Tag: mailvox

Mailvox: Monday column

TA writes in response to today’s column on Police State America:

I had a chief of police as a neighbor while growing up. He pistol whipped a black kid once. And I had a neighbor that became a cop and a friend that became a cop in spite of his criminal record and both of them were cowards. I have said for many years that 25% of any police force should be in prison, 25% should be under psychoanalysis regularly and 50% should get better pay.

We would get fewer nuts on the force if we drafted our police forces instead of hiring them. Only management that doesn’t come into contact with the public on a regular basis should be career personnel. And as you said, cops should not be allowed to investigate cops. Because they have been indoctrinated into an “us against them mentality” ‘them’ being the public and ‘us’ being every cop a self appointed heroic martyr who is the law instead of an enforcer of the law.

These three cockroaches will get theirs some day and of coarse be amazed at the injustice of it all.

I don’t think a police draft is the answer, but it’s true, there probably would be fewer issues with psychologically disturbed individuals seeking employment.

Mailvox: defending free trade

EJ takes exception to my previous post critiquing Ricardian comparative advantage:

I have to disagree with you regarding free trade.

You write: “This example assumes that there is something that the old man can do that is of value to the young man. But that’s not necessarily true. What if instead of 2 people, there are 20 and all the old man can usefully do is gather 5 coconuts a day when two young girls with no other useful skills can gather 100, more than the castaway society needs, in the same time? Yes, total production will increase +5, but so what? No one is going to give him anything for his worthless coconuts because there is already a coconut glut thanks to the highly productive young girls. Austrian-savvy individuals should be able to see the seeds of an Austrian critique of Ricardo here.”

Your example fails to take into account that there are always other needs to be satisfied, needs which require other goods beside coconuts. Either the old man or the young girls can, for instance, gather berries, help build a hut, etc. Ricardo is right in that, by shifting the old man’s production into that which he does comparatively best, society benefits. The only time this isn’t true is if every need has already been satisfied and there is absolutely no other task that the old man can do. Your assumption strikes me as an unwarranted; it is certainly not true that all needs have been met in the world we live in.

Ricardo’s discovery has astounding consequences for libertarians. I’ve noticed in your writings that your libertarianism seems to stem from an understanding that men is fallen, and that, therefore, it makes little sense to allow a fallen man to lord it over his fellow creatures. This was largely my take, too, but thanks to Voxiversity, I’ve been reading my Rothbard. Since voluntary exchange benefits both parties, free trade between two people is a good which should be extended as far and wide as possible.

This is not to say tariffs are always wrong. As Ilana Mercer pointed out in last week’s column, a revenue tariff on all goods would be a reasonable way to fund a minimal state. But free trade itself remains sound.

There are two significant errors here that render EJ’s criticism invalid. The first flaw is this erroneous simplification. “The only time this isn’t true is if every need has already been satisfied and there is absolutely no other task that the old man can do.”

The proper formulation would have been as follows: “It isn’t true whenever there is no other need that the old man is not only capable of satisfying, but willing to satisfy in return for the compensation that he is offered in return.” It is irrelevant to argue that all needs have not been met in the world; the old man on his desert island has no ability to meet the needs of a hungry child in Somalia and the meager compensation he is offered for collecting sea shells may be insufficient to move him to collect them.

Furthermore, there may be no demand for the services he can supply. The bankruptcy of Say’s Law can be seen in the way the old man’s ability to donate sperm to his nubile female castaways in no way creates any demand for the product. In much the same way, the international market for American workers whose only skills concern filling out paperwork for regulatory compliance and creating Powerpoint demonstrations is extremely limited.

The second and much more serious error is in the statement that “voluntary exchange benefits both parties”. This is both logically and empirically false because it posits a non-existent human rationalism without temporal limits. While it is true that value is subjective, thereby allowing the possibility to defend totally irrational actions as at least nominally rational, this still doesn’t avoid the problem of how the subjective values that the Misean acting man assigns are necessarily momentary in nature. What the acting man defines as a beneficial exchange at one moment he may very well not define as beneficial in the very next moment for a wide variety of reasons. And it is this fatal flaw in the logical foundation that causes the entire edifice in support of free trade to collapse.

Mailvox: praxeology and free trade

S asks about reconciling trade barriers with distrust of government:

as always, great work with the blog. I’m a big fan of your writing on economics, especially when applying Austrian theory to show how badly Keynesians misunderstand the subject. As such, I was hoping to ask you for some clarification regarding free trade. I read your book, The Return of the Great Depression, and found your comments on free trade rather interesting. (It’s been 9 months since I read the book so I apologise if I misrepresent any of your arguments.)

If I understand what you write correctly, it seems that the paradigm of comparative advantage espoused by Ricardo and his intellectual descendants doesn’t really make sense because of what you characterise as “the n-body problem”. In other words comparative advantage might work when dealing with two isolated counterparties, but what works for two entities does not necessarily work for three or more because of the exponentially increasing complexities introduced by additional trading entities. On this basis, you argue that a policy of unrestricted free trade doesn’t make any sense from a theoretical or practical perspective.

Here’s my question: given that the conclusions of praxeology generally argue that government intervention is a bad idea, how can this be consistent with a policy of government intervention in trade using tariffs to support specific industries or the general economy?

I’ve been trying to figure this out for a while. The articles at Mises.org generally reference Ricardo’s theory to support their arguments even though Ricardo wasn’t an Austrian theorist. Then there’s this article which makes a lot of interesting points in favour of protectionism, even though it’s written by a guy who is a Keynesian (as far as I can tell). What are your thoughts on the “correct” policy regarding trade?

There are three ways to consider the problem. We can look at it logically, we can look at it empirically, and we can look at it historically. The Ricardian position fails by all three metrics, in part because there is an inherent fallacy in your observed dichotomy. To observe that government is always inefficient and to mistrust its application of power is not synonymous with saying that there is absolutely no role for national governments. Libertarian minarchy is neither anarchy nor the U.S. Constitution, but I think it is worthwhile to note that protecting the borders and funding itself through tariffs are two of the very few genuine powers that the U.S. Constitution grants the federal government.

It is a very odd and perverted form of American conservatism that supports democracy-building on the other side of the globe, but argues against American industry-protecting import duties.

But that’s a tangent. Getting back to the logical angle, the Ricardian notion of comparative advantage completely fails because it is too focused on the TOTAL production rather than the nation-specific production or the effects on a nation of being forced to exchange its manufacturing from one set of goods to another. But the biggest problem is that because it relies on a labor theory of value, it fails to take demand, much less the limits of demand, into account. Furthermore, being a pre-industrial concept, comaprative advantage simply does not envision that a nation could possibly have nothing to physically produce that is considered worthy of trade. Consider the Wikipedia example.

Two men live alone on an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated. He is also faster, better, and more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small.

Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them.

This example assumes that there is something that the old man can do that is of value to the young man. But that’s not necessarily true. What if instead of 2 people, there are 20 and all the old man can usefully do is gather 5 coconuts a day when two young girls with no other useful skills can gather 100, more than the castaway society needs, in the same time? Yes, total production will increase +5, but so what? No one is going to give him anything for his worthless coconuts because there is already a coconut glut thanks to the highly productive young girls. Austrian-savvy individuals should be able to see the seeds of an Austrian critique of Ricardo here.

Anyhow, that’s just a superficial first pass at the intrinsic logical flaw of Ricardian comparative advantage. More on the empirical and historical flaws as well as the government question in future posts.

Mailvox: economics and immigration

LR asks about low interest rates:

So this may be a dumb question, but I was reading an article that was talking about the returns bank were receiving on home loans (5-6%) and the returns that savers were receiving on their savings accounts (practically nothing) and how elderly people that had previously been able to live off of Social Security and the interest from their savings were now having to spend their principal. My question is why don’t people take their savings out of the banks so that the banks then have to compete for their business by offering decent interest rates? If enough people did this, could it force the banks to operate differently?

Because people primarily use banks as a place to store their money. They aren’t going to take the risk of stuffing their cash under a mattress and only one in a thousand Americans utilizes precious metals as a store of value, so the Fed has realized that it can crush depositors with impunity without having to worry about mass withdrawals. In other words, what you’re describing is theoretically possible but realistically implausible. If people aren’t withdrawing their money because two percent of the banks are failing every year, they’re not going to withdraw it over zero interest either.

MB wants to know if a Republican sweep in November can stave off economic contraction:

I’m hearing from a few pundits that if the Republicans take the House (at least) the stock market will pick up because business will trust that no more insane bills will pass for two years or more. They’ll “trust” that govt won’t make things worse. If the equities market does swing up, when will this Depression hit home if the day of reckoning keeps getting postponed?

There might be a very short term bump, but the reality is that the central problem with the economy isn’t the Obama administration, the health care act, or the business community’s inability to calculate future employment and regulatory costs. The central problem is the massive amount of debt that is crippling the private sector and no amount of change in the political makeup of Congress is going to change that. Furthermore, there is absolutely no reason to expect that the Republicans aren’t going to do pretty much the same thing that they did before and resolutely defend the interests of Wall Street and the Federal Reserve against the futile fury of the electorate.

MM asks about different waves of immigration:

I would like to first say that though this is my first time to write you, I enjoy reading your blog, and I do so regularly. Second, I would like to ask you a question regarding immigration, I have been reading your posts on that subject, and would like to get a clearer picture of your opinion on the subject (or maybe of the US history as well).

Here is my question: I would like to understand how you differentiate what happened during the 16th and 17th centuries (even the US as a nation was founded by early settlers from other countries or at least their children) from the immigration which is recently happening in the US? If you can label the latter as detrimental do you consider the former to have been so as well?

Again, you mentioned in a previous post that there were 3.3 million more people in the US every year during the period (1997-2010). Do you think that this is necessarily a bad thing to the US nation? What if the 3.3 million were not mostly Mexicans, Somalis and people from the third world, but rather wealthy and skilled western Europeans, would that be okay?

The main differentiation between the various waves of immigration was ethno-cultural. The English and Dutch immigrants were very different from the later Irish, German, and Scandinavian immigrants. They, in turn, were very different from the later Asian, African, and South Central American immigrants. The significance of these ethno-cultural differences is much greater than most people can imagine, let alone understand.

For example, the present American public school system would not exist were it not for the heavy German influence, hence the term “kindergarten”. Having grown up in Minnesota, I can testify the reason the upper Midwest is so inclined to the left is due to the German/Scandinavian heritage of the immigrants who settled there; this is the reason that the University of Wisconsin, Madison is more socialist than the erstwhile Patrice Lumumba University and why Democrats in Minnesota are more properly known as the Democratic-Farmer-Labor Party.

So, I don’t regard the formative Anglo-Dutch immigration to have been harmful; that was the America of the Constitution, after all. The German/Irish/Scandinavian immigration transformed the Constitutional Republic into a Progressive Democratic Empire and laid the groundwork for the present Third World immigration that will convert the Democratic Empire into an Authoritarian Oligarchy. I consider that to be detrimental, but those who prefer authoritarian oligarchs will obviously feel otherwise.

In answer to the last question, one percent new immigrants every year is simply too much for any nation that is even nominally democratic. If you consider that the average presidential vote margin is around 3.5 percent, such an immigration rate means that new immigrants can theoretically control national elections within a single electoral cycle. Immigration and democracy are simply not compatible and I am confident this will soon become eminently apparent as the recent wave of immigrants transform the areas they settle into plausible replications of the lands from whence they came.

Mailvox: reflections on RGD

Stilicho’s summary:

I received my copy of RGD on Friday and finished it last night. Excellent work. Funnily enough, just as I was starting to read the Saint Bernanke/green shoots scenario at the end, there was a power outage and I finished by flashlight. How apt. At any rate, I’m not sure I’ve grokked the full implications of your theories yet, but the first reading sure was an eye opener. There are a lot of thoughts I had while reading that are still bouncing around in my head that may take a while (and more reading) to fully digest, but I’ll share a couple with you:

1) The conventional Austrian theory that a switch from capital production to consumer production causes contractions doesn’t seem logical to me. Rather, it seems that such a switch would be a symptom rather than a cause. I don’t think you classified it as such, although you did express doubt that it was a casual factor. Why did the Austrian school think it was a casual factor?

2) I too was quite sympathetic to the WZI scenario until recently. I still think there may isolated incidents as certain industries or sectors experience mini bubbles induced by an excess of credit that is available and actually used in said industries/sectors. However, after reading your thoughts about the depth and breadth of secular debt issues, I don’t think that general inflation will be an issue for some time. If and when there is some recovery on the far side of TGD 2.0, do you think the WZI scenario is likely to occur given the monetary authorities adherence to neo-keynesian and monetarist theories?

3) I wonder how long we can keep limping along in what amounts to great recession mode until the bottom finally drops out? Isn’t that what Japan’s lost decade(s) amount too? A great recession scenario? But given the world-wide nature of the current crisis, you have convinced me that the bottom will drop eventually. How many bullets does Bernanke have left?

4) The neo-keynesians must have an absolute disdain for microeconomics. Either that, or it would be just too damned inconvenient to acknowledge verifiable microeconomic principles that might cast doubt on their macro theories. A bit of both perhaps?

1) I simply don’t know. My feeling is that because so much Austrian theory was not developed ex nihilo as so much Marxian and Keynesian theory was, but built rationally on the work of previous economic theorists, the conceptual model was somewhat influenced and therefore limited by the various pre-classical, classical, and neo-classical ideas that influenced them. What is strange about it to me is that Rothbard points out the exact limits of demand that I propose as a causal mechanism, but he only applies it to the market for labor. In any event, I agree, the shift from one form of production to another is a symptom rather than a cause. This probably makes me impure from the doctrinaire Austrian perspective, but hardly a heretic. The model works to describe and correctly predict regardless of which mechanism is favored. The advantage of my “limits of demand” mechanism is the way it explains how Austrian theory applies to financial services and other markets in which there is no distinction between capital and consumer goods.

2) No, I think the entire structure will collapse of its own weight first. Debt implodes faster than money can be printed. And I reject what appears to be the revised inflationist notion that a deflationary loss of confidence in a currency can be reasonably labled hyperinflation.

3) Not long. Not any. Most of the positive exit scenarios involve the Federal Reserve being either thrown aside by the US government or supplanted by the IMF.

4) Yes, they have ever since Keynes first voiced the idea that perhaps a macroeconomy behaved in a different manner than a microeconomy writ large.

In which we hope it won’t kill him

A fellow writer sends along a link with the following note: “Today is Ray Bradbury’s 90th birthday. As online tributes to him go, nothing I could ever do or say could hold a candle to this one.”

He was right. There wasn’t. Anyhow, it’s heartening to see the kids are enthusiastic about reading quality fiction these days. Happy Birthday, Mr. Bradbury!

A sign of an indication?

In which we are informed that the Lizard Queen is now making noises about resigning from Obama’s Cabinet:

Hillary Clinton raises prospect of resignation. Hillary Clinton, the US Secretary of State, has complained of the tiring natue of her job and said she will step back from the role before the end of Barack Obama’s presidency.

R writes: “I admit it doesn’t actually surprise me that it is so far playing out as you predicted.”* So far, so good, anyhow. I have no doubt that Hillary will resign, most likely before the end of the first term. Of course, the much more interesting question is if she intends to step back from the role in order to bring about that end to Mr. Soebarkah’s presidency.

*“it is clear that he [President Soebarkah] is likely to be extraordinarily vulnerable if the Lizard Queen elects to strike against her current boss. The first indication that she intends to do so will be a growing chorus of elite Democratic opinion against Obama’s conduct of the war… the more significant indicator would be her resignation from the Cabinet next year.”

The Writer’s Lottery, part II

Vrye Denker expresses a certain degree of incredulity: The successful writing career of Katie Price? As in Jordan?

Yes. Exactly. In fact, the woman is topping the bestseller lists even as we contemplate the matter:

July 29, 2010 – One time glamour model Katie Price looks set to reach the number one spot of the Sunday Times Bestseller list with the publication of her lastest book in the Angel trilogy entitled Paradise. Katie known also as Jordan will see her novel go straight to the fiction top spot for hardbacks as her Random House publishers revealed that the book is outselling its nearest rival by two to one.

In other words, she is presently outselling the best-selling Harry Potter novel and the bestselling Twilight novel combined.  And that would be why I don’t worry about how well my books sell or equate book sales with literary quality. No doubt Katie Price will, like JK Rowling before her, have an entire generation of children – girls anyway – reading too. Having written numerous bestsellers, she is obviously a literary giant and an example to be much-imitated by ambitious young writers of the future.

The face of modern literature

Mailvox: interpretive fails

Dawo appears to have a wildly inaccurate understanding of how the literary world works:

I think the present blog is not designed to encourage actual debate, and it is likewise not designed to encourage echo-chamber-style mutual affirmation. If I had to guess, I would guess that this blog is designed to maximize the writing career of the writer who blogs here.

He’s correct in that the comments are just there to let people comment if they wish; I added them in response to numerous requests. But I don’t think alienating pretty much every editor in both the SF/F and CBA publishing worlds with one’s exotic socio-political views is generally considered to be the optimal way to maximize one’s writing career. I have had no less than three negotiated book contracts canceled simply because a female member of the pub board took offense to something I wrote in a column or on this blog. One of them was even signed, so I ended up getting paid to NOT write the books. This is why Media Whores and the UK translation of The Irrational Atheist do not exist. Needless to say, this experience has completely caused me to rethink my position on female fascism and women’s tolerance for opinions that diverge from their own.

In short, I don’t give a damn about my writing career. In fact, I seem to recall posting about how the very concept of the professional writing career is dying out not all that long ago. By which I mean scroll down one post!

Meanwhile, Joe theorizes about my interest in Game:

Why women overrate themselves … or why Vox sublimates himself. Man Vox, dont you have better things to think about? Your titular observations may be interesting to the ilk but boy, you likewise lower your value in your vocational pursuit for no apparent reason except for your amusing titalation of the ilk. I surmize you have unsettled issues with some so-so looker that beat you in arm wrestling one night on the bowery, correct?

Well, I’m not terribly concerned about DLV’ing. A picture being worth a thousand words and all, the following one may at least partially explain why I do not, in fact, have any unsettled issues with anyone, so-so looks or otherwise. It’s not that there’s anything wrong with so-so looks, it’s just that they may as well be invisible to me.

Mailvox: responding to a liberal

CG asks for help in responding to this, but I think he is probably looking in the wrong place by coming here:

Conservatives have no clue about business. They think that business can sell MORE AND MORE to people who have jobs paying less money, with a collapsing middle class. Who is going to buy stuff after we get through gutting the system and eliminating the buying power of workers in this country? What fuels consumption now that the borrowing binge we’ve been on for thirty years is over. Can consumers borrow their way to prosperity, along with our economy. How do you pay for the $10s of trillions in private debt that has masked a collapsing real economy which used to be fueled by savings and investment?

40 years ago we had a third of the private work force unionized, tariffs to protect domestic industry, 70% marginal rates on income over about 3 million, and were the most prosperous country on earth, the exporter and lender to the world. Now that Reaganomics has worked it’s magic for 30 years, China owns us.

Not sure how you think us running 30-40 billion per month trade and current account deficits will work out long term. Love to hear the theory of how we import our way to prosperity, trading jobs that produce wealth, transform raw materials into valuable to valuable goods, for “service” jobs that add no wealth and don’t sustain any economy that I’ve known of in all of recorded history. How long can we keep sending the rest of the world paper, and they send us oil and TVs and cars, and clothes and electronics, etc. Seem unsustainable to me, but I don’t understand how business works.

This demonstrates why the Democrat/Republican, liberal/conservative poles simply don’t apply to the present economic situation very well. CG’s liberal interlocutor is correct in diagnosing the problem as debt and “free trade”, but he is incorrect in thinking that Reaganomics is to blame for either of them and he is deeply mistaken to think that high marginal tax rates helped produce societal wealth. One doesn’t increase savings and investment through taxation, after all, and while it is absolutely true that consumers can’t borrow their way to prosperity, governments can’t tax-and-spend their way there either, Keynesian arguments to the contrary notwithstanding.

The reason we were the most prosperous country on Earth 40 years ago was very simple and easily proved. The USA was about the only major economy on Earth that had not had its industrial infrastructure completely destroyed by World War II and American industry made an absurd amount of money selling both consumer and capital goods into European and Asian markets that had to rebuild their industrial base. This was the source of our post-1940s economic growth and concomitant wealth. Now that all of our former competitors have rebuilt their economies and numerous other countries have succeeded in developing theirs, it has naturally become much more difficult to maintain our economic primacy vis-a-vis the rest of the world. As I have previously stated, but have yet to conclusively prove, the Ricardian concept of comparative advantage has turned out to be incorrect and therefore American wealth should be expected to decline in both a relative and absolute sense as other countries grow at the expense of American industry and workers in a free trade environment.

It’s not that conservatives have no clue about business, they have no clue about economics. But neither do liberals; the fact that one party is incorrect does not automatically make the other right. The fact that conservative Republicans and liberal Democrats alike supported TARP, the banking bailouts, and the automotive bailouts demonstrates that the intrinsic problem is superpolitical and therefore will not be solved regardless of which political faction ends up temporarily on top.