Friday, December 16, 2011

Funny.

There's almost nothing that makes me happier than this tonight. Two friends, Alex Pappas and one of my favorite people, Jeff Winkler made it into a Funny or Die Caption Contest.


I'm so proud :)

Monday, November 28, 2011

1968? Really?

New York Magazine has a wonderfully positive piece today about Occupy Wall Street/etc. centered around a main figure in their activist community. The whole thing is pretty predictable ("OWS had scored plenty of victories" vs. "provided the right with fuel for feral slander... and casual caricature."), but it also highlights something that has been really annoying me for weeks now.

The article reads:
"It’s perfectly possible that... the raucous events of November 17 were the last gasps of a rigor-mortizing rebellion. But no one seriously involved in OWS buys a word of it. What they believe instead is that, after a brief period of retrenchment, the protests will be back even bigger and with a vengeance in the spring—when, with the unfurling of the presidential election, the whole world will be watching. Among Occupy’s organizers, there is fervid talk about occupying both the Democratic and Republican conventions. About occupying the National Mall in Washington, D.C. About, in effect, transforming 2012 into 1968 redux."
It seems to me that it's probably true that the Occupiers believe that they are the second coming of the Civil Rights Era... Talking to many of its more fervent supporters over the last couple months, I have certainly gotten that impression.

But let's look a little more closely at a key difference, shall we?

In 1968, everyone - from Martin Luthor King, Jr. to Malcom X to the Black Panthers, to the cops turning fire hoses on protesters - knew what they were there for. Not as a matter of abstract "outrage", but as a matter of clearly defined principle, with clearly defined end goals.

Simply put, it goes a bit like this:
  • Problem: African Americans were being systematically denied access to the American political system, and in the market.
  • Solution: Amend the Constitution to be explicitly include and define the requirements of government to protect the rights of African Americans as well, use Federal government resources to enforce these changes at the state & local levels which had been the main violators of rights at the time.
Now, I know this is simplified and that many people disagreed on both the methods of protest, and the specific details of the final changes... and, for that matter, the final implementation also included a handful of rights-violating provisions of their own. But one thing that I think is relatively undeniable here - even when different visions collide (i.e. MLK vs. Malcolm X), they are still defined visions! There were always relatively concretely outlined goals and recommended courses of action.


Can we say anything even remotely like that for Occupy Wall Street?

As far as I can tell, a few months in at this point, not only does every single 10-person "occupy" group around the country have its own "General Assembly" and official positions (maybe), every single individual member takes whichever positions they want a la carte anyway.

Ok............ How?
Do they want redistribution of wealth from "The 1%" to "The 99%"? Is there any universe in which that is not anything but a nonsensical and bullshit platitude? Do they want to prevent corporations from having Political Action Committees and lobbying Congress? How does this square with free speech, freedom of assembly and the freedom of individuals (make no mistake, corporations are - like OWS - still just a collection of individual people banding together for a common purpose) to petition the government for redress of grievances?


Do they want to overthrow "Capitalism" and replace it with... Communism? Social Welfare State? Direct Democracy? Do they want to simply increase the already staggeringly large number of regulations already on the books? If so... Which regulations?

Let's say that all of OWS agrees that the "problem", so to speak, is that "corporations" are too powerful and a corrupting influence on government. I could even agree to a limited degree... but even this type of statement is far too broad to be meaningful. Which corporations? All of them? Even the sole-proprietership bakery in say, McCool Junction, Nebraska, which has no lobbying connections or capability?

The whole OWS movement is one giant ball of contradictions, conflicting (or outright confused) intellectual viewpoints, and meaningless platitudes that only serve to obscure reality. The whole idea that it's leaderless and that it's very individually based entirely misses the point. If you want to be a bunch of individuals, each with his or her own unique set of values, goals and ideas on best courses of action - then do what I do: Don't join a freaking group!

The whole point of joining a group is that the increased numbers can help provide some "oomph" behind a unified message or set of goals... But if you don't have a message, much less a single concrete goal... Then......... What's the point, guys?

I am getting really tired of having to ask this, but... to all the Occupiers out there: What's the action item? What's the goal? What are you hoping to accomplish?

At some point, it'd be really cool to get an answer.

Friday, November 25, 2011

Thanksgiving

It's Thanksgiving again, and I find that my reflections on this holiday are mixed.

As I write this, I sit with my family watching Ken Burns' "Prohibition"... which, thusfar, has been a perfect example of the way "good intentions" destroy other people's lives (frequently the lives of the most vulnerable) when backed by the state.

But still... I am thankful, for example, that I just enjoyed an amazing meal cooked by my father which included not only a wonderful local Columbia Valley Semillon, but an Ice Wine for dessert as well - and no government thug prevented us from doing so.

Great book!
I am also immensely thankful that yesterday I read virtually the entirety of Matt Ridley's powerful book, "The Rational Optimist". As disheartening as much of the world appears to me to be these days, Ridley reminds us how good we all have it today, and how much prosperity has exploded for human beings all across the planet. He also provides an amazing amount supporting evidence for what good economists would have surmised - that human cultural and economic development, and our amazingly sharp increase in wealth bringing literally billions of people steadily out of the "natural" living conditions that reflect absolute poverty by modern standards, is a result of freedom & trade. I will likely write more about this later.

Today, in the spirit of Ridley's book, I want to take a minute to express my thanks for the people and events that are usually, incorrectly, vilified.
I want to thank the "robber barons", for bringing prices of everything they touched down and thus bringing products & services previously only available to kings within reach of the poor. Specifically I want to thank Andrew Carnegie for making transportation and steel accessible to most, and I want to thank Rockefeller and oil for saving the Whales from certain extinction by introducing a vastly superior alternative to the prevaling energy source of his day.

This cute "energy source" still exists today
because their blubber was outmoded through
creative destruction.
I want to thank oil and other "fossil fuels"... for being amazingly efficient and indeed, one of the most sustainable and even clean fuel sources the world has ever seen. I want to especially thank it for providing a cost-effective alternative to mechanical work which would otherwise be done by (mostly enslaved) human hands or animal hoofs. The reliable abundance of energy has not only made humans incalculably better off, it has spared untold millions from crushing, miserable lives of slavery and poverty as well as spared horses, oxen and other fine creatures broken bones, cruel owners and painful deaths. At some point, perhaps a new fuel will be employed that does even more to alleviate world-poverty, but without oil, coal, natural gas and the like, you can be assured that everything I have done in the last 24 hours - not to mention the computer I am writing all this on - simply wouldn't exist. Instead, we would be as poor as anyone in the Dark Ages.

Earned his Nobel Prize by saving a billion people from starvation.
I also want to thank genetically modified foods. Without the vastly superior crop yields generated by these innovations, most of the world would be starving to death instead of continually becoming better fed with each passing year. In addition, without these advancements, the land would be environmentally devastated... to feed a growing human population without increasing output per acre as we have would require more and more area of land given over to agriculture, and that would wreak havok across the world. We would have more erosion, more deforestation, more disease. Disaster. Norman Borlaug and his colleagues prevented this.

I want to thank Walmart, Target and other typically hated "big box" retailers, and in fact I must thank every innovator of business systems to bringing down the price of goods and services through advancements in supply and distribution networks, and throughout the production process. These advancements have brought higher productivity (and incomes, regardless of the common myths to the contrary) to American workers while dramatically falling prices benefit consumers everywhere - especially the poorest among us.

Villain? Hardly.
On this note, I also want to thank Target - I'm spite of their recent bad press - for opening early on Thanksgiving and today, "Black Friday". It is true that some whiny middle class kids who don't want to work are probably missing some family time... of course, if they valued their family time more, they could certainly quit and seek (or create) employment elsewhere. But... I suppose this would all be very sad if it weren't for the other side of the story. Target and their other competitors opening in the middle of the night for Black Friday sales means that truly poor people who work there and who don't have the luxury of complaining about getting up early have an opportunity for earning more this month - even getting a seasonal job that woukd not otherwise exist - as a result. It would also be an injustice to fail to mention that Black Friday sales not only keep retailers afloat and provide jobs and hours to people who may need them the most, they also allow many, many people the opportunity to save a lot of money - particularly on gifts for their friends and family.

It is unwise to undererestimated either the cumulative effect of lower prices (allowing people to get more value from each minute of their working lives thus obtaining higher standards of living and/or more free time) or the importance of social traditions like gift-giving at Christmas time.

If a handful of rich people who would rather complain than work succeeded in restricting the hours of operation of stores like Target - purely on the aesthetic view that "it sucks to work on a holiday" - it would be the poor worker and the poor consumer hurt by far the mostm via the loss of work opportunity (or even the decline in seasonal jobs overall) and a rise in prices. Don't be fooled by comparatively wealthy people imposing their luxury values on everyone, regardless of how noble their cause may seem. The net result is inevitably terrible for anyone who is actually poor.

And lastly, I want to thank... Freedom, mutually respected property rights & trade. Without them, everything else I have thanked above doesn't exist.

So to borrow directly from Ridley himself... I want to thank "ideas having sex" for making the truly fantastic living conditions enjoyed by continually more & more modern humans throughout the world possible - by any comparison to the conditions available to us at any time previously in our history. In spite of how dispirited I can become watching the same terrible arguments crop up over & over - ready at a moment's notice to destroy, impede or prevent prosperity - I find that taking the long view today keeps me optimistic.

There is still much to be thankful for.

Thursday, November 17, 2011

Political Spending Reminder: Statists Win.

I posted this a while back when I was talking about who actually makes up the bulk of political lobbying & political donations... But after a brief exchange on Twitter where I was told that it's always the "capitalists" who control everything, it's worth putting up again today.

Here, you will find the top political donors between the years 1989 and 2012, as compiled by www.opensecrets.org:


At least for me... Here are the major take-aways:
  1. Unions dominate political spending, and have for a very long time.
  2. Pretty much all unions, but particularly the public sector unions (who - in a spectacular conflict of interest  to the taxpayer - are spending members' money to elect the people on the "other side" of the apocryphal bargaining table), give almost exclusively to Democratic politicians.
  3. Predictably and by contrast, when you look at the corporate political spending it is split fairly evenly between Republicans & Democrats.
  4. To the extent that any organization within this list of the top 30 political donors contributes most heavily to Republicans, the split is not overwhelming in the way that union spending is.
  5. It is not "capitalists" who have the most influence, but rather any well-organized special interest groups.
 Indeed, if you break down the support by political party... You find that of the top 30 groups within the last 23 years, 70.2% of that money went to Democrats, and thus just 29.8% goes to Republicans. Interesting breakdown, but aside from the mythbusting aspect of this (in that the common misconception is that Republicans get all the money, when that's absolutely not the case), I'm not interested in whining about the uneven distribution of political spending... Cause Republicans also suck.

Here's my thought on this:

We all already know Democrats are abysmal on limiting the power of government. That's more or less their raison d'etra as far as i can tell. "They" (by which I guess I mean the Democrat political class) favor expansions of state power in literally every aspect of our lives. Even when ostensibly allowing for more freedom, such as marijuana legalization (which the current crop of Democrats is pitiful on), they still favor centrally managing and taxing those things. So we're looking at more state power over education, health care, transportation, the market in general, finance/banking, etc.

But Republicans as well are generally awful on everything too (if your goal is limiting the state)!

More state power over people's relationships, over their bodies... More state power to wage wars internationally - even without declaring them or having the slightest shred of moral justification. In virtually any area in which Democrats aren't aggressively trying to expand political power over people's lives, Republicans tend to pick up the slack.

And all groups work tirelessly to dole out special benefits to favored special interests... Because, well... That's the whole point.

So what do we learn?

Statists win, and they win BIG. In fact, it might even be fair to say that the more statist your political platform, the better you do in the long run - particularly when it comes to control over the economy. The other thing we learn is that libertarian ideas don't even warrant an honorable mention.

I think Philosoraptor got it right: If big businesses love the free market so much and have so much control over politics... Why don't they support libertarian candidates?

Wednesday, November 16, 2011

Holy Cognitive Dissonance, Batman!

My twitter feed is filled with all kinds of interesting, odd, surreal, insane, hilarious and sometimes upsetting things. I tend to like it this way because I get a lot of viewpoints and a lot of ideas. But sometimes... holy cow. You get something as unexpected as this interview/debate, from Playboy Magazine, with the notorious conservative blog-tycoon Andrew Breitbart... and famed liberal journalist, Paul Krassner.

First off... Huh? Breitbart?

But no. That's not even the interesting part! The interesting part was when Krassner blew my mind with a stunning display of cognitive dissonance - the likes of which I've almost never seen so clearly before ever. Feast your little eyes at this:
KRASSNER: It’s revealing that Norman Thomas ran for president six times as the Socialist Party candidate, and though he was defeated in each election, over the past several decades every one of his platform planks has been adopted by both Republican and Democratic administrations. The laws they passed just weren’t labeled socialist. Now, I have no economic ideology, but I realize there is something wrong with capitalism. I realized it as I read the business section all those years before the recession was officially declared. I noticed day after day these news items about hundreds of employees being let go by different corporations, and yet their shareholders were pleased because the value of their stocks went up. There’s something wrong with that. In the insurance industry especially, greed became a preexisting condition.
Let me just go back over that once more so your brain has time to fully digest the comment...
"...over the past several decades every one of his [Socialist Party] platform planks has been adopted by both Republican and Democratic administrations."
and............
"I realize there is something wrong with capitalism."
Wow. Explain how a 79 year old man can say these things without a trace of irony. Please? I mean seriously. He outright acknowledges that we've moved in a distinctly socialist direction, adopting literal planks of the Socialist Party platform, and yet still manages to blame "capitalism" for failures in the economy.

I'm speechless.

Sunday, October 30, 2011

Thing I learned today: HuffPo users are idiots

I'm not even going to go into much detail here, as I think the comments and my replies will speak for themselves. On an article which had linked video of Jon Stewart interviewing Andrew Napolitano, "Huffington Post SuperUser" ScreenName05 wrote some incredible nonsense in multiple places which I responded to. I'll present just two examples here, because he (assumption) actually replied to my response.

First, is this...
ScreenName05:"I think he also ignores that without government­s we would all be getting guns and blowing each other's heads off whenever we felt offended.

Oh yeah, that is what we used to do in the wild west. That is what people do in Afg. That is what people do in Somalia.

At what point do libertaria­ns realize that the only reason they get to spout their silly, naive and foolish ideas is the government protects them from the rest of us."
Me: “Cept... Umm....


That didn't actually happen, Super User... Even Cracked.co­m figured it out 
http://www.cracked.com/article_18487_6-ridiculous-history-myths-you-probably-think-are-true.html 
More on that: http://www­.thefreema­nonline.or­g/featured­/the-non-e­xistent-fr­ontier-ban­k-robbery/


Perhaps you shouldn't get your history from movie & TV 'Westerns'­? It's not very accurate.”
ScreenName05: "So you are dumb enough to believe that Billy the kid (the Lincoln country wars), the James brothers, the Cole brothers, Quantrell'­s raiders and a host of others did not exist, and didn't really kill people?

You might try real history instead of silly web sites."
Me: "Did I say they "didn't exist"? Nope.


What I said - or really implied in the rather short comment - was that the "wild west" you see in movies is bullshit.


There were not a huge amount of murders, and in fact the amount of murders in the so-called wild west states like Arizona (where Tombstone is), had far FEWER murders than the more "civilized­" Eastern states.


The lawlessnes­s and danger that you think existed in those parts of the country were a myth ginned up by Hollywood because Westerns are romantic and gunfights are good TV.


Nice of you to call me dumb though. Go figure."
I figured that by pointing out that even a silly site like Cracked has better information than the HuffPo "Super User", it might be enough as a rebuttal. But no... I guess I'm "dumb".

More on the "Wild West" that wasn't so wild here, and in this book.

We also have another amazing point, and subsequent response from our new friend, regarding a point by another (I'm guessing) libertarian commenter defending Napolitano. I assume the original poster was a libertarian as he referenced, and recommended reading Murray Rothbard's "Conceived in Liberty". I also recommend checking that book out... But again, Huffington Post Super User strikes back with this bit of amazing intellect...
ScreenName05: "You are confusing libertaria­ns with civil libertaria­ns. Different animals - civil libertaria­ns are staunch advocates of the constituti­on, especially the bill of rights and the 14th amendment - as they are the basis of civil rights in the United States.

Libertaria­ns on the other hand simply want the government to stop interferin­g with their property rights. They generally have no concept of the need for laws that deal with increases in population - as long as they are left alone. This worked when you had 3 million people in America - it does not work when you have 330 million. You need urban planning when you have 10 million people living in 100 square miles. You need police making sure the strong do not steal and kill the weak. You need laws that protect consumers from con men and frauds.

Ignore reality if you want, but do not try and confuse us with ignorance."
Me: “Actually, the fact that there are 307 (not 330) Million Americans is not an argument for more urban planning but - in fact - less. The more people you have, the more it becomes utterly impossible to plan out how those people should act in ways that are actually value adding.


Consider that if I have a family of 4 people, central planning isn't so tough. I could coordinate use of a car, dictate when my kids go to bed, set establishe­d rules of order for the house, dictate when and what will be for dinner, etc. And everyone can be reasonably ok with this.


Now try to do this with 400 people. Even with 100x the resources to scale everything up equally, there is simply no way for me to dictate how each and every one of those people acts in a way that encorporat­es their unique goals, values & preference­s. If you scale that up again to the level of a city, it's even less possible still.


Now, of course, I'm talking about full on central planning - but even simply planning out streets, zoning and other aspects of "urban planning" have resulted in innumerabl­e disasters in urban areas. See: Robert Moses with New York... Rampant eminent domain abuse...Di­sastrous "urban renewal" projects that often include giving giant subsidies to owners of sports teams for new arenas... Zoning that has created permanent "poor" areas devoid of trade, residentia­l communitie­s with no immediate access to stores, and countless other problems.”
ScreenName05: "It is hard to argue with indignant ignorance like yours. And pointless."
Me: "MMMMMMmmmm­m... Ad hominems are fun, aren't they?


Bad form for debate though. Thanks for letting me know that my taking the time to present you with a real argument and references to actual historical and modern events was a complete waste of my time, though."
I'd cite more on this too, but honestly, how hard is this to understand? Urban planning resulted in Robert Moses destroying a huge chunk of New York City and putting in a bunch of crappy highways, as well as resulting in low-income housing we now know as "The Projects" in most major cities around the US which did nothing except concentrate poverty & crime in certain areas that were also conveniently devoid of jobs, schools & services.

Plus, go see the Battle for Brooklyn, to check out what Urban Planning is doing to New York right now. It's not pretty.

And then, there's this... Which I wrote music for:

Honestly... Fail, buddy. Fail.

Anyway, I spent like half my day today reading other comments on HuffPo and found them all to be distressingly devoid of intelligence, historical knowledge and almost everything against libertarianism came down to "Hey guys, why don't you just go live in that number one libertarian paradise: Somalia!".

Ugh.

Robert Reich: Clear, Simple & Wrong

By now, you have probably seen Robert Reich's cobbled together series of weak talking points cut together in a video mistitled "The Truth About The Economy". Honestly, I haven't written too much on Robert Reich, but today (by which I mean - at this point - 3 months ago!) my buddy Isaac did a breif point-by-point dismantling of Reich's video... which, in case you haven't seen it, looks a lot like this:



Now... Here's Isaac:
1) "Since 1980, the American economy has almost doubled in size."

I'm presuming he means GDP? I don't know where he gets this:

Absolute GDP growth:

http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/US?display=graph

Per capita GDP growth:

http://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG/countries/US?display=graph

2) "Since 1980, most people's wages have hardly increased"

Wrong:

http://visualecon.wpengine .netdna-cdn.com/wp-content/uploads/2008/05/avg-income-2006.jpg

2) "Almost all of the gains have gone to the super rich"

This is misleading if you just look at raw numbers and averages:

The lower quartiles have actually experienced a faster growth of income than the rich, if you track individuals over time.

http://www.youtube.com/wat ch?v=vDhcqua3_W8

3) "All this wealth has given the rich lots of power, including the power to lower their tax rates."

True, the super rich do exercise a gross amount of political power, but I think there's a chicken and egg problem here. Most of the extremely wealthy families have been so for some time and have been exercising political power for at least as long. It's a self-feeding cycle, but I think his implication is that "these people got rich without government and then manipulated government." That certainly is true some of the time, but many of those wealthy families got rich *by* manipulating government power.

4) "This leads to huge budget deficits"

The idea that the only reason we have budget deficits is because the rich have lower tax rates is (sorry) FUCKING RETARDED. You could tax the rich 100% and *still* not cover the deficits our government is facing.

http://freerepublic.com/fo cus/f-news/2688472/posts

5) "Instead of joining together for better wages and jobs many people are so scared that they're competing with other working people for the scraps that are left behind."

Uh, what? Firstly, being "scared" has nothing to do with labor competition. People compete for jobs because it's the natural thing to do. Improve your skills, education, etc. Apply for better jobs. What exactly does this guy expect people to do? Politely step out of the way so someone else can have that job? How does that even work?

Secondly, the whole "scraps left behind" thing just screams zero-sum game reasoning, which jobs are not.

"So we get union vs. non-union... public vs private"

Ohh, he wants everyone to unionize... Right, because union states are doing *so well* against non-union states.

http://www.safehaven.com/a rticle/21577/jobs-income-data-show-right-to-work-states-have-advantage

6) "The vast middle class unable to borrow as it could before no longer has the purchasing power needed to get the economy growing again."

Firstly, I'm not convinced that the middle class is unable to borrow. I can't find any stats either way. But this is sort of beside the point. Purchasing power comes from income and savings, not borrowing. Borrowing only allows you to spend now what you'll have later, with a net *decrease* in total purchasing power (due to interest). The idea that borrowing is essential to economic growth is absurd.

And now for a little ad hom :P

http://mises.org/daily/733
I have virtually nothing to add here, but I will say that a week or so ago, Reich's video made it around my new office and all the Economic Freedom team people were both moderately irritated by Reich's willingness to play fast & loose with the facts, and to gloss over important details like income mobility; while also being a little shocked that the thing has been viewed by so many people.

Neither of those things surprises me, though. In fact, to a degree, they are related.

HL Mencken said:
"For every complex problem there is an answer that is clear, simple, and wrong."
And when Former Secretary of Labor, Robert Reich claims to be able to explain what's going on with the economy in 2 minutes... You can be sure that his clear, simple solution is just... Wrong. Way wrong, in fact.

Keynesian & other mainstream economists who rely heavily on macroeconomic modeling always make the mistake of operating far too much with aggregates and rarely dig into the details of their data sets in ways that they really need to do to actually understand what's going on.

Smooooooooooth.
So much of economics works that way, though. If you look at general statistics on compensation for men vs. women, you find that women make around 75% of what men make. Except, when you dig into the details and start controlling for hours worked, amount of time spent at the same job or in the same profession, full time vs. part time employees and marital/child status of men & women you find that that pay discrepancy disappears. This is how we should all know how to weed out bad economists from good ones.

Guys like Reich will take an incredibly complex national or even global economy and reduce it to a handful of aggregate numbers, and then make false conclusions without actually understanding the human elements operating within that system. No accounting is made for incentives, for the effect that monetary expansion and low interest rates - not to mention the numerous regulations and subsidies government has put in place - have on creating bubbles and their subsequent crashes.

Human action matters. Incentives matter. And aggregating all your data and drawing stupidly simplistic conclusions isn't a good way to do economics. Use all the math and the statistics you want, but you have to understand that these things are devoid of context and given the right inputs, you can get whatever output you want... Simply because the data sets are too big and the variables far too numerous to actually do anything meaningful with without zooming in.

Reich needs to zoom in.

But the tragedy here is that the video Reich made is incredibly convincing for people who are looking for an easy answer, and looking for a scapegoat and finding ways to blame their own dissatisfaction with their situation on someone else. As a video producer, I'm always looking for good ways of explaining and characterizing information in ways that are effective and convincing to people with no knowledge of economics.

Unfortunately, as one of my coworkers put it regarding Reich's video; the take-away from this video is that if you're willing to toss out reality, you can get a lot of views.

Note: This blog was originally drafted in July... But the demands of my job at the time prevented me from completing it. I'm just now catching up.

Tuesday, October 25, 2011

S-S-Something from the Comments: Occupy the 1%

This morning, I got a well-written comment from "Jackylhunter" on my recent post, "Dear, Occupy Wall Street. You are the "1%" too.". I didn't go into a ton of detail on that post, since it was really just highlighting a great info-graphic on Americans' comparative wealth versus the rest of the world. I didn't do much in the way of explaining the points I made in addition to that.

So... I left myself open to some obvious points, and commenter Jacky took the time to question a few things that are worth responding to directly. I'll just go through bit by bit here. First:
"You may want to check your definition of socialist state, or at least define what type of socialist model you are referring. Versus a totalitarian state. Which I feel is your real grievance."
The real grievance isn't at all exclusively about totalitarian socialism, but in fact, socialism as an idea - as a concept.

If this were actually true, it would just be one
more reason to ignore Jesus.
As I hope most people who know me understand, I try my best not to deal in strawmen or make bad-faith arguments, and after a decade or so of interacting directly with self-described socialists, debating, I feel confident that I do have a very firm grasp on their best arguments in favor of the system and their best definitions. According to socialists, the easiest definition of the term is that socialism is a system in which the "means of production" are collectively managed and operated, and resources are shared "equally".

There are innumerable reasons why this is a concept that is doomed to - and has a historical track record of - failure. The biggest, and most crucial, among them being that it is impossible for any individual or even any group to know what they need to know to effectively manage resources and allocate them to their most highly valued use.

You need prices generated by free people trading with each other to do that, because knowledge in society is dispersed, and value is subjective and based on every individual's wants, needs and constantly-evolving preferences... These are two important things that Marx & Engels, not to mention their hordes of modern-day disciples fail to understand.

Socialism is an intellectually bankrupt concept... a bad theory... and practically, much worse in reality. I don't just mean the handful of totalitarian socialist states that exist either, I mean all of it - including the infusion of faulty socialist assumptions into "mixed economies" as well.

It's not something to be "balanced" with capitalism, it's a drain on humanity that is propped up in each case by the productivity generated in more free market elements in those societies. Sweden - for instance - for all it's hype as a socialist country has largely free trade with all of its neighboring countries, and a robust, entrepreneurial private economy which is taxed heavily to support the welfare state. It's always the "capitalist" part of the economy dragging the socialist part along for the ride, not the other way around.
"BUT that doesn't mean that the minority within the first world should actively be allowed to continue to increase wealth at the detriment to the majority. It is ok to be rich and recognise [sic] this."
It's definitely ok to be rich by world standards and point out the inequalities that exist in your own country and others.

Except here's the thing... What Jackylhunter said simply isn't how economies work.

Economies aren't zero-sum. At least, not without government forcibly redistributing wealth that already exists to politically favored groups... which of course, the OWS crowd is largely calling to increase (to the extent that any of them are actively "calling" for anything specific).

On a basic level, if economies were actually zero-sum as your statement assumes (people get rich "at the detriment" of others), then we wouldn't have progressed beyond prehistoric standards of living.

50 years ago, Hong Kong was as poor as any place on the
planet. Today, they are among the richest with no
natural resources to speak of: Free markets win.
Wealth is created (not merely distributed) by utilizing resources that are less valued, and converting them into products & services that are more highly valued - through production. This takes thought, ingenuity, creativity, hard work and responsiveness to economic signals provided through trade. It's not magic. It's a repeatable, predictable process that relies on the dispersed knowledge and economic interaction of people who are free to pursue their own individual goals using their own unique skills & knowledge - and who have well-defined and respected property rights.

As nations get more economically free, they get more prosperous - not less, as would happen if in fact economies didn't grow.

As we've seen an increase in markets and freedom of ordinary people to trade with each other in places like China, India, Southeast Asia, Central America and even parts of Africa over the last several decades, poverty rates worldwide have dropped dramatically... to the point where they've almost been cut in half in the last 30 years. For that you can thank an INCREASE in free markets and capitalism.

Which brings me to my final major point... Jacky said:
"The occupy wall street protesters are raising an inherent problem with society, with capitalism."
They may believe that that's what they're doing, but they've missed the mark by a mile.

Capitalism is not the system that is being (or should be) rebuked by the current financial crisis. Socialism, and more specifically its cousin - Italian-style corporate "fascism" is.

Talk to any capitalist, free market economist, and they'd have told you - as I did (repeatedly) on this very blog - that the right thing to do over the years was not to guarantee loans, and bail out banks, but to let companies that took on inappropriate risks and over-leveraged themselves to take their losses and either go bankrupt of *CHANGE* the way they did business.

That's not what happened, however. What happened instead was that we had a Federal Reserve pumping the economy chock full of new money while politicians were constantly guaranteeing our giant corporations and financial firms against any risk.

In a capitalist economy - or rather in a free market - greed is counterbalanced by fear of loss. But that only works when you allow the firms to fail. As even George Stiglitz said recently, the banks were able to "socialize" their losses (never mind the fact that for all his outrage, he is on record supporting the bailouts, claiming we could pass it and then "change it later"... cause that always works, right?) and points out now that this isn't capitalism.

This guy...
That's not a feature of a capitalist economy, it's not a feature of free markets. It's a feature of exactly the opposite - state control over the economy, and collectivizing risk.

Every free market economist I know personally, or have ever talked to (and I work with dozens on a daily basis) predicted all of the consequences of the bailouts - most of the good ones pegged the housing bubble long before anyone else to boot. I'd put their record against the records of socialists & Keynesians any day of the week.

We - if I can now include myself among the ranks of "free marketers" - all understand that big corporations don't like competition or eating their duly-earned losses... and we all understand that  the more power the state has to manipulate the economy - the easier (not harder!) it is for those big companies to avoid responsibility for their actions. One of my favorite quotes of all time comes from that infamous economist Milton Friedman, who the left routinely accuses of being a corporate shill, but who - in 1978 - said:
Milton Friedman: "Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger....Every businessman is in favor of freedom for everybody else, but when it comes to himself that's a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy."
I've referenced this quote numerous times on this blog and elsewhere.

We see it all over the world. There's even an entire school of economics (Public Choice) devoted to better understanding how the process works, and it's a school of thought dominated by largely free-market economists... Not because they don't understand that corporations and government have a symbiotic relationship but because they do understand it extremely well. And more importantly, unlike supporters of more powerful government, Public Choice economists accurately understand the cause of corporatism/"crony capitalism".

The Occupy Wall Street guys don't. So for the most part, they seem to be advocating policy changes or agitating for ideas that will do exactly the opposite of what they claim they want.

Thus... When Jacky challenges me as such...
"But do you care enough to Occupy Wall Street, and try instigate change peacefully?"
...I have no choice but to challenge the premise!

I definitely "care enough" to try to instigate change peacefully. That's why for the past several years I've completely refocused my career towards advocating for individual liberty and free markets. I won't be Occupying Wall Street (or DC, or anywhere else) because I don't believe that that movement itself is instigating change at all.

Wall Street sought bailouts to absolve themselves from their financial mistakes. They were only able to accomplish this through a friendly and powerful state. Many of the "Occupiers" I've spoken with and read about believe that - somehow, with absolutely no evidence to speak of - if only we establish an even more powerful government with more control over the economy, a less friendly environment to big corporations will spontaneously appear... At no time anywhere in history can I think of an example of a situation where substantially increasing the importance & incentive to take one action (i.e. manipulating the government) has caused less of that action to take place.

I'm not a fan of wishful thinking, so in spite of my long-standing outrage at bailouts, and corporatism... I will not be joining Occupy Wall Street at this point in time.

* * * * *

Addendum: I omitted a chunk of Jacky's comment, because the response to it wouldn't really be as directly related to OWS. It related to starving children in the third world and about America's health care system. On poverty world-wide, I think the above post should make it clear what I believe should be done about that. On the American health care system, the insinuation of Jacky's comment was that America has a "free market system" and that it is "a joke". But... Unfortunately, America has no free market in health care at all. Not even a tiny bit. Government controls everything from pricing and availability to the number of doctors allowed to practice and hospitals that are built.

Thursday, October 20, 2011

Matt Taibbi: Bad Economist.

If by "people powered", Rolling Stone meant
"Goldman Sachs people" powered... Sure.
It's obviously fairly predictable that a guy who writes for Rolling Stone magazine wouldn't be the greatest economist in the world, but hey... I'm just a musician, and I turned my media production skills towards advocating on behalf of sound economics, right? Just saying, you never know.

However, recently a progressive guy I interact with from time to time on Twitter suggested that I read a Matt Taibbi article titled "My Advice to the Occupy Wall Street Protesters"... He starts off nicely by asserting that:
"The protesters picked the right target and, through their refusal to disband after just one day, the right tactic".
I beg to differ, Matt.

The protesters picked exactly the wrong target, actually. And their tactic of refusing to disband, as far as I can tell, has way more to do with the protesters desire to have a big 60's come-back party than any sane attempt at initiating real, systemic change.

Taibbi really gives up any hope of making sense by admitting:
"No matter what, I'll be supporting Occupy Wall Street. And I think the movement's basic strategy – to build numbers and stay in the fight, rather than tying itself to any particular set of principles – makes a lot of sense early on."
Here's the difference between me and guys like Taibbi. If the Wall Street protesters had occupied, say, the Federal Reserve, I'd more or less support their mission. I'd still be mocking them for being ridiculously privileged people - certainly by world standards, but even quite often by American standards - whining about how "poor" they are. I'd still be mocking the stupid signs, and confusion... but of course, in the alternate timeline where they're "Occupying" the Federal Reserve or the United States Congress, I have a feeling the signs wouldn't be quite so dumb.

Because... They'd have picked the right target.

The key here is, I wouldn't - and don't - support anyone "no matter what". The nice thing about being independent and focusing on critical thinking is that I get to support people based on the quality of their ideas and actions, so if their ideas and actions aren't good, I'm not emotionally tied to supporting the team when they're wrong. I've read a lot of Taibbi over the years, and while he's not the worst on some of these topics, he's stuck himself with team-thinking way too often, and here's a prime example.

In any case, he gives 5 pieces of advice, and each piece needs to be addressed individually... not only because I promised to do so via Twitter, but also because it really demonstrates why it's so important to think through ideas more clearly. At the very beginning of Frederic Bastiat's seminal essay, "What is Seen and What is Not Seen", he writes:
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."
Taibbi - and let's be honest, most people - really doesn't think through his solutions. I think this is in part because he's emotionally invested in being angry at Wall Street, and in part because he's just not good at economic thinking. Let's go through his suggestions.
1. Break up the monopolies. The so-called "Too Big to Fail" financial companies – now sometimes called by the more accurate term "Systemically Dangerous Institutions" – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.
Ok... Let's set aside the fact that Taibbi asserts that 20 competing firms somehow is the equivalent of a monopoly. I agree with him that the limited market dominated by a handful of giant firms is a bad thing for everyone. It is a threat to our national financial security to be sure (virtually all centralized control is... that's a major theme of this blog time and time again), and while it's a bit hyperbolic, I think it's pretty fair to say that most of the big Wall Street titans are more dangerous than "a thousand mafias".

So I agree with Taibbi about the scale of the problem.

But Taibbi doesn't actually accurately understand where the problem comes from, and thus entirely misunderstands how to solve it. He claims they're "above the law and above market consequence"... But how did they get that way? Taibbi fails to address this, and therefore he makes innacurate conclusions about how to handle it.

First, he seems to think that simply re-instituting a separation of commercial and investment banking would solve the problem, but alas, Lehman Brothers & AIG for instance never had commercial divisions - yet they were instrumental to the collapse. So... How exactly is bringing back the Glass-Steagall Act going to fix that problem? It would not have prevented the financial meltdown in 2007 in the slightest, and there's plenty of documentation to prove that - not to mention pretty basic logic. If AIG wasn't subject to Glass-Steagall rules, and it was one of the chief direct recipients of bailout funds (and was used as a major argument for why we needed to bail out banks), then that by itself is enough to know why that argument is silly.

Also, simply having the government "dismantle" companies because we don't like them omits that the government and every single action it takes is politically directed.

So you always have to say; "Who decides"? In this case, who decides which banks get dismantled and why? The absurd utopian dream that guys like Taibbi are effectively supporting is that we'll just have some impartial, all-knowing, all-benevolent group of banking experts who will be able to determine which banks are ok and which aren't, and at what point the government should "dismantle" them.

But I wish for once some progressives would get serious about how government actually operates and about understanding the limits of knowledge that prevent their fantasy ideas from ever actually working.

In reality what happens is this. Whatever "czar" or board, or panel, or whatever you want to call it that ends up with the power to decide which banks survive intact and which don't will be staffed by real live human beings. These humans will have political affiliations, and in all likelihood, they will be closely tied with both the current politicians in power and with the very Wall Street firms they're about to oversee.

News flash: This is exactly why the SEC sucks.

So all of these insiders - and of course they must be insiders, because those who haven't worked on Wall Street or have ties to it won't be capable of understanding the systems they're trying to regulate in the first place - will be relatively easily manipulated by the biggest firms at the expense of weaker firms. So whatever "dismantling" occurs, we can be virtually assured that it will happen according to political will, and according to the wishes of the most well-connected players on Wall Street - not according to which banks "need" to be dismantled.

That means that - just like we've seen throughout the last 3 years of bailouts and exploding financial regulation - the big, well-connected firms will only get bigger and more powerful, and their smaller competitors who failed to successfully influence the regulations and regulators will die off.

This is seriously "Regulatory Capture 101".

It also gets to the heart of George Will's quote that I was recently made aware of more clearly expressing the Occupy Wall Street protester's bizarro logic: "Washington is grotesquely corrupt and insufficiently powerful."

If premise 1 is: Wall Street banks own the government, then there's no world in which it makes any rational sense to believe that you will somehow overwrite that ownership in passing new legislation when the political system and all the people operating it are the same.
2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it's supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.
There are a lot of assertions here that are simply absurd, the first of which being the idea that levying a tax on all stock trades is going to generate revenue for the government, period, not to mention enough revenue to cover the effectively $16 Trillion the Fed has dropped on the banking system over the last couple years. At some point, I'd really like for progressives to understand that taxation, especially on non-human entities like businesses - simply isn't a viable solution to most revenue related problems, because the tax is always either passed off onto consumers of products, or depresses transactions to a point where any gains in revenue you've made by raising rates you've lost (and then some!) by decreasing the number of transactions being taxed overall.

The point is, Taibbi is thinking essentially of only the best-case scenario where he's smarter about tax-law & finance than the collective intelligence of bankers at all of these giant financial institutions combined. I'm gonna go out on a limb here and bet that's a pretty poor assumption. These guys tend to live and breathe money-making and the finer points of arbitrage, and Matt Taibbi is a journalist. Ish.


Translation: The real consequence of such a tax would very likely be that transactions get funneled into some other area of banking that is - in all likelihood - more risky and more dangerous to the average investers 401k; perhaps through reducing the number of transactions per day and instead pursuing bigger individual transactions. Additionally, these kinds of taxes would mean the complete and utter destruction of businesses like eTrade which allow ordinary investors more control over their accounts.

If I had to bet, the end result would be a world where big banks had more consolidated power over people's investments, and the taxes themselves would be passed off in some way to consumers. See also: Bank of America's brand new debit card fees.

The more hilariously obnoxious side of all this is that it was all of the free market economists and their supporters like myself, who explicity warned the government NOT to bail out the damn banks in the first place!
Remember this?
...cause I do.
If the government had just stayed out of this mess in the first place, it wouldn't have rewarded banks for bad behavior, thus creating even more moral hazard and screwing over the tax payers of the United States and Matt Taibbi nor the "Occupiers" would have anything to complain about. Bad banks would have gone under, their assets bought by solvent banks or written off via a bankruptcy process and the market could have recalibrated based on a more accurate understanding of real market value.

But nope... Why listen to good economists when you can listen to idiots, screw everything up and then write even worse laws when it becomes clear your policies have just created tons of problems?

And by the way, most of the banks did pay for their own bailouts - most, actually, didn't want to get bailout funds in the first place because there were so many strings attached, and thus they paid back the loans they were forced to take as quickly as possible. But anyway...
3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer's own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can't do both. Butt out for once and let the people choose the next president and Congress.
Yet another issue that wouldn't exist without the state intervening in the economy in the first place, but whatever, what's done is done... So let's talk about the logic here, shall we?

Setting aside the reality that this kind of a law would be a grotesque violation of the 1st Amendment which guarantees the right of everyone, including those who work for and run banks and other corporations, the right to petition their government and engage in any type of speech they wish to advocate ideas - including policies - that they agree with... I'd be a hell of a lot more ok with this kind of a rule if it was evenly applied across the board.

If you get money from the government, or even if you are simply a "net recipient" of government money, you don't get to vote and you don't get to lobby.

Alright.

Know what this means? Public sector workers, and especially public sector unions... You're out. No more lobbying from the AFL-CIO, the SEIU, the AFSCME. No more lobbying from the Teachers, Firefighters, or Police Officers Unions... Actually, this is sounding pretty good.

Let's carry it out further. Something like 47% of Americans pay no income taxes at all. The bottom quintile of Americans actually are net tax-recipients, through all of our various welfare programs. So, according to Matt Taibbi logic, those groups have now lost the right to lobby or petition the government in any way. In fact, the only people remaining who get a say in how the government works are people who are both tax-payers and who do not get subsidized.

That means no farmers, no ethanol producers, no solar panel companies, no oil companies.... Definitely can't have any military contractors of government consultants. Absolutely no major auto companies. Hell, I don't even think that Tesla would make the cut.

It's a nice bit of populist nonsense by Taibbi to single out the bankers, but if his argument was even slightly consistently applied, he'd realize that he's just disenfranchised millions upon millions of people - many of whom he probably would be appalled to see losing the power to lobby.

Fail, Taibbi. Fail.
4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.
I wonder sometimes if people like Taibbi are actively just retarded when it comes to understanding the tax system, not to mention basic finance - quite apart from their epic failure to understand economics generally.

There are a bunch of interesting points to be made here that I'd like to cover in the briefest time possible.

First of all, everyone who has a retirement account is subject to that 15% tax, not just billionaire hedge-fund managers. I had to pay that same tax on my silver bar that I sold last year, because it is counted by the Federal government as investment income and capital gains. If you raise that tax, or "close the loophole" (is a simple tax rate a "loophole"? Really?) as Taibbi puts it, you're not raising the tax on Warren Buffett. You're raising that tax on millions of Americans who are counting on obtaining a reasonable amount of capital gains in returns to literally fund their retirement.

Secondly, on every conceivable front, taxing people on capital gains is already double taxation... although this is apparently a hard concept to grasp.

Let me try to simplify it, and explain how this works with an example...
Example:

10 people, including you and me decide to start a company. We each put in $100. The company has $1,000 and we are each 10% stakeholders.

Cool?

Our company does ok, and... Great news!... We're profitable. We not only break even and recoup our initial investment, but after all the overhead has been paid, vendors and employees paid, we make $1,000. Now for the bad news... The government taxes corporate profits at 35%, one of the highest rates in world. Boo!

We're a small business, and not best buddies, Jeffrey Immelt of General Electric, so we don't get any special subsidies or really anything else that would knock that rate down so we've gotta pay it. Now our $1,000 profit is actually just a $650 profit. Kinda sucks.

Now we pay dividends based on stock ownership from those profits.

Each of us had 10% of the company, so each of us gets $65. Except, no... We don't. After taking 35% of the total just moments ago, the government takes yet another 15% the minute the money leaves the accounting books of the corporation - that we own!  - and into our own personal bank accounts. So I don't get $65, and neither do you.

We get $55.25.

All combined, you might note that the total tax rate applied to profits incurred from successfully providing a product or a service that benefited other people's lives at least enough that they were willing to pay us for it, is actually 44.75%.
So fine, Taibbi.

Claim that a mere 15% on capital gains is not enough. But take a step back and realize that it isn't 15%. It's nearly 45%! The stockholders of a company are the owners of that company, and the vast majority of people who own stock in businesses around the world are not big wealthy tycoons. They are ordinary people with a little extra cash that they put into a 401k.

We need corporate profits to facilitate the retirement accounts and pensions that need to be paid, insurance benefits that need to be funded, (barely) interest-generating savings & checking accounts, and everything else... So right now, that's 44.75% on the high end (without tax-breaks) that is going to the state rather than to ordinary people.

Yes, it's also 44.75% that isn't going back to the tiny fraction of Americans who are super-rich... But so what?

Lastly, I want to note that complaining about tax-rates in this way is a great bit of populist class-warfare, and I suppose it's convincing to the people who haven't thought this stuff through any more than Taibbi. An Obama supporter I filmed last week at the OccupyDC/Code Pink rally at Freedom Plaza asked; "Whatever happened to Progressive Taxation!?" and complained that it just "didn't seem fair" that... to be quite honest... he had to pay any taxes at all when there were rich people out there.

But I mean... What happened to Progressive Taxation? It's the defining feature of the American tax code! You literally do not get more progressive than the US tax system. Even the OECD says so. The Top 1% of income earners covers, what, 34% of our Federal tax revenues now? How's that for "fairness"?

Personally, I'd flatten the hell out of the tax system and just make it one rate for everybody. No loopholes, no breaks, no subsidies. People focus so much on tax rates without bothering to focus on what you're actually collecting nominally from people.

If I make $25,000 in a year, and pay taxes at a standard 10% rate, I pay $2,500. If you make $250,000 in a year, you pay $25,000. If you make $25,000,000... well, then you pay $2.5 Million in taxes.

I struggle to see how that by itself is not "progressive", especially considering the fact that the guy paying $2,500,000 a year (say a professional athlete) in taxes isn't using the roads or any of the other crap Elizabeth Warren believes justifies radically increasing the amount of theft in society any more than the guy who's paying $2,500 in taxes. And in a lot of cases, assuming the multimillionaire sends his kids to private schools, built a private road and plumbing system, etc. to his house and everything else that rich people like to do, he's using the tax-funded infrastructure a hell of a lot less.
5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company's long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.
I feel like just mocking this outright. Taibbi's solution is to have the state start deciding what, when and how employers pay their employees? Really?

Cause that always works out so well.

Look... The more substantial issue here is that Taibbi's comment here completely ignores how we got to a point where there are these giant "too big to fail" firms in the first place. The simpleton's answer is usually "greed", but for the millionth time, greed is just a human characteristic found in every person on the planet at all times throughout history.

Wall Street didn't just randomly get way more greedy between 2002-2007. Note: If you believe that that's what happened, you're probably pretty much hopeless.

Greed exists at all times.

The issue is what are the systemic incentives that either reward or punish greedy people for acting irrationally. The free market - contrary to Matt Taibbi and the OWS crowd's understanding - is the one type of system that exists that actually punishes greedy people when they behave badly. A government controlled and highly regulated market - as we have in the United States - actually rewards the greediest and most weasely among us. I know this is counter-intuitive, but it's simply reality.

Here's why:

Government can and always needs to be defined as the one entity which maintains a socially accepted monopoly on the use of force in human society. It is funded via forced taxation, and all political decrees are backed - at the end of the day - with guns and violence. There is no other socially accepted institution that you can say this about.

Government is unique in all of human institutions purely because it is perpetuated through legitimized violence.

Please note that I'm not making any arguments for or against government here. I'm simply trying to break down the institution to its most essential characteristics and properly define it. Government is violence. Deal with it, come to terms with it, and please understand what exactly that means.

...and if the government didn't dominate most of your economic
decisions in one way or another, you wouldn't need one.
Also understand that the more violence is used to control people's actions, the more politically determined economic outcomes become and the more necessary it always becomes for individuals and companies to make attempts at influencing those outcomes.

On a small scale, everyone understands how this works.

Imagine if your high school class president had the power to choose 10 people to go on a fun class trip to Cancun, how many bribes, favors, or other demonstrations of social capital do you think that class president would receive from people who wanted to go on that trip? I'm betting quite a few... Especially from people who felt like they had a reasonable chance at succeeding. The rest of the lumpen proletariat who understood they had no chance what-so-ever might be inclined to just give up...

Everyone seems to be able to understand all this, but apparently the lesson is not learned when the class president becomes US President.

Now... This might appear like I'm saying that all powerful people are inherently corrupt and always take bribes. I'm a little cynical in that I bet most do, but certainly some don't. But even still... If you have the power to give special benefits to on one hand, or kill on the other a business or industry, how do you decide how to use that power? Do you listen to your constituents, or an economics textbook?

The point is, it's all political all the time. And the more power political officials have over the economy, the higher the stakes get... Unfortunately, there's not that many people who can handle high-stakes games.

The people who can tend to be rich, established and well-connected. People like Jeffrey Immelt, who I mentioned earlier. It should never be a surprise that corporations have influence over policy as long as policy has influence over corporations. Without a strict separation of business and the state, this trend will just continue, grow and get more problematic.

Any honest assessment of American history should have shown Taibbi that we've done exactly what he wants a dozen times over the last century, and the result has been more corporate influence in politics, and more consolidated, risky banking decisions than ever.

So again, it's a cause & effect problem.

No... It  really didn't.
People like Taibbi mistakenly believe that the government is horrendously corrupt and beholden to big corporate interests, and that - in defiance of absolutely all common sense - the way to solve this problem is by giving the government even more power while simultaneously trying to regulate the people that (now more powerful) government benefits the most. It is utterly insane. And what's more, even if you did manage to pass legislation that somehow made lobbying or anything like that illegal, all you'd be doing is pushing the bribery into a seedy black market which wouldn't be tracked by sites like www.OpenSecrets.org.

Taibbi's ideas on how to fix banking are not unlike Dodd-Frank. They are simplistic solutions to complex problems made by people who arrogantly think they're smarter than people who actually do banking for a living. But Taibbi isn't smarter in the realm of finance than the whole of Wall Street, much less probably even its worst day-trader. I know I'm not and it would be horrendously hubristic of me to think that I could predict the unintended consequences of a whole host of new government powers to dictate how and when the state bails out private companies.

I can tell you this though... Whatever the unintended consequences are, they're pretty much guaranteed to be uniformly abysmal for ordinary people.

And seriously? For Taibbi it's just a forgone conclusion that the state will bail out failing companies. What?? Isn't that the problem in the first place?

The actual solution here is to take away the incentives for banks and other major corporations to lobby the political system, by removing the power of government to give the benefits that those corporations are seeking at the tax-payers' expense. Get rid of the loan guarantee programs like the FDIC, Fannie, Freddie, etc., completely remove Congress' power to give bailouts, and for godsake, end the Federal Reserve!


I've already explained the Fed at length a million times, but if you don't understand why it is the central planning of interest-rates (thus grossly distorting market behavior and time-preference) and the ability of that organization to inflate the currency that produces an environment where greed wins over risk of loss in a way that simply cannot happen in the freed market, you're just not up to speed.

Once you understand that, it will be come crystal clear why Occupy Wall Street is filled with fools who will - if they succeed at all - only create more of the problems they are currently protesting.

Until the ideas change, Occupy Wall Street is a disastrous movement.

So here's my advice to Occupiers... Learn economics. First, you need a solid grasp of the basics, and this needs to come not from the guys like Paul Krugman or Joe Stiglitz, who actively called for the intervention into the economy that sparked the housing bubble, then just 3 years ago supported massive bailouts of the very financial institution you're occupying, but rather from guys who predicted the crash and exposed the bubble early on.

These men & women would be nearly 100% of the Austrian School of Economics persuasion. Look it up if you're unfamiliar. The Austrians, you'll be happy to know, have been focused on Human Action as opposed to government action or econometrics measured with numbers that coincidentally make inflation look like the solution to everything - and they've been doing that from the beginning.

So I'd start with reading the following:
  1. Human Action by Ludwig von Mises
  2. Economics in One Lesson by Henry Hazlitt
  3. The Use of Knowledge in Society by Frederich August von Hayek (this one is going to be hard, but once you understand it, you will find that it will become instantly clear why Paul Krugman and other Keynesians - apart from being hypocritical douchebags - are wrong from their initial premises on down)
  4. What is Seen and What is Not Seen by Frederic Bastiat
  5. Also, read the book, but simply take a few hours and watch Free to Choose by/with Milton Friedman
Once the Occupiers have completed that small survey, I hope they'll also pop over and read up on Public Choice Economics and familiarize themselves with the work of Nobel Prize winner James M. Buchanan. Dr. Buchanan pioneered the study of employing the tools of economics to view how different incentives effect the agents of the state.

Turns out, incentives matter for politicians too, and we can learn lessons about who will ultimately always have the lion's share of control over any regulatory agency when they get more power. That'll be giant, well-connected corporations typically at the expense of their lesser competitors - and ultimately, at the expense of consumers.

All combined, I hope this sets the Taibbis of the world straight.

Tuesday, October 11, 2011

Dear, Occupy Wall Street. You are the "1%" too.

As many of you know... My greatest annoyance - by far - with the Occupy Wall Street is the privileged "white whine" on display across the country. A facebook friend tagged me in the following image. Have a look, please:

I didn't make this, but I love it.

So much of these protests are - and should be - ridiculously insulting to the literally billions of people around the world who must worry about where their next meal is coming from, and if working a 20 hour day is even going to be enough to provide for themselves and their families.

These problems aren't the failings of capitalism. Quite the opposite.

Real poverty seen around the world is virtually without exception caused by societies that fail to respect private property in any way, shape or form; societies in which the state controls the majority of the economy directly and indirectly; societies in which redistribution of wealth is common place; societies in which trade is reviled and prohibited... In short, in socialist societies.

When you must go through your politically motivated masters to get permission to start a business, or to simply trade with your neighbor... When you risk the products of your labor being stolen without recourse by the state or its operatives... When you are in constant fear of physical violence as so much of the world is... Your opportunities are vanishingly small.

When you live in a country like the United States - for all its major and minor failings, and in spite of the self-evident fact that it's guiding principles are being eroded into that of a third-world kleptocracy - you still have opportunities of all kinds. Some people have so many opportunities that instead of even attempting to work, they can hang out all day and whine about how college costs a lot and someone else should have to pay for it.

Like this girl:

I did make this. And yes, that's a real girl at a real protest I really talked to.
Yes, college is expensive. Yes, so is top of the line health care (mediocre, average health care isn't that costly though and most prevention is pretty cheap). Yes, Wall Street sucks... Though they suck for taking handouts from a government that shouldn't have power to give them out - and in other news, I have yet to meet an "Occupyer" who isn't seeking some kind of hand out for him/herself from the state as well. Of course, they are not greedy. Right?

I'll even add that it also sucks that you have to be extremely productive and add a huge amount of value in America - way more than most places around the world - to even warrant getting paid at a rate that most people consider "good" or "livable". So... Yes, when you're young, you're probably gonna need a roommate. Or two (I have two). It also sucks that between the Fed inflating the shit out of our currency, and the government adding cost after cost to people's living expenses in regulatory compliance and taxation, the bar for what is "livable" keeps shooting up and it often compels some employers to find alternatives to high-cost American labor - be that robots and other capital machinery or a part of the let's generously say 6.5 billion people around the world who are poorer than the poorest American and seeking work.

Just maybe the truly priceless young woman above could simply lower her expectations of what life owes her just a tiny bit and stop spending so damn much, and she'd be fine. Pretty sure she didn't need to go to Harvard. I know she didn't need to wear $198 Ralph Lauren boots, after all. Privileged girls being oblivious to their privilege is funny... But not that funny.

So, to wrap this up... Occupy kids (I will happily stop calling them kids when they start behaving like adults)... Stop acting like you are the new "Arab Spring". You're not.

American women are in no danger of getting whipped for wearing make-up or painting their fingernails, small children are in no danger of being mutilated or having their limbs chopped off with machetes, and families are in no danger of disappearing in the middle of the night because someone mouthed off about the government on the internet. Real people, all over this planet, have real problems. The overwhelming majority of nouveau, not-remotely-radical, pro-establishment, pro-"the man" hippies I've encountered at these events just... Don't. At all.

As far as I can tell, they are mostly college educated, middle class kids who spent between $20,000 and $200,000 on degrees in philosophy or English, that have mysteriously turned out to have not prepared them to be valued by employers in the US or anywhere else during the rough economic times we're experiencing. 

So... Occupy Wall Street trustafarians: Pleeeeease just shut up about how awful your lives are before I am forced to call the waaaaambulance.

Wednesday, October 5, 2011

Real vs. Superficial Arrogance

You wouldn't even believe what Google images returns
when searching for "Cocky"!
This is a post I've been thinking about and wanting to write for a very long time... Probably years, actually... But for whatever reason, I've been in some conversations over the last few weeks in which it's come up and I think it's finally time to really pull the trigger.

The topic for today is the very substantial difference between what I believe is real arrogance, and what is the cosmetic bravado many people define as arrogance, and mistakenly believe is a problem.

Let's start with definitions...
Arrogance:
noun
offensive display of superiority or self-importance; overbearing pride.
Ok. So, this is pretty much exactly what I'd define as superficial arrogance. It's an arrogance of appearance. I'm definitely guilty of this appearance - particularly when it comes to my online presence. See: Title of this blog.

Now, some of it, in the case of the blog (and my twitter handle, etc.) is more for the purpose of snark than anything else and I hope most people who know me or who have interacted with me in a sane manner have understood that I don't take myself overly seriously. I also am pretty scrupulous about admitting when I've made mistakes and am wrong, mostly because I really do like being right. If you're wrong, clinging to that position for the sake of your ego doesn't really get you anywhere, and can often be wildly counterproductive.

But we've all known people who are over-confident, overbearingly prideful, and who believe they are better than everybody else. They're obnoxious, they get laid a lot more than they should, and in business, they're the kinds of guys who can drag a company down with stupid decisions that they won't back down from. In arguments, they're usually just blowhards and eventually you have to ignore them.

I hope not to be one of those people at all. If I ever have been, it has been a mistake, and I do apologize for it.

But as annoying as that superficial arrogance can be, on the grand scheme of things, it's really not that harmful, and it's just not that big of a deal intellectually. It's just a guy who's wrong, and who's emotionally attached to being wrong. People like that can, and often eventually will, change. Or they won't... And they'll keep going to bars and picking up drunk girls. Either way... That's fine.

What concerns me is what I call "intellectual" or "epistemological" arrogance. This calls for another definition for those not familiar with the deeper depths of philosophy...
Epistemology:
noun
a branch of philosophy that investigates the origin, nature, methods, and limits of human knowledge.
When someone is epistemologically arrogant, at least in my view, they are overly certain of conclusions they've drawn about the nature of reality and the premises from which they've built arguments. They are also overly confident about the ability of human beings - either as individuals or even in groups - to know enough about the world to plan out the future.

The epistemologically arrogant are those who believe that the economy is a machine with levers, like fiscal & monetary policy, to "pull" whenever we want it to improve (no mention of which levers were pulled to make it go bad, of course). The epistemologically arrogant are those who believe that we can, or should, dictate who gets to interact with whom and on what basis. The epistemologically arrogant are those who believe that they can predict the climate, global ice flows or animal populations 100 years into the future.

These are just a few examples...

It is also epistemologically arrogant to assume that individual human beings are capable of being perfectly objective or perfectly "rational".

The highly punchable face of astounding
epistemological arrogance.
This line of reasoning underlies virtually all of the calls for more, bigger and more powerful government. Ironically, I've found that Keynesians & "Progressives" in particular often mistakenly believe that free markets require "perfect knowledge" and "perfect competition" when they absolutely do not (indeed, imperfect & dispersed knowledge is the primary reason that free markets work best), and yet those same fans of a powerful state fail to understand that perfection in human understanding is the hidden false premise sabotaging all of their wonderful utopian schemes.

For a government to be able to effectively plan an economy (or any other aspect of human society, such as the culture, artistic zeitgeist or even a language), the people operating that government must not only have up-to-the-second information about all of a thousand variables regarding individual preferences, available supplies of raw, capital & final goods, as well as the whereabouts, current deployment & skill-set of the whole labor force under their command; they must also be perfectly, unerringly rational, not to mention perfectly "good" and wise.

But no one person or even 100 people - no matter how smart and informed they may appear to be - has an almost infinitesimal fraction of the requisite knowledge... and no one is that "good", or wise. Period.

This is just the base logic of the economic calculation problem, and it doesn't even touch on the practical (and highly disturbing) reality that if you were to hand over the level of control over an economy that full-on central planning requires, in order to get it "to work", you'd literally need to treat individual human beings as fooseball men on a stick. They must go where you tell them to go, do what you tell them to do, act how you want them to act.

Humans in that situation are parts of a machine you're trying to build, and if they don't operate "the right way" (i.e. your way), the whole "machine" doesn't work. In short, you need totalitarianism. Anything short of that and you just have a broken machine.

The epistemologically arrogant types wind up making claims like, "My new jobs policy will save or create 2 million jobs", or to be politically "fair", they might claim that a $300 Tricky-Dick Funbill"rebate" check will get it going again. These types fail to understand the basic lessons of trade offs and opportunity costs and the role incentives play out in an economy... not to mention the reality that individual people all have different values and cannot be lumped into broad macroeconomic aggregates.

Of course, here I am mostly speaking about economics, but this is true in other areas as well - epistemological arrogance also underlies arguments people sometimes make for the power of people like scientists and other authoritative "experts" to have all the answers. Most scientists I've met and know personally are pretty good about being epistemologically humble - but reporters certainly aren't, and neither is Al Gore, so no matter what caveat a scientist puts on his work, it will often be interpreted to being the word of (no?) God.

In any case, I can no more plan an entire economy than I can effectively dictate even what you should want to have for lunch... That much should be obvious by now...

But I should also not assume that I can know everything about myself.

We all make cognitive errors, and we are all - from time to time - blinded to our own little intellectual black-outs. It's very difficult, if not impossible, to know when and why we're making mistakes in judgment or reasoning.

Now, let's be clear. Contra the absurd statists of the world, just because individuals err, and because human beings aren't perfect or even great at reasoning from time to time does not mean that someone else can do it better on their behalf.

The point here is that there is a massive difference between being a cocky jerk, and holding a core of philosophical ideas that assume knowledge to which no human has realistic access.

Here's the real kicker... A cocky jerk can also exhibit epistemological humility, and one of the most philosophically and truly arrogant people on the planet might come off as a genuine, caring, and wonderful person.

So I guess if anything, my point in writing this is to suggest that anyone who is bothered by arrogant people should take a step back and ask themselves if it is just the superficial arrogance of a type A frat boy, or it's the true (and extremely dangerous) arrogance of an overly-confident intellectual or public official imbued with the power to influence the way people act by force?

The trick is that sometimes the most humble people by outward appearances hold the most epistemologically arrogant views. This is where things get difficult. Most people pay far more attention to style, and almost no attention to substance - it's easy enough to understand why, but it's entirely unreliable.

So... Quit paying so much attention to the style of someone's delivery, or how nice they appear to be. Pay attention to the ideas, and to hell with how they're delivered!