Maybe hiring a hypothetical night watchman would be cheaper

February 3, 2015 § 10 Comments

The “night watchman” is actually a canonical example in debate over usury. For some reason supporters of usury tend to think that night watchmen don’t do anything actual. But a night watchman clearly does something actual, or else his activities would be just as valuable – and he would get paid just as much – if he sat at the bar down the street drinking beer rather than manning his post. But he actually does provide a deterrent to thieves by his actual presence, his actual vigilance actually does prevent theft when theft is attempted, and his actual witness to what happens helps in actual investigation and prosecution even if an actual theft is successful.

As I mention in the Usury FAQ, modern supporters of usury tend to suffer from a kind of anti-realist materialism. So every time I use the word “actual”, they hear “physical”. If anything non-material is actual, in their confused view, then everything non-material must be actual.

So opportunity costs – profits intentionally foregone by an investor in hypothetical investments that he did not actually make – are as “real” to the modern mind as the protection provided by a night watchman.

While it is doubtless true that my editorial choices could be improved and perhaps even are atrocious, I cannot explain things to people until they reach the point where it is possible for them to understand what I am explaining. I really have to leave it to others to determine how much of the incomprehension on the subject is because of my editorial incompetence and how much is because of the incapacity of certain readers to understand. But I am working on the editorial end of it all the time.

Finally, it would be a mistake to conflate incomprehension with genuine disagreement. On this subject, as on many, there is far more incomprehension than there is comprehension accompanied by genuine disagreement.

§ 10 Responses to Maybe hiring a hypothetical night watchman would be cheaper

  • jf12 says:

    Another way to dodge the night watchman’s healthcare costs, besides virtualizing him (hologram?), would be to outsource the effect of his protection: just insure everything. Then if you did bother to hire him all the watchman would do is reduce your insurance costs. Or maybe he would be subcontracted by the insurers to reduce the threat to their, er, investment in what they protect.

  • Zippy says:

    jf12:
    Well, I think your disdain for insurance probably takes it too far. It makes perfect sense for small fry to band together, at marginal cost to each, to pool assets so that catastrophic losses on the part of one are mitigated financially. It also makes perfect sense for a rich investor to put assets into a pool to insure small fry against large-if-they-happen (to the small fry) but unlikely losses.

    Insurance isn’t wrong per se; but going from insurance to the idea that other people should be enslaved to personally bear our risks for us is not a big mental leap for most people. Insurance contracts (non recourse) are not immoral but they can easily inculcate bad habits of thought in the ignorant, which can lead to immoral behavior or formal cooperation with immoral behavior.

    Heck, the same could be said for savings accounts or CD’s: they are not themselves usurious, but because everyman misunderstands the nature of savings accounts and CD’s their pervasiveness helps create a ‘climate of usury’.

  • jf12 says:

    re: “It makes perfect sense for small fry to band together, at marginal cost to each, to pool assets so that catastrophic losses on the part of one are mitigated financially.”

    Surely.

    re: “It also makes perfect sense for a rich investor to put assets into a pool to insure small fry against large-if-they-happen (to the small fry) but unlikely losses.”

    Far less surely, depending on the Big Man’s motivations. If he’s doing it primarily for the filthy lucre, then it is because he decided this way of fleecing worked best for him. Running an insurance business probably should be more like running a large charity, but I also have disdain for large charities (including large Churches …) for similar reasons.

    “Insurance contracts (non recourse) are not [always 100% necessarily]immoral but they can easily [be described as having the definite purpose to] inculcate bad habits of thought in the [clients who must be kept always somewhat] ignorant, which can [be counted as culpably intending to] lead to immoral behavior or formal cooperation with immoral behavior.”

    TIFIFY.
    Question, since as you notice my visceral reactions may be misguided. (There are personal reasons which are not terribly important.) Is it the potential for recursion that makes insurance so difficult not to do wrong? As soon as a company’s business is founded on the notion of guaranteeing making someone whole, then they can, and arguably *should* seek second-order insurance to guarantee their guarantee.

  • Zippy says:

    jf12:
    It certainly creates moral hazard and obscures risk – even if it isn’t usury strictly speaking in itself – when Bear insures against default in Lehman’s bad loans, Lehman insures against default in Goldman’s bad loans, and Goldman insures against default in Bear’s bad loans.

    Circular paths through counterparty balance sheets are always problematic and should be illegal, like Ponzi schemes and multi-level marketing — even if none of those are usury strictly speaking.

  • tz says:

    Excellent Usury FAQ – I understand it far better now.

    38: ” Modern economics is very anti-realist: it is under the delusion that economic value is purely subjective, that is, a function of human preferences whatever they happen to be. But economic value is not purely subjective: it has an ineliminable objectivity”.

    Here I’m not sure if you mean “economic value” as such, or the economic value of a particular object (including Serfing USA’s observation that such value can be negative).

    If there is an objective value to an object, then wouldn’t it be unjust to have a subjective value that differed from the objective value?

    (I’m reminded of the labor theory of value, and the diamonds v.s. water paradox).

    A subjective value might be irrational or even wrong in the sense that the judgment is erroneous – desiring the wrong things. But because it is bad doesn’t mean it is or should be objective.

    (Also on Labor, rerum novarum &c, the object-subject split also applies – Men and their labor are not a commodity, unpaid wages cry to heaven, not unpaid bills for objects, but economists can’t put that into their models).

  • Zippy says:

    tz:
    Thanks, I’m gratified that the FAQ/ebook is clarifying the discussion for at least some folks.

    I’m not sure if you mean “economic value” as such, or the economic value of a particular object…

    The main point is that economic value – even when aggregated and abstracted for the purpose of economic theory – is tied inextricably to actual property, to real objective things in the world and the real actual utility of those things directed at achieving good ends. It isn’t that economic value has no subjective or relative components or modes in its structure: it is just that value also has an inextricably objective component as well (Question 8) which cannot be ignored. Compare this to moral theology in general, which (as JPII teaches in Veritatis Splendour) has an inextricably objective aspect because we are embodied beings living in an objective reality which is independent of ourselves.

    It isn’t that the objective aspect or mode is all that is the case: it is that the objective aspect or mode is indispensable, and any theory or idea which explicitly or implicitly dispenses with it is necessarily false.

    If there is an objective value to an object, then wouldn’t it be unjust to have a subjective value that differed from the objective value?

    In general it is possible to price things unjustly, to be sure, although (as I allude in Question 11) theories of ‘just price’ don’t really impact usury doctrine in particular. Noonan (IIRC) had me snookered for a while with his assertion that usury doctrine could not be disentangled from medieval just price theory. The latter is almost certainly not the simplistic provincial thing that modern critics (including Noonan) portray it to be, but in any event it is an entirely distinct subject from usury.

    The prohibition of usury is (much like the prohibition of theft) a matter of straightforward universal morality which applies under all economic conditions and has no dependence on any particular economic theory for its validity.

    Men and their labor are not a commodity, unpaid wages cry to heaven, not unpaid bills for objects, but economists can’t put that into their models.

    I don’t know that I would give up on the possibility of an economic science rooted in objective reality (as opposed to all modern economic theories, which suffer from anti-realist bias). But I know that developing such a science (by addressing the various anti-realist errors of currently fashionable theories) is well beyond my own capability and ambition, at least for the time being. Heck even the ebook is less a formal project and more just a re-purposing of existing blog content into a format which is more convenient for some purposes.

  • […] or friendship. They are not morally licit as profit-producing investments, even when the lender might have hypothetically made a profit in some other way had he, counterfactually, chosen to do something […]

  • […] or friendship. They are not morally licit as profit-producing investments, even when the lender might have hypothetically made a profit in some other way had he, counterfactually, chosen to do something […]

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