Small Business And Libertarians

Santa Fe

James Wernicke wrote a letter ( outlining a few tenets of mainstream economic theory. As a starting point on this, in computer science, trying to solve a problem by always doing what seems best at the time is (perhaps ironically) called a “greedy algorithm.” There are vanishingly few problems that are solved well through the repeated application of local optimization. Indeed, greedy algorithms almost always produce disastrous results.

I bring this up because of my mixed feelings about invisible hands. The real point Adam Smith was making was, running a business as though it were a charity—in other words, being motivated by the public good—really doesn’t work out. I agree with him on this point. It’s honestly hard to convey why this is, but most likely it’s because of all the skin you have in the game. When you need business revenue to live, you take it pretty seriously.

This is why I have such a low opinion of so many “leaders” in Los Alamos—those who want to tell people why Los Alamos kills or exiles businesses, but who are themselves playing with the house’s money. This is also a very different dynamic from what James was talking about.

The reason mainstream economics is so ludicrous is that it tries very hard to obscure the role of power. Or rather, the only form of power it acknowledges is state power. The irony is that, under liberal democracy, you have a lot of recourse against state power. Market power, though, is hidden away behind articles of faith like “voluntary exchange” and “supply and demand” and “sanctity of contracts.”

Back in the real world, you have to invest $50,000 to $100,000 to get a business going. This investment is made in real estate owned by somebody else. That person has you by the balls, and they know it. The event that set Fleur de Lys on the path to leaving Los Alamos was that its landlord attempted to evict them for spurious reasons. The eviction failed, but lease renewals are completely discretionary. FdL entered a race against time—to leave Los Alamos just as their lease was ending.

Economic theory is about a fantasy-land where goods are fungible and investment isn’t bolted to the ground. In the real world, when you find yourself in Marcel’s situation, the only option is to take what you’ve learned and go back to square one. Write off the $100k you spent at 1460 Trinity, spend a million at 451 Alameda, and leave Los Alamos in the rear view mirror.

As for Los Alamos, the only policy anyone’s pursuing is subsidies. I asked Dan Ungerleider, the County’s economic development man, what happens when you put public money into a supply-constrained market. He refused to answer. The economics textbook says you drive up prices. In the real world, you further entrench existing power structures.

The funny thing is, Los Alamos isn’t as unique as people claim. It’s a lot like, for example, the Bay Area—where large amounts of money combined with incompetent local government have produced huge economic wastelands. That’s also why I don’t have any real answers for you all: entrenched power can be dislodged, but it requires real, coordinated, disruptive action by a large number of people. Meanwhile, Automotive Professionals was running its own race against the clock—and our local optimization was to write off our investments at 99 DP Road, spend a million at 4230 Airport, and leave Los Alamos in the rear view mirror.

I’ll leave you with an old joke: A group of professors are stranded on a desert island, and crates full of canned food wash ashore. The physicist and chemist start arguing with the engineer about which solvents they could make or how sharp a rock they need. The economist looks up and says, “Assume we have a can opener…”