The Dallas Independent School District (DISD) has recently been shutting down exemplary schools (while keeping open the worst ones) and has also decided to extend teachers' work days by 45 minutes (not to provide 45 minutes more education for students, but rather for more pointless meetings that accomplish nothing and from which nobody learns anything -- if my experiences are typical), which has had teacher's protesting the actions. In Texas, it is illegal for teachers to go on strike, so protests, letters and emails are all teachers are really left with.
Now, in the U.S., one of our rights as citizens is the right to petition our government for a redress of grievances (Amendment I of the U.S. Constitution). This includes not only federal officials, but all elected officials. It should thus concern us that a DISD teacher, Joseph Drake, was put on "administrative leave" an hour after sending a critical email to Edwin Flores, a school board member. In other words, it appears that Drake was punished for expressing his opinion as a citizen to a board member. That is retaliation, and an abuse of power. Everyone involved in the decision should be removed from office and imprisoned for corruption and violating Drake's civil rights. Yes, imprisoned. Unless we treat people like this as the criminals they are when they violate citizens' civil rights, we can only expect more of this sort of corrupt behavior to occur. Our elected officials should be too scared to even think about such violations, and treating them like the criminals they are is the only way to do that.
More, it should not be illegal, as it is in Texas, to protest government working conditions. Certainly teachers make a pretty good living here in Texas -- better than do most teachers in most other states -- and that is probably in no small part because of the weakness of the teachers' union, but that's really not the point. A strike is a form of protest (typically against working conditions, unfair treatment, etc.), and by prohibiting striking by their own employees, the Texas government is violating the 1st Amendment. (If the state of Texas does not like teachers to be able to strike, they should privatize all the public schools, and then the private schools can prohibit striking by firing anyone who does.) We should thus not be surprised that Flores and the DISD board thinks they can violate Drake's civil rights at will, since such violation is already law in Texas. But that hardly means any of the guilty parties should be allowed to get away with it.
Tuesday, January 31, 2012
Monday, January 30, 2012
Perverse Incentives and Education in Dallas
The Dallas Independent School District (DISD) has recently decided to shut down several schools to save money. This could be a great opportunity to shut down the worst schools and get rid of all the bad teachers who help make those schools so bad. Instead, DISD has decided to shut down their exemplary schools, meaning they will be getting rid of their best teachers.
What corporation in the market economy would act like this, shutting down their best performing companies and keeping open their worst? If you saw this happening, you would know there were perverse incentives afoot. No company keeps an unprofitable sector of their business around unless there was something in it for them -- unless they were getting subsidies or tax breaks -- or both. And this is what we should expect when we see a school district shutting down their best schools and keeping open their worse.
Of course, it is the state and federal government which is providing the perverse incentives. If there is a low performing school, their solution is to throw more money at it. High performing schools get less money, because it is perceived that they don't "need" it. There is a mistaken belief in government that if something is not working, it is because not enough money is being spent. Thus, there is a financial incentive to shut down good schools and keep bad schools, since the latter get more money. Of course, most of that extra money goes to bureaucrats who are only going to make matters worse, and to utterly useless technology (not all technology is useless, of course -- but my experience is that much of it bought for our schools is utterly useless, especially after, say, a bulb goes out on a $1000 piece of equipment, and the money is not available to buy new bulbs, which are not as sexy as new equipment, even if it is the new bulbs which are actually needed!).
The federal and state governments consistently make our educational system worse and worse -- and then they turn around and blame the teachers, who are doing the best they can in the institutions created by ignorant legislators and selfish bureaucrats. Teacher pay is cut, but not a single bureaucrat's pay -- or job -- is under threat, even though letting go a few of those useless, value-destroying parasites would probably solve most budget problems.
What corporation in the market economy would act like this, shutting down their best performing companies and keeping open their worst? If you saw this happening, you would know there were perverse incentives afoot. No company keeps an unprofitable sector of their business around unless there was something in it for them -- unless they were getting subsidies or tax breaks -- or both. And this is what we should expect when we see a school district shutting down their best schools and keeping open their worse.
Of course, it is the state and federal government which is providing the perverse incentives. If there is a low performing school, their solution is to throw more money at it. High performing schools get less money, because it is perceived that they don't "need" it. There is a mistaken belief in government that if something is not working, it is because not enough money is being spent. Thus, there is a financial incentive to shut down good schools and keep bad schools, since the latter get more money. Of course, most of that extra money goes to bureaucrats who are only going to make matters worse, and to utterly useless technology (not all technology is useless, of course -- but my experience is that much of it bought for our schools is utterly useless, especially after, say, a bulb goes out on a $1000 piece of equipment, and the money is not available to buy new bulbs, which are not as sexy as new equipment, even if it is the new bulbs which are actually needed!).
The federal and state governments consistently make our educational system worse and worse -- and then they turn around and blame the teachers, who are doing the best they can in the institutions created by ignorant legislators and selfish bureaucrats. Teacher pay is cut, but not a single bureaucrat's pay -- or job -- is under threat, even though letting go a few of those useless, value-destroying parasites would probably solve most budget problems.
Thursday, January 26, 2012
Humility is Arrogance
One of the trademarks of Austrian Economics is that it argued that the economy is too complex to fully comprehend. The conclusion, therefore, is that we should approach understanding it with humility, and we should beware of anyone who says they know how to make it behave as they would wish it to behave. This is always my argument against those who think they know how the economy will or ought to behave, those who believe this or that regulation will have this or that definite outcome -- interventionists and socialists of all stripes. My argument is always that we cannot know what the outcome will be, that the system is too complex to fully comprehend -- particularly since we are elements within that system, meaning the economic system is more complex than we are. I argue that we are necessarily ignorant of what we can do to make the economy behave exactly as we want it to behave -- even as we can understand how people will typically behave given the right conditions, the right incentives, etc. We can make pattern predictions, but not outcome predictions.
I preach humility-- that we have to be honest about our ignorance. Yet when I do, I get accused of arrogance. How is it that the one who argues for humility in the face of our necessary ignorance is the one who is arrogant, while those who argue that we can in fact know everything such that we can plan the economy or, at least, knowingly regulate it, are not? By definition, it is the latter who are arrogant. Basically, I love that the one who says we should have humility when it comes to the economy because it is too complex to control is called arrogant by those so arrogant they think they can understand and control things more complex than they are.
It is amazing how much of a NewSpeak world we live in:
Humility is arrogance; arrogance is humility.
Wisdom is Foolishness
Ignorance is Knowledge.
War is Peace
More Regulation is Deregulation
Corporatism (fascism) is Free Markets
Power is Virtue
Hate is Love
"We are only threatening to kill you for your own good."
The solution to the problems created by power is more power.
I preach humility-- that we have to be honest about our ignorance. Yet when I do, I get accused of arrogance. How is it that the one who argues for humility in the face of our necessary ignorance is the one who is arrogant, while those who argue that we can in fact know everything such that we can plan the economy or, at least, knowingly regulate it, are not? By definition, it is the latter who are arrogant. Basically, I love that the one who says we should have humility when it comes to the economy because it is too complex to control is called arrogant by those so arrogant they think they can understand and control things more complex than they are.
It is amazing how much of a NewSpeak world we live in:
Humility is arrogance; arrogance is humility.
Wisdom is Foolishness
Ignorance is Knowledge.
War is Peace
More Regulation is Deregulation
Corporatism (fascism) is Free Markets
Power is Virtue
Hate is Love
"We are only threatening to kill you for your own good."
The solution to the problems created by power is more power.
Wednesday, January 25, 2012
The State of the Union 2012
Last night in the State of the Union address, President Obama said he wanted the government to drive up prices for consumers, treat the symptoms rather than the disease of higher education costs, and decrease charitable giving.
With his proposed "Trade Enforcement Unit," Obama is actually proposing to punish countries for selling cheap goods to the U.S. The argument is that subsidizing businesses so they can sell to us cheaper is unfair. However, such actions are actually harmful not to Americans, but to the countries, like China, that are doing it. Americans are benefited by lower prices, because lower prices increase our standard of living. But when you subsidize a company, you have to do so by taking money from the economy -- from your own consumers and from other companies in the country -- to allow a few companies to sell at a lower price. This harms China over the long run and makes their companies less competitive, their economy weaker, and their consumers less wealthy and with a lower standard of living than they would have otherwise had. If China wants to do that to their economy to sell cheaper goods to the U.S., who cares? To point out that we do the same thing is no argument, either -- it only shows our government is just as stupid as the Chinese government on this issue. And what about our companies? We don't have to make those things the Chinese are making -- in fact, comparative advantage suggests we shouldn't try to do so anyway.
Higher education costs so much because cheap money in the form of student loans -- made cheap by government subsidies (at least, until the federal government took over that aspect of the program) and by the fact that 18 year olds do not think about the fact that they will have to pay all this money back -- drives up the price of higher education the same way cheap money created the housing bubble. But instead of addressing the cause of ever-increasing higher prices in higher education, Obama of course only focused on the result. His solution, then, is to use the federal government to bully universities into lowering their prices. Of course, since much of the increasing cost of higher education is due to the development of a massive administrative bureaucracy to in no small part deal with federal requirements, loans, etc., meaning the bureaucracy can't go anywhere, the places where costs will be cut will be in faculty -- especially faculty in areas not considered to be "important," such as the arts, literature, philosophy, history, and languages. Thus higher education will get worse, meaning high school education will get worse (since there will be even less pressure on high schools to teach anything for anyone to get in college).
With the so-called "Buffett Rule," Obama would decrease charitable giving by millionaires, since
One of the few economically sensible things he said was that we should extend the payroll tax (yes, please, let's not pull more money out of a bad economy!), and that we shouldn't give tax breaks for companies to relocate overseas. Of course, he then went on to say that we should give tax breaks to this, that, and the other company -- when the federal government needs to stop trying to pick winners and losers. It doesn't do a good job of that, as a few scandals of late along those lines shows.
I found the following to be particularly hilarious:
And now for the audacious:
And then there is the rhetoric. The following sounds like something I would agree with:
In other words, this was yet another State of the Union in which the President of the United States was allowed to demonstrate his overwhelming economic ignorance. It's an annual tradition we have gotten accustomed to decades ago -- but we shouldn't let ourselves get used to it.
With his proposed "Trade Enforcement Unit," Obama is actually proposing to punish countries for selling cheap goods to the U.S. The argument is that subsidizing businesses so they can sell to us cheaper is unfair. However, such actions are actually harmful not to Americans, but to the countries, like China, that are doing it. Americans are benefited by lower prices, because lower prices increase our standard of living. But when you subsidize a company, you have to do so by taking money from the economy -- from your own consumers and from other companies in the country -- to allow a few companies to sell at a lower price. This harms China over the long run and makes their companies less competitive, their economy weaker, and their consumers less wealthy and with a lower standard of living than they would have otherwise had. If China wants to do that to their economy to sell cheaper goods to the U.S., who cares? To point out that we do the same thing is no argument, either -- it only shows our government is just as stupid as the Chinese government on this issue. And what about our companies? We don't have to make those things the Chinese are making -- in fact, comparative advantage suggests we shouldn't try to do so anyway.
Higher education costs so much because cheap money in the form of student loans -- made cheap by government subsidies (at least, until the federal government took over that aspect of the program) and by the fact that 18 year olds do not think about the fact that they will have to pay all this money back -- drives up the price of higher education the same way cheap money created the housing bubble. But instead of addressing the cause of ever-increasing higher prices in higher education, Obama of course only focused on the result. His solution, then, is to use the federal government to bully universities into lowering their prices. Of course, since much of the increasing cost of higher education is due to the development of a massive administrative bureaucracy to in no small part deal with federal requirements, loans, etc., meaning the bureaucracy can't go anywhere, the places where costs will be cut will be in faculty -- especially faculty in areas not considered to be "important," such as the arts, literature, philosophy, history, and languages. Thus higher education will get worse, meaning high school education will get worse (since there will be even less pressure on high schools to teach anything for anyone to get in college).
With the so-called "Buffett Rule," Obama would decrease charitable giving by millionaires, since
If you eliminate deductions, you eliminate one of the reasons people give money to charities. This is certainly not the only reason people give, of course, but incentives do matter. If you eliminate deductions, you eliminate a reason to give money away -- and you should not be surprised then when people don't give as much. Of course, with less private charity giving, charities will have less money to do their work, and government will "have" to take up the slack. The real result will be that the Left will get to talk about how stingy the rich are and point to how "charitable" government is.
Anyone making over $1 million will be required to pay an effective tax rate of at least 30%. At the same time, deductions would be eliminated on Americans earning more than $1 million. In tandem, the proposals would mean a substantial tax hike for the wealthiest Americans. (CNN)
One of the few economically sensible things he said was that we should extend the payroll tax (yes, please, let's not pull more money out of a bad economy!), and that we shouldn't give tax breaks for companies to relocate overseas. Of course, he then went on to say that we should give tax breaks to this, that, and the other company -- when the federal government needs to stop trying to pick winners and losers. It doesn't do a good job of that, as a few scandals of late along those lines shows.
I found the following to be particularly hilarious:
"I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place."This is hilarious because from day one he engaged in exactly the same policies that brought on this economic crisis. Obama is the kind of doctor who, seeing a man bleeding to death, calls for the leeches! Of course, Obama hasn't the foggiest idea what caused the economic collapse, so he certainly cannot know that what he thinks will help was the cause of the problem in the first place. Among the reasons to support a separation of economy and state is precisely because those who go into government know nothing at all about the economy and how it works. Of course, those who do so understand the economy would have enough sense to call for a separation of economy and state too.
And now for the audacious:
"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that does the same. It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody."The bailout, handout, cop-out king has the audacity to make this argument? He says "no bailouts" in the same speech in which he praises himself for the GM and Chrysler bailouts? He says "no handouts" when he wants government to subsidize highly unprofitable green energy companies? He says "no cop-outs" in the same speech in which he continues to blame Bush for the bad economy? (Bush deserves all the blame one can heap on him, but after a while, this economy became Obama's fault for continuing on as long as it has.) I would love to have an economy in which there were in fact rule of law, equality under the law, and no bailouts, no handouts, and cop-outs from our government. But Obama violates these things on a daily basis (and by daily, I think I am being overly generous to him).
And then there is the rhetoric. The following sounds like something I would agree with:
"We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules. What's at stake are not Democratic values or Republican values, but American values. We have to reclaim them."But wait, the bailouts Obama supported allowed "a shrinking number of people to do really well," at the expense of the well-being of the rest of us. And every one of Obama's subsidies, special loans, cronyist activities, etc. are different rules for people he prefers over others. He doesn't believe in equality under the law. He believes in special treatment of some vs. others under the law. His every action shows he in fact opposes equality under the law and supports special laws for certain groups and individuals.
In other words, this was yet another State of the Union in which the President of the United States was allowed to demonstrate his overwhelming economic ignorance. It's an annual tradition we have gotten accustomed to decades ago -- but we shouldn't let ourselves get used to it.
Monday, January 23, 2012
The Wisdom of Watching Waves
Watching waves roll in can tell you a lot about the world.
On the weekend of the 13th, I was in Hermosa Beach, on the pier, watching the waves roll in . The waves moved in smooth, almost unnoticeable, until they approach the shore, where resistance changes the wave's shape, eventually turning it into much more complex foam as it breaks. Still, the energy of the wave drive the foam to shore.
Energy plus resistance creates work and more complexity.
The waves came in in predictable patterns. Small waves gave way to lager waves and larger waves, until the largest wave of the series came, then the waves would come in smaller and smaller. After I saw the waves get bigger, I would predict that a new wave of waves was coming. But I could not predict which wave (the next? or the next?) was the first of the new series, or the last of the old. After I saw the next wave was smaller, I could predict the next wave after it would be smaller, and that they would get small for a while, but I could not predict which one was in fact the peak wave. That is, it was possible to predict the pattern, but not the nature of each wave.
As with an economy, perfect prediction was impossible, even as pattern prediction was possible.
I believe Hayek made a similar observation in regards to the economy, in fact. Nothing a little wave-watching couldn't tell you. And that's a pretty simple system.
On the weekend of the 13th, I was in Hermosa Beach, on the pier, watching the waves roll in . The waves moved in smooth, almost unnoticeable, until they approach the shore, where resistance changes the wave's shape, eventually turning it into much more complex foam as it breaks. Still, the energy of the wave drive the foam to shore.
Energy plus resistance creates work and more complexity.
The waves came in in predictable patterns. Small waves gave way to lager waves and larger waves, until the largest wave of the series came, then the waves would come in smaller and smaller. After I saw the waves get bigger, I would predict that a new wave of waves was coming. But I could not predict which wave (the next? or the next?) was the first of the new series, or the last of the old. After I saw the next wave was smaller, I could predict the next wave after it would be smaller, and that they would get small for a while, but I could not predict which one was in fact the peak wave. That is, it was possible to predict the pattern, but not the nature of each wave.
As with an economy, perfect prediction was impossible, even as pattern prediction was possible.
I believe Hayek made a similar observation in regards to the economy, in fact. Nothing a little wave-watching couldn't tell you. And that's a pretty simple system.
Friday, January 20, 2012
Open Source Legislation?
Gus diZerega argues that democracy is a spontaneous order. In the broadest sense of political action, it certainly is. In the sense of government as a set of organizations, it is not. Of course, the first requires the existence of institutions and organizations, so in a real sense, if democracy is the first, it is also necessarily the second as well. One can argue about whether or not protests are part of a democracy proper, but if they are not, then you probably believe government is necessarily an organization and cannot be a spontaneous order.
But what if citizens participated in the creation of legislation. Rarely does a government actually contribute to a spontaneous order developing into more of a spontaneous order as opposed to trying to develop it into an organization. Certainly things like SOPA, PIPA, the ongoing concentration of power in the hands of the Presidency, etc. are strong indications of a move away from spontaneous order and toward government becoming more of an organization. However, there is also the OPEN Act, which is an alternative to SOPA and PIPA, and may or may not be much better. Why, then, bring it up? Because of the way the legislation is being created: democratically. If you go to the OPEN website, you "can annotate the bill with comments and suggestions for its author, much like they would a Wikipedia document. There's a field where you can submit your e-mail address to receive updates about changes to the bill and its path through the maze that is our legislative process." Truly democratic bill creation? So it seems. Of course, the final arbiter of what does in fact go in is the sponsor, meaning the legislation is not truly a spontaneous order. But there is at least some possibility of ideas coming up the sponsor would not have otherwise come up with.
I am not going to argue that such a process will come up with better bills. Maybe it will, maybe it won't. Maybe it will be a mixed bag. But if all bills were created this way -- and were required to be created this way -- we would have a much more open process. We would see what is in the bills before they were voted on, we would see their creation, and we would have a hand in that creation. It is not quite common law, which does not require legislation, but it is no longer "experts" designing laws for the rest of us.
But what if citizens participated in the creation of legislation. Rarely does a government actually contribute to a spontaneous order developing into more of a spontaneous order as opposed to trying to develop it into an organization. Certainly things like SOPA, PIPA, the ongoing concentration of power in the hands of the Presidency, etc. are strong indications of a move away from spontaneous order and toward government becoming more of an organization. However, there is also the OPEN Act, which is an alternative to SOPA and PIPA, and may or may not be much better. Why, then, bring it up? Because of the way the legislation is being created: democratically. If you go to the OPEN website, you "can annotate the bill with comments and suggestions for its author, much like they would a Wikipedia document. There's a field where you can submit your e-mail address to receive updates about changes to the bill and its path through the maze that is our legislative process." Truly democratic bill creation? So it seems. Of course, the final arbiter of what does in fact go in is the sponsor, meaning the legislation is not truly a spontaneous order. But there is at least some possibility of ideas coming up the sponsor would not have otherwise come up with.
I am not going to argue that such a process will come up with better bills. Maybe it will, maybe it won't. Maybe it will be a mixed bag. But if all bills were created this way -- and were required to be created this way -- we would have a much more open process. We would see what is in the bills before they were voted on, we would see their creation, and we would have a hand in that creation. It is not quite common law, which does not require legislation, but it is no longer "experts" designing laws for the rest of us.
Thursday, January 19, 2012
Knitting Together the Humanities and the Sciences
What do the humanities study? Beauty, ethics, language, the arts, history, epistemology, ontology, meaning, values, etc.
For a long time now, the sciences and the humanities have been divided. The sciences were understood to be sciences because of their ability to be mathematized and to give predictions. The humanities could not be mathematized nor made predictable, so they were shuttled off into their own area. And ignored by science. Though there was some effort at turning the humanities into science, the favor was mostly returned.
However, what if reductionist science is only half of the equation? What if complexity and emergence -- aspects studied by the humanities -- are legitimate areas of study for science? How does that change the relationship between the humanities and the sciences?
Many in the humanities have studied the impact of the economy and society on the humanities and artistic production -- mostly through Marxist lenses. Many in the humanities have used anthropological and cultural studies to study the humanities and artistic production. Many in the humanities have used psychological theories to study the humanities and artistic production. And they are right to do so, because the mind/brain, culture, and society are important elements to understand the humanities, and the production, appreciation, and understanding of the arts. But psychology, anthropology, and economics and sociology are all sciences. They are just complex sciences. They cannot be reduced to physics. They have their own emergent properties. Out of our psychological, culture, and sociological interactions -- out of this milieu -- come the arts and humanities. We are already in a situation to use science to understand the arts and humanities -- so long as we are using the right science, and not the wrong ones (mathematized sciences, like physics), which are far, far, far too simple.
Chaos theory, self-organization (including spontaneous order) theory, bios theory, complexity, emergence, information theory, network theory, etc. are all part of the new science of emergent complexity that is central to reconnecting the sciences with the humanities. More, it will help us to stop doing bad science in the complex sciences, particularly the social sciences, which are between the sciences of psychology (broadly understood) and the humanities. This suggests that the mathematical approaches so popular in economics in particular can do little more than mislead us. More appropriate to understanding self-organizing social networks are the methods of the humanities. Spontaneous orders are the stories of our lives we are living with others. We need to understand them as such. That is a very different approach than the attempt to turn economics into something akin to mathematical physics.
For a long time now, the sciences and the humanities have been divided. The sciences were understood to be sciences because of their ability to be mathematized and to give predictions. The humanities could not be mathematized nor made predictable, so they were shuttled off into their own area. And ignored by science. Though there was some effort at turning the humanities into science, the favor was mostly returned.
However, what if reductionist science is only half of the equation? What if complexity and emergence -- aspects studied by the humanities -- are legitimate areas of study for science? How does that change the relationship between the humanities and the sciences?
Many in the humanities have studied the impact of the economy and society on the humanities and artistic production -- mostly through Marxist lenses. Many in the humanities have used anthropological and cultural studies to study the humanities and artistic production. Many in the humanities have used psychological theories to study the humanities and artistic production. And they are right to do so, because the mind/brain, culture, and society are important elements to understand the humanities, and the production, appreciation, and understanding of the arts. But psychology, anthropology, and economics and sociology are all sciences. They are just complex sciences. They cannot be reduced to physics. They have their own emergent properties. Out of our psychological, culture, and sociological interactions -- out of this milieu -- come the arts and humanities. We are already in a situation to use science to understand the arts and humanities -- so long as we are using the right science, and not the wrong ones (mathematized sciences, like physics), which are far, far, far too simple.
Chaos theory, self-organization (including spontaneous order) theory, bios theory, complexity, emergence, information theory, network theory, etc. are all part of the new science of emergent complexity that is central to reconnecting the sciences with the humanities. More, it will help us to stop doing bad science in the complex sciences, particularly the social sciences, which are between the sciences of psychology (broadly understood) and the humanities. This suggests that the mathematical approaches so popular in economics in particular can do little more than mislead us. More appropriate to understanding self-organizing social networks are the methods of the humanities. Spontaneous orders are the stories of our lives we are living with others. We need to understand them as such. That is a very different approach than the attempt to turn economics into something akin to mathematical physics.
Wednesday, January 18, 2012
Why I Am For "Corporate Raiding," and Why You Should Be Too
Mitt Romney has gotten a lot of flak for being in Bain Capital, a venture capital company that has been described as "vulture capital." Others simply call some of what they do "corporate raiding," which is generally considered to be a bad thing.
But why is it considered to be a bad thing? Let us take a look at what corporate raiders do, paying particular attention to the "seen" and the "unseen."
Before I begin, let us acknowledge that the entire reason Bain Capital does anything is to make money. That is the purpose of business. Thus, it is no argument whatsoever against what it's doing. It is irrelevant as to whether or not what it does is ethical or unethical, whether we should support it or not.
Companies like Bain Capital thus, through such activities, create value by making underperforming companies (more) profitable. In doing so, they help keep the economy healthy.
I will note, though, that this is not the same thing as a government bailout or takeover. There are a variety of reasons for this. For one, a private company like Bain is going to be concerned with transforming the company to make it more profitable, more efficient, and healthy. If they cannot do so, they break the company up and sell off the parts, to reallocate the capital in the company to more valuable uses. Were a government to do the same thing and take over a company, there would be pressures to keep everyone on and maintain the benefits. Since the government does not have its own money, but instead has a supply of public funds from taxes and borrowing, they further not only have no incentive to make the company lean and competitive, but rather can keep everyone in place and, more, even expand, making the company more bureaucratized. Such companies can lose efficiency, since there are no market pressures on them to be more efficient and wealth-creating. Further, there will be public choice issues, where others within the industry will want to get involved in the company in order to ensure it remains unthreatening to others in the industry. Many people with wealth and power will get more wealth and power, all at public expense. In other words, with a government takeover:
But why is it considered to be a bad thing? Let us take a look at what corporate raiders do, paying particular attention to the "seen" and the "unseen."
Before I begin, let us acknowledge that the entire reason Bain Capital does anything is to make money. That is the purpose of business. Thus, it is no argument whatsoever against what it's doing. It is irrelevant as to whether or not what it does is ethical or unethical, whether we should support it or not.
SEENThe characterization of this process as "vulture capital," intended as an insult, is actually an accurate description of what is taking place. Vultures provide a valuable service in the ecosystem. Without them and other carrion-eaters, dead bodies would take longer to break down, with the result that there would be far more disease. As disease spread, more animals would get sick and die, resulting in more rotting corpses, with more disease. Vultures, by eating the corpse, thus helps keep the ecosystem healthy. So, too, corporate raiders. By taking weak companies and making them strong, they actually strengthen the economy. It's not a pretty sight to see, but one has to look at the benefits to the overall system. It is not a sign of virtue to sacrifice the well-being of everyone else with the maintenance of a weak economy with weak growth so a few people can keep this or that particular job or set of benefits.
When a company like Bain Capital takes over a company, what we typically see is a strong company taking over a weak one, people getting fired, benefits getting cut, etc. Finding someone who doesn't like what a corporate raider does in the aftermath is like finding a fundamentalist Christian in the South: it's nearly impossible not to do it.
UNSEEN
But what social benefits may there be to corporate raiding? Well, let's begin with the fact that a business, in order to be taken over, must be in a weak condition. It is most likely unprofitable, if not actually losing money. Should it continue on in this way, it is likely to go out of business, which would result in the elimination of its product from the market (reducing competition, reducing consumer choice, etc.) and every single employee in the company losing their jobs (and, needless to say, benefits). Often management won't want to do what is necessary to keep the company afloat, whether it be because of nepotism, unwillingness to fire anyone (which is often exacerbated by a variety of laws that allow fired or laid-off workers to sue the company for "discrimination," even when no discrimination has occurred; such lawsuits could bankrupt the company, leading to everyone being laid off), mismanagement, etc. Further, workers are often resistant to reductions in pay and benefits, which puts the company in a difficult position financially. They may need the workers, but can't afford what they are being paid (directly or indirectly, through benefits). Sometimes it takes an outside perspective to make a company profitable once again. That is what companies like Bain Capital do. They come in, assess the situation, take over, and make all the hard decisions. The result is the creation of a newly profitable company that can continue to make its product, and perhaps expand once again in the future. A variety of painful cuts occur, but they are necessary to save the patient.
Companies like Bain Capital thus, through such activities, create value by making underperforming companies (more) profitable. In doing so, they help keep the economy healthy.
I will note, though, that this is not the same thing as a government bailout or takeover. There are a variety of reasons for this. For one, a private company like Bain is going to be concerned with transforming the company to make it more profitable, more efficient, and healthy. If they cannot do so, they break the company up and sell off the parts, to reallocate the capital in the company to more valuable uses. Were a government to do the same thing and take over a company, there would be pressures to keep everyone on and maintain the benefits. Since the government does not have its own money, but instead has a supply of public funds from taxes and borrowing, they further not only have no incentive to make the company lean and competitive, but rather can keep everyone in place and, more, even expand, making the company more bureaucratized. Such companies can lose efficiency, since there are no market pressures on them to be more efficient and wealth-creating. Further, there will be public choice issues, where others within the industry will want to get involved in the company in order to ensure it remains unthreatening to others in the industry. Many people with wealth and power will get more wealth and power, all at public expense. In other words, with a government takeover:
SEENIt should then be obvious which one the public will support. But it should also now be obvious which one you should now support.
Everyone keeps their jobs and benefits.
UNSEEN
The economy is weakened by having a wasteful company in the market, surviving on taxes and borrowing that remove money from the economy and direct it toward the maintenance of such an increasingly wasteful company.
Monday, January 16, 2012
Markets, Socialism, and Liberty
This past weekend I attended a Liberty Fund colloquium on "Markets, Socialism, and Liberty." The first day we discussed readings of Don Lavoie, Mises, and Hayek; the second day we discussed more recent developments, including "Participatory Planning" by Michael Albert and Robin Hahnel, and "Calculaton, Complexity, and Planning: The Socialist Calculation Debate Once Again" by Alain Cottrell and W. P. Cockschott, responses by David Prychitko and Steven Horwitz, respectively, and finally excerpts from Socialism After Hayek by Theodore Burczak. The discussion was made somewhat more interesting by the actual presence of Horwitz, Prychitko, and Burczak.
The Albert and Hahnel piece was a horror story of apparent bottom-up planning through endless meetings. I say it is a horror story because I cannot think of a worse kind of personal Hell than having to participate in their kind of endless committee meetings. Worse for their argument was the fact that they had a logical fallacy -- in arguing that one thing needed was the measurement of value, they committed the logical fallacy of quantifying a quality. Of course, individual value rankings change from moment to moment, and even if they don't, they don't scale up to the group. Within an individual, it's not likely that one will value A over B, B over C, and C over A. But in a group, that is entirely possible. And those things cannot be dealt with. It was also pointed out that very often such committees just end up approving everything to avoid conflict -- and I am certain such would end up being the case with their councils, because otherwise decisions would inevitably breed resentment between councils, and before long there would be wars between neighborhoods. Their plan would inevitably lead to civil strife -- or a positive feedback loop in which everyone got everything they wanted, until all wealth was exhausted, and then nobody could get anything they wanted.
The authors argue that this is also a way to avoid the problems of top-down centralized power. However, what happens when councils come into conflict? It turns out that higher-up ones make the decision. More, the more impact a decision has on others, the higher up the council that has to decide. They argue that underwear color is local, but deodorant is global (because of the ozone layer problem). However, underwear is made of cotton (and other materials, but let's keep life easy), and one must grow cotton, and that means one needs to use fertilizer and pesticides, which have a global impact. Thus, underwear comes under the central planning council's jurisdiction. It would be easy to go through just about any product and prove global impact, meaning in the end, everything would be decided by a dictatorial central planning board, just like they are trying to avoid.
This of course points to the problem of unintended consequences. Pretty much everyone there agreed that Marx would not have been happy with the actual ways Marxism has been realized. But is it possible for Marxism to turn out any other way? Our analysis of decentralized planning led us to conclude that even that would necessarily result in central planning. It turns out Marx's dream is impossible. The only thing that can happen is for the state to take over the economy, with the same problems of alienation and exploitation (according to his definitions).
Cottrell and Cockshott propose using artificial neural nets (ANN) to plan, which they claim solves the knowledge problem. However, this does not in fact do so. There is still tacit knowledge which, by definition, is inarticulate, meaning it cannot be put in as input into the ANN. And even if one could in fact put in all the information (which we observed was impossible), there would still be problems involved in data input itself. Anyone familiar with chaos theory and complex systems knows that even the smallest variance of input can result in wildly different outcomes, whether it be a typo or a choice of where to round off.
Ultimately, both ideas fail because they are still trying to eliminate prices. Horwitz points out that money prices are similar to language in that they both stand-in for something and they both communicate information. To want to eliminate money prices is like wanting to eliminate language, but still want the full range of information communication. It's simply not possible. All one can have without either language or prices is the simplest information communication. Prices are an emergent property of the network of suppliers, producers, and demanders in the same way that meaning emerges in the process of reading or listening to someone speak. Words gain meaning in context; prices emerge too in context. Socialism wants to remove that context and the process that creates prices, and yet still have all the information. Again, this is simply impossible.
Prices allow us to express our wishes, knowledge, and desires. These are all embedded in prices. Thus, markets let us talk to one another -- often across long distances, and to people who do not know us and otherwise could not know what we want or know. If you eliminate prices, you eliminate information.
Of course, one of the reasons socialists want to get rid of money prices is that prices communicate incomplete information. Left out are various externalities, etc. They seek perfect information, but as it turns out, if you have perfect information, you mathematically have no information. Thus, perfect information under socialism would be no information. It would be like me telling you that you have on a blue shirt when you already know you have on a blue shirt. No information is communicated. According to information theory, you have to have noise to have information. If I tell you that you have something on your shirt, and you don't know that, I have communicated information. There is noise, ambiguity in the message, which increases in information with the redundancy of looking down at your shirt to see what I'm talking about. With this new information, new actions emerge. With perfect information, no actions emerge.
The bottom line is that socialists think that syntactic clarity is the same as semantic clarity -- that the logical structure itself is what creates meaning. But this is simply not true. It is like saying you understand a poem because you know it's a sonnet. There is more to it than its structure. Yet, it is also true that structure affects meaning. A sonnet has a different meaning from a ghazal, even if they both deal with the same theme(s) in the same way. So market socialists who argue that their schemes will work because there is a "formal similarity" between their models and models of the free market economy are wrong. The formal similarity among sonnets does not mean that gibberish in one sonnet creates identical meaning as the use of language in another. You still need meaningful information, and that cannot take place in socialism.
I pointed out too that if market socialists are depending on equilibrium models, they are in real trouble, because real market economies are not and cannot ever be at equilibrium. No, they are in fact far-from-equilibrium processes -- the only state in which knowledge can be created. At equilibrium, all the knowledge is available; in chaos, no knowledge is available. In between, in the critical state, knowledge is created. Socialism requires the economy be at equilibrium, because all of the information that is required would be present only in an equilibrium state. But since real markets are in a far-from-equilibrium state, the market socialists are doubly wrong: market socialism does not and cannot have even a formal similarity to the market economy.
This then gets us to Burczak. In his review of the most recent developments, he discussed problems of social justice, rights, and inalienability of labor.
The real problem with ideas of social justice involve the fact that we have to solve actual, not possible conflicts. This is how real justice emerges, making it possible for us to live together. Common law justice emerges in precisely this way, where conflict are dealt with when they take place. One does not anticipate all possible conflicts beforehand in order to create laws for possibilities.
Negative vs. positive rights were also discussed, with the claim that even negative rights are positive rights because one has to have an enforcer. However, the real issue differentiating the two is that with negative rights, you respect the rights of others, and your rights do not come into conflict; however, with positive rights, you necessarily treat others as a means to your own ends, and your rights necessarily come into conflict with the rights of others. If I say I have a positive right to health care, that means I have the right to appropriate others' money to pay for it and to appropriate the physician's time and work to get it. This latter is particularly ironic given the argument for the inalienability of labor.
The idea of the inalienability of labor is essentially that people cannot be alienated from the labor, that whenever they labor, they have ownership in what they labored upon. This idea does make some sense, now that I think about it -- but only if one thinks that all labor is like scholarship or artistic production. When I write an article, my authorship is necessarily connected to the work done. I create a series of articles that others recognize as being by me. It should not surprise anyone that academic scholars have thus come up with such a notion. However, not all work is like scholarship.
The argument was made that a finished car is not owned by anyone -- so therefore, it should be considered to be owned by the workers who made it. This seems to demonstrate more than anything a complete lack of understanding of how a car is built and of capital theory. Surely the person/corporation (which is legally considered to be a person) who puts up the money to buy all the capital goods is the owner of the finished product, since they were the one who risked their own money, own the plant the cars are manufactured in, etc. And what about the workers? The inalienability of labor argument says that it is invalid for anyone to give up ownership in anything they labored on, so the argument that one is paying for the labor won't stand up. However, one could perhaps argue that the firm is in fact buying the product from the workers in the form of wages. A little rhetorical jujitsu seems to solve the problem.
However, that's not entirely true. It doesn't solve all problems. But my outright denial of the inalienability of labor does. Consider the problem that would occur if you helped your neighbor fix his lawn mower. Does helping your neighbor fix his mower mean you now own his mower? If so, the last thing you would want to do is let anyone fix anything of yours -- every attempt to help someone fix something would be seen as an attempt to appropriate your things. Who would trust anyone? Who would try to get anything fixed? You can't alienate your mechanic's labor by bringing your car home. Of course, socialists argue against private property, so perhaps your car and your lawn mower aren't really yours, anyway. They belong to the community. But then, wouldn't the lawn mower belong to the one who can fix it? And wouldn't it be up to him to mow your lawn, since he owns the mower? And once he mowed your lawn, wouldn't he own your lawn? Thus all ownership would end up in a few hands -- again, the opposite of what socialists want.
Having read some of the more recent ideas to come out of the socialist literature, I am more convinced than ever of the impossibility of socialism. Even if you ignore the fact that it's based on a false understanding of human nature, a misunderstanding of epistemology, some strange and contradictory notions of ethics and justice, a failure to understand the purpose of money prices, the failure to understand the nature of the economy as a whole (a problem neoclassical economists also have), and unintended consequences, the fact is that you cannot control a self-organizing, scale-free network process. We are in the middle of the economy, and our actions and interactions give rise to the economy. Thus, we cannot take an outside view of it, we cannot control it, we cannot impose our wills upon it, we cannot transform it from an ateleological process to a teleological system. The best we can do is understand the nature of complex, self-organizing network processes, how our interactions create patterns, and the nature of emergence so we can understand both how we create meaning and value and, thus, money prices.
I of course am not the only one writing on this. Several of the other participants have as well, including David Henderson here, here, and here, and Pete Boettke here.
The Albert and Hahnel piece was a horror story of apparent bottom-up planning through endless meetings. I say it is a horror story because I cannot think of a worse kind of personal Hell than having to participate in their kind of endless committee meetings. Worse for their argument was the fact that they had a logical fallacy -- in arguing that one thing needed was the measurement of value, they committed the logical fallacy of quantifying a quality. Of course, individual value rankings change from moment to moment, and even if they don't, they don't scale up to the group. Within an individual, it's not likely that one will value A over B, B over C, and C over A. But in a group, that is entirely possible. And those things cannot be dealt with. It was also pointed out that very often such committees just end up approving everything to avoid conflict -- and I am certain such would end up being the case with their councils, because otherwise decisions would inevitably breed resentment between councils, and before long there would be wars between neighborhoods. Their plan would inevitably lead to civil strife -- or a positive feedback loop in which everyone got everything they wanted, until all wealth was exhausted, and then nobody could get anything they wanted.
The authors argue that this is also a way to avoid the problems of top-down centralized power. However, what happens when councils come into conflict? It turns out that higher-up ones make the decision. More, the more impact a decision has on others, the higher up the council that has to decide. They argue that underwear color is local, but deodorant is global (because of the ozone layer problem). However, underwear is made of cotton (and other materials, but let's keep life easy), and one must grow cotton, and that means one needs to use fertilizer and pesticides, which have a global impact. Thus, underwear comes under the central planning council's jurisdiction. It would be easy to go through just about any product and prove global impact, meaning in the end, everything would be decided by a dictatorial central planning board, just like they are trying to avoid.
This of course points to the problem of unintended consequences. Pretty much everyone there agreed that Marx would not have been happy with the actual ways Marxism has been realized. But is it possible for Marxism to turn out any other way? Our analysis of decentralized planning led us to conclude that even that would necessarily result in central planning. It turns out Marx's dream is impossible. The only thing that can happen is for the state to take over the economy, with the same problems of alienation and exploitation (according to his definitions).
Cottrell and Cockshott propose using artificial neural nets (ANN) to plan, which they claim solves the knowledge problem. However, this does not in fact do so. There is still tacit knowledge which, by definition, is inarticulate, meaning it cannot be put in as input into the ANN. And even if one could in fact put in all the information (which we observed was impossible), there would still be problems involved in data input itself. Anyone familiar with chaos theory and complex systems knows that even the smallest variance of input can result in wildly different outcomes, whether it be a typo or a choice of where to round off.
Ultimately, both ideas fail because they are still trying to eliminate prices. Horwitz points out that money prices are similar to language in that they both stand-in for something and they both communicate information. To want to eliminate money prices is like wanting to eliminate language, but still want the full range of information communication. It's simply not possible. All one can have without either language or prices is the simplest information communication. Prices are an emergent property of the network of suppliers, producers, and demanders in the same way that meaning emerges in the process of reading or listening to someone speak. Words gain meaning in context; prices emerge too in context. Socialism wants to remove that context and the process that creates prices, and yet still have all the information. Again, this is simply impossible.
Prices allow us to express our wishes, knowledge, and desires. These are all embedded in prices. Thus, markets let us talk to one another -- often across long distances, and to people who do not know us and otherwise could not know what we want or know. If you eliminate prices, you eliminate information.
Of course, one of the reasons socialists want to get rid of money prices is that prices communicate incomplete information. Left out are various externalities, etc. They seek perfect information, but as it turns out, if you have perfect information, you mathematically have no information. Thus, perfect information under socialism would be no information. It would be like me telling you that you have on a blue shirt when you already know you have on a blue shirt. No information is communicated. According to information theory, you have to have noise to have information. If I tell you that you have something on your shirt, and you don't know that, I have communicated information. There is noise, ambiguity in the message, which increases in information with the redundancy of looking down at your shirt to see what I'm talking about. With this new information, new actions emerge. With perfect information, no actions emerge.
The bottom line is that socialists think that syntactic clarity is the same as semantic clarity -- that the logical structure itself is what creates meaning. But this is simply not true. It is like saying you understand a poem because you know it's a sonnet. There is more to it than its structure. Yet, it is also true that structure affects meaning. A sonnet has a different meaning from a ghazal, even if they both deal with the same theme(s) in the same way. So market socialists who argue that their schemes will work because there is a "formal similarity" between their models and models of the free market economy are wrong. The formal similarity among sonnets does not mean that gibberish in one sonnet creates identical meaning as the use of language in another. You still need meaningful information, and that cannot take place in socialism.
I pointed out too that if market socialists are depending on equilibrium models, they are in real trouble, because real market economies are not and cannot ever be at equilibrium. No, they are in fact far-from-equilibrium processes -- the only state in which knowledge can be created. At equilibrium, all the knowledge is available; in chaos, no knowledge is available. In between, in the critical state, knowledge is created. Socialism requires the economy be at equilibrium, because all of the information that is required would be present only in an equilibrium state. But since real markets are in a far-from-equilibrium state, the market socialists are doubly wrong: market socialism does not and cannot have even a formal similarity to the market economy.
This then gets us to Burczak. In his review of the most recent developments, he discussed problems of social justice, rights, and inalienability of labor.
The real problem with ideas of social justice involve the fact that we have to solve actual, not possible conflicts. This is how real justice emerges, making it possible for us to live together. Common law justice emerges in precisely this way, where conflict are dealt with when they take place. One does not anticipate all possible conflicts beforehand in order to create laws for possibilities.
Negative vs. positive rights were also discussed, with the claim that even negative rights are positive rights because one has to have an enforcer. However, the real issue differentiating the two is that with negative rights, you respect the rights of others, and your rights do not come into conflict; however, with positive rights, you necessarily treat others as a means to your own ends, and your rights necessarily come into conflict with the rights of others. If I say I have a positive right to health care, that means I have the right to appropriate others' money to pay for it and to appropriate the physician's time and work to get it. This latter is particularly ironic given the argument for the inalienability of labor.
The idea of the inalienability of labor is essentially that people cannot be alienated from the labor, that whenever they labor, they have ownership in what they labored upon. This idea does make some sense, now that I think about it -- but only if one thinks that all labor is like scholarship or artistic production. When I write an article, my authorship is necessarily connected to the work done. I create a series of articles that others recognize as being by me. It should not surprise anyone that academic scholars have thus come up with such a notion. However, not all work is like scholarship.
The argument was made that a finished car is not owned by anyone -- so therefore, it should be considered to be owned by the workers who made it. This seems to demonstrate more than anything a complete lack of understanding of how a car is built and of capital theory. Surely the person/corporation (which is legally considered to be a person) who puts up the money to buy all the capital goods is the owner of the finished product, since they were the one who risked their own money, own the plant the cars are manufactured in, etc. And what about the workers? The inalienability of labor argument says that it is invalid for anyone to give up ownership in anything they labored on, so the argument that one is paying for the labor won't stand up. However, one could perhaps argue that the firm is in fact buying the product from the workers in the form of wages. A little rhetorical jujitsu seems to solve the problem.
However, that's not entirely true. It doesn't solve all problems. But my outright denial of the inalienability of labor does. Consider the problem that would occur if you helped your neighbor fix his lawn mower. Does helping your neighbor fix his mower mean you now own his mower? If so, the last thing you would want to do is let anyone fix anything of yours -- every attempt to help someone fix something would be seen as an attempt to appropriate your things. Who would trust anyone? Who would try to get anything fixed? You can't alienate your mechanic's labor by bringing your car home. Of course, socialists argue against private property, so perhaps your car and your lawn mower aren't really yours, anyway. They belong to the community. But then, wouldn't the lawn mower belong to the one who can fix it? And wouldn't it be up to him to mow your lawn, since he owns the mower? And once he mowed your lawn, wouldn't he own your lawn? Thus all ownership would end up in a few hands -- again, the opposite of what socialists want.
Having read some of the more recent ideas to come out of the socialist literature, I am more convinced than ever of the impossibility of socialism. Even if you ignore the fact that it's based on a false understanding of human nature, a misunderstanding of epistemology, some strange and contradictory notions of ethics and justice, a failure to understand the purpose of money prices, the failure to understand the nature of the economy as a whole (a problem neoclassical economists also have), and unintended consequences, the fact is that you cannot control a self-organizing, scale-free network process. We are in the middle of the economy, and our actions and interactions give rise to the economy. Thus, we cannot take an outside view of it, we cannot control it, we cannot impose our wills upon it, we cannot transform it from an ateleological process to a teleological system. The best we can do is understand the nature of complex, self-organizing network processes, how our interactions create patterns, and the nature of emergence so we can understand both how we create meaning and value and, thus, money prices.
I of course am not the only one writing on this. Several of the other participants have as well, including David Henderson here, here, and here, and Pete Boettke here.
Wednesday, January 11, 2012
Searching for Jobs
Having unsuccessfully searched for a job since May, I must say that I am disappointed at the way job sites are set up online. They do not make use of the internet in the least, but simply act as glorified newspaper classified ads.
Why on earth is there not an eHarmony of job searching? Seriously. It could replace all the H.R. departments. There is serious misallignment of skills and positions, and part of this is because of the fact that H.R. people do not really understand the positions they are filling. Thus, they only match buzzwords -- much like online job sites do. There has to be a better way.
Why on earth is there not an eHarmony of job searching? Seriously. It could replace all the H.R. departments. There is serious misallignment of skills and positions, and part of this is because of the fact that H.R. people do not really understand the positions they are filling. Thus, they only match buzzwords -- much like online job sites do. There has to be a better way.
Tuesday, January 10, 2012
Education Credits as the Systemic Resource of the Educational Order
Morgan Brown has an interesting article on why professors are anti-capitalist. He traces it to the fact that universities are set up as guilds. The systemic resource of education is credits. When the educational institutions are the credit-granting institutions, we end up with a guild. Thus, we need a separate credit-granting institutions in their own spontaneous order -- much in the same way we have banks participating in the monetary order, separate from the stores we shop at. By doing so, by separating the systemic resource from the educational institutions, we would have the conditions for a true market-style educational system.
Monday, January 09, 2012
Power Law Spectra a Fundamental Law of the Universe
According to Hector Sabelli,
The theory of entropy says everything is seeking the lowest energy state. Thus, high frequencies are more stable in 1/f patterns.
This relation among action, energy, entropy, power, and time results in power law spectra, which are necessary (if not sufficient) for self-organization. This implies that self-organization is a fundamental feature of the universe. Entropy drives self-organization, which results in greater complexity.
Human action = human work x time. Thus, the natural pattern one should see in human inter-actions is once created by power laws. We should see power law spectra in sizes of firms, longevity of firms, city sizes, wealth distribution -- anything that is the result of human action. If and when we do, we are seeing a natural process at work; if and when we do not, we are either seeing an equilibrium state caused by low density, or an equilibrium state caused by unnatural interventions into the process (by "unnatural" I mean rules or values from one spontaneous order being introduced into another, foreign, order). Self-organization takes place in the far-from-equilibrium, or critical, realm -- not in states of equilibrium. Thus, equilibrium theories of the economy -- or of any spontaneous order -- in which there is sufficient density for self-organization to occur are wrong. Perhaps, not even wrong.
Power spectrum analysis related energy with time. Power is the statistical frequency of action quanta; temporal frequency is 1 over time. As a rule, physical energy is a function of frequency; the higher the frequency, the greater the energy. In 1/f patterns, the greater the frequency, the lesser the energy (power). (Bios, 151)Action = energy x time. Energy is work. Thus, action = work x time. Further, Power = work/time, meaning if work = energy, then energy = power x time. Thus, Action = power x time x time (time squared).
The theory of entropy says everything is seeking the lowest energy state. Thus, high frequencies are more stable in 1/f patterns.
This relation among action, energy, entropy, power, and time results in power law spectra, which are necessary (if not sufficient) for self-organization. This implies that self-organization is a fundamental feature of the universe. Entropy drives self-organization, which results in greater complexity.
Human action = human work x time. Thus, the natural pattern one should see in human inter-actions is once created by power laws. We should see power law spectra in sizes of firms, longevity of firms, city sizes, wealth distribution -- anything that is the result of human action. If and when we do, we are seeing a natural process at work; if and when we do not, we are either seeing an equilibrium state caused by low density, or an equilibrium state caused by unnatural interventions into the process (by "unnatural" I mean rules or values from one spontaneous order being introduced into another, foreign, order). Self-organization takes place in the far-from-equilibrium, or critical, realm -- not in states of equilibrium. Thus, equilibrium theories of the economy -- or of any spontaneous order -- in which there is sufficient density for self-organization to occur are wrong. Perhaps, not even wrong.
Friday, January 06, 2012
Bringing the Creative Economy Online
I am reading Reinventing Discovery by Michael Nielson. His thesis is that the internet is beginning to be used to change the way we do science. He uses Galaxy Zoo, Foldit, and eBird as exmples of where this is taking place in science, and Innocentive as an example of the commercial application of this idea. No doubt there is plenty of room for innovation in these areas.
Innocentive in particular is an attempt to monetize crowdsourcing. One can solve problems on one's own, or create a group -- and get paid if your solution is accepted. This isn't a bad way of going about things, but it seems to me that a more productive way of going about getting financially lucrative ideas would be to combine the approaches of Innocentive and things like Foldit. At Foldit, one can get help from others. Incremental changes suggested by others can be integrated, and thus solutions found. It seems to me that if one could figure out a way to pay people for their participation in solving creative problems that can lead to profitable products, that would both revolutionize work and greatly stimulate the economy.
I imagine for something like this to work, there would have to be some combination of hourly pay and bonus for being part of the successful solution. One could pay people per hour by having them log in and by tracking their activities during the time they are logged on. One could tell how much they are doing, more or less, and whether it has to do with the project, more or less. I would imagine that the pay at this level would necessarily be low. The real incentive would lie in contributing to the successful solution(s). With the way Innocentive is set up, you have the incentive to avoid anyone knowing what you are doing. But if everyone who makes a positive contribution to the successful solution gets part of the bonus (this could easily be determined by looking at percentages of contributions, the central importance of an idea, etc. -- one could even have group members vote on what they perceived to be the contributions of other members). I am sure a variety of solutions will be developed by a variety of companies, with the best one shaking out through competition, but this should get some creative juices flowing for anyone interested in developing such companies.
From the worker point of view, one could easily sign up for several companies, working for each, and perhaps make a decent living -- especially if you are part of a successful team or two. I certainly know I would love to have the opportunity to participate in several financially lucrative creative projects if I knew I would get paid for it, and faces the probability of at least some payment for my contributions. Humans are most creative when they are able to work both as individuals and in groups -- as individualistic social beings -- avoiding group-think collectivism. This approach would allow us to work both independently and together, to try out ideas, get them critiqued, and contribute using our own tacit knowledge, local knowledge, expertise, etc.
Further, it may make sense to allow people within a company to propose their own ideas and become team leaders for creating solutions. A regular idea worker could become a manager and then become a regular idea worker again once his project is finished. Under such conditions, the firm doing this would approach becoming a spontaneous order -- and would perhaps be able to harness the benefits of both spontaneous orders and organizations.
Companies are one day going to be doing just this sort of thing. It will be interesting to see how and in what ways it all works out. For an unemployed creative worker like myself, it cannot come soon enough.
Innocentive in particular is an attempt to monetize crowdsourcing. One can solve problems on one's own, or create a group -- and get paid if your solution is accepted. This isn't a bad way of going about things, but it seems to me that a more productive way of going about getting financially lucrative ideas would be to combine the approaches of Innocentive and things like Foldit. At Foldit, one can get help from others. Incremental changes suggested by others can be integrated, and thus solutions found. It seems to me that if one could figure out a way to pay people for their participation in solving creative problems that can lead to profitable products, that would both revolutionize work and greatly stimulate the economy.
I imagine for something like this to work, there would have to be some combination of hourly pay and bonus for being part of the successful solution. One could pay people per hour by having them log in and by tracking their activities during the time they are logged on. One could tell how much they are doing, more or less, and whether it has to do with the project, more or less. I would imagine that the pay at this level would necessarily be low. The real incentive would lie in contributing to the successful solution(s). With the way Innocentive is set up, you have the incentive to avoid anyone knowing what you are doing. But if everyone who makes a positive contribution to the successful solution gets part of the bonus (this could easily be determined by looking at percentages of contributions, the central importance of an idea, etc. -- one could even have group members vote on what they perceived to be the contributions of other members). I am sure a variety of solutions will be developed by a variety of companies, with the best one shaking out through competition, but this should get some creative juices flowing for anyone interested in developing such companies.
From the worker point of view, one could easily sign up for several companies, working for each, and perhaps make a decent living -- especially if you are part of a successful team or two. I certainly know I would love to have the opportunity to participate in several financially lucrative creative projects if I knew I would get paid for it, and faces the probability of at least some payment for my contributions. Humans are most creative when they are able to work both as individuals and in groups -- as individualistic social beings -- avoiding group-think collectivism. This approach would allow us to work both independently and together, to try out ideas, get them critiqued, and contribute using our own tacit knowledge, local knowledge, expertise, etc.
Further, it may make sense to allow people within a company to propose their own ideas and become team leaders for creating solutions. A regular idea worker could become a manager and then become a regular idea worker again once his project is finished. Under such conditions, the firm doing this would approach becoming a spontaneous order -- and would perhaps be able to harness the benefits of both spontaneous orders and organizations.
Companies are one day going to be doing just this sort of thing. It will be interesting to see how and in what ways it all works out. For an unemployed creative worker like myself, it cannot come soon enough.
Tuesday, January 03, 2012
Monday, January 02, 2012
Ron Paul Is Mainstream
46% of Americans favor legalizing marijuana
59% of Americans favor ending the war in Afghanistan
53% of Americans favor legalizing gay marriage
59% of Americans favor the free market
Looks to me like Ron Paul is mainstream.
59% of Americans favor ending the war in Afghanistan
53% of Americans favor legalizing gay marriage
59% of Americans favor the free market
Looks to me like Ron Paul is mainstream.
Sunday, January 01, 2012
Indefinite Detentions -- Or, America Is Now For All Intents and Purposes a Dictatorship
1012 has started off about as bad as one can imagine, with President Obama signing into law H.R. 1540, the “National Defense Authorization Act for Fiscal Year 2012," which allows the President to indefinitely detain American citizens. Never mind that indefinite detention of citizens is about as unambiguously unconstitutional as any law could possibly be. Obama says, although he signed the law, he won't actually detain anyone. What a load of nonsense. Who is going to sign a law you have no intention of enforcing? He plans to use it, or he wouldn't have signed it. Of course, this is the same man who assassinated an American citizen, so we should not be surprised that he signed himself this dictatorial power.
All Obama -- or any President -- has to do now is get someone on the terrorist list, and that person can be indefinitely detained. And who is a terrorist? Anyone who disagrees with the government? Anyone who is perceived to be a threat? A threat according to whose definition? It has been said that one person's terrorist is another's revolutionary -- and I'm certainly revolutionary in regards to my politics.
In any case, the left/progressives have no business complaining about conservatives, since their man cannot be differentiated from a neoconservative as far as I can tell.
All Obama -- or any President -- has to do now is get someone on the terrorist list, and that person can be indefinitely detained. And who is a terrorist? Anyone who disagrees with the government? Anyone who is perceived to be a threat? A threat according to whose definition? It has been said that one person's terrorist is another's revolutionary -- and I'm certainly revolutionary in regards to my politics.
In any case, the left/progressives have no business complaining about conservatives, since their man cannot be differentiated from a neoconservative as far as I can tell.
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