Curt Doolittle

Theme: Incentives

  • Is There A Cartel Effect Under Minimum Wage?

    From: SMALL TRUTHS ABOUT THE MINIMUM WAGE http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2010/11/small-truths-about-the-minimum-wage.html Something troubles me about this debate on the minimum wage. How do we know that employers in at least some sectors, artificially reduce wages by forming a wage-price cartel using state-sponsored price fixing of minimum wages? Wages are, aside from compensation, also a form of data, and employees can rate a company’s status or viability, or ‘greediness’ based on it’s wage rates. Fixing minimum wages distorts this information, and allows owners and managers to exhibit ‘bad behavior’ under the guise of minimum wage laws. Also, in many sectors, ‘labor’ in the sense of physical expenditure, is irrelevant, and other skills are not (literacy, attractiveness, manners). But those valuable skills are not paid for in the form of wages because all related businesses can claim minimum wage barriers, and if they compete at all, do so by trading entirely on environment rather than wages? Doesn’t this subsidize bad businesses? There are plenty of people who will work at certain companies simply in exchange for the environment (at a discount) rather than in sectors where the cartel effect drives down wages (less comfortable environments). In other words, they’re compensated partly with education, partly with environment, partly with lifestyle. Retail clerks, ie: jobs with comfortable social, clean environments that require unskilled, easy labor, seem vulnerable to low wages. But thats the discount the employee accepts for the ability to work in such an environment. Mexican “illegal” construction day labor on the west coast generally costs no less than $14 per hour. And if the buyer wants people who know concrete, it’s as much as $20. Waitresses in popular restaurants can, and often do, earn hundreds of dollars per day – often more than in their ‘day jobs’. Janitorial labor in office buildings costs well above minimum wage, even in our current economy. It appears that a cartel effect is in place, at least in the upper two quintiles. Has anyone studied that distortion? I don’t have a stake in this argument, it’s not my area of expertise, but I’m not entirely confident that the cartel-effect created by the minimum wage (at least in some sectors) is not driving down wages in at least some areas of the economy. And I don’t see any literature that grasps that much of the minimum wage economy is indeed the ‘on-the-job-training in exchange for rate discount’ ecosystem. Or ‘I’m husband shopping with this job”. Or “every other job is real work, and this makes my parents happy”. Or “I’m doing this job that’s easy while I”m in college.” All of these are not meaningful if considered on wages as compensation alone. What might be more interesting is experimenting with minimum wages in certain sectors in order to drive talent and ‘social status’ into them. I don’t think its important for us to subsidize retail and fast food clerks. It’s more important to drive more people back into skilled and semi-skilled labor. For example, (to be a bit crass) if we’re talking about single moms flipping burgers and waiting tables, or performing office work, (and we’re accepting the fact that we aren’t educating men and women on mate selection, and we’re saying that it’s acceptable for women to have children that they can’t support, and therefore that it’s acceptable for them to export their preference for childbearing, and poor choice of husband onto others) then why don’t we simply wage-match people with such problems rather than distort the entire pricing structure? I’m not advocating this but just wondering if there is any work in that field that isn’t riddled with the typical errors so endemic in quantitative probabilism (rather than evidence) preferred in the field. I’m sure there is quite a bit of data out there. I just am not sure that any paper that I’ve read on this topic relies on anything other than errors-of-aggregation, unsupportable probabilism, or questionable a priori logic, all of which run counter to observation. Again, this isn’t my field, but I don’t see the cartel-effect or these other issues addressed in the literature that I’ve spent time on.

  • What Do The Elections Mean For The Economy?

    In a staff meeting the other day, one of our senior people asked me what the elections mean for the economy, since our business (advertising and marketing) is highly influenced by the direction of the economy. We are a leading indicator of both upward and downward trends. I responded that the question depended upon the time frame one was using. In the short term, the elections mean that a divided government will eliminate social and political tensions so that people will spend more time on meaningful activities at home and work, and that business people will feel less [glossary:REGIME UNCERTAINTY] Regime Uncertainty. That means that the small business side of the economy should improve. That’s about all. The common people assume that the quantity of political rhetoric is equal to the qantity of economic power that a state can exercise, and this is not true. A state as we currently have constructed it, is largely capable of USING economic wealth in the short term, but incapable of creating wealth in the long term. That is the primary change in government over the past hundred and fifty years. We have converted from middle-class wealth creation to lower class wealth distribution in the west, as the consumer economy and democracy put political power in proletariat hands. That trend was acceptable given our extraordinary wealth. But the current trend must reverse itself, and the power of government must switch from an ambition entirely devoted to redistribution, to one more concerned with increasing the intellectual capacity of our less-than-hard-working citizenry.

    [callout]A state, as we currently have constructed it, is largely capable of USING economic wealth in the short term, but incapable of creating wealth in the long term. That is the primary change in government over the past hundred and fifty years. We have converted from middle-class wealth creation to lower class wealth distribution in the west, as the consumer economy and democracy put political power in proletariat hands. [/callout]

    In the medium term, it means that middle class white people are beginning to act like a minority, as has been predicted for some time now by any number of public intellectuals (Buchanan). It means that our economic recovery will be slow and protracted and vulnerable to shocks, and that it will take a decade or more for the worlds distorted capital structure to realign. It means that unemployment will be persistent and chronic for that period of time. It means that the US will not likely return to previously comforting low unemployment levels. It means uncertainty will prevail. In the long term, in regard to the general economy in the united states, it is not likely that any government intervention on any scale that is politically tolerable, will allow the adjustment to education that is needed to alter our basic competitiveness. It is unlikely that US businesses will produce at 20th century levels, which were only possible because of factors outside of political action: the large land area, the high rate of breeding and immigration, the high transformation of the population into the middle class, the low cost of language and legal transactions due to cultural homogeneity, and the low cost of administration due to the use of the common law. The response to my statements was that they painted a gloomy outlook. I responded that there is a vast difference between objective reality, and the emotional experience that we attach to it. I read something the other day about african meat-packers, living a terrible and dirty life. But that during the day, as they worked, they were joyous, playful, enjoyed their friends and family, and in general described themselves as happy. For human beings, uncertainty, unpredictability, and negative environmental change are impediments to our rather fixed rate of adaptation. But people adjust to their circumstances when they can, and find good in almost everything. Therefore, the objective picture may appear gloomy, but the general sentiment will improve as people adjust to the new circumstances. What will happen is the perception of power, or excellence, which we refer to as ‘status’ will change, worldwide, and continue, as it has since the collapse of the soviet system, to be local and cultural, and less western or ideological. The world’s common people, will continue to return to it’s civilizational biases, and admirations. It’s business leaders and intellectuals will continue to explore each other. Consumers will adopt whatever fashion is relevant to them. But by and large, they will be more interested in their cultures than in western culture. The west will be less of a destination for the highly talented and upwardly mobile. And the western demographic problem (the high land occupation by white christians) will be under pressure, and white christians will increasingly adopt minority postures, just as their political leadership warned they would for the past century and a half. This is the meaningful trend. We will be less wealthy of a civilization relative to others than we have been since the opening of the atlantic trade 500 years ago. Our politics is just the daily expression of our sentiments as these shifts occur.

  • Why Not Change Our Tax Structure To Punish Extra-Market Coercion?

    Paul Krugman writes:

    Soros, Obama, And Me What do we have in common? We’re all small business owners, according to Mitch McConnell. Obama and I make our business income off books — he sells the audacity of hope, Robin and I sell the misery of Econ 101; Soros makes his money off financial destruction directing funds to their most productive use; but we’re all in the same category as the owner of a small factory.

    Small business people? Hardly. That writing provides a limited return is not a measure of its level of consumption by a large number of customers, but a measure of how little people are willing to pay for it. The term Mitch is looking for is not “entrepreneur” it is “[glossary:Schumpeterian Intellectuals]”: people who bring about the destruction of capitalism, the market, and the prosperity of national competitiveness by undermining both the sentiment of, and capital structure of entrepreneurship.

    [callout]Then, perhaps some of us should put our capital stock of violence to better use, if in our restraint, we are disabused by men who simply take advantage of our creation – the market. It would be the optimum use of our asset.[/callout]

    Unfortunately, we don’t have special taxes for Shumpeterian market destroyers like we have special taxes on entrepreneurial market creators. But we can fix that. Perhaps we should level the playing field by heavily taxing political, extra-market goods and services, and lowering taxes on apolitical intra-market goods and services? Wouldn’t that be a switch? I mean, why should the amount of income be the axis of measurement, rather than the service provided to the market? Under that measure we could confiscate all of Soros’ money, recover our losses from the bloated financial sector, and reduce the media to non-profit status, and make political writing an unprofitable exercise. As for putting capital to a better purpose, that’s not yet proven. Soros was not participating in the market for goods and services by creating unemployment and reorganizing that capital for his use. He’s just using remunerative coercion under state protections. And extra-market remunerative coercion at that. A form of coercion made possible only by the restraint of violence by others in order to create the somewhat free market – a restraint he does not himself employ. And while that asymmetry of restraint may not be apparent to your cult of those who are incapable of holding territory and trade routes, or building an durable government, or durable institutions of calculation and cooperation, it is not lost on those of us whose ancestors have done so for a millennia or more. It seems odd to me that so many people fail to grasp just how entertaining and enjoyable civil war is for those people who practice militial restraint – often at high personal [glossary:forgone opportunity cost]. Modern war is a ‘hell’ only for people who fight in the western model. It’s not for warriors, terrorists and raiders. We forget that the reason we cannot conquer the Afghans is in no small part because raiding and killing are actually enjoyable, entertaining, status-enhancing pass times among practitioners. And creating markets and property rights, and philosophy and econometrics, is a poor substitute. Then, perhaps some of us should put our capital stock of violence to better use, if in our restraint, we are disabused by men who simply take advantage of our creation – the market. It would be the optimum use of our asset. Or those who put their financial capital stock, or political capital stock to such extra-market or Schumpeterian Intellectual purposes, could pay the opportunity cost of restraint, so that we do not have put our stock of violence to extra-market uses. So that we can continue to devote our energies to the proxy of entrepreneurship instead of the more enjoyable and rewarding uses of our capital stock of violence. Why should we simply transfer our capital at a discount from a stock of market making violence to a stock of market destroying verbal and political coercive uses, or remunerative extra-market coercive uses. After all, violence is far more coercive. And much more rewarding. 🙂 Cheers See [glossary:three coercive technologies].

    The depth of this insult is probalby accessible to only a few people. But I have to say this is one of my favorite little essays of late. – Curt

  • Review: Dead Aid by Dambisa Moyo

    “Why Aid Is Not Working And How There Is A Better Way For Africa.” We know: Aid is bad. It creates corruption. It harms the economy. It makes nice happy Christians, and nice happy DSH’s (( Democratic Secular Humanists )) feel good about themselves. But it is terribly harmful for Africans and their civilization. Because I agree with everything she says, I’d like to say something meaningful and supportive, but everything I read in the book is old news. In the Austrian school we’ve been talking about this problem forever. Other than the fact that the author is a successful woman of African origin, this book is a easy read that is very hard to criticize for having uncomfortable motives. Good book. Good cause. Smart woman. But nothing new. What I can say is this: there isn’t any difference between the problem of giving aid to Africa, the Spanish and Portugese import of gold from the new world, and easy credit for american citizens and their expansionist government. It’s all bad.

  • Hayek, Kling, Austrians And Providing The Libertarian Solution

    From Arnold Kling, By way of the WSJ, By Peter Boettke:

    Mr. Hayek rightly warned of the dangers of central planning, Mr. Boettke says, but “he didn’t give a prescription for how to move from ‘serfdom’ back.”

    – Austrian Resurgence by Arnold Kling (Taken and expanded from my comments on EconLib.) Back From Serfdom? Hayek didn’t solve the problem of the social sciences. He gave us the right warning, but no meaningful prescription for government other than to rely upon what we already knew. Liberty is the desire of the minority. The minority participates in the market. The majority on the other hand lives off it, but does not participate in it. The majority is often frightened of the market. And if not frightened, they simply want to avoid the dirty reality of market participation: spending one’s life trying to understand and satisfy the wants of others, and risking one’s capital to test his or her judgement. We’d all rather be selfish. CALCULATION AND THE SOCIAL SCIENCES Mises, Hayek, Popper and Parsons all failed to solve the problem of the social sciences. The conservative sentiment remains a sentiment, and not an unarticulated rational philosophy. What structure it does have, remains allegorical and historical. This is why it cannot easily win a rational battle against the various forms of positivism aligned with marxist and collectivist sentiments.

    [callout]Austrian ‘Calculation’, Austrian incentives, the abstractions of Property and Opportunities, along with the properties of human memory and cognitive bias, are, when taken together, a necessary and sufficient system for economic and political order, and a rational means of articulating the conservative and libertarian sentiments. [/callout]

    Austrian ‘Calculation’, Austrian incentives, the abstractions of Property and Opportunities, along with the properties of human memory and cognitive bias, are, when taken together, a necessary and sufficient system for economic and political order, and a rational means of articulating the conservative and libertarian sentiments. This structure. This answer to our problem of the social sciences, is in Austrian Theory. It’s just incomplete. Our political system relies upon debate and rhetoric as means of resolution of PRIORITIES and METHODS among people with SIMILAR interests. Debate relies upon relevant knowledge of the content policicians are debating. But without data that is sufficiently complex, and formulae that are sufficiently PREDICTIVE, their debates must rely upon social class and cult preferences. And since the society is comprised of multiple classes and people with multiple interests, debate in the absence of rational data, and a rational social science, must descend into sentiments and rhetorical contrivance of people wth dissimilar material interests, rather than rely upon scientific Without additional complexity in our information systems, and without additional complexity in our political process the differences in our interests are too divergent to be solved by irrational discourse. It is a battle of who can win the greatest sentiments, rather than the determination of priorities among people with similar interests. We need data, and a system of applying that data that will allow us to move beyond the convenient contrivance of the DSEM model, and that will permit human beings to rationally make political decisions based upon something other than the tyranny of the majority won through the artifice of irrational sentimental political debate, unbounded by the practicality of hard money, and the difficulty of borrowing hard money. KLING’S RECALCULATION IS THE CORRECT MODEL Calculation and Incentives are the reason the Recalculation Story is the correct analogy. But without rational, causal, articulation, it remains an allegory, and is an insufficient argument relying on explanatory power, rather than causal definitions. There must be a way to combine knowledge of a nation’s market practitioners the way that the market does, and put it in the hands of politicians. We need politicians because if we are to pool our resources (if only to defend ourselves and our property from the barbarians and the proletariat) then there is a scarcity of resources to apply to infinite political choices. PAST FAILURES Past civilizations failed because law, rhetoric, bureaucracy and religion were insufficient means of coordinating a large division of knowledge and labor. They failed to create property definitions and calculating institutions sufficient for cooperatively managing their resources and for forecasting their use by combining the knowledge of the body of practitioners who were participating in the market. This is the reason all civilizations fail internally. It is a structural problem of complexity. Complexity does not have diminishing returns as some authors have suggested – just the opposite. But as complexity increases so must our cooperative technologies. And the tendency of governments to become corrupt, ritualistic, and calcified, combined with the lack of information systems and lack of conceptual models, and lack of institutions to use those models and data, leads to cooperative failure. HARD MONEY AND KNOWLEDGE VERSUS SOFT MONEY AND PROBABILISM Hard money and lending allow this cooperation between power and knowledge. Hard money requires borrowers to make a case to their debtors, and debtors can apply their knowledge of potential profit and loss. But hard money has given way to fiat money, in order to keep the supply of money needed for it’s uses available, while limiting inflation. Had government the inability so spend money itself, this process of inflation targeting would work. Fiat money is also a form of insurance. It makes government the insurer of last resort. It increases productivity by socializing risk. It will not prevent booms and busts. Instead, such easy credit encourages them. But human society has made the decision to tolerate this risk of credit distortion in exchange for the ability to provide each other with national insurance – the ability to borrow from everyone by printing money, and providing restitution of losses to those who have catastrophes. And as the Anglo-Rothschild-French alliance has proven, and the USA has taken to extremes, the most heady insurance a nation state can make use of, is the ability to print money as debt in order to wage war. And, as all developed nations have demonstrated, fiat money also permits governments to create social programs by borrowing against a future that is uncertain. In the absence of hard money – hard money that must be willingly lent – we can no longer rely upon the wisdom and knowledge of property holders we call lenders. Instead, we rely on mathematical prediction — which specifically does not contain the wisdom of property holders and their predictions of the future. Nor is our government debt actually comprehensible. It is simply too complex and vast, and speculative to understand. A SOLUTION THAT ALLOWS COOPERATION AND CALCULATION Thankfully, we already have the model of banking and credit. We’ve just allowed banking and credit to embrace precisely what we have warned politicians from embracing: the error of aggregation, called ‘pooling’ in fixed categories inherent in our current accounting technology, which is further enabled by an erroneous application of probabilism that violates the primary principle of property: it’s dependence upon knowledge of it’s dynamic utility. Hayek identified the problem but not the solution. We have a solution. We have the technology to implement it. It’s implementing it that’s now the problem. The fundamental problem for any civilization is increasing the granularity of economic calculation and keeping the temporal pace of their categories of measurement with the dynamism of their utility. In addition, if we are to have the self-insuring system of fiat money, then we must also have a means of capturing knowledge of lenders, and practitioners that was inherent in hard money. Then, possessed of that means, alter our form of government to take advantage of that knowledge. So Hayek was right. Kling is right. But they answer to WHY they are right has not yet been articulated. And the truth is, that since freedom is a minority sentiment, it is very difficult for such changes to be implemented in a polity. Even if it would satisfy the opposing side’s materialist desires. Because it would not satisfy their desires for status parity. Collectivism is largely an effort to attain status parity.

  • Egalitarianism (Insurance) vs. Status Seeking (Access To Mates)

    Egalitarianism is an attempt to either:

      Egalitarianism is the passive and low-cost alternative to producing innovation, excellence and performing actions in real time.

    • Is Economics Ideological By Nature? (Yes and No.)

      The Curious Capitalist at Time Magazine posts: “Is economics ideological by nature?” by Barbara Kiviat

      It’s easy to rag on economics as not being a “real” science, and I try not to do things that are too easy. But in recent weeks I’ve really started to wonder. It is fascinating, and frightening, to me that smart economists can disagree about whether what the economy needs right now is more government spending or less. The debate isn’t about how much stimulus, or how much austerity, or the way such stimulus/austerity should be applied, but rather about which one is called for in the first place. How is this possible? It’s like a group of doctors not being able to agree whether a patient’s blood should be thinned or coagulated. What am I supposed to make of that?

      Let’s be technical for a moment:

      [callout]Whether we do better governing with econometrics than random guessing, or by asking the average man on the street, or than relying on traditional wisdom, or better than interpreting a deity, or even interpreting entrails, is yet to be proven. In fact, it appears from the data that asking a random person on the street is a better predictor than any economic model. — And anyone who tells you differently is not scientific but ideological.[/callout]

      1) Economics is a correlative mathematical discipline. Science is a methodology for incremental improvement of knowledge. Economists are attempting to act scientifically in their research. (Many of them anyway.) However, unlike the physical world, reproduction and interpretation of economic data are very hard to accomplish. We are doomed to eternally vulnerable correlations. Our mathematics and our measurements are too simple for the problem we’re taking on. But we know that. Everyone in the field knows it. As such, we’re acting scientifically, but our answers are not scientific, only our process of discovery is scientific. And our process of discovery is incomplete. People often equate scientific with ‘true’. But that’s an error. Science is a process of refinement whose purpose is to reduce human error. All scientific knowledge is tentative. It’s just the best we have to date. Economics (econometrics) must, of necessity, require assumptions because of ‘causal density’. The number of causal factors is very, very high. Human economic activity includes shocks (shortages) and inventions, and as such it’s economics are not gaussian (normally distributed), so any one event in a myriad of causal hierarchies can radically alter the entire network of human behavior. Unfortunately our mathematics, even in economics, tends to be probabilistically gaussian (normally distributed), rather than probabilistically mandelbrotian (abnormally, or randomly distributed). Simply because we do not know what we do not know, and have not figure out yet, ‘where’ there is a likelihood that we may ‘know’ something in the future that will effect our economy, and how people may react to it. 2) Political Economy is a moral philosophy that makes use of economic data for the purpose of determining the investments and returns on a society’s investment portfolio. A society is best thought of as a joint stock company with larger and smaller shareholders with different classes of shares each trying to get the management team to work in their favor. These shareholders have different interests. They want different things. They all ‘invest’ in society if only by not undermining it, or engaging in theft, fraud and violence. Most pay taxes. Some risk their lives in military service. We all buy our shares differently, and are rewarded differently. We do not understand the mathematics of human reasoning. It is largely the result of the properties of memory and of our cognitive biases. We are using correlative mathematics from the physical sciences to compensate for the fact that we do not understand the mathematics of human memory – probably because it is vastly more complex, and we do not have enough of the right kind of data. However, our use of current mathematics leads us to errors of aggregation and misunderstanding of causes. In fact, many have argued that all human knowledge is correlative, not causal. So we may always be working with insufficient information. 3) Politics is Decision Making: As a body politic, we disagree about the goals of political economy. We disagree about the purpose of government itself. This is because there are varying groups in our polity with different class, cultural, generational value systems, as well as different resources, and different biological capabilities. Our entire body of human moral codes are based upon circumstantial values (farming societies), and we no longer live in a farming society but an urban one. We are not even sure what a ‘good economy’ looks like for a densely urban society, or even if our limited tools of laws, religion and credit are sufficient technologies for maintaining social order: respect for some form of property, political decision making, cooperation, and redistribution. So, the problem is that we MUST use some sort of bias in resolving economic problems. We are using limited tools and a model of decision making in government that is probably antiquated for our circumstances. It was designed for city states. It seems inadequate for an empire. Society is changing very rapidly. We are open to many different unpredictable shocks. We have different preferences we apply when solving economic problems. And we must have those preferences in order to make some sort of decisions. And no matter what decision we make some faction of society will want another decision made instead.

      [callout]This is because of the fundamental problem of human cooperation: while we can agree upon ends, we cannot agree upon means. And even when agreeing upon ends, it requires that we know and catalog ALL ends, and then sort among them. And given a multitude of ends, it becomes impossible for people to prioritize them, or even comprehend them. Our society is simply too large. [/callout]

      This is because of the fundamental problem of human cooperation: while we can agree upon ends, we cannot agree upon means. And even when agreeing upon ends, it requires that we know and catalog ALL ends, and then sort among them. And given a multitude of ends, it becomes impossible for people to prioritize them, or even comprehend them. Our society is simply too large. THE PROBLEM OF POLITICAL ECONOMY As such, a large economy is better, but politically difficult to govern unless it is very homogenous with people sharing very similar values. A smaller economy is less strong, but easier to govern. The worst economy of all is a large strong one like that of an empire, with many, many factions – because there are too many choices and people are not gregarious in diversity, just the opposite. And that’s the political environment that we have to work with. To make matters worse, our federal government can print money which makes it seem like we can either solve fewer more complicated ends, or we can solve a larger number of ends, than we actually can. Printing money as a means of redistribution or insurance are one thing. Printing money so that there isn’t any shortage of it is another. Printing money so that we just distort and confuse everyone, including economists, is something else. And we are doing too much ‘something else’. We are not the blind leading the blind. But we are definitely expecting too much of our current level of understanding of economics, when economic reasoning has become the primary means of decision making in human political systems. Whether we do better governing with econometrics than random guessing, or by asking the average man on the street, or than relying on traditional wisdom, or better than interpreting a deity, or even interpreting entrails, is yet to be proven. In fact, it appears from the data that asking a random person on the street is a better predictor than any economic model. And anyone who tells you differently is not scientific but ideological.

    • It’s Not A Privacy Issue: The Economics Of Tracking : Correcting The WSJ’s Sale Of Fear Uncertainty And Doubt:

      From the WSJ:

      The Wall Street Journal conducted a comprehensive study that assesses and analyzes the broad array of cookies and other surveillance technology that companies are deploying on Internet users. It reveals that the tracking of consumers has grown both far more pervasive and far more intrusive than is realized by all but a handful of people in the vanguard of the industry. The study found that the nation’s 50 top websites on average installed 64 pieces of tracking technology onto the computers of visitors, usually with no warning. A dozen sites each installed more than a hundred.

      In this survey, the vast majority of people were concerned about ‘privacy’.

      [callout] It’s not like Coca Cola, Nike and IBM want to be associated with cheap european amateur adult videos, snippets of skateboarders doing face-plants, or some silly little group of bloggers fomenting rebellion on some little personal political agenda.[/callout]

      To which I respond: Tracking is not a privacy issue. It’s actually good for you, and good for society. (Really.) Tracking = Legitimate Companies. Privacy Invaders = Illegitimate Organizations. It’s not like these tracking-companies are doing anything novel, invasive, or even risky. They aren’t capturing your credit card number, or your home address, or the contents of your romantic emails. They are capturing the kind of things you’re interested in seeing online, so that advertisers can promote goods and services that you’re interested in, rather than spamming you with stuff that completely annoys you. The advertising industry knows perfectly well that people want privacy. Brand owners know perfectly well that if they mistreat your private information, that their brand, their products and their stock price, will pay a very high cost for that abuse. There are plenty of sites that will install malware and viruses. Tracking sites and cookies don’t do that. It’s not in their interest. It would put them out of business if they did install viruses or malware. Advertisers avoid anything negative. It’s too dangerous. Spammers don’t. That’s why spam and certain web sites, or petty criminal web sites (downloading or free entertainment) are the sources of malware and viruses. So, it’s not your absurd searching that will generally get you in trouble. ***It’s trying to get something for free.*** Spammers, Malware and Viruses are delivered by disreputable organizations doing disreputable things on disreputable sites. But advertisers aren’t. Advertisers use TRACKING cookies, and avoid malware, spam and viruses. Nobody Cares. You Aren’t Special But lets also look at it another way: Nobody cares if you surf adult sites, read about absurd human behavior at 11pm, or watch silly animal or kung-fu videos, delve into subcultures you would never interact with in real life, and generally prove that you are surfing under safe conditions for novel, absurd, silly , or radical experiences from the safety of your laptop – which is the best way to explore them.

      [callout]Why? Because you aren’t special. You aren’t interesting. You aren’t rare. In fact, you’re so average that if you saw your surfing behavior graphed next to everyone else’s you’d be horrified and how much you had in common with people form all walks of life. We revel in the absurd. We like to learn from a safe distance. We like to understand the very limits of human behavior. We like to fantasize about what we could never really do. And there isn’t any harm in it. In fact, all things considered, it seems that just the opposite is true: it turns out that it’s a vent, a safe exploration, and it’s good for you, and society.[/callout]

      But that said, no one cares. Why? Because you aren’t special. You aren’t interesting. You aren’t rare. In fact, you’re so average that if you saw your surfing behavior graphed next to everyone else’s you’d be horrified and how much you had in common with people form all walks of life. We revel in the absurd. We like to learn from a safe distance. We like to understand the very limits of human behavior. We like to fantasize about what we could never really do. And there isn’t any harm in it. In fact, all things considered, it seems that just the opposite is true: it turns out that it’s a vent, a safe exploration, and it’s good for you, and society. The private world of browsing is indeed private. It’s like using the bathroom. Everyone does it. We just don’t talk about it in public. That’s because it’s not risky to browse such things. By contrast, it’s very risky to DO those things in real life. That’s why we keep risky behavior safe, private and on the web. A relationship between you and your browser. The Self Interest Of Advertisers But your eccentric surfing behavior isn’t helpful to an advertiser. There isn’t anything really useful to advertise next to those oddities that isn’t already being advertised there. It’s not like Coca Cola, Nike and IBM want to be associated with cheap european amateur adult videos, snippets of skateboarders doing face-plants, or some silly little group of bloggers fomenting rebellion on some little personal political agenda. Or to be gender-balanced, your favorite little gossip site, compromising celebrity photos, rants about how awful men are for being interested in something other than living to fulfill a woman’s every whim, insecurity, status impairment, and nesting urge, and the fact that you shop for clothes that are too young and fitted for your weight, figure and age group. Your sense of individuality – the one that makes you want to protect your privacy – is a self imposed delusion. A delusion we embrace because our self image is part of our sense of social status. We guard that self illusion like we guard our property. If that realization seems unpleasant to your self esteem, then you know why advertisers are good at their jobs: they know this simple fact about you. They know you aren’t special, but you need to think that you are. Brands Only Want To Advertise In Places You Aren’t Ashamed Of Visiting Because of that, they only care about those places where reputable brands can advertise on the web. Not those things where they can’t. And more importantly, even if you were special, it’s not valuable to big brands to associate with perceived absurdities. Brands are public entities. They have public personas. Mixing those brands with anything that would not be done in public would be damaging to them. In fact, if a tracking organization captures enough data that could associate a group of consumer behavior that was aberrant, with a well known brand, (say associating domestic violence with a brand of alcohol) and if that data was released, it would be extremely damaging to the brand. ie: tracking companies don’t want to know, or capture, you’re extraordinary activities. Even having the data in their possession is dangerous to them. It presents them with a liability. Advertisers don’t want them even to collect it. For exactly that reason. Advertisers See The World As Groups Not Individuals Advertisers do not care about you as an individual, or your personal information. They are statisticians. They care about groups. They care about aggregates. About large groups of people doing similar things. They care that of all the people who hit MSN.com, or the NYT or Conde Nast, which kind of things are most of them interested in hearing about? They care about measuring the effect of their ads. They care that if you saw one ad in one place, where else can they show it to you to reinforce it? Because the more targeted the advertisement, the more interested you are, the more times they can show it to you in the hope of making an impression, then the cheaper it is, the more effective it is, and the less chance they will alienate someone by showing them something that they don’t like, while paying dearly for the opportunity to offend someone. They do care about your email. Because if they have your email, they can advertise directly to you. But they know that if they don’t ask permission, you will literally hate them for invading your privacy, and that will hurt their brand. Email crosses the line into privacy for most people, because you can’t shut out advertising that you don’t want. Email is personal. But traffic measurement isn’t stealing your time, or filling your inbox. It’s invisible. The current level of cluelessness among advertisers and marketers on how to use this traditional data and traditional advertising strategy on the web, is not clear to the public. Advertisers have not figured out exactly what to do about the decline in traditional media, and the kind of advertising that has been successful in the past, They don’t know how to advertise to you on the internet. They aren’t sure if it’s good money or bad. They know you want content that helps you make buying decisions. But they aren’t sure how to make you aware of new products and services. Or even if they need to make you aware of them. Tracking Is A Social Good? So to some degree, you’re doing yourself, and society in general a favor. Society needs advertising not only to help fuel the economy, but to simply help us be aware of our choices. If these people collect enough ‘traffic data’ (data about what you view, not about you yourself) then they will build enough information so that they can tell you about what you want to know, not what you don’t want to know. Personally, I would love it, if all the advertising I saw, was about those things I really want to know, but miss out on because there is no way to advertise them to me. For example, a small italian suit designer, or an interesting watch maker, or a small b&b in the Lake District, or a new local Porsche mechanic, or even Proctor and Gamble’s new products, or Crest White Strips, or the WSJ, or Precor Fitness Equipment, or Starbucks to reach me with a sincere sounding and useful message using existing mass market channels. It would simply be too expensive. and it’s not that I don’t want to know about all those things. I do. I just never, ever want to hear about weight loss, or, feminine protection, or a new pharmaceutical, or local football jerseys or sales at Sears, or discounts at Target, or any of the other things that are very relevant to other people and completely annoying wastes of time to me. Advertising is only bad when you don’t want it. And unless you help advertisers understand what you want, you’re going to continue getting what you don’t: stuff that’s irrelevant, and sometimes offensive to your sensibilities. Tracking your behavior lets advertisers target you with the right kinds of ads, and to keep up with your changing tastes and interests. So, tracking isn’t a privacy issue. It’s a public good. (Really.) – An Advertising Agency CEO. (We don’t do tracking. We just don’t think it’s useful to mislead people about tracking either.)

    • All Costs Are Opportunity Costs. Projections Do Not Include The Alternatives.

      This article by a local democratic group led me to this CBPP article, which is a response to a paper by the Heritage foundation.

      Some critics continue to assert that President George W. Bush’s policies bear little responsibility for the deficits the nation faces over the coming decade — that, instead, the new policies of President Barack Obama and the 111th Congress are to blame. Most recently, a Heritage Foundation paper downplayed the role of Bush-era policies (for more on that paper, see p. 4). Nevertheless, the fact remains: Together with the economic downturn, the Bush tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years

      Which is another example of pretending that the long-cycle view of the republicans, from the sixties through the previous administration is selfishness rather than a REACTION to the socialist policies and socialist social system that conservatives were fighting for the majority of the 20th century. It was the conservative perception that without reinvigorating business and in particular entrepreneurship, that the american quality of life would perish, as it had appeared to by the 1970’s. If you think the european model is better, go live there for a while. Life in europe is expensive, cramped, dirty and urban. People look, act, and feel poor by comparison. The pretty part of europe seen by tourists was built in prior centuries under the great monarchies. It has nothing to do with the post war model. European cities are vast rings of urban blight, Los Angeles style, around small downtown cores of ancient monarchical elegance. By and large, no matter what social class you live in, america has offered better opportunities to its citizens. People have more choices. Add to their costs the necessity of rearming, and that they have a social problem with muslims on the scale of our post-slavery problem with blacks, and they have tremendous future costs to bear for their model. So go live there. Really. For a while. Life in europe is expensive. An expensive life neutralizes many class status differences. And that’s really the point of those models. But that aside, what bothers me most about the CBBP analysis, regardless of the figures presented by the heritage foundation, is the belief that our country would not endure OTHER costs, often strategic costs, that are NOT expressed in the numbers, if republican policies were not undertaken. We have accomplished much of our ambitions with the wars, which is to neutralize Iraqi expansionism, and punish afghans for hoteling terrorists. that we continue to attempt to create democracies is an ideological problem. It would be cheaper to reduce pakistan and iranian capabilities as we have iraqi and afghani capabilities. But we will not do that because we feel that we must be ‘nice’ to people who attack us, rather than punish people who attack us. But unless we forecast the republican view of the future, which was one in which even worse outcomes existed for the USA’s budget, and in particular, energy costs and decreased entrepreneurship, and decreased competitiveness, The dirty secret underneath our lack of competitiveness is our education system. We are paying vast competitive costs by forcing education into the private sector, and producing inferior goods, because we do not teach disciplined excellence in schools as do the germans. We don’t teach it for political reasons. We’re dumbing down our citizens. And it’s that cost that republicans are trying to fight as well. So most of the forecasts based upon assumptions made by both sides are complete nonsense. All that said, I responded with: I have absolutely no idea how you are coming up with this chart, and what assumptions it’s based upon. But it’s correspondence with reality approaches zero. Our tax revenue problem is far deeper and far more structural than whatever assumptions you’re relying upon. These include the dollar, the world economy, structural unemployment, and demographic changes. Most importantly they involve the class and race issues involved with different occupational distributions, and the resulting difficulty in putting vast numbers of our population (in particular, males) into industries that are permanently lost to us. We have expanded enough of the bottom end of the labor force through immigration, that we cannot push down our existing labor force into less interesting, but certainly productive, jobs. No society can survive 20% of the male population living in frustration. This anxiety will be directed somewhere. The country, as both a domestic and international empire, is too insufficiently homogenous to permit higher taxation and redistribution. It is contrary to human nature. There is no evidence of it in history. There is no evidence of it in behavioral testing. The costs of conducting these poorly managed external wars do not account for the cost of not prosecuting them, which are not insubstantial, and perhaps greater. Our domestic political mythology is a conflict between the erroneous assumptions of the twentieth century, and the expired political technologies of the eighteenth century. Neither side is going to get their desired future. We are headed toward the south american model of class and racial segregation of urban centers and a powerless central government. This pattern is evident in immigration and emigration moving patterns, demographic changes, domestic trade, domestic cash movement, re-regionalization of identity, and a loss of confidence in both the government and the nation itself. Conservatives live in a fantasy that the colonial republic is possible to reinstitute. Liberals live in a fantasy of the homogenous egalitarian society. But democratic republican government cannot function at our current scale for the same reason socialism cannot function at scale – information and incentive problems. Even if politicians want to make good decisions, law and taxes are insufficient tools for doing so. Only credit and banking and provide sufficient granularity of management, and our state is not structured any longer to assist in building the economy, only in resolving conflicts between interest groups. Furthermore human beings do not, never have, and never will operate in an egalitarian fashion across status class and race boundaries because status is more liquid and valuable in-group than extra-group. And because epistemologically, human beings do not possess sufficient perception, information, and intelligence to operate as creatures without status signals to tell them which actions are good and bad for them, any more than they can cooperate in large numbers without pricing signals to tell them what actions are good and bad for them. I am sorry if this is to complex an analysis for a posting on tax and spending policy. But I am speaking to the false assumptions that underly the graph that you presented here. I would love to live in an egalitarian redistributive society. But to accomplish that goal, you will have to fragment the empire into regions, reduce the federal government to banking and military functions, return the legislative control to the localities, and allow the natural preference that people express to associate within race and class. And that is antithetical to the underclass fantasy – a fantasy which is more concerned with status than it is with money. But every society is composed of classes. Not just economic classes, but social classes, and ‘greater and lesser productive classes’. And each of these groups pursues its own interests. And because those interests are epistemological in nature ( people need to know how to act ) they are permanent. And as permanent features, they will, especially under prolonged economic duress, be expressed by citizens. Either openly or in black markets, racism, and corruption. You will never achieve equality outside of a few million people of very similar racial and cultural preferences, with very similar economic interests. Otherwise, The only equality is in poverty. And that set of problems underlies the reason why people will become more conservative. ie: they will express sentiments of group persistence and attempt to implement those sentiments by legislation. So, we are destined to decades of political hostility. Because the US is now an empire, both domestically and internationally. And while internationally the government has lost legitimacy. THat is irrelevant compared to the loss of legitimacy of the government here at home. The only thing we can do is contract the empire and attempt to get our people employed in, while getting the upper and middle classes to try to create jobs and we may have permanently displaced our society by trade policy. THe germans build their society to produce disciplined craftsmen. This is important, because craftsmen can create exportable hard goods. But we have tried to create a service economy. And a service economy must bring people INTO the country in order to serve them. We can create a medical tourism industry. But that is not sufficient. We can close our educational system to foreigners. but that is not sufficient. We can devote vast labor to building nuclear power plants, a new power grid, and electric automobiles. And that might be enough. But we can never put people back into building houses. It creates expensive sprawl. But most importantly, it doesn’t make people ‘skilled’. It’s the intellectual equivalent of ditch digging, and as such it is a vast loss of human capital. Thats the reality of it. So your deficit prediction is based on the assumption that the nation was not at a structural crossroads by the fall of socialism in 1989. It is based upon the assumption that american productivity will continue as it has. But neither the society we call america, or the advantage that was western, or the advantage that was american, persists any longer. We are in for another decade of this economy, and if history is any measure, we are also in for something unpleasantly disruptive in the next generation. And neither side has a plan for getting us out of it.

    • Krugman Watch: Barking Up The Wrong Tree

      Paul Krugman writes, in Permanently High Unemployment

      I really don’t think people appreciate the huge dangers posed by a weak response to 9 1/2 percent unemployment, and the highest rate of long-term unemployment ever recorded

      Paul, You will not get consensus on general liquidity (unbridled credit). You will not get consensus on government spending (expansion of the bureaucracy). You will not get consensus on redistributive infrastructure (city projects). But you will get consensus on investment in strategic competitive advantages if you can identify them. We are going to have long term structural employment. These people are not going to go back to work in their previous careers. You’re right that government can provide a solution. but that solution is to concentrate capital behind investments in competitive production that the market cannot create largely because of regulatory hinderances, or regulatory uncertainty, or regulatory competition. The greatest benefit to the country will be to invest in a new grid, triple the number of nuclear plants, and to convert as much infrastructure from hydrocarbons as possible. There is no mystery why this is a competitive advantage. It will create millions of jobs, especially in skilled trades. You’re just recommending the wrong platform for getting money into the economy. And no one is buying it.