Power & Market

In a January 14 article for Vox, Ian Millhiser discusses a new proposal in the Harvard Law Review designed to accomplish four things:

(1) a transfer of the Senate’s power to a body that represents citizens equally; (2) an expansion of the House so that all citizens are represented in equal-sized districts; (3) a replacement of the Electoral College with a popular vote; and (4) a modification of the Constitution’s amendment process that would ensure future amendments are ratified by states representing most Americans.

 The scheme consists of dividing up the District of Columbia into more than one hundred new tiny states so as to drastically increase the number of leftist-controlled states so as to push through a wide variety of new Constitutional amendments.1 

Milhiser is enthusiastic, since he believes the US electoral system is too "undemocractic" and that the system must be overhauled "so that the United States has an election system 'where every vote counts equally.'" 

[RELATED: Stop Saying "We're a Republic, Not a Democracy" by Ryan McMaken]

Milhiser's concept of "unequal" is illustrated more clearly when he calls the US Senate "ridiculous" because it is a system "where the nearly 40 million people in California have no more Senate representation than the 578,759 people in Wyoming."

So now we have arrived at the heart of the matter. 

Milhiser contends Californians are underrepresented in Washington—or more likely he thinks leftists are underrepresented, given the context of the piece—because Wyoming and California have equal representation in Congress. 

This, we are supposed to believe, somehow leaves millions of Californians disenfranchised. 

Common sense, however, strongly suggests Californians—or at least the politicians who claim to represent them—are quite well represented in Washington and wield quite a bit of power. Let's look at some numbers:

California has fifty-three votes in the US House of Representatives while Wyoming has one. 

As a percentage of the full House, California's delegation makes up 12 percent of all votes while Wyoming's makes up 0.2 percent. 

In fact, California's representation in the House is so large that California House members outnumber members from an entire region of the US: namely the Rocky Mountain region. If we add up all eight states of the Mountain West (Nevada, Utah, Arizona, Montana, Idaho, Wyoming, Colorado, and New Mexico) we come up with only thirty-one votes. Moreover, many of these states have split delegations (as with Arizona and Colorado) and rarely vote as a unified group. California, on the other hand, has only seven Republican House members out of fifty-three, meaning that the state's delegation tends to reliably vote together.

California even enjoys a sizable advantage in the electoral college as well. It is true that the electoral college formula evens things up somewhat. California representatives wield more than 10 percent of all electoral college votes, and Wyoming enjoys only 0.6 percent of all votes. Now, if the Rocky Mountain region were to vote together for a certain candidate, it could theoretically, almost equal the power of California. But, the region doesn't vote together, with Colorado, New Mexico, and Nevada often going for one party while the rest of the region goes for another. Thus, California, because its electoral votes are centralized, brings more power to presidential elections than the entire Rocky Mountain region.

So, while it's true that Wyoming's two votes in the US Senate make it easier for a Wyoming-led coalition to veto legislation that favors California, the same can be said of California in the House. While California and Wyoming theoretically have equal power in the Senate, Wyoming has essentially no power in the House, and could not possibly hope to do much to overcome opposition from California House members. The fact that voters in Wyoming have more US senators per person hardly places people with California-type interests at the mercy of people with Wyoming-type interests.

Essentially, the system as it now functions places significantly more veto power in the hands of California in the House. At best, though, Wyoming has only an equal veto to California in the Senate. Veto power, of course, is one of the most important aspects of US legislative institutions, since it is designed to help minority groups protect their own rights even when lacking a majority. This is the philosophy behind the Senate's filibuster, and the philosophy behind the bicameral legislature. The purpose is to provide numerous opportunities for minorities to veto legislation pushed by more powerful groups. 

The importance of protecting minority rights, of course, is a mainstay of the ideology we used to call "liberalism"—the idea that people ought to enjoy basic human rights even when the majority doesn't like it. 

All that is out the window, however, where progressives and other leftists suspect they are in the majority, in which case the protection of minority groups is null and void. Suddenly, the Democratic majority is the only thing that matters. 

Had rank majoritarianism won the day in the past, Indian tribes, Catholics, Quakers, and Japanese Americans would have all been extirpated or run out of the country a century ago. But the sort of prudence that put some limits on the power of the majority in the is now thoroughly unfashionable on the Left. The Left now strains to grasp the opportunity to rid themselves forever of even what small amount of legislative resistance can be offered by the hayseeds in flyover country. 

The fact that California gets more than fifty times the votes of North Dakotans isn't enough for progressives. They must also stamp out what limited influence North Dakota has in the Senate as well.  

This sort of thinking suggests that in order to make the US more "democratic" large minorities of voters—voters with specific economic and cultural interests that differ from those in other regions—ought to be rendered essentially powerless.

All that said, I endorse the plan from the Harvard Law Review Milhiser is pushing. It undermines the idea that the US's current state boundaries are somehow sacrosanct and that enormous states with millions of people are a perfectly fine thing. The US and its member states are far too large, and could use a thorough dismembering. But Milhiser should be careful what he wishes for.

• 1. I should note there's nothing wrong with dividing up the US into a large number of small states. It's just that the scheme ought to encompass the entire country rather than just a tiny of part of it with the goal of helping a single political party. Indeed, most US states are far too large and ought to be broken up into far smaller pieces: https://mises.org/wire/if-american-federalism-were-swiss-federalism-there-would-be-1300-states

In the “crypto” world, there are theorists mistakenly applying Irving Fisher’s equation of exchange without knowledge of Austrian critiques of the idea. Understanding why Austrian economists are critical of MV = PT might help these theorists avoid these errors in reasoning. (These theorists include Kyle Samani, Chris Burniske, and Vitalik Buterin among others, hereafter referred to as "crypto velocity theorists.")

Quick Overview of Terms in the Fisher Equation of Exchange

In the equation, M = ​the money supply, V = ​the velocity of money, or the average number of times a currency unit changes hands per year, ​P = the average price level of goods during the year, and T = an index of the real value of aggregate transactions​. In the MV = PQ formulation, Q = an index of real expenditures and P × Q = nominal GDP.

How Are Crypto Velocity Theorists Misapplying the Theory?

Crypto velocity theorists seem to believe that the current structure of crypto tokens (non-bitcoin ones) has a velocity that is too high. They assert that somehow by using the protocol to force holding or "lock up" periods the velocity of the token can be slowed down, enabling more sustainable value capture for a crypto protocol. There are various "tokenomics" ideas being proposed to achieve this slowdown in velocity, such as profit share mechanisms, staking functions to lock up the token, or gamification to encourage holding.

But are these mechanisms sustainable in the longer term? Distinguished against these ideas is the simple concept of bitcoin, a token and monetary network created to replace fiat money. Bitcoin can justifiably hold a place in a person’s cash balance under a theory of speculative demand based on its monetary characteristics. In this case, the more relevant reference is Carl Menger and the argument around marketability or saleableness, not the quantity theory of money and associated equation of exchange.

How Do Prominent Austrian Economists Critique the Quantity Theory of Money?

Austrian economists reject the quantity theory of money, which is too mechanistically focused on the nominal quantity and not on real subjective valuations by individuals. Murray Rothbard and Joseph Salerno point out many problems.

In Man, Economy, and State, Rothbard points out a serious conceptual flaw:

At any one time there is a given total stock of the money commodity. This stock will, at any time, be owned by someone. It is therefore dangerously misleading to adopt the custom of American economists since Irving Fisher's day of treating money as somehow “circulating,”…There is, actually, no such thing as “circulation,” and there is no mysterious arena where money “moves.” At any one time all the money is owned by someone, i.e., rests in someone's cash balance.

In other words, Rothbard shows that velocity is a rather meaningless idea. Further, he points out that different goods cannot be meaningfully added together, demonstrating the absurdity of doing so:

How can 10 pounds of sugar be added to one hat or to one pound of butter, to arrive at T? Obviously, no such addition can be performed, and therefore Fisher's holistic T, the total physical quantity of all goods exchanged, is a meaningless concept and cannot be used in scientific analysis.

Joseph Salerno levels his own critique against the idea of the quantity theory of money also, identifying where it is vacuous in his article "A Simple Model of The Theory of Money Prices":

Let’s begin with the Quantity Equation as conventionally stated: MV = PQ. Our simple model above reveals that the real action is on the right side of the equation.…The mechanical passing of a specific sum of money from one hand to the next in exchange, that is, “spending,” is completely governed by the money price that has been antecedently established by the exchanging parties. Thus the money spent is merely an outcome of the pricing process and in no sense a causal factor. In other words, the aggregate flow of money spending is determined by the value of money and not the other way around.

Salerno demonstrates that individuals' subjective valuations drive prices all along, not the quantity of money in a mechanistic sense.

So, in the end, "Tokenomics" and attempting to "game" token velocity downward to satisfy an erroneous Fisher equation of exchange is misguided. We should aim to understand bitcoin and cryptocurrencies from an Austrian monetary theory standpoint. Menger's On The Origins of Money and Ammous Saifedean’s The Bitcoin Standard are more relevant places to begin. Saleableness is more important than velocity.

Sean Stevens of Heterodox Academy and Professor Mitchell Langbert of Brooklyn College have a new article published by the National Association of Scholars. They examined professors' self-identified political views, party affiliation, voter registrations, and FEC (Federal Election Commission) records of political donations. Their research appears to confirm that college professors in fact skew overwhelmingly left-wing in their political views, even more than many of us thought. If they are even mostly correct, the (left) liberal professor stereotype is absolutely grounded in reality rather than caricature. 

Professor Langbert writes:

Sean Stevens and I have been working on a study of 12,372 professors in the two leading private and two leading public colleges in 31 states (incl. DC) that make registration public (mostly closed-primary states).  The National Association of Scholars has posted our initial findings on their blog. We cross-checked the registration against the political donations.  For party registration, we find a D:R ratio of 8.5:1, which varies by rank of institution and region.  For federal donations (from the FEC data base) we find a D:R ratio of 95:1, with only 22 Republican donors (compared to 2,081 Democratic donors) out of 12,372 professors.  Federal donations among all categories of party registration, including Republican, favor the Democrats: D:R donation ratios for Democratic-registered professors are 251:1; for Republican-registered professors 4.6:1; for minor-party-registered professors 10:0; for unaffiliated professors 50:1; for non-registered professors 105:1. We include a school-by-school table that facilitates comparisons.

These ongoing revelations about the reality of higher education in the US should give pause to every parent writing big checks for elite school tuition so Johnny or Jenny can fulfill their dreams. Think twice before blindly sending your children (or yourself) to ideological indoctrination centers. A university education may well be worthwhile, but only if students and parents alike have their eyes wide open.

Despite smears and scare tactics from the Virginia law enforcement and the corporate press, thousands of protestors have landed in the capital of Old Dominion in response to an anti-gun agenda being pushed by the new solid-blue state government. While large protests aren’t particularly unique in American politics, this particular event has captured the media’s imaginations in no small part due to the fact it consists of their favorite sort of villain: largely white, Trump-supporting, armed men. They can’t help but salivate at the idea of it descending into the tragic chaos that occurred in Charlottesville in 2017.

To a certain degree, the showdown in Virginia is really only superficially about guns. It also represents the valid anxiety that has arisen as the state’s rural population finds itself increasingly powerless in the face of rapidly expanding political power wielded by high-population centers.

Of course, it’s not surprising that the same commentators that often condemn—foolishly—economic gentrification, openly cheer political changes that threaten the way of life of families that have lived in an area for, in some cases, hundreds of years.

In a rare instance of usefulness, David Frum tweeted out today this chart illustrating the political trends in the state:

What the gun rally in Richmond is about. pic.twitter.com/WCpl0OjAIO

— David Frum (@davidfrum) January 20, 2020

So what we see playing out in Virginia is, as Jeff Deist has frequently noted, the question of what happens to politically vanquished people.

Of course, to the Frums the answer is obvious. If your side doesn’t have the ballots, it’s time to submit or pay the price.

Message of the day in Richmond. One side has more ballots. The other side only bullets. And as Lincoln wrote: "Among free men, there can be no successful appeal from the ballot to the bullet; and that they who take such appeal are sure to lose their case, and pay the cost." https://t.co/6gr0VzY39E

— David Frum (@davidfrum) January 20, 2020

Of course, Frum’s evoking the only American president to wage war against an American nation makes sense given his long and bloodstained support for centralized power and the American empire. To others who do not share his cavalier dismissal of life and liberty, the question deserves more serious analysis than simply asking, What Would Abe Do?

In Virginia, we see two major contributing factors to its new progressive domination.

One, a massive influx in non-native-born Virginians due to the massive growth of the North Virginia economy. While it’s worth noting that much of this growth is the direct byproduct of the growing federal leviathan—both in terms of direct state employment and companies that relocate there to ensure better access to the dollars that come with it—the state connection here isn’t particularly important to the larger trend. After all, we see similar trends in non-beltway adjacent red states such as Texas, Florida, and Tennessee, where companies are relocating for better tax environments.

Two, the high-growth urban areas have also made Virginia one of the most schooled states in the country. The state is now sixth in the country in terms of percentage of residents with a bachelor’s degree or higher. While an educated population would once be considered a strength, the devolution of higher education means that such rankings now have some correlation with Americans favorable to the political left.

It is not a coincidence, for example, that Millennials are the most schooled generation America has seen—and also the ones most open to socialism. Further, when it comes to cultural issues—such as political correctness, abortion, or acceptance of drag queen story time—it is white college-educated Americans, not immigrants, who are the most out of line with rural Americans.

While Virginia’s unique history, as the native country of most of the most famous American founding fathers, along with being the former capital of the Confederacy, adds a level of symbolic significance that may escalate these tensions superficially, the divide on display today is likely to be repeated as otherwise-red states continue to see their cities grow.

It is not difficult to imagine, for example, the Atlanta metro area amassing large enough of a voting population to cancel out the votes of the rest of the state. In New York, we already see how a political majority in the city dictates the politics for everyone else.

What’s the solution, then? Well if the goal is having governments reflect the ideology of its residents—the true aim of democratic political self-determination—then the goal should be to add and alter states as need be. Allow northern Virginia to serve the interests of its solid blue base. Allow southern Virginia to defend the rights and cultural norms of southern Virginians.

The alternative is to continue our current democratic imperialism—which runs the risk of escalating to the point where today’s protesters show why it is so important to stand up for their right to bear arms.