Adam Smith’s Concept of Justice

by Dr. Vernon Smith

One of the best-known quotations from Adam Smith’s The Wealth of Nations (1776) defines natural liberty: “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man.”

Smith inserted the condition “so long as he does not violate the laws of justice” ahead of the directive because it was central to his conception of liberty. What everyone remembers is “free to pursue his own interest,” with the last often turned into “self-interest.” But Smith’s conception of human sociality and economy—I like the word “humanomics”—was far deeper than modern utilitarianism.

Justice is the infinite set of permissible actions remaining after specifying the finite limited set of prohibited actions and corresponding penalties.

What did Smith mean by justice, and why is it so important for understanding his message? The carefully articulated answer was in his first book: The Theory of Moral Sentiments (1759, pp. 78-91).Justice for Smith was the negative of his proposition on injustice, which stated that improperly motivated (that is, intentionally) hurtful actions alone deserve punishment because they are the objects of a widely shared sense of resentment.

Rules that punished in proportion to resentment emerged naturally in pre-civil society as a means of defense only against real positive evil and to secure innocence and safeguard justice.

Hence, justice is a residual. Justice is the infinite set of permissible actions remaining after specifying the finite limited set of prohibited actions and corresponding penalties.

Imagine a large playing field in which people explore, discover, and innovate, but with well-defined foul boundaries that people are not to breach without penalty; these boundaries will change, based on consent, with experience, culture, and technology.

Smith saw society as seeking human socio-economic betterment through the control of actions that our common experience leads us to judge as hurtful rather than through collective actions designed to achieve future conjectured benefits. The latter is uncertain and fraught with unintended consequences; moreover, history is littered with examples of grandiose failures. The former relies on natural impulses for individuals and assemblies to pursue betterment, risking only their own resources; this framework led him to oppose slavery, colonialism, empire, mercantilism, and taxation without representation at a time when such views were unpopular.

His policy views derive from his belief that every person’s socio-economic achievements should depend as much as possible on merit and as little as possible on privilege.

Reprinted from the Independent Institute

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Will technology enable workers or replace them?

As the next generation of robots arrives in the workplace, will they enable workers or replace them? According to MIT’s Daron Acemoglu, one of the most frequently cited economists in the world, this distinction is the difference between technology that raises workers’ wages versus tech that reduces overall employment and stifles wage growth.

Daron Acemoglu is a professor of economics at MIT, a frequent contributor to Foreign Policy Magazine, and co-author of the book Why Nations Fail: The Origins of Power, Prosperity, and Poverty. He joined me to discuss his recent research and what technological innovation means for the future of work.

Some of your recent work has looked at how the increasing use of machines will affect workers, and your conclusions aren’t too optimistic. In particularly your paper “Robots and jobs: Evidence from US labor markets” shows how robots have a negative effect on both employment and wages in some communities. This finding has been treated with some alarm and I see people using it as evidence we’re headed toward a jobless future, the robots are going to gobble up all the jobs, etc. And one reason I think there is this alarm from your paper — aside from the fact that we’ve seen the rise of new technologies at exactly the same time that we have a weak recovery after a recession — is that the standard Econ 101 perspective might be different than your finding from the paper.

So first I want to give a review of what that standard perspective is. I got a report from a consulting firm that was very optimistic about our future with robots, AI, and jobs. Here is the happy ending the consulting firm gave me:

New automated technologies will boost productivity considerably over time. This will generate extra income, initially for the owners of intellectual and financial capital behind these new technologies, but eventually feeding into the wider economy as this income is spent or invested in other areas. This additional demand will generate more jobs and increase incomes especially in sectors that are less automatable. So, the historical evidence suggests that automation will eventually lead to broader, similar overall rates of employment, and higher average real incomes across the country, though there might be a different skew to the income distribution.

So that is a fairly happy ending despite all the concerns of the rise of the robots. To what extent do you agree with this happy ending scenario?

I think that’s something we don’t know about. I think there is a lot of comfort in thinking that there is an inexorable link between productivity, wages, and employment, and everything is going to be fine; but, there are so many unknowns. I would interpret my research here, and it really goes perhaps even against my own priors, as concerning but not alarmist.

Alarmism would be: We’re losing jobs so quickly that within the next generation’s lifetime, we have some major problems if we don’t do something about it. That’s not the case. The rate of job loss from automation or this particular branch of automation, robotization, is relatively small over the last 20 years or so, perhaps less than half a percentage point of the population, (the working age population). So, we’re not talking about huge numbers.

I think what the result signifies is important to put in a broader context, and that was your question. The way that Econ 101 thinks about productivity, employment, and wages, is that whatever increases the productivity is going to translate into wages relatively quickly. And we used to chastise Keynes, one of the greats of economics, for predicting in 1929, before the Great Depression in a speech that he gave, that rapid technological changes would reduce demand for labor and lead to technological unemployment, or much shorter working days or working weeks for people. And that hasn’t come true obviously in the intervening 90 years.

But, the conceptual point that new technologies could reduce the demand for labor, rather than increase the demand for labor, is a possibility and it’s not a crazy idea. There are many conceptual reasons why that could be the case, and I think what makes it more likely is precisely new technologies that automate — meaning replace tasks that were previously performed by labor. And it’s not a crazy thing because there are other examples in which this happens. Almost one hundred years from the beginning of the British Industrial Revolution to the middle of the 19th century did see an unprecedented rate of arrival of new technologies that totally transformed how production, especially textiles but also in other industries, took place. But we didn’t see pretty much any change in wages, and that led to what is sometimes called the living standards paradox.

I think that is another example in which many technologies that replace workers in important tasks in the economy do not necessarily translate into higher wages and higher labor demand immediately. And I think the important point here is a concern but not alarmist, because I think how we deal with these technologies, and whether we can turn them into things that essentially lift all boats very much depends on our institutional and educational responses to them.

The British economy, in the middle of the 19th century, started a breakneck pace of institutional transformation, things that we had not seen before. You know, a welfare state of sorts, taxation, unions, and it also started investing in skills at a very high rate by historical standards. I think those were not unimportant in turning this wave of technologies into something that increased wages for the average working man of Britain. So, that’s why this is the right time for having this conversation about what these new technologies are doing, what we expect them to do, and how we can work toward making them work for us.

I have mentioned technology, you have mentioned technology, but one of the points that you make in your work is that not all technology is the same. And in fact, you differentiate between what you like to call “enabling technology” versus “replacing technology.” Can you talk about the race between those two things, and how that race is changing?

Absolutely, I think that is exactly the crux of the matter. Enabling technologies are essentially what we focus on in basic economic analysis. Those are the things that make the workers more productive in tasks and functions that they are already performing, and perhaps even also expand those tasks. They tend to increase wages and labor demand because they are making workers more productive. When you look at the details, it’s more complex because when you make workers more productive, sometimes you need fewer of them in some activities, and they can get reallocated to other activities. But at its root, this type of technology is directly making workers more productive; but this is very different from replacing technologies.

What would be an example of an enabling technology?

An example of an enabling technology that I like to give — but I think every technology has some grey areas — is the computer assistive design machines, or new spreadsheets. Those take some very specific types of workers. For computer assistive design machines, it would be design workers, and this type of technology increases their productivity. Now they can design things much more precisely, they don’t have to waste time doing repetitive tasks, and it boosts their potential capabilities. Spreadsheets, the same thing. If you are a mid-level or supervisory worker, or essentially a non-routine clerical worker, spreadsheets, early on in the 1980’s, really expanded your capabilities quite a bit.

In contrast, replacing technology directly displace workers from the tasks they were previously performing. A good example would be ATMs; ATMs took away a whole range of tasks that bank tellers were performing, so now we don’t need the bank tellers for those tasks. Now it doesn’t mean that ATMs don’t have the capability or the potential for raising wages, they could do it through the optimistic scenario that you outlined in the beginning of our conversation. Now ATMs make the business of bank transactions much more productive, and as those become more productive, we want to consume lots of other things. We want to perhaps now consume advice from bankers about financial planning, and we also might want to consume more coffee and more cars, and things like that, because the banking sector has become more productive. And that increases labor demand in other activities, and that might be sufficient to offset the negative effects of displacement, or even surpass them.

What I hear about most of all, and what you also focus on in the paper, is robotics and artificial intelligence. Are those — and again technologies in some ways can be enabling and maybe also replacing — but are those technologies fundamentally replacing technologies that are going to result in job loss and probably stagnating wages for some people?

I think the odds are in the favor of these technologies being more on the replacing side. If you look at robotics, what that technology does is it automates and increases the ability of machines to do relatively more complex tasks than manufacturing workers were performing before. AI is very much geared toward applying machine learning to big data, to unstructured data, in order to replicate human judgment and human decision-making in a variety of things. And according to the experts, we are getting to the point where we can use AI to perform tasks that were previously done by accountants, financial planners, paralegals, definitely customer service, and the clerical occupations.

As these technologies advance and spread, if I was just going to look at the big economic numbers that get released every quarter, I might see GDP go up, I might see productivity go up, but that wouldn’t necessarily translate into incomes going up or good paying jobs being created then.

Exactly, I mean, obviously these technologies have a great potential for increasing productivity. Automation is about performing a variety of tasks and functions much more cheaply, and that will translate into greater GDP, greater riches for the nation. But it will not raise labor demand and it might harm a great many workers. Now, the puzzle, of course, is that over the last 15 years, or perhaps slightly longer, productivity numbers have been doing badly.

Right, I’ve been writing a lot about this productivity paradox, in which we certainly read about these great new innovations, whether it’s AI or robots — now everyone has a computer in their pockets, Silicon Valley is going crazy with startups — so it seems like there’s all this innovation and technological progress. But when you look at our productivity numbers, it looks like total stagnation; they’re flat-lining, and they actually started to weaken before the Great Recession. So, how do you think about that productivity paradox and how do we solve it?

I think this is one of these questions that is so puzzling that nobody has the answer to it. But I think it is important to get some facts on the table; back to like you said, this is not about the Great Recession, this is not about a cyclical phenomenon, this is something that we’ve been living with. Into the 2000s and perhaps even in the late 1990s, there was a pickup in productivity in the 1990s but even then, we’re not in the age of very rapid productivity as in the 1950s or the 60s.

Now, the second thing is, people point out the mismeasurement of productivity. I think that’s definitely something to be taken into account and we need a much better measurement. But it’s not as if the Bureau of Labor Statistics and the Bureau of Economic Analysis are idle. They are doing a great job in terms of trying to measure productivity as well as we can. And I think the evidence is, we’ve always mismeasured productivity to some degree and there isn’t a compelling reason to think that it’s gotten much much worse, that it explains all of this slowdown.

So, I think the big issue is that new technologies are coming, but it takes time for us to use them in the most productive way, and that’s for two reasons. One is, we need to adapt a whole host of supporting institutions in order for the productivity of these new technologies to be realized. If our organizations don’t work well with these new technologies, if the workers don’t have the right skills for these new technologies, that’s going to hold back the gains that we can make from them.

But the second one is that, in fact, the technologies are not sufficiently pervasive — yet. If you imagine our cars, the amount of new technology, high-tech gadget that are in our cars, it’s just mind-boggling. But you cannot drive our cars any faster than our grandparents did. Why? Because if you want to drive much faster, you need non-congested roads, much better tires, and there are going to be a whole host of other institutional limits for our ability to drive much faster. So, at this point, we can pack better and better software into the cars — perhaps our air conditioning can get better, perhaps our stereo system can get better — but the thing that we really want from our cars, which is get us faster from A to B, that’s not changing.

Now, the next wave can start transforming that, now you can have many more innovations together with the organizational adjustments, institutional adjustments, and we can go to driverless cars. And that can suddenly change the equation because even if the cars cannot go faster, the cost of doing that sort of driving is going to go down a lot. And that’s going to start changing. So, what that suggests is that there is a cumulative aspect to all of these innovations. And it may well be that we are still in the middle of this cumulative aspect.

I have seen numbers saying that you have productivity inequality, where you a smaller number of leading-edge firms which seem to be very productive and very innovative, and then everyone else is getting left behind. Could it be that we are innovative and we are productive but it’s limited to superstar firms, and either there’s not enough competition so other companies aren’t taking up these innovations, or they’re hard to figure out, and these other companies just figured it out sooner? Is the future already here, just not evenly distributed?

I think that’s very important. I think the business of innovation is probably becoming more unequal and the phenomenon of superstar firms, as you’ve mentioned, is a real one. The US economy has become much more concentrated than any time for which we have data to measure concentration. There’s a recent OECD study which shows that if you look at the top firms in various sectors, and this is tracked over several OECD economies, their growth rate seems to be very similar to what it was in the 1980s and the 1990s. But if you look at the next tier of firms, the follower firms so to speak, they have slowed down.

So that again highlights the inequality in the technology treadmill or the inequality in the innovation capabilities of different firms. And that may have institutional reasons, but I think that it might also be a consequence of the nature of these new technologies. Once Google starts dominating all information, it’s very difficult for another search engine or for another company who wants to use another similar innovation for AI or for customer service to catch up with it, because Google has this superb war chest in the form of terabytes and terabytes and terabytes of data that nobody else can access.

Just to  jump back for a second to this idea that you have two different kinds of technological progress, replacing and enabling, it reminds me very much of some work done by Clayton Christensen over at Harvard, in which he talks about the different kinds of innovation. You have efficiency innovations, which is sort of classic; it’s a new technology, it replaces workers, overall it just reduces the cost of making existing products. Then he has what he likes to call sustaining innovations, which replace old products with new, such as a Toyota Prius replacing a Camry or something. And then he has what he calls empowering innovations, which are brand new products and services creating new jobs. He gives the example of Ford Model T or the Sony transistor radio. Could it be that the technological progress we’re making is just more of the sustaining or efficiency kind of innovation, and we’re just not generating enough of this enabling or what he calls empowering kind of innovation?

I think that’s exactly right. I think we are not creating the types of technologies that are going to use our available labor force. And I’m not sure the process versus product is exactly the right division. But obviously, many process innovations, exactly as you have suggested, would be of the replacing kind; but there are also process innovations like computer-assisted design or spreadsheets that increase our productivity, but do so in a way that enables existing workers to become more productive.

But it is also the case that many of the important products that we have created over the last several decades, over the last two decades in particular, have not added much to the bottom line employment figure. Think of Apple’s iPods and iPads and iPhones; they are amazing innovations and consumers have absolutely rewarded the company by purchasing billions of them. But, look at the number of employees working in the United States for producing these products — it’s very very small. So, there we have an intersection of new technologies that have a very heavy design component and the division of labor can be very finely broken down, and the labor-intensive parts of those products can be manufactured abroad. So, there is a sort of a parallel process to automation that’s increasing efficiency but it’s not really adding to the bottom line employment figure.

Is that a problem that can be fixed by policy? Can we rejigger things to create or change the balance? Move the needle more toward enabling and empowering kinds of innovation and technological change? It seems like we need more of that, but does that just fall like manna from heaven?

I think very much policy can play a role, but not an obvious one. Because I think there’s a lot of evidence that shows the exact composition of innovation and therefore the exact types of technologies that firms develop are responsive to policies and to financial profit incentives. The problem is, it is difficult for us to describe or recognize exactly enabling technologies when they are in the incubation period; so you cannot say we’re going to subsidize the enabling technologies. It was much easier for us to recognize green technologies, but even there, our track record of giving subsidies to green technologies is a mixed one. These sorts of fine incentives are very easy to game.

But I think there are other problems in the labor market and the innovation market that we can start thinking about. We implicitly subsidize production with machines relative to production with labor. If you buy a machine, you don’t have to pay payroll taxes, you can debt finance it, and that’s going to get a subsidy from the government. And the capital income that is generated is going to be taxed at a lower rate. If you hire a worker, you have to pay payroll taxes, they are going to be taxed at a much higher rate, you have to put up with lots of other costs coming from regulations, and other things you have to do when you’re employing workers. So that creates a very non-level playing field, so we’re essentially subsidizing firms implicitly for using machines rather than labor. So I think it’s probably a good idea to start thinking about how we can even that playing field a little bit. So I am definitely not suggesting a robot tax so that we can raise revenues.

That was my next question about Bill Gates and the robot tax.

I can comment on that, but I think what I’m suggesting is, let’s not subsidize robots and other machines implicitly while making it much harder for firms to higher labor.

I have heard people suggest though, when they look at those productivity numbers they say, “Well, gee, that to me looks like companies aren’t using enough machines, so maybe we need to dramatically raise the minimum wage, make workers more expensive, and then companies will, say, use more kiosks and they’ll become more productive and down the road, we’ll have higher growth and higher productivity.” So there’s also that flipside argument that I hear.

Well there is some of that going on, you know, certainly if you look at countries where wages are higher and workers are scarcer, you see more automation. So the US, actually, is a laggard in automation. South Korea, Japan, and Germany are far ahead of the United States in the use of robots and perhaps more worryingly, if you think that robots are part of the future, we don’t have any of the major robot producers in the world; they are all in Japan and Germany, so we are lagging behind there.

But I think taxing employment and workers further would definitely be at the very very very bottom of my list of good ideas. Because I think the problem we are going to be facing in the next several decades is how can we encourage people to be part of the labor force. And I think the United States does very well on that, relative to other countries, partly because of the earned income tax credit. So I think certainly the minimum wage has a role in making sure that some workers are not paid very very low wages, especially if you take workers who don’t have any other option so they might be subject to monopsony power. But I think jacking up the minimum wage so that you force firms to sort of automate more — I think that probably is going to be very distortionary.

And we did mention the robot tax, which is interesting because when Bill Gates mentioned it, he mentioned it both as a source of revenue to help with retraining, but he also specifically mentioned it was a way of slowing down progress and giving workers more time to adjust. I mean it makes a difference for truckers — which you always hear about now when you hear about automated vehicles — it matters whether we go to level 5, full automation in the trucking industry over 10 years versus over 25 years. So do you have any sympathy to slowing down the pace of automation to give workers more time to adjust?

Well what I would say is three-fold. First of all, I believe that if we are indeed, as I just have tried to articulate, subsidizing capital, then that’s distortionary, and that’s a bad idea. We should be having a level playing field. I think we need to go much deeper into this and look exactly at various different types of technologies and see if some of these numerically controlled machines or other automation technologies, as well as robots, are being introduced precisely because labor is being artificially made more expensive. And if that’s the case, there is an obvious thing for us to do.

Second, I totally agree with you; the issue is one of adjustment of labor. So if labor is suddenly caught unaware about what’s going on, and is thrown out of work because of automation, the costs of that are very high. Detroit is the case in point. But, we know self-driving cars and self-driving trucks are coming, so it’s not as if it is going to hit anybody as a big surprise. It’s just that US society does not have the institutions to prepare either the workers currently in this occupation, or even worse, the youth that will be graduating from high school or college in the next few years. We’re just not providing them with the human capital and training opportunities and vision to prepare for them so that they can work with the machines rather than try to do what the machines are doing.

So slowing down the progress, I think, yes and no. If the problem is we are totally unaware and this is hitting us as a surprise, there might be some adjustment process that might help us. But I think, at the end of the day, these technological changes are also our future; we want to have rapid technological change because that’s where the productivity gains are coming, and that’s where productivity gains are going to come from. So we don’t want to slow down the technological progress, we want to turn the technological progress and our skills so that they can work with each other.

We’re already going long, and we did not even get a chance, unfortunately, to get to Why Nations Fail, which I think probably has a lot to say to us these days in the United States. So I just want to end as I always do. I go online and I ask the Twitter-verse for questions, so here’s that question: “The thing that every middle-class parent wants to know is, dear God, what should my child major in when they go to college, given our technological progress and automation?” So what should the kids be majoring in and studying to deal with this future? Do they all have to be computer science majors?

I think that’s a great question and you know what the funny thing is? That parents are asking this question, but policymakers aren’t. Who in the current administration is worrying about such things, for example? Nobody. I think we don’t know the answer to that. We know certain things: We know that flexibility is a great asset in the current labor market and will become a bigger asset, and a more valuable asset in the decades to come. That we want students who can adapt to different circumstances, who can reconfigure themselves to use and deploy different types of skills, and that’s very important, and that’s not something that our high schools or even our colleges do a good job in. But if you go in greater detail, do we need workers who have numeracy skills? Do we need workers who have better software skills? Do we need workers who are better at teamwork?

I don’t think we know these things. Obviously, there is going to be a small elite group of workers, perhaps 2 or 3% of the US labor force, who are going to work in computer programming, designing these AI, big data machine learning programs, or designing new products, and those workers need to have all the computer science and all the technical expertise they can get. As well as the vision; I mean, it’s not just about knowing how to program. Steve Jobs didn’t become Steve Jobs because he was the best programmer. He had a vision, he had a way of conceptualizing the product that other people could not, so that’s actually a broad skill.

But let’s take somebody who’s going to work in the financial industry. Do they need to know much better programming so that they can seamlessly program the AI machines? Possibly, but probably not. Probably the AI technology is going to be developed enough that people who use it don’t actually need to reprogram it. But they may need to have a broader set of skills so that they can act as the conduit between these programs and the customers. They may need to have much better teamwork and soft skills in the new labor market. We just don’t know that because we have not been studying it.

So in some sense, this is reemphasizing what I was trying to say earlier on. The changes that are going to come in the next 20 years shouldn’t surprise anybody, but we are totally unprepared for them.

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The World Is Getting Freer, Faster

According to the new Fraser Institute report, economic freedom is steadily increasing, and that’s a good thing.

Earlier today, the Fraser Institute published the 21st edition of its annual Economic Freedom of the World (EFW) report. The Canadian think-tank uses 42 data points across five different areas (size of government, legal/property rights, sound money, freedom to trade internationally and regulation) to rank the economic freedom of 159 countries and territories.

The results? As Johan Norberg puts it, “freedom is awesome”. Which is to say that – almost without exception – the freer the country, the more rapid its economic growth, and the higher its citizens’ income.

The full report is available on the Fraser Institute’s website. But here are the key points:

America is not the real Land of the Free

Hong Kong, despite recent political upheavals, takes the top spot – as it has since 1980. For the tenth year in a row, Singapore comes in second. New Zealand, Switzerland, Ireland, the UK, Mauritius, Georgia, Australia, and Estonia make up the rest of the top 10. The United States has moved up from 13th spot to 11th. There it joins Canada, which has fallen six places. Other notable rankings are Germany in 23rd place, France in 52nd, Mexico in 76th, Russia in 100th and China in 112th place.

The freer the country, the better

Why do the positions on the list matter? They matter because, as mentioned above, there is a high correlation between economic freedom and important indicators of human well-being.

The freer the nation, the better off the poorest people in it are.

The Fraser Institute splits the measured countries and territories into quartiles (i.e., each quartile represents a quarter of the samples) based on their level of economic freedom. The freest quartile has an average income that is seven times higher than that of the least free quartile ($42,463 and $6,036 respectively). Between 1990 and 2015, economic growth averaged 3.35 percent a year in the freest quartile, whereas the least free experienced a measly 1.66 percent growth.

It’s not just about money. In the freest nations, life expectancy is 80.7 years. This is 16.3 years more than in the bottom quartile. For many people, that amounts to a difference between knowing one’s grandchildren or dying before their birth.

Finally, the freer the nation, the better off the poorest people in it are. The bottom 10 percent of income earners in the freest quartile earned 11 times more than the bottom 10 percent in the least free quartile ($11,998 per year and $1,124 per year respectively). In the freest countries, the poorest 10 percent make almost twice as much as the average person in the least free countries.

Economic freedom isn’t just about the economy

The inclusion of the index acknowledges that women are not always accorded equal treatment before the law.

For the first time, the 2017 edition of the report has adjusted its methodology to include the Gender Disparity Index (GDI). The inclusion of the index acknowledges that women are not always accorded equal treatment before the law. By using information from the World Bank’s Women, Business and Law and 50 Years of Women’s Rights projects, the Fraser authors have amended the EFW scores retrospectively.

This methodological change has meant that the Arab nations have dropped – a lot. (The report was compiled before the news broke that Saudi women will now be allowed to drive, but I don’t think it would have affected the findings much.)

In the previous report, for example, there were four Middle Eastern nations within the top 30. Now that GDI is included, not a single Arab nation ranks in the top 36. The United Arab Emirates and Qatar, which were previously the highest ranked MENA nations at 5th and 11th places respectively, are now just 37th and 45th. And the 10 countries that experienced the biggest decreases due to the GDI adjustment were all Muslim-majority nations.

The world is getting freer, faster

Economic freedom has increased substantially in the last 25 years – especially in developing nations.

This is the final and most important point to make. Despite our tendency towards pessimism about the state of the world, economic freedom has increased substantially in the last 25 years – especially in developing nations.

In 1990, the average score for a “high-income industrial” country was 7.18, compared to only 5.28 for the average “developing” country. By 2015, the average score in high-income countries was 7.76 and the average in developing countries was 6.61. The gap between the two groupings has fallen from 1.90 to 1.15 – an improvement of 40 percent. This is thanks in large part to trade liberalization and the widespread conquest of inflation and introduction of sound money.

The result is that, if the 1980s world average was a nation, it would place in 154th place today – ranking between war-torn Syria and anarchic Libya. If the 2015 world average was a nation in 1980, it would be the 9th freest – with a score of 6.88, slightly above Canada at the time.

The new EFW shows that despite many anomalies and challenges, economic freedom remains deeply linked to important indicators of human well-being, including wealth, poverty alleviation and life expectancy. As such, it is the poorest members of the human family who get the greatest benefits from it. Long may that continue.

Reprinted from CapX

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Nigerian Government Just Take a Remarkable Leap towards Free Market

Courtesy: Vanguard News Nigeria
The Federal Government has granted a 3-year tax relief to the newly inaugurated Pay TV operator in the country, TStv Africa, as well as tax free dividends to all investors in the company. Lai Mohammed The Minister of Information and Culture, Alhaji Lai Mohammed, announced this on Sunday night in Abuja at a dinner to mark the official unveiling of the new company.
TStv Africa is a wholly owned Nigerian Pay TV operator with refined offerings of novel Unclassified Pay Per View subscription and complimentary internet services. Mohammed, who performed the official unveiling of the new company and its products, said the tax reliefs were in line with the Pioneer Status recently granted to the Creative Industry by the federal government. The minister congratulated the Chief Executive Officer (CEO) of the company, Dr Bright Echefu, and his team for liberalising and breaking the monopoly of Pay TV in the country.
“The important thing about what Echefu has done today is that he has redefined the pay per view television industry and from today that industry will never remain the same again. “What he has done is to democratise the media and entertainment industry and make it possible for even a peasant farmer to have access to the best entertainment and news in the world.
“It is a great opportunity for me to be the one to unveil TStv because just like a Nigerian made history by crashing the cost of telephony in Nigeria, I am glad that another Nigerian is now coming forward to crash the cost of Pay TV,” he said. The minister commended the courage of the investor for coming from the Diaspora to invest in his country and for believing in the government’s seriousness about diversifying the economy.
He said the company had also demonstrated that government alone could not do all things but needed the participation and synergy of the private sector. “I want to assure that this administration will continue to assist you and other investors in creating the enabling environment for businesses to grow,” he said. The minister said that the government was aware of the huge contributions of the creative industry to the nation’s economy and would continue to support the sector.
However, he identified contents and the lack of objective audience measurement as major challenges that had retarded the growth of TV and advertising industries in the country. “With the liberalisation of the industry, content has become very key because content determines which channels are being watched and which are not. “Another major challenge is how to get an accurate measurement of which channel is being watched and which is not. “Kenya and South Africa are about one third of our population but they do much better in TV and radio advertisement than us because of their robust audience measurement,” he said.
The minister announced that the National Broadcasting Commission and his ministry would organise a workshop on Nov. 28 to address the challenge of audience measurement. Earlier, Echefu said that TStv Africa, which had gone through a lot of challenges, was birth to liberalise PayTV in the country, make it affordable to every Nigerian with added values. He said for the first time, Nigerians could now enjoy Pay Per View because with TStv, “subscription runs as you watch and it has the facility to pause your subscription when you travel”.
Echefu said that TStv for a start has 70 premium channels model with the cheapest pay-TV in Africa with maximum subscription fee of N3,000 only. He said as a fully Nigerian brand with consideration for the masses, TStv is not classified and it has a model that accommodate subscription as low as N200 as N500 for a period of time.
The CEO said TStv came with PVR (Personal Video Recorder) Decoder which allowed viewers greater control over their viewing experience with functions like pause, rewind, forward, save and record of programmes of interest. Echefu said that once you subscribe to TStv, you will also get complimentary internet service, enabled Wi-Fi, as well as video calls and video conferencing services.
“It has an array of amazing TV channels with premium entertainment, educative programmes that cut across all genres. “The genres included news, music, general entertainment, documentary, movies, religious, sports, health, kids, fashion and lifestyle that better define the uniqueness of Nigeria’s diverse culture and traditional values,” he said.
The CEO said TStv which was modelled for Nigerians had come to stay, assuring that it would not fail and they would deliver on their promises. The guests at the ceremony were entertained with live performances by musicians and comedians.
Among the dignitaries at the event were Gov. Akinwumi Ambode of Lagos represented by the Permanent Secretary, Lagos State Ministry of Information and Strategy, Mr Fola Adeyemi, and the Permanent Secretary, Federal Ministry of Information and Culture, MS Grace Gekpe. Others were the Director-General of National Orientation Agency, Dr Garba Abari; former Minister of Aviation, Femi Fani-Kayode; Nollywood actors including Emeka Ike. Adigwe Okafor, Zack Amata, Dr Opa Williams and Afeez Oyetoro aka Saka.
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Everyone Loves This Book But Who Has Actually Read it?

After years of avoiding Hayek’s Road to Serfdom, I have decided to dedicate the next sixteen days to liveblogging each chapter.

I have never actually completed F.A. Hayek’s, The Road to Serfdom. I am completely comfortable admitting that. Still, like many who are intrigued with Hayek’s ideas but lack the willpower to read the entire book, I alway list The Road to Serfdom as one of my most influential readings.

To be sure, I had read the few chapters that were assigned to me by my school’s token libertarian political science professor. I assumed I had accurately interpreted its message. The three chapters I read were full of highlights and great quotes about the importance of the individual. But with all the other books out there in the world, why was finishing this one book so important?

Hayek makes it clear that this path refers to society’s “progressive” rejection of individualism.

It was not until my current mentor called me out on my inability to follow through on one of the most economically relevant books of all time, that I realized that I had robbed myself of an education by not finishing Hayek’s important work.

As a matter of millennial pride and also wanting to reclaim the knowledge I foolishly pushed aside as an undergrad student, I decided to dedicate the next sixteen days to both reading and liveblogging The Road to Serfdom.

The Individual Built the Modern World

Proponents of laissez faire capitalism and libertarian thinkers alike constantly throw around the phrase,” the road to serfdom.” And while most understand its general negativity towards socialism, the phrase is so ingrained in liberty speak that few often take the time to really explore what Hayek was trying to tell us.

In the book’s opening chapter, “The Abandoned Road,” Hayek makes it clear that this path refers to society’s “progressive” rejection of individualism. More importantly, he goes on to describe how this rejection of the sanctity of the individual has, and will continue to have, negative impacts on the society.

For a period of time, the western world had flourished under the 19th-century ideals of free market capitalism. For the first time in history, an individual was allowed to follow his own desired path without the status of his birth holding him back. All he needed was an idea and the ambition needed to make that idea a reality.

As a result we saw a revolution in thought and an industrial revolution incomparable to anything the world had ever experienced. In fact, even with the advent of the internet, the world has still never progressed quite as dramatically as it did during this laissez faire revolution.

And while this period brought the world the wisdom of Adam Smith and the rebellion of the American Revolution, it did not maintain its momentum of popularity as the 20th century approached.

As Hayek points out:

“We still believe that until quite recently we were governed by what are vaguely called nineteenth-century ideas or the principle of laissez faire…But although until 1931 England and America had followed only slowly on the path which others had led, even by then they had moved so far that only those whose memory goes back to the years before the last war know what a liberal world has been like.”

If in 1944, Hayek thought the world had already forsaken and forgotten true liberalism, I can scarcely imagine what he might say today. And it’s true that he was writing about a period of wartime economic planning both in the US and the UK. Prices and wages were controlled. Censorship was in place. Rationing and quotas governed the production and distribution of all essential goods and services. But even given all this, government consumed a far smaller degree of overall national production than today.

So far removed are we in 2017, that the individual is not even a consideration when contemplating economic policy. In fact, the “greedy” “selfish” individual is often the villain in modern economics, as he seems to always operate contrary to the whims of the collective. Now, terms like “individual mandates” are used to convey each person’s “social responsibility” to care for the collective.

As common as this anti-individualist sentiment has become, it wasn’t always this way. As Hayek reminds us in this opening chapter, the most tremendous strides towards human and economic progress were taken during a time when the individual was allowed to innovate and create without worrying about interference from the state on the grounds of protecting the greater good. But even though the positive implications of a pro-individualist society were proven by the innovations created during that time, society had still been steadily moving away from it.

“We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton, but one of salient characteristics of Western civilizations…Not merely the nineteenth- and eighteenth- century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides, is progressively relinquished.”

So far removed are we in 2017, that the individual is not even a consideration when contemplating economic policy.

Again, I have to wonder what Hayek might say if he were alive today and around to see how groupthink and collectivism have shaped our modern policies.

This chapter, then, sets the stage. He names liberalism as the system that gave birth to the greatest of human achievements ever seen in history. It was individualism that caused the most spectacular effect. If you understand that–and vast numbers today do not understand this–you are prepared to see how the abandonment of this system and idea leads to not only the unraveling of liberty but even what we call civilization.

So, yes, this book is a warning, not just against one party but all ideological positions that reject individualism for one or another version of the planning state.

Now onward to chapter two!

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Finding alternative strategies in Nigeria’s war against corruption

By Doyin Olawaiye 

‘A rotten apple spoils the whole barrel’ is the proverbial saying that has been used by many to describe how corruption spreads. This suggests that a bad person can infect/corrupt a group of people. The story of Eve and the serpent in the Garden of Eden corroborates this notion. The serpent deceived on Eve, who went on to deceive Adam, and Adam in turn infected the entire world with sin, as the story goes. However, you are likely to read stories about rotten apples, not about rotten barrels. So what happens when the barrel is rotten? As corruption is both systemic and endemic in Nigeria, it begs the question: Is Nigeria a rotten barrel? In such a situation, where are the positive influences expected to come from? Can those who are themselves down help others up?  Can many wrongs make right?  What are the implications of tackling corruption in a rotten barrel?

According to the Organisation for Economic Co-operation and Development (OECD), corruption increases the cost of doing business; excludes the poor from public services; and, delegitimizes the State. Corruption also has adverse budgetary effects in that it leads to waste or the inefficient use of public resources. Imagine schools without chairs; hospitals without drugs; pensioners without pension; housing units without water; citizens without passports; Internally Displaced Persons (IDP) camps without food, and universities without research laboratories. Sadly, you do not have to imagine too hard. This is the reality that depicts the Nigerian State, which can be equated to the decay that occurs in a rotten barrel.

Corruption in Nigeria is pervasive and has untold consequences. The cost of corruption though topical and deserving of a lot of attention is not often discussed because it is hard to establish a direct causal link; there is a plethora of other factors that may be responsible for poor service delivery and underdevelopment in corruption-prone countries. Nevertheless, the high correlation between corruption and the pathetic state of our nation is not to be ignored.

Corruption is said to limit economic growth as it dissuades investment into the country. Researchers at the International Monetary Fund (IMF) claimed that countries, where corruption is rife, are likely to have 5 per cent less in investment than countries with lower corruption rates.  In addition, a PwC Nigeria report estimated the economic cost of corruption to be approx. $1,000 per person in 2014. The report warns that this could balloon to 37% of GDP by 2030 if corruption is not dealt with right away. This would translate to about $2,000 per person by 2030. How about the human cost of corruption? Can this cost be quantified? Perhaps a measure of corruption in body bags may drive home the point. How many people have died because there was a lack of oxygen in our hospitals? How many die from expired malaria drugs? How many fatal road traffic accidents are due to bad roads? How many deaths from severe burns owing to adulterated fuels? And the list goes on.

These figures and probable impacts are mind boggling and disturbing yet corruption continues to thrive in the land. Clearly, something is wrong! The anti-corruption strategies and tactics deployed by past and present administrations have been largely ineffective, as the focus has been on drawing attention to the bad apples only.  How then does one successfully fight corruption in a rotten barrel?

The rotten barrel notion suggests that corrupt tendencies in a person can be attributed to widespread societal influences and pressures. Citizens have been shaped by standards and customs in the society that permit dishonesty. This implies that the likelihood of being incorruptible in an environment predisposed to corruption is extremely low if not near impossible. Researchers at the University of Nottingham and Yale University found that corruption not only harms a nation’s prosperity but also shapes the moral behaviour of its citizens. The impact of corruption is more damaging when the barrel is rotten because people tend to acclimatise in the rot. Imagine stepping out of a crowded room for a while and stepping back into the room only to discover the air in the room is stale and pungent and has always been. Citizens are simply unable to link corruption to the state of their affairs, as they are also infected with the same virus. How else does one justify a corrupt politician being publicly celebrated in his constituency even though he steals from them? Or how a former Chairman of an agency charged with an anti-corruption mandate is being investigated for corruption? Ibrahim Lamorde, former Chairman of the Economic and Financial Crimes Commission (EFCC), was alleged to have fraudulently diverted over N1tn proceeds of looted funds recovered by the agency. It’s little wonder that with the recent discovery of over N13 billion in a Lagos apartment, citizens are being subjected to an episode of -Whose Money is it Anyway? Multiple interests continue to vie for ownership of the funds. Many Nigerians are now wondering whether this is a deliberate attempt to divert attention away from the money so that the real looters can get away with it.

Is the story all bleak then? Corruption is ultimately a learned behaviour and as such the fight against corruption, though multi-faceted, must be primarily focused on behavioural change strategies and interventions if it is to be sustained and effective. Nonetheless, how does one go about fixing the barrel? Is it about the apple(s) in the barrel or the barrel itself or both? Can one really be separated from the other or are both intertwined? Can a person really be separated from their culture? These are pertinent questions we must answer if we are to gain ground in the fight against corruption.

By focusing on behavioural change strategies and interventions, the fight against corruption will progressively be championed by all. Institutions, such as the home, religious institutions and schools, responsible for value reorientation and learning should be targeted. Places of learning should be specifically targeted as they are where an understanding of what corruption is in the Nigerian context and its associated risks and impacts should emanate from.  Being able to identify what corruption really is, the cost of corruption and how much of a corruption risk an individual or organisation is are good places to start.

Doyin Olawaiye is a Public Policy Manager at The Integrity Organisation, an anti-corruption training, research, advocacy and consulting organisation founded in 1995.

Reprinted from


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The Real Reason Young People Can’t Get Jobs in Africa

Youth unemployment in Africa is sky-high, and that’s a serious problem.


6.8 percent: that was July’s seasonally adjusted unemployment rate for US workers ages 18–44. For those ages 18–24, the rate was 9.5 percent. That’s a high rate for young people. But if you were 20 years old and lived in Africa, you might be thrilled with an unemployment rate like that.

Today, 60% of all those unemployed in Africa are youth. In South Africa, more than 55% of young people are unemployed. Those are staggering figures. And many who are working are underemployed: with a job in the informal sector, working only a few hours, or helping on family farms or in family businesses. They scrape by as “necessitous” entrepreneurs doing what they can to survive, often juggling multiple informal jobs.

Given that Africa has the world’s youngest population, the lack of steady, formal-sector jobs is an enormous political and economic risk factor. Unemployed youth are more likely to be criminals, may be lured into militant groups, and contribute to political unrest. With few other opportunities, the cost of engaging in harmful behaviors is lower than it otherwise would be. Economic vulnerability among the young contributes in important ways to overall social instability that frustrates economic growth.

This is not a new problem — African countries have had a tough time creating formal sector jobs for youth for decades.

Bad policies contribute to poverty in Africa

So what needs to change to fix Africa’s jobs problem? The problem of too few formal sector jobs for those who want to work is a problem of poor policies. In too many African countries, hiring and firing workers is too expensive. Governments create legal and regulatory barriers (or fail to address discriminatory social norms) that make it more difficult for employers to hire women. They restrict access to certain professions or limit the number of hours women may work. They also create barriers to firing poorly performing workers, which makes it riskier for businesses to take a chance on people with limited work experience. Youth and young women particularly tend to lose out.

As the most recent Doing Business report notes, “Low and lower-middle-income economies tend to have more rigid employment protection legislation compared to more developed countries.” These “rigidities” include things like limits on fixed-term (short-term or maybe part-time) work contracts — less than 60% of sub-Saharan countries allow for fixed-term contracts (Europe is even worse!). The legal requirement to give a worker severance pay when a job is ended may help in some cases but can have unintended consequences: it adds to the costs of hiring people, limiting the number of formal jobs created and the length of those jobs.

The region continues to rank abysmally in terms of starting a business.

For example, in Sierra Leone, an employer is required to pay 132 weeks of severance for a worker with 10 years of tenure. Ghana and Zambia both require more than 86 weeks, Mozambique requires 65 weeks, and Equatorial Guinea more than 64 weeks. This means that 5 of the top 10 countries with the highest severance payment requirements are in sub-Saharan Africa (no developed countries are in the top 10).Fixing labor laws to encourage more participation from women and young people would be one important way to promote job creation. It’s also critical to improve the overall business environment and to support conditions that encourage, not discourage, business creation and enable entrepreneurs to flourish.

Here, there’s a huge scope for improvement in sub-Saharan Africa. The region continues to rank abysmally in terms of starting a business, enforcing a contract, registering property, trading across borders, getting credit, protecting minority investors, and getting access to electricity. While some countries are taking steps to make it easier to do business overall, African countries continue to make it too cumbersome and too expensive to start, run, and then, if needed, terminate a business. The result is a dearth of jobs for all Africans but especially for youth.

Is There Hope for Improvement?

It’s this kind of change from within that holds the most promise for Africa’s millions of unemployed youth.

Yes, so long as barriers to trade within Africa fall. In many countries, service industries are expanding. Economies still rely heavily on commodity production (oil, gas, gold, timber, etc.), but this is changing. More diversified economies are helping to meet domestic and international consumer needs for goods like processed agricultural products, cosmetics, textiles, and clothing. And African entrepreneurs, like entrepreneurs everywhere, are on the lookout for new and profitable opportunities.Interested in seeing what some of Africa’s leading entrepreneurs are up to? They’re working in telecom, fashion, marketing, and branding for leading multinationals and the food industry, among other things. As they succeed, one hope is that they’ll push for more changes to African economies, creating a more vibrant, open, and competitive private sector. It’s this kind of change from within that holds the most promise for Africa’s millions of unemployed youth.

Reprint from Learn Liberty

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A Book Is a Tool, Not a Trophy


I once had coffee with a guy who told me that he read Rich Dad, Poor Dad six times. He said it with such pride too. I was really excited since this was one of the first resources to influence me to think about financial literacy.

It’s been over ten years since I’ve read the book, but I still remember a few of the core concepts. So I started to discuss Robert Kiyosaki’s concept of assets as income-generating resources versus the traditional notion of “things you own,” and his mind was blown. He never heard the idea before. This surprised me because it was one of the main points of the book and it was repeated over and over. No big deal. Maybe that concept wasn’t important to him. After a few minutes of discussion, however, it was clear that he couldn’t recognize anything from the book. Again, no problem. Maybe he doesn’t remember the details, but he has an emotional memory of being impacted by it.

In a Relationship with Books

I have no opinions about that one guy’s relationship to that one particular book, but our conversation made me think about the purpose of reading books and how that might differ from the social rewards we sometimes get from claiming to have read certain books.

In How to Talk About Books You Haven’t Read, Pierre Bayard makes a fascinating distinction between internal (psychological) and external (physical) libraries:

In truth we never talk about a book unto itself; a whole set of books always enters the discussion through the portal of a single title, which serves as a temporary symbol for a complete conception of culture. In every such discussion, our inner libraries — built within us over the years and housing all our secret books — come into contact with the inner libraries of others, potentially provoking all manner of friction and conflict…For we are more than simple shelters for our inner libraries; we are the sum of these accumulated books. Little by little, these books have made us who we are, and they cannot be separated from us without causing us suffering.

I see the aim of reading as the construction of an inner library. The books in our outer library provide the tools for construction. When we face a problem, set a goal, or have a need, what matters most is our ability to retrieve something useful, relevant, or pleasant from the inner library we’ve gradually built through our studies. In this sense, books are not status symbols, they’re soul stirrers. We don’t read them because we wish to brag about ourselves. We read them because we wish to build ourselves.

The Brag Shelf

A book is not a trophy. It’s a tool for personal transformation.

Wherever learning resources are shared, there’s usually at least one person who’s quick to say something like “oh, I’ve already read that book” or as in the case I mentioned earlier “I’ve read that book multiple times.” My question is, can you say something intelligent about it? Can you use the ideas to create a result that matters to you? Can you advance the discussion started by that book with your own ideas? The purpose of reading a book isn’t to say you’ve read it.A book is not a trophy. It’s a tool for personal transformation. For Kafka, “A book must be the axe for the frozen sea inside us.” Education isn’t a name-dropping contest. It’s a paradigm-shifting process. It’s an opportunity to have our perspectives and presuppositions challenged from every angle.

If the process of scanning your eyes across the words on a page isn’t contributing to personal transformation, start over. If the process of letting sound waves pass through your ears isn’t leading to critical reflection, start over.

Reading isn’t about how much technical detail you remember nor is it about how much time you spend on books. It’s about what you’re able to retrieve from your inner library during those moments of need when no book, author, thought-leader, or friend is within grasp.

Keep reading great books. Keep sharing great books. Keep taking beautiful photos of great books. Keep tweeting and talking about great books. But don’t forget to let those books disturb you, provoke you, and transform you.

As Mortimer J. Adler wrote, “In the case of good books, the point is not to see how many of them you can get through, but rather how many can get through to you.”

Reprinted from

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The Best Fantasy Has Roots in History

By James Walpole

This week I came across a popular Reddit thread exploring how Game of Thrones author George R.R. Martin created his fictional land of Westeros.

It looks remarkably like England.

Landmass shape isn’t the only thing Martin borrowed from the British Isles. The whole history and characterization of the book/show bears strong impressions from England’s War of the Roses. These similarities lend the story a remarkable sense of realism and depth that you might normally find in one of Shakespeare’s histories.

This set me to thinking. The best fantasy I’ve read – the kind that really sticks with me – feels like it was deliberately made to be like our world.

The many nations and cultures of Robert Jordan’s Wheel of Time are curious but obvious remixes of different cultural periods of our world. The Lord of the Rings’saccount of hobbits ties itself to the pre-history of the pre-history of man. The Chronicles of Narnia embeds itself within a medieval worldview and classical mythology, albeit with talking animals, that parallels many of the practices and beliefs of our own.

If these stories – some of the most well-regarded fantasy writing of all time – root themselves in history, then we had better notice why.

It turns out that we need familiarity in our most escapist fiction. And we need to believe (or be reminded) that the fantastic is not so distant from our history and our experience.

Fantasy doesn’t, after all, help us escape our world. It takes us more deeply into it.

I doubt very much if it is possible to create a really successful fantasy story in America or Europe that does not have some medieval elements. The Middle Ages are the prehistory of the West. Our founding myths are myths of knights and saints – the individualistic hero tales of good vs. evil, dragons and holy men. Similarly, successful fantasy in a place like Japan will likely hearken back to the samurai age.If we lived at a different time and a different place, the archetypes we use might look different. But they would be consistent with what made up our culture and with the same struggles that affect us.

You’ll rarely find a fantasy story so different and distant from human history that really succeeds in embedding itself in our memories. You won’t find people lining up for a fantasy based in a world without swords, or even one based in our own world a hundred years from now. You might have science fiction, but you would not have a good fantasy or a memorable one.

In short, good fantasy make us think “the world could be like this.” The best fantasy makes us think – on some level – that “it should be like this.” Fantasy doesn’t, after all, help us escape our world. It takes us more deeply into it.

Reprinted from

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A Libertarian Paradise in Nigeria

By Daniel Mitchell

Whenever someone accuses me of being too dogmatically opposed to government, I tell them that I only got 94 out of 160 possible points when I took Professor Bryan Caplan’s Libertarian Purity Quiz.

That’s barely 70 percent, which makes it seem like I’m some sort of squishy moderate even though I have a nice list of government departments and agencies I want to abolish.

And whenever someone accuses me of being insufficiently opposed to government, I point out that my score on Professor Caplan’s quiz is good enough – albeit just barely – for me to be categorized as a hard-core libertarian.

So does this mean I’m a principled moderate, if such a creature even exists?

Actually, it simply means that I’m not an “anarcho-capitalist,” which is the term for people who think all government can be abolished (sort of like the “more libertarian than thou” character in this amusing list of the 24 types of libertarians). If you want to get a perfect score on the Libertarian Purity Quiz, you have to favor abolishing the Department of Defense, the court system, and every other vestige of government.

That being said, I like that there are people pushing the envelope for more liberty. And I tell my anarcho-capitalist friends that we should all work together to get rid of 90 percent of government and then we can quibble over the rest.

Moreover, when I spoke earlier this year at the conference celebrating the 2nd-anniversary of Liberland, I pointed out that there are plenty of examples of how the private sector successfully carries out functions that most people think can only be handled by government.

Which leads me to the focus of today’s column. The U.K.-based Guardian has a fascinating story about a very successful Nigerian church.

The Redeemed Christian Church of God’s international headquarters in Ogun state has been transformed from a mere megachurch to an entire neighbourhood, with departments anticipating its members’ every practical as well as spiritual need. A 25-megawatt power plant with gas piped in from the Nigerian capital serves the 5,000 private homes on site, 500 of them built by the church’s construction company. New housing estates are springing up every few months where thick palm forests grew just a few years ago.

To most people, this story is probably interesting because of what it says about Nigeria and religion.

But since I’m a wonky libertarian, what grabbed my attention was the fact that the church – for all intents and purposes – was building an anarcho-capitalist society.

Education is provided, from creche to university level. The Redemption Camp health centre has an emergency unit and a maternity ward. …“If you wait for the government, it won’t get done,” says Olubiyi. So the camp relies on the government for very little – it builds its own roads, collects its own rubbish, and organises its own sewerage systems. And being well out of Lagos, like the other megachurches’ camps, means that it has little to do with municipal authorities. …according to the head of the power plant, the government sends the technicians running its own stations to learn from them. …the camp’s security is mostly provided by its small army of private guards in blue uniforms.

To be sure, it’s not a purely anarcho-capitalist society. The Nigerian government still has ultimate power to enforce laws.

But from a practical, day-to-day perspective, the church has set up a private city governed by private contract and voluntary cooperation. Sort of a Nigerian version of Galt’s Gulch.

And it’s definitely worth pointing out that it is far more successful than traditional Nigerian cities (and it sounds like it works better than many American cities!).


Daniel J. Mitchell is a Senior Fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending.

Republished from International Liberty.

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