A Special Anniversary and My Pending Recovery

It's not everyday that you get to have a conversation or two with the retired Professor Israel Kirzner (-- that's Rabbi Kirzner to me anyways!) on the subject of Austrian economics and its syntheses with the Torah's ethical codes.

For the benefit of the handful of readers who don't know my religious background, and haven't picked it up from here, I'm an orthodox Jew. (No, that's not the same thing as Hasidic.) I unfortunately do not have the benefit of a college education, and so the process of my notions being challenged from multitudes of sources was limited to the ideas I was exposed to in the books I have read and the websites which I visit.

Over the last couple of years though, I've been examining and re-examining the ethical principles by which I desire to lead my life. Under the circumstances of being brought up in a orthodox Jewish home, and attending yeshivas both near home and abroad for the most part of my life, I have been instilled with a plethora of Jewish ideas and values.

Naturally then, I've long considered myself a conservative/republican, and usually falling lockstep with the other Jewish "group-think" wherever the arguments of a social issue were drawn.

But about two years ago the mind barriers started dropping, as I began to question the rhetoric I thought was gospel. Maybe it was in the voucher issue, as this is a very sensitive one to orthodox Jews to whom public schooling their children is the equivalent sending them to Auschwitz (some might say it's even worse than a death camp since a public school education will destroy the individual's "Olam Haba", literally his "world to come", but I digress.) It was within the voucher issue I encountered voices who argued that even if we are responsible to educate our children (and pay the taxes which goes toward education), why does that require the actual bricks-and-mortar approach of building public schools? Instead, they argue, the government could more easily just give monetary support towards the basic education of children wherever they choose to attend.

It was about then when I stumbled upon the magnum opus of one Allisa Rosenbaum, better known by her adopted name, Ayn Rand. And it wasn't before long that I read most her other books and essays, and became familiar with the Objectivist philosophy and in a less minor way the economic theory which was compatible with her ethical system.

The question then became, how do I synthesize the worldview espoused by what I liked about Objectivism with my existing religious beliefs? That issue and Rand's irrational (ha ha!) hatred of Immanuel Kant on a personal level led me to do research on her, her philosophy, the institute, its offshoots, and what their critics had to say about all of them.

It was a few months later when I came across an amusing and interesting article on Slashdot titled "The Monetary Economics of Thurston Howell III" which later directed my attention to the Ludwig Von Mises website. I don't recall the topic of the other daily articles I perused, but I remember being fairly impressed and immediately sensed a familiarity, as though I was on ideological turf I could call home.

It's been exactly one year since I've read that article, and metamorphosed into an anarchocapitalist, one who despises the use of force and coercion, and it's foremost monopolist, the state. Over the year I have learned plenty about Austrian economics and its corresponding libertarian ethics which made me look yet another time into my actions, ideals and notions, and those of others around me in society.

But of course in the end, some nagging questions remain -- how do I fit what I understand about libertarian ethics and Austrian economics into what I know from the Torah? And so I started writing a list of questions to have sorted out such as: "What is the Torah's perspective on the natural state of man?" as I have been grappling with Hobbes's, Locke's and Rousseu's arguments (Hobbes's interpretation of the biblical account of the original sin is not consistent with my understanding of the Torah)

I had a decent list of questions, now who to turn to? It's discouraging, but I feel as though everyone around me are domesticated statists, never to question the status quo.

I was then of luck to learn that Prof./Rabbi Kirzner lives but a short distance from my home. Gathering my courage, I cold-called him at home on Monday and quickly related my concerns. I do admit that he sounded baffled to learn that a Jewish kid who went to the Ivy League of yeshivas would actually be interested in the application of Austrian economics, and not enrolled in some kollel.

Rabbi Kirzner then amicably agreed to have a look at my notes, and perhaps discuss the issues with me afterwards. Later that day I passed his house and delivered my notes as per his instructions.

Today, the anniversary of my introduction to Austrian economics, he gave me a call in the afternoon. We exchanged pleasantries, and again he asked me about my background. He then related that he personally never adopted the rothbardian libertarian ethic, and spoke briefly about his teacher, Von Mises. He said he did enjoy seeing the austriolibertarian ideas being contrasted with the Torah's concepts, but to him it was clear that the Talmud accepted the concept of government, and never questioned that.

I mentioned that the only governmental system explicitly accepted by the Talmud is monarchy, and no where does it give specific support to either a democracy or republic, something which I told him that Professor Hans-Hermann Hoppe likes to argue is superior and morally acceptable (disclaimer: I have not read "Democracy: The God that Failed" but I believe this is the gist of his position.)

He then asked me how I rationalize submitting to Jewish law if I hold anarchistic libertarian position. My answer to him was that my understanding of natural law doesn't necessarily interpose with the application of super-natural law; sort of like a pacifist not necessarily objecting to the non-aggression principle.

When we finally ran out of conversational steam, he referred me to two Jewish thinkers who have combined economics and ethics with those of the Torah; one of those individuals is Dr. Meir Tamari (whose books are available on Amazon, but the reviews I read of one of them isn't very encouraging.) I then thanked him for his time and help, and exchanged goodbyes with promises to call if I had any more questions.

Well after all that, I was elated for the remainder of the day and that's why I'm still recovering!

Neologist's Fresh Coinage

Get them while they're still hard

humantropy |(h)yoō'məntrəpē|
noun Psychology

• A dismal outlook on the state of human condition and the expectation for further entropic degradation ultimately leading to chaos in all human relationships.

• The state marked by which one is suspicious of all others, and lives in a fearful, Orwellian-type world identified with statements to the like of: "the free market doesn't work because people are greedy and if you base a society on unbridled greed, health and happiness will not be the outcome"
  

• The condition onset by disciples of the Aneristic Principle, whom suffering this illusion cannot appreciate the erisian lessons of discordianism, and will therefore be fearful from any activity not strictly regulated in the illusory cosmos enforced under government fiat.

ORIGIN human: late Middle English humaine, from Old French humain(e), from Latin humanus, from homo ‘man, human being.’
+ entropy: mid 19th cent.: from en- 2 [inside] + Greek tropē ‘transformation.’

USAGE: A victim of the pernicious humantropy meme suspects and distrusts everyone around him in society, leaving the victim with no true friends, and many questionable alliances.


sorostitute |sōräs'təˌt(y)oōt|
noun

• An addled beneficiary of mercantilism and political rent extraction, who whores his celebrite and prestige upon the admiration of his perceived wisdom to the social cause du jour, but usually to denounce economic capitalism.

ORIGIN soros: mid 19th cent.: modern Latin, from Greek sōros ‘heap’ describing the hoard of multibillionaire stock and commodities speculator George Soros
+ prostitute: mid 16th cent.(as a verb): from Latin prostitut- ‘exposed publicly, offered for sale,’ from the verb prostituere, from pro- ‘before’ + statuere ‘set up, place.’

USAGE: George Soros, Ted Turner, Donald Trump and Warren Buffet are often times the darling sorostitutes of the muckrakering media, used solely to lend credence to their anti-capitalistic stance with the prestige and support of those whom gained most from anything but a capitalistic system.

Naive Muckrakers

In response to this "Worst. Landlord. Ever." post on Gothamist and its accompanying article in the NY Daily News, I felt compelled to write this little diatribe to sooth my temper. And so I begin:

Hmm... it sounds like to me that overzealous government regulation is the problem in both these stories, not evil landlords. Allow me to explain.

In the first story, Mr. Landau was denied the full usage of his property because of government fiat, and thus to flirt those inane rules, he had to make use of unlicensed workers who care not about obtaining permits. Licensed plumbers have their livelihood on the line, so they won't touch it, or not before being heavily bribed/paid.

Had government minded its own business in regard to determining the optimal occupancy of said housing, Mr. Landau could have hired the services of either plumber, and the prices would have been more equitable between the licensed and unlicensed. This does not completely absolve Mr. Landau of his guilt, however the government must own up to its fair share for creating the situation in the first place.

In the second story, just for starters, Gothamist left out the statement of Mr. Kosman's lawyer who said that his client was overwhelmed from trying to repair a building where tenants aren't paying rent.

Again, due to moronic rent control/stabilization laws, landlords have no incentive to make repairs or to upkeep their buildings. In fact, the incentive system here has been turned upside-down.

Just imagine you own a building, in which no one pays market rents, is it in your best interest to spend as much as you can on maintaining it, and keeping your tenants happy -- or as I correctly suspect, you the landlord will not go out of your way, and will only perform the bare legal minimum required since you would rather have the tenants vacate, so that you may eventually obtain market rents.

Thought so.

Again, I'm not looking to praise either of these landlords for their ignoble activities; I'm just trying to point out that its only because of excessive government regulations which lead up to situations such as this. Had the market place been freer, landlords would be forced to compete on quality product.

Kelo is but the tip of the proverbial iceberg*

Now that my conspecifics (to borrow Vache Folle's endearing term for the unenlightened resident statists who control society) have been somewhat startled out of their quiescent stupor when it comes to all things "state", perhaps they will be more receptive to hear about, and hence be virulently opposed to an even less savory pronouncement as summed in this Yahoo! headline:

"Treasury Department Claims Power to Seize Gold, Silver--and Everything Else, GATA Says" (thanks to the mises.org blog for the heads-up)

Not that anti-statists of all stripes should be shocked to learn this; it's simply par for the statist course that in fact this law has been on the book for ages. As BKmarcus once sagely quipped:

What social contracts, implied consent, legal positivism (and probably most other statist positions) are masking is the statists' real core belief: eminent domain -- the State owns everything.

Linked beneath the Yahoo! article is a rather timid message from Chris Powell, the Secretary/Treasurer of GATA, in which he prostrates before the almighty state and kindly asks that the saintly congressmen repeal this bad piece of law.

Speaking of Kelo, did you hear that the city of New London, Conn. has sunk to a new low? They are now demanding tens of thousands in back rent from each of the victims of home theft. But hey, if my conspecifics are okay with the state owning the ultimate title to everything including life, set aside property, why should they be so alarmed?

I guess part and parcel of being anarchist-minded is the frustration of viewing societal conflicts without the detriment of horse-blinders, and I guess the truth really does hurt you. I humbly submit that I unfortunately agree with a rather angry sentiment expressed on a Catallarchy post which I suppose makes me more of a bolshe- than a menshe-libertarian. Not that it's a such a bad thing-- Vin Suprynowicz's Black Arrow makes this fantasy quite enticing.


* Coincidence or similarities of name are just that.

The Attack of the Killer Wal*Mart

From the I'm-not-suprised-to-hear-this-b.s. department

You can't make this shi... er, crap up.
According to this NY Post article (reg required, or use bugmenot to obtain one):

"In the latest move to scare away Wal-Mart, the City Council is on the verge of passing a law that will make ensure that all city grocers and some other companies pay for the health insurance of their employees.

"We believe there are about 12,000 individuals who will end up getting insurance," said the bill's prime sponsor Christine Quinn (D-Manhattan).

She said lawmakers also had their eyes on mega-stores like Wal-Mart, as well as grocers, that don't often provide insurance.

"If we were ever unlucky enough to have a Wal-Mart, they would be required to provide insurance," she said, adding that that however wasn't the genesis of the bill."

Somebody, please cue the scene of Godzilla physically destroying small businesses and setting financial ruin to hundreds of families.

The Insult of Hedonic Adjustments

On the subject of "Hedonic adjustments", the Austrian economists treatment usually revolves around the inherent fraud that these downward adjustments reflect upon the government's index of price-inflation. Not that I've read every single dissertation of course, but of late I have come across a few Mises and LewRockwell articles or blog posts, and especially by Messrs. Karlsson and Mueller.

One of the first points usually raised is that the Bureau of Labor Statistics engages in disingenuous behavior when conveniently choosing to emphasize the lower core index and leaving out the more volatile goods, or their inclusion when it will be more favorable to do so.

More importantly, the method of how the index is compiled is discussed. Mueller's article titled "The Illusion of Hedonics" clearly demonstrates that the calculation required for hedonic adjustments is impossible, and thus any attempt is really no better than anyone's guess. Karlsson writes "Because the state for this reason has a self-interest in underestimating inflation, it is clear that one should be sceptical [sic] towards the official numbers" and by example decries the housing price being calculated upon an "home owners equivalent rent", which therefore results that the index does not represent the higher cost of home ownership.

However, it seems to me that no one in particular takes issue with the implementation of hedonics being used to offset price inflation; it is but in the sloppy, inaccurate and especially political application of the adjustments in which they denounce it. So to borrow a cliche, if the Angel Gabriel came down and gave us the exact and objective index numbers, I'd suspect that these economists would be warmer to its use.

For example look at what Mueller states-

"However, how many technical improvements are being offered every day and there is no market for them?"

and later

"The consumer himself will judge to his best knowledge and preferences whether he likes the product or not. With respect to its price, he will decide to buy or to abstain."

On the corresponding Mises blog, Karlsson states-

"Regarding hedonics, it is not in principle wrong to take that into account as a better product could be seen as equivalent to more products."

Of course they are certainly correct to point out that the BLS most likely overstates the benefit that the consumer derives from the improvements, and thus the price inflation is potentially understated.

It is on this very point I wish to lay yet another criticism of the hedonic adjustment, based not from the consumers' point of view, but rather from that of the entrepreneur. The popularly maligned entrepreneur is the victim of unrealized theft when the BLS applies hedonic adjustments to the money prices of his improved consumer goods.

I do not claim to fully understand the methodology of the BLS prestidigitators, but I hope my forthcoming fabricated example will address my concern adequately.

Suppose the average 23" TV sells for $100 in 2003. Now we find that in 2004, the average 23" TV now includes a digital comb filter, and other improvements not found in the average 2003 model, but yet now is priced at $110. The BLS will now say that improvements X, Y and Z of the average TV in 2004 are worth some figure above the $100 in 2003, and therefore will wash the 10% price increase with the hedonic adjustment, and claim that the price inflation was significantly lower, neutral or even negative!

What I see happening here is that some entrepreneur went forward on spending his time, money, energy and ingenuity in order to offer the consumer more competitive bang for his TV buck. This probably involved the coordination of the many factors encountered in such areas as the R&D phase, market research and preparing marketing materials, the manufacturing process, labor relations, vendor negotiations, consumer advertising, etc.

Due to efficiencies the entrepreneur discovers and implements in these processes, his cost for producing a 2003-level model might be significantly lower than in the previous year, yet because one of the lower-order goods, suppose the plastic housing, now doubled in price due to general price inflation, he might only be able to deliver the final good at $95 MSRP versus the $90 which would have been possible sans price inflation.

Likewise, the 2004 model with many improvements, the entrepreneur was planning on delivering it for $100 MSRP, yet also due to price inflation, the market price is established at $110 for the average 2004 TV set.

In both cases, when offering either the old or newer technologies, the entrepreneur worked to bring better value to consumers. In both cases, price inflation ate away the consumers' potential savings, which would have appeared as lower market prices for either TV set. Savings that the entrepreneur would have brought them with his toils.

But all this is virtually transparent to the consumer. All they see is general price increases in the new items, and slight decreases in the older items. They don't realize that the newer technology could have been selling for a lower market price than the old technology used to.

This is why I find it fraudulent when the BLS compiles an index which utilizes the black-magic of hedonics to make price inflation less of a bitter pill. The BLS's adjustments does not recognize that entrepreneurs did the most to counter the Fed's counterfeiting efforts, and instead they attribute the increases to the improvements through questionable measures and call it a day.

The BLS thus hides the price inflation with the efforts of the entrepreneur. I like to think of this as theft, but in the least it is definitely an insult.

Brownstoner Remarks

Note: These remarks were made in response to this post on Brownstoner.com.

The blame for this latest housing craze, and its ugly results lays partially at the door of the Fed which is responsible for this "cheap" money phase and it's accompanying disasters.

The masters at the Fed are all Keynesians, and in order to forestall a much-needed minor recession to correct the reckless spending of the dotcom era, they pump the system with more money (by way of lowering the rates and by purchasing treasury notes) in order to boost even more consumer and government spending- which was the root cause of the recession in the first place!

So instead of letting the market ride out the brutal, but usually short term recession (which in fact is a healthy function of the market, since it weeds out the less-efficient investments which were unsound business proposals) the Fed policies delay the less minor recession, and in its place they add an unhealthy housing boom which was partially encouraged because when interest rates are so low:

A) it's actually pointless to hold onto savings which don't generate enough bank interest to offset the price inflation, so you might as well spend it today and worry about it tomorrow (ask anyone who took and ARM or interest-only loan how they plan on paying for it tomorrow)

B) it lowers the barrier of entry for developers to build projects, so that any Joe Sixpack who is not experienced now can join the "everyone is a developer" crowd.

The results of inexperienced developers flooding the market with "cheap" money leads to first-time projects which don't really make sense when the rates are higher. You've got architects whom are overwhelmed with the sheer volume of new projects, so that they can't really dedicate their time and energy to designing the best structures. Or maybe the developers don't really care much about aesthetics, because it doesn't make a difference when consumers are spending everything but their last 2 cents.

Reducing Men Into Beasts

Often whilst discussing the topic of [government-] free-markets regulated by the market participants alone, the interlocutor will make the claim that only bedlam and chaos would arise from the lack of government oversight of all market transactions.


I believe that this Pavlov's-dogmatic† assertion is conditioned into the layman two-fold; first by what passes for American History education in our schools, and second, by years of living within the framework of a regulating state.

It's the second point I would like to explore further.

I want to ask the reader to take a moment and imagine living on an remote island along with a small group of others, but with no communication to the outside world. Assuming that there is no elected leader, and everyone gets along, what percentage of any given sample of that population would you say are dishonest, or have no remorse over causing financial or bodily harm to others?

Now imagine that you lived on the island, and you found the lost property of another person, would you return it even if they would never be the wiser?

I know that I would. Call me naive, but I believe that most of the population are born naturally honest and overall good people. I'm willing though to admit that I can't speak for everyone, and that there exists a minute number of individuals who are born polar to natural law.

It was just a few years ago when I read Alan Greenspan's essay titled "The Assault on Integrity" featured in Ayn Rand's "Capitalism: The Unknown Ideal" which brought this humanistic insight to my attention, and which has been churning in the back of my mind ever since. (It's actually a very powerful piece, Greenspan's present day integrity not withstanding ;-) You may read this by clicking here: "The Assault on Integrity" and select the first link to page 118.)

In the essay, Greenspan explains:

"The hallmark of collectivists is their deep-rooted distrust of freedom and of the free-market processes; but it is their advocacy of so-called "consumer protection" that exposes the nature of their basic premises with particular clarity.

By preferring force and fear to incentive and reward as a means of human motivation, they confess their view of man as a mindless brute functioning on the range of the moment, whose actual self-interest lies in "flying-by-night" and making "quick-kills". They confess their ignorance of the role of intelligence in the production process, of the wide intellectual context and long-range vision required to maintain a modern industry. They confess their inability to grasp the crucial importance of the moral values which are the motive power of capitalism.

Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not of vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventive law, snooping bureaucrats, and the chronic goad of fear."

The essay straightforwardly demonstrates that this pessimistic view of humanity (i.e. claims such that "chaos will prevail absent of government regulation") and its accompanying regulatory implementation only begets further discordant tendencies in the realm of human relationships, nicely summed up in the common expressions- "dog-eat-dog world" and "watch your back".

The most valuable asset to an individual or business is their integrity, or good will. This seemingly trifle point is a big deal when the market is unhampered by regulations. As a motivating agent, it is by far the greatest incentive for people and businesses to provide the highest level of service and product. Regulations and punitive damages when instituted by third-parties, are too poor a substitute for the purpose of keeping businesses honest.

In fact, it lowers the bar for all competitors who produce, say for example, breakfast cereals. If the regulation stipulates that the advertised weight can be off by 5%, every business no longer has to compete on selling you the advertised weight, since the regulation set the bar to some minimum standard, the different producers can now "collude" to not give a private guarantee staked on their reputation, that their product is exactly what they claimed it to be. In essence, regulations reverse the incentive model with punitive disincentives, and hence encourage businesses to get away with as much as they legally can.

All this is of course is not without the help of the beguiled consumers, who innocently believe that only further government scrutiny and fear of punishment will keep the companies straight, and so they no longer rely on the reputation and integrity that good will would have provided sans regulations.

The layman thus loses his or her innocence, and always seeks to get ahead, perhaps even unethically, since if he or she doesn't, other unscrupulous individuals (just like himself) will ride roughshod over them.

This is why I laugh when people conditionally regard anarchism as chaos; a better definition of chaos cannot be found than in the replacement of integrity with government regulation, and unfortunately this humantropy™ self-perpetuates us into a snarling pack of nervous dogs‡.


†I lay stake to this pun
‡This one too.

Brilliantly Insane!

Those two words is all I have to say about Robert Shea's/Anton Wilson's "Illuminatus! Trilogy".



Oh, and Atlanta Hope's "Telemachus Sneezed" spoof of Ayn Rand's "Atlas Shrugged" was so warm-soda-squirting-from-my-nose-funny that I almost choked after reading that passage. (If you want to see it for yourself, click the book above, and search for the text "Taffy Rhinestone" to quickly skip to that passage, or if you have the book, open up to page 538, and start from the last paragraph.)

Many thanks for the tip!

Hail Eris!
All Hail Discordia!

*Upon later rumination, I would submit that the Illuminatus! Trilogy is composed one-part of Kurt Vonnegut's "Slaughterhouse Five" time-slipping, and two-parts Robert A. Heinlein's psychedelically-twisted "Stranger in a Strange Land" and individualist/anarchist "The Moon Is a Harsh Mistress". Yes, Joseph Heller's "Catch 22" predates Vonnegut, but Vonnegut's prose doesn't both annoy and amuse the reader, something I would say makes it a better fit.