Author: Curt Doolittle

I love Russia. I love Russians. I love all the crazy wonderful stuff about them.

http://www.bbc.co.uk/iplayer/episode/b016lklv/iPM_05_11_2011/The case for Monarchy. Constitutional monarchy, with property rights under the common law is the best form of government yet developed. Hoppe’s forceful argument is that under monarchy we had lower taxes, fewer wars, trade unions, political parties, an active and supportive church, and that’s because as the ‘owner’ of the government, and the territory, the monarch acts as any business person who wants to hand his company over to the next generation – with long and low time preference. Furthermore, any action by the monarch that threatens the viability of the noble family tends to result in the family killing him off (see Mad Ludwig who build the bavarian castles we so admire.) Elected officials tend to treat the country like predators in a tragedy of the commons. THey consume everything like locusts and destroy the traditions and the wealth of the country. Furthermore, there is nothing more warlike than a democracy, and nothing so unwilling to follow through on it’s warlike ambitions.

from Modeled Behavior on the Jobs Report

…here is the long-run trend on private sector service sector employment.

Notice that its just as strong as the last recovery though coming sooner. Not quite as strong as the 80 and 90s. On the other hand goods and government over that period look like this

To the extent there is a structural transformation afoot in the US economy, this is it.

Yes, the average citizen can attest to the fact that you’re correct simply by casual observation while living daily life. The problem you’re stating is obvious. But the question that is currently circulating in the popular media is whether increased money supply that increases demand, and whether additional taxation and redistribution, will improve that long term trend, or whether we had better improve our schools, improve our industries, improve our infrastructure, and improve the world marketability of our unskilled, and semi-skilled working classes. We cannot make our lower classes more productive by demonizing our upper classes. And we are too heterogeneous now to form a ‘society’ that will support different classes under the emotional sentiments of tribal nationalism. Germany promises the working classes skilled labor. America promises the working classes entry into the middle and upper middle classes. But, america’s promise if false. Its just not possible. And what you’re seeing today is the acknowledgement among the laboring classes that their status is depreciating along with their incomes, and that given their ages and knowledge, that the rest of their lives are questionably comfortable due to the false promise of middle class membership — given to them to assuage the natural problem if integration of races and cultures with different potentials both environmental, physical and cultural. Economics is a subset of politics, not the other way ’round. In the long run we are all human.

Illustrating The Moral Dilemma Of Monetary Policy Using An OWS Poster http://www.capitalismv3.com/index.php/2011/11/illustrating-the-moral-dilemma-of-monetary-policy-using-an-ows-poster/

Karl Smith says that a government with it’s own currency can never be insolvent. But this is not true. There is a very practical point whereupon the rate of inflation makes planning and coordinating production impossible because prices along the production cycle are no longer calculable. At that point production rapidly crashes, consumption rapidly crashes, people ‘forget’ skills and relationships that make businesses cooperate. They abandon social conventions and mores. They develop black markets for goods and social status. The tax base crashes. And public order fails. To the modern macro economists this is an absurd and impossible probability. To Austrians it is a deterministic and logical consequence of monetary policy.

RUMINATION: Macro always seems to have a sort of 19th century concept of an economy — one of trying to distribute the basics, rather than a 21st concept of an economy that consists almost ENTIRELY OF STATUS SIGNALS.

As a geek, I love the economics of affection, dating and relationships, and found this quote today in line with what I’ve written. It’s from a posting about Laura Sessions Stepp’s book “hooking up”, where the writer poses an obvious economic actor’s solution to Stepp’s questions:

“Why do young women make themselves so available, unmarried, to young men in hopes of making themselves happy? (This clearly makes the young men happy, but that’s beside the point).”

“This downward spiral that women have been caught in — the dwindling supply of available men — induces women to make themselves even more sexually available than the next women in order to compete, thereby further dampening the supply of potential mates—seems impossible to break out of. At the heart of the problem is a classic, Olsonian collective action failure. All women would benefit if, collectively, women were to require more of men they had sex with. But every woman knows that her behavior, by itself, will not cause market prices to change, so she cheats—and by “cheats” I mean she cheats the female collective. The problem with this free riding behavior is that everyone faces the same incentives and there is not an effective punishment for cheating. The result: men get more sex and women can’t find mates.”

In, How to Detect an Asset Bubble, Robert Jarrow, Younes Kchia and Philip Protter describe the method by which asset bubbles can be deduced from the asymptotic behavior of prices. I can just about follow the reasoning, and it make sense – although they don’t explain WHY it makes sense as a series of incentives and actions – which an Austrian would require. And I while I appreciate their work, I’m struck the the fact that, at least for me, asset bubbles are so easy to detect that it’s ridiculous: The old adage that if your gas station attendant or your school teacher is concerned about it then it’s ready to pop, and you should sell.

Rick writes:

RE: “One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.”

They enacted accelerated depreciation because the usa has the second highest total corporate tax burden in teh world, second only to japan. And this tax burden is equally distributed against low risk companies like the financial, legal, accounting, and other services sectors as well as the high risk companies that require significant capital investment in order to function. So what was happening, because of this extremely high corporate tax rate, was that high capital investment companies were going broke or leaving the country, depriving the country of unskilled, and low skilled, labor-class jobs. For example, the state says that your laptop must be depreciated over three to five years, however, in reality, it becomes almost valueless the moment you buy it. IN this way the state artificially increase profits and increases taxes on those profits by disallowing companies to expense things like laptops at the low end and mechanical equipment at the high end. This process effectively forces heavy industry to be uncompetitive on the world stage where other nations actively subsidize those heavy industry investments. These tax breaks effectively BUY JOBS that would depart if not. IN the case of power companies, it makes no sense to tax them if the all it does is pass through costs for energy to consumers. So we are BUYING cheaper energy for consumers by offering tax breaks to them. Executive stock options are not ‘real’. The purpose of stock options is to create an incentive for execs to increase the value of a company for shareholders. Options differ from stock in that they are not taxable until you exercise them. If you grant stock to someone they have to pay taxes on it now, despite the fact that no one has made any money yet. That would be like asking you to pay your taxes for the year, before you could take a job and earn the income. Options differ in that they give people incentives even though they are rarely paid out except in public companies, but that the employee only earns income if the stock appreciates in value – ie: they were successful. Offshore income is necessary because most corporations make their money these days outside the country. If they did not, then they might not even exist. We give shelters to people and companies because if we didn’t they would just circumvent the system or they would leave teh country entirely because the opportunities in the developing world are higher than they are domestically. The majority of depositors in swiss accounts are average european citizens who are hiding their incomes from high taxes so that they can retire safely and in some degree of comfort. Europeans rarely own homes and they tend to live in apartments, and so they do not have home equity to rely upon at retirement. If you want to tax goldman sachs you won’t get any complaints. But politicians making tax policy are far more rational than we think they are

Profit Is Not A Motivator – It’s A Sensation. http://www.capitalismv3.com/index.php/2011/11/profit-is-not-a-motivator-its-a-sensation/