Curt Doolittle

Form: Quote Commentary

  • 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.

  • 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.

  • Schiller Takes A Step Toward Capitalism 3.0

    From an article in the NY Times. A Way To Share In The Nation’s Growth Robert Schiller, who I greatly admire, recommends one step toward Capitalism v3.0. Why? Because investment in the productivity of a nation does not privatize wins and socialize losses, as does debt. It is gambling, but gambling by people who know what they’re doing, rather than simply impoverishing citizens for government’s incompetence. I have worked on this particular theory quite extensively, and it appears that the worldwide impact would be positive and durable. The argument against it, is that it makes governments accountable. And the entire purpose of government seems, at least from the historical record, to be one of avoiding political accountability at all costs. Which is precisely why we need this particular solution.

    Shiller: Sell Shares in the U.S., Not Just Its Debt Thursday, 31 Dec 2009 09:09 AM Article Font Size By: Julie Crawshaw Yale economics professor Robert Shiller says a new kind of government security is needed, one based on equity instead of debt. “Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits,” Shiller writes in The New York Times. “Governments should do something like this, too, and not just rely on debt,” he says. “We would sell shares in America instead of just debt of the American government.” Shiller even suggests a name for the new security, which would be based on Gross Domestic Product: a “trill,” because it would represent one-trillionth of annual GDP. Though GDP numbers still are subject to periodic revisions, “the basic problem has been largely solved,” Shiller says. “Such securities might help assuage doubts that governments can sustain the deficit spending required to keep sagging economies stimulated and protected from the threat of a truly serious recession.” If substantial markets could be established for them, Shiller notes, trills would be a major new source of government funding, issued with the full faith and credit of the respective governments — which means investors could trust that governments would pay out shares as promised, or buy back the trills at market prices. “What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” Bill Gross, co-CIO of Pimco, told The New York Times. “It’s capitalism, I guess, but it’s not to be applauded.” © Newsmax. All rights reserved.

    When governments no longer can justify violence, they resort to fraud. Debt at this level is either ignorance, stupidity, the replacement of wisdom with ‘hope’ which is a secular version of trust a divinity, or simple outright fraud. And it is not a question of political parties. The left destroys through it’s kind of policy debt, and the right though it’s kind of monetary debt. The only difference is that the right’s method can be corrected through a recession, depression, price adjustments and fiscal collapse. The left’s will require a bloody revolution, and destruction of the civilization itself. Between those two ‘bads’, perhaps, the ‘bad’ of the left is worse, but it is only marginally worse. It would simply be better for all of us if government could not commit fraud on such a scale, ever, under any circumstances. To prevent policial fraud we need methods and processes that are measurable, and to measurable they need to be calculable. Calculability is an extension of perception, and an extension that is necessary because our innate human perception is unable to make judgements without the aids that calculation provides for us. (Numbers represent consistent immutable categories.) Accountability requires calculability. Capitalism 3.0 creates political accountability through plain old fashion calculability. Curt

  • Losses Are Losses Regardless Of Size: Tiger Woods, Losses and Celebrity Endorsements

    December 29th, 2009 § 0 Comments

    Over on The Sports Economist, I found a posting about a UC Davis Press Release on the Tiger Woods scandal and the losses incurred by companies that had sponsored him.

    And Felix Salmon editorializes that the number is an example of specious academic research (in other words, like most academic research that has popular appeal, it’s nonsense.) I’m not a big fan of Felix for historical reasons, but his criticism is spot on.

    Now, how am I going to spin this as another example of a strategic marketing error that is the fault of executive management?

    It’s easy. Because what makes the estimated $12B (or 1b, or whatever number of millions) in losses from the Tiger Woods scandal more interesting, is that celebrity endorsements have very little positive impact on brands, and advertising agencies have known this for decades.

    Celebrity sponsorships improve the public’s awareness of the celebrity outside of his or her own field. But that awareness does not translate to the products themselves. In general, Tiger made more people (especially minorities) interested in golf. But he did not necessarily advance the revenue of the “non-golf” brands he was associated with. (I do not have data on Tiger, I’m using comparisons of past celebrities – although I would honestly love to be proven wrong on this).

    For example, some of the models and actresses do fairly well with brand development, and have impact on the brand, but they manufacture that value – they don’t bring it to the table. Wilford Brimley’s commercials for grape nuts were a positive example, but he created that value as a character actor, rather than brought it to the table in the form of external legitimacy.

    So given the data on losses to shareholder value from the Tiger Woods scandal, it at least appears to confirm what most of us already know: celebrities increase awareness of the celebrity, but have little or no impact on the bottom line, but celebrity exposure once engaged in a brand, has a serious downside that is logarithmically more negative than any possible gain can warrant risking.

    And if you pick a reasonably attractive high performance high stress male athlete that marries a woman clearly outside his social class, and who travels extensively among fans (especially homogamous status-seeking females) that you helped create through increasing his exposure, you are simply asking for trouble. You get the same problem if you bring in a young female olympic medalist from a small town, and give her unfettered access to the media – she will speak honestly, and pragmatically, from her heart, and that is not the job of politicians or brand representatives whose job it is, is to perpetuate myths. (Yes, that’s a politicians duty: to perpetuate a myth, because political decisions in large groups are decided according to mythos.)

    Now, part of the problem is his own agency’s fault. They positioned the poor guy as a saint. Nike never does this kind of thing that I’m aware of. THey leave room for human frailty. If you don’t you just create a vehicle for necessary failure. They did. He stepped in it. It cost a lot of money – specious self promoting academic research or not.

    Celebrities cannot legitimize brands by bringing external legitimacy to them. Characters that symbolize brands, rendered by talented actors bring acting talent to the process of creating brand value. (Mr Whipple – played by Dick Wilson, Wilford Brimley – for Grape Nuts, and Catherine Zeta Jones for T-Mobile, for example, all created brand value.)

    In other words, blame the CEO and CMO, and agency for the lost $X-Billion, because it wasn’t Tiger’s fault for being Tiger, it was their fault for using a celebrity as a means of promotin when celebrities have near-zero positive impact on the business.

    Advertising should not be comprehensible to executive management. Sales data that is the result of advertising should be comprehensible to executive management. But that’s not how it works. A very smart guy, Larry Ellison, CEO of Oracle personally knows the agency and who is representing his company. And while I, he id due his how personal criticisms at times, as a CEO he should be respected for his depth and flexibility and accountability – he demands accountability and is involved in how his company is marketed.

    So it’s CEO’s and CMO’s that lost billions by manufacturing a celebrity that they can talk about with their friends, when the data is clearly that celebrities have very little positive impact on brands, and very high negative impact on brands, and they were betting on the chastity of a guy (probably with a lot of legal nonsense that assumes far more of a human animal that is possible) who has about zero chance of holding to those achievements – not because of a character flaw, but because any person under duress for a long enough period will seek human comforts and rationalize them.

    We worry about CEO corruption as if it’s an intentional malice rather than the foibles of being a human being in the midst of disconnected, fragmentary, and often erroneous data, in a rapidly changing market, under considerable time pressure, with credit money distorting all financial data worldwide, when CEO’s appear to be, at least from the data, some of the most ethical people in the world – especially given that they must fight the daily battle of tax, banking, investment, regulatory, journalism and political leader’s desire to attribute predictive value to temporal noise in data as if it is a trend, without resorting to calling the leadership of each of these categories ignorant fools, or giving away their current strategy. That’s a task that makes a centrist politician’s duties look tame by comparison. Yet we do not hold CEO’s accountable for malinvestment that was made despite being clearly contrary to all existing evidence.

    Except for Nike, who is in this kind of business with full knowledge of the consequences, (and employs some of the smartest people in marketing today) and EA, which of course, is directly profiting from Tiger’s name, (and is an exceptionally well run organization with deep knowledge of it’s customers) and Golf Digest who again profits directly from his participation and legitimacy in expanding the sport of golf, we should blame the CMO’s of the companies that invested in Tiger Woods. (Accenture, Amex, ATT, Gatorade, TLC, Gillette ) because it’s their decision to invest in a risky strategy (most likely because it’s easy to get through the bureaucracy) instead of developing a character or characters that represents their brand. (Geiko, and Progressive insurance are the current popular winners.)

    Tiger’s downfall was a foregone conclusion, and certainly, in the trade, the topic of a barstool raffle on his time-to-failure. He’s a human being, and no matter how many layers of paper indemnification we wrap a human in, he is still a human living in a world of other humans.

    But while the contract clauses can stop you from paying out your sponsorship fees, and some well spent money will help consumers forget the negative association with your brand, it cannot so easily recover lost shareholder value, despite the fickle memories of investors. Billions are BFN’s to lose. And they are lost by executives who buy into celebrity endorsements instead of building brand value around characters that they actually own, and in particular, fictional characters that can’t get caught in infidelity in hotel rooms with waitresses.

    from: www.puretheoryofmarketing.com (offline)