Curt Doolittle

Theme: Governance

  • Krugman Watch: On The Right’s Level Of Agitation

    The right is very angry right now, even more angry than the early Clinton years. And they are only going to get more agitated. De -masculinizing the military was Clinton’s only real mistake, as the military fraternal order and its meme of group-persistence are conservative’s most agitating sentiment. Obama’s transfer of risk from the poor (unenfranchised risk creators) to small business owners and professionals (enfranchised risk takers), and his general attack in word and deed on the right’s social status and values, plus the sentiment that the ‘rules of the game’ (the constitution, which is the core value of The Classical Liberal wing of Conservatives) were violated to pass the healthcare bill over the will of the populace, have inflamed them. Furthermore, the right lives in a consciousness of the status-economy, which consists of accumulated sacrifices in order to achieve status, and status which increases the probability of opportunity, and opportunity which when combined with risk, create wealth and security. This status-economy is universal, permanent, and material, and vastly amplified in any heterogenous empire. (Conservatives don’t wear funny hats as identity symbols, everyone else wears Conservative hats in order to enter the conservative status-economy.) Just like taxes which are a cost, there is a maximum amount of wealth transfer that a group will tolerate. The political problem is no longer money. It has become a status problem in a heterogenous empire. Empires break because of such differences. (Empires break for two reasons: excess cultural heterogeneity and insufficient institutional calculability: religion and law are insufficiently marginal influences in heterogenous urban societies. No civilization has survived the transition from homogenous to heterogenous density, because it ceases to be in group interests to pay the opportunity cost of respecting institutions whose underlying causal pressure to conform to them diminishes with anonymity. And for your side, the left, it would help if one did not confuse preferences with truths. Because equality, as a value, is contra-logical to the status economy. There is no evidence that people are equal, nor that equality can persist for any period of time. There is a minimum interpersonal, and inter-class, status delta that is tolerable in any society, and the more diverse that society, the more exaggerated must be the delta. This is as much a law, as is supply and demand. And only silly people think otherwise. As for exemplary European models applied to the US, and perceived happiness thereof as a metric, the power-and-weakess discount must be applied to europeans, as demonstrated by the written record of migrants, almost all of which choose the USA model over the european simply because of decreased costs. The opinions europeans hold of their policies are not met by the opinion of european and american expatriates, who actually possess the information to make such a valuation. The popular opinion is nothing but the reversal of power and weakness postwar. Combined with the homogeneity of the germanic countries, this creates an opinion-bias that makes european opinion irrelevant to American policies. The problem for our nation, is that we are an empire that used to be 80% homogenous, becoming an empire whose cultures are increasingly at material odds. In particular the status-discount whites have been paying is reaching intolerable proportions. Why? Because there is a maximum cultural delta, not the least of which is driven by IQ variances. But primarily driven by the human preference for similar-looking and similar-acting people. That preferences is material because of the STATUS economy experienced by people who compete across racial and cultural boundaries. In other words, for the majority, there is a status advantage, and therefore an economic advantage to group identity. In other words – Cultures do not integrate when status deltas reach a cliff-effect. Instead, they hunker-down in tribes. The data is becoming quite clear that the american melting pot was a myth post-european integration. It is a myth here, and will be a myth here and everywhere. And when people do not integrate, they do not tolerate redistribution. It’s funding you’re opposition. This is the reality of human existence. As for the popularity of leftist sentiments versus conservative sentiments, the country is vastly center right. But our universities, are vastly left. Our business community is vastly right. One of these communities is an outgrowth of theology. The other operates using practical techniques. Conservatives never forget this. Liberals (the left kind) always choose to.

  • The Institutional Solution: A Solution To Current Socialist Sentiments And Incrementalism

    Mark, over on CARPE DIEM quotes Mises, who said:

    The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!

    [callout title=’Conservatism’] “…. liberals are too conservative to embrace capitalism.”[/callout]

    And to which he recieves a number of interesting comments, but one that deserves an answer:

    “Aren’t some rules necessary? Aren’t some goals the proper purpose of government?”

    Of course, rules of the market are necessary. The purpose of government is to administer markets. Without markets there is nothing to defend, so defense is a subset of market activity. Without markets there is nothing to redistribute, so redistribution is a subset of market activity. Without contracts and property there are not disputes to resolve so the judiciary is a subset of market activity. Without types of property to register, to codify, and to determine the properties of, there is no reason to legislate. Government, in the sense that we have a military force, we make and adjudicate laws, and redistribute some income, is unnecessary without a market. In fact, there is only one form of government: a government that administers a market. All abuses of government are abuses of the definitions of property for the purpose of reverse redistribution from the common to the authority by use of force. Government itself is a MARKET ACTIVITY. Otherwise it is just organized theft or fraud. In this sense, I am not sure that redistribution is a government activity, or if it should be separated from market governance. This is, actually, the underlying problem with our form of government: it is based on the city-state history of europe, and the simplicity of those states. Parliaments took over from kings. Multi-houses took over to balance power. But we did not develop houses for separate purposes. Instead, they all must agree on solutions that can be universally proposed, rather than each devoted to proposals limited to their scope of knowledge and influence. In three different pieces today I’ve tried to convey the idea that the market and property in themselves are institutions that were created by ‘regulation’. This does not mean that we have full power over the market, it means that the market is a deliberate institution, not an invisible hand, that has been paid for. And by following the chain of causation we can both understand it’s costs, and understand it’s limits, and in understanding it’s limits, understand how and when to increase regulation of the market: we can increase it along with the abstractions that are traded in it. Because all forms of property are defined by different ‘properties’. Life, real property (land), Improvements (immovable property), several property (movable property), opportunities, commitments, abstractions (patents and trademarks), and cooperative tools (morals and ethics), and to some degree metaphysical abstractions such as funding the implied costs hidden in our social conventions. If we can ACT on it, then it is a function of trade, exchange, cost and cooperation. Property is just a subset of market activities that require physical resources. However, the majority of trade is made in lower cost people’s actions and people’s forgone opportunity to act.

    [callout title=’Foregone Opportunities Are Costs’] “… civilization’s institutions are built almost entirely out of the cost of forgone opportunity.”[/callout]

    In fact, civilization’s institutions are built almost entirely out of the cost of forgone opportunity. The minority of our costs go to institutions like buildings and monuments and roads and bridges. The majority of social costs go to forgone opportunity, the respect for property, ad the maintenance and definition of different kinds of property, and the institutions we use to register and account for property of all kinds, from Cars, and Houses to Marriages and Trademarks. If you grasp this concept of the forgone opportunity economy, libertarianism as it is currently constructed by the Jewish arm of the movement (Rothbard and Friedman) fails for ethical, economic, and rational reasons, while the Christian arm of the movement (classical liberals and Hayekians) fail because of their failure to articulate their movement in something other than historical analogy and post-religoius moralism. Despite being right (in both senses of the term) they cannot articulate why they are so. And the problem is worse for conservatives who rely on unarticulated habits so old they have been reduced to sentiments and invective. I don’t make those errors. I’m trying to give conservatives a language for competing with socialists, who have been developing a form of articulated argument for a century and a half, despite achieving massive murder and destruction. But back to the current state of affairs: I think socialists are just moving gradually, at the extremes via incrementalism. they are able to make these incremental violations by taking advantage of the limited ability of human memories to sense change in time, and they can do so because we have not institutionalized the government such that we can isolate market legislation from redistributive legislation. This is effectively the corruptive influence on our government. I refer to this form of corruption as ‘pooling’. That is, institutions cannot have mixed purposes without MIXING those purposes. The socialist movement has abandoned it’s pursuit of control over the means of production as technique for achieving redistribution and focuses instead on direct partial redistribution wherever they can find an opportunity. But they have not abandoned Ponzi schemes that confuse insurance, which is a probabilistic cost, with redistribution, which is a certain cost. Social security was a probabilistic insurance scheme when few people lived to collect it. But it’s a certain cost today. Nor have they abandoned totalitarian administration of scarcities like health care and retirement income, nor addressed that the scarcity of these services (not commodities, but services which require people, which cannot be solved by increases in production, only that increases in production in one commodity industry can drive down the quality of people in another service industry. I do not think that the influence of, or driving force of the left’s ambition of social status equality versus freedom from poverty is adequately discussed in the literature. Since tomorrows luxuries become today’s commodities, poverty is constantly redefined, and status redefined, and redeveloped on a constant basis. Status is their objective, not redistribution alone. Nor do we sufficiently discuss the fact that people do NOT integrate, do not acculturate but hunker down in their own communities. And where they do integrate, it’s a status ambition by the middle classes, and not integration so much as cooperation. In fact, the general shift has been away from ‘becoming an american’ to living in the ‘american empire’ under the ‘american code of laws’, while retaining one’s cultural identity. This is, in many ways, a strategy for attainment of social status. Nor do we discuss the EFFORT required of those to whom we redistribute money on the maintenance of their property and our institutions – and their lack of effort expenditure even when they are property holders. Since American exceptionalism is likely to have passed it’s prime – the world has adopted western political, economic, and production technologies in what will (for IQ, geographic, and cultural reasons) likely be a permanent global labor class, which will put permanent economic pressure on our middle and lower classes – we will not be able to assume a world of infinite inter-temporal redistribution based on the assumption of growth any longer. If we can reinstitute mandatory savings instead of inter-temporal redistribution, and temporal redistribution into savings rather than consumption, we can probably correct most of the errors that socialists have burdened us with, and put the “saving-sensitiblty” back into the cultural vernacular. Redistributing earnings into savings is a form of reallocation that is both logical and moral in a society that employs fiat money borrowed against the future efforts of the working classes. But monetary redistribution is one thing. Risk redistribution is another. Inter-temporal monetary and risk redistribution are something else altogether because they are incalculable. (Taleb/Mandelbrot/Hakey/Mises). Conservatives and libertarians on the other hand, must understand that the market itself (not trade, but the market) as well as the institutions of property and contract and objective truth, are all forms of regulation.

    [callout title=The Market Is A Form Of Regulation]Conservatives and libertarians on the other hand, must understand that the market itself (not trade, but the market) as well as the institutions of property and contract and objective truth, are all forms of regulation.[/callout]

    Markets as we understand them are distortions of human behavior. Even the competitive benefits of the market are obtained by the efforts of people to circumvent the market converted to good use. Western civilization differs from other civilizations by it’s consistent application of the gladiatorial rules to market exchanges – they are presumed to be fair. And by fair we mean, that one can only win if the other wins as well. There are limits to the fairness of market activity: if one attempts to circumvent the market’s purpose for existence (prosperity) and the reason markets were created (to take advantage of trade routes conquests) and whom they were created by (the fraternal order of soldiers, which is our cultural source of individual responsibility), then the activity is not a market activity and instead is either Fraud or Theft. Not morally, but materially. Because the market is PAID for via foregone opportunities to commit fraud or theft. These are material costs. So there is no such thing as a ‘free market’. We pay to create it by foregone opportunity. It exists because we register these costs of foregone opportunity as rules of the market. And a market can only exists where trade routes are paid for and sanctioned by a division of labor’s specialists at holding land and trade routes: the risk taking soldiers. George Soros and Goldman Sachs circumvented the market, and privatized wins while socializing losses. This is not a market activity. France nationalized the Rothschild’s, and it’s a miracle that England did not nationalize Soros’ money because it privatized wins and socialized losses. The purpose of markets is not to replace the military class with the banking class. It’s to make the banking class, the military class, the merchant class, the clerical class, the craftsman class and the laboring class all benefit by increased division of labor and knowledge that leads to increasing production (Yield per man hour) and decreasing prices. Socialists do not want to ENTER the market because they are afraid to lose – they are stuck in a world of trade rather than markets. This is their fundamental problem. The market is a Circus: a Gladitorium. It is a boxing ring. It is gambling. It is risk. The rewards of the market come from RISK – not TRADE but RISK. It is this market speculation that constantly leads to wins for the spectators. The difference between conservatives and liberals, between conservatives and socialists, is in the difference between the Market, risk and opportunity economy, and the Trade and craftsman economy – progressives are regressive Luddites just as was Marx: seeking to return to the trade economy rather than the market economy. To some degree liberals are the equivalent of color blind. They do not see that the benefits that they live upon are the result of material risk taking. Conservatives do. And it is convenient for them not to see it Liberals like Krugman are simply buried under silly cultural mythos that they mask as economic doctrine – confusing preference and cultural bias with market truth. Krugman’s only objective is to undermine the western white military hierarchy and replace it with the debt slavery of politicized bankers. Libertarians (Rothbardians) are simply buried under the silly cultural mythos that they mask as economic doctrine – confusing the practicality of a RELIGION that favors only one minority class, without understanding the opportunity and forgone opportunity costs, as well as material defense coasts to both capture land, maintain trade routes, and establish and police the rules of the market. LIbertarians (Hayekians) have not produced a synthetic strategy for implementing calculative (rational and calculable) institutions that can replace the political institution of legislative debate (non-rational and incalculable). Although they are probably the most sensible group in the economic sphere. This is a solvable problem some of us are working on diligently. Libertarians (Friedman Monetarists) have been proven wrong by current events, as was Keynes, for exactly the reasons Hayek demonstrated. They are too close the the science to see it’s costs – and too happy to have others pay for the tragic cost of their experiments.

    [callout title=It’s A Problem Of Institutions]The anarcho capitalist libertarians have developed this philosophical structure but it emphasizes free trade and personal property as a means of achieving a class-based exit from the influence of political institutions rather than the wholesale reformation of those institutions.[/callout]

    As Godel demonstrated and as Taleb says, there are a class of problems impervious to statistical analysis. Numbers and models are an extension of our senses. They are not descriptions of future courses of events. But rationality goes out the window under universal egalitarian democracy rather than meritocratic republicanism: as others have said here, progressives have engineered a dependent class, the inverse of the historical politically dependent classes, and that dependent class is accumulating political power slowly but constantly. And what they do not achieve by dependence they achieve by immigration. So, I see no reason to celebrate until we develop a Post- Conservative, Post-Classical Liberal, Post-Libertarian, Post-AnarchoCapitalist solution. That solution must achieve calculative temporal redistribution, savings rather than intertemporal ponzi schemes, and increase the complexity of government (market making) such that we have institutions that cannot pool their interests in order to change the government’s job from market making, to market exploiting. This is the great myth of left liberalism and right libertarianism: that the market simply ‘exists’ because of an invisible hand. Trade exists. A market of risk tolerance that allows the concentration of capital does not exist without the force of violence to prevent violence, and to compensate and punish for fraud. And only silly libertarians think so.

    [callout title=Fixing Liberarianism] For the anarcho capitalists to correct their system, requires they integrate the forgone opportunity economy into their articulation of the explicit economy.[/callout]

    The anarcho capitalist libertarians have developed this philosophical structure, but emphasize free trade (and personal property as a means of achieving a class based exit from the influence of political institutions) rather than the wholesale reformation of those institutions so that they do not have to escape those institutions. For the anarcho capitalists to correct their system, requires they integrate the forgone opportunity economy into their articulation of the explicit economy. And in doing so this would force them to realize that their principle of non-violence is simply a silly religious dictum, and a false starting point for any theory of market activity to give their ‘class’ power in society. Rather than understanding that their class must share power in society in order to create the very markets that they depend upon. My position is that we cannot fix those institutions without crisis or violence. But perhaps, the threat of violence can achieve the crisis which will allow the reformation of the institutions for the protection of all. This strategy would put the republic back into place, while realizing that a republic of farmers is a republic of equals, and a republic of an advanced industrialized society competing in globalized economy requires that we have a more complex political system than the farmer-system we inherited from the classical liberals who were our founders.

    [callout title=The Virtue Of Violence]My position is that we cannot fix those institutions without crisis or violence. But perhaps, the threat of violence will encourage the crisis which will in turn allow the reformation of the institutions for the benefit of all.[/callout]

    All we can know for certain is that the socialist method is, and always will be, a failure, given any significant period of time, and the calculative libertarian method will always be a success given any significant period of time.

  • The Keynesian Conversion Of The Responsibility Of The State

    Think of how much easier the job of government is, when instead of seeking competitive increases in production, it seeks redistribution and reduced unemployment. The first requires that you have some comprehension of your economy. The second requires that you have little to none.

    [callout title=The Net Effect Of Keynes]The net effect of the Keynesian revolution was to change the purpose of the government from one of concentrating capital such that the population would derive benefits from increases in competitiveness and production, to one of consumerism, whereby the citizenry is discouraged from saving in order to create consumer velocity.[/callout]

    The net effect of the Keynesian revolution was to change the purpose of the government from one of concentrating capital such that the population would derive benefits from increases in competitiveness and production, to one of consumerism, whereby the citizenry is discouraged from saving in order to create consumer velocity. We have accomplished that objective. We have converted to the consumer society and shipped the productivity of our lower classes offshore, and made the upper classes dependent upon the lower classes consumption. We have destroyed the cultural habit of saving. And with it, the culture of individual responsibility. Our whole country lives under the myth of prosperity without applying a discount to the increased risk we are exposed to by our hubris. The responsibility of the state is capitalization which reduces risk. Not consumption which increases it.

    [callout title=Callout Title]Think of how much easier the job of government is, when instead of seeking competitive increases in production, it seeks redistribution and reduced unemployment. The first requires that you have some comprehension of your economy. The second requires that you have little to none.[/callout]

    I am not against redistribution or the insurance-state. I am against the destructive state. And our state has become destructive. It has become destructive because it has become consumptive. And it justifies that consumption by leaving competitive increases to the private sector, despite the market’s incapacity for extraordinary investments. We need 200 nuclear power plants. We need a new power grid. We need to convert to electric cars. We need to rebuild the voting system and reform the houses of government. We need to increase research funding for hard sciences and decrease it for humanities and social so called sciences. We need to change the structure of the tax code. We need to change accounting procedures that allow causal laundering of money. We need to restructure corporate law so that we can de-corporialize the corporation so that it must serve customers or fail. We need to reform the banking industry. We need to privatize the administration of social insurance. We need to do a hundred other things that will create institutional improvements for the population to compete against other nations who have cheaper labor costs. Yet we consistently fall under the Keynesian spell, and distract ourselves from the meaningful work of building a competitive society.

  • Don Boudreaux Swings And Misses The Entire Point: Sovereignty

    Over on Cafe Hayek, Don Boudreaux attacks Arizona’s policy, and in doing so, falls into the abyss of economic tyranny: the justification of economic outcome over freedom and sovereignty.

    By demonizing immigrants, these politicians exploit voters’ misinformation about the economic consequences of the alleged devils.

    My response was:

    Don, 

    You’re confusing the priority of people’s perceptions of their economic consequences with the priority of people’s perception of their political and cultural sovereignty, as well as their perception of their associated status. These people [Arizonians] have been wronged. They have been wronged by a loss of sovereignty, and a reduction in cultural dominance, and wronged by an ongoing diminution of their status. And people will act far more passionately to defend their social position than they will to an abstract economic benefit. That was, and is, the entire reason behind nationalism. Or did you forget?

    When the use of economic outcomes becomes the primary criteria that one uses to determine all policy, then the economist makes a fundamental error because he ignores the most important of ‘animal spirits’: status and sovereignty. And then the methods of economics become either a religion, or the error of intellectual myopia, or of intellectual vanity.

    Otherwise, economic policies are the tools of tyranny, and the justification of tyranny.

  • The Virtue Of Violence

    The Virtue Of Violence: “We do not forego violence in exchange for democracy, we forgo violence in exchange for creating and accessing the market. Democracy is simply a means of hiring and firing the administrators of our markets. We do not exist to serve democracy. Democracy exists to serve the market. And should it cease to do so, it ceases the only reason for its legitimacy or use, and is simply a means of whereby the masses destroy the accumulated prosperity of the market in the greatest act of theft and ruin that a humans can perpetuate. If we are no longer cooperating in order to maintain our market. Then we no longer need to cooperate to maintain our government. And as such, we no longer need to restrain our violence, so that we may recreate a market and a means of administrating it. The principles of non violence and non aggression are a means of stealing from us whenever the market is circumvented by those we hire to administrate it. It is an act of deception and fraud. It is an infinite discount on our contribution of forgone opportunity for the purpose of creating the market. That is the true meaning of the word ‘freedom’: to spend the currency of our violence in creation of the market, our respect for property such that we may cooperate in a division of labor, our time and efforts in the creation of products and services to participate in the market, and our rewards for having done all of the above. Violence is the source of the market, and the market the source of our prosperity, cooperation, and happiness. Violence and it’s use in creating and maintaining the market, is man’s greatest achievement. Violence is a virtue because it is the amount of violence possessed by men, and their creativity in and capacity for using it, and the use of it to create the market, that is the prerequisite for prosperity, and division of labor.” And there is no other argument for the source of the market, our actions in maintaining it, other than we are slaves or children instead of free men, capable of any creative or destructive act we choose. And I will not surrender my violence, and pay the cost of forgone opportunity to create a market from which I, my family, my friends, my tribe, my culture, may prosper, so that someone may enslave me.” – Curt Doolittle Curt Doolittle’s writes on libertarian economics and conservative politics at Capitalism v3.0, and hosts the Libertarian And Conservative Roundtable news feed – a set of syndicated articles opinions and news in the english language from across the web. (From Our Facebook Page)

  • Conservatives Cannot Articulate Their Promise, And A Warning Is Not Enough

    The conservative movement lacks skill in articulating it’s position. It does so because it has shifted from the intellectual debate of the 50’s and 60’s to the emotional debate of the post 60’s era. It has, unlike the libertarian movement, failed to provide a vehicle for educating conservatives with POSITIVE statements rather than negative castigations. Conservatives have largely failed to develop a language and ‘scripture’ because they do not have a solution other than to return to the nineteenth century classical liberal model. That model will never rise again. It only occurred because government was very weak, and the individual entrepreneurial need to expand and populate the continent required both private ambition and private capital. It required the conversion of resources into taxable resources, which would empower the government. Conversion requires business people the way conquest requires soldiers. And therefore commercial society was in control during that period. Our current problem is not to convert land into taxable assets. It’s to maintain the international system, and our ability to financially manage the international system. We have been paying for it by trade advantage for some period of time, and then selling dollars for the past forty years. Liberals do not want us to maintain that system but they want the rewards that come from it to be redistributed. Conservatives object to this position. Neither really understands that there is no american exceptionalism except american military exceptionalism. Our future problem is that in redistributing the wealth of that military network of trade and banking we have directed too much of the profit to bankers and not enough to the citizenry. Conservatives do not like this privatization of wealth any more than liberals do. But most importantly conservatives do not like being castigated and treated as Being conservative simply means taking a gradual approach to social change and particularly with respect to the financial, family and military traditions. It 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. We as a nation are notorious for predicting an optimistic future that cannot or has not occurred. The dialog around 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 that is their language. They may fail to articulate their position effectively because of that language, but they ACT conservatively, think conservatively, and treat the world conservatively. This is 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. 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. It’s the competition of ideas that gives us the choice as a body politic.

  • Contradicting Bruce Bartlett’s Fantasy Of American Exceptionalism And Good Government

    Bruce Bartlett, who is a well known conservative, tried to pitch tolerance to conservatives, and in doing so proved he fails to understand conservatism. I left this comment on his web site:

    Bruce, I want to let it pass, but I simply have to contradict this column of yours, even if I agree with it’s sentiments. You (and Boaz) are confusing language with content. (This is the same mistake religious fundamentalists and their critics make. It’s an endemic human error.) Slavery was not the reason for the civil war, the fact that the south paid for the government and could block the north’s initiatives was the reason. Lincoln only changed to ‘slavery’ to get popular support. Slavery is a bad economic model and was in decline, and would continue to decline. Every economist in the world knows this. It’s not about airbrushing slavery. It’s about social status, political power, costs, and ‘the long run’. Denmark is a small homogenous society that has imported a labor class and has yet to experience the degree of friction that empires face when they merge cultures. Denmark literally pays a third of the poulation to stay home so that they wont disrupt the real people, and so that you can talk to an educated person in train station. They pay their poor and ignorant to go away. Homogenous societies are more generous and egalitarian. They can afford to be because political power is something that they have a grip over. The same is true for small societies. Comparing small communities of protestant nordics to the vast body of the world populace is either disengenuous or simply stupidity. The italians in the south are a corrupt and lazy people. THe north know this. They hate supporting them. The north chinese rule the prosperous Southern Chinese. The south hates this. American conservatives don’t like it for the same reason. And, we aren’t nordics. We’re romans. Freedom expands elsewhere? You mean capitalism spreads because it is a superior social technology. However, the vast body of the world is in the process both as an intellectual movement, an as a material political force, to totalitarian capitalism. We may live in the illusion that democracy is meaningful, but it’s actually property rights and fiat money that make a nation. Our ability to expand has been under the force of arms. Not under our graces. Democracy if it persists another century, will be an oddity of northern european civilization. And there is no record in history of democracy enduring, and there is no rational reason that it should. It’s a bad system of government for anything other than a city state. Freedom is maintained by a freedom seeking minority of the population that is willing to use violence to perpetuate those freedoms. That is the source of freedom. It has been the source. It always will be the source. Most people want the fruits of freedom. But freedom has always been and always will be a desire of the creative minority. You are confusing FREDOM FROM nature, and FREEDOM TO act. I’ve written a longer posting to you about this, because it warrants it. But freedom is a specific term that has to do with human political organization and the use of property (life and property). The other ‘freedoms’ allude to are ***ANALOGIES*** to freedom. They are forms of security, safety, and reinsurance. They are not freedom. They are the RESULT OF THE PROSPERITY GENERATED BY FREEDOM. In this comment, and in my posting, I have tried to correct each of your points as erroneous attributions of causality, in an attempt to provide a better understanding of conservative sentiments, and to express those sentiments as a rational economic philosophy. “Conservatism is an economic strategy for group persistence on a longer time frame by a military class using sentiments that represent material economic costs.” This is a long article, but it is a topic that requires explaining a number of issues that are poorly understood for historical reasons. Conservatives need a language to express their complexity. That language is in economics and sociology. The problem for any intellectual is to create a system of thought that can be expressed by people who can only understand those sentiments, people who are more critical of them, and those that an completely articulate them. Conservatives need to understand themselves in something other than metaphorical language in order to compete with short term thinking secular humanists. And even with well meaning but erroneous conservatives who only serve to make the problem worse with their acquiescense and justification. Four thousand words is the best I could do. http://www.capitalismv3.com/index.php/2010/04/contradicting-bruce-bartletts-fantasy-of-american-exceptionalism-and-good-government/

    Bruce, I want to let it pass, but I simply have to contradict this column of yours. This is a long article, but it is a topic that requires explaining a number of issues that are poorly understood for historical reasons. While you might attempt to say ‘government has more goods than bads, Conservatives have material objections that, in the end, they feel will result in the elimination of the ability for government to deliver ‘goods’. 1) The accumulation of political power by the state in opposition to the civic republican tradition of denying the state power. 2) Using immigration to disempower the ‘group’ as they perceive it out of political power 3) Giving others extraordinary rights at our expense in violation of the civic republican tradition’s mandate for equality. 4) education biases against us, in violation of the civic republican tradition of meritocratic outcomes. (“Why can jews take over harvard but we have to be restricted by quotas”, for example.) 5) job biases against us 6) abuse and derision by public intellectuals – who have disempowered the churches in favor of the religion of democratic secular humanism and are now mandating their religion as the new social order. 7) redistributing our wealth, in particular, favoring immigration over retirement schemes. The state undermined another pillar of civilization: the mandate to save rather than consume. By liquidity and taxation we are permanently impoverished in old age. Income taxes should be instead be based upon balance sheet wealth so that men can be independent in retirement. 8 ) asking us to sacrifice our productivity to pay for what we don’t believe in. This is the definition of oppression. Democracy is not a vehicle for justifying oppression. It’s a means of peaceful transfer of power, and a means by which peers can choose among opportunities for mutual benefit. When it becomes a means of oppressing one group for the benefit of another, and in doing so empowering government, then it’s simply oppression and no amount of ‘common good’ changes that oppression. 9) undermining the family structure which is the basis for our entire society. Giving people property rights and access to capital is one thing. But undermining the family, and effectively, enslaving men through divorce and child care law is not equality. It’s oppression, and it has made it too easy to enter a marriage, and too costly to exit it. (and yes I can debate the statistics on this with the best of them.) We reward malcontents at the expense of people who have discipline. THis is offensive to conservatives who only want a level playing field. 10) building a victim society instead of a meritocratic society which is against the principles of the Civic Republican Tradition under which it is assumed that we give authority to the state in exchange for not TAKING that authority ourselves. And that is what conservatives DO. They give their authority to the state. (Authority is a proxy word for VIOLENCE.) Why? Because conservatives are Pareto’s ‘Residues’ of the military social class – the last remnants of nobility at the top, and of the soldiery and craftsman class at the bottom. THey operate by the concepts of duty, which they see as indirect payment for the social order. They are the remnants of the Civic Republican Tradition. The one cultural advantage of the west is it’s prohibition on corruption, and this class is the originator of that tradition. If all nations are organized by corruption, then the most wealthy are those with the least of it. The military class is what obtains and maintains trade routes, and what obtains and maintains land, and therefore what obtains and maintains resources . Trade routes and land are the source of prosperity. Not everyone can be switzerland so to speak, and switzerland and singapore are outliers. Essentially conservatives object to profiteering by government at our expense while demonizing our objection to their abuses. Government is the equivalent of a priestly class that lives under the protection of conservatives and by their effort and labors while deriding them and encouraging the beggars to steal from them. I can enumerate these causes of government abuse ad-infinitum. Even if most conservatives cannot articulate their positions in the temporal language of secular humanism, I can. Conservatives have not had enough time or worked in sufficient numbers to develop a competing political language to that of the religion of secular humanism. In fact, to some degree, doing so is antithetical to their dictum of “actions not words, since words are deception”. As such they are trapped in historical metaphor at the top, and religious metaphor at the bottom. These metaphors can be restated rationally, even if most conservatives lack the ability to do so. That doesn’t mean that such a language cannot be developed, despite Mises, Hayek, Popper, Parsons and many others having failed. It just means that as a group that seeks “group-persistence-over-time”, the language that they must employ is necessarily historical and strategic rather than temporal and tactical. Simply because our academic understanding of politics and economics is lagging so far behind our scientific language, and our history, literature, religion and myths are all an impediment to correcting that deficiency. Our wealth, and the ‘goodness’ of government that you casually attribute to the state, is not from the state, but from the freedoms FROM the state. In contrast to your correlations, I’ll enumerate the causations: The real sources of American Prosperity? 1) English Common Law, which facilitates individual property rights, which facilitates human calculation of opportunities. Wide spread use of accounting technology that facilitates calculation of opportunities and costs. Wide spread contract dispute resolution. This law was not made. It evolved. The king could not write laws as we mean them, until recently. He had to rely upon common law. 2) The civic republican tradition awakened in germany as a reaction to the search for freedom from the dominance of Mediterranean civilization, it’s culture of corruption, and it’s trade routes. That german awakening was then distributed by way of english naval dominance. 3) The movement of trade to the atlantic so that we could exploit the newly discovered continent, and the increase in wealth given to the northern european naval nations over the more sedentary competing civilizations of the east. And in particular, the militarization of the entire english nation into what we call Merchantilism, or the corporate state. Ths allowed officers to move into business and expand business under state sponshorship. This mobilizes the vast amount of ‘individual computing power’ when combined with sound money and granular property rights. 4) Plentiful money so that we are not constrained by the availability of money. Contrary to most libertarians who want to expropriate money into the capitalist class, the military is what makes trade possible, and money is borrowed from the citizenry – else we have what libertarians desire, privatized wins and socialized losses – expressly against the civic republican tradition, as well as that of all other civilizations. (this is what we have been doing by the way – privatizing wins and socializing losses. Instead, we should bypass the capitalist class the way the swiss have but that’s another topic althogether.) 5) the importation of vast numbers of people as we sold off this newly discovered continent while giving them political power before they were self sufficient. This is the real reason why the property qualification was valuable. It prevented the importation of people who could empower the political class and allow it to extort money from producers. 6) the concentration of capital made possible by selling off the continent. This has been the greatest land grab in history. 7) the funding of a military bought cheaply and at a discount after the world wars, by the profits earned by selling off a continent. 8) the use of that military network to take over and expand trade routes, banking and the ‘international financial system’ that made american ‘currency’ a necessary commodity for world trade. 9) This export of ‘money’ has been our fee for creating and exploiting that world trade system. it is the source of all our wealth since the great depression. THe imbalance of power has led to an imbalance of wealth that has been in our favor. THAT IS THE SOURCE OF OUR GOOD LIFE. PERIOD. The ENTIRE world knows this. They understand the myth of american exceptionalism even if we don’t. “The west dominates the world because it westerners are simply better at war, not because they are more virtuous.” You can find this statement or an equivalent in the literature of every civilization. In particular, in the literature, worldwide, for the past decade, has been coalescing an argument against western democracy as something peculiarly western. They do not take it to the full conclusion. THat we have a democracy because we are wealthy enough to have one, but that is a temporary phenomenon. We americans are wealthy because in the act of discovering a continent the wealth generated and the freedom of individuals to act, outpaced the ability for the european governments to appropriate that wealth. This led to local concentration of wealth in the hands of local ‘business people’ who then took political power and profited from westward expansion. THe increase in productivity by the late 1800’s along with the after effects of napoleon’s chaos collapsed the european economy in the first great depression and led to the franco-prussian problem, and eventually to the first world war. The further concentration of capital allowed the US to capture english trade routes and military bases and buy that empire’s trade routes at a discount. England has been a client state ever since. And the dollar the world currency instead of the pound. We are in our position of wealth not out of national character, or our system of government, or any myth of american exceptionalism, but out of english heritage and the act of selling off a continent. Conservatives, who are historical and traditional by nature, and whom have a long view of time, will take pride in any civilization wherein their status as the progenitors, and maintainers of that society are acknowledged. Conservatives seek to maintain group persistence by maintaining group advantage. This is a masculine strategy as old as mankind. LIberals seek to distribute resources for current good, rather than capitalize resources for future stress. This is a feminine strategy as old as mankind. Together they generally balance one another whether in tribal cave, clannish village, or chieftain state. The problem becomes epistemological when we get to empires. We have trouble ‘knowing’ if we’re storing or distributing enough. WE haven’t had the political technology to solve that problem yet. The first time mankind had this problem we developed writing, numbers and counting systems. The second time we developed Accounting, contracts, interest and banking. Now we need to understand that our political system has to catch up with technology. We have an antiquated political system in this country for the size of empire that we have and it is this antiquity, this antiquarianism, this reliance upon metaphysical biases and residues that is preventing us from solving the problem of reinventing government. Socialism is not reinvention, it’s re-establishment of tribalism. Democracy is not advancement, it’s a temporary tool for increasing the scope of participants in problems solving. We are beyond the ability for politicians to comprehend our problems and provide solutions. Conservatives know this. They just don’t know how to change it. (I do.) But if history is true to form, the invested interests in government, and the money in the political chain, (just as conservatives warn) is such that these innovations will take a century to implement if even possible, unless there is a catastrophic failure of our ability to maintain trade routes and the global monetary system. Government broke the boundary of moral hazard when it created fixed benefit programs and sought full employment rather than variable benefit programs and productivity increases, and in doing so converted the society from saving so that the old could profit from lending to the young to the young supporting the old, when it had taken thousands of years of human history to adopt the established technology of saving and interest. This is was social hubris on a massive scale. Furthermore the government simply SPENT all that accumulated wealth in savings, as redistribution and social and infrastructure programs over a period of eighty years. The conservatives tried to counter it but could not, and now demographically have lost the opportunity. They have been out immigrated and out bred. Americans need to stop congratulating themselves on their perceived wisdom and the virtue of their religion of democratic secular humanism. That’s all nonsense. We are prosperous because we control resources, and levy a worldwide tax for our policing of the international system. While at the same time we undermine that system’s ability to function by undermining the political power of the people who made that system possible: the military class. Americans need to have an honest conversation about the source of their prosperity so that they can have an honest political debate. without that debate we cannot have a democracy or a republic because all else is superstition, religion, absurd metaphysics and outright fraud supported by outright violence. And that’s the danger. At some point, that military class and it’s newest iteration as the small business owner, has been so willfully undermined by the priestly class’s new iteration of public intellectuals and the new religion of secular humanism, will choose to return to it’s basic principles as a military class. Conservatives may be conservative but they are only non-violent by restraint, not by choice. (Aside from the jewish contingent in the libertarian movement that failed to learn the one lesson of the hebrew bible, and it’s story of the rise and fall of Israel – that jewish doctrine is not sufficiently self sacrificing to hold land, and therefore hold a state.) The conservative dislike of Clinton was almost entirely because of his failure to understand the importance of the military culture to conservatives. When he undermined that culture, he effectively stole the inheritance of the conservatives. That we only had a few incidents of domestic violence was surprising. If he had not done that one thing, he could have emerged as a great president. The trick in this country is to be both militaristic and socially tolerant, and fiscally responsible. But our leaders lie about the source of american prosperity. It is this primary lie that causes american political friction. The West’s success versus all other civilizations, despite it’s marginalism and distance from the beginnings of the centers of civilization, has been that the military class adopted individual tactics in battle. THis led to enfranchisement. Enfranchisement led to debate. DEbate led to reason and logic. Logic to science and technology. Science and technology to And our civilization’s locus changes, from athens, to rome, to florence and Venice, to Paris, to Holland to london to new york to washington, and now to the different cities that are capitals of ‘nine nations of north america’ that make up the Washington Empire. People do not possess the necessary information to make rational decisions about political and social ends. They rely on myths. (THe alternative would be to say “I simply don’t know” which is a sin in the religion of secular humanism. There are a few people who are aging now who are wise enough to say that but the religion is so pervasive that it’s become rare to hear someone say “I don’t knw enough about such things.”) People instead rely on metaphysical presumptions and biases instead of rational information. Because of the complexity in predicting the future during periods of dynamic change (as another generation of our economists are discovering yet again), makes prediction nearly impossible due to such extraordinary complexity, people in all social classes rely on their biases and assumptions. As such, metaphysical biases and therefore, all human decision making, are made according to class judgements – ‘residues and derivations’. And for complex reasons due to pedagogical content in our families, child rearing, language, and literature, THIS CANNOT CHANGE. Class memes are relatively permanent. Most voting patterns are not due to political changes in opinion but to redistricting and immigration and breeding rates. Even for neutral policies that do not affect them, people do not change their long term biases except to generally become more conservative as they age. This is why conservatives are annoyed. THey see their sacrifices in the name of group persistence used by the government to immigrate and empower the state, and they feel angry at the theft of their sacrifices. As such, conservatives and liberals simply hold class residues that together form a division of labor, with short term altruistic goods on the left, and long term group persistence on the right. The question is not whether one or the other is right, but whether each group’s preferences are fulfilled well enough and with sufficient compromise, that neither revolts. (even if revolting is ‘leaving the economy’) The problem in the USA is that the south has recovered from it’s slumber, and the rust belt and west coasts have immigrated vast populations. Second, that the industrial heartland is NOT on a coast, and faces the same problem as does germany – it must produce exceptional products in order to create an export economy that compensates for it’s geographic disadvantage, yet the ‘residues’ in that part of teh country do not promote german or japanese quality, because the rust belt/great lakes culture was developed for westward expansion and developed a culture of cheap simple goods, not for an export economy. This can only be fixed over a generation of policy, and a political ability to articulate that policy. Democracy is notoriously bad at accomplishing these kinds of change. And socialist totalitarianism is the opposite direction. it seeks to distribute normative gains not to increase production. Macchiavelli, Weber, Pareto, Michels, Hayek, Mises and Popper all understood these things to some degree. (I think rothbard distracted the libertarian movement despite his many insights he prescribed anarchism as a means of controlling the state, rather than developing tools by which we could maintain the system of social insurance created by fiat money and the state-bank, making the government insurer or last resort.) Yet these men were unable to develop a prescription for government that solved the problem faster than the state could appropriate power under the myths of socialism and secular humanism. That is because the problem of distributed government in the civic republican tradition is much more complicated than under the simplistic tribal metaphor of centralized states. Socialism succeeds because of SENTIMENTS not because of reason. Government empowerment succeeds because of incrementalism, and a failure of conservatives to articulate a sufficiently explanatory alternative. From my position, in hindsight, it turns out that some people in the thirties, during our second great depression stumbled across it. But that in that period of duress, the state sought the short term goal of FULL EMPLOYMENT instead of the long term goal of PRODUCTIVITY, and thus Keynesianism supported socialism, and we developed the welfare state, just as did the egyptians, Romans, the Mayans and just about everyone else who ever had to run an empire. We can have our cake and eat it too. We can do it without using politics as a tool of calculation. That’s what we do now. We calculate the future of our society using democracy’s political ‘wins and losses’. By trial and error. But we don’t have to race to the bottom like all other democracies in history. We can have our cake and eat it too. We just have to understand that our system of government is from an era of shipping and trading agrarian goods, and that laws are a remnant of slave society, and that the use of politics and government is of necessity an imprecise, and fraud-producing enterprise. As has been said, “We have simply swapped a culture of violence for a culture of fraud.” Conservatives by their nature, understand this. THey see government as fraud. And for reasons that are explained in the myth of the rational voter, it is only by fraud and later justification of failure, that politicians are empowered, and only those that seek power, who seek political office. When the entire western tribal tradition has been to ensure that no man obtains sufficient power to dominate others. Now, the underlying and unstated problem here is that conservatives, as the remnants of the military class are by definition, militant. They are not a rabble. They do not like rabblery. And they will shortly, if they have not already, choose to CEASE refraining from their use of VIOLENCE. I have stated this repeatedly : “men are not equally endowed with either violence or courage. Some are capable of interpersonal violence, some of rabblery and protest, adn some of revolution and civil war.” If I forgo my opportunity for violence, I pay a cost in doing so. If I forgo by opportunity for fraud, i pay a cost in doing so. If I work hard then I pay a cost for doing so. If I am self supporting then I pay a cost for doing so. This is how our civilization is paid for – not by money, but by forgone opportunity. This is the currency of human action that pays for a non-corrupt society, and for the institution of property. That’s how property is PAID for. Not by government, but by many, many millions of forgone opportunities every day. It is THIS that funds the development of the STATE, not the state that creates property. “We have laws because we have property, we do not have property because we have laws”. THe differences in cultural definitions of property have to do entirely with the degree of familial independence needed to keep a farm or craft a good. It is not that one civilization is more charitable than another. It’s that more advanced civilizations are more productive and as such require greater divisions of labor, and as such more granular definitions of property. You didn’t think property rights were FREE did you? Or granted by the government did you? Governments simply publicize property rights – when they interfere with them they disrupt the society. Property is a very complicated technology that must evolve along with the division of labor. It is very little different from the technology of numbers or language and is just as important as science. And it is paid for by forgone opportunity. So conservatives feel that sacrifice by sacrifice they pay into the ‘virtual wishing well’ that creates society. They do this, each of them, with a thousand micro-payments a day. Then, along comes the state and wants them to pay the RESULTS of those sacrifices to the state for reasons of mutual investment. Then the state shows up and wants them to pay the results of those sacrifices for charity. Then the state shows up and wants them to pay the results of those sacrifices to empower the government, and the government says it’s not a donation, but a duty, and then the conservative looks up and says, “hmmm….. I do all these things, and make these sacrifices so that others may jeer at me and ridicule me. ” Soldiers are the source of every civilization because they are the source of it’s ethic, it’s resources and it’s trade routes. Different civilizations’ social systems are largely a reflection of their ancient battle tactics. The west is unique because it adopted the wheel, horse, bronze and coordinated tactics, which required individual initiative, and that the warrior supplied his own instruments of war. That is the difference between western, byzantine, middle-eastern, and asian cultures. It is how you use them as a civilization that affects all other classes that come after it. Furthermore any civilization that loses it’s soldier class, and in particular their motivation to act as soldiers despite the sacrifice of doing so, rapidly becomes the victim of someone else’s soldiers. Conservatives are your soldiers. They carry the meme of heroic sacrifice. The question is, how do you want to use your soldiers? This is the core of conservatism. “Group Persistence and heroic sacrifice to maintain that persistence, and the individualism needed to maintain that ethic.” And as such it is not a silly believe or an absurd metaphysics or a religion. It is a strategy for maintaining land and trade routes. And as such, is the source of not only western but american prosperity. And none other. Everyone else is just along for the ride and complaining about the scenery.

  • Bruce Bartlett’s Optimism

    Bartlett annoys me. I’m not sure why he annoys me so much. Perhaps it’s the political hack in him that I find offensive. Perhaps the pomposity? Perhaps the fact that he insults the suffering of the common man? Perhaps both. In this posting he states:

    I’m rather astounded at all the ill-informed commentary I have read today in normally responsible places such as the Financial Times to the effect that the National Bureau of Economic Research is not sure that the recession is over. That is not at all the case. I am 100% certain that every member of the Business Cycle Dating Committee knows perfectly well that the recession ended some time ago. What the committee is unsure about is precisely when the recession ended.

    Of course, according to the definition, it simply means that we are no longer falling. However, imbalances remain, and on a global scale. And unemployment will persist for a long time. In general, the period of contraction only constitutes one third to one quarter of the time span needed for recovery of employment. Unemployment will persist for four or more years. And global contractions are still possible in for multiple reasons in multiple areas. So early claims of recovery are cheerful only for speculative investors and political hacks. The common people have no reason to celebrate.

  • The State’s Moral Hazard, The States Immoral Mandate, and The Solution To Both

    Rafe Champion on The Austrian/Keynesian Marriage from The Coordination Problem.

    …the problem of regime uncertainty which the Keynesians address by saying you will get all the certainty you need from our helpful interventions. But we have long ago reached the point where most of the interventions are the problem, not the solution. Uncertainty is a fact of life and maybe the role of good policy is to provide political and legal stability – not certainty but a reasonably stable institional framework where people can plan for the future with some expectation that they will not be shafted by the next political or administrative decision. If the institional framework is badly broken it need to be fixed but as Roger likes to remind us, that can only be done by piecemeal, experimental steps to handle unintended consequences.

    (Note “Regime Uncertainty” is a term meaning “uncertainty created by fear of government intervention”.) Pietro Follows

    #1: monetary policy is a cost-socializing technology which reduces the costs and risks of investment, causes bubbles and pushes for a type of overconsumption called “equity extraction”: consumption out of unreal wealth, i.e., capital consumption (Machlup described the same process). #2: moral hazard makes irresponsibility and recklessness privately rational, and the bubble economy is the result. This is the transmission mechanism in its most abstract form: cost socialization begets coordination problems in terms of bad incentives and false information. #3: at the certain moment either (3a) the monetary drug is no longer available or insufficient, maybe because of inflationary fears (exogenous credit crunch), (3b) the financial structure is no longer capable of transmitting monetary stimuli because it is broke (endogenous credit crunch, which, as the famous rapper Freddie H sang “That credit crunch ain’t a liquidity trap, just a broke banking system”), or (3c) the economic structure is no longer capable of sustaining overconsumption (real resource crunch, whose result is normally a scarcity of circulating capital, like raw materials, that in fact have skyrocketed the first 12 months of the recession, and are rising now that someone ventures to talk of a recovery). In ABCT there is (3a) (the Fed takes away the punch bowl) and (3c) (the economy collapses because of capital structure problems), but there is no explicit analysis of (3b), i.e., systemic risk. I think that a breakdown of the financial system due to an unsustainable financial structure, such as excessive leverage, monetary multipliers, reliance on foreign credit, reliance on liquidity, maturity mismatch (30y mortgages vs 3m commercial paper!) is a more apt description of the recent crisis than problems in the capital structure. … An unsustainable financial structure is not an aggregate demand problem: it’s the legacy of a past moral hazard problem which causes a dearth of capital and a crisis. There is no path to a new equilibrium which does not pass through a credit crunch, the repayment of debts, massive deleveraging, exposure to maturity mismatch, and thus a reduction in investment levels.

    The question then, becomes one of quantity. How do we know how much social insurance and risk reduction is maximal? The moral hazard then exceeds risk taking on the part of individuals, and in turn becomes risk-mandating, when all participants in the bubble economy must not only forgo opportunity for gain, but instead, will be driven out of business if they fail to participate in the risk. This is what happened to bankers who need to keep clients, and employees, buliders who need to keep banking relationships, and subcontractors, business owners who see competitors using low priced capital to compete rather than superior products, services and prices, and the general public who fears missing an opportunity for gain, and losing both status material opportunity. That is the definition of a bubble: the point at which social-insured capital is being consumed as a defense against opportunity loss, rather than as an offense for the purpose of increasing production, increasing choice, and reducing prices. The problem for economists and policy makers is either knowing when this inflection point happens. Or knowing when it must occur. This knowledge cannot be achieved by monetary policy – it is a WEAK LEVER for managing an economy. That weakness is well known, and well understood. Our desired ends can only be achieved by LENDING, not monetary policy. The difference is the knowledge one has of MONEY IN THE AGGREGATE , which is zero, and the knowledge one has of his LOANS, which by is greater than zero. While it may not approach ONE, it is far greater than zero. Instead, we print money at public expense and give the proceeds (interest) to the people who do the WORK of the state: large capital firms, and they determine it’s use. The state should make loans to private industry and the state should collect the interest as earnings by the citizens for the purposes of redistribution. The government needs to become a bank that makes loans into an economy for the purposes of increasing production, competitiveness and therefore employment, not a re-distributor in the economy for the purposes of increasing consumption and achieving full employment by MANDATING the LOSS of competitive production. Fundamentally, we must transform elements of the physical world for human consumption. Fundamentally, money is a store of human effort. Borrowed money, or printed money, is a borrowing against future human effort. And future effort is lower if we invested in production increases. This is sensible borrowing. And future effort is higher if we increase consumption by borrowing against the future, but do not increase production by the act of borrowing. That is NOT sensible borrowing, it is simply self deception and over consumption. Property is an institutional tool for divinding up the labor of human interacdtion with the physical world into digestible and managable pieces by our limited and somewhat frail human minds. Loans are a type of property. They help us break up the world into estimable bits and pieces. Property solves a KNOWLEDGE PROBLEM. Property makes things CALCULABLE. Money is a means of making PROPERTY commensurable. (Money is a unit of measure, a method of account) But money is a PROXY for property. You cannot measure money itself in a meaningful way. YOu can only measure the objects that it represents. By putting unmeasured, chaotic money, into an economy, you have no control over whether that money goes to consumption (negative redistribution) or production (positive redistribution). The confusion over the nature and purpose of government’s monetary dictatorship is a KNOWLEDGE PROBLEM. Loans are a way of atomizing borrowing against the future so that the results are knowable, or at least estimable and calculable. Instead of investing in nuclear power plants, a new power grid, and perhaps electric vehicles, or new roads, all of which would produce vast wealth, we invested in speculations and gambling on the tech boom, then in houses, then in commercial real estate, all without increasing production (houses are consumption not production because external groups cannot compete to produce them) or decreasing prices (we increased prices). Without increased production we cannot increase redistribution. The goal of policy should be productivity increases, not employment. We can have our cake and eat it too. But we have to get away from the myth of democratic and socialist government, and the tools of law and monetary policy. And instead we need to move most of government into the banking sector, and treat our government as the bank that we wish it to be, using the technology of bankers and insurance companies, not the technology of ancient tyrants, who were, to the letter, to a man, tyrants because they used law and tax, because that is the only technology available to them We do not need laws and taxes. We need loans, credit and interest. There is only one law, and that is property. We can have our redistribution and we can measure it. We just need to deprive our government of the ability to issue laws and levy taxes, and print irresponsible money, and instead, constrain it to the use of money EARNED by investment on behalf of the citizenry in productive increases. All of which would be calculable. All of which would enable and encourage freedom. And all of which would help social classes work together rather than at odds. What I cannot understand is why so few people have come to this conclusion in human history. Why the great economists were so enamored of the state and the republican tradition, why some others so enamored of individual rebellion against the state that they failed to see it. Why a few people during the Great Depression managed to figure it out, but failed to compete against the socialists. We need to replace our system of government so that it embraces the use of fiat money for the purposes of insurance, governance, social order, and redistribution. We live in the credit society, not the law society. Now we need a government of the credit society.

  • 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.