Satoshi's Sidewalk #22: Development

"...for the lack of a better term, is good."

I listened to Alex Epstein on an episode of TFTC last week and was reminded of his pro-fossil fuel arguments. Alex wrote a (highly recommended) book called The Moral Case for Fossil Fuels and is currently working on a new, revised edition. Alex’s grasp of information and pro-fossil fuel arguments emerge from a foundation of pro-human flourishment. The arguments developed by Alex apply equally well to the built environment and the prevailing anti-development movements of today.

Let’s rehash the two major arguments Alex dissects on the podcast through the lens of creating the built environment.

1) Impacting nature is morally wrong

Humans are alive and kicking for an unknown period of time. With the relative exception of the last 5,000 years survival was a daily struggle. Famine, disease, hunger, boating accidents. Many did not make it far. As such, humans work towards improving their situation (and chances) of survival in nature. Nature is not good or bad, it just is. Nature is not, however, inherently safe for Man. Humans are capable of making the natural world safe by human action - we will call this form of action: impact. For humans to adapt and improve their situation the environment must be impacted as a means to an end.

Example: humans use wood-fueled fires as a source of warmth during the winter. To produce the fuel, trees must be cut down and chopped into manageable pieces to be set in a fireplace. Man cut down a tree for heat to be provided. The result being nature has been impacted for an improved human condition.

Improving the human condition through environmental impact is a morally right decision. Constructing buildings, roads, and factories are a net benefit to human flourishing. By developing the built environment the human condition improves. This is the goal. Quality of life improvements such as marketable goods and services are worthy aspirations and worthy employments of labor, capital, time, and the impacting of land.

The explosion of textile manufacturing during the Industrial Revolution was not possible without first accumulating the necessary capital: seeds, farm equipment, factories, machinery, farmer know-how, processing, and transportation infrastructure. For the capital to be created, land had to be cleared, leveled, prepped, and or built upon for the various stages of production to occur - a temporary impact of the land used. This was done for a purpose. Someone valued the result of layers upon layers of producers creating the higher order goods necessary for the final consumer product - like white crew socks.

I have never met an individual (who wasn’t a dirty hippy) who claims they would be better off without socks. The value to consumers for the socks produced are greater than the value of the un-impacted land necessary to produce this wonderful consumer good. If this were not true, there would only have ever been one sock factory ever built. The producers involved in each part of the process who could not adapt also long kaput.

This same thought process applies to office buildings, corner stores, homes, apartments, telephone booths, citadels, rooftop bars, and butchers. The million sat question is how can humans impact nature to achieve desired ends without turning the planet into an over-parked hellhole?

2) Any impact humans create will be mostly negative & even catastrophic

Some ways of impacting the planet are better than others. The impact of land can range from permanent damage to undisturbed areas yet to be discovered (including the mythical realm where communism works). Without human action in the environment, nature would have continued its course - whatever they may be. This is not the case though. As stated, humans impact the environment as a means to improve their lives. Transforming land can be a net positive or net negative affair.

We observe the range of impact by analyzing how past or present governments enforce their rule of law, the gradient of private property rights, and the soundness of money. The USSR and Maoist CCP are bleak examples for both the rule of law and private property. The rule of law under both regimes was quite simple: do as you are told or else you suffer (aka two to the dome). The situation with private property is quite similar: there is no such thing as private property, comrade. Neither government produced much beyond misery, scarcity, and death. Neither government used sound money.

Politically-driven economizing (command economies) can skate by for some stretch of time yet are incapable of escaping the gravity of their own mistakes. They are unable to economize efficiently without a pricing mechanism. Government as the sole economic actor can only set a price, not discover price, and are quite literally crushed by repeatedly misallocating capital.

Capital allocated under distorted pricing creates malinvestment. The materials and resources used up in the process are wasted. Land is dug up for mines, deforested, or entire cities built atop fertile ground at the whim of political decision making. Politically-driven economizing is incapable of acting without net negative impacts of land, labor, and capital.

Rothbard wrote an essay where he quotes British economist Peter Wiles who, after visiting Poland, said of the planned economic system:

What actually happens is that "world prices", i.e. capitalist world prices, are used in all intra-[Soviet] bloc trade. 

The USSR couldn’t operate without prices being set by the external, capitalist world.

Talk about irony.

The opposite, or close to it, is not hard to imagine - we’re living with such a system in the US. Incentives are an important factor to analyze for the desired net positive impact outcomes. Systems which incentivize individual entrepreneurship over political action create more wealth, provide better protection of private property, and increase the standard of living for humans. This system is the free market.

The free market is the best solution humanity has devised for improving individual quality of life to date. The pillars of a free market are: the rule of (common) law, sound money, and strong property rights. The free market within the US is not as good as it once was but it is still better today than most countries.

The free market as a whole incentivizes net positive impacts on land and disincentivizes net negative impacts. The value created by human impact must outweigh both the value of inaction (no impact) and negative (probably illegal) impact. As noted earlier with the impact of the sock factory, the net value created by the impact of land throughout the market process is a net positive. Consumers value the impact of land and resources more than not having socks. Higher order goods such as land, cotton, tractors, know-how, and a factory would not be continually reinvested and produced anew if the consumers good (socks) were not valued by consumers.

By creating socks the human condition is improved. Sock enable human flourishment. Human flourishment is the goal.

Impacting land for the purpose of a city is no different. Value must be created by individuals for other individuals. Across time and space, successful patterns of development emerged which were copied, applied, tweaked, applied, expanded upon - over and over. An iterative process of keeping what works and discarding the rest. St. Louis was slightly different than Detroit, Detroit slightly different than Denver. The result was traditional development patterns refined to fit the local geography, climate, and resources.

The traditional development pattern was (and still is) a net positive human impact on land. US cities prior to World War 1 were shining examples of free market principles minimizing net negative changes to land. If the impact created no value, no impact continued. Land can be repurposed with some elbow grease - preferably with hydraulic fluid though.

This is not to say mistakes weren’t made. Mistakes are part of life and part of value creation. Impact can cause damage. The difference is how much damage and how often. Regions with weak private property rights are more likely to pollute, dump toxic waste, and grant special privileges to do so. Only in a free market can mistakes be recognized and stopped rapidly. The US is now closer to a quasi-free market society where, unfortunately, malinvestment goes unliquidated. I believe the Suburban Experiment is the largest class of malinvestment in history. A sea of roofs spread out over hundreds of square miles is not the norm.

Prior to WWI cities were small by today’s (absolutely ridiculous) standards and packed a productive punch. Wealth was successfully created by individuals impacting land in a net positive manner to produce value for others. Human flourishment. Traditional development patterns are a result of a free market. The dream of fine-grained urbanism can only be achieved with all three pillars of the free market: rule of (common) law, strong property rights, and sound money. No zoning, no design ordinances, no parking ordinances, no political approval processes. All of these actions create distortions in the use and allocation of scarce geographic land in a given area (or jurisdiction). The goal to is minimize distortions and maximize wealth creation.

Enter bitcoin.

The free market system is only as strong as its weakest triumvirate of columns. In our modern case, sound (hard) money is the weakest. With the degradation of hard money, so degrades the rule of law, followed by weakening of property rights. Easy money, while solving some problems, created others. The weight of the free market system needs all three columns to function property. Two columns cannot bear the weight and will buckle.

As easy (fiat) money sweeps society the scope of government expands at whatever rate the government can get away with. So long as the government can afford the enforcement more burdens will be placed on citizens in the form of taxes, transfers, and curtailment of liberties. When governments collect through seignorage and inflation, they can afford to enforce just about anything.

To turn back the tide of expanding government, the money must be changed. And changed it was. Bitcoin is an open-source, decentralized, digital, monetary standard that cannot be co-opted or controlled. Running the protocol on a node is the opportunity individuals must take (it’s super easy to do, btw). The battle for protocol control was settled. Pour one out for Mike Green. Just kidding, don’t waste good booze like that.

Fix the money, fix the free market.

I appeared on an episode of @MartyBent’s Tales from the Crypt Podcast which dropped two(!) weeks ago. Check out the episode on Spotify or YouTube.

Marty is a fantastic host and I enjoyed being on the pod. It’s wild enough having subscribers who also think about, experience, and or are trying to figure out how the built environment. Situation fubar.

Thanks to everyone who reached out in DMs, emails, and replies. Both praise and criticism of my appearance was received (and feedback still encouraged). I will sharpen my pencil to develop better, more precise arguments for how Bitcoin Fixes This(TM), how the built environment can be retrofitted (bit-fitted?) under a bitcoin standard, and will try not ramble/get off topic.

This newsletter is meant to be a two-way street (heh). Please feel free to drop me a line by replying to the newsletter via email, my twitter DMs, or the @BitcoinUrbanism DMs. I would also be happy to collaborate on articles or other opportunities to spread the message!