Curt Doolittle

Theme: Reform

  • 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.

  • Hubris, Regulation, Artificial Life and Zombies

    Mariam Melikadze at Adamsmith.org references the movie 28 Days in order to criticize irrational and premature regulation.

    “And so, much like of the opening scenes of an apocalyptic movie, science has reached a great milestone, … The era of bioengineered creatures has officially begun. … But in all apocalyptic movies the great invention inevitably goes wrong. The environmentalists seem to have picked up on this: only a few days have passed since the discovery was revealed and they are already demanding a ban on synthetic biology. Enter regulation, the obvious answer to all of mankind’s problems.”

    Of course, the sentiment expressed in these movies, and our greek myths, is a warning against hubris. In science, economics, politics, and any other personal vanity we engage in. She is right that we cannot unlearn technology. She is right that civilizations who do not adopt technology are conquered by those who out-gun, out-germ, and out-steel them. She is right that these technologies once mastered, tend to deliver material benefits to the survivors. However, that doesn’t mean we should not be cautious, experimental, and cogent of our potential for hubris. And to be cautious, we need to keep that particular mythology alive, lest we invent other technologies like eugenics, complex derivatives, communism and thalidomide. Or engage in other acts of hubris, like the belief that regulation solves mankind’s problems.

  • Response to The Washington Post’s ‘Constitution in decline’ : Actionable Plans vs Sentiments

    Joseph Postell of the Heritage Foundation, whom I admire, posts an article in today’s Washington Times entitled Constitutional Decline. Keeping the tradition of picking on your friends, because it’s simply an easier way to make a point than systematic refutation of your enemies, I respond in this posting with a sketch of a more appropriately rational solution, and a more causally descriptive one, than Joseph’s comforting but in-actionable sentiments. His proposition is:

    If we are seeking the most effective means of defending – and restoring – the Constitution, we must pay attention to the rise of the administrative state and the decline of constitutional government in the United States. … The Founders confronted a basic problem: How to vest government with sufficient power to get things done without giving it the instruments to exercise tyrannical control? To protect individual liberty and rights, they established (among others) two basic principles at the center of our constitutional order: representation and the separation of powers. To assure that government operated by consent, they provided that those responsible for making laws would be held accountable through elections. Moreover, legislative, executive and judicial power would be separated so those who made the laws were not in charge of executing and applying them. …

    [callout]… our problem is that we have outgrown, … the civic republican model that is based upon a separation of powers and the … process of rational debate, because our legislators are not free of the limits that socialists fell prey to: the limits of legislative incentives and the limited information necessary for economic consideration, calculation and forecasting. … Our government literally consists of a technological strategy insufficiently informed to make the decisions with which we have empowered it. [/callout]

    Joseph blames the problem rightly on the corrupt bureaucracy. But does not know how to solve the problem: our model of debate is insufficient for our complexity of civilization. We have abandoned communism and socialism because of the problem of incentives and economic calculation in favor of redistributive democratic secular humanism, without understanding that conservative values and classical liberal procedural limits on power or not, our problem is that we have outgrown, by the division of labor and knowledge, and the increase in technological velocity, the civic republican model that is based upon a separation of powers and the calculative process of rational debate, because our legislators are not free of the limits that socialists fell prey to: the limits of legislative incentives and the limited information necessary for economic consideration, calculation and forecasting. Our government literally consists of a technological strategy insufficiently informed to make the decisions with which we have empowered it. Therefore it is open to abuse – not simply because of intention, but because of folly and a lack of means by which to conduct a rational argument. We must divide up the problem of governance differently – while adding computational capability and adding incentives for responsible actions to an increasing number of people – the vast majority of them citizens who are members of the private sector. In other words, the problem is one of calculation: we lack the data to make rational judgements and therefore rely on sentiments. We lack the incentives and therefore fall prey to the bureaucracy. Joseph, Your argument and your sentiments are admirable. But the institutional problem is well understood. It lies in describing the additions to the constitution such that we create alternative institutions free from bureaucratic corruption, yet which are practically implementable, and which would not require violent revolution, nor extraordinary suffering to implement. As well as a plan of implementation and schedule. Sentiments are easy. Sentiments are wishes in the wind. They are the dreams and fantasies of well intentioned men capable of nothing but exposition. They are the masculine version of a romance novel – experientially pleasant but materially vapid.

    [callout]Sentiments are wishes in the wind. They are the dreams and fantasies of well intentioned men capable of nothing but exposition. They are the masculine version of a romance novel – experientially pleasant but materially vapid.[/callout]

    Plans are tangible things open to action, improvement and criticism. And since Mises, Hayek, Popper, Parsons and Rothbard failed to define a rational model for the post-agrarian world, there is no institutional model by which to deliver us from evil so to speak. Our problems are non-trivial, and vastly more complex than reverting to the debate structure of the framers, wherein a small number of men simply exaggerated the city-state model of the greeks, relying upon the wisdom of platonic pseudo-philosohpher kings to make good judgment despite their representation of craftsman, merchant and farmer alike. This is too simple a form of government for a nation of hundreds of millions producing tens of millions of products and services, and a worldwide empire of trade, trade routes, and a world monetary system we treat as third party, but which, like international policing and trade routes, is the primary source of our empire’s power. Our government has expanded and corrupted into exactly what was predicted by the Iron Law of Oligarchy: We have added judicial review – legislation from the bench. We have added a state sponsored religion: democratic secular humanism. And ostracized the church. We have allowed a bureaucracy to develop that cannot be shut down. We have become an empire over distinctly different cultures with distinctly different economic interests. We have become externally dependent upon our most competitive resource – energy. We have transferred the culture from saving while productive to lend while in retirement, to inter-temporal redistribution from the productive to the unproductive. We have converted government from it’s objective of increasing productivity for the purpose of international competition to the effort of redistributing hypothetical gains at the expense of international competition – we have created the predatory state instead of the productive state. [Callout]We have converted government from it’s objective of increasing productivity for the purpose of international competition to the effort of redistributing hypothetical gains at the expense of international competition – we have created the predatory state instead of the productive state.[/callout] We have converted from a culture of integration whose problem was to enfranchise farmers for the purpose of securing our interior from external conquest, to a culture of disintegration that actively undermines integration. We have all but dissolved the states and oppress the country’s center at the bequest of the coasts. We have destroyed our currency, overextended our empire, exhausted our cultural habits of saving and the ‘Protestant ethic’. And turned our cultural majority into a cultural minority open to conquest by tribal primitivism on a scale and at a speed which would have horrified and panicked Roman citizenry. We have instituted ponzi-insurance schemes under the premise of reducing risk for the few, but in doing so created a redistributive scheme of permanent debt, and insurmountable risk for the many.

    [callout ]We have instituted ponzi-insurance schemes under the premise of reducing risk for the few, but in doing so created a redistributive scheme of permanent debt, and insurmountable risk for the many.[/callout]

    We have squandered a century of post-european manufacturing advantage, not to improve our competitiveness, but to export our jobs in the silly believe that the price reductions would be worth the competitive loss of jobs, as if all men in america could be rocket scientists and engineers. We have immigrated cheap labor without understanding the cost of delaying our children’s entry into the work force. We have demasculineized our military without understanding that the secret to western individualism is in the fraternal order of self-sacrificing soldiers, who by their risk gain earned enfranchisement and after such risk would not become obedient to authority. We have allowed our military to become an administrative machine, and police force only able to operate hierarchically rather than a collection of warriors capable of post-industrial defense and conquest from multiple independent angles. We have adopted silly pseudo-libertarian monetary policy and exposed our lower classes to terrific long term risk, and privatized great wealth at the expense of our working classes. We have trained two generations of children to be lifestyle pets rather than productive and competitive citizens. We have demasculinated men and made vast numbers of them abandon society for the comfort of video games or sports, and allowed feminists to take our their wrath on men rather than on the church, the state, and ignorance itself. And forced men into aged poverty in order to secure a consistent standard of living for children who have yet to become productive. We are a debt society with a predatory redistributive kleptocratic state bent on accomplishing through debt slavery and constitutional circumvention what cannot be accomplished through the proscribed constitutional rules and voluntary democratic process. But worse of all, we have vastly increased the division of knowledge and labor and become a society managed by credit rather than law or religion, but we have not updated our government to consist of institutions that act as a bank, when the credit function is primary lever of our post-religion, post-law government. We must amend our constitution for this reality. Our government must act as a bank whose duty is to issue loans and cooperate with the private sector, and socialize the profits of competitive advantage. for redistribution to the common people. It must take only calculated insurance schemes that are the product of gains in productivity earned by borrowing on the promise of the common people. This institutional change will have behavioral consequences that will remake our state as one that is competitive, and resurrect us from the simpleton idiocy of the redistributive and irresponsible state whose actions are not measured, not earned, and only stopped by near revolt at the ballot box, but inescapable once implemented as law. We must relieve the house of commons from the act of taxation ,and allow it only investment and redistribution of the profits. We must close the department of education and institute a voucher scheme. We must privatize all functions of the state and open them to competition. We must vote directly with dollars against competing published contractual budgets, rather than competing individuals whose promises are immaterial. We must restore the senate to election by the state legislatures, and limit both the volume of taxation and origin to the senate.

    [callout]We must reform our lending system so that loans are not escapable by the originator, and vastly increase the number of bankers, and their quality, so that they are at the level of our lawyers, rather than at the level of our book keepers.[/callout]

    We must reform our lending system so that loans are not escapable by the originator, and vastly increase the number of bankers, and their quality, so that they are at the level of our lawyers, rather than at the level of our book keepers. We must restore local banking and personal advocacy of individuals by bankers, so that we do not devolve into an class of the enslaved, as ignorant of compound interest and risk as we are of laws and due process. We must sunset all laws so that they die along with the poor fools who write them. Laws too often institutionalize silly ideas that would be destroyed by the market of daily experience. We must disallow the development of regulations outside of the legal process, and destroy the power of the bureaucracy permanently. We must separate property definitions, and abstract property definitions (like CDO’s, patents, copyrights, stocks) from the legislative process by creating registries for all legally reconcilable traded property types, and remove the ability for patents to prevent products from seeing the market. Put to practice is insufficient a test for protection: put to market is the only protection we should offer. We must change corporate law to provide the same freedom to sole proprietors and partnerships and LLC’s and SC’s and Corps so that we only have one body of law for each, and one method of taxation for all. We must change taxes such that they do not distort human cooperation, require little or no overhead, and are all based upon both income and balance sheet, so that we encourage men to become independent, but protect the people from the political class of financial predators who circumvent the market purely by the application of capital. We can have redistribution. People under fiat money are DUE redistribution, because it is they who are borrowed against and whom take the risk.

    [callout]We can have redistribution. People under fiat money are DUE redistribution, because it is they who are borrowed against and whom take the risk.[/callout]

    We can maintain our empire, our freedom, our way of life. But it must be calculable to be responsible and accountable. Right now it is unregulated chaos of extreme borrowing using snake oil formulae peddled by charlatan economists, snake oil mathematicians and other hucksters who are no better than entrail-readers, oracles and bone-augers and less accurate it turns out at inter-temporal prediction than the average man on the street. THE FUNDAMENTAL PROBLEM FACING US IS THE WEAKNESS OF THE DEBATE MODEL OF GOVERNMENT IN THE FACE OF THE CALCULATIVE COMPLEXITY OF OUR CIVILIZATION. OUR MODEL IS JUST TOO WEAK. The problem of socialist calculation is still evident in the debate model of government. OUr problem is sufficient information to make decisions, and limiting decisions to where we have sufficient information, and avoiding legislation that uses quantitative, methodological and ideological charlatainism. Some of us who spend time on these theories are diligently working in back rooms, offices, academic institutions, think tanks, cars and showers to solve this problem. But it is not a problem of sentiments. It is a problem of execution.

    [callout ]Institutionalizing this degree of change will not come without violence or trauma. It never has. It never will. [/callout]

    Institutionalizing this degree of change will not come without violence or trauma. It never has. It never will. There are too many with vested interests feeding off the predatory state. But some of us are now more willing to take that risk than we were over the past decades. And it takes only about five percent of a population to force such a change, if that group is willing enough to act to enforce the change.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Conservatives Can’t Remake Society Either.

    Leftists wish to remake society. They want to return us to the “homogenous tribal redistributive society” (HTRS) on a large scale. They will fail. They have failed. They cannot make a homogenous redistributive and tribal society from a multicultural empire of vastly unequal groups of people who who act as competing groups of people. ( See Putnam’s article on the impact of diversity ) The only result of any government over this diverse set of people will be a totalitarian one. While in our fantasies, we believe that we could have immigrated only a certain class of people, or a certain race of people, or both, but the continent is too large, and the chance to profit by importing cheaper labor in each generation diluted the chance to become a large, powerful and single-class-single-race society. The import of the vast numbers of Europeans who then in turn used the new land and ready capital to produce cheaper goods to ship back to europe at a discount was not an insignificant cause of the collapse of european civilization and the resulting european civil war we call the world wars. Status is epistemologically necessary social construct — we couldn’t live without it — and Status also controls access to mates, networks, and opportunity. Since a large and diverse population would doom most people in the population to a status discount in exchange for economic solidarity, they fracture into factions where status within the factional group gives them access to mates within their group, opportunities within their group, and influence in their group. In other words, this factionalization creates an increase in the opportunities for any individual to obtain status. (Islam and Buddhism solve this problem by making status spiritual rather than material. This is the ;primary attractiveness to these religions. They create mental rather than material status. Jews work the inverse methodology: the achieve status by group persistence. Whites are torn, and that is their problem. ) Each little faction in the world seems to desire that they make their whole society homogenous, equal and tribal. OUr tribal instincts, and instincts they are, compete with our status instincts to form an equilibrium between the comfort necessary to maintain a group, and the innovation needed to strengthen the group. We call these the masculine and feminine, but that is to apply gender bias to a problem where gender is meaningless. The only societies who achieve the comfort of tribal equality do so by embracing that feminine tribal homogenous egalitarian principle at large, and oppressing attempts at disruptive status attainment, is the poor, ignorant, and despotic monotheistic societies. And in doing so they embrace the virtueless cycle of degenerative decline. So no, liberals cannot remake society. And if they succeeded we would simply decline in prosperity. They would not make the utopia that they dreamed of. Or rather they might make the feeling of coming utopia, but actually cause decline. Whereas conservatism forces us to face material reality and in doing so we create a utopia we had not planned to. But conservatives cannot remake society either. We never could. Conservatives live by the fantasy that they can create a society where they can legitimately rule, without violence, by merit alone, and that merit the act of denying the accumulation of power, by the force of rules of consent, rather than the promise of violence if those rules are broken. In other words, conservatives who are not willing to use violence to maintain the rules are attempting to get others to pay the costs of maintaining those rules. In more economic terms, conservatives are as unwilling to pay the costs of preventing the accumulation of political power, as liberals are unwilling to pay the costs of enforcing the extraordinary discipline needed to control breeding rates, to work and save, and to build a meritocratic society. So, in this light, conservatives are either foolishly believing the documents of their religion of the American Founding Documents If someone breaks the rules you must resort to violence. The purpose of the rules is to avert violence. The threat of breaking the rules is that we will return to our use of violence. On a regular basis we allow liberals break the rules. Conservatives do not use violence against the state because it would be violence against their church. Yet liberals use violence and protest and insurgency and capital disruption and undermine the constitution, undermine the courts, by-pass the legislature. And conservatives sit by, wondering why their god does not enforce the scripture of the founding documents. Conservatives believe that we can aspire to make everyone noble – a member of the fraternal order of soldiers of equal suffrage. They believe that we can live according to the founding principles of the american republic, rather than those documents only survived seventy years, until the civil war. Afterward it became a useful myth by which the attainment of power could be justified by popular consent. The American founding civilization died with the civil war. Since 1914 we have taken over the role of the british empire. Our ‘god’ died with that war. For a brief period in human history, we created the illusion that a majority of people could join the civic republican tradition. Any man who could fight and could own a bit of land, could call himself noble. Because of our vast division of knowledge and labor, which has freed us from physical labor, and which rewards merit, status, and prosperity to the result of genetic gifts, our citizenry is no longer equal enough to form a large class of lesser nobility and soldiery, that is the social construct necessary for political unity, and cultural and territorial expansion, and the maintenance of an empire. There is no equality of man. There never was. There never shall be. We are unequal. We are unequal in physical ability and intellectual ability. (( Human capital is an asset that is worth investing in: when educated in large numbers, african americans only improved in IQ slightly, they did improve. )) We cannot have a government of equals unless that society is extraordinarily small and homogenous. The republican form of government was always a minority form of government. It was simply a meritocratic minority form of government, that desired a constant expansion of and rotation of the elites in order to keep the homogenous society competitive and the elites prosperous. To attempt to make a homogenous tribal redistributive society out of an empire of heterogeneous is simply an impossible act. THe question then, is do we fragment the empire so that each fragment may have a homogenous tribal redistributive society, or do we rule the empire in self-defense, to protect ourselves from it? Any group that wishes to maintain power must in the end do so by its willingness to use violence. Any group of meritocratic individuals must maintain power or become the subject of extortion by less meritocratic groups : usually the priestly class or their modern version the public intellectual class. THis is another instance of the ancient battle between those who coerce by words and those who coerce by force, and those who coerce by trade. Conservatives are, by and large, the remnants of lesser nobility. They practice military epistemology. (( Military epistemology is the most accurate epistemology because the outcome of taking risks is very high. Nassim Taleb discusses this topic in The Black Swan. )) The questions we must answer are : 1) Whether we will use violence to maintain the meritocratic society, or become enslaved by the Bonapartist (( Bonapartism: democratically elected totalitarians )) ambitions of the politically active minority. (Contemporary Russia is a Bonapartist state.) 2) Whether we will break the nation into regions which may choose different approaches to government and allow people to vote with their feet, or whether we will stay an empire and attempt to force people into the Civic Republican Model. (( Immigrant urban areas will choose Bonapartism, the south, and middle of the country will choose meritocracy, and the west coast democratic egalitarianism – at least as long as the center of world trade remains the pacific rim. ))

  • Bad Policy In Democracy Is The Outcome Of War And Revolution Is The Outcome Of Bad Policy

    The war period has been highly controversial, and unfortunately led to a radical minority taking control of our government, and that minority is creating policy that is against the will of the majority of the people. This is another example of the dangers of war. Countries overreach during war. Empires overreach. Democracies, counter to conventional wisdom, are actually very willing to wage war. Yet they are unwilling to continue them. In a democracy, an exaggerated counter reaction develops in response to warfare, because only exaggerated reactions are possible, when the nation consists of opposing forces whose extreme elements determine the candidates. Extremes breed extremes by creating a dichotomy of choice between dramatic positions. These positions then empower the radicals. There is no failure to understand this trend in history among political scientists. There is every reason to advocate it among political theologians. This is because there are very few political scientists that measure what people actually DO, and many political theologians who recommend what people SHOULD do. Evidence is what it is. Democracy is a dangerous construct when government is a debate over the reigns by which one economic class or philosophical class can oppress the other, rather than forming a government where each class has control only over those issues where their class has demonstrated accomplishment. This was the reason for the property requirement in the USA’s founding. While property may be an insufficient requirement in modern society that is no longer dependent upon farming, we do not have houses of government that represent classes and we need a means of empowering houses and regulating participation in the, and we must return to that state of affairs, or continue our decline and class warfare. As I have stated before, we are all unequal in our ability to create violence. Some of us petty interpersonal violence, some of us rabble and protest, some of us revolution and civil war. I only constrain my violence because I feel the state acts justly. But we are nearing a point where I feel that the state has become a means of class oppression, specifically designed to doom me to poverty and dependence in old age, and to do my heritage, my class, and my people to servitude under a false argument for morality. And while I have rejected their please twice now, the next group of people that offers me money to raise a revolution will find me a willing advocate of bloodshed. War is dangerous because it makes a polity and it’s state fragile, and allows radicals to obtain purchase amid the chaos and dissatisfaction, which in turn leads to oppression, which in turn leads to civil war. While the myth of the general strike is a commoner’s revolution, the myth of a violent minority creating a coup is the nobility’s revolution. And I’m getting very close to changing from a public intellectual to a violent revolutionary. It is only marginally more interesting to be personally acquisitive, run companies, and write for a living than it is to wage war. And it is becoming painful enough to pursue the former, that the latter becomes more enchanting by the day. We have an entire american civilization around the great lakes that is in decline, and like china, have coastal areas that oppress the interior. And a southern border under assault because of fear by those in power to protect the southern states. That is our nation’s fragile position. It simply requires fomenting local interests against a universal federal government, and restructuring our government so that it is either representative of the different nations that make up the American empire on the north American continent, or that we destroy our imperial government and restore power to the regions. The world has adopted commercial capitalism. We have completed the act for which our federal government was created: to sell off the american continent. We no longer need to be the world’s policemen. And we are no longer competitive enough and possessed of enough advantage that we can continue to do so. Now we find ourselves the citizens of a corrupt and declining state. It is time to let local areas prosper, and return to the practical matters of civic interest in local development and politics away from our fascination with theocratic democracy, socialism and empire.

  • Schiller Takes A Step Toward Capitalism 3.0

    From an article in the NY Times. A Way To Share In The Nation’s Growth Robert Schiller, who I greatly admire, recommends one step toward Capitalism v3.0. Why? Because investment in the productivity of a nation does not privatize wins and socialize losses, as does debt. It is gambling, but gambling by people who know what they’re doing, rather than simply impoverishing citizens for government’s incompetence. I have worked on this particular theory quite extensively, and it appears that the worldwide impact would be positive and durable. The argument against it, is that it makes governments accountable. And the entire purpose of government seems, at least from the historical record, to be one of avoiding political accountability at all costs. Which is precisely why we need this particular solution.

    Shiller: Sell Shares in the U.S., Not Just Its Debt Thursday, 31 Dec 2009 09:09 AM Article Font Size By: Julie Crawshaw Yale economics professor Robert Shiller says a new kind of government security is needed, one based on equity instead of debt. “Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits,” Shiller writes in The New York Times. “Governments should do something like this, too, and not just rely on debt,” he says. “We would sell shares in America instead of just debt of the American government.” Shiller even suggests a name for the new security, which would be based on Gross Domestic Product: a “trill,” because it would represent one-trillionth of annual GDP. Though GDP numbers still are subject to periodic revisions, “the basic problem has been largely solved,” Shiller says. “Such securities might help assuage doubts that governments can sustain the deficit spending required to keep sagging economies stimulated and protected from the threat of a truly serious recession.” If substantial markets could be established for them, Shiller notes, trills would be a major new source of government funding, issued with the full faith and credit of the respective governments — which means investors could trust that governments would pay out shares as promised, or buy back the trills at market prices. “What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” Bill Gross, co-CIO of Pimco, told The New York Times. “It’s capitalism, I guess, but it’s not to be applauded.” © Newsmax. All rights reserved.

    When governments no longer can justify violence, they resort to fraud. Debt at this level is either ignorance, stupidity, the replacement of wisdom with ‘hope’ which is a secular version of trust a divinity, or simple outright fraud. And it is not a question of political parties. The left destroys through it’s kind of policy debt, and the right though it’s kind of monetary debt. The only difference is that the right’s method can be corrected through a recession, depression, price adjustments and fiscal collapse. The left’s will require a bloody revolution, and destruction of the civilization itself. Between those two ‘bads’, perhaps, the ‘bad’ of the left is worse, but it is only marginally worse. It would simply be better for all of us if government could not commit fraud on such a scale, ever, under any circumstances. To prevent policial fraud we need methods and processes that are measurable, and to measurable they need to be calculable. Calculability is an extension of perception, and an extension that is necessary because our innate human perception is unable to make judgements without the aids that calculation provides for us. (Numbers represent consistent immutable categories.) Accountability requires calculability. Capitalism 3.0 creates political accountability through plain old fashion calculability. Curt

  • A Convert: Winterspeak and the Public Purpose Of Banking

    Over on Winterspeak, I found another convert.

    ….a bank should be required to keep all loans it makes on its books until maturity.

    In under six hundred words he provides a solution to a great deal of the problem. I’ve extended this basic line of reasoning to explain WHY banking should be run this way, WHY the public should and must insure banks, and WHY we can provide redistribution using these institutions, and HOW to look at government differently. But then I’m trying to solve the broader problem. To determine how we must govern, we must agree on what life we desire. To agree on that life we must understand what kind of creatures we are. These two statements are as old as philosophy itself. However, these ancient questions are formulated with an assumption about our power of decision making: we may not be able to make decisions with out the institutions that help us do so. The civic republican tradition of political participation assumes we can make such judgements, or that we need only philosophical knowledge or religious tradition to do so. When, at some level of complexity we cannot sense the data with which to make these decisions in any possible way. I’ve included the article here in it’s entirety for posterity.

    Winterspeak The Public Purpose Of Banking THURSDAY, NOVEMBER 12, 2009 The Public Purpose of Banking While Lloyd Blankfein claims bankers are worth Billions, even as they destroy Trillions, it’s worth taking a look at what the public purpose of banking is. Chicago economists, sit back down, the public purpose of banking is not to enrich their shareholders any more than the public purpose of pharmaceutical companies is. Capitalism works by enriching owners as they compete to provide some value to customers. So, what is the value that banks deliver to their customers? First, what is a bank? My definition is simple and goes to the heart of their public purpose: a bank is an entity that has a reserve account at the Fed. That is it. If you have a reserve account at the Fed, it means you can lend unconstrained by your reserve balance. Briefly, this is how it works: 1. You make a loan. This debits your reserve account, and you credit a receivable account. 2. The loan gets deposited, which credits that reserve account, and credits a liability. Note how the loan created the deposit, not the other way around. 3. If the loan and the deposit are made at the same institution, that institution has no net change to its reserve levels. If the loan and deposit were made at different institutions, then the institution short reserves borrows what it needs from the institution long reserves overnight. That’s it. If you or I make a loan, we cannot use the reserve credit that the corresponding deposit creates to top up our own reserve levels. Thus this clear, operational difference between banks and non-banks. Ultimately, the Govt creates all reserves, so why not just have the Govt make loans directly? Because we do not want the Government to make credit decisions, they are too likely to dole out money to politically connected constituencies, while starving worthwhile, but unconnected borrowers. You can see this today, as banks and unions get Billions, while shop keepers, dry cleaners, manufacturers, and restauranteurs shutter their businesses and go on the dole. An institution that makes loans it knows will not be paid back is not making loans at all, it is making gifts, and the operational bankruptcy of the FHA is a great example of this in action. Many adjectives come to mind: corrupt, wasteful, abominable, unfair, fraudulent, etc. This is the opposite of Responsible Governance. Barry, we really expected more. So, to keep responsible lending, we put private capital infront of public capital and ask that private capital take the first loss on loans it makes which turn out to be bad. Ultimately, taxpayer money is there as backup, but it should not be directing investment. We call this institutional arrangement a “bank”. This simple sensible construct is utterly lost on policy makers and the commentariat alike. For banking to do the job it is meant to do (ie. make loans that will be paid back), a bank should be required to keep all loans it makes on its books until maturity. It should be forbidden to participate in any secondary markets, in any way. It should not run a prop trading desk. It should not sell insurance. It should not have a fee-for-service business. It should simply conduct its own credit analysis, make loans, and service them. And in return for providing this public purpose, a bank shall have a reserve account at the Fed.

  • Writing the script for this week’s video shoot on how to fix the global financia

    Writing the script for this week’s video shoot on how to fix the global financial system.

    Source date (UTC): 2009-02-15 22:11:14 UTC

    Original post: https://twitter.com/i/web/status/1213415596

  • is working on tomorrow’s strategy session. Cool stuff. The New Agency. Fixing Th

    is working on tomorrow’s strategy session. Cool stuff. The New Agency. Fixing The Corporation.

    Source date (UTC): 2009-01-14 19:03:00 UTC