Free Riders, Free Readers, and Free Lunches: The Economics of LewRockwell.Com

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Now that
the new year has begun, and tax deductions for donations to this
site are for this calendar year, and the donor’s economic payoff
is over a year away, and those who planned to give have already
given, allow me to offer an emotion-free, value-free, self-interest-free
economic analysis of the economics of LewRockwell.com.

First, let
me say that those of you who have come to this site month after
month, have read all this stuff, and who haven’t sent in any money
are basically a bunch of cheapskates. That is to say, you’re economically
rational.

You have
made a careful cost-benefit analysis. You have asked yourself:
“What is the likelihood that this site will be on-line for the
next year if I do not send any money this year?” Your answer:
“High.” I suspect that it is the correct answer.

You have
also asked yourself: “What is the site’s position on my scale
of values — ordinal, not cardinal (we’re all Misesians here)
— of the money that I can send?” Your answer: “Lower than
at the top.” In this world, the top is what matters, decision
by decision.

LewRockwell.com
is a representative case of the traditional economic problem known
as the free-rider problem. Users get the benefit, but someone
else pays. Total benefits received are higher than total costs
expended. Benefits ought to equal costs in an unhampered free
market, but they don’t whenever there are free riders hanging
onto the side of the enterprise. If the enterprise is altruistic,
benefits can exceed costs considerably.

This theoretical
problem not a life-and-death matter with Web sites. In fact, it
is a way of life with Web sites.

The World
Wide Web

The Web
is a rapidly growing, international, historically unprecedented
institution that is almost entirely based on a premise that economists
find difficult to accept as an analytical category: altruism.
The Web allows altruists to share ideas with other people. The
cost of sharing ideas is lower on the Web than ever before: no
paper, no ink, no postage. Instead of a professional printer,
the site’s owner hires a Webmaster. A Webmaster needs no web press
to create a Web page.

Most Web
pages can be accessed free of charge. Access is given away. Money
rarely comes in from page-viewers.

Don’t get
me wrong. There are ways to make a lot of money on the Web. The
main ones are these: (1) selling access to photos of naked young
women; and (2) selling schemes that promise to show lots of ways
to make money selling things on the Web.

The most
powerful Web search engine is Google. According to the latest
posting, it searches over two billion pages. Some of these pages
are HTML pages that print out at 100 to 200 pages. I know this
because I’ve posted some of them.

Why would
anyone spend time and money to post things on the Web that are
unlikely to make enough money to repay the investment? Because
there are millions of true believers out there who are willing
to make the investment in order to get out The Message.

Lew Rockwell
is one of them. So are his unpaid authors.

Altruism
and Self-Interest

Altruism
is a powerful motivation. Most schools of modern economics officially
deny this. They cannot account for it in their equations and charts,
so they ignore it or deny its relevance. Modern economics is based
almost exclusively on a methodological assumption: self-interest
is the only economically relevant motivation for human beings.
This methodology has a necessary corollary: either the denial
of altruism or redefining it as concealed self-interest.

A good analysis
of the limits of this methodology is Robert Nelson’s Economics
as Religion: From Samuelson to Chicago and Beyond
(2001).
He makes the point that Chicago School economists who promote
the methodology of exclusive self-interest do so as true believers.
They do it for the sake of the cause. They do it in the name of
academia’s pursuit of truth — generally, a non-profit endeavor.
Admittedly, a dozen of them got rich doing this: they won Nobel
prizes. But when they began their careers, there was no Nobel
Prize in economic science. Nelson identifies Milton Friedman as
an evangelist. So do I.

Chicago
School economists have the same practical problem that Marxists
do. Marx and Engels were theorists of an economically inevitable
proletarian revolution. They were both bourgeois sons of bourgeois
families. Marx’s father was a lawyer. Marx’s uncle, Lion Philips,
was the founder of the Philips Corporation; Norelco is the American
branch. Engels’s father was the owner of cotton mills. Engels
ran one in Manchester for decades. Yet their theory taught that
one’s class position determines one’s philosophy of life. All
philosophies are class-driven — ideology, they called it.

Marxism’s
theory of history was always refuted by Marxism’s history. Marxism
was initially adopted almost exclusively by educated members of
the urban bourgeoisie, who then sought political power in order
to impose it by force on millions of peasants: Russia, Asia, Cuba.
The West’s urban proletarians never did buy in.

Chicago
School economists go out of their way to promote the free market.
Yet, economically speaking, their free grant of time to promote
the free market probably will not have the effect of changing
the present social system into a Chicago School-certified world.
The individual marginal cost of promoting the idea of the free
market is a lot higher than the expected marginal return of living
in a transformed world as a direct result of the professor’s investment
of time. So, why do they do it if the only relevant motivation
is self-interest? This is Nelson’s conundrum.

Free
Lunches

TANSTAAFL:
“There ain’t no such thing as a free lunch.” In a world of scarce
resources, somebody must pay.

I have no
argument with this. Christianity teaches that there is free grace
from God, but it also teaches of a representative who paid the
price for sin: Jesus Christ. His righteousness is then imputed
judicially by God to individuals. They don’t pay for the privilege,
but someone did. Somebody up there likes them.

This supreme
representative payment on behalf of others is Christianity’s theological
explanation for altruism. Men are made in God’s image. They act
in terms of grace. “And forgive us our debts, as we forgive our
debtors” (Matthew 6:12). The historical sacrifice of Christ is
judicially and morally representative. Mankind, even in sin, follows
this standard to some degree. It is basic to human existence.
If it were not, parents would kill their children . . . and then
eat them. Altruism is taught by every supernatural religion and
even some non-supernatural religions (e.g., Buddhism). It is a
universal motivation. The methodology of economics must acknowledge
the existence of altruism if it is to be a real-world methodology.

A corollary
of TANSTAAFL is this: “Every man has his price.” This is another
corollary of the methodology of pure self-interest. If taking
an action always has a cost — giving up something —
in a world of scarcity, then if the benefit is high enough to
offset this cost, he will take the action.

Is this
corollary true? I am the owner of a life insurance policy on my
wife. Does it cost me the face value of the policy to refrain
from murdering her, if I can figure out a way not to get caught?
Is all that forfeited income a true cost, i.e., an opportunity
cost? Yes. But why won’t I commit the act if the price is high
enough? Because some actions cannot be purchased. Some men do
not have a price for some acts. If this were not true, a war could
be won by rich nations simply by paying off poverty-stricken enemy
soldiers. This is not how expires expand. There are many acts
that men will not commit for any price. The fact that such internal
restraints exist make society possible.

The Chicago
School economist might argue: “You have a doctrine of hell. For
you, the subjective cost of committing a murder for insurance
money is high. It is higher than the gains available for killing
your wife. But you are acting in your own self-interest. Our methodology
can explain your action, or rather lack of action.”

This argument
is technically correct. But there is an unstated implication here:
by promoting the methodology of atheism-agnosticism, Chicago School
economists are promoters of murder. To the extent that public
accepts their methodology, Chicago School economists are lowering
the subjective costs of committing murder. How? By promoting a
view of human motivation that explicitly ignores God as an objective
factor in history and eternity.

Ideas have
consequences, said the title of a book by a University of Chicago
English professor, Richard Weaver. So do methodologies.

Rockwell,
the Altruist

Lew Rockwell
is as much a true believer in the free market as Milton Friedman
is. Furthermore, he knows that he is not going to win the Nobel
Prize in economics. What I wrote about Rothbard in 1988 surely
applies to Rockwell. (“Why Rothbard Will Never Win the Nobel Prize!”
in Man,
Economy, and Liberty
, edited by Rockwell and Walter Block.)
Nevertheless, he runs this Web site. Why?

The reason
is his devotion to an idea: the idea of liberty. His subjective
cost of not running this Web site is high. His subjective gain
of doing something else with his time is low. So, he runs the
site.

He runs
it for the sake of an incorporeal idea: the idea of liberty. He
runs it also for the sake of self-interested readers who come
to it and feast on his digital smorgasbord table every day. Every
day except Sunday, there is a table full of new choices.

I shall
now let you in on a secret. Rockwell has copied the television
industry’s strategy. He offers all this for free, but it is free
only on one assumption: free time. But, you say, there is no such
thing as free time. Bingo!

He is luring
tens of thousands of people every day into making a donation of
their time — not to him, but to his idea of liberty. An incorporeal
idea is being subsidized by people just like you. You donate your
only irreplaceable resource to learning more about his idea. He
is acting as the economic agent of the idea.

He has adopted
a promotion strategy rather like the one used by entrepreneurs
at your community’s local public high school. “The first one’s
free, kid. Try it. You’ll like it.” Unlike the entrepreneurs at
the high school, he is trying to addict you to an idea: the idea
of liberty.

You keep
mainlining on his idea. You just can’t get enough. Maybe you want
to quit. Maybe you’ll quit tomorrow. But not today.

One of these
days, you may even send in a donation. Why? Because you will have
become an altruist.

Until
Then, Send Links

If you’re
not yet ready to send in money, send out links. Whenever you see
an article on LewRockwell.com that you think deserves a wider
audience, send a link to at least one person who might appreciate
it or learn from it. Don’t send a link just to the stand-alone
article. Send a link to the front page of the LewRockwell site.
Include a brief note recommending the article. This way, the recipient
finds out about the site and the article.

If you receive
the site as a daily e-mail from Lew, use your e-mail program’s
Forward button to re-send it. If you access the site directly
from the Web, use your browser’s File/Send Link mailing sequence.
To do this, you will have to click your browser’s Back button:
out of the article, back to the front page of the site. Then send
this link.

Building
readership for this site is a major factor in getting out the
message. You can become part of this recruiting process with nothing
more than a brief note and a click of your mouse.

The Internet
makes it almost free of charge to share valuable information:
no extra money, not much extra time. Think of LewRockwell.com
as a digital shoe to toss into the messianic State’s meat grinder.
Make link forwarding a systematic part of your daily LewRockwell.com
experience.

Conclusion

What about
free riders, free readers, and free markets? What about free lunches,
free time, and free societies? Are they all linked? Yes. They
are all linked by altruism. In Christian theology, this is called
grace.

When self-interest
is balanced by altruism, people make donations. Lew Rockwell is
making the case for the free market by means of an appeal to evidence,
funded by altruism. It’s kind of like churches that send out missionaries.
The true believers back home pay for the cost of delivering the
message. Some of the hearers are savages. Others are former savages
who have become non-donating pew-sitters. A few will become tithers.
Then the message will go out to the next group of savages.

January
2,
2002

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©
2001 LewRockwell.com

Gary
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