Curt Doolittle

Category: Economics, Finance, and Political Economy

  • THE MEANING OF “AUSTRIAN” (as I understand it today.) (draft) Note: I’ve wanted

    THE MEANING OF “AUSTRIAN” (as I understand it today.)

    (draft)

    Note: I’ve wanted to put this together for some time, since I have some significant issues with the way that Boettke has written it – even if he has written the best to date. I believe this form of articulation is more analytical and less romantic. But this is still just a draft. And each bullet needs a paragraph of explanation. – Thanks.

    VALUE

    1) Value as incentive to act.

    2) Subjectivity of Value.

    3) Marginal Value.

    4) Opportunity Cost.

    5) Exchange as only test of value and therefore production or consumption

    6) Morality as voluntary exchange. (Propertarianism’s addition: productive, fully informed warrantied, exchange that is free of externality.)

    VOLUNTARY ORGANIZATION OF PRODUCTION

    1) Property. Without property one cannot choose between alternative actions available to him.

    2) Commodity money allows for the evolution of prices.

    3) Prices function as information about what others want and need.

    4) Information provides incentives. Prices make actions and resources commensurable, so that complex choices and planning are possible.

    5) With Property,Money,Prices,Information and Incentives, individuals can voluntarily choose to participate in production.

    6) If many people possess this choice, a polity can evolve the Voluntary Organization of Production. Without these choices, people cannot voluntarily organize production, and must be involuntarily organized. (It is not clear that all people prefer the voluntary organization of production, even if they prefer the rewards of living under a voluntary organization of production.)

    THE ORGANIZATION AND REORGANIZATION OF VOLUNTARY ORGANIZATIONS

    1) Increases in participation in voluntary organization of production increase the division of knowledge and labor and by consequence their participation produces variations in productivity and prices.

    2) People Evolve complex organizations from Sustainable Patterns of Specialization and Trade.

    3) Changes in preferences cause alteration of the existing sustainable patterns of specialization and trade (Reorganization).

    4) Innovation (Discovery) provides incentives to alter the existing sets of preferences, and the existing organizations of production to satisfy those preferences.

    5) Changes in the scarcity of resources (Shocks) alter prices and by consequence alter preferences, and the existing organizations of production change in order to satisfy those changes in preferences.

    6) Changes in innovation, resources and preferences create opportunities for the satisfaction of preferences.

    7) People, and organizations of people, demonstrate flocking and schooling in response to opportunities.

    8) Business cycles evolve from the exploitation and exhaustion of opportunities available in the current organization of production, and the evolution of new opportunities in new organizations of production, and the need for the reorganization of the existing patterns of specialization into new organizations of production. (ie: equilibration is a fallacy of numeracy.)

    INTERFERENCE IN THE INFORMATION SYSTEM, ORGANIZATION, AND CAPITAL

    1) The state distorts information under Keynesian employment policy by flooding the market with cheap money and misinforming individuals as to what actions they should take.

    2) Unnecessary shortages of money also misinform individuals as to what actions that they should take.

    3) Economists and philosophers have not solved the problem of supplying money independent of shortages, (although it appears possible by increasing taxes along with interest rates).

    4) The cost of distortion is an opportunity cost between one possible set of affairs and another possible set of affairs. We just can never recover a lost set of affairs.

    5) Monetary prices may be neutral in the long run, but distortion of those prices produces externalities that are non-neutral.

    6) Distortions impact all capital Human capital (skills), Reproductive capital (family structure and gene pool), Normative Capital (inter-generational habits, values, traditions, myths), and Institutional Capital (Formal institutions, including the law). While economic activity may be easily quantifiable, accounting for gains or losses in the remaining forms of capital are not.

    PROPERTARIAN EXTENSIONS TO AUSTRIAN THEORY

    1) The first means of production is reproduction, and is the purpose for all other production.

    2) The organization of reproduction and the organization of economic production are interdependent, and for one to change so must the other.

    3) Moral rules are those that prevent parasitism: free riding, involuntary transfer (fraud), and imposed cost (theft and violence), and family structure heavily influences moral rules, which only property rights and law can change.

    4) Voluntary exchange requires the exchange is productive, fully informed, warrantied, and free of externality.

    5) Trust is the word we use for the feeling we have, when transaction costs (risks) of free riding, rent seeking, fraud, theft and violence are eliminated – leaving only error in forecasting of demand as the possible risk.

    6) Trust is developed by increasing the scope of property rights to exclude all actions that make free riding possible, and therefore eliminate transaction costs.

    7) The common (organic) law of property rights, being specific positive assertions of the general negative prohibition on parasitism in order to make cooperation rational, is the only means of scientifically (experimentally) evolving law that corresponds with morality.

    8) It is not clear that savers have a moral claim to appreciation of the value of currency from saving, albeit they do have a claim to against inflation of the currency. It is quite hard to argue otherwise.

    OPPOSITIES: AUSTRIAN (aristocratic) VS PSEUDO-AUSTRIAN (cosmopolitan).

    Austrian theory is broken into two branches: (a)The Cosmopolitan (Jewish) Branch (Mises/Rothbard/Hoppe) and (b) the Aristocratic (Hayekian) Branch (Hayek/Popper and as far as I know, myself).

    It may be novel idea or not, but the difference is largely in the Aristocratic use of the commons and high trust as a competitive strategy, and the cosmopolitan attempt to privatize all commons, and eschew high trust in favor of low trust, as a means of evolutionary strategy that COMPETES with the high trust producers of commons. In other words, the Misesian/Rothbardian if not Hoppeian Austrian branch produces behavior that eschews all commons. For these reasons, the Misesian/Rothbardian/Hoppeian branch is not an Austrian branch but a cosmopolitan competitor specifically articulated as an attack on the high trust aristocratic commons.

    In the early 2000’s I had assumed that I could reunite Mises and Hayek, because I understood that Hayek was speaking politically and Mises individually. But I did not at the time understand that these are competing and mutually exclusive social strategies. That the purpose of the Cosmopolitan strategy was to preserve levantine low trust, and to privatize all possible commons. That the aristocratic strategy is to produce commons because no other group has been able to.

    Hayek may have challenged the view among academics that fascism was a capitalist reaction against socialism. He argued that fascism and socialism had common roots in central economic planning and empowering the state over the individual. But just as we must mobilize one another for war, fascism was an effort to mobilize us against communism. So while it may be true that fascism and socialism possess common roots, but it is also true that war is not a process of exploration as is capitalism – it is a deliberate concentration of all production into fighting. And the fascist war against communism most likely saved the west.

    So, these two branches are not tastes. They are polar opposite propositions. They ask us to choose between levantine low trust morality and aristocratic high trust morality. And that is an easy choice.

    Only warriors can produce aristocracy.

    Curt Doolittle

    The Propertarian Institute

    Kiev Ukraine.

    Source date (UTC): 2014-09-15 14:15:00 UTC

  • ON SILICON VALLEY BUST —“Right now you’ve got private companies raising $200,

    http://online.wsj.com/articles/venture-capitalist-sounds-alarm-on-silicon-valley-risk-1410740054GURLEY ON SILICON VALLEY BUST

    —“Right now you’ve got private companies raising $200, $400, $500 million. If you’re in a competitive ecosystem and you raise that amount of money, the only way you use it—because these companies are all human-based, (they’re not, like, building stores)—is to take your burn up. … And I guarantee you two things: One, the average burn rate at the average venture-backed company in Silicon Valley is at an all-time high since ’99 and maybe in many industries higher than in ’99. And two, more humans in Silicon Valley are working for money-losing companies than have been in 15 years, and that’s a form of discounted risk. … In ’01 or ’09, you just wouldn’t go take a job at a company that’s burning $4 million a month. Today everyone does it without thinking.”—

    Well, I have been through the 69, 73, 81, 91, 01, and 07 cycles as a youth through my business-owning parents, a young entrepreneur, and a mature entrepreneur. I have ‘muscle memory’ – I have not forgotten these experiences. And I am highly sensitive to the effect on businesses (my own included) of overheated markets, which, as Gurley states, drive up costs (rents in San Francisco), as well as the impact on myths (“Startups do this so we should too”).

    Although as an Austrian (Hayekian, not Misesian), I also understand that some of these misallocations of capital distort the labor market in positive ways such as encouraging the education of and attracting engineers, while in other cases they are negative, such as attracting men to home construction (which is enjoyable but unskilled labor) instead of skilled labor which may be less enjoyable but is both independently sustainable, and internationally competitive. Once a man loses the opportunity to enter a field at a young age he can never recover it.

    I am hoping to do a capital rase in 2015, and this overheated market is making me very nervous about selling into a cold investment cycle. On the other hand, I built a business wherein all I will ask of investors is to fund going to market, not research and development. And I have intentionally engineered the organization to operate on eastern european costs, rather than San Francisco costs. As such it will be impossible for us to burn money at San Francisco rates (the $4m a month number Gurley refers to). Human capital and physical plant costs are just not the same here, and the distribution of our product (as Atlassian has demonstrated) is not one that requires a large sales force. Yes, Oversing, for any large organization, may require some consultation, consisting mostly of configuration and training, but that is also a benefit, because services in the ERP space are highly profitable. It is hard to invest in service organizations but very easy to invest in combined product and service organizations. So hopefully, even if I have played the cycle poorly by expecting to be done with version one earlier than I thought, I think we should be fine. I mean, at the top end, we will burn in a year what a lot of startups are burning in a month, and our potential for success is reasonably ascertainable, and the exit strategy is obvious and controllable.

    Source date (UTC): 2014-09-15 09:29:00 UTC

  • Untitled

    Paul Krugman’s Philosophy of Economics, and What It Should Be

    Source date (UTC): 2014-09-14 16:54:00 UTC

  • is what I expect to happen if any digital currency is successful. Ecuador create

    http://hosted.ap.org/dynamic/stories/L/LT_ECUADOR_DIGITAL_MONEY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-08-29-08-28-04This is what I expect to happen if any digital currency is successful.

    Ecuador creates it’s own fiat digital currency. Which is good for the third world. Becuase digital currency is traceable and hard for corrupt politicians to steal.

    Source date (UTC): 2014-08-29 13:58:00 UTC

  • THE “WHAT IF” OF UNIVERSALISM What if all companies compete in the market with t

    THE “WHAT IF” OF UNIVERSALISM

    What if all companies compete in the market with the same strategy? Those with the most credit will eventually accumulate the talent and other resources to defeat the rest. So companies specialize in market tactics.

    What if all states compete in the market with the same strategy? If everyone competed on meritocracy, the most technologically advanced state would capture a disproportionate amount of the wealth. If on violence, the strongest would capture a disproportionate amount of the wealth, territory, and control. The most vocal the most influence. This is why states specialize in different tactics. Because meritocracy is only beneficial to the meritocratic. war is most beneficial to the strong. and everyone else engages in criticism and complaint as moral rebellion.

    What if all tribes compete in the market with the same strategy? If all compete on meritocracy, the smartest, strongest, most trustworthy, and most technologically advanced will capture a disproportionate percentage of the wealth. If on strength, the strongest, and fastest, willing to make the greatest sacrifices will capture it. The rest will rely on gossip criticism and complaint and negotiate whatever possible ends they can. So tribes specialize in reproductive and social tactics.

    What if all families compete in the market with the same strategy? if families competed in the polity using the same strategy the wealthy would prosper under meritocracy and the poor would prosper under communism, and the powerful would prosper under authoritarianism. This is why families politically compete using different political preferences: it is in their interests to do so. Classes vote as classes because classes share reproductive strategies. As much as we do not like it, humans use three different strategies (gossip/criticism/guilt, violence, remuneration) to compete, and they do so because the upper classes are literally genetically superior to the lower classes in both intelligence, ability, and reproductive value.

    An homogenous polity, an homogenous moral code for a political system, is a disadvantage to some and an advantage to others. The state isn’t the only monopoly that’s ‘bad’. As an artifact of an extended family of aristocrats, it is adequate for the representation of their interests. A multi-house government is merely a market for constructing social contracts – as long as they are contracts that expire, rather than laws that do not. The mistake we made was in not adding the church as the lowest house of the state, and requiring that aristocracy(the land), merchant and banker (commerce), the common folk (the church and care-taking) were not separated into individual houses. Each with their own requirements for entry, and taxes paid, and all of which participated in exchanges.

    Even as such, a division of those preferences does not solve the problem of the demand for totalitarianism on one end and demand for liberty at the other. The problem is that property rights must exist as universally atomic (private) but that we can use those rights under a political contract, to construct whatever political order best suits our reproductive interests.

    Any order that constructs a market for exchange between those of us with dissimilar interests and abilities is a moral one. However, any order which favors one house or the other through parasitism rather than exchange does not.

    The fallacy of the enlightenment is that of equality, since equality is a code word for monopoly, and monopoly is a code word for tyranny, and tyranny is a code word for parasitism. And under no condition is cooperation rational under parasitism. And if we are not cooperating then violence is on the table.

    Source date (UTC): 2014-08-29 04:31:00 UTC

  • Untitled

    http://www.quora.com/Does-Keynesian-economics-work/answer/Curt-Doolittle?share=1

    Source date (UTC): 2014-08-27 06:41:00 UTC

  • Is Bitcoin Superior?

    Question: —“Curt, does Bitcoin meet this Criteria? Is Bitcoin superior to Gold in terms of means of exchange?”—

    Steven,

    [I]nteresting question. Lets look at the list.
    1) Scarcity (no. as long as people want them we can create more of them at a constant rate – the problem is actually the opposite: requiring constant adjustment to the weights to require enough work to maintain consistent value. Otherwise we could produce them infinitely without cost.)
    2) Commodity Utility. (no. it has no intrinsic use.)
    3) Non-perishability (no. because like the stock market they require infrastructure for redemption.)
    4) Volume and weight to value ratio (yes)
    5) Nearly universal convertibility (not yet, and until we get to 10 second blocs, which kind of defeats the purpose, I suspect we wont get there.)
    6) Functional unit of account, store of value, and medium of exchange. (not yet. Not enough volume).

    UNDERSTANDING THAT BITCOIN ISN’T MONEY – IT’S FRACTIONAL SHARES OF THE BITCOIN NETWORK.

    A bitcoin consists of a fractional share of stock in the bitcoin network. What separates the shares of stock in bitcoin from shares of stock in other publicly and privately traded stocks, is (a) that one need not go through a clearing house (anyone with a wallet can clear an exchange), and (b) that one can sell a fractional portion of a share of his stock (a bitcoin).

    Just as any other business can fail, so can the bitcoin network. It is fully open sourced, fully transparent organization, operated by pretty good incentives, but that does not mean it cannot fail, and that those shares cannot be worthless. (In fact, it’s just as likely as not.)

    BItcoin provides low transaction costs. And I suspect that it will result in a lower cost means of transferring money, rather than as money itself.

    Now, I know a lot about the subject of what is money and what isn’t. Technically speaking, bitcoins are fractional shares of stock usable under some conditions as a money substitute that we call token money, for the purposes of decreasing transaction costs.

    It is an ingenious way of funding a business. It is however, not ‘money proper’. Or, in classical language ‘money in the narrow sense’.

    (Of course, that won’t stop a zillion imbeciles from spewing nonsense at me but that’s the reality of it.)

    It is very unlikely that anything will surpass gold as a currency of last resort. And in truth, the currency of the reigning world powers will except under shocks, always be a better store of value than gold because prices are harder to manipulate than the price of gold, since governments work hard to insure that they are the exclusive manipulators.

  • Is Bitcoin Superior?

    Question: —“Curt, does Bitcoin meet this Criteria? Is Bitcoin superior to Gold in terms of means of exchange?”—

    Steven,

    [I]nteresting question. Lets look at the list.
    1) Scarcity (no. as long as people want them we can create more of them at a constant rate – the problem is actually the opposite: requiring constant adjustment to the weights to require enough work to maintain consistent value. Otherwise we could produce them infinitely without cost.)
    2) Commodity Utility. (no. it has no intrinsic use.)
    3) Non-perishability (no. because like the stock market they require infrastructure for redemption.)
    4) Volume and weight to value ratio (yes)
    5) Nearly universal convertibility (not yet, and until we get to 10 second blocs, which kind of defeats the purpose, I suspect we wont get there.)
    6) Functional unit of account, store of value, and medium of exchange. (not yet. Not enough volume).

    UNDERSTANDING THAT BITCOIN ISN’T MONEY – IT’S FRACTIONAL SHARES OF THE BITCOIN NETWORK.

    A bitcoin consists of a fractional share of stock in the bitcoin network. What separates the shares of stock in bitcoin from shares of stock in other publicly and privately traded stocks, is (a) that one need not go through a clearing house (anyone with a wallet can clear an exchange), and (b) that one can sell a fractional portion of a share of his stock (a bitcoin).

    Just as any other business can fail, so can the bitcoin network. It is fully open sourced, fully transparent organization, operated by pretty good incentives, but that does not mean it cannot fail, and that those shares cannot be worthless. (In fact, it’s just as likely as not.)

    BItcoin provides low transaction costs. And I suspect that it will result in a lower cost means of transferring money, rather than as money itself.

    Now, I know a lot about the subject of what is money and what isn’t. Technically speaking, bitcoins are fractional shares of stock usable under some conditions as a money substitute that we call token money, for the purposes of decreasing transaction costs.

    It is an ingenious way of funding a business. It is however, not ‘money proper’. Or, in classical language ‘money in the narrow sense’.

    (Of course, that won’t stop a zillion imbeciles from spewing nonsense at me but that’s the reality of it.)

    It is very unlikely that anything will surpass gold as a currency of last resort. And in truth, the currency of the reigning world powers will except under shocks, always be a better store of value than gold because prices are harder to manipulate than the price of gold, since governments work hard to insure that they are the exclusive manipulators.

  • The Mere Mortal’s Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.

  • The Mere Mortal's Journey To Economic Literacy

    1) -The Single Idea-
    Economics in One Lesson, by Henry Hazlitt : Economic thought, unlike Moral thought, asks us to think about equilibrating consequences, and opportunity costs. If you understand the “one lesson” of the broken window fallacy, then that teaches you economic thinking in a nutshell.

    2) –The Application of The Single Idea To The Civic Society–
    Basic Economics, by Thomas Sowell : Basic Economics applies this single principle.

    3) –The Application of the Single Idea To Production Distribution and Trade–
    Principles of Micro Economics, by Greg Mankiw : Micro Economics textbooks deal with patterns of cooperation (business).

    4) –The Application of the Single Idea To Monetary, Fiscal, Industrial and Social Policy–
    Principles of Macro Economics, by Greg Mankiw : Macro economic textbooks deal with the impact of fiscal policy (government spending) and monetary policy (issuance of new money or credit) on the economy, in the government’s effort to keep us all busy.

    5) –The “Missing Link”: The Operations of the Financial System that connects political policy with production, distribution and trade.–
    Rothbard’s Mystery of Banking, and;
    Nial Ferguson’s History of Money

    The book that is missing between Micro and Macro, I do not think has yet been written, which is how the financial sector services the relationship between micro and macro. I think that book has not been written. In the meantime Rothbard’s Mystery of Banking, and Nial Ferguson’s History of Money, are the best and most accessible works. (Others might disagree). Rothbard was a terrible philosopher, but his works on money and banking are still the best I have found.

    6) –The Study Of Applications, Eddy’s And Flows-
    Most advanced (niche) applications of economics are useful for professionals, but not terribly meaningful for citizens.

    Personally, I don’t understand why we don’t get this stuff in high school.