Failure is Not an Option… It’s a Standard Feature

Posted on September 12, 2010 by john

Dear Friends,

It seems to me that The Obama administration makes my arguments better than I ever could. They prove over and over the validity of my assertions. For that I love this administration. I fear the result of their policies, on myself and posterity, but if you take the long view of history, as I do, then you have to appreciate a teaching moment.

Economics;

First they passed huge amounts of government spending and called it “stimulus.” Now even the blind can see that the “stimulus” failed. Perhaps catastrophically. The argument for it now is, “well, it would have been much worse if we hadn’t done it.”

If that were the case, what they are really saying is, that no economic policy could have alleviated the economic problems we are now in. No mastermind could have charted a better course than the one we took. It is a predicate of their argument. Because if any other policy was taken, it is not physically possible for it to have worked better… else the argument falls apart. That cannot be known so the argument is unacceptable. (Circular reasoning).

Now the administration has another stimulus on the table. They are not calling it “stimulus” because calling it stimulus II would be admitting stimulus I had failed. It contains many things that should have been in any package to actually stimulate the economy. Tax cuts for small business for, expansion, research, etc… Productive uses of capital.

But Republicans are loathe to vote for it because they are wary of actually fixing the economy before the election. They want to wait and pass these things under their watch and take credit for the economic expansion that results. Plus they want to be the ones to pass it so their backers can get the pork benefits not the democrat’s backers. (Who are already pretty fat with trillions of dollars of “stimulus” that will come from our grand children‘s paychecks).

The thing is, no one is pointing out that the new policies are tacit admittance by the Obama administration that a balanced, pro business – pro consumer protection, is pro growth. Consumers must be protected else they will not buy and the economy locks up. Business must not be milked like a cash cow else jobs will evaporate. It is unfortunate but true. When government screws consumers and milks business economies collapse. – Proving one of the major contentions of the International Capitalist Party.

Foreign Policy;

History may forget the giant missed opportunity that was the botched Iranian elections. Obama, in typical progressive fashion, backed the tyrant and the tyrant stayed in office. No matter that the devil defeated was probably no better than the one in power… but the people’s will would have been manifested. Instead, the world is facing an illegitimately elected tyrant, backed by a zealot, with access to nuclear weapons… No way that could go wrong. Maybe radioactive air will be good for our grandchildren to breath. The policies of this, and other, administrations ensure that they will.

Pulling the missile shield from Poland and Ukraine seems pretty stupid now. With the tyrant of Iran wielding nuclear weapons in a few short years. He will be able to hold the world hostage. After all, really, who will retaliate when the little Ego nukes Israel? When the little Ego will can simply nuke an offender? No missile shield means no missile shield. No way to stop an incoming Iranian nuclear missile. Putting all of Europe in the threat range of Iran’s long range nuclear missiles. (That will be coming online about the same time as Iran has several nukes operational).

North Korea is not of Obama’s making. It is true that the policies that Obama called for would have put the deranged tyrant of North Korea in a much better position… But Obama was not in power…

He is now though. With the Dear Leader facing his reward he is passing the baton of tyranny to his son. Who almost certainly will be no better than his father. In part due to the infrastructure a tyrant needs to build around himself. Like Bashir Al Assad, the son will step into his father’s shoes, and trod his father’s path.

History will record the blunders of this Administration for posterity. The world will recover from the nuclear war. The economy will eventually recover and history will show the philosophy of today’s romantic anti capitalist for the fallacy it is.

Hopefully the lesson will be learned… this time…

Posted in economy, International Power, philosophy, polictics of class envy | Tagged , , , , , , , , , , , , , | Leave a comment

Chimerica and the Global Economy

Posted on September 9, 2010 by john

Dear Friends,

It seems to me that the Chimerica analogy is apt but misses a critical point.

The Chimerica analogy is… That the growth we saw during the first decade of the 2000‘s was a result of China producing products, Americans purchasing those products and borrowing the money to buy those products from China. The collapse of the American home market translated into a collapse in the American appetite for Chinese products.

Where it misses the point is the part where China loans Americans money to buy Chinese made goods. The largest consumer of Chinese goods is the United States Government. In the form of debt. Take the US debt out of the equation and the American Chinese picture changes.

Today we hear rumors of sovereign insolvency. The news reports that Harrisburg Pennsylvania has gone insolvent. Another example of Sovereign insolvency. We find out Greece hasn’t come clean on it’s debt yet. Rumors abound, about the other countries in Europe teetering, even as Germany reaps huge profits from the devalued Euro.

Governments are spending money as fast as they can to “prop up“ their economies. Especially the American government. Spending to “Improve” the economy and drive up aggregate demand. Some are cheering the spending claiming that as long as the bond market keeps interest rates low government can keep spending. Ignoring the fact that most people thought Lehman Brothers was a good investment… until it wasn’t. So is government borrowing. There is a brick wall somewhere in the fog out there. No one knows where it is… So might it not be prudent to slow down?

Government borrowing also has the pernicious attribute of raising the expected level of government spending. People get more money from government and expect that money to never stop coming in. Look at the mohair subsidy. The US stopped putting mohair into military uniforms after the first world war.

The Obama administration believes, publicly, that there is a multiplier of .8 for government spending. So a dollar of government spending stimulates $1.80 in the private sector. If this were true then all spending should be channeled through the government. It would be a win win. This is exactly what some in the administration believe. That the government is in the best position to determine what should be bought and sold in the economy. Added a .8 multiplier and it makes it seem, to them, a no brainier.

Of course reality has to stick in it’s ugly head. Empirically, if that were true the 3 trillion dollars the US government spent on stimulus should have generated 5.4 trillion dollars in economic output. At a tax rate of 33% that aggregate demand should have generated 1.78 trillion in tax revenue. We clearly see that it did not. In fact government spending has a negative economic multiplier.

Now the money is spent, (on everything BUT infrastructure), and we nothing to show for it. The national debt load to foreign persons and nations has dramatically gone up. Driving up the aggregate balance of trade deficit, Soaking up capital for industry and creating fear of future taxation. All have a negative effect on any economy.

So the American economy is faltering. Due at least in part to the unrestrained spending. The US budget deficit is slated to be 100% of GDP this year. The last time this happened was during the FDR administration when we were fighting the Second World War. With no such existential threat the US government is spending like it is fighting an all out war.

Maybe it is… Against the American People, our children and our grandchildren…

Posted in economy, International Power, Mercy, philosophy | Tagged , , , , , , , , , , , , , | Leave a comment

Confucius On Government Corruption

Posted on September 6, 2010 by john

Dear Friends,

It seems to me, how can the government hold me to my word when they publicly don’t hold our highest office holders to theirs?

Everyone knows the example of Clinton and Lewinski. Regardless of what was lied about the fact is there was a lie said under oath and it was publicly known. More importantly the negative consequences amounted to a slap on the wrist. So if the President of the United States can lie under oath and have no real consequences then why should other far less important people bend the truth to serve their self interest?

In Vermont a Judge was caught with 35 marijuana plants and 2LBS of processed marijuana. The judge served no jail time, paid no fine, instead got diversion. Less then a year later 2 college students were caught with 2LBS of processed marijuana and the book was thrown at them. The Prosecutor made the statement that an example would be made of them.

Tim Giethner who is in charge of US Treasury was caught not paying income taxes. To the tune of not reporting over 100K dollars. No negative consequences were deemed appropriate. He simply paid the back taxes. No other years were looked into. Charlie Rangel is accused of not reporting hundreds of thousands of dollars over decades. Lets sit back and see what negative consequences are levied against one of the most powerful men in the Congress.

Today the government is hiring thousands of IRS agents to look into your income tax records. They want to make sure you are not chiseling a few dollars here or there. If a discrepancy is found you will be punished, fined and punitive interest levied.

We can clearly see from these very few examples the tip of a much larger iceberg in society. That is the Elite need a peaceful society to enjoy their power in. But they themselves want to live as Thrasymachus claimed. They don’t want to live to the laws they seek to force the rest of society to live up to. So with this fundamental tension going on they must resort to ever more punitive measures to keep the populace in line.

Right out of Confucius. He pointed out this very problem 2500 years ago. But being Confucius he also pointed out the cause and the solution. Ancient Chinese Philosophers were all about causality and the chain of causality.

Confucius pointed out that Dukes and Barons in his day lived by rapine and averous. They lusted and fulfilled those lusts. Yet detested their very own actions when they saw them in others. As did Tonnies. They were and are hypocrites. But that hypocrisy is not lost on the population.

When the people see their leaders lusting after money, luxury and sex they naturally lust after these things themselves. But when all people behave as Dukes and Barons who have no respect for the persons, property or family of others societal advantages break down and society collapses. There is no longer a stable society for the Elite to enjoy their power and wealth.

So the Elite must resort to some means to keep the population virtuous. The answer is always in increasing punitive measures. In fact I believe there is a correlation to the level of punishment meted out in society for infractions to the level of corruption in the upper ranks of that society.

Confucius answer too this intractable problem was as elegant as it was simple. Eliminate the fundamental tension. That is to force the Dukes and Barons to be as virtuous as they need the population to be.

Simple, elegant and next to impossible to do…

Posted in Law, Mercy, philosophy, polictics of class envy | Tagged , , , , , , , , , | Leave a comment

The More Regulation… The Less Integrity

Posted on September 2, 2010 by john

Dear Friends,

It seems to me that the reason Americans don’t save money and the stock market is not a good investment is because the system is loaded.

American’s are self-interested people rightly understood (rational maximizers). We will roll dice all day long. But, as soon as we see the dice are loaded, we pick up our money and we stop playing that game. The dice are clearly loaded in the stock market.

The personal investor is barred from using money gained as a result of a stock trade for 5 business days. But the investment firm is not barred from charging $60.00 to transfer $112.00. Does that seem like regulation that is written to protect the consumer?

No it benefit’s the institution. Regulation and regulators always get into bed with the industry they are tasked to regulate. There is even a term. (If the phenomenon was rare there wouldn’t be a term in the lexicon). That term is ‘regulatory capture‘.

How is it efficient for a firm doing financial business to be so large their net income surpasses 50% of the countries of the world’s GDP? To control such a behemoth requires gobs of bureaucracy. The only advantage a giant would have over an ad hoc group of smaller leaner firms… is regulation.

What about blatant price fixing? When financial firms bring an IPO to market they have agreed before hand on a price floor! Imagine if sofa dealers agreed on a price floor. Someone would go to jail. But no matter the consequences to society the outright corruption of giants is overlooked. But when it is so egregious something has to be done… Government punishes the investors, not the culprits! No one who made the decision to break the law ever has to face negative consequences. They keep their jobs and their bonuses. The investor gets charged. Who is paying the price for the BP disaster? Management or the investor? What incentive does this give to potential investor? What incentive to management?

Government regulation punishes investment and rewards corruption in the people who handle money. FANNIE MAE and FREDDIE MAC are examples of institutions that were intricately involved in the recent economic meltdown. But the regulator didn’t see fit to saddle them with any new requirements. In fact the regulators rewarded them with more money and new powers.

The reason that firms grow too big to fail is that regulation favors that outcome. Why would regulation, that is supposedly there to protect the consumer, be an incentive for businesses to grow to huge scales making supernatural profits, even in a down turn? Because the people at the table when regulation is written are the industries that are being regulated.

That has to be done to get sane regulation. The problem is that the total lack of oversight of government and it’s action results in corrupt officials. If there was no oversight in the business you work for, would the level of corruption go up, or would it go down? Further, add to that, when corruption that will inevitably lead to the diminishing of our standard of living is discovered… people laugh! We laugh at our own funerals.

Now we have a huge amount of regulation flowing down the aqueduct into our investments and our employers investments. Can we trust that our officials are clean and wrote those new regulations with an eye to fairness and without bias? Of course not! What fool would actually believe that? A willing suspension of disbelief would be required.

The amount of shady things institutions can do with our investments is the reason people don’t invest. As soon as you put your toe in you are bombarded with caveats and gotchas that ensure that unless you are extremely luck or somehow navigate around the gotchas you cannot make a profit. Even tough your stocks may rise in value the fees, hidden charges and outright gotchas winnow down the profit to nothing. (Loading the dice). And nothing stops commerce in it’s tracks like a rigged game. No one willingly plays when they know they are being played. Only a fool.

So why go without to invest? The institution you invest in will get the profit and the investor gets the bills. Unless there is a giant catastrophe and the investment houses loose money… then the taxpayer covers the investment houses, the investor takes a bath and is looking at inevitably higher taxes to pay for the bailout. So the investment houses can keep playing the people…

Here’s an idea… Tie the profit of the investment firms (and their employees) to the profits of their clients. Force the alignment of the two party’s interest. Then lay off thousands of government CPAs…

Posted in economy, Group Politics, Law, Mercy, philosophy | Tagged , , , , , , , , , | Leave a comment

Medeival Doctors and the Economy

Posted on August 29, 2010 by john

Dear Friends,

It seems to me that money flowing through an economy is like blood flowing in a human being. Ergo it can be compared with fluid dynamics or electricity.

Instead of looking at volume or amperage, economists should keep in mind demand vs. supply, (pressure or voltage). As well as the (resistance, pipe diameter) or regulatory friction expressed as some factor.

Modern economists are like the doctors at the birth of the modern age in medicine. They look at the body (macro economy) and see too much blood (money). Too much blood must cause ailments like inflation and unemployment. So the answer is clear. Keynes said to open a wound and drain some blood from the economy. Not too much… just enough to get the economy healthy again.

Because that is exactly what most government spending amounts to… Draining money from the economy. When did a government program ever do its job and finish? Really. Isn’t that the measure of success? To complete a job. Imagine if Ford Motor company never actually finished a car. They started millions but never actually finished one. How long would the market economy reward such incompetence?

Some economists claim that some money needs to be taken to keep inflation in check. That if the government wastes some money oh well. It keeps demand in check. (A UVM economist told me this once). Recognizing that much of government taxation and spending is a waste of money. Again, an example of, draining the body economic of “excess” money.

Others argue that money the government spends today drives demand today. Even if the money is wasted as far as the actual intentions go the money goes into someone’s paycheck. They then spend that money etc… The problem with that reasoning is in proportion. The very few who will receive and spend the largess at cost to the rest putting the money to productive use is miniscule. Especially when compared to the cost.

Not only in money taken from producers but in governmental corruption that is generated by access to money. Bureaucracy is very good at adsorbing money. Growing the corrupt bureaucracy which then require more and more from the producers. There is no end to the demand for tax money from a government that seeks to do everything. It’s like a tool that will do everything… It will, but it will do nothing well.

If these factors (volume, pressure of resistance) get too far off in the human body the circulatory system shuts down. Economies work the same way. Lately the Hindenburg effect has shown itself in the stock market twice. It is an ecclectic theory that when certain criteria are met the economy has built up tension. That tension will be relieved by a correction in the market. It has been shown to be “statistically” accurate. We’ll see if it holds this time.

Regulation and the threat of regulation have the effect of constricting the demand for money. People make good bets on things they have a good read on. That is why they always tell you to read the prospectus. The more you know about a given situation the better you can profit from it. But if there are changing or potentially changing parameters the amount that can be known shrinks. If that which can be known shrinks beyond a certain amount it becomes no longer prudent to engage in the venture. Constricting the demand for money.

Today the government is spending money like never before in an effort to jump start the economy. While at the same time they are increasing regulation in every area of life. Corporate and personal.

Why do you suppose the macro economy is running on life support?

Posted in economy, philosophy | Tagged , , , , , , | Leave a comment

Romantic Anti Capitalists

Posted on August 26, 2010 by john

Dear Friends,

It seems to me that the integration of African Americans into White society was as much a factor of capitalism as it was political.

Take the example of Jacky Robinson into the major leagues. What today seems obvious is not so obvious before it has been done successfully. We look back and think that it is absurd to exclude people from an activity due to the color of their skin. But, in the day, people were afraid of public opinion. They didn’t have a good read on whether or not it would be tolerated.

That is the role of the entrepreneur… to see an opportunity and seize on it. If you reduce baseball to it’s capitalist roots you see that each firm vies to have the “winning team.” the more winning your team the more profit there is in owning it. With this as the incentive it is in the best interests of the owners to put the very best players on their teams… that are available.

The entrepreneur notices that the available players are not necessarily the best players alive. So in his evil way the entrepreneur changes the parameters of what attributes are allowable. In this case erasing skin color as a disqualifying attribute. The entrepreneur who makes the leap first… successfully makes monopoly profits until the rest catch up. But in the interim the entrepreneur has bought up the best players at the beast prices. Monopolizing them to his evil ends.

Take the example of the wicked factory owner. He wants access to the cheapest labor he can get. Cheap in the smart capitalist terms… Lower labor cost per unit produced. Cheap cost is not necessarily cheap labor. Labor that is very inefficient is not cheap at any price… He sees that there is a segment that is excluded from his factory. If the exclusion were removed the available pool of labor would go up and his labor cost would at least stabilize if not go down. So the self interested entrepreneurial factory owner will seek to open up the formerly excluded people to his labor pool. It is in his self interest.

This is a fundamental attribute of capitalism and the market system. The very thing that make capitalism so hated by the romantic anti capitalists. Like Moser and Freyer worrying about the market system’s effect on community and the loss of ethnicity. To Marx and (in his own way) Schumpeter, on the imminent demise of capitalism… In the case of Schumpeter his book might have saved us all decades of stagnation at the hands of the progressives… One uniting attribute of all the anti capitalists is that they have a fixation on groups.

They love to group people and think about them in groups and as members of groups. Like meteorologists use blocks of data to represent large volumes of air in their computer simulations. It makes the computing task much easier. But introduces a huge amount of discrepancy. That discrepancy is why the weather man claims it will rain and it actually is clear and sunny. People are people. We react as individuals. Our actions then aggregate into societal action. But to try to represent human beings as groups looses a huge amount of data. This is a case of arguing from the specific to the general.

Because capitalism has introduced the ability of the individual to follow a path according to his or her desires and propensities. Allowing people access to the means of human improvement. The very thing that the original conservatives like Burke wanted to protect. That genie or djinn is loosed from the bottle. It will wrought what it wrought. But it is loosed. The internet only exacerbates the situation for the anti capitalist.

As more and more people follow their own paths and free themselves from group attachment we will see an improvement in the reactions of people to those that are different. As we have said before the sofa salesman cares nothing for the color of the customer’s skin he only frets over the color of his money…

But this vanilla-ing of society infuriates the romantic anti capitalist. They look at people doing their own thing and never fail to find fault. The planet cannot sustain it! Is a modern cry. But it has echoes from the past as well. During the 1930’s the Elite were claiming the Depression was caused by the diminishing of the Earth’s natural resources. As we have seen, empirically, that was not the case then, nor is it the case now.

It is romantic, to be anti capitalist, but romance is blind, and it is often foolish.

Posted in economy, Group Politics, philosophy | Tagged , , , , , , , , , , , | Leave a comment

Why Has the Stimulus Failed Us?

Posted on August 22, 2010 by john

Dear Friends,

It seems to me that anything that quenches the natural dynamism in the market system, results in lower economic growth, to the point of recession if the anti stimulus is sufficient. I contend that is exactly what is holding back the US economy now.

As Schumpeter said, everyone hates the entrepreneur. His innovations result in the destruction of whole industries and ways of living. But that dynamism, the “creative destruction” is what continually builds up the economic standard of living of society. Nations unwittingly quench the dynamism that drives economic growth. With regulation aimed at stifling the negative externalities that result in free entrepreneurial enterprise.

Much must be controlled else the markets would seize up. There must be accountability when dealing with people’s money. Especially money someone has saved over many years to have for retirement. Such funds are the most precious that a banker, broker, etc…. will ever handle. Someone went without, to put those funds in the hands of a person, so the capital can be invested effectively. That capital should be invested in the means of production resulting in a short and long term capital gain for the saver. Anything that misappropriates the money of investors must not, under any circumstances, be tolerated.

But regulation too often benefit’s the people regulated at cost to potential competitors. Existing companies get deferrals to upgrade to the new regulation. New businesses don’t. This keeps entrepreneurs from competing with established firms. The established firms then grow larger, taking up more market share and monopolizing their business sector.

Japan is an example of this type of corporatist regulation and banking. We see that when The Japanese corporations were growing entrepreneurially the Japanese economy grew at a fast pace. But for the past few decades the corporatist economy has shown it’s weakness. Once the corporation grows too large it becomes inefficient. In part due to the ever burgeoning bureaucracy. In this way the lack of entrepreneurial competition slows economic growth.

Japan’s embrace of Keynesian economic theory… Japan’s corporatist economic system is the most effectively stimulated by Keynesian economics. Large corporations have the in house legal ability to navigate government bureaucracy. Entrepreneurial companies do not. Even though the Japanese model is best suited for Keynesian intrusion Japan has stagnated, despite huge amounts of government spending, for decades. To the point of turning Japan’s huge government surplus into huge government deficits. I have heard that Japan pours more concrete than the US. That is a lot of government spending… Having produced economic stagnation.

The US economic system is far less responsive to Keynesian style stimulus for exactly the reason Japan is better suited for it. The US model is more entrepreneurial based. Except for some highly regulated sectors the US economy in which corporations are encouraged to grow too big to fail the US model is more free wheeling. Entrepreneurs are heroes in America. (To most people except romantic anti capitalists). But entrepreneurs are far less able to tap into government stimulus.

Entrepreneurs have some specialty. They obsess over something the rest of us overlook. In doing so they come up with a new way of organizing business, manufacturing a product or process for the delivery of goods. They are not good at changing their focus on governmental minutia. Rules to keep fraudsters from bilking the system.

So that is why the Keynesian economic stimulus that the Obama administration has been implementing has not worked. The US economic model is far too entrepreneurial in it’s nature. That nature will have to be changed for Keynesian stimulus to have any effect. But as we see with the Japanese model even under nearly ideal conditions Keynesian economics are no panacea. They still lead to stagnation. So why keep ignoring the obvious.

Take the brakes off the entrepreneurs.

Posted in economy, philosophy | Tagged , , , , , , , | Leave a comment

What Metric to measure the Moralality of an Economic System?

Posted on August 19, 2010 by john

Dear Friends,

It seems to me that the statement “I find it morally wrong that some people have so much while others have so little.” is comparative. It compares that which the speaker knows nothing to that which the speaker knows little. And so, it says more about the speaker than it does society.

Because how can anyone actually know the heart and the true worth of another? Is the person the speaker has in mind about to go bankrupt. Is a terrible accident about to happen to a loved one of the person with too much. Or is the person with too little actually a miser?

Groups are ever more slippery. Because statistics are so poorly done. They are wielded like scientific certainty when there is increasing evidence, (scientific evidence) that statistics are misleading at best. If they are done right they can be informative but they are so rarely done with the proper scientific scrutiny that most are useless. Since groups must be compared statistically the comparison is ever more flawed.

The assumption is that material wealth is the paramount attribute. All others are tangential to it. And so a large difference between the top ten percent and the bottom ten percent is seen as a metric on the moral value of society. But if that is so then they must believe that a society with perpetual want is preferable to one where obesity is a constant threat to the impoverished.

The Desiderata says, “If you compare yourself to others, you may become bitter or vain, for always there will be greater and lesser persons than yourself. “ How much worse comparing others to others?

If a metric to apply the morality of a system is needed then take the lowest segment and compare their lot with the aggregate world standard of living. If the impoverished in a society live at or above the average standard of living in the world then we can say, empirically, that society is moral.

On the other hand if the average standard of living in a society is lower than the world average then we can say that this society is less moral. There is some roadblock to that societies effective use of the market system.

In both cases we look at the fruits of a given economic policy not the intentions. If the results are a high standard of living for the lowest 10 percent then the difference between the lowest and the highest is irrelevant. If the intent is simply to make the economic outcome equal for all players then the only workable means is to lower everyone’s.

I cannot ski that well. It is too late for me to learn to ski at more than a remedial level. If skiing were economic outcome then the socialists, progressives and communists would have to break the legs of those that ski well. So I would n’t feel inferior to them. Because it is impossible to raise me to their level so it is only possible to lower them to mine. But there are people who cannot ski at all…

But, like most things romantic anti capitalists say, it sounds great until you actually think about it. Then it sounds pretty silly.

Posted in economy, philosophy, polictics of class envy, Societal Myth | Tagged , , , , , , | Leave a comment

Nuance

Posted on August 15, 2010 by john

Dear Friends,

It seems to me that the term, “nuanced view” is most often synonymous with dialectic defeating logic.

There once was an ancient Chinese sage, who made the argument that, a white horse is not a horse but a yellow or black horse is. Using dialectic Kung Sung Lung effectively proved that a white horse is not really a horse. (Knowing himself that a white horse is of course a horse). What he was really pointing out was that the deficiencies in language make it possible to prove that a white horse is not a horse. I.e. Prove the empirically impossible.

We all know that a white horse is a horse as is any other color horse. Because color is a subservient attribute to species. But in the language that Kung Sung Lung spoke it was possible to prove otherwise. He used language (dialectic) to defeat logic (or empirical reality).

It is taking advantage of these deficiencies in language that allow people to act, speak and think anti-Semitically but not be anti Semites. They have nuanced views on the subject. But people who have no opinion at all about Jews are anti Semitic, (There is no nuance in their view). Nuance allows a politician to claim that he didn’t realize doing personal business using company property, and premises, during working hours, is a bad thing. (Soliciting campaign contributions on government phones in his government office during working hours). Nuance is why an unborn baby is not a human being but in a matter of seconds it becomes a person. Nuance gives cover when a politician lobbies for a bank teetering on bankruptcy that her husband is a large stockholder in…

Twisting language to make the absurd seem plausible is the bailiwick of lawyers. (the modern incarnation of the ancient Greek sophists). That is why a sneak thief who cuts himself on a window, he broke, getting into a hose to rob it, gets millions of dollars from the lawsuit. But the guy’s legal bills, who invents delayed wipers, outweighs the settlement. Nuance is the side of the toast the butter is on… for lawyers. That butter is rendered from human flesh however.

For the rest of us it is a source of friction. A few examples include, higher taxes, more red tape, higher unemployment, lower wages, more off shoring of jobs and a generally higher stress level in society than would otherwise be. The extra costs associated with protecting a business, person or organization from lawyers is astounding. Much of the insurance industry is simply legal costs.

But to argue that this is a positive externality is spurious. As Bastiat said about the broken window. The economic stimulus from the broken window comes at a price. That price is, whatever other use that capital would have been put to, say… a new pair of shoes. So the window maker gets a windfall at the expense of the cobbler.

What incentive does the lawyers butter set up in society? The incentive to rob homes. If you get trapped in the garage and have to subsist on Gatorade, for a week, until you are rescued by your victims, they owe you millions. Legally… How about the incentive to improve the lot of Mankind?

This butter for lawyers is a pernicious incentive to inventors and entrepreneurs. The rise of the legal oligarchy coincides with the fall of the entrepreneurial ethos. Using nuance lawyers undermine the ability of entrepreneurs to bring dynamism to markets. Stability benefit’s the wealthy Elite. (Old money).

The very dynamism that has led to the largest increase in the standard of living of the human race ever. In only four hundred years, since the invention, of the market system Humanity has gone from a state of perpetual want to a state of constant surplus. The industrial revolution itself would not have been possible if not for the market system.

So while it is nice to have a segment of society that has means. It is not in societies best interest to have that segment’s means come at the cost to dynamism in our markets. That insures we go from growth to contraction. No matter to lawyers… They make money in growth or contraction. People can be induced to fight over an ever smaller pie easier than an ever growing pie.

Nuance, it has it’s place… in History.

Posted in economy, Group Politics, International Power, Law, media | Tagged , , , , , , , , , , , | Leave a comment

Good Intentions are the Road To…

Posted on August 12, 2010 by john

Dear Friends,

It seems to me that In all matters it is best if government use incentives instead of regulation. Incentives work universally. Regulation is bypassed universally.

Take the new banking regulation. While I haven’t read the 2000+ page bill I am no less ignorant of it than most (If not all) the people who voted for it. It seeks to move power to the Fed to regulate certain actions. But it is no different than the SEC. Remember the SEC who’s employees were looking at porn while the banking system burned? I have heard (on Bloomberg radio) the SEC as the most captured unit of government.

Industry capture is always an omnipresent pernicious force. It undermines the people’s trust in fairness of the financial system lowering GDP growth. Regulators, consciously or subconsciously, start to believe that their job is protecting the companies or industry they oversee, (an example of normalizing deviance), not protecting the consumer. This capture is especially prevalent where companies have access to huge amounts of capital and legal resources. They over awe the people who are tasked with keeping them honest.

But if the incentives are set up thoughtfully… I heard an excellent idea the other day. Unfortunately I don’t remember who said it but it was on Bloomberg Radio. He said that if banks or institutions grow beyond a certain size the amount of capital reserves would have to grow at a faster pace. Thus reducing the incentive to grow out of proportion. Basically like a transmission in a car.

In a transmission the ratio between the engine speed and the drive shaft speed changes given the gear ratio. In his idea the capital needed to be tied up unproductively as M1 money would change as the capital size of the corporation changed. An incentive like this would make growing too big to fail too expensive. The amount of capital needed to grow would make it more productive to spin off a division to handle a new opportunity. Reducing the risk to society if the new (or old) company fails.

Today there is no personal risk to management if a company were to fail that was too big to fail. The government would certainly step in to rescue them. In fact that in itself is a pernicious incentive to grow to be too big to fail. Once your company is too big to fail it will have a tacit free safety net. The precedent has been set on numerous occasions.

Regulation is always full of pernicious incentives. They are inevitable when extremely complex transactions are regulated. No person or group is omniscient. There will always be pernicious incentives when activity is regulated. No matter the activity.

The wise lawmaker keeps the law simple and thinks it through. A few years ago there was a spike in falls from aerial lift vehicles in the USA. The spike lasted a few months and the companies that were involved addressed the situation. (People not wearing their fall protection devices or lanyards). The Occupational Safety and Health Administration (OSHA) stepped in.

They did millions of dollars of taxpayer funded research and decided that the answer was to shorten the length of the lanyard and increase the fine to companies that didn‘t comply. The fine was the same whether the wrong lanyard was worn or not at all. The incentive for the person using the aerial lift vehicle was not to use the new shorter lanyards because they are far more restrictive. So the incentives the new rules set up were pernicious. They undermined the solution to the actual problem. Which was, people not wearing their lanyards while operating aerial lift vehicles. The result was lower productivity from the employees, higher operating costs to implement the new rules, (buying the new equipment) and I bet not one more lanyard was connected than had been done after the companies involved had addressed the situation in house.

Results are irrelevant when government is involved. It is good intentions that counts. Regulation that produce the worsening of a situation requires more government intervention. It’s obvious. If the result of the new government intervention make things even worse, then it requires a cabinet post in the Executive branch…

Government’s ineptitude and outright corruption coupled with good intentions always result in more government. Regulation is simply the road to it…

Posted in economy, Law, philosophy | Tagged , , , , , , , , , , , , , , | Leave a comment