Curt Doolittle

Source: Original Site Post

  • Correcting Our Uses Of Taxes, Law, Money And Credit

    There is a natural conflict between the need to avoid a scarcity of cash and credit, such that all opportunities for increases in productivity within the economy can be exploited, and the fact that fiat money and fiat credit tend to mask, obscure and distort the information that would come from climbing interest rates. The general strategy has been to monitor the interest rate. However, the interest rate alone is not a sufficient barometer because a) people ‘flock’ or ‘school’ to over exploit opportunities — and b) unfortunately, (and this is becoming a topic of interest by the serious mathematicians in the field due to the plethora of data collected from the boom) it appears the entire economy is becoming governed, not by opportunities and not by productivity, but by nothing more than *responses to the discount rate.* Which means, (as the austrians have said for a century), the distortion caused by fiat money is cumulatively, and recursively the source of booms and busts. Of course, the fact that those of us say it is logically obvious is countered by the short term quants who fall into the ludic fallacy of probabilism.

    [callout]There is a natural conflict between the need to avoid a scarcity of cash and credit, such that all opportunities for increases in productivity within the economy can be exploited, and the fact that fiat money and fiat credit tend to mask, obscure and distort the information that would come from climbing interest rates.[/callout]

    There is a way out of this problem. But we would need a long and deep discussion about the nature of government to fix it. We are using a system of lawmaking and taxation that was invented for an agrarian era when the unit of work was at best a season, but accounts were settled annually. We live today in a world where the month is a meaningless topic, and only weeks and quarters are of informational value. Instead, by the combination of pooling accounts (the error of aggregation of plastic categories under quantitative analysis), taxes (which are disconnected from the causal actions that produce profits), and fiat money and fiat credit (which obscure information signals) we effectively launder causality from the pricing system which is the entire purpose of HAVING a pricing system. If we issued loans rather than collected taxes, this problem would right itself quite quickly, and both our political rhetoric, and abuses by the government would be much more rational and tangible if we did. Or rather we taxed what we should (income against an averaged three year balance sheet) and we gave loans rather than provided general liquidity, we would allow private money to pursue it’s ends and public money it’s ends.

    [callout]There is a way out of this problem. But we would need a long and deep discussion about the nature of government to fix it. [/callout]

    Furthermore, tagging all financial transactions, then treating the internet, and the financial network as a utility that can tolerate failure through multiple layers of redundancy wouldn’t hurt either. There is nothing magic about this series of prescriptions. They simply prevent the laundering of causal information from the pricing system by the error of aggregation. In the simplest terms, tax pooling and general funds are money laundering. Loans are causally transparent. Taxes are causally opaque. We cannot have a RATIONAL government if the data that they rely upon is by DEFINITION, IRRATIONAL, null, and void of rational content. THE DISCOUNT RATE IS, FOR ALL INTENTS AND PURPOSES, AN ERROR OF AGGREGATION. THIS ERROR THEN “FINACIAL-IZES” THE ECONOMY OUT OF THE PURSUIT OF PRODUCTIVITY. (Of course, under that scenario the profits of the big banks would be captured by the public sector.)

  • Fiat And Private Money From Both Sides Of The Coin

    The first reason that the USA wanted it’s own money is so that it did not export profits to England or France in the form of currency appreciation. The second reason was to reduce trade friction between the colonies. The third was because private money is a riskier proposition, and trade was artificially limited by the instability and problems that came from runs and scares. The reasons that the USA developed the banking system and fiat money was because there was a shortage of money to lend in order to finance the westward expansion of the country.

    [callout]Since only the government, which consists of citizens who spend their time on geographic protection, protects the geographic territory, and since the citizens are shareholders in the government, then to expect the government to conduct territorial wars, yet to allow private profiteering of the windfall opportunity of geographic expansion because the state is unable to create money to provide the credit, is for individuals to PRIVATIZE WINS AND SOCIALIZE LOSSES. [/callout]

    Credit money is useful to all societies and it DOES cause inflation, because there is no way for people to KNOW when and when not to lend. As long as there is credit money there will be booms and busts. Paper money is necessary for the same reasons – there are artificial limits to competitive productivity without paper money, and without fiat money. Furthermore, as we have seen in the PIGS countries, fiat money tends to decrease corruption. Early in US history, when they tried a multiplicity of monies it created financial instability and trade friction. It was only after taking the dollar off the gold standard that we saw the abuse of it. The question is, if there is a geographic opportunity, should private investors profit from that or should the government profit from it? That is not the same type of investment as the use of private personal knowledge for the purpose of increasing production. Since only the government, which consists of citizens who spend their time on geographic protection, protects the geographic territory, and since the citizens are shareholders in the government, then to expect the government to conduct territorial wars, yet to allow private profiteering of the windfall opportunity of geographic expansion because the state is unable to create money to provide the credit, is for individuals to PRIVATIZE WINS AND SOCIALIZE LOSSES. This may take a few readings to understand. But this is the entire point. Christian Classical liberalism and it’s restatement as Hayekian libertarianism differs from jewish anarchism and it’s restatement as Hothbardian libertarianism almost entirely because christians are philosophically fraternal land holders, and their metaphysics assumes the necessity of land holding, while jews assume land is magically held by someone else because they are metaphysically nomadic and have been diasporic since being conquered by Rome. These assumptions have been part of both groups’ tribal sentiments, philosophy and cultural ethics for thousands of years. Judaism is an arrested civilization. Christianity is an overextended civilization. But you will have a hard time pointing to the success of non-landed civilizations. So, in the end, private money is as often a means of privatizing wins and socializing losses as is fiat money a means of destroying productivity and socializing profits that were made by individuals taking personal risks. The problem with money is that it serves to coordinate diverse and dispersed and fragmentary human KNOWLEDGE, and that gold, or hard money, or private money, because it is scarce, serves better to make use of that dispersed knowledge by capturing willingness to put it behind any initiative or investment that might be poorly considered. While soft money helps to solve the problem that occurs when people have a willingness because they agree on an opportunity for investment, yet they cannot obtain the scarce money to do so. Our problem is not necessarily fiat money. It is that the state can use ‘pooling’ of funds to mask transfers. That is a deeper conversation. But hopefully I have given you some food for thought.

  • Governments Should Be Empirical Not Moral

    All societies in history, without exception, appear to have a ‘referee’ or ‘judge’ — usually an elder male. This topic has been researched to death: Egalitarian tribal warfare societies have some elder male. Chieftain societies tend to concentrate decision making power. Urban societies develop specialists. Advanced civilizations have micro-specialists (judges). Likewise, as they grow, societies also develop specialists for extra-group conflict resolution (warriors), and specialists for in-group conflict resolution (politicians). It is impossible to have a peaceful and prosperous society without conflict resolution because planning and risk taking necessary for production become impossible. If we continue our evolution into industrialization, market economies become so much more productive than any other in history, that shareholders (people who pay the cost of adhering to norms and rules) desire returns on their investment in that society via conformity.

    [callout] If instead, our government operated as a bank and insurance company, it would be empirical, calculative and specific rather than rational and deliberative, and general. As such, it would be far less easy to rely upon supposedly moral arguments, that are in effect, universally, without exception, forms of deception or convenient rationalizations and justifications for either theft, class warfare, or corruption.[/callout]

    The problem for social scientists, and the citizenry, is not the rational constitution of, and methods used by these different specialists in conflict resolution. The problems are the coordination of their activities, the setting of priorities, and the limits on their privatization of opportunities (corruption), as roles filled by individuals evolve into institutions and then into methodological, self interested bureaucracies. In the private sector we use prices, money and accounting and contracts to coordinate our activities – they are empirical. Instead, the bureaucracies coordinate their activities using laws, regulations and rules – and laws and rules are insufficiently granular and empirical for the size and complexity of our current population sizes and the resulting complexity of our devision of knowledge and labor (instead their moderately rational, which is less precise, and more reliant on interpretation). This is the problem with the rule of law – the formal principle for any law is that it must apply to all people equally in order to protect the citizenry from overreach. It is by definition and necessity a GENERAL rather than SPECIFIC tool. If instead, our government operated as a bank and insurance company, it would be empirical, calculative and specific rather than rational and deliberative, and general. As such, it would be far less easy to rely upon supposedly moral arguments, that are in effect, universally, without exception, forms of deception or convenient rationalizations and justifications for either theft, class warfare, or corruption. This is the hole in our philosophy of government. (It is the hole some of us are trying desperately to fill with a solution.)

  • All Cultures Developed Religions Of Some Sort

    Mystical Political Religion and the concept of good and evil was invented by the Persians to separate the persian people from the indians who were, at that time, similar peoples. Mystical religion was invented to cause conflict and political division. All cultures developed religions of some sort. If by religion we mean a body of habituated knowledge consisting of Myths and Rituals – but which in modern terms we call ‘education’. History and Political systems are in effect, Myths and Rituals too. If we look at history, the lower clases make use of and rely on mystical religion for insurance and education, the (admittedly small) middle classes on craft, guild, contract and trade, and the the upper classes on politics and bureaucracy, and the different classes cooperate by sharing those different cooperative strategies. So, even the ancient politicians learned how to use education for political purposes. Thats where we get mystical religion from. (See Nietzsche if you can manage it. Gimbutas, Weber and Armstrong otherwise.)

    [callout]History and Political systems are in effect, Myths and Rituals too. If we look at history, the lower clases make use of and rely on mystical religion for insurance and education, the (admittedly small) middle classes on craft, guild, contract and trade, and the the upper classes on politics and bureaucracy, and the different classes cooperate by sharing those different cooperative strategies.[/callout]

    Moral principles are, without exception, under analysis, economic principles – and as economic principles they can be rationally articulated, or embedded in a narrative like a fairy tale, so that they may be taught to children who cannot grasp more abstract, rationally articulated ideas. There is no need for religion to achieve moral education. The fact that all religions, even post-buddha buddism, have developed a myth of afterlife is to add the force of violence to mysticism. The fact that we teach mystical religious principles instead of rationally articulated moral principles makes it impossible to create political compromises between religious traditions – which encourages conflict. More importantly, religious traditions are economic strategies – they promote the values of particular social orders. (west=fraternal and technical, middle=tribal and mystical, east=familial and bureaucratic) This difference is why the west developed the industrial revolution twice (greece and england) and no one else ever has. It’s simply a better strategy for experimentation. (See Hayek, Weber and Armstrong)

  • Ayn Rand’s ‘Selfishness’ Is A Play On Words In Order To Hook Your Attention

    Selfishness, as defined by Rand, is a play on words in order to hook people’s attention. It is a classic marketing trick. It assists her in marketing her ideas specifically because the word ‘selfish’ has negative connotations. While she uses the word ‘selfishness’ the general idea is used by other writes as any one of: individualism, responsibility, enlightened self interest, or pragmatic self interest. The purpose of the idea of self interest is epistemic: you can’t KNOW enough to work for other people’s interest in a division of knowledge and labor. In a division of knowledge and labor, you can’t KNOW very much. We’re necessarily ignorant. Our view of the world is very limited. It’s simply a proscription for ‘think globally, act locally’. So, self interest, or selfishness is simply a play on words for the purpose of making us look at individual responsibility inversely – as taking care of others by taking care of ourselves, rather than as the duty that we have to one another to take care of ourselves. Rand was trying very hard to market individualism and freedom during a period of socialist expansion, when there was rampant false attribution of success to the soviet model by western sycophantic pseudo intellectuals – the soviet model that had destroyed her family. So she is making a play on words to hook your attention. There is nothing in rand that is not, at least in implication, in Adam Smith or Frederic Bastiat. Hayek tries to remind us that the source of freedom that we know as Classical Liberalism was a product of the English empirical pursuit of science, and the analysis of data that had accumulated by the 18th century, as the middle class grew in size. But that at the same time, the French were pursuing the concept of freedom as a REACTION to the english, by RATIONAL or verbal reasoning, rather than by data – the germanic protestant versus latin catholic approach to life shows up everywhere. These rational arguments are moral arguments. Moral arguments are by definition specious. But they are easier to digest by the common person, and easier to manipulate by politicians. In large part, the language of freedom was distributed by translation that were made from french literature using the french interpretation in rational terms of english empirical principles and reasoning. So the language we use today to discuss freedom has become the rational of the french, rather than the empirical of the english. This french rationalism is where marx obtained the foundation of socialism and communism.

  • It Will Take All The Cuts From Ryan, Obama And Rand To Balance The Budget

    From Mish Shedlock:

    “Look at it this way: If we take all of the cuts the Ryan has proposed and all of the cuts the administration has proposed, we are still not there. However, if we add them together, then kill the department of energy and the department of education, and cut still more from the defense budget, we might have a solid chance at balancing the budget in 10-12 years. In other words we need more defense cuts + some of Rand Paul’s ideas + some of Paul Ryan’s ideas + some of Obama’s ideas.”

    I’ve been thinking exactly the same thing. That’s what it’s going to take. (Wonkish) And as long as we kill the department of education it’s worth it to me. But afterward, we should hang the boomers by the millions for their ignorance and stupidity. (I’m a Jones Generation, along with Gates and Jobs, not a Boomer.)

  • It Will Take All The Cuts From Ryan, Obama And Rand To Balance The Budget

    From Mish Shedlock:

    “Look at it this way: If we take all of the cuts the Ryan has proposed and all of the cuts the administration has proposed, we are still not there. However, if we add them together, then kill the department of energy and the department of education, and cut still more from the defense budget, we might have a solid chance at balancing the budget in 10-12 years. In other words we need more defense cuts + some of Rand Paul’s ideas + some of Paul Ryan’s ideas + some of Obama’s ideas.”

    I’ve been thinking exactly the same thing. That’s what it’s going to take. (Wonkish) And as long as we kill the department of education it’s worth it to me. But afterward, we should hang the boomers by the millions for their ignorance and stupidity. (I’m a Jones Generation, along with Gates and Jobs, not a Boomer.)

  • The Remaining Marxists Are Not Trying To End Poverty

    From a Comment on Cafe Hayek: “Marxists must define poverty as a relative phenomenon. Otherwise, they couldn’t in good conscience be marxists.” Or perhaps, better said, they wouldn’t have a semi-rational reason to justify class envy, and therefore attempt to obtain unearned social status through political power rather than through market service of others.

    [callout]Social status is important. It’s a cognitive necessity. It tells us who to imitate.[/callout]

    The left’s desire is not to end poverty, it is instead, the desire to alter one’s natural, biologically and environmentally determined social status either by gaining access to unearned income or by gaining status through access to political power. And social status is not irrelevant. Social status is important. It’s a cognitive necessity. It tells us who to imitate.

  • On Happiness: Prospective and Retrospective

    To be happy, people desire access to new stimuli – ‘relishes’ as Aristotle put it, or ‘new experiences’ as we put it today. People prefer working on optimistic ends. They prefer to work successfully to accumulate new stimuli, rather than at planning to prevent negative stimuli, or at planning to conserve resources so that they can preserve the current stimuli. And they enjoy operating at the maximun that their abilities allow while still succeeding in their plans. The human mind craves something to do. It just wants to do something it can succeed at doing. Throughout history, any number of people have tried to take ownership of the term ‘happiness’ and to define it according to their preferences. Usually, someone picks a point on the temporal spectrum and claims that ‘true happiness’ comes from either pleasure, freedom from stress, or a life that is retrospectively well lived. Temporal priority is an important attribute of happiness, because Time Bias (Time Preference) or the tendency for people to pursue outcomes of shorter or longer distance in the future is correlative with social status. These terms below use the temporal spectrum to accommodate the most common priorities.

    • ‘Pleasure’
    • ‘Prospective Happiness’
    • ‘Retrospective Happiness’

    Happiness is both a reward for our anticipation of the opportunity for stimulation, and our reward for the exercise of good judgement in obtaining that stimuli. The priority that each of us give to these different properties of Prospective and Retrospective Happiness are different, and dependent upon a combination of our abilities and skill at forecasting, planning, succeeding, obtaining group membership, and avoiding stress. We would all be happier amidst the plenty in the Garden of Eden wherein our basic wants and needs were fully and freely satisfied, and there was little else to do but enjoy one another’s company. At least, we would, until our biological Alphas decided that hoarding the best resources and controlling access to mates was more entertaining than communalism. But in our real world, we are somewhat challenged in achieving happiness because of the unresolveable conundrum of living not in the garden of eden – which is a place of plenty – but in a universe of scarcity. And having to transform the scarce resources of the real world into increasingly complex products and services through a division of labor and knowledge in which many hands may indeed make light work, but which, because of the many hands, requires cooperation among people of different ages and abilities and interests to make that work light. To coordinate people within such a complex system, we must rely upon the information provided by an uncaring and anonymous pricing system rather than our natural empathy, observable interactions, personal commitments and habituated relationships that constitute the much more limited information system inherited from our tribal biology. And it is the conflict between our a) tribal instincts and sentiments, the need for belonging to a group, the status signals that come from that membership, and b) the anonymity and confusion that come from our dependence upon the pricing system, that make our prosperity and freedom from the vicissitudes of nature possible. This conflict appears to be an unresolvable conflict that satisfies our pleasures, but limits our happiness. Never in history have so many people had it so well, but claimed so little happiness – except perhaps since the first invasion of north america by modern man. But it need not be an unresolvable conflict if we separate thinking and acting locally as if we are in a tribe governed by our instincts, from thinking and acting socially and politically as if we are in a market, governed by prices. Unless we understand that difference, happiness will be elusive. You cannot be happy if want the impossible. That runs contrary to our biological want to have our plans succeed rather than fail.

  • Stocks Are Not Currency. We Buy Companies Because We Like Them. And We Like Them For Different Reasons

    Felix Salmon writes:

    … it’s maybe no coincidence that the Russian clients of Goldman Sachs who are falling over each other to bid ever-higher prices for Facebook shares are much the same people as the Russians paying $100 million for trophy Picassos, or Los Altos mansions. The theory here is that Goldman Sachs, SecondMarket and the like have identified a group of buyers who are willing and able to pay through the nose for assets which are rare and special and which few other people can have. So long as companies like Facebook and Zynga meet those criteria, the winners in any auction for their shares are likely to be cursed — or, to put it another way, the final auction price is likely to significantly overvalue the company. Looked at in this way, the market in private equity is less an opportunity for plutocrats to get excess returns, and more an opportunity for intermediaries to extract large profits by selling them overpriced equity in overhyped tech stocks.

    That’s true. And you’re right that it’s not an advantage for plutocrats to have access to shares that common investors dont. But, that rather pejorative language is not the way to look at it. Instead, business men are finding a product that has extra-monetary value to investors and charging them for it. Or, more simply, Social status is a ‘good’ that people will pay for. If I have a Ferrari, two Porsche’s an a Jaguar, and my wife has a gucci purse and a hanoverian horse, the fact is that cars, purses, and horses are not scarce. So social status is what we pay for. Why is it that shares of stock in companies should be regulated such that people cannot buy status in companies the way that they buy status in products? And in a market economy, paying for social status is about the only way of achieving social status. There is nothing fraudulent about selling social status. There are plenty of ways to lose money. There are plenty of ways to spend money getting something that you want.