Saturday, January 26, 2013

Capital as sunk cost

Commenter Gregg wants me to explain why every advanced capital-intensive industrial economy (ACIIE) needs to socialize investment. The primary source of my belief on this issue is Michael Perelman's Railroading Economics. It's been a while since I've read the book, so I'm not sure what's his argument directly, and what's my interpretation.

First, let me define my terms. An advanced capital-intensive industrial economy (ACIIE)is an economy where capital investment in many sectors is large enough such that if the capital had to be paid for in full up front, the firm would be uneconomical in the short run. However, if we can amortize the capital costs over the long run, then the business becomes economical.

(click for larger image)

What the above graph shows is the supply and demand schedule for a firm. I'm assuming linear demand and marginal cost curves, and three average total cost curves: one with all the capital paid up front, one with no capital payments (just fixed and variable costs), and one with an amortized payment of capital. The return on investment (~3% p.a.), amortized yearly, is chosen intentionally to make the average total cost with capital payments equal to the marginal cost at the equilibrium.* The equilibrium price is 70 per unit at 41 units per year, the ATC without capital costs is 41 per unit, the operating profit is, on average, 29 per unit.

Long-run competition will ensure that the cost of capital for the sector will move the ATC to the marginal cost at the equilibrium quantity/price.

In a truly laissez faire economy, everything has to be cash on the barrel-head. There's no way to enforce a long-term contract. If I have to pay cash on the barrel-head for my capital, I don't turn a profit until the middle of the 8th year. And that's assuming a relatively steep supply curve. If the supply curve is flat (no diseconomies of scale), then my average total cost excluding capital costs is nearly equal to my marginal cost, and I never make a profit, because annual ATC then equals MC, and the average total cost over the lifetime of the capital is MC + CC/Q, which is greater than MC. (And even if I could make a profit over the ten year lifetime of the capital, long-term competition would ensure that someone would try to undercut me for a little less profit, and someone would try to undercut her, and so forth, until sector was making a penny total profit over ten years.)

It's important to note that minarchism is not a truly laissez faire economy: a truly laissez faire economy has no forcible government intervention at all, and forcible government intervention to enforce a long-term contract is, well, forcible government intervention.

Because capital is a sunk cost (indeed, all fixed costs are sunk costs), no one can make money by investing unless we have a political, i.e. non-economic, way of recovering capital costs. Capitalism is one such way of socializing capital costs; socialism and communism are also ways of socializing capital costs.

Friday, January 25, 2013

The Stupid! It Burns! (knee-jerk edition)

the stupid! it burns! Apparently, Cassie Gray is burningly stupid. In a comment added today to a post I wrote more than four years ago, this complete idiot writes (and I reproduce her comment in full, unedited):
Americans have a knee jerk reaction to the word "Communism" because they know history. Over 150 MILLION people murdered at the hands of communist regimes in the 20th Century. Enslavement of 1/3 the population worldwide. Communism cannot work because it views humankind as parts in a machine and makes life decisions for its people based on budgetary costs. Ironic that a system that claims to care so much about people care less than than the people themselves. If its so brilliant, then explain why the last 100 years have shown people trying to escape it? It is stunning to me that any of you would even attempt to legitimize the brutality of such a system. What do you think that says about your character when you defend government sanctioned mass murder? You all are either masochists, sadists, or the epitome of ignorance! Just goes to show that most of the institutionalized so-called professors in America and Europe should be on trial for treason.

Thursday, January 24, 2013

Typical comments with typical answers

To pre-answer a few comments I often get:

Stupid comments:

You're wrong about X.

No, I'm not.

You're wrong about X, asshole.

No, I'm not. Fuck off.

I think you're wrong about X.
No, I'm not wrong, and I don't really care what you think; I care only about why you think it.

How dare you assert X?

Because I think it's true.  

How dare you fail to mention X!?

I don't know about it, I don't think it's true, or I don't think it's relevant in this context.

You failed to justify X.

Yes, I know. Sometimes I speculate, sometimes I summarize. This is a blog, not an academic journal. If you want to know why I think something, you need but ask.

You didn't justify X, so I don't have to justify to you my vehement assertion that you're wrong.

No, you don't have to justify anything at all to me. Indeed, you don't have to post here at all to not justify your opinion to me, so don't.

Mediocre comments:
You're right about X.

yay. I know. Do you have something to add?

Good comments:

Why do you think X?
You're wrong about X because of A, B, and C.
You failed to mention X, and it's important because of A, B, and C.
You're right about X, and it implies the surprising results of Y and Z.

Some of what I know (or believe) about economics
























Sunday, January 20, 2013

Don't Download This Song

The inconsistentcy of Libertarian arguments











Wednesday, January 16, 2013


(via Daniel Florien)

Quantity and quality of money












Tuesday, January 15, 2013

The Stupid! It Burns! (feminist edition)

the stupid! it burns! The 9 Ugliest Feminists In America That's it. Just the title. The actual article is just as stupid as you think.

(via Chris Clarke at Pharyngula)

The Stupid! It Burns! (liberallogic edition)

the stupid! it burns! I've never given this "award" to an entire website before. Many sites deserve it, and there are a number of websites that I no longer feature here because they are an endless stream of stupidity, and I try to be ecumenical. However, today's site is an endless stream of burningly stupid soundbites using the demotivational poster template. Have a look, but be prepared for the stupid!

Liberal Logic 101

And apropos of nothing, let's hear it for Ahren Paulson, who graciously allowed me to use the graphic I use for this series. He's an incredible artist and all-around great guy.

Absentee ownership

I don't particularly like reddit, and I have my statistics counter set to not report (but still record) inbound links from there. However, every once in a while I'll get a spike in traffic, look around, and see my work discussed on some reddit thread. (The actual spike is from a different reddit thread.)

Thus, I stumbled upon MaunaLoona's commentary on my post, "The Libertarian argument." As is usually the case with Libertarians, the commenter pretty much completely misses the point, but inadvertently brings up some topics that deserve more analysis.

I define absentee ownership here as the situation where the objectively determinable direct use of physical coercion against the person of the owner is not required to deprive him or her of its objectively determinable use.
By his definition leaving a car parked on the road is absentee ownership.
There are a number of issues here. First, yes, leaving your car locked on the side of the road is one form of absentee ownership. And, we do in fact have to make social constructions, such as laws, courts, and police, to define and protect individuals' interest in retaining possession of objects, such as cars, they are not presently using, or even that they loan to others. A misconception here seems to be that I am absolutely against absentee ownership. I'm not. I just argue that all absentee ownership is socially constructed; there are no objective physical facts that define absentee ownership. The argument is against the justification, which MaunaLoona will talk about below.

For example, the occupant of a rented house is already in physical possession of the house; if the renter arbitrarily decides not to pay the rent, no objectively determinable coercion against the person of the owner is necessary. Indeed, it is the owner who must, in a objectively determinable sense, initiate coercion against the possessor to exert meaningful ownership.
The owner of the house is using force to remove an invader. You can call it "initiating coercion" all you want, just as long as we're clear what you mean by that phrase. Words have meaning. They don't mean what you want them to mean.
But this is precisely my point: what does "coercion" actually mean? Does it mean what it does when Libertarians are arguing against coercion: taxation is obviously coercive because if you don't pay your taxes, men and women with guns will come to kill you. Or does it mean what it does when Libertarians are arguing for rent: if you don't pay your rent, although men and women with guns will come to kill you, that's not coercion because it's justified by an agreement. Again, MaunaLoona will develop this point below.

One response is that coercion to enforce absentee ownership is socially constructed to be legitimate, even though the absentee owner does not possess the property. However, if social construction can legitimatize coercion to maintain absentee ownership, then social construction can legitimatize coercion to collect taxes. Remember, the argument against taxation above must be in some sense that because it is coercive, taxation is unjust regardless of any social constructions that legitimatize it.
Taxation is not voluntary. Entering into a rental agreement is. If there is any doubt about who the owner of the rented property is, the contract will say "the owner retains ownership of the property and will kick you out if you fail to pay rent".
Here, MaunaLoona just changes the justification from the use of coercion to socially constructed idea of "voluntary." OK, a socially constructed "voluntary agreement" can potentially justify objective, physical coercion, but this is a different argument than that objective, physical coercion is itself unjustified. The argument then becomes how to construct "voluntary agreement" to exclude taxation but include rent. It is perhaps possible to construct "voluntary agreement" to exclude taxation but include rent, but the construction becomes so convoluted that it loses its obvious linguistic meaning. And even if we could create a coherent, consistent construction, why should we accept that particular construction as authoritative?

Seems like equivocation and strawman are typical leftist tactics. The above argument is similar to:
    a. Libertarians claims taxation is immoral because of coercion
    b. Defending your property is coercion
    c. Property ownership is immoral. Checkmate, libertarians!
I don't think I'm exaggerating when I say I've heard this argument a hundred times before. I wish they would come up with something new.
Well, we don't come up with something new precisely because Libertarians keep using the same contradictory, equivocal justification, which I discuss in this post. Again, I am not claiming that Libertarian ideology is inconsistent or incoherent; if Christian theologians can consistently reconcile the character of Yahweh with an omnibenevolent deity, we can reconcile anything, including Libertarian ideology. Instead, I am arguing that their justification for their ideology is incoherent, inconsistent, and equivocal.

Commenter saint1947 adds:
Taxation is not voluntary. Entering into a rental agreement is.

Exactly! It is not a social construct that allows a property-owner to "initiate force" to remove a renter who refuses to pay. It is the terms of the contract that that specific individual renter signed.
The obvious stupidity of this comment probably deserves a The Stupid! It Burns! tag. A contract (including all the social institutions necessary to interpret and enforce it) is a social construct, in just the same sense that a statute mandating payment of taxes is a social construct.

To reiterate: I am not absolutely against absentee ownership, contracts, the use of physical force, nor am I absolutely against making social constructs to manage and enforce these social relationships. But social constructs are, well, social; what I object to is Libertarians claiming some sort of privilege for their own preferred forms of social constructs, and using poor arguments to justify them.

The power of selling out

(via Lambert Strether at naked capitalism)

Monday, January 14, 2013

Time Preference

A staple of both micro- and macroeconomics is the individual time preference. According to this theory, first, goods and services are worth more now than they are later, and second, individuals have different time preferences: some prefer fewer goods and services now rather than more later; others prefer more goods and services later than fewer now. In other words, if I'm entitled to one latte each day, I would never go without a latte today just so I could consume two tomorrow; there's no benefit to foregoing today's latte just so I can drink it tomorrow. But I I can go without a latte today and consume three lattes tomorrow: today's latte, tomorrow's latte, and the "extra" latte I gain by going without today. Some people would rather have their one latte each day; others would rather forego some individual day's lattes so they can get extra in the future.

That there is a time preference is obviously true: some people do not save at interest, and consume everything they're entitled to today; others, in exactly the same situation, consume less than they're entitled to today to consume more tomorrow. However, the question is whether time preference is an intrinsic or a derived element of an individual's utility function.

Let's consider an obviously unrealistic economy. First, we assume the economy is completely stable: there's no per capita economic growth*. We will produce exactly the same amount tomorrow as we do today, and everyone knows and expects economic stability. Second, everyone has exactly the same income, and we assume no individual's income will ever change. Third, we assume that everyone's utility function is constant across some period of time, say a four-week month: every individual will always want to consume exactly the same bundle of goods in any given month.

It seems clear that at least some elements of individuals utility functions still make sense: some people will prefer to consume only lattes and go without yoga lessons; some will consume only yoga lessons and go without lattes, and some will prefer various combinations of lattes yoga lessons. The aggregate of all the utility functions will create a family of indifference curves between lattes and yoga lessons, and the marginal costs of lattes and yoga lessons will create a production possibility frontier, and we know there's one optimal point where the indifference curves and the production possibility frontier intersect, specifying the relative quantities and prices of lattes and yoga lessons. Let's assume that the optimum is that one latte per day for a week is, in aggregate, equivalent to one yoga lesson per week, and people can choose between two lattes per day for a week, two yoga lessons per week, or any combination in between**.

*We can either assume no population growth and no economic growth, or we can assume that per capita production is always constant.

**It doesn't matter here whether or not we can produce and consume fractional lattes and yoga lessons.

We can say, then, that any element of a utility function that makes sense under these restricted conditions is an intrinsic element. Any element that makes sense only when we relax these assumptions is a derived element, derived, that is, from the relaxation of the assumption. For example, if an individual's utility function changes because we allow per capita economic growth, that change is an element derived from the fact of extrinsic economic growth.

Under these assumptions, then, time preference would say different individuals who valued lattes and yoga lessons equally but had different time preferences would choose between the following options:
  1. Neutral: one latte every day (28 per month) and one yoga lesson per week (4 per month) on the one hand, and on the other hand, they might choose
  2. High: two lattes every day for one week (14 per month), two yoga lessons the first week (2 per month), and none at all for the rest of the month.
  3. Low: no lattes or yoga lessons at all for one week, and two lattes and two yoga lessons for the next three weeks (42 lattes and 6 yoga lessons).

The first individual has a neutral time preference, the second has a high time preference, and the third has a low time preference. It's clear that if time preferences are symmetrically distributed, then those with low time preference can trade with those with high time preference, and production and consumption remains constant on a daily basis, with every pair of individuals consuming a total of one latte per day and one yoga lesson per week.

However, it's hard to look at this as specifically a time preference. If we assume that everyone is rational, then every person knows they will have to go without sooner or later. Instead we can look at these kinds of preferences as saying that an individual prefers two lattes a day for a week more than they dislike going without a latte for a week. But in this case, they can trade one-for-one with others with the same preference. They can trade their lattes this week for others' lattes next week, and then switch back and forth. Then, instead of getting two lattes per day (and two yoga lessons) for only one week per month, they get two lattes per day and two yoga lessons per week for two weeks. Thus, a time preference, where more goods later can be substituted for fewer now, seems entirely irrational under conditions of absolute stability.

If we relax the assumptions, then time preference starts to seem more reasonable. If we assume economic growth, or if we assume that income levels change over time (note that the former implies the latter, but not vice versa), or if we assume that fundamental preferences change over time, then a time preference obviously makes sense. Some people will be happy with their one latte a day; those who forego their latte today invest the unused labor to make latte production more efficient tomorrow, and they reap the "extra" lattes not taken from the high time preference consumers but from increased productivity. Indeed, investment and increasing productivity are not the result of time preferences; time preferences are an artifact of economic growth.

Friday, January 11, 2013

What is a voluntary agreement?

Today, a rather stupid anonymous commenter left this message in response to my post, The Libertarian Argument:
How can you not see the difference between a lease, which was signed by the tenant, and a decree that was forced upon a citizen by the majority? One is a voluntary agreement, the other is force.
The commenter makes a number of rather obvious errors, most notably that that Libertarian argument does not usually consist of how to justify the initiation of coercion, but rather that the initiation of coercion is intrinsically unjustifiable. Of course, as I discuss in the post, the Libertarian argument is fundamentally in bad faith: agreements they don't like are unjustifiable because they entail the initiation of coercion; agreements they like aren't the initiation of coercion because they are justified. I find this "argument" as tedious and stupid as Divine Command Theory.

But this comment, while completely stupid, does suggest a more interesting question: what is an agreement? What do agreements mean? When is an agreement voluntary? The Libertarian position is straightforward: Agreements are what Libertarians want them to be, they mean what Libertarians want them to mean, and they're voluntary when Libertarians like them (and involuntary when they don't like them). Libertarians interpret "voluntary agreement" like Christians interpret the Bible.

But there are more subtle issues (more subtle than a Libertarian is like shorter than Manute Bol) about agreements.

What is a voluntary agreement and what does it mean? Well, first of all, an agreement has to provide mutual benefit: all parties to an agreement have to be better off overall than if the agreement did not happen. Second, all parties to a voluntary agreement must be able to forego the agreement without harm. Finally, an agreement cannot be fully explicit: there must be a social process to interpret the meanings of agreements. But even with this definition, there are still notable controversies.

First, although an agreement has to provide mutual benefit, there's no determinist how that mutual benefit is allocated among the parties. The allocation of the "surplus benefit" is a matter of bargaining power, not logic, which then raises the question: what are legitimate and illegitimate ways of obtaining and exercising bargaining power? Is possession of money legitimate bargaining power? How about votes? How about violence, threatened or actual? People have any number of positions on these issues, but there's no single rationally correct answer; they're political questions.

Second, what constitutes "harm"? It's relatively uncontroversial that getting killed or beaten constitutes harm, so that giving my wallet to a mugger who points a gun at me is not a voluntary agreement. But what about natural harms? Does freezing or starving to death constitute a harm that renders an agreement involuntary? How about becoming stateless, ejected from the protection of a society? Is it harm to lose some portion of the mutual benefit of an agreement because of a change in bargaining power. No one is self-sufficient; we all need to rely on others for our physical survival. Does our mutual dependence entail at least some obligation on the part of others to assist the survival of others? Again, these are not rational but political questions.

Third, how do we resolve disagreements between parties to an agreement about what a particular agreement actually means? What, precisely, have the parties agreed to? What do we do about these disputes? Again, how to interpret an agreement is as much a matter of not rationality but politics.

It's not enough to lay out just a consistent set of answers to these questions, because there are a very large number (perhaps infinite) number of consistent answer sets. Why should I prefer your set of answers to another?

One problem (out of many) with not only Libertarianism (right-anarchists) but also left-anarchism is that anarchists simply push all the interesting political questions to "voluntary agreements" and assume all these problematic questions are thereby solved at a stroke. I think this position is at best naive, and at worst dishonest.

Wednesday, January 09, 2013

The Stupid! It Burns! (incompatibility edition)

the stupid! it burns! The author of the blog, Shadow to Light, does not appear to like Susan Jacoby’s Atheistic Beliefs:
So the community that insists science and religion are incompatible is now going to embrace the notion that emotion and reason are complementary? Well, intellectual consistency has never been a strong point of atheism.

Again, I've only given you a taste of the stupid.

ETA: The stupid refers to the Shadow to Light author's critique. Susan Jacoby rocks!

The Stupid! It Burns! (which god? edition)

the stupid! it burns! Christians say Atheists are right Atheists don't believe in
god as Kim Jung Il. . . A god of power and supervision and invigilation and suspicion. . . . And [a Christian] almost always has to say: I don't believe in that god either.
Uh... I know a lot of Christians who actually do believe in such a god, but all right, let's run with that. What kind of a god do you believe in, Dave?
Wait, what?

Lots more stupid in the article.

Monday, January 07, 2013

The Stupid! It Burns! (humility edition)

the stupid! it burns! Why Are Atheists Always Attacking Christians?:
It's common to read attacks by Atheists on practicing Christians on Daily Kos -- and, indeed, on the Internet at large. These attacks often infantalize Christians, assault their sense of reason, slander them or level broad accusations that have little support in fact. The context of these attacks is usually the All-Seeing Eye of the Atheist, which is capable to seeing into the minds of Christians and instantly understanding their motiviations, even when such motivations are cloudy or obscure to the Christian himself. . . .

Human nature is such that, on closer examination, the Atheist movement is full of the same weak, irrational, conflicted, myopic human beings that fill the ranks of the religious. We're all small -- tiny, really -- when compared to the grandeur of the Divine or the Universe. (Your choice.)

So, please. A little humility?

Sunday, January 06, 2013

Economic growth and the gold standard

Assuming a gold standard were possible (i.e. that people wouldn't just create fiat money around it), it doesn't seem possible that we could get optimal economic growth under a gold standard.

In market/capitalist economics, Y * P = M * V: Real gross domestic product (Y, the total production of final goods and services) times the price level (P) equals the quantity of money (M) times the velocity of money (V, the number of times, on average, a unit of money is used in a transaction for final goods and services). We can also say Y = (M * V) / P. We can choose our units so that P = 1; therefore Y = M * V.

Remember that V in this case is not just the number of transactions using a particular unit of money, it is the number of times the unit of money crosses the production/consumption boundary. Alice's employer pays her; that's one transaction. Alice buys food at the store; that's two transactions. The store uses the money to buy food from a wholesaler. That's not a transaction that counts towards V, because the store and the wholesaler are both on the production side. Similarly, when the wholesaler pays the processor, or the processor pays the farmer, or when the farmer pays his mortgage, those are not transactions that count in the velocity of money. It's only when the store, wholesaler, processor, farmer, or banker, pays an employee, investor, or landlord does the money cross the producer/consumer boundary and V increases. It seems clear, therefore, that V is physically limited. No matter how an ounce of gold is represented, whether it's a physical coin, an ingot, or an entry in a database that corresponds to some physical gold, money can move only so quickly.

The point of a gold standard is to physically limit M, to create a quantity of money whose increase is physically limited. Since V is already physically limited, that means the quantity of money in motion, M * V, is physically limited. If we have price stability, then P is constant. Therefore, an increase in real gross domestic product is limited to the limit of the increase in the physical quantity of gold. But there is no particular reason to believe that the limit on the increase on the physical quantity of gold is the optimal increase in real gross domestic product. And that's absolute GDP; there's no reason to believe that the increased quantity of gold even match even population growth.

Furthermore, what is the value of a specific quantity of gold? Gold has very little intrinsic value, outside of electronics and jewelry: you can't eat or drink it, nor does it keep you warm or dry. Gold does, however, have a physical cost: the marginal socially necessary abstract labor time to produce the "last" unit quantity of gold. Expressed in money, the marginal cost of one unit quantity of gold is one unit quantity of gold. In other words, all the economic growth would go to the gold producers. There really isn't a world with an industrial economy in which a gold standard is a good idea.

There are, of course, any number of people that support a gold standard who have just not thought through the economics. But there must be gold standard advocates who have thought through the economics. Some of them, I suppose, really would limit real economic growth, but I've never seen a gold standard advocate say explicitly endorse limiting economic growth to the increase in the supply of gold. The others, however, realize that some sort of fiat currency is necessary for economic growth in an industrial economy. The question, then, is who gets to control economic growth, and, more importantly, who gets to distribute the benefits of economic growth. It is fairly obvious, then, that such control would go to the people that own most of the gold.

Economic power, control over the means of production, is political power. One does not imply the other; they are the same thing. In an advanced industrial economy, the means of production is not ownership of factories or land, but ownership of money itself. By definition, the government is the set of institutions and their members that own the money. Thus there can be no such thing as "private" ownership of money: the fundamental owners of money are, by definition, the government. So the question is not whether we should have government ownership of money, but rather what kinds of institutions, with what kinds of members, should constitute the governmental ownership of money.

I'm not a big fan of republican democracy, but a republic is, at least to some extent, accountable to all the people. Putting the government in the hands of people who say proudly and explicitly that they recognize no accountability except to their own well-being seems like a Very Bad Idea.

Saturday, January 05, 2013

Promises that can be kept

In "Promises That Can't Be Kept", John Long argues that the government benefits are like free ice cream, eroding the profitability of the economy until it becomes bankrupt. Yes, people like free stuff, but Long argues that if a business starts giving out too much free stuff, someone has to pay for it, and the people who can afford to pay extra will go elsewhere. There Ain't No Such Thing, dontcha know, As A Free Lunch. Long explicitly describes his on-the-course-to-bankruptcy ice cream shop as an analogy to the federal debt. Mentioning (but not citing), I presume, "Why $16 Trillion Only Hints at the True U.S. Debt," by former Republican congressmen Chris Cox and Bill Archer. In this article, Cox and Archer claim that the federal government owes $86.8 trillion:
According to Cox and Archer, we will soon have to collect $8 trillion per year to fund these entitlement programs, a task that would be difficult even in an economy with an annual gross domestic product of $13-14 trillion. Sooner or later, something has to give. But Cox and Archer's numbers are suspect; more importantly, Long's ice cream shop analogy is misleading and fails to accurately describe the macroeconomic role of a government with a sovereign currency.

Cox and Archer are trying to scare us with big numbers, and they don't describe these numbers and their sources accurately enough for us to really understand the numbers. On what time-frame does the government "owe" $86.8 trillion? Are these actual debts, or just promised payments? There is a difference: I could say that you personally owe more $1 million, because that's how much money you'll have to spend to stay alive over the next 30 years. But you don't have to reduce your spending to pay back that "debt": that "debt" just is what you'll have to spend. I'm not an expert in social security accounting, but I do more-or-less vaguely know that both Social Security and Medicare project income and expenses over about 75 years. So if that's $86.8 trillion over 75 years, then that's about $1.16 trillion per year, which is not particularly scary. Similarly, as an accountant, I look carefully at qualified numbers. When Cox and Archer talk about an "annual accrued expense of $7 trillion," the first thing I want to look at is how they calculate an "annual accrued expense." Even the most honest accountant uses bullshit numbers, and this $7 trillion smells like a bullshit number. Without telling us how they got it, I just don't know what it means. Finally, these are Republicans talking about government money, and Republicans have less credibility talking about money than Kent Hovind has talking about population genetics. I don't even bother to check Republican math anymore; I simply presume it's an outright lie.

John Long's analogy, though, is not merely unhelpful, it is actively misleading. First, the government is not handing out free ice cream, and it is not handing things out to poor people. They are providing a service that everyone must have: retirement income and old-age health care to people who have, for the most part, worked and paid taxes their whole lives. No rational person would forego these benefits, and the only reason anyone might do so would be to survive in the short term. By making it a universal tax-supported government benefit, employers cannot force workers to compete on who is willing to starve later to work now. Second, the government is not a business that must make a profit (or at least not make a loss) to survive. The government must have debt, because net government financial debt is net private-sector financial assets. If we want to have net private financial assets, then we must have net public debt. That's how the financial system works. Furthermore, the government does not, like an ice cream shop, have to compete with other businesses, and does not have to match its revenues to its expenditures, even in the long run. The government not only must run a deficit, it can print money at will. There are pros and cons to printing money, of course, but they are completely different than the pros and cons of a private business borrowing from individuals. Any time someone compares the government to a business, they simply do not understand fundamental macroeconomics. John Long does not understand fundamental macroeconomics.

Social Security and Medicare are obligations that Americans, as civilized human beings, must meet. We simply cannot choose to let any of our old people starve or go without adequate medical care. We simply must do it. And we can. Even if it did take 50% of our GDP to take care of our old people, then that's what we would have to do. Letting old people starve and die is simply not an option. But the idea that we will have to spend 50% of our GDP to take care of our old people doesn't make any sense. In "A Summary of the 2012 Annual Reports," the Social Security and Medicare Boards of Trustees report that total Social Security spending, 4.2% of GDP in 2007, will rise to about 6.4% of GDP in 2035 and then fall to about 6.1% of GDP in 2050. Similarly, Medicare, at 2.0% of GDP in 2011, will rise to 4.0% of GDP by 2086. Cox and Archer are pulling annual expenditures of 50% of GDP out of their asses; The true amount of 10-11% of GDP isn't couch-cushion money by any means, but it's hardly impossible. For Long to repeat these numbers is simply irresponsible journalism. Our promises to, well, ourselves, that our society will ensure that we won't starve or die of treatable medical conditions in our old age, must be kept, and they can be kept.

Friday, January 04, 2013

The Stupid! It Burns! (leap of faith edition)

the stupid! it burns! The Atheistic Leap of Faith

I want to point out some of the contradictions that I see in [an atheist's] worldview. My point in the following is to be loving by clearly presenting the truth as I see it. I recognize this style is a bit abrupt and can come across as harsh, but I assure you, that’s not my intention.

Here are the clashing statements, right next to each other:
1: There are no objective moral truths.
2: I’ve decided to accept some moral axioms as true, because I think it is important to have a moral system to live by.

1: There is no ultimate moral accountability for my actions.
2: Even when I know no one can catch me doing things that we would both consider to be “bad”, but are still incredibly fun things to do, I try to do what I think is right.

1: In the long run, all life will be extinguished.
2: I’m pretty hopeful about the future.

1: Anyone you help will die shortly afterwards.
2: I’m willing to make sacrifices so that others can have a better life.

1: Looking at it scientifically, we are specks of cosmic dust.
2: I think my life has a lot of meaning.

1: Everything happens in accordance with the laws of physics and biochemistry.
2: I have free will.

2: My mind rationally assess propositions in order to make logical conclusions.

1: We are biochemical reproducing machines.
2: I truly love my family and friends.

1: Our particular existence is the result of a colossal series of random events and the process of natural selection.
2: I’m trying to figure out the purpose of my life.

1: Everything about us can be explained by evolutionary pressures.
2: My own beliefs about reality are explainable in terms of what is most reasonable.

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Day 9: Godwin's law

Hitler's Economics, by Llewellyn H. Rockwell, Jr.

Day 9 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Previous: An unproductive critique
Next: We're done.




Tuesday, January 01, 2013

Day 7: An unproductive critique

Is Greater Productivity a Danger?, David Gordon

Day 7 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

Next: (soon)

There's really no point in reading David Gordon's more-or-less accurate summary of Tim Jackson's article, "Let’s Be Less Productive or Gordon's trivial response. Jackson's article isn't that informative: I really don't know whether or not we might no longer be able to increase labor productivity. Furthemore, while Jackson offers an ontological definition of productivity, he doesn't talk about how to measure it.

The only point I can see in in Gordon's summary and response (and Wenzel's inclusion) seems to be to accuse those crazy liberals of arguing against productivity, which Jackson manifestly doesn't do.