No Market Failures

There is no such thing as market failures; there are only market solutions.

The problem with mainstream economics, as Steve Horwitz points out, is that they start with the assumption of perfect allocation. When that does not occur -- because it cannot occur -- a market failure is proclaimed. But if one starts with the question of how anything gets allocated at all, of how one can get any kind of coordination at all, then one comes to the realization that markets do a great job. It's idealism vs. realism. Where do you begin? If you begin with an idea situation -- of perfect allocation, perfect knowledge, and perfectly self-interested rational actors (who of course have perfect knowledge) -- then you will always end up terribly disappointed with the real-world system. And you will look to other "solutions" to solve the problem. Of course, if one starts with reality in the first place, realizing that perfection is not possible, then what is interesting is that order and coordination comes about at all. One cannot presume order -- one has to explain it. Mainstream economics, presuming what should be demonstrated, cannot. Austrian economics can. And does.

Against Social Justice

Over at Bleeding Heart Libertarians, Matt Zwolinski discusses various aspects of social justice. Hayek argued that social justice is a non-concept. Everyone talks about it, but nobody can seem to define it. Zwolinski attempts a few definitions of it, but it runs into the very problem at the heart of "social justice," which is that it is neither social, nor justice, precisely because of what it is: collectivist.

Naturally, this claim begs all sorts of questions. So let me say that I accept the Hayekian distinction between two kinds of individualism, Scottish Enlightenment and Continental, as I describe here (for "Continental" I use "Cartesian," meaning in the tradition of Descartes' theory of rationality rather than attributable in all it's forms to Descartes himself -- a distinction I have discovered some find difficult to understand). So there is an individualism that leads to collectivism and an individualism that is fundamentally social in nature. The former is anti-social, and thus requires collectivist schemes to "socialize" the people. It is under this world view that "social justice" emerges (I am not unaware of the fact that social justice is originally a Catholic concept -- but I will note that it is a reaction to this version of rationality/individualism that fits in with it).

When people are talking about "social justice," you often hear terms like "the poor," "the oppressed," etc. Please note that these are aggregates are misleading. They hide all sort of details that are in fact quite relevant. This is a necessary element of collectivism, of course. Collectivism must see things as aggregates, and aggregate-thinking tends to lead one into collectivist thinking. With "the poor," one will sometimes see people divide them into the deserving and the undeserving poor. But even this is problematic. Each person is poor for their own particular reasons, based on a combination of personality traits (partially inherited, partially influenced by environment), circumstances (of time, place), and even luck. There are local economic conditions, problems of institutions and governance, etc. Clearly the poor of Swaziland are not the poor of Switzerland. It makes little sense -- and is an insult to the poor of Swaziland -- to compare the two. One can justly argue that compared to the developing world, places like the United States have no poor. Calling the same people who receive our various forms of welfare and those who live on a dollar a day while working themselves to the bone by the same term is absurd. Worse, it cannot but lead to bad ideas.

One of those bad ideas is that education is the answer to poverty. In places like the United States, which is increasingly dominated by creative workers, there may be some truth to this (even if it is not true that a university education is desirable for as many as are getting one, with the debt load they are getting, when other kinds of education may be much more desirable), but in developing countries, it is not. As I have pointed out, overeducating a population relative to the ability of an economy to absorb those receiving the education can result in dire, even revolutionary, consequences. A country has to have the right institutions in place for entrepreneurship to take hold and economic growth to take off. When that happens, those whose lives are improving financially will then seek out education for their children. As is typical in such situations, the natural evolution of society works best, both long and short term. Of course, in a country like the U.S., which is well past the agricultural stage, and into the so-called postindustrial stage of development, education is of central importance. Thus education as a solution makes more sense, even if it is still not the utopian solution too many make it out to be.

But let us return to the basic problem of social justice being connected to collectivism. Not only does it result in aggregating "the poor," but also to looking at all kinds of groups as aggregates. When one looks at members of a race as an aggregate, that has typically been known as racism. Yet, we see precisely this kind of thinking among those many advocates of social justice. We can see it, for example, among the advocates of reparations for slavery in the U.S. The problems with such reparations is many-fold. First, there is no one alive who was a slave, and there is no one alive who owned a slave. So who can be said to justly receive reparations, or to provide them? The logic behind such reparations is that the son is guilty of the sins/crimes of the father (or in this case, great-great grandfather, at least). More than that, it is a racial sin. One may not even be descended from slave owners, yet one has to pay reparations because one is of the same race as those who did. What is this but good old fashioned racism? It's racism dressed up with progressivist garb (but progressivism has deep roots in racism as well).

This should not be surprising as racism is a form of collectivism, and thus is in the same family of thinking as other forms of collectivism, no matter how "advanced" they may be. There is an atavistic element to all forms of collectivism. Spontaneous order social individualism is a very complex form of thinking, and much more recent. And, thus, more difficult. It is easier to fall back on our evolved tendencies, no matter how bad and even maladaptive they may be for living in contemporary society. In this sense, then, social justice, as a form of collectivism, has no place in modern moral thinking.

That being said, there is something Zwolinski ends his piece with that I cannot agree with more, and which needs to be emphasized. He says it in reference to the idea of social justice, but it is generally true:

"Philosophy can tell us what we should be aiming for, but not how to get there. Economics can tell us how to get where we want to go, but not where we should be trying to end up. Neither economics nor philosophy by itself can tell us what our public policies ought to look like."

Too many think good intentions are enough (the "philosophers" in this example). It is not. One has to know how to get there, or else one is lost.

Posting Policy Change

Due to egregious abuse by an anonymous poster, this blog will now only allow registered users to post. That way people cannot post anonymously, meaning they have to take personal responsibility for their comments because they will be able to be identified. My preference would have been to allow anyone to post, but some people ruin it for everyone when they behave immaturely. Abusive comments are a clear indication that one does not believe it possible to defend one's own positions. It is easy to be abusive when one hides behind "anonymous." One does not have to own up to what one says. There is little danger of someone one respects learning that the bile spewed comes from them. I have no objection to people disagreeing with me. I would love for more people to come to this blog and comment, agreeing and disagreeing. We well-argued disagreement is a benefit to myself and my readers. The kind of bile I marked as "spam" and removed from my blog is a benefit to noone, including the person posting it, as it only works to make them a worse person. These are the reasons why I have made this change in posting policy. On this blog, you will have to stand behind your words publicly.

Networks Result in Speciation

Increasingly I find myself studying networks. I am working on a paper in which I discuss the hierarchical networks of organizations and the scale-free networks of spontaneous orders. I am working on another paper on cities as far-from-equilibrium scale-free networks. I have written a paper on the brain and moral evolution as spontaneous order networks, and another paper on the arts as spontaneous order networks. So it is not in the least bit surprising to me that networks are a major driving factor in evolution. It is certainly a major driving factor in social evolution, including specialization and division of labor. Indeed, it is noted in the article that with the model used "Many other applications are possible, for example to describe and predict behaviors of ideological or economic groups in sociopolitical settings."

Passing off Partisanship as Reason

While it is hardly a new development, I nevertheless find those who try to pass off their partisanship as rational, let alone based on rational philosophical grounds, incredibly annoying. A prime example of this can be found on many of the postings at Rationally Speaking, which is in my blogroll, and which I read regularly.

Partisanship -- which I identify as the villification of the political Other for being Other -- is primitivist thinking at its worst. A partisan would be one who, for example, thought what George W. Bush did in response to the economic meltdown was "what needs to be done," while what Barack Obama did is "destroying America," even though Obama really only did what Bush did, if on a slightly larger scale that, had Bush been in office, may have been exactly what he would have done as well. Another example are those who are either defending or are remarkably silent on Obama's actions in regards to Libya, but were horrified by G.H.W. Bush's war on Iraq (let alone his son's war of revenge on Hussein in response to the assassination plot against his "daddy"), protesting the war as unjust and secretly because of the oil there (why has nobody noticed that Libya is also full of oil?). A consistent position would either praise or condemn the actions of both men for engaging in similar actions. Is it really better or worse that Bush I attacked a country for attacking Arabs in another country while Obama attacked a country for attacking Arabs in their own country? The partisan says, "yes," while the philosophically consistent says, "no." The partisan says "yes" because his tribe is always right no matter what. The philosophically consistent says "no" because the same principles are being applied no matter what party or person is involved. The former rationalize their positions; the latter use reason to form their positions.

This does not mean that everyone using reason will necessarily come to the same conclusions. In order for that to happen, each person would have to have the same disposition, experiences, knowledge, ability to see patterns and connections, etc. Nevertheless, if one is going to be philosophical rather than primitivist in thought, there are a few things one is going to have to understand.

Those who engage in primitive thinking believe that if there is order, there must be an orderer. This is not necessarily true. Just because it takes an orderer to make a watch, that does not mean that one is needed to make a living cell. They are very different kinds of order. One is in fact quite simple in nature, while the other is very complex. Ironically, there are kinds of simple orders that require an orderer, while there are truly complex orders that do not. Many make the mistake of believing that because some things need an orderer that all ordered things require one. Surely if these simple objects require an orderer, complex objects do! But this is in fact not the case. Life came about through self-organizing processes. So do cultures, economies, and the network structure of the world wide web. The presence of organizations -- simpler, created orders -- within these complex spontaneous orders does nothing to disprove the fact that the more complex orders the organizations are a part of are not self-organizing. We have different kinds of networks structures -- hierarchical vs. scale-free networks -- which emerge in organizations and spontaneous orders, respectively. The primitive thinker does not believe in spontaneous orders, but only in organizations. They thus try to impose organizational structure on spontaneous order structures, with devastating consequences.

A corrolary of this is the failure to even see order in spontaneous orders, but to insist that there is only chaos -- and, thus, we need to order it.

Thus, one is not a philosopher in the highest sense of the term if one believes in creationism or intelligent deisgn -- at any level. This sort of thinking is primitivist thinking, whether it is applied to biology and geology or to the economy and/or culture. Socialism is economic creationism; Keynesianism and other forms of economic interventionism are economic intelligent design. I make no apologies for that analogy. It is apt and precise. The various censors are, equally, cultural creationists/intelligent designers, thinking they can create a culture that is better, more artistic, more virtuous, etc. They can, of course, do none of these things.

I argue that such is unphilosophical thinking as well as primitivist because philosophy means "the love of wisdom," and the failure to recognize the complex interconnections that constitute the various spontaneous orders, both physical and social, means one is distinctly lacking in wisdom. In "The Power of Limits," Gyorgy Doczi says wisdom is seeing the world as one, unified. This is a legitimate definition of wisdom and of truth. The words truth and betrothed are related, through the Old English treowth, meaning “good faith,” which gives us the words “truth” and “troth.” To betroth is to marry, meaning truth can be seen as a betrothal of facts, the unifying or marrying of facts. “Men who love wisdom must be good inquirers into many things indeed” (Heraclitus, K. IX). Truth as wisdom is unifying. One could see wisdom as understanding the scalar nature of the world, seeing the world as a fractal whole, and knowledge as seeing the world in its constituent parts. By combining knowledge and wisdom, we get a more knowledgeable wisdom, or a wiser knowledge, that sees the world as scalar with emergent properties derived from its constituent parts. Since bringing together knowledge and wisdom creates variety in unity, it would show the world as beautiful. Knowledge alone is not enough; nor is wisdom alone. “Graspings: wholes and not wholes, convergent divergent, consonant dissonant, from all things one, and from one thing all” (Heraclitus, K. CXXIV). The unity of knowledge and wisdom is beauty.

All of this goes against primitivist thinking, which all too often gets passed off as philosophical. If you are partisan, you are not philosophical. More, you are not rational. Let us stop pretending that reason leads us toward primitivism.

The Gold Standard Did Not Cause the Great Depression

Among the many myths of the cause of the Great Depression I have heard, I recently learned of a new one: the gold standard caused it. The argument is of course Keynesian in nature. People suddenly started hording money. Since that money was in the form of gold, and money could be exchanged for gold, people were in fact hording gold. Thus, there was no money available. It is also argued that the global gold standard is what caused the Great Depression to go global. Of course, these people would have to explain why, then, the Great Recession went global even though money today is, globally, fiat money.

Professor Richard Timberlake argues otherwise. Indeed, if there had been a real gold standard, the Federal Reserve could not have expanded the money supply in the 1920's to create the artificial boom known as the Roaring Twenties, and the subsequent crash. More, during the Depression, Roosevelt got a law passed making private ownership of gold (beyond things like jewelry, of course) illegal. Under the theory that gold hording caused the Depression, this would have ended the Depression. It most certainly did not.

Keynes' General Theory Chapter 7, The Propensity to Consume I

This chapter goes into what Keynes considers to be the "objective factors" that affect levels of consumption. If by "objective," one means that lower income results in less consumption, and higher income results in more, then there is little to argue with here. He also argues that short-term, slow changes in interest rates are unlikely to affect behavior much, even if long-term changes will. Again, this is probably correct. Am I more likely to save money if the interest rate goes from 3.0% to 3.1% over the month? Probably not. However, Keynes then goes into objective government factors:

If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes, its effect in creasing the propensity to consume is, of course, all the greater. (95)

Since Keynes' concern is precisely that of encouraging consumption, I think this is very telling regarding what he considers to be desirable fiscal policy. I do love how he states that this is "of course" the case, and does not bother to even make an argument. We can derive an argument from his earlier statements in the book that the rich don't consume like they should (according to Keynes), so if we take their money they are refusing to spend on consumption and give it to those who will consume more rather than save/invest their money, then the economy is in much better shape. He also argues this same thing later in Ch. 7 when he says that "men are disposed, as a rule and on the average, to increase their consumption as their income increases, but not by as much as the increase in their income" (96), a statement which is, on the face of it, true. But what do they do with the excess? Selfishly refuse to spend it? Or do they invest it? Keynes here is of course inverting not only economics as generally understood, but the morals which state that saving for a rainy day is virtuous and reckless spending is vice. I suppose that's to be expected from a self-described "immoralist." But that is something which should be taken into consideration when trying to understand Keynes' ideas.

Next, let us consider Keynes on "austerity measures," which is to say, government attempting to reduce debt:

We must also take account of the effect on the aggregate propensity to consume of Government sinking funds for the discharge of debt paid for out of ordinary taxation. For these represent a species of corporate saving, so that a policy of substantial sinking funds must be regarded in given cirsumstances as reducing the propensity to consume. It is for this reason that a change-over from a policy of Government borrowing to the opposite policy of providing sinking funds (or vice versa) is capable of causing a severe contraction (or marked expansion) of effective demand. (95)

So, if government stops deficit spending, it will cause a contraction, while if it starts deficit spending, it will cause a marked expansion. On this logic, the reduction in deficit spending after WWII and by the Clinton administration once it was forced to do so by the Republican Congress (this latter resulting in an actual reduction of debt for a few years) should have caused a severe contraction. Instead, we saw economic booms in both cases. And G.W. Bush's deficit spending should have kept the economy growing well, but it was in fact rather anemic in the aftermath of the tech bubble bursting, until the housing bubble took off (caused by Fed manipulation of interest rates and Federal housing policy), and it certainly did nothing to either prevent the Great Recession or to reign it in. Krugman and other Keynesians of course argue that Obama did not deficit spend enough, but that's part of the brilliance of believing such nonsense -- no matter how much you spend, if it doesn't get you out of the recession, it just wasn't enough. It's rather convenient that it's not able to be disproven that way. It's much like those Marxists who insist that Marxism was "never really tried." No matter how bad the outcome of following the policies set forth, those policies can't be held reponsible because they were never really tried. Anything that cannot be disproven no matter how much evidence you bring to bear isn't a science -- it's a religion.

In Section III Keynes develops more the argument that increasing income stays ahead of increasing consumption and that, as a result, full employment is not reached. We can see, though, that this doesn't make the least bit of sense if the economy is a positive sum game. Let us say that we have an economy in which we have "full employment." Everyone's wages stay the same except for 10% of the population, whose incomes all go up 10%. Let us say that they consume only half that increase and save the rest. How does that reduce employment? The same people are making the same number of products as before to be consumed at the same rate as before, only now there are some people with more income and who are willing to spend more, meaning in fact there is more demand for products, so more products will be produced. It sounds to me like there will be more demand for labor. And of course those who have saved money will not just stuff it into their mattresses; they will invest the money in different ways, providing capital for business expansion or the creation of new businesses. More products are produced, more people are needed to work. In a positive-sum economy like a free market economy, an increase in income for anyone does not reduce employment, but rather increases it, as well as the income of those who are already employed. Only if the economy is a zero sum game does Keynes' redistributionist policies make sense.

Keynes ends the chapter by arguing that the more capital we have available for investment, the more disinvestment we will have. This is true only if the capital is "easy money" in the sense of low-interest rate loans encouraging risky ventures. But Keynes does not make this distinction (one cannot expect one who thinks in aggregates to make distinctions, I suppose). He simply argues that an "object produced previously" is a disinvestment (105). Previous to what? The immediate demand? What would one call "immediate" in this case?

To whatever degree this is in fact a problem during normal economic times (i.e., not a bubble created by easy money), it seems that in the modern economy that this is less and less a problem. More and more we are seeing products able to be created literally on demand. If you shop online, you can pick a t-shirt with an image that can be put on the shirt only after you have chosen the color, size, and image. Books are another product that are on the verge of being created on demand (with Kindle, etc., this is even more true). There are still going to be products that have to be mass produced, though, and there will be calculations as to how many to produce based on prices. Under normal economic conditions, it seems unlikely that disinvestments will be more than marginal. That's the beauty of prices.

Reformulating National Income

Prof J is a regular here at Interdisciplinary World. Over at his own blog, he riffs off of my discussions of Keynes, reformulating the national income equation. I'm more than a bit leary of the national income equation, because I don't believe that government typically creates wealth, and the equation requires you believe that it makes a positive contribution to national income. Nevertheless, Prof J does some interesting things with the equation that result in a quite remarkable insight: "the household ultimately makes the investment expenditure, but uses the business to do so on their behalf. Households, then, are the real capitalists." Go to his blog to find out how he gets there.

Others on Keynes

Don Boudreaux discusses Keynesianism, pointing out, as I have, that Keynesianism is, essentially, folk economics.

Meanwhile, Steve Horwitz explains the difference between Keynes and the Austrians on stimulus spending.

experiencing life in all its darkness and all its light

What a strange way for a literature professor to come to understand why we really need literature: "through literature, they were experiencing life in all its darkness and all its light, without suffering any of the consequences. Literature was fulfilling its best purpose, as I see it now." One hopes the message gets out to everyone else who studies, reads, and teachs literature, for this is truly what it's all about.

Frederick Turner's Epic Poems Re-Released!

Contemporary epic poet, Frederick Turner's, scifi epic poem THE NEW WORLD is in print again, from Ilium Press. An excerpt can be read here and it is now available through Amazon's Kindle. The new print edition will be out soon.

Ilium Press will also be reprinting his other great epic, GENESIS: AN EPIC POEM in the next few weeks.

Ch. 7 of Keynes's General Theory

In Ch. 7 Keynes argues that "the exposition in my Treatise on Money is, of course, very confusing and incomplete in the light of the further developments here set forth" (GT, 78). If that is the case, then his Treatise on Money is a complete disaster, a train wreck of a work, because the "further developments" in Ch. 7 is a confusing mess. He continues with his confusing of investment and saving, claiming that his argument makes sense if you consider aggregates rather than individuals. Considering that aggregates is an idiotic idea that makes unlike things like, heterogeneties homogeneous, it is no wonder that this chapter is a mess. It couldn't possibly be anything else.

Becoming Bonobo

This article on bonobos suggests that we have a lot to learn from bonobos in regards to the ways they solve problems. Bonobos are far less aggressive, and no instance of a bonobo killing another bonobo has ever been recorded (the same cannot be said of chimpanzees or humans, of course). Of course, it is easy to say that we should be more like bonobos -- but that would require that we literally change our most basic human natures. More than that, it would mean that we would have to adopt the bonobos' way of solving problems: having sex with everyone and anyone. Yes, bonobos are bisexual, and sex is their way of greeting, solving problems, and trading. Sound like a great society to live in?

Becoming Bonobo
A Play in One Act

A minimalist set: a plastic-covered couch with an end table, on which sits a remote control. BONNY and PAM enter BONNY’s living room, carrying shopping bags. They place the bags on the floor beside the plastic-covered couch. Each drops down on the couch, exhausted. As their conversation continues, they sit up more and become increasingly animated, gesticulating, etc. Both should act out whatever is implied in the dialogue.

BONNY: My God, I am exhausted!

PAM: And sore.

BONNY: Sore! My God, talk about sore! Shopping’s such an ordeal anymore.

PAM: I think we’ve overdone it.

BONNY: You and me?

PAM: You, me, society! It’s all too much!

BONNY: I know just what you mean. The cure – in pill form – has become the disease.

PAM: Yeah. The male pill has him shooting blanks. The female pill has me shooting blanks. The morning after pill sweeps up afterwards in case any shots were in fact fired.

BONNY: And why wait for recovery? Viagra keeps him up for hours. The same hours the eight hour sleep pills gave us to give us time. R.E.M. in a bottle. The only thing that gets done more is me!

PAM: They’ve made actors of us all.

BONNY: Don’t have to be attracted – our pills will make us act as though we are. We’re always ready to do the act. Every man can now perform at any time, at any place – and every woman wants him to, it seems.

PAM: Remember venereal diseases? With them gone, there’s no stopping anyone.

BONNY: It’s safe to sleep around. And everyone does. All the time.

PAM: I wish he would, give me a break.

BONNY: Won’t catch a thing, won’t get anyone pregnant.

PAM: It’s better. Better not to have disease, accidental pregnancies.

BONNY: It’s true, but . . . the danger slowed them down, at least. A life without
consequences . . .

PAM: Makes women sore and tired.

BONNY: And social stigmas! Why’d we give up those?

PAM: It’s everywhere and anywhere.

BONNY: It’s freedom of expression.

PAM: Ah, yes! Expression. Expression in the park, expression in the car, expression in the corner store. Is there anyplace I can go where people aren’t expressing themselves with each other?

BONNY: Not that we’re any better. Besides, it comes in handy if you’re short on cash.

PAM: True. There’s likely to be someone in the store who’s willing to make a cashless trade.

BONNY: A pop or candy bar . . .

PAM: A pop or candy bar? You don’t know what I did to get that big screen T.V. I have at home.

BONNY: Just goes to show, it’s not money makes wealth.

PAM: Reproductionless productions. Now, that’s an incentive to produce.

BONNY: You know, when I was young, I remember people shaking hands to greet each other.

PAM: A messier business now, for sure. Not as many colds or flus passed around now, though.

BONNY: That’s true. You never really think of that.

PAM: But then, there’s all the furniture.

BONNY: All plastic-covered . . .

PAM: So no one stains.

BONNY: It’s crinkle-crinkle everywhere.

PAM: But women are in charge now.

BONNY: I know. Who knew that men would give up power everywhere for constant sex?

PAM: Directly, indirectly.

BONNY: I never expected Freud was right on this one.

PAM: That the masculine drive for political power was really sublimated sexual urges?

BONNY: By sexually oppressed . . .

PAM: Or practically impotent . . . .

BONNY: Older men?

PAM: Precisely.

BONNY: How often have the younger tried to rule?

PAM: Not often.

BONNY: Much too busy getting laid.

PAM: Or trying to.

BONNY: But now with youth pills . . .

PAM: And Viagra . . .

BONNY: And social stigmas gone . . .

PAM: The men don’t try to rule.

BONNY: Too busy getting laid.

PAM: Or trying to.

BONNY: And wealth! We women now have all the wealth.

PAM: My ass is such an asset now.

BONNY: Each woman has her purse to fill.

PAM: The jealous, prudes, and moralists all live in poverty.

BONNY: But not us.

PAM: Oh, no! Not us!

BONNY: An economic boom.

PAM (grabs her own breasts): An economic bust.

BONNY: Men and women work and work.

PAM: And that is why they work so hard.

BONNY: All busy getting laid.

PAM: Or trying to.

Enter RANDY, BONNY’s husband.

RANDY (to PAM): I’d greet you, Pam, but I haven’t greeted Bonny yet.

BONNY: Well, greet me later. I can’t take a greeting now.

RANDY: Congratulate me, then.

BONNY: Congratulations!

PAM: Good for you!

BONNY: I can’t believe your luck!

PAM: It can’t have happened to a nicer person!

BONNY: You certainly deserve it. You worked so hard.

PAM: Did everything you could . . .

BONNY: And should . . .

PAM: And would . . .

BONNY: The excitement almost makes me want to greet you. What happened, dear?

RANDY: I got promoted and a raise.

BONNY: So soon!

PAM: So quickly!

RANDY: Teatime in the boss’s office daily. That’s what gets it done. Make your boss a sandwich now and then. It gets results.

PAM: Congratulations!

BONNY: Good for you!

RANDY: And now, if you don’t mind, I’m going to take a shower now.

Exit RANDY.

BONNY: He always takes a shower after work.

PAM: Well, I do, too. Or when I’m finished shopping. Or visiting my friends. Or after a walk. Of after I get back from a restaurant. Or whenever I’m pulled over by a cop. Or after the movies or a play or a ballet or the opera or the symphony or the museum – though I try to show some decorum there – or a concert or a poetry reading or the library. Or after yoga. And the gym, of course.

BONNY: I shower once a day, no matter what I do. My water bill would be outrageous.

PAM: You have to catch the meter man whenever he makes his rounds.

BONNY: Don’t pay your water bill?

PAM: Less than you, at least. And I use much more water.

BONNY: Mine’s more of a meter maid, so that won’t work for me. Lovely Rita . . .

PAM: Don’t swing that way? Who doesn’t swing that way today?

BONNY: She doesn’t seem to swing either way.

PAM: How strange!

BONNY: I know. Everybody on this block pays full price for their water.

PAM: A prude?

BONNY: A virgin.

PAM: There are virgins still?

BONNY: She’s antisocial. Never met anyone like her.

PAM: Yes, antisocial. No greeting anyone? In any way at all?

BONNY: And pays for everything – full price! – with cash and cash alone.

PAM: I can’t believe that such a thing exists . . .

BONNY: An oddity, I know.

PAM: I remember when I was a virgin. Life was so much simpler then . . .

BONNY: Of course it was. You lived with your parents, didn’t have a job, and your parents paid for everything.

PAM: And now I live with my husband, don’t have a job, and it’s my making prostates pulsate which pays for everything.

BONNY: So, except the virginity thing, not much has changed?

PAM: Not really. Except, I shower more.

Enter RANDY in a bathrobe.

RANDY: Anyone ready to get greeted now?

BONNY: We just got back from shopping, Randy.

RANDY: You really ought to try to get back home at least an hour before I do so that you’re ready for me to come home.

BONNY: I don’t know who you think you’re talking to. Go make me dinner.

RANDY: And then . . . ?

BONNY: We’ll see.

Exit RANDY.

PAM: Poor thing. I ought to go and greet him. I am a guest here in his home.

BONNY: Go. Greet him. Be my guest. I need a break.

PAM stands and exists in the direction of RANDY.

BONNY: That woman is insatiable. She must be taking Libidoprone. The last thing that I need.

BONNY stands and wanders back and forth a few times. She glances at her watch.

BONNY: Well, this is boring. I guess I should have greeted my husband home from work.

BONNY glances at her watch again.

BONNY: Would you please hurry up in there? I want to have my friend back. Perhaps some dinner, too!

BONNY paces once more, then slumps onto the couch.

BONNY: Let’s see what’s on T.V.

BONNY picks up the remote and aims it at the audience.

BONNY: Let’s see. Porn, porn, porn. Shopping. Cooking channel. Porn. Reality T.V. Porn. Reality porn. Viagra infomercial. Might as well be porn. Documentary on the sexual and social habits of the bonobo, also known as the pygmy chimpanzee. Porn. Libidoprone commercial. Silver bullet commercial. Ah, the news . . . is . . . over. What’s on next? Oh. Porn.

BONNY turns off the T.V., puts down the remote. Enter PAM.

PAM: I heard the T.V. on.

BONNY: There’s nothing on. You find out what’s for dinner?

PAM: I got an appetizer out of him.

BONNY: So, what’s he going to make?

PAM: Bruschetta.

BONNY: Nice! Italian, then.

PAM: Blackened chicken with fettuccini alfredo.

BONNY: You’re staying for dinner?

PAM: Of course. I love Randy’s alfredo sauce. His chicken is to die for.

BONNY: You should try his coq au vin.

Enter RANDY.

Randy: I’m afraid I’ve got some bad news. I’m completely out of cream.

BONNY: Completely out of cream? I’ve never known you to be out of cream.

PAM: Oh, no! You can’t be out of cream. I had my heart set on your sauce.

RANDY: I know. I thought I had some left.

BONNY: I guess you’ll want me to go to the store to get some?

RANDY: No cream, no sauce. It’s up to you. How bad you want it?

PAM: Please go. I really want it. I really, really, really want it bad.

BONNY stands.

BONNY: I have to take care of my guests. Meet all their needs, I guess. I’ll be back in a minute with the cream. Do we need anything else?

RANDY: You want some eggs and sausage in the morning, get those too. Want white sausage gravy on your biscuits, too?

BONNY: Sounds good. You know how much I love your sausage gravy.

RANDY: Some flour, then. I’m out.

BONNY: That’s practically grocery shopping.

RANDY: That’s all I need. Unless you want to have some tacos. I have the meat and chile and the sour cream, you just bring the taco.

BONNY: That all you need?

RANDY: I’m satisfied if you are.

BONNY: Then I’ll come back in just a bit.

RANDY: Come soon. We need to keep our guest here satisfied.

BONNY: I’ll come as soon as I get what I need. Be patient.

Exit BONNY.

RANDY: She always takes much longer than is really necessary.

PAM: Well, that’s okay. I’ll entertain you while she’s gone. If you’re up to it.

RANDY: Libidoprone?

PAM: I take it twice a day.

RANDY follows PAM offstage. Lights down.

End

Virtue Ethics

Here are some reflections on virtue ethics. It is an approach to ethics I myself subscribe to. However, for my money, virtue ethics must also be mapped onto our moral instincts. I don't think Aristotle would object.

Keynesian Support for Destruction as Economic Stimulus

John Papola on the supreme idiocy of Keynesianism in their belief in the broken windows fallacy in light of the Japanese earthquake and tsunami. Anyone espousing the idiocy that the earthquake and tsunami will help the Japanese economy should have their economics degree stripped from them.

A Praxeology of Truth, Virtue, and Beauty

"Let truth as a human value be defined as the recognition of permanence in reality" (J.T. Fraser, "Time, Conflict, and Human Values, 46).

"Good as a human value is an assertion that a certain conduct, intent, or character trait will promote stable balance and harmony in the mind and affairs of a person and in the dynamics of society here on earth or elsewhere in a postmortem world" (84).

"If the quality of feelings is such as to make one desire its perpetuation, then whatever is believed to be reponsible for it is said to be beautiful. If the quality of the feeling s is such as to make one desire to be absent, then whatever is believed to be responsible for it is said to be ugly." (125-6)

In each of these definitions, Fraser is defining a particular value people hold. People value truth, virtue, and beauty -- among other values, of course.

"Human action is purposeful action. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego's meaningful response to stimuli and to the conditions of its environment, is a person's conscious adjustment to the state of the universe that determines his life." (Mises, "Human Action," 11)

"The ultimate goal of human action is always the satisfaction of the acting man's desire. There is no standard of greater or lesser satisfaction other than individual judgments of value, different for various people and for the same people at varius times. What makes a man feel uneasy and less uneasy is established by him from the standard fo his own will and judgment, from his personal and subjective valuation. (14)

"Human action is one of the agencies bringing about change. It is an element of cosmic activity and becoming" (18).

If you want to discover truth, achieve virtue, or create beauty, praxeology -- the science of human action -- is also relevant. But its application still needs to be developed.

And we must not forget that

"Beauty is truth, truth beauty" -- John Keats, Ode on a Grecian Urn
"Virtue aims at the beautiful" -- Aristotle, The Nicomachean Ethics

So the three are deeply interrelated. How does this affect a praxeology of each?

The Spontaneous Order of the Internet and Its Offspring

Prior to the Renaissance, church, state, economy, and culture were deeply intertwined. Government received its power from the Church, anti-usery laws were religious in origin, and the Church actively persecuted anyone whose ideas or art works contradicted established doctrine. In the aftermath of the Renaissance, we saw a variety of spontaneous orders trying to emerge -- free market economies, democratic governments, a wide variety of churchgoing options, and both non-religious and even anti-religious works and ideas emerging. Now we have a variety of spontaneous social orders of this kind in a variety of countries. The religious order in the U.S. creates new religions on a daily basis. The artistic orders create an incredibly wide variety of arts. The economy, to the extent it is allowed to be a spontaneous order, creates a wide variety of products and increasing wealth for everyone. Over the last century or more the U.S. has moved more and more away from democratic spontaneous order and has become more and more a centralized democratic organization.

But it appears we are on the cusp of a second emergence of spontaneous social orders. What do the current revolutions in the Middle East, the Tea Party phenomenon in the U.S., the Netroots movement, and the fact that goods and services are starting to be provided in smaller and smaller units have in common? (Other than being discussed by Max Borders along similar lines.) One is that all of these follow a power law distribution. Self-organizing processes, or spontaneous orders, all follow power law distributions. (Not all things that follow a power law distribution are self-organizing processes, but all self-organizing processes follow power law distributions.) The second is that all of these are based on information technology, particularly the internet. It is no surprise to learn, then, that the internet and World Wide Web both have power law distributions.

Spontaneous orders seem to generate other spontaneous orders. More, the internet and WWW seem to have done something none of the other spontaneous orders were able to do: make people feel comfortable in the spontaneous order. Everyone is familiar with the complaint that capitalism is alienating. Well, there is a certain degree to which this is true of all spontaneous orders. We are used to living in intimate social systems, not in impersonal ones like spontaneous orders. Yet, spontaneous orders can coordinate our activities best, allow us to live well with a very large number of strangers, and create wealth for almost everyone in it (relative to the poverty humans were born into as a species, and live in for most of our species' life). But the internet and WWW are different. They allow us to have the feeling of it being a personal space while at the same time allowing for the impersonality. For example, how many of your Facebook friends are people you have actually met? Yet you interact with them almost every day on Facebook, exchanging ideas or at least pleasantries. They are strangers, yet not strangers. It is a category of people we once encountered in city neighborhoods as described by Jane Jacobs. We reinvented them online, distributed across geography. Now imagine how powerful these connections could be if combined with those city neighborhoods our governments have all but destroyed through their urban planning schemes.

Or do we have to imagine? Have the revolutions in the Middle East shown us?

The result of all of this does not have to be revolution -- though I have little doubt we will see more and more such in the future. The result -- no less revolutionary in a real sense -- could be massive decentralization in the government and economy, creating truly decentralized democratic governments (following power laws such that the small local governments have the most power, the middle-sized state governments have less, and the large national government has almost none at all) and generative, rapidly-growing economies that create a wide variety of goods to suit literally everyone's tastes. We are seeing the latter in products offered online. Shipping and storage costs restricted the variety of goods offered. But Amazon doesn't care what's on its shelves, and how much of it is there, so long as it can sell what it has. A small company can make a small amount of something, sell it to Amazon (or offer it directly on eBay), and be able to sell it to the few hundred people around the country that are interested in buying their product. Such a sales strategy was literally impossible prior to the World Wide Web.

The power of the internet has yet to be truly tapped. We are mostly sticking to what we know. eReaders are finally digitizing books, but for the longest time, the internet simply made more of the old fashioned kind of books available. Not much has come of the theories of hypertext literature. What we have seen is a limited amount of hypertext, acting primarily as reference links rather than bibliography (as I did above), in what are otherwise stardard forms of writing (like the essay -- this being an example of such). Even in politics, we have seen only limited use -- fundraising being an exmaple of a typical thing made more efficient. And perhaps that is all we will ever see. But, as with the advent of the book from the invention of the moveable type printing press, that may be enough. The real revolutions the internet is and will be creating are only in their infancy. Much we cannot imagine waits to be born.

Probability, Statistics, and Economics

To what degree is statistics -- the mathematics of probability -- relevant for the humane sciences, such as economics?

J.T. Fraser observes that

"Probablistic laws that govern the behavior of aggregates of objects assumed to be indistinquishable occupy an intermediate position between the absolute unpredictability of chaos . . . and the predictability and retrodictability of deterministic processes" (Time, Conflict, and Human Values, 60).

Chaos is the state of the pre-quantum universe, probability is the state of the quantum universe, and determinism is the state of the macrophysical universe, with material goal-orientedness the state of life, and material and symbolic goal-orientedness the state of humans. So probability is most appropriate for the quantum physical level of reality, and to that level of complexity (each level is exponentially more complex than the one preceeding it in Fraser's formulation). Yet, in addition to quantum physical particle-waves, and because quantum physical particle-waves do,

"macroscopic physical systems from pebbles to galaxies also follow probablistic laws, as do biological species and as does human conduct both individually and collectively" (60).

The bottom line here is that probability occurs between chaos and determinism, and is thus most relevant to systems three levels of complexity below the human -- and for levels of complexity below an economy. This means that statistics is relevant for understanding humans and the economy, but it is less relevant the further you get away from that level of complexity. Thus it is actually less relevant to use statistics at the level of economics than it is for humans. This may seem odd, since it would seem that humans in aggregate are behaving in more statistical fashion. There is a probability that people will do X in situation Y. But wait, I actually just describe humans in a statistical fashion, not the economy. An economy cannot be understood by aggregating humans, as an economy in fact emerges from the repeated interactions of a wide variety of human beings acting on their values of the moment. That cannot be aggregated. Thus, statistics becomes at best difficult. At the least, it suggests that we need a different kind of statistical approach than we have perhaps used in the past. At worst, it suggests that we may never have the math to explain economic processes, since the economy is more complex than the humans in it -- and we certainly do not have a mathematics of human behavior!

So where does that leave us? There are no doubt models that are appropriate to understanding the economy -- but I suspect they are only just now coming about, with complex adaptive systems work, agent based modeling, etc. More, I suspect that they are only ever going to be so abstract that they are useless for anything other than creating general understanding of certain kinds of patterns. The economy is less predictable than are individual human actions. That does not mean we cannot understand the economy, or other social systems, only that we cannot ever predict outcomes. Unless actions are taken to simplify the economy, of course, in which case the system does become more predictable -- but also less stable as a result. Humans can be made more predictable by destroying our psyches, making us more animal-like, and living things can be made more predictable by killing them and turning them into chemicals. But it should be clear that reducing complexity should not be our goal.

Math can thus only ever explain the economy in the sense that it can highlight general principles and show certain patterns. It is even able to help us understand subprocesses within an economy. But for the truest, fullest understanding, we have to have a level of description that approaches the economy in complexity. Math is good at describing the lowest levels of complexity, but not the highest. It cannot even describe living things, let alone processes one or two levels of complexity above life's complexity.

In the end, the true economic scientist will recognize that a full understanding of the economy is futile. Language, which is at the human level of complexity, by definition is then not complex enough to explain the economy. It is unpredictable, but not impossible to interact in. Its chaos is not that of the lowest level (though it contains it), but the apparent chaos of that which is deeply incomprehensible to beings less complex than it.

Krugman: More Education Is NOT the Answer

Paul Krugman has a NYT piece that makes a lot of sense (right up to the end, where he makes policy suggestions -- of course). Of particular note is that he agrees with me that education is NOT the answer to our economic problems. The reasoning is something most people have probably not thought about before: that many of the jobs middle-income people have historically done have been routine tasks, which are exactly those tasks best able to be mechanized and taken over by computer programs. There is certainly nothing to be done about that -- and Krugman's argument for labor unions is most certainly not going to help with this problem. Universal health care will only make things worse. But these are the typical things one exects Krugman to say almost without thinking (it is certainly anti-economic thinking at the very least). Too bad he does not put the same care into thinking through possible solutions as he does in helping us understand the problems.

Of course, it is impossible to know what the solution is, because we cannot have knowledge of the future. Flailing about is all that one can expect from anyone. The market will create these solutions as people engage in entrepreneurial discovery -- if they are allowed to do so, of course. These solutions cannot be predicted. They can only be discovered.

One thing we do have to discover, though, is what to do with all those who already have a great deal of education. There is a great deal of intellectual capital out there not being used. There is surely better use to be made of my education, for example, than working nights at a hotel. And I know I am not the only one.

Some Thoughts on Sociotemporality

I am rereading J.T. Fraser's Time, Conflict, and Human Values in light of comments on my spatial economics proposal/abstract made by a reviewer. He or she suggested I take time into more consideration. That's like telling me to eat more pasta! So I am rereading Fraser.

However, I am rereading TCHV in light of several years of work on Hayek's spontaneous order theory of society. I have talked about Fraser's umwelt theory of time here. But as I am rereading TCHV, I have realized that Fraser's discussion of sociotemporality, which I question in Diaphysics, is even more problematic than I realized. In particular, Fraser attributes society as having a purpose. Hayek of course observes that society does not and cannot have a purpose. More than that, if Hayek is right about a particular level of complexity being unable to understand its own or a higher level of complexity, it would be impossible to understand the nature of sociotemporality in the first place. Fraser does note this in passing, but then procedes to describe it anyway. Is it not appropriate that one with a tragic world view would engage in an act of hubris? How daring, and how foolish! But it must be done, even if one is in error. How else can understanding emerge?

So let me engage in the same foolish, hubristic enterprise (again, as I did in Diaphysics). Fraser's sociotemporality is in fact part and parcel of his nootemporality -- that of human time -- because humans are a social species. Our brains develop in a social situation -- and, thus, our nootemporality develops in sociotemporality, as Fraser describes it. What is truly different, what gains a new level of complexity above the human, is the spontaneous order. Does it have a temporality all its own? Or, as I suggested in Diaphysics, must we expect new temporaities to emerge not external to the human mind, but internal to it? Or, even more likely, an internal-external coevolution. Might minds (and new temporalities) be emerging that can live comfortably in spontaneous orders? One can only hope. But that will be a new mental temporality, not one external to us per se. Spontaneous social orders have no goals -- but they allow us to realize our goals, if we know how to act in them. That may require the emergence of a new temporality. Perhaps. It is an interesting question that requires more thought.

My Egypt Article Around the Internet

My Egypt article at the Pope Center was mentioned in a blog post at Washington Monthly and in Prudent Investor Newsletters and in a blog post at History News Network and by Nigel Ashford at Kosmos.
____________________________________________

Update: another discussion of my article (in light of Krugman's, which I discuss above) by Kelly Evans. No comparison between countries can be perfect, so I don't think that complaint to be valid, but she also argued there are inconsistencies. Being the author, they are not obvious to me. What inconsistencies are there? There is a very interesting point at the end about Americans blaming themselves (using the example of the Japanese, who do so for very different reasons than do Americans).

Keynes's General Theory Chapter 6 Appendix on User Cost

In this chapter Keynes argues that if you idle your equipment, it still costs something to keep it up, though the equipment will, because of not being used, be more valuable than similar equipment being used over the same time period. He even has a nice little equation for it. This observation seems obvious enough, but Keynes argues that it wasn't (72). Sometimes it's the most obvious things that need to be pointed out.

The only thing that seems a bit odd in this chapter is his argument that his formula proves that idling equipment will drive up prices. It seems easier to point out that if you idle your equipment, you reduce the supply relative to demand, and that drives up price. I suppose his equations can prove a more complex relationship, but in the end it just boils down to the simple fact that if you reduce supply while demand remains the same, prices are going to go up.