3CNB

(Un)intellectual Property

2012-01-27T19:35:00.000-08:00

Yet another assault on the free-market has been averted, this time, against the internet by a motley collection of entrenched business interests that have failed to adjust their business models to the realities of the modern age. Or is that a general description of the usual perpetrators of these kinds of things? In any case, one would think with a good decade or so of fair warning, they would have made the transition by now. But no, they'd much rather ask Congress to pass an abominable package of laws that would have stripped users of the information highway of many of their freedoms with an appalling lack of due process, erecting barriers which these businesses can milk for easy revenues. In the business, we call that rent-seeking. So much for the dynamism and competitive spirit of entrepreneurship. Well, at least of these particular entrepreneurs.

As is typical, their arguments were couched in terms which attempt to appeal to free-market sentiments. Intellectual property, they claim, must be protected from acts of 'theft' and 'piracy,' else the whole edifice of of modern civilization will collapse. Or something like that, as if it hadn't already, and mostly through the efforts of these very kinds of chumps to confuse the situation and confound our traditions so that they might be taken advantage of. A violation of property? What man of any decency could tolerate such a horror? As it turns out, quite a few. Over seven million people have petitioned Congress to tell these businesses to stuff it. Apparently, there was a difference of opinion as to what constitutes decency in this particular situation.

And as is also typical, I would like to use this happening to ask the reader to consider a few rather radical propositions. Namely, I'd like to take a look at what is meant by intellectual property -- and maybe even property in general.

There have been very many good essays on this site and others like it concerning the 'properties of property.' Basically, most people instinctively know what these are as a matter of habit, but they haven't always thought about them deeply. One of the more important of these 'properties of property' is that the holder of property has the right to exclude others from using it. If he can't exclude them, it is taken that he has limited sovereignty over it, and the 'propertiness' of the purported property is thereby diminished.

But consider for a moment how this applies to something like a copyright or a patent. Both of these 'properties,' come with a built in expiration date, which to most people I would think would be a very strange feature if they really thought about it. Imagine if it applied to, say, one's car. Imagine waiting outside a man's house for the strike of midnight on the day of that expiry, and when the moment had arrived, hopping in and drive off. There would be nothing the purported 'owner' could say or do against you. He had lost his right to exclude you from it. But if patentable and copyrightable ideas really are property, that is basically how it works.

It seems to me that this is rather incoherent. Either your property is yours until you choose to dispose of it, or it is not. So, if an idea is property, it really ought to be property forever and ever into perpetuity, to be bought and sold and passed on to one's heirs. Alternatively, it ought not to be property at all and freely used by anyone who likes. But this in-between world makes little sense, and smacks of a contrived legal pretense. The 'expiration date' is obviously a recognition that actually treating ideas as property in the normal sense would be impractical. So, allowing patents and copyrights to expire accomplishes a legal jamming of a round peg through a square hole.

It is quite clear what the interest is -- the restriction of markets, using the language of property to justify what would otherwise be immediately recognized as an attempt to assert a right to monopoly by legal force. And, typically, that is exactly how intellectual property is used. Worse, once a particular monopoly is established, it becomes a launching point for installing further market chokepoints. The best example of this strategy which I can think of is the way Microsoft attempted to use its overwhelming marketshare in operating systems to attempt to shoulder out competition in web navigators and other software by making them incompatible with its OS. This attempt eventually failed, but it provides a good example of the types of maneuvers that can be piggy-backed onto IP law to restrict markets for the purpose of rent-seeking.

As for the argument that the end of IP law would bring the free-market down around our ears, it is easy to see that this is not the case simply by looking at the digital media industry, where digital technologies have effectively blunted enforcement mechanisms. Yes, major record labels, Hollywood studios, publishers and the like are seeing their profits eroded, and rather heavily at that. But on the other hand, there is certainly no less media available for consumption as a result. Far from it -- there appears to be far more of it than ever, and of greater variety than before. Creativity and innovation have not been squashed, they appear to have been multiplied.

What has been squashed are the gatekeepers -- the media cartel which before had dominated and effectively homogenized media offerings in an attempt to maximize profits by limiting choice. Among other agendas. Up until recently, they also had the help of a large technological barrier. But with effectively self-produced media approaching the quality of the professional stuff, it becomes difficult for the 'take it or leave it' model to work any longer. The erosion of IP is only one aspect of an avalanche of economic effects which have been triggered by the digital age; others are at work as well. But even so, it is still possible, certainly, for the big performers to make the big bucks through concerts, live appearances and such, but in order to do so, they will actually have to work for a living, as the strategy of rent-seeking through legal monopoly and technological barrier is slowly being taken off the table.

It might be argued that the scrapping of IP wouldn't just hurt the big publishing houses and the like, it's going to hurt the writers and other creative artists as well, who otherwise wouldn't be able to protect their ideas. But in reality, very few of these people benefit from the restriction anyway. Typically, for example, it is the publishing house which sees most of the benefit. It uses the copyright to prevent other publishing houses from distributing its titles, of course, but unless you are a Stephen King, a publishing house is not likely to pass on the spoils to you because you have no negotiating power. It is going to go looking for authors who are more desperate to have their works published -- of whom there are plenty.

But to take the argument to the next level -- let's forget about all this practical stuff and rhetoric, and get philosophical. What if the 'in-betweeners' are just flat right? What if all this market-restriction nonsense is exactly the kind of thing I'm accusing the IPers of doing -- attempting to couch an anti-IP argument in the language of the free market? What if, in reality, there are some legitimate differences between types of property which necessitate a slightly different treatment, but on the whole, it really is right and proper to protect the property rights of creative sorts to their ideas? What if not to do so is a very basic and fundamental abridgment of their rights and, as such, certain to be followed by serious, negative repercussions?

I think that what has happened is that this argument -- like most political arguments -- has been trapped in a sort of ideological vortex. I think that, like it or not, there is no straightforward answer that takes a form that most people would like, if this 'logical rhetorical answer' is the form that most people prefer, which it probably is. Life, after all, is not a logic problem, and as the notion of what property is must depend strongly on the answer to the question as to what constitutes human nature, it should be plain that there isn't going to be a clear-cut answer given one has accepted the notion that human nature can be a variable as opposed to a constant.

As I wander down this path, questioning axioms as I go, I'm reminded of a certain thesis I once heard which I find to be quite brilliant -- that there are certain institutions which are given purely by human convention. Sorry, I've lost the link, but it was by that Fran Porretto guy. Three were named -- money, language, and marriage. And I begin to wonder if perhaps property should not be added to this list.

I say this in the main because it is difficult for me to accept that the notion of property as articulated by the Enlightenment philosophers is the end of the argument when I see the medieval notion of property placed alongside it. Clearly, if the one is valid, and we live in a world where such things are defined purely 'logically', then the other must be invalid. Invalid, as in, not even close. I find this very difficult to accept, and further, I find it difficult to accept that I can be thrown into such a logical conundrum over something as simple as a patent. If property is as simple as that, this should be a piece of cake.

But if I take the view that property, like money, marriage, and language, is defined by the norms, traditions, habits of thought, and conventions of the society which institutes it, it provides me with a way to reconcile all of these notions. In fact, it does so in a way that is rather useful. Neither the philosophers of the Enlightenment nor the medieval traditions were wrong -- or, at least, not utterly wrong -- and I am free to see what good I can in any particular convention, to begin deriving ideas concerning the behaviors of property and people under different sets of norms, and understand the notion of property as something that changes with people and situations.

None of this is to say that property may be defined arbitrarily, or that any which way is perfectly valid. Nothing could be further from the truth. I perfectly accept, for example, that money is similarly defined, yet I will criticize our own norms and conventions about it until I am blue in the face. I recognize what money was 'meant for,' how it 'works,' and how choosing silly and nonsensical ways to deal with it produces spectacularly reprehensible results. Nevertheless, I fully acknowledge that no matter what I may say, or how 'illegitimate' I can argue our money system to be, at the end of the day, it is what it is. If people accept bank deposits as money, then bank deposits are money and there is nothing I can do about it. Except to repeat over and over that it is really, really stupid. But people will just keep doing it. Including myself.

Likewise with language and marriage. There are good, sensible ways of doing things, and really, really retarded ways. Evil, even. I expect that property is the same way, and that it is perfectly valid to have very strong opinions on the subject, and that these opinions may be said to be 'correct' or 'incorrect,' if you see what I mean. I just suspect that they do not take the form which I used earlier in the essay, and which most people tend to employ. And now that I've completely philosophized myself out of my original argument and thoroughly confused myself about what I mean, I think I'll leave the reader to make up his own mind...

Dogma, Ideology, Criticism, and Philosophy, Part 2

2012-01-12T06:58:00.000-08:00

...continued more or less directly from last time...

Ideology as Dogma

Gene Callahan has been producing some excellent and insightful pieces on the nature of ideology. These focus on two questions -- first, where do they come from, and second, what are they really?

In response to one commenter, he describes the production of an ideology as a stripping down of a philosophical ideal and body of truth to produce a set of rote rules to be dogmatically followed, irrespective of the actual results they produce. It is easy to see this kind of thing in action, and while he uses libertarianism as his ideological example, I'll stick with something a little more obvious: communism.

No doubt, most readers will disagree with the ideals of communism, however, from the point of view of the communist himself (at least, if he is an honest communist), he is pursuing something he considers to be an ideal. However, as the 20th century will attest, every attempt to implement this ideal was an abject failure, but often no matter how bad the failure became, and no matter how horrific the consequences, communist ideologues continued pushing their systems to greater extremes, attempting to overcome reality.

But in truth, it wasn't really the ideal which failed, because the ideal never had a true existence indepenedent of the efforts of the ideologue. What did exist were systems of rules -- legal manifestations of ideologies -- instituted while people persisted in behaving in manners contrary to the ideal, to a significant enough extent that every experiment failed rather spectacularly. No doubt, if people's natures had really conformed to the ideal and shared it to a sufficient extent, strange as the notion may seem, they probably would have succeeded, at least for a while. But where is one to find such people?

Ideologies can also be a sort of deformed offspring of a well and fully developed philosophical worldview arising by a different means. Gene describes how a worldview can come under an external pressure and 'crack,' fragmenting into pieces. This is how Voegelin described the proliferation of Christian sects under the pressure of the human desire to immanentize God and discover form in history in the late Middle Ages. An ideology is a practical attempt to cling to the ideals of the old whole which could not hold together under the strain. It is a broken and incomplete expression of the full original, simplified and hardened to survive in a caustic reality.

Ideologies survive not because they are better, but by hardening people into committed ideologues. They function better than the nothingness that would prevail in the truth-vacuum created by the dying, coherent worldview, but they themselves can never be, nor do they even attempt to represent, a real set of philosophical truths. To comprehend reality is not their purpose -- they are a superficial attempt to deal with reality, not to understand it. As such, they 'work' better than nothing at all, but they are inherently mildly to severely dysfunctional, as any people that attempts to live too strictly by them for long enough will eventually find out.

What Chesterton and his company of philosophers have done -- as it seems to me, anyway -- is to have seen in the dogma of the modern ideologies the reflection of the ancient body of truth from which they disintegrated. They looked at the dogma of the day, and made the 'critical transition' on a grand scale. They began to criticize the dogma, and to interpret it, until they had built back up in their minds for themselves the thing from which it had come, at least to the degree possible to each of them.

It is this which such philosophers are looking towards and trying to convey their vision to others. This is the reason they appear to be all over the map with respect to ideology, yet manage to argue in manners strangely consistent with themselves. They are not arguing from a set of 'logically consistent' ideological positions. They are criticizing what they see from the light of a divine vision. They have a complete and whole thing in view, the thing from which the others were derived, which is why what they have to say often has a great deal in common with every ideology, but must also conflict with every one of them, wherever it falls on the political spectrum.

For Chesterton and Belloc, this image seems to conform most to the social organization of the late Middle Ages, but if you read enough of them, you will begin to detect strains of the modern -- mostly tempered versions of those strains of thought which rebelled against the medieval, especially the notion of 'equality.' Chesterton even sympathizes with the French Revolution, of all things! To them, the situation may not have been perfect, to be sure, but whatever its failings, at least the notions of order articulated by the medieval worldview were a good-faith attempt to be the right kind of thing.

Modern attempts are not. No fixed set of rules informed by an ideology -- as our modern governments are organized -- can ever hope to preside over beings possessing a free will and therefore governed by a non-fixed nature, at least in a way that pretends to a philosophically sound notion of justice. Logic and systems of abstract derivations can never govern alone, because life is not a logic problem, nor is reality the product of an argument, but an actual and messy experience.

On the other hand, a system informed by a body of eternal truths, governing beings committed to living their lives in light of it, might just stand half a chance. Libertarianism, while still an ideology, in its own way acknowledges the failures inherent in 'rules,' and, where it has been limited to the politics of civil government, generally acknowledges the necessity of external sources of values and means of social order and organization. Where it has attempted to fill the entire void and become a full-blown body of philosophical truth, (or, rather, where people like Ayn Rand have attempted to make it serve in such a capacity) it has performed poorly.

But in as much as it reflects a skepticism towards the role of rule-mongering in resolving the problems of governance, it does have the germ of 'political criticism' in it. It just does not have the full flower. It is the skeptical, chaotic, in-between separating the established left-right ideologies from the as-yet-unnamed group containing the philosophers, just as the skeptical, chaotic liberal 'adolescence' separated the 'youthful' authoritarianism from 'conservative' adulthood.

So, to recap, as it seems to me at this point --

The medieval order, informed by the orthodox Christian worldview and the preceeding centuries of Western philosophical tradition, 'cracked' during the late Middle Ages, which eventuated in the Reformation. Adherents tried to 'save' the situation by successive efforts of codifying into law systems which had largely been governed by tradition. In so doing, they were inadvertently converting their governance to an ideological basis rather than being based on a body of tradition informed by received truth, occasionally and judiciously reinterpreted as necessary.

Eventually, the effort failed, and groups committed to varying ideologies successively overthrew cobbled-together legal orders as they rebelled against dominant rival ideologies. Initially, these groups were decidedly Christian and oriented towards asserting liberties against legal restrictions imposed by their rivals. However, both positions had become decidedly ideologically based and detached from the original body of truth which had sprung them. Over time, both the liberty and the Christianity dropped by the wayside, as tradition died, practical necessity and ambition asserted themselves over questions of philosophy, and memory of the ancient body of truth and the ability to relate to it in the old ways slowly faded away.

The turn of the 20th century marked a critical escalation point in this process, especially as the normalization of the 'industrial lifestyle' resulted in a practical elimination of the study of the ancient truths in favor of modern science and an absorption in high material productivity and titillating distractions. Very few people anymore bother with 'the classics,' medieval theology, or other such subjects, which are largely considered quaintly anachronistic and useless. The history of 20th century violence and social decay reflects this disregard for the lessons of the past.

Belloc and Chesterton saw this, as have other thinkers and observers in slightly diferrent ways. They thought the trajectory of things had gone off in an undesirable and dangerous direction, even before the turn of the century, while others were trumpeting the inevitability of progress and material greatness. They saw that the solution, if it were anywhere, lay far in the past and in putting aside much modern claptrap. They thought it was important to grasp the old truths again and resurrect the old ways, if in new forms, and they saw that the measure of things was not to be found in mere logical coherency, or in economic statistics, but in the degree to which a man's life is allowed to conform to the ideal for which he was created.

I'm beginning to think so, too.

Dogma, Ideology, Criticism, and Philosophy, Part 1

2012-01-11T06:14:00.000-08:00

Awhile back, I did a little speculation about a sort of progression of political consciousness. Basically, I put forward a model of alternating political philosophies as one progressed through life and grasped certain truths, from a sort of authoritarian youth, to a relativistic liberal adolescence, to a conservative adulthood, which might then progress to a few other phases -- a libertarian phase, and ultimately a phase which I could not really describe, but suspected to exist. A person could become 'stuck' at any of these phases through much of his life, even the rest of it after having entered, and of course there is some variation not described here, but in general, most people who make it to 'adulthood' at least do seem to roughly funnel through these phases in this order.

Well, I think I have a little more light to shed on this idea, especially that last 'phase.'

I have since noticed that, in very rough sort of way, this progression seems to parallel a trend that runs backward through history. Many observers have noticed that 'today's Republicans are yesterday's Democrats,' and have taken to labeling a faction of the GOP 'neo-conservative,' presumably to distinguish it from the 'paleo-conservative' positions of the older right. In many ways, the Old Right would have been considered libertarian by today's standards, juxtaposed with a Democratic party which had more in common with today's neo-conservative Republicans than modern socialistic and morally-relativistic Democrats.

In other words, voters are asked to choose between positions which would be considered 'less mature' in the model as time goes on, as the dominant philosophy of American politics moves backwards through the progression. Once you start reading political philosophy from the 19th century, you start realizing that this has been in play for some time -- and then you run into people like G.K. Chesterton and Hilaire Belloc, who are throwbacks yearning for the really old days of medievalism. And as much as you might want to call a man a crank who believes that 'the truth' has been left behind long ago in the past, and that ancient, medieval ways and organizations of society are in many of the most important ways superior to those which have followed, once you start reading a little bit of what they have to say...they start making sense to you.

I do not think that any of this is a coincidence, and I think I'm starting to make sense of it. I think.

I would lump those men -- and a few others, who to many might appear as if they did not belong -- into that class of people which has fallen off the far end of the accepted political spectrum and landed them in a blessed la-la land of their own from which they appear to derive immense enjoyment. And once you have entered into it yourself, it begins to make sense, and you realize that you haven't actually left reality behind as you might have believed, you've only just now entered into it.

Dogma and Criticism

I do not think that this transition can ever properly be explained in a complete form, because at least in part it belongs to that class of knowledge which does not transfer well from mind to mind by the normally accepted modes of rational explication. It's kind of like giving a full and detailed explanation of kissing. It simply must be experienced to be known, and is some ways better related through stories and myths and artistic expression. But I do think a particular chain of thought presented by R. G. Collingwood captures a large part of the idea rather well.

He says that in learning about practically any subject, a person must go through a few stages, which in their general outline should sound familiar. First, a person must approach the subject rather innocently, because he has no knowledge with which to work, except in some cases perhaps as a sort of background from other subjects. Thus, his first absorption of the subject matter must necessarily take the form of dogma due to an utter lack of familiarity with the material. And for most people, some period of time must elapse in this dogmatic absorption mode as new information is taken in.

For some subjects, such as mathematics and even the more well developed 'hard sciences,' it is possible to persist in this mode, more or less indefinitely. (At least, I presume it is. Collingwood never talked about this idea applied to these subjects.) However, for the 'interesting' subjects like history, at some point, an intelligent person will almost always realize that his dogma is chock full of contradictions. This often comes with a suspicious feeling of having been taken in, or lied to.

The reason is that these subjects contain too much of an element of the relational types of understanding for a mere 'drinking in of facts' approach to really convey a substantial understanding of them. To understand requires relation, interpretation, and rumination over their contents. By the very nature of these subjects, no amount of human effort could achieve perfect consistency because they contain too much of that element of art in them, and no other means exists to trasfer their lessons to others than to perform the mental struggle on one's own. It is a natural and important step in maturing in one's understanding of the subject to reach this juncture. It is certainly a special moment for the person who reaches it, but of itself, it is not special at all.

A person who reaches this point passes from a dogmatic understanding to a critical understanding. He may not be conscious of it, but he recognizes that necessarily all the material which lies before him and has been given to him to 'study,' is not so much historical fact as historical evidence -- whether he is actually studying history, or some other subject. Each bit of writing he encounters is evidence of a thought in another person at some past time, which may or may not be true. Criticism -- the 'interrogation' of evidence -- is a necessary element in approaching the subject matter if there is any hope of ironing out the inconsistencies and achieving a true understanding as opposed to a progressive cataloging of dogma.

Criticism in thought -- especially on subjects involving human action -- reflects a certain conscious or unconscious grasp of the notions I was talking about in the last couple of essays, and which I talked about indirectly some months ago. Namely, there are certain realms of knowledge which are inaccessible purely through logical approaches. This is not to say that they are illogical; of course, whatever is true must obey the laws of logic. It is only to say that the knowledge contained within them must be accessed initially by other means -- relationally, rather than by either logical deduction or empirical induction.

Can a person persist in the dogmatic state forever, never achieving that critical mode of understanding in a broad sense? To a large extent, I think that the phenomena can apply both on a subject-by-subject basis and in a broader fashion, so almost all people will eventually become 'critical thinkers' on at least a few subjects of their own expertise. But in the broader sense, I think they can still remain in the dogmatic mode while achieving great intellectual mastery on a range of topics, and in fact such people can be quite brilliant. It is entirely possible to make enormous intellectual strides without recognizing the basic necessity of 'alogical' relational means of gaining understanding of the universe, especially if one hasn't strayed too far into the 'softer' sciences. In something I consider to be a very interesting twist, it seems to me that quite often these people far exceed the knowledgeability and raw intellectual power of many of those who have made the broader critical transition. Note that I am not intending to use 'dogma' in a negative fashion. It is just a way of relating to facts and to the universe, and a quite necessary approach to understanding for all people.

I bring all this up because I have just encountered what I think is an amazing example. I was investigating homeschooling materials and came across this video:

Art Robinson explains the Robinson Curriculum from Arnold Jagt on Vimeo.

Dr. Robinson is obviously a brilliant and insightful thinker and a very intelligent man. But it is quite clear from the video and several statements on his website that he believes the scientific, logical approach to understanding is the only valid means of acquiring legitimate knowledge or navigating reality. Ironically, he has produced and advocates an approach which is probably exceedingly effective at giving those who use his curriculum exactly the type of critical understanding I am talking about and which he seems largely not to have yet realized -- even his own children, who were the first to use it. One of his reviewers directly remarks that the reading material has given him a 'feel' for history that he never had before -- exactly the kind of relational understanding which I have been talking about that comes from achieving a critical level of thought. He has acquired a 'feel' for the history because he has begun interrogating and relating to the authors set before him, rather than simply drinking in what they have to say as 'fact.' The 'facts' have been transmuted into evidence, and he is unconsciously doing what Collingwood calls 'the history of history' -- the investigation of the historical investigators, and the relation to them and to past modes of thinking.

Further, and even more ironically, he appears to have embraced exactly the kind of positivistic, uber-scientific philosophy to which many attribute the decline of Christianity in the last two centuries. Somehow, though, he comes out of it apparently quite steadfast in his religious beliefs. I wonder if his children are in fact more thoroughly rooted in their spiritualities for having accidentally been 'scientifically' educated in such a classical fashion by a man who appears to have had absolutely no intent of doing so, nor any conception himself of the notions he would be giving them! Maybe he should consider putting himself through the same regimen...

At any rate, it seems to me that this moment of critical awareness can go on to produce a critical understanding which 'softens the edges' of dogma by clearing up it's purpose -- to suggest the image of the ideal, not to define it as a set of rules. But of course, before that happens, the realization of the conflict within the absorbed dogma and between it and the nature of reality can also produce a caustic skepticism, and probably does so at least for a time in everyone. Thus, the immature 'believer' experiences a period of conflict and perhaps a feeling of betrayal and alienation. But hopefully, if he is mature, he goes on to see the reasons why, and forgives 'the world,' and puts aside those haughty and rebellious attitudes towards 'indoctrination' to see the picture he was really meant to see by way of that indoctrination. If he is not mature, he may stay mired in this acerbic and skeptical philosophical adolescence, at least until such time as he can come to better terms with it.

Yes, I see that what I have just related might have strong implications for the nature of religious experience, but anyway, this is not an essay about that right now. But to continue, I trust the reader has seen the parallels to the model I laid out earlier. From dogmatic youth, through skeptical adolescence, to a mature and contented critical mind, the progression described by Collingwood seems to closely parallel the political progression.

But what about those latter stages, and those crazy medievalists? And why does history appear to be running backwards?

I think I will stop here and take that up next time. My thoughts on that (or at least, the expression of them) are not yet completely ordered.

Subjects, Objects, and Christmas Carols

2011-12-14T20:11:00.000-08:00

[Note: This is an extension of the last post I did on human nature. I am drawing -- and quartering, in some cases, maybe -- these ideas from R.G. Collingwood's The Idea of History. As I am even less familiar with philosophy than with economics, and not to be trusted on the finer points of anything, the interested or skeptical reader is heartily encouraged to investigate for himself.]

Every year about this time, I am flabergasted by the bizarre and irritating renderings of Christmas carols. For the past several, I have bought or received as gifts Christmas music CD's, almost all of which I find myself disappointed with.

The major problem for me is 1) I much prefer the older songs, and 2) almost nobody seems to understand them, so they can't seem to perform them in an appropriate manner. Take, for example, Oh Come Emmanuel. This is perhaps one of the very best ever written, and yet it never ceases to amaze me how badly it gets butchered, even more badly than most others. After some thought, I think I have come up with the reason why.

Clearly, the song is a very powerful expression of the collision between hope, faith, and the temptation to despair at the condition of human existence 'under Satan's tyranny.' Hence the powerful refrain, Rejoice! Rejoice! -- sung mightily in the imperative -- the duty of the Christian who understands the message and power of the Incarnation.

This is a serious and powerful song whose principal theme is a message of strength and perseverance, and yet, each year, one is greeted with renderings like the following:

Note that musically, there's nothing really wrong with it. It isn't bad, per se, it's just goofy. It isn't appropriate.

The reason -- I think that most of the performers simply don't understand the song. They can't fully relate to the ideas that it expresses, to what the author must have felt when he was writing it, if they relate at all. It is just too old, and its sentiments too foreign.

Contrast this performance with the one below, a more modern rendering of a poem by Henry Wadsworth Longfellow that has long been sung as a hymn:

Whether you particularly like the song or its style (I find the children's choir which is obviously lip-synching to be a bit phony and annoying) you can tell that the performance is at least appropriate. I think it is even more appropriate than the original hymn. The people on stage actually grasp the song's meaning and message.

Why? Because it is an idea they can relate to.

Relation and Understanding

Suppose, however, musicians tried to perform music in the way that most modern thinkers approach the subject of science. In other words, they tried to be 'objective' about it.

Rather than relate emotionally to the message by looking at the song 'from the inside,' they stood outside the song and tried to pick it apart, perhaps in terms of its 'psychology,' or the way the song reflected the underlying assumptions of social hierarchy of the time it was written. They refused to allow their emotions and sympathies get in the way of understanding the 'objective truth' of the thing. This, of course, would be a completely inappropriate treatment, but what would the performance eventually look like?

It would be a disaster -- mechanical, dry, empty, everything that music is not supposed to be.

And yet, for most people today, the notion of objectivity is synonymous with the idea of 'fair,' or 'accurate,' or 'correct.' How would the musicians be able to produce a 'fair' representation of their object, if they were not objective about it?

Perhaps I haven't quite made the point I intended very well. Performance of a piece of music is not the same as judgment, which is a more appropriate setting for getting at the notions of fairness and accuracy. Suppose a judge were listening to these two performances and was asked to decide which performance was 'better.'

Should the judge view the performances purely 'objectively,' as objects, refusing to relate to the music in a subjective manner by allowing it to touch her sympathies and emotions, looking at the performances 'from within' rather than strictly 'from without?' Perhaps if he did so, he might judge that the first performance showed more technical skill, so that it was the superior piece.

Would such a judge have 'understood' the two pieces?

Would that be an appropriate way to judge?

Objectivity is Not Necessarily Fair -- Or Appropriate

What I have just described might be called a mistake of positivism -- the attempt to apply the methods of science to everything, even where it is inappropriate. I have talked about this mistake quite a lot before, and committed it myself even more than that. I am probably incurable. It is, perhaps, the philosophical mistake of our time, and a difficult habit to break.

It is simply inappropriate to treat all things objectively -- as objects, rather than subjects. Many things, perhaps even most things of importance in everyday life, cannot be understood by this approach. They must be looked at from the inside, related to, sympathized with and then evaluated, before the most important truths can be known about them.

Many people believe that one of the most important of judgments -- the judgment over a criminal trial -- must be done objectively, 'strictly according to the law,' to be done fairly and justly. Setting aside the 'according to the law' part for right now, I don't think that this can be correct, as I'll explain. But deep down I believe that even most people who would say this also know it to be untrue. How do I know?

Ask them how the Ultimate Judge -- God -- would do it, and how He will judge us when the time comes. Supposing of course, that the person being so interrogated believed these things, or could at least to relate to the idea of the ultimate judgment of the soul. God would know every corner of the soul, both the victim and the accused. He will know every 'fact' of the case, seen both from the inside and out, and the relation between every facet and fact all the way out to the very ends of all truth. He will be able to deliver 'true justice' just as surely as He has all perfect knowledge and perfect judgment. But the important thing to note here is that to do so, He must be in part subjective about his analysis of the question, in order to render an objectively just verdict. He must take into account all truth, not merely what may be known 'objectively.' He will look at everything, from within and from without.

How can any judge understand the true evil of a crime unless he looks at the thing from the inside, rethinks the thoughts of the criminal in his own mind, the pain and anguish of the victim, and relates to them, to know these things for himself? How can he render a fair judgment unless he has bothered to try to understand the crime? It is impossible to understand such things purely as objects, they can only be got at as subjects, because they involve human volition and free-will. The human is actor, decision maker, not the passive object of the scientist's -- or judge's -- inquiry. The thing one is after -- the truths concerning the essence of human action itself -- cannot be had by way of objective observation, only by the act of subjective understanding and relation to the mind and thoughts of the actor.

Of course, to truly understand and stand in a position to judge in the manner I have just described is a very difficult thing to do, perhaps impossible for humans to do very well at all in the case of such emotionally charged subjects as routinely come up in criminal law. So, perhaps in that case it is better simply to judge according to the legal guidelines in an objective manner. Nevertheless, deep down, it should be clear that this is not the way to do the thing properly, not merely as a matter of sentiment, but as a matter of logic. No human action may be understood from the objective frame of reference, because to understand the action, one must understand the man, and be able to relate to his thoughts and their context. And an action which has not been understood may not be properly judged or criticized.

Human Action as Subject and Object

Thus I arrive at the whole point of this essay and the last: why it is that in so many ways people of the modern West have a difficult time understanding things from their own past -- like those old Christmas carols -- as well as themselves. Of course, a big part of the reason is plain ignorance, true, but when people do try to investigate, they usually don't know how to go about understanding it, and generally try to do it in the wrong way -- the objective, 'scientific' way.

Human volition and free-will act as monkey-wrenches tossed into the gears of the 'it is what it is,' positivistic analysis of man. Any analysis of human action which attempts to understand and properly answer the question of 'why' must treat man subjectively. It is principally man's ability to form his own opinion and act upon his own will which makes his outward nature a dynamic and non-uniform quantity. A man cannot be merely what he is, because he is free at a moment's notice to become something else. What one is today may not be what he is tomorrow, and what applies to one individual or class of men may not apply to another. Both across individuals and across time, he simply can't be perfectly pinned down.

Because they rely on positivistic assumptions, most modern 'histories' are not histories at all. They may be 'investigations' of the past, or some other such sort of thing, but they can't be real histories because they make such an outlandish hash of looking into the human aspect -- the most important part. Human actions in the past are just that -- human action, something which cannot be known or understood in an objective fashion. These 'objective' histories may be able to describe certain aspects of events, but from the outset they preclude themselves of the possibility of actually understanding them.

The typical modern approach is a sort of two-part fiasco. First, there is an effort to gather together the 'brute facts' of the matter -- the so-called 'data' -- then a secondary effort of finding the pattern and producing a theory that explains it. Kind of like trying to discover the gas laws using temperature and pressure measurements and drawing graphs with them, except with an object completely refractory to such an analysis.

As one might expect, the effort appears to fail at the second stage, mainly because people don't know what to do. After all, to do the impossible can tend to be a rather challenging thing. In this attempted capacity of historical 'analysis' has grown up the thick weed-bed of the social sciences, among them sociology. It is in this capacity of trying to find theories that 'explained' the data that investigators may have done some incidental little bits of history by accidentally relating to people when they weren't trying to, as well as some other social science like economics.

But by and large, if history requires one to understand specifically the element of human action in past events, then these things cannot really be history. So, if the first stage does not attempt the understanding of history, and the second stage cannot, then, for the most part, history is not done, and it should come as little surprise that the field has experienced some degree of decline. Most other fields which are not suitable to the application of scientific methods have experienced such declines as well.

In reality, it is not merely the second stage of the effort which is being neglected by this approach, but both. Neither activity is appropriate. As any high-school student will gladly relate, isolated 'facts' like dates and places do not help one to understand history, regardless of their quantity. By tearing them from their context, the surroundings which give them meaning and connect them with one another, they lose intelligibility. It is the body of 'facts' itself, which include what so-and-so was thinking when he did that dastardly/heroic deed, all in proper relation to one another which is the history, not the disected bits and pieces.

It does not matter, for example, in-and-of-itself that a letter from a certain person is dated a certain date. The letter is an artifact of human action, and neither the date, the name, nor the letter mean anything apart from one another. The writer may have been mistaken about his location or the time, or other such 'facts' contained within the letter, and the whole thing will be colored with his own point of view, his history and understanding. What matters is the thing taken all together, all subjected to the historian's understanding of the document itself. It must be evaluated for what it is, in the context of other historical evidence, its author related to by the historian, and evaluated as a whole as to what it suggests about the actions of people in the past.

It is easy to see how the drive to objectivize the study of history and the 'science of people' would tend to lead to the static and uniform picture of human nature as discussed in the last essay. It is true that it is in the nature of things that one must look to find understanding -- but often that understanding is only accessible through the subjective approach. A wrong approach with built-in wrong assumptions will give a wrong analysis. But even given the very rudimentary analysis I have just related, it would seem that only a determined and willful obtuseness would explain the insistence on an objective approach to practically everything.

On the brighter side, it is also amazing and refreshing to see just how natural it is for a historian with a clear conscience to go about doing some real history once his head has been cleared of all the inane ideas which have been imposed upon him by the positivistic quasi-scientific outlook. It is such a natural and normal thing to relate to other people, and to imagine having met the author of a book or historical work and to see the world through his eyes. The innocent and imaginative child who first begins to really enjoy reading because he has involuntarily done just that is in many ways a more fit historian than most 'grown-ups.' That is, at least until he has had his head ruined with a modern education.

A Cliché Most Divine

2011-12-05T18:34:00.001-08:00

It is what it is.

--Anonymous

The thinking behind this well-known saying is one with which I have had a long love-hate relationship. It is, of course, related to that other well-known cliché -- 'the nature of the beast.' Simple as it sounds, up until just very recently I do not think I have really even begun to understand it. I think many other people do not either. I recently heard a radio host proclaim that the use of this saying was one of her biggest pet peeves, claiming it meant absolutely nothing.

Well, perhaps, to some minds. What it is meant to mean, at least to mine, touches on some of man's deepest assumptions about the universe -- What do we mean by the nature of things? It is actually a bold assertion of a certain way of thinking -- It is what it is, and of necessity cannot be asked or expected to be anything else.

Well, can 'it?'

To Sin Against Nature

A certain argument I used to hate against the practice of homosexuality was that it was obviously wrong because it was 'unnatural.' Now, I do not necessarily support homosexual marriage or anything like that, I just really hate bad arguments about difficult subjects, especially when they appear to me to vastly oversimplify something in a deceptive way. But I have had to rethink my reaction to this argument upon deeper inspection. Since that time I have encountered arguments that attempt to construct entire moral systems on the notion that the very definition of immorality is to treat something in a manner which violates its 'nature.' Though I didn't necessarily agree with them at the time, I was forced to take them seriously, and they gave me something to think about.

The hangup -- naturally (I can't help it!) -- is what is meant by 'nature.' In my former thinking, I interpreted the statement against homosexual conduct to be an egregious violation of basic common sense, as well as a very basic Christian doctrine -- the notion of original sin. Evil, cruelty and brutality are very 'natural' things. Anyone who has spent any time 'in nature' and seen the nasty things animals -- including the human animal -- do to one another would know that. The 'naturalness' or 'unnaturalness' of an act would therefore seem to be an exceedingly poor metric for the evaluation of the rightness or wrongness of a behavior. Based on well documented examples of perfectly 'natural' animal behavior, it would appear at various times and circumstances to include rape, incest, and the eating of one's own offspring among acceptable actions.

Further, the doctrine of original sin would suggest plainly that since The Fall it was in man's 'nature' to engage in evil. His nature and inclinations were compromised and no longer to be trusted, and to escape evil it was up to him to adopt a nature opposed to the one he was born with -- a divine nature. Again, man's nature is a very poor metric, and since it is typically Christians making this argument, it would seem a rather obtuse thing to say.

But this, of course, is to misunderstand the meaning of 'nature' in the context of the idea being expressed. Incidentally, it is also to misunderstand several very basic points of the Christian faith, at least as I have come to understand it more recently, but that is another topic for another time. On the other hand, I'm not too sure that many people really understand what is meant by 'nature' in this context either, including many of the people who actually use it in such arguments. Though it is obvious to me that to mean it in the way I have just described is really quite absurd, I actually do think that this is the way that most people who say it really do mean it. But taken in its proper context, it is actually a very meaningful and insightful argument -- its just that very few people actually mean it in that way!

So, if one is to be tossing around what are really very useful words like 'nature' and 'natural' to say what would otherwise be important ideas if anyone knew what he were talking about, it might be useful to do a bit of clearing up of what this controversial word means.

What, then, is meant by nature?

Nature and Substance

The ancient Greeks had an unusual notion of the idea of 'substance' which goes directly to the heart of what we mean today by 'nature' -- especially in the context of human nature. I suppose this might be expected, as the Greek civilization is the birthplace of Western thought. By 'substance,' the Greeks meant almost the exact opposite of what one might mean using the word 'substance' today, which is the beginning of a very interesting and enlightening train of thought.

A thing of substance, to the Greek mind, meant something which was necessarily eternal and unchanging. Only things of substance were worthy of serious thought, because a thing which was not of any substance could have no determinate truth known about it. It was ever changeable, so that what might be found true of it today would not necessarily apply tomorrow or to yesterday. And since all material things were subject to the physical forces of the environment, such that they weather and age, or grow and multiply, or are otherwise transformed by the mere fact of being material things, however slowly or quickly this process may in practice take place, they could by dint of their very materiality be of no substance. Thus all substantial things, if they are to exist, must of necessity be immaterial.

The 'substance' of a man, therefore, was not to be found in his body, which would grow and change and eventually die over the course of his life, but in his soul. By this reasoning, the human soul was reckoned an eternal and unchanging thing and the seat of a man's true being. But by approaching the subject of the human sould by way of the idea of substance, several unusual ideas snuck in about what modern philosophers would call 'human nature' that seem to have been necessary for maintaining philosophical coherency than actually reflective of reality.

For example, the Greeks believed that if a traumatic or otherwise 'lifechanging' event happened to a person that dramatically altered his personality, the person himself -- his soul -- remained unchanged. Rather, the event or experience served only to bring out some aspect of the soul which had to that point remained hidden or unexpressed. The man himself could not change, through any force of circumstance or by his own will, only his body or outward appearance. A man 'was what he was.' Anything he did or could do was only a product of that.

This was one note of doctrine that got Socrates in trouble with the authorities and eventually resulted in his death. Socrates, like later Christian thinkers, disagreed, believing that a man's moral choices over the course of his life could alter the soul, 'scarring' or preserving it intact and unspoiled to the day of judgment. This heretical take on things, as well as many other of his views, put him well ahead of his time philosophically -- and at odds with the ancient Greek orthodoxy.

The Enlightened Human Nature

Fast forward a few thousand years, to the budding Enlightenment movement. A millenium of Christendom had firmly entrenched certain notions concerning the nature of God and the universe. In particular, it was firmly held that God and His laws were things of 'substance' in the Greek sense -- they could be relied upon as constant and unchanging. This expectation gave rise to the method of logical induction -- the searching for patterns or laws in observable physical phenomena. The application of this method of inquiry produced a burgeoning of the natural sciences and investigations into the natural world, which, contrary to Greek expectations, did appear in some aspects show 'substance' after all.

But the success of the 'scientific method,' however based it was upon articles of faith intrinsic to the Christian perspective, nevertheless began to turn its methods back against its maker, so to speak. Not content with the very types of faith that had made their sucesses possible, Enlightenment thinkers began to question the merits of 'religious superstitions,' and in particular turned their attentions towards issues of religion, philosophy, politics, and human government.

With respect to the question of human nature, the old notions from classical Greek philosophy, which had either been rejected or heavily modified for centuries, were raised up from the grave, but dressed up in a new form. For thinkers of the time, to do so was simply too tempting, in light of how it contradicted those pesky religious superstitions and convenient as its assumptions were to the notions of 'scientific' inquiry. If man and his nature could be taken as constant, consistently obeying a defined set of laws, science could be put to work on him. Once again, man was viewed as having a fixed nature, and the task was undertaken to determine just what that nature was and how it might be most effectively 'governed.' Many opinions and controversies arose, of course, but behind these opinions sat this same basic assumption.

The great hope of Enlightenment Utopianism, for example, rested on this idea. If human nature were fixed, it stood to reason that the questions of political governance contained a definable and finite number of 'problems' to be 'solved.' And if science could produce answers to such problems and questions, as the 'progress' in natural sciences strongly suggested it could, over time, it was reasoned, these problems would be solved one by one. Mankind could and would march steadily and predictably towards the day that all were solved, and Utopia had been realized. Progress, as it were, was inevitable, written into the very laws of nature.

In fact, most modern social science rests on this idea, including the science of ... economics. Of course, if this view is not correct, the house of cards tumbles, my precious passtime with it. If man's nature changes as his understanding of the universe changes, or as events and experience take their course on his awarenesses, or as a million other effects have their impact, then the catalog of human problems becomes a volatile and dynamic quantity, never to be solved. Every solution produces new understanding and awareness, and a new set of problems to go with it. There is no ideal state, or even the possibility of one. The 'laws' of social science may be correct today, but must come with an endless list of caveats and be transient or of questionable permanence -- hardly the set of natural laws one was looking for.

Which Is It?

To be sure, I'm doing a little of conflating several arguments in this essay -- the issue of man as an individual, and man as a collective, as well as tossing every part and parcel of man's nature into the same basket. It is certainly possible that various aspects have their various characters, but even so, even if only in certain limited aspects of his nature, man is in fact a variable and dynamic creature, this quality of the individual must manifest itself in the whole in some form. The idea is quite a disturbing intrusion into many a political argument, especially in this day of highly polarized ideology.

The argument from fixed human nature certainly has its utility, as well as its appeal. Who could deny, for example, that possibly the very worst thing one could do for one's marriage would be to persistently question or insult the very manhood or womanhood -- the very seat of identity -- of a spouse, or to ask that person to conform to ideals in opposition to his nature? Or that the confusion and questioning of natural role and responsibility is not the most destructive thing one could do to a society?

It is impossible, however, to ignore the logic of the opposite case, and a Christian in particular would find it difficult to reconcile the case that man has a fixed and unchangeable nature with the message that his life can be transformed for the better through faith, hope, and the power of God. But once admitted, it raises a number of difficult questions. Is there a 'correct nature,' and a corresponding governance, deviation from which is the source of social evils, or are there several, possibly many, acceptable natures with matching governments, such that the source of problems is as often a matter of the regimen as the man, or a general mismatch between the two? Is the ideal of government a fixed or moving target, changing with the natures of the men over which it holds authority? If natures are variable from one man to the next, are certain natures inherently incompatible, such that a mixture of them becomes inherently ungovernable and unstable, and either one or the other must prevail or the two separated in some fashion?

Whether human nature is static or dynamic, uniform or variable, the most basic questions concerning it must be resolved to at least some degree in order to even begin approaching some of the most important questions, as was apparent to Plato and should have been down to the very present day. It is perhaps an impossible thing to state the answer, but for now I think the problem is principally to stop taking it for granted. Too many have myopically chosen one set of assumptions to the exclusion of any other consideration, and much evil has come of that this century past.

So, are things just what they are -- men in particular -- or not? Might they be what they are today, but perhaps weren't yesterday, and may not be again tomorrow?

On the Enslavement of Debtors: Pros and Cons

2011-11-25T21:47:00.001-08:00

Cultures and peoples have long been plagued with the problem of what to do with a man who is either incapable or unwilling to pay his bills. In the old days, there was a rather widespread solution which was also a rather simple one, if also rather crude. If a man sold off all his property and still could not pay his debts, he was forced to sell the only thing left which he 'possessed' -- himself. He was sold into slavery to his creditors. This practice was imminently logical and folded in nicely with the widespread institution of slavery as it existed for most of human history.

Now, there were certainly many other ways in which one might find himself enslaved which would in no way impugne his character, to say nothing of the abuses which were prolific in this system, and to be sure I would seriously doubt that there was any forethought given to the aspect of the situation which I am presently interest in. Nevertheless, there was a certain 'upside' of this way of doing things that bears reflection giving our present circumstance. Namely, an economically productive outlet was created to deal with those sorts of people who simply could not be trusted to manage their own finances or to pay their bills. By the action of this practice, their activities were largely placed under the stewardship of those that could and would keep them mostly out of trouble. Unless, of course, they happened to be shiftless and feckless enough that they became good, honest outlaws. At any rate, there was a very strong incentive to stay out of debt and to carefully mind one's obligations. Thus, the financial systems of the ancient world had at least one built-in mechanism to address a serious threat -- the activities of people who would outherwise have created havoc in the marketplace by rampantly stiffing creditors.

Fast-forward a few thousand years. By processes of which I do not pretend to know all the details, the West has decided that this practice should be abolished -- presumably because it violates basic human dignities. Legal institutions governing bankruptcy now generally allow a debtor to discharge his debts by agreeing to give up all his assets to his creditors while retaining his own freedom, the creditors absorbing whatever residual loss remains. Unless, of course, it is student loan debt, which may not be discharged through bankruptcy -- it is with the borrower 'till death or repayment do them part. I suppose that even respect for human dignity has its limits.

But as the reader must by now suspect, there has also been a number of rather perverse outcomes in the financial world as a result of these changes. Nowadays, rather than reducing the financially irresponsible to a position in society that will keep them from harming others and mostly out of trouble, or else truly exposing them for the ruthless brigands they are, the modern practice is to either put them on welfare and/or make them powerful statesmen and financial magnates.

The Problem of Moral Hazard

The Problem of Moral Hazard in finance can be succintly stated as a situation with privatized gains coupled to socialized loss. Heads, I win, tails, you lose. There are a myriad of manifestations of this phenomenon --

Inflation, which benefits the inflating banks and their borrowers while harming savers and other holders of cash, besides creating the business cycle
Too-big-to-fail bailouts, which subsidize the risk- taking of large institutions by allowing them to reap whatever profits emerge from their activities, while pushing losses onto taxpayers when they fail
And, of course, government subsidy and other forms of welfarism which are self-explananatory

Modern bankruptcy is a major source of moral hazard. It places a limit on the losses a defaulting borrower can sustain, as well as leaving him free to enter into further borrowing arrangements after he has defaulted. Theoretically, market participants should refrain from lending to a borrower with a history of default. Practically, they don't. Ask the lenders to the governent of Argentina. Credit markets are an 'aggregating phenomenon' -- which often means a 'lowest common denominator phenomenon' -- in that a giant pool of creditors is competing for borrowers. What one party knows about a borrower won't necessarily be known by all parties, and with inflating money, there are typically plenty of fish to fleece.

Never mind the moral hazard that governs the mechanics of most lending -- a lending broker, with limited interest in repayment beyond the initial transaction, doling out somebody else's money, to God-only-knows-who. Given the natural limits of the flow of information and the ingenuity of the human rationalizing organ, it should not surprise anyone that credit can usually be had by practically any narethewell in a 'good' market, and pretty much only by Government In Whom We Trust in a 'bad' one. Except, of course, when it's really bad.

Most entrepreneurs know this. Most go bankrupt several times before they hit it big. If they ever hit it big. Some find that careful bankruptcy can be a lucrative enough trade in itself. In the process of creating wealth and jobs and all the other wonderful things rightly attributed to them, they also commonly leave a flotsam of bankruptcies, financial havoc, broken promises and unpaid bills in their wake. Naturally, in a competitive environment with subsidized risk, it pays dividends to knuckle under the competition with ruthless doubling-down. Hey, it ain't your money, and if you blink, you might lose. (But then, so what if you did?) The process of bankruptcy tends to intimidate and deter those who retain notions of decency and shame, archaic and vestigial as they may be to the modern economy. These days, the cautious and prudent need not apply, which is all well and good for those who are neither -- better pickings for them. Thus it is that the scum so readily rises to the top.

In case the reader hasn't heard, such soulless entrepreneurship has hit a new low in recent weeks with the bankruptcy of MF Global. It appears that under the watchful eye of that stalwart euntrepreneurial soul John Corzine, MF Global 'invested' the margin holdings of its clients and somehow lost them. They are gone. In case the reader is not quite sure how that works, these holdings are supposed to be held with the financial institution in the event the investor sustains a large loss on a leveraged position. Which means, the investor has chosen to borrow money from someone else to invest, and the borrower has asked that he set some fund aside to prove he will be protected by a cushion.

In the event that such a large loss is sustained, these funds allow the institution to unwind the position and ensure that the investor's lenders get paid back. MF Global, however, in a fit of entrepreneurial genius, simply took these funds and did 'something' with them. After all, like gold, uninvested funds earn no interest. Such a holding is financially inefficient, and in keeping with modern investing philosophy, MF Global decided it was better to be all-in all the time. Prudence is, after all, for middle-class, wage-earning losers.

Now that they are bankrupt, it has been revealed that they were operating a bank with an empty vault. Many people who were legally supposed to be paid back won't be. This is very unsettling to markets, as it undermines faith in the ability of counterparties to meet their obligations, and at least one broker has decided that it simply does not make sense for her clients to invest in markets with such obvious breaches of good-faith. At all.

It is by such practices and others that the West has come to be ruled by the class that otherwise would have been fetching water and avoiding the lash in previous generations. Or raping and pillaging on the highways, I suppose. Since being entrusted with the reins of the system, they have been systematically picking it apart it to suit their interests to the point of today's destruction. But I have told that story many times before. Today, a particularly interesting situation is been brewing in the Old World.

The Problem of Europe

I think most people understand the basic Problem of Europe. Several governments on that continent owe more money than they are able or willing to pay. That much is pretty simple. But there is a very interesting interplay of forces going on there that is somewhat more complex and worthy of more attention than it gets.

Governments love banks, and banks love governments. Perhaps, to be somewhat more accurate, politicians love bankers and vice versa. As I have shown, in the modern world, both groups are largely populated by reckless and financially irresponsible people.

Politicians love bankers because bankers have the power to lend them large sums of money with which to buy votes and engage in pyramid building -- usually to the benefit of politicians and the bankers' mutual cronies. Bankers love politicians because they have the authority to borrow enormous sums of money and the power to collect payments on that debt from taxpayers on threat of imprisonment. Thus the relationship is naturally highly mutualistic with respect to one another -- and parasitic towards the taxpayer.

But like all such matches, there comes a time when the love affair must end and reality intervenes. The host runs dry, or at least out of patience. For despite protestations coming from Athens, Brussels, and other such dens of iniquity, it remains that sovereignty is ultimately an issue decided by force. The taxpayer of Athens has decided that he does not wish to pay for the expenses his politicians have seen fit to saddle him with, his own enjoyment of the benefits from such government spending notwithstanding. But the money is largely owed to the banks, who have in effect lent the governments their peoples' own deposits for them to spend on themselves. If the people do not pay the banks back...who will pay the people back?

But never mind that for now. As I have discussed, the banks have a seat very near the governments' ear. They would very much like to be paid back, whether the people like it or not, and have taken steps to see to it that they do. In other words, they are attempting to revoke the assumed sovereignty of the government of Greece to declare bankruptcy and discharge its debts on behalf of the Greek people, calling to mind the ancient issue of the enslavement of the debtor. That is what 'austerity' means. If it weren't so, it would be called 'prudence,' but as it is well known that there is no residue of that involved anywhere, and hasn't been a hint of it for ages, 'austerity' it must be. The banks are contending with national governments as peers in the geopolitical state-of-nature. I suspect they will eventually lose, but that remains to be seen. They perhaps should have considered investment in tanks and troops along with all that sovereign debt, had they seen this day coming.

Or perhaps they did see this day coming, and thought that their investment in sovereign debt was an investment in troops and tanks?

The issue of sovereignty looms. The people are theoretically sovereign in democratic Athens. They can choose not to repay, to drop the Euro and leave the EU, to do as they please. Immunity and irresponsibility is the ultimate expression of sovereignty. So far, the banks have blinked. The ECB has inflated, and offered a 50% haircut to boot if the Greeks will just keep putting their checks in the mail. The fact that this deal fell through shows that some powerful sovereign entity isn't satisfied -- namely, the people of Greece. But for aligning itself with the populace and attempting a popular referendum, the seated government was tossed out. Which means that the banks still have great leverage. They have also managed to prod the other governments of Europe to lend to Greece several times -- against the will of the respective populaces. Their power and influence is manifestly widespread, but the resolution of this struggle remains to be seen.

If the banks get away with 'austerity,' we will know with whom the final measure of sovereignty rests in Europe -- the banks. At least for now, until Italy, Spain, Ireland, Portugal, and, realistically, the rest of the European continent meets the same end. Then it will be plain to all what shifting sand the European banking empire was built upon.

As for America's...well...one can only wait and see...

Misconstruing Hayek

2011-11-19T17:28:00.001-08:00

Slogging through Prices and Production and other Works, though somewhat painful, was very rewarding, as I find most such undertakings to be once they are over and done with. I had avoided Hayek for a long time because I find him generally to be difficult to read, mostly because he is so exacting in his language that it gives me a headache, like watching a TV screen with the contrast set too high. It is tiring, with no wriggle room for the brain to relax a little.

However, as might be expected, if you have understood him you can be sure you know exactly what he meant, which I can't always say is the case for other authors, such as Mises, whose writing I find to be often rather fuzzy so that I'm not quite sure exactly what he means. But maybe that is not their fault, as most of what I have read are English translations from other languages. Further, my abilities at reading comprehension often leave something to be desired.

All that said, I think that of all the Austrians I have read so far, I find Hayek's arguments and point of view to be most convincing. His arguments confirmed my longheld view that the quantity of money was actually the key to understanding its behavior and effects on the economy -- and not its valuation, as is so often the focus. He even chides Mises a bit for focusing on the issue of value as opposed to quantity. As I have repeatedly argued, he also believes that money will function most effectively when its quantity is absolutely fixed. I'm glad to find him in my corner on these issues, about which I must confess Mises was raising doubts.

On a very important point, though, I found that my understanding of his views was somewhat lacking -- the Austrian conception of the production structure, to which he apparently contributed more or less the majority of ideas in terms of a triangular model of the stages of production. I had previously only encountered this model in summaries by other writers, and the idea that I had in my head made so much sense to me and worked so well and was so useful that I thought I had the thing pretty well understood. I was close, but I had taken the idea in a far more abstract sense, and even at that I was not quite there. But now having read Hayek for myself, I understand where a certain idea came from that I have frequently encountered and thought rather strange. First, a summary of the model, from which my readers will no doubt extract an overly abstract idea like the one I did and go on misconstruing Hayek to others until such time as they actually read the book for themselves.

Hayek models the production structure as a series of extending bars, which when stacked up make a triangle. (My apologies if the picture at that link does not resemble what I have just described. I could not easily find a good picture. If you want to see a proper one, check p. 233 of my first link.) The extension of the bars represent the increasing value of materials as they are processed towards consumer goods and receive additional inputs of the original means of production -- land (raw materials) and labor -- which cause this increase in value. Basically, it is kind of like a production line, where goods start as raw materials and proceed through various manipulations until they become finished products, increasing in value along the way as more labor and materials are invested in them and they get closer and closer to being finished products.

Raw materials enter at the 'top' of the triangle and move towards the bottom as they are converted to products. The vertical axis is a sort of 'time' axis. This had confused me a bit -- I had thought that the 'top' of the triangle represented higher-order capital goods, but what it really represents is merely earlier stages of production. I think that my original misinformed interpretation is actually mostly correct in an accidental sort of way -- which I'll explain in a minute -- but clearly, that was not the way the triangle was meant to be interpreted by its creator.

Hayek modeled economic growth as an extension of the triangle upwards, adding more stages of production to the top of the triangle. This results from savings and investment, which allow capital investments that permit longer, more complex methods of production which are more efficient. Savings and investment -- or the fake variety produced by inflation -- create demand for these longer methods of production by inducing entrepreneurs to seek more efficient means of producing goods.

Hence an assertion by many economists of the Austrian school which I have run into many times in recent years, but which to this point in time made no sense to me -- that the spike in commodity prices we have witnessed recently were caused by inflationary forces acting at the highest stages of production. Raw materials are furthest from the stage of consumption, therefore they should be the first to respond to inflationary pressures.

This may sound all well and good taken in isolation, but actually it makes no sense at all looking at the bigger picture. If this take on things were true, commodities would always be at the 'top' of the production structure, and one would expect them to rise first, near the beginning of the business cycle. But looking at commodity prices in the 1980's, and even the 1990's, one finds them more or less flat. They haven't risen really substantially until the latter 2000's -- near the end of the business cycle! Meanwhile, stock prices, homes, and other capital goods were all off to the races through the 80's and 90's, suggesting that they somehow occupy an earlier stage in the production structure. But how can that make sense -- don't they have to be made out of something?

What is going on here? Time for that explanation.

It is my opinion that this method of looking at the production structure, however true it may be to Hayek's original description, may be somewhat outdated -- or at least in need of updating. Prices and Production was written in the 1930's, at a time of far less capital intensive production methods. It probably made a lot more sense to think of things this way back then, but today the situation is much more complicated. Far more capital is employed in the production of goods, such that a great deal of capital must already be produced and in existence for pretty much any manipulation of materials to take place -- even for the extraction of natural resources from the environment! Clearly, then, for such capital to be in place already, it must as a rule be produced at an earlier stage of production, else it will not be in existence to do its job.

Hayek addresses this more or less directly, suggesting that the steps for producing capital goods which are used for the production of later stage goods may simply be incorporated further up in the production structure from the point at which they are used. So, in effect, my original interpretation was correct, as higher-order goods really will be higher up in the production structure, though I had no concept of the details that would lead to this conclusion and completely lacked the fundamental understanding of why this was the case. It is solely a sort of byproduct of the fact that earlier stages of production belong higher up the triangle. But getting back to the issue of commodities, if this is the case, then in order to describe the modern production structure, there is an awful lot more piling on to do in comparison to the early 1930's.

So much, in fact, that it seems perfectly reasonable to me to expect that the stages of production of capital goods for application to the production of most consumer goods would extend far longer than the stages of production to produce the consumer good itself from raw materials. That was a really long sentence. Let me give an example.

Imagine wood being processed to produce something like a baseball bat. The tree must be felled, stripped, processed to lumber, shaped, and finished to produce the baseball bat. However, imagine all the stages of production which must be applied to generate the heavy equipment just to cut down and transport the trees! I can't imagine describing a similar process for producing just a tractor trailer, and even that is not the most complex, high-tech equipment used in the process. If this is the case, it is a relative hop, skip and jump to produce the bat in comparison with the long, hard, slogging and complicated marathon to produce the truck, so that the wood will necessarily enter the production structure at a relatively low point overall.

It may be objected that the truck is made of steel and other commodities, which must necessarily enter at the top of the production structure, or at least higher than the truck. But, just to illustrate a point for a moment, I shall retort that it takes capital equipment to produce the steel, which must necessarily stretch in steps up above the entry of the steel for the truck. Of course, the steel working equipment must itself be made of commodities, and on and on, chicken and egg and chicken and egg, on into infinity.

This was basically the argument of Thorstein Veblen, who asserted that, contrary to the position of the Austrians, the production structure is flat. Sheet metal and screws are produced by factories, which are themselves made of sheet metal and screws, therefore no such analysis is possible. To this I say that the entry of commodities for production of these types of higher-order goods is irrelevant. The volume of commodities required for these types of production is relatively insignificant in comparison to the volume used for lower order products, such that the price of these higher-order goods and changes in their production volume will not influence the overall price of the commodity because it will not influence supply or demand significantly. The volume of wood being processed for factory tool manufacturing will be insignificant in comparison to the volume for paper production, plywood, furniture and the like, such that the volume of the latter will set the price of wood overall. Inflation will have no impact until it begins to influence the price of these types of goods, which are near the bottom of the structure.

Therefore, one should expect that with few exceptions, commodity prices will not rise until late in the business cycle -- as I have asserted before, and contrary to what many Austrians are arguing. Hayek's own model even explicitly and openly acknowledges that raw materials are used over the entire course of the process of production, such that there are actually many entry points for commodities into the production structure after the initial stage. Why so many Austrians have seized on only the initial entry point as describing price behavior eludes me, and even so, if one is to consider the modern production structure as it stands today, then latter entry points must surely be more important. The inflation we are seeing today is influencing commodity prices so strongly because the wave of price increases has moved down near the bottom of the production structure. If it were really as the 'traditional' interpretation would have it, stock markets and large-business valuations would be rallying to high-heaven, and unemployment would probably be much lower in response to the flood of money that the banking system has generated lately. Instead, it is moving into commodity and consumer price inflation.

Was that all clear? I have one more topic, along similar lines.

If Hayek's triangles are to represent the flow of intermediate goods towards consumer goods, then the question naturally arises as to where management and corporate hierarchy fits into the picture. Certainly, these people represent an employment of part of the original means of production (labor), and certainly they are engaged in 'production' of some sort, if they are said to be employed. But how does their rather abstract 'product' fit in?

I say it belongs atop whatever order of production they as individuals oversee, and extends upwards in proportion to the depth of the hierarchy in question. I say this because it is their 'output' that couples with the industrial equipment under their oversight which produces the intermediate, capital, or consumer good in question, and that higher levels of the hierarchy are employed in the management of the workings/'output' of the subordinate levels. At the top are people rearranging the production structure at the very highest levels, buying and selling whole companies.

This model fits neatly into what one actually observes with respect to wages -- higher-ups and the financial community see their incomes escalating early in the cycle, till at the end, when unemployment falls, lower-order wages start increasing and consumer price inflation is looming. At this point, those higher-up and the financial community tend to get hammered, relatively speaking, especially if their is some degree of monetary tightening. Of course, they may still be making a great deal of money, particularly when they successfully lobby Washington to give them some courtesy of taxpayers.

Conclusion

Don't count your chickens before they hatch, and don't think you know something 'till you've read the original reference.

The production structure is best understood in terms of the flow of materials -- circulating capital, moving from raw materials to intermediate goods to consumer goods -- vs. the ordering of a capital structure in terms of higher- and lower-order fixed capital, though as a sort of accident, they happen to roughly coincide if taken in a very abstract manner. Because supply and demand ultimately determine prices, price changes should operate at the 'center of mass' of a good's employment in the production structure, so that commodities which are principally employed for the production of lower stage goods -- which is most commodities -- will see their prices rise late in the cycle, rather than early as a more direct interpretation of Hayek's model would suggest.

But then again, I'm hardly a master, only an amateur, and I'm making all of this up as I go. As always, don't take my word for the gospel.

A Mystery Solved (Maybe...)

2011-11-06T18:20:00.000-08:00

Lately a political kerfuffle has been making the rounds which is really quite old -- if leftists believe that the wealthy should be taxed at a higher rate for the purposes of charitable acts of government or for some public good, why do they not voluntarily pay higher taxes themselves? OK, it has not been all that lately; I admit that I am very late to the table to comment on this. In its most recent incantation, which was actually a few months ago, one multi-billionaire Warren Buffet asked why it was that he should pay a lower tax rate than his own secretary, and more recently one B. H. Obama made a similar remark that 'people like him' might ought to fork over more.

I really tire of these kinds of discussions, mostly because they are always so riddled with rhetoric and disingenuousness, but a flurry of commentary on some economics blogs has actually treated it with some seriousness. A post at Free Advice got me thinking more seriously about the question than the the usual yelping of 'hypocrite! hypocrite!' That analysis has never set well with me, and apparently also not with others. But what is one to think of the situation, if he is to treat it rationally rather than rhetorically and really understand it?

My first instinct was that, even if one does not agree with these sentiments or behavior and detects a whiff of incoherence, it is not reasonable to expect 'consistency' in this exact context. The leftist is expressing a sentiment about a hypothetical world, about how it 'ought' to be, and by an unspoken extension asserting how he would act in it, then being asked to act consistently with that notion in the actual world. But the hypothetical is not the actual, so logically it is not realistic to expect 'consistency' between the two any more than it is to expect 'consistency' in a captain navigating his ship on calm seas versus in the middle of a hurricane. The two might coincide, but it is not reasonable to expect that they must of necessity. If the difference -- the hurricane -- impinges directly or indirectly on the captain's objectives, it is perfectly rational that he should change his plans. It seems to me reasonable to expect consistency within arguments that concern comparable situations, and between arguments and actions concerned with real situations as they actually are, but not arguments about hypothetical situations or situations different from those presupposed by the arguments. If the leftists in question had advocated the higher taxes, and then having gotten their way and not paid them -- now that would be inconsistent, and hypocrisy.

I thought that I had settled the question for myself, but it kept nagging me, and I realized that my response, while true, was trivial, and I hadn't actually found the thing that really mattered -- namely, what caused the discrepancy, and whether or not it was legitimate. Was there a difference between the situations that the tax advocate could point to to justify his actions? What, apart from the stated reasons and rhetoric, which are mostly uninteresting to me, underlies this tendency to state things for which there is an obvious retort, and for which one will so obviously be accused of inconsistency in word and deed?

I trust that for most readers I have asked something which sounds rather naïve and infantile. But it is too easy to chalk such things up to greed, posturing, disingenuousness, etc. Perhaps it is -- but perhaps there is much more to it to understand. This type of rhetorical behavior has long fascinated me. For example, the amount of time, emotion, and effort invested in the spinning up of plausible deniability has long baffled me, especially in cases where it is quite obvious that one is lying. Why would, for example, Iran's Ahmadinejad bother with plausible sounding excuses for Iran's nuke program? At some point he is going to have the nuke -- and then what? Everyone pretty well knows he is lying now, and they will surely know when he has the thing. If they don't know Iran has the bomb, the bomb does Iran no good. In either event, he will be found out someday -- but no doubt, on that day, he will again hedge and backfill!

Why not just tell baldfaced lies from the beginning, and give a big middle-finger when it's said and done and nobody can do a thing about it? That's what I would do. If I'm going to do something dishonest, why bother with pretense? If it is dishonest, it is dishonest, and no amount of dissembling on something like that is going to fool anyone worth fooling. And why would the rest of the world care if his assertions made any sense or not, or bother investigating them, or any such political thing, rather than answering the question straightforwardly and directly for themselves, and blowing the thing up or not as they saw fit?

I'm not trying to advocate a policy here -- I am probably the last person who should ever be considered for the post of diplomat and do not pretend that I would be be able to handle it any better than the people who are doing so presently. I am also a lousy poker player and do not understand the popular infatuation with it. It would not surprise me to learn that I am perfectly tone deaf with this sort of thing, or perhaps that I am capable of far greater evil than even these types, because in this situation, I would simply say whatever it was that I though most efficacious, plausible deniability two sheets to the wind. I don't care. But I don't see the use or the point of all the posturing and maneuvering on something so straightforward -- except that all of humanity seems to hang on this ability to produce plausible sounding utterances that one can point to in the wake of what are obvious deceptions and misdeeds, and say "see, I never actually said anything that wasn't technically true." What in the world does it matter if or when thousands or millions of people are dead, and why invest so much in the charade? Will it not be patently obvious that you are a liar, and is anyone really going to trust you anymore when it is all said and done, in either event?

Anyway, it doesn't make any sense to me, but I think that this time I have found something worth thinking about in this situation.

I see two possibilities -- either the tax advocate is being disingenuous, or he is being sincere. If he is merely disingenuous, and would not pay 'his share' of tax even if he had his way, there is nothing more to say. But if he is sincere in his desire for higher taxes -- even on himself -- and in demurring from paying higher taxes now for reasons that he either can, or cannot, or will not articulate, then I think there is something here to ponder.

If he sincerely would pay more if everybody else did, or at least if all other wealthy persons did, I think that it says something important -- that his income qua income, is not actually the issue. Now, it is true that the situation is not an exact parallel, in that the tax advocate is not giving up the same stream of consumption in both high- and low-tax situations, because the change in income distributions would change the price structure in unpredictable ways. It is impossible to know what the actual change in lifestyle would be. However, though Warren Buffet surely understands this, a dope like Obama and most other such personalities probably does not, so I think that it is a safe assumption that, in fact, they are accepting of such a change as tolerable to the pursuit of their ideal. Which -- and I will be perfectly honest about this -- at least taken in isolation, to my eyes pays them a sincere compliment.

No rotten eggs yet, please. I'm not quite finished.

But if they do not cling to their wealth in the high-tax situation, why cling to the income under the low-tax regime -- as, obviously, they are? If I try to imagine what economics looks like to one like Obama, I think I see my answer. No, I'm not going to try to channel everything about the man, just take a stab on a single phenomenon.

In Obama's world and most of those who think like him, if the millionaires are taxed, and the tax paid out through whatever channels he imagines they will, what he supposes will happen very generally is that the income distribution will narrow, with lower incomes brought up and higher incomes brought down in some proportional fashion. Which is, of course, his goal. But -- and this is the important part -- he does not see any changing of places. If, however, he were to give up some substantial portion of his own income without a similar commitment of others, his own position in the distribution would fall relative to them. This, I think, is the place to look for my answer.

But if his income means nothing or very little to him as a means for securing consumption, then why cling to his relative position? Because his position on the distribution means something very different to him, and this is the thing he wants to remain secure.

For most high income earners -- and Obama is certainly to be numbered one of these -- income isn't usually valued so much as income anyway. People who are driven by the desire of fantastic levels of consumption usually do not become wealthy. They usually become poor. For the wealthy, even a large change of income will probably not affect their lifestyle much, if at all, because every dollar earned beyond that which secures their chosen level of expenditure is useless in this regard. Warren Buffet is rather famous for continuing to reside in a relatively humble household despite being one of the wealthiest men ever to live. To men such as he, it has all become marginal -- in these terms.

It is not marginal in others, however. For the very wealthy, other things which may be secured by wealth have usually become the desired ends, most often status, influence over others and the world around them, fame, power, or even merely the securing of even more wealth. Often, even among the not-so-wealthy, one's accumulated possessions begin to be identified with the actual self. To relinquish income is to relinquish these kinds of things, some of which really do become part of a very vicious zero sum game -- most notably power and status.

If such men were to relinquish wealth disproportionately when others were not required to do the same -- especially their peers -- they would sink in exactly the pursuit which they have made their life's focus. And really, would one expect a man who cared little for his own status to pursue the office of President, at least successfully, given the present day and age, or to become an aggressive titan of finance?

It is entirely possible that such men really do have good intentions, and that they think their own influence on the world so positive that they dare not relinquish any of it for fear of being overtaken by rivals. In fact, I suspect that that is at least partially the case for the vast majority, and it is entirely understandable to me that they refuse to 'let go' without some commitment from others, but would do so with good grace given the right assurances. They are perfectly open to an absolute diminution of 'the self' for the right cause, just not a relative one. In that way, it is somewhat analogous to an arms race. We are talking about very driven men who have made their pursuits something of an obsession. Their achievements did not come easily, at least in their own eyes, and who does not take his own beliefs seriously?

But on the other hand, we are also talking about the satisfaction of egalitarian sentiments! So maybe they really are hypocrites, but on a completely different level, and in a way probably almost no one is conscious of. In any event, I leave it to the reader to decide for himself whether or not this 'difference' in situations legitimizes the decision of wealthy tax advocates not to donate their funds to the Treasury voluntarily. But I do not think they can be accused of ungenerosity, disingenuousness, or greed in the normal sense of the words. I suspect that money qua money has ceased to be any more of an issue for them than for most other people, and perhaps they may even be on a better footing than many who do not advocate for higher taxes.

However, some other issue certainly has, and perhaps Thorstein Veblen had things right even in ways I did not want to give him credit for. Given the above, it is as unsurprising to me that the wealthy might prove to be the least 'generous' in percentage terms as it is that the most generous should be found to be lower- to middle- income 'conservatives' -- who are really probably more religious people than actual ideological conservatives -- for whom presumably worldly status might mean relatively less.

Or perhaps the latter only appear to despise worldly status and accumulation because they see their acts of charity gaining them otherworldly status? But supposing they did, would it actually be bad?

I don't know, I don't know... It is all to guess and to speak in generalities. Only God knows the soul...

Home-Ec 201: Entrepreneurship of the Soul

2011-11-03T12:05:00.000-07:00

I have often been struck -- as most people probably have been, especially recently -- at how in almost every situation, seemingly no matter what befalls me or however I might change my behavior, I always seem to be 'just barely getting by.' Seemingly nothing makes a difference. There's always just barely enough money, or time, or what have you, no matter the acrobatics by which I try to rearrange my finances.

I attribute this phenomenon to at least three possible sources:

the tendency for desires to expand to use up a given budget
the skill with which entrenched or otherwise powerful interests are able to keep their negotiating partners (the rest of us) forever on their heels
the tendency for resources to be applied towards their optimum ends, such that in equilibrium almost all changes produce only marginal effects

The first tendency is perfectly self-explanatory and probably not worth comment. Until quite recently, I would have scoffed at the suggestion of the second, but now I am convinced that this activity is the primary source of 'business advantage' and likewise the focus of almost all business and governmental activity. In this category I have in mind, for example,

the tendency of governments to extend taxation to the largest extent possible without quite squashing productive activity
the tendency of corporations to lobby for open borders or special immigration privileges whenever any particular profession reaches the point of being able to negotiate a higher salary, to subsidize activities that favor them and push costs onto other parties, or to otherwise change the legal structure to favor themselves at the expense of others
the tendency for labor unions to ... be labor unions
the tendency for banks to collude with governments and compel the citizenry to use a persistently devaluing currency, such that savers are compelled to subsidize the profligacy and excessive risk-taking of borrowers, and then, when their ventures fail, to have the taxpayers bail them out,

and, in general, for such parties to keep the average, honest, middle of the roaders as miserable as feasible without them actually revolting.

These shall I pass over, as the first is rather an obvious matter of individual budgetary choices and discipline, while for the second it is doubtful anyone could actually hope to do anything this side of collapse. Besides, there has been plenty of commentary on that. But in the case of the third I think that there are some interesting dynamics going on and a few important points to be made.

I have noticed this phenomenon in a great number of forms, but I will stick with just one to illustrate. I recently bought a house, thinking that I would be able to save money by avoiding the costs of rent. I was wrong. Between the costs of the house and the expenses of maintenance, I have not saved a penny. That may conceivably change over time as I acquire the tools and other equipment necessary for said upkeep, but at least up front it has been an amazing thing to see just how 'balanced' things are.

On the other hand, this observation makes perfect sense. If there were a great deal of money to be made by one arrangement over the other, people would flock to adopt that arrangement, moving prices to reflect that situation and eventually erase the advantage. So, in most such cases, there is practically very little one could do to rearrange his finances and make a profit, except in such cases as there are powerful barriers to entry -- such as doing extensive car repairs or one's own dentistry or the like -- and even then, should one actually attempt it, as a practical matter it likely wouldn't prove profitable in many cases, for fairly obvious reasons.

Though one doesn't often think of it in these terms, every individual is really acting as an entrepreneur when he fiddles with his finances and his way of life in this manner. He is searching for some discrepancy in valuation or for some innovation in fulfilling his own wants more efficiently so that he can make a profit. He is facing the same problem that most entrepreneurs face -- that doing so is usually very difficult.

I can, however, think of two notable exceptions to this case.

The first I experienced most vividly on my first day in high school. I spent my youth as an inmate of the Texas Public School System, the apparently proud holder of the 49th ranking of such systems in this union, however such things are determined. My high school was horribly overcrowded, such that the lunchroom cafeteria was always filled far beyond capacity.

An intelligent student would have brought his lunch and eaten it outside. I, however, was not an intelligent student, and persisted in waiting in one of the various line for food that was of questionable quality. On that first day, I studied the situation carefully, and reasoned to myself that, all things being equal, probably every line would take a similar amount of time, given that all students were equally undesirous of experiencing the tedium of waiting. Any line which was persistently significantly longer in wait time would discourage students from standing in it until wait times evened out. This is, of course, very similar to the economic reasoning I have been employing so far, that, in general, changes in behavior towards attaining some end usually meet with marginal differences in outcome due to the tendency towards optimization.

I targeted two lines which were, in theory, equivalent in that they served the same food at the same price. One line, however, snaked along a wall, while the other was a rather packed group of people stuffed between a counter and a handrail. Not being one to enjoy the experience of playing a human sardine, I opted for the first, again, reasoning that they would take approximately the same amount of time.

This was a very naïve mistake. The reason was that the handrail limited access to the head of the second line, while the first was left widely accessible. Thus, the long, thin line was the object of prolific line-cutting by cheaters, while one would have had to be pretty brazen to cut in on the line of sardines by jumping the handrail. I did pay for this lesson in economics, as the bell caught me before I got through the line and I had no time to eat. I was in the other line the next day.

The point here is that the assumption of optimization is not a good one where a) cheating is highly probable, and b) this fact and its effects are not obvious to most people. For whatever reason, that line never shortened in proportion to the tendency for people to cut, and a great many students spent their lunch periods waiting for nothing. Perhaps it is because the effects of cheating are not always easy to estimate that the situation never really adjusted. I know for certain that the chronic line cutting was well known, and, high schools and high schoolers being what they are, never adequately dealt with, if at all. In any event, it is a good habit to keep this in mind -- it may be obvious in a situation or it may not.

Too many out there are making deposits of the purse by making withdrawals of the soul, as one David Elginbrod might say. I would say that very many more may be doing it unknowingly. If it is a form of entrepreneurship of the soul, I say it is one to avoid. If gains are coming in too easily, or if one seems to have 'hit the wall' and taken a loss with something that appears that it should have worked, it might be time to reflect on this possibility.

The second exception I would like to talk about is like the first, but the inverse.

In many cases where one alternative appears the rough equivalent of the other in terms of money prices, there is often an unseen aspect of the equation that can throw the balances heavily in one direction or the other. However, the tendency of people to focus on the monetary aspects of the transaction lead them to prefer the one that shows the greatest money profit, rather than 'pricing in' the unseen aspects.

An easy example is one I have already given -- the house. Though I have not much profited in money terms from the purchase, I will say that I greatly prefer it and believe it to be a vastly better environment for myself and my family than the apartment we were living in. With that thrown in, it is no contest at all.

A far more insidious -- and important -- example of this is to be found in those soul-rending decisions of family -- to be married or not, to have children or not, how to care for them, how to educate them, etc. Too often to be due to chance, at least as it seems to me, it is just barely profitable to do the wrong thing. When the numbers are finally tallied, it is so frequently just barely profitable to choose daycare rather than to stay at home, to choose to remain single and sterile than to have a family and children, or to choose private or homeschooling rather than public school. Actually, in that final case it is usually no contest, as one is compelled to pay for the public schools whether one makes use of them or not.

Some have even made the case that the crisis of falling populations of the industrialized world are probably due to the implementation of government pensions like Social Security -- rather than the opposite claim which is usually claimed, that falling populations are causing a crisis in the pension systems. The tax burden coupled with the safety net and support in retirement have induced couples to avoid children, or to have fewer than they otherwise might have afforded, and who could have looked after them in their old age. Financially, it simply didn't make any sense. But like most deals with the devil... I mean, government...it appears that Uncle Sam is not going to hold up his end, and they are to have no children, and no retirement either. But even if he had, and the deal hadn't fallen through -- was it really worth it?

On the brighter side, the fact that it is usually just profitable to do the wrong thing is a fairly stong indication that there is something left out of the balance on the other side. After all, prices usually reflect marginal differences in utility, and if there is a difference in the one, there probably is a difference in the other. For those entrepreneurs of the soul, let that be a clue -- there may be a discrepancy in value to exploit! Consider everything that sits in the balance. If one path is just barely profitable, by all means, consider taking the other.

Conclusion

There are those who stand in line, and those who cut in. There are those whose decisions are guided purely by columns of numbers, and those who do not let the sums blind them.

They each shall have their inheritance. Choose wisely.

An Unusual Argument Against Libertarianism

2011-10-23T11:48:00.000-07:00

Gene Callahan is something of a 'recovering libertarian,' having written one of the better introductory books to Austrian school economics, and later disavowing himself of the libertarian movement. He likes to antagonize ... I mean ... challenge libertarians, especially those of the Austrian school, and especially Robert Murphy, about their philosophical beliefs, and to my mind, often does so pretty convincingly.

In one of his latest volleys, he turns the logic of a common Austrian objection to Keynesianism back to bite the libertarians:

(Argument A):

1) Keynes's supporters say that his policies don't necessarily call for bigger government; instead, Keynes said governments should run surpluses in good times and deficits only in bad times, a recommendation which is entirely size neutral.

2) However, Keynes's advice was unrealistic; knowing public choice theory, we can see that, in fact, governments will love running deficits and hate running surpluses, and so will only pay attention to half of his advice.

3) Therefore, in fact, Keynes's prescription calls for more government.

So, let us apply this to a libertarian policy stance (Argument B):

1) Libertarians say that the market should decide both when a firm should grow large and when it should fail. No one should step in to bail out market losers, no matter how big they are nor how many people they employ.

2) However, their advice is unrealistic; knowing public choice theory, we can see that, in fact, governments will happily allow businesses to make profits and grow large (profits can be taxed and large businesses are great campaign contributors, etc.), but will be very reluctant to allow them to fail.

3) Therefore, in fact, libertarians' prescription calls for larger government.

His point here isn't necessarily to show that libertarianism is wrong, but more to highlight a cognitive dissonance. Libertarians can't very well lay the blame for big government at the feet of John Maynard Keynes when governments have explicitly broken his advised policy, and then hold themselves blameless when the giant accumulations of private wealth and power that their own advised policies have made possible make it more and more likely that governments will become interventionist and generally anti-libertarian.

He makes the argument even more forcefully in the comments:

How about, for B, by allowing greater concentrations of private power, the libertarian launches us onto a slippery slope that that makes it more and more likely that those with that power will be able to capture the state and use it to extract rents from the rest of us?

Aside from Gene's actual intent merely to illustrate libertarian incoherence, this, I think, is a very compelling argument. To be sure, a great number of other contributing factors went into the long decline of the United States over the years, in terms of liberty and otherwise, but it should be obvious by now that this is one of the major ones.

Forex Markets and American Competitiveness

2011-10-06T19:01:00.000-07:00

I originally got the idea for the blog at 3CNB because I was emailing a few friends so voluminously about questions of economics that it made more sense to do the thing publicly where everybody could see it than privately. I got into the habit again, and do not have time this week for a fully composed post, so here is a recent one concerning the question of why regulations do not matter very much in terms of international competitiveness. I apologize in advance for the lack of formality and rough language, but I do not think it is worth trying to fix.

Background: we were discussing why there are no catfish restaurants at a particular reservoir outside of Dallas, Texas, which eventually led me to explain why I thought that almost all of America's supposed lack of international competitiveness was due to monetary causes and was totally corrupted, such that it doesn't really matter who is more productive or efficient or 'cheaper', and not from regulations as almost everyone seems to think.

***

The exchange rate manipulation thing is so insanely complicated that I don't think I have even understood some small fraction of it yet, but basically what I do understand goes as follows--

It is a very easy thing to 'encourage exports.' The first thing to do is to tax everything coming in, or otherwise erect trade barriers towards imports. But you know that. What follows after that is a long chain of interventions. Each act creates other incentives and necessary acts just to keep the ball rolling that you've already started. But of course, once you've got the ball rolling, you create dependencies, just like with other welfarist type activities and inflation. Things just get worse and worse and ever more outrageous things must be done to keep it going, until eventually you wind up with a situation like ours which is completely asinine. As for those other incentives, many other nefarious activities have gotten wound up in the enormous cash flows that the process of manipulation generates -- chief among them, America's outrageously bloated government and deficits.

If you really want to understand the consequences of international trade on current account flows under different monetary regimes, check out Monetary Nationalism by F. A. Hayek, which can be found as part of Prices and Production and Other Works. Anyway, it's free, and it taught me a lot of things, even though I already knew quite a bit about it. But it is not that easy to read. He talks about 3 different regimes -- an ideal hard money regime that has never existed, the 19th century so-called gold standard (which was actually quite bad in this regard, as he describes), and 'monetary nationalism,' a fiat money scheme that did not exist at the time he wrote it, but was being contemplated and is basically what we have today. The fiat system with floating exchange rates arose to 'fix' the problems that were occurring under the gold standard, but they did so by severing the processes that hold the system to a basic level of account, which had the consequence that the new system would be easier to game and send into complete chaos.

Basically, because under the gold standard you still had the monetary pyramiding effect (m1, M2, etc.), whenever one nation ran a trade deficit, the dollars (M1 or M2) that wound up in the foreign country would be redeemed for gold (monetary base), since dollars were useless to the exporter but gold was useful. So, trade deficits had the effect of shrinking the monetary base -- which had a multiplying effect on the rest of the money supply because of the pyramiding! There was an exponential destruction of money relative to the actual money transferred. The gold exporting country would have a credit contraction and depression, while the importing nation would experience credit fueled boom (since it got new monetary base to pyramid off of). This is, of course, totally wacko, creating all sorts of bizarre consequences that have nothing to do with any real economics, i.e. it is all a purely monetary effect, simply as the result of one company in one country realizing a competitive advantage over its competitors in another. Or because of some other effect which caused a temporary trade deficit, like tariffs.

Floating exchange rates were meant to mitigate that effect. Instead of a huge transfer of monetary base, your money stayed put but became worth a bit less, which encouraged goods to flow the opposite direction and alleviate the deficits. Unfortunately, it should be obvious that even if this might possibly be a less bad effect, it is still totally wacko -- why should an exporter in the US, say, suddenly and completely randomly have a competitive advantage because of the success of a totally unrelated Chinese exporter? What does that have to do with anything economically? Nothing. It is purely a monetary effect. On top of that, changes in currency exchange rates create changes in the value of capital in different locations which again have nothing to do with anything in the real world. A whole new high-volume 'market' in international capital transfers was created and populated by traders like George Soros et. al., in which people began making fortunes on, basically, imaginary figments of money systems that have nothing to do with anything real.

Governments (like China's) also found that they could still have their cake and eat it too as far as mercantilism is concerned. They can undermine the whole point of floating exchange and keep their currency at a certain exchange rate with foreigners simply by artificially providing a 'back transaction' to balance exports. Their government and central banks buy financial assets in the US to keep their currency at an exchange rate that favors the export of goods to the US. Once again, the money system was fueling behaviors that have no connection to reality -- demand for something (US Treasury debt and other financial assets) regardless of price on the basis of its 'financial accounting location' and benefits conferred to favored industries by manipulating international capital flows.

Other governments (like the US) found that, by allowing mercantilists to play their games, they could get extremely cheap financing for their bread-and-circus boondoggles. They could run more or less perpetual deficits without any negative consequence, so long as foreign exporters controlled mercantilist foreign governments and prodded them to purchase these financial assets. They ran up huge debts for decades and decades, addicting vested interests within their countries to free government stuff, creating a proliferation of political nasties, buying off enemies, papering over decay, and spreading virulent and caustic attitudes.

Domestic manufacturers (mostly located in places like the US) found that, rather than being wiped out by the foreign mercantilists, they could join in the feeding frenzy by moving offshore. By hooking up and playing along with the corrupt governments involved, they got in on the very lucrative, very destructive game. With time, they have insinuated themselves into the very systems that caused them to offshore in the first place, and now have become powerful vested interests in seeing the thing perpetuated indefinitely.

The normal 'equilibrating' forces that most people assume will iron these things out and bring them into a balance that reflects reality are never allowed to do their work. Equilibrium is never reached -- the policies and actions of these groups are designed to ensure that. It is equilibrium that is laying waste to markets today, and equilibrium that the banks and governments are fighting off. If equilibrium were ever reached, and financial accounting ever allowed to reflect reality, the powers that be would be destroyed.

All of this, purely monetary figments. Nothing related to reality. Trillions of dollars of goods, services, and financial transactions, year after year, with precisely zero connection to anything in the real world. Anyone who defends this, or the Wall Street clowns and their ilk in foreign financial cesspools, profiting by parasitizing the brainwashed and corrupted and the innocent alike, is an idiot. Anyone who understands and defends it is evil. That is what I mean. It is not efficient, it is not wealth creating, it has none of the qualities its apologists ascribe to it, it has no connection to economic reality. It is a racket written into law for the benefit of glorified thieves and it is disgusting.

And yet, people blame regulations for the perceived uncompetitiveness of American industry. Obviously, regulations, however stupid and egregious they may be, are only a minor nuisance in comparison, and in the long run, they can never actually create imbalances. That is just the nature of the beast, the way it works, but not many people understand it.

***

The Signs

2011-10-01T09:38:00.000-07:00

The signs of out-and-out recession are finally back. Of course, most of us with any sense know that we have been in a recession the whole time and there was never any real recovery, but the papering over is now wearing thin and the ugly truth is starting to show through.

Everyone has probably noticed that stock prices are down --

Chinese markets are really getting hammered --

But so is oil --

And gold prices --

All as my new favorite indicator would have predicted --

Is this deflation? Hardly. M1 has gone practically hyperbolic, with M2 not far behind --

It is yet another correction of capital goods prices downwards, but don't expect consumer goods prices to fall much, if at all. Unemployment has not yet taken off on another moonshot, but it tends to lag, and I would expect that within several months businesses will again be shedding jobs.

Headlines speak of fears of sovereign default in Europe. What they should speak of is certainty. Financial arrangements have gotten so distorted and snarled up by funny-money and the games of banking make-believe that the last thing they might be expected to reflect is reality. But when finances don't reflect reality -- and people know it -- they have a tendency to stand on the sidelines and stare. They don't know what to do, so they do nothing, and things simply get worse and worse.

Well, sometimes they riot, but that is not helpful.

The FED has chosen to respond with 'Operation Twist,' which is pretend inflation. It will reduce its holdings of short term assets -- for which there is such overwhelming demand that so-called real interest rates have gone negative and a reduction FED in purchases will likely not be missed in the feeding frenzy -- and increase holdings of long term assets, pushing down long term rates and flattening the yield curve. What effect do I expect this to have? Not much. A few borrowers who don't really need better credit terms will likely refinance, but there is simply no appetite outside of Washington for taking on more debt. Who besides a power-grubbing politician could love this business environment? So, my guess is that nothing much will happen. Without a serious liquidation that clarifies the direction in which the economy should develop, businesses are not going to stick their necks out with any substantial real investment. The big fish will just stick to their Wall Street shell games.

The financial powers that be refuse to give up the game of pretend, and until they do, nobody will have the first clue what to do with himself. Eventually, it will have to come to an end, but I don't expect that to be for a long time.

Hunker down.

A General Parent Bashing

2011-09-26T12:55:00.000-07:00

WARNING! This is likely to prove the most controversial post I have ever written. I am going to do some serious face-stomping. Hopefully it will all be taken in good fun, but I expect that I may receive my first hate mail for this. Be advised...

As a father of an almost two year old with another on the way, issues of parenting have started to come to the front of my mind. I suppose that I have always been somewhat opinionated on the subject, but perhaps its more immediateness and proximity has brought it more to the fore.

As such, I seem to have picked up on more emanations of stupidity on the subject lately. At least, I hope that's the reason.

Breastfeeding

If you're going to wade into this topic, why not go straight for the one most likely to get your eyes clawed out right off the bat?

I do not have a strong opinion on this subject in its generalities. I do have a very strong opinion on a certain particular which has raised its ugly head.

When my wife had our last child, she was, of course, bombarded with propaganda about why she needed to be breastfeeding as opposed to using formula. I expected this. I also expected her to be confused about it, which she was. There is some strong emotional appeal to this debate that tends to confuse it -- and has taken a very, very nasty turn.

I told her that whatever she did, she should not invest too much in her decision and remain committed to being practical and reasonable in the end. I have heard of too many stories of people becoming psycho on this topic, and did not want to see that happen to her.

As it turns out, nurses are generally psycho, at least where I live. When things weren't working out to their satisfaction, they began a Nazi-esque bombardment of her psyche trying to bring her back into line. Information, I understand. Guilt tripping I think crosses the line.

"They can 'survive' for at least three days without eating," elicited homicidal rage.

Not feed a newborn infant for three days? Is she serious? Did she hear what she just said?

I would think that anyone who had spent some time as a human being would have at least some grasp of how hard it would be to go for three days without food. I would think that any contact with a baby at any point in a person's life would convince him of the urgency with which they feel hunger. I cannot imagine the pain and anguish it would put such a small child through to experience that first thing out of the womb, or that any person with any shred of humanity would suggest doing it. It is absolutely unconscionable to me that anyone would suggest that the possibility of a marginal nutritional advantage would be worth three days of starving a newborn baby! Yet I have since found out for a fact that this kind of thing is really going on, apparently as a matter of some routine.

I don't care what the nutritional requirements of a baby are. I don't even care what any doctor says. A baby is not a piece of meat or a biological specimen for dissection. You feed it! By any means necessary!

What Happened To My 2 Year Old?

Since acceeding to the right honorable title of Mommy, my wife has had a sudden and understandable interest in the phenomenon of baby blogs. Being Chinese, she frequents the Chinese versions of such things, which do exist and even proliferate.

She pointed out to me something of an ironic contrast the other day. I have written before about the tendency of young Chinese families to send their children away to be raised by their grandparents for the first few years. But even outside of this phenomenon, a good proportion of families in general routinely turn their very young children over to others to care for on a daily basis, even if the degree of the 'hand-off' is not quite so drastic. By 'a good proportion of families,' I mean all families, not just Chinese.

Most, if not all, parents and children alike struggle with the terrible twos. But the reality is that a baby is quite a struggle from the very beginning. It is demanding -- and many parents are transferring that burden to others, only to receive back a child which they do not know how to handle because they have not been in the heat of that struggle since the beginning.

Contrast this apparent nonchalance towards how a child is raised and behaves, with the frothing-at-the-mouth obsession with breastfeeding. I wonder how many of those mothers obsessed with breastfeeding and otherwise obsess over food and nutrition issues pass their children off to others in such a manner? That struggle -- over food -- was absolutely critical, and worth every exertion, but this one... eh... who cares? Food and nutrition are everything, but daycare, grandma and grandpa, small cage with a feeding tube, it's all the same? The possibility of my child's character being ruined -- not worth my time.

My wife has said of the 'bonding' that goes on between mother and child that it is mostly due to the struggle, not the fun cutesy stuff. At the very least, I wonder if these moms know what they are missing out on?

Primary Education

There was a time when I listened to 'right wing radio' pretty much whenever I was in the car, but there were two issues that repeatedly came up that would set my blood boiling and eventually alienated me from it, such that now I almost never listen.

The first was the incessant, outraged railing against welfare -- mostly in terms of food stamps and such and the 'priorities' of the people who used them. Anger at being taxed to pay for things that one does not agree with -- especially freeloading and supporting an outrageous lifestyle -- I understand. I get it, and it really is outrageous. What made me angry about the topic was the absolute, almost willful ignorance of these commentators towards the depth of their own participation in welfare and redistribution.

Unfortunately, that is the nature of the beast. I do not care who you are or what you do, nobody is free from the tentacles of welfare and redistribution. Public schools, public parks, state universities, government contracts, subsidies, mortgage deductions, tax breaks and credits, everybody's got his finger in the kitty. Medicare and Social Security are practically universal, and alone are more than sufficient to bankrupt the entire system. No more need be said. Case closed. I suppose that not everyone really understands this, and I should be more understanding, but I am tired of hearing about it. At any rate, if this is what conservatives want to talk about, I do not want to listen and I shut the radio off.

But this wasn't supposed to be a post about welfare. The other topic that so alienated me was the topic of public schools.

Again -- the public schools are bad. I understand, and I agree. The complaining I get. What I don't get -- and pushes me over the edge -- is the undertone of outrage.

Seriously, none of this should be news to anybody. Everybody knows the public schools are bad. It is nothing new, and totally uncontroversial. They are run by sociopathic morons. This is a well known fact. There can be no other description for people who continually tolerate the outrageous conduct that goes on there on a daily basis. There can be no other descriptor for people who so regularly produce this kind of decision making.

But -- and how sad is it that I really need to point this out? -- there can also be no other description of parents who know this and continually send their child to said schools anyway! If the schools are as outrageous as that, and the parents demonstrably know what is going on there -- pull the child out! Seriously, do they hate their children, or do they not mean what they say? What kind of parent does not protect his children from harm, let alone willingly hands them over to known sociopaths?

I mean, who cares about drugs? If a parent will send his own children into such dens of iniquity, why not have them pick up a few rocks of crack on the way home?

Higher Education

I have also begun to grow tired of encountering the fairly continual stream of letters from 'conservative' parents which amount to something like the following:

I really care about my daughter and her values, so much so that I sent her to public school and daycare for the first eighteen years of her life, and she emerged something of an ignorant lump of meat with personality and behavior problems. She was unable to articulate even a mildly coherent stream of reasoning on any subject, I know, but she really enjoyed music and drill team and spending nights with the football team. I didn't want to push her too hard, you know?

After high school, I sent her off to a very expensive liberal arts college, where she studied homosexual sociology. I know it was a good education, because you can bet I paid a lot for it! She could have bought a couple of houses with that kind of money, or started a business, but I knew her education was more important. It is a matter of character, you know? I was a little worried because despite my best efforts to raise her well, she still seemed a bit impressionable, and now my fears have been realized -- she seems to have become a liberal. I don't mean in the raging liberal sort of way, because that would mean that she had gone to the length of actually thinking about it. I mean, she just seems to sort of tend that way in the things she says and her attitudes, like she doesn't remember the values we tried to give her. But it's too late to do anything about that now since she's already graduated.

I was suspicious from the beginning, because I have heard how liberal colleges can be, and now my fears have come true. I told her to use her head, and not to believe everything she heard -- right before I dropped her off, even! How could she have forgotten so quickly? I'm not too worried about the pregnancies, or the abortions, or the drugs, or the sexual experimentation, but I can't stand the thought that she might disagree with me. What should I do?

OK, that was really sarcastic. But seriously, what do you say?

You paid for it, now didn't you?

Pun intended.

Love

Where I live, there is an FM Christian radio station. I do not normally listen to it because I don't really like the music much, and I usually listen to books in the car anyway. But somehow my wife had turned the radio to that station the other day before I got into the car, and since we were driving together and I wasn't listening anyway, I just left it on.

A little talk section came on, and a guy began describing a situation, which I shall paraphrase (from memory) --

Sometimes, people lose sight of what we Christians stand for in the face of the kinds of things we tend to oppose. I have a friend who was telling me that his father has a job which keeps him overseas, so that he only gets to see him once every other year. His mother's job keeps her so busy that he never sees her either. He winds up doing practically everything around the house, like even paying the bills.

"You know what I want more than anything else?" he asked me once. "A real mom."

Sometimes people need to hear things every now and then, like that we really love them. I let him know how much I cared for him, but how much more would it have meant coming from her?

Yes, that's what he needs. A few words change everything. Not a father who would be a man, quit his job and take a more reasonable one that would let him actually see his family. Not a mother who would actually get some priorities and be a mother. Theoretically, he needs love, so theoretical love he ought to get.

Perfectly logical.

Conclusion

So, to recap --

If by some turn of events, anyone happens to wind up with one of those 'kid' things running around the house, he is advised to --

-- feed it.
-- not hand it over to people who are known to hurt such creatures.
-- be around.

And that concludes this lesson in parenting, which is apparently quite advanced for the present day and age.

And to think there are people who think our biggest problem is government...

A Targetted Approach to Restoring Liberty

2011-09-21T18:52:00.000-07:00

Fran came up with a great idea a few posts back to deftly maneuver the shoals of American national politics and eliminate Social Security. In terms of present day political maneuverings and salesmanship, I think the idea is great. But I objected on the grounds that, given the present constitution of banking, the money system, and the operation of markets, it is really more or less impossible to save and invest for retirement, as all too many erstwhile retirees are about to find out.

As such, the beast would eventually get re-implemented under some form or another, much as it was originally introduced in the 1930's in response to the Great Depression. This, I believe, is a general principle of encroaching statism -- the installation of one program initiates a ratchet effect, where one policy creates a series of unintended consequences, which necessitate more policy, which create more unintended consequences, etc. An attempt to roll-back one or more of these latter policies in general will not prove successful, if the problem it was installed to address in the first place hasn't been adequately dealt with. In the course of things, the problem will raise it's head again, and the public will be left asking itself "Didn't we have regulation X to deal with this 20 years ago?" Much of the public has spent the last few months/years asking itself just this question over banking deregulation of the 1980's.

In fact, banking is the perfect example of this process in action. The original problem with banking was (and ultimately, still is) the practice of lending against deposits, which causes the process of lending to increase the supply of money and initiate the business cycle. In response to the periodic financial crises that this process produced, as well as to solve other 'problems' of the business of banking that were connected to the tendency to pyramid various forms of money on top of the precious metal base, the banks erected the Federal Reserve System. This, of course, allowed the banks to expand the money supply ever more readily and over a longer period of time, eventuating in the Great Depression -- the worst deflationary crash the US had ever experienced. The cascading bank failures of that period instigated the creation of the FDIC, which prevented the deflation. But this meant that during crashes, there was no longer any deflation of the larger money aggregates against the base, such that the supply of money rose continuously, eventually straining the ability to link money to precious metals. Thus, silver coinage and the gold standard had to be abolished, and so on and so on, to produce the mess we have today.

This whole train of thought has led me to a different tack on things. Normally, the public gets motivated to reform things which are most pressing on its present awareness -- usually some recent trampling it has been forced to endure at the hands of the political class. This is either an unintended consequence of a previous policy, or the enacted policy itself. As far as the rollback movement is concerned, I'm chiefly concerned with the latter.

The problem with the approach of rolling back the most recent assaults should be obvious. Anyway, I explicitly stated it in the second paragraph. The solution, I think, should be obvious as well, though it may sound rather strange. The reformers keep starting at the wrong end of the timeline. Rather than rollback the most recent political affront, they should really start back at the beginning. This way, the latter layers of compensating policy will no longer be necessary once the original offenders and their unintended consequences have been eliminated, and they can be done away with without much controversy.

Thus, I offer this brief suggestion of an order of targets that might prove more successful than the approach used by conservative reformers over the last century or so. It is based on my own admittedly limited understanding of history and economics; others with a better understanding might be able to suggest useful modifications.

Target #1: Corporatism

It seems to me that this is where it all began -- the Gilded Age and the rise of massive corporations. This is where the avalanche really got rolling. Those who are familiar with my view of things know that I think the FED and central banking in general are one of the most destructive and tyrannical forces acting on mankind today, and that they absolutely have to go. But it does seem to me that in the larger picture, central banking was actually more of an institutionally critical waypoint in a larger, more general movement towards centralization. Several attempts were made at instituting a central bank prior to the coming of the FED, but these were all batted down in fairly short order by a public intolerant of such things. It seems to me that the coming of the corporations was what created such fertile ground for something that had previously found American soil so hostile.

I do not think I need to elaborate too much on what it is about the mentality of corporatism that makes a thing like a central bank and large, bureaucratic government appear to be a good idea. Obviously, once one accepts the idea that it is through large institutions that the greatest efficiencies are achieved, wealth is most effectively created, and that humans achieve their highest potentials in such regimented structures, a large institution of banks appears to be a great solution to the problems and inefficiencies of banking. It also goes without saying that as a society becomes ever more accustomed to a way of life as a part of such structures, it produces a proletarian mentality which is not the most conducive to preserving freedoms. It seems to me that the business dynamics of corporations also disrupt the community by causing unnecessary migrations of people from job to job and place to place, so that it becomes difficult for people accustomed to such a life to imagine depending on friends, family and neighbors in times of need, or committing significant parts of themselves to growing and developing a specific place and position in the community that would give them some security outside of their employer.

I have already written at length that I believe that, far from being more efficient and productive structures, large corporations are actually less efficient than their smaller counterparts, and owe their apparent success to economic and political parasitism. In no small part, this parasitism is made possible by their persistent interventions in the realm of politics. No doubt, practically any proposed reform measure which one attempted to pass through government would have to pass muster with the majority of the corporate community to have any chance of success, so embedded are corporate interests at this point. Which is another way of saying that any attempt to decentralize society will not get past the corporate gatekeepers, since as centralized bodies themselves, they have an entrenched interest in keeping things the way they are. So, any real attempt to change things at that level will have to substantially reduce this influence first.

There was a time when the majority of people in this country were either self-employed or owned their own businesses. At least in these terms, it will probably be impossible to restore conditions to the state of things in the mid 19th century anytime soon. At least some of the great corporate structures will have to stay with us for the indefinite future. But eroding at least a good fraction of the corporate share of the economy would go a very long way to creating a climate of self-confidence and robust independence that would further the cause of rolling back other nanny-state type legislation.

Target #2: Public Education

No permanent or semi-permanent purging of the society-as-extended-government-bureaucracy mentality or the restoration of the family will be possible so long as the public school system remains intact. Mass public schooling is both derived fom the notions of mass, corporatized industry and helps to encourage its growth and secure it. Without the public school system, the middle class two-income family arrangement would not be nearly so widespread to the point of approaching universal. It would also be much more difficult for the corporate/government class to efficiently mold succeeding generations of the class traditionally most responsible for upholding and passing on the accepted social norms.

This is to say nothing of what actually goes on all to often within the schools themselves. A blow against them would both further the disintegration of corporate influence, and make yet further incursions against the Planners possible.

Target #3: The FED, Money, and Banking

I will not dwell too much on this target as I've already stated my views on it many times. The salient point here is that the inflating money system is far too much of a cash cow for too many entrenched interests to attempt to roll it back without a substantial contraction of the groups with a strong interest in maintaining it. Today the FED itself is quite unpopular, even to the point that the notion of abolishing it is starting to be taken seriously. But how serious are its new critics, really? Does their thinking really go all the way to the core of banking, to the practice of lending against reserves? Or is it more a sort of populist anger? If they have not thought too deeply about the problem, such that they are not really ready to reform banking to the necessary extent, will there still be a commitment to keep out the central banking once all the old problems of banking re-emerge which the FED was created to address?

The odds of successfully withstanding the temptation to revert back would be drastically improved if there were fewer interested parties in doing so, which means a smaller average size of business, and a public with a better grasp of what was going on with money and business matters because it was more personally involved (and less stupidified by dumbed down schools...) On the flipside, getting back to stable money would itself help to weaken the influence of those corporate and financial interests who favor inflating money, as the advantages conferred by artificially cheap lending would be removed. It would also go a long way toward making more stable communities and encouraging longer term investments if monetary disturbances of the economy were reduced.

But there must be an established, thriving class of small-businessmen and investors with an interest in hard-money first to make it happen. If there is a lesson here, it is that it's important to get the tangled mess of chickens and the eggs in the right order.

Target #4: The Welfare-Warfare State

Only when these interests have been dealt with, and the resulting social transformation taken place, will the stage be set to deal with the issue that immediately rankles so many -- the tax and spend redistributist state. The other forms of redistribution and social molding must be thoroughly expunged before there is much chance of successfully eliminating the more obvious ones.

On the bright side, I think that by the time one has arrived at this point, it will be fairly easy pickings. No doubt the entire process would be a very long, hard slog and not the magical legislative stroke of a pen that people have come to expect of the notion of reform. But I think that if most people could understand the depth and pervasiveness of the effects of those less visible phenomenon mentioned earlier in relation to these, they would know that by the time came to deal with the more obvious things, it would actually be a piece of cake.

The Other Kind of Welfare...

2011-09-08T13:26:00.000-07:00

..has apparently been known to have been with us for a long time:

Whenever, in the actual state of things, a fresh issue of notes comes into the hands of those who mean to employ them in the prosecution and extension of profitable business, a difference in the distribution of the circulating medium takes place, similar in kind to that which has been last supposed; and produces similar, though of course comparatively inconsiderable effects, in altering the proportion between capital and revenue in favor of the former. The new notes go into the market as so much additional capital, to purchase what is necessary for the conduct of the concern. But, before the produce of the country has been increased, it is impossible for one person to have more of it, without diminishing the shares of some others. This diminution is affected by the rise of prices, occasioned by the competition of the new notes, which puts it out of the power of those who are only buyers, and not sellers, to purchase as much of the annual produce as before: While all the industrious classes -- all of those who sell as well as buy -- are, during the progressive rise of prices, making unusual profits; and, even when this progression stops, are left with the command of a greater portion of the annual produce than they possessed previous to the new issues.

-- Thomas Robert Malthus, 1811, from
Prices and Production by F. A. Hayek

Malthus apparently noticed that the issue of new notes created a boom in prices of capital goods, and that it caused wealth to accumulate preferentially to business owners -- "sellers as well as buyers" -- as opposed to wage earners and those living on fixed incomes -- "those who are only buyers, and not sellers."

Now, if he'd only followed through on that observation...

We're All Gnostics Now

2011-09-06T08:24:00.000-07:00

A Brief Review of The New Science of Politics by Eric Voegelin

I'm not quite sure why I insist on reading old books that leave me feeling like I've been flattened by a steamroller, but I do. It is becoming an addiction.

Does that make me a literary masochist?

This, to be blunt, is the book our age needs to read. Unfortunately, our age is probably not literate enough to understand it, myself included. So, I'll just share some thoughts on the bit I managed, and leave the rest to better readers.

Voegelin starts from a more general version of a premise that I myself have argued on several occasions -- namely, that modern inquiries seem to have an obsession for doing things 'scientifically,' even when science is not appropriate for addressing the question at hand. This, he says, is a specific version of a broader phenomenon -- the tendency to subordinate relevance to method. Historically, there have been many manifestations of this phenomenon. When a particular field has seen a great advance in a short time span, it is common for a sort of 'philosophical fad' to take over, such that almost every field of inquiry begins mimicking the approaches of the 'hot' field, whether this is appropriate or not.

In our case, this takes the form of positivism -- the application of the 'scientific method' to everything. Voegelin's main example is the work of Max Weber. Because science (supposedly) heavily values 'objectivity,' historians and political scientists find themselves limited by positivism into dealing only in 'value-free' theories and narratives. This has a tendency to turn what would otherwise be deep inquiries into the nature of human societies into massive catalogues of undigested data. According to Voegelin, Max Weber, for example, winds up producing as immense body of work that may be reduced, more or less, to statements of 'value set X produce system Y with practical outcome Z.' Marxism, liberalism, and Puritanism become separate movements merely to be described and catalogued like so many insects in a collection, rather than critically evaluated and placed into their proper contexts by a coherent philosophical theory.

This, Voegelin says, is something of a lunacy and a travesty of philosophy. It is something like answering a question of 'what is 2+2?' with 'the color purple.' Philosophers may not know exactly what the answers to every question are or ought to be, but at least they should know what possible answers should look like. It is this use of irrelevant method that produces logical absurdities, and Voegelin says that the solution is a restoration of coherent philosophical inquiry -- a "New Science of Politics." Voegelin rejects the assumptions of positivism, and appears to approach the problem from the point of view that all the legitimate tools of philosophy should be brought bear on the question of the nature of human social structure -- including the findings of the ancient metaphysicians and theologians.

Voegelin begins by addressing the issue of representation in government. Most people living in Western democracies associate 'representation' in the political sense with the process of voting and selecting political representatives itself. It is the method of representation of members of society in government. This Voegelin calls 'elemental representation' and it is actually not the most important in terms of understanding political science and the unfolding of history. The modern West seizes on it as almost the only form of 'representation' of any importance as a matter of having so thoroughly absorbed what Voegelin might call the 'civic religion' of democracy.

Representation operates on two other levels. The second he terms 'existential representation' -- how government represents the identity of society as a whole -- its 'constitution.' Modern Westerners tend to think of the documents called constitutions as purely legal documents, but they were supposed to express the 'essence' of the people they purported to bring together and bind under government. The picture Hobbes paints of societies as bodies of men joined by shared culture and identity to submit to norms and form the Leviathan is the basic idea of existential representation, with Leviathan as the representation of the people who came together to form it. Voegelin blames the neglect of this idea in modern Western conceptions of the order of society for many of its failures of foreign policy -- such as the rather arbitrary or 'political' drawing of boundaries in the wake of wars to produce 'nations' which include peoples incapable of being represented together existentially because they do not share an identity.

The third level of representation is probably the most important, but will appear bizarre to most modern minds. It is the idea of society as a representation of cosmic order, an 'Order of Heaven.' This is quite easy to see in ancient societies, such as in Egypt under the pharoahs, where Pharoah was taken to be a god, and society was to be ordered in a fitting manner. It is not so easy to see in modern times, so I will not belabor the point now and will arrive at an explanation at such time as it will make more sense, however, there is a hint of it in what I wrote about democracy being a civic religion.

The investigator who wishes to look into the nature of human society therefore arrives at a dilemma. Society itself already has a 'truth' in the way that its members understand their order to represent the cosmic order. Society, as Voegelin says, is a cosmoid illuminated from within by its own understanding of itself. The political scientist must place himself in a position of criticizing this truth, creating for himself a separate, 'theoretical truth.' Voegelin turns to Plato and Aristotle and their notions of the 'opening of the soul' to accept spiritual truths in the formulation of theoretical truths external to what is understood by society's truth. They thought that such a person must be of unusual mental and spiritual maturity to be capable of undertaking such an inquiry, and even those who might otherwise have been capable of doing so often do not, simply because they have no inclination. A true philosopher of this type is exceedingly rare.

Voegelin thought that history tended to produce these thinkers rather sporadically through a process of specific personal experiences -- usually crises. He notes that through most of history, 'political scientists' tend mostly to simply describe the system to which they belong and apologize for its order, rather than actually delve into the fundamental truths of social order and the meaning of human existence. Typically, it takes a fantastic crisis for thinkers to begin to ask such questions and open their minds to such matters. There have been few such crises in the course of Western history. Socrates, Plato, and Aristotle arose in the generation of Athenians who witnessed the destruction of their city by the Persians. St. Augustine was produced by the fall of Rome. Other than these junctures in history, there have been a few other such crises, generally less severe, but not so many thinkers.

There are a few other 'truths' worth mentioning in this part of Voegelin's exposition before moving on. Plato articulated the 'anthropological truth,' which I did not completely understand, but has to do with existential representation and 'man as the measure' of the social order. There is also the 'soteriological truth,' which I completely did not understand but know was contributed by Christian theology. (I did not say that this would be a good or a thorough book review...)

Voegelin thought that even after the emergence of the first set of 'mystic philosophers,' which included not only Plato and Aristotle, but also other Westerners, as well as Laozi, Confucius and Bhudda in the East who were very nearly contemporaries with these, Rome did not really appreciate their contribution to political ideas. They were treated as a sort of 'icing on the cake' the cake being the cult of the Roman state -- Roman identity, religion, and the ideology of the empire. Philosophy was nice, but mostly for show. It was not taken seriously. As Christianity displaced the Roman religion as the civic religion, it presented an unsettling force acting on the Roman sense of existential and cosmic representations. There was a long period of 'religious experimentation' in which the rulers tried to patch together a workable cult of the state that would create a stable social order. It failed.

Voegelin compares Rome at that time to Japan of his day -- an island of archaism in a world that had grasped new and larger sets of truths. The crisis of the fall of Rome and the philosophies of Augustine helped to drag it into the philosophical 'big leagues.' However, as Christianity became the dominant religion, it presented a dilemma to the old notions of social order -- especially in terms of 'cosmic truth.' The trinitarianism and transcendental natures of God were impossible to reproduce in a rulership of the social order. So, eventually, they weren't. What emerged was the Medieval system -- according to Voegelin a 'de-divinization' of the political sphere. This sounds strange to modern ears, but he describes it in terms that sound like a separation of church and state. The two operated as separate -- if intertwined -- systems in a manner very different from what had come before. A modern might think of the Pope as 'God's representative on Earth' in the medieval world, but certainly it stands to reason that this was not in the same sense that Pharoah would have stood as an actual god.

The de-divinization of politics had a massively stabilizing and pacifying effect. Unfortunately, this was eventually overturned by a particular quality of the Christian civic religion. Because Christianity holds that God is transcendental, he is seen as 'far away,' not as accessible in the way that the pagan gods had been. Christianity asks faith in things unseen, and takes a rather passive view of history in that the world is a transitory thing which Christians must pass through, but the search for real meaning must always be focused on eternity. 'The end' -- the eschaton -- is something to be awaited passively.

There emerges a desire for 'immanent' meaning. Voegelin believes that this manifests itself in the spread of Christian heresies, and that these heretical forces eventually produced what he calls 'Gnostic movements,' which are attempts to re-divinize society in search of temporal meaning. One of the earliest events in this eruption was the 'speculation' of Joachim of Flora, who attempted to find an order to the unfolding of history in trinitarian terms. It is from this 'speculation' that modern historians and the gnostic philosophers got the idea of history being divided into three periods -- the ancient, the medieval, and the modern. Most gnostic movements take the modern period as a sort of symbol, and are centered on the belief of the eschaton arriving at the end of the modern period. They seek a re-organization of the social order to produce the final, eternal order which will reflect the order of heaven and usher in paradise. Although this is taken to contradict Christian theology, nevertheless, wave upon wave of these movements are continually produced, some considering themselves representations of the 'true faith,' and some rejecting Christianity altogether.

As an example, he points to the founding of the Russian Orthodox church. When Rome fell, many Christians took Constantinople to be the new center of orthodox Christendom -- the 'New Rome.' By the same token, when Constantinople fell to the Turks in the 16th century, a certain monk in Moscow took this as a symbol that the torch had been passed to Ivan IV. The idea caught on, and in a century a narrative had taken hold that Moscow had become the 'Third Rome,' again neatly dividing history into three epochs with the society in question at the helm in modern times. Russian Orthodoxy was taken to be the new 'Order of Heaven,' with appropriate emphasis on the meaning and importance of the historical actions of Russia in the final destination of history. Russians became instilled with the belief that they had an important role to play in bringing about the final kingdom of God and peace and freedom to all people. Russia began an aggressive period of expansion, which did not end or much change in the conversion to communism. Even with the fall of communism, to this day I'm told by a friend of mine who is married to a Ukranian, that there is a deep belief among Russians that they have an important, but as yet unknown role to play in 'saving the world.'

Most modern ideologies follow along similar lines, regardless of whether they claim be religious or secular. It seems that to Voegelin's mind, they are all religious. He characterizes Gnostic movements as conforming to a general pattern. They tend to begin with some 'reformer' who has found something terribly wrong with the present order such that it needs to be torn down. The movement produces a 'koran' -- a book of doctrine considered to be the inarguable core of the movement's belief. He identified several of these as examples -- Institutes of the Christian Religion by John Calvin, and the writings of Karl Marx. Intellectual leaders of these movements may consult with older writings and engage in serious theology themselves, but generally they try to limit their followers to the movement's koran and create taboos against other sources, especially older ones. They tend to suppress theoretical argument -- the seeking of the theoretical 'truth of the soul' of Plato and Aristotle. They tend to resort to governmental authority for a reassertion of the cosmic order and their own civil theology. This civil religion serves as a sort of articulation of a 'dream world,' asserting laws of cause and effect that do not have any bearing on the real world because they are rooted in falsehoods. The failure of action to produce the desired result, rather than leading to a questioning of the premises of the gnostic movement itself, is blamed on enemies, or insufficient zeal, or other such sources as the ideal of the dream wold is defended.

Over time these movements have become increasingly radicalized. To Voegelin, they represent regressions in the state of philosophy as they are less coherent than the original Christian order against which they rebelled, and especially with the onset of positivism, they have become increasingly irrational, refusing to submit themselves to philosophical scrutiny as they consider the methods of philosophy invalid. He considers Marxism and other such movements to be religiously of a lower order than even the very ancient Greek paganism because of this inherent irrationality. Ultimately, he considers the logic of the progression of gnosticism to end in totalitarianism.

There is a great deal of example and discussion in the last few chapters which are well worth reading, but I thought that I would finish with one that is of particular interest -- the apparent contradiction of progress and decline in the modern world at the same time. Voegelin attributes the material progress with a sort of immanentist apocalyptic zeal -- the 'Protestant' work ethic, the space race, and other gnostic rivalries vying for the triumph of their own worldview come to mind-- as well as a place of significance for individuals in history. By bringing God into the temporal and ascribing eternal meaning to the unfolding of history, fame and recognition of achievement in the eyes of gnostic referees becomes a matter of the assessment of individual existential value. The same immanentization that eventuates in the totalitarianism also motivates the frantic drive for 'progress.'

So much for that. And now, if you'll excuse me, my brain hurts. I need a break.

Money and Debt: The Real Story

2011-08-27T12:55:00.000-07:00

A very interesting interview on the origins of money and debt, with lots of discussion relevant to today.

Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.

Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.

And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.

ht: Gene Callahan

Aaron Was Right -- And Some Great Graphs To Prove It

2011-08-26T19:53:00.000-07:00

Awhile back, I 'corrected' Aaron that in the course of the business cycle there isn't really a problem with 'overconsumption.' As it turns out, I was the one that needed correction.

In defense of myself, I will here blather uselessly for a few moments about why it did (and in some ways, still does) not seem reasonable to think this way about the problem. Firstly, the business cycle is caused by the issue of excess credit above the rate of savings. The extra credit is used to increase demand for capital goods, shifting the ratio of expenditures in favor of capital goods versus consumer goods. Thus, how could there be an excess of both investment and consumption at the same time, in a universe in which materials are generally understood to be conserved?

Secondly, the partition of demand between present (consumption) and future (production) goods is given by the time preference of the society in question. This is an intrinsic property of the population. It is time preferences which determine interest rates. The hypothesis of overconsumption would tend to suggest that FED policies had in fact influenced time preferences -- that the manipulation of interest rates had changed the time preferences of society. This is a case of the tail wagging the dog, and begs the chicken-and-egg question. Do interest rates determine time preferences, or time preferences determine interest rates?

Finally, I had had my delicate ego crushed rather cruelly not so long ago by a particular passage in The Theory of Money and Credit:

In drawing this conclusion, their doctrine implicitly denies the existence of interest. It regards interest as compensation for the temporary relinquishing of money in the broader sense—a view, indeed, of insurpassable naivety. Scientific critics have been perfectly justified in treating it with contempt; it is scarcely worth even cursory mention. But it is impossible to refrain from pointing out that these very views on the nature of interest hold an important place in popular opinion, and that they are continually being propounded afresh and recommended as a basis for measures of banking policy.

This had fairly well destroyed my view that I knew anything about the phenomenon of interest at all. I had (stupidly) believed that people saved principally in response to interest rates, as if they were passive beings being led about by the nose by whatever the market 'told them to do.' If the rate changed, they would find something else to do with their money.

Actually, people save mostly because they feel the need to, not primarily in a sort of passive response to 'compensation.' They will do it even if they are punished by markets for doing it. Thus, it was firmly fixed in my mind that real savings follow from qualities intrinsic to people, and whatever the effects banking might have on appearances, they wouldn't really change, except possibly over the very long term as the mentality of society itself was warped by the experience of inflation. Thus, time preferences stay fixed over the course of the business cycle, while the market adjusts to a new apparently lower time preference illusion created by inflation, only to be smashed at the end when the old preference reasserts itself because inflation is no longer distorting things.

Be all that logical or illogical as it may, a short time later I encountered Robert Murphy making the same claim as Aaron. Dr. Robert Murphy, that is. So, even though this didn't make any sense to me at all, I decided to investigate for myself, and I'm glad I did.

This passage pretty much set me straight:

In Mises's subsequent exposition in Human Action (1966), forced saving takes on a substantially different meaning. Mises articulates a theory of boom and bust that is largely compatible with Hayek's formulation but not obviously so. The essential problem of the credit-induced boom is repeatedly summarized by Mises with variations of the phrase "malinvestment and overconsumption." The aspect of the problem identified by the first term of this phrase is recognized and emphasized by Hayek. The misallocation of resources—too many resources committed to the early stages of production—is the malinvestment. But what about the "overconsumption"? Can a macroeconomy experience forced saving and overconsumption at the same time or, at least, during the same boom? On the surface it would seem that the two terms are virtual antonyms. A sorting out of their various meanings and applications to the different phases of the boom-bust sequence, however, can almost fully resolve the seeming contradiction and in the process produce a more thorough understanding of the Mises-Hayek theory of the business cycle.

The notion that the boom is characterized by overconsumption also follows straightforwardly from the loanable-funds theory. The market for loanable funds—or, more inclusively, for investable resources—is equilibrated by movements in the interest rate, broadly conceived. An increase in saving would be depicted by a rightward shift in the supply of loanable funds. The market would take the economy down along the demand for loanable funds to a new equilibrium at which the interest rate is lower and both saving and investment are greater.

While creating similar incentives for the business community, a credit expansion in the absence of an increase in saving would have ultimate consequences that are fundamentally different. With this policy-induced change in market conditions, the apparent rightward shift of the supply curve represents an increase in credit in the absence of an increase in saving. Saving is simply augmented by credit creation. Nonetheless, the rate of interest would fall and the business community would be enticed, at least initially and to some extent, to undertake greater investments and would tend to allocate the credit-financed resources to the early stages of production. But since saving, as still represented by the unaugmented supply curve, has not changed, the lower rate of interest means that the amount saved actually decreases.

Only in the extreme and unlikely case of a perfectly inelastic supply of loanable funds would there be no decrease in saving. With an upward sloping supply, credit expansion causes the volume of saving to decrease—which is to say, it causes consumption to increase. This increase in consumption associated with a policy-induced decrease in the rate of interest is justifiably labeled by Mises as "overconsumption." Workers and other factor owners receiving increased incomes as a result of credit expansion will be induced to consume more than is implied by their pre-expansion intertemporal choices.

You get all that?

Actually, it is pretty simple. The saving/consumption partition is principally set by time preferences, as I had thought. But there is a secondary influence by interest rates -- the reward to save, whether phony or not -- as Aaron said, that will have a smaller effect over the course of the business cycle and nudge behavior this way or that depending on whether rates were higher or lower than the natural rate that would prevail in the absence of manipulation. As inflation generally pushes interest rates down, over the course of the business cycle people will save slightly less than they otherwise would have, leading to an effect of 'overconsumption.' I had discounted this effect, because I was taking "the extreme and unlikely case of a perfectly inelastic supply of loanable [sic] funds" perspective.

That would seem to settle the matter, but I didn't stop there. You see, I'm such an arrogant and bull-headed twit that I refused to take on authority something that seemed counterintuitive to me. I thought I'd show all of these guys they were wrong, including Mises. Instead, I think I proved them right.

I decided to see if I could actually graph time preferences using FED data, and prove for myself what really happens. I was 'inspired' to do this by of one of the charts Murphy used to support his claim, which I thought misrepresented things. It is a graph of Personal Savings (PS), which is defined by the FED as Personal Income (PI) minus Personal Consumption Expenditures (PCE). But PS doesn't really equal that, because 'savings' in the view that we are taking here -- the preference for future goods over present goods, the putting back of things for the future -- must include investments. PCE includes Durable Goods (DG), which by definition cannot be consumer goods precisely because they are durable. These expenditures are investments and should be included as savings. So, I thought I'd try to tease the statistics apart and reconstitute them according to something closer to the Austrian take and see what they said then.

Unfortunately, a second component of PCE is Services (S) -- a label which implies that all services, whether production oriented and therefore to be categorized as savings, or consumption oriented and therefore to be categorized as consumption, had been uniformly lumped together in the same category, with no possibility of teasing them apart. So, I couldn't make it a simple matter of shuffling things around. And since the S component of PCE is pretty large, it can't exactly be neglected.

So, thought I, if I could just tease out the pattern I was looking for in the other quantities as a ratio -- the proportion if savings to consumption expressed as a fraction -- I could assume that whatever was going on in S expenditures would mirror this and effectively neglect them. First, I stuck to the goods market, and simply assumed that whatever priorities were reflected there would probably be reflected elsewhere. A graph of PCEDG (PCE Durable Goods) divided by PCENDG (PCE Non-Durable Goods), while not quite time preference because it neglects savings, would be expected to show how future good demand compared to present good demand -- and any fluctuations in this proportion over the course of the business cycle.

Here is the graph:

The grey bars denote periods of recession, as determined by the NBER.

I could not believe my eyes when I saw this graph. Though it wasn't exactly what I was going after for this argument, I have never seen a better illustration of the business cycle. It shows perfectly the rising demand for capital goods in the boom, which fades and begins to fall towards the end of each cycle. There are not many metrics that show the periodicity of recessions as well as this. Unemployment is probably the best I know of, and by the time changes start showing up there, it is usually pretty much into the bust. Note that little molehill out where we are in 2011, and how similar it looks to the one around 1981. I think that is Bernanke's green shoot. Not the best case I have ever seen that recovery is around the corner...

This graph shows the periodic surge in demand for producer goods that produces the business cycle, but it does not actually show time preference because it neglects savings. I decided "what the hey, why not add in the savings and forget about services and just see what happens?"

So, I did --

Again, I was amazed. Adding back in savings, I got a graph just like I would expect if the 'overconsumption' hypothesis were true. The curve flattens out -- note the y-axis scale. Most of what is going on is just 'noise,' the basic curve is flat, and very slightly falling over the course of the business cycle, from about 1983 to 2003, to signify that ever slightly more expenditure is devoted to consumption rather than savings over the period of inflation. During periods of recession, it turns back up. Amazing.

But I couldn't stop there, because as I said, I had neglected services, and obviously their contribution might be significant. So, I decided to make the approximation I had made before -- that whatever was going on in goods markets was probably reflected in the service market as well, so that if I assumed the proportion of production and consumption spending on services was the same, I could approximate the outcome as if I had the real data. I just multiplied the durable goods/non-durable goods ratio by the spending on services, and put that part of services to the numerator and the rest to the denominator. I also flipped the ratio, so that the graph of expressed time preference would follow the convention that 'high' time preference favored consumption, and 'low' time preference favored savings. Basically, I put consumption in the numerator and savings in the denominator. And to see if the time preference responded to interest rates, I also graphed it versus the 10-yr Treasury yield, which I chose rather arbitrarily.

Here it is --

The blue line is time preference (as expressed/approximated by my metric) and the red line is the 10-yr yield.

It is not perfect, but it does largely show falling time preference as interest rates rose from 1959 to 1982, followed sometime later by a broad inflection and rising time preferences as rates fell from 1982 until today. Overall, the curve is fairly flat (note the scale of the right y-axis), while being nudged up and down by the interest rate. All pretty consistent with the notion of 'overconsumption.' Note especially the period from 2003 to the present, a rather steep rise in the face of the monumental inflation of that period. If it really is savings and investment that gets the economy out of the slump -- which the Austrian school and common sense would suggest that it is -- it does not bode well for us...

Altogether, I thought these graphs were excellent and interesting confirmations of some of the basic assertions of the Austrian school, if not proofs, and I never would have found them if I hadn't stubbornly clung to an incorrect idea.

Sometimes it is good to be wrong.

Hard Examples

2011-08-15T18:59:00.000-07:00

I have a theoretical mind. I can't help it. I have always been that way, and being trained as a scientist hasn't made it any better. It is both a strength and a weakness. It is a strength in that I can sift through situations and ideas that most would find immensely boring, and then apply my theoretical understanding to new circumstances usefully. It is a weakness in that many people are not so oriented, or at least not so heavily so, and I have a difficult time relating to them.

'Hypertheoreticalism,' which is what I'm dubbing my mental malady, is an excessively Greek outlook. The Greek way of explanation and understanding is through chains of reasoning – if A, then B and not C, and so on. Think Euclid's Elements. Most people, truth be told, prefer Hebrew explanations and understanding – 'Let me tell you a story.' This is the narrative way of understanding, which is a long way of saying that most people like hard examples that they can relate to. I do too, when it comes down to it, and my mind can't handle the theory I'm throwing at it.

I have a second problem as well. I was once a sort of mini-expert on the Myers-Briggs personality type model, where this shortcoming was revealed to me. In the Myers-Briggs model, personality characteristics are assigned as four sets of paired dichotomies, the most important of which – at least as far as learning and understanding is concerned – is the final quality, whether one tends to perceive, or to judge, as his primary means for ascertaining new knowledge or truth. I am a Perceiver, which means that I look for consistencies or patterns across a wide range of observations, but neglect strict internal consistency within my ideas. Judgers, on the other hand, tend to neglect observation and instead derive new knowledge on the basis of trusted information which they already know. Thus they focus on rigorous internal consistency at the expense of breadth.

Most people – especially the argumentative types that one encounters on the blogsphere – are Judgers, so again, I tend to fail to impress. This same orientation is reflected, I think, in an old description of philosophers as being either bees – who fly about all over from flower to flower, taking whatever there is to offer – or spiders, who weave their intricate, perfect webs in a tiny corner somewhere and rarely venture out. Again, I am a bee, and most people seem to be spiders.

Narratives have generally been useless to me unless I have had a theory against which to understand the story. Unfortunately, it is stories which most people need to see the utility and relevance of theory. So, I have typically been dealing in theories and generalities, when it appears that narratives and particulars are what is most needed. I admit that this is my weakest suit but I shall here try to oblige.

The following three examples, I think, reflect the theories I have been dealing with in action. At least, I will try to show that they do, though I am not a professional economist and am not really equipped at actual practice. But I will try. They will also still at least have some generality to them, as I wish to protect identities.

Case 1 – The Uncrooked Crook

I know of a man who is a millionaire. He became so by the use of a particular scam, of which he became a master. This seems to be the model of a great number of 'successful' men – identify a useful loophole in the system that others do not really understand, and use it to the hilt. But I am digressing into theory again. He repeated it over and over, and it never seems to have failed him. To my knowledge, he never landed himself in jail, because what he does is not illegal.

The basic scam consists of about three parts, although I am sure that there are other elements which I am not familiar with that are necessary to make it work, as it is so brazen a pilfering. No doubt one of them is personality and charm. In the first step he would get a job at a fairly large company as a purchasing agent or with some role in such a capacity. The specifics are not so important. In the second step he would set up a separate company which sells some item which the company that he works for uses. The specific instance that I know of was delivery vans. The company which he worked for (but did not own) would be used to buy the vans from the company which he did own. Of course, in his capacity as owner, he had bought the vans cheaply and sold them dearly at the larger company's expense and his own great profit, using his capacity as a purchasing agent to ensure that his company got the contract.

He would modify the vans very slightly and make some excuse as to why the company he worked for needed those particular vans. But in the end, the company would notice the hemorrhaging cash at some point, and he would be fired. He would then move on, and repeat the same procedure at another company, building a fortune in the process as he ripped off one employer after another.

So far as I can tell, he was was utterly destructive of wealth and human happiness, but was able to profit from it by making use of two market limitations. First, he created a market restriction for himself by dealing only with himself at two separate companies. He had a monopoly of van sales to the company he worked for (but did not own), which allowed him to evade competitive pricing. Secondly, he obviously made use of limited information at at least two points. He used the limited knowledge of the larger company about vans (or whatever he was peddling to them at the time), which he had been hired as a purchasing agent to deal with, but obviously did so in bad faith. Secondly, he used limitation of knowledge in the business community at large and the labor market in order to get job after job and use the same scam over and over.

As described by the Porter 5 forces, markets need perfect access to information and competitive bidding, in addition to some other criteria, to work efficiently. When these conditions are not satisfied, and everyone pretends that markets still work anyway and everything is still fine and dandy, this is an example of what can happen. It is not a knock against capitalism or markets, it is an example of a failure of capitalism in theory to deal with markets in reality. In the old days, I would have said that the fact that he was fired shows that markets do work. Today I would say that the fact that he profited – and, might I add, continues to profit over the course of a long and distinguished business career – through the destruction of wealth shows, well, something else, but at the least that this outlook is naive. (In case you can't tell, I've been mired in something of an existential crisis these past few months and have generally been avoiding the topic in favor of things like idiotic dating theories and trippy quasi-theological utterings.)

Business schools specifically teach budding businessmen these kinds of tactics (check that link! Go to 23:00 or so and watch from there if you are pressed for time) – how to undermine markets. Note that this is exactly what Veblen said they would do – insert a market restriction by which to undermine the market and disproportionately profit at the expense of others.

Case 2 – Graduate School

I offer up this second broad category of cases in contrast with the one above.

There are so many misconceptions about higher education that it would take a multi-volume work to begin to expunge them and replace them with a remotely accurate understanding in the minds of people who haven't taken part – and even in many who have. By 'higher' here, I actually mean the highest – the graduate schools, where Ph.D.'s and such are conferred.

I will limit myself here to point out that 1) such 'education' is heavily subsidized by taxpayers, especially in the hard sciences, and 2) that the US 'imports' and 'educates' hordes of such 'students,' mostly from places like China and India. I am not sure of the statistics, but if I were to find that US schools awarded more Ph.D.'s to foreign than domestic students, it would not surprise me, especially if the inquiry were limited to those fields most heavily subsidized.

Many people are under the delusion that this situation arises because Americans are not so much up to the rigor of the task, or have no inclination towards it. I assure the reader that this is largely untrue. I do not deny the talents of those who come here – even, on average, a general superiority in some aspects, anyway (but not necessarily the most important ones.) No, Americans who do have the talent for graduate studies not generally go for it because of a fairly well-kept secret of science and engineering – there is not that much money in the field, and certainly not enough to justify the hell of higher education, even when it is 'free.'

I have known brilliant engineers and scientists whose products have made millions and millions of dollars for companies who themselves make little. Most of the Ph.D. holders I know make about what public school teachers make, and often less. This is because the field is flooded with them. They are a dime a dozen, businesses know it, and they treat them that way. Contrast their reward for productivity and their contributions with the man described above. If markets reward value contributed, what is going on here?

Again, to understand the theoretical how's and why's, consult Porter's 5. An advanced education is a market barrier – a natural restriction. Normally, not that many people would try to surmount it to enter a particular career. A business bidding for such a worker would necessarily have a smaller pool to choose from, pushing up wages. They know this. This is exactly the type of restriction they try to use in their own favor (except for the personal price tag which it takes to 'install,' of course) now working against them. Their business models tell them to eliminate restrictions among their suppliers – like labor – just as much as to install them against their customers. That is the way to maximize profits. So, they do, and especially in such a way that attempts to minimize costs to themselves.

Industry lobbies government with laments of insufficient scientific and engineering talent, the magical boon of technology, and a crisis of national security. Can't have the Chinese catching up, after all. Government responds by handing out subsidized and often free educations, and when the market gets so thoroughly saturated with degree holders that Americans get discouraged with prospects in the field, government begins importing poorer nationalities. All courtesy of the taxpayer. The whole thing has become such a racket now that it has become self sustaining in that insiders of the system have become dependent on the cash flows and are committed to its continuation. It doesn't matter how little graduates are needed or desired by markets, so long as it remains possible graduate schools will continue to churn out degree holders with little or no prospects for getting a position appropriate to their abilities. Believe me, 'the fruit rots on the vine' does not begin to describe the situation. Some spend their entire 'careers' seeking full employment, and instead get stuck in the barely remunerated pit of 'postdoctoral training' forever.

Again, the 'capitalist' may point out that it was an anti-capitalist action by government which created the situation, with which I would agree. But again, I would remind him that it was profit-seeking business motivated by well-established business models that incited the action, using constitutionally protected freedom of speech and petition to attack the system. As well, it was democratically elected politicians which carried out their wishes. Again – non-capitalistic, but a real part of the real world that is subject to influence by the goings-on of a capitalist market.

It is not a failure of capitalism per se, it is a failure of capitalism to survive the collision with reality, or perhaps reality to survive a collision with capitalism, and yet further testimony that without established habits and customs to limit the application of freedoms to undermine said freedoms and rights, a free system can rapidly decay into the Servile State of Belloc or the Imperialist State of Veblen. This is an excellent demonstration of Veblen's contention that the competition between businessmen would rapidly spread from the goods market, to the capital market, and eventually to the political arena of government and the legislature. If not limited to legitimate competition, it will rapidly devolve into illegitimate competition. Again – limited, the opposite of free.

Case 3 – The Destruction of Honest Enterprise

This last case will primarily be a demonstration of illegitimate competition in capital markets, made possible by an illegitimate treatment of money and banking on the basis of pure contract.

I have a friend whose father used to own and operate a successful gravel pit operation. I say 'used to' because he no longer does. He was run out of business in a method almost exactly described by Veblen in the Theory of Business Enterprise. Now he is a freelance welder.

To my abilities to analyze the situation, it it appears that the situation was set up by two market restrictions, both 'natural.' The first is that gravel is generally so cheap and abundant -- a fraction of a cent on the pound at the time – that it cannot profitably be transported long distances. A gravel pit is therefore geographically limited to deliveries of perhaps a few tens of miles from where the gravel is unearthed, so that a large company will be forced to operate several pits in different locations if it is to expand, rather than one giant pit for a large area -- which it would rather do, to minimize the necessary invested capital.

The second is that it takes a considerable capital investment to open a competitive gravel pit, which functions as a pretty heavy barrier to entry, as does the expertise of how to operate the equipment. I would estimate the cost of equipment of opening a gravel pit at several million dollars or so. It requires very big, heavy, expensive equipment. Labor is expensive enough that it takes considerable mechanical equipment to make for a profitable venture, at least under present conditions. Most people would agree that this, at least, is a good thing.

These two restrictions create an economic situation which might be characterized as local oligopoly. At most, a few firms might be able to service any particular spot of geography, and each firm competes only with a few nearby neighbors.

Those firms in my friend's father's vicinity, naturally, tried to use this to their advantage. They realized that to get prices up, they would have to choke off supply somehow and eliminate competitive pricing. Enter the inflationary banking system. Note – if you do not understand how the banking system is inflationary or why this situation is economically illegitimate, I do not have time or space to explain here. Suffice it to say that it is not, and the reason why and how it works is somewhat complicated, and the situation is made possible by a strict belief that keeping a contract is all that matters, regardless of the integrity of money or its ability to actually reflect economic reality. The competing firms borrowed loads of money at artificially suppressed interest rates and bought up all the available land leases in their vicinity at prices which were simply unprofitable.

Throughout the seventies, my friend's father did fine, as most businesses were afraid to borrow, with or without inflation. They were, in fact, being crowded out by Washington's borrowing. He had no trouble with availability of land. But when rates fell in the eighties, and especially in the nineties, suddenly this monopolistic approach took off, and he was left high and dry. Eventually, he simply ran out of gravel. Though there was plenty physically available around him, all the rights had been bought with inflating money. He was forced to close the business and sell off his capital, a lot of it for scrap. The competing firms no longer competed, at least with him.

With my friend's father's firm eliminated, the competing firms closed their own facilities and opened much larger sites further away from the city. This way they could service a larger area with a minimal capital investment. It didn't matter that these facilities were less efficient and they had to pay more to transport the gravel -- they had pricing power over their customers, so they just rammed higher prices down their throats. With a barrier to entry on the order of millions of dollars, and a stranglehold on supply, they do not have to worry about a new competitor coming in and taking away customers for a product that would otherwise sell for less than a penny a pound.

The consumer was hurt. Market efficiency was damaged. My friend's father and his family were hurt. The only people who came out well were the businessmen that caused the damage. In return for their nefarious rent-seeking genius, screwing their customers, destruction of economic efficiency, and undermining of markets, they get to live high on the hog. Meanwhile, the honest man who did make markets more efficient and served his customers well had his business destroyed. This is not how capitalism is supposed to work. This is not a process of 'creative destruction' for the sake of economic growth. This is destructive destruction for the express purpose of parasitism and economic decay.

I can honestly say of him and his wife that they are The Nicest People I Have Ever Met. They are not theoretical, hypothetical beings. They are real human beings with real families and lives, not fodder to send through an ideological meatgrinder.

Nowhere have I invoked an anti-capitalist action or sentiment to tell their story. The FED would not have had to exist, nor any other government agency or intervention take place for it to happen. It is purely an outcome of the free market, applicable to any similar situation.

Conclusion

I'm not sure how to conclude this thing. I would think I'd made my point to exhaustion by now and it was time to move on, but no doubt the response to this will be 'well, these are just isolated cases...' or 'you're not really describing capitalism...' or some other no-true-Scotsman type argument.

I think it was Aristotle who came up with the idea that a thing could not be itself and not itself at the same time. It was certainly popularized by Ayn Rand, capitalist apologist extraordinaire. One cannot have freedom of contract and not freedom of contract at the same time. One cannot have absolute property rights and limited property rights at the same time. One cannot even have freedom of contract and property rights at the same time, because property rights place limitations on freedom of contract, and certain applications of freedom of contract will interfere with itself. Something has to give. The freedoms one does have, and the rights that one does have, must be defined, qualified, and limited in some manner, or else they don't make sense and the situation will lead to its own destruction. For example, one can only divorce so much sovereignty from his property before it ceases to be property. But if one cannot freely divorce his sovereignty piecemeal, or that sovereignty which has formerly been surrendered by a previous owner is not allowed to stand, does anybody have freedom of contract? Do contracts mean anything anymore?

I would think that most of this was elementary once it had been pointed out, and my continued commentary on it was beginning to border on the absurd.

Whatever the case, my main argument is about the nature of the collision between capitalism as an ideal and the real world, and what to do about it. For the capitalist who complains that people should not behave in an anti-capitalist manner, I must say that I agree. I have said this myself, and I am also a capitalist. And socialists should not steal from the system they belong to, either. In both cases they should not, and in both cases they do. A system that is designed to govern the behavior of people who do not exist, who are purely theoretical people, is perfectly fine for those purely theoretical people and a purely theoretical world. But for real people, demands and expectations must be a little different.

Capitalism must survive practical tests of the real world with a certain amount of integrity if it is to perform 'as advertised.' If it is not to morph into a horrendous monstrosity, such behavior must be curtailed in some manner. Businessmen that are free to destroy the free market most certainly will, and they are perfectly able to do it within the rubric of capitalism. Capitalism itself is insufficient to stop them.

For capitalism to survive, something else must be invoked. If the capitalist says that markets were more free in the past, such that it is in fact possible to have more free markets than exist today, I say that he is right. And markets today are less free than they were, so it is also possible for them to get less free. The question is really about what drives things in each direction.

It was not the free market that produced the free market. Causes necessarily come before effects. Yesterday gives rise to today. The free market, in practice, as a practical matter, has produced the welfare state. It did not sustain itself. It was medievalism that produced the free market, and I am beginning to suspect that it is the residues of medievalism – which are wearing away as we speak – which made the old style free markets possible. Medievalism almost did sustain itself, but then it didn't. That is not to say that any of this had to be that way, or that it is always that way, but the more I look into it, the more it seems to be the case.

What is for certain is that capitalism is not sticking around on its own. If it is to stick around, and to work as the capitalists advertise, it needs help – in the form of behavioral restraints.

The Distributists

2011-08-10T12:40:00.000-07:00

About the same time that Ludwig von Mises was writing his Theory of Money and Credit, and Thorstein Veblen was writing his Theory of Business Enterprise, yet a third – and somewhat more obscure – group of social theorists was busily trying to come to grips with the faults and failures of the economic system around them. Like the others, they also thought that things were becoming too centralized, and did not trust to the general benevolence of such arrangements. Unlike the other groups, they had a strong religious bent informing their views. The two principal proponents of this view were lay Catholic writers, G.K. Chesterton and Hillaire Belloc, who even in their day were known more for their political journalism, religious writings, and fiction than their economic opinions. In fact, they were not even economists at all, and appear to have been less concerned with the efficiency of any production scheme than with its being well suited to the lives and dignity of those who participated in it. The group I am speaking of is the Distributists. Today, their views live on in the books of these two prolific writers as well as some few modern adherents to their views.

As G.K. Chesterton frequently laments, distributism is a perfectly awful name for their movement, and, as he says, he would have been happy for it to have been called 'cat' or 'dog' so long as people properly understood what it meant. I must confess to having known about distributism for some time without having the slightest interest in investigating it, thanks to this awful name and the vague notion that it was in opposition to capitalism, which together suggested to me that it was just some variant of socialism and not worth the time to look into.
Actually, that is not even remotely the case, and though I can now see where the movement got the name 'distributism' and could not come up with a better one myself, I still say it is a bad name. Distributism is, in a nutshell, the idea that the concentration of productive capital into the possession of a relatively small number of capitalists has extremely negative effects on society, and as such is a state of affairs which should be vigorously opposed in favor of a state in which capital is well 'distributed' among many owners. In Chesterton's words, 'too much capitalism does not mean too many capitalists, but too few capitalists.'

Even though the two were not economists, it appears not to have stopped them from occasionally foraying into the field when they felt the desire. They would have done better, in my opinion, to have better suppressed the urge. Both these men were brilliant intellects and gifted writers, but where they try to take up this topic in anything approaching specifics, it often isn't pretty. In many places, one finds them advancing fairly elementary fallacies. On the other hand, it seems to me that their instincts were largely right in the broader view of things, especially where Chesterton flatly denies that large corporate enterprises are actually more efficient than smaller ones. But though he observes well enough that this seems to be the case, he has difficulty in defending his opinion.

Like Veblen, both men bewail the evils of monopoly, and both conclude them to arise illegitimately. But unlike Veblen, they are not so convincing in their explanations for how this state of affairs can come to be if the larger corporations are not in fact more efficient than the smaller ones. Belloc comes closest in his Essay on the Restoration of Property, even identifying credit markets as being an important force in the growth of centralized business structures. But both men make many of the same mistakes – principally in assuming that on the whole the regime of financial transactions as presently constituted and which lead to this state of affairs actually reflect economic reality. Both the Austrian school and Veblen put the lie to this assumption, but unfortunately Chesterton and Belloc apear largely unaware of them. They probably would have been hostile towards both points of view in any case, as the one advocates – and even celebrates – an almost utterly free and unfettered market, while the other is coldly and cynically materialistic in its analysis.

Possibly the worst such blunder comes from Belloc, who attempts to make a historical case that capitalism arose from – of all places – the English Reformation. The distributists tend to hold up the latter Medieval age as a sort of ideal, when most people were petty landowners or shopkeepers, such that capital really was well distributed, at least to a large degree. Belloc asserts that this idyllic situation was destroyed by the Reformation, when the monarchy seized church lands and then began distributing them among the nobility. This enormous confiscation of wealth piled up in the hands of a select slice of society, which used its new economic power to its advantage, pushing what were once customary arrangements of prices, payment of rents and other fees into a competitive arrangement which favored the large landholding class. Thus, saith Belloc, was the principle of the competitive market born. It was the product of the spirit of landed nobility lording their advantage over smaller holders of property, with all of the economic and political fallout that ensued.

Now, I have no doubt that this wrongful seizure of lands was a wrenching and evil event in the history of Britain, nor do I doubt that it did in fact cause a major shift in the balance of power. But the argument that this political shift could fundamentally change the way that people viewed what constitutes right and proper economic relationships between one another seems to me absurd. It could be that this event marks a particular point in time when the capitalist market order found opportunity to assert its dominance over medieval custom, but that would only be if such an order pre-existed the event in some fairly widespread and advanced state – in which case the Reformation could not have created it in the first place. I find Veblen's explanation far more satisfying.

Belloc does, however, provide a more convincing explanation for the rise of medieval custom out of the ancient system of slavery. He says that once the central powers of Western Europe fell – namely, Rome – landholders were put in a position of having to deal with their captive populations without recourse to the apparatus of an organized state. Thus, they were forced to 'come to terms' with those who worked for them in arrangements that were more voluntary and mutually satisfactory to achieve a stable organization. The result was eventually serfdom and a free peasantry. Like Veblen's explanation for the rise of capitalism, the rise of medievalism was a gradual process that centered on new social arrangements and habits of thought that solved a practical problem in a generally mutually satisfactory manner.

In keeping form with the same sort of error which led Belloc to blame the rise of capitalism on the Reformation – one which has a tendency to both lay blame and look for solutions to problems in grand actions of the state, whether they could reasonably be expected to lie there or not – Belloc and Chesterton both seem overly statist in their outlooks, especially when it comes to proposing solutions to the economic dilemmas of capitalism. Perhaps that is due to their Medievalist sympathies, when times tended to be more ordered along such lines, or perhaps it is because they had themselves succumbed somewhat to the newly festering Progressivism of their day. But all that aside, on points where these men excel, and especially for Belloc where he sticks to his strengths and remains systematic and logical, they do succeed in making a highly convincing case for their cause.

Belloc, I think, outlines the dilemma the better of the two. In The Servile State, he notes that the capitalist order is unstable for many of the reasons that Veblen did – the order itself tends to undermine the notions that secure the capitalist mindset in the people who live under it. This happens mainly because by depriving the vast majority of the population of the ownership and management of productive property, the 'mood' of property ownership is lost on society at large. It develops a proletarian outlook, concerned with wages and income rather than with wealth itself. In addition, capitalism's volatile, supposedly intrinsic cyclicality tends both to put the capitalist at risk of his profits and property, and the employee at risk of his livelihood, such that both have an incentive to 'stabilize' arrangements, as it were.

Belloc thought that capitalism as it existed in his day – which he defined as most capital being held in the hands of the few, such that this arrangement of things set a social 'tone' of widespread proletarianism – had three possible fates. Firstly, capital could be held by fewer men such that eventually it was held by none, residing almost wholly in the hands of the state. This is, of course, Socialism. Secondly, capital could be held in more hands, such that the mood of society would be altered and the institution of property preserved indefinitely, as it presumably would have been in medieval times. This is the Distributive State. Third – and in his estimation, most probably – the present arrangement would continue, the general tone of society deprived of notions of property, with social relationships calcifying over time such that both the capitalist and proletarian would be preserved in a new class structure. Welfarist policies – such as payment for unemployment, minimum wages, and the like – could be used to permanently stabilize the economic arrangement into what he called the Servile State. Belloc makes a convincing case that the West was in fact moving towards the Servile State at the time, and no doubt the reader has already perceived that he has largely been proven correct, though today one would call it the Welfare State.

It would be easy for the critic to take a cursory look at these ideas and come away from them with the idea that distributism emerges from a sense of envy and unfairness, similar to what so often motivates Socialism. Perhaps to a small degree this is the case, as one does detect a note of this sort of resentment in both writers. But it would be an injustice to dismiss distributism on these grounds or to deny that there is anything else to it. In one particular respect, it is essential to get a sense of the passion that both men had for the institution of private property in order to understand their point of view. Perhaps the best such illustration comes from Chesterton, who goes so far as to declare that 'property is to man as Christ is to God.' While this statement probably captures the intense passion that the two vested with property as I am not sure many others could, especially coming from such a devout Catholic as Chesterton, by the very nature of its terms I doubt that anyone could fully comprehend it.

Chesterton thought that property was essential in order for a man to fully come into being. By working property himself and shaping it as he saw fit, he mirrors the act of God creating man in His image. He participates in an act of divine, cosmic creation. He expresses his individuality and enjoys liberty and sovereignty over what is his, as a man with no property simply cannot. A man with no property is reduced to a servile and insecure condition, or worse, lives in a state of dependency. While such arrangements may be materially satisfactory – or even superior – or alleviate many unwanted responsibilities from the worker or the dependent, they nevertheless deprive him of the conditions under which a man was meant to live and under which he achieves his highest state of being.

In What's Wrong With the World, Chesterton 'derives' the ideal conditions under which man was meant to exist from 'first principles' observable in the natures and characters of men, women, children, and families. Naturally, he concludes that the small farm or family proprietorship is the ideal condition – otherwise Chesterton would not count himself a Distributist. But that is not the book's real value. It is filled with insightful observations and arguments that really very well support his contention, but more importantly, highlight the importance of having a real contention to begin with. In Chesterton's mind, one of the biggest problems with 'the world' of his day is that people had moved from thinking in terms of doctrine and solid points of fixed policy and philosophy to thinking in terms of bland tendencies and directions. Worse, thinking had become so divergent among the different schools of thought that what appeared a good to one was viewed as an evil by another.

Thus, modern reformers might all generally agree on the evil of a bad situation and agree that reform was necessary, but each have no real idea of what the good situation was which he was striving for and in utter disagreement even in the direction which society ought to aim. He only thinks in terms of directions and tendencies, defining himself against others, and even so, for such longings as he harbors there can naturally be no satisfactions. How far is one to go? One winds up in a world of pullers and tuggers, none of them with any fixed goal in mind – or even any notion that as reformers, they ought to have such a thing – and all in perpetual disagreement. The goal of almost any modern negotiation is 'as much as one can get.' As such, Chesterton thought the first order of business should be to clear the air of all this social tinkering, and rather than ask what it was that ailed a society, what it ought to look like in health.

In this argument, Chesterton anticipates the modern world of myriad special interests vying for government largess and Veblen's army of meddlers deliberately operating at cross purposes – and in the process making the lives of those forced to tolerate their incessant proddings, tinkerings, and material extractions miserable. It is not that society needs to be drug about by the nose by armies of practical men who know 'the system', 'how it works,' and 'how to fix it,' each according to his own vague opinions. It is that 'the system' is so clearly and fundamentally broken in critical places that it needs men to quit thinking about where it needs to go, and instead on what it needs to be. This dragging it about in every direction with its problems intact is not making things any better, it is creating more problems. What society needs is an 'unpractical man.'

Chesterton's 'solution' as sketched out above should look quite familiar at this point – it is Veblen's Artisan Economy of the late Medieval and early Enlightenment. It is the stable, economically decentralized state of the Austrians. While Chesterton and Belloc's arguments for how to achieve it and what causes the economy to unnaturally depart from it are not always good, nevertheless, in their broader strokes they have identified almost the same state.

One especially hopeful aspect about their arguments and speculations is that both Belloc and Chesterton appear to have assumed that people in such an economy would, on average, be materially worse off than under the present order of things. They continually refer to people under such idealized systems as 'peasants,' and celebrate them in their proud poverty even in their other, unrelated works of fiction. Yet even so, they thought that it was better to be a peasant and relatively poor than a proletarian and materially better off, such were the benefits of the security and dignity of ownership of private property. But if we believe Veblen and the Austrians, it is just as probable that under such a system, the 'peasant' will not only enjoy the spiritual benefits of his own property, but will be materially the better for it as well.

I remain agnostic on this point, until I see such a system in action. It is one thing to hypothesize about an observable system which really does exist and for which there is actual data -- however misleading the data may be. It is another and more difficult problem to hypothesize about the hypothetical. That said, it seems to me that the answer would boil down to two major effects. First, I am quite sure that an idealized, decentralized system which managed to avoid the pitfalls outlined by these three sets of theorists would suffer from far less economic parasitism and the inefficiency associated with artificial centralization. On the other hand, I am not so sure how that effect would weigh against a situation in which most people were not under constant compulsion to work diligently by an employer, did not have their work carefully organized by such an entity, and true consumer sovereignty was allowed to assert itself.

It could very well be that people would both produce and consume less, either out of inability to achieve higher efficiency of production, or simply given the free choice to do so. Perhaps they would simply find life satisfactory with less effort, and leave it at that. It might be that it is the structure of the modern capitalist order that creates the incentive to live a lifestyle that is simultaneously heavily materialist and frenetically productive. These artificial incentives might be structured such that the alternative appears so much less appealing that people who otherwise would opt for the less productive lifestyle nevertheless live highly productive lives. Or it could be the reverse – that once the parasitism and inefficiency were removed, the reward to effort would be so much greater that most people would rapidly become productive dynamos. I don't know.

Whatever the case, to me the issue is moot. It might be an interesting question to think about, but it is not the crux of the matter. The critical thing is that the order be structured such that financial and economic outcomes faithfully reflect the exchange of value for value, that economically illegitimate transfers of wealth are minimized, that consumer sovereignty be firmly upheld so that economies serve the needs of people rather than the other way around, and in general, common principles of liberty and justice prevail over human affairs. Chesterton and Belloc, for all their flaws, appear to me to have identified many important aspects of the problem and a coherent and detailed idea of what any proposed solution should look like.

As far as the question of material productivity is concerned, I would rather find out what happens by doing it, and accept whatever answer I find, come what may.

Greek Bank Run and a Debt Downgrade

2011-08-06T10:26:00.000-07:00

Wise Greeks have begun withdrawing their savings and holding them as cash --

In one of the biggest banks in the centre of Athens a clerk is explaining how his savers have been thronging to pull out their cash.

Wary of giving his name, he glances around the marble-floored, wood-panelled foyer before pulling out a slim A4-sized folder. It is about the size of a small safety-deposit box – and those, ever since the financial crisis hit Greece 18 months ago, have become the most sought-after financial products in the country. Worried about whether the banks will stay in business, Greeks have been taking their life savings out of accounts and sticking them in metal slits in basement vaults.

The boxes are so popular that the bank has doubled the rent on them in the past year – and still every day between five and 10 customers request one. This bank ran out of spares months ago. The clerk leans over: "I've been working in a bank for 31 years, and I've never seen a panic like this."

This is the modern version of a bank run. Greeks are apparently increasingly coming to terms with exactly what the consequences will be of the situation they are facing. Ultimately, deposit insurance that would repay them in the event of bank failure is funded by the government treasury. If the government fails AND their bank fails, their deposits will be lost.

Paper money, however, is part of the monetary base -- under a fiat regime, anyway. Under a gold standard, it is not. As such, its supply cannot be contracted or destroyed by bank failures, while mere bank deposits can. By holding 'cash,' -- not bank deposits --wise Greeks are are protecting themselves. Their government has no way to nationalize the ECB or to force it to inflate or to save the financial system, though obviously in its own self interest the remainder of Europe's banks would prefer the Greek system not to fail. This is a fairly unique juncture.

Our own threatened 'default' of the past few weeks is not analogous, as evidenced by low Treasury interest rates here vs. Greek rates. Greece is at the end of its rope, while we still have a few more feet to fall. There is no such threat here and now, but that does not mean there will never be.

S&P has downgraded Treasury debt -- notably on a Friday evening after markets had closed, so that nobody could do anything about it. That was very considerate of them. Whether that will actually raise interest rates remains to be seen. Theoretically, it should, but theoretically, where is an investor to put his money these days?

Whatever happens over the next few days, at some point America's lenders will balk at further funding -- even including the FED. There will be a choice to make -- nationalization of the FED, or default. When that day comes, remember this day in Greece.

Forewarned is forearmed.

Two Worlds

2011-07-24T12:04:00.000-07:00

I say that there are two worlds in this one.

Everyone knows about the first. It surrounds, glaring, like billboards from the hillsides, declaring itself without shame. There is no need to describe it, for it is known to all and contains nothing of importance -- except that which can only be revealed by contrast with the second.

The second is not so easy to find. Few do, so far as I know. I have found but one way in, though I suspect there are probably more, and perhaps others might have found them. As with so many other things, my understanding on this point is limited. The way I know opens like a little door to a vast, cavernous space, for as far as I can tell, that world is far greater than the one known to all. Once a man has seen it, even only a little bit, the Outer takes a feeling of being close and cramped. Small isn't the right word, for clearly the dimensions have not changed, but perhaps I am not talking about space.

I say Outer only because that is the way it appears to me. The other world seems to be Inner, though I would understand someone else if he took the two to be reversed. I say it is Inner because, having seen it, it appears to be at the Center, with everything else on the Periphery of its Centrality. But I can also see someone saying that it was 'outside of' the one that they had always known. In truth, I suspect that it cannot be known by any man, for all minds are limited, and it is doubtful that any exertion of reason might finally succeed in achieving sufficient expansiveness to know its dimensions and arrangement. In such a case, one must rely on something else, and in this I have resorted to what I feel. But it is also unimportant; what is important is that the two are separate, and that they are different. I shall use my own convention.

On the Inside is darkness, but I only say that it is dark because I cannot see. It could be only that I do not see well there, for my own eyes appear to need illumination from the Outside world. Very little of this light may penetrate through my small door. It is like the light which comes in to an unlit room from a window, when the sun is on the other side of the house. I see but dimly by it, and not very far. My knowledge of the Interior is limited to my tiny corner.

How, then, can I know that it is vast and cavernous? I've never known a sound to return to me from any direction except by what local objects I can see, but then, perhaps sound is not the best judge of distance. All I know is that I look out, and see no end. More important, I feel none. The vastness swallows me up.

What is in this other world? First, though the light is dim and cannot penetrate far, the eye will notice of the colors which can be seen, that they are Full, and Deep, and Rich. They are not like the obnoxious, screaming pastels of the Outside. Once you have been on the Inside, you realize that the Outside is like that. It screams, demands, distracts. But mostly it wastes -- attention, cares, worries, and Time, all for Nothing.

The textures, the sounds, they are likewise. No one has seen or heard till he has seen and heard the Inside. Where the Outside is intrusive and loud, the Inside is quiet and contemplative. It does not demand; it respectfully and reservedly is. The Outside grasps. The Inside is content. I describe the Inside in terms of the Outside, because that is what others know. But the Inside does not resemble the Outside. It is the Outside which is the distorted and mutilated reflection of that Within. I know that now.

But what is actually there, I can only say of my small corner, and it is something like the corner of a library, or a study, or a drawing room. There are books there, and the perfect atmosphere for reading, even if the light is dim. But bringing a book near enough to my little door is sufficient. There are not as many books as I might have thought, such as there are Outside, and the subjects are very few. Maybe there are many more books on many other subjects elsewhere, but as I say, my corner is very small. One thing I must say about these books is that they are all very good. Many Outside books -- almost all of them, even -- are not good, especially once you have read books Inside. It is possible to find copies of books from the Inside on the Outside also, but they are not the same. They are different Within. Within, they are something of their own, but Outside they only point towards the Inside.

Perhaps all of the Inside is not that way. I do not know. I know about the books because that is what is nearby to my door. But Inside is a great region. Other doors might lead to different places, but I have never seen them and do not know about them. Likewise, I am not sure that many others know about my door, and I am not sure that I could direct anyone to it if I tried. It would be like trying to point to a very particular place in a clear, blue sky. It is possible that there are others who know many such doors, or can even see by some light Within which I cannot and know much more that dwells there. I have heard that there were in the past. But I do not know any of those people myself, and cannot do these things.

It is strange. With respect to things like the books, on the Outside, if a man has a question, he may 'look up' the answer. Or so he believes, and so he does, anyway. But I find that this is not the way things work on the Inside, and once I spent some time there, I knew that this was also true of the Outside as well, though few seem to realize it. It is only an illusion. On the Inside, one recognizes it, and knows it for what it is. He recognizes that there is knowledge to be had, knowledge in abundance for those who seek it patiently and diligently, but nevertheless, to the limited mind the world will always be filled with Wonder. That is one of its supreme blessing, next to Humility and Discovery, which bring so much Joy.

In like manner there are many subjects about which I would like to know a great deal more, but which do not appear in the little corner that I know, and I must accept that until such time as I may encounter them Inside, I must be content with plain ignorance. Right knowledge of them will be hidden from me, and there is nothing I can do. I caution myself not to accept the answers which I find Outside, for I have seen that most of them are lies. It is the Outsiders who delude themselves and so often delight in accumulating these answers. They have not yet learned that truth which is too easy to find – or to accept – is usually not truth at all.

Sometimes Outsiders seem to notice this in their specialties, that Conventional Understanding often does not work in practice. At first they are frustrated, but the clever ones can sometimes sort out for themselves a few Secrets which give them Advantage. Both are important Outside, and these they often guard jealously. Rarely do Outsiders allow the existence of Secrets to burst the pretenses of Conventional Understanding or to disrupt the Pomp of Progress. For some reason, it does not alert them to the Lies, or point them towards the Inside, and on other subjects they just continue to accumulate Lies as though they had learned nothing. Perhaps they really haven't.

I fear that the End may be coming for the Outside, and that one day, all will be forced In. I love the Inside, but I do not look forward to the End. Of that, I am very afraid. On that fateful day, I fear that I will be flung headlong into the very Center, blind and hurtling through darkness to confront the very face of the Unknown. It is of this that I am most afraid.

But if Outside or Inside must End, I must choose the Outside, whatever my fear. Till then, I wait in apprehension.

Biblical Feminism, If Any

2011-07-21T17:27:00.000-07:00

This Sunday past, I encountered a Sunday School lesson from the Old Testament that attempted to demonstrate the feminist leanings of said text. I say 'encountered' to be, more or less, polite. Thankfully for all involved, I was there to save the day, disrupt the proceedings and disabuse all involved of such notions, the essence of which I shall now relate.

Like most Sunday School lessons, it revolved around the reading of a passage, and then a discussion of what the thing 'meant.' The passage was fairly long, obscure, and involved, so rather than quoting it in full, I'll give the executive summary. It can be found in Judges chapter 4 for those interested.

The Israelites are at the low point of one of their spiritually rebellious phases, and a Canaanite king has conquered them. They have 'cried out to God' to bail them out of a mess of their own making once again, and God sends a message to a prophetess named Deborah, who is presently a judge of the Israelites, that if they attack the army of the Canaanites, He will see to it that the Israelites prevail.

Deborah delivers the message to the military commander of the Israelites, who is skittish about attacking and refuses unless Deborah accompanies him. Ironically, the commander's name is Barak. (I know it's a tired cliché, but you just can't make this stuff up.) Deborah informs him that because of his timidity, the glory of capturing Sisera, the enemy commander, will not fall to him, but instead Sisera will fall into the hands of a woman.

The Israelites attack, and rout the enemy. The enemy commander flees to an allied Canaanite camp and hides in the tent of a woman there named Jael. She shelters him as he requests, but upon his falling asleep, decides to betray him and kills him by pounding a tent stake through his head with a hammer.

Yikes! But that's what it says.

This passage was taken to support a basic 'women's lib' message that the Bible supports a model of equality between the sexes in terms of assuming leadership roles. Unfortunately, the leader (who, to his defense, did not get to choose the subject matter of the lesson) allowed me to express my own opinion, at which point I derailed the entire thing, and probably upset a few poor, meek souls in the room.

The two problems most people have with reading the Bible is, firstly, that they have almost no historical or cultural context because they lack background reading in ancient history, and secondly they don't read the Bible itself enough to even develop some meager sense of its atmosphere from within, either. It is easy to see how someone could come away from this passage with the basic feminist message -- look at these two incompetent men, one for whom the assurances of God aren't enough, doesn't want to take responsibility for his own role in the tribe, and who has to have his hand held by a woman to do his job. The other flees from battle like a coward and dies like a coward hiding from his enemies in a woman's tent. Isn't that what life is like! Men are cowards and shirkers, and without women to look after things, their affairs would immediately go to pot. Note that that is not what the class leader said. He took a more moderate stance that the story was an illustration of how women could be just as competent as men in leadership roles and ought to be considered equals.

At the minimum, whatever your take, of the two sexes the women definitely come off looking better. If you wanted to take some passage from the Bible to the uber-feminist level, this one would be a good choice. However, one would have to come to that conclusion by reading the story in an absolute vacuum. I'll save some counter-citations for later, and focus on the context of this story.

First of all, it helps to have an idea who the Canaanites were. In a nutshell and to be fairly blunt, they were a hodgepodge of savage, demon-worshiping, human-sacrificing tribes who worshiped gods like Baal Moloch the Destroyer and Baal Zebub (modern spelling -- Beelzebub), Lord of Flies and Corruption. These are the 'foreign gods' whom the Israelites were worshiping, and child sacrifice and the other abominations were some of the bad habits the Israelites were guilty of picking up from their neighbors. Needless to say, this had a tendency to put them on a bad footing with God, and also tended to result in a bit of moral decay within the Israelite community. The Israelites went through wave after wave of these falling away periods, and notably, the period of this story was at the bottom of one of them.

Ergo, it kind of makes a lot of sense that the men of Israel were shirking their duties. It also makes a lot of sense that a Canaanite leader would be something less than a tower of virtue. In other words, this is not to be taken as a model of 'how things are supposed to be' or even 'how things usually are.' It is a story of how things can turn out when a society has become decadent and rebellious towards duty and almost nobody is behaving the way he is supposed to. The men of the story bring shame upon themselves and the women get forced into roles that aren't appropriate and are often unflattering to them. I don't think that even a feminist would want to spend her time with a man either babysitting him or smashing his brains out. Ok, maybe in a few extreme exceptions.

Anyone who had the appropriate background for reading this story would have immediately seen that. There would have been no confusion on the point that this was not 'typical' or 'model' behavior. They would have gasped at the disgraceful, 'unmanly' behavior of the men and recognized the story as being laden with irony -- ironies which are absolutely necessary to understanding its message. They are, in a few words, the whole point, and if you don't 'get' them, you might as well forget about understanding any of it. These kind of ironies, especially role inversions, saturate the Bible and were probably a big part of what made these stories memorable and interesting for so many centuries. However, to the uninitiate, 'it's all Greek.' They don't see any of this and approach the story the only way they can -- naively. Yet there is this attitude that 'if you'll just explain it to me, I'll get it.' Right. And if I just explain French to you right quick, you'll be speaking it – just like that!

That's not how things work.

Even I am lousy when it comes to these things. One big reason I don't read the Bible that much is because it confuses me. I appreciate the effort, but honestly, I think 99.9% of Christians would be better off putting their Bibles safely in a box somewhere and spending the rest of their lives reading C. S. Lewis. Their children might be able to branch off into philosophy, ancient history and the writings of the church fathers, and maybe after a few generations, their great-great-grandchildren could dust those old Bibles off and have a reasonable chance of understanding them. Note that I would include myself in that description – and that I do read a lot of C. S. Lewis.

And much as I hate to admit it, I'm not such a manly man, either. I can sympathize with not wanting to lead an army against a force I thought to be superior to mine. I'd rather not lead an army at all. Or even fight for that matter. But in so many ways, that is exactly the point. It doesn't much matter what roles we happen to fall into in life, including the roles of man and woman, it is our job to properly fill the role that we have been given whether we like it or not. That is part of sucking it up and 'being a man.' Or woman. Rebelling against our roles is the antithesis of virtue, as most people instinctively understand when they see -- or worse, undertake themselves -- an act of cowardice, or betrayal, or dishonesty. It feels of physical revulsion.

Right now, and in so many ways, most people seem to be in some kind of bubble of 'Decadent Americanism.' Every culture has such bubbles that interfere with their ability to connect with reality, especially of basic human lessons coming from outside cultures – like the ones in the Bible – but America's cultural bubble seems particularly dense at this time. It is the decadence, I'm sure. It is a sign of The End. In this same class I heard a charitable mission being described going to some locale in Africa, where – apparently! – men typically don't do any work and goof off all day while their wives take care of everything.

If this is surprising news to anyone, well, welcome to your bubble. I have heard exactly this same description applied to multiple nations and societies -- Vietnam and India in particular come to mind, as reported by a Chinese and a fellow Indian, respectively. The fact is, that situation, far from being an exception, is likely the rule. For most places most of the time, it is 'normal.' But even knowing that, most people still respond incorrectly. They assume that the men are dominating the women and forcing them into a subservient position. Perhaps in some cases, but probably not in most. To be done properly, domineering normally requires uncommon zeal, dedication and energy. This is usually best supplied by an element of shameless and overbearing self-righteousness. These men, like most, are probably just lazy. They probably aren't all that suited to oppression, at least as most people understand the term.

More often, in my opinion, investigation will show G. K. Chesterton's explanation to be the correct one -- that the women have repeatedly prodded their men to get to work like they are supposed to, and the men have disobeyed. Done often enough, and the women stop asking. And when men shirk the proper roles given to them, such as in supporting the family, or in leadership, or doing the work, or whatever, the work inevitably falls to the women. Filling the role of a shirker may be sometimes be necessary, or laudable, or even heroic, but what it is not is ideal.

And now we get to brass tacks. The Bible as a whole, and this passage in particular, emphatically do not support the notion of women in leadership positions as male equals or equivalents as some kind of ideal. If one would like to make a philosophical 'bigger picture' argument about the thing being taken in some spirit of whatever, well, there might be anything or nothing to any particular theory. But it will not be the straightforward interpretation. Taken as a whole and in context, the Bible is pretty clear. You may have whatever opinion you like on the matter, but the Bible does not support the feminist equalitarian position.

Like almost all ancient wisdom, and practically all wisdom of all civilizations of all time except for the little Western eye-blink that we presently occupy, the Bible operates under the assumption of differing roles for different people in different relationships with one another, and in propriety in behavior according to role. The key word in that sentence was 'assumption,' and in any culture these are legion and often not spelled out. You just have to know them. It then goes on to give lessons, histories, and parables in terms of these ideals, including and especially lessons in which characters have refused to submit to their duties.

In general, the Bible ascribes role-reversals such as Deborah's to periods of decadence, like the one depicted in this narrative. Isaiah describes one of the woes of 'God's people' who are in disobedience to Him that 'children are their oppressors, and women rule over them.' (3:12) I do not see how this description could be interpreted as a positive one for feminists. In the New Testament, Paul describes roles within the church where women may lead, but these are limited and circumscribed. Generally, it is expected that men should lead, as leadership is a role more ascribed to men as a rule.

It is the modern 'liberated' West that has idealized women in the roles of men, men as children, and children as adults. And it is the modern 'liberated' West that finds itself confused. Those indolent African men may not be behaving themselves, but at least they are not confused about the matter. They know better. The problem with the West's understanding of all of this and the offense it causes originates, once again, in decadence. It lies not with the stars, but with ourselves.

And like most problems, it has many sources, one of the most perplexing that we seem unable to think about these situations rationally. Chesterton outlines an interesting problem of modern thought I would never have thought of -- the problem of trends versus doctrine. Modern thought has largely abandoned doctrine in favor of trends, in his mind because of the rise of the theory of evolution. Thus otherwise intelligent men do the equivalent of noticing dandelions growing in a field in the springtime, and then concluding that because they grow they will certainly one day be larger than skyscrapers. The tendency to think in trends erodes the notion of specific, inflexible assertion and leads to extremes and absurdity.

Today, most people cannot deal with supposedly conflicting Biblical notions of female roles and social status, such as the supposed contrast of what I have described here with the idealized wife found in Proverbs, chapter 31. They are too accustomed to dealing with any notion of the status of women, or status in general, as an either-or proposition. Either men are to be high-heel licking commie homosexual equalitarians, or wife-beating Johnny Talibans. Any position staked out in between is taken to be a disingenuous guise for one or the other. Equality is taken to be an absurd absolute and in every particular, or else it is nothing but a shade of abominable oppression.

Ironically, the class leader started off the talk with a reference to Michelle Bachman, who, on reflection, could not have been a more apt example of a modern version of Deborah, though I'm sure he had not quite intended it in the way I do. I do not much follow these things and have no desire to, and I will confess up front that I know absolutely nothing about her except that she is considered a leader of the Tea Party. For all I know, she might be the greatest candidate ever to hit the ballot. If so -- good for her, and everyone out there should vote for her.

But do not forget that we are a decadent culture, as Israel was in the time of Deborah. I am not the first to notice that the Tea Party has an inordinate number of women leaders. Good for them -- but for shame for the rest. For shame for all the millions of Baraks that will only back her and vote for her to lead them, rather than being leaders themselves. For shame for the men of the Tea Party, hiding their opinions behind the skirts of these assertive women like so many Siseras, to avoid the darts of their enemies.

For shame that these women will be taken away from critically important duties that will influence the fates of their children and families, for the sake of such a relatively petty and futile thing as influencing the political fate of a nation. For shame that the abuses of the American political system will be heaped upon their already overburdened shoulders. For shame that they will dirty their hands in fighting more appropriate to men. For shame that our nation has reached the point that it asks this of its women.

I could go on much longer – and probably be much less politically correct about it. But you get the idea. Deborah and Michelle Bachmann might well be heros, but the last thing they are is models. It is perfectly reasonable and appropriate to celebrate single mothers who overcome hard circumstances, especially when they are not of their own choosing, but conservatives are not supposed to be celebrating single motherhood itself.

These are not ideal circumstances. Nobody should be confused about that.

Essay on the Kinetics of Dating and Marriage

2011-06-30T19:29:00.000-07:00

Auctor: One who seeks knowledge of some arcane, or even a not necessarily so arcane subject, is often tempted to consult an 'expert.' This, I have found, is usually a mistake, especially if the expert is known to have a longstanding association with the subject.

The seeker may also seek out a 'master,' who appears to have a track-record of outstanding success in the field of whatever endeavor he is contemplating. This, too, is probably a mistake. I am thinking in the first case of a person with an interest in physics seeking the advice of an Albert Einstein, or in the second of an overweight person asking a rail thin model how she manages to stay so thin.

At some future point in time, these may be perfectly useful sources of input, but in the early going they are unlikely to have much to offer. This is because, in most cases, their basic 'expertise' comes very natural to them, long ago having become unthinking habit, such that the seeker's very fundamental difficulties will be so far from their minds that they will not be able to anticipate what it is that frustrates the seeker's comprehension.

The expert has a tendency take the basics for granted, and suffers from the universal human tendency to assume that the problems of others must be similar to his own. Thus he operates at a level so far above the total novice that he is often no longer able even to have a conversation with him. Such talent does exist, but it is exceedingly rare. More likely, the novice will find himself frustrated because the expert either talks over his head, leaves out crucial details, or oversimplifies to the point of absurdity. But the expert can hardly help it.

In such a case, what I have found to be most satisfactory is to seek out, if one can happen to find it, not an expert, but a complete and utter idiot who has neverthless managed to scrape by on the topic of interest. That person will likely be intimately familiar with every pitfall that the novice is likely to face, and rare as he may be, he is both far more valuable and usually easier to find than a comprehensible expert.

It is in that spirit that I offer up this essay on the dynamics that govern marriage. The reader would be hard pressed to find anyone with less innate talent on the general subjects of romance and relations between the sexes than I, who nevertheless managed to get himself married off -- to procreate, even -- and stay out of divorce court for a number of years. So far.

So, to begin, it seems to me that there are some lessons about marital romance that may be understood by analogy to chemical kinetics --

Lector: I think I may have found your problem.

Auctor: Problem? What problem?

Lector: Never mind...

Auctor: Well, anyway, I am going to sketch out here a model based on chemical reaction kinetics, which I have had in my head for some time now and find a very useful tool. Skeptics beware! My model is based on no data whatsoever, but like any worthwhile science, is backed mountains and mountains of anecdote and speculation.

Marriage and Chemistry

The subject of marriage is riddled with misconceptions, and I will begin by exploding one of them -- the idea that it is a risky business because, as everyone knows, some 50% of marriages end in divorce.

Even supposing one accepted this statistical fact at face value, the assessment of excessive risk would not follow. This is obvious upon simple inspection. First of all, not all people get married, and secondly, those who get one divorce often get more, sometimes many more. Thus, if the question is instead put 'what is my probability of getting a divorce over the course of my life,' even in the absence of any other knowledge, any particular person must face substantially less than a 50% chance of facing a divorce before he dies, though, obviously a person who never marries can't be divorced, that much is true.

But personally, I do not even accept the statistic itself. It seems to me misleading. I think it is much like the startling murder rates in the US as compared to Europe. Foreigners often take this as a sign of how terribly unsafe the American streets are, but as anyone who lives here knows, those rates are heavily skewed towards certain demographics which have voluntarily chosen a particular set of lifestyles for themselves. So long as one does not habitually involve himself in violent criminal activity, his chance of being murdered drops dramatically -- to about the rate that prevails elsewhere, or even less.

Likewise, the 50% divorce rate statistic conflates all 'couplings' indiscriminately. I think that people who take their relationship choices halfway seriously and manage to avoid certain 'habits of thought' and behaviors stand a good chance of staying out of divorce court. It seems to me that quite a goodly fraction of so-called marriages are not really serious 'couplings' at all, and probably do not belong under the same heading. Playing house does not a marriage make, as anyone who has ever been in a real marriage knows.

The idea that an individual's choices and attitudes are the prevailing determinant of whether or not he will have a chance at a good marriage runs smack into another misconception about marriage that is probably the great grand-daddy of them all -- the myth of the soul-mate. This, of course, is the idea that the key to a successful relationship is a matter of finding the right person, that one, perfect match that will ensure that everything works out effortlessly.

However romantically appealing, one would think this notion would be rejected on its face, as people tend to change and develop over time, such that whoever might be 'right' today would not be the same person a year from now. Neither would the person supposedly making the assessment. What would be the probability that they still 'matched,' esppecially given the notion that the phenomenon of 'matching' is so rare?

Lector: Just a moment. I understand the improbity of the 'perfect match' which negates the necessity of effort altogether. But surely you aren't discounting the necesity of matching personalities to a healthy relationship?

Auctor: I am, to a large degree. I do not deny a certain utility of compatibility to 'getting along.' But I do deny the necessity, and especially the centrality, of matching personalities to marital success.

Lector: Hmmm. Perhaps. But I should think a certain constancy of character a basic virtue necessary to a stable relationship. Wouldn't tweaking one's personality to a significant degree hazard alienating one's spouse, and further, in a way violate the basic understanding behind marriage itself? Your spouse did, after all, agree to marry you, not the as yet unkown stranger you may one day become.

Auctor: You still haven't displaced personal compatibility as central to a relationship. Ironically, in my opinion it is exactly those people who do grow and change over their lifetimes who are likely to make the best mates, as they are the ones making the effort to develop themselves. We all start out as children; those who succeed in remaining constant must be doomed to remain childen forever. To reject change is to reject growth. But then, they are the ones most likely to harbor the myth of the soul-mate, so perhaps they are to be forgiven for the misconception.

The truth is that a successful relationship is not about finding the right person, it is about being the right person--

Lector: You're making my head spin.

Auctor: Give it time.

I do not refer to one's entire personality, but some few specific aspects of it, a part of what may be called character. This assertion -- that attaining a certain aspect of character is the essential ingredient in a successful marriage -- forms the center of my kinetic model.

It is my belief that the population of single people out there may be roughly divided into two groups -- those who are 'marriageable,' and those who are not. This is apart from the division between the sexes, which is obviously the second important division.

Those who have by whatever means achieved a state of 'marriageability' of character are the only ones capable of entering into a relationship that may realistically be called a marriage. A pairing between two marriagable people will in all probability succeed, with only a residual probability of divorce (which can never be ruled out entirely). Non-marriageable couples who 'marry' are most likely entering a fantastic construct of their own which is only superficially similar to the real thing and has little to no chance of succeeding in the long term, no matter how hard the couple may 'try' at it. Mixed pairings will also inevitably fail, as the toxic attitudes of one partner will eventually pull the relationship apart. Says I. But I suspect these pairings are fairly rare, as a marriageable person will naturally seek out a marriageable partner and tend to reject those who fall short.

What is with this property of marriageability? I think that for the reader who has to ask, no explanation will be sufficient, while the reader who understands is already nodding his head. It is a thing easier to identify than to define. Like obscenity, one knows it when one sees it.

My best attempt to explain would be to call it something like maturity. One is born without it, but over the course of one's life, as he develops and matures (and if he develops and matures) he eventually crosses a threshold. He realizes that happiness comes principally from conforming one's self to certain notions, most of them known since ancient times, and that rebellion against them inevitably brings misery. It is a coming to terms with the universe, and once the impudence of youth has finally been broken, though the individual will not be in final form, the battle has largely been won. The rest of one's life is a matter of working out just what the 'rules' are.

Though it may sound strange to say, it is my firm opinion that one who has reached this state will succeed in marriage with practically any other who has also reached it, independent of other aspects of personality. Marriageable adults could be practically matched at random, and though the pairings would most likely prove not to be the ideal arrangement, nevertheless I am confident that almost all would work out. I say this based on the fact that the couples had already committed in the beginning to a realistic idea of what marriage entails, and as mature people of character, they will value this central aspect of their mates above the other surrounding details of personality, which fall away in importance. Those who are actually serious and realistic about marriage can generally succeed, even against long odds.

So much for the model's core assumptions. There will be a few more, but they are of lesser importance.

The Kinetics

As my model ignores non-productive pairings, or rather, consigns them pre-emptively to failure, I focus solely on 'real' marriages and the dynamics of their formation. As such, one would expect as a first guess, then, that the rate of marriage would be proportional to the probability of two such people encountering one another (and thus having the opportunity of pairing up). It would obey some form the following equation--

Rate = c[M*]^x[W*]^y

Where--

c = the rate constant
[M*] = the incidence of marriageable men in the population
[W*] = the incidence of marriageable women in the population
x = the order of the process with respect to marriageable men = 1
y = the order of the process with respect to marriageable women = 1

...which is to say, that the rate of marriage will be proportional to the product of the quantities of marriageable people of each sex present in the population.

Lector: Oh God! This is going to be another one of those awful essays that treats some social phenomenon as if it were a branch of physics, isn't it?

Auctor: Chemistry, not physics. Not 'as if,' only 'analogous to.' Analogies may not have mathematical validity, but they are useful rhetorical and illustrative devices, are they not?

Lector: You haven't learned your lesson yet, have you? That awful Veblen destroyed your faith in capitalism, and now you're going to go and turn yourself into some cursed, soulless sociologist who treats people as numbers and vector quantities. To point out what should be painfully obvious -- they are not! Mathematical validity? You even used an equation, for crying out loud! How are you going to extract anything useful by comparing things to what they are not like? You are out of your mind! You keep playing with these philosophical matches, and next thing you know you're going to be declaring yourself a socialist and a homosexual and start canvassing for the Democrats!

Auctor: Look, I don't agree with everything Veblen said. His Theory of the Leisure Class made me want to vomit. But yes, I take some of his economic observations to be beyond profound, and they have shaken my assumptions about markets -- in a very good way, I think -- that I would probably never have gotten in any other way. His insights into the dynamics of business enterprise are unspeakably helpful to understanding how and why actual business practice deviates so radically from the behaviors economists would predict. Nowhere have I ever obtained such sweeping, comprehensive insight on this question, which has long given me grief in this subject.

And I have certainly given up on the idea that any legal regime is capable of producing a free market, let alone through mere freedom of contract and property rights. That much is true. I have also given up on the idea that markets on the whole function the way the free-market apologists claim. But just because perfect freedom and liberty eludes any conceivable legal regime it does not follow that I will conclude that they are bad.

I will admit that it is always a danger to begin picking apart human behavior and especially values by a 'scientific' analysis. Veblen and others like him can have a corrosive effect on the soul if one isn't careful. But it must always be remembered that the 'scientific' component, however useful it may be to analyzing such things, is never the whole story and often not even the beginning of it or even an important part. It is, for me, a toehold on something for which most other approaches are difficult. I am, after all, a scientist. Allowing such ideas to destroy one's faith and turn him into a monster is not the fault of the approach, it is weakness and error on the part of the investigator. One must think logically, and not allow narrow conclusions to run wild into regions of philosophy where they have no bearing and no business.

The danger of irresponsible application is a phenomenon common to a wide swath of human experience. Think of something as simple and necessary as sex. Think of all the harm that so often comes of it -- the diseases, the emotional destruction, the tragic fallout of procreation among people who have no business doing so. I suppose next you'll want me to give up sex?

Lector: Do you really want me to answer that?

Auctor: Never mind.

Now, IF I may continue...

Note two things -- first that the 'reaction' is 'second order' overall, but 'first order' with respect to the individual marriageable fractions of the two sexes, i.e., both exponents are equal to one. This is a mathematical way of saying that there is no cooperativity -- no 'helping effect' of having other marriageable people nearby, and certainly no requirement that other marriageable people be present for the 'reaction' to continue forward. Such a condition would cause the probability of a successful union to be proportional to a higher order product of individual probabilities.

Lector: You don't really expect anyone to understand any of that, do you? I mean, really, why bother with this whole exercise if it's just going to be gobbledygook to almost your whole audience?

Auctor: (sigh) This is why I so rarely write about actual science. Fine.

The analogy I'm trying to draw on relies on the comparability of chemical kinetic models with the process of finding a marital 'match.' Chemical kinetics is based on the idea that in order to react, the reactive species must actually encounter one another in three dimensional space, just as for any given couple to marry they must actually meet.

Thus, one is analyzing probabilities of 'encounter.' Naturally the more prevalent a species is, i.e. the higher the incidence or concentration of a given entity, the more likely any particular observer is to encounter it. One may take this probability of encounter to be proportional to the concentration, as described by some constant, as in--

Probability of encounter = (probability constant) X (frequency of entity in sample)

If one takes a reaction of be an event of 'meeting' then one simply multiplies the individual probabilities of encounter, times yet another constant. Since any number of constants multiplied together just produces another constant, all of them are rolled together into one general constant at the beginning of the equation.

Lector: But you can't possibly know what those constants should be or how they relate to the actual 'concentrations.' And what about non-productive encounters, those that don't result in a 'reaction' or a 'marriage'?

Auctor: None of that need be determined for the equation to work empirically. All of those concerns get rolled into the reaction constant as well.

Lector: So it's a fudge factor. A fudge factor that glosses over all the actually interesting aspects of the thing which you do not understand but are only pretending to.

Auctor: That's how science works. Besides, I'm not a specialist in chemical kinetics. I only know the basics, and even so I'm simplifying even that. Of course, if you're just dying to get into complex technical details about chemical reactions, I'm pretty fluent in mechanistic organic chemistry. I could talk about something like the Arbuzov rearrangement, substituent effects on the nucleophilicity of trivalent phosphorus, leaving group effects on catalytic efficiency, the practical management of the thermodynamics of conversion of a phosphorus III species to phosphorus V--

Lector: That sounds boring. Let's just stick to the present topic.

Auctor: I thought so. Now, I could imagine some grumbling exceptions being taken to this idea of there being no cooperative effects and the conveniently vast simplification this produces, but in my experience, those who are really ready to marry are usually flying solo at that point. There might perhaps be grounds for a negative contribution from the unmarriageable fraction of each population (especially the unmarriageable women, who have a greater tendency to attempt to 'poach' marriageable men more than the other way around, and also as marriageable men tend to be more susceptable this 'poaching' than the marriageable women) but I will ignore such effects. For the most part, truly marriageable people tend to be attuned to such behavior and intolerant of it.

Secondly, the quantity of marriageable people of each sex as a fraction of the population is itself a dynamic quantity, each with its own rate of formation from the underlying unmarriageable population, and furthermore its members being siphoned off by the marriage process itself. Incidentally, this dynamism is why reaction rates are often more strictly termed instantaneous rates -- because the quantities they depend on are themselves changed by the reaction and cannot be constant for long except in rare circumstances.

This process of maturation into a marriageable species is chemically reminiscent of a process termed 'excitation,' in which a lower energy chemical species must enter into an 'excited state' in order to react, although chemicals are usually able to 'relax' back down to the ground state while humans generally do not 'un-mature.' In our case, this non-equilibrium should not introduce any problems, but the process of entering into marriageability does introduce a very interesting confounding dynamic. As it turns out, this dynamic actually winds up having an even greater simplifying effect to the overall process which I will now explain.

If one imagines the unmarriageable populations of the two sexes entering into 'marriageable maturity' without much reflection, one will probably assume that these rates will be fairly similar. Actually, in my opinion this is incorrect -- the women mature to their marriageable state much faster than the men to theirs. Or, looked at another way, women are usually ready to marry at a younger age. Why this is the case, I am not certain, I only observe it to be true. Perhaps it is because in general, women tend to be more socially aware than men, are generally more emotionally sophisticated than men, or perhaps it is a significant difference in the marriageable states themselves. I do not know. What I do know is that as I look at the singles around me, within any particular (say) 5 year age bracket, I see far more single marriageable women than men. The skew tends to get somewhat worse the older the age bracket. To a point, anyway. At some point, you're just old, and I can't tell anymore.

This phenomenon has all sorts of interesting ramifications for the dating scene, but from a strictly kinetic point of view, it means that from a practical standpoint the equation can be rewritten as a pseudo-first order reaction by folding the marriageable women into the rate constant like so--

Rate = c[M*]¹

Why, the reader may wonder? Simple -- because the number of marriageable men at any one time will always be so much smaller than the marriageable women that the men can never really make a dent in their population by marrying them. In the 25 to 30 age bracket, for example, I estimate that perhaps one in twenty single women is marriageable, but the proportion of marriageable men is vanishingly small -- because the women are snapping them up as fast as they appear. Thus, for all intents and purposes, the quantity of marriageable women will swamp out the men to the point of remaining constant and will not affect the overall rate of marriage. A marriageable man will always have plenty of marriageable women handy. It is for this reason that one tends to hear of women 'settling,' presumably for a barely-marriageable man, while for men it is more a matter of 'settling down.'

If true, the natural conclusion is an interesting one -- that the overall rate of marriage depends almost exclusively on the rate of maturation of men to the marriageable state. As we say in the business, the maturation of men is the rate-limiting step. Many people have arrived at this same conclusion by other means, citing a changing social atmosphere that has proven detrimental to the ability of boys to mature into men. I have no doubt that this is true, though I would add that girls are no less under attack, and no less under the malevolent influence of changing social norms and customs. It's just that the men happen to be at the rate limiting step, so that their behavior appears to show up as 'causing' the 'problem.' But of course, nothing could be further from the truth. They just happen to be located at a critical point in the process, as they likely always have been. But both sexes have been negatively impacted by the modern social atmosphere.

The difference between the 'normal' approach and mine is only that I've just given it to you from another point of view. I haven't denied the 'spiritual' or otherwise immaterial sides of things by applying a material method. I have augmented, not diminished them. See how that works?

Now, as to what all this means--

Lector: Wait a minute, wait a minute. That's it?

Auctor: Well, yes.

Lector: What!? That's not a scientific approach at all. You've just restated everyone's common sense with fancy words and equations.

Auctor: What did you expect?

Lector: I mean, if you're going to build this thing up as some kind of so-called scientific theorem, you ought to at least be systematic about things -- state your assumptions, derive everything ex-nihilo and all. I mean, all of this might actually have been construed as reasonable. A real scientific approach would have been completely different.

Auctor: I never used the word 'theorem.' But if you are so sure you know how I ought to be doing things 'scientifically,' by all means proceed.

Lector: Gladly.

First, assume that a human is a rigid sphere, like a ball-bearing. Next, we will model their motions by assuming they are governed by a Boltzman distribution of energies. Applying the Maxwell gas equations to a flat, two-dimensional surface will allow us to derive all the critical parameters -- average velocity, path length, and of course, the frequency of and energy distribution of collisions, which we will use to derive the rate of marriage --

Auctor: Hold on. That's absurd--

Lector: --Ah! I see you've finally got the point--

Auctor: The earth isn't flat.

(awkward silence)

Lector: You can't be serious.

Auctor: That would never work. I mean the edge effects, and the curvature--

Lector: You truly are hopeless. Just forget it. Never mind. I see now there is no point. Why don't we just hurry up and get this thing over with?

Auctor: You know, you're becoming quite the obnoxious literary device. Tell you what, you work out one of your own stupid little theories, write it all down, and I'll be sure to interrupt it with half a dozen obtuse objections. How does that suit you?

Lector: Oh come on! What have you got to complain about? Ever since you moved to Eternity Road, you've been absolutely insufferable. You'd think somebody died and gave you rank and title. You get one little comment and you're parading around as if you were king for a week. Next thing you know you'll be referring to yourself in the third person like The Remus.

Auctor: I'm quite sure I don't know what you are talking about. Now, if you'll excuse me, I've got an essay to finish. No more interruptions, okay?

Practical Applications

Clearly, for anyone single and looking to improve his odds of a enjoying a successful marriage, the overwhelming lesson here is -- first and foremost -- to grow up! One's individual maturity is the single most important determinant in having a chance at a successful relationship and attracting a decent mate. No matter who one is, there is no single thing he could do that would improve his prospects more. Of course, this model says little about how exactly to go about that, but I can assure you that mimicking the abortive mating practices one sees among the 'successful' singles in the dating scene is probably not the way to go. They, after all, do not have successful marriages. The traditional approaches to life appear to have accelerated things in the past. Why not look into that?

But whatever the case, there really isn't much point to aggressive, serious dating until you've reached that marriageable level of maturity. In fact, it could very well be dangerous. There are situations worse than being single, after all. Priority number one should be getting to that state of marriageability, and then to worry about the rest of it.

For the men -- once you've attained marriageability, you've accomplished the hardest part. From that point, I suspect the single biggest difficulty you'll encounter is sorting out the marriageable ladies from the various and sundry females clamoring for your attention. And believe me, once 'you're there,' they will be throwing themselves bodily at you. You will be tempted. But you must resist, and you must understand and forgive them -- they are starved for your type.

Because you are a man, you may have some difficulty sorting this all out. You likely do not have the 'sensitivity' of the female species, nor their relationship cunning. You will also be fighting hormones. Make sure you are watching for the signs of marriageability -- self-restraint, personal discipline, 'a putting away of childish things,' especially the esteem of the in-crowd -- and be careful to avoid being fooled by similar looking attitudes that do not really reflect this maturity, like mere social aloofness, not to mention outright fakery. But if you really are marriageable, you will already know many of the signs, and will with time learn more. Focus on those things, and do not get caught up in trivialities. If you aren't sure -- go no further! You know very well what the danger is. There are plenty of wonderful, ripe ladies growing on the girl tree. Do not waste your time or risk your future with those who aren't ready.

On the whole, though, your problems, while serious, are enviable in comparison to the marriageable ladies. They vastly outnumber you, and are desperately competing with one another, tooth and claw. Be understanding. And careful.

For the women -- you face a very different set of difficulties. No doubt, you already have more than an inkling of your problem as described by this little theory. You will probably have little difficulty recognizing a good man -- if you remain honest with yourself and leave the status-mongering bad-boys alone. The first problem with a good man is that all too often he will have someone else hanging on his arm. The second is the confounded difficulty you have in ramming through his head just how good a prospect you are. We men are generally good with carburetors and weaponry, but on the topic of relationships we tend to be rather simpler creatures, and so easily distracted when it comes to the opposite sex. Be patient.

All that I can say to you is that you'll really have your work cut out for you -- truly! Your best asset is yourself -- your femininity. Don't succumb to modern pressures; don't be afraid to be a woman. A real woman, not the modern twisted version of one. If he wanted another man, he'd be gay. If you want to impress your friends and stroke your ego, by all means -- be a modern woman. But be prepared to stay single. Your career, earning potential, education, all that won't matter too much to a man worth having. But if you let them, they most certainly can and will get in the way.

Don't waste your youth -- repeat -- don't waste your youth! Time is not on your side. The longer you wait to get with the game (and grow up!) the worse the deck will be stacked against you when you finally decide get serious. Don't let it get to the point that you're surrounded by a sea of lonely, desperate rivals who will do anything for a man. Marry young, if you can. It still won't be an even match, and it won't be easy, but that is when your prospects will be best. Just make sure you've got your act together and know what you're doing first.

Despite the traditional stereotype of the way things are supposed to work, unless you are very special, men generally will not line up to ask you out, so that you get to pick and choose. And if they are, probably the whole lot of you aren't the marriageable sort anyway. If you're serious about getting married, you'll be serious about getting married -- which means you'll be active about it, in a feminine sort of way.

Your target will be elusive and rare. Do not sit around waiting for him -- seek him out. Keep your eyes peeled. You must be proactive, creative, and vigilant. He is also sometimes a bit dense, and eventually you'll be needing his cooperation when it comes to the whole dating and marriage thing. You might want to consider some targeted advertising and not so obscure hints. Sometimes even the marriageable men need some tasteful prodding.

(Seriously though, does anyone older than ten not know that the women are running the show?)

It might also pay to keep an eye on those guys who are 'almost there,' but not quite. You know who they are. It may take them some time, but most of them will eventually come around and get to the stage that they are worth pursuing. If you've been observant, you might be lucky enough to be first to spot the transition and will have a leg up on the competition.

Well, hopefully not too literally...

Finally, with respect to--

Lector: (Laughing) Seriously, I'm not sure which is funnier -- your little pet theory, or the idea of anyone actually taking your opinions on relationships seriously.

Auctor: Alright, that's it--

(crashing)

Close Encounters With Thorstein Veblen

2011-06-09T08:38:00.000-07:00

Perhaps I am only flattering myself, but in the latter course of writing my last series on Veblen's economic theories I felt as if I were being tag-teamed by Robert Murphy and Gary North. Murphy wrote two different pieces for Mises.org on pricing in oddball market circumstances and the flaws of classical cost-based pricing theory. (Update -- he just posted another one). Gary North wrote a piece on the role of the very wealthy in the economy and the inadequacy of the desire for consumption to account for their productive efforts and the efforts of others. All of their points strike at critical economic assertions made by Veblen.

Robert Murphy's points are the most damaging to Veblen's theories, so I'll start with them first.
And the first thing that I will say is that as far as Murphy's assertions about pricing are concerned, he is correct -- classical theory is inadequate to explain many aspects of pricing behavior, and is in fact fundamentally incomplete. Carl Menger, considered one of the first economists of the Austrian school, was the first to articulate the ideas of subjective valuation and marginal utility to explain pricing, and for most purposes his theory is fully accepted as the standard of economic orthodoxy.

My critique of the use of modern pricing theory as a refutation of Veblen's position would be several fold. First, note that Murphy used two very unusual examples to illustrate situations for which classical theory fails -- the pricing of the Mona Lisa at an art auction and a farmer selling a gold-nugget meteorite that lands in his field. Neither of these situations would be expected to have significant large-scale economic ramifications, and certainly aren't generally applicable examples that would be expected to much impact, let alone order, people's lives.

But to be fair to the argument, there are economically more important situations where this logic would apply -- for example, urban real estate, where the total available land is fixed (like the supply of Mona Lisa's), and mining, where some mines have lower costs of ore extraction than others and can therefore consistently deliver higher profits. But note the defining characteristic of both cases -- a market restriction is in force, in these cases a natural restriction. The restriction creates 'surplus' profits above what is available to other producers which can be leveraged as described by Veblen for parasitic business aggression. Murphy is using exceptions that prove Veblen's rule. His slushee drink essay falls in the same category, though to such a lesser degree as to be trivial. I don't think the world is going to be taken over by slushee drink vendors.

Secondly, Veblen did not make stringent use of classical pricing theory as Marx did. His theory does not depend on it. Veblen cites Bohm-Bawerk repeatedly, so he no doubt knew full well the subjective pricing model. He did not seem concerned.

A classical pricing model only really enters the conversation because I used it as an easy way of explaining the basic idea Veblen was trying to get across. And I was mostly using it to illustrate concepts of profit -- not to explain pricing. Most people can grasp classical pricing (even though it is the wrong model to use in many cases) and it is much easier to explain and understand than subjective valuation and marginal utility. Whichever model is in operation and however prices are determined, as far as Veblen is concerned the outcome is the same. All other things being equal and however costs are to be accounted, in a comparison of two otherwise identical businesses, the business which effectively imposes a market restriction evades competitive pricing and will realize higher profitability than the one which does not. The profit differential -- and the ability to influence prices -- can be attributed to nothing other than the restriction.

All things never being equal, the result of such behavior is parasitism, economic stagnation, centralization, and an eventual unwarranted wealth accumulation by some at the expense of others and of the overall productivity of the system. Note that this is exactly the same outcome produced by restrictive economic orders like socialism, though different in degree.

As to the question of the market rendering judgment in terms of the price mechanism, I am not objecting to a price on the grounds of my subjectively perceiving it to be too high or to low. I am not qualified to render such a decision -- nobody is. That is what the market is for, and was one of the main points of the mathematical analogy in the last essay. (Which, incidentally, in hindsight was a somewhat dangerous analogy to make, as economics and finance are so often taken to be 'like math' in ways which they are not.) I object on the grounds of markets and the price mechanism being so easily subverted by pecuniary meddling and market restrictions. Any evidence of such meddling must necessarily call the legitimacy of market judgment into question, as well as the wisdom of submitting one's life and calling to its guidance or judgment. Actually, that is also one of Gary North's frequently repeated points. If he's making exactly that point, then...isn't he also making mine? Oh, wait... I'm still dealing with Murphy's arguments.

The important thing here is to see that a negative activity -- market restriction -- can create undue profits in a parasitic fashion -- by limiting choice and hurting other participants -- under the capitalist economic order. This situation thus encourages attempts to restrict markets, and to make use of 'natural restrictions,' in order to gain pecuniary advantage over others and thereby spread and expand existing pecuniary advantage. So long as these strategies are not effectively thwarted by other forces, they will tend to proliferate and impact economies and society in a destructive fashion.

Murphy is correct to note that 'cost pushing' cannot determine pricing because the classical model is invalid, or at least is not generally valid. However, the classical economists would not have come up with the idea if there had been nothing to it. As he said, they weren't dummies. If consumers are not willing to pay for things like solid gold roofing shingles, whatever the cost to produce them they will not be bought, so the costs don't matter. But for goods which are bought and sold in significant volume, and for which markets are competitive, prices almost invariably approach costs as profits get squeezed by competition to near zero. It works both ways, actually, as he points out. The cost of upstream goods will also increase to reduce profits as competing producers bid for raw materials. Ultimately, after all the dust has settled, it is the demand for their final use as finished goods that sets the price of raw materials. But whether by raising raw materials prices or pushing down finished goods prices, profits tend towards zero in competitive markets.

If this is the approximate case for most markets most of the time, it is arguably a more important concept to grasp even than the more accurate model of marginal effects, and more significant in terms of determining the shape of the economic order. It is under competitive markets that rational economization of resources can take place by the pricing mechanism, and real productivity can be increased. That is a basic tenet of capitalism.

It is when pricing is arbitrary and uncompetitive that things begin to go awry. Yet the standard free-market economist will argue that, in the long term, all markets are effectively competitive. Ultimately, high prices lead to competing innovations. Cartels eventually fall apart due to the greed of individual members. The problem here is that long term forces are being invoked to counteract short term phenomena. It may be true that at some point, a cheap replacement for oil will be developed. In the meantime, which could be and certainly has been a very long time already, OPEC will make a mountainous fortune by deliberately restricting the supply of oil. Vast resources will have been wasted solving a problem created by a market restriction. Immense productivity will have been suppressed to enrich Saudi sheiks.

The point being, it can take very little scheming and effort to create a restriction that takes generations for the free-market to undermine. Even if it takes much less time than that, which is admittedly most cases, so long as the marginal benefit of inserting restrictions exceeds the marginal cost as compared to actual productive activity, the economy will find itself in a state of perpetual restriction. Undermining individual cases is irrelevant so long as there is a constant stream of opportunity. Increasing economic complexity creates ever more opportunity, and ever increasing durability of a restrictive insertion. Thus, despite the validity of the claims that any such attempt at market interference will be undermined, Veblen's claim that the economy operates under the burden of a steady extractive interference to sustain a priveleged parasitic class will still hold. It is only that the mechanisms of extraction are continually being shifted about and discovering new forms. It is a steady state model, not a static model.

These facts cannot be refuted by reference to the legality of such actions, or even to voluntarism or right of property. By its very nature, law is coercion, and therefore restriction. Even basic rights to property are restrictions of sorts. To be viable, all social orders must require participants to submit to some notions of proper conduct and behavioral limitations. The nature of the order is defined by the notions and limitations to which its participants submit. Capitalism has chosen a regime of freedom of contract and right of property, and general submission to these legal notions produces this particular outcome.

Note that I am not saying that I believe that these are wrongful legal restrictions or that anyone should abandon the capitalist legal order, only that it will eventually produce the situation Veblen describes. I do, however, think these are problems worthy of discussion and not to be dismissed with reassurances of capitalism's inherent virtue. To do so is grave error, in my opinion, and a disservice to the cause of liberty. Pretending that a problem does not actually exist looks callous to those impacted by it and tends to persuade them to reject the system in question and seek redress by other means, usually destructive means. More than that, it really is callous, and cruel.

In terms of addressing these problems, it would seem that any effective change would most certainly not be in the direction of centralization or government controls, as the resistance to such forces is precisely what makes capitalism work as well as it does, and it is restrictive processes which creates the problems in the first place. Any useful change would need to be in the opposite direction -- more freedom -- in such a way that it would address the presence of these restrictions. One would think that the 'properly applied freedom' would aleviate them. Such changes might not be legal in nature, however, I am at a loss as to what they would be.

Likewise, Gary North's claims seem to me mostly true, but again, irrelevant to the aspects of Veblen's theories that I am interested in -- though perhaps they are only intended as interesting points of discussion and nothing more. Veblen became famous for the most part because of certain claims he made which I have almost completely neglected, mainly because I am not much interested in them. He thought that the principle motive of the predatory pecuniary class was the pursuit of status. In fact, he thought the principle source of economic demand apart from the bare necessities of life was the pursuit of status among one's fellows, principally displayed through 'conspicuous' consumption and leisure, i.e. 'showing off.'

North points out that this cannot possibly be true, as one simply does not generally observe the fantastically wealthy consuming much more than even a tiny fraction of all that they possibly could --

In every social order, there is a hierarchy of wealth. At the very top of the income production system, there are people who do not have to work in order to be fed, clothed, housed, and generally kept happy by retainers who cater to his every whim. The question I ask is this: Will most of these rich people be indolent? That is, will they use their one irreplaceable resource -- time -- exclusively to consume or to "set aside for a rainy day" so as to consume later? I have never read of such a society.

In richer societies, where consumption is a matter of taste rather than survival, more people can afford to accumulate capital in order to . . . what? Not consume. For consumption costs time, and time is not replaceable. The cost of time is high for the productive masters of capital. They do not waste it in full-time orgies of consumption. They could afford to, but they don't.

Thus, in general, one should look elsewhere for their motivations. He suggests they are generally interested in ever more production, significance, and impact from their lives, as evidenced by their tendency to accumulate ever more production goods as opposed to consumption goods.

That is all fine as far as it goes, but this simple treatment does not even begin to touch the elaborate ideas Veblen had about the situation, most of which I found insanely boring and some of it incredibly stupid to boot. But as I said, for whatever reason this seems to be the aspect the thing which most others latch on to, and is probably the aspect most economists are familiar with. I do not want to go into it except to say that North's observation(s) can be perfectly true and Veblen still be correct about the matter.

The fact is that criticism of the choice of goods which consumers desire falls outside the realm of valid economics. Veblen even admits as much. Economies exist to satisfy consumer demand, whether that demand is expressed as desire for elaborate codpieces or for bibles. Although it is a mildly interesting question, I am far more interested in how people are behaving in the economy to acquire funds than how they are disposing of them. I am also far more likely to take umbrage with something I see in the former sphere than the latter.

The tendency of the wealthy to acquire production goods can in no way exonerate them from accusations of foul play in the way they go about accumulating those goods, nor does it address the existence or non-existence of a pecuniary class in the first place. Their consumer motives have no bearing on their existence or their activities, whether parasitic or not.

To the question of parasitism -- I have remarked about this before, but it surprises me the degree to which economists, who otherwise seem to have a fantastic theoretical grasp of the subject as a whole, seem to completely flub the dynamics of behavior within a corporation. One of the most important insights of the Austrian school is the danger of aggregating assumptions. But when it comes to the behavior of 'corporations,' they seem nevertheless to treat the thing as as a single aggregate of people seeking profit in the marketplace, when it should be obvious that no single person really has much individual stake in the real, long-term profitability of the company -- though admittedly a few do on paper, at least in the short term.

It seems to me much more accurate and realistic to treat the corporation as an organization composed of self-seeking individuals. And as self-seeking individuals, there is a tendency for those employed by the company to subordinate the interests of the company to each one's own -- which leads directly to a tendency towards inefficiency and parasitism. The larger the company, and the more specialized and dilute one's influence, the less responsibility one would have for the overall effort and the more the tendency would assert itself. There is so much acknowledged humor about these kinds of behaviors -- from Dilbert to Office Space, etc. -- I would think it common knowledge.

Economists assert that freedom of action and the individual possession of specialized information help a spontaneously ordered economy -- a free market -- to outperform a regimented one. It would seem, then, that a corporation that allowed employees closer to a particular situation to have discretion over decision making would outcompete a strictly regimented corporation. Yet in practice, one almost never observes such a structure. Gary North even acknowledges that real-world big-businessmen almost always tend towards the meddling control-freakish side, and if one of them would try the model of actual delegation of authority he would probably mop up the floor with the competition.

Yet almost none seems willing to use this obvious management strategy. They seem more interested in power-mongering -- status, if you will -- than the performance of the company. Which does not much surprise me, because these people are selected by way of their skill at aggressive corporate ladder-climbing. What would surprise me would be if they got to the top through relentless self-seeking, then suddenly changed personalities once they got there. But then I don't think corporations are efficient business structures, so I don't expect businessmen to act optimally.

As far as managing companies is concerned, in my experience upper management tends to be too far removed from operations to make good specific decisions about it. But that does not stop them from issuing edicts that attempt to 'improve' operations by micromanaging them but which actually snarl everything up. It is typically up to the lower level employees to protect the company's physical operations from the brunt of management's poor decision-making through, shall we say, selective implementation. Most of the really successful changes I have experienced have come from economists and engineers, usually with grudging reservation from the businessmen, who I think want to shield themselves from blame if the idea fails.

So far as I can tell, the principle contribution of businessmen is just what Veblen attributes to them -- pecuniary maneuvering. Admittedly my experience is limited, but most of what I hear higher level businessmen talking about is ways to hogtie their customers into paying inflated prices for their products, or some other such scheme to force their customers' hands, eliminate competition, or otherwise take advantage of some situation to restrict markets to their benefit. I don't see how this adds to the overall wealth of society.

Yes, they often show great skill at this, especially in navigating capital markets, and these behaviors certainly are advantageous to the firms that they work for. But I already accept that capital markets have been warped by the activities of the FED, the banking system, and various government agencies, so as far as actual economic reality is concerned they are a sham. Are a businessman's successes here advantageous because they result in a materially better world, for which the company rightfully profits? Or is it just so much account shuffling?

In the end it boils down to a "who are you going to believe? My elaborate theory or your lying eyes?"

Sorry, Gary.

Wall of Shame

2011-05-26T18:01:00.000-07:00

In case Fran's post didn't make you quite angry enough --

Hat tip to Gary North and Robert Murphy.

What? Inflation? Or Why I Prefer Gold Over Silver

2011-05-24T19:06:00.000-07:00

Markets have been rather tumultuous over the last month or so.

Especially commodities.

Especially precious metals.

Especially silver.

The price movements provide a good illustration of why I prefer gold to silver --

Similarly, in 2008 --

Note that in both cases, silver's precipitous move down was preceded by a precipitous move up as well, such that overall movement is not as bad as it looks in the chart. Still, for silver investors, it has been a stomach churning ride. Gold has also had some big moves of late, but they simply don't compare with silver's.

I already don't like volatility, and enthusiastic about the precious metals as money as I am, I'd rather not be an investor in them. I don't really like being an investor at all. I'd rather have been a plain old chemist focused on my career and saved my money in the bank.

I only started actually involving myself in markets some years after I had been investigating the market phenomenon, and 'discovered' the necessity of investing. Perhaps 'utility' is a better term than 'necessity,' as at the time I had not yet realized that money itself could not be trusted. It would still be some time before I would characterize it as a necessity, and an unfortunate one at that.

I'm getting sidetracked. The point is that I tend to view my investment in precious metals as something that is going to protect me in a time of trouble, or to help carry my accumulated savings through the financial turmoil. I do not want to see my investment plummeting like a stone at just the time when I need it most, even if it means that I may also miss out on the manic periods when I might see massive gains over a short period. That's not why I'm buying the stuff, and gold is already more volatile than I would like.

I'm not a trader, and I don't want to obsess over day-to-day movements of my assets that can amount to a large fraction of their worth. So, I prefer the buy-and-hold Steady-Eddie of the two. I know I'm not going to get rich by it, but that is okay with me. I have no delusions about that.

I also have no delusions about the fact that I may be holding on to my investments for quite a long time, or possibly need to dump them quickly. I have no delusions that there will periodically be large corrections like the one we just saw, and that possibly the boom will end with a devastating crash, especially if Washington goes bankrupt and the banking system fails. This doesn't rattle me. I feel comfortable enough with the functions of the banking system that I will be able to tell when it's the real deal, and when things are just temporarily wonky.

Like right now. Besides -- if it gets that bad, what have I got to lose?

Inflation is here. It is not as bad as some think, but it is also not absent as the deniers claim. Unfortunately, today's money is something like a vapor -- mysteriously volatile, hard to define, at one moment confined to one space and the next seeping through every crack and crevice into new regions, all imprecisely and unpredictably. There is no one place or statistic to look at to know exactly what is going on.

I remarked earlier of the possible coming train-wreck between PPI and CPI, and that I thought producers would not be passing along quite as much of their price increases as they had thought. It looks like we just saw a bit of that, with producers solving at least part of the conundrum by 'bidding prices down.' There have also been some cases of lower earnings. Upstream prices were overbid. Somewhat. But even with their recent correction, they are still very high, and in the long term likely to continue to climb.

Those who look only at CPI or 'core prices' but ignore monetary statistics and commodities are probably underestimating inflation. Those who look only at commodities and the monetary base but ignore lending and prices are probably overestimating it. There are too many of the former in the stock market and too many of the latter in precious metals.

Both markets are loopy, and every so often weird stuff happens. Sobriety and nerves of steel are the best assets now. Slow and steady does it.

New Feudalism VI - The New New Feudalism

2011-05-18T20:24:00.000-07:00

So -- what happens next? How will this conflict resolve itself?

There are actually some fairly good guides as to what might happen when one order is supplanted by another -- in these very two works by Burke and Veblen, no less. One 'pattern' that I have seen pointed out in other places is to look at the various colonies that spun off of the British Empire over the past few centuries. Early to break away was America, which based its governing principles on the early Enlightenment ideas that were swirling about at the time, mostly along the lines of the ideas of John Locke. Much as the revolution was about kicking the British out, structurally and philosophically, America based its governing principles on the Britain of that day.

Later came Canada and Australia, once the Enlightenment's more strongly libertarian elements had faded and a more 'pragmatic' approach to statecraft had taken over that began to try to accommodate both the so-called 'positive and negative' freedoms. John Stuart Mill would probably best characterize the thinking of that period.

Later still came India in 1947, after Britain had spent a number of years in the grip of Fabian socialism. Unsurprisingly, Indian democracy proved highly bureaucratized, though that may also be a reflection of India's long tradition of social regimentation. Lastly, Hong Kong was transferred to China mostly in the image of Thatcherite free-market conservatism.

Today we see the Middle East in the throes of revolution, and the rhetoric of the upstarts mostly revolves around 'democracy.' Even if their actual articulations may be fairly shallow and that may not be what they eventually get, nevertheless, for most it is the animating motivation. It also, for better or worse, happens to be the popular mantra of the day.

This all falls in line pretty well with Burke's description of the Glorious Revolution's codification into written law what had already been the custom of common law for many years. It is also consistent with Veblen's observation that major changes in the order of society come in the wake of a major shift in commonplace habits of thought of people and their understanding of reality. Where the existing order fails to reflect reality as people observe and understand it in everyday affairs, it is displaced to reflect the new understanding.

The questions one must answer then, it seems to me, is 'what basic assumptions about life are broadly entertained by Americans at this point in time' and 'where do these conflict with the present order'? Those are the attitudes that are likely to find their way into law and custom in the future. So, one finds himself playing armchair psychologist of the American people, of which I'm probably not going to be the best practitioner. But I'll give it a whack, trying to stick mostly with the subject of economics. I'm sure others will be able to contribute better where they have special insight.

The Corpse of the Enlightenment

It seems to me that the Enlightenment, at least in the strict sense Veblen describes, is mostly dead. And, speaking for myself, I'm not too sad to see it go. The more I have looked into it, the more I find myself on the opposite side of most that it seems to have to say. The early movement appears to have been fairly sensible and reasonable – a belief in human freedom and respect for individual autonomy – but also fairly generalist.

From there, it seems that thinkers began to see 'problems' in their arguments, and began to tangle themselves up in knots as the outcomes of their policies failed to produce the vision of society they had thought that it would. Freedom took a back seat to equality as the Lockes were replaced by Mills and Rousseaus, and eventually Condorcets and Marxists. Meanwhile, the old conservatism never really had anything that awful to say about liberty in general, mostly it was about particulars, which the lofty minds of Enlightenment seemed to have no time for until such time as they began to bring down the philosophical house of cards. They could not conceive that their 'freedom' would eventually 'liberate' people of the very tendencies that a conservative social order had fostered and were necessary for their notions of freedom to function. Thus the latter philosophical circumlocutions. Burke and Malthus, on the other hand, seem to have been a bit more practical thinkers from the beginning.

At any rate, most of the residues which seem to remain have little in the way of Lockean property rights and social contract in them and more in the way of equality, though thankfully not the rabid material equality of the late Enlightenment. They are fairly bland and generalized, though often felt quite strongly.

Under a true order of freedom of contract, differential treatment of people, say, employees, is perfectly acceptable. A boss could be utterly abusive of one employee and favor another for absolutely arbitrary reasons, and that would be perfectly within 'reason.' The only recourse of the abused employee would be to dissolve the relationship -- to quit -- and that would be all there was to it. Purely a business decision, nothing more. Perfectly logical, and perfectly inhuman.

As a practical matter, things don't actually work that way. In the past, people may still have had strong opinions on how one person ought to treat another, probably even stronger than today, and they would most certainly feel angry at such behavior. But they would not try to impose appropriate behavior by law, and, in general, no court would hear a case over something like 'wrongful termination.' That would be a nonsensical term.

Nowadays, such legislation is commonplace, which tells me that people favor 'fairness' and equality over freedom of contract. Even outside of the law, every employee and even the boss almost always submit to a basic ethic that people should be treated 'equally,' even in cases when it logically does not make any sense. If one is to be singled out for abuse, there must be a general consensus that he deserved it, or else there is likely to be anything from widespread grumbling to high employee turnover to outright mutiny. Behavior is generally kept within reasonable bounds, simply as a matter of widely agreed upon attitudes.

The tendency towards naïve equalitarian attitudes can also be seen, for example, in the widespread support for the essentially Wilsonian Mideast policy in the wake of the 9/11 attacks. That attitude has since soured, but in the beginning it was widely believed that if democracy were simply planted in the Middle East, everything would somehow be okay. This was predicated on the deeply rooted attitude that 'all people are basically the same,' thus democratic governments are both desirable and practical for everyone. I must confess to having been a part of that, though in my defense, I was in my early twenties at the time and nobody should be held accountable for his early twenties.

In these attitudes -- the resentment of unwarranted discrimination, assertions of human equality and essentially equal validity of tastes and points of view -- present day America is still very much in the grip of the Enlightenment. In a few other instances this also holds, such as a general disinterest and disdain for the past and a tendency towards self-absorption.

But in most other regards – absolute sanctity of contract and right of property, for example – that is no longer the case. I think that a little experience with such a regime (read – 'subprime meltdown' and 'credit card companies') has led people to rethink the absolutist nature of some of these attitudes.

Other Elements of the New Order

This may all seem very simple and obvious. Very basic premises usually are. But rationally, from the mechanical point of view which we have been taught that the world works, it makes no sense. It is actually a contradiction, for example, to base one's relationships on freedom of contract, and then to be intolerant of differential treatment. As a practical matter, freedom of contract won't exist anyway. Why hold on to it as an ideal, codified into law? It is a clash of new attitudes with an old convention.

As in this simple example, the new order, it seems to me, is based on a fairly nebulous system of ideas about fair treatment and what constitutes appropriate relationships among people. The new codes are not all that unlike the old codes of the feudal orders, though not of the same flavor, and often disregard logic and settled law.

They are observable in many other instances as well. For example, in business it is common practice to provide employees leeway for absences. But for whatever reason (not 'whatever,' actually), the employer actually bothers to sift through the 'reason' for the absence. It makes a difference whether the employee claims to have been sick, had car trouble, or was out all night with a prostitute and couldn't make it in. From a business point of view, and from a point of view of freedom of contract, it should make no difference. The result in any case is the same. The business loses money whatever the reason, and since it is easy enough to make up a lie, why bother to ask? Why not simply allocate so many days to such circumstances and dispense with it?

There is this need to be judgmental. There is a need to feel that 'life is fair,' at least so far as one can make it, and that reprobates of whatever kind ought to get their just deserts. Actually, illogical and occasionally annoying as it sometimes comes off to me, I think it speaks well of a culture that such standards of behavior are so rigidly observed, however naively and imperfectly -- and without the force of law. It may seem unimaginable, but such is not the case everywhere. Arbitrariness is an accepted fact of life for a good fraction of the world's peoples, not something to get worked up about or to take action against.

Another such example is the phenomenon of 'I tried.' One may have failed, but if 'he tried,' well, he can't really be blamed. Horseshoes and hand grenades aside, he did all he could and that is what matters. This is also completely illogical, as trying has no effect on outcome, and often even negative effects, unless the attempt is successful. Whether or not one tried is irrelevant -- one succeeds or one does not.

The Medieval feudal mindset grew out of a Christian/Pagan past, but the New Feudalism has grown out of the Enlightenment. The old codes of behavior had mostly to do with recognizing the sanctity or holiness of a thing or a situation and acknowledgment of conquest or status. The new code contains a somewhat nauseating, somewhat quaint recognition of the 'newly holy' -- the politically correct, self-esteem, equality, etc. -- plus a mixture of local, mostly unexamined sentiments. These sentiments will probably find their way into law – as they obviously already have in many cases.

Many people wonder about the possibility of national breakup. A major problem for national unity is the tendency to attempt to legally codify behavior according to such sentiments and impose it on large scale. These sentiments are naturally localized -- they are local habits of thought, and life in different places produces different habits. People from one locality find the sentiments and habits of other locales grating.

The so-called nation-state is largely an Enlightenment phenomenon. Things weren't always so. It may be that it is only Enlightened cultures that can produce sprawling nations held together by minimal legal structures, where there is less of a felt need to impose any particular order or to sustain an extensive social stratification. Feudal codification of behavior and the strength of the codifying sentiment may not permit such sprawling structures.

I am not certain of that, though. I know that in its latter stages, Rome's social structure began to resemble the feudal hierarchies that followed when it fell. In many ways, Rome's fall was not really a fall, it was a transition to a new way of life that grew out of he old order but would not sustain it. It has been argued, convincingly to me, anyway, that the 'fall' of Rome was actually beneficial to much of the lower social strata, as it removed the upper layers of corruption that had built up and to that point were thoroughly sapping wealth away from those who labored to produce it.

Perhaps ours will be like that as well. Latter Rome produced a quasi-feudal stratification that was not sustainable on the scale of the Roman Empire. For the social order to continue on as it had been developing, it was forced to decentralize, lopping off the expensive and unproductive uppermost layers of stratification. Perhaps what is needed for our own present social structure to sustain itself and continue on in the vein it has been developing is for the upper layers to be lopped off as well.

But whether or not that happens isn't all that material. It is clear that there will be a decentralization. Whether the national and state layers are removed or remain in a vastly weakened condition will not make much material difference to the social order or the lives of individuals -- the possibility of warfare excepted, of course.

I will return to the topic of decentralization later.

God and Public School

I think most of these attitudes stem, again, from public schooling. Possibly, it is the other way around – that public schooling reflects these attitude.

In any event, even outside of these attitudes, the authoritarian hierarchical structure of early life has definitely had an enormous impact on people's perception of 'how life works.' One goes to school, one 'gets a job,' one raises a family, retires, and then one dies. Life is 'planned.' That's just the way it is. Serious travel, entrepreneurship, other real initiative-taking activities are not really on most people's radar screen of realistic possibilities. We are no longer a nation of pioneers. There seems to be little curiosity about the 'big picture' or how things work, merely the necessity of participating in it however it does and trying to enjoy a little of life on the side. 'Someone else,' those people who seem to know everything, take care of the details. Everybody else just does what they say and tries to enjoy the bread and circuses.

Mostly, life comes 'pre-packaged,' like a TV dinner, and if one does what he is supposed to do -- stay in school, don't do drugs, go to college, 'work hard' -- things are supposed to turn out. The fact that they often don't doesn't seem to faze the mindset in the slightest. They are supposed to, and when they don't, it isn't fair and 'somebody' is to blame. 'They,' that elusive cadre of geniuses who are supposed to make everything work, need to do something about it.

I think that this tepid authoritarian streak is reflected in most people's theology as well, to the extent that they have one. Many people seem to have a sort of quasi-Calvinistic idea of God as an ever-present benevolent micro-manager, 'in control of everything,' or if not, then something fairly close to that. Whenever this square meets the circle of free-will, which is admittedly rare in the minds of most people, the circle seems to be the one squared more often than the other way around. This translates to the real world as an expectation that authority ought naturally to be centralized and to intervene as necessary to 'make things turn out' or 'to set things in proper order,' -- even among conservatives. Hence the attention to national government and national news as compared to disinterest or disdain for the local variety, and the implicit attitude that lower levels of authority derive their legitimacy (when they are acknowledged to have it) from higher and ought to submit to it. There are fewer and fewer areas that are off-limits to the higher orders of political organization.

Note that this does not necessarily follow from a Calvinistic outlook -- there is no reflexive reason that political theory should of necessity mimic theology, or that government must 'be like God' to have legitimacy. God may micromanage everything, but He might specifically command people not to. Nevertheless, due regard for nuance and peccadillo are not known to be strong points of revolutionary movements. Most people most of the time seek 'consistency,' even if their ideas of consistency are fairly shallow and its pursuit leads them straight into a ditch.

Decentralization

Juxtaposed to these attitudes produced by a centralized way of life is an imminent and severe decentralization across the West. Without question, the EU will be pulled apart. Pushing up the division of labor with inflation will not work when currencies are failing. Governments and particularly public school systems are presently under intense financial pressure, with vastly more in the pipeline. They won't be able to hold it together. How 'modern feudal' attitudes adjust to the new, decentralized situation will be interesting to see.

My guess is that the new order will be asked to accommodate the attitudes bred in the old, but will not have the means to do so on a national scale. As discussed above, it will be like the fall of Rome, or the Middle Ages running in reverse -- larger feudal 'tell me what to do because I don't know' arrangements devolving into smaller and smaller. Large corporations will be bankrupted and broken up, local government overtaking the higher levels in influence. Meanwhile, the very institutions that encouraged and sustained these attitudes will have disappeared, or at best the stripped-down survivors will have little influence. Without them, attitudes could change rapidly within only a generation or two, precipitating further changes.

Those would naturally be more difficult to predict -- I have no idea what new attitudes will be produced, and only a vague idea that the new system will be decentralized and marked by a weak, naïve authoritarianism, obviously an odd and unsustainable combination. Will younger generations look on their dependent, directionless parents as pathetic and weak, and rebel against their attitudes in a new Enlightenment? South Korea provides such an example, as the US-allied conservative old-guard, which lived hand-to-mouth under the threat of aggression by their communist neighbor, gave rise to a new generation born in relative security and prosperity, which saw little sense in its parents' superstitious fears and turned sharply liberal.

Let's just deal with one change at a time, and acknowledge that whatever emerges may not last all that long.

Local Interactions

One very positive thing to say about American cultural attitudes is that on the whole they are quite intolerant of illegitimate attempts at power-mongering, coercion, and corruption -- when they recognize it. It's that judgmentalism thing again. Wave an American flag or flash an official-looking badge, and you can rob them blind. Try to do it brazenly on your own muscle and wits and unless you are exceedingly clever you are likely to be summarily shot. Well-known local exceptions that shall go unnamed are duly noted, but they were never really all that influential anyway, were they?

I do not think that gangsterism and corruption will become a big problem. It might for six months or a year, but hard times tend to produce hard attitudes, and with the long arm of the law safely bled dry, individuals are unlikely to put up with as much as government has in the recent past. Nor will they be held back as effectually by government, either. Streets in most places may actually become safer.

Modern American corruption has typically been an institutional, large-scale phenomenon. On an individual level, things are mostly on the up-and-up. Mostly. That is one of the positive things about a rule-mongering, quiescent culture, and I don't expect that to change soon. It is usually Americans trying (unsuccessfully) to hold big government to account, not the other way around.With big government gone, the level of corruption may actually go down -- again, with duly noted local exceptions.

I would imagine that the emergent social order will be hungry for local leadership. Possibly some of the recently deposed pecuniary class will fill this role, but again I doubt there will be much patience for the same kind of legal posturing that created the situation in the first place. But maybe I'm being naively optimistic. I would expect appeals to the mechanical side of things to be more likely to succeed -- 'here's how we can get things moving,' in other words.

So, I would expect to see local politics take over in a sort of odd fashion, with many localized quirks and sentiments forming the basis of custom and the legal structure. Probably many of the procedural details -- like how trials are conducted, will be retained. Many of our own go clear back to the Medieval period. What could be more logical to a mechanical mind than 'if it ain't broke, don't fix it'?

The Law

Now that I've got a basic outline of the dominant habits of thought of our time, at least in the eyes of yours truly, it is time to look at how they clash with the legal order to see how things will probably change.

One of the most glaring discrepancies are the attitudes towards economic arrangements central to average people's lives -- like employment, and important purchases such as homes and education -- and freedom of contract. Americans do not believe in absolute freedom of contract in these cases -- they believe in fair treatment and right conduct, whatever that means. If free contract can be accommodated in that framework, so much the better. But right conduct clearly comes first.

For example, an employer feels a need to give a reason why an employee is to be let go, even though in most cases he legally he has no obligation to do so, or even to have a reason. He feels the need out of his own personal relationship to the employee, but also because he implicitly believes the employee justified in wanting to know the reason for such a wrenching change to his life, whether that reason is 'you deserved it' or 'I don't have the money.' That is just the way people feel and act. There is no law requiring such consideration, people just do it.

Another example -- lawsuits. Much as I may understand the logic of tort reform, and might even agree with it, does it make any sense to, as Burke might say, create law counter to the sentiments and prejudices of the people? Clearly, if this is a 'big problem,' there must be a great number of people who are of a mind that it doesn't matter -- fair is fair, right is right, and the practical consequences can go play in traffic. What happened to 'the consent of the governed'? What is a government that tries to hem in large fractions of its own people with laws that they find repulsive?

Many other such tensions are evident today -- the Drug War, environmental laws and other regulations, illegal immigration, tax evasion -- that testify to the fact that America's laws do not reflect the sentiments of goodly fractions of her people. Yet this does not stop groups from attempting to impose even more. One of the visible outcomes of this tension is the tendency towards mass imprisonment -- the US has one of the largest fractions of its population imprisoned in the world. Another is the polarization and acrimony that characterizes modern political discourse.

And yet in all these cases, one observes often flagrant disregard for written law as a matter of day to day behavior. The de facto case has become divorced from the de jure, and people go about their lives just the same. Which means that, if these are generalizable examples, in many cases things probably won't actually change all that much. Tomorrow is already here. And in my opinion, they probably are generalizable examples.

The de facto standards that people live by already appear to be in force, regardless of what the law says. That was one of the main points of most of this discussion -- medievalism had set in before Rome fell, capitalism was already in operation before Adam Smith wrote about it, etc. To see what the world will be like the day after tomorrow, take a look around today, then subtract out the centralization. That is probably a good approximation, and to me, doesn't look all that bad.

I acknowledge that the wrenching economic changes in the immediate term will be painful and possibly life-threatening for many, and that a physical moving about will be necessary. Likely America simply won't attract many immigrants in the near future, and many may leave. Likely urbanization will both intensify and reverse, as cities become both denser and smaller. Other such changes are probably coming. But America as a society has already likely become what it will be. It just remains either to be codified into law, or left to common law.

To me, I don't think this is all so bad. I may lament the 'demise' of free-markets, but let's face it -- they were 'demised' a long time ago. I also look back with some fondness at the very human elements of the medieval order and its ennobling spirit. We have lived under a fairly soulless New Feudalism like the cold stratification that prevailed in latter Rome, cruelly enforcing established structures on a society that largely rejected them and had moved past them, but the New New Feudalism will likely be more personal and reflect a local spirit, like latter medievalism. I may not like a lot of that spirit, but at least it beats the posing and pretense of the pecuniary sorts who maintain the validity of abhorrent practices by dint of legal and contractual prowess. They'll have to fetch their own water because they'll be stripped of their wringing machines.

What might this legal order look like in practice? Perhaps a more practical common law as described by Burke is a reasonable guess. Maybe, for example, there will still be practical freedom of contract, but under a common law it will include recourse to proceedings to adjudicate 'fairness' in the event of conflict. Practically, that is what we have now, it is only that juries feel intimidated into enforcing laws they don't always agree with or understand due to the standing legal order. Under a common law tradition, they will be free to decide on the merits. Such an order would hopefully better secure contracts that both parties really are happy with and that really does result in mutually beneficial exchange -- if we can behave ourselves, and resist the temptation to fall back into legalistic rule-mongering. In other words, one will be able to have freedom of contract, so long as his trading partners don't complain.

I don't really like the idea of my affairs being perpetually subject to the opinion of every Tom, Dick, and Harry on the street, but on the other hand, I don't like being legalistically rule-mongered and placed over a barrel at every opportunity, either. I certainly trust an average, local Tom, Dick and Harry to give me a fairer shake than the present powers that be.

Will it be perfect? Obviously not. A lot of it will likely be very troublesome and annoying. But the slavery of Rome wasn't perfect either, and something better grew out of it. The medieval order wasn't perfect, but it produced something better. The Enlightenment has proven far from perfect, but perhaps it is leading into something better. And there were things to admire in all of these orders.

Cleaning Up

As I gauge it, I have left out two topics that some readers probably would like addressed -- what about the machine process, and what about those solutions to the capitalist order it looked like I was going to take a stab at.

The machine process is unpredictable. I predict it will continue to be unpredictable. It is a wild card. It could produce some wonders that completely change the economy and life in a way nobody can possibly imagine. Perhaps the engineers will produce an artificial super-intelligence that solves all our problems, or robots that eliminate labor as a factor of production. Perhaps the geneticists and biologists will give us superhuman intelligence and abilities, and we'll solve all our problems ourselves. Or invent some really big new ones. Maybe the new super-intelligences will use their abilities to form a new overclass and enslave the rest of us. Who knows?

Two things the machine process seems to be doing and will continue to do merely by being what it is -- decentralizing the economy by eroding the value of existing capital at a faster and faster rate, and forcing people to cooperate if they wish to partake in the benefits that technology confers. Veblen's centralizing effect of economic complexification ran its course long ago, I think. The intensity of concatenation and interdependence is already so far into the stratosphere that it ceases to be relevant to the discussion. It has gone from being a dynamic factor to a given. The question is as it has been -- how to deal with it. The new order is working out a way to deal with it by jettisoning the present overclass and searching for newer, equitable social arrangements. That is a good thing. As the social order breaks down into localized systems, there will be a great deal of further experimentation, the positive results of which will hopefully spread from one to another.

Which leads to the second question. I posed the very general problem of the free-market generating too many avenues to obtain 'something-for-nothing' as its basic dilemma. But every order has had this problem. Slavery was almost by definition something-for-nothing from top to bottom. Medievalism had a hefty share of it, too. Capitalism eventually became riddled with it, but for a good while it fared pretty well.

I can suggest some band aids. What led to 'something-for-nothing' was the discrepancy between custom and law on the one hand and material reality on the other. Custom and law, though, were derived from habits of thought. The solution, then, it seems to me, is to best match thought with material reality.

But isn't that what philosophers have been attempting for millenia?

Finally, I see that the thing boils down to an impossibility. I have learned my lesson. Capitalism is not to be hated and berated. It tried. Neither is medievalism -- it did, too. So did Rome. Neither are any of them to be held up as the epitome of perfection. That was my mistake. There is no perfection this side of the grave. What comes next is not likely to be all that bad but it won't be perfection, either.

But practically speaking -- here's my two cents on the economy.

First, gold and silver money have survived and functioned under every one of these economic orders. They worked. They will always work. They work because as a custom and habit of thought they best match the reality of their function in the economy -- the physical exchange of a value for a value. There is nothing I can imagine that will ever come closer than that, certainly not magically dynamic accounting entries or scraps of paper managed by a bureaucrat. These systems are designed to be gamed and they always will be. Something-for-nothing will always come part and parcel with them. Gold and/or silver should be money, and nothing else.

Second, financial transactions must accurately reflect the manifest reality they were designed to represent. Maybe that statement is somewhere between too vague and too obvious. Maybe an analogy is in order.

Think of markets as some kind of mathematical system of algebra or calculus. The prototypical 'math problem' takes a three part form. First, there is the statement of problem. This might represent something as simple as a business proposition, accurately 'translated' into the language of markets in terms of prices, volumes, etc., or it could be the entire economy.

Second comes a series of 'mathematical transactions,' in which the statement of problem is repeatedly manipulated according to the appropriate mathematical 'laws and customs' in an attempt to tease out the information one desires -- the statement of solution, the final part.

For the most part, practitioners of the mathematical arts learn the operations and mathematical strategies, and then once they are understood, use them rather unthinkingly like a meat-grinder to churn out the answers they want. Once the skills are honed, unless it is a very difficult problem, not much thought is given to the actual algebra or calculus, especially in the age of the computer. The thought goes into setting up the problem and evaluating the answer.

But, at least in a theoretical sense, every statement in the transaction portion of the math problem is also a reflection of the real situation set up in the statement of problem. If the transactions are performed correctly, and the statement of problem is true, then every statement is also true clear down to the statement of solution. All the statements are actually statements of solution, they just don't appear so to our eyes.

(Assuming that the problem actually has a solution, of course. Let's not get into those kinds of details just yet.)

Even if one accepts that every other statement in the transaction series is also a reflection of physical reality as described in the problem, it is almost always impossible to directly relate any particular statement to physical reality for anything more difficult than a trivial problem. Curious mathematicians may occasionally try to do so, and actually be able to do it on rare occasions, but for the most part it is all done on faith. One usually only understands each statement's relationship to reality via its relationship to the statement of problem, plus faith in the applied mathematical transactions. This is the 'magic' and the power of math -- it lets people indirectly manipulate notions that their minds could not possibly handle directly.

Likewise with markets. Financial transactions are indirect means of manipulating quantities that symbolically represent economic reality, sometimes in a very abstract sense. It is quite nearly impossible to look at any particular price and estimate whether it is 'reasonable' versus reality, or directly evaluate any particular business situation and know whether it is a wealth-producing or a wealth-destroying employment of the factors of production with any degree of precision. Doing so requires all the indirect financial transactions of the market and the information they provide. For this process to work, the initial description of the problem must be accurate, the indirect financial transactions used by the market must be legitimate methods of accounting for economic reality, and those transactions must be capable of handling the situation in question. Otherwise, the information the markets provide will be poor reflections of the real world, and provide economic incentives to do uneconomical things. Nobody expects to get accurate information by using incorrect algebra to solve a problem that requires calculus. Nobody should expect markets to work with financial transactions that don't reflect reality, or business situations that foil the available tools of finance, either.

The problem with the Enlightenment was that its rules governing financial transactions and business situations were limited only by freedom of contract and the absolute right to property. It trusted to human self-interest and intellect not to construct a dysfunctional financial order or to engage in transactions that were nonsensical. For the most part, it worked reasonably well, but obviously that has broken down as described.

It is possible to detect some types of financial transactions that do not make economic sense, such as fractional reserve lending, and it is possible to detect some situations that are going to foil the calculating abilities of the financial process, like market restrictions. But it is not easy for me to imagine a legal order that would prevent all such transactions and situations altogether. Obviously it would need to incorporate some sort of regime of proper and improper usage, such as existed under the medieval order. But naturally, the whole idea of a regime implies inflexibility, while it was liberty which allowed the market to grow as it did. Perhaps it is possible that there is a totally different system of 'financial math' that does not allow such errors. But I wonder if this suggestion is as implausible is a 'different' system of regular mathematics.

On the other hand, perhaps such exercises are illegitimate in and of themselves. Legal orders flow from human ideas, values, customs and habits, and it does not make sense to contemplate foisting something on society that society hasn't itself embraced on its own. Which is to say that it does not matter what ingenious program anyone may come up with, this is not how these matters are decided. I'm sorry I don't have a better answer than that. Maybe discussion was helpful.

Conclusion

The progression from slavery to serfdom to capitalism has provided better and better mechanisms for solving the problem of economy and social order. And as much as one tends to focus on the differences between these social orders, it is also important to note the similarities. The medieval order imparted an intrinsic human value to all people through the Christian faith by granting everyone a defined place in society and a relationship ultimately to God. That was absent from the ancient slavery, where each man's own struggle to negotiate the often fickle and arbitrary temperaments of the gods was his own problem. He was lifted up or destroyed as fate would have it. The Enlightenment had different ideas about social arrangements from medievalism, but did not overturn the basic idea of intrinsic, individual human worth, at least until it began to reach its latter stages in 20th century socialism. I do not expect the next order to do so, either.

History tends to be written from the perspective of 'important people' – kings and queens and generals, and business tycoons. But their lives usually do not reflect the lives of the lesser of us. In large part, I suspect we are already seeing the social order working out its differences with the modern economy, and much of it in a good way. I certainly take heart in the notion of individuals standing up against being commoditized, mulcted and abused, and continuing on with their standards in the face of law that often seems not to respect any. Even if I don't always agree with the rhetoric or the methods, I do agree with the spirit.

Many of the something-for-nothing problems that came with centralization will at least temporarily abate with it, with or without 'solutions.' The division of labor will contract, but so will the ability of the authorities to milk the system. Overall, in the long term I am optimistic. At worst, it sounds like a wash to me.

In the short term, I will try to be prepared. I will look to insulate myself from the contracting division of labor, and I will try to live amongst people whose attitudes I can deal with.

The New Feudalism V -- The System and How It Works

2011-05-09T23:57:00.000-07:00

Here I lay out the basics of The New Feudalism.

The Crux of the Matter

Economic conservatives have long been able to identify nefarious practices that distort markets to the benefit of some over others. These would include, among others –

Tax-and-spend redistribution schemes
Punitive Tariffs and Subsidies
Government Regulation

Note that these activities are not only thought of as unfair, but they are rightly blamed for distorting the entire economy in a destructive manner.

The Austrian school adds another source of such economic distortion, plus a predictive theory for how this distortion works. It believes that manipulations of the money supply by the banking system, and especially central banks, create distortions to the economy that not only create winners and losers, but produce the economically destructive business cycle. These negative consequences of tampering with the money supply arise because changes to the supply of money subvert its accounting function. The supply fluctuations are created by the nonsensical financial accounting of the banking system, in which deposits of money are both 'spendable and lendable' at the same time.

Those of us who believe in free markets and sound money have to this point contended that, this being the situation, the destructiveness and unfairness can be practically eliminated simply by 'setting the rules right.'

What Veblen has contributed, which I believe is unique, is the idea that markets may be subverted within the basic legal framework of the free market. This is made possible by the increasing interdependence of market participants as the division of labor increases. The tactic is very simple – use contracts and legal maneuvering to secure legal rights that allow the creation of some sort of market restriction, or more generally, a stream of 'free-income.' The supply restriction (or other contractual installation) essentially subverts the accounting function of money by rewarding the restriction rather than a value contributed to the market. It is like being paid for punching other economic actors in the face -- businessmen start punching one another in the face and getting paid for it, rather than serving the consumer. It also distorts the price structure, causing other actors to adjust their behavior inefficiently in response to spurious market valuations.

The market restriction provides a 'something-for-nothing,' -- a violation of economic reality.

This technique has been known for quite a long time as 'cornering the market,' but in practice it has been difficult to pull off because economic workarounds were relatively easy to come by. As interdependence increases, however, workarounds become increasingly difficult. Each newly installed restriction takes longer and longer to unravel, providing 'free-income' streams of longer and longer duration. At some point they become so difficult that a businessman is better served by trying to string together such subversions of the system rather than building it up with new products and higher efficiencies. The entire system bogs itself down in the schemes of parasitic businessmen, while engineers and technicians struggle with the mechanical side of the equation to wring out what mechanical efficiencies there are to be had.

Just in case these ideas ever manage to become significant, I suggest that this critical economic transition be called the 'Veblen Point.'

But even so, in itself the potential for 'unearned profits' through the installation of a market restriction would be mostly a nuisance, except for the fact that business accounting is further subverted by the boosted revenue stream. Thus, the business that successfully installs a market restriction finds itself over-valued, and able to leverage this overvaluation in capital markets to acquire the resources to extend its activities further and further. It is easy to see how such business activity could 'go viral,' in that each new restriction invites further expansion of the influence of that business and encourages further restrictions. The logical limit to this process would be 'what the market was able to bear.'

Or the social order.

Examples, Please

At this point, the reader probably gets the general idea, but needs some concrete examples. The easiest example I can think of would be an exclusivity contract, an example of which Fran posed a few days ago. Why would a large company offer to buy the entire product of another company at an above-market price, when it could simply go into the market and get most of what it wanted cheaper? Simple – to deprive its competitors of access to a key good. In doing so, it estimates that it will be able to raise the final sales price above what it is paying the original producer by dint of being the only supplier to the market. Exclusivity contracts are inherently anti-competitive, extremely common, and if cleverly structured, can provide a stream of 'free-income' for some time.

Another example is provided by none other than oil tycoon John D. Rockefeller. One of Rockefeller's attorneys came up with the idea of having Rockefeller and his associates set up a legal trust, in which all ownership shares of the original companies were placed 'in trust' and new trust shares doled out to each contributing owner in proportion to his contribution. The entire trust was then managed as a single company, effectively establishing a cartel and wiping out competition between them. In this particular case, all the companies belonged more or less jointly to Rockefeller and his associates together, so the combination appears fairly innocent and more intended as a way to coordinate behaviors than to rig markets. However, such a strategy would be very useful for forming an effective cartel, and it is understandable why the public looked on such behavior with suspicion.

It should be plain to see that both arrangements properly executed are anti-market, yet both are completely permissible under a regime of freedom of contract and respect for property rights. I'm quite certain that a clever lawyer or businessman who knew a market well could devise many others. I used to encounter such schemes all the time from businessmen, and I always thought that they were ignorant of the subject of economics. I would point out how the scheme would be undermined by market forces and was a bad idea. I did not realize that while it lasted, it would make them very rich, and by the time the laws of economics finally brought it to an end, they would have devised a new one.

In other words, they knew economics perfectly well, well enough to know that they stood a good chance of getting away with it. Now I realize that they had discovered the secret to wealth under our system, and I was the ignorant one.

Other examples of ways to create market restrictions or otherwise secure 'something-for-nothing,' some of which rely on government, others which are generally considered legitimate would include --

Monopoly and Cartelism
Intellectual Property - creates a restriction in technology applications
Banking/Monetary Inflation - I can't think of a more glaring example of 'something-for-nothing' than fractional reserve banking. In addition, it creates the financial illusion of a shortage in capital goods, which is just as useful in many respects as the real thing
Corporatism - creates a whole host of nonsensical legal situations, including a legal 'person' that is not a real person, a separation of ownership from control, and shedding of personal risk (which can be a very valuable 'free good')
Immigration - although some consider this to be legitimate, it can be used to create an artificial 'shortage' of jobs, especially in a targeted fashion to undercut what would otherwise be higher salaries and supplying 'free income' to a business
Regulation - provides all sorts of opportunities for milking the system
Deficit spending by government - provides government spending while avoiding taxation
Bankruptcy - provides the ability to repudiate debt

While that is not an exhaustive list, it should give an idea just how many avenues are available and how pervasive these activities are. Imagine how many people not only take advantage of them, but also those who are personally employed just to service their existence (i.e. patent lawyers, bankruptcy lawyers, regulatory bureaucrats, etc.).

The Myth of America's Free Market

Fran has pointed out that the first really sweeping, major legal departure from a laissez-faire system was the Sherman Anti-Trust Act, which was passed in 1890 largely in response to such schemes as the Rockefeller oil trust described above. The mid- to late-19th century was a period of rapid industrialization of the US. It was the heyday of such notables as Jay Gould, J.P. Morgan, John D. Rockefeller and Andrew Carnegie, who became some of the wealthiest men ever to live. No other period in American history comes close to producing so many staggering fortunes, some larger even than those of modern titans like Bill Gates and Warren Buffet, corrected for inflation of course, and at a time when the economy was far less productive.

All four were notorious for their monopolist business practices, and, incidentally, so is Bill Gates. It would astound me to learn that most businessman prior to their time were angels of the markets and refused to engage in such practices. It seems more likely to me that they were simply unable to do it. I conclude that something important changed sometime around 1870-1890.

The Veblen Point.

The problem, which parallels that of the banking system, is that freedom of contract and property rights don't actually guarantee a liberal and open marketplace. Capitalism, it seems, is not nearly as robust as we tend to think. It doesn't seem to handle market restrictions well. The accounting function of money is easily thrown into disarray, both by the nonsensical financial practices of the banking system and by anti-competitive practices by business. Both strategies are protected by the capitalist legal order. In addition, government imposed market interference also contributes to the mayhem, thought that is generally considered anti-capitalist.

This creates a disconnect between financial and material reality, a highly lucrative disconnect rife for exploitation. The disconnect was always there, and there were always forces at work trying to exploit it, but they were effectively held in check until the system reached the Veblen Point. Prior to that time, the errors were probably not negligible, but at least they could not be exploited to such a degree that they called the entire system into question. Capitalism plodded along acceptably well. But after that point, the problems could no longer be ignored. Something had to be done.

At that point, a disastrous mistake was made. Rather than actually addressing the problems that were arising, in both the monetary and the business cases the legal order attempted to 'turn the facts to account to established legal conventions,' when it should have been the other way around. The banks cartelized under the FED, and eventually created a system of deposit insurance in an attempt to meet legal obligations in a way that flies in the face of material reality. Both practices further undermined the money system's ability to reflect economic reality. It effectively institutionalized the practice of fractional reserve banking, when the correct approach would have been to somehow abolish it.

On the legislative side, government attempted to break up monopolies and take an active role playing umpire in markets. But now that the camel's nose was under the tent, and legislation that violated property rights and free contract had been deemed justifiable in the name of the public interest and protecting the free-market, there was no stopping it. And, naturally, once that ball got rolling, most of the waves of legislation that followed were not really aimed at 'protecting markets,' but bending them to the will of some special interest or another.

The rest of the 20th century is history. Society responded to contradictions in the marketplace, which were really contradictions of the Enlightenment, with a legislatively created 'pretend free-market.' A managed market is what it really was – managed for the benefit of entrenched interests. Ever since the Veblen Point was reached and the pot started to boil, the West has struggled to keep the lid on the pot. Rather than address material reality, it has tried to respond with legislative band-aids, and as material reality has diverged from legal practice, and the system has fallen further and further into corruption, 'something-for-nothing' opportunities have proliferated.

The Problem With 'Something-for-Nothing'

The problem with 'something-for-nothing,' aside from its blatant violation of economic reality and implicit unfairness, is that each opportunity creates 'vested interests' – groups with an interest in perpetuating and expanding their own established perquisites that parasitize the system. Worse, they inherently centralize the system they are feeding from.

Whether one is speaking of welfarism, corporatism, tax policy, monetary inflation, cartelism, regulation, market restriction, or any of the other offshoots of the disconnect between material and legal reality, the effect is to both centralize discretionary power and to create opportunities for parasitism. They go hand in hand. They are inherently inseparable. Once a 'profit' opportunity presents itself, whether legitimate or not, it will be exploited by some group of actors, creating a dependency that seeks to have its interest institutionalized. This creates a ratchet effect, as some fraction inevitably succeeds.

Every new free-income stream attracts new workers into parasitic roles and away from productive roles. Every free-income stream, however it arises, boosts the market capitalization of the beneficiary business, allowing it to expand ever larger. As resources 'follow the money,' smaller enterprises which lack 'free-income' shrink or get taken over. Wherever it operates, something-for-nothing creates centralization, bureaucracy, homogeneity, and inefficiency.

That is not to say that a business or group that manages to land itself a free-income stream is on easy street. Of course, others will try to dislodge its position to their own advantage. It must be on constant guard, always defending its position from others. The point here is that business efforts will be directed inordinately towards defending an established gravy train and seeking out new ones as opposed to actual innovation and seeking out new efficiencies.

Established interests don't like newcomers, either.

Centralized Minds

Veblen blames the 'mechanical mindset' on the machine process. No doubt this is true, but I tend to think that the greatest contributor to this mindset is one specific outgrowth of this movement which he tends to neglect – public schooling.

The first 'public schools' got their start, actually, as 'charitable' initiatives of some of those monolithic corporations mentioned at the end of the 19th century. They were not public because they were state supported, they were public because they admitted anyone. As one might have guessed, their industrialist patrons ran them as 'education factories,' and since they were the basically the toys of multi-millionaire megalomaniacs, they became the objects of 'practical experimentation.' Why so many well-meaning people seem to think the minds of small children are the ideal material for social experimentation, and why their parents put up with it, I'm not sure. But experiment they did, completely overturning the 'character education' provided by classical methods and replacing it with 'practical knowledge.' Government eventually took over these 'enterprises,' and continued more or less in the same vein.

The main reason I think this development has fomented the mechanical mindset more than any other effect is that children are brought up in a bureaucratic environment in which rewards are doled out according to the ability to please an authority figure. Bureaucratic, authoritarian environments tend towards formalized, mechanical interactions among people. Though there are occasional exceptions, that is more or less how almost all public education works, and it is how children are brought up to think that the world works.

To a large extent, they are correct. As time passes, the effects noted above tend to centralize social and business structures into bureaucratic hierarchies, and the drive for innovation is squeezed out by the vested interests. Learning to operate within a bureaucracy is probably the most effective thing a young child can learn. Of course, this is all to the advantage of the vested interests, as young, uncreative bureaucrats tend to keep to their places, not rock the boat and mind their own business.

Much as I hate to admit it, I wonder if perhaps the reason that I, and I believe others, tend to focus on God's authority flowing from his status as absolute and ultimate Judge might actually be a result of having been brought up in such an environment. Perhaps this is the next step in the progression that Veblen observed, from King, to Artisan, to Relic, to Authoritarian Judge.

The New Feudalism

Veblen thought that most societies naturally progressed into hierarchies, where one class performed the productive labor while the other engaged in various unproductive activities. He did not think that our society was headed there. He thought it was already there.

The two classes do not neatly correspond to the pecuniary class and the mechanical class, but the two are related. The unproductive class consists of those few titans of industry and finance, the political class, and others with 'vested interests' in maintenance of the system, plus their hangers-on who perform menial services for them and otherwise operate unproductively in various capacities to maintain the structure. Hence their title – the vested interests. The vested interests live off the productive activities of the outsiders – the common man.

The vested interests are in charge, and have been for some time. They have subverted the money system, the economy, and the educational system. Until recently, they controlled the media and Hollywood. They have subverted our democracy. They vet the candidates and fund them, then tell them what to do in office. We get to pick the ones we like. Our social order has slowly been calcifying, with the overwhelming preponderance unable to grasp that anything is amiss.

They set policy, and they control the agenda. When something disturbs them, they adjust. Banks threatened? Taxpayer bailouts. Wages getting uncomfortably high? More immigration.

This, finally, is the New Feudalism – all the power-mongering, wealth-extracting hierarchy of old, none of the humanity. Unless, I suppose, one happens to have a soft spot for the welfare state.

But those who've been paying attention have noticed the cracks forming in the edifice.

Which leads one to ask – what is next?

The New Feudalism IV: Intermission

2011-05-08T12:58:00.000-07:00

There is so much ground covered by these two works that it is hard to begin to put them into modern perspective. They call to mind so many ideas about the present and recent past, it would be impossible to comment on everything. And no, I haven't managed to pull together a 'final analysis' yet. Here are a select few ideas as a sort of intermission until I can get things done.

Modern Myths

Veblen, I think, was a good and insightful economist, but not the best I have ever read. His strength is more in his observation of the transitions of social order and where the driving forces for this social order might arise. As such, I think his most influential role is as a 'modern mythmaker,' one who looks at a situation, and behind and through it to arrive at a narrative that captures essence of it, as much 'romantically' -- in a spiritual and emotional sense -- as in a technical, factual one. A myth is nothing more than a narrative that conveys important truths above and beyond the facts of the narrative, especially stories about how things came to be. Generally, a myth is considered fictional, but it need not be, in my opinion.

The modern world looks askance at the romance of myth, preferring to focus exclusively on the factual, taking a scientific 'just the facts ma'm' approach to everything. In so doing, it tends to produce mere data, which in the long run will always fade into the oblivion of the forgotten, the defunct, the outdated, and the irrelevant. Our myths are important, and both elements are important to our myths. It is romance that keeps truth relevant and fresh to living, human minds, as opposed to the computers we often pretend ourselves to be. To capture the spirit of a story does not deny it of truthfulness by some infraction against 'objectivity.' But to sterilize it, and to subsist only on the hard remainder robs one of his humanity, and eventually his sanity.

All useful history is myth in that it gives us more than mere facts. Always, truth is preferable to falsehood, but an infraction against spirit is graver than a violation of fact. Says I, anyway, for whatever that is worth. With that, I shall do some modern myth-making of my own.

The Enlightened Corruption of Banking

It did not escape my notice in Veblen's discussion of the primacy of property rights and freedom of contract how such a view of things could, and probably did, lead to social and legal tolerance of the practice of fractional reserve accounting in the banking system. The possibility probably escaped Veblen because he didn't recognize its importance in creating the business cycle, considering it just as illegitimate as the rest of corporate finance and not worthy of special attention.

The issue is quite worthy of special attention, in my opinion. To the Enlightened mind, what is important in banking, as in all other enterprises, is that liberty is respected and contracts kept. Thus, so long as a bank keeps up its contractual obligations by returning depositor money 'on demand' as stipulated by the banking agreement on receipt of deposits, it should be none of the depositors' business what the bank does with those deposits in the meantime. Money is a unique good in terms of its infinite fungibility and the general indifference of its value to physical damage, so long as it is not too serious, especially if it consists of nothing more than an accounting entry.

A 'depositor' of some unique, fragile property for storage, such as at a warehouse, might be considered 'within his rights' for inquiring after storage conditions and practices to be certain of the state of his property when returned to him. But in the case of money, such concern about what might go on behind the bank's closed doors or questions as to the legitimacy of its activities and practices would be considered an affront to Enlightenment attitides. So long as contracts are kept, that ought to be none of the depositors' concern. It is out of bounds, a meddlesome violation of privacy, individual sovereignty, and 'freedom of contract.'

The medieval mind would have had no problem condemning fractional reserve accounting practices as an improper usage of money, provided that the financially nonsensical nature and fundamental dishonesty of the practice was recognized. In fact, the lending of money at interest was largely forbidden in much of the medieval world, albeit on different grounds. Lately, I have been slowly coming to the persuasion that they might have had the right idea, as perhaps the usefulness of interest to reward savings and efficiently allocate capital may just not be worth the trouble. What good are they if they are corrupted by the accounting used to arrive at them anyway?

Veblen thought that it was the machine process, daughter of the Enlightenment, that was so toxic to the social order that gave rise to it. But it would not surprise me if it proved to be the modern banking system, which the Enlightenment also spawned, and was the driving force behind Veblen's 'corporate finance' bogeyman, that actually proved to be its undoing.

Notes On the 20th Century

It is interesting to note that --

-- The establishment of the banking cartel under the FED and WWI both followed within just a few years of the publication of The Theory of Business Enterprise.

-- Almost all economists view the last two decades in Japan as a period of economic stagnation and 'deflation.' Yet this period is uniquely notable as a time of very low inflation, the success of smaller businesses over larger, moderation and evening out of income and lifestyle disparities, and generally quiet times with respect to the business cycle, warfare and other such disturbances to tranquility, the recent earthquake and tsunami notwithstanding. It also corresponds roughly with the idealized economic environments of Veblen and the Austrians, and in outward appearance to be moving in the direction of the artisan economies of the early Enlightenment. This has not generally been considered a period of 'national greatness' by the international community, but a great many people have found it to have been relatively beneficient. Food for thought.

-- The 20th century was the bloodiest century in human history. The central ideological conflicts were concerned with the ordering of society and the role of property in it. Most of the principle combatants staked their ideological positions on opposite sides of the Enlightenment.

-- Socialism was first strongly articulated in modern times in the 19th century. It did not fully take hold until the 20th. It proved theoretically unsound and morally bankrupt, yet it still persists. At its core was a radical change in the notion of property, much as the early Enlightenment radically changed medieval notions.

-- America moved in a socialist-reordering direction through the New Deal and into the 1970's. However, with the election of Reagan and a turn towards broadly Enlightenment policies, smaller businesses tended to proliferate. Enlightenment sentiments seemed to grow stronger as lifestyles and the economy moved in that direction.

-- The reassertion of early Enlightenment ideals at the end of the 20th century produced a rapidly accelerating globalist division of labor, though this was helped along and guided to no small extent by the activities of governments and central banking. Interestingly, this 'managed free-trade' tended to result in the transfer of industrial jobs out of the West towards the undeveloped world, especially nominally socialist countries with an entrenched 'mechanical' view of life and society. Meanwhile, the trades of Veblen's 'pecuniary class,' such as financial, legal, and political roles tended to proliferate here.

-- Advances in technology continue to chip away at cartelized enterprises. Digital music has undermined a centralized music industry. The Internet has undermined the mainstream media cartel and opened up communication and information transfer. Cheaper electronics and communication also now threaten the education cartel, as instructional materials may now be produced by practically anyone and viewed anywhere. Hollywood may be next.

-- The technology issue brings up particularly interesting issues with regards to its effects on property. Rampant copying of digital music and software begins to call into question their practical status as property. If the owner is effectively incapable of asserting his sovereignty over what he claims is his, does it (or can it) really belong to him? When it begins to take police state tactics to assert property rights, it begins to look less and less like a legitimate claim. This is perhaps just one example of the machine process beginning to enforce its own order against whatever the law may say.

Class Warfare

Veblen noted what I think are important sentiments with respect to 'advantage taking' and violence under the pecuniary norm.

Capitalist appologists often hold out the principle of mutual benefit as the ideal of contracts and trade and one of the driving forces of the success of the capitalist order. Yet in practice, these activities degenerate into rancorous disputes more often than probably anyone would like. There are two tendencies that I observe to cause the most trouble in this respect -- to aggressively seek advantage to the point of disadvantage to the counterparty, and the inability of one party to understand or appreciate the advantage he receives. Both tendencies produce transactions that dissatisfy one party and result in disputes. Repeated experience of such dissatisfaction tends to undermine faith in freedom of contract and the capitalist order itself. That is to say nothing of the instances of outright bad faith and fraud.

Veblen's 'class structure' exacerbates this problem greatly. On the one hand, you have a pecuniary class whose members specialize in such transactions and whose very livelihood depends on their skill with them, and on the other, the mechanical class, who not only do not much deal with them, but in many ways are actively 'programmed' not to handle them well.

In particular, rules have a tendency to mean very different things to these two groups. For those with a mechanical inclination, rules tend to be viewed as actual guides to behavior. As in, they are there to be obeyed. After all, that is the way machines behave, very reliably, and it is reliability and predictability makes a useful and productive machine. A good set of rules can be liberating to those of this temperament, as they facilitate smoothe functioning and reduce personal frictions, especially in the realms of the unknown. Bad rules, of course will be viewed in quite the opposite light for someone to whom rules are important in this capacity.

The pecuniary class, however, knows better. Rules are impediments to be navigated or ignored, if possible and need be, and best used to hem in the behavior of others. The pecuniary artist has realized the secret that the mechanic usually has not -- that rules and contracts only really matter 'when and if it comes down to it.' Until then, which is 90% of the time at least, posturing and maneuvering is at least ten times more practically efficient. Predictability is not always an asset, and quite often a liability, to the success of members of this class. The mechanic tends to say exactly what is on his mind. The pecuniary master has gained expert control of his tongue, his expressions...and often his conscience.

Fran provided an excellent example of a clash of these two points of view a few weeks ago. Through the Veblenian lens, the exchange might be viewed as follows -- pecuniary business manager attempts to extract a verbal commitment (a contract) from a mechanical-class engineer to complete a new project. He knows the weakness of the mechanical class in negotiations and for hewing to rules. He disguises the full nature of this commitment by merely asking for a completion date and tries to hem in the engineer in by implicitly invoking the engineer's subordinate status.

The engineer recognizes that intimidation is being used against him, that the request is indefinite and potentially in violation of natural law, and responds with a witticism as such. The business manager grudgingly backs off, defeated for the time being. He makes a mental note that this specimen would make an unsuitable yes-man lackey and is unfit for promotion.

Such is the nature of modern bureaucracy.

This is all well and good if you happen to be a galactic superintelligence. Certain masters of the pecuniary as well as the mechanical like Fran and Robert Heinlein may not have that much difficulty confronting such behavior. But for the rest of us mechanical types, it isn't so easy. We are generally honest people, we don't like being treated this way and we feel we don't deserve it.

The law tends towards silence on such tactics, as they are generally considered within it even if viewed by most people as being outside the realm of fair play. The mechanical versions of such unfair play -- the discreet snipping of a brake line, the drugging of a recalcitrant social interest -- however, are generally considered criminal. The pecuniary class gets to carry its skills with it in finding advantage in personal affairs, while the mechanical class generally cannot and often finds itself in a position of weakness. It also happens to form the vast majority, and I can only imagine that the skilled pecuniary types must often feel themselves surrounded by a vast sea of easy pickings.

In summary, what we have here is the potential for a severe breakdown in the division of labor, which seems to me to be well under way. The ideal of contractual mutual benefit is going to be difficult to meet if the pecuniary class doesn't show some restraint in its dealings with the mechanical class. This taking advantage of and lording one's expertise over others is a basic human tendency that is inimical to fair dealings in relationships, but particularly so in this case. Specialization that entails implicit social arrogation and license to unrestrained piracy towards those of other 'castes' runs counter to, well, everything good and decent. This series is called The New Feudalism for a number of reasons, though, with my apologies, I seem to be a long time in coming to them. The West seems to have slowly acquired most of the power-mongering intrigue, stratification, and wealth extracting elements of the old feudalism with practically none of its endearing elements to speak of.

Frankly, if you ask me, a system isn't worth defending if it produces such an outcome in practice. Capitalism's best justifications are its occupation of the moral high ground in respect for the rights of others, liberty, and fair dealing, and its general benevolence in producing material wealth to the benefit of all of society who would participate in its production, and even often for those who would not. What happens if, as a practical matter, it can claim none of these?

Freedom of contract may turn into 'no contract for you at all if you don't behave yourself.' Already we see companies like CarMax making hay out of the displeasure we mechanical types experience at haggling and negotiation.

I'm not looking forward to becoming a third world country.

Burke, Veblen, and the New Feudalism: Part III-ii -- Veblen the Economic Historian and Sociologist, cont.

2011-04-29T11:32:00.000-07:00

The previous section focused mainly on the historical lead up to the modern social order and the conflict it has with the modern economic order. This section will focus on the state of the nature of that conflict as it stood at the turn of the 20th century.

***

The Modern Enlightenment Legal Order

According to Veblen, at the center of the Enlightenment legal order that eventually prevailed over the West are two nearly inviolable legal principles -- the absolute right of property, with the implicit absolute right of usage, and secondly, the right to freedom of contract. Rarely are residues of the Medieval order allowed to impinge on these two absolute rights, at least in Veblen's opinion of his day. Almost all other legal conventions are the logical corollaries of these two rights. Like the absolute right of property, the absolute right to freedom of contract conflicted with Medieval practices. This discussion is not particularly noteworthy except in one or two regards as to its practical effects on the pursuit of business.

The first is that the right to absolute freedom of contract creates a very restrictive legal climate towards injunctions attempting to enforce fair dealing in the marketplace. Apart from the prohibitions against force and fraud, freedom of contract and injunctions to 'play fair' are almost completely incompatible. The second is that competition against one's business rivals is strictly limited to what may be accomplished through the use of contracts and property, for example, lawsuits or other applications of the legal system, fooling your customers or suppliers with tricky contracts, uses of property which interfere with a rival's operations, like buying a plot of land and leaving it idle simply because it would be useful to a competitor. That would, of course, be in addition to the normal modes of economic competition -- the pursuit of higher efficiency and better meeting of consumer demand.

These two legal absolutes form the bedrock of the modern business environment which Veblen calls the 'pecuniary norm.' Other important assumptions of this norm are that the value of money is effectively stable, and that all property and claims are inherently able to be liquidated to a cash value. Instability in the value of money would implicitly violate the notion of the inviolability of money contracts. The assumption of the 'universal ability of liquidation' is what allows the legal order to settle practically any dispute in a pecuniary fashion no matter how seemingly unrelated to property, such as a fine of restitution for assault or even wrongful death. That kind of thing would have resulted in a contest of arms in medieval times. (And somehow, the medieval way actually strikes me as more appropriate.)

Machine Processes and Machine People

According to Veblen, the advent of the machine process created a powerful social bifurcation that is a major source of its antagonism towards the Enlightenment order. Under the artisan economy, the tradesman was both the businessman and the laborer. The two aspects of business -- the physical act of production and the negotiation of the markets -- were united in one actor. But with the coming of the machine process there came a split between these two responsibilities as part of the new division of labor. Some tended to markets and the issues of property, ownership, and business transactions. This was Veblen's 'pecuniary class.' The others focused solely on the mechanical aspects of production -- the machine class.

The intensive use of machinery in the industrial process created a class of workers whose lives, and therefore habits of thought, revolved around the service and manipulation of machines. The focus and attention necessary to operate complex mechanical equipment led to habits of thinking that diverged from what had predominated for centuries. Certain skills and abilities became heavily emphasized while others were allowed to languish. Mechanical cause and effect became the nearly exclusive acceptable grounds of reasoning for a large fraction of the population, and particular gifts and skill in this area became highly prized.

The focus of academic inquiry, and scientific investigation in particular, shifted from mere causal and effectual relationships to the actual mechanical process by which cause produced effect. This is the period that produced Charles Darwin and his famous theory, and who can even guess whether his ideas would have caused such a stir if they had been articulated a century before, or if he even would have been able to articulate them for lack of background. The transition to the machine economy also marks the rise of the modern pursuit of science and the beginnings of its perceived dominance over the other academic disciplines.

In addition, the changes in production led to changes in lifestyle. For the artisan, tools and modes of production revolved around him and his life. His tools aided him and supplemented his output as he undertook production for the marketplace. But for the modern machine worker, his life revolves around the machines he serves. He is a supplementary factor of their production, not the other way around. Eventually, industrial production began to involve things like intensive shift work and urbanization, in many ways a radical and unnatural departure from the human norm. The industrial worker's labor is often repetitive, he does not see the process of production through from beginning to end (and therefore has little invested in the Enlightenment notion of ownership in it), and he has very reduced human contact and minimal communication throughout the workday.

Notably, education also became mechanized, especially towards the end of the 19th century in the US. Schools were eventually to be run like factories, regimented and impersonal, with bells to signal shifts in the day. The notion that education should be practical and efficient, 'like a business' took hold, and subject matter began to change as schools shifted to prepare workers for what were likely to be mechanical professions. The classics, foreign language, and history were pushed aside. Science, mathematics, and even, ironically, entire 'trade schools' took their place.

The Enlightenment philosophy began to have less and less meaning for this class as life and work became more and more mechanized. As noted earlier, the nature of the work tended towards standardization and homogeneity, in output, in the process of production, and the lifestyle that participating in this division of labor afforded. This effect tended to commoditize labor. Such a state must be caustic to the spirit of individualism that characterized the Enlightenment. The notions of property ownership being rooted in the act of creation are almost totally irrelevant to such a system. The commoditization of wage labor tends to undermine the notion of freedom of contract. Property rights mean little to those without much property to speak of.

According to Veblen, the further the machine process carries things, the more the Enlightenment begins to sound like so much make-believe that does not reflect the real world. The new mechanical class begins to have very little connection to the pecuniary norm that forms the atmosphere of the business world around them, and often have very little skill in negotiating it, finding contact with it troubling and irksome.

The Pecuniary Class

Meanwhile, the other half of business operations -- management, salesmen, lawyers, and generally, businessmen -- have abandoned very nearly all connection to mechanical processes of production and have become thoroughly saturated in the customs and thought processes of the pecuniary norm, the established Enlightenment legal order. This class spends its time in the assertion of property rights, the acquisition and disposal of property, strategizing the best application of pecuniary maneuvering to business advantage, and the like. Often, the businessmen in charge have little or no idea how the processes under their control actually work, though they may be experts in the world of business affairs.

This group has a great deal 'invested' in the Enlightenment notions of natural rights, natural law, property and contracts, so to speak, and little patience for attempts to modify them. Among them, there is a strong tendency to 'turn facts to account for the purposes of maintaining an accepted convention,' rather than modifying convention to account for facts. Veblen characterizes the pecuniary class as operating more in the abstract and acting on the basis of de jure reasoning, while the mechanical class tends to the de facto and has a strong matter of fact point of view. The pecuniary class is inherently conservative, and perfectly comfortable with the pecuniary customs that dominate Western society within and outside of the business world, unwilling to change them.

Veblen saw the established governments of the West as being inherently pecuniary and operated towards pecuniary ends, even at the national level, such as in the conduct of war. But he also saw the pecuniary order eroding, as the value that the Enlightenment placed on equality gave the common man and his opinions considerable influence over government and law. As the common man was decidedly mechanical in outlook, so the government would sway. He saw the tension very visibly in his own day, citing, for example, the way that juries of common folk were regularly at odds with the higher courts.

The Tension

That, in a nutshell, is the unarticulated tension that Veblen thought dominated the political landscape of his day. It was somewhat related to class, in that one observes a class segregation about the tension, but was really about how to deal with an economic product of the Enlightenment order -- the machine process -- being incompatible with that order. Where the two collided, in particular the mechanical class desired custom and law to address the new circumstances. Veblen felt that the changes in life brought about by the machine process amounted to a mechanical form of coercion that was, nevertheless, unrecognized by a law that did not tolerate coercion by one party against another. This angered the mechanical class in a way that they could not clearly articulate. To them, if life was to be mechanical and commoditized, so ought the law to reflect it.

Veblen saw the socialist movement, syndicalism, and unionism, as well as the anarchist movement, as an attempt to address this tension, in the same way that the Enlightenment was an answer to the medieval tension against the artisan economy. However, while he did sympathize with the complaints of the mechanical class, he thought that socialism was theoretically unsound and a failure. The Enlightenment really did address the new circumstances and were in harmony with them while these movements did not.

He also thought that as the machine process 'produced' socialism, it also produced many of the social-ills that are often associated with that movement. He thought that the lifestyle and mechanical outlook it produced helped destroy the family, eroding old social bonds and the authority of the father, just as the Enlightenment had also weakened those bonds with its notions of equality and nearly eradicated the medieval notion of paternalistic leadership. He thought that as the Enlightenment had demoted God from King to Artisan in the popular mind, so the machine process had made Him an irrelevant relic and pushed an atheistic outlook on those that it touched. And since the mechanical mentality is not much given to 'mythmaking,' as these 'conventions' were corroded away to nothing, they would not be replaced with new ones.

I think that if Veblen were still alive today, he would probably see the history of the 20th century as the West's continuing attempt to resolve the internal ideological inconsistencies and social tensions that were created and revealed by the machine process. I don't think that he would believe that as yet it had come up with an acceptable answer.

Veblen, Prophet of Doom

Veblen considered how the situation might resolve itself, and in his prognostication one finds some frightening insights.

First, he notes that considering what 'should' happen is totally irrelevant to the question, as it provides no guidance as to happenings in the real world. The only realistic question was what 'would' happen. As such, he considered that the resolution, if there were to be one, would come as a 'business proposition,' as this is the source of initiative under the pecuniary order and the clearest mode of addressing the problems to the Enlightenment order created by the machine process. It was the system of business enterprise itself that was threatened most by it and thus the members of this quarter would have the most motivation to protect themselves.

The machine process was principally incompatible with business enterprise because it was corrosive to the pecuniary order that undergirded it. If a mode of business enerprise could be undertaken that was not incompatible with the machine process, such as, for example, a return to the artisan style of business, then the tension would be relieved. However, that was clearly not a solution, as any society that tried that would lose the material benefits of the machine process and quickly fall victim to the aggressions of its rivals.

The solution Veblen thought most likely was cartellization of business and militarization of society. Both were business propositions that addressed the central issues. Cartellization allowed outsize profits for businessmen in a stable fashion (assuming the cartel could be held together, of course) ensuring that there would be no 'decapitalization' threat to their abilities to squabble with each other and extract excess gains out of the economy, as is their wont. It represents a permanent institutionalization of their interests, as it were, giving them as a group more control over changes to the economic system. The militarization of society tends to stoke patriotism and a loyalist spirit to the the established social institutions, including the legal order, providing a buffer from the caustic sentiments of the mechanical class without actually addressing their concerns. It also provides another profit opportunity to the cartels who make it their business to provide armaments to government. He described the resulting system as 'aggressive dynastic politics.'

In summary, Veblen basically predicted that, as the machine process was an existential threat to business enterprise, the present order of things as they stood in the late 19th century and very early 20th could not stand. The West would likely come under the sway of entrenched interests that would militarize society and pursue an aggressive foreign policy in response to the social strains created by the ravenous advances of the machine process. He was not sure, however, that the advancing machine process itself might not in some way undermine the entire system before the described entrenchment could take place or in some other way overwhelm the attempt, and left that avenue of change open as a strong alternative possibility.

Military-industrial complex, anyone? Did I mention that this was written in 1909?

Conclusion

I tend to be a generous reader where I see important insight, and when I do I usually struggle with strict objectivity. I have likely presented Veblen in a better light than a more critical reader might have, simply because I found some of his observations to be especially profound. That is not to say that I didn't find anything I thought a little screwy. I just tend to overlook such blunders where I find something extraordinary. And who knows? Perhaps I am the one making the blunder. As always, and as the reader should have concluded at the outset of the first essay, anyone seeking a perfectly objective opinion is advised to read the original book himself.

Veblen's historical explanation, however odd it may seem in light of other more accepted narratives (or what one might rather like to believe), appeals to me for several reasons. First and foremost, the major assertions are consistent with what I have learned from other sources that I trust, and consistent with what I observe in everyday life. He has clearly addressed issues that I thought were poorly or unrealistically dealt with by others, usually in a begging-the-question type manner, in a way that makes sense to me. In particular, his dealing with the issue of the spreading mechanical mindset and the erosion and demeaning of other human qualities, the integration and interplay of this change with other social changes, the parallels between the medieval-to-enlightenment transition with this one, as well as his explanation of the tension between much of society and the old Enlightenment norms, seems to me very insightful. In every other form I have encountered them, they were presented as isolated, unconnected phenomena that obviously are connected. These are all issues I think critical to the unfolding of 20th century history and of critical importance today, but are generally overlooked by modern investigators who seem to be blinded by the very effects these happenings have produced in our culture. Most people do not seem aware of them.

However, as my own understanding and mental retention of the specifics of history is less than perfect and I tend to favor the subject of economics, I acknowledge that I may have been quite too generous in this regard. Sometimes facts and ideas I encounter in a work like this are actually widely known and obvious to people with more familiarity with the subject, but they are new to me. Most of Burke's arguments that he considered 'obvious' I found to be his most powerful.

Just as a disclaimer, I have made some additions and subtractions to my recounting of Veblen's views where I thought it would make for more insightful or approachable reading, and I have also retained a number of ideas even where I disagreed so long as I didn't think them too outrageous or irrelevant to the topic. Again, if you want it straight from the horse's mouth, go get it.

Next time, I'll start doing my own analysis of things.