Curt Doolittle

Category: Economics, Finance, and Political Economy

  • IEA Blog: UK Lib Dem’s and ‘Ten Years Of Substantial Unemployment’

    I love reading the UK press, because by and large, the quality of discourse is far beyond that of what occurs in the US. I posted on the IEA Blog, this response to the statement that, coarsely written and paraphrased here as ” Yes the Lib Dem’s may achieve power, but anything is better than ten years of substantial unemployment.” I’m a little cautious about sounding like a critic when I actually think that the IEA produces great thought. But it is far less work to criticize a good idea, than it is to refute an ocean of fantasy and ignorance. Hence I apologize if I come off a critic rather than an advocate.

    Unemployment results from the government’s confusion between consumption and production in that they assume that consumption is equal to production. Their policy of general liquidity that diverted capital from production to consumption and created both recursive asset inflation, and a reduction in competitiveness. This is the broken joint in Keynesian logic. It assumes that increasing liquidity can be put to increases in production. Production means that an activity increases output while decreasing man hours, and costs. The problem for any state is to put captial, not behind consumption, but behind increases in production that cannot be achieved by the private sector. … This concentration of capital will create new jobs, and ongoing competitiveness, from which redistributive capital can be siphoned. Private sector production increases will lead to some unemployment. Uncontrolled breeding and immigration will lead to unemployment, and particularly disadvantage second quintile workers. (A step above the bottom). So the state can divert this process by participating in funding international (export) competitiveness. The state must adopt a policy of investment, not liquidity or redistribution. Because only investment allows redistribution. (And the government, which consumes such a vast amount of GDP is simply a redistributive system.) A free market is a bounded market, because there are LIMITS to private investment. Since all borrowing is, under fiat money, borrowing from the middle and lower classes, and they (as we have just demonstrated) carry the risk of borrowing, then the reward for that investment should be returned to them. As such the state should borrow to create productivity increases (power, transportation, technical innovation, resource exploitation, and education) and return a portion of the profits to the citizenry as redistribution. Laissez faire both puts the citizenry at risk without reward, concntrates capital in the hands of a state sponsored class, and deprives the citizenry of opportunities. That is how to prevent ‘ten years of very substantial unemployment’. The party that accomplishes it is meaningless. THe party that ignores it is meaningless.

  • Conservatism Is Not A Longing For The Past – It’s A Capitalization Strategy.

    Being a conservative simply means taking a gradual approach to social change and particularly with respect to the financial, family and military traditions that affect status and political power, which they are skeptical of. Conservatism means being skeptical that our visions of the future will come true, and looking at the world as what people ACTUALLY DO not what we WISH they would do. In that sense, conservatism is historically scientific even if linguistically archaic. Conversely, while liberalism is linguistically modern, it is utopian, idealistic, contra-observation, contra-history, and therefore anything but scientific. The differences between these two philosophies are vast and numerous, but the one that is most important, is the difference between the reliance abstractions from experience in conservatism, and the reliance on abstracting experiences in liberalism. This may seem a complex idea, but liberals try to extrapolate the daily experience into the extended order of human cooperation. THis is called ‘induction’. Conservatives synthesize the actual experience of aggregate human activity from history. This is called ‘deduction’. Induction is a process that we are not sure, despite the vast effort of philosophers, exists. In other words liberalism if faulty on scientific grounds. It is a religion. This language problem has always been an issue for conservatives. Liberal dictums may sound scientifically sound if one induces from experience. Conservative (dictums) are sensible when one deduces from abstractions of history. And everyone must use these shortcuts, because too few of us possess the knowledge to make rational judgements and therefore must rely upon basic principles when making decisions. In fact, rational thought is applied to the vast minority of choices. Most decisions are made by habit. The rest according to shortcuts. For the vast majority of people from either conservative or liberal, neither induction or deduction is a rational process of choice, but instead, a process of identifying analogistic sentiments: it’s the act of pattern recognition rather than reason. Pareto called this process of pattern recognition “residues and derivations”, others called them “Metaphysical Judgements” or “Sentiments”. Contemporary thinkers and public intellectuals call them “beliefs” or “biases”, or “science or religion”. And our language incorporates these different sentiments. Our arguments do as well. Our narratives, myths, popular fiction, entertainment, status aspirations do. But so do your political rhetoric, which, because reason would be a technique unavailable to the masses, rely entirely on a complex web of constantly warring sentiments wherein the citizenry seeks confirmation bias, rather than a simple argument consisting of reason, where the citizenry seeks both consensus and falsification of their biases. In other words, where people are skeptical – conservative and rational. Utopianism is a technology that people use during periods of prosperity. Because we have been artificially prosperous due to the discovery and exploitation of a continent, we as a nation are notorious for predicting an optimistic future that cannot or has not occurred. The public dialog over the causes of our prosperity is often inaccurate and self-congratualtory rather than factual. We have transformed our culture of evangelical christianity into one of evangelical democratic secular humanism. Conservatives are skeptics. They may speak in antiquated language, because antiquity is their source of their language. They may fail to articulate their position effectively in contemporary terms because of that language, but regardless of the source of their language, the content of their language is strategic, intelligible and rational. And it is not just a language, but a methodology that represents their strategy for social order. They ACT conservatively, think conservatively, and treat the world conservatively. This conservative strategy and conservative activities are why conservatives are, in general, more prosperous – and frankly, happy. And the sacrifices that they make in order to be prosperous are material to them. They remember them. And therefore they resent those sacrifices being ’spent’ by others who do not make the same sacrifices. Monetarists and capitalists are not conservatives. They may hide under conservatism. But they are not conservatives. The conservative class is a military, middle and craftsman class and it always has been and always will be. It is the ‘residue’ of the european fraternal order of soldiers at the bottom, and at the top, it’s a ‘residue’ of the middle class movement that revised and adopted civic republicanism during the enlightenment as a way of transferring power from the kings and church to the middle class. it is an alliance of the military and middle class. Liberalism (socialism, communism) is a ‘residue’ of a union of the priestly cast and the peasantry. Academia is simply an outgrowth of the church. The peasantry has always allied with the church, and the church has always had power because of it’s support by the peasantry. And that said, we do not have a separation of church and state. Our state religion is now democratic secular humanism. We are now a state-run-religion using the myth of division of church and state to oppress (or reform) religions so that we can have a state sponsored church. That’s it. That’s the articulated conservative position. The republican party collects conservative coalitions. The republican party is not a conservative party. conservatives join the republicans because they have no choice. They see the party as corrupt. People are complex and only join parties because of limited choice mandated by our ‘winner takes all’ form of government, which fosters class warfare. In fact, all political decisions exist on a spectrum or bell curve. There are a myriad of political decisions to be made. There are a myriad of people with different abilities to understand each political opinion. Each person is interested in a myriad of decisions. Parties are collections of people with opinions. Very skilled people tend to be highly unsatisfied with party choices. Very unskilled people tend to simply support their party of nearest interest. Parties therefore pick platforms that make enough people happy that they can get into power. Arguing that conservatives want to keep things asa they are, is a silly argument. The objection is simply illogical. The question instead, is whether liberals propose a solution that conservatives can live with, and wether conservatives can propose a solution that liberals can live with. The difference between social classes are differences in Time Preferences (between “consume” or “capitalize”, or gratification now versus gratification later). Longer (lower) time preferences are only possible if you have the ability to comprehend long term time preferences. This is another reason why social classes are organized by intelligence, and why a market economy tends to organize us into economic classes according to our application of intelligence to the satisfaction of OTHER PEOPLES WANTS, instead of our own. Time preference affects not only a dimension covering an individual’s perception of gratification. It’s a second dimension that describes whether his gratification now or later is served by providing solutions to himself or to others. This is the moral lesson of Adam Smith – that capitalism creates a virtuous cycle. If we had listened to the liberals in the last century we would have ended up like either Russia or China. If we had listened to conservatives we would not have had our progressive social changes, but we would not have corrupted our financial system using Kenesnian inflation. It’s the competition of ideas that gives us the choice as a body politic. It is the combination of LIBERAL OBJECTIVES and CONSERVATIVE METHODS that provides the means of achieving shared goals. Lets say that again. Liberal objectives are moral desires. Conservatives methods are moral means. It requires both these tools to achieve moral ends. The problem is, conservative methods take time because they require the learning and adaptation of people to calculative processes. These processes have nothing to do with religion. Christianity is largely a religion of the poor. Protestantism is perhaps the most important religion for generating wealth in the west as it is a class religion. Secular humanism is a feminine religion just as Aryanism (expansionist civic republican tradition of the initiatic fraternal order of city-defending soldiers) is a masculine religion. We do not need all to believe one thing, share one goal, work according to the same rules. If we did, we’d break the principle of the division of knowledge, labor, time, and intelligence. WHat people really want when they seek universal agreement is to concentrate labor, knowledge, time and intelligence on their goals at the expense of other people’s goals. Since people are unequal in their ability, in their class goals, in their cultural goals, in their age and experience, in their knowledge and in their intelligence, then we must divide up our actions into bits and pieces which we cooperate with each other to achieve. Democracy as we have implemented it is a winner-take-all political order. It foments class warfare. It does not foment class cooperation. We need a government that is a return to the division of labor and division of classes and time preferences. Democracy is a failure as we have implemented it. Because we confuse the value of the transformation of power inherent in democracy with the universal aspiration of classes, cultures, ages, generations, and abilities.

  • Contra Mises and Rothbard, and Aligning Mises, Hayek and Hoppe With Weber and Pareto

    I dont like to criticize postings at the Mises Institute, of whom I have been a member and supporter for almost a decade. It is far less work to improve on small errors than to solve catastrophic ones. And therefore less work, and more reward, to criticize your friends in the hope of making progress, rather than undertake the vast effort of correcting your enemies in a vain attempt at altering their desires, when their arguments justify their desires rather than their desires being the outcome of good argument. There was another recent posting on the MI blog regarding the use of private property. It proposes unlimited permission to use private property for private ends. And, I simply don’t like this facet of libertarianism. I don’t think it helps our cause. It’s not that I have sentiments against these kind of arguments. Its that I know that these arguments are not only false, but they’re fraud – theft. And if property and freedom are the underlying principle of libertarianism, then theft is the opposite of libertarianism. And the article by David Albin entitled Historic Preservation VS Private Property Rights is an example of how libertarian thought has incorporated the justification of fraud and theft into it’s doctrine by defining property to PERMIT fraud and theft. And, I see it as my duty, and that of any other seeker of freedom, to undermine any such doctrines so that we can continue our efforts to correctly identify the scope of powers that we must endow to the minimal state so that we may preserve our freedom (juridical defense), our property (registries of opportunity that permit economic calculation), and our prosperity (hours gained and prices decreased by dividing knowledge, labor, and and time.) The reason I have a problem with these errors, is that they have consequences. In particular, such errors as Mises and Rothbard (and Rand) have inserted into the discourse, have tainted the school of thought we call Austrian, such that some members of the libertarian movement are abandoning the term Austrian and adopting the general “libertarian” label, in an attempt at creating distance from the Rothbardians who are trying to legitimiza themselves by adopting the historical label of “Austrians”. In this broader context, the article, as as an example of the errors in the movement, is a proponent of fraud, is counter intuitive to the civic republican tradition to the extent that it appears to freedom seekers as either immoral or criminal, resulting in decreasing adoption of the principles of freedom. It weakens the insight that Hoppe has given us into democracy, monarchy and their corollary the coordination and calculation problem, deprecates the good Austrian thought of Hayek, Popper and Parsons, discounts the valuable part of Rothbard’s analysis of property and incentive, and taints Mises accumulated scholarship and wisdom by emphasizing a failed system of logic (Praxeology) — which failed because of it’s erroneous definition of property and limited definition of action, the logical necessity of which it purports to rely as an observational science in an effort to justify it’s conclusions and therefore act as a functional abilty to persuade people to adopt policy and political ends. This error is both a moral hazard and an intellectual one. intellectual because it advocates something that the movement specifically exists to support, and Moral because it does not facilitate the preservation and advancement of freedom. I have taken on the labor of rewriting a number of chapters of Human Action by Mises such that the statements are positive and do not incorporate the errors caused by Misesian limitations on action, and Rothbardian limitations on property. Hayek likewise could be corrected for his use of sensory order rather than calculative order, and thereby making the sentiments in traditional knowledge as he defines it, articulable in Rothbardian language. Approaching the works of these authors with these corrections is useful for both my self education, but also for revising the vast doctrine of examples and a priori language that have been build up in the field. This is a heroic effort, and I may not, partly because of the age at which I started working full time on the problem, be able to complete it. If I make a dump on my property next to yours have I not stolen from you? If a man wishes to use violence against you, is that not because he feels his property has been stolen? Isn’t this the entire premise of libertarian property rights, which is, that the state has allowed violation of property rights (by pollution in particular) in the name of ‘social good’? What’s the difference in going to a city council and asking to resolve disputes and going to a judge to resolve disputes and going to a sheriff, or priest, or tribal elder to resolve disputes? The answer is just the different criteria that the judge uses to determine his ruling. A city council who asks you to absorb losses is different from the city council who prevents you from speculating (in this case, that’s what’s going on, speculating.) Speculating is a risk. Quite unhappily for my friends here, individual property as a conceptual institution and it’s political institution of juridical defense (what we called freedom) is an outgrowth of the european system of fraternal defense, and in particular, fraternal defense of cities. While there were origins in greece’s fraternal order, the egalitarianism of the Civic Republican tradition is a european artifact – and a Germanic one at that. People ‘pay’ for property rights by restraint: by forgone opportunity. They pay for the political institutions by forgone opportunity. These costs are more substantial costs for the strong than for the weak. The ongoing justification for property rights is a) production increases in the division of labor and the decreased consumption of time, and the resulting reduction in prices, b) the conversion from a tax to a credit society allows a development of a code of laws for different social classes who are more productive or less productive than one another, and as such the cost of administration of a populace is distributed across the population. c) the decline in violence between groups who would otherwise resort to violence. d) the virtuous cycle resulting in the fulfillment of wants and needs. If I act to decrease the value of your property either directly or indirectly, why are you not simply STEALING from the pool of forgone opportunity investment? In other words, if other people who are affected by secondary costs REFRAIN from attempts at development they are paying an opportunity cost. If they codify this cost as a PROPERTY RIGHT by registering that loss with a property registry (the council) then anyone’s attempt to circumvent those registries is simply an act of fraud and theft, using the ruse of property rights to steal. That is the correct application of libertarian (hoppian) property rights, because those are the set of both the ACTIONS (costs) and RESTRAINTS (costs) that people take in order to make use of hte institution of private property. The attempts by certain sects of libertarianism to undermine this process of property rights is NOT the defense of property rights but a SCHEME for organized THEFT. This ‘sect’ of libertarianism is very easy to identify once we use the Misesian Doctrine that you can ACT by acting and ACT by not acting. You can also pay costs by ACTING and pay cost by NOT acting. There is no difference between a joint stock company and a city council as long as teh council is taking deposits on forgone opportunities RATHER than exploiting forgone opportunities. There are many types of property registry. It is the transformation of these institutions from property registries to political forces by which property can be extracted from forgone opportunities, rather than registries are a collection of forgone opportunities, a joint stock company, by which people can use micro payments of forgone opportunity to capitalize their efforts. To capitalize wealth by INACTION rather than action. To capitalize opportunity costs. This may be a big leap, but it is the missing part of Mises->Hayek->Rothbard->Hoppe, and the theory of human action embodied in Mises work, and personally, I find it a convenient means of attempting to STEAL from the wishing-well of deposits made over time by various people of all strata in an attempt to privatize wins and socialize losses. Mises made a mistake because he had too narrow a view of social cooperation, possibly because of his upbringing. (which Hayek noted.) Hayek was not able to correct mises, largely because he was distracted by his concepts of Sensory Order (because of his upbringing), and to turn his observations on common knowledge into action statements as did Mises. Rothbard continued to make progress but relied upon natural law, either as a means of avoiding the underlying problem or simply because he could not see the underlying problem. I see it eitehr as avoiding the problem, or a distraction resulting from egoism. Hoppe has almost corrected Rothbard’s bias. But these systems of thought all focus on visible actions and costs rather than the less visible forgone actions and costs. They justify ignoring them because they are hard to measure, then happily justify their desire to expropriate from the common man precisely BECAUSE they ignored these forgone opportunity costs. I am unable to fathom whether it is by malice or error that these ideas persist. However, failings aside, the anarchic research program has made it possible to undermine the assumed “calculative” necessity for government as we have envisioned it for millennia and to replace that error with a superior “calculative” tool of cooperation – capitalism. But the continued attempt to ignore the forgone opportunity costs and focus only on money costs, is simply an attempt at the deceptive theft, by fraud, not trade. Let me repeat that: A statement that relies upon property rights rights, but is SELECTIVE in the definition of PROPERTY, and specifically to apply infinite DISCOUNT to forgone opportunity costs, is FRAUD. Period. Either all costs are opportunity costs or they are not. Selective attribution of costs is simply FRAUD. This statement will have, or should have, as much an impact on libertarian thought as did natural rights. And if it does not, then there will cease to be a movement. Because the reason that conservatives and libertarians fail to achieve significant political success is that they have failed be able to articulate those elements of their framework such that they can provide a POSITIVE solution for humanity, rather than a resistive one. And in particular, the argument that says we must rely on the MORAL position of libertarianism is simply a TRAP so that we can further ignore the forgone opportunity costs paid by all people in a society. Instead of a specious moral mandate, the problem is one of coordination, and as a problem of coordination among large numbers of people, where there senses are inadequate to provide needed information for decision making, the answer, rather than moral, is ‘calculation’. Because ‘calculation’ is the only means of extending our perceptions such that we can make increasingly complex decisions. Even if the ‘number system ‘ we use consists of time and property, and the numerical system we use is to gain efficiencies in perception on the use of time and property. From this standpoint, Mises and Hayek are not opposed. They are both inadequate with Mises solving the individual cost problem, and Hayek solving the opportunity cost problem – albeit in terrible and ineffective terms. Rothbard is inadequate as was Mises. Hoppe took us farther and compensated for some of rothbard, almost breaking out of the Rothbardian limits and simply returning to the problem of incentives and knowledge. We have spent a century trying to use money as our sensory system and means of analysis. Mises created or at least elaborated on a theory of action, while missing the underlying economy of forgone opportunity. Hayek and Popper dealt with the problem of ignorance. Pareto and Weber dealt with the problem of knowledge and bias. Parsons did his part as well. But these men all failed. Instead, the answer was sitting there in the socialist calculation debate. What surprises me is despite the obvious nature of that answer, and the predominance of misesian thought, that the history of human political operation has not be rewritten to accommodate it. “The greatest forgone opportunity cost is by the strong, who do not simply conquer the weak, but instead demand tribute for their institution of property rights as their lowest cost means of profiting by handling exceptions.” Individual property is the result of the defensive tactics of the fraternal order of soldiers and the need to enfranchise the population. This is the very opposite of the religious dictums proposed by all to many libertarians. Peace and property are the result of the use of and organization of violence. The state is the application of organized violence. It is the abuse of that violence by members of the state to steal from the forgone opportunities for violence that have been paid into the wishing well, and paid for, by constant recapitalization, the institutions and habits we call freedom, and it’s calculative tool, property rights. The question is not what happens with one man on an island. It is, should a thousand of us be put on an island, what happens? Island myth is false at it’s outset, and therefore all that follows is false as well. Again, since I learned more from these people than anywhere else, and I believe desperately in their mission, and I respect them immensely and call a number of these people friends, I am not criticizing any intention or character. I want to advance that mission. But to do so I think that the Misesian-Rothbardian error needs to be corrected for libertarianism to provide the intellectual leadership that conservatism needs, and to finally offer a positive solution to compete with the utopianism of the socialists. Curt Doolittle

  • IEA Thinks Taxis Are Not A Public Good

    Over on the IEA Blog, Eric Masaba asks the question: Why do black cabs cost more than Concorde? I couldn’t point out ALL the holes in this article, because the IEA blog limits the number of characters per comment. I find the argument for the virtue of brevity a ‘cute’ one because affirmations are the most brief of comments, while refutations are the longest. The state subsidizes the ‘Black Cabs’ of London.

    Hackney cab drivers inexplicably enjoy a rule stating that no one else can describe a taxi service as a “taxi” in their marketing, and the important restriction that no one else can pick up passengers on the street. These regulations have deep historical foundations, dating back to the days of Dick Turpin. In today’s world, they are anachronistic, anti-competitive and pointless.

    London cab drivers are a pleasure to deal with. They are an intrinsic part of the tourist trade. The Danes pay an entire social class to stay home so that the average clerk in a train station is educated, literate, well mannered, and a pleasure to deal with.

    When there are price comparison sites for insurance, airlines, hotels, holidays and office supplies, where we can buy the same product from a myriad of suppliers at different prices, how is it that there are very strict rules requiring that Hackney drivers receive a minimum wage for every mile driven yet private hire drivers do not?

    Because the market is an unlimited physical space and the streets of London are a limited physical space (and the tube is a monopolized space. And therefore Cabs require a very simple set of regulations in order to maintain quality.

    Why is it good for certain stripes of taxi driver to be able to oblige people in London to pay higher rates than the market would support if such a law was not in place?

    Why is it a good for the state to regulate any kind of competition?

    Why do the same drivers, who expect to be able to choose what clothes they wear (and how much they pay for them) and which airlines and car insurance firms they use, want to deny travellers in London the basic freedom to choose another vehicle service they can hail at the airport or on the street?

    They don’t. You can hire a car from the airport. You just can’t pick someone up on the street.

    If people want to pay for the superior knowledge that the Hackney drivers clearly possess, they will do so. If they do not care, they will find cheaper alternatives until the market has informed the black-cab community what customers really think and what price they are willing to pay.

    They are not paying for the knowledge. The state is using a knowledge criteria to create a hurdle for market entry. Just like they do for just about every kind of specialist.

    Many people are disgusted with the special treatment bankers received, but through the price controls and regulations on taxis in London, transport markets are being distorted to favour one type of vehicle provider.

    Bankers recieved special treatment because the state printed money without regulating it and forced banks either to compete for profits or to go out of business. This process of moral hazard created large banks that are pseudo governmental agencies, that were so responsible for subsidizing the national payroll and cash disribution and management system that if they were not rescued then the crash would have been worse. On the other hand, the state CREATED the moral hazard. But it did not have to. The problem has been that creating the ‘rules’ of the fair game in banking (defining the properties of property and it’s rules of transfer) has become extraordinarily complex because the object of definition has become exceedingly plastic. Derivatives and new financial instruments were a new form of property that many of us decried at the time, but that was unregulated because both the state and the purveyors of these new devices foolishly bought the argument that it was possible to insure that kind of risk, and secondly, because So, I have to disagree with the IEA’s position. Travel to NYC, Chicago, LA and ask yourself if the London policy is better or worse for everyone involved. And if we subsidize transportation like subways why cant we subsidize Cabs. If price is a concern, then If you want another choice, call a less expensive cab company on your cell phone. Prices aren’t everything. In fact, low prices and full competition in a market often accomplishes the lowest cost service at the lowest quality that is tolerable by consumers, and bars quality from availability within a geography. (Home Depot and Walmart in the US, and superstores versus butchers, bakers and the like in Europe). I am happy that superstores exist to provide additional choice, but only if there is a replacement ‘tax’ for using them by distancing them. From this simple analogy of taxis and tubes versus superstores and specialty stores, we can illustrate that reduced prices and a free market within geographic boundaries produce commodities, and thereby prevent societies from capitalizing long term values of aesthetics, choice, and the ‘special’ environments we adore across all of europe in favor of a bland, disposable environment. We restrain competition in order to raise prices and therefore concentrate capital and we do it in many ways: political subsidy (money transfers like taxation, redistribution, and outright subsidy) constraining the market by qualification (lawyers, doctors and london cabbies), and constraining the market with monopolies (public transportation like Tubes and Buses). We unrestrain the market to reverse the concentration of capital and to reduce prices, and we do it in many ways: political subsidy of The natural order of man is to attempt to circumvent the market. The free market is a byproduct of the civic republican tradition’s advocacy of meritocratic equality. It is a rebellious movement against the control of markets and the expropriation of wealth by the state. Markets are a solution to corruption that asks us to create fair competition among equals and to maintain that set of ‘rules’ we call “competition in the market”. However, the natural behavior of man is to circumvent that market. The means by which he circumvents it are those tools we consider fair market competition: reducing prices, increasing choices, advertising and marketing. Not all cultures have taken this route. In fact, in history, the free market is an exception that concentrates wealth in hte hands of the monied, productive and creative minority. THis concentration benefits all by decreasing prices for nearly everyone. It limits the power of capitalists as long as there is enough money in circulation to create inexpensive competition. But since the culture or state determines the definitions of property (the means of calculating the use of opportunities to act) the rules for any ‘game’ are particular to that game. Rules are not universal to all games. They are plastic. And this comparison of Taxis to Tubes is perhaps one of the best ways to illustrate that these rules are inconsistent. But what may not be obvious is the DISTORTION that is created by the myth that rules must be equal for some things and unequal for others. Or, that lowest prices are the ultimate virtue to be sought by economsts and political economists. As a libertarian, I care that the choices available to me are not constrained by Concentrating capital attracts talent to the private sector where it is skimmed by private individuals, and those who lack talent to the public sector where it is skimmed by bureaucracy. Yet this is what most cultures seek to impose: expropriation by the bureaucracy. WE also constrain capitalists, and unconstrain capitalists. Capitalists can temporarily distort a market by applying capital that profits one company or anotther, requiring competitors to rely upon capital or depart. They can do this by simply extending debt, so that prices may be decreased in the anticipation of driving competition out of the market, and later increasing their share of the market as these competitors disappear. the problem with this technique is that talent accumulated in the industry is sometimes forced out. Niches are abandoned (the wall mart and home depot effect). The state acts like a disruptive capitalist creating temporary price decreases in return for decreased niche services, and in doing so makes it impossible to concentrate capital in niche excellences. It makes it impossible to subsidize a public good: choice of the more expensive, better, prettier. The purpose of the London cabbie is largely to create a public ‘good’. It enforces quality so that quality personnel can afford to work in the industry (rather than the horrid service, delivered by the filthy, ignorant and incompetent in US cities). Prices would drive down quality, and all that will happen is that you will need additional regulation to managed an impoverished and corrupt network of marginal businesses that deliver cheap but intolerable service that prevents quality competition from competing in the market. If you are willing to spend money on the tube. You have no argument against spending money to maintain a quality system of taxis. Just because market mechanics are POSSIBLE for taxis and IMPOSSIBLE for tubes, that doesn’t mean that taxis are not serving the same function as tubes. Lowest costs does not generally create a good. It creates a marginal enterprise. Aesthetics are forms of capital that are perhaps, the best investment that any civilization can make. For a country like the UK, whose history is an industry, you’d think that such a principle would be better understood. For a country that is creating demand through immigration, cash by selling off it’s assets, and the illusion of prosperity by dilution, inflation and redistribution, rather than by increases in productivity, it is understandable why a myth of exceptionalism would be a useful distraction from the fact that the UK is selling off its exceptionalism and it’s heritage, and would do even more so along with it’s taxi subsidies. Prices alone do not a world make. The purpose of the market is exploration. The purpose of unbridled market is prevent government exploitation. THe purpose of the regulated market is to capitalize SOMETHING for a social good. And not all social goods are consumables. Some social goods capitalize distortions to create beauty, which is a high return for a society, as all monuments, arts and architecture demonstrate. So, instead of universally pursuing consumption as an ultimate good. Instead of the keynesian virtue of spending. Perhaps we should balance our capitalist strategy with the art of saving. It took english civilization a very long time to create a culture of saving, and the institution of interest, so that the middle aged could save until they were old, and the old could lend to the young, in a virtuous cycle of investment that distributed the risk of long term calculation across a vast number of people, and wherein retirement security was an insurance scheme for the underclass rather than a mandate of the majority. This virtuous cycle was undermined. Perhaps we should return to it, and to other forms of capitalizing our civilization, so that we leave something behind for our heirs rather than the record of a visitation by locusts. Subsidizing quality is the entire point of aesthetics and the arts. And capitalizing everything from street signs, to cabbies to historic buildings to libraries and museums is an antidote to anti-historicism.

  • People ‘Earn’ Redistribution By Controlling Their Breeding

    Another Empathic Appeal for the poor on NewsJunkiePost.com, entitled, Poverty: Half The World Lives On Less Than $2.50 A Day Unfortunately, the first prerequisite for prosperity is to control your population’s breeding. The worlds problems are not ‘density’ or ‘pollution’ or ‘capitalism’ but the transfer of life-extending technology to peoples who do not the cultural ability to control their breeding without the limits set on life by agrarian food production. For thousands of years, food production and disease gradients have limited population for people who lack the personal and social technology to control their birth rates so that they may stay within their productive means. Then we in the west, in our compassion, and in our lust to profit, sell these people life extending technologies without demanding that they control their birth rates. Were we to distribute all the wealth of the west to these people they would simply consume it and would match their reproduction to all increases in production, impoverishing the west as well. The division of knowledge and labor, the resulting increases in production, and the virtuous cycle of lowering prices because of this increased production are only one half of the equation. The control of breeding in the (protestant) countries is the other half of the social problem. More countries need a one-child policy, and the infrastructure to support that policy. Unfortunately, corruption is so rampant in these breeding-centers. Thankfully the rate of capitalism’s transformation of the world from agrarianism where children are a productive asset, to industrialization where children are a very high cost, is slowing the overbreeding problem in the ’second world’ of organized states. Incorporation of women into the workforce further controls breeding, and often too much (Japan and Russia). The reason we need women’s participation in the work force, especially in poorer countries, is so that they do not breed their civilizations into permanent poverty. The problem isn’t money. It’s cultural discipline. If we are going to even discuss mobilizing states to correct poverty then we should mobilize states to control breeding. Otherwise, along with our technology of life extension we are simply handing a murder weapon to a madman. “In other words, in 2004 about 0.13 percent of the world’s population controlled 25 percent of the world’s wealth. If we consider the global spending priorities of 1998, the trends were already extremely alarming.” Most people who read have heard of the 80/20 principle. Which means that 20% of the people control resources. This principle was developed by Vilfredo Pareto, for whom it’s named the “Pareto Principle.” He used quite a bit of data to show that in England in particular, 20% of people controlled about everything, and that income was rewarded accordingly. This also supports the value added by people. Despite our rhetoric of egalitarianism and equality, the top third of people are more productive than the bottom two thirds combined. And, at least it appears, that the top twenty percent are more productive (have more impact on generating goods and reducing prices) than the rest combined. The problem for any society is allowing the most productive people to concentrate sufficient capital that they may raise the population into prosperity. After which it’s possible to implement programs of redistribution. you can’t share what you don’t have. Unfortunately, the only value most citizens have in an economy is to provide menial labor and to consume goods and therefore create demand for goods and sevices. Imbalances in assets are needed to allow the creative and productive members of society to concentrate capital (which is the ability to influence others in an organized fashion) so that productivity can be increased. There is no record in history of this system of wealth concentration being abated. If it IS changed, then the vast majority of people on this earth will rapidly die. The problem is instead, to control reproduction and to increase production and continue the ‘virtuous cycle’ while we live within our means, so that we can redistribute something on the order of 20% of our wealth to those who have EARNED that right by the cost of forgoing further reproduction. In other words, you EARN redistribution by controlling your breeding.

  • Yes We Could Have Prevented The Suffering Of Citizens

    Rebekka Grun, on The Growth And Crisis Blog writes that we could have protected the consumers rather than the banks, in her posting Conditional Individual Bailouts – a Potential Anti-crisis Instrument

    Why not save the individuals that went bust rather than their banks? Unconditional bailouts, of course, would generate the wrong incentives (for the banks as well, by the way). It is therefore important to attach smart conditions to discourage free riding. For example a course in financial literacy and commitment to a program of (maybe painful) debt restructuring, and possibly further measures to improve the education or health of the affected individual or family.

    Your sentiment is correct even if you haven’t done the math on it. In general terms, there is a simply technique for doing exactly what you’ve suggested, but we lack the infrastructure for it. The arguments against the solution at the time were that we didn’t know how far prices would fall (I’m not sure, I think we were about right), and that it would make very visible that the government was the source of the problem (true), that it would have geopolitical impact on the value of the dollar (of course, but so would the alternative), and that it could be unfair to people who had behaved well (that would be fixable), and that it would encourage a bubble (this is false). THe primary problem with distortions is that the distortions are in PRICING. Libertarians would call corrections ‘repricing’. The problem is that human beings must suffer a great deal and absorb a lot of stress to conduct that ‘repricing’. When the state, as the creator of the distortion by the manufacture of cheap credit, could easily reprice major (home) assets by repricing the DEBT of those assets. In other words, we could have easily corrected the economy by bypassing the banking system, and giving money directly to the citizenry as buy-downs on their mortgages, which would have provided them with cash to spend or to put into banks. Doing this is fine if you do it FAST. In other words, the state created both the BOOM problem and the CRASH problem because it relies on the irresponsible tool of providing general liquidity – easy money. In hindsight this is more obvious than it was at the time. Those of us who made this recommendation were the smaller voices, because the banks and the financial industry were so terrified and the impact on the economy if they failed, so severe. The problem for our country is to put this system in place, so that we are insuring citizens AGAINST their bankers, so that we can use the market to PUNISH bad bankers and their investors, rather than the citizenry. I’ve worked the mechanics of this process out in some detail, and it’s quite simple. It’s just novel. And it’s anti-bank. And that makes it dangerous to a lot of people in one of our biggest industries: finance.

  • Notes On “Adam’s Fallacy: A Guide To Economic Theology”

    I’ve purchased two books, this one “Adam’s Fallacy: A Guide To Economic Theology”, as well as “Economics As Religion: From Samuelson to Chicago and Beyond”. There are any number of books on this theme. Note: This book was a waste of time and money. It is a silly marxist pamphlet. I can summarize it as “poor people breed too much and capitalism doesn’t care” when in fact, capitalism simply makes it very expensive to have children and those who breed irresponsibly are punished abstractly by enduring poverty rather than forced by village and tribal elders to leave their child exposed and dead. The vast silliness of the logic in this book is unworthy of further commentary. I’m surprised that this notion of economic religion is not more commonly discussed in the venal press. But it is too valuable a tool of those who wish to empower a democratic state and it’s politicians who are, quite frankly, at a loss to apply something other than the practicalities of getting elected, or the mysticisms of our founding documents, christian religion, or marxian fantasy. I start with Adam’s Fallacy. Using the KIndle edition on a mac, and therefore cannot annotate in place, and am not sure of page numbers. (This is a problem we need to fix, because we’re going to increasingly use dynamic text, which requires paragraph numbering not page numbering. Anyone remember wordperfect versus word?) PREFACE I am not sure I buy the argument that smith created a fallacy by separating market life from personal life. The Wealth Of Nations (TWON) is only the second half of his philosophy. the first is The Theory Of Moral Sentiments. (TOMS) They together represent his insight that the division of labor increases production and that human sentiments to cooperation at both the intimate, interpersonal, local, social and global level. While we are only in the preface, I’m not sure I buy the assumption because it’s too loose an assertion. Instead, I blame Knight and Keynes. Smith is nothing but a moral philosopher. “Contemporary economics has grown into a major intellectual industry” I hope this is elaborated further because it’s the the same problem presented by the clergy. People depend on perpetuating the faith. “Teaching economics reinforces the world view I call Adam’s Fallacy”. I don’t think so. I think that’s the crowd post 1900. “Teaching students to think like economists .. is hard.. and thinking like an economist … is just as value laden as any other way of thinking about society”. The idea in economic reasoning is the broken window problem: the need for all humans to think in terms of secondary causes and to follow the chain of secondary causes. This teaches people to think more deeply about the trade offs of both personal and political decisions. Yes it’s hard for people. Otherwise we wouldn’t need a market. CHAPTER 1 “The moral fallacy of smith’s positin is that it urges us to accept direct and concrete evil in order that indirect and abstract good may come of it.” Well, now, we need a definition of evil, don’t we? “neither smith nor … his successors have been able to demonstrate rigorously ad robustly how private selfishness turns into public altruism”. I don’t think he says that. I think he says that by participating in the market europeans will have fewer wars. CH1 – The Division Of Labor “Smith leaves unanswered the chicken and egg question of whether it is ultimately the human propensity to truck and barter that lads to the division of labor, or the division of labor that compels people to exchange.” Isn’t this a false dichotomy? People have always bartered and exchanged. the division of labor is simply more profitable for the individual. Ask any art-jeweler or craftsperson, who starts out producing one offs, but determines that quality of life depends upon his or her development of a product line that can reliably produce revenue, so that she is free to create those individually interesting pieces. The VIrtuous spiral of economic development. “Smith puts his faith in the ultimate benefits to be gained from the virtuous spiral to in crease standards of living and enhance the wealth of …. the sovereign.” “Smith SAYS LAW “… rise in labor productivity has at least one immediate and negative effect: a reduction in the demand for labor in the industries undergoing raid rises in productivity. …. unemployment can result.” “thus say’s law is based on a belief in the efficiency of the financial institutions of a capitalist economy” I don’t think so. I think it’s based on the belief that no other alternative is available while retaining the productivity RELATIVE to other nations, so that wars can be averted, and we can overcome the myth of the fixed-pie. “some of these displaced workers will eventually find alternative jobs” Yes, they will. They just might not like them. The alternative is that people should subsidize workers to produce goods at increased cost of goods to themselves and/or that the entire enterprise of production that employs ALL workers will fail to compete for market share against people from OTHER nations. In other words, it’s the smallest of three evils. “It appears that over long periods of time, says law does operate” Well, of course it does. At this point I’m frustrated because I don’t understand the problem. I know marxian fantasy must be in here somewhere by now. THEORIES OF VALUE I cannot for the life of me discern what point he is trying to make here. MARKET PRICE AND NATURAL PRICE Well, since the time of smith we understand that the labor theory of value is flawed and we have dismissed this part of smith as an error. So I don’t see this as material. he states in many more words ,that natural prices and market prices are in disequilibrium at all times. This makes no sense because a natural price is a tool for us to use to conceptualize movement, and a market price is a thing that comes into existence. So far either he is trying to accumulate a later argument or he’s simply confused. “contemporary economics on the the hand, focuses more theoretical attention on the the ideal imaginary state of equilibrium where market price and natural price coincide.” At this point he is trying to build an argument upon a falsehood – the labor theory of value and natural price. I hope that this is going somewhere. Either that or he is trying to state that the DSEM construct is a myth, and we all understand that it’s a myth. There is no bell curve. There is no equilibrium. It’s just a construct we use so that we can apply math because without that construct we CANNOT apply math. WAGES “… wages have the social function of allowing workers to reproduce themselves” (he means have children). “In order for wages to perform this function, they have to be high enough to allow workers to buy a subsistence standard of living” Ok, so this is supposed to be that the poor have the right to breed? So when did this become a social good? the problem for mankind since industrialization is that people simply don’t die, and they’re expensive. Our problem is overpopulation not supporting the unproductive people’s fantasy of unrestrained child birth. “Smith associates high wages and a high workers standard of living with a growing capital stock” Yes, I agree. at this point I understand that he is providing contemporary context. I read the rest of chapter1 and move to chapter 2 in the hopes that he is going to provide some insight here. Note to authors. Make your premise first then prove it so we don’t have to guess our way through your fantasy. FAR AHEAD “Behind this…. lies the unpleasant truth about capitalist social relations. The organization of the social division of labor through commodity exchange and wage labor systematically inverts the ordinary logic of human relationships.” What logic is that? That people have not exposed children for years, or even outright murdered them or sold them into slavery if they could not support them? In fact, breeding differences account for large differences in the prosperity of difficult cultures. So is this the author’s point? That he has some fallacious concept of the ‘right to breed’, instead of the ‘responsibility to only breed a child you can afford to feed?” Then he goes on to say that marx systematically breaks down and…. helps us understand. What he does instead is create a system of justifying primitivism. Look. We converted from hunter gatherers to farmers. We figured out how to control our breeding by creating the ‘family’ and monogamy. This made families economic units that could manage resources. We invented the market, and the tools of quantitative cooperation we call money, accounting, numbers, interest and credit. We increased our ability to breed further, but penalized those who have less foresight. Capitalism creates temporary extraordinary wealth then forces people to control their breeding in order to participate in the wealth. Those who don’t, suffer because of their choices. We just have a more abstract way of controlling population. ( INSERT A VAST AMOUNT OF JUSFICATIONISM OF MARX HERE. ) ESCAPING ADAM’S FALLACY “thus we cannot look to capitalism to solve inequality and poverty” That is correct. WE can only look to capitalism to provide the incentives for controlling reproduction so that the poor do not doom themselves to perpetual poverty in a world where children do not provide security or comfort but are a drain on resources. In other words. This is a silly marxist book, and I wasted two hours reading it. The chinese solved it with the one child policy, and it was a good policy and successful. Rather than redistribute ourselves into mutual poverty and regale the thought leaders of the past, you could simply write a book on the value of the one child policy, or at least, pay men and women to sterilize themselves. Capitalism makes poverty a choice of reproduction.

  • Pooling Information Is Laundering Information – Governments Are Money Launderers

    What’s the difference between money laundering, general accounting principles as they are currently practiced, the process of taxation, the use of fiat money to create general liquidity, the practice of monthly financial reporting, and the process of electing government officials as proxies for sovereign actions? Nothing. These are all examples of pooling. Pooling information so that causality is removed from that information. They are distortions of the human system of cooperation and coordination. They are an act of money laundering so that the causes and origins of that money can be attributed to mythical causes, rather than identified or deduced to the actual, rational ones. Truth is causality. We can have redistributive government. We can have safe monetary policy. We can disempower the governments ability to generate and foster class and group conflict. We just have to create a form of government that prevents pooling. Pooling is laundering. Laundering is the primary tool of those who commit fraud. Sound incomprehensible to you? It isn’t. It’s actionable. It’s not expensive. It will transform humanity as much as has industrialization. It will radically increase the rate at which humans solve problems together. It will concentrate capital for productive ends, and deliver the results to the populace. We developed libertarianism to stop state theft, and state dissolution of society, and the state’s empowerment of luddite systems of metaphysics like Marxism and Socialism. But in our ambition to do so we lost the purpose of property and trade. We lost our sense of community. Of the general costs of running society that are paid by all men. Of our need to cooperate in groups with others around the world. Libertarianism is a defensive posture. Like conservatism, we need an offensive posture. We need something to promise people in order to maintain our freedom to be the creative class, and to create a competitive society. The answer was laying there since Weber. We were so busy defending ourselves that we didn’t see that answer. Great minds like Hayek and Mises failed. Keynes failed and achieved the opposite of his intent. They were too enamored of the Civic Republican tradition and too optimistic about government. I know that answer. That answer is a program. It will empower conservatives with a message. It will retain a meritocratic society and the propensitiy for hard work, innovation, competitiveness, and retain the most important feature of any culture, it’s symbols of STATUS as those that are founded in the heroic tradition’s self sacrifice and competition for the common good. We can restructure government. We can do it in the USA with amendments. We can rid ourselves of the IRS and the specious justification of government interference in our lives. We can redistribute what is justly the wealth belonging to the people in need. We can. Capitalism 3.0. The Credit Society.

  • Laments For Attention On Environmental Economics

    On Environmental Economics, the authors take note that Krugman appears to be reading their blog. They then state that the market will fail to protect the environment. Not that the government literally, by reserving powers to itself, FORCES the failure to protect the environment. As soon as something that is useful becomes a scarcity, it needs market PROTECTION. Not market consumption, but market PROTECTION. What does that mean? Lets start with their erroneous complaint:

    But what if a deal between consenting adults imposes costs on people who are not part of the exchange? What if you manufacture a widget and I buy it, to our mutual benefit, but the process of producing that widget involves dumping toxic sludge into other people’s drinking water? When there are “negative externalities” — costs that economic actors impose on others without paying a price for their actions — any presumption that the market economy, left to its own devices, will do the right thing goes out the window.

    This is only because we allow the violation of property rights. If rivers, oceans and air were ‘owned’ then we could . Ownership need not include infinite rights to use. We do not have infinite rights to use flammable things, nor even infinite rights to play music or engage in speech. So it is possible to regulate the use of rivers, oceans, forests and air, as well as endangered species, so that people have the incentive for responsible protection of resources. It is the enforced-ignorance that the state places upon men by denying them the ownership of resources and with it the construct and protections of property. Ownership is a necessary part of the division of knowledge and labor. The state mandates knowledge-incompetence by reserving to itself administration of the ‘property’ we call commons, instead of defining the limits on the use of that property and putting it in private hands, so that individuals have the knowledge and incentive to protect it. Privatize stewardship of air, water, nature. The market will correctly distribute costs of doing so. And the owners of these resources will vehemently protect their ‘interests’ while protecting ours. Otherwise, there will continue to be the ongoing illusion that political forces who compete for government attention are the same as commercial forces who seek to avoid it, and our bureaucracy will continue to be a self-aggrandizing waste of the efforts of the citizens, while our resources continue to be ruined. While the market has weaknesses: in particular, it cannot CREATE property without state intervention (as in determining the rules by which property is used), and it cannot PRESERVE objects without state intervention (as in determining the conditions by which the property is transferred, or the limits on it’s use), the market is far superior at protecting those interests and making use of scarce monetary resources to do so without the waste of government. Since government employees can have special consideration because they are outside the market, they gain special rights that the market would not endow them with. In particular, protection against risks that we call unemployment (the drop in demand for our skills and labor). As such, this is the driving factor behind all political organizations. Whereas, the market would protect the long term resource over the short term desires of government employees. In other words, failing to make ‘public goods’ or ‘commons’ into ‘property’ is simply the willful and mandated theft and redistribution of those goods and the redistribution of those goods to government employees. The commons is the theft of resources by the state so that individuals may profit by the use of ‘commons’ to fund their political advocates. The tragedy of the commons is that ownership leads to over-consumption. But there is another tragedy of the commons, and that is the state-ownership tragedy of the commons, wherein the state uses it’s assets to reward or create advocates. Instead we should avoid the over-consumption tragedy of the commons as well as the bureaucratic tragedy of the commons, and eliminate the commons as a form of property and stewardship, and instead, make it a market matter of the regulated use of and transfer of property, thus enabling individuals and organizations to protect and use it without the participation of the state except as an enforcer. Sell off the air, seas, rivers, lakes, forests, preserves. Directly redistribute money to these ‘owners’ in order to subsidize any ‘common use’. But leave protection of the resource to the owners, who will, universally, do better than the state at doing so. Regulate the use of those ‘goods’. The division of labor, knowledge and incentive is humanity’s greatest accomplishment, because it is the method and means by which we break the universe up into knowable entities. The market is the means by which we allocate the use of those resources. And the state is the organization that creates the ENVIRONMENT that is the market, as well as the means of resolution of differences in property. The state is CREATING THE WRONG ENVIRONMENT when it manages something, rather than when it defines the rules for something, and leaves it to the market to actually do the labor. And thinking otherwise, is to attribute to human beings, knowledge and incentive that they cannot have in a division of knowledge and labor of any degree of complexity. And therefore a fools errand.

  • Citi’s Prince Doesn’t Place Enough Blame On The Government

    From Reuters, regarding today’s CITI testimony before congress:

    Prince’s infamous comment that his bank was “still dancing” even as the subprime crisis worsened came back to haunt him at the commission hearing where he was asked about it. His explanation seemed to boil down to this: it was a race to keep up with competitors who kept loosening lending standards and Citi couldn’t afford to drop out.

    Prince is too defensive. The correct response was that the government was madly printing money in an attempt to recover from the tech bubble’s crash. In this environment of cheap cash, Bankers must lend or be forced out of business by the actions of the government. The risk was compounded by the governments failure to regulate new financial instruments. And the government failed to regulate them because academic economists has proposed models and equations that promised risk, and many financial luminaries, of which Greenspan was a member, believed that these instruments had indeed reduced risk. THe problem is this: by printing money the government created a moral hazard, and the government is responsible for the outcome. A banker, with understanding or not, should not be forced into being uncompetitive or into insolvency because the state dumps the commodity we call money on the market. Bankers just protected their organizations from the government’s interference in business. Sure they profited from it. Because the only other choice was to go out of business. If capitalism fails, it fails because of government interference. Markets cannot solve all problems, in particular, they cannot concentrate a large volume of capital on long term projects such as infrastructure. But failures of capitalism are almost universally failures of government to refrain from those acts which cause long term harm for short term good. We are two years into this crisis and still the blame is on the wrong parties. Bankers are normal people, and few of them have all but the vaguest understanding of the economy. They are largely clerical workers and accountants who move the commodity money around our civilization. For all there terminology, graphs and formulae, for all their statistics and reports, the vast majority have little understanding of the impact of their decisions, the outcomes of their actions, or the limits of our conceptual technology in forecasting such things as risk. If the greatest minds in history have had trouble with such consensus, then why should we think bankers should? Furthermore, why do we think government is capable of doing any better than bankers? It’s hubris on the part of government. Practicality on the part of bankers. And foolishness all around. But the people who CAUSED this problem, are the people who have, at least since FDR, but likely since the start of the federal reserve, conspired to destroy our money, and with our money, our cautious behaviors, and with our behaviors our nation.