What do underwear and hotel rooms have in common? …. Underwear Sales and Hotel Occupancy are increasing – they are early indicators of economic confidence. What? What did you think I was talking about?
Source date (UTC): 2011-04-22 05:54:00 UTC
Theme: Incentives
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Correcting Our Uses Of Taxes, Law, Money And Credit
There is a natural conflict between the need to avoid a scarcity of cash and credit, such that all opportunities for increases in productivity within the economy can be exploited, and the fact that fiat money and fiat credit tend to mask, obscure and distort the information that would come from climbing interest rates. The general strategy has been to monitor the interest rate. However, the interest rate alone is not a sufficient barometer because a) people ‘flock’ or ‘school’ to over exploit opportunities — and b) unfortunately, (and this is becoming a topic of interest by the serious mathematicians in the field due to the plethora of data collected from the boom) it appears the entire economy is becoming governed, not by opportunities and not by productivity, but by nothing more than *responses to the discount rate.* Which means, (as the austrians have said for a century), the distortion caused by fiat money is cumulatively, and recursively the source of booms and busts. Of course, the fact that those of us say it is logically obvious is countered by the short term quants who fall into the ludic fallacy of probabilism.
[callout]There is a natural conflict between the need to avoid a scarcity of cash and credit, such that all opportunities for increases in productivity within the economy can be exploited, and the fact that fiat money and fiat credit tend to mask, obscure and distort the information that would come from climbing interest rates.[/callout]
There is a way out of this problem. But we would need a long and deep discussion about the nature of government to fix it. We are using a system of lawmaking and taxation that was invented for an agrarian era when the unit of work was at best a season, but accounts were settled annually. We live today in a world where the month is a meaningless topic, and only weeks and quarters are of informational value. Instead, by the combination of pooling accounts (the error of aggregation of plastic categories under quantitative analysis), taxes (which are disconnected from the causal actions that produce profits), and fiat money and fiat credit (which obscure information signals) we effectively launder causality from the pricing system which is the entire purpose of HAVING a pricing system. If we issued loans rather than collected taxes, this problem would right itself quite quickly, and both our political rhetoric, and abuses by the government would be much more rational and tangible if we did. Or rather we taxed what we should (income against an averaged three year balance sheet) and we gave loans rather than provided general liquidity, we would allow private money to pursue it’s ends and public money it’s ends.
[callout]There is a way out of this problem. But we would need a long and deep discussion about the nature of government to fix it. [/callout]
Furthermore, tagging all financial transactions, then treating the internet, and the financial network as a utility that can tolerate failure through multiple layers of redundancy wouldn’t hurt either. There is nothing magic about this series of prescriptions. They simply prevent the laundering of causal information from the pricing system by the error of aggregation. In the simplest terms, tax pooling and general funds are money laundering. Loans are causally transparent. Taxes are causally opaque. We cannot have a RATIONAL government if the data that they rely upon is by DEFINITION, IRRATIONAL, null, and void of rational content. THE DISCOUNT RATE IS, FOR ALL INTENTS AND PURPOSES, AN ERROR OF AGGREGATION. THIS ERROR THEN “FINACIAL-IZES” THE ECONOMY OUT OF THE PURSUIT OF PRODUCTIVITY. (Of course, under that scenario the profits of the big banks would be captured by the public sector.)
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Fiat And Private Money From Both Sides Of The Coin
The first reason that the USA wanted it’s own money is so that it did not export profits to England or France in the form of currency appreciation. The second reason was to reduce trade friction between the colonies. The third was because private money is a riskier proposition, and trade was artificially limited by the instability and problems that came from runs and scares. The reasons that the USA developed the banking system and fiat money was because there was a shortage of money to lend in order to finance the westward expansion of the country.
[callout]Since only the government, which consists of citizens who spend their time on geographic protection, protects the geographic territory, and since the citizens are shareholders in the government, then to expect the government to conduct territorial wars, yet to allow private profiteering of the windfall opportunity of geographic expansion because the state is unable to create money to provide the credit, is for individuals to PRIVATIZE WINS AND SOCIALIZE LOSSES. [/callout]
Credit money is useful to all societies and it DOES cause inflation, because there is no way for people to KNOW when and when not to lend. As long as there is credit money there will be booms and busts. Paper money is necessary for the same reasons – there are artificial limits to competitive productivity without paper money, and without fiat money. Furthermore, as we have seen in the PIGS countries, fiat money tends to decrease corruption. Early in US history, when they tried a multiplicity of monies it created financial instability and trade friction. It was only after taking the dollar off the gold standard that we saw the abuse of it. The question is, if there is a geographic opportunity, should private investors profit from that or should the government profit from it? That is not the same type of investment as the use of private personal knowledge for the purpose of increasing production. Since only the government, which consists of citizens who spend their time on geographic protection, protects the geographic territory, and since the citizens are shareholders in the government, then to expect the government to conduct territorial wars, yet to allow private profiteering of the windfall opportunity of geographic expansion because the state is unable to create money to provide the credit, is for individuals to PRIVATIZE WINS AND SOCIALIZE LOSSES. This may take a few readings to understand. But this is the entire point. Christian Classical liberalism and it’s restatement as Hayekian libertarianism differs from jewish anarchism and it’s restatement as Hothbardian libertarianism almost entirely because christians are philosophically fraternal land holders, and their metaphysics assumes the necessity of land holding, while jews assume land is magically held by someone else because they are metaphysically nomadic and have been diasporic since being conquered by Rome. These assumptions have been part of both groups’ tribal sentiments, philosophy and cultural ethics for thousands of years. Judaism is an arrested civilization. Christianity is an overextended civilization. But you will have a hard time pointing to the success of non-landed civilizations. So, in the end, private money is as often a means of privatizing wins and socializing losses as is fiat money a means of destroying productivity and socializing profits that were made by individuals taking personal risks. The problem with money is that it serves to coordinate diverse and dispersed and fragmentary human KNOWLEDGE, and that gold, or hard money, or private money, because it is scarce, serves better to make use of that dispersed knowledge by capturing willingness to put it behind any initiative or investment that might be poorly considered. While soft money helps to solve the problem that occurs when people have a willingness because they agree on an opportunity for investment, yet they cannot obtain the scarce money to do so. Our problem is not necessarily fiat money. It is that the state can use ‘pooling’ of funds to mask transfers. That is a deeper conversation. But hopefully I have given you some food for thought.
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Stocks Are Not Currency. We Buy Companies Because We Like Them. And We Like Them For Different Reasons
Felix Salmon writes:
… it’s maybe no coincidence that the Russian clients of Goldman Sachs who are falling over each other to bid ever-higher prices for Facebook shares are much the same people as the Russians paying $100 million for trophy Picassos, or Los Altos mansions. The theory here is that Goldman Sachs, SecondMarket and the like have identified a group of buyers who are willing and able to pay through the nose for assets which are rare and special and which few other people can have. So long as companies like Facebook and Zynga meet those criteria, the winners in any auction for their shares are likely to be cursed — or, to put it another way, the final auction price is likely to significantly overvalue the company. Looked at in this way, the market in private equity is less an opportunity for plutocrats to get excess returns, and more an opportunity for intermediaries to extract large profits by selling them overpriced equity in overhyped tech stocks.
That’s true. And you’re right that it’s not an advantage for plutocrats to have access to shares that common investors dont. But, that rather pejorative language is not the way to look at it. Instead, business men are finding a product that has extra-monetary value to investors and charging them for it. Or, more simply, Social status is a ‘good’ that people will pay for. If I have a Ferrari, two Porsche’s an a Jaguar, and my wife has a gucci purse and a hanoverian horse, the fact is that cars, purses, and horses are not scarce. So social status is what we pay for. Why is it that shares of stock in companies should be regulated such that people cannot buy status in companies the way that they buy status in products? And in a market economy, paying for social status is about the only way of achieving social status. There is nothing fraudulent about selling social status. There are plenty of ways to lose money. There are plenty of ways to spend money getting something that you want.
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If You Want To Celebrate, Join A Church – A Wet Blanket On The World Bank’s Sentimental Talk.
(Copied here for documentation purposes.) Over on The World Bank OTAVIANO CANUTO solves for happiness by actively working against it.
We economists tend to see well-being, and poverty in particular, as a matter of finances and income. But fortunately, at least in the Bank, we have come a long way from that simplistic view. Reducing poverty is not only about increasing productivity and income. It is about enabling people to have a broad sense of well-being and opportunities to express and make choices about their lives.
[callout]If you want to be a priest, join a church. If you want to move people run for office. If you want to celebrate, join a club. If you want to be a scientist, and to better mankind, stick with pragmatic improvement of the material well being of individuals by consciously upgrading their cooperative institutions so that they are ‘calculable’ and rational rather than political and sentimental. In other words, don’t make the problem worse by celebrating the ends, rather than the means.[/callout]
But, the road to economic Hades is paved with good intentions:
If you want to be a priest, join a church. If you want to move people run for office. If you want to celebrate, join a club. If you want to be a scientist, and to better mankind, stick with pragmatic improvement of the material well being of individuals by consciously upgrading their cooperative institutions so that they are ‘calculable’ and rational rather than political and sentimental. In other words, don’t make the problem worse by celebrating the ends, rather than the means. The happiness of man has been achieved by increases in the institutional ability for people to break up the world into little objects and apply increasingly fragmentary knowledge to the satisfaction of the wants of others outside of his or her social circle, and independent of his or her cultural memes, by using the information provided by the pricing system, and by the predictability created by institutional protections for his or her risk taking. Sentimental talk in economics and in politics is destructive and always has been. It is evidence of the failure of the political system utilized by the group making the statements. People on the ascent make arguments to productive group action – they ask us to pay opportunity costs for a collective end, for the purpose of increasing potential productive security. By contrast, all moral arguments are by definition false. And that’s the reality of it. Our job is to be the one academic discipline, and the one social science, that isn’t solving for the satisfaction of humanity’s tribal sentiments despite their natural conflict with a division of knowledge and labor and the pricing system, but that solves for the truth of what makes people actually happy by giving them choices. Humans want a discount. Always. So when you’re trying to determine if your arguing for conviction or convenience, make sure you’re not just looking for the discount that comes from embracing convenience. If you want to celebrate. Celebrate both the means – institutions of calculation and cooperation, and their happy ends. (Now that I’ve been a wet blanket I’m going to go celebrate the day with family.)
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Yes, It Would Be Nice If We Could Withdraw The Empire And It’s Costs – In Exchange For Reduced Standard Of Living
Having created, by accident, the empire, and having done so for the purpose of exporting our market system, and its trade routes, we are stuck with the very real consequences of creating power vacuums if we withdraw our military power, and create opportunity for the greater cost of NOT acting as we are acting. We have, after all, made a nice profit out of bringing the Hindu and Sinic cultures into the modern era. We have, and continue, to make a profit bringing the Islamic cultures into the modern era – by exporting debt (that we may questionably have to pay for) rather than by collecting tariffs or taxes for having done so. These efforts have been made under the rubric of political democracy for the purpose of popular opinion, but are actually for the institutional purpose of creating an economically incentivized and politically enfranchised middle class that is invested in perpetuating the world market system. I do not think that there is disagreement among political economists that we would be better off without having to support the empire. But when faced with the very real, and very negative impact that a withdrawal would have on the average (pampered) american, and on the average (schumpeterian) public intellectual, practical heads prevail.
[callout] Property rights are indeed the basis for prosperity. However, property rights are an institution that is created by the application of organized institutional violence. This fact is usually lost of ideological libertarians. [/callout]
As I understand it, the general thinking among the strategic thinkers (those who study military, political, and economic relationships, rather than just political, financial and social relationships) is that if we bear the burden long enough, the world will evolve into a sufficiently middle class economy (a synonym for democratic) that the purpose of the empire will decline at a rate equal to the relative importance of the american economy, allowing us to withdraw without creating shocks to the international system. A failure to understand military history is what separates ideological political economy from practicable political economy. Property rights are indeed the basis for prosperity. However, property rights are an institution that is created by the application of organized institutional violence. This fact is usually lost of ideological libertarians.
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Economics Is A Moral Philosophy Because It Solves For Political Ends
From Economist’s View (In reference to Schiller’s argument (in an exceptional recent paper) that economists should be more interdisciplinary.)
Is Adam Smith Partly an Economist, or Wholly a Moral Philosopher?, by Brad DeLong: Tiago at History of Economics Playground reacted very negatively to an AEA Annual Meeting presentation by Robert Shiller and Virginia Shiller:
This is a question that posits a false dichotomy. The correct question is either: a) “Is adam smith … an econometrician, or a moral philosopher?” He is a moral philosopher. b) “Is adam smith … an economist or an econometrician?” He is an economist. c) “Is an econometrician an economist?” The answer is “No.” An econometrician is a statistician that works on economic data. Why? Economics is a branch of moral philosophy, because the all branches of economics SOLVE for a political end – an end, and an input, without which the profession cannot exist as a discipline. (Yes, that’s right.) Therefore one cannot be an economist unless one is a moral philosopher, unless economics is a branch of statistics, in which case, there are no economic facts because there are no facts without theories. A fact is impossible to define without a theory in which to analyze it. Because being an economist in academia has lost it’s philosophical content, it is possible for Brad to ask this silly question. And if more economists spent more time on philosophy before interpreting statistics, they would understand the erroneous and somewhat ridiculous claims made by the profession are not grounded in demonstrable scientific reality. And they are not grounded in demonstrable scientific reality because economics is currently explanatory, but not predictive.
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that we need stimulus. Agreed that we can finance the debt.The question on the r
http://krugman.blogs.nytimes.com/2011/03/25/deficits-and-the-printing-press-somewhat-wonkish/Agreed that we need stimulus. Agreed that we can finance the debt.The question on the right, is rather, “How can we insert that money into the economy without subsidizing the bureaucracy, and instead, creating a competitive advantage for our business community, which will then create profits from which we can extract taxes to pay for our borrowing?”So, unless your argument consists of BOTH the explanation of financin
Source date (UTC): 2011-03-25 21:57:00 UTC
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honest appraisal. Now, the fact that Valve owns their own client base and distri
http://www.industrygamers.com/news/valve-disappointed-in-ad-agencies-for-marketing-almost-worthless/An honest appraisal. Now, the fact that Valve owns their own client base and distribution system, and that as a game company they have strong creative and storytelling, makes them an uncommon client. But the criticism stands.
Source date (UTC): 2011-03-18 10:02:00 UTC
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Nabisco: Please do an annual run of Milk Crackers for the holiday season, even i
Nabisco: Please do an annual run of Milk Crackers for the holiday season, even if you only distribute them through Amazon by the case. There is no substitute. It’s simple business. It’s good brand building.
Source date (UTC): 2011-03-07 00:37:00 UTC