathan to impose them in the first place. At least that would seem to be true in a free and peaceful society where individuals are more jealous of their liberty than governments are of their power. In other types of society, resistance can instead provoke more repression or even generate a dynamics of civil war. (Economists have used “reaction functions” to explore this sort of dynamics: see Kenneth Boulding, Conflict and Defense: A General Theory [Harper, 1962], pp. 24-29 for the simplest model.)
The possibility of stopping the encroachments of government through resistance has been invoked by Anthony de Jasay:
Self-imposed limits on sovereign power can disarm mistrust, but provide no guarantee of liberty and property beyond those afforded by the balance between state and private force.
What de Jasay meant by “private force” certainly includes the standing obstacle of decentralized and private institutions but also the actual capacity of physically resisting the expansionary power of the state, democratic or not.
This capacity requires individuals and organizations powerful enough to resist. Otherwise, we will meet the problem of collective action: free riders will wait for their neighbors to take the risk. (See the classic book of Mancur Olson, The Logic of Collective Action [Harvard University Press, 1971].) Note that the limits of collective action also affect voting not only because a minority cannot win against a tyrannical majority but also because of other problems in democratic politics, of which voters’ ignorance (rational and not) is not the least one (see my forthcoming “The Impossibility of Populism,” in the Fall issue of The Independent Review).
An interesting example of the capacity to resist (or at least its belief) is given in the delicious 1906 book of historian Marc Chassaigne, La lieutenance générale de police de Paris (The General Police Lieutenancy of Paris). The modern police as we know it, powerful and intrusive, may have been born in Paris when, in 1667, King Louis XIV created the General Police Lieutenancy of Paris. The nascent police spied enthusiastically on the population, but the surveillance was mainly aimed at common criminals. Nobles did not fear the Paris police, even if the king loved to be informed on their personal affairs. And here is the example: policemen tried to stay clear of the Hôtel de Soissons, domain of the Princess of Carignan, lest they were insulted or worse. Is Elon Musk an attenuated version of the Princess of Carignan?
The economics of resistance to tyranny is complex. Resistance against the rule of law, as opposed to resistance to an arbitrary ruler, can be counterproductive. The purpose of the rule of law was to deliver us from the rule of men and it would be a disastrous consequence if resistance should bring us back under the latter. But note that Musk’s resistance remains within the legal system. And we may wonder whether the current level of regulation and control is consistent with the rule of law or represents the rule of men in disguise. Another factor to consider: the later the resistance comes, the more costly it is likely to be.
Federal regulations alone only contain more than one million restrictions as measured by the use of such words as “shall,” “must,” and “prohibited.” In Federalist No. 62, Madison did not quite imagine what Americans (and other people in the West) have become accustomed to:
The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?
READER COMMENTS
John Hall
May 25 2021 at 9:42am
The date on the first article should be 2021, not 2011.
Pierre Lemieux
May 25 2021 at 10:14am
Thanks, John. Corrected. (In my defense, the 1 is soooo close to the 2 on my keyboard.)
Craig
May 25 2021 at 9:59am
Here I am, your corporate welfare queen, I might be a little young but honey I ain’t naive. — paraphrasing from lyrics to Guns and Roses, Rocket Queen
Sure, Elon Musk is at once one of America’s premier entrepreneurs AND crony capitalist.
Fact: But for regulatory credits Tesla would be cash flow negative.
Fact2: In its infancy Tesla relied on customers getting tax credits to make the price of a Tesla more reasonable. They still get these credits but there are caps on them and obviously other automakers can benefit from them as well.
Still, I might say if you gave my customers similar tax credits I’d be a billionaire too, well, maybe not, but I would absolutely have ALOT more, there’s no question.
“But whatever his motives, his resistance is refreshing. If he pursues it successfully, libertarians and other lovers of individual liberty will be indebted to him.”
His resistance is likely self-serving and indeed to the extent he flipped off CA with a secessio plebis to TX is refreshing, but at the end of the day, he is ALSO a dartboard for the left and provides them with a reason for wealth taxes and, not an eliminating of bailouts, but to provide bailouts to others.
Pierre Lemieux
May 25 2021 at 12:31pm
Craig: I agree that Musk has been a crony by feeding at the trough of the government’s industrial policy. He will discover that he can’t be both a crony and a resister; let’s hope he will choose the latter. And note that whatever his motives to resist, the consequences are what matter (I am making an economic more than a moral argument). As Adam Smith said in a different context, “by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
Pierre Lemieux
May 25 2021 at 12:36pm
In resisting the police, the Princess of Carignan probably did not have altruistic motives either.
Mark Brady
May 25 2021 at 1:14pm
I’d prefer that he didn’t resist and didn’t take government money. I think the rest of us would come out ahead. 🙂
Pierre Lemieux
May 25 2021 at 3:22pm
Mark: Ahead by a few dollars or perhaps a few tens of dollars each. While if he resists successfully and humbles the state, it would have a major impact–and a positive one on everyone who believes in individual liberty. For the latter, resistance is a public good (at least certain forms of resistance are).
Pierre Lemieux
May 25 2021 at 3:41pm
Moreover, what he took in the past is a sunk cost.
Craig
May 25 2021 at 4:02pm
A sunk cost in an accounting sense, I suppose. But GM, Ford, et al. had to physically pay the regulatory credits. Compound interest suggests that cost will be incurred perpetually into the future, no? Plus, “equity will not suffer a wrong to be without a remedy” — and indeed why shouldn’t this unjust enrichment be disgorged!?! And indeed one could say GM and Ford, even if they might have unclean hands of course, but for sure with respect to the regulatory credits, they absolutely DO have an equitable claim to reparations, no?
Pierre Lemieux
May 25 2021 at 6:21pm
Craig: No, it’s a sunk cost in the economic sense. Real resources (labor, buildings, aluminum, plastic, chemicals, etc.) have been used to produce (say) subsidized electric cars and these resources could have been used to produce something else. This something else cannot be produced now that the resources have been used up: time flows in only one direction, nobody can change that, the cost is sunk. Whoever paid taxes or received profits at that time, and whether some should be reimbursed now, is another issue– transfers and distribution. The resources used won’t reappear.
Past distribution (and possible ex-post corrections) by government is a tricky issue because generally we don’t really know and cannot know who is a net taxpayer and who a net tax receiver. People send their children to public schools, travel on public streets and roads, require police protection for their persons and property, pay many taxes whose incidence is not obvious, and pay more for their goods and services because a myriad of government interventions (like tariffs) that benefit other people, and so forth.
What government should do from now on is a much clearer issue.
Mark Brady
May 25 2021 at 7:51pm
Three years ago Elon Musk told us that he’s a socialist. Is he?
“By the way, I am actually a socialist. Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm. True socialism seeks greatest good for all.”
https://twitter.com/elonmusk/status/1008013111058526209
Question for Pierre. Is Elon Musk no longer taking government money?
Pierre Lemieux
May 26 2021 at 9:19am
Mark: I don’t know the answer to either your first or second question. Can you share yours with us?
Mark Brady
May 26 2021 at 1:40pm
Dunno. That’s why I asked you! 🙂
Craig
May 26 2021 at 3:18pm
“By the way, I am actually a socialist. Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm. True socialism seeks greatest good for all.”
I’m a monogamist, just not the kind who believes in having intercourse with only one woman.
Thomas Lee Hutcheson
May 26 2021 at 7:16am
I would prefer that Musk return only that part of his income in excess of what he would have received from an optimal tax on net CO2 emissions. Likewise, he should exercise civil disobedience only in the case of regulations with NPV< zero, perhaps commissioning a study using his disobedience as a natural experiment to estimate the NPV of the regulation defied. The former would lend political legitimacy to the latter.
Pierre Lemieux
May 26 2021 at 1:02pm
Thomas: It would be only marginally more difficult (slightly less impossible) for Musk to calculate the optimal level of coercion in society and the corresponding optimal size of the state, plus the mathematical expectation of his actions moving society towards that bliss point. Only the utility and production functions of everybody would be required, plus some social welfare function impervious to the problems raised by Samuelson and Arrow. Or am I mistaking your sense of humor for an actual policy recommendation?
Thomas Lee Hutcheson
May 27 2021 at 7:21am
I am trying to clarify the circumstances in which Musk’s taking advantage of tax incentives and complying with regulations would be praiseworthy or blameworthy.
I take it that implicit in your partial admiration for Musk’s defiance of regulations is an assumption that the regulations had greater costs than benefits. Opening his factory during the pandemic would produce more income (not just for himself) than the losses of QALY’s that the opening would cause. And your blame for accepting tax subsidies stems from an assessment that the subsides are inefficient ways of reducing the harm generated by increases of CO2 in he atmosphere.
Pierre Lemieux
May 27 2021 at 4:34pm
Thomas:
Your comment is a useful way to tackle our disagreement. My argument does not depend on benefits received by some individuals being greater than the costs imposed on other individuals. Instead of this redistributive approach of a philosopher-king, the approach I advocate considers the impact of different actions or events on the viability of a system of free cooperation among individuals.* You can model this system in terms of a social contract à la Buchanan or in terms of coordination conventions à la Hume-Hayek-Sudgen-de Jasay. This leads to jettisoning the illusion that cost-benefit analysis can provide meaningful numbers to the philosopher-king.
* The following quote, from James Buchanan, gives a flavor of the deep difference between the two approaches:
Thomas Lee Hutcheson
May 28 2021 at 7:07am
Wow! Your reply really does clarify many disagreements and not only with you. They really are two very different conceptual frameworks.
If I attempt to translate your concern into an optimizing framework, it would be to say the framework models a functioning system of markets that have equilibria and can yield data about costs and benefits from small changes in exogenous policy variables, but that that leaves out that a) policy is not exogenous and more fundamentally, b) uses of some policy variables uses or uses beyond some scale are inconsistent with the system of markets. It’s a sort of reductio ad absurdum argument.
This explains why I never get any traction with my “So what is a better policy?” criticism of posts that criticize policies. That reply assumes a policy maker that in your conception does not exist.
Is there a way of translating the optimizing view or parts of it into your framework? What happens in a “system of free cooperation among individuals.” In the presence of an “ externality” (optimizing framework concept, I know) like the harm arising from the discharge of CO2 into the atmosphere? You must agree that it does not fit into Buchanan’s free exchange of apples for oranges framework.
Or is even this query not allowed in your conception? [I hope this doe not sound like sarcasm; I mean it as a good faith question.]
Pierre Lemieux
May 28 2021 at 11:36am
Thomas: You continue to put your finger on the problem (although your second paragraph might need some fine-tuning). It is significant that the Buchanan quote I gave comes from a conversation about their disagreements (parallel to ours) with Richard Musgrave, the pontiff of mainstream public finance.
I understand your questions even better as I have myself, starting in graduate school and even in college, long been influenced by welfare economics and cost-benefit analysis.
Your penultimate paragraph asks crucial questions. Externalities are a very slippery concept as I suggest in a recent post and will further elaborate in a long article in the Fall issue of Regulation. Note that I am not saying that there cannot be public goods, such as protection against asteroid hits on Earth or perhaps global warming, but the meaningful question is not simply whether the cost of a related public policy is greater than its benefit. The framework to analyze the issue, I contend, is that of the last paragraph of my just-published post “The Producer as a Guilty Prostitute.”
As to how to translate your “optimizing” perspective into the approach I defend, this is what Buchanan tried to do: see my “Lessons and Challenges in The Limits of Liberty.” But for most of the classical liberal economists including Adam Smith, the “optimizing” has to be toned down to “insuring social coordination.” Recall Smith:
Juan Manuel Perez Porrua Perez
May 26 2021 at 2:32pm
This is Elon Musk:
He breaks the law by opening a plant in defiance of a California county’s stay in place order; threatens his employees to do the same; fires the employees unwilling to risk their lives and the lives of others, and breaking the law; bullies a California county with the help of the President of the United States to extract special privileges and exemptions from pandemic-containment measures; in 2020 he becomes the wealthiest man in the world.
And hundres of his employees get infected: https://www.nytimes.com/2021/03/15/business/tesla-workers-coronavirus.html
Pierre Lemieux
May 27 2021 at 12:24am
Juan: His employees are children?
Jens
May 27 2021 at 3:53am
I just had to submit documents to my (heavily regulated) health insurance; annoying and seems unnecessary. And if I try to change something about that, then it is quite an effort. And – in contrast to Elon Musk – my chances of success in changing or cirucmventing those rules are not so good either.
But on the other hand, if I had to get involved in something that has a relatively long course over time. Maybe even longer than my life. And if I didn’t know when I had to take part in this company, then I would probably prefer that the rules of this venture are adaptable and mutable as a metarule. It is of course true that – when I got the chance to participate – I don’t want everything to change overnight. But then I would probably choose a middle ground so that there would be no false dilemma between ancient laws carved in stone and flittering change faster than i can perceive them. This also allows myself to adapt without overburdering. In democracies, legislative changes are prepared through open debates in which everyone can participate and listen and through which everyone changes whether they want to or not. That’s something special. Of course, even this can be called coercion. Life is hard.
It is also questionable whether the input parameter time for the law function should really be treated differently than other input parameters (“less fixed-Madison”). Places, people and properties are treated differently by the law. Why shouldn’t that also apply to time. Especially if you don’t even know before or after whom or where you are affected by it. A piecewise defined function surely is a function. And a good one it may be. Of course, law should be determined at every point in time, just as it should be determined for every other constituent element. And this determinateness is not the determinateness of a mathematical function, but a question of interpretation. But that applies to law and regulation and their omission always and in every case.
Another consideration is the scope and impact (“little known-Madison”). It would be untenable if I could make myself punishable by a norm of criminal law and therefore end up in prison, and if at the same time the criminal law is so complex or impenetrable that I cannot understand why I am going to prison. And in fact in many legal systems making such an impotence to recognize the criminality of one’s own act credible leads to innocence on the part of the perpetrator. But I don’t have to understand everything my electrician or doctor does, regardless of whether they do it for legal or technical reasons. Of course I can question all of that, whatever they do for whatever reason they do or not do it. But that always holds true and is hardly worth mentioning.
I also have to admit that the distinction between “rule of laws (made by men-Madison)” and “rule of men” is very undistinct to me. I understand the distinction between rule of law and arbitrariness. But “rule of law” and “rule of men” is the rule of people over people in the broadest sense. The rule of law also confers subjective rights that can be exercised. This finding does not help when one wants to talk about whether this rule and exercise is cruel or not here and now or there and then. So it does make a difference if you transform the short phrase of “rule of (a single) man” to “rule of men”, because the latter transformed to (but somehow bumby, which probably is the reason for the shortcuts) “rule of all (wo)men” is the “rule of law” in its broadest sense. In order to drive my tendency towards gender-compliant special characters to the extreme of what is tolerable for me, I would say: The “rule of determined and non-cruel law” is “the rule of all (wo)men”. Unfortunately, it doesn’t get any shorter and paradoxes are included and overcome and integrated by debate.
Btw, if Madison had had a problem with the mutability of law and policy in and of itself, it would have been better if he hadn’t – as in Federalist No. 62 – proposed about the composition and requirements for the Senate and House of Representatives at all. The quotation above comes from a context that is totally about the mode of changing written law. He presupposes that law and policy must and can be changed. I also highly recommend reading No. 62 from the quotation to the end. There are two very entertaining paragraphs following up.
And one more thing: I’m grateful to Elon Musk – and not just with my credit card number – for Starlink. Awesome tech. I use is as a backup link, but i really, really want it. Phased array on the roof. Great.
Pierre Lemieux
May 27 2021 at 4:59pm
Jens: I am not sure I understand everything you are saying and there are many aspects to the issues you are raising, but here are two points that might be helpful.
First, there is a fundamental difference between the rule of law and the rule of men: it’s the difference between known standing laws (whatever is not explicitly prohibited is permitted) and the arbitrary decrees of a dictator—whether personal or majoritarian. A very good book to read on this (it is historical, legal, and non-technical) is Hayek’s classic The Constitution of Liberty.
Second, democratic politics does not work the way you seem to understand it. For one thing, the rule of all men is impossible, except if you take “rule” in a very abstract sense or, alternatively, in the sense of every man ruling over himself. My forthcoming article in the Fall issue of The Independent Review, “The Impossibility of Populism,” addresses that question. If you absolutely cannot wait, my recent Regulation review of William Riker’s classic Liberalism Against Populism discusses part of the argument.
Comments are closed.