Curt Doolittle

Category: Economics, Finance, and Political Economy

  • Krugman Watch: Paul’s Beginning To Admit Failure And Here Is Why

    In a series of recent posts, Paul Krugman is starting to admit that he’s failing to be able to use his pulpit, position and his credibility to encourage government spending. What I find most interesting is that he argues that proletariat sentiments of inequality (injustice) are the driving social force, while failing to understand that middle and upper middle class sentiments of injustice (inequality) are an equally driving force. Paul:

    [callout]What I find most interesting is that he argues that proletariat sentiments of inequality (injustice) are the driving social force, while failing to understand that middle and upper middle class sentiments of injustice (inequality) are an equally driving force.[/callout]

    I think you are failing in your effort as a public intellectual, that you are aware that you’re failing, and that twenty years from now, it’s going to be clearly evident that you failed to encourage borrowing (debt) and spending (investment) that WOULD have made a difference, and WOULD have assisted us in getting out of this long term stagnation. And you’re failing because you can’t envision HOW to put money to work in the economy, and you can’t do that because of your personal biases and fantasies. But I suspect that you will go to your grave holding desperately to your desperate convictions – convictions held by the fantastical beliefs of a frustrated minority. A minority that has not in two thousand years, been able to obtain and hold onto land, and as such fails to understand peoples that DO hold onto land, and why they are able to hold it. And in particular, why they are wiling to pay very high social costs, in order to hold it. But the social engineering you think that you can accomplish with economic policy runs too counter to human behavior to produce your desired ends. A heterogeneous people will NEVER act as you desire them to. A ‘CREATIVE CLASS’ will never work to produce your desired ends. Because a creative class must take RISKS, and they take risks with people with whom they TRUST. And they trust people with whom they can best how to trust. And they best understand people who are LIKE THEM. The diasporic english, armenian, chinese, hindu and jewish people are the most competitive and innovative, but aside from the english, the rest tend to work intra-race. Even within races, people cooperate within CLASSES. They may work or consume across lines but they do not RISK across lines, and RISK is what generates jobs, and jobs are what generate consumption. Government spending does NOT ‘inform’ risk takers. It actually makes them angry, because they see the state as a competitor that deprives them of opportunity, and a predator that deprives them of choice. More importantly, all productive creativity requires some sort of technological innovation. It is a product of material manipulation of the physical world. Creativity is not in the capitalist class but in the entrepreneurial middle class. Something must be invented before it can be profited from. So some groups are more effective at mobilizing their middle classes than others. The USA had prosperity to share because of external, not internal factors. Anglos had a new continent to sell off, the only form of government capable of distributing the work of it, (And after the Louisiana Purchase, a government invented specifically for it). Aggregate but temporary technological advantage over much of the world. The inexpensive acquisition of british sea ports. The ability to sell ‘dollars’ internationally because of adopting those ports and the ensuing projection of military power. The collapse of or absence of competitors – particularly those under communism. The conversion of vast numbers of laborers and farmers to suburbanites made possible by low cost of energy, energy distribution and manufacture. The use of print, television and radio advertising to stimulate class-advancement incentives in vast numbers of people by the accumulation of basic consumer goods many of which freed women from the need for dedication to household labor and allowed them to enter the work force and increase productivity. These external factors are MORE INFLUENTIAL than monetary policy. Demographic (distribution), Race, Culture and Class factors are MORE important than monetary policy in determining risk-taking, and risk-taking is what creates jobs. These cooperative frictions DECLINE under wealth because of less need for group persistence, and they INCREASE under duress. In fact, we are seeing a national moving pattern that is the ‘flight from diversity’. And we are witnessing the US adoption of the south american model of a defensive white urban elite, an increasingly minority poor suburban ring. And in those cities where this situation cannot form, flight. Because diversity is an economic disadvantage. Cheap labor may not be. Diversity is. And we have known for a very long time that tribes may integrate into the legal and property system, but they do not integrate into the political and cultural system. Any integration is an illusion of our winner-take-all two party system. Minorities and majorities demonstrate group-persistence strategies. They do so because status determines mate selection, access to opportunity as well as serves to provide people with feedback signals, and status is easier to obtain within group than without. This status-economy is MORE important than pricing signals EXCEPT under absurd conditions. The US interwar period is an ABSURD condition. The euro-atlantic expansion is an absurd condition. The western dalliance with integration of cultures is the product of ABSURD conditions.

    [callout]our government, has built an empire rather than a nation. … [Empires] only survive when a minority has political control over the empire, and where that minority allows economic freedom, but specifically prevents political freedom.[/callout]

    Under these conditions of absurdity, our government, has built an empire rather than a nation. Empires are not egalitarian, they simply consolidate trade routes and reduce the friction of trade while increasing the size of the market. They are anything but egalitarian. And they are only beneficent, and they only survive when a minority has political control over the empire, and where that minority allows economic freedom, but specifically prevents political freedom. You are not going to get what you fancy. You’re going to fail as a public intellectual. And you’re going to fail as a public intellectual because of your own class and cultural biases. It’s not that we don’t need spending. It’s that we must invest in production not consumption. And that your underlying desire is really redistribution, and fulfillment of your frustrated cultural and racial ambitions, not increases in production. And you will not get the body of people to borrow and invest unless you abandon those fantasies. But people never do. You won’t. And so you’ll fail. And all your efforts will be wasted.

  • Krugman Watch: Paul Thinks It’s Envy. (What is it with these people?)

    Paul Krugman argues that envy and inequality pop the bubble. He asks “Correlation or Coincidence?” To which I reply: …. or completely unrelated causality. I don’t think you’re making any argument and I think you’re inventing a correlation, and hoping it sticks via the contrivance of sentimental association rather than reason. The cause isn’t income difference. It’s distortion of pricing and demand by irrational access to, and consumption of credit. And no small part of it is the recursive distortion of credit once it enters the system. Then, when Mom and Dad’s seven-eleven clerk talks about real estate investment, the average person starts to see irrational feedback and develops cautious sentiments. This effect undermines confidence, and after enough feedback from their network, mom and dad start retrenching. Shocks, like the spring oil crisis, confirm their sentiments, and the process accelerates. How about another feedback loop: once enough credit has been available that individuals exhaust their inventory of readily comprehensible wants (as determined by their class and peers), they must stop acting to consume until they can identify new status consumables. Something which means expanding beyond the familiar. This is a marginal illustration but an important one. There is a lot of saturation of the middle class’s consumption. They know it. This provides additional feedback on top of the dissociative feedback of the gas-pumping proletariat investor. Instead of this rational behavior due to the presence of overwhelmingly obvious-to-the-consumer information, you are arguing that **envy** by the lowest classes has a greater impact on confidence than does uncertainty due to omnipresent, obvious, sometimes absurd, irrational feedback. And for the lower proletariat, that sentiment is undoubtably persistent, doctrinal, and inherited. But everyone is just demonstrating observation and rational behavior. Or are you arguing that we can tell that there is a distortion of pricing in the economy because the differences between class consumption simply indicate that credit is out of hand? The question is instead, how much of this distortion remains after the bubbles burst? (Some, but losses are disproportionately allocated to those with paper wealth, and unemployment disproportionately allocated to those in least productive industries.) And the problem is, that the proletariat now foots the bill, with long term interest, for the expansionary credit, unless it is recovered through inflation. This is the damning critique, not that of inequality. The cause is not disparity or inequality. It is not envy. It is simple feedback from observations of irrational information. And that feedback occurs because the state has used credit and fostered consumption in lieu of investment that obtains increases in productivity, and the differences in instability are between thse resulting consumer and producer economies, and the rapidity with which they react to shocks. (Consumption is NOT STICKY when compared to production.) Furthemore, your efforts seem to think that there is an endless supply of entrepreneurial innovation availalbe that can yield increases in production. And that isn’t true. It is clear that you wish to ignore the reality of inequality, the reality of the unwillingness for people to redistribute to others who they feel disagree with or undermine their value system, and the reality of social status as a permanent, and *epistemically necessary* component of the system of human cooperation and coordination. Let alone the mating ritual. Envy isn’t the problem. General liquidity used for consumption rather than productivity is the problem. People have cognitive biases. Plenty of them. But they also are not oblivious to social economic and status signals that are irrational, and tell them ‘something just isn’t right here’. The shift to Friedman was the only one available to the conservatives who wished to reverse what they saw (accurately) as a decline in their civilization due to prior policies. That Friedman was partly wrong, as was Keynes partly wrong, is immaterial. Our problem is that we do not know the answer. The philosophers of the thirties failed. And so has everyone else since then. And they have failed largely due to the myth of equality. People simply do not, and will not act that way in a heterogeneous society. They do the opposite. The status economy with its class status demands, and its racial status preferences, and its group persistence preferences will not permit the purely economic homogenous model you fancy. In fact, research shows that people will gladly undergo hardship in order to ‘fund’ their social preferences, and in particular to preserve their status. And so you will never create the levers that you seek to manipulate. We are instead headed toward the south american model of geographically separated classes, and likely races, forming permanent classes in rings around urban centers, and systemic corruption necessary to preserve group solidarity. This demographic movement is already suggested in moving patterns. Be careful what you ask for. (PS: I swear. Left-Jewish egoism is a cultural if not genetic cognitive bias. Unbelievable. Krugman is just as out there as his conservative mirror image Paul Gottfried. )

  • Who Was Hayek, What Are Austrians, And Why Should I Care? (In 1500 Words)

    On Old School Economics, someone asks:

    Can anyone summarize the basic tenets of this school of economics and what are Hayeks contributions? I’ve been looking all over the place and have found some websites that are a bit confusing so if you could make a list, it would be helpful.

    Hayek is one of a line of Austrian thinkers. The term ‘Austrians’ was originally, like ‘capitalism’, derogatory: meaning essentially ‘those quaint hicks’. Austrianism is a micro-economic (versus macro), rhetorical (versus mathematical), approach to political science and economic theory. This approach suggests that we can analyze the behavior of individuals in economic affairs and from that deduce the best macro policy. It assumes (Like all systems of natural law) that people are not terribly plastic, and that they will ‘always act as humans with self interest’ and that we should enact policies that work in tandem with human behavior rather than trying to change human behavior.

    [callout] The Austrians used insights gained from calculus (the relative movement of bodies) to create the principle of ‘Marginal Utility’ (wherein each unit of a group of resources changes in value to the owner as they are sold) and the ‘Subjective Theory Of Value’, wherein the value of an object is in what others will pay for it, thus explaining the essentially speculative, and therefore unsettling, nature of capitalism. [/callout]

    Historically, the Austrian school is a German reaction to the English school’s theory of value. The English (and then marxist) schools, embraced the Labor Theory Of Value, wherein the value of an object has to do with what work went into it. The Austrians used insights gained from calculus (relative movement of bodies) to create the principle of ‘Marginal Utility’ (wherein each unit of a group of resources changes in value to the owner as they are sold) and the ‘Subjective Theory Of Value’, wherein the value of an object is in what others will pay for it, thus explaining the essentially speculative, and therefore unsettling, nature of capitalism. This theory created a much more complex world of things for economists to measure: if all values are subjective, and if each unit of a resource has a different value, then the world consists of an infinite number of unique objects whose value cannot be known until it is sold, and our attempts to measure them in real time are limited to our ability to make wide generalizations and averages about the economy. After these initial insights, Austrians also contributed to theories of money, trade cycles, business cycles, and in particular theories of money and interest. But they all depended upon the basic innovation: relativism (like Einstein’s relative motion of bodies) and therefore subjectivism – again, the application of calculus to human affairs. (The depth of this cognitive insight into the nature of relativism might not be apparent to most people, nor the complexity of created by it. Pi For example is forever inaccurate because it is an approximation of an infinite number of triangles. It’s insolvable using the technology of mathematics as we understand it. Economics to some degree, must make similar averages and assumptions and there is simply no way around it. In fact, the only measure of what we may do, is what we did. There may be no mathematics to explain our economic activities other than the record of our economic activities, because we invent the future, we don’t discover it. ) Austrian theory, which explained the workings of money and information in the market economy, provided the analytical and mathematical methodology with which to argue against the socialist’s attempt to revert from the increasingly complex relativistic market economy to the simplicity of the predictable the village economy. Hayek contributed to this body of economic and political theory in a range of areas. But he is particularly read for his application of the limits of knowledge to political and economic systems. These limits of knowledge are embodied in three essays. They are easy to read. And you can read them a hundred times and learn from them on every reading. 1) “Economics and Knowledge” 2) “The Use of Knowledge in Society” 3) “The Pretense of Knowledge” (To which I would add one more “Coping with Ignorance” and another by Karl Popper: “sources of knowledge and ignorance”. THey were friends and popper’s essay is insightful. ) And after reading those, the one book he referred to as a ‘pamphlet’: “The Road To Serfdom”.

    [callout]One critic has stated that “all of Hayek can be understood in a few essays”. Which is true. Of course, all philosophers can be reduced to one insight. However, his insight is profound.[/callout]

    One critic has stated that “all of Hayek can be understood in a few essays”. Which is true. Of course, all philosophers can be reduced to one insight. However, his insight is profound. Along with Ludwig Von Mises, Hayek helped undermined the advance of socialism in what was called the ‘Socialist Calculation Debate”, in which he and Mises argue: first, that as populations increase and specialize in a division of knowledge and labor, the knowledge needed to coordinate production in time is so vast and so rapidly changing that it is impossible for a central authority to obtain and use that information. Second, that prices are the vehicle by which we communicate and coordinate with one another and by destroying prices you destroy that ability to coordinate our activities. Third, that without prices and competition there is no incentive for people to participate in ‘problem solving’ necessary for efficient production, and instead, production will atrophy through entropy. Fourth, that people will simply turn to recreating the price-market in the form of a black market. There are an infinite number of additions to this list, but the central themes are the same: we must increasingly coordinate our actions in increasingly large numbers, producing increasingly complex goods using increasingly fragmentary knowledge. And that without these tools we cannot coordinate our activities. For most of his career Hayek was unhappy that ‘The Road To Serfdom’ was so well respected compared to his more ‘scientific works’ as he put it. But he changed his mind later in life. We should note that Hayek’s ideas are not arguments against redistribution or redistributive public services, so much as arguments against interference in the market economy, and the necessity of using the market economy to provide services. The contemporary reader may not understand that the scope of socialism has changed from one of outright management of the economy to incremental management of the economy. Others have followed Hayek and stated that the behavior of people in a bureaucracy is the problem, not necessarily government itself, when we see government as limited to the use of ‘earnings’ for the provision of public services. Others have theorized that the entire state can be privatized as it was under the large monarchies and can accomplish the same ends. And it appears that this might be true. Hayek’s strengths are also his weaknesses: he was a polite gentleman, and thus his arguments are often ‘softly spoken’. WHen he refutes someone else, he assumes that they are making a simple intellectual error and that he’s helping them correct it. He assumes all men have the best of ambitions. And in doing so does not expose their motivations. In particular he did not refute Keynes, who simply gave socialism a nicer name, and allowed government to change it’s purpose to that of reducing unemployment and increasing redistribution from that of creating competitive capital, and changing society from a system of saving for the purpose of inter-generational lending, to one of consumption and inter-generational dependence. This gentle conservatism perhaps limited the scope of his theory. But for whatever the reason, his theory was too limited. Among all theorists back to Hamilton and Jefferson, Hayek came the closest to solving the problem of political economy in an industrial society: but failed. He gives us warnings about what not to do, and why not to do it, but despite his efforts, he failed to tell us what we should do. Or at least, he failed to sufficiently innovate such that we could implement a society that would preserve our anglo-saxon ‘rights as englishmen’: those rights and obligations as a fraternal order of peers participating in a republican self-government operating a market economy. Which is really what the conservative movement is, and always will be, about.

    [callout]he failed to sufficiently innovate such that we could implement a society that would preserve our anglo-saxon ‘rights as englishmen’: those rights and obligations as a fraternal order of peers participating in a republican self-government operating a market economy. Which is really what the conservative movement is, and always will be, about. [/callout]

    He tried to solve the problem of political economy in the industrial age, but he failed, along with Mises, Popper and Parsons. Socialism is not an innovation. It is Luddism: the attempt to make comprehensible a market economy, which exists precisely because it is so complex and incomprehensible that we must use the pricing system and a division of knowledge and labor to administer it. But that does not mean we know how to govern a complex and diverse empire using the traditional republican methodology of opposing powers using debate and consensus over abstractions and an unaccountable legislature relying on intuition and hearsay because the numbers that they have to work with are of such imprecision and speculation that they are meaningless. And when, under fiat paper money, they are not limited by the opinions and willingness of others to comply with their ambitions. Republicanism is a methodology for operating the extended family we refer to as the city-state in a hard-money economy: people with shared economic incentives and shared values.

    [callout]Republicanism is a methodology for operating the extended family we refer to as the city-state in a hard-money economy: people with shared economic incentives and shared values[/callout]

    We have not yet solved the problem of Imperial Government under Fiat Money. Hayek thought too small and failed us. The libertarian answer is a Luddite response as well: either reduce government and our states to city states (classical liberals) or fully embrace a market government (Rothbardian-Hoppian Anarchists). And so far, we are left with creeping socialism and no sufficient answer to the problem of preserving our freedom from within competing empires. These articles can be read at http://hayekcenter.org/?page_id=11.

  • Where From Comes The Collapse : The Schumpeterian Priesthood Profits From The Absence Of Calculability

    Mark Thoma suggests that the government should both use Tax Cuts and Spending to improve an economy. Which is a pretty common sentiment among economists. Nothing new there. He is simply changing his mind on the value of Tax cuts because they help correct household balance sheets and therefore increase the likelihood of future spending.

    In balance sheet recessions, tax cuts that are saved will help to end the recession sooner and hence should be part of the recovery package. The most important concern is still aggregate demand, and policies must be devoted to this problem first and foremost, but tax cuts have a role to play in the recovery process even when they are saved.

    One of the posters commented (as leftists do, on his blog Economist’s View) that increasing Demand does not fix the problem. Which I then used as a springboard.

    ken melvin said… The implicit assumption that demand provides solution is not valid, hasn’t been since forever. The model is invalid, has been since forever. Yet, for lo these nearly 40 years. we pursue this model in the face of the ever mounting failure. The model, never really sacred, was built on forensics, and, more, to make the status quo work. From physics and bio-science, we’ve evidence that man is capable of divining forward. Now is the time for economists to ask ‘how should it be’?

    But I think he misses the point.

    [callout]Economists don’t have any idea how the world should be.[/callout]

    Economists don’t have any idea how the world should be. The failures of the DSEM models are catastrophic. The problem of human memory (Mandelbrot-Taleb-Hume and to some degree Hayek) implies that humans are permanent victims to behavioral boiling-the-frog, and to the somewhere on the order of fifty cognitive biases. We know, as you state, that demand does not work. We know that innovation is a supply-bias that generates demand. It appears that it is the only means of increasing velocity and volume in an economy. We know that the state moved from saving-and-investment to consumptive redistribution and debt during the period of rapid industrialization and the act of selling off the american continent. We know that we assumed we could use mathematics to control this by a number of levers we call monetary policy. Vast Changes Give Our Ambitions Context The world is going through a number of changes. 1) repricing due to the asian economies coming into capitalism and industrial production. (Just as the US did to europe in the mid 1800’s) 2) reorganization, as people must learn and move to new forms of production (jobs) without knowing what to move to. 3) the future-assumption-of-growth debt bubble bursting everywhere. 4) the movement of private debt failure to sovereign debt failure, destroying the ‘lender and insurer of last resort’. 5) the demographic shift to an older media age population that is lower production if not non-productive. 6) Increasing urbanization worldwide (urbanites and rural’s have different epistemological biases because of perceived opportunity density – different cognitive biases, but cites are increasingly becoming the home of the poor, and income disparity is largely an urban phenomenon) 7) Decline (as has been predicted since 1945) of american ability to police trade routes inherited from the English after the wars (military influence) and increasing destabilization of trade routes, power, and monetary systems that will come from that change in influence. 8) the permanent decline in the relative economic position of american middle classes that will result from this worldwide rebalancing. The Failure Of The Democratic Republican Model Of Debate It appears that the working class’s attempt to bankrupt the capitalist class, and the capitalist class’s attempt to bankrupt the state to defend itself, BOTH worked. States are very nearly bankrupt. The republican model of debate between opposing forces for governmental decision-making under the unbounded system fiat money has failed. If we are going to have fiat money, we are going to have to find another way to debate the future. Fundamentally, our current republican form of government is government by non-productive people. By priests. It is quite the opposite of early republicanism under farmers, who specifically were productive. The classical liberal revolution failed to adequately define a government for the post-industrial era. The republican model of debate between opposing forces for the purpose of governmental decision making has failed under fiat money. If we are going to have fiat money, we are going to have to find another way to debate the future.

    [callout]The republican model of debate between opposing forces for the purpose of governmental decision making has failed under fiat money. If we are going to have fiat money, we are going to have to find another way to debate the future. [/callout]

    And since we have a clear difference between class predictions of the future (entrepreneurs must take and absorb risks so they see the future as dangerous while independent laborers and craftsmen and small business people see a similar view, but white collar educated workers and government and union workers tend to see a stable future – because they are isolated from visible flows of capital and risk), then consensus from PERCEPTIONS ALONE (*that’s the issue right there*) between classes of people who are disproportionately distributed across geographies, cannot come to a consensus of PERCEPTIONS. An emphasis on perceptions here: because a) the perceptions are vastly different, b) the data is insufficient and models are notoriously faulty in prediction c) our method of governance is not factual but PERCEPTUAL. The most common perceptive difference between cultures and classes is time preference (in the austrian model this is a degree of willingness to wait for gratification. In simple terms, people from different social classes have different views of time. Higher classes longer, lower classes shorter. There is some evidence that this is simply an expression of having means or not, or one of what a class teaches its children by implication and habit rather than intent, but that is counteracted by research showing that all classes have both short and long term thinking members. That would indicate that austrian model is correct, that the issue is the underlying drive for stimulation. In either case, these perceptions are material determinants of the differences in perceptions. All mathematical formule are improvements on our perceptions. If they prove true in forecasting outcomes they are extension of our senses. Or better said, they alter our perceptions of the world by improving our perceptions in limited domains. But data must come from categories of actions that we can measure. We cannot measure many dimensions. In particular cannot measure the alternative worlds that people to NOT choose (as we can forecast in physics using alternate world hypotheses). And we tend to measure commodities and ‘flatness’ best, and outside of those who worlds can barely forecast anything at all. How Do We Make Choices? SO in this ‘fact-less’ world, how should we know what to do, and how should we CHOOSE what to do, and what mechanism for CHOOSING what to do will work to produce outcomes that are beneficial enough, that productivity increases sufficiently to allow for redistribution, so that status-envy and status-achivement-for-mating-purposes are both satisfied? (And I am not ruling out that due to status envy a large part of any population will happily encourage the diminution of an economy. There are too many records of this effect in history.) We have the wrong form of government. We lack shared perceptions of the world – for structural reasons. We lack the tools and formulae to scientifically prove one set of perceptions or another, in order to come to agreement. How Should We Reform Government? So, how should we organize society, and what research should economists pursue, so that we can calculate, estimate, judge, plan or whatever, a future that we can agree upon in a democratic society? Or should we simply try to come up with another set of ridiculous religious concepts even if they are metaphysical (marx and Smith) or positivist (keynes and Friedman)? Or is there yet another way? Is there a way to look not at mysteries (religions and metaphysics and morality tales) or to look at false sciences (formula and application of the constant physical world principles to the heuristic world), as means by which to FORCE AGREEMENT BY FALSITY under the assumption that the world is either externally created, or naturally bound, or scientifically predictable? All of which we know are FALSE. Or instead, is there a way to cooperatively EXPERIMENT and DISCOVER that world and SHARE COOPERATIVELY in it’s RESULTS? In other words, is there a way to create a government of DISCOVERY that rewards all citizens for their participation? And more importantly, is there a way to create the correct SENSATIONS that are PERCEPTIBLE to both the entrepreneurial and the craft and the labor classes, such that the CAUSE and EFFECT of one’s actions allow the productive classes to coordinate and profit, without the systemic bureaucratic pilferage for the purpose of profiting from class warfare? Or better stated, how can we create a system of information post-agrarian, post-industrialization, that stops the priesthood, whichever form of mysticism that they practice, whether it be Monotheism, Traditionalism, or Progressive (Socialist) Democratic Secular Humanism? The rational man asks, how do we kill off religions, and that means all of them, including positivism? We are asking the wrong question So, I think both left and right are asking the wrong question. And if they are not asking the wrong question, then they are simply a band of fraudulent thieves. The problem is not one of solving economic science, so that we can justify one position or another, using what we claim is science. The problem is the very nature of our process of government. The Republican Model Of Debate Is Insufficient For Political Action, because men and women in government are incapable of possessing the information necessary to make the level of decisions with which they are tasked. We know that socialism fails because of a failure of ‘calculation’ and of ‘incentives’. We know the political model of republicanism fails above a certain very small population for the same reason that socialism fails outside of a family: that calculation becomes impossible, and incentives fail to encourage and reward productive behavior.

    [callout]The problem is the very nature of our process of government. … Religion and Law and the republican model are artifacts of the agrarian world which we left behind a century ago.[/callout]

    Sensation, Perception and Complexity We live in an advanced industrial society with tens of millions of products and hundreds of millions of people, calculating a complex future in a vast division of knowledge and labor, using metaphysical and inherited systems of perception under a government that was designed for a minority of wealthy farmers to coordinate decisions for a large number of farmers and subsistence farmers. WE use religion, and law, and now false application of science (which is simply a process of organized discovery of an existing system) to make our choices. But our choices fail. THey fail here in America. They fail in the more socialist world of europe. They failed in the most socialist and communal world of the east. They fail everywhere. Religion and Law and the republican model are artifacts of the agrarian world which we left behind a century ago. The Answer Is In Front Of Us So what is it that we need to do instead? The answer sits in front of us. It’s our religious cultural fantasies that create the mythos that prevents us from seeing it. It doesn’t matter if that silly religion is christianity (military mysticism), judaism (minority mysticism), or “democratic secular socialist humanism” (positivism: mathematical mysticism). We create a lot of social habits without really understanding them. We invent behaviors and technologies by accident and define them later on when we finally understand them. We label them and then claim to understand them, as if we invented rather than stumbled upon them by trial and error. The answer isn’t any form of ‘ism — It’s just to work at it. The question is, how do we get everyone to voluntarily work at it? What institutions do we need to make it work? How do we change government so that these institutions succeed? THe libertarians have been right about a lot of these institutional problems. They have been wrong on selfishness and money. Christian protestants have been right about cultural discipline and production, but wrong about separation of church, state, and banking. Keynesians and Friedmanites have been wrong about free trade and monetary policy. Everyone is just a little bit right.

    [callout]Or do we, like all other urbanized civilizations in history fall prey to the real reason for Collapse : the failure of law and religion .. due to permanent [urban and market] anonymity that breaks the prisoner’s dilemma of social cooperation…?[/callout]

    Collapse Or do we, like all other urbanized civilizations in history fall prey to the real reason for Collapse (Diamond was wrong) : the failure of law and religion (punishment and ostracization) in an urban society due to permanent anonymity that breaks the prisoner’s dilemma of social cooperation in families, friends, tribes and among farmers and craftsmen, who are dependent on themselves for their production? Schumpeterian Intellectuals Since we created the market, people have increasingly chosen to enter it. First by making excess production in order to get money to buy scarce goods that they could not produce on their own. Second, by entering the market, by producing ALL goods for the market and relying entirely upon the market for sustenance. They stepped into a world of risk without the comforting cushion of their farms. Then, once dependent upon the market, they started seeking jobs in the market-bureaucracy where they were isolated from the market risk. (this is the purpose of going to college today – to exit the market). And this is the entire issue for our civilization: so many white collar people have exited the market by joining the private sector market-bureaucracy, and are compensated highly for it (as were priests in pre-secular society), that they ‘sense’ that the market doesn’t exist. So we have a productive class (people who speculate with capital whether) we have a dependent class, and we have a bureaucratic class (the state, and the private sector white collar and union workers). The dependent class cannot function in the market. The bureaucratic class lives off other people in the market but are exited from it – living in the best of both worlds, and the capital-risking class is the minority of the market taking all the risk. The market is a process of discovery. The question is how do we build a democratic society for a world of discovery without having the white collar market-exiters (Schupeterian intellectuals) destroy the market? Or rather, how to we reward the productive classes, whether they are laborers, craftsmen, entrepreneurs or capitalists, and deprive the priesthood who lives off them? Because all Priesthoods. All bureaucracies. Are predatory. And our Bureaucracy, our priesthood, has simply extended into the private sector.Today’s economists are no different. They are, in large part, part of the positivist priesthood. That’s the reason for Collapse: Schumpeterian collapse: The dependent and bureaucratic classes cause the collapse of the productive entrepreneurial class, who, like Atlas can no longer carry them, or is no longer willing to. The solution is to create a government that does not pool information and thereby launder it. But that informs everyone accurately of their contribution, or dependence, upon the cooperative endeavor, the joint stock company that administers the market that we call ‘the state’.

  • Payback Time? But what’s the fee?

    Entitled “Payback Time”, this NYT article by Steven Erlanger states that “Crisis Imperils Liberal Benefits Long Expected by Europeans” I’d like to clarify this argument a bit with the following points: 1) It will take somewhere between 3-5% of GDP to correct the retirement funding problem given the current ratio of prices and payments. 2) The problem with any policy is in determining the degree of uncertainty with regard to the future state of production (how much the productive people in any society will earn without the historical advantage that west has had in capitalist political and economic systems.) This means that the 3-5% number could be about the same, or it could be as much as twice that amount. 3) Most of the world, Europe in particular, will need to increase military expenses as the US loses it’s ability to project the power needed to police world trade routes, and it’s citizens lose the will to do so. We do not know what this cost will be. For european countries it will likely be on the order of 10% of GDP if history is any measure, that will mean roughly doubling the wealthier countries in europe, and quadrupling the spending of the eastern fringe countries.

    [callout]The fact that this economic instability is going to be caused by demographic changes, much of which will be caused by immigration of non-integrating subcultures, will remain the unspoken elephant in the room for years to come.[/callout]

    4) Most of the developed world will have to increase expenses on infrastructure due to aging populations. We do not know this number. Health care in particular will need to be rationed further as the cost of prolonging life continues to climb. 5) Cost of government is increasingly expensive and burdensome as productivity declines. 6) demographic changes underway, the increasing differences between american super-regions, and the lack of integration of immigrants, and the rising racial tensions, will lead to the increasing potential for political upheaval, somewhere in the 2015 – 2025 range, which would put extraordinary financial burdens on the world as regional power vacuums forced rapid reallocation of resources worldwide. The conservative position would argue that the world system is much more fragile than we assume, and that it’s prudent to cautious in our expectations of the future. The libertarian position would be to change from speculative policies that rely on growth and government, to calculable policies that rely upon saving and productivity, and in doing so, create both security and prosperity rather than worrying about the degree of risk we’re taking on. The likely cost then, is somewhere between a low of 3% assuming stability, and a high of 15% of GDP over the next ten years. The fact that this economic instability is going to be caused by demographic changes, much of which will be caused by immigration of non-integrating subcultures combined with aging dependent generations will remain the unspoken elephant in the room for years to come.

  • Krugmanism Of The Day: The Debt-Slaver Strikes Again.

    Latvia is often cited as an example for Greece as it undergoes a brutal internal devaluation while keeping its currency pegged to the euro….. Yes, that’s right: the oh-so-virtuous Baltics have done worse than Iceland. … But their money is sound.

    Well Paul, what do you recommend instead? If not unemployment, and social reorganization and price recalculation, then what? Destruction of what little concentrated capital that there is? Enslaving the population with debt in the false hope that these countries will be able to compete well enough on the world stage that they work their way out of it? Rapid redistribution rather than rapid reorganization? The answer is undoubtably the loss of sovereignty in exchange for security, without acknowledging that people value status and sovereignty as much as they do security. That is, unless your ambition is debt slavery. Which it is, I’m sure: to replace violence and militarism with fraud and slavery. But then, to understand this, one would have to have an ancestry that could hold land, and a culture willing to die for it, as a means of maintaining freedom. Debt-totalitarianism is no different from force-totalitarianism. Personally I find it simply the difference between the honesty of violence and the fraud of debt enslavement. This is the underlying problem with all Krugmanism – totalitarianism under the guise of a false economic equality. Watch what future discipline the Baltics develop versus the Greeks. The most important institutions are those of cultural habits: behavioral institutions are paid for by the accumulation of forgone opportunities: ie: discipline.

  • Understanding Greece And Germany In Terms Of The Economics Of Human Action Rather Than Moral Sentiments And Class Envy

    Over on Economists View, where the left seems to hang on like dirty ruffians intent on downgrading the local bar, Mark Thoma posts a misleading article: “About That Mediterranean Work Ethic” Do Greeks work less than Germans?, which states that Greeks work a lot of hours, perhaps more than germans. Which is a pointless and false because it is intentionally misleading, because it assumes individuals are equally productive and the societies  are collectively equally productive, when in fact, the term ‘productive’ means ‘the market price of stuff produced per human hour’. One of the people who leaves a comment sees through the veil and says: “These kind of statistics are not enough….”. Which is correct. They don’t tell us anything. Another who lives in Italy says “The problems here are political and cultural. It’s very frustrating to see…”. Which again is correct. Work is an individual expression. [callout] Productivity is an INSTITUTIONAL problem: people lack the institutions and habits by which to create productivity by forming capital alliances in GROUPS[/callout] Productivity is an INSTITUTIONAL problem: people lack the institutions and habits by which to create productivity by forming capital alliances in GROUPS. In Italy (like in southern california) business stay artificially small because of tax and benefit predation by the government, rather than encouraging competitive business, and taxing the very large corporations with whom the state must do business and support. Another says “Greece has crazy early retirement ages and a tax collection system that is pathetic?” Which is true. These are institutional problems. Largely political problems. But people in democracies CHOOSE their governments, now, don’t they. And Another (by a leftist sycophant who goes by the pseudonym of Paine) attempts to avoid the cultural and institutional predicament, as well as the problem of the productivity of the greek people, as well as the culture of corruption, by saying it’s all a problem of insufficient TAXATION. But WHAT KIND of taxation? Let’s look at this a bit. Yes, the chart is misleading (and so are Paine’s arguments, and in so many dimensions, per usual, that refutation is the process of tedious swatting of gnats who by virtue of their simplistic reproductive capacity put a drain on one’s energy simply by their volume.) First, the Greek problem is productivity not work hours: the market competitiveness of one’s goods and services in relation to one’s trading partners, divided by the number of human work hours necessary to produce the goods and services. The Greeks work longer hours to produce goods of lower value than that of their neighbors.

    [callout]the Greek problem is productivity not work hours: the market competitiveness of one’s goods and services in relation to one’s trading partners, divided by the number of human work hours necessary to produce the goods and services. The Greeks work longer hours to produce goods of lower value than that of their neighbors.[/callout]

    Second, the institutional reasons within the system that either encourage or enforce that behavior: lack of return on efforts due to a) silly cultural ideas, b) lack of education in productive information, c) lack of advanced institutions, d) private and political corruption and political impediment, e) political predation on the productivity is out of proportion to the marginal effort and risk needed to produce increases in productivity, f) cultural regression due to status impact of success on group cohesion (the urban african american versus the eastern orthodox ethos versus the jewish or protestant ethos. Third, the cooperative and competitive relationship between groups of different cultures: groups ‘fund’ shared objectives by forgoing opportunities. Forgone opportunities are a cost. Taking advantage of opportunities is a theft from those who forgo them. Since different cultures have different ambitions embedded in their habits, there is a forgone opportunity competition that permanently divides people with dissimilar interests. This is WHY people of different grope dimensions compete with one another: differences in forgone opportunity costs.

    [callout]groups ‘fund’ shared objectives by forgoing opportunities. Forgone opportunities are a cost. Taking advantage of opportunities is a theft from those who forgo them. Since different cultures have different ambitions embedded in their habits, there is a forgone opportunity competition that permanently divides people with dissimilar interests. This is WHY people of different grope dimensions compete with one another: differences in forgone opportunity costs.[/callout]

    Fourth, the status economy is material to people because they ACT as though it is material to them. Just as the race-preference is material to people because they ACT as thought it is material to them. Just as the creed-preference is material to people because they ACT as though it is material to them. And, precisely because of the forgone opportunity costs associated with those preferences. Most cultural differences have to do with the impact on social status of different forgone opportunity costs. People do not want to give upon their investments. Biases are NOT fanciful or meaningless: most often they directly impact mating choices, social status and therefore group-economic status.  Ie: people stay in-group often because they are given better status signals in-group than extra-group.  They transact across group, but they status-seek within group. Argument by emphasizing the material economy alone is a convenient way of distracting the argument from the forgone opportunity economy (discipline), and the opportunities, resources, financial, and labor costs that are required to create those institutions.

    [callout]Argument by emphasizing the material economy alone is a convenient way of distracting the argument from the forgone opportunity economy (discipline), and the opportunities, resources, financial, and labor costs that are required to create those institutions.[/callout]

    In the cast of Greece, it is a poor and corrupt culture that cannot create hard-working low-friction institutions that allow people to increase productivity by the process of constant creative destruction. It appears that Greek IQ is declining slightly probably due to poor urban education. And this has material impact on a society: assuming a broad enough population, people with IQ’s above 122 design machines, people with IQ above 105 repair machines, and people with IQ’s below 105 are limited to using machines. IQ distribution matters because it affects the general set of institutions that a body of people can develop. Education differences can depress IQ means by as much as twenty points. (Exactness of this is disputed but it’s certainly ten points). This mean limits the productivity of any nation, and in turn the appropriate institutions for any body of people. We are not equal in ability to comprehend abstractions, nor in our group ability to produce abstraction-producers and consumers in sufficient numbers to lather the group’s competitive advantage.

    [callout]assuming a broad enough population, people with IQ’s above 122 design machines, people with IQ above 105 repair machines, and people with IQ’s below 105 are limited to using machines. IQ distribution matters because it affects the general set of institutions that a body of people can develop.[/callout]

    Germany is a nearly land locked, oceanic temperate and continental temperate country of rivers and friction-able land transport that despite constant attempts of external containment has remained productively competitive for two millennia. This is accomplished by the discipline of forgone opportunity in order to create institutions that accumulate competitive advantage at a material cost to the citizens as individuals, but which is a cumulative investment of high returns for the group. Greece is a geographically advantaged, climate advantaged, port-rich country with limited agrarian potential, and a large urbanized population with few choices but to increase productivity. Institutional development costs are the HIGHEST productive cost paid by any civilization. That is why the non-corruption habits are so rarely developed in the world. (We do not yet know why some cultures have such a difficult time forgoing opportunities for gratification and developing longer (lower) time preferences. There are both biological and cultural and environmental hypothesis.)

    [callout]Institutional development costs are the HIGHEST productive cost paid by any civilization. That is why the non-corruption habits are so rarely developed in the world.[/callout]

    After forgone opportunity costs. The second highest cost is human capital: literacy, education and training. The third highest cost is the political institutions. The fourth highest cost is economic institutions (credit, banking, contract) And lastly comes the material cost of resources. These costs, when combined with the realities of group IQ differences, when combined with the realities of territorial resource availability, are the primary reason for development differences between cultures. We do know that Greece and spain were more productive cultures before Spain experienced new world gold, and before Greece was administered by the ottomans. So it would appear that these are not biological problems, but institutional (cultural and habitual, and political) problems. Greece is less productive because it’s institutions are poorly paid for by forgone opportunity, because their government is corrupt and bloated, because their people work in unproductive efforts, and because they have no group incentive to work otherwise – and so Greece is poorer because of its instutions. And since germans pay the forgone opportunity cost as well as the monetary cost, they are (rightfully) resentful of it. And the convenient myopia of quants is that they disregard REAL costs of action in preference for visible monetary costs simply because of the ease in which the data can be collected. A convent way of perpetuating leftist ideas – ignoring the majority set of costs in preference of the confirmation bias permitted by the data that’s easier to collect. As the right always says “we are not against taxes we are against bureaucracy”. The problem is not taxation. It’s the USE of taxes to steal the productive result of forgone opportunity costs : double taxation on the productive which only serves to limit the investment by the non-productive in the bank of forgone opportunity costs, which are, in reality, the primary cost any civilization must pay : behavioral costs. Property itself is a forgone opportunity cost. The more granular and abstract we make our definitions of property the more opportunity that people have to steal it. Objective truth telling is a forgone opportunity cost. Each forgone opportunity for deception and fraud is a high cost. One does not need to be materially wealthy to pay that cost. One simply needs to forgo opportunities to profit from deception. One does not need to be deprived of good pay as a bureaucrat, one needs only to forgo opportunities to charge for one’s services rather than render them at the lowest cost to the beneficiary.

    [callout]This is the moral argument for redistribution of wealth: if you conform to forgone opportunity costs, you may receive redistribution from the results of productive ends. But ONLY if you pay your ‘taxes’ in forgone opportunity costs.[/callout]

    Or put another way: the secret to the success of the pacifist monotheistic scriptural religions is that they undermine the forgone-opportunity-cost economy via redirection of opportunity costs toward the group-persistence costs of a new social institutions, and away from materially productive institutions. In other words, they are a non-participation rebellious movement, a form of economic tax evasion. (In case this isn’t clear, there are two forms of tax evasion: monetary and forgone opportunity, with the productive classes seeking to evade monetary taxation and the unproductive classes seeking to evade forgone opportunity costs.) This is the moral argument for redistribution of wealth: if you conform to forgone opportunity costs, you may receive redistribution from the results of productive ends. But ONLY if you pay your ‘taxes’ in forgone opportunity costs. In other words: conform or no redistribution. This effectively is the german argument against Greece. Or more precisely, monotheistic religions are resistance movements and they are what people like Paine advocate: the adoption of a lower cost forgone opportunity strategy that undermines the productivity of the more productive classes, making them subservient to the resistance movement. Greece needs an austerity program. It needs freedoms to compete disruptively internally, it needs to concentrate its capital on goods that are competitively productive, it needs to improve its infrastructure. It needs a broken window policy of zero tolerance (the place is a dump), it needs regulations on quality (which are underrated as a social institution), it needs better education. But most of all it needs the elimination of a predatory state whose members see their positions as personal property to be exploited rather than a public service to be rendered at the lowest cost to the population. Leftism is predation on the productive classes. Rightism is too often predation on the non-productive classes. (Productivity being different from labor hours). The issue for any culture is to reduce predation in favor of cooperation, maximizing the productivity of the group in response to other groups. Acknowledging inequality is only acknowledging rarity. we are vastly unequal in our abilities. Therefore we are vastly unequal in our productive capacities. However, we are equally productive in our ability to forgo opportunity from theft or fraud, especially theft by over breeding one’s self into permanent poverty. If you conform to these institutions, then you are PAYING for these institutions, and therefore you are EARNING some amount of redistribution. But if you are not willing to work regardless of the job (as are the Japanese and chinese) and if you are not willing to forgo drugs and violence and theft, and if you are not wiling to forgo the effort of manners and ethics and morals, then you are not worthy of redistribution of the productive gains because you have not PAID for the effort needed to create the institutions that make such productive gains POSSIBLE. We can all equally forgo opportunity. In this context, Universal egalitarianism is simply another means of predation on the productive classes. Which means predation on the society itself. Greece needs to pay it’s taxes. It needs to pay it’s forgone opportunity tax. It needs to pay it’s monetary tax on the result of productive efforts. The most important feature of taxes on productivity, is that it incentivizes the government to enforce forgone opportunity costs, for the purpose of increasing productivity. This creates cultural unity, class unity, and competitive advantage for the group.

    [callout]And “it is not taxes that are paid, but unpaid” is true. It is the unpaid tax of forgone opportunity cost which is the very ‘charge’ for entering the civilized market, and becoming a citizen rather than a barbarian.[/callout]

    Ie: Paine is advocating thievery, economic and social destruction here on a daily basis, by simply replacing the absurd moral arguments of monotheistic scriptural religion with the one-sided absurd argument of economics and egalitarian redistribution of productive gains in order to fund his predation on the productive classes, so that he, and others, do not have to pay the forgone opportunity costs needed to create institutions that permit productivity. Yet another silly religion that is simply a rebellion movement that justifies tax evasion. And “it is not taxes that are paid, but unpaid” is true. It is the unpaid tax of forgone opportunity cost which is the very ‘charge’ for entering the civilized market, and becoming a citizen rather than a barbarian. Hayekian knowledge is economic knowledge: it’s an institution. And it’s the most expensive institution we have to pay for.

  • Krugman Watch: Debt Totalitarian

    Default, Devaluation, Or What?

    Is there anything more to say about Greece? Actually, I think so.

    Krugman goes on to comment on the loveliness of more debt. Why? Because debt causes two systemic changes. First, it transfers power to the banking class and the state. Second, it replaces law, custom, and religion, as a means of social management. We have evolved three systems so far for managing society: first phase: religion and shared labor, second phase: law and taxation, and third phase: credit and debt. My Krugman wants us to enter the third phase without understanding the first: concentration of resources, the second: trade routes and markets, or escaping it’s claws. [callout title=Debt Slavery]Mr. Krugman your world view is full of debt slavery.[/callout] The truth is that we must keep each of these systems of social organization. Religion is a means by which we establish general goals for concentrating effort and resources. Soldiery and market making allow us to control land, trade routes, and to build markets and a division of labor. Credit and Debt let us build a more complex world of incentives and regulations on a more granular individual basis so that we may increase the division of knowledge and labor. But none of these systems is sufficient alone. A reader comments to this effect on Mr Krugman’s blog:

    Konstantin, New York, N.Y. May 4th, 2010 Mr. Krugman your world view is full of debt slavery. Greece should leave the tyrannical European Union and then if it wishes can devalue their currency but not too much.

    To which I responded:

    “Mr. Krugman your world view is full of debt slavery.” Quite true. But this strategy suit’s Mr Krugman’s desire to move society from upper class military control over trade routes for the purpose of creating markets, to working class bureaucratic control over individual lives for the purpose of creating the illusion of psychological certainty. In other words, from a growing to a dying society. Since we possess too little information to predict the future, we invariably make our judgements about the future according to our class and cultural metaphysical assumptions. We confuse these assumptions or ‘preferences’ for truths. But they are just ‘silly ideas’ writ large, whose silliness is obscured by ignorance, time and complexity.

    And unfortunately, it would be a full time job to criticize Mr Krugman’s silly logic. He complains elsewhere that the volume of criticism has increased of late, and that it’s from the Crazies. Crazies simply include a vast number of people in and out of the profession that see him as not an economists but a political hack. But I’m not sure that there is any better way of illustrating the foolishness of the left than to build a body of work that articulates one’s position by showing the consistency of errors in one’s opposition. And it’s entertaining as well as utilitarian. Unfortunately, I dislike the man.

  • Conservative Complaints About The Social Security Scheme

    The conservative complaints with social security are that it is not a fund, but a state-expanding tax. Nothing was paid into it, and therefore it is simply a current tax to redistribute from young producers to old consumers who failed to save. And secondly, that this tax also funds an intrusive and abusive government. These are structural complaints, not complaints about ambitions or outcomes. The original creators’ ambition for this tax was to create an insurance scheme for the minority of people who lived past 65. Except, people vastly live beyond 65 today. In other words, the tax went from low to high risk because of unforeseen consequences. The conservative objection to liberal hubris is that they are asked to absorb risk because of the STRUCTURE of this system, which is now a form of intergenerational welfare, rather than the form of insurance that it was designed to be. The solution to this structural problem is as follows: 1) to convert from an inter-temporal redistributive and high risk tax to a low risk insured savings program. 2) To change from income tax to balance sheet tax. 3) To have the government participate in, and redistribute, profits from the use of credit money – credit money which is borrowed from and secured by the promise of labor by the average person. This set of changes would eliminate benefits at a specified multiple of the mean. It would unfund government bureaucracy. It would insert more money into the economy as investment capital, and decrease the negative effect of inflating the monetary supply on savers.

    [callout title=It’s A Tax]social security … not a fund, but a state-expanding tax. Nothing was paid into it, and therefore it is simply a current tax to redistribute from young producers to old consumers. [/callout]

    The general argument against the correction of the social security system, is that if we increase the tax by 2% and change the age slightly, that the system as it stands would be fully funded. To which I’d counter, only if that 2% comes from balance sheet weight, not income. Because for a vast number of companies that are not subsidized by the financial markets, 2% would be half of their annual profits, and this failure would have to be built into the system. I see no reason to rely upon assumption that the 20th century, which consists largely of the greatest external advantage that a nation has ever experienced, can be used to project the future. It is not logical to ask decreasingly populous generations facing increasing worldwide competition to support a longer living and increasingly expensive class of retirees, when instead, retirees should have saved to lend money to the generations that follow. These advantage are not sustainable, and even if they are, the system currently asks all to risk in order to fund current government, rather than all to save, to insure their mutual success. The belief that we will continue our economic advantage is the myth of american exceptionalism. Savings is sustainable – in any culture. But not the assurance of worldwide competitive advantage which can be redistributed. As an entrepreneur, I do not fear the market. I fear that the government will extort enough from the entrepreneurial class that they will abandon their belief that they can outpace the predatory state. Tax individuals not by income but by balance sheet. Progressively tax companies for market participation. Eliminate the double tax system on dividends. Increase the tax on speculative returns.

    [callout title=Fears]I fear that western advantage, which was demographic, technical and military, will be neither demographic, technical, or military. And that the very institutions that were limited enough to guarantee us our freedom will be the institutions by which we are permanently enslaved and impoverished.[/callout]

    I fear that the bureaucracy, as in the UK, will become a predatory class living on a virtually enslaved population. I fear that western advantage, which was demographic, technical and military, will be neither demographic, technical, or military. And that the very institutions that were limited enough to guarantee us our freedom will be the institutions by which we are permanently enslaved and impoverished. It is easy to rate the success of any government by the direct redistribution divided by the cost of government employees, and seek to constantly improve the ratio, just as we do for non-profits.

  • What Problems Should Austrians Solve. Different Ones Apparently.

    Walter block sent out a survey to the Mises blog in support of some research he has been doing. In it, he asks, what problems should Austrians solve? I read the list, and, thought that almost none of the categories of interest were actually problems that needed solving. The problems that economists need to solve are not those which derive from the antiquated process of pooling, or aggregating quantities into categories. We know that aggregation of categories a failure as a strategy. We know that we must apply statistical methods across periods of differing utility and differing sentiments in order to find correlations from which we can deduce theories of causation. It is a loose set of tools for a complex world. The problem is to define institutions that would allow us to posses knowledge of human activities so that we can measure distortions of policy. The problem is institutions and data. It is not how to further plumb the depths of error – to divine nonsense from the nonsensical. The problem is our institutions.