The Devil Went Down to Wall Street

The Devil Went Down to Wall Street


Abstruse Goose

(reprinting permitted)

Political arguments

PZ Myers reviews an interesting study of political argumentation and strategy:

[W]hen you've got an argument going, and one side has the evidence but the other side has an inflexible certainty that the evidence is wrong, the inflexibles tend to distort the normal process of weighing the evidence and drawing reasonable conclusions — they suck in more uncommitted participants (called 'floaters') to their way of thinking, generating more inflexibles, strengthing [sic] the position of the anti-science side, leading to greater attraction to being wrong. The counter-strategy, suggested later in the paper, is to 'get more inflexibles' — winning over floaters so they drift over to your side has little long-term impact, it's far better to build a larger army of forceful advocates for your position.

Myers notes that the paper "is entirely theoretical, based on a mathematical model of human behavior" and therefore of limited usefulness. It's an interesting paper nonetheless, and [from the original paper]

The results she a new but disturbing light on Designing adequate strategies to eventually win public debates. To produce inflexibles in one's own side is thus critical to win a public argument whatever the rigor cost and the associated epistemological paradoxes. At odds, to focus on convincing open-minded agents is useless. In summary, when the scientific evidence is not as strong as claimed, the inflexibles rather than the data are found to drive the collective opinion of the population. Consequences on Designing adequate strategies to win a public debate are discussed.

Everything you wanted to know about the Pope...

Definitely NSFW

(via PZ Myers)

Blogroll and comments

I've trimmed my blogroll. I'm keeping only:

• Blogs I read regularly
• Blogs that I don't read, but I think are important
• Blogs that link to me, unless I really dislike them.

I may have made a mistake. If you're linking to me and I'm not linking to you, I may not know about the link, or I may have deleted you in error (the mouse does slip from time to time). If you care, send me an email.

AFAIK, most site ranking algorithms ignore blogrolls. I almost never click blogs from other people's blogrolls. I conclude their utility is limited.

I've also turned off comments. Some blog authors like them and find them valuable, but I don't. As far as I'm concerned, there are three useful functions for blog comments: To build a community (e.g. Pharyngula), to correct errors of fact, and to conduct reasonable debate about complicated issues. I'm not interested in building a community, and I'm careful enough about the facts; if you want me to correct an error of fact, you're welcome to email me.

I'm interested in reasonable debate, but 95% of the people who disagree with me are either flat-out liars (e.g. Christians) or idiots (e.g. anarchists). There have been a few good exceptions, but not enough to be worth the trouble of the jackasses whining that I'm some sort of Maoist tyrant because I won't publish their stupid, argument-free dogma in the comments on my blog. Regardless of whether I'm correct or mistaken, it seems like I'm so far out of any ideological box that my opinions put seemingly reasonable people into a state of apoplectic rage or embittered betrayal. I just don't care that you don't like me any more because of what I said. I learned long ago that most people don't like me no matter what I say or do; if that's the result of a flaw in my character or intellect, it's one I'm powerless to correct.

If you don't like what I have to say, write about it on your own blog. If you do like what I have to say, write about it on your own blog. I don't pay much attention to links, so if you want me to respond, you'll have to email me.

You are free to republish without changes anything original I publish here, with attribution and a link. (For content I republish, you'll have to follow the licensing of the original author.) Of course fair use permits excerpts for several purposes, including critical commentary.

If you have questions or want clarification about something I've written, email me. Unless you tell me otherwise, I'll refer to you anonymously and paraphrase your comments. If you want to argue — with evidence and reasoning — that I'm wrong, email me. I'll anonymize and paraphrase by default, but if you give me explicit, specific permission I'll consider publishing your unedited argument as a post, with whatever attribution you specify.

If you want to tell me what a big jerk I am, you can email me. If it makes you feel better to get it off your chest, good for you. Remember, though, I assume unless proven otherwise that everyone thinks I'm a jackass, so don't expect me to be crestfallen that you personally think I'm a jackass.

Immigration and labor

A reader brings to my attention Joe Mostowey's essay on immigration and labor:

The illegal immigration problem is more accurately described as a labor problem.

In todays right-to-work era, free market, and what the market will bear pricing, it is only natural for employers, who have no loyalty to countries or communities to seek out the lowest priced labor possible.

They did this in the era before labor unions too. They imported Chinese to build railroads, Africans to pick cotton, poor Europeans to be laborers. ...

We already know that the Media, and Businesses have a vested interest in keeping the status quo, in keeping the flow of immigrant workers as high as possible to prevent the a rise in the cost of labor.

Until the worker in America realizes that as an individual he or she has no voice, no power and no future, the illegal immigrant will continue to replace him, will contine to lower labor costs and devalue the the only product he has -his labor.

Interestingly enough, Paul Krugman writes today on the curious politics of immigration:

[M]y take on the politics of immigration is that it divides both parties, but in different ways. ...

On one side, [Democrats] favor helping those in need, which inclines them to look sympathetically on immigrants... On the other side, however, open immigration can’t coexist with a strong social safety net. ...

Republicans, on the other hand, either love immigration or hate it. The business-friendly wing of the party likes inexpensive workers... [b]ut the cultural/nativist/tribal conservatives hate having these alien-looking, alien-sounding people on American soil.

Goddess of the market

Satyajit Das reviews Goddess of the Market: Ayn Rand and the American Right by Jennifer Burns:

In “Goddess of the Market”, Jennifer Burns identifies the source of [Rand's] appeal. The very shallowness of her thinking that intellectuals dismissed was inherently attractive to a certain sensibility, especially adolescents. Her absolute values and intolerance are attractive to those who prefer a Manichean worldview.

I disagree, however, that

Rand’s popularity also derives from her correct insight that thriving societies are not possible without freedom, entrepreneurial abilities and innovation. This fact is most evident in China’s embrace of market economics to some degree.

This "insight" is not particularly profound; few "collectivists", I think, would assert that we want to do without innovation entirely. The question is how best to innovate, and how best to manage innovation. The financial innovations of the last few years, for example, have not proven particularly socially valuable.

I also disagree that "Rand never succeeded in creating a lasting legacy or political movement. The collective fell apart when she fell out with Branden." Rand's actual "cult" fell apart, but her legacy — as evidenced by the popularity of her books today as well as the adoption of key ideological themes, especially her take-no-prisoners absolutism, by the leadership of the radical conservative movement — lives on.

As Rogers notes:

There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

The genre artist

The Genre Artist:

Jack Vance, described by his peers as “a major genius” and “the greatest living writer of science fiction and fantasy,” has been hidden in plain sight for as long as he has been publishing — six decades and counting. ... [Vance is] one of American literature’s most distinctive and undervalued voices.

(via Frederik Pohl)

Philosophy of the LTV

The philosophy of the Labor Theory of Value is irrelevant to determining whether or not it's actually true: we must depend on empirical tests. However, the philosophical justification is important to understanding what the Labor Theory of Value actually says, and how it can be empirically tested.

The LTV starts with the observation that how human beings use our physical bodies over time is the only sort of decision or choice we can directly make; every other kind of choice (at least choices that have physical effects) results from our choice as to how to employ our labor. Since labor is the only thing we physically can make direct choices about, it seems at least plausible to hypothesize that the amount of labor will determine prices.

The LTV assumes that all labor has equal "intrinsic" value. There are more or less valuable ways that someone can use her labor, and there are particular characteristics of individuals that allow them to employ their labor more effectively for some uses and less effectively for others. The point of the "equal value" premise is to say that an hour of Jane Doe's labor is not more valuable just because she happens to be Jane Doe — or more realistically, just because she's white or her parents were royalty, nobility or of a particular economic class. It does not contradict the LTV to say that because Jane Doe is smart, hard working, talented, charming, and sociable, she therefore can put her labor to more valuable uses than could the dull, lazy, obnoxious John Smith. It would contradict the LTV to say that because Jane Doe is smart, etc. her labor is intrinsically more valuable than John Smith's regardless of the uses to which they put their labor.

Note too that the LTV, by incorporating the notion of abstract labor time, does not make any assumption at all about the variability of individual characteristics that allow people to put their labor to more or less valuable uses. The abstract qualifier is empirically meaningful to the extent that we can independently measure these individual characteristics and correlate them both empirically and theoretically to different uses of labor. For example, we can to some degree independently measure "intelligence" and correlate these measurements both empirically and theoretically to labor of more or less value. ("intelligence" tests measure only very narrow and specific cognitive abilities, and the relatively small differences between ordinary human beings in what "intelligence" tests measure does not come close to explaining actual differences in pay. Bill Gates might be smarter than me, but it seems unlikely he's even a thousand times smarter than me.)

Note that the "Libertarian" theory that all differences in pay are necessarily or by definition due to different individual characteristics that afford higher-paid people the ability to put their labor to more valuable uses is an entirely different (vacuous and unscientific) theory, lacking the critical components of independent measurement and theoretical justification. A CEO making $10,000,000 per year has mystery qualities compared to a top research scientist making $100,000 per year: We "know" the CEO must have better qualities because he is paid more; we don't know he is paid more because he has different measurable qualities.

The rest of the LTV follows directly from the ordinary assumptions of the ideal free market of independent, self-interested, rational individuals making mutually beneficial choices. Of course, the ideal free market is itself an ideal theory: it makes a number of assumptions that don't actually obtain in the real world.

It bears repeating: The Labor Theory of Value (as well as the ideal free market) is not intended to be a complete explanatory theory. It is, rather, half of a reduced theory: Just as Newton reduced celestial and terrestrial motion to inertia plus gravity, the LTV reduces economic behavior to labor plus externalities. The empirical value of the LTV thus depends on being able to independently measure externalities, correlate externalities to economic behavior, and empirically demonstrate that without the externalities, prices would correspond directly to labor time.

Reasonably Suspicious

What "Reasonably Suspicious" really means.

The Labor Theory of Value

The Labor Theory of Value (LTV) holds that the price of a commodity is determined by the amount of actual labor required to produce that commodity.

There are a couple of quibbles that can easily be addressed.

The LTV talks explicitly about price, not use-value. A commodity that takes twice as much labor to produce as another is not necessarily twice as useful or inherently valuable the other commodity. The LTV says only that if some item is actually traded for some other item (i.e. presuming the use-value of the items justifies the trade, and therefore makes them commodities), the relative magnitude of the trade will be determined by the amount of labor necessary to produce the items. If it's worth trading hats for shoes, and it takes twice as long to make a pair of shoes as to make a hat, then one pair of shoes will be traded for two hats.

All the quantities in the LTV are not individual but statistical quantities, and they are all relative to the physical means of production actually in use. "The amount of labor necessary to produce a commodity" is a statistical property of how much labor is necessary to produce all the shoes in a particular economy. Hence Marx explicitly qualifies his version of the LTV by talking about the socially necessary labor time.

All labor is not the same, even restricting "labor" to time spent producing commodities of known price and use-value. Labor differs in intensity, desirability, training, education and marginal utility* (i.e. the time spent making the first widget creates more use-value than the time spent creating the last marginally useful widget). Again, Marx explicitly qualifies his version of the LTV by talking about the abstract labor time. If, for example, it were half as desirable to make hats as shoes (perhaps because of the obnoxious fumes), then the abstract labor time necessary to create a hat would be twice the actual labor time, and one hats would trade for one pair of shoes. Similarly, because it takes an additional seven to ten years (and a considerable amount of labor) to train a physician, the abstract labor time of an hour of a physician's actual labor is also magnified.

Also, the Marginal Utility Theory of Value (MUTV) does not contradict the LTV. The MUTV specifies which statistical properties of labor time constitute the price.

These quibbles notwithstanding, the LTV is, of course, not even close to being true, at least not by itself. For example, it's implausible to believe that in 2007 more than ten times more labor* was required to build a house in Sunnyvale, CA than in Youngstown, OH. It's implausible to believe that a Macintosh computer takes twice as much labor to build as a similarly configured Windows computer.

*National Association of Realtors

The best way, I think, to view the LTV is as a candidate "ideal" theory in the same sense as Newton's First Law of Motion. Neither bodies on Earth nor celestial bodies ever travel in straight lines at constant velocity. In a similar sense, the LTV can be recast with the proviso: In the absence of external economic forces, the price of a commodity is determined by the amount of socially necessary abstract labor time necessary to produce that commodity.

Of course, simply saying that the LTV is an "ideal" theory does not make it true, any more than calling Newton's First Law of Motion an ideal theory makes it true. There are specific scientific techniques that we can bring to bear on ideal theories to gain confidence in their truth.

It's important to understand that Newton never observed an object traveling in a straight line at constant velocity. The "net force" Newton was most interested in, of course, was gravity. Newton never actually observed one body exerting a net force on another body. The First Law of Motion (inertia) is explicitly contradicted by observation, and its primary modifier (which turns inertia into an complete* theory) was also not observable. (Worse yet, Newton had no clue how one body could actually exert a gravitational force on another.)

*At least regarding celestial bodies, which aren't affected by air resistance and aerodynamics, and leaving aside General Relativity for the time being.

We cannot justify inertia on "philosophical" grounds. The elegance and aesthetic appeal of the logical derivation from first principles is irrelevant. The "obvious" or intuitive appeal of those first principles is irrelevant. How can we empirically justify the FLM and the theory of gravity?

If we simply "induce" laws of motion from celestial bodies and bodies on the Earth, we end up with one law of motion for Mercury, one for Venus, one for the Sun, one for the Moon, etc., etc. and yet another for bodies on the surface of the Earth. (Curiously, we have (not counting aerodynamics) only one law of motion for all objects on the Earth's surface.) But if we hypothesize "unobservable" inertia and gravity, we end up with one law of motion which takes two independently observable* parameters: mass and distance. We cannot simplify all the motions of the celestial bodies without assuming inertia and gravity.

*More-or-less observable (and more directly observable than inertia and gravity). Density does not vary that much, and we can get a reasonable estimate of mass and distance from apparent size.

(It is a separate philosophical issue whether this sort of substantial simplification is at all epistemically relevant.)

If we consider LTV as an "ideal" partial theory, can we do the same sort of thing? There are a number of scientific tools available to us for testing the LTV.

The first tool is a general correlation. Correlation is not causation, but lack of correlation falsifies hypothetical causation. And there is indeed an apparent general correlation between actual labor time and price: jet airliners require more labor time per unit than houses, which require more labor time than cars, which require than computers, which require more than hamburgers, which require more than jellybeans, and the money prices show the same inequalities.

We can eliminate or control for "external" forces: Houses might vary in price between Sunnyvale and Youngstown without regard to labor time, but the difference in price of two houses in Sunnyvale or two houses in Youngstown will correlate more strongly to the difference in the amount of labor actually required to build the houses. A computer shipped by Amazon.com (i.e. a non-location-dependent commodity) to Sunnyvale will have almost exactly the same price as one shipped to Youngstown. (In a similar sense, inertia is more directly observable for bodies moving in nearly frictionless environments at right angles to the force of gravity.) The difference in price of two Windows computers will be more correlated to the difference in actual labor time, as will the difference in price of two Mac computers.

Better yet, we can independently observe "external" economic forces — geographical location, network effects, monopolies and monopsonies, etc. — and we can observe that two commodities with similar independently observable externalities will have similar "distortions" to the LTV.

Therefore we can conclude that the LTV + externalities has a similar empirical justification to inertia + gravity, and similar confidence is scientifically warranted in both.