Sunday, December 29, 2013

Would the Real Honest Character Please Stand Up?

Simple question here, and one that should be of utmost importance in a culture where everyone is really into authenticity and "being yourself:" Do you find out who people really are when they are under pressure, or when there is no pressure on them?

It's not a simple question. Look at the context in which we expect people to make decisions. We have pushed and pushed to create a cultural environment with no judgment against people who want something outside the norm, and we have pushed even harder to undermine judgment against people who don't maintain long-term contracts. Everything becomes unfair when the prices go up, the expectations too high, the costs too great, the effort needed for this game too intense. Divorcing wives and homosexuals both seem to find it important that society is not judging them as they find happiness in being who they are. Money seems to screw up everything, too, so we want people to avoid the pressures of having to respond to it. No one should have to do a job they hate just for the money, right? Remember Office Space: if you had a million dollars, what would you do? This kind of thinking is important to people. Their decisions must not be constrained by coercive elements like the threat of violence, ostracism or deprivation.

So think about what this means. It seems that only decisions made effectively in a void are actually legitimate decisions. Therefore, an individual is not expressing their true point of view if the power of the outside world is coercing them in any direction, a state which is a little difficult to create but intuitively desirable. Thus, we have the makings of oppression.

It's easy to see the mental workings behind the idea: if someone is making me choose something by threatening me if I make a wrong decision by some standard, then I'm going to be what the world wants me to be, not who I want me to be and therefore who I really am. So my real self is being buried by the pressures of a cruel universe.

These are the people who emphasize free will, a difference between persuasion and coercion, the rights of the individual, the necessity of choices provided, the moral illegitimacy of decisions made under duress. They have a hell of a time squaring all this with law and order, with the economic machine, with punishment, with responsibility, all the more so in a world increasingly more guiltless and godless. But we place an awful lot of stock in this idea.

But hold on a second:

I know lots of people, particularly men, who seem to think that we only really know what someone cares about by how much they prioritize it in the grand scheme of the world, not simply when the world holds no influence. Obviously if everything was free, you'd have more of whatever you had time and attention to consume, but what you decide to pursue despite being on a budget and having to accept the trade-offs is what's really important to you... right? I mean, you aren't making decisions with no sense of priorities in this world, are you?

Doesn't it say more about who you really are and what you really care about, that you are willing to pay?

It's a question worth asking: would you tolerate loss for something? For someone? Would you take risks for what you value? More to the point: is what you want worth pain? These questions are more aligned with a perspective based on economics and praxeology than Western liberation ethics, a discussion more involving cardinal and ordinal utility. From this point of view, it's about what you do, not what you say. We're talking revealed preferences. And doing right by other people or by the principles of your culture is only impressive if it comes with a price.

Helping your Dad fix his car when you have nothing better to do IS different than helping your Dad fix his car when you blow off other things you'd rather be doing or even need to do for your own sake. That's when you can really say something about how much you care about your father.

What does this say about people, when the prices seem to regulate their desires? Because it probably says more about the people making the decisions than about the prices themselves, or even the people setting the prices. If your understanding of a person's true character is who they would be if no one gave a shit what they did, if they had the Ring of Gyges and endless resources, then I have a funny feeling that people wouldn't look any better - assuming an honest evaluation, even by their non-standards - if they were allowed to be who they really are.

This kind of thinking is critical for understanding how much value someone places on something. It was seen as extremely important witness to faith in God that Jesus, and later the Apostles, preached their sermon despite threat of arrest, punishment, and even death. It has been seen as important to understanding their devotion that men work for years at jobs they don't like to care for their family. The other way to communicate to others how much you value something -just telling them you want it - becomes too easily a drama contest pitting people's rhetorical talents, their ability to scream and cry on command that is alien to a masculine ideal of stoic effort that does not intrude itself on others. Why would mad desire that comes out in passionate expression be a legitimate gauge of worthiness? That's a Western and extremely feminist notion; need becomes gauged by emotional intensity and not exchange value.

That goes hand in hand with welfarism. Doing good works for people is easy if it's free of cost or if you're rewarded for it; in the end, it means making someone else do it. If you're expecting some kind of exchange out of politeness, someone showing thanks by "giving" something back without ever having consented, then you've just thrust an exchange on them and it isn't really good works. But doing something for others at genuine cost to yourself... why must charities beg, anyway?

There is a reason - actual reason - that Christianity emphasizes sacrifice so much that their corporate logo is a guy getting himself literally crucified for the sake of other people.

So. Which is the real you? Are you what you see yourself as in your mind's eye, or are you how you respond to the world on its terms? Are you a private ideal or a public persona? Would your real, honest values, the real YOU, please stand up? Can we get a word from your true self?


One side looks at life innocently. They just want a life where their path is clear. The other looks at life strategically. And the arrogance necessary to believe that there is such a thing as innocence reflects the arrogance necessary to believe you deserve a state, as opposed to a deal. A strategist approaches the world on its terms. An innocent - or so they would call themselves - just wants what they've come to believe the world owes them.

Of course, this changes the moral calculus. You aren't a victim of the world: you're a part of it. Only a hermit could really live well without some control over people, some expectations realized and ideals conformed to. Without this we have no prerogative to judge and therefore no prerogative to condemn the prices others demand from us, so you can see the difficulty: suddenly, there's no such thing as oppression. And we have to believe in oppression, so oppression comes from high prices.

Assume the price tag to be a fact of life, and assume that any "just price" can only be a matter of perspective. If that's the case, then who are these people who regard justice to be a world where everything is all but free, in every sense of the world? Do we owe them Valhalla? Evidently we do. You've seen this perspective before, likely almost every day. It's the perspective of someone who lives with someone else paying the bills. It's the perspective of a child.

What child is happy to know that their most powerful dreams and desires can be reduced to coefficients in a demand function? And a demand function among many that form an aggregate demand function, at that. It makes our dreams seem so... irrelevant. Aren't we supposed to be more important than that?

It is the repression of the true self, only if you understand that the true self wants power and considers all obstacles to be unjust be definition. What we imagine we want if cost is no object - a free world - is not so much anything inborn, but some desire picked up due precisely to the pressures of the world. Of course we want what's out of reach, but I rarely hear of people truly desiring something that doesn't exist at all. People get their desires from the world, so I find it difficult to believe that desires are "inborn" and a "part of who we are" outside the context of our physical and social environment. Everything is power, remember, and it should never be surprising that someone wants something just because he can't have it. The entire philosophy doesn't just scream of rebellious reaction for its own sake but screams louder that all that can be right is solipsism.

Great men have made the world by building their visions, but they paid for it. If you want your world free, then good luck finding someone to sell it to you at that price.

If you meet someone who does something asinine and inconsiderate, then says, "look, I didn't want to do that, but I have bills to pay/cops to avoid/grades I need to get/potential sex partners to impress/a boss breathing down my neck/shit that needs to get done," then you should know what they're doing. They're selling themselves to you, lowering the cost of their failure by assuring you that, really, deep down, they aren't like that. And they aren't. If they had nothing to gain, they might not have done that. But they did have something to gain, and your irritation, pain, and inconvenience was worth the price to them. Remember: you have a price to others.

That doesn't make the world a tragic place to live. Instrumental value is all you can have to people who don't know you, and you don't really know that many people. It just shows the value of those who treat you better than that.

Thursday, December 19, 2013

WordGames: Lost Decades

The professions of economics and politics have embraced a new fashion over the last few years. Whenever there's a somewhat extended period - several years, often around ten years - where economic growth is less than excellent, they now label this period a "lost decade."

And man, these lost decades are everywhere. The most famous of them goes to Japan, who's economic problems have been going so long that judgment against their performance covers two decades, starting in 1991 and arguably continues today.

European countries seem to be headed in a similar direction. Their financial crisis kicked off a period of stagnating growth pretty much everywhere except Germany.

And of course, there's the good ol' US of A. Particularly when your attention is riveted on employment and income, America has sucked for a solid forty years now. My alma mater recently hosted professor Edward Wolff, who explained the situation on fairly sensible terms: the mismatches in labor supply and labor demand, the rise in the superstar phenomenon, and globalism all played a part in pushing American incomes back to a standstill since 1973. Thus, a lost few decades for average American incomes.

Implied in the "lost decade" phrase is the idea that things should have and could have been better, if it weren't for some X factor which invariably gets politicized. Among the first people to talk about this was Paul Krugman, who identified Japan's lost decade and established the concept of liquidity traps, whereby central banks can no longer stimulate an economy by lowering interest rates, as they can only go so low - theoretically to zero, although negative interest rates have happened, where you pay people to take the newly printed money - and they can't force anyone to borrow (for those playing the home game, the Fed can't force anyone to borrow, but the US Treasury department can, and did, in 2008 following the collapse of Lehman Brothers).

Just so you know, these are pretty much all happening after huge booms where long term trends are left in the dust. In Japan, for example, the property boom was, ah, a little exaggerated. In 1991, the land in Tokyo alone was worth more than all the land in the United States. After the crash, no investor wanted to pay the price to re-inflate the bubble, so of course, the economy retracted, at least on paper. In reality, if you control for stupid speculative asset values and the distortions they create, the crashes suck but performance afterwards usually isn't really that bad. Japan's lost decades actually feature expansion at a rate of about 2%, which is quite good if you remember that Japan has basically zero population growth. No surprise there: companies like Honda, Mitsubishi, Canon, Nippon Steel, and Fuji Heavy Industries continue to make money just fine, thank you.

The European debt crisis came from their own housing boom, one that took place in pretty much every country that has earned the PIIGS moniker. Greece, obviously, enjoyed a boom in housing which went along with their permanent boom in government services, made available by a bond market which assumed that Europe would bail out the default-prone country if it screwed up again. Same for Spain and Portugal. All three countries enjoyed labor policy far to the left: Greece maintained a railroad so inefficient that you could have paid a taxi to drive every passenger to their destination and still saved money, just to keep 6,500 railroad workers employed, while allowing workers in "highly physical" occupations like hairdressers to retire with full government benefits in their early 50's. Spain's labor market maintained so many protections for full-time workers that no employer would hire them, instead relying on temp labor; unemployment, presently around 26%, is far higher for young people. Italy has managed to hold on to zero productivity growth - and a high degree of popularity for socialist politics - for well over a decade. Ireland, the odd child, renovated its tax code along the line of Reagan-style supply-side policy, drew in corporate employment, and held their own housing boom, which collapsed and was among the first to contribute to the crisis. The government then decided to guarantee its banks and debt exploded; although harsh, the austerity measures faced less argument there than any other country, and recovery has been stronger.

So let's review: a situation occurs in which everyone agrees that the valuations levied on certain assets is explosive, unsustainable, and ridiculous. Those prices eventually, and painfully, return from orbit in a crash. Then, this idea of lost decades comes around which, using the periods of ridiculous values as their benchmarks, whines about how things have gone a really long time without meeting expectations. Obviously, I've come to the conclusion that I hate the term "lost decade."

Lost decades have nothing to do with whether or not something that realistically had the potential to exist was lost. They have everything to do with using the permanently high expectations of voters that come around whenever there's a boom. Plenty of people see this, but the existence and political popularity of terms like "lost decade" will be around for a while as it remains useful to damn whoever is in charge by labeling one.

Subsidizing American Labor

So land values get involved in pretty much all of them, and the crashes usually start there. But forget land; the most common economic good to overvalue in the post-industrial world is labor.

Artificially inflating labor costs isn't a market distortion in the eyes of most people, because it happens to be the cornerstone of most party platforms for cultures that hold competitive elections. Work is, of course, just another economic input when viewed without a moral agenda. It rises and falls in value, and while we like to see the cost of everything else fall in this world, we hate it when labor falls in price, as that's our wages we're talking about. But we should expects downs to go with the ups in labor value, too.

So the US situation focuses a lot on inflating the value of labor. Now, think about being a business which uses labor as a production factor. What do you do if your society is constantly trying to increase the cost of labor? Obviously, then the natural thing to do for those whose business requires a lot of labor is to reduce the use of it or find cheaper alternatives, which is exactly what we've done.

I can't blame them. The background of the American labor market, the standard by which earnings and worker conditions are compared, is the period between World War 2 and Vietnam, one of the world's greatest middle-class booms.

The period after World War 2 saw a degree of demand enjoyed by American business and American labor that was so freakishly wonderful that compared to material progress at basically every other period of the same length, heaven had arrived on Earth. We rebuilt Europe with Marshall Plan money, the last industrial power left standing, exporting like mad and, after NSC-68, throwing battleships full of cash at the military as well. Over 35% of the labor force was unionized in the 50's, and unions exist pretty much exclusively at times of economic prosperity, where they can siphon some cash off for themselves from companies that enjoy huge market power. The identity of the American middle class lives in this time period; the demand for American labor was extraordinary.

Remember that word. Extraordinary. As in, other than ordinary. As in, not normal.

Just so we're clear on this, no one in their right mind, with the slightest bit of historical perspective, would assume that the growth from that era could possibly be kept up in perpetuity. Think about this: if the American economy grows by 4% a year, what will it look like in 2250?

Previous middle classes have risen briefly, running on for a few decades, and then fallen apart, usually attached to an empire. That's the historical pattern. Spain had a middle class in the 15th and sixteenth centuries. Holland had one in the 17th. Britain in the late 18th through about World War 1. And the US has had one since World War 2. It stagnated, as all of them do. And it will probably end, as all of them do.

Middle classes are a bitch to maintain, because you're talking about the distribution of market power, which is dynamic in any healthy economy and tends to move towards increased concentration. Trying to avoid that concentration through demand-side redistributive schemes increases the likelihood of inflation, while trying to avoid concentration by supply-side management is basically shooting yourself in the foot. Supply-side stimulus literally empowers those who already have wealth as a matter of policy.

When it comes to managing the value of labor, you basically end up subsidizing work. Not just a little work, but the bulk of it, because economies that function are hierarchical by nature, and the closer you get to equality, the less efficient the system becomes. Efficiency, by definition, is getting things done with minimal input. You can't maintain high growth with high levels of inefficiency, so the push to "liberate business" made by guys like Reagan is, after the collectivist ideals run their course, the only way to stimulate growth without inflation.

The Really Big Picture

The term "lost decade", with its ridiculous expectations, implies that the business cycle has been mastered, and despite all the Keynesian and neoliberal pronouncements to that effect over the last seventy years, no sensible person believes it. Instead, you're left with a simple statement of moral and political righteousness.

What we've distorted is not rational expectations, but expectations of progress in a moral sense, and the progress comes from the moral ideal of equality. The problem with a bust, really, is that normal people are affected by it and it moves the distribution of wealth towards those who have wealth. Booms don't; booms make money cheap, and investors must take bigger and dumber risks to maintain their relative place. Labor, however, benefits from constantly increased demand.

The link between inequality and boom/bust draws out some hellacious arguments and isn't overwhelmingly dominated by either side, but underneath the talk about the rich getting richer is a basic reality: under boom conditions, the economic world needs people, lots of people, to work. Everything becomes easier, happier, with higher standards, and thus less efficient. Under bust conditions, people become useless; when spending less, we don't need them anymore. We love that booms devalue money: I remember the tech boom in 1999, when one magazine article suggested ways to spend all the excess cash you had lying around, including buying the body of Vladimir Lenin and using it as a coffee table, or having a famous Japanese calligrapher monogram every blade of grass in your yard. During the housing bubble, a few years ago, I remember commercials showing loan officers acting like retarded used car salesmen, prodding everyone to cash in every penny of equity from their homes, moves that would pull them financially underwater after Lehman failed. Booms encourage the hell out of debt, of all kinds, which is usually the most painful element of the bust. Stupid, all of it.

We crave that stupidity, because it means that money is losing relevance. A boom economy convinces people that we're moving towards a world where everyone can expect work, then can move towards doing the work they want, then can work when they feel like it, when ridiculous ideas like the efficient market hypothesis seduce people into complacency and utopian dreams. Those dreams, in modern Western consumerist civilization, live on perceptions of equality, on the fantasy that growth isn't driven by competitive energy and is instead a product of cooperative preferences with no need to fight or tolerate unpleasantness.

When a country becomes powerful in global terms, like Spain, Holland, Great Britain, and the US, the wealth reflects dominance and the power is real in the sense of a powerful business dominating a market. Working in those countries become the equivalent of working for Apple or Goldman Sachs. It's a matter of relative strength, where productive action is needed from a population as clearly as it is during a war. The wealth created by internal booms is not like that. It's purely speculative and psychological.

An economist named Kondratiev and an accountant named Elliott have both hypothesized about grand cycles of economic growth and stagnation, and their ideas stand in stark contrast to the political desires of most of the modern world. We want to think we can maintain booms forever, but we can't.

What you get in the long view is a notion similar to what Hyman Minsky said about the boom-and-bust cycle of credit: stability begets instability. We go from hedge investment, to speculative investment, to Ponzi investment. It's extremely psychological, and given what people are, it's inevitable over the long run. Those big Kondratiev waves work over the course of generations, not years, eliminating the possibility for individuals to learn from experience: every generation thinks it can fix the fails of the last, and they pay for that arrogance. Overconfidence creates the groundwork for stupid people to do stupid things and screw up, thus destroying the confidence. The push to get the economy going again after a credit bust is basically an attempt to use monetary and fiscal policy to manipulate investors into doubling their bets on a craps table with cold dice. They won't do it. The only way government could really fix any of it is through authoritarian action in the moment or moves to stabilize the financial sector during a boom, which translates into an imposed reduction in growth. Democratic nations won't stand for it.

For labor, it's more of the same. The big demand for labor in boom countries eventually overextends itself and dries up, creating shocks and disappointment. Labor gets devalued as investors stick to sure things, people rediscover thrift, and with the memory of waste in the back of their minds, don't trade as much for stupid crap that would only be bought by someone who doesn't really value their own wealth, thinking that it's endless. In other words, they grow up, and those with little or nothing of real value to contribute are exposed. In other words, equality begets inequality.

Thursday, December 5, 2013

Pope Francis: Part 2

Today, December 5, 2013, Nelson Mandela died. I have strangely little to say about this, except to note that his politics assaulted the status quo for the sake of utopian populist notions of freedom. But he also seems like a really nice guy. Come to think of it, he reminds me for all the world of Pope Francis.

Think about it: serious idealist comes into institutional power, preaches love and hope, is (mostly) beloved by the political left, and throws yet another wrench into the concept of legitimate hierarchy. I'm seeing a historical troika developing: Mandela, Pope Francis, and I'd also throw Mikhail Gorbachev in there, just so you know what's likely to happen to the institution unfortunate enough to have one of these guys take power.

Francis recently spoke out against capitalism, and boy, am I shocked. A clergyman with long-time experience in the ghetto hating inequitable distribution? Never would have seen THAT coming. Obama's already rolling with his ideas. How long before the wealth of the Vatican becomes a topic of conversation? And how long before the good pontiff starts giving it away?

Conservatives are not pleased with this new direction from His Holiness. Evidently, there is something more acrimonious to talk about than abortion and homosexuality, and for obvious reasons, questioning capitalism makes little sense to much of the establishment. We really have no option. Going from one group of self-interested people holding power - capitalists - to another group - politicians - is not solving anything, and this has been historically proven. At least with capitalism, things get produced. No other known system gets things done with any kind of reliability, unless you go back to more authoritarian systems, which people will not tolerate. Even in Christian thought, you need some form of your own strength to help the weak in the face of the selfish strong.

The Road To Hell...

Look, he's a pope. He's not an economist, and really, he's not even a philosopher. He's a sweet man, and guys like that have no business with power because they don't understand the basics of how it works. Capitalism, socialism, all these cultural systems describe methods of distributing authority over resources in such a way as to get things done. Speaking out against capitalism IS pointless, but the reason it's pointless is because nowhere in this game are we going to find a system that gives people what they want, which is more power. Poverty, Francis' pet peeve, is by definition a lack of economic power, and power is a zero-sum game. There's nothing Francis can do, nothing anyone can do, to create a system in which all rise in power, as opposed to simple possession of material goods and the supposed utility they provide. The closest he can come is to promote redistribution, which creates an expectation that people will get more from those in charge for doing less. Our system is already optimized to give people tons of crap. Whether or not they need more stuff is hardly questioned, and Francis looks blissfully unaware that people's "needs" are relative and impossible to satisfy.

A pope should understand that material wealth is not the problem with modern society, although this one doesn't seem to know it now. But hey, railing against the rich is making him popular. What can you do? None of this should surprise anyone.

Rush Limbaugh can call Pope Francis a Marxist without irony because Rush Limbaugh doesn't understand enough about Christianity to know that its fundamental philosophical foundations are the same foundations as Marxism, and always have been. Us Nietzscheans know how this works, but precious few other people do, especially conservatives.

Rush speaks to Christians over the airwaves; it might be news to some of those Christians, the ones who do not think through their moral principles, that Judeo-Christian ethics are based on subservience and self-sacrifice, and not the kind of individualism that modern libertarian-oriented conservatism promotes. Just a hundred years ago - a single century - some of the most well-known and beloved left-wing radicals in America were preachers, albeit Protestants. The most obvious example was William Jennings Bryan, who railed against the corporate classes, rousing farmers against bankers and pushing inflation through the Free Silver Movement. For most of Western history, religious organizations have been the political left.

In the case of Catholicism, that role has not been revolutionary so much as evolutionary; the church knew, and basic Judeo-Christian philosophy understands at the core, that inequality and some kind of relative deprivation are part of earthly existence. Thus, they focus on life after death, and redemption for the inevitable self-interest of being alive here. They cannot create heaven on Earth, although at various times, some popes have addressed inequality; Pope Leo XIII and Pope Pius XI wrote Rerum Novarum and the retrospective Quadragesimo Anno respectively, to address inequality and industrialism specifically. The Catholic solution looked an awful lot like the guild system that individualistic capitalism replaced. Pope Francis might intend to move in a similar direction, which isn't so bad, but really places blame for modern problems in the wrong place: on capitalist inequality. In contrast, Rerum Novarum and Quadragesimo Anno called out liberalism and socialism as false gods, and with good reason; the Enlightenment holds some of the blame.

This might be a missed opportunity for the church already. Were the pontiff to point out the problems of capitalism and suggest a new arrangement in which Catholicism played a greater role, then the entire exercise would be a sharp - albeit unlikely to work - institutional power play. But Francis, who's also toying with changing the church's principles regarding homosexuality and contraceptives as well, might be under the impression that liberating people will solve problems instead of making them worse, by encouraging policies that "liberate" people from poverty, like redistribution. Francis is a true believer, not so much in the fundamentals of his religion - this is, after all, a man who called proselytizing "solemn nonsense" - but in the people; Mandela and Gorbachev would be pleased, but institutional order would be in trouble.

The "solemn nonsense" article is important to understanding what he's trying to do. Francis' idea of attracting people to the church is to be more giving and more pure in morality. He wants to, in essence, inspire people to be Catholic by selling them the faith, by creating an image of goodness that will draw people in by their natural inclination to the good and the Godly, by being the brand-name house of love, kindness, and sacrifice. What a vision, this species that is attracted to rigor and discipline out of love.

It's beatific, it's sublime, and it's completely fucking ridiculous. There are large portions of Christian thought that I find ludicrous anyway, but the degree of faith needed to look at the human species and decide that the problem is that stupid people don't have enough agency, and that people living in an individualistic culture want to do more in exchange for less, hoping for metaphysical grace in the afterlife in this secular age, truly staggers my mind. Religion needs cultural and institutional legitimacy - maybe even some mildly coercive proselytizing - not hippie humanism carried out like you're trying to sell a club membership. The Protestants would have never fallen off if things worked that way.

If Francis held some genuine economic insight, he would be able to see that capitalism, the system of economic distribution by property rights and legal accountability, is not his enemy. It's just a system, and at the core of that system is people making decisions. The decisions are made according to cultural and personal values. If Francis wants to make a change, he will need people to be empowered to do something, and they will not have that power if they do not have rights to property, and responsibilities to go along with those rights. The way he talks, he encourages socialism by default, simply because it isn't capitalism, but socialism is enforced redistribution, not voluntary charity, and the meaning of charity dies when options disappear.

But still, he's such a nice guy. Once again, he's a great PR pope; you can see why people like him, especially certain people who are looking to have their worldview validated. I agree that the financial and material elements of the world should matter less than the relationships, than the cultural and moral elements of society, but Francis isn't making things better, he's making them worse. He's empowering fools. I want to like the guy, but... but...