Money doesn't matter

Disclaimer: I'm fairly intelligent, I'm used to delving into the philosophical foundations of various modes of thought, and I've read a fair bit beyond my coursework. I am, however, still a very junior economics student, so take what I say with a grain of salt.

Part I: The National Economy
Part II: Money Doesn't Matter

In Part I, I showed that conceptually, we can treat a national economy as a "whole", existing more-or-less in isolation. One important consequence of looking at something as a whole is that concepts that identify relations between parts of the whole do not apply to the whole itself. The most important concept that identifies relations between parts of an economy — households and businesses — is money.

In ordinary circumstances, money is a debt held by an individual household or business and payable by society. If I hold a \$100 bill, then society "owes" me some amount of goods and services: I can go into any store, present my debt, and have it satisfied in goods and services. Money is debt both in a "fiat" currency as well as in a "hard" currency such as gold. Gold is money only if most everyone in society sees it denoting a debt they have a duty and interest in monitoring; without this social agreement, gold would be valuable only to people who had some actual use for it, such as jewelers or electronics manufacturers. The only difference between a fiat currency and a hard currency is how these representations of debt are authenticated. Money, therefore, is a relation between one part of the economy, the household or business holding the money, and the rest of the economy. Looked at as a whole, however, every debt has a net value of zero. The individual that holds the \$100 is +100; the rest of society, who owes the goods and services, is -100. As a whole, +100 + -100 = 0. The net value of all the money in an economy is zero.

There are a few other ways of looking at money in a macroeconomic sense. Suppose, for example, in one day we were to multiply everything about money by a billion (10^9). Thus, if yesterday you had \$10,000 in your bank, today you have \$10,000,000,000,000. When you go to the grocery store, a loaf of bread that cost \$5 yesterday today costs \$5,000,000,000. If you paid \$1,000 for your mortgage or rent payment last month, this month you'll pay \$1,000,000,000,000. It seems pretty clear that nothing much would change, even increasing the amount of money by many orders of magnitude. Or suppose that one day all the money in the economy were to simply disappear. We would still have all our farms, factories, oil wells and refineries, cars, houses, cell phones and computers. We could still physically produce the same amount of stuff we produced yesterday*. Money does of course matter even in a macroeconomic sense, and I'll talk about how it matters in a later installment. But money doesn't matter in the way that it matters to ordinary people acting as a part of the economy.

*As best I recall, I first heard about this idea from Buckminster Fuller.

Every ordinary capitalist macroeconomics textbook will show the "long run aggregate supply" — how much goods and services the economy as a whole can produce — plotted on a graph with real (i.e. physical) output on the x axis and "price level" (the value of money) on the y axis. It's plotted vertically, meaning that in the long run the total amount of stuff we can produce does not vary by the price level. Increase or decrease the total amount of money in the economy by 1%, 10%, 10 times or 10^9 times; the total amount of physical goods and services we can produce in the long run stays the same.

The Stupid! It Burns! (hate crime edition)

Who knew atheists could be so dishonest?

An atheist on twitter by the name of @Inrideo thought it would be funny to create a foundation collecting money for a LGBT Scholarship in my name. The only reason he created this foundation was because he hates me and hates my religious beliefs—this is a prime example of a hate crime.

At this point I feel like I am being harassed, bullied and stalked. It has gotten to the point where I am beginning to fear for my safety.

A good time

I am always pleased when moviegoers have a good time; perhaps they will return to a theater and someday see a good movie by accident, and it will start them thinking.

— Roger Ebert

The philosophy of macroeconomics

Disclaimer: I'm fairly intelligent, I'm used to delving into the philosophical foundations of various modes of thought, and I've read a fair bit beyond my coursework. I am, however, still a very junior economics student, so take what I say with a grain of salt.

Part I: The National Economy

The textbook definition of macroeconomics is the study of the economy as a whole (in the aggregate), as opposed to microeconomics, the study of economics one actor (individual, family or business) at a time. But what does it mean to study the economy "as a whole"?

We could simply talk about the global economy, but there are several reasons why that definition of "the whole" isn't really convenient or illuminating. Instead, macroeconomics usually focuses on the national economy, the economics of an individual country. International (global) economics might dominate the economic activity of a smaller nation, but for a larger nation, such as the United States, China, Russia, Australia, or England*, the majority of economic activity (about 70%) is entirely internal. In macroeconomics, we ignore international economics at the fundamental level. Macroeconomics takes international trade only as a relatively small (in a large economy) correct factor, net exports, to Gross Domestic Product. Overt, active international coercion is usually not plausible, especially for larger nations; countries rarely go to war for the payment of debts**. Most importantly, by definition, the government of a national economy defines its own currency, and some or all of its government debt is denominated in its national currency. The control of currency — control that individual actors do not have in microeconomics — is the decisive factor that makes macroeconomics substantively different from microeconomics.

*The eurozone, the 17 countries of the European Union that use a single currency, the euro, poses interesting and unique macroeconomic issues, but that's a topic for another day.

**I am, of course, ignoring covert, subtle coercion (e.g. assassination or coups), which does happen.

The view that international economic concerns should dominate our national economic policy is almost completely mistaken. Unlike an individual within a national economy, no nation can forcibly collect real, physical assets to satisfy a monetary debt. If a person or a business default on a debt to a bank, the bank can and will send armed men to satisfy that debt. If, however, the United States were to default on its debt to China, the Chinese will not send the People's Army to seize our assets. There would be negative consequences to such a default, but they would not be as catastrophic as losing our national wealth or, if we were to resist, imprisonment or death. If it were more beneficial to default on our international debt than to honor it, we could, practically speaking, choose to do so. Our creditors (those that are large enough) know they cannot forcibly collect, so it is incumbent on them to always ensure that our rational consideration of the benefits coincides with their own. Essentially, international economics between large nations is a good exemplar of pure voluntary cooperation.

Section 4 of the Fourteenth Amendment* makes an outright default difficult and unlikely. However, because the United States government** controls the value of money, any foreign debt could, if we so chose, be arbitrarily reduced inflating the currency. Inflation has real effects in the short term — it's not a panacea — but it is an viable option.

*"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

**Taking the Federal Reserve Bank as part of the government. The United States Treasury, by only executive order without additional legislation, could also create new money.

Because of effective national sovereignty, therefore, we are justified in treating (with the correction of net exports) a national economy essentially as a whole.

The Stupid! It Burns! (misandrous edition)

Return of the Pink Poseur

I’m sure you’ll agree. I would rightly be called a misogynist for talking to my general audience as if they were all prostitutes. ... But why is it different for Rebecca when she talks to males as if they were date-rapists?

Sadly, it's true: men are pigs. Sorry.

Diversity vs. itself

Diversity vs itself:

On the one hand, to increase diversity in a movement, you must make sure that the focus isn't only on the concerns of middle class white men. ... On the other hand, broadening the focus constitutes mission creep, and may reduce the diversity of views allowed under the same tent.

An excellent analysis, with some deep implications for political science and social systems analysis.

A Republican strategy

Peter Dorman speculates about A Game Plan for Rational, Self-Interested Republicans

Let’s suppose for a moment that all this talk about ideology—about the evils of big government, the flood of debt that threatens our moral and economic collapse, and of course the line that must be drawn in the sand against any new taxes of any kind on anybody—is simply a fig leaf, and that Republicans are pursuing their own partisan advantage without any scruples whatsoever. What would such a strategy look like?

As an unpaid advisor to Boehner and company, here is what I propose

Read the rest to discover Dorman's cunning and ruthless plan.

Do you not know?

An nescis, mi fili, quantilla prudentia mundus regatur?

— Axel Oxenstierna

Do you not know, my son, with how little wisdom the world is governed?

(via the good doctor)

Mirrors

There comes a time when you look into the mirror and you realize that what you see is all that you will ever be. And then you accept it. Or you kill yourself. Or you stop looking in mirrors.

— Tennessee Williams

(via scarlettoharahasthetardis)

The meaning of subjectivism

One charge against subjectivism is that it entails contradictions. If I say, "Killing Jews is bad," (because I don't like killing anyone) and Hitler says, "Kill Jews is good," (because he does like killing Jews) both statements are true, but they obviously contradict each other. Any type of theory that has this sort of internal contradiction is obviously incoherent, n'est pas? But this view misses a fundamental point: while there are certainly philosophers who would endorse this kind of view (since there are philosophers who will endorse anything) a subjectivist account of morality must talk not about the objective truth of moral statements but about their meaning.

It is a tenet of meta-ethical subjective relativism that ethical statements in general are true relative to some subjective entity or entities. In other words, ethical statements are statements not about the "objective" world (i.e. the world outside peoples minds) but about the minds of various entities. As such, seemingly contradictory ethical statements are simply statements about the properties of two different entities, and we are typically not philosophically distressed when different entities have different properties. We do not see a contradiction when we say that "Alice is tall" and "Bob is short." Similarly, the statements, "Killing Jews is good," and, "Killing Jews is bad," are not in contradiction, because they are statements about the different properties of different minds.

The subjectivist account really can't be understood as establishing a pattern of logical entailment. Subjectivism cannot attempt to establish the syllogism

Minor Premise: I dislike killing Jews
Major Premise (enthymeme): What I dislike is bad
Conclusion: Killing Jews is bad

because of the rather obvious contradiction that different people really do have radically different likes and dislikes, which would entail that mutually contradictory statements would be accepted as true. The subjectivist position can't be that "Killing Jews is bad" follows from "I dislike killing Jews;" instead, the subjectivist position must be that the statement, "Killing Jews is bad" is the same statement as "I dislike killing Jews." A subjectivist theory is not a theory about how to find ethical statements objectively true or false, it is a theory of what moral statements mean.

Now it is of course true that a lot of people really do intend an objective meaning by ethical statements. In contrast, when people say "Ice cream tastes good," they consciously and intentionally understand that they really mean "I like the taste of ice cream." In this case, the apparently objective syntax ascribing a property to ice cream itself serves only as a metaphorical idiom for the more literally accurate subjective language. But people typically don't have this idiomatic metaphor consciously in mind. Whey they say, "Killing Jews is bad," they really do mean that it is objectively true that killing Jews is bad, regardless of anyone's preferences; it is merely a happy accident (or the consequence of the objective truth) that they also dislike killing Jews. The subjectivist therefore sees the conscious meaning as a category error, an error that can be corrected only by applying idiomatic interpretation.

Whether subjectivism in general and this particular flavor of subjectivism is actually true at the meta-ethical level is a different argument. It might be true that "Killing Jews is bad" really is objectively true regardless of what anyone or everyone actually thinks. It might be true that "Killing Jews is bad" really does follow from "I dislike killing Jews." To date, however, I've been unimpressed by the arguments for either position. More importantly, I think subjectivism has a compelling positive case (which I've described in previous essays). Until someone comes up with a compelling epistemic theory that can give us any knowledge at all about the mind-independent truth of of ethical statements — a theory which, as far as I can tell, would be as revolutionary an epistemic innovation as was the scientific method — I have to go with the simpler theory that when we make ethical statements, regardless of category errors we might make in our interpretation, we cannot be talking sensibly about anything other than our own preferences.