The Last 1 1/2 Weeks

As one can probably imagine from my last posting, I have been too busy to post much of late. It did not help that I attended, last weekend, a Fund for the Study of Spontaneous Orders conference on higher education.

Having three children is chaos. Utter chaos. Daniel is having a hard time of it. I had to take him out on a father-son date to help him feel better. A little time, just him and me, at Starbucks, playing with cars on a table. It seemed to raise his spirits for a few days.

At the FSSO conference, we basically concluded that revolutionary change is both unlikely and counterproductive, that any changes will likely be marginal, and that probably most students are getting what they want, anyway. This is what happens when you believe in social change on the margins, keeping tradition in consideration at all times. Of course, not all traditions are good, and that is why change is sometimes necessary. But what happens when the professors have a different concept of what education is than most of the students? And what if many professors prefer the students' attitudes, because that means far less work for them?

The good news is that the new baby sleeps well, wakes up to eat every 3 hrs, like clockwork, and is not fussy at all. In other words, Anna and I can actually get some sleep. This differentiates Dylan considerably from both Melina and Daniel when they were his age. With them, we did not get sleep for about 8 weeks.

Now that the FSSO conference is over, on to the next round of projects. I have a book review to get done asap, and a paper on the Basic Income Guarantee vs. the Negative Income Tax, which is due in June. Those are of immediate importance. I also need to work on my paper "Why Economists Ought to Go to the Theater" and I am thinking about a paper on the relationship of higher education to the various spontaneous orders. The latter was, of course, inspired by the FSSO conference.

This is my life right now: alternating between domestic life and a life of the mind. I read philosophy, economics, and literature, and Dr. Seuss, Biscuit phonics, and princess stories. I attend conferences and play with trucks. All I need now is a job, and my life will be perfect.

Dylan Francisco Camplin

Today, at 1:30 pm, Dylan Francisco Camplin was born.

And there was much rejoicing. (Yea!)

He is #3, and he will be the last.

Thoughts on the Evolution of Social Complexity in Humans

Whenever I engage in discussions with people who object to evolutionary explanations of human behavior, I discover the same underlying misconceptions of evolution.

First, we need to realize that the presence of a trait does not mean it was necessarily selected for or 100% adaptive. Evolution is not teleological. You can have traits that are adaptive, traits that are neutral, and even traits that are slightly maladaptive, so long as it is not overly harmful. Those of the latter two kinds can act as sort of “preadaptations” for different future conditions, if they end up being neutral in the original environment, but adaptive in a later one. Also, one can have the evolution of a trait that is both adaptive and maladaptive. The dropping of the larynx, for example, is necessary for speech – but dropping it also makes human susceptible to choking. The latter is clearly maladaptive, especially since it does kill some people, but it is also clear that language was so beneficial, that it over-rode the slightly maladaptive element to the adaptation.

Another example of this is our having adapted a hypersensitivity to the presence of intentionality. Those who were able to detect intention – which is to say, those able to see an orderer behind any order – were more likely to survive in a world full of other tribes who were more likely to spear first, ask questions later. It was better to mistakenly see intention than to miss it, so those who overapplied the presence of intention were more likely to survive. Combine that with the unifying elements of ritual and storytelling, and you have religion. This too is adaptive insofar as it enhances social cohesion. Hypersensitivity to intentionality only becomes maladaptive if, once people reject religion, they continue to believe that for there to be order there must be an orderer, and they then go on to adopt socialist ideals. This indeed, was Marx’s objection to capitalism, that it was chaotic. He could not even see the order in it, though it is an exemplary example of self-organization and the patterns associated with such processes.

This sets us up to deal with the specific objection, which is that it makes no sense for people to be so social that they will accept others from other tribes into their own. As it turns out, Darwin himself dealt with this issue – and dealt with it in the way that most evolutionary moral theorists have come around to themselves – which is the “expanding tribe” theory of increasing moral behavior. Insofar as one is dealing with related individuals, altruism is pretty easy to explain. But how do you know who is related to you? This is easy enough if you are a member of a tribe – everyone in the tribe is your relative. However, chimpanzee females leave their troop for other troops once they reach sexual maturity. Humans do the same thing. Both are driven by the Westermarck effect – an evolutionary adaptation that reduces significantly incest. One of the results is that other troops/tribes end up having your relatives in them. For chimpanzees, this is not an issue – if you are a member of another troop, too bad for you. However, bonobos do not go to war with each other. Humans are about halfway in between in behavior. This, in combination with the presence of language, which can act as a marker for relatedness, can tie together a number of tribes. Especially those tribes that used to be united, but divided because of environmental conditions. Religion can also act as a social marker in this sense. Thus, those who speak the same language and practice the same religion could remain closely connected. This was strengthened by trade between such tribes. Bonobos engage in a primitive kind of trading, but human trade is much more complex. It is one of the main drivers of social cohesion, and can even override significant social differences, such as language and religion. In a species which over-applies behaviors, it should not be surprising to find trade being extended to even non-related tribes over time.

There are two things that are distinct to humans: language and trade. I believe both can be explained quite handily using evolutionary theory. One would have to argue that both language and trade are a divine dispensation – that God gave us both language and market activity – as both are sufficient to explain the expanding tribe theory. Social signaling is sufficient – if we can communicate with others we are members of the same expanded tribe, then we are accepted.

I do not believe any of this necessarily denies the existence of God. I would have to wonder at the kind of God who could not create a universe that did not need his constant intervention for things to go right. If you want to believe in that pathetic little moron, by all means do so -- it's just not a God for me. Further, it may be that we are all evolving toward God, emerging toward the ultimate emergence.

And that brings me to the problem of the concept of emergence. Too many people are still rejecting this concept, acting as though all scientific explanation is necessarily reductionist. That is an impoverished science. And it misses half the universe -- the evolving, complexifying half. What is the relation, then between the brain and mind (which is really what I've been talking about, above)? Well, to amino acids, the cell is an emergent phenomenon. And it is, in relation to its constituent biomolecules. It has emergent behaviors, and the existence of the cell affects the kinds of chemical activities that take place, when and where they take place, to a certain degree. Similarly, the (inter)actions of the neurons in the embodied brain in their minding processes give rise to the mind, an emergent process. This mental order in turn is able to affect the underlying neural activity to a certain degree. The economy, for example, is a complex emergent process created by the interactions of a variety of embodied minds. The mind is a complex emergent process created by the interactions of a variety of neurons. A cell is a complex emergent process created by the interactions of a variety of biomolecules. Atoms and their ability to engage in chemical reactions are complex emergent processes created by the interactions of a variety of subatomic particle-waves. You can call this reductionist if you want, but if you only engage in reductionism, and ignore emergent properties, you won’t have the foggiest idea what is really going on. In this sense, Darwinian evolution is not reductionist, and nobody is reducing a thing by invoking it as a proper explanation of biological activities.

Rationalities

Mario Rizzo on rationality. I recommend paying attention to Peter Lewin's first comment, too.

A few thoughts:

Reason is contextual.

Reason is not what you think the person should do, but has to do with the person in question having good reasons given what they know.

Reason cannot assume perfect knowledge.

A rational decision is not monological. For example, I may know that if I want to accomplish X, I must do Y. But I do not want to do Y for moral reasons. Thus, it is rational for me not to do Y, even if it will accomplish X for me, even if someone else does not find doing Y immoral.

Institutions matter. What is rational in one institutional context may be irrational in another.

Perhaps spontaneous order matter as well. That's an idea that needs to be developed more.

Beginning the Marginal Revolution (if I could)

I was asked what I would do if I could begin to make changes in the political economy of the United States. Of course, being a Hayekian and spontaneous order scholar, I understand that the changes that need to take place have to be marginal changes. You have to keep in mind the fact that all changes have to take place within the context of the rules that already exist.

Thus, one has to consider what the elimination of a given regulation will cause to happen. The last thing you want to do is deregulate in such a way that you end up with people demanding to reregulate, because other regulations on the books are now causing different problems. We have to remember that when the government "solves" a problem, it creates regulations that in turn cause their own problems, that the government then blames the market so they can put on more regulations, etc. in a vicious circle. That being the case, one has to be careful, because simply removing the last regulation put in place may result in the problems the layer of regulations preceding it caused. To the extent possible, an analysis of regulatory cause-and-effect would have to be done to figure out how to dismantle the regulations in such a way that few problems would occur.

At the very least, it seems to me that we need to do away with socializing loss. This allows companies to justify taking much greater risks than they would otherwise take, since the profit will be theirs, but the loss will be spread out among the citizens of the country. I suspect a lot of regulations can go once we do this.

Another thing we could do right away is get rid of corporate welfare. There should be no subsidies. Subsidies distort the market, and they go to the already-established as it is.

Remove barriers to entry to allow competition. All federal barriers to entry could be removed, and the states would then be in a position of either adopting them themselves or letting the barriers go away. With competition among the states, there would likely be fewer barriers over time. Indeed, simply de-federalizing most legislation would allow for spontaneous order marginal changes to take place, since competition among the states for both businesses and workers would likely encourage moves toward market reforms, since free markets are most productive.

I would implement a simple flat tax. That would reduce the tax bureaucracy considerably and release a lot of tax lawyers and accountants to do something that creates economic wealth and value.

I would replace all welfare programs, including social security, with a basic income guarantee.

I would begin procedures to decentralize our banking system with the goal of the creation of a free banking system. With local banking responding to local conditions, monetary recessions and depressions would become a thing of the past (except insofar as the rest of the world continues to have central monetary planning, that is -- still, much of that would be considerably moderated by the ability of local banks to react to local conditions).

Cutting military spending and getting us out of everyplace on earth would go a long way to paying down the debt, as would the economic boom that would take place as people were freed to pursue their economic interests and create more new businesses and, thus, jobs. This would help bring interest rates in line with the natural interest rate of interest, too. Having true free trade with the rest of the world (regardless of what they do) would also benefit our economy considerably, as lower prices benefit everyone.

I would also defederalize the drug war.

This all seems like a lot, but in fact much of it really is just tinkering around the edges. There is much more that would have to be done. But simply de-federalizing much of what we do would make a huge difference. Our government should have a power-law distribution of power, like every other natural self-organizing process. The more we move away from such a distribution, the less natural our government and economy become -- and the weaker and less wealthy we all become.

DISD Violates a Teacher's Civil Rights

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.

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.

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.

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

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)

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.

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.

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.

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.

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.

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.

SEEN

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.

The 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.

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:

SEEN

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.

It should then be obvious which one the public will support. But it should also now be obvious which one you should now support.

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.

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.

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.

Power Law Spectra a Fundamental Law of the Universe

According to Hector Sabelli,

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.

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.

My Contribution to the Meme Generator

Here.

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.

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.

When Will the Education Bubble Burst?

Good article on the education bubble. More and more people are getting around to my position.

The question is, when will it burst? And what will be the consequences?

Thyme and Time Again Reviewed

Poem Shape reviewed my poetry blog Thyme and Time Again.

My Thick Libertarianism

I did not start my life as a libertarian. I was not a libertarian in high school. I was not a libertarian until well into college. I did not become a libertarian by reading Ayn Rand. In fact, when college started, I was at best a centrist with Republican leanings, the latter in no small part due to my Baptist upbringing. I had no real notion of how the economy ran other than my folk economics I was born with, and which was reinforced by our political culture. My moral beliefs were almost entirely formed by my Baptist upbringing and my parents' tolerant natures. If there were any libertarian seeds planted during that time, it was the moral aversion to racism planted by my parents.

I went to college and majored in recombinant gene technology. Through that major, I came to understand the world as complex, self-organizing, and evolving. This was reinforced by books I read in college on chaos theory, self-organization, quantum physics, cosmology, etc. I saw the world as complex, self-organizing, and evolving, and so, when I took an Intro. to Philosophy class, in which I was first introduced to economics -- specifically, free market economics -- by Ronald Nash, I found that this fascinating area matched well the world as I understood it to be.

It is perhaps difficult, in one's path to libertarian thinking, to avoid going through Ayn Rand. Which of course I did. I read "Capitalism: The Unknown Ideal" (which it is), which led me to Atlas Shrugged and The Fountainhead, and on to the rest of her philosophy. At the same time, I read a number of other economists, from Walter Williams to Milton Friedman, but somehow did not come across too many Austrian economists. They remained to be discovered much later, after my world view had become even more complex, even more developed. Through Rand I discovered Nietzsche and Aristotle, with the former becoming a close companion.

All of this led me to abandon biology and pursue creative writing. I wanted to write stories that showed my world view. That led me to a Master's in English, and to the Ph.D. program in the humanities at UT-Dallas. I went through a postmodern-nihilist stage of sorts during my Master's time, but came out ready for a revaluation of values at UT-Dallas. It was there I met Alex Argyros and Frederick Turner, both of whom introduced me to the ideas of J.T. Fraser, the great philosopher of time. Through these three, I developed a far more complex world view -- one that was fully universalist, complex, self-organizing, emergentist, and evolutionary. I learned more and more about human evolution, evolutionary psychology, the way the brain worked and processed information about the world, the way we came to know about and understand the world, the ways in which we were social and individualistic -- and the ways in which we were not collectivist and individualistic.

In the beginning, nothing. But nothing, or perfect symmetry, is unstable. The symmetry thus broke, and the universe came into existence in the big bang. Waves of energy spread the universe, and spread through the universe, resulting in interference patterns that, as the universe cooled, crystallized into particle-waves that were capable of interacting to crystallize further into atoms. These atoms were pushed around by the waves of the universe, causing many to pool. As they pooled, gravity increased, attracting more and more atoms, until fusion occurred -- thus did the first stars self-organize and enlighten the sky. Fusion and, later, supernovae created more complex atoms, which were then able to engage in more complex chemistry, creating more complex molecules, and less volatile objects, like planets, on which life could emerge. Complex organic molecules are self-organizing, particularly in an aqueous environment. Life self-organized out of the early earth conditions -- life indeed is likely to be found throughout the universe, so likely is self-organization to occur. Complexity evolved as simple organisms competed for the available space. Competition is a discovery process, and thus life discovered many ways of doing things, including becoming more complex to create new environments. Self-organization to create more complexity is a natural process of the universe itself. One result was the emergence of intelligent species, including one intelligent enough that, with sufficient population density to make them socially intelligent as well, there emerged the ability to understand the universe itself. Yet, humans evolved in a particular environment, even as we are able to adapt to many environmental conditions. Yet, we are adapted to particular social conditions, which we cannot disregard if we want to live a moral, human life. Further, our brains are complex neural networks, which take in sensory data and convert that data into concepts. We are both born with instincts that allow us to learn certain things -- like language -- very rapidly, and subtract differences in common things to create concepts. We must forget to know, meaning we can never know everything possible in the universe. More, our practical knowledge is local. Humans interact with one another to create emergent, self-organizing social processes (spontaneous orders). These range from the moral order to the artistic orders to the economic order. These orders emerge as we become more moral, including more and more people in our "tribe", which really means, in our moral sphere of common humanity. We are thus social individuals whose interactions allow us to be smarter than we are as individuals, and which allow us to coordinate our actions and cooperate better. Organizations emerge which help us achieve our individual goals in that spontaneous order.

Thus, I am a libertarian because libertarianism comes closest to the way the world works. It is the political system one should hold if one believes in human equality, if one believes all people are in fact people and ought to be treated that way, meaning it is fundamentally the most moral system of them all, since all people, regardless of who they are, must be treated morally, meaning, as fellow human beings. The ethical person does not and does not support theft, rape, or murder, regardless of who the person is, whether they are rich or poor, black or white, of a different ethnicity, of a different culture, speak a different language, or are from a different country. These things are immoral for an individual, a group, or an organization to do -- even if that organization calls itself a government. Thus, I am a libertarian because libertarianism is the most moral world view -- not just political view -- one can hold. There is a recognition that good intentions are not good enough. The actions one takes to reach one's goals matter as much as the goals themselves. Which is in part why I'm an Austrian-school economist (the other reason being that this school of economics also is realistic in its understanding of epistemology, its tendency to reject equilibrium, and its understanding of the economy as a self-organizing process, or spontaneous order -- meaning it is the school of economics that takes more of the world into consideration in its understanding of the economy, and which actually matches the way the world actually works).

It is because I understand the universe to be a self-organizing, complexifiying, emergentist, evolutionary process, with humans and their social systems a part of that process, that I am a libertarian. It is because of my inclusive moral system, which is itself a spontaneous order, that I am a libertarian. It is because of my understanding of human psychology and human evolution, of how the brain works, of the presence of a variety of instincts we cannot do away with, and the way these all interact to create each individual, and how each individual in turn interacts with others to create organizations and spontaneous orders that, in turn, affect our emergent minds, which affect our neurochemistry, -physiology, and -actions that I am a libertarian. It is because of my understanding of human epistemology that I am a libertarian. My libertarian came out of these things; these things were not informed by my libertarianism. I followed the logic of discovering a consistent world. A free market and a free people interacting in spontaneous order societies reflects the self-organizing complexity at every level of reality in the universe. The world is inexorably and inevitably evolving toward libertarianism. It does not matter if there are conservative elements who oppose this movement. The universe will evolve as it will. All the enemies of reality as it truly is can do is delay it -- with all the negative consequences that delay necessarily brings.

Delay means we are trying to keep the world simple, or we are trying to simplify the world more. If you simplify a human, you make him an animal; if you simplify a living thing, you make it a pile of molecules undergoing entropy (you kill it). If you kill people, you simplify society. If you protect companies from competition, you stand in the way of new ways of doing things, and thus prevent more complexity from emerging. You thus stand in the way of the natural tendency of the universe. To do so is as immoral as actively simplifying the world. Thus, those who would destroy wealth by attempting to redistribute it (wealth can be created or destroyed, but cannot be redistributed -- only riches can be redistributed), those who would stand in the way of social complexity by opposing immigration in all forms, those who would stand in the way of economic complexity with their socialist or interventionist schemes (anti-natural religious schemes, if the truth be told), those who would prevent cultural and artistic evolution, are all from this point of view immoral people, standing in the way of the complexifying drive of the universe.

Praxis, Common Praxis, and Praxeology

Praxis is action; common praxis is the action common to a group who must act as they do to cooperate and coordinate their actions. Mathematics has a common praxis. So, too, does physics, chemistry, and biology. The arts and humanities almost do not have a common praxis -- though the overlaps are themselves interesting. Between the simple sciences and the arts & humanities is the complex sciences, the social -- or humane -- sciences. This of course includes psychology, economics, and sociology. There are some aspects in which the social sciences have common praxis, with considerable divergence. This is perhaps not surprising, given the complexity of what is being studied. Complexity implies more perspectives are possible. The arts and humanities, of course, are highly perspectivist in nature. The more values come into play, the less likely one is to share a common praxis, too. Math and physics do not bring many values into play other than the values of truth and accuracy. But what values come into play when making an economic analysis? Or in analyzing a poem?

Where does this leave praxeology? One can certainly study human action, and determine what would be the best action to accomplish a particular goal. One can even recommend a common praxis if one is to work with others to accomplish a common goal. To achieve coordination of plans, there has to be a common praxis. With a common praxis, you can get people to cooperate and coordinate -- this is true in a business or in collaborations, be they online or in the real world. Which implies that the internet will be good for engaging in business and in engaging in the simple sciences -- but will be less helpful in making advances in areas where there is less of a shared praxis.

One possibility is that the internet will actually help those who do share a common praxis in more complex endeavors to get together -- not just online, but in the real world. Want to be a Marxist and live in a Marxist country? By all means, get all of those who share that common world view, find a place to move to, and move everyone there. Want to live in a Keynesian economy? Get all your fellow Keynesians, move someplace, and get to work setting it up. This, I think, is the future. When we get over the idea that there must be a state, once we accept that there can be a variety of governments, and once we get it into our heads that the free movement of people is a good, not a bad, thing, then we will be in a situation where we can peacefully divide up like this, set up areas of common praxis, and have true societal competition. Then we will see which society is, truly, the best. Through competition, we will discover which common praxes are best.

RIP, Vaclav Havel

It is a shame that the death of a contemptible dictator, Kim Jong Il of North Korea, has overshadowed the death of one of the few great political figures of history, Vaclav Havel. A great poet and a great statesman, Havel oversaw the peaceful transition of Czechoslovakia from communism to capitalism, and the peaceful breakup (following the will of the people!) of Czechoslovakia into the Czech Republic and Slovakia. Following the lead of Havel, the Czech Republic remains one of the few bastions of economic freedom (and sanity!) in Europe. May Havel be remembered forever as one of the few true defenders of freedom -- and one of the few poets of the 20th century to be willing to sacrifice everything for true freedom, standing against most of his fellow European poets against the horrors (and ugliness) of communism.

Poem in Poetry Daily

I made it into Poetry Daily.

Krugman Doesn't Understand Inflation

Krugman is off saying silly things again:

"Look, the Austrian/Ron Paul types made some very strong predictions about inflation — and rightly, given their model of how the world works. In their version of reality, it really isn’t possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that’s not only possible but what the model predicts in a liquidity trap."

Apparently Krugman does not take several things into consideration in his model.

The first thing one should consider is that, in a recession, there is real deflation. That means that monetary inflation is of course going to be partially offset by that deflation. Krugman should know that. And, of course, he does. This is the entire basis of his argument. It may account for the small trickle of money that has actually entered the economy, but certainly not all of it.

Krugman forgets two other facts. The second thing one should consider is that the banks are not releasing the created money into the economy, but are sitting on it. They are waiting for better lending conditions before the lend the money they have. Bernanke is hoping he can get all that money back before that happens. I wouldn't hold my breath. Finally, third, there is the fact that money doesn't go into the economy equally, but rather enters it in one or two places. Like housing -- which is what happened last time, and helped create the housing bubble. Where is the money entering now? Look for one or two sectors where there is inflation -- that's likely to be your entry point. Inflation spreads from there.

So, considering all three things are in play, we shouldn't be surprised we don't see inflation yet. Yet. Of course, Austrian economics helps us understand the second and third points are in play -- points Krugman is apparently ignorant of. Which is why his analysis is way off.

Once the economy does get going -- if it is allowed to get going through all the continued distortions going on, all of which Krugman approves -- we will see that inflation the Austrians and Ron Paul have been predicting. I am sure Krugman will have some other explanation for it when it comes, though.

Why Your Boss Cannot Coerce You in a Free Market

I have often heard opponents of free markets argue that, like government, which is necessarily coercive, that free markets are coercive as well. They point to things like bosses firing employees as being an example of this. But is a boss firing -- or threatening to fire -- an employee truly coercive?

In a free market, "if you do something good for me, I will do something good for you." In government, which, as noted, is necessarily coercive, "unless you do something good for me, I will do something bad to you." This is the very nature of policing and the military. It is the very nature of taxation.

And what of the boss threatening to fire an employee. Well, that is a case of "If you cease to do something good for me, I will cease to do something good for you." This is NOT the same as "unless you do something good for me, I'll do something bad to you." People think they are the same, and thus free markets are coercive, but they are not. Those are completely different kinds of relationships.

Threatening to end a relationship is not the same as using threats to keep you in one.

Hayek In Mind: Hayek's Philosophical Psychology

The issue of Advances in Austrian Economics I am in, Hayek in Mind: Hayek's Philosophical Psychology, is now published! You can find it here, where you can download each individual chapter. My chapter, which is titled "Getting to the Hayekian Network", is the final chapter of the book. The book itself can be purchased here. Enjoy!

Basic Income Guarantee, Negative Income Tax, and Austrian Economics

I was invited to submit a paper for a book on the idea of the Basic Income Guarantee. The editor, Guinevere Liberty Nell, is still working on getting full permission to do the book, but she says things are looking good. In any case, here is the proposal, which has been accepted:

Civil society is made up of a variety of spontaneous orders, including the economic order and the democratic order. Each has its own values and its own ways of communicating information – and different orders can come into conflict with one another. What is good economics may not be good democratically, and vice versa. And this is certainly most clear when dealing with programs that touch on both orders, such as welfare programs. There is a very large amount of literature out there proving that welfare programs are bad, economically. However, welfare programs are still popular democratically. One could just chalk this up to economic ignorance on the part of the populace – or, one could consider the fact that there are values other than those found in and promoted by the market economy, including social values, that people find just as important. When looked at in this manner, a different set of arguments opens up.

Whatever the economic argument are against welfare programs, from the point of view of the democratic order, they are beside the point. If they are beside the point in one sense, because the populace want such programs, it then behooves us to try to figure out what kinds of programs are least economically problematic. It is from this perspective that I will be comparing welfare as currently constituted in the United States, and comparing it to both the idea of a Basic Income Guarantee (BIG) and to Milton Friedman’s proposal for a Negative Income Tax (NIT). There were some experiments with NIT during the 1970’s that resulted in it being abandoned as an idea, but I will be considering some problems that would necessarily have to be taken into consideration in analyzing those results. I will also be comparing how such programs could be set up, the costs of such programs, etc., to try to suggest which one would produce the best social results at the cheapest costs. Along these lines, I want to pay particular attention to the unseen elements as much as the seen, as replacing all of our welfare programs with one program is going to affect the nature and extent of the current system in place. What will happen if we can eliminate a significant portion of those working in the welfare bureaucracy at both the public and private levels? The natural assumption is that all of those people will now be laid off, but the fact of the matter is that they will be freed to pursue other economic avenues, which may in fact contribute to economic growth and the creation of even more wealth, now that they are no longer participating in non-wealth-creating activities. One has to look down the road quite a bit to truly understand why a program may be either desirable or undesirable. This is the approach I will be taking in analyzing all three – current welfare, BIG, and NIT.

I am sure my regular readers will be a bit surprised at the above proposal. My answer to them: there's always room for second-best ideas. In any case, I'll be writing this paper as a good scientist investigating the interface of two spontaneous orders rather than as the polemicist I can sometimes be here on my blog. There is and should be room for both in one's life.

Why Do People Defend Unjust, Inept, and Corrupt Systems?

Here is an interesting article on why people defend unjust, inept, and corrupt systems. It turns out that there are "four situations that foster system justification: system threat, system dependence, system inescapability, and low personal control." One wonders where ideology comes into play in all this.

Those of us who support spontaneous orders need to consider this: "The less control people feel over their own lives, the more they endorse systems and leaders that offer a sense of order." Often people feel like they do not have much control over their lives in a spontaneous order, like free markets, and thus look toward those who promise "a sense of order," such as welfare statists, interventionists, and even socialists. How do we help foster a sense that we have control over our lives in spontaneous orders? The fact is that we do in fact have more control over our lives in spontaneous order systems than in those ordered by others -- it just does not feel that way. And how it feels matters. What can we do to help people feel more at home, more in charge, in spontaneous order network systems?

Businessmen Do Not Necessarily Understand the Economy

Last night in the Republican debate, Mitt Romney argued that, contra Newt Gingrich, he had spent time in the private sector and, therefore, he understood how the economy works. While I will hardly defend the knowledge of economics held by a historian who spent most of his life in government, the fact that Mitt Romney ran a business does not mean that he understands economics. Indeed, the proclamations of people such as Warren Buffet and Bill Gates on economics proves business people do not necessarily understand how the economy works.

How does this make sense, that someone who can successfully run a business can, nevertheless, be generally ignorant of how an economy works?

The knowledge needed to run an organization such as a firm -- or a government -- is not the same as that needed to understand an ateleological scale-free self-organizing network process. For one, organizations are teleological and have hierarchical network structure. They are designed orders. This may allow a business person to run a government agency -- another teleological, hierarchical, designed organization -- but it hardly argues that they are uniquely positioned to understand the economy qua economy. It is likely they know what business people would like to happen, but what business people would like to happen is good for their businesses, but not necessarily for the economy per se. This argues that Mitt Romney would be good for crony capitalism or mercantilism, but not necessarily for the spontaneous order economy.

The problem is that the skills needed to know how to run a good organization are not the same skills needed to understand how an economy works, including what to do (or not to do) to ensure one has a long-term healthy economy. Contrariwise, one who understands the working of an economy is not necessarily in the position to run the government organization -- which includes, of course, knowing what it can and cannot do, what it should and should not do.

This can be solved if one were to get a politician who is able to run an organization and also has the wisdom to understand that he does not understand how the economy works, and hires good economists as advisors to make up for that shortcoming. But note that knowing one is ignorant requires wisdom (is wisdom, according to Socrates), and there are few who are both arrogant enough to run for office and humble enough to admit ignorance. Things are worse yet if you have someone who has been in business, because they are even more certain they understand how the economy works.

Spontaneous Order Auto Design

The future of design is crowdsourcing -- another word for "spontaneous order" -- as we can see in this story on Local Motors. Of course, of equal note is the brilliant way they have managed to get around all of the laws that make new car companies impossible to start: if you want it, you have to come help build it, so it can be considered a "kit car."

Agglomeration economy theory could easily be used to explain why there are only a few, very large auto makers in the U.S. -- and the world -- but one should also wonder at the costs imposed by regulations, too, which ensure that only the auto makers already in existence can afford to make automobiles. If auto production were truly a self-organizing system, you would expect to see a power law distribution of auto makers -- many small ones, a medium number of medium-sized ones, and a small number of large ones. Of course, if we consider parts makers as part of this -- as one should -- one should expect them to add to the variety. Probably the auto industry, this broadly conceived, comes a bit closer -- but the industry is still unhealthy from a self-organizing process point of view.

One would expect to see auto parts producers supplying small, local auto makers and inventors. The broader distribution of auto makers would drive innovation, and there may even be a viable electric car by now -- or something even better. But because our laws have resulted in the centralization of the auto industry into a few well-protected crony companies, innovation is slow at best.

The good news is that Local Motors exists, and they are using spontaneous order theory to design their automobiles. Competition is a discovery procedure. Our auto companies need more competition so we can discover better ways of making automobiles.

Happy Birthday Melina!

Today is Melina's birthday. My little girl is 5 today!

Librabase

I can now be found on librabase.

More on Hayek as Macroeconomist

My posting below seems to be pretty popular. I even managed to get a posting over at Cafe Hayek.

Things That Never Happened In The History of Phlogiston

Mikhail Lomonosov is not an important figure in the history of phlogiston.

These days, you constantly see articles that make it seem as if there was a great debate in the 1700s between Robert Boyle and Lomonosov, and that this debate has continued through the generations. Nothing like this happened. Lomonosov essentially made a fool of himself early in the 1750's, and his ideas vanished from the professional discussion.

The above may sound familiar if you have read Krugman's critique of Hayek's place in the history of macroeconomics. As Mario Rizzo observes, this is almost entirely beside the point, since Hayek in many ways outright rejected macroeconomics. As well he should. It's equivalent to phlogiston theory -- and just as unneeded.

Actually, it is Brad DeLong who put it in such a way that his position can actually be critiqued:

Friedrich von Hayek is only a very minor and very unproductive figure in the work of macroeconomics. He--and Schumpeter, von Mises, and the rest of them--spent a lot of time figuring out why it might be that when you learned that you had overinvested and overborrowed, the natural and necessary thing to do was to shutter (rather than repurpose) factories and send your workers home to eat Cheetos and watch "The Real Housewives of Galt's Gulch".

I often find the economic reasoning skills of economists like DeLong astonishingly bad. Let's analyze this statement. First, Hayek et al did not say that the "necessary thing to do was to shutter" factories. But we should not be surprised if we find that we have less money than we thought we did that we also do not have enough money to repurpose our factory. If you find you have less money than you thought, first cut costs. That is likely going to mean cutting wages, or cutting wage earners. Once you get costs back below income, you can begin to repurpose. The fact that this is apparently completely off the radar screen for DeLong says volumes about him as an economist.

The first thing it suggests is that the macroeconomics mythology he believes in blinds him to the world's reality. There are underlying mechanisms to larger economic patterns. If you don't understand those, you can't understand the larger patterns. DeLong and Krugman (though I know Krugman should know better) are like doctors who think that one can completely understand a patient without understanding that there are organs, tissues, and cells one needs to understand first to understand how the person works at these levels. They take the temperature, find a fever, and recommend bleeding and leeches. Or, to switch analogies, they are the Lysenkos of economics, thinking the social is the important thing, and not the underlying individual's behaviors.

Little do they understand, their macroeconomics is doomed for extinction. It is headed for the ashcan of history, where all wrong theories go. The irony, at least for them, is that it will be replaced by improvements on ABCT and Hayek's spontaneous order theory.

Clearly Melissa Gorga Was a Stripper

There is nothing that says that Melissa Gorga of The Real Housewives of New Jersey was a stripper than the fact that she's mortally offended at being accused of being a stripper. Otherwise, it's just silly rumors. And who says a bar maid can't be a stripper?

Am I the only one posting this to see if her idiot lawyer will sue me for saying Melissa Gorga used to be a stripper? I mean, I've never met her, been to the strip club she worked at, or anything, so how could I know? I think the fact that one could get sued for saying such things about someone one doesn't know and who one could not know is ridiculous. And suing me for saying Melissa Gorga was a stripper is only going to make me get my 15 minutes of fame.

I mean, seriously, who actually cares if she was or wasn't? How is that going to affect her reputation? All of those Real Housewives shows merely show us that there are rich people who act just as bad as trailer trash. That is all. Many of those women were strippers too. And many of them weren't. Who cares?

Student Loans Drive College Costs, Driving Student Loans

James Banks raises the question Can the Humanities Be Saved? He recommends some interesting ideas at the end -- one I had not thought of is price differentials among majors (put a little supply and demand at work). But I would like to look at how he starts off his piece, with “formal statement” issued by the Modern Language Association (MLA):

Public attention has been directed recently to the educational debt students accumulate in the course of undergraduate, as well as graduate, study. A major contributing factor has been the increasing portion of educational costs students must bear in the form of loans. To reduce debt burdens in the future, we call on Congress, state legislatures, and institutions of higher education to calibrate educational costs and student aid in ways that will keep student debt within strict limits. We also call on them to hold in check tuition increases, which often far outpace inflation, and to ensure that degree programs allow for timely completion.

I suppose one should not be surprised that the MLA is ignorant of economics and, thus, they don't understand the real problem is with the loans themselves. The loans make university education artificially cheap -- with artificially low interest rates and delay of payments for people who have short time horizons, due to their age. This drives up prices in the same way similar programs drove up housing prices during the housing bubble. Further, almost all of the increase in costs go to bureaucracy -- much of which is needed to deal with the government, including the loans, etc. Does the MLA really believe that the price reductions won't be sent their way first, rather than to the bureaucracies? In other words, those at the MLA need to learn a little cause-and-effect. Sure, I know that goes against their pomo proclivities, but it's time they grew up and rejoined the real world anyway.

Right to Privilege?

The natural historical state of humans is poverty. Thus, poverty is not what needs to be explained, but wealth.

The natural historical medicine available to humans has been local herbs and magic. Modern medicine is a recent technological development, and it is a wonderful development that has given us longer and better lives. But like all technological advancements that improved our lives, it is a privilege to have it. Does it make sense to argue that one has a right to a privilege?

Justice vs. Social Justice

A good piece on Justice versus Social Justice. Hayek argued that social justice is a non-concept. Leonard Read argued that it's the very antithesis of justice. They are probably both right. It is a non-concept because it is incoherent, yet it is used to destroy justice. Why? Because there is no such thing as collective or social justice -- there are only unjust acts committed by an individual against an individual. There is no excusing "I was only doing my duty" or "It was my job." To knowingly enforce an unjust law (which was conceived of by an individual and voted on by individuals and enforced by individuals) is immoral. To obey an unjust law is immoral. To advocate unjust laws under the guise of social justice, too, is immoral.