Curt Doolittle

Author: Curt Doolittle

  • An Analysis Of Freedom #2: The Economy Of Freedom

    A Little History For Context

    The term ‘Freedom’, and its near relation ‘Liberty’, have a long heritage.   The babylonian words “ama-gi”, meaning “Return To The Mother”, written in cuneiform, are often cited by Libertarians as the first written use of ‘freedom’. That usage literally refers to giving a slave back to his mother — an analogy to the more precisely stated ‘freeing him from slavery’ – owners gave a slave back to his mother when freeing him.  In practice, the word “ama-gi” was used to grant exceptions from the dictator’s obligations or taxes.  So the term meant freedom from obligations to the government. These special dispensations were used as a reward – freedom from requirements. The most simplistic use of Freedom described the opposite of slavery. It was not an abstraction, but a direct analogy to the deprivation of one’s choices under the threat of violence. Slavery to contemporary ears is a horrid system, but under barbarism it was universal. ( Barbarism refers to those people not members of one’s market  system ) (( DEFINITION of “BARBARIAN”: Those persons who do not pay the set of costs of forgone opportunity, employed within a social order that cooperatively manages a market and territory. )) Most farm labor required a great deal of physical effort — hard work easily avoided with slaves. People often sold themselves into slavery simply because it was a reliable way to be fed and sheltered in a world where starvation and hunger were common. Wars and raids were conducted to obtain slaves – forced laborers. And escape was dangerous in that ancient world – without a tribe to take care of you, starvation was almost guaranteed. Later, ‘Freedom’ was the term used to describe a Free Man. A ‘Citizen’. A ‘non-barbarian’. This means quite literally, in a world consisting largely of either barbarians, competing warrior states, or eastern dictatorships, ‘an investor in the city and market’. As an investor, or rather It is hard for us to to imagine a world of barbarians. It is not so hard to imagine a world filled with conquerors. Today’s barbarians are immigrants who do not conform. And nation states that seek power in order to obtain resources and trade routes. Liberty by contrast, refers, not to constraint of, and control of, individual actions under threat of violence such as under the institution of slavery, but to the more general absence of coercion by a government, of those people who are not slaves, and not barbarians, and therefore citizens.  In particular, in the west, it implies and egalitarian relationship between all those who are responsible for society: refraining from imposing conditions other than those one places on one’s self, or are required in order to maintain the property definitions (( DEFINITION of “PROPERTY DEFINITIONS”: A set of forgone opportunities that require one refrain from using objects of utility, or refrain from seizing or creating opportunities for gain – ie: self enforced self deprivations – usually described as property both individual and shareholder, manners, ethics, morals )) that constitute the social order. ((DEFINITION of “SOCIAL ORDER”: A social order is a collection of property definitions, and the required forgone opportunities required of members of the society in order to allow non-violent cooperation, and the establishment of a division of labor, and peaceful trade and exchange. And if a landed culture, also including the visible material contributions needed to maintain the physical viability of the territory, its built capital, its resources, and most importantly its market – without which escape from poverty is impossible. )) But in response to increases in the complexity of social order due to increases in population and the resulting increases in the division of knowledge and labor, both of the terms of “Freedom” and “Liberty” have been subject to political framing by public intellectuals and politicians, and their followers in the pragmatic public who use the extraordinary and uncommon freedom of speech ‘discount’ under democratic government to redefine these terms.  This redefinition of the Social Order’s Property Definitions, and restatement of the material costs and  the forgone opportunity costs of that system, has effectively constituted a legitimization of fraud, theft and redistribution. This restatement consequently led to a gradual usurpation of the social accounting system of opportunity costs, material costs, that make the market society possible. This distortion and confusion of meaning begs analysis, so that we, as members of a society under a democratic government, can tell the difference between those commonly held properties of freedom and liberty that are necessary and possible, from those that are either forms logically and physically impossible, from those that are intentionally obscure or distorted for the purpose of committing fraud and theft — or both. While frequent increases or decreases in redistribution of the PROFITS from the market are not only justifiable and beneficial, but warranted as a return on on the investment to shareholders (( DEFINITION of “SHAREHOLDER”: Synonym to “CITIZEN”: individuals who contribute forgone opportunity costs expressed as property definitions and thereby pay for the social order. ))  (“Citizens”) as the division of knowledge and labor increases, the redefinition of the accounting system of property definitions, and forgone opportunity costs is simply a complex form of corruption, theft and fraud.  Corruption theft and fraud  made possible by the obscurity of the causal processes employed to create the Social Order, due to the fact that they are evolutionary in origin, unarticulated, expressed almost entirely as sentiments, and understood only as habits, superstitions, traditions, or exploitations, rather than as a system of precise and material accounting and costs, that materially effect economic calculation and human cooperation as the size of the population and the resultant division of knowledge and labor increases.

    A Society Is Its Market : The Agrarian Society, Built Capital, Trade, And The Division Of Knowledge And Labor

    (UNDONE)

    The West And The Fraternal Order Of Market Making Soldiers

    The Great Transformations: In Europe, Asia, The Middle East, and Africa Converting From Barbarism To City And Market – Europe Converting From Barbarism To Irrigating The Alluvial Plain – Middle East Converting From Barbarism By Combat – Asia Remaining in Barbarism – Sub Saharan Africa

    The Behavioral Properties Of Freedom

    The Desire For Freedom Versus Security.

    Endless Want And Acquisitiveness, and The Role Of Imitation, Envy  Status, And The Status Economy.

    (UNDONE)

    Property Is Defined Universally, But  Shareholder Rights Are Open To Corruption

    (UNDONE) The Oddity Of The Cognitive Bias In The Consensus And Equality Sentiments (UNDONE) Consensus Is Limited, On Means, and On Ends To Small Numbers Of People With Similar Objectives, Abilities, and Resources (UNDONE)

    Freedom And The Status Economy

    Almost Universally, Humans Don’t Like Status That Is Not Given as a reward for redistribution. All cultures, all humans, sense and express resentment at ‘excessive returns’ on any type of investment. Under heroic cultural systems, the hero is granted status and access to opportunity in exchange for his efforts on behalf of the group.  As population increases, classes form because enough people exist in each class that they form group status hierarchies, and trade opportunities, and contribute to sustaining the group’s advantages.  In effect, a class becomes an organization or bureaucracy whose members attempt to preserve it’s network of opportunities – it’s binding principles. At this point, exchange between classes must form some sort of trade network, and as this happens, classes, as organizations,  compete against other classes for status.

    The Freedom Seeking Minority Versus The Equality Seeking Majority

    The Vast Majority of people to not want freedom, because freedom requires responsibility and risk.  When people come to free societies, they either desire the standard of living, or access to opportunity. But they rarely, if ever, desire to contribute to the maintenence of the market order by forgoing opportunities, .  In fact, they desire to gain the most using the least contribution. Likewise, (equality) So the contemporary use of the word freedom is the opposite of the contemporary use of the word equality

    Property Is The Human Accounting System And Money And Numbers Increase Our Capacity for Perception, Comparison and Calculation Of Property

    (UNDONE) The Economic Function Of Freedom In a division of labor, freedom increases consumption, decreases cost of maintaining the behavior of paying opportunity  costs to create the  market and contribute to property definitions, but most importantly, increases the process of trial and error – the process of entrepreneurship. Increases in trial and error lead to increases in the division of knowledge and labor, and increases in consumer choice, and decreases in prices.

    The Limited Use Of Freedom As A Competitive Strategy Between Groups

    If we define freedom as freedom from coercion, then there are only so many strategies that work for different groups with different abilities and resources.  Total freedom, which means barbarism,  Religion (resistance), Trade, and Force.

    Freedom As Return On Investment In The Market, And The Market Is The Social Order

    Freedom obtained in exchange for one’s return on one’s investment of forgone opportunities in the property definitions that constitute the local market. This contribution of forgone opportunity costs, is the cost of entry into the market, and the means by which one has access to the market.  One can only be as free as the granularity of the property definitions. Profits are signals that convey rewards from the market participants that you have been rewarded for fulfilling their wants and desires. Redistribution is a form of return on the market, but only so long as (only so long as what?) Freedom is only relevant in a market society.  Market societies are superior to alternative societies.

    The Economy Of Freedom

    We are all born free, so to speak, and able to use perception, memory, thought, action, force and violence to get whatever we want, if we choose to. Cooperation is not a necessity, at least for the strong. It is a compromise. It is a trade off. So lets look at the scope of actions human beings can take, and start from there, so that we can understand cooperation and freedom, and the compromises, costs and benefits that cooperation requires of us. Scope Of Individual Human Action If we eliminate the nearly infinite complexity that comes along with cooperation, we are left with only this scope of human actions.

      • A.0) Thought
      • A.1) Motion
      • A.2) Consumption
      • A.3) Transformation
      • A.4) Violence
      • A.5) Mating

      The Five Freedoms

      Given the possible scope of human actions listed above, there are only five possible non-contradictory freedoms available to human beings. Non-contradictory means that they can be granted to others equally without coercing them.

        To grant these rights we only need to refrain from violence. In libertarian philosophy this is the principle of non-violence.

        By refraining from violence we enforce cooperation.  In other words, we coerce cooperation by depriving people of their natural ability to use violence.  Furthermore, by depriving people of violence we make them more equal, by redistributing opportunities from the strong to the weak.

        All other freedoms or rights, are derivatives of those five listed above. The remaining freedoms people commonly refer to are technologies of coercion for the purpose of cooperation, or of opposition for the purpose of competing with or avoiding the coercion.

        To say that they are forms of coercion, is not to demean them. Many coercions are a proxy for violence. Property itself is a coercion.

        We defend property. (talk about property and memory here)

        there is a limit to cooperatino because of a limit to perception. Imagine for a moment that you could know the wants and desires of all people on the planet at once, and you could also know, all the resources that could be put to use by each person, all the skills that could be put to use by each person, all the tools available to each person, all the relationships that each person has, and the geography that each person has access to. Imagine trying to organize it all. Now, imagine that each person is trying to at least maintain his or her respect, or status. And that all these people are of different ages, and of differentI. Cooperative Organization – The Production Economy

        Cooperative freedoms permit the division of knowledge and labor, which decrease everyone’s costs, or the concentration of effort to increase both the likelihood of success, and decrease the individual costs. Many people use subjective analysis, expressing these cost reductions as emotions. But our emotions exist to assist us in identifying cost reductions. Emotions describe changes in state. They inform us. They inform us in particular about changes in the state of our costs. Human aesthetics may be wounded by this fact, but all group emotional sensitivities are to costs and discounts.

          • Coercion: Norms under threat of violence.
            Opposition: Violence, Fraud, Theft, Coercion, Physical Restraint, Enslavement
            Cost: Forgone Opportunity costs of Coercion, Fraud, Theft and Violence. The cost of not stealing.
            Perception and Calculation: Property and prices allow us to percieve beyond our senses. To cooperate in large numbers. Property IS calculation.
            • Key Concept:
            • P.1) Life, Movement and Action:
            • P.2) Property (Exclusive Use. Inventory)
            • P.3) Exchange (Trade)
            • P.4) Freedom of Cooperation:
            • P.5) Freedom Of Assertion

            II. Cultural Organization: Manners, Ethics, Morals, Religion  – The Conformity Economy (Inclusion / Ostracization)

            Ethics: The Invisible Cost Economy Freedom to attempt to establish a network of norms: restraints on action enforced by inclusion or exclusion in the group. Inclusion in the group reduces risk and increases opportunity.

            Manners, Ethics and Morals are terms for different segments of a spectrum for controlling costs of a group. Manners reduce friction and demonstrate predictability, class and quality. Display of good manners means access to more people who may grant one more opportunities. Each use of good manners requires some form of discipline. Each act of discipline is a cost to the individual, and a contribution to the cultural institutions. Each abuse of manners is a lack of discipline and a withdrawal from the cultural institutions. Manners must have a witness who can observe the demonstration of one’s discipline. In a demonstration of manners, there is no asymmetry of information. Each equally can observe the other.

            Ethics on the other hand is a study in asymmetry. An action is ethical or not, because of shared lack of knowledge of the future, and asymmetry of knowledge between individuals. If one person has deep knowledge and the other shallow of the same exchange, ethical treatment requires that the person with greater knowledge act as if the other person is possessed of the same knowledge, and each is responsible for protecting the other from harm.

            Ethical systems generally occupy some portion of a spectrum from the criminal to the charitable. a) The Criminal Ethic: I take what I can, without consent. a) The Bazaar Ethic: whatever I can get away with in voluntary exchange. b) The Warrior Ethic: whatever will not make the other or unhappy. c) The Christian Ethic: What is equally beneficial for both parties. d) The Charitable Ethic: As long as the other person prospers, I do not care what my outcome is. Then most ethical systems generally consist of intra-group and extra-group criteria, that might not be the same. Within and across family, clan, tribe, culture, religion, race, each culture varies in its adherence to its ethical standards. Furthermore,

            Moral systems imply total asymmetry of knowledge. Actions fall under moral criteria whenever the cost of seizing an opportunity for one’s benefit either risks, or places an external cost, and a high cost, on others, and in particular, others with no recourse.

                • Coercion:
                  Opposition:
                  Cost:
                  Perception and Calculation:
                • C.1) Cultural Freedom: (Choice and Opposition)
                • C.2) Freedom of Norms (Competition and Choice) Participate in sets of norms, to select norms.
                • C.3)
                • Religion (Cultural Law And Institutionalized Conformity)

                • R.1) Religious Freedom: Freedom to create institutions, rituals, and codes for the purpose of establishing the criteria of inclusion and exclusion (ostracization). Including Freedom to choose to participate in religious factions, and freedom to evade participation in factions. Religions create opportunity monopolies and attempt to disallow competition of forgone opportunity costs. Competing religions are competitions of opportunities and opportunity costs. Evading participation is an attempt to obtain opportunities at a discount.

                III. Regulatory Organization: Law(organized violence and coercion)

                P.1) Political Freedom (Choice and Opposition): speech, assembly, leadership, concentration of wealth. (The right to cooperate against others who have a similar right) The right of opposition. Political freedom is the freedom to cooperate for GROUP ends, by pooling resources, and establishing an organization, or association for the purpose of advancing those ends.

                  • L.1) Legislative Freedom:
                  • L.2) Institutional Freedom:
                  • L.3) National freedom:

                  IIII. Credit Organization (Anonymous, Non-Territorial Law)

                  • CL.1)

                  VI. Capitalist Freedom

                  (organizatoins to concentrate real capital) (abstract property definitions)

                    V. Redistributive Organization

                    • R.1) Redistributive Freedom

                  • A Life Lesson – A Change In Approach – And A Thank You

                    Every day I read around twenty academic papers, a book, and something on the order of 300 blog postings on economics and politics, and a little philosophy. I have my own aggregator on www.roundtable.capitalismv3.com, various news readers, and I use the site Rtable.net for everything related to economics. I have a high tolerance for information, a passion for the subject. And I maintain this pace while running a not insignificant mid-market company of hundreds of people, and maintaining a bi-coastal existence at the same time. I visit a variety of sites, comment on a dozen, copy the comments to a text file, then edit them and put them on my blog, usually expanding them, fixing some of the language and grammar. Because while I read and write a great deal, I write far too fast and often carelessly. I’ve come to this set of conclusions:

                      These ratios are about the same, depending only upon the number of assumptions, preferences, or errors involved. An eloquent writer can discount by half or more. An analytical writer like myself will use every word and then some. I started working like this twenty years ago. Before the web. Back when there were modems and bulletin boards. I learned early, in newsgroups, and on CompuServe, then on email lists and web forums how to conduct a thorough debate online under hostile circumstances and win. Because of this strategy, I rarely lose. Winning efficiently is accomplished by answering all the possible objections in your post, and leaving no stone unturned. I have literally thousands of these text files going back for decades, as a record of my intellectual development. (( I started out as a classical liberal in the Jeffersonian sense, became increasingly conservative, then libertarian, than anarchist, and now decidedly conservative libertarian. )) But this debating technique is designed to win, not to collaborate. That is because a radical does not collaborate, but fight. Otherwise he would not be a radical. And as a radical, I’m invested in this debate. I see it as a battle for the species. I learned a lot from Mises, Rothbard and Friedman: fight tooth and nail. And I learned what not to do from Hayek: be tepid – he only let Keynesian ideas roam freely, and to our painful detriment. Unfortunately, the comment forum is not the debate forum. It is simply a forum for affirming the sentiments of the article’s author. Debates happen between blogs, not within them. That’s tantamount to stealing thunder. And I too often, quite by accident, steal thunder, or at the very least, only distract from the context. And it’s annoying. My writing, which was much more literary in my youth, has been reformed by two very dominant experiences. The first, is this assertive debating online. The second, and somewhat unfortunate, is formed by the transformation of my thinking from the literary to that of discreet logical sets, by the act of spending years writing software programs. Writing software is somewhere between math and poetry. I have subconsciously merged the two experiences of debate and programming. And despite my attempts to change, I still write, effectively, the literary equivalent of programming code. My writing is structured as a program. And as such does not account for human short term memory. I leave too many associations unstated, because they are obviously deduced from the set of statement that i put to paper, and I am trying, believe it or not, for brevity despite my desire to describe an argument in a sequence of first-concepts. Someone very kind, from another blog, chastised me today. And so I’m going to have to try to change my habitual behavior. I’ll leave my authoritative voice for my blog. And resort to socratic questions in comment sections. And point to my blog where necessary. Old habits die hard. But using a methodology for the wrong application is just plain silly. (Thanks Lauren)

                    • “Extend And Pretend”

                      I lost the source of this quote, but thought it captured the sentiment correctly:

                      The government has been playing “extend-and-pretend” based entirely on the idea that pent up demand in consumers would grow until it busted out and the recovery would be on – fueled by consumers. What has happened is the exact opposite. This is very serious. We are running into 3 years now, and 4 if you look at what commodity speculation did to consumers starting back in early 2007. Remember the prices for wheat and such that were even driving the price of pizza up 30% or more? And then we have such things as “staycations”. And so the concern should be whether or not we have a permanent shift in consumer behaviors. Three or four years is plenty of time to break old habits and establish new ones.

                      1) People forget. Their forgetting follows a ‘forgetting curve’. Knowledge is perishable. Habits are perishable. Relationships are perishable. Even wants are perishable. 2) People don’t ‘unforget’. They have to learn new techniques, develop new habits, and form new relationships. And it takes time. 3) People school or swarm on opportunities. Demand is created by those people who invent ideas then bait people into swarming on them. Developing swarms, especially large scale swarms takes time. Months, even years, because people have to learn from the person closest to them, how they can participate in the swarm. Then as the swarm grows, they must learn enough to break off from the main body and find and exploit new niche opportunities.

                      This last swarming behavior is the general problem with the Keynesian approach to aggregate demand. People are infinitely acquisitive as long as their acquisitions increase either their entertainment, security or status. But opportunities are not infinite. And the less knowledge, the fewer resources available for risk, and the fewer relationships they have, the less likely they are to identify and swarm new relationships.

                    • Review: Dead Aid by Dambisa Moyo

                      “Why Aid Is Not Working And How There Is A Better Way For Africa.” We know: Aid is bad. It creates corruption. It harms the economy. It makes nice happy Christians, and nice happy DSH’s (( Democratic Secular Humanists )) feel good about themselves. But it is terribly harmful for Africans and their civilization. Because I agree with everything she says, I’d like to say something meaningful and supportive, but everything I read in the book is old news. In the Austrian school we’ve been talking about this problem forever. Other than the fact that the author is a successful woman of African origin, this book is a easy read that is very hard to criticize for having uncomfortable motives. Good book. Good cause. Smart woman. But nothing new. What I can say is this: there isn’t any difference between the problem of giving aid to Africa, the Spanish and Portugese import of gold from the new world, and easy credit for american citizens and their expansionist government. It’s all bad.

                    • Review: The Secret Of The West

                      I try to keep track of the ‘Grand Theories’. And I came across this one last week. I can’t find the book anywhere except online. I read what I could. And found this page by the author that summarizes his theory. Which is, quite simply, “stability and wealth provide the foundation for technological progress.” There doesn’t appear to be anything new here. His thesis is a well understood circumstance of geography, which applies both tho coasts and to rivers. Europe has both. He seems to dismiss culture as a factor. But western culture developed at the fringe of the bronze age and then iron age civilizations. And as a fringe order, especially a fringe order of metalworkers and warriors, they wanted to preserve their freedom from eastern mysticism, decadence and tyranny. It is this culture that led to vast enfranchisement. I don’t see how he explains chinese stagnation. China is primarily coastal. It matured early. It has vast rivers, wealth and bureaucracy. What is it about confucian society that left it stagnant? I could go on, but I don’t feel he has made enough of a case to allow me to draw any conclusions. Hopefully I’ll seek him out on one of my trips to europe. Here is his summary:

                      Le Secret de l’Occident (“The Secret of the West”) unveils an economic and political theory about scientific & technological progress. The theory gives the reasons why the scientific and industrial revolutions originated in the West, and not in the Middle East, India or China. It succeeds in explaining the European “miracle” in the IInd millenium as well as the Greek “miracle” in Antiquity. It unravels the causes for the declines and rises of India, China and the Middle East across the centuries. 
That theory was brought together, like a jigsaw puzzle, from many pieces of the historical research previously unconnected. To my knowledge, it is the first united scheme able to explain the main booms and slowdowns observed in the scientific and technological evolutions of the main civilizations. Chapter 1 – Debunking Traditional Explanations 
The usual “internalist” explanations for the European originality – religion, culture, genetics, climate, third-world abuse, Greek heritage, pure hazard – are dismissed. None of these elements can pretend to shed light on the long-term European success. 
They basically fail at the two following stumbling blocks: Eastern Europe backwardness and leadership fluctuations among civilizations. 
– Eastern Europe is religiously, culturally, ethnically, climatically very similar to Western Europe. Nonetheless, it has always been lagging backward, for centuries if not more, painfully catching up with Western advances, but never leading the way. 
– During some periods of time, China, India or the Middle East led the way in science and technology. This does not fit well with the idea of an inherent (religious, cultural, ethnical, etc.) superiority of the West. If, on the other side, one admits important changes in those inherent abilities, these remain to explain. 
Greek heritage must be rejected because the Romans, the Muslims, the Indians too could benefit from it. Randomness is not an acceptable answer, it merely amounts to giving up looking for an answer. Chapter 2 – The Economic and Political Theory (European case, 11th to 18th century) 
Chap 2 discloses the theory. For science and technology to advance in a given civilization, two conditions are required: a thriving economy and a stable political division. That is, a rich and stable states system is needed. Western Europe enjoyed growing trade and manufacturing, and was divided between long-lasting competitive kingdoms, during the whole 2nd millenium; this is why it succeeded the way it did. – A wealthy economy fosters scientific and technical progresses in several ways: 
1) it generates a surplus which can be invested in non-immediately profitable activities, as science and arts. 
2) merchants, bankers and entrepreneurs have a strong bent towards accuracy, numbers, (ac-)counting, weighting, timeliness, measurement. When successful, they impose gradually this kind of science-friendly mentality upon their social environment. 
3) merchants, bankers and entrepreneurs have a vested interest in science and technology: they support development in mathematics (accounting arithmetic, higher-degree equations for interest rate calculations, statistics for stock exchange trading and insurances, etc.). In the Middle Ages, they supported the development of accurate clocks for measuring manufacturing and travelling times, of accurate maps for travelling, of astronomy for navigation, and of course of all sorts of new technical devices, since increasing manufacturing productivity and decreasing transport costs brings profit. The mercantile community, when successful, would financially support individuals active in those fields. – Stable political division helps science and technology in several ways: 
1) It generates freedom. No center has a monopoly of power, no government can control everything. Suppressed in a given country, a scientist or a technician can shelter into another one. Same for ideas and techniques. 
2) Competition between states generates a profitable stimulation. Every government want to do better (or at least not worse) than neighbouring countries. Hence governmental support for science academies. 
3) War exercices a continuous pressure towards modernization, it creates a strong government interest for new technical devices and for improving technical knowledge and education. War does not wreak too much havoc in the case of durable states, hence the need for a stable political division. In particular, the smart European scientific professional structure, the institutions that allowed scientists to make a living while doing research – universities, royal academies, private mathematical schools, etc. – could come to life and survive only thanks to the existence of the wealthy and stable Western European states system. In this context, the XVIth-XVIIth century Scientific revolution is interpreted as the outcome of the economic boom and military revolution that Western Europe underwent in the same period 1500-1700. The difference between the two parts of Europe becomes clear here. Western Europe had a favourable economic and political background during the whole 2nd millenium, that is, it enjoyed a rich and durable states system. Eastern Europe suffered from bad economic and political conditions. Eastern Europe’s states were unstable, they underwent fast boundary moves. Moreover, trade was weak, manufacturing rickety. Merchants never thrived half as well as their Western equivalents. Chapters 3, 4, 5 – The Economic and Political Theory (Middle East, India, China) 
Chap 3, 4, 5, demonstrate that the rich states system theory explains quite well the different stages of the scientific evolutions of the Middle-East, India and China. Each time prosperity and stable division are there, scientific knowledge flourishes. In all other cases (political unity, fast-changing boundaries and/or economical doldrums), science recedes. 
Each civilization is studied century after century, period after period, because they do not experience a constant economic and political situation. So, to get a clear picture, one must consider each period separately. 
The book devotes 110 pages to analyze the political and economical histories of the Middle East, India and China in relation to the evolution of science and technology. This is arguably the most original element in the book’s approach, since, generally, authors studying scientific history focus on the West, devoting only a few pages to other civilizations, without distinguishing between the (very) different periods. 
For example, the rich states system theory solves neatly the mysterious ups and downs in Chinese scientific history. The interval from 750 to 1280 was highly productive in scientific and technical progress because China enjoyed a rather stable division and a very dynamic trade and manufacturing. After 1280, political unity set in and science stopped. Chapter 6 – The Coastline Shape Hypothesis 
In chap 6, I find out why only Western Europe benefited from prosperity and stable division during such a long time: the main cause is the shape of its coastline. The Western part of the European continent is the only densely populated area in the Earth boasting as many peninsulas, gulfs, straits, inland seas, while still being for the most part an interconnected land. Such an articulated coastline enhances trade, because sea accessibility makes maritime transportation easier. The sea route is much better than river or land transportation. Before modern times, it was safer, quicker, freer and tremendously cheaper. Moreover, an articulated coastline defines naturally limited core areas within which polities can live their lives without being too much disturbed – Britain, Ireland, Spain, France, Denmark, Sweden, Italy are regions well delimited by the sea. The long-term stable political division stems from that advantage, as the sea is the best possible boundary for a state. 
In mathematical terms, the quality of a coastline is measured by Mandelbrot’s fractal dimension of the coastline. The higher the dimension, the better the shore articulation. I made some measurements on maps and obtained that Europe has a fractal dimension of 1.46, much higher than China (1.26), India (1.14) and the Middle East (1.13), which is significant because this figure can only take values between 1 and 2. 
Eastern Europe does not enjoy as good a shore profile as Western Europe: it is a mainly landlocked area. Vast surfaces are deprived of sea access: the seas are too far-away, they are often closed or ice-blocked seas. Hence, trade could not take off, and no natural boundary protected the regions’s states, which were brittle and short-lived. This is the reason why this region did not perform well in science and technology. Chapter 7 – The Greek Miracle Explained 
Chap 7 shows that the rich states system theory explains the ancient Greek miracle as well. The Greeks formed a lasting states system, enlivened by a brisk trade, both element thriving on the very indented and articulated coastline of the Aegean sea. Only the Southern part of Greece nurtured the miracle, because it had abundant access to the sea. The mostly landlocked Northern part of Greece stayed apart from the scientific adventure. So the Southern/Northern opposition in ancient Greece mirrored the Western/Eastern opposition in modern Europe. 
The miracle lasted until military technological progress overshot the possibilities of the Greek geographical platform. Then, the scene extended to the whole Eastern Mediterranean region, which the Greeks conquered. Huge states formed in Egypt, Mesopotamia, Asia minor, which could follow the competition, but only for a while: the new territories did not have an articulated coastline. The economy slumped down (this was compounded by demographic decline) and a more and more unstable division settled, ruining the Greek world and ending the “miracle”. Chapter 8 – Evolution of the West, 19th and 20th Centuries 
In chap 8, I apply the theory to the 19th and 20th centuries. The states system of Western Europe continued on its course, generating scientific progress at a fast pace, until the first part of the 20th century, when technological progress in the military domain (essentially tanks and airplanes) rendered the European continent too small. At this stage the states system destroyed itself (2nd world war). Greater states were required for the competition to continue. The USA and USSR, luckily, were there. They continued the battle until, again, the military technology (thermonuclear bombs and intercontinental missiles) exceeded the possibilities of the geographical platform. But this time, technology was so powerful that war simply became impossible on Earth between great powers, ushering the nuclear peace in which we live now. Chapter 9 – Present Situation and Near Future 
In chap 9, I develop several contemporary topics, like the Asian boom and the sharp drop of science in Russia. I show that, today as ever, only two forces prop up science: stable division and prosperity: governments, companies and donators are the funders of science. They can assume that role only if the necessary ressources are there, hence if the economy fares well. Also, only the freedom of a multicenter world allows research to go on unfettered (think of cloning, assisted fecundation, and so on). Furthermore, inter-state prestige or trade competitions are a crucial motivation behind that financing. 
As a consequence, one can take scientific progress for granted in the future as long as some region in the world will enjoy prosperity and stable division – this progress shall be a bit weaker, however, with the waning of the military pillar. Epilogue 
Finally, the epilogue generalizes the theory for the space age (that never came). Planet Earth has become too small to stand large conflicts between great powers, but wars with missiles and nuclear bombs could still be waged in the interplanetary medium. I briefly study the quality of our stellar system in that respect. In the same way as not all coastline profiles allow for long-lasting rich states systems, similarly, not all “planetographies” foster such lush combination at the space age level. The result of this investigation is that, unfortunately, our neighbouring planetary environment seems hopelessly forbidding. We are not going to experience in the future another full-fledged “miracle”, like the Greek and the European ones in the past. ========

                      (more…)

                    • The Reality Of Freedom #1: Freedom Requires Coercion

                      Whenever something is scarce,  some concept of property (the exclusive use of a resource)  is necessary for the development of incentives, coordination, and production — even if the difference between ‘several property’ and ‘shareholder property’, is defined differently by different groups — therefore all societies include and sanction some form of coercion.  No society can exist without coercion. This applies to tribal hunter gatherers, nomads, village agrarians, market city dwellers, and vast urban and rural empires in a complex division of knowledge and labor. We can equally forgo the opportunity for violence theft, fraud, corruption.  For the poorest, this means refraining from theft, fraud, deception and violence in exchange for access to the market society and it’s prices. For the middle class, it means refraining from fraud and deception in exchange for participating in the market society and profiting from it.  For the wealthiest, it means refraining from manipulation of market prices or and participating in corruption of the rules of the market, and corruption, in exchange for status and choice.  For the most powerful it means refraining from corruption, and refraining from laziness, incompetence, and maintaining disciplined efforts to serve the marketplace in exchange for freedom from participation in the marketplace. Each of these forgone opportunities for profit is a cost to the individual.  Cumulatively, for each individual, and for any society, these are very, very high costs, because opportunities for violence, theft, fraud, deception, market manipulation, and corruption are more frequent than opportunities for fair exchange of goods and services due to asymmetries of knowledge and resources — even if the type of cost is different along the spectrum: theft and violence are easiest for the bottom and corruption is most easy for the top.

                      [callout=’Freedom’]There is no social order that is free of coercion as long as there is scarcity. Property itself is a form of coercion. It must be or we would not have to invent it and enforce it.[/callout]

                      There is no social order that is free of coercion as long as there is scarcity.  Property itself is a form of coercion. It must be or we would not have to invent it and enforce it. The coercion that people object to, and classify as corruption, is profiteering by the political class.  Or financial coercion, which means the taking of their time, opportunity, effort, property, or most importantly, status, and to some degree their very attention,  and distributing it to people with whom they disagree, or using it for purposes with which they disagree.  They see this as corruption: obtaining political office and favors by taking from one group and giving to another whom they disfavor. All societies concentrate and redistribute wealth. All societies participate in coercion – or else they could not have property and production.  But whenever a society consists of people with dissimilar interests, by definition there must be negative coercion. Almost all members of any society will tolerate any commonly accepted set of property definitions, even if the scope of individual property is severely limited.  They may form black markets if that scope is too severely limited.  They may form tax avoidance schemes if taxes are too expansive.  But if those definitions remain constant, and they do not have to feel that their plans, and efforts at gain were frustrated, then they will not see the state as coercive. Freedom is defined as freedom from coercion. Meaning freedom from all but equal coercions. And the only freedom we can equally coerce each other with is respect for property. And even then, respecting property is a higher cost for some, and lower for others.

                    • China And Defining Freedom – Easterly VS National Review

                      In William Easterly’s post “Why can’t leading conservative magazine understand freedom?” he refers to a National Review article “China Teaches US Lessons About Economic Freedom“. I replied in the comments: William, I’ve read this post four times, and it’s still not very clear what you’re arguing for and against. I think you’re reading far too much into a what are simple, broad analogies that express a sentiment not a formula. All he’s saying is that small increases in freedom produced a great impact on china. And he’s implying that small decreases in freedom here in the USA, will have as grand a set of effects. I think you’re both confused and you both overrate government, overrate individuals, and underrate demographic migration and change. Growth was easy for the USA during the 1800’s: buy half a continent from Napoleon and import millions of Europeans into it. Sell them all sorts of consumer goods so that they fill up the territory, and so that you can collect profit and create capitalist barons doing so. Use the cheap land and labor to produce commodity goods and sell them to europe. Cause a price catastrophe in europe. Let them have a horrendous civil war and inherit their intellectuals and england’s naval empire. Now, take a country like china, forcibly held back in ignorance and poverty by Mao who decided it was better to have everyone poor and suffering than a wealthy south and a poor north and west — fragmenting the chinese empire. Now, import vast amounts of western technology, western banking and accounting technology in particular, and use your inexpensive labor to produce goods based on that technology cheaply and sell back to the westerners. China’s growth is largely in the form of construction: moving people from hovels in the rural areas, to apartments in urban areas. The country is vastly poor. And it’s per-capita GDP is horrid. They used totalitarianism and capitalism to manage their expansion, we used republicanism and capitalism to do the same thing. There is nothing interesting about china. Nothing. There is nothing interesting about america, either, which is why you’re both confused. What’s interesting is how Europe in general, and England in particular, created so much innovation, how Americans capitalized on it, and how we can use that tradition and culture of innovation to compete in a world where we are no longer the one making money from a huge demographic change. Once cheap labor stops, and marginal differences in knowledge are exhausted, what remains is a nation’s ability to dynamically reorganize production in real time, and to competitively innovate in real time. The question is, whether Americans will maintain their innovative risk taking speculative culture without the military and economic dominance they possessed in the last century, and the resulting control over the international banking and trade system.

                      William Easterly wrote: Curt and Sam, thanks for your comment. I was making a simple point: the article had a double standard for the Negative Changes in Economic Freedom in China and the US. And, 2nd, in giving so much general credit to Deng Xiao Ping vs. America’s leaders, it ignored Deng’s despicable actions against individual freedom in Tien An Men Square, and continued violence against and imprisonment of dissidents in China.

                      William, thank you for replying. Let’s define Freedom. Because unless we define it, I’m not sure what you’re talking about. Let’s see: Freedom: absence of external constraint.

                        The only form of ‘freedom’ you can have, that is non-contradictory (you can equally grant it to others and they to you) is personal, individual freedom. And even then, the only form of political freedom you can have is to DENY others the right to their political freedom. And at that point you are stuck with the problem of either getting to the point where you can convert the barbarians into paying the opportunity cost of becoming property holders in the first place, (establishing the system of property definitions) and without that need for coercion, you’re stuck in poverty even if you want to change the established order. But the only freedom you can have is individual freedom – the freedom of constraint. We can grant it to others equally. The rest of the freedoms are not ‘freedom’. They’re rights to take from others. All political freedoms are rights to take from others. They are rights of coercion, oppression. But then one cannot have a division of labor, a complex society, economic calculation, and the incentive to participate in productive activities unless you apply the ‘coercion’ of private property – at least to some degree. Confucianism is a high-opporunity-cost social order. It is very conservative. It requires respect for hierarchy and authority (opportunity costs). It requires consensus (opportunity costs but with risk reduction). It is an almost entirely shareholder-property society with low rates of creativity, low risk, slow moving social and economic model. But if it is BIG enough that people cannot sense external competition from OTHER social orders then internal status symbols can be preserved by way of nationalism or culturalism and the social order can work. (it doesn’t: the south is a competitor with the north of china, which is their whole cultural problem – that’s what Mao did. He destroyed the country economically to keep the south from outpacing the north.) This is not necessarily ‘bad’ in Confucian society. It may bear understanding that Confucius failed to solve the political problem (it is somewhat evident that he understands this) and directed everyone to hierarchy and family. So the Confucian model is not republican at it’s base. It is not tribal. It is hierarchical, and familial. The entire nation operates as a family. This is not a bad strategy unless you are competing with a group of high-risk, highly-innovative, fast moving westerners, for whom individual heroism, innovation and achievement are viewed as ‘keeping the group strong’. Competition and individualism are a ‘group good’ in the west. They are not in the asian societies. we are free to copy the innovators, and in doing so, everyone has the opportunity to be ‘better’. The west is an innovation and adaptation society. Freedom as we understand it, is not possible, and probably not necessary under Confucianism. Economically speaking, a nation that does NOT participate in heavy research and development will eventually fall behind, and governments can concentrate more wealth than the private sector on Research and Development. (What would the impact be of 200 new nuclear power plants in the USA? We have people feeling good about not wasting energy but manufacturing is the greatest energy consumer, and we need more manufacturing. Economizing is a spiritual act, not a material one.) China is making productive investments. We are making redistributive expenses, and spending trillions defending oil and trade routes, and our primary export – the dollar. And we will not get anywhere thinking that some very small minority of a Confucian population, or our odd obsession with the religion of Universal Democratic Secular Humanism will have any long term effect on the Sinic culture. The rest of the world is clearly condemning it. There isn’t even any evidence yet that our UDSH values will persist in the west without the Militial and Commercial balance to it, that is the foundation of western civilization. The calculative institutions of capitalism, which provide incentives in the form of pricing, sensory information in the form of objects defined as property, expressed and manipulated quantitatively, and the technologies of intertemporal collaboration and coordination in the form of money, interest, banking, fiat money and the technologies of dispute resolution in the form of contract and law, have little or nothing to do with the technologies of redistribution, and the methods of capital concentration, as well as the ‘forgone opportunity costs’ which citizens pay for participation in society and market’. Political freedom is not economic freedom. Political freedom exists either to defend ones self against a predatory state, or to use the violence of the state to put extra-market pressure on competing groups with competing interests. The reason for the western matrix of freedoms is to promote innovation, competition and wealth, so that the nobility, the upper middle class, and therefore prosperity will be maintained, and management elites, will rotate keeping the society competitive. At least, that’s the implied theory: meritocratic rotation of the elites – a thematic value system inherited from western heroic competitive militarism. ie: it’s a knowledge production engine. China values stability and security, not change and innovation. It is a culture where conflict is a sin. Where the individual is subordinate to the state. Where virtue is not heroic excellence, but duty. (At least, until the middle class is large enough.) Conservatives are in large part, whether knowingly or not, subscribers to ‘natural law’ theory, which states that human behavior is what it is, always has been and always will be. They do not subscribe to the philosophy that all men would work happily for the common good, nor, if given the opportunity, that they would do some common good in political power, or even know what such a good would be, simply because of the number of trade offs and secondary causes. Nor, that we are capable of implementing any designed change in our social orders without horrific consequences. And under that view, they would say that you are making a moral equivalency where there is none. Moral statements are economic actions, and either economic payments or theft. Ethical statements are economic actions, and either economic payments or theft. Manners are economic demonstrations, contributions, and payments. But these payments are made against a vast, habitual, rather than written set of legal, cultural and class body of accounts – and vastly different concepts of property definition, and they exist largely to ‘pay for the social order’ by reducing opportunity for friction and conflict. In the west, we have a very different payment system. We are all trying to be noblemen or priests. In the east, they are all trying to be Confucian – to hold their place. More like the German model prior to ww1. Our anglo model, is very rare. And it may simply be the artifact of a thousand years of wealth generated by expansion under the reformation. So before I get too far into this (I already have gotten way too far into it) I think you are being literal with conservative (allegorical) language. Conservative language is allegorical because conservatives have failed (especially during the 1870’s and 1930’s) to articulate a causally sufficient social science. (Myself and two or three rather off the wall libertarians, excluded perhaps.) Where the social democratic method can rely on the coincidence and correlation between easily collected monetary transaction information the Dynamic Stochastic Equilibrium model, and christian egalitarian sentiments, and Jewish anti-western-militial sentiments. But that does not mean that conservatives sentiments, expressed in allegorical language are false. It means they are insufficiently articulated. (and worse -foolishly wrong as in the case of many libertarians.) It simply means that they don’t yet know how to do otherwise. I think furthermore, that a) China is simply importing knowledge at very low cost. It is not producing it. Wealth may make knowledge production possible. But we have seen the Asian model is great for incremental improvement and the western model is better for radical innovation. b) cultures do not change. There is a high cost of changing norms. And Sinic civilization is very resistant to change. It is highly racist and highly culturist. (And it has a huge chip on it’s shoulder.) c) Their entire obligation structure (morals, ethics, property rights, manners) is a set of established costs. Our values are antithetical to them. d) their identity ( the means by which they judge the world) and their status signals (the human natural intuitive economy of events and consequences) will continue to force them in their native direction. And lastly, (why am I just getting to this now?) all the conservative writer was saying is that ‘a little momentum made a big difference’, and that ‘even if we make a little momentum in the wrong direction it will make as big a difference’. He is not comparing statements, he is comparing trajectories in time. And that’s what it means to be conservative: taking the long view.

                      • The BiPolarity Of Class

                        In response to The Tea Party is a Marxist movement on Half Sigma, I created this diagram.

                        BiPolarityOfClass-2010-08-29

                        The BiPolarity Of Social Class, And The Status Competition Between Them. I”ve posted a diagram that is in progress. It’s at: http://www.capitalismv3.com//srv/htdocs/wp-content/uploads/2010/08/BiPolarityOfClass-2010-08-29.png What I want to illustrate is the difference between people who exist in the market economy and people who exist in the bureaucratic economy, and their gender, class and cultural origins. Tea partiers are, in general, status seekers who participate in the non-clerical, market economy. They are white people who are remnants of the anglo saxon social order. Very “Burkeian.” Tea partiers are a status and power movement – a cultural movement that crosses classes. Most tea partiers appear to be middle class, or upper prole. Uppers and upper middle (like me) are not as status-challenged as middle’s are by cultural dissolution. In other words, in any cultural or racial group, the penalty for loss of political dominance by your elites is paid for by its middle and proletariat classes, who benefit from cultural network opportunities created by the dominant preferences. So it’s materially important: The prole risk status loss if they do not rescue their elites. Even as such, I’m not sure anglo saxons don’t have a bifurcated proletariat class: militial service in the west conveys social status, and anglo saxons are a militial society. This drives enfranchisement lower into the class system.

                        [callout]Tea partiers are a status and power movement – a cultural movement that crosses classes. Most tea partiers appear to be middle class, or upper prole. …. In any cultural or racial group, the penalty for loss of political dominance by your elites is paid for by its middle and proletariat classes, who benefit from cultural network opportunities created by the dominant preferences. So it’s materially important: The prole risk status loss if they do not rescue their elites.[/callout]

                        In our case, it so happens, that the tea partier social preference is for freedom, individualism, and capitalism, which also happens to be a material benefit to society. Even if they wrap it in religious doctrine. But they wrap it in religious doctrine because as a group they tend to create solid families, and solid families tend to be more religious. While religiosity increases as IQ decreases, the statement is open to erroneous interpretation. WIthin a people of similar values, the religious moral codes are equally justified among all the member classes. It’s just that the upper classes are more rational, the middle are more allegorical, and the lower are more sentimental. It’s just a matter of articulation – methodology – not one of differences in execution. The tea party movement relies upon sentimental arguments rather than rational arguments because conservatism lacks a rational social science to compete with marxism. While conservatives and libertarians have tried for over a hundred years, they have so far failed to articulate a social science that can compete with the combination of marxist sentiments, democratic secular humanism, and mathematical positivism. This is partly due to inter-temporal complexity, and our over-reliance on the analysis of money and redistribution rather than the status economy – an economy that humans are far m ore sensitive to than the monetary economy. (Intertemporal complexity is too complicated for here. But in general, conservatism is a longer time preference, that puts greatest emphasis on group persistence – it is a capitalization strategy for the future.) I think, Half-Sigma’s goal was to try to pull marxian class analysis into the tea party movement. And there is some truth to it. But it’s not a class movement. It’s a culture or race movement. Traditional whites are now a minority and they are losing their status symbols both domestically and internationally and this goes against their core reason for existence – self sacrifice, family, forgone opportunity, in exchange for group persistence, and they see that persistence under attack.

                      • Hayek, Kling, Austrians And Providing The Libertarian Solution

                        From Arnold Kling, By way of the WSJ, By Peter Boettke:

                        Mr. Hayek rightly warned of the dangers of central planning, Mr. Boettke says, but “he didn’t give a prescription for how to move from ‘serfdom’ back.”

                        – Austrian Resurgence by Arnold Kling (Taken and expanded from my comments on EconLib.) Back From Serfdom? Hayek didn’t solve the problem of the social sciences. He gave us the right warning, but no meaningful prescription for government other than to rely upon what we already knew. Liberty is the desire of the minority. The minority participates in the market. The majority on the other hand lives off it, but does not participate in it. The majority is often frightened of the market. And if not frightened, they simply want to avoid the dirty reality of market participation: spending one’s life trying to understand and satisfy the wants of others, and risking one’s capital to test his or her judgement. We’d all rather be selfish. CALCULATION AND THE SOCIAL SCIENCES Mises, Hayek, Popper and Parsons all failed to solve the problem of the social sciences. The conservative sentiment remains a sentiment, and not an unarticulated rational philosophy. What structure it does have, remains allegorical and historical. This is why it cannot easily win a rational battle against the various forms of positivism aligned with marxist and collectivist sentiments.

                        [callout]Austrian ‘Calculation’, Austrian incentives, the abstractions of Property and Opportunities, along with the properties of human memory and cognitive bias, are, when taken together, a necessary and sufficient system for economic and political order, and a rational means of articulating the conservative and libertarian sentiments. [/callout]

                        Austrian ‘Calculation’, Austrian incentives, the abstractions of Property and Opportunities, along with the properties of human memory and cognitive bias, are, when taken together, a necessary and sufficient system for economic and political order, and a rational means of articulating the conservative and libertarian sentiments. This structure. This answer to our problem of the social sciences, is in Austrian Theory. It’s just incomplete. Our political system relies upon debate and rhetoric as means of resolution of PRIORITIES and METHODS among people with SIMILAR interests. Debate relies upon relevant knowledge of the content policicians are debating. But without data that is sufficiently complex, and formulae that are sufficiently PREDICTIVE, their debates must rely upon social class and cult preferences. And since the society is comprised of multiple classes and people with multiple interests, debate in the absence of rational data, and a rational social science, must descend into sentiments and rhetorical contrivance of people wth dissimilar material interests, rather than rely upon scientific Without additional complexity in our information systems, and without additional complexity in our political process the differences in our interests are too divergent to be solved by irrational discourse. It is a battle of who can win the greatest sentiments, rather than the determination of priorities among people with similar interests. We need data, and a system of applying that data that will allow us to move beyond the convenient contrivance of the DSEM model, and that will permit human beings to rationally make political decisions based upon something other than the tyranny of the majority won through the artifice of irrational sentimental political debate, unbounded by the practicality of hard money, and the difficulty of borrowing hard money. KLING’S RECALCULATION IS THE CORRECT MODEL Calculation and Incentives are the reason the Recalculation Story is the correct analogy. But without rational, causal, articulation, it remains an allegory, and is an insufficient argument relying on explanatory power, rather than causal definitions. There must be a way to combine knowledge of a nation’s market practitioners the way that the market does, and put it in the hands of politicians. We need politicians because if we are to pool our resources (if only to defend ourselves and our property from the barbarians and the proletariat) then there is a scarcity of resources to apply to infinite political choices. PAST FAILURES Past civilizations failed because law, rhetoric, bureaucracy and religion were insufficient means of coordinating a large division of knowledge and labor. They failed to create property definitions and calculating institutions sufficient for cooperatively managing their resources and for forecasting their use by combining the knowledge of the body of practitioners who were participating in the market. This is the reason all civilizations fail internally. It is a structural problem of complexity. Complexity does not have diminishing returns as some authors have suggested – just the opposite. But as complexity increases so must our cooperative technologies. And the tendency of governments to become corrupt, ritualistic, and calcified, combined with the lack of information systems and lack of conceptual models, and lack of institutions to use those models and data, leads to cooperative failure. HARD MONEY AND KNOWLEDGE VERSUS SOFT MONEY AND PROBABILISM Hard money and lending allow this cooperation between power and knowledge. Hard money requires borrowers to make a case to their debtors, and debtors can apply their knowledge of potential profit and loss. But hard money has given way to fiat money, in order to keep the supply of money needed for it’s uses available, while limiting inflation. Had government the inability so spend money itself, this process of inflation targeting would work. Fiat money is also a form of insurance. It makes government the insurer of last resort. It increases productivity by socializing risk. It will not prevent booms and busts. Instead, such easy credit encourages them. But human society has made the decision to tolerate this risk of credit distortion in exchange for the ability to provide each other with national insurance – the ability to borrow from everyone by printing money, and providing restitution of losses to those who have catastrophes. And as the Anglo-Rothschild-French alliance has proven, and the USA has taken to extremes, the most heady insurance a nation state can make use of, is the ability to print money as debt in order to wage war. And, as all developed nations have demonstrated, fiat money also permits governments to create social programs by borrowing against a future that is uncertain. In the absence of hard money – hard money that must be willingly lent – we can no longer rely upon the wisdom and knowledge of property holders we call lenders. Instead, we rely on mathematical prediction — which specifically does not contain the wisdom of property holders and their predictions of the future. Nor is our government debt actually comprehensible. It is simply too complex and vast, and speculative to understand. A SOLUTION THAT ALLOWS COOPERATION AND CALCULATION Thankfully, we already have the model of banking and credit. We’ve just allowed banking and credit to embrace precisely what we have warned politicians from embracing: the error of aggregation, called ‘pooling’ in fixed categories inherent in our current accounting technology, which is further enabled by an erroneous application of probabilism that violates the primary principle of property: it’s dependence upon knowledge of it’s dynamic utility. Hayek identified the problem but not the solution. We have a solution. We have the technology to implement it. It’s implementing it that’s now the problem. The fundamental problem for any civilization is increasing the granularity of economic calculation and keeping the temporal pace of their categories of measurement with the dynamism of their utility. In addition, if we are to have the self-insuring system of fiat money, then we must also have a means of capturing knowledge of lenders, and practitioners that was inherent in hard money. Then, possessed of that means, alter our form of government to take advantage of that knowledge. So Hayek was right. Kling is right. But they answer to WHY they are right has not yet been articulated. And the truth is, that since freedom is a minority sentiment, it is very difficult for such changes to be implemented in a polity. Even if it would satisfy the opposing side’s materialist desires. Because it would not satisfy their desires for status parity. Collectivism is largely an effort to attain status parity.

                      • I’ll Counter Paul’s Prediction With One Of My Own

                        Paul writes:

                        Predictions I Wish Had Been Wrong Looking for some other stuff, I found this post from October 2008 in which I predicted a level of right-wing craziness about Obama similar to that facing Bill Clinton, but worse. I really, really wish I had been wrong about that.

                        But this is followed by interesting comments. All from liberals. Like these:

                        Palin makes and breaks candidates in the GOP now — she’s far and away the most powerful person in the party. Fox News is #1, and they’re basically a beacon of disinformation. When a paper like the WSJ joins in, it makes a lot of people think that what’s being said is legitimate. I try to challenge this stuff each and every time I encounter it, but the truth is that I’m never able to persuade anyone who believes it that they’re wrong. It’s as if the whole country has gone insane, and no one is ashamed to lie or hate people any more.

                        and

                        You certainly weren’t Professor Krugman. If they gain enough credibility to have a substantial influence on the electorate, then the whole country is in peril.

                        And this:

                        The Right has to act crazy, for one thing they are; for another, the Right knows that if the Left takes control of the government, hunting will be outlawed. The Spanish must have their barbaric, anachronistic bullfight/torture ceremony and the gun-lovers must be allowed to shoot Bambi throught the heart. This is a culture war plain and simple. It is not a civil war, but a highly dangerous and uncivil one. I hope the Right loses, but they have the guns, so I’m doubtful. (Un)civil wars are usually costly in terms of lives lost and sheer destructiveness. I can refer you to the Spanish Civil war to give you an idea. Remember, the Fascists won that one, after something like a million people died.

                        And this:

                        There was something about Obama’s can’t-we-all-get-along rhetoric, and then confirmed by a first year of making nice with a bunch of thugs who’d as soon lynch him as have lunch with him (with no result, I must add), that showed this is a man who cannot wield power.

                        Interesting comments. I think they miss the point though. The country is demographically center-right. Liberals, comprising no more that 1/5 of the population are a minority compared to independents and conservatives. People seek status more than they seek money. Cultural dominance in each class determines status signals. People will surrender money unto Caesar, but they will never surrender their social position willingly. As Paul has stated before, the left and right are committed. The independents are the only people who determine elections. They are don’t play the great game except at election time, are disinterested, pragmatic, and swayed by whatever emerges as deciding key issues and the personalities of the candidates. The purpose of both parties is to establish simple sentimental memes that can help frame the candidates currently up for election. Amidst a long term downturn, and faced with a government that passes a law that affects their health care, over the will of the majority, and the country’s only remaining competitive technology, deprived of their cultural status, it’s only rational that they rebel. White guilt was easy to sway when they were an entrenched majority, and especially when suffrage, then feminism, both the result of mechanization of the household tasks, could be brought against the christian sentiments of the dominant male fraternity. But as a minority that is embattled and demonized, as a cult of family and freedom, they see their status under direct threat, their values and way of life under threat, and they are beginning to act like a minority whose status and way of life is threatened. They no longer see room for compromise. They no longer feel guilt. They are angry. It certainly looks like in the long term, the cyclic historians are right, and that the political system no longer works as designed – which is the assumed binding mythology of our country. Despite having certain cooperative and organizational technologies unavailable to the ancients, our government no longer works because it is a system of empire over people with dissimilar cultural-status-political and economic-financial-organizational ambitions. And both the domestic and foreign nations are beginning to revolt – because they can sense that both domestically and internationally, the government is no longer legitimate. A government over people with dissimilar interests must of necessity oppress all. The current political status holders will not easily surrender their positions. The bureaucracy is enormous, in government, unions, academia, education, the vast white collar clerical system, the media and the arts – all the people who do not participate in the market process, but are intentionally insulated from it as intentionally protected classes. The decline of the centralized media has been instrumental in assisting in the change, and major media will continue to decline, as each subsector of society increasingly seeks confirmation bias for its fantasies, and each race, culture and class will seek confirmation of its underlying assumptions leading to increasing fictionalization. This election cycle, and this economy, is simply part of this broader change in the distribution of world economic and political power, and the decline of the international attractiveness of, and personal ambitions of, the western secular humanists — a class whose only strategic option now is to ally with the numeric superiority of Islam as a replacement for Marxism, in order to maintain their control and isolation from market participation. That is my prediction to equal Paul’s. Without cultural cohesion permitted by the wealth generated by selling off the north american continent to immigrants, the unnatural dominance of the dollar, and military control of world trade routes, trade and money, the coalition of DC (violence), NY (Money) and LA (Propaganda) cannot hold. And as Paul senses, and as most synthetic historians have stated for a century or more, a long term economic stagnation or decline will accentuate inter-group differences, as people rely on intra-group status symbols and traditional alliances for support. Egalitarianism is a convenience of a debtor economy.