Sunday, December 30, 2012

Day 6: The cause of, and solution to, all the world's problems (response)

Economic Depressions: Their Cause and Cure, by Murray N. Rothbard, originally published as a minibook by the Constitutional Alliance of Lansing, Michigan, 1969. (summary)

Day 6 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

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Murry Rothbard is, on the whole, correct in his exposition of the proximate causes of the booms and busts of the business cycle. Excess credit causes overinvestment, and since capital investment leads, not lags, consumer spending, the downturn starts with the capital industries. As deleveraging occurs, capital contracts as factories are left idle, worn-out machines are not replaced, workers lose skills and tenure, and new workers are not trained to replace those who die or retire. Eventually, debts fall far enough and the capital base becomes small enough that it starts to pay again to build capital, and another boom starts anew. The problem, of course, with Rothbard's diagnosis is that he doesn't tell the whole story, and his diagnosis, while couched in more neutral and academic language, is just as infantile and nihilistic as Llewellyn Rockwell's anarchism.

If I recall correctly (and I'm no historian), one of the biggest problems the early aeronautical engineers had with their aircraft was control. The amount of lift a wing gives is dependent on the angle of attack, which is a combination of the pitch of the aircraft and the shape of the wing, controlled by the ailerons. Unfortunately, increasing the angle of attack by changing the ailerons also causes aerodynamic forces to increase the pitch of the aircraft, further increasing the angle of attack. So, if the pilot makes a small increase to the angle of attack, the aircraft will pitch up uncontrollably until it stalls, at which point the aircraft will pitch down until it gets enough airspeed and angle of attack to generate lift again. Engineers solved the problem by adding the tail. The elevators on the tail are angled such that in normal flight they generate negative lift. Thus the tail acts to give negative feedback: when the aircraft increases its angle of attack, the pitch increases, which causes aerodynamic forces on the tail to decrease the pitch, providing dynamic stability.

In a capitalist economy, fiat money generated by private banks using fractional reserve banking act like the wings, generating lift; the government (should) act like the tail, providing negative feedback and dynamic stability. Rothbard is right: without the government acting like the tail, capitalist economic growth would be obviously impossible. And Rothbard is also right: when the government does not act correctly to provide its negative feedback effect, positive feedback causes wide swings in the cycle. But having dynamic stability does not make an aircraft trivially easy to fly, and even more so having dynamic stability does not make a multi-trillion person-hour international economy trivially easy to control.

But Rothbard's "solution" is to simply not fly. There are no problems with aerodynamic instability on ground vehicles, and there are no problems with economic instability if we abandon all fiat credit. But of course cars can't fly, and an economy without fiat credit grows very slowly, if it grows at all; it can even contract when the marginal cost of producing gold falls, reducing the overall economic value of the world's gold stock. Abandoning fiat money means abandoning capitalism itself.

Saturday, December 29, 2012

Day 6: The cause of, and solution to, all the world's problems (summary)

Economic Depressions: Their Cause and Cure, by Murray N. Rothbard, originally published as a minibook by the Constitutional Alliance of Lansing, Michigan, 1969. (response)

Day 6 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Previous: A socialized straw man
Next: (soon)

In Economic Depressions: Their Cause and Cure, Murray N. Rothbard argues that the Keynesian theory of demand-driven depressions is falsified by experience. Instead, Rothbard attributes the negative consequences of the business cycle exclusively to government intervention. Rothbard's cure is simple: the government should simply stop intervening in the economy and act essentially like a household with an exogenously limited budget.

Rothbard notes a number of flaws in Keynesian economic theory. First, Rothbard asserts that Keynesian theory fails to explain why businesses, normally very good at predicting the economic future, suddenly become curiously inept at doing so, which triggers the depression. Moreover if depressions were caused by underconsumption, then Rothbard asks why depressions typically feature a fall in capital spending before a fall in consumer spending. If depressions were caused by consumers not spending enough, then we would expect to see consumer spending fall first, and then retail providers scaling back their capital spending. Keynesian theory just doesn't seem to fit the facts.

Rothbard offers an alternative theory. He argues that the proximate cause of inflationary and recessionary gaps is bank credit created by private fractional reserve banking. When the bank loans money it doesn't have, i.e. creates more demand notes presumptively redeemable in gold (or silver) than it actually has. This private fiat money lowers the interest rate from its natural equilibrium, leading to excess capital investment. As more money flows into the national economy, inflation rises, causing domestic goods to become relatively more expensive than foreign goods, which leads to increased imports. But foreign governments don't want to hold domestic bank notes, so they demand redemption in gold. The banks' gold reserves fall relative to notes outstanding, until the fraction of gold reserved falls below safe levels. Furthermore, workers are receiving higher real wages (because excess capital investment causes a shortage of labor), but because they still have the same time preference for consumer goods now rather than later, and because the interest rate is artificially low, they do not save and invest their higher real wages, so bank reserves do not increase domestically. Banks then deleverage: they refuse to extend more credit and reduce existing credit, leading to deficient capital investment and a depression. Eventually, deleveraging runs its course, the banks have adequate gold reserves, and they begin the cycle anew. Although the banks are private, Rothbard claims this boom and bust cycle could not happen without a government-supported central bank. Without the central bank, banks would just start runs on competitors' banks, demolishing the fractional reserve system. The central bank, by acting as a lender of last resort, allows all domestic banks to extend excess credit in tandem, until international pressure finally collapses the whole system.

Rothbard's cure is simple: the government should not support banks or currency at all. Without the support of the central bank, fractional reserve banking will collapse. There may be considerable pain as the economy recovers a true equilibrium based on sound money, but when the lingering aftereffects of government intervention finally wither away, the economy, because all the signals are purely reality-based, will proceed without the boom and bust cycles caused by government supported credit.

Day 5: A socialized straw man

What Soviet Medicine Teaches Us, by Yuri N. Maltsev.

Day 5 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Previous: Economics as theology
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There really isn't anything that we can learn from medical care decades ago in the Soviet Union. There are too many confounding factors, including cultural, political and economic history, and the persistent violent hostility of the West, including three brutal wars and the threat of nuclear annihilation.

If you want to study the pros and cons of socialized medicine, look at how it's practiced today in all the industrialized Western nations except the United States. Michael Moore's documentary, Sicko, is a good place to start.

Friday, December 28, 2012

Hard money?

How do you enforce a gold standard?

Anyone can create a fiat currency. All I have to do is write an IOU for a half hour of my time, or a day's worth of groceries of my time, or one arbitrary unit of my time. Since people trust me, those people can use that IOU as currency. If my descendants choose to honor the IOU, then it can circulate indefinitely, mediating an arbitrarily large amount of trade. Private banks were creating money like this long before governments got into the game.

All you have to do to not use a fiat currency is, well, not use it, or at least not use it much. Take all your money out of your savings account and buy gold with it. When you need to buy groceries, trade in a little bit of gold for cash. The amount of cash you get for the gold doesn't matter: since gold (supposedly) has a consistent, real value, then the amount of stuff you get for that cash will depend not on the arbitrary units of the potentially inflating currency, but on the real value of the gold. Whether it's one Euro per ounce or a thousand lire, it'll still represent the same amount of food.

This is kind of cumbersome, but people generally don't want to take gold directly; it's not their problem that you don't like the fiat currency. (Would you force them to take gold?) But that's a business opportunity! If gold is so useful as money, start a gold bank. Let people deposit currency, use the currency to buy gold, hold the gold, and give people currency when they want it at whatever the going rate is. There are plenty of idiot goldbugs who don't understand economics. You could make a fortune!

What is money?

In a capitalist economy, money is the accounting identity Y * P = M * V, which is true by definition; in English, the real Gross Domestic Product (Y) times the price level (P) equals the quantity of money (M) times the velocity of money (V). By definition, then, all economic activity (worth counting) involves the transfer of money. There must be a finite, measurable amount of money in existence. Money must move; money that doesn't move isn't really there; if the velocity of money were zero, then M * V = 0 for any quantity of money, even an infinite amount. As a corollary, the amount of money by itself doesn't determine anything; what matters is how much money is actually moving. On the other hand, because there are physical limits on how fast money can move, and because there are physical limits on how much the price level can change, economic activity can be limited by just the quantity of money.

With a little algebra, we can say that Y = (M * V) / P; real Gross Domestic Product is money in motion (M * V) divided by the price level. We can arbitrarily choose a unit of measure in which P = 1, therefore Y = M * V: money in motion is therefore a symbolic representation of real productivity, which is just labor, energy, and matter in motion.

At the macroeconomic level (the economy as a whole), what is produced must, for the most part, be consumed; actually producing goods and storing them in a warehouse is a tremendously inefficient activity. It is much more efficient to simply not produce goods that won't be immediately consumed: we could use the resources to produce something that would be consumed, or we could just produce less and have more leisure.

Similarly, human labor, the sine qua non of productivity (we have free energy from the sun, and anything can be produced given enough human labor) must be used or wasted: the hour of labor lost by some individual who could work for an hour but doesn't cannot be stored and used later.

All three of these observations entail that saving money is, in general, if not an entirely bad idea, then a fairly limited one. We cannot save what is produced, and we cannot save potential labor that is not used, so saved money doesn't symbolize anything actually being saved. Money saved is money that is not in motion, and thus not "really" money.

Saving money can (and does) symbolize is virtually shifting consumption in time by physically shifting consumption in space. If I want to spend a lot of money next year, I let someone else spend my money this year, and I spend her money next year. If I just save my money and don't let someone else spend it this year, then we simply reduce real productivity, since there's no reason to produce something this year that will not be consumed this year. And that lost productivity is really lost: If we can produce 100 cars a year, but only produce 99 this year, we cannot therefore produce 101 cars next year*. Indeed, if we lower productivity enough in amount and time, then we can actually lose the capacity to produce: if we can produce 100 cars a year, but we only produce 50 cars per year for a few years, then we might find that we can produce only 90 cars per year. And now because my money is still there in some sense, we have more money chasing fewer goods, which is the definition of inflation.

Instead of saving money, I can invest money: instead of using labor (and energy and matter) to produce goods for consumption, I can allocate my money to produce goods for increased efficiency of production. In exchange for not consuming the 100th car (which is the most expensive car to produce), I can build a car factory, which will allow us to produce 110 cars per year, and I get to keep or trade 10 cars per year. Win all around!

But there's a catch, of course. Obviously, in a large economy with many goods, investment is both risky and uncertain. I might build a car factory only to have it burn down or get hit by a meteor (risk). I might build a car factory only to find out that people don't want that 110th car enough to justify its production (uncertainty).

But there's another, subtler, catch. Increased consumption lags economic growth by a considerable margin, and the effects of any one factory on wages diffuses through the whole economy. If I build a car factory, I will produce my 110th car before the workers who actually built the cars receive their wages. Furthermore, these workers aren't going to actually buy all ten cars: they will buy more shirts, shoes, dishwashers, movie tickets, lattes and yoga lessons. I have to hope that the shirt makers, shoe manufacturers, etc. have also increased production and wages so that my workers can buy more shirts, etc., and their workers can buy my extra cars.

There's yet another, even subtler catch. Capital costs are sunk costs. If I have a car factory that produces 10 cars per year, I can sell all ten cars only for what it costs me to produce the tenth car. The cost of the factory is embodied only in the cost of the first car. As Michael Perelman describes at length in Railroading Economics, capital as a sunk cost (mostly building railroad tracks and steam engines) was the primary cause of the Long Depression of 1873-1879. In a pure free market with perfect competition, capital costs cannot be recovered.

Because of these catches, a complex industrial economy requires a degree of coordination impossible in a free market with perfect competition. If we're going to increase production, we have to increase production across the board, so there's more of everything. If we're going to increase production, we need to make sure that consumers have the money ahead of time, so they can buy the products. We must make sure that sunk capital costs are included in the marginal costs of all the goods. By definition, the institution that provides this coordination is the government; in other words, if we look around and we see that some institution is coordinating investment and consumption, we slap the label "government" on that institution.

A coordinating institution, a "government" in the above sense, must exist for an industrial economy at a technological level greater than that of the early 19th century to exist. Without this coordinating institution, there's just no reason to invest in steam railroad or higher levels of capital; doing so at best pays off more for everyone other than the actual investors and at worst pays off for no one.

There are, at least superficially, four ways of coordinating investment and consumption, corresponding to the four terms of the fundamental equation of money, YP=MV. We can try to directly control production, by just having the government build and operate factories. We can try to directly control the price level by having the government set prices. We can try to affect the velocity of money, making money move faster or slower. And finally, we can try to affect the quantity of money.

The government concentrates its actions on directly affecting Y, real GDP and M, the quantity of money; P and V change indirectly.

A government changes Y and M in tandem in two ways. First, the government creates new money, changing M, and spends that money directly for public works, directly changing Y. Second, the government creates new money, changing M, and loans it to businesses for investment, changing Y. Both measures overcome diffusion, because investment is spread across industries. Creating new money to loan also overcomes the capital as sunk cost problem, because the "sunk" cost is virtual, and becomes baked into the marginal cost of all the products through periodic loan payments. Finally, consumer lending, again creating new money, changing M, and loaning it to consumers who buy things with it, changing Y, overcomes the lag problem. To offset all this creation of new money, money must also be destroyed, so the government destroys money by collecting taxes and loan payments. It's tricky, but with only four major variables, keeping everything in balance is a tractable problem. Fundamentally, then all coordination of an industrial economy requires the targeted creation and destruction of money, so that money can lead productivity rather than follow it.

It doesn't matter what we call the institutions that create and destroy money: they act like a government, therefore they are a government even if we call them a "private" banking system. Because it is impossible to maintain cooperation in a purely uncoercive competitive environment, cooperation must have some coercion built into it. Again, calling coercion by another name, like the justified enforcement of contracts, doesn't make it any less coercive. And if we went on a pure gold standard, we would just create some other virtual something which would fulfill the same role as money does.

The question is not whether we have a government, but who gets to be the government. And the only options are monarchy, oligarchy, or democracy, or some mixture of the three; no political philosopher has found an alternative that is more than a renaming of one of those three.

Thursday, December 27, 2012

All power to the soviets!

Worker-owned businesses are a cornerstone of communism.

(via uber Libertarian Allen Small. No shit!)

Day 4: Economics as theology

"The Peculiar and Unique Position of Economics", by Ludwig von Mises.
Excerpted from Human Action, (1949), chapter 37, "The Nondescript Character of Economics."

Day 4 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

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In "The Peculiar and Unique Position of Economics," Ludwig von Mises argues that economics is outside the realm of empirical inquiry. Although von Mises believes that economics is real — a good economic theory will produce the intended outcome; a bad theory will not — he asserts that economics, like history, is simply too complex for observable events to prove or disprove any particular theory. Hence economics is in the realm of "praxeological knowledge": we must evaluate economic theories according to dictates of reason without reference to experience. von Mises argues that unlike a good technological theory, which can be proven by events, the praxeological character of economics requires that a good economic theory requires that proponents marshal public opinion in its support before its value can be realized. Hence, unlike technology and scientific progress, the project of social progress requires two forces, the creation of sound praxeological knowledge, and the ability to persuade the public to accept those theories.

I have to correct myself. In my previous response, I called Wilhelm Röpke's article, "Free Economy and Social Order," sophisticated theology. It is not: it is naive theology that simply takes its premises for granted. Sophisticated theology entails that the theology be explicitly placed beyond the bounds of empirical inquiry.

In this article, von Mises places economics firmly in the realm of sophisticated theology, and like religion, links his economic theology to the necessity of evangelism. The notion of praxeological knowledge is, of course, just as vacuous in economics as it is in religion. There is simply no way to compare theories on the basis of pure knowledge. Praxeology is just a dodge, long perfected by Christian theologians, to place their ideology outside the bounds of rational criticism, to "socialize" its failures to the complexity of society in general but "privatize" and take individual credit for its successes. Had Popper known about von Mises economics, he might well have placed it in the same category as Freudian psychoanalysis and Marxian historical theory.

Curiously von Mises explicitly contradicts himself. On the one hand, the real consists of that which preference cannot change: "'Real' is, in the eyes of man, all that he cannot alter and to whose existence he must adjust his actions if he wants to attain his ends," that which "wishful thinking cannot alter." On the other hand, praxeological economic requires that people in some sense wish for it for it to be effective: "the practical utilization of the teachings of economics presupposes their endorsement by public opinion." Either economics is not real, or reality is something that wishful thinking at a large enough scale can alter.

Four days, and the parallels of Wenzel's presentation of Libertarianism is looking more and more like borrowed Christianity.

Wednesday, December 26, 2012

Day 3: The sophisticated theology of the market (response)

Free Economy and Social Order by Wilhelm Röpke. Originally published on January 11, 1954. (summary) (response)

Day 3 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

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"Free Economy and Social Order" is Wilhelm Röpke's foray into sophisticated Libertarian theology. (Reader's of Jerry Coyne's blog, Why Evolution is True, will get the reference.) Like Christian theologians who simply assume God shares their personal preferences, Röpke simply assumes that a market economy must necessarily rest on his bourgeois buergerliche social foundations. Like Christian theologians who simply assume that secular morality expropriates the superstructure of Christian morality without the sustenance of its divine foundation, so too does Röpke simply assume that the establishment of markets in the "proletarianized" society is a hollow caricature without the sustenance of buergerliche social values. Röpke employs two obvious fallacies here: First, the post hoc fallacy: the buergerliche society uses markets; therefore, the former is a necessary precondition for latter. Second is the reverse genetic fallacy: the market economy is assumed to be inherently good; its source, therefore, must be inherently good. But there is no actual argument here. Why can the market economy not be simply a toolbox "of prices, of markets, of supply and demand, of competition, of wage rates, of interest rates, of exchange rates, and whatnot"? Why must it rest on some arbitrary set of social values? As a Christian theologian cannot tell us how ordinary human morality cannot be anything but the work of God, Röpke cannot tell us why a market economy (even granting the value Röpke assumes of markets) cannot rest on anything but his "narrow-minded and 'reactionary'" petit-bourgeois society.

What is more interesting, however, is how Röpke describes his necessary social foundations of individual liberty. What Röpke makes absolutely explicit is that Libertarianism is not about the society of peacefully coexisting autonomous individuals. Instead, his buergerliche society rests on "a solid and necessarily hierarchical structure." And this is the essence of individual liberty: not freedom from coercion, but the freedom of the superior individual to coerce the inferior masses. All of Röpke fundamental values require coercion, but to preserve the illusion of liberty, the coercion is placed behind the pillars of property and money. Indeed, these structure are indeed absolutely necessary to maintain the illusion that the superior individual is not coercing the inferior, but rather to protect the objective value of property. The parallels with Christian theology are again apparent: coercion is not used to impose the will of clergy and nobility on the masses, but simply to guide sinners to God's graces.

Day 3: The sophisticated theology of the market (summary)

Free Economy and Social Order by Wilhelm Röpke. Originally published on January 11, 1954. (summary) (response)

Day 3 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

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In "Free Economy and Social Order," Wilhelm Röpke sets underlying Libertarian social values as the necessary foundation for the market economy. Röpke asserts that because explicitly socialist and communist societies lack this foundation in Libertarian values, their use of market economies can be at best a mere "gadget." More importantly, Welfare-State capitalists, who consider the fundamental Libertarian values to be "contemptible and reeking of narrow-mindedness and 'reaction'" should, Röpke says, explain their own underlying social values or be seen as simply borrowing ideas from communism. Röpke sets up a fundamental binary distinction: the Libertarian, buergerliche social order, founded on private property as well as
individual responsibility; respect of certain indisputable norms; the individual's honest and serious struggle to get ahead and develop his faculties; independence anchored in property; responsible planning of one's own life and that of one's family; thriftiness; enterprise; assuming well calculated risks; the sense of workmanship; the right relation to nature and the community; the sense of continuity and tradition; the courage to brave the uncertainties of life on one's own account; the sense of the natural order of things.
In contrast, the "proletarianized" society lacks "a solid and necessarily hierarchical structure," without which the buergerliche society cannot exist, and the market economy that can emerge only from the buergerliche cannot be effective. There is no middle ground between these two ideas, no compromise, only the Good and the Evil.

Even in 1954, Röpke believes that the Western democracies are already well down the road to the "proletarianized" society. One chief culprit is Keynesian economics, which abandons private property, savings, and thrift, and embraces "the Bohemian spirit," extolling subsistence, debt, and profligacy, leading to nothing less than the abandonment of the very idea of civilization, the civil society.

Fundamentally, all these notions of civilization rest on the sacred nature of money. Röpke illustrates the proper regard to money by noting two episodes from France's revolutionary period of the late 19th century. In the first, the Bank of France rebuffs Gambetta's (presumably Léon Gambetta, republican champion of petit bourgeois and later Prime Minister) request to print money to finance the republican revolution; Gambetta, although presumably empowered to demand the money, is, according to Röpke, so ashamed of his request that he does not insist. Later, the even the leaders of the Paris Commune do not, because of their respect for the sanctity of money, do not expropriate the gold and printing presses of the Bank which is at least physically under their control. Even the communists show a reverence for money that today's modern so-called "capitalist" leaders dismiss; therefore modern "civilization" is clearly no civilization at all.

The Stupid! It Burns! (basic, i.e. moron, edition)

the stupid! it burns! Philosophy Basics for Atheists (i.e. morons)
"OK, atheism is not a religion and it’s certainly not a moral code." . . . This is a statement typical of the absolute idiocy of atheism. At least Christian nutjobs will admit that it’s faith and not reason that is behind their stupid ideas…but Atheists have not only the idiocy to mistake their faith for reason, but also the arrogance to then believe what they mistake for reason makes them better than anyone else. . . .

[T]o not believe in God is an act of faith.

You have no proof that God doesn’t exist. Further it is logically impossible, let me repeat LOGICALLY IMPOSSIBLE, to prove a negative. Thus to believe in something that cannot be proven in any way, shape, or form, is an act of faith. It is believing in something you can’t know, and can’t prove, ever. That’s faith. That’s about as close to the definition of faith and religion as you can get.

“But you don’t have any proof that God does exist either” the standard line goes. You’re right, except for the logical impossibility of an infinite regression series in causality, the fact the big bang statistically should have produced as much matter and anti-mater making a psychical universe all but impossible, the fact that random chemicals can’t just turn into self replicating cells, the fact that evolved chimps can’t just magically become sentient, the fact that near death experiences show that memories are formed when there is no electrical charge in the brain, and a thousand other pieces of evidence that suggest that there is a soul and a God…yes, I have no evidence. And while each piece of evidence I could bring up could be explained away on its own, the totality of it suggests quite strongly that there is a God.

And the stupid goes on.

Tuesday, December 25, 2012

Reflections on money

I'm taking a couple days off my analysis of Wenzel's 30 Day Reading List for Christmas, but I want to write a brief reflection about money and the State.

Money, as I've written before, is really hard to understand. Indeed, no one really understands money, in the sense that scientists really understand evolution, relativity, or even quantum mechanics. Everyone has different theories, but no theory has gained the kind of wide acceptance that good scientific theories gain. There are a couple of reasons for this. First, the problem is complicated. Second, money, considered as a "thing," is an inherently political instrument. Money is not something that just is; money is political, ideological, social, cultural: money is what we think it is. So different kinds of people think about money in the same terms they think about politics and social institutions in general. Socialists construct socialist money. Libertarians construct Libertarian money. Capitalists, fascists, mercantilists, feudalists, and slave-owners construct capitalist, fascist, mercantilist, feudalist, and slave-society money. Money is, in essence, a political institution just as are a congress, a president, a judiciary, a dictator, a ruling elite, a body of law, and a constitution.

Money differs from other political institutions because money seems objective, because money seems to reside not in our minds but in the pictures of dead presidents printed on paper or stamped on metal, bars of silver and gold, bank accounts, etc. Money is, first and foremost, countable, and we're conditioned to believe that countable means scientific and objective. But money is, essentially, the pure abstraction of counting: money doesn't actually count anything; it's just, in a sense, a Platonic ideal of counting itself. It's a curious inversion: in science, we count actual physical things; in economics, we instantiate physical things such as dollar bills to concretize the abstraction. But it is clear: despite appearances to the contrary, money is a pure political, social, and cultural construct, symbolizing nothing but itself.

Thus we have the curious fusion and tension of money and stuff in economics. To the extent that economics is about real stuff, physical things that take labor to produce (goods), or labor traded directly (services), economics is a science, a study of objective reality indifferent to our preferences. Regardless of now much pizza and beer we want, if we want more pizza, we have to settle for less beer. As a scientific economist, based on your subjective preferences, I can tell you the optimum amount of beer and pizza to produce. If you want more of both pizza and beer, I can tell you the optimum amount of both you should forego today to invest in making both pizza and beer more efficiently to have more tomorrow. Classical economics seems (at least so far) to be quite sophisticated and effective at answering these sorts of questions.

Although there's a subjective component, our preferences, these are questions and answers about purely physical things like pizza and beer (and human labor). Economics, however, is really confused, when it is not silent, about money itself. Half the time money is simply abstracted away, as when we divide out by the price level to get "real" quantities, such as real gross domestic product or real income. Half the time, money is itself real: private and government debts, which are just money, are ardently proclaimed by some to have a crippling effect on the economy, and just as ardently proclaimed by others to have a salutatory effect on the economy. Both are, or can be, right, because money itself is not a physical thing like a hat, a haberdasher, or a hat factory: money is an idea. If we believe that debt will cripple the economy, then it will; if we believe that debt will improve the economy, then it will. This is not superstition, just political psychology: economics is, fundamentally, about what people choose to do, and people really do choose based on what they believe.

Marx introduced to economics an interesting term derived from primitive sexology*: fetishization, an attitude towards an object that is substantially at odds with its real nature or intended purpose. Marx referred to "commodity fetishization," by which he means valuing a commodity not for its use value but for its ability to gather more money. But I think Marx's notion is more powerfully expressed as money fetishization: instead of money's true or intended purpose of optimizing the production, distribution, and consumption of commodities to maximize use value, we see money as an end in itself, which subsumes the production of commodities.

*I use "primitive" advisedly here. Early sexologists considered reproduction to be the real nature and intended purpose of sexual activity; sexualization of non-reproductive activity was therefore pejoratively referred to as a "fetish." More objective modern notions of scientific sexuality largely abandon the term.

In an emerging capitalist economy with expensive labor, the fetishization of money seems an inevitable side-effect of the high social value of investment, the reallocation of labor from the satisfaction of desires to consume today to the development of more efficient production to satisfy the desire to consume more tomorrow. People act on what they want today; we cannot, I think, really act on what we want tomorrow without translating that desire into wanting something, such as money, today. (It's an obvious truth of psychology that to construct a long-term goal, it is crucial to construct short-term goals and rewards that will lead to that long-term goal.) Money fetishization, then, is the result of wanting to build an industrial infrastructure: it is the short-term goal and reward pointing to the long-term goal of making our productive society vastly more efficient.

There's another psychological tendency, though, that works to our disadvantage: moral inversion. We construct short-term goals and rewards to instrumentally achieve a long-term goal, but then we assign an intrinsic good to the short-term goals directly, which often inverts our judgment of the long term goal. In Zen and the Art of Motorcycle Maintenance, Robert M. Pirsig explains the concept in his (probably apocryphal) story about the sacralization of cows in India: these cows are incredibly useful, therefore they must be gifts from the gods, therefore they are sacred, therefore we must not use them. The moral value of the cow has been inverted from valuable because they're useful to useless because they're valuable.

Similarly, we value money instrumentally because valuing money helps us build an industrial economy. Then we start valuing money intrinsically, and sometimes, to preserve the money, we must sacrifice the industrial economy. At a more sinister level, consider material immiseration to be intrinsically bad. We value sacrificing some consumption today to build an industrial economy because it will relieve material immiseration. We start valuing building an industrial economy intrinsically. Therefore come to believe preserve, rather than relieve, material immiseration, because immiseration is the justification for the intrinsic good of building an industrial economy.

Moral inversion is not always so malignant. For example, we might start off deprecating theft to preserve property, but after not stealing has become habitual, we start disliking theft intrinsically, and simply become a society of people who do not typically steal, not directly because of the broader social and economic consequences, and not even directly just because we might get caught and be humiliated or imprisoned, but because we are just not the sort of people who steal. In essence, we have fetishized not stealing. It is arguable that all our social and cultural conventions (that are not pure accidents) come about due to moral inversion. So moral inversion is by itself neither good nor bad, but we have to carefully and skeptically examine instances of moral inversion to determine their value.

So what can we say about the fetishization of money? Is it a case of irrational attachment to an ad hoc instrumental goal that has outlived its usefulness, or is it the kind of cultural norm like not stealing that fundamentally makes our society better? To a certain extent, it's a little of both, but more the former, irrational, than the latter. And when taken to Libertarian "gold standard" extremes, it is much more irrational.

Indeed, the fetishization of money is very similar to the fetishization of religion. Religion used to be the basis around which we built social trust; its actual truth was not really relevant. Now, we build social trust economically, politically, and socially; religion is no longer necessary and useful for social cohesion, and attachment to its superstitious and arbitrary claims to truth are without any value. Similarly, the fetishization of money, once useful for building an industrial economy, is no longer necessary or useful. And, like religious apologetics, the defense of money is becoming, as we're already seeing in the examination of Wenzel's canon of Libertarian thought, just as bizarre and dishonest.

Sunday, December 23, 2012

The Stupid! It Burns! (historical Jesus edition)

the stupid! it burns! Are the Atheists Right about Christmas?:
The captions under the pictures [on the American Atheists' Times Square billboard] are “Keep the Merry” and “Dump the Myth”. Apart from having the captions under the wrong pictures, the sentiment is one I agree with. . . .

Santa Claus is an ever growing and developing myth. It is possibly based on some fact, lost to any serious historical research. . . . In comparison to this, the historical evidence for the death of Jesus is overwhelming. . . .

The difference between Jesus and St Nicholas is not only in the historical evidences but also in their meaning. One man comes like a cargo cult, as the smiling face of our malignant materialism; rewarding morality by giving gifts only to good children. The other does not give gifts but himself – and not for the good, but for the bad, for he came to not to call the righteous but sinners to repentance.

Tons more stupid in the original article.

Day 2: Jackbooted thugs (response)

Jackbooted thugs (summary) (response)
The Fascist Threat, by Llewellyn H. Rockwell, Jr.
Day 2 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Previous: It's popular and successful, so it must be stopped! (summary) (response)
Next: The sophisticated theology of the market (summary) (response)

On the one hand, a lot of the same things that concern Llewellyn H. Rockwell, Jr. concern me as well. Like Rockwell, I'm concerned about poverty, and stagnating incomes of the lower and middle classes. Like Rockwell, I'm worried by our crumbling infrastructure. Like Rockwell, I'm appalled the increasing militarism of the police. Like Rockwell, I'm outraged at our nation's murderous imperialism. I don't endorse his wording, and I do believe that most police are sincere, dedicated professionals (one problem is lack of institutional control over the minority of police who aren't professionals), but I share Rockwell's dislike of the "the bullet-proof-vest wearing, heavily armed, jackbooted thugs" patrolling our borders for drugs. And, like Rockwell, I believe these trends can and should be opposed, and I see that people are beginning to oppose them.

On the other hand, Rockwell sounds like, and I can put it no more charitably, a complete lunatic. He is a man who observes the nasty cut on your finger, diagnoses cancer, and recommends the amputation of both arms and both legs. I cannot determine if his lunacy is sincere, if he actually believes what he says, or is simply some sort of cynical calculation to appeal to those in arrested adolescence, but this work is simple craziness.

Rockwell's definition of fascism is at least partially correct: what distinguishes fascism from other objectionable forms of government really is that fascism "exalts the police State as the source of order . . . and makes the executive State the unlimited master of society." Fascism is the location of all civic and public life within the state, which is absolutely controlled by its executive. But fascism requires not just that the state be large, but that the state control, or assert control, over everything, and that those individuals who are members of the executive assert their independence in principle from any restraint. And clearly by this definition, the United States government is not fascist. The government controls a lot, perhaps too much, but not only does it not control everything, it also does not even assert control over everything. The executive branch is very powerful, but not only is our executive not absolutely unrestrained, it also does not assert that it is in principle absolutely unrestrained. Not even Nixon or Bush fils asserted that the President can legitimately override an election. Fascism requires that civic life be explicitly and intentionally rooted exclusively in a state under the absolute control of an oligarchy or dictator, and this is simply not the case anywhere in the industrialized West.

Indeed, Rockwell does not even try to prove that the United States is really fascist. Instead, he names a laundry list of things he doesn't like, names them "marks" of fascism, and then tries to shoehorn modern events into these artificial markers. While his first two markers, unrestrained government power and de facto dictatorship, really are inherently fascistic, and his final two, militarism and imperialism, while hardly exclusively fascist, are at least objectionable, the three more, "immense bureaucracy," cartelism, autarky (economic self-sufficiency) have at best only an accidental resemblance to fascism. The sixth marker in Rockwell's list, government spending and borrowing, is a necessary function of any industrialized economy.

Where his markers are legitimate, Rockwell's case that the United States government actually fits these markers is contradictory and incoherent. For example, Rockwell says that most people would reject the characterization of the United States government as totalitarian "so long as they happen not to be directly ensnared in the State’s web." But the very definition of totalitarianism is that it that even the smallest act is "ensnared in the State’s web"; a totalitarian state is omnipresent and inescapable. Similarly, on the one hand, Rockwell asserts that fascism requires a dictatorship based on the leadership principle. But then he says, "The president is only the veneer, and the elections are only the tribal rituals we undergo to confer some legitimacy on the institution [of the executive branch]." If the president is not actually a "messiah," if he is only a figurehead, then where is the leadership principle? If the people really do consider the president du jour a messiah, then why does he content himself with a subordinate role? Rockwell is trying to have his cake and eat it too.

Rockwell's cure for our "fascism," a simple-minded anarchism that could appeal only to the ignorant and deluded person stuck in the mindless, aimless rebelliousness of arrested adolescence, is even more nonsensical. According to Rockwell, "No constitution, no election, no social contract will check" the power of the man with the guns. The only remedy is for "his powers distributed within and among the whole population." By "powers," Rockwell presumably means the actual guns, tanks, artillery, fighters, bombers, battleships, aircraft carriers, cruise missiles, and nuclear weapons that the government actually wields. No sane person could endorse such an obviously unrealistic proposal in reality. And Rockwell believes that the whole population "should be governed by the same forces that bring us all the blessings the material world affords us." Other than human beings with guns, he only "forces" we're governed by are physical laws, which we observe permit tyranny, oppression, slavery, imperialism, famine, plague, war, death, mopery on the high seas, and the Ice Capades.

When responding to literature this obviously unrealistic, it's difficult to determine the most charitable assumption about the authors intentions. If we presume Rockwell is sincere, then he must be so profoundly deluded as to approach actual clinical insanity. If he's sane, then he must be intentionally insincere. I'm not a psychiatrist, so if he's insane, there's nothing I can do. On the chance that he's simply insincere, I can at least speculate on his hidden motivation.

Rockwell is explicitly attempting to delegitimize the United States government at the institutional and constitutional level. As a revolutionary communist, I'm sympathetic to that position; although for reasons probably very different from Rockwell's, I consider our present government, while not precisely illegitimate, certainly far from ideal. On the other hand, what precisely does Rockwell want to delegitimize? One clue is the persistent Libertarian fetishization of money. Rockwell's article is the text of a talk delivered at the 2011 conference, "When Money Dies." In the article, Rockwell bemoans the end of the gold standard in 1973, with the result that "the money was destroyed and American savings were wiped out and the capital base of the economy was devastated. Rockwell denounces "the rise of fiat money that depreciated the currency, robbed savings, and shoved people into the workforce* as taxpayers." Indeed, Rockwell claims that fiat money is the foundation of fascism, it is
the wicked power to create the money necessary to fund this executive rule. . . . No government in the history of the world has spent as much, borrowed as much, and created as much fake money as the US. If the US doesn’t qualify as a fascist State in this sense, no government ever has.
All the other ills are incidental, what matters to Rockwell is money.

*I don't understand why a Libertarian would deprecate more people working as being "shoved into the workforce"; I suspect Rockwell is just chalking up talking points without being too worried about internal consistency.

But money requires government. Without government, money is both unnecessary and untenable. Without money, people can operate in quite sophisticated ways* using only social credit, which is, ironically enough, the fundamental example of a fiat currency: Any individual with social credit can create locally circulatable currency by simply signing an IOU. Indeed, this sort of ad hoc private fiat money resting on nothing but the good faith of the issuer was the primary medium of exchange during the height of the Islamic commercial empire (and the origin of the word, "check"). But circulating IOUs are not money in the sense of the gold standard that Rockwell refers to.

*Probably not sophisticated enough, however, to support a modern industrialized economy.

For money to be money in the gold standard sense, it must be be ubiquitous. If someone is going to pay me in seashells (or feathers, glass beads, portraits of dead presidents, or hunks of metal), I want to be absolutely certain that I can then use those seashells or whatever to pay the grocery, the hardware store, the lumberyard, the shoe store, and all the people I rely on to survive. (Remember that self-sufficiency, i.e. autarky, is a mark of fascism.) If I personally know them and they know me, then I don't need seashells; I need the seashells only if we don't personally know and trust each other. Thus I need someone I trust to make sure my seashells are good everywhere I go. Governments implement this ubiquity to some extent by legal tender laws, declaring that all debts may be satisfied by seashells. To a greater extent, governments implement ubiquity by collecting taxes in seashells. If (most) everyone needs to pay taxes in seashells, then they have an obvious motive to accept my seashells for food, nails, wood, shoes, etc. I have no need of seashells with people I know and trust, and without a government, I have no reason to believe that people I don't know and don't trust will accept my seashells. There's absolutely nothing about gold that magically makes it ubiquitous; a gold standard is a gold standard only if a government enforces legal tender laws coercing me into accepting gold in payment and enforcing taxation in gold.

Furthermore, for money to be money in the gold standard sense, debts in money must not only be enforceable but also differentially enforceable. Again, the whole issue with money is that it allows me to trade with people I don't personally know and trust. If I loan someone money, and he refuses to pay me back, I need to be able to send some "jackbooted thugs" over to his house and collect my money. Without the jackbooted thugs, I won't lend to anyone I don't know and trust, and I don't need money to lend to people I do know and trust: I'll lend them what they need directly, and trust them to give me what I need. On the other side, if I can simply arbitrarily enforce my will, I don't need actual money: I'll just send over the jackbooted thugs to enslave people directly. If there are jackbooted thugs collecting debts, I need to know they will only enforce their will only to collect money. Thus to have money we need to have coercion moderated by a social process, i.e. a government.

Even a more-or-less democratic republic such as the present-day United States doesn't need a "hard" currency; we've been doing well enough for about forty years on an explicitly fiat currency, about eighty years on a de facto fiat currency, and several centuries on private fiat currency, i.e. fractional reserve banking. There's only one kind of government that needs the appearance of a hard currency, and that's a plutocracy. They need it both to legitimize their own rule, and manage conflicts within the ruling class of the owners of money: instead of counting votes, they count gold bars.

Thus, if Rockwell is not simply deranged, we have to see his underlying motivation not as delegitimizing "the State" in general but rather delegitimizing the democratic foundation of the current state, even in its primitive, superficial form. As with Hazlitt, the foundation of Libertarianism is plutocracy.

Saturday, December 22, 2012

Day 2: Jackbooted thugs (summary)

Jackbooted thugs (summary) (response)
The Fascist Threat, by Llewellyn H. Rockwell, Jr.
Day 2 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Previous: It's popular and successful, so it must be stopped! (summary) (response)
Next: (soon)

In "The Fascist Threat," Llewellyn H. Rockwell, Jr. argues that the United States, and indeed the West in general, is literally fascist, properly defined, and the remedy is not minarchism but absolute anarchism, the abolition of the State as an institution. Rockwell offers a definition of fascism: a government that "cartelizes the private sector, centrally plans the economy to subsidize producers, exalts the police State as the source of order, denies fundamental rights and liberties to individuals, and makes the executive State the unlimited master of society." He asserts there are eight "marks" of fascism:(1) totalitarian and unrestrained government, (2) a personality-based dictatorship, (3) bureaucratically managed capitalism, (4) cartel-based, (5) autarkic (economically self-sufficient), (6) uses borrowing, (7) militaristic, and (8) imperialistic. In his second definition, Llewellyn focuses on the United States, and claims that our government fulfills each of those criteria. Rockwell quotes Mussolini: "All within the State, nothing outside the State, nothing against the State,"* and, "The keystone of the Fascist doctrine is its conception of the State, of its essence, its functions, and its aims. For Fascism the State is absolute, individuals and groups relative."** Mussolini's conception of the state is, according to Rockwell, the "prevailing ideology in the United States today."* Unlike some other Libertarians, Rockwell acknowledges that there are substantive differences between left-wing and right-wing totalitarianism, between socialism and communism, and asserts that the variety of totalitarianism we observe in the West is definitely of a right-wing character. Unlike his understanding of socialism, fascism preserves nationalism, private property, income inequality, and existing social institutions such as religion, marriage, and family; fascism just places these institutions under the absolute control of the State. Rockwell believes, however, that millions of people are beginning to resist fascism. Perhaps, all is not lost.

*This quotation appears to be apocryphal, or it is a snippet from some work that has not been translated from the Italian. It seems, however, a reasonably accurate summary of Mussolini's work, "The Doctrine of Fascism," 1932.

**Mussolini, "The Doctrine of Fascism," 1932

Not only is the Fascist State oppressive and tyrannical, it is ineffective. Our public infrastructure is "falling apart" because they are in the charge of the State. We have unemployment because the State has made employment too expensive. The State just spends, borrows, and creates fake money. The State "promised security, prosperity, and peace; it has given us fear, poverty, war, and death." What the State creates cannot hold a candle to beauty and utility of "the world created by the private sector." If we want to build a better society, we have to do it ourselves, and the only thing standing in our way is the State.

Rockwell's cure for fascism is outright anarchism. Rockwell rejects minarchism: The conception of the State as the "night watchman" is "woefully naive." Once we give an institution a monopoly on force, "No constitution, no election, no social contract will check his power." The only cure is to distribute coercive power: "The night watchman must be removed and his powers distributed within and among the whole population, and they should be governed by the same forces that bring us all the blessings the material world affords us . . . through peaceful human cooperation." It is possible to resist fascism because all the fascists have are guns, but guns are no match for a great idea whose time has come.

Friday, December 21, 2012

Day 1: It's popular and successful, so it must be stopped! (response)

Day 0: The Libertarian catechism
Day 1: It's popular and successful, so it must be stopped! (summary) (response)
Day 2: Jackbooted thugs (summary) (response)

The Task Confronting Libertarians
Excerpt of chapter 24 of Man vs. the Welfare State [pdf], by Henry Hazlitt, 1969.
Available from the Ludwig von Mises Institute
Day 1 of Robert Wenzel's 30 Day Reading List on Libertarianism

I have to examine this reading in two lights: one in the context that Hazlitt was writing in 1969, and the other in the context of Wenzel offering this chapter in isolation as his "hook" to engage his readers and persuade them to read the rest of the series.

I cannot, of course, judge Hazlitt directly; I'm reading part of the second to last chapter of a 25 chapter book.* For all I know, Hazlitt could have made an airtight case in the preceding 23 chapters that supports the call to action in chapter 24. Even so, I do know something about its historical context. In 1969, the post World War II economic expansion was at its peak. The last recession, which was fairly mild, was 7 years ago, in 1961-1962. Real wages for all income levels had been rising steadily. The national debt had been falling slowly but steadily in nominal terms, and declining precipitously as a percentage of gross domestic product. There were still considerable social and economic problems, notably the Viet Nam war as well as institutionalized sexism and racism, in the decade preceding Hazlitt's book, economic conditions are as close to ideal as possible for a capitalist economy. Hazlitt notes the popularity of the Welfare State, and we can see its success in reality. Hence the title of these two posts: it is the very popularity and success of the emerging Welfare State that seems to motivate Hazlitt's alarm.

Man vs. the Welfare State is available for free in PDF format from the Ludwig von Mises Institute; if anyone wants to read and review the whole book, I would be happy, subject to ordinary editorial standards, to publish the review.)

Why then, does Wenzel use as his hook a diatribe more than four decades old, written under very different conditions than today? Even had Hazlitt made strong arguments in the chapter (and his few arguments there, taken out of context, are thin), they would be largely irrelevant today. Wenzel is clearly not writing to even the minimally skeptical reader. There were nearly 3,000,000 bureaucrats in 1969? So what? Big numbers by themselves don't mean anything. There were more than two hundred million people in the US then, and more than two million uniformed military personnel. (Furthermore, there are fewer bureaucrats today, 2,776,000, than in 1969, for a population that has increased from 202 million to more than 300 million.) The FCC forced AT&T to lower its long distance rates. And? As Hazlitt mentions, the decision is 144 pages long; all Hazlitt tells us is that long distance prices had already dropped, but doesn't tell us why the FCC still considered them too high. Hazlitt warns that the dollar might be devalued, like every other currency. Why should I care? The dollar is an arbitrary accounting unit, and if, as Hazlitt asserts, every other currency has devalued, then we're all back where we started. The facts and evidence that Hazlitt presents here, and that Wenzel considers a compelling introduction, are entirely unpersuasive.

What Hazlitt does extremely well in this chapter is lay down the core of Libertarian ideology:
  1. All government redistribution is always bad.
  2. All government regulation of business is always bad.
  3. All government control of money is always bad.
  4. Politicians and bureaucrats are, by professional necessity, dishonest, self-serving, short-sighted, and arrogant.
Indeed, Hazlitt has nothing at all good to say about government, even though some government seems necessary (a necessary evil?) for the conduct of business. So, by presenting this chapter as his hook, Wenzel seems to say, "If you believe, follow me; if not, you're better off looking elsewhere." As an academic, it's my job to investigate even where I don't believe, but for the average reader, this chapter seems to be nothing but a filter to include only those who already believe, albeit those whose beliefs are perhaps not yet precisely and coherently formed, or who lack an authoritative exposition of their beliefs. If you hate the government, keep reading; if not, you're already damned. But the true believers aside, a skeptical examination of Hazlitt's claims reveal not only that they lack argumentative support outside the context of his book, but they also seem profoundly counter-intuitive.

First, Hazlitt goes to great lengths to argue the obvious fact that redistribution is, well, redistributive, not productive. In neutral terms, it consists of taking money from people who have it and giving it to people who don't have it. It results, as Hazlitt describes, in a society where
nobody pays for the education of his own children, but everybody pays for the education of everybody else's children; by which nobody pays his own medical bills, but everybody pays everybody else's medical bills; by which nobody provides for his own old-age security, but everybody pays for everybody else's old-age security; and so on.
Well, duh. Ordinary non-Libertarians call this the essence of a community. If the concept, "Nobody pays for his own X, but everybody pays everybody else's X," is absolutely, intrinsically bad, then we have to rethink the foundations of modern government that go back to the founding of civilization. After all, nobody pays for his own law enforcement, but everybody pays everybody else's law enforcement; nobody pays for his own national defense, but everybody pays everybody else's national defense; nobody pays for his own automobile accidents, but, through insurance, everybody pays everybody else's automobile accidents; and so on. Hazlitt gives us no compelling reason we should consider education, medical bills, or old-age pensions to be different.

Hazlitt does give an uncompelling reason, though, "incentives." But "incentive" is just a euphemism for structural coercion. Of course, the largest source of structural coercion is nature itself: we have to eat, drink, wash, stay out of the cold, mate, have and raise children, etc. or we individually or as a species will suffer and die. In this fetishism of incentive, we see a classic case of what I call moral inversion: we must do X because of Y; therefore X is good, therefore we must preserve Y to justify X. We must work to live; therefore work is good; therefore we must ensure that we must work to live to justify the value of work, which is good. But in today's modern, technological society, the amount of work we have to do just to live has decreased tremendously. If it is more economically efficient to socialize education, medical care, automobile insurance, old-age pensions, law enforcement, national defense, or even food or housing, and nature ceases to create the incentive, it is monstrous to enforce a tyranny politically that nature no longer enforces.

Finally, Hazlitt's insistence on a full reserve gold standard* is so economically infeasible as to constitute the most appalling economic ignorance, outright delusion, or, more charitably, a hidden agenda. One of the "technical defects" Hazlitt obliquely refers to is that there wasn't anywhere close to enough actual gold to monetize the world economy even in 1969. Money, even electronic money, can change hands only so many times in an accounting period (in economics jargon, there are technological limitations on the velocity of money). If we were to restrict our money to actual gold (or even gold and silver), we would place an artificial limit on how much we could actually produce for trade. There's no way business would stand for such a limitation. Like God, fiat money is so useful that if the government didn't make it, business would invent it. (And they have. Many times. And without a central authority to manage it, it periodically collapses.) A 100% reserve gold standard is physically impossible, and there has never been a society in recorded history that successfully operated exclusively on a hard money standard, without at least some sort of back-door fiat credit.

*As opposed to fractional reserve gold standard private banking, a business model pioneered by private goldsmiths in Adam Smith's era. See Fractional Reserve Banking for more information.

More importantly though, the call for a full reserve gold standard, especially in conjunction with an absolute rejection of government regulation of business, philosophically rejects any economic role of the government. Remember, the government that Hazlitt so roundly condemns is not, as he implies, an entrenched oligarchy institutionally accountable to no one but itself, but rather a democratic republic, at least partially accountable to the people. I'm no fan of republics, but I seriously doubt that Hazlitt, or Libertarians in general, argue for more democracy, for more direct control of the government by the people themselves. No, they want to make economics independent of any government control, with the government acting only to protect the interests of the owners of property. In short, the sort of Libertarianism Hazlitt presents is nothing more than plutocracy, where the owners of property can impose their will without any interference from the people.

Thursday, December 20, 2012

Day 1: It's popular and successful, so it must be stopped! (summary)

Day 0: The Libertarian catechism
Day 1: It's popular and successful, so it must be stopped! (summary) (response)
Day 2: Jackbooted thugs (summary) (response)

On June 18 2012 the Ludvig von Mises Institute website posted an excerpt from "The Task Confronting Libertarians," chapter 24 of Man vs. the Welfare State*, written by Henry Hazlitt (1894–1993) in 1969, presumably in response to Robert Wenzel's J30 Day Reading List, posted on June 11 of the same year*. I'm describing the complicated provenance in some detail to highlight first that even forty years after Hazlitt's book, Libertarians still consider this chapter relevant. I also want to make clear that it is they, not I, who ask us to consider this chapter outside of the context of the original book, as the "hook" for becoming more knowledgeable about Libertarianism. In this chapter, Hazlitt presents the task confronting Libertarians as daunting, but maintains that the committed Libertarian can make a difference, and that it is the responsibility of all committed Libertarians to take up the struggle.

*The excerpt does not seem to fall under fair use, so presumably the Ludvig von Mises Institute has seen to the appropriate permissions and compliance with copyright protections.

**Given that von Mises post of the chapter is dated a week after Wenzel's post, it's unclear what Wenzel was originally linking too.

Hazlitt describes the Welfare State's almost insurmountable advantage. Hazlitt complains that "more than 100 out of the 111 or so nations and mini-nations that are now members of the International Monetary Fund" are drifting towards socialism and government control. In just our own country, Hazlitt claim the Welfare State is promoted and defended by "armies of bureaucrats," with 2,500 agencies and nearly 3,000,000 employees in the United States federal government alone. According to Hazlitt, these bureaucrats — especially the 100,000 in the Department of Health, Education, and Welfare — have an obviously self-interested motive in protecting their own jobs and work to undermine and marginalize any honest inquiry by "the individual businessman, the occasional disinterested professor of economics, or columnist, or editorial writer" as to their utility. Furthermore, Hazlitt argues that even the individual efforts of these bureaucrats swamps any individual's capacity to keep up. Hazlitt highlights that to intelligently comment on the FCC's 1967 "extremely harmful decision" that AT&T must lower their interstate telephone rates, well-informed criticism requires reading its 144 single-spaced typewritten pages. Libertarians, Hazlitt contends, must somehow navigate a "Niagara of decisions, regulations, and administrative laws" to effectively oppose the Welfare State. And it is not just the bureaucrats. Every day, according to Hazlitt, "individual private zealots" present "elaborate statistics that supposedly prove" the need for government reform. Hazlitt accuses even business owners of at least passive complicity in this creeping socialism, whether from confusion, cowardice, or self-interest. It seems that all of the world is united against the occasional champions of liberty.

Hazlitt proposes the obvious solution, organization and specialization. If the enemies of liberty are united, so too must its champions. These organizations must not only promote "pious generalities" but also grapple with all the detail and complexity of the Welfare State's propaganda in specialized organizations such as the Citizens Foreign Aid Committee, the Economists' National Committee on Monetary Policy, and the Tax Foundation. However, Hazlitt contends that even the lay Libertarian can contribute by concentrating on a few basic principles. The first principle Hazlitt highlights is that government is not productive. All the government can do is unjustly redistribute, "robbing Peter to support Paul." The supposed justification, which Hazlitt attributes to J. K. Galbraith (presumably John, not his son James), is that "the taxpayers, left to themselves, spend the money they have earned very foolishly, on all sorts of trivialities and rubbish, and that only the bureaucrats, by first seizing it from them, will know how to spend it wisely." Every expenditure is a trade-off, and when the government seizes a billion dollars from the taxpayers, it is taking away millions of needs and wants from those taxpayers. Government redistribution is inherently arrogant and unjust. Second, Hazlitt exhorts Libertarians to highlight the long-run consequences of government redistribution. Fundamentally, Hazlitt contends, all redistribution destroys the incentives of both the rich and the not-so-rich. The rich cannot keep the fruits of their labor, and why should those otherwise "capable of earning at least a moderate income" labor to obtain that which the government gives away for free? Finally, Hazlitt believes Libertarians should strongly condemn inflation and the fiat money that makes it possible, and push strongly for a 100% reserve gold standard. Inflation really is the keystone issue: without absolutely hard money and the impossibility of inflation, the Libertarian agenda, Hazlitt argues, is feasible; with fiat money and inflation, the Libertarian agenda is vastly more difficult. Thus we can say that opposing government redistribution, preserving incentives, and demanding an absolutely hard currency form the core of the Libertarian agenda.

(Because the summary is already long, I'll post my response later today)

Wednesday, December 19, 2012

The Stupid! It Burns! (ho ho ho edition)

the stupid! it burns! Stupid Atheists:
What’s hilarious about this ill-thought out campaign [the Times Square billboard] is that the atheists keep telling us they are only interested in evidence. They only want the facts ma’am. They’re thinkers. They’re rational. blah blah blah.

They’re opposed to “myths”. They don’t like make believe. They think it’s a form of child abuse to tell children stories about big sugar daddies in the sky who will give them everything they want. Religion is, they say, an infantile belief system to bring comfort to the frightened, weak minded babies. The atheists tell us they’re down on fairy tales. They don’t believe in magic sky fairies.

But they want to keep a magic elf who lives at the North Pole and flies through the sky with dancing reindeer? They want to keep the fat fairy man who comes down the chimney of every home in the world in one night while drinking Coca Cola? . . .

In the meantime they dub the crucified Jesus Christ a “myth”? In fact, of the two images, Jesus Christ crucified is just about as far from a myth as you could get. It’s about as mythical as a photograph of an Auschwitz corpse or one of those black and white photos of a lynched negro hanging from a tree.

I don't normally do repeats, but the comedy gold of the incomparable Fr. Dwight Longenecker is just too good to resist.

The Libertarian catechism

Day 0: The Libertarian catechism
Day 1: It's popular and successful, so it must be stopped! (summary) (response)
Day 2: Jackbooted thugs (summary) (response)
Day 3: The sophisticated theology of the market (summary) (response)
Day 4: Economics as theology
Day 5: A socialized straw man
Day 6: The cause of, and solution to, all the world's problems (summary) (response)
Day 7: An unproductive critique

In a display of synchronicity too odd to dismiss (as Bokonon says, "Unusual travel suggestions are dancing lessons from God.") Allen Small recommends Robert Wenzel's The 30 Day Reading List that will Lead You to Becoming a Knowledgeable Libertarian just as I begin my winter break and am free for a month from my academic and professional responsibilities. So, on his suggestion, I will tackle one article each day every other day (on average, excluding holidays), read it carefully, and post a summary and response.

I've chosen the title of this post advisedly. A quick survey of the first few articles reveals, unsurprisingly, a tone I became intimately familiar with before I ever thought about studying economics: Christian apologetics. Libertarianism, as presented by Wenzel and endorsed by Small, is a faith. Indeed, a luminary no less than Ludvig von Mises explicitly equates economics and religious faith: the "particular theorems [of economics] are not open to any verification or falsification on the ground of experience. . . . The ultimate yardstick of an economic theorem's correctness or incorrectness is solely reason unaided by experience." Without exception, all of the first half dozen of the articles tell the reader what to believe; they do not even attempt to persuade the skeptical, critical reader. It is, so far, pure catechism. We'll see how later works play out, but I strongly suspect that, like Christianity, we'll move from catechism to Sophisticated Theology, with the only hint of science or critical thought being an adoption of the forms and vocabulary of skepticism without its actual content.

I will do my best to get through the series, but I make no guarantees.

See you on the other side!

Sunday, December 16, 2012

Socialist vs. Libertarian Smackdown!

UCD Libertarian vs. Socialist Debate from Jeffrey Koehler on Vimeo.

Atheist Census

Atheist Census

On conflict

We can resolve human conflict into three general classes.

The first class of conflict is argument, where people disagree about what is in some sense true whether anyone in particular likes it or not. Argument requires that both* parties really want to know the truth, irrespective of their (direct) preferences. (Obviously, preference is important at an indirect level: both parties have to prefer to know the truth.)

*All of these classes of conflict apply to more than two people, but it's slightly easier to discuss them in terms of dyads.

The second class of conflict is negotiation. In a negotiation, the parties' low-level preferences are central in a way that they are not central in an argument. In a negotiation, both parties are trying to maximize their individual satisfaction by taking advantage of mutual benefits, but there are enough differences of opinion that the optimum mix of gains and sacrifices are non-obvious and usually non-trivial.

The third class of conflict is fighting. In a fight, the parties' direct preferences are still central (they're fighting for what they want), but one or both parties do not see any mutual benefit: one party's win must be the other's loss.

Almost everyone wants to frame a negotiation as an argument, and they want to frame a fight as either a negotiation or an argument, because a negotiation requires more goodwill than a fight, and an argument more goodwill than a negotiation. If you can get your opponent to offer more goodwill than you are willing to offer, you're in an advantageous position to get more in a negotiation or win a fight.

Pay attention to the frame. If you're in a negotiation, watch out for your opponent framing his preferences as truths. If it's really a fight, watch out for your opponent framing his battles as negotiations.

Saturday, December 15, 2012

Why we fight, and why we we fight for what we do

The Crescat's recent post is, of course, stupid on so many levels that there's no way we can actually engage at any intellectual level with the author. All we can do is stare in astonishment yet again that a real human being can actually be that stupid.

However, a commenter on my post describes why we New Atheists do indeed confront Christianity in the United States:
I am an escaped Xtian. It did in fact take me more than 20 years to allow myself the freedom to admit my own doubt (mainly due to the overriding presence of the HELLFIRE meme, which threatened me every time I was about NOT TO BELIEVE IN JESUS). . . . Once I had the courage to face the terror of HELLFIRE, and say, "even if it means hell for me, I must be honest about what I believe or don't believe". The amazing was that the HELLFIRE terror vanished when I turned around to face it: I have not been afraid since. It took only my willingness to be honest to make this chimera disappear.
The fear of hell is very real, and it causes a lot of suffering.

The Crescat complains that the American Atheists display "sniveling cowardice" because they choose to confront the evils of Christianity rather than the evils of Islam. But that's complete nonsense. First, a lot of New Atheists do confront Islam, with Maryam Namazie leading the charge, and with, as far as I know, the support of most of the New Atheist community. But there are many problems in the world, and each individual has to fit his or her personal strengths and weaknesses, as well as his or her standing, to the problems of the day, and determine the best use of his or her time. There are three issues that lead most Westerners to focus more on Christianity than on Islam. First, Christianity is the predominant religion in the West. Even if Islam were ten times as bad as Christianity, the total amount of suffering Christianity causes in the West would still be ten times as much as Islam. Second, Westerners have less standing (not none at all, but less) to effect changes in those societies where Islam predominates. We are neither citizens of those countries nor members of those cultures; our criticism is limited to what is appropriate for an outsider. In contrast, since we are citizens and members of our Western, Christian nations and cultures, we have far greater scope to effect changes as insiders. Thus most New Atheists reasonably spend more time on issues that can do more harm and that we can more immediately and powerfully affect.

But there's a bigger issue. There is an enormous tendency among neoconservatives to cloak imperialism in criticism of Islam. The argument is not really that Islam is oppressive; the argument is that the oppression is improperly justified. It's not that Muslims are marginalizing, oppressing, killing, and torturing women, homosexuals, intellectuals, etc. It's that Muslims are marginalizing, oppressing, killing, and torturing women, homosexuals, intellectuals, etc. in the name of the wrong god. If they were marginalizing, oppressing, killing, and torturing women, homosexuals, intellectuals, etc. in the name of Jesus, then it would be all good. Obviously, no neocon critic of Islam is going to come right out and openly make the "wrong god" argument, but when someone actually says we should stop criticizing Christianity and start criticizing others for the same things that Christians actually do, there's really no other conclusion we can reasonably draw than that Christianity cannot be at fault precisely because whatever it does is justified by being in service to the right god. As I seem to recall reading in some book or another:
And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye? Or how wilt thou say to thy brother, Let me pull out the mote out of thine eye; and, behold, a beam is in thine own eye? Thou hypocrite, first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother's eye.
In other words, if Christians want to be exempt from criticism for their oppression, they could reasonably start by not, you know, actually being oppressive and evil.

Friday, December 14, 2012

The Stupid! It Burns! (war on Christmas edition)

the stupid! it burns!, be honest. It’s just Christians you have issue with, not religion in general… The author (amazingly) cites and quotes the American Atheists post, Winter Billboard Launched in Times Square:
David Silverman, President of American Atheists stated, “We know that a large population of ‘Christians’ are actually atheists who feel trapped in their family’s religion. If you know god is a myth, you do not have to lie and call yourself ‘Christian’ in order to have a festive holiday season. You can be merry without the myth, and indeed, you should.”
In response, the author writes:
Truly, this is a sniveling cowardice “campaign” they’ve got going and it’s hidden behind false concern for poor suffering closet atheists living in fear of retribution from their Christian families. I think they’re confused. They have Christianity mistaken for something else.

Where is their sense of concern for large populations of Muslims “who feel trapped”? . . .

And if you want to get down to technicalities, your billboard is false. . . .

The word “myth” should actually be under the Thomas Nast version of Santa Claus. . . .

Get your own damn holiday. Just make something up. I hear your pretty good at that.

Thursday, December 13, 2012

Ethics, meta-ethics, death, and killing

In his comment to my post, Do the ends justify the means?, theObserver encourages "radical honesty." theObserver believes that all ethical systems are to some extent flawed and self-serving. While I don't agree that all ethical systems are "flawed" — I don't know what would constitute a flaw in an ethical system — I do agree that all ethical systems are in a sense self-serving: an ethical system just is systematic expositions of one's socially relevant preferences. But theObserver raises an interesting question: Do one's preferences dictate a meta-ethical system or any of its components?

In one sense, the question is trivial, since if you dig down deep enough, one's preferences, in some sense, dictate everything. Even science: our preferences dictate what we choose to study scientifically, how we choose to study it, and how what kinds of models we use to describe an object of study. Yes, some specific propositions emerge from this methodology that are preference-independent, but as philosophers since Kuhn have noted, the whole process is so subjective and preference-driven that the notion that science is absolutely "objective" and preference-independent is obviously incorrect.

In another sense, though, we do have methodologies, such as science, that really do subvert some of our preferences. It would be unacceptably reductionist to simply say that we just believe what we prefer to believe, without any reference to constraints imposed on our beliefs by observation, experience, and reason. Thought is complicated, and I don't think it a good theory to say that every particular thing a person does and says results directly from a preference that is simply a brute fact of his or her consciousness. On the other hand, people do have preferences which do inform their speech and action, and while these preferences presumably have a causal history, they are actual facts about the world.

As theObserver correctly notes, the difference between deontological and pragmatic meta-ethics is philosophical rather than scientific; neither deontological nor pragmatic meta-ethics by itself actually solves any particular ethical question. But that observation seems unsurprising. If someone has "bad" preferences, i.e. the sort of preferences that you, gentle reader, and I both find unacceptable or abhorrent, phrasing them in terms of deonticism or pragmatism isn't going to make those preferences any better. I claim that at best, pragmatism makes the analysis of ethical beliefs, good and bad, more straightforward and consistent.

theObserver, however, goes on to make a stronger claim:
Modern history offers its own objections [to pragmatism], even when using a pragmatists own standard. France for example with its long history of revolutionary political violence accepted such violence as the inevitable price of change. Thus in post-war France, philosophers like Sartre were able to welcome Stalin’s slaughter and the show trails because they showed, perversely, the great cause was worth fighting for. The communist revolution was the Party and to dissent against the Party was to weaken the revolution. Therefore sacrifices must be made for the great cause.
It is not clear, however, how pragmatism per se is the culprit here. First, even granting arguendo that Sartre and others really did "welcome Stalin's slaughter and show trials" (I don't know either way), the actual argument is that the extremity of the means justified the ends. This argument might be labeled as perverse deonticism, but it is not pragmatism. A pragmatist could argue only that the ends were so valuable that even the "slaughter and show trials" were of lesser consequence than the value those means obtained. That's a much more difficult case to make; given uncertainty and a welfare-utilitarian view of outcomes, I think the pragmatic case cannot be made. I think the only way to make the case for egregious acts of brutality against human beings is to take a deontic view (e.g. communism is inherently better than capitalism, regardless of any specific consequences), which is of course not an argument against pragmatism, or to take a non-welfare-utilitarian view of outcomes (e.g. the best outcome is one where I have absolute power over other people).

The latter "bad" case above just rests on "bad" preferences for outcomes. But it is already admitted that a meta-ethical system does not by itself entail that one's actual preferences are good. A meta-ethical system is just a framework for conceptualizing ethics. In much the same sense, the scientific method does not mean that all actual science performed by scientists accurately describes the real world; it's just a framework for a process. So just like saying that a scientist can do bad science (or even do good science and get fooled by the world, which happens a lot),
simply saying that a pragmatist can have bad ethics is not by itself an argument against pragmatism.

And in fact, the theObserver's pragmatic analysis of the specific ethical failures of Stalin shows the power of pragmatism as an analytic tool. The outcome wasn't worth the means to get there; if the outcome had been worth it, if the Soviet Union were today a Stalinist paradise, we would be as tolerant of its historical faults, however grievous, as most people are of the historical faults of every other society, including our own*. We judge Stalin bad not because he contravened any deontic, inherent ethical truth, but because he failed. The ends were insufficiently good to justify the means.

*Stalin is a monster, and communism is utterly discredited, because Stalin unjustly tried and killed a few hundred thousand people. The founders of the American Republic, however, who suborned the actual enslavement of millions of human beings and laid the foundation for our present society that imprisons and oppresses millions of black and Hispanic human beings and is has killed tens of millions of human beings for its colonialist and imperialist ambitions, were intelligent, thoughtful men struggling as best they could (and quite well indeed) with difficult political problems, and they helped build today's capitalist society , which is, absent a few judicious reforms, a successful, vibrant political system which should serve as a model for the rest of the world.

theObserver continues:
You may answer ‘Yes but as a result of pragmatism I no longer support a party system and instead support delegate democracy.’ Fair enough. But cost of that knowledge was horrendous and consequentialist ethics were deployed to justify these actions in opposition to deontological ethics. If we were to pragmatically choose ethical systems based on pragmatism by observing outcomes, I don’t think pragmatism itself comes out ahead very often.
I don't see this as much of an objection. First, all knowledge, and all changes in our ethical beliefs, have come about by horrendous costs. All of human history is written in the blood of children. More importantly, I am not convinced that "consequentialist ethics were deployed to justify these actions in opposition to deontological ethics." As theObserver himself notes, the difference between consequentialist/pragmatic and deontic ethics is philosophical, not scientific: any ethical belief, good or bad, can be framed in both pragmatic and deontic terms, and any objection to some ethical belief can be similarly framed in both meta-ethical terms. One can, therefore, simply frame everything bad that's happened in pragmatic terms, and frame all the objections in deontic terms, and poof! pragmatism comes out looking terrible. One can also do the opposite, of course, and find deonticism to be completely horrible. Therefore, this kind of analysis does not seem promising.

However, it's worth noting that deontic meta-ethics often tries to frame its principles in terms of pragmatism or pseudo-pragmatism. As theObserver notes, deontic ethicists assert that deontically worse actions (somehow) always have "negative and usually unforeseen consequences"; they also usually assert that deontically better actions always have positive consequences. To the extent that the consequences of actions can be judged independently of the means, then they are simply asserting the equivalence of deonticism and pragmatism. However, there are three varieties of pseudo-pragmatism. The first is vacuous pseudo-pragmatism: the best outcomes are whatever happens to occur from deotically better actions; we cannot judge an outcome independently of the means used to obtain it. So if, for example, the deontically good free market system entails that we have massive unemployment and a permanent hyper-exploited and imprisoned underclass, well, those must be good outcomes; people are getting what they deserve, or, bad as these outcomes might be, any change would be for the worse. The second is unfalsifiable pseudo-pragmatism: submitting to the Church's moral authority will have a pragmatically better outcome, more people will go to heaven in the afterlife), but while the pragmatic outcomes can be independently judged (it is better per se to go to heaven than hell), they cannot be independently observed. Finally, there's delusional pragmatism, means justified by some imaginary end that cannot possibly be known to result from those means. None of these are actual pragmatism (rational pragmatism entails that the ends be reasonably knowable and known), but all four of these cases show the value of pragmatism: even when they cannot do so, and have to retreat into metaphysical bullshit, the pragmatic argument remains powerful.

Finally, I want to confront one of theObserver's points head on. "How many people can we kill to make the world a better place for the rest? How much must I sacrifice to reach my goal?" These are questions that demand, I think, answers less simplistic than "none" and "nothing," respectively. How many people should we have killed to end slavery? We can argue that perhaps, the answer is less than the hundreds of thousands who died in the U.S. Civil War, but to answer none at all is to suborn chattel slavery. How many should Gandhi have encouraged to protest, exposing them to death, to achieve Indian independence? Hundreds, perhaps a thousand, were killed in the Jallianwala Bagh massacre alone. How many construction workers have to fall to their deaths or electricians have to be electrocuted so we can have our homes and offices? Again, the answer might be fewer than actually occur, but none? We live in a hostile and uncertain world, and we have to make trade-offs, sometimes trade-offs that result in people's death. If you absolutely condemn killing as unjustifiable, then you also, I think, have to absolutely condemn putting people in situations where you know some will die; else you cannot condemn Hitler, who never, as far as I know, actually killed anyone. And, fundamentally, if you will not kill, or suborn actual killing, you cannot defend yourself against tyranny and oppression.

This is not to say that killing and death are entirely unproblematic, tools as benign as eating and drinking. They always result in, well, the deaths of human beings, which is an unarguably bad outcome. Without a doubt we always want to have fewer deaths (i.e. shortened lives), but we cannot have zero.