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Post 20

Thursday, December 13, 2007 - 2:47pmSanction this postReply
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Jordan:

Predatory pricing is extremely difficult to pull off successfully and even more difficult to discovery.


And it's a stupid term to use. All pricing is predatory, the point of placing a price on a product is to be competitive, so that's why it's pretty much impossible to prove because it is the very definition of competition.

I would reword your first factor as: High enough barrier of entry (including the cost of competing with Company (A)) would yield greater deterrence than incentive for someone else to enter that market.


But Jordan, even if they have a monopoly and there is a high barrier to entry, you still can't keep raising the price in perpetuity because eventually the cost to entry is worth it to get a market share of a commodity that has risen so much in price. And if every time Company (A) after raising its price too high after establishing a monopoly, a new competitor enters the market, and they resort back to selling below cost, then the consumer still benefits from having a cheap product during that price war. It's still not a valid reason to support anti-trust laws as no matter what happens, the threat of competition is always there. I'm surprised you didn't learn that in your study of economics?

I would reword your second factor as: High enough demand elasticity to the point where consumers won't turn to substitutes despites Company (A)'s supracompetitive pricing over some set period of time. This is often referred to as a SSNIP (pronounced "snip") test, which stands for Small but Significant and Non-transitory Increase in Price.


But Jordan, who benefits from this supracompetitive (which I would think you mean price war) pricing? The consumer. They get a product cheaply, cheaply than they could ever get, and when it goes up in price it can't go up that high because there is no such product that is so inelastic in its demand that no substitution would take place nor would it ever be too high a barrier an entry for another company to enter. While certainly the price can end up being higher with a monopoly, it is not a limitless ceiling to that price due to a monopoly. Never for any product. There's always a price that just gets up high enough for a competitor to enter a market. And there are many huge corporations that are conglomerates that can compete with another conglomerate that operate in multiple markets.

Take for example Sony and Microsoft. Both conglomerates, both selling products in similar markets. Neither one of them could start selling below cost to the point of driving the other out of business since both have enormous resources to draw from. It's rumored Sony is selling the PS3 game console below cost, but it may be because it's hoping to grab a market share of Blu-ray movie sales and videgame software sales. They're not doing that just to try and drive out Microsoft's XBOX from the market to turn around a sell the PS3 at a high price afterwards.
(Edited by John Armaos on 12/13, 2:56pm)


Post 21

Thursday, December 13, 2007 - 3:59pmSanction this postReply
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Hi John,

But Jordan, even if they have a monopoly and there is a high barrier to entry, you still can't keep raising the price in perpetuity because eventually the cost to entry is worth it to get a market share of a commodity that has risen so much in price.
Oh I totally agree.  But if Company (A) is clever enough, it will raise the price just before it would reasonably risk a new competitor entering the market. I never suggested that Company (A) would rise prices higher and higher and higher ad infinitem. 

...the threat of competition is always there. I'm surprised you didn't learn that in your study of economics?
Sometimes that threat is remote. I trust you learned that in your study of economics. (Please resist snide comments.)
But Jordan, who benefits from this supracompetitive (which I would think you mean price war) pricing?
No. I mean pretty much the opposite. Supracompetitive pricing means pricing above the price that would be set were the market competitive. Consumers subject to supracompetitive pricing lose out.  It's sort of the antithesis of a price war.  It's when competitors aren't around to smack down the high-pricer.

Jordan


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Post 22

Thursday, December 13, 2007 - 7:42pmSanction this postReply
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but why should some regulator care to intervene?  he knows better?  he has a right to dictate what someone does with their property?  so we are left with:

1)  A theoretical problem that has almost never actually happened
2)  Regulators who can't possibly know enough factors to make the correct choices for other people choose to do so anyway
3)  Government force being used to dispose of people's property by force

and this leads to the reality of:

antitrust law serves no one other than those who wish to use it for corrupt purposes


Post 23

Friday, December 14, 2007 - 10:33amSanction this postReply
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Kurt,

Who said anything about a regulator intervening? Are you referring to my post-script? Predatory pricing provides a private right of action. That is, a private party -- as opposed to the government -- who thinks it's been unjustly injured by another private party's predatory pricing may sue that other. And yeah, predatory pricing is pretty much a dead letter law, but that shouldn't mean that every other antitrust law is poop, right?

Jordan


Post 24

Friday, December 14, 2007 - 1:38pmSanction this postReply
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how could you sue a competitor for competing?  They did not actually defraud you - so absent the regulation/law, no one would be able to enforce such a tort because no contract was violated.

and yes, all anti-trust law is invalid for exactly the same reason.


Post 25

Friday, December 14, 2007 - 5:11pmSanction this postReply
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Kurt,
how could you sue a competitor for competing? 
That's not what antitrust suits are about.  They're more like suing a competitor for cheating.  That last sentence probably warrants a new post.
 .... no one would be able to enforce such a tort because no contract was violated.
What are you saying here? Torts are civil wrongs that are extra-contractual. They are not enforced. And contracts are not needed for tort claims to succeed.
and yes, all anti-trust law is invalid for exactly the same reason.
Which reason is that? Not all other antitrust laws are dead letter.

Jordan


Post 26

Monday, December 17, 2007 - 6:18amSanction this postReply
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I am saying that they are not cheating - they are a fabrication used by government to wield a club on business.

The laws are invalid because they are immoral, not because they are not enforceable - you can enforce lots of invalid laws if you want to.


Post 27

Monday, December 17, 2007 - 11:07amSanction this postReply
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Hi Kurt,

some of those antitrust laws allow for a *private* right of action. It's not the government wielding the club. But maybe you mean that the government wields the club simply by virtue of making these antitrust laws and by allowing private entities to redress their grievances under those laws. If so, I understand your point.

Still, antitrust laws exist to squash cheating; they do not exist to squash competition.

I think it's an interesting question whether such "cheating" is unethical in the first place, and even if it is, whether the government should step in to help right the wrong.

Jordan

Post 28

Monday, December 17, 2007 - 4:44pmSanction this postReply
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For the love of god Jordan, make your point already, the suspense is killing me! In all seriousness, I'd be interested in hearing your take on the matter, since up till now it appears you've been playing devil's advocate. I would even encourage you to write an article on the subject if you have time.

-JF-


Post 29

Monday, December 17, 2007 - 6:08pmSanction this postReply
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Jordan,

Still, antitrust laws exist to squash cheating; they do not exist to squash competition.

Have you ever heard of Melco Industries, Inc. (Melco Embroidery Systems)? That isn't what happened to them. They were forced to break up the company simply because they held too much market share. No "cheating" involved, unless having more customers than the competition is "cheating." 

Or how about Detroit Edison, the electric company?  When I was a child, the electric company would give consumers free light bulbs when they brought back their old, burned out bulbs. My mom would save old bulbs all year long, and then take them all back at once for new ones. 

Some cranky old bastard who owned a hardware store (that, of course, sold light bulbs) filed an antitrust, unfair competition suit and won.  Consumers are now forced to pay for light bulbs.  Delighting consumers with free household supplies is "cheating?"   Did the cranky old hardware owner have a "right" to a share of the market?

The list of antitrust horror stories is long.   Theory is all fine and good, but the proof is in it's practice.


Post 30

Monday, December 17, 2007 - 7:35pmSanction this postReply
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Hi Teresa,

No, I have not heard of Melco's or Detroit Edison's antitrust suits. Please provide links if possible. But I doubt they were squashed merely for mere competition, as the antitrust law (at least on a federal level) explicitly restricts activities that injure competition -- not that injure competitor, mind you -- but competition.
The list of antitrust horror stories is long.   Theory is all fine and good, but the proof is in it's practice.
I definitely agree! Antitrust history is a sordid mess.   Maybe I'll pop out some example cases of antitrust cases that were justified. 

Jordan


Post 31

Tuesday, December 18, 2007 - 3:03amSanction this postReply
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Oh, believe me, I looked.  I couldn't find anything regarding Melco, but I remember the case from over 20 years ago as I've been in the business at least that long (had to do with selling supplies as well as equipment and software).   The DTE case is over 40 years old.

I look forward to justified cases you may be able to site, but if you use Microsoft, I'll barf, for sure.


Post 32

Tuesday, December 18, 2007 - 10:05amSanction this postReply
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but if you use Microsoft, I'll barf, for sure.
LOL. Time permitting, I'll poke around for some nice cases.

Jordan


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Post 33

Tuesday, December 18, 2007 - 4:21pmSanction this postReply
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Jordan:

Maybe I'll pop out some example cases of antitrust cases that were justified.


I won't be holding my breath.

The problem always Jordan is the government cannot act as central economic planners and expect the markets to be efficient. They can't predict how markets will behave, how innovation will play out, where there was once not a substitution to a product hundreds of options opened up, where there was no such thing as a computer market because there was no such thing as a computer, the government, nor you or I, can behave as philosopher-kings, pretending to know we have all the known possible variables to competition and the free market. No one does. It's an extremely complex system with a myriad of variables each influencing each other, and throwing technology and innovation into the mix, then it becomes an impossibility to know the future outcomes of markets. I don't trust my government to provide me healthcare or a pension plan, but now Jordan you are expecting me to trust them to be economic Czars over one of the most complex and unpredictable systems known to man? I might as well trust them to change the weather (oh wait some people who are anthropogenic global warming proponents actually do trust our government to change the weather! Silly me)

If you do trust them on the grounds they can know what is best for us, then there is no more any moral repudiation to economic central planning, there's nothing to distinguish the argument the government understands the marketplace from Stalin's justification for his "Five Year Plans".

some of those antitrust laws allow for a *private* right of action. It's not the government wielding the club. But maybe you mean that the government wields the club simply by virtue of making these antitrust laws and by allowing private entities to redress their grievances under those laws. If so, I understand your point.


Jordan, the private citizen uses the resources of the government's club. The government always wields the club when it comes to using the courts. So you trying to distinguish anti-trust litigation as a private act is absurd. There is no difference. A private citizen can use a myriad of unjust laws at his disposal to usurp another private citizen's rights but he enjoys government enforcement of that usurpation. So what do you mean it's a private right of action with the government not wielding the club?

And exactly what are the moral justification to a competitor seeking damages from competitive pricing? I don't understand that Jordan, did that competitor have an entitlement to operate in that market? If so then what exactly is your view of man's rights? That man has a right to be entitled to a farm that makes money?


They're more like suing a competitor for cheating.


What do you mean cheating? How do you cheat someone you don't have any contractual agreement to? You mean competing?

I originally said:

...the threat of competition is always there. I'm surprised you didn't learn that in your study of economics?


Jordan responded:

Sometimes that threat is remote. I trust you learned that in your study of economics. (Please resist snide comments.)


I didn't mean to be snide Jordan but I don't understand your point? You are saying there is a degree to competition, sometimes markets are very competitive, sometimes they're not as competitive, ok so what? The point is there is no market that has no competition or at the very least no threat of competition. So why are you arguing for anti-trust legislation? So why not force companies existing in a very competitive market to start operating in a less competitive market by changing their product? How about make me stop operating in the hotel/restaurant business and open up a Gaming Console company? I could even have the government make Microsoft and Sony give me some start-up money to start such a company. Is that any different a moral justification than anti-trust legislation?

People don't have a right to exist in a highly competitive market, they do have the right to compete the best that they can according to their own abilities free from oppression. Innovation, not governments, always squashes monopolies.


(Edited by John Armaos on 12/18, 4:59pm)


Post 34

Wednesday, December 19, 2007 - 3:22pmSanction this postReply
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Hi John,

I don't trust the government much at all. I also don't draw a strict line between law-making and economy-influencing. When the government identifies and enforces a right, there is (dare I say) always an economic effect.

Anyway, antitrust concentrates on what is happening in a market.  Antitrust is not supposed to be speculative (unlike the Federal Reserve). Government and non-government economists alike often have a reasonable grasp on what some market is up to, despite the complexity involved.  Whether the government is best at curbing naughty behavior in a market -- rather than just leaving the market alone -- is an empirical question.
 So what do you mean it's a private right of action with the government not wielding the club?
Lemme back up a second. Sometimes the the government sues someone for something. Sometimes a private entity sues someone for something. The latter case is called a "private right of action" in legal jargon. If only the government can sue someone for something, then there is no private right of action for filing such a suit.

And exactly what are the moral justification to a competitor seeking damages from competitive pricing?
Nothing. That's not what antitrust laws redress. Merely competitive pricing is a-o-k under antitrust law.
How do you cheat someone you don't have any contractual agreement to? 
That's what tort law is all about.  
You are saying there is a degree to competition, sometimes markets are very competitive, sometimes they're not as competitive, ok so what? The point is there is no market that has no competition or at the very least no threat of competition. So why are you arguing for anti-trust legislation?
My point was that coercive monopolies (and other antitrust villains) are possible, even maintainable. If such monopolies are bad, then what's the best way to fix 'em? Market forces or government intervention? Again, that's really an empirical question. 

I'll try to get a new thread going on this.

Jordan


Post 35

Wednesday, December 19, 2007 - 4:13pmSanction this postReply
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Jordan:

I don't trust the government much at all. I also don't draw a strict line between law-making and economy-influencing.


Then what distinguishes you from a Marxist?

When the government identifies and enforces a right, there is (dare I say) always an economic effect.


Yes because a law that enforces rights as a corollary leads to economic prosperity. But that is a corollary not the primary reason to a just and proper law.

Anyway, antitrust concentrates on what is happening in a market.


You trust the government very little, but you do trust them to understand what is happening in a market? I find that to be remarkable.

Antitrust is not supposed to be speculative (unlike the Federal Reserve). Government and non-government economists alike often have a reasonable grasp on what some market is up to,


No they absolutely do not. I wholly reject this premise. Nor does anyone have enough of a grasp to be able to influence the economy through force. You can't tell me anyone can predict how innovation will play out. Unless you are omniscient and can predict what new markets and products will be created by innovative minds.


Whether the government is best at curbing naughty behavior in a market -- rather than just leaving the market alone -- is an empirical question.


I completely and wholeheartedly reject competition as being described as "naughty behavior".

Lemme back up a second. Sometimes the the government sues someone for something. Sometimes a private entity sues someone for something. The latter case is called a "private right of action" in legal jargon. If only the government can sue someone for something, then there is no private right of action for filing such a suit.


It is only justified to sue someone through a civil action if someone suffered property damage. You can't say people suffer property damage if they couldn't compete in a market. I'm sorry but your treading on thin water here.

Also the government CAN sue someone through anti-trust legislation without waiting for a private action.

I wrote:

And exactly what are the moral justification to a competitor seeking damages from competitive pricing?


Jordan responded:

Nothing. That's not what antitrust laws redress. Merely competitive pricing is a-o-k under antitrust law.


NO, that is not the case. Anti-trust laws describe certain aspects of competition as "predatory" but in fact predatory means "competitive". And anti-trust legislation includes breaking up monopolies even if the monopoly came about on its own through free market forces because a company was "competitive". Companies also create new markets where none existed before, such as Computer Operating Systems, when a company introduces a brand new product in the marketplace never seen before, do they have an unjust monopoly? Anti-trust legislation attack competition and punish innovation, and is a purely subjectively applied law. If there are any set of laws that describe subjective rule, it's anti-trust laws.

I wrote:

How do you cheat someone you don't have any contractual agreement to?


Jordan responded:

That's what tort law is all about.


That's not what I addressed. You said the word "cheat", you can't "cheat" someone you never had any agreement with. That has nothing to do with tort law, or at least just and proper tort laws.

Tort law, or at least when it is justly applied, is to remedy property damages suffered from another party's actions.

My point was that coercive monopolies...


Stop right there! What coercive monopolies? The only kind of coercive monopoly is a monopoly that receives the benefit of government force to eliminate competition or threats to competition. A monopoly that came about freely coerces NO ONE.





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Post 36

Wednesday, December 19, 2007 - 8:22pmSanction this postReply
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John,
Then what distinguishes you from a Marxist?
Uh...tons of stuff. I don't accept the precept "to each according to his need." I don't accept the labor theory of value. I don't accept the theory of perpetual revolution due to the inevitable tension between labor and capital. And the list goes on.  <shrug>  Again, my point was just that lawmaking affects economics, a premise with which you seem to agree.
You trust the government very little, but you do trust them to understand what is happening in a market? I find that to be remarkable.
I expect the gov to try and make just laws. I don't expect any miracles.
You can't tell me anyone can predict how innovation will play out.
First, this is an "all or nothing" fallacy. The government doesn't need to know everything to see that something is wrong, i.e., that cheating is taking place. Second, there comes a point where it's unreasonable to suspect that innovation will play out, even though such point might be rare.
Also the government CAN sue someone through anti-trust legislation without waiting for a private action.
Sure, but that's not what I was talking about.
Anti-trust laws describe certain aspects of competition as "predatory" but in fact predatory means "competitive".
Wrong. You don't understand antitrust law. Competitive and predatory are not the same.  And "natural" monopolies are just fine under antitrust law; coercive or abusive monopolies are not. I suspect you're committing what I like to call the "I'm not touching you" fallacy. This is the fallacy that  claims someone is forced or harmed only when someone else physically attacks him. That was the fun premise we stuck with when we were kids. But it just ain't so.  People can destroy you indirectly by severely manipulating the environment around you. They can starve you by taking away all the food around you. They can cut you by surrounding you with knives. They can paralyze you by surrounding you with off-limits places. And the list goes on.  That's coercive.  That's akin to what abusive monopolies do. Again, it's rare. 
You said the word "cheat", you can't "cheat" someone you never had any agreement with. That has nothing to do with tort law, or at least just and proper tort laws.
This might be the fallacy of idealist thinking.  We can cheat someone without an agreement in the world we actually live in. It happens all the time on the road. Someone doesn't wait at the stop sign like he's supposed to and cheats the person who does wait. Someone runs the red light, cheating the person who had the green. Someone cuts in line to enter the highway. Someone cuts you off. Etc. Now, some Objectivists like to point out that if roads were private, then all this cheating could be couched in agreement-violation because everybody who drives would have to agree to the road-owner's rules, or something like that. But hey, tough shit. Those roads aren't privately owned. That's not the world we live in. So cheating without contract can happen.

I'll try to get the new thread running. 

Jordan


Post 37

Thursday, December 20, 2007 - 7:23amSanction this postReply
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Thanks for all your replies. I need some time to read them. I come in here only occassionally. I appreciate your efforts to answer the question.

What I know of Objectivism is only what I got from Atlas Shrugged, this website, capmag.com and a few other sources. I was not declaring a stand on the issue here, but raising my questions.

Post 38

Thursday, December 20, 2007 - 11:41amSanction this postReply
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Jordan responding to my question what distinguishes him from a Marxist:

Uh...tons of stuff. I don't accept the precept "to each according to his need."


Yes you do. You advocate people should get help from the government to have a competitive business, and not necessarily of their own ability. That is explicitly a philosophy of "to each according to his need".

Again, my point was just that lawmaking affects economics, a premise with which you seem to agree.


Of course lawmaking effects economics, obviously it has and to a great extent the lawmaking of this country has affected it negatively, that's not the contention here. You advocate a set of laws that adversely effect the marketplace by placing coercion on businesses that did not initiate force. Let's get our disagreements in order here.

I originally wrote:

You trust the government very little, but you do trust them to understand what is happening in a market? I find that to be remarkable.


Jordan responded:

I expect the gov to try and make just laws. I don't expect any miracles.


No you do not expect the government to make just laws, you expect them to continue enforcing unjust laws such as anti-trust legislation.

First, this is an "all or nothing" fallacy. The government doesn't need to know everything to see that something is wrong, i.e., that cheating is taking place.


Yes, whether something is wrong or right is an all or nothing proposition, and using force on the marketplace is wrong. That you think being competitive means someone is cheating is a fallacy.

Second, there comes a point where it's unreasonable to suspect that innovation will play out, even though such point might be rare.


No one could have predicted the wonders that technology has brought man as a result of free and creative minds. Over a century ago before the invention of the automobile the big environmental dilemma of the day was the pollutant "horse-dung", people made speculative predictions about the long term environmental disaster of what horse-dung would bring a hundreds years into the future. If only they knew the foolishness of their speculation. There was no such thing as cars, computers, CAT scans, shuttles, planes, LEDs, lasers, superconductors, fission bombs, GPS, microchips, cell phones, broadband, gene therapy, plastic, hybrid fuel cars, automated robots, etc. Unless you have insight into every creative mind more so than even creative mind themselves do, you can't possibly think you or anyone else will know what innovations will happen in even the next decade that would make a current product obsolete.

I originally wrote:

Anti-trust laws describe certain aspects of competition as "predatory" but in fact predatory means "competitive".


Jordan responded:

Wrong. You don't understand antitrust law. Competitive and predatory are not the same. And "natural" monopolies are just fine under antitrust law


Unbelievable! And you accuse me of not understanding anti-trust law? Perhaps if you studied it more closely you wouldn't be making these erroneous assumptions. Natural monopolies are NOT fine under antitrust law:

Clayton Act: mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at 15 U.S.C. § 18);

This means a company that freely becomes a monopoly can be punished.

coercive or abusive monopolies are not.


Yes...yes they are allowed! I deal with a government enforced monopoly every week in my own business dealings. I have to deal with liquor distributors that have exclusive territorial rights over liquor products as mandated by Connecticut liquor laws. Laws obviously designed to protect a monopoly. Don't sit there and tell me the anti-trust legislation stops coercive monopolies.

I suspect you're committing what I like to call the "I'm not touching you" fallacy. This is the fallacy that claims someone is forced or harmed only when someone else physically attacks him. That was the fun premise we stuck with when we were kids. But it just ain't so. People can destroy you indirectly by severely manipulating the environment around you. They can starve you by taking away all the food around you. They can cut you by surrounding you with knives. They can paralyze you by surrounding you with off-limits places. And the list goes on. That's coercive. That's akin to what abusive monopolies do. Again, it's rare.


Jordan, you obviously have a poor understanding of Objectivism to say that and sounds surprisingly Marxist. Individuals do not have a right to have a material existence provided to them, only to be free to trade with other individuals free from coercion. There in fact does exist a harmony of interests between men where it is in an individual's rational self-interest to trade with other men because both parties mutually benefit. There doesn't have to be a conflict of interest man qua man, a dog eat dog world where one exploits another at the expense of another's rational self-interest as you seem to suggest. You propose anti-trust legislation because man may suffer from being surrounded and having their food taken away from them? Are you serious when you suggest that?

I originally wrote:

You said the word "cheat", you can't "cheat" someone you never had any agreement with. That has nothing to do with tort law, or at least just and proper tort laws.


You responded:

This might be the fallacy of idealist thinking. We can cheat someone without an agreement in the world we actually live in. It happens all the time on the road. Someone doesn't wait at the stop sign like he's supposed to and cheats the person who does wait. Someone runs the red light, cheating the person who had the green. Someone cuts in line to enter the highway. Someone cuts you off. Etc. Now, some Objectivists like to point out that if roads were private, then all this cheating could be couched in agreement-violation because everybody who drives would have to agree to the road-owner's rules, or something like that. But hey, tough shit. Those roads aren't privately owned. That's not the world we live in. So cheating without contract can happen.


Oh brother! I'd like to call this "context dropping".

Traffic laws are designed to punish people for engaging in behavior that endangers the physical safety of others around them. Just as you would punish someone for brandishing a gun and waving it around a McDonald's because people's physical well-being are threatened, so too can a moral argument be made that running a red light or reckless driving can endanger or threaten the physical well-being of others. A car is literally just as dangerous as a gun and using it in a manner that endangers people's lives is an initiation of force. You don't need an agreement with someone to be free from that person's initiation of force against you. But you have yet to make a case free competition is an initiation of force.

Post 39

Thursday, December 20, 2007 - 2:26pmSanction this postReply
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John, your demeanor is less than pleasant, and your comments are too far off the mark to entertain. You are no longer worth my time.

Jan, good luck. Questions in Objectivist forums are often met with hostility. Brace yourself.

Jordan



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