Posts Tagged ‘pernicious incentive’

Government Simply Cannot Solve Problems

Thursday, August 4th, 2016

Dear Friends,

It seems to me, government in all it’s manifestations, subsidizes and encourages bad behavior, to the detriment of humanity. Not just modern government, although the welfare state has risen the body politic to levels not seen since Rome’s bread and circuses. The negative incentives government inflicts on mankind, in the name of compassion, have the cumulative effect of making worse that which they are supposed to alleviate. There are several reasons this is so. The mechanism of government funding, the inherent incentives of that funding process and the constituency that instantly crops up depends on it, all combine to give immortality to any government program set up to fix something. The very nature of government wielding power, ie, handing out money, lends itself to corruption, dependence and lack of ambition.

By mitigating the negative consequences of negative behavior, whether from compassion or a lust for power over the individual, government creates more negative behavior. If fathers are not needed, economically, to raise children, then children will not have fathers along with all the other negative consequences for those children, economic, social and cultural. The more government subsidizes a fatherless society the less fathers there will be, and the less people will feel they have a stake in society, leading to more crime, violent and otherwise, making more men unsuitable to be fathers in the first place. Government’s ham handed way of solving any problem always leads to a worsening of that problem.

Government always makes permanent anything it tries to fix. That is because the moment government announces it is going to fix a thing, that thing instantly has a constituency and permanent ever increasing funding supply, to feed those constituents/dependents, which insures it is in no one’s favor to actually solve the problem, too much money is at stake. The fundamental problem grows worse, while bureaucrats make up statistics showing some alleviation of the worst suffering, justifying more spending. The cycle goes on and on. Can you think of any problem the federal government has ever solved? Did prohibition stop alcoholism, does the war on drugs eliminate the scourge of drugs, did the Agricultural Agency solve the problems of small farms, did welfare lower the amount of people who are poor, does the Department of Energy done anything to lower our dependence of foreign oil and has the federal government’s usurping of our children’s education improved it or lowered the cost?

If someone is put in a cell wired to electrodes and offered two choices, one is a candy bar, the other is a cockroach, every time the subject reaches for the candy bar he gets a shock, but if they eat the cockroach they don’t, eventually, every subject will eat the roach… eschewing the candy bar, even flinching at the thought. Incentives work that way, they change our perceptions, rightly or wrongly, about what is good and what is bad. People can be convinced to always choose the wrong path, even when they know explicitly it is the wrong path, if the incentives are sufficient. Why work if welfare pays better? Why marry if there is more sex outside of marriage than inside? Why pay for your own children if the government will do it so you can have more children by more women? Those bad decisions, negative actions, normally would have a host of negative consequences, impelling us to make better choices, better for us, our society, our culture and our overall best interest… if not for government creating pernicious incentives.

Sincerely,

John Pepin

Billion Dollar Business Idea

Thursday, May 28th, 2015

Dear Friends,

It seems to me, a smart business idea that could net someone millions, and perhaps billions, is a website that reads and posts a simple to read synopsis of every shareholder’s report, briefly describing any changes the board wants to make, the likely consequences to the company and profits short and long term of those changes, an easy to read and understand report on any election to the board of trustees regarding their background, philosophy of corporate governance and work history, those synopsis and reports would be written for every firm with over one hundred million in gross revenue, and for a nominal fee that synopsis could be read by any shareholder of those companies. Companies that are ethical would offer to pay for the service for their shareholders. To get that done, such a company needs to become well known, create simple to read, correct and understandable reports and synopsis, as well as the intellectual capital to make it work. The potential earnings of such a company are staggering.

If there was such a company it could be a paradigm shift in the principle agent relationship. Today the agents have all the power. They send shareholders a several hundred page document that we are supposed to read and understand, that is in arcane language, redundant and actually says nothing of any import pertaining to the question they want us to vote on. That paradigm has created a lop sided power relationship between the principles and agents. That lop sided power in the relationship has allowed many companies to be run against the shareholder’s interests and have enabled senior management to get an out sized portion of the profits. I mean really, what employee is worth tens of millions of dollars, while running a company into the ground?

Empowering the principles to over see the agents can only lead to protecting the principle’s interest and limit the power of the agents to abuse their position. The power differential in the principle agent relationship has been used for over a century to enrich the senior management at cost to the shareholders and customers. Examples abound where shareholder profits and wealth have been undermined by management. One famous case was when J D Rockefeller bought an iron company, converted it into a publicly traded company, sold the shares for double what he paid, and remained as the CEO, reaping even more profit at the expense of the shareholder chumps.

Such a rebalancing of the principle agent relationship would create better run companies that would have a better relationship with their customers. Everyone is self interested, which is to say we all seek to maximize our returns on our investments. Economists call human beings rational maximizers. Clearly, since we are all self interested, if given actionable knowledge, we would seek to increase the longevity of our assets, seek long term profits instead of short term gain, provide excellent quality service and products to our customers while ensuring the company’s business model is consistent with the times. In short, instead of our agents working under pernicious incentives, we could return the entrepreneurial ethos to businesses.

If the principle’s interests are protected and the companies themselves are better run, the macro economy will improve, by potentially starting a new wave of Schumptarian economic expansion. Schumpeter coined the term, “Creative Destruction,” to explain the macro business cycle. In it, he posited… a new idea that improves efficiency in management, production or product, starts the business cycle. In the creative part of the cycle, as the new idea is implemented, the macro economy grows at a rapid pace. Once the idea is mostly implemented and the gains have been mined out, the old firms that have become outdated go belly up, ushering in the destruction portion of the business cycle, (recession). The recession destroys inefficient firms, freeing up capital, space and equipment for the next entrepreneur to begin the cycle again.

When a new firm is started, the more disruption it creates the more profit there is to be had, especially in the financial services sphere, where the sector is awash with other people’s money. As in any innovative idea that is disruptive, starting a business that reads and produces synopsis of every firm’s shareholder reports, board of trustee elections and board of trustee requests, would be a sea change in the way shareholders get information about the firms they own, by leveling the information landscape. In and of itself such a firm would start the creative cycle. Such a firm would need a great deal of startup capital to hire the necessary lawyers, MBAs and knowledge base to make such reports, and do it inside the regulatory framework that has been set up by the agents to protect their interests, or to change the regulatory environment if needed. The initial cost would be high, but the profit over the long term, the benefit to shareholders and the economy at large, would be tremendous.

Sincerely,

John Pepin

Deflation and Deficit Spending

Monday, May 26th, 2014

 

Dear Friends,

 

It seems to me, the real reason economists, politicians and Central Bank Presidents are so terrified about deflation, has nothing to do with any pernicious incentives deflation would introduce into the economy, but actually because it would hamper the ability of governments the world over, to deficit spend. Deficit spending has become so entrenched in our political systems that most people don’t give it a thought, and when they do, they grumble but consider it a necessary evil. The ability to deficit spend gives politicians extraordinary power, over the economy, our lives and political evolution. The political elite exploit their ability to spend huge sums of money, to reward their political cronies aka crony capitalism, they “stimulate” the economy with deficit spending and they get and hold office, by promising this or that constituency a hand out if they get elected. All of which are pernicious and destructive of our economies, our Rights and our personal standard of living.

 

John Maynard Keynes aggregate supply aggregate demand model of economics gives politicians an imperative to deficit spend. In the aggregate demand aggregate supply model, if aggregate demand exceeds aggregate supply the economy grows, but if aggregate demand falls below aggregate supply then the economy shrinks, resulting in recession. Keynes made no distinction between consumer demand, business demand or government demand. In fact, he is famously known for saying, if the government buried money in the bottom of a mine, and let firms use the market system to get it out, that would stimulate the economy. This shows he made no distinction between productive uses of money, and schemes that use money to draw people into non productive actions, actions they otherwise wouldn’t engage in.

 

One of the fundamental reasons the aggregate supply aggregate demand model is deficient, is that it doesn’t make distinctions between productive spending, where productivity is increased by upgrading plant and equipment or where someone’s needs or wants are being met, and schemes where money is wasted to draw in other money, which is then also wasted, to increase aggregate demand. When government spends money to stimulate the economy, it takes money that otherwise would be used for productive purposes, and wastes it.

 

The more money that is wasted the lower real economic output will be. Every government today counts government spending as a part of Gross Domestic Product. Therefore, as they deficit spend to draw in other money to gin up the economy, using aggregate demand aggregate supply, the money that is wasted feeds a system where government must have more deficit spending, to offset the loss of market efficiency that is the inevitable result of government “stimulus.” In other words, government spending is increased, to increase GDP, where the market has been so damaged by deficit spending and stimulus, it cannot increase GDP itself. Where government doesn’t deficit spend sufficiently to raise GDP, outside of actual economic growth, economists call it fiscal headwinds.

 

Crony capitalism around the world is fueled by deficit spending. The political elite use it to reward their half witted brother in laws and political backers. In many countries it is impossible to get a permit to do business unless you have political backing. No one can get licensed in those countries to compete with the political hacks. If the power to deficit spend were limited, that would also limit the ability of the politically favored, to reward their backers and half wit relations, for their own illegitimate purposes.

 

The first goal of any political party is to get and hold power. Deficit spending allows the faction in power at any time to hold that power. Further, it allows that faction that is willing to damage the interests of society as a whole, by deficit spending, to get that power they so covet. This is a pernicious incentive for political factions each trying to out promise the other. The party offering the most rewards to the people will be the one to get and hold office. This has the tendency to ratchet up deficit spending to ever higher extremes while lowering outcomes. Simply because, that party which has the least scruples to protect the public purse is rewarded, while the party that practices the most fiduciary responsibility, is punished.

 

All of these things rely on deficit spending and deficit spending needs inflation. Inflation is a hidden tax on the accounts of savers. As a government’s deficit gets ever larger, if the value of the money that the deficit is counted in gets smaller, that deficit also shrinks. If however, the value of the money a deficit is counted in goes up, savers and consumers are rewarded, but government deficits become more problematical. Therefore, governments, central banks and their dependent economists cannot allow any deflation. Deflation would explode the huge deficits governments have built up over the years… to reward their cronies, buy power and “stimulate” the economy. Deflation would show in stark contrast the fiction that deficit spending can go on indefinitely and the system of political favor would come crashing down. Make no mistake, they couldn’t care less about the good to society, in fact the ability to deficit spend rewards those who care the least for the public good, so next time you see a central banker weep at the possibility of deflation remember, those are crocodile tears.

 

 

Sincerely,

 

John Pepin

 

Job Security

Thursday, June 20th, 2013

Dear Friends,

It seems to me, government is the only place where the worse job you do, the more job security you have. Union bosses would be wise to rip a page from the political elite’s handbook. For screwing your employer even the much vaunted unions have nothing on bureaucrats and politicians. Government under their watch is the most inept facet of our civilization. We all know it. We all want better, but all we get is more laws, poorer results and more taxes. Unless we step in and solve the underlying problem… our society and indeed our civilization itself is doomed.

Politicians claim a minor problem is a crisis, they propose some legal “solution” for that “crisis,” the law makes matters far worse, making a new need for another law to rectify the problems created by the first. They pass another omnibus law and lo and behold the problem grows exponentially. Now it actually has become a crisis and lawmakers propose a new comprehensive law… From this simple example we can see that the poorer the results of their governance the more desire we have of their services.

Some might say that a carpenter always sees every problem as needing a hammer, a logger believes a chain saw is the perfect tool for building stuff and a plumber is of the opinion that every problem can be solved with pump pliers. In the case of politicians they see every problem as needing a legal solution. Each seeing problems and solutions through the eyes of his occupation. If the solution doesn’t fix the problem it is because the wrong tool is being used… is the logic. This would hold water better, if laws that don’t function were removed from the books, but once a law always a law. How much is the US government spending this year on the mohair subsidy? You know, the one to protect our vital access to World War One Army uniforms…

I think the problem is more pernicious even than that. If we believe that politicians are human beings, and that human beings are indeed rational in most cases, then we can conclude that politicians are rational. If they are rational then they must see that the worse they make society the more need there is of their services. Unless politicians are the dumbest people this must be true. Since they claim to be much smarter than you and I, with the knowledge that their laws generally make matters worse, then why would they continue to pass them? Self interest, or to be more precise, egoism.

If laws were the be all end all of civil tranquility, then why is society so much more roiled now, with our millions of pages of laws, regulations and ordinances, than it was at the turn of the Twentieth Century, when people self regulated? As the pernicious laws pile up and up, outcomes get worse, the politicians chime in with the old sophist song, “Government has a valid role to play in making people’s lives better.” Knowing in their hearts that every word of it is tripe. Clearly, it is not law that is the source of wealth, happiness or love, law only subtly protects property if it is right and seizes that property, if it is being used by an egoist. Human history shows unequivocally, that law is most often a source of oppression, theft and murder by those who wield it, against those who do not.

We have a system where the worse our leaders do the more we need them, the elite know this and use it against us, and we suffer in a myriad of ways because of it. The answer is not to give the elite more authority, to continue down the road to serfdom… it is to take back the workings of government. Do away with bad laws, that don’t have a function, make matters worse or unreasonably infringe on the Rights of the people. We must think and do for ourselves! To have eyes and not to see is a shame, to have ears and not to hear is a tragedy, but to have a mind and not use it is criminal.

Sincerely,

John Pepin

A Solution for Too Big To Fail.

Thursday, January 24th, 2013

Dear Friends,

It seems to me, the too big to fail dilemma gets worse, every time our legislators have a go at it. The Elite’s regulations always result in pernicious incentives that, instead of preventing banks from becoming too big to fail, actually create the conditions where banks must become too big to fail, else they cannot compete. The new regulation bears such an associated cost that it makes small banks uncompetitive, not due to market forces, but to regulatory causes. Of course, the Elite only take, they never give, their solutions are always more regulation, as we have opined in the past, so their solution must add to the problem, no matter how well crafted their regulation is. This increases the chance for great disturbance to our financial system. The same system your 401K is invested in, as well as your checking account, your savings account and any other account you have of M2 or M3 money. This makes the too big to fail problem your problem too.

Too big to fail is a result of old bank regulations, passed in an earnest effort to solve issues that became apparent after the 1929 banking crisis. As with all regulation, it created more problems than it solved, requiring more regulation. Banks actually create money, just like they had a printing press in their basements, but to create money, they need to have deposits and make loans. Obviously, creating money is a strong incentive to bankers to get deposits like, checking accounts, savings accounts, money markets etc… All a bank’s insured deposits are guaranteed by the Federal government through the Federal bank, (The Fed).

Banks are required, by regulation, to have a certain amount of the money deposited in their bank available as M1 money. The theory is, in normal times, a bank will never see 10% of it’s deposits withdrawn in a day. The problem is… our economy is a complex system. In complex systems, rare events graph in long tails instead of bell curves. Very unlikely occurrences are not only possible in complex systems but are certain. Because of this, there are times when more money is demanded than the bank can produce, if that happens the bank is in bankruptcy and must close it’s doors. It becomes the property of the Fed, it’s assets sold, and it’s debts paid. The Fed then insures every depositor’s first 200K of money if the assets don’t meet the debts.

When a bank becomes too big to fail it means that if it were to fail and go bankrupt the entire economic system would be put in jeopardy. The daily debts and outlays of a tottering, too big to fail, institution would be disrupted if it were to fail. Checks would bounce even though sufficient funds were available, paychecks couldn’t be cashed, large money changers could be shut down for a period of time like PayPal, inter bank payments would be disrupted, and the Fed would be handed a steaming pile to deal with. This could lead to a cascade of possible bank failures as the debts one bank owed another were disrupted by failures causing more failures. Banks that survived the first round would stop lending and hoard assets to stay alive. The entire monetary system could collapse if this were to happen… and it almost did! The 2008 banking disaster could very well have led to the very cascade of bank failures I have explained.

Therefore, a bank that is too big to fail will be bailed out, no matter how far off the rails it goes. This gives their debt issuance the implicit backing from the US Government, further exacerbating the problem. Because a smaller bank doesn’t have the implicit backing of the government and so must pay a higher rate on it’s debt! Plus a higher regulatory cost to nominal deposits makes it a virtual commandment for all banks to get… too big to fail! If you think about it for even a moment, even a fool would realize, we need to get a handle on the too big to fail dilemma.

The answer is as simple as it is hard for the Elite to swallow. Remove as much banking regulation as possible. Leave only standardizations eliminating regulations. This would level the playing field for the smaller banks and credit unions. Then, determine an upper level of bank holdings, that would make a bank become a systemic risk. Reduce that by 10% and set this as the upper limit for protected managers. Banks would be allowed to grow beyond this limit, but if they failed for any reason, the board of directors, the president, the CEO, the CFO and all the vice presidents would go to jail, even past bank officers up to the time the bank passed the limit. They would serve not less than 4 years and no more than 10 years. Make the law as simple as possible with no wiggle room for an especially weaselly CEO to worm through. Make them personally liable for the bank’s solvency if it grows past this point… and it won’t.

The self interest of every member of a bank’s board of directors will make absolutely sure, every bank in which he or she is a member of the board, will remain well under the limit. No bank president will allow his or her bank to grow beyond the limit, and top quality candidates for vice presidents, will be non existent. This would solve the too big to fail problem simply and efficiently. Our economy would be allowed to grow at an expanded rate due to less regulation, money would be more available to small businesses and entrepreneurs because small banks usually lend to these important economic actors, and a major systemic problem will have been addressed, once and for all.

Sincerely,

John Pepin

Fall of Libya

Sunday, August 28th, 2011

Dear Friends,

It seems to me, that people who are celebrating the downfall of Muammar, are foolish as they are ignorant. Muammar was nothing but, a glistening turd, freshly dropped from a dog’s ass, a ruthless tyrant, some say was clinically insane and perpetrated many evils on the people of Libya and Lockerby Scotland. But none the less, his overthrow will lead to much more chaos and bloodshed in the World, than if he had been allowed to stay. Glistening the whole time.

The most important reason it is stupidity incarnate to have toppled him is the message it sends to other Middle East Tyrants and tyrants the World over. Muammar, the glistened, was the only tyrant on the planet to actively give up his nuclear weapons program, put his chemical and biological weapons under UN supervision and pledged to the Non Proliferation Treaty. That is why Bush renewed diplomatic relations with Libya.

Now look at Obama’s reaction, to Syrian president for life, Bashar’s, killing of scores of his people. Only now, after months of bloodletting, has Obama applied any really stinging rhetoric to the situation. Syria sits in quiet comfort, that Obama will not attack unless Bashar is as stupid and ignorant as was Muammar… and publicly give up nuclear weapons. Remember the plant the Israelis shot up in the desert? It was quickly and quietly disassembled and stolen away before any International observers could get there.

What was Obama’s reaction to the uprisings in Iran, the country that is most openly in violation of the nonproliferation treaty. Iran has an ongoing ICBM program, medium and short range missile programs; with a focus on attaching a nuclear warhead as the payload. Iran was supposed to conduct an underground nuclear test with North Korea, (who sits safe from invasion or bombing in the knowledge of having a tested a nuclear weapon), but was supposedly postponed by the Japan Earthquake and openly threatens it’s neighbor with annihilation and tacitly the rest? Obama’s reaction was that the people should remain calm… in Iran.

When Iran tracked dissidents even into Europe and the US, threatening their relatives with torture and execution to keep them quiet, there was a resounding silence from the Obama administration. But when Riots erupted in Egypt however Obama was quick to call for Hosni to step down. Hosni did, and the violence has escalated, with the Moslem Brotherhood now in firm control of the military. Lately we hear of widespread calls for the annulling of Carter’s Peace Treaty with Israel in Egypt.

What message does all this send to all the other tyrants around the World? Keep your nuclear weapon program active, if you don’t have one, get one going, it is the only protection from the US military. Muammar gave them up and was being bombed within six years. Iran didn’t and is caressed by the Obama administration. Egypt was at peace and was overthrown by Obama and an anti Israeli regime set up.

Libya has been fighting a sixteen year Islamic rebellion. If, Muammar the glistened, couldn’t put it down, it must have deep root within Libyan society. Deep roots are what allow perennials to get a head start on annuals in the garden. Deep roots allow plants, that have them, to weather droughts and store up better from rain. It will be those deep roots that will give the Islamic radicals in Libya the upper hand in the upcoming political struggle. Well, that, along with their absolute disinterest the weak emotion of compassion.

Now that the US and NATO, have delivered Libya and Egypt into the hands of Islamic radicals and the tyrant of Syria wavering, the vultures of the World community are circling. All hoping to get a small bite before the Islamic radicals take over the carcass. Of course the Islamic radicals will stop there. They have no expansionistic intentions. No, they only want to live under Sharia… well them and everyone else the World over. All help along with your tax dollar, Euro, Pound, Dinar…

Yea, keep setting up pernicious incentives for tyrants. No way that could go wrong. Make it against their interests to give up nuclear weapons. Demonstrate it in Libya and then stand in bewilderment at the fact that every tyrant in the World runs to them as fast as they can. So yea, I call it stupidly ignorant to cheer at such idiocy! What help, to carefully remove a glistening turd that has been stepped on, from atop a pile, a mile deep, of glistening turds?

But, if actions be the true measure of a men’s intentions and rhetoric a mere reflection on a cave wall, then the intentions of the Obama administration and the leaders of the European Union are clear. If sociopathic…

Nothing Grows in the Dark but Mold…

Thursday, March 3rd, 2011

Dear Friends,

It seems to me that any capitalist enterprise is always held to a much higher standard than any governmental or public entity. This seems to be universal as far as I have looked. If anyone knows of a confounding example please let me know. The more I look however the more the theorem appears proven, but, just because I look to no avail for black swans, that doesn’t necessarily mean there are no black swans, there may be an example, of a public entity being held to some standard, in history.

One recent example is the appearance of for profit colleges on the scene. They fill a valuable niche for non traditional students, (who are far more at risk of defaulting on student loans). The government has recently passed regulation that applies to them only, not public universities. The government seems to be in the process of, ensuring many people stay unemployed or under employed by regulating this sector of the economy, with the intent to wither it on the vine.

Cost is one argument against for profit colleges. But they are a new sector in the economy and as in all things new, patents, copyrights and new ideas, there is value in being the first with new innovation… monopoly profits. As new people enter the new market they naturally drive down the profit until, if lasses fair regulation has been implemented, the sector will reach perfect competition and the cost will approach close the cost of production.

How, you may ask, did the government do that? Because the government guaranteed loans that for profit college students have, government claims, make up 50% of the defaults, while they constitute, less than 50% of total student output. Some students claim, that they cannot get the job they studied for, because the school has not been accredited. No one has claimed, to my knowledge, that their education is in some way was or is inferior, just that government will not recognize their degree as being valid.

With no means of testing to see if the requisite knowledge in the applicable fields, government effectively closes the doors for those graduates, then when the older graduate, who is more at risk to default for many factors, cannot get employment at the career he or she studied for then inevitably goes into default, the government has something to point to and scan then subject one, politically disfavored segment of the education sector, to onerous regulation, while ignoring the other, politically favored, sector.

To complete the government’s, behind the scenes play, was that, last year, the government nationalized the tuition loan segment of the banking and loan sector of the US economy. Creating a whole host of pernicious incentives, that mirror the government’s, unexamined, hands in the home loan debacle that so recently hobbled the American economy and is still holding the ankles of the US economy at an unnatural angle.

But government never comes under examination. It’s like government’s, politically favored groups and segments of society, have an invisibility cloak. They simply swoosh it over themselves like Dracula and do whatever they want… because they are invisible. Anyone who questions them is called crazy, a conspiracy theorist and a kook. Ridicule and vitriol are heaped like dung in a barn.

Take Fanny Mea and Freddy Mac’s role in the recent housing crisis. It was government regulation that required loans be given politically favored groups regardless of their ability to repay. Those that formulated the policies must have believed that the bad loans would be absorbed by a less politically favored sector of society. Redistributing wealth underground so to speak.

The resulting tidal waves of bad loans grew in frequency and magnitude until the financial levees were overcome. Many very old and cagy institutions fell and many people lost millions of dollars. Government immediately pointed the finger of greed at the banking executives who were the politically unflavored group that was supposed to absorb the bad loans in the first place.

We have had Oscar winning examinations into the actions and motives of Wall Street executives but not a single one about Fanny Mea and Freddy Mac’s roles or especially government regulation or the proponents of those regulations. But don’t worry… we won’t. The Elite cover for the Elite. There will be no peering documentaries about the role of regulation in the financial crisis.

Because government, while criticized daily, is never actually critically examined, but capitalism, which is the font of our prosperity is constantly poked and prodded to find even the smallest fault. Like a Dane who examines his levees with a microscope, while the dams holding back the sea are pouring rivers in behind him. I wonder… Is it the Dam’s fault of the Dane’s his land is being lost to flood?

Human Nature and World Government

Monday, February 21st, 2011

Dear Friends,

It seems to me that there are no greater motivators of men than money and power. The thirst for which is unquenchable. In fact it can be said, and a good argument made, that not only are money and power great motivators of men but the more of either a person has, the more of both they want. In other words as a person’s thirsts are quenched the person’s thirsts grow ever faster.

That is why, if a cigarette company came out with research that proved cigarettes prevent cancer and that the higher cancer observed in populations that smoke is due to poor lifestyle including poor diet, no exercise, and other risk factors, including exposure to factory emissions, that in fact, smoking cigarettes lowered the prevalence of cancer in those populations people would be cautious.

Because everyone would know, and understand intrinsically, that the companies that produced the scientific papers and research, have a vested interest in the outcome, in both money and power. We innately understand, that having ‘a dog in the race’ so to speak, gives people bias. That bias can manifest itself in massaged outcomes.

It stands to reason that the more money and the more power at stake the more bias it would naturally coerce from people. So much so that until certain conditions are met any thought of world government is absurd. Absurd to the point of abstraction. Like a political black hole that, once created, would inevitably suck humanity into itself and feed on us until it had consumed us and extinguished itself thusly.

Many pernicious notions still exist, that invade the thoughts of mankind and keep humanity largely in a state of perpetual poverty, instead of a state of perpetual prosperity. Notions that are as pernicious as they are magnetic. Like, for example, the idea that a person has any “right” to the labor of another free person, or that any other is not free.

As Adam Smith said, if given the choice between slave labor and negotiating with a free man for his free labor most people will choose the slave because of men’s pride… People have an inner feeling, they, (you and I), have some right to the labor of another without or without their consent. This is manifested in many forms. I will name a very few but if you think about it you will be able to think of many more.

The notion that a person has a right to the labor of another is manifested most often as false “Human Rights” bestowed by some “benevolent” State authority. They freely give out “Rights” to politically favored groups. Meting out the labor of others in the form of taxation for votes to maintain power. The faction that keeps the authority in power Is not relevant.

Another example is the Social Security system in the US. Under that system the proletariat of today pay for the retired proletariat of today. Extra money is (was) then spent to garner political favors from political factions. Then rhetoric is thrown out that the money is in a lock box. Well, there is no tooth fairy, and there is no lock box. The money is spent and an, possibly valueless, IOU is there instead. The law entitles one generation to the labor of another with no guarantee that the payers of today will have a government that is able, for many reasons, to extract that toll from the payers of tomorrow.

Capitalist social security would be the best means to get a retirement system that would not give any faction the “right” to the labor of another. These two examples are two of many. To get this nut cracked will take many more years of civilization of humanity through the use of capitalism. As I have said before, capitalist and capitalist behavior makes people more civilized in many ways, more punctual, greater self control, the ability to maintain one task for an extended period of time etc…

If every country, or at least a plurality of countries, had a functional market system, un warped by political influence, the possibility of a world government could be considered, but until then it is like an ancient Scythian considering the possibility of interstellar travel. He could see the stars and consider their import but had no real context to imagine what it would entail what it would take to be done right.

People today, looking at the possibility of a world government, are no more advanced philosophically, that our Scythian was scientifically. To launch into such a poorly thought out venture would certainly end in disaster, but with the whole of humanity along for the ride.

Three Paths to Virtue in Society

Sunday, November 7th, 2010

Dear Friends,

It seems to me that for a market system to function properly the people must be honest. As the people that make up a society become less honest, for whatever reason, the market becomes less and less efficient until it’s correct function is totally destroyed.

In this article we mean honesty in the sense of; honesty in action, honesty in speech and honesty in thought.

Most people think there is one path that can be taken to create the necessary conditions for an honest society when in fact there are three;

The first is the path the human race has taken the most, the easiest and worn with wheel ruts, it is to use draconian law to control the avarice of the people. The aristocracy is given free reign to their avarice. The few exceptions are notable in that they resulted in historically significant advancements in human understanding.

The second means to keep the citizenry honest is to hold the aristocracy to a high level of honesty. This is the means proscribed by Confucius. This is the means, that comports with reality the best, in that people, naturally follow the Elite. The people value what the Elite value and disdain what the Elite disdain. In societies where the Elite value luxury the people will value luxury. In societies where the Elite value hard work the people will value hard work.

The sage kings of ancient China are said to have put aside their own selfishness even to the point of selecting the next king by merit instead of blood. The Spartan civilization, under the laws of Lycurgus, is another example. The Spartan citizens were, by law, forbidden from luxury, coined money in iron, could not do manual labor and had to constantly train for war. While the laws of Lycurgus warped and distorted humanity they did show the advantages of forcing the Elite in a society to eschew luxury and vice. The Spartan by law… the Sage Kings by being sages.

Moreover people try to act as the Elite as best they can. When the Elite are corrupt the people will follow them into Hades. Where the Elite are virtuous the people will be virtuous. It follows then that to hold the Elite honest holds the people honest.

The third way is chaos. Hold no one to no standard. As a means, this is the worst, and would not result in an honest Elite or an honest citizenry, inevitably resulting in the lowering of everyone’s standard of living.

Just as water flows downhill and smoke rises in still air a dishonest society requires ever expanding law and punishments. Providing clear evidence that the Elite are corrupt in that society. Just as water proves a grade and smoke proves fire. In societies that are increasingly honest there is less need for onerous law and punishments. Liberty in society requires an honest people to enjoy it.

In a society where there is liberty but not honesty, the people will quickly call for more and more law, to protect them selves and their property from the dishonest society they live in. You cannot live in a cesspool however without smelling like it. People who lived in a less and less honorable society are incentivised to become less honest themselves. Even the Jen Man who lives the Golden Mean will necessarily lower his level of honesty as that of society lowers. Like a boat with the tide.

The ideal example is the Weimar Republic in Germany during the interwar period. The Elite tried to protect their vassal businesses with legislation. Protectionism was the ethos of the 1930s and the Weimar Republic was a big believer. They also wanted to minimize the negative impact their policies had on society so they passed ever more socialistic laws. Laws that undermined the very business they sought to protect. So government and society corroded. The Government decided that all they needed was more money and they could subsidize favored business, and support the people put out of work, from the self serving policies of the politicians. The result was an economic collapse and a backlash against liberty. The people came to the conclusion that it was liberty that was causing such a mess of the economy. They thought that if only the government could have more power the Elite could do what was necessary to get the economy moving again. This pernicious notion coupled with extreme nationalism created the NAZI party.

Corrupt Elite enact corrupt policies which create more need of law, allowing the self serving Elite to pass more corrupt law. The loop is only broken when the Elite are forced to be honest. They won’t do it by themselves. The Elite must be forced to it. Else liberty will be something our grand children read about in history books…

Catastrophic Desisions

Thursday, May 20th, 2010

Dear Friends,

It seems to me that government’s propensity to normalize deviancy threatens us all. Due to Government’s ability to deliver catastrophe on a society.

Normative deviancy is a sociological term that describes why some groups make catastrophically wrong decisions. It is a theory that takes into account the environment in which a decision is made. Basically, When a group of people are set up there is usually some thought put into keeping complexity low, keeping connections loose, ensuring rigorous debate, etc… but as time goes on small deviations become the norm. Then small deviations become larger then become the new norm. Until catastrophic failure of the group or decision-making process takes place. Catastrophic failure becomes inevitable.

The group could be the House of Representatives. Some of the deviations we see. (that have apparently become the norm) are, not reading bills before voting on them, protecting members that take bribes, reacting before sufficient facts are in, and putting a faction’s good over the good of society. These are not all the examples I can come up with but the list becomes tedious.

Not reading bills before voting. How could this ever go wrong? No potential for catastrophic failure of the decision making process there…

But seriously, lawmakers don’t even read ten page bills before voting. This has great potential to be used against an unwary congressman or congresswoman. People vote for a person because they believe that that person will make good decisions regarding government. How can a person make a decision about a bill they have not read?

When a lawmaker is so sloppy, about his job that they don’t read bills they are voting on, it says they don’t take their job seriously. When people see that the leaders in society don’t take their jobs seriously when their jobs are so important, lawmakers pay is over $174000 a year, with benefits better than anything in the private sector, so if a congressman has so little regard that he doesn’t even take the minimum effort in doing his job… why should we? Imagine the subconscious pernicious incentive this is to society… on top of the potential for abuse of the system.

Protecting members that take bribes, sexually bother pages and aides, are ignorant of tax law, ship horses through the US mail calling it official business, cashing in postal vouchers for cash to buy drugs, drunk driving leaving the scene of the accident death resulting, the list is endless. With this caliber of people running our government how can we go wrong? Blackmail is only one of the potential problems that could lead to catastrophic decisions that could result.

Jumping to conclusions before all the relevant data is in. Some examples are when rep. John Murtha, (God rest his soul), Accused the US Marines of war crimes. The facts came out that the US Marines were innocent. But the damage had been done. The war effort had been undermined. President Obama even acknowledged that he didn’t know the facts then attacked a police officer. Again wrong. Over and over members of our government publicly make statements without sufficient knowledge to make them. Over and over they are proven wrong. How many of you have read of heard the story of the Little Boy Who Cried Wolf? Being wrong over and over undermines one’s credibility. When it is an elected member of the government it undermines the credibility of the government.

Putting the good of a faction of society over the good of all of society. This is not a new problem. Madison wrote about it in the Federalist Papers, #10. Faction is pernicious because it is necessary for the political process. But even as the power of faction impels political power it undermines that power by corrupting it. Often putting the good of a faction of society over the good of all society is in the political interest of a party. Like illegal immigration. Everyone knows in their heart what is right. (fix immigration law to reflect the need, seal the boarder to prevent more illegal immigration and enforce the law) But every one in the political process wants to game the system. They want to reap the political favor of a potentially large faction. So the interests of society are stepped on. The result is that human beings in the USA are treated as subhuman… to enhance the political power of the Elite that are courting them. No irony there.

The private sector goes to great lengths to prevent these types of things from occurring. Perhaps because the threat of jail is ever present in the private sector but is totally absent the government. That problem is answered by the NUMA… Perhaps because the private sector must succeed or fail. (Unless it is politically favored. Then the taxpayers will bail them out. Even as the lawmakers, in the back pockets of those firms, vilify them… I think I hear Braer Rabbit, “Please don’t throw me in that briar patch.”)

Another possibility is that the dross floats to the top.