Archives for category: Economics

Why is not more made of the fact that the supposed Trump economy is really just a chimera based on a loan against the future that serves the rich very well, while mortgaging the middle class’s future and especially that of their children?

…as answered on Quora….

Is that a fact or a theory?

I am not saying it is not true. But the likelihood of a default on the debt is very high, so who ultimately pays may be a bit of an open question. The incidence of the burden shall shift.

Why is not more made of this, though? Great question.

The answer is easy: it is not just about the “Trump economy.”

Economic policy madness is a truly bipartisan effort. The recent and quite unhinged “stimulus” bills that Trump signed ran through the House of Representatives under control of the Democrats, as well as through the GOP majority Senate.

Fiscal irresponsibility is the basic position of both major parties.

Any attempt to characterize this as a mere partisan or personal failure is a nonstarter. The truth of our predicament is that our rush into the future is chaotic and crazy and by consensus. Confronting the truth of government today? Americans simply cannot handle the truth.

Which is perhaps the real reason our politics is so . . . mad. The double bind we have collectively embraced must have some effect. The effect is a kind of schizophrenia. All Americans are implicated. All. And thus politics is basically the drivel of madmen.

SARS-CoV-2

Last week I published another episode of the LocoFoco Netcast, but forgot to link to it here. So, a little late. . . .

LocoFoco Netcast #11.

The podcast version is on SoundCloud, findable with the domain name LocoFoco.net:

Each new day I hear yet another call for “opening up the economy,” and my annoyance level rises.

Not because I do not want the lockdown orders removed, however. I am annoyed because “the economy” seems unexceptionable but is not. It is an extremely deceptive term. It induces people to think of a Thing that can be shut off and on like a light switch. It suggests that it’s about money and organization and is generally ancillary to our lives. But it isn’t an existent “it” in the singular, much less in a mechanistic manner, it is an emergent order of people producing and trading. “The economy” is people doing the things that allow us to live. It is, in a sense, living.

It is “making a living.” Shut it down and you make death.
When you prohibit people from commerce, from producing and exchanging, you are cutting off the life blood of the civizilization. When we worry that “the economy will suffer” we mean “people will suffer.” And some will die.

twv

If communism is so bad, then how come the USSR was able to increase industry to match or beat that of the Western powers?

…excerpted from an answer on Quora….

We might want to distinguish ‘communism’ from ‘Communism.’ That latter is sort of trade-marked (‘“anti-trade” marked’?) by the political implementers of the Marxian paradigm.

Karl Marx, you may remember, prophesied a classless, stateless future of communism, share and share alike, and all that. He was quite vague on how it would work out. But he did think the capitalists first had to be expropriated by the workers, and the economy run by ‘a dictatorship of the proletariat.’ This gave the Bolsheviks and their later imitators an excuse to set up state socialism, where the Communist Party runs the unitary state which in turn runs everything else. It is ‘communist’ only by an association of ideas and by tradition. But no utopian-minded communist in her right mind wanted that.

Besides, as others have noted, a moneyless industrial society didn’t work. So the Bolsheviks quickly backpedaled, adding markets back in under the New Economic Policy. As Michael Polanyi and others have shown, the Soviet Union engaged in a lot of fakery to make their central planning seem to work.

Ludwig von Mises explained why it couldn’t work. Capitalism is mass production for the masses. Market societies use dispersed knowledge gleaned especially from private markets in production goods and the firms that make up the productive sector to distribute resources to their most valued uses. Without private property and real market signals, socialists find themselves in a sea of arbitrary decisions, without guide. The Soviets never succeeded much in mass production for the masses, but by hook and crook and a rigid class system, the USSR succeeded in making hydrogen bombs and rockets for a pretty good space program (it helped that they were willing to risk cosmonauts’ lives to an extent NASA never found acceptable). But that isn’t mass production for mass consumption, it is mass production for Big Projects, which we know the ancients mastered in the megalithic period. Pyramids and all.

Slavery and the organization of a religiously oriented (ideologically controlled) servile population can indeed do amazing things. But not beat capitalism at its own game.

So, what of communism? The communal production of a limited set of goods for common needs can work in small groups. That this manner of economic organization produces a great abundance of consumer goods or can be carried on in an egalitarian fashion are fantasies of romantics who cannot think very well. Human being run up against calculation problems, as Mises explained, as well as the Dunbar number, and similar problems.

Few tribes actually engaged in communism for all goods produced. Individual and family property was a commonplace throughout the primitive world. But some things were done communally. But in societies more complex than mere tribes, some method of organization had to develop, and these included honor standards, allowing the adulation of Big Men — chiefs — whose vigor, intelligence, and social skills allowed for elaborate hierarchies to expand economies out of rudimentary forms. Some of the most successful of these chiefdoms became conquerors, and found ways to grift off of sedentary populations, after conquest, and civilization with their states were born.

In all the upward progress and sideways motions of societies and their histories, communism haunted the imaginations of poets and sages and shamans and priests, probably for reasons that psychologists have theorized: as lingering dreams expanding on the yearning of strapped adults for their lost childhoods, when benevolent parents and other adults provided all and made everything work like magic.

Communism of that sort is a dream and a yearning, and deserves, in most cases, little more than eye rolls.

Communism of the Soviet variety deserves a finger on the trigger, for Communists lie about what they are doing, and the contradictions of their own ideas mean they are always one small step away from mass murder.

twv

Lockdowns in the first world will cause deaths because of untreated disease, and will lead to suicide and madness and violence. Depending on how long this crushing of capitalism goes on, we could see starvation here in America and Britain and the rest of the first world.

But it is leading, quickly, to the death of marginal peoples elsewhere, around the world, people on the edge of poverty who have no stocks of food in their pantries and whose lesser-developed countries have less supply warehoused and in the supply chains.

Millions of people.

Dead.

Starved and suffering.

Brown people, mostly.

The lockdown is now strongly ideologically aligned, with progressives being generally gung ho for shutting down all or most commerce. This will make progressives’ guilt in pushing the debacle of Prohibition seem like a baby fart in a hurricane.

Supporting lockdowns will in the future be seen as akin to genocide.

Consider this a ‘pro tip.’ Repent now and save yourself guilt later.

…a comment on Quora….

Lots of people react negatively to Economics. It has been called the Dismal Science because (a) calling it a science is stretching things, and (b) it keeps telling people true things which they don’t want to hear. However, merely disliking a statement is not sufficient evidence that it is false. Concocting far-fetched theories of second and third order effects that will rescue minimum wage laws from their perverse consequences is not science at all, it is motivated reasoning and confirmation bias.

Matthew Park Moore, Quora, answering the question: “My teacher claims that if restaurant owners raise food prices when the minimum wage increases, they’re doing it because they’re greedy, not because of the minimum wage increasing. Is he right or wrong?

I too am amused when people concoct bizarre defenses of minimum wage legislation. It is obvious that they like the policy because it makes them feel good. They dislike economics because it undermines their cheap method of feeling good.

This was a subject I studied 40 years ago. I was initially a bit surprised to learn that there existed economists who denied that the legislation generally benefited the poor. So I studied it. What interests me about people who get defensive is that they do not appear to be earnestly trying to better the poor, but to defend their position. I earnestly studied wage theory; they reflexively try to “debunk” a critique.

And as for “far-fetched theories of second and third order effects” — well, that is what economics looks like to non-economists. They see only what the words direct them to see — “minimum wage law” — and they think that is what the regulation does, increase wages. I mean, come on! It’s in the name!!! Are you an idiot!!!!!

But what we have to remind them of is TWO things, not ONE.

First, minimum wage legislation does not raise anyone’s wage. It is a prohibition to hire anyone below a certain rate of remuneration. It is actually, in its very transactional nature, a prohibition of wages, not a raising of wages.

THEN we go second- and third-order effects to show what the results of the prohibition are. The actual results. This gets into incentives and competition for scarce resources and equilibrium and much more. This can be done well or badly. Done well, it shows that the general effect of minimum wage legislation is to disemploy some low-skilled workers now or in the future, depending on the rate.

Further, it is worth noting that a regulation of this order — an intervention by force into the market for higher-order economic goods — can have two effects: decrease production, or nothing.

That “nothing,” as Bastiat explained, is there because often regulations of market rates establish a rate that does not actually apply. And, indeed, in the case of minimum wage regulation, it affects a surprisingly small number of workers in America. Most people get paid higher. But there is a sad truth lurking here: it would affect more but the people it would affect are not even counted as in the labor market any longer.

A friend of mine had a very clever defense of legislated wage minima: a person no longer able to find a job at the value of his marginal product would be encouraged to increase his skills, perhaps by extending his education. The problem here is worth thinking about:

  1. The prime way of increasing one’s marginal product by skill acquisition is by working.
  2. For most people at the bottom of the “economic ladder,” the most important skills are punctiliousness, cleanliness, reliability, courtesy, and skills of such a basic nature that we usually call them virtues. The chief reason many people are unemployable is that they lack one or more of those skills. The absolute best way to increase these skills is by practice, not by schooling, and sending young people out into public schools and colleges to acquire them is absurd. These are the very things most schools are incapable of teaching these days.
  3. The second reason for low employability is that the putative workers have low IQs. Schooling in adulthood can do little to push that string. The best thing for these people is to be employed at very easy jobs with low productivity. So minimum wage floors are too high for them and they remain unemployed and unemployable.
  4. The most obvious thing that happens to the unemployable is they go on assistance, where they strain tax budgets and charitable toleration. This makes of them suckers upon society, not contributors — parasites not hosts — and paying someone to do nothing is a deal that many people are more than willing to milk for all its worth. (I think we should reserve tax or charity aid for those who simply cannot ever, in any circumstances, work and be productive.)
  5. The general effect of minimum wage legislation then is to take low-skilled people out of the market and run them through the welfare state, either in direct aid or government schooling. As such, this becomes one of its chief attractions for the regulation’s advocates: they like the State and taking from some and giving to others, and profoundly distrust “business” and “bosses” and see them as exploitative.

And here we get to the main thrust of progressivism: replacing market interaction with government subsidy, coercion and credentialism. The people who support progressive regulations the most are moderately bright people who pass tests well. They like schools. They do well. They thus become teachers and bureaucrats, and their world is insulated from market rigors. So of course they promote self-defeating legislation, because it settles them in their class interests.

Do you agree with United States of America President Donald Trump when he says the coronavirus crisis is ‘worse than Pearl Harbor’ or 9/11?

…as answered on Quora (May 6, 2020)….

The policies chosen as a response to the contagion in most of these United States (as well as, to a somewhat lesser extent, by the federal government) will, I hazard, prove more damaging than either World War II or the insane War on Terror.

These policies may define a new era, and appear to demonstrate the willingness of the public to do damn near anything governments with a barely plausible rationales tell them to. That is, the population, alarmed by scary stories told by scientists wielding faulty models, will just stop what they are doing and submit themselves to house imprisonment.

Now, the willingness of some people to protect themselves and others in public using gloves and masks and social distancing (I was an early adopter) was a noble and respectful adaptation. But shelter-in-place and orders to close business were not. Willingness to go along with them was very, very bad.

Because the prophecies were ridiculous and the policies were bad.

Why?

I am not going to get into the epidemiology. I will leave that for others to argue about — though I was skeptical from the beginning. And I ignore the pathetic, witless arguments for ‘flattening the curve,’ which are even now being modified, in a massive migration of the goalpost, by the policy’s proponents.

I am concerned about ‘the economy.’

Attitudes about this have shown people, including many economists, to not understand the most basic elements of commerce. To worry about shutting down business and trade is notto worry about ‘money.’ It is about producing the things we use to live. Stop producing, total, and there is nothing to buy. Stop most production, and there will be huge shortages. The government can send you all your beloved checks, but if there is nothing on store shelves, then the money becomes useless.

Shutting down commerce for a week or maybe a month requires us to exist on savings of actual goods as well as ready money. And goods in the supply lines. But without production, eventually there must come insurmountable shortages, starvation, death. Even now mass starvation in third world countries has begun, and the absence of meat in stores and at, say, Wendy’s, is here. In America. Now.

Livestock is being slaughtered for want of demand.

I suppose there are vegetarians who cheer this. They shouldn’t. Their foodstuffs will be soaked up by an increasingly desperate population, and choke to nothingness fast.

This could be the end of civilization. And the population has meekly complied, because they have been fooled by the money illusion. They think money is wealth. And they have been alarmed senseless by scary stories. And by their own pathetic fears of death.

Fearing death, they have embraced policies that lead to death.

Sure, governors have kept some ‘essential’ businesses somewhat free. But they do not understand how commerce works, either. No more than the central planners of the Soviets did. So keeping some businesses open will allow for some longer rope on the noose.

The lockdown must end, or it will be the biggest hit civilization has taken since Communism — which was, remember, the insane belief that a state-free utopia can grow out of state socialism, a tyrannical, centrally planned totalitarian system.

The lockdown policies may prove worse than Communism. For socialists were greatly aided by the existence of free countries to purchase grains and other goods with natural resources and gold, and by the existence of the pricing systems elsewhere, that central planners tried to ape. Well, we cannot all survive off the wealth allowed in the pockets of freer societies, such as Sweden and Arkansas, Iowa, Nebraska and the Dakotas.

Even if we right now normalized commerce, and re-introduced productivity, we would still face tough times, for much damage has been done. The idea that governments can switch off commerce and then restart it again is absurd. Of course, when we start really hurting, after the lockdown orders cease, many will blame capitalism.

Do not listen to these people. Ever again.

And as for Trump, well . . .

It’s the productivity, stupid.

Yesterday I discussed the main reason the coronavirus shutdown must end: we are not producing, and without production we will be unable to purchase anything no matter how big the government bailout checks are. No production, no produce. The only difference between a mandated and voluntary shutdown is the difference between mass murder and mass suicide.

So, why have I heard no one saying this? Not even a libertarian economist? It is logical. It fits with theories from Hume and Smith that liberals and libertarians have been parroting for years. So why are economists not prophesying disaster? Do they think we have enough saved wealth to go for another 17 months without producing?

Do they really believe in the efficacy of “government checks”?

I suspect there is a simpler reason. They could be cowards.

I remember how few libertarians prophesied the collapse of the Soviet Union. Oh, sure, libertarians knew that socialism couldn’t match the industrial output of a capitalist society, and that the makeshift workarounds in the context of tyranny that the Communists manqué perpetrated could not provide anything like stability. It couldn’t last.

But few dared say it.

Why?

Well, we could not predict when, making our predictions seem vacuous, and the collapse of such a system had never happened naturally, without attack, before. So we would have had to dare to take theory beyond the comfort zone of repetitive reality.

Economists are not trained to be courageous. Not courageous enough to draw the consequences of a never-before-experienced event. Before we predict the Sun to rise on the eastern horizon, we first must observe it many times. A new event? Yikes. That is hard to confidently assert.

We might be made fun of!

Just so, this shutdown quarantine, the “lockdowns.” Though there have been shutdowns of small regions because of conflict and catastrophe, never before has so much of the modern, capitalist world been shut down. I guess the idea must be, “well, we survived Acts of God and war and regional famine, we will survive this!” But cities and towns struck by a major blow can rely on folks outside the region for help, at the end of the crisis period. But who could help nearly all of the world’s nations?

I do not see a way around this. No production = no products = poverty/destitution on a mass scale.

The few allowed “essential services” cannot feed the world, clothe the world, heal the world. “Commercial society” is one big super-organic system of mutually depedent-but-uncontrolled-but-adapting endeavors.

I do not see how I am wrong. At some point, universal non-productivity ruins not merely the price signals that allow order in a market, but interrupts production enough to completely scuttle the delivering of goods we need to survive. At some point, we go beyond not merely a navigable “opening up” of the economy, we go beyond the point where we can make up for lost time to provide what is necessary for civilized life.

The COVID-19/coronavirus lockdowns could be the biggest hit to capitalism since Communism. Possibly bigger than Communism. At some point, an extended shutdown could lead to the starvation of millions.

Just as now the prioritization of coronavirus over all other illnesses will cause tens of thousands of cancer and other deaths.

I have lost a lot of respect for the experts, even among libertarian economists.

Money isn’t wealth . . . and the source of the wealth for our continued existence as a civilization and species is continued productivity.

I am unaware of any amendments to the laws of economics.

I just see people fooled by fear and paralyzed — at least in tongue and lip and lungs — by cowardice.

And remember, when jumping off a tall building, free fall can seem wonderful . . . right up until you hit the pavement.

If you have jumped off, and are falling, falling, falling, only one thing is safe: predicting a major impact. Probably death.

twv

Are the mitigation measures for COVID-19 worth sacrificing freedom and the economy?

I don’t believe so. But a word of caution: “the economy” sounds antiseptic. People hear that and they echo Greta Thunberg, ALL YOU CAN TALK ABOUT IS MONEY!!! But that is a not very bright way of looking at it. 

What we call “the economy” is the nexus of our production and trades (but I repeat myself). We live by participating in “the economy.” Our clothing, homes, heat, food, light, and nearly everything else we engage in is “our economy.” This isn’t about “the money,” or lowly, non-human things, this is about what keeps us alive.

Shutting down “the economy” forces us to live on savings. And since we live in a society nurtured by a welfare state and have been thoroughly, ceaselessly programed by inflationism — the policy of increasing the money supply for a variety of goals, yielding a general decline in the value of money — about half the population has no savings to speak of: no money in the bank, no cash on hand, no investments, not even much food in the cupboard. Forcing these people to live on savings that they do not possess means forcing them to beg or suffer.

And it’s worse than that. Not producing means the supply lines, warehouses, and store shelves cannot be replenished. No produce. Goods do not magically appear for us to buy and allow us to live our lives, they are produced by people going to work, whatever that work may be. What the shutdowns accomplish is a huge hit to our wealth. Which we live by. Which allows us, by the way, to be healthy.

Here is where you can separate the fools from the common sense folks: if someone says the answer to the predicaments caused by the shut-downs is to have the government give out checks to compensate for our losses — and they have been tremendous — then that person is a fool. Sans production, you could have a million dollars in the bank and still have nothing to buy.

Money is not wealth. Read David Hume and Adam Smith** on this.

A free society would have people trying to protect the weakest, most jeopardized, during a time of a new contagion. The shut-downs are the opposite: quarantine everybody, on the rationale that we do not know who is infected. There is a certain plausibility to this, but it was a bad idea, especially since it is such a narrow view of the problem. The cost of the shut-down is the lost productivity. And that cost is . . . almost everything.

Those folks talking about many more months — even 18 months! — of the whole-populace quarantine are, well, fools of outrageous proportions, or just downright evil. I would not wish the resulting destruction even on my enemies.

The worldwide response(s) to the coronavirus may be the biggest con job in history. But it may not be a conspiracy. The trick of politics and governance is often the same as in stage magic: misdirection. But we can do it to ourselves, by focusing on the wrong things, just as practicing magicians can fool themselves by looking away at the crucial moment, simply by looking away.*** The citizens of the modern world are the product, largely, of public schools, which have, somehow, neglected to introduce basic concepts that would allow people to think through mental traps like the ones we now routinely face.

Mainly, though, it helps that many people, schooled by government checks and retirement funds and money machines and debit cards and much else, forget that money is not wealth, and that “the economy” can just be put on hold without consequences dire.

Capitalism may have taken the biggest hit since Communism, and we have largely done it to ourselves. The enormity of this astounds me.

The “lockdown quarantines” must end. As soon as possible.

And when someone asks why, keep in stock a ready answer: IT’S THE PRODUCTIVITY, STUPID.


* I wrote this answer to the question above on Quora, but, for the first time ever, I could not post it. Three times and I stopped trying. I assume that I am not allowed to write about this on Quora. I could be wrong, though. It could have been a fluke. Quora could be innocent as doves. But I doubt it.

**  I wrote an introduction to the Laissez Faire Books ebook edition of two relevant essays by David Hume on this subject. The ebooks in this series are no longer up on Amazon, but are on Apple’s platform — just search for my name, David Hume, and “Money and Interest.” The image is at the top of the page.

***  James Littleton Gill informs me of this problem, common lore among stage magicians. I know nothing more about it.

Why is capitalism not liberalism?

…as answered on Quora….

Which capitalism? Which liberalism?

What came to be known as “capitalism” grew out of mercantilism and the freeing up of such systems in part by liberals — “classical liberals” — who sought to limit government interference in the workings of markets. Arguing for a generally ‘laissez faire’ approach, and persuaded by economic reasoning that most of the goals and methods of mercantilists achieved socially negative results — often the opposite of the promised results of the traditional advocates of private-public partnerships — these liberals helped spur the astounding economic advances of the agricultural and industrial revolutions.

But almost no country has ever sported pure laissez faire — such a policy seems austere to folks in government, whose power is limited under such a policy — and Actually Existing Capitalism has always been to some degree mercantilist, filled with goofy and exploitative favoritism, transfer payments, deceptive and slippery regulations, tragedies of the commons, vast public work projects, and persistent rent-seeking manias. Self-proclaimed liberals fought this for many decades of the 19th century, but the popularity of socialist ideas infected the class of people who called themselves liberals, and this class of people reverted to a kind of neo-mercantilism, dubbed ‘progressivism’ in America and ‘social democracy’ in Europe, often pushing to dirigisme — sometimes called fascism and other times called national socialism and often pitched with eulogistic, sloganeering brand names, like The New Freedom and The New Deal.

It is time to take back the term ‘liberalism’ from the advocates of some jury-rigged ‘third way’ between laissez faire and state socialism. But we may have to stick with alternates, like ‘libertarianism’ or Benedetto Croce’s ‘liberism.’

It would be easy to argue that ‘capitalism’ has almost always been used as a pejorative, and should be dropped like a scorched spud. Worse yet, naming a system of private property, free production, free trade, free labor, and free banking by only one of the three traditional factors of production — ‘capital’ (instead of by land and labor as well) — makes capitalism unsuitable for those who wish for any sort of precision. But we are probably stuck with it, too. In my nitpickier moments I sometimes talk up The Catallaxy — the emergent order of all voluntary exchanges (Richard Whately defined economics as ‘catallactics,’ or the Science of Exchanges, nearly two centuries ago, and F.A. Hayek coined the above term for the liberal system sometime in the 1960s or 70s) — but that isn’t going to fly.

When someone says they are for or against ‘capitalism,’ we must ask for clarification. When folks call themselves a ‘liberal’ but are only liberal in spending other people’s money, laugh in their faces.

Today’s critics of capitalism must not be allowed to get away with their most characteristic legerdemain, pretending that every problem in our mixed economy is caused only by the ‘free market’ aspect of the system, and not the government part. And conservative defenders of capitalism have got to stop calling the current system ‘free enterprise.’ Wake up and throw out the coffee grounds.

In my opinion, liberals are those who advocate laissez faire capitalism. They oppose the neo-mercantilists of all varieties, and socialists even stronger.

So, back to the question. Why is capitalism not liberalism? Capitalism is an economic order; liberalism is an ideology.

Alas, we are almost always stuck with the tedious job of disambiguating both terms.

twv