Curt Doolittle

Theme: Incentives

  • Is The US Any More Or Less Redistributive Than Europe?

    On the Economist’s View, a Dr Why, a commenter says

    In the United States, countercyclical fiscal and monetary policies redistribute income mainly from the rich to the poor, which is politically acceptable. In Europe, countercyclical policies also redistribute income from the German pensioners to the Greek civil servants and the Italian Mafia, which is much less acceptable. Eventually, Germany will probably have to capitulate, since it needs the euro more than anyone else; but for now German politicians have no choice but to play this game of chicken in order to get the best possible deal for their voters.

    This is true ideologically but not not in practice. The resistance we see in the states is driven by a redistribution from white to non-white. Today’s poll numbers, divided along racial lines, illustrate natural human tribal sentiments. And that any concept of ‘fair’ is governed by the transfer of status signals in exchange for money. This means that groups with different status signals will never permit monetary transfers. And since racial groups contain different status signals, they will, at least under duress, fail to be charitable with their money. The status signal economy provides all human incentives because it determines access to mates and experiences. THe status signal economy is as real an equilibrium as are supply and demand or IS-MP curves. It is unscientific to believe otherwise.

  • Is The US Any More Or Less Redistributive Than Europe?

    On the Economist’s View, a Dr Why, a commenter says

    In the United States, countercyclical fiscal and monetary policies redistribute income mainly from the rich to the poor, which is politically acceptable. In Europe, countercyclical policies also redistribute income from the German pensioners to the Greek civil servants and the Italian Mafia, which is much less acceptable. Eventually, Germany will probably have to capitulate, since it needs the euro more than anyone else; but for now German politicians have no choice but to play this game of chicken in order to get the best possible deal for their voters.

    This is true ideologically but not not in practice. The resistance we see in the states is driven by a redistribution from white to non-white. Today’s poll numbers, divided along racial lines, illustrate natural human tribal sentiments. And that any concept of ‘fair’ is governed by the transfer of status signals in exchange for money. This means that groups with different status signals will never permit monetary transfers. And since racial groups contain different status signals, they will, at least under duress, fail to be charitable with their money. The status signal economy provides all human incentives because it determines access to mates and experiences. THe status signal economy is as real an equilibrium as are supply and demand or IS-MP curves. It is unscientific to believe otherwise.

  • Why does the right lean toward NGDP targeting?

    On Worthwhile Canadian Initiative, Nick Rowe asks “Why isn’t NGDP targeting a lefty thing?” and asks why the right seems to support it, instead of supporting inflation targeting. My reply was: Nick, I think you miss the point that from the right’s position, NGDP targeting would require that the government focus its efforts on industrial policy in order to be able to fund redistribution, and therefore cooperate rather than prey on business and industry. This in turn would require we correct our dysfunctional education system that creates uncompetitive workers, and it would reduce class warfare by focusing on specific policy initiatives that would make the nation competitive rather than devolutionary. The right originally abandoned industrial policy because of the collaboration between unions and the state. Now that they see unions as weak and foreign states as a threat, they would prefer to return to industrial policy and very likely, away from free trade – which was just a vehicle for competing against the government-union alliance while the USA had a temporary postwar technological advantage. Conservatism is the sentiment and subsequent philosophy of inter-temporal group persistence by the concentration of capital in all it’s forms. In the USA conservatism also includes an allegiance to the status quo of classical liberalism, which in itself is a commercial meritocratic philosophy that retains the english system of class cooperation through multiple houses of government. The democratic socialist movement is an attempt by the proletariat and public intellectuals to obtain political and economic power by propagating the mythos of equality in order to undermine the multi-class system of government in which tehy are at a disadvantage compared to the commercial productive classes. But it is nothing more than an appeal to power for the purpose of material gain. Nothing more and nothing less. While conservatism is more likely to rely on historical metaphor and moral argument because of their inter-temporal content, and the left is more likely to argue for empirical positivism because it specifically lacks that inter-temporal content and replaces that historical view with an absolute faith in the human ability to manage it’s own destiny, that does not mean that conservatism cannot be articulated as a rational philosophy. It simply means, that because it is more complex, it is harder to do so. But then again, concepts of this depth are usually outside of the understanding of macro economists, and are instead the provenance of political philosophers and historians to whom economic activity is a predictable cycle driven by little more than institutions, military power, trade routes, and population composition.

  • Why does the right lean toward NGDP targeting?

    On Worthwhile Canadian Initiative, Nick Rowe asks “Why isn’t NGDP targeting a lefty thing?” and asks why the right seems to support it, instead of supporting inflation targeting. My reply was: Nick, I think you miss the point that from the right’s position, NGDP targeting would require that the government focus its efforts on industrial policy in order to be able to fund redistribution, and therefore cooperate rather than prey on business and industry. This in turn would require we correct our dysfunctional education system that creates uncompetitive workers, and it would reduce class warfare by focusing on specific policy initiatives that would make the nation competitive rather than devolutionary. The right originally abandoned industrial policy because of the collaboration between unions and the state. Now that they see unions as weak and foreign states as a threat, they would prefer to return to industrial policy and very likely, away from free trade – which was just a vehicle for competing against the government-union alliance while the USA had a temporary postwar technological advantage. Conservatism is the sentiment and subsequent philosophy of inter-temporal group persistence by the concentration of capital in all it’s forms. In the USA conservatism also includes an allegiance to the status quo of classical liberalism, which in itself is a commercial meritocratic philosophy that retains the english system of class cooperation through multiple houses of government. The democratic socialist movement is an attempt by the proletariat and public intellectuals to obtain political and economic power by propagating the mythos of equality in order to undermine the multi-class system of government in which tehy are at a disadvantage compared to the commercial productive classes. But it is nothing more than an appeal to power for the purpose of material gain. Nothing more and nothing less. While conservatism is more likely to rely on historical metaphor and moral argument because of their inter-temporal content, and the left is more likely to argue for empirical positivism because it specifically lacks that inter-temporal content and replaces that historical view with an absolute faith in the human ability to manage it’s own destiny, that does not mean that conservatism cannot be articulated as a rational philosophy. It simply means, that because it is more complex, it is harder to do so. But then again, concepts of this depth are usually outside of the understanding of macro economists, and are instead the provenance of political philosophers and historians to whom economic activity is a predictable cycle driven by little more than institutions, military power, trade routes, and population composition.

  • the right leans toward targeting NGDP. (If I was only this patient when I wrote

    http://www.capitalismv3.com/index.php/2011/11/why-does-the-right-lean-toward-ngdp-targeting/Why the right leans toward targeting NGDP.

    (If I was only this patient when I wrote all the time.)

    Source date (UTC): 2011-11-15 11:03:00 UTC

  • Can We Predict Bubbles? And Don’t We Really Want Them?

    Predicting Bubbles on Modeled Behavior: I think we can see and measure booms and bubbles. I just think we’re lying to ourselves when we say we want to stop them. We WANT people to live beyond their equilibrial (‘natural’) value to the world market. Bubbles and credit help us do that. If predicting bubbles meant that the class structure would become even more rigid (it would) then would you want to eliminate bubbles? Or would you simply try to allow them to pop earlier? We can predict bubbles. Because they’re easy to predict. A bubble occurs whenever people seek to sieze opportunities in a domain in which they have no expertise. ie: when they are gambling on momentum – swarming. You cannot necessarily deduce a bubble from the trading data as other than some vague heuristic driven by price volatility. But if you survey consumers you can deduce bubbles all the time. If members of the lower middle class, and upper proletariat are speculating then it’s a bubble. If people outside a field are rallying to create speculative gains rather than PRODUCTIVE gains, then it’s a bubble. (PRODUCTIVE meaning that they applied additional capital to the thing that they purchased, prior to reselling it.) There is always value created by speculators who identify asymmetry of information and profit from informing others of that asymmetry. There is no value created by speculators who are swarming information that they do not understand, and where capital is not applied to transform the asset they wish to resell — in effect, where speculators are distorting information in the pricing system. (Ethically, this means liquidity encourages fraud.) If we are borrowing to create productive increases so that people can live a higher standard of living now than they could in the future if they had the ability to use current knowledge to create current production, then it’s good spending. If we are providing liquidity because of a shortage of ‘money’ (money in the broader sense) then we are helping people to create the highest level of productivity possible. If we are borrowing to to increase consumption without increasing relative production (exports) somewhere else in the economy, then we are not creating productivity and spreading it around, we are just going into debt by consuming now despite not increasing productivity — i.e. the ability to pay it back. A bubble is a knowledge problem caused by the failure of the pricing system to convey accurate information to participants in the economy. Cheap GENERAL credit allows average consumers to swarm opportunities. Productivity matters. The inter-temporality of consumption vs production matters. And disconnecting consumption from productivity causes booms and busts. So, again, maybe we (you) actually want our booms and busts if it gives people the ability to consume during booms that would never be able to consume goods above their economic class otherwise? But targeting inflation or nominal GDP is too loose a tool for accomplishing policy goals unless the country is small and relatively homogenous.

  • Krugman Watch: Culture Is A Status Economy

    The assertion that Europe’s crisis proves that the welfare state doesn’t work comes from many Republicans. … The idea, presumably, is that the crisis countries are in trouble because they’re groaning under the burden of high government spending. But .. the nations now in crisis don’t have bigger welfare states than the nations doing well — if anything, the correlation runs the other way. Sweden, with its famously high benefits, is a star performer… Meanwhile, before the crisis … spending on welfare-state programs … was lower, as a percentage of national income, in all of the nations now in trouble than in Germany… Oh, and Canada … has weathered the crisis better than we have.

    ( Sweden is a small homogenous protestant germanic country. It is an outlier. ) No one argues that highly redistributive societies are possible. We argue that large redistributive empires are impossible. This impossibility is caused by the fact that the social ‘economy’ that consists of opportunities, habits, manners, ethics and morals consists of a set of ‘costs’ that people must bear by ‘forgoing opportunity for privatization’. This forgone opportunity economy’s currency is status and this status economy rewards people for paying the fees of forgone opportunities. Money is the tool by which people pursue status by competing in the market. In any economy, racial and cultural (linguistic) diversity creates diverse sets of status signals cause economic competition that discourages redistribution. Therefore a redistributive economy can only persist in a homogenous society. And a rich, redistributive economy is only LIKELY to persist in a country where people are homogenous — culturally and racially. So, all external factors being equal, because of signaling, all empires are under constant pressure to fragment into tribes, and all tribes are under pressure to develop competitive institutions. Nationalism then is a prerequisite for wealth and redistribution. As Taleb states, the Levantines thought they were special too. Until there weren’t enough christians… Germanic protestants resent Northern germanic-italians resent souther greco-italians. And public intellectuals resent the status of both politicians and entrepreneurs and seek to alther the status economy for their benefit — just as Schumpeter said they would. 🙂

  • Economics is a subset of politics, not the other way ’round. In the long run we are all human.

    from Modeled Behavior on the Jobs Report

    …here is the long-run trend on private sector service sector employment.

    Notice that its just as strong as the last recovery though coming sooner. Not quite as strong as the 80 and 90s. On the other hand goods and government over that period look like this

    To the extent there is a structural transformation afoot in the US economy, this is it.

    Yes, the average citizen can attest to the fact that you’re correct simply by casual observation while living daily life. The problem you’re stating is obvious. But the question that is currently circulating in the popular media is whether increased money supply that increases demand, and whether additional taxation and redistribution, will improve that long term trend, or whether we had better improve our schools, improve our industries, improve our infrastructure, and improve the world marketability of our unskilled, and semi-skilled working classes. We cannot make our lower classes more productive by demonizing our upper classes. And we are too heterogeneous now to form a ‘society’ that will support different classes under the emotional sentiments of tribal nationalism. Germany promises the working classes skilled labor. America promises the working classes entry into the middle and upper middle classes. But, america’s promise if false. Its just not possible. And what you’re seeing today is the acknowledgement among the laboring classes that their status is depreciating along with their incomes, and that given their ages and knowledge, that the rest of their lives are questionably comfortable due to the false promise of middle class membership — given to them to assuage the natural problem if integration of races and cultures with different potentials both environmental, physical and cultural. Economics is a subset of politics, not the other way ’round. In the long run we are all human.

  • Karl Smith says that a government with it’s own currency can never be insolvent.

    Karl Smith says that a government with it’s own currency can never be insolvent. But this is not true. There is a very practical point whereupon the rate of inflation makes planning and coordinating production impossible because prices along the production cycle are no longer calculable. At that point production rapidly crashes, consumption rapidly crashes, people ‘forget’ skills and relationships that make businesses cooperate. They abandon social conventions and mores. They develop black markets for goods and social status. The tax base crashes. And public order fails. To the modern macro economists this is an absurd and impossible probability. To Austrians it is a deterministic and logical consequence of monetary policy.

    Source date (UTC): 2011-11-05 07:02:00 UTC

  • As a geek, I love the economics of affection, dating and relationships, and foun

    As a geek, I love the economics of affection, dating and relationships, and found this quote today in line with what I’ve written. It’s from a posting about Laura Sessions Stepp’s book “hooking up”, where the writer poses an obvious economic actor’s solution to Stepp’s questions:

    “Why do young women make themselves so available, unmarried, to young men in hopes of making themselves happy? (This clearly makes the young men happy, but that’s beside the point).”

    “This downward spiral that women have been caught in — the dwindling supply of available men — induces women to make themselves even more sexually available than the next women in order to compete, thereby further dampening the supply of potential mates—seems impossible to break out of. At the heart of the problem is a classic, Olsonian collective action failure. All women would benefit if, collectively, women were to require more of men they had sex with. But every woman knows that her behavior, by itself, will not cause market prices to change, so she cheats—and by “cheats” I mean she cheats the female collective. The problem with this free riding behavior is that everyone faces the same incentives and there is not an effective punishment for cheating. The result: men get more sex and women can’t find mates.”

    Source date (UTC): 2011-11-04 20:39:00 UTC