pseudos etumos-logos

Wherein I pretend to dabble in the dark arts of etymology, I tend to discover inner meaning when there really isn't any. For example, a common slur against Iranian Jews is to stereotype their frugality. Hence, the term parsimony has special meaning to me as it may be broken down to the [false] roots 'parsi' + 'mony', 'Parsi' being the Hebrew word for "Persian".

Another such example would be to relate the word "Hasidic", which in its original Hebrew sense did not depict a Jew wearing a funky hat, curly sidelocks and a black frock. Instead, in Mishnaic terms it referred to a person who refrained from the pleasures of the world, choosing to live the most basic, ascetic life.

Where am I going with this? Well I wanted to devise an explanation for the division of man-made law into two categories:

1) common law
2) private law

The difference between the two is lies in it's origination. I reckon that the typical origination of common law was a spontaneous arrangement of acceptable, universalized principles which civilized society could easily agree to, such as prohibition against murder, enslavement and robbery. These are such prohibitive laws that from the viewpoint of the individual are obvious (since the prohibited action is clearly harmful to another party), and need not to be instilled for one to be aware of them (and I stop short of referring to these as 'natural laws'.)

Private law, or positive law on the other hand, is comprised of laws which are many times non-obvious, and therefore to be known must be learned (although one will be found guilty in unknowing transgression, since ignorance of the law is not an excuse.) The law's prohibited action might be seemingly or truly harmless, and one might be found guilty in the nebulous sense of committing a "crime against society". These laws, even if well-intentioned, will favor the interests of a private few, required active legislation to define them, coercion to gain their employ, and in effect lead to the breakdown of, and de-civilize society.

R.A.W. (and R.S.) said it squarely, or rather, Hagbard Celine did:

PRIVILEGE: From the latin privi, private, and lege, law. An advantage granted by the State and protected by its powers of coercion. A law for private benefit.

With this historical background, we can better grasp the typical hurdle often encountered by many an anarchist in the conflation of these two types of law. It is the difference between the two law types that anarchists object to when they object to rulers, but not rules.

What anarchists may or may not realize, privilege-private laws are those "rules" which beneath the print are just rulers disguising themselves in the rubric of rules in order to demand obedience and/or enslavement. These pseudo rules do not arise from conflict-reducing norms, and in fact create more conflict.

Private laws are those which anarchists are most confident will not arise in a market-anarchy, whilst the common law they hope will be rigorously obeyed, whether out of a sense of common decency (in my belief), or because of an expectation that the market institutions will have a much better replacement to the state's pathetically useless enforcement agencies.

impromptu thoughts

In the never-ending debate of nature vs. nurture; doesn't the latter approach run into a regression problem? What I mean is that if we consider a man's behavior to be the product of the inputs of his social environment, where did the social environment originate those inputs?

quixotic exotics

Catallarchy commenter Sam writes in regards to so-called 'exotic' goods:

"This is an issue for semantics only. A good is not merely a physical commodity, but a commodity acquired for the purpose of providing satisfaction to the consumer. If “$20k Rolls-Royce” and “$60k Rolls-Royce” provide different levels of satisfaction, then they are, in fact, different goods."

From a March 16th 2006 email to Professor Emeritus Walter Block,

"My thoughts about the phenomenon of veblen and giffen goods are such and I would like your comment. In economics, goods can be said to be homogeneous if the units supply the same exact service. If there is any differentiation, even if but a psychological differentiation (such as ice in the winter being a different good than ice in the summer), under the scope of economics they are considered to be two different goods.

So too, "goods" as regarded by economics should not include special categories for either veblen or geffen goods, because the goods in question (either a veblen status-good, or a giffen substitute-good) have essentially transformed into another type of good providing a different array of services. There is nothing special about either of these to qualify for an "exotic good" category, as the theory only gives an explanation why the good transformation should occur.

Any child could come up with examples of goods which transform into other goods and provide a sound explanation; for example, a fur coat in the winter and summer, a pastrami sandwich before and after eating a filling meal, popcorn during a movie and afterwards, a discount coupon before and after making a purchase, etc.

If this is so, would it be correct to ignore such so-called exotic goods, despite the mainstream acceptance of these concepts?"

Sadly enough, he never responded to me on this particular point.

Economics 2.0

[Crossposted to the Ludwig von Mises Blog.]

Can the Future Do Without Economic Logic?

Flying cars and little green men aside, many science fiction writers have shown an uncanny ability to predict and "foresee" the future.[1]

Yet, for all their prophetic accomplishments surrounding the development of future technologies, many fail to grasp the economic laws — the catallactics — that have remained unchanged for thousands of years.

Here is a quotation to get our discussion off the ground:

"Capitalism doesn't have a lot to say about workers whose skills are obsolete, other than that they should invest wisely while they're earning and maybe retrain: but just knowing how to invest in Economics 2.0 is beyond an unaugmented human. You can't retrain as a seagull, can you, and it's quite as hard to retool for Economics 2.0." — Charles Stross, Accelerando

Hard science fiction author, Charles Stross published a novel last year entitled Accelerando that tackled the issue of "the Singularity" and its rippling effects throughout society.[2][3]

Initially taking place around 2010, the reader follows the lead character — Manfred Macx — a computer nerd turned globe trotter whose modus operandi is said to be altruism.[4] He bills himself as a venture altruist, building and seeding productive ideas in exchange for mere reputation points.[5]

Ever the second-hander intellectual mountebank, Stross manages to mangle a bevy of technical and economic gobbledygook and shoehorn it into an exponentially spiraling plotline.[6]

However, Stross for all his valiant efforts falls short of delivering a futurist economics that is not subject to the economic principles we know today.

Russia has been back under the thumb of the apparatchiks for fifteen years now, its brief flirtation with anarchocapitalism replaced by Brezhnevite dirigisme and Putinesque puritanism, and it's no surprise that the wall's crumbling — but it looks like they haven't learned anything from the current woes afflicting the United States. The neocommies still think in terms of dollars and paranoia. Manfred is so angry that he wants to make someone rich, just to thumb his nose at the would-be defector: See! You get ahead by giving! Get with the program! Only the generous survive! But the KGB won't get the message. He's dealt with old-time commie weak-AIs before, minds raised on Marxist dialectic and Austrian School economics: They're so thoroughly hypnotized by the short-term victory of global capitalism that they can't surf the new paradigm, look to the longer term.

While some self-professed Marxists have allegedly embraced Austrianism — and vice versa — one wonders exactly how to synthesize the Marxist Labor Theory of Value with its polar opposite subjective theory as enshrined by the Austrian School.[7][8] This fact is punctuated best by Das Capital, in which Marx embraces historical materialism as the de facto epistemology to explain how and why historical events occur, in part, through the now-classical bourgeois-versus-proletariat class struggle.

In direct contrast is the Austrian School's a priori science approach, called praxeology.[9] Its foundation was laid out by Ludwig von Mises's axiom of human action or purposeful behavior. Society is a product of the human urge to remove uneasiness and dissatisfaction as far as possible; it is not a product of social classes, political hierarchies, and various other synthetic structures.

The Calculation Debate 2.0

While introducing the decade of 2070 A.D., Accelerando's narrator notes:

The last great transglobal trade empire, run from the arcologies of Hong Kong, has collapsed along with capitalism, rendered obsolete by a bunch of superior deterministic resource allocation algorithms collectively known as Economics 2.0.

It is these algorithms that Manfred earlier sold to an Italian politician, as a means to objectively calculate prices in a command economy. The mechanics of such equations are never fully fleshed out, leaving the reader to wonder exactly how a third party can, in some manner, come to such a measure of the multitudinous subjective values and preferences that individuals intrinsically have towards goods and services.

These "superior resource allocation algorithms" have been conjectured among numerous economists over the past century as it has played a central role in the socialist calculation debate. And while political scientists and technocrats continually busy themselves with tweaking the economic "black box" with various inputs, they fail to grasp how prices arise.[10]

Unfortunately for Stross, the future holds no deus ex machina in store to rescue this storyline, because a finite set of supercomputers cannot encompass a problem set containing infinite sets of possibilities. In this respect, the idealized command economy is a mathematical impossibility.[11]

Misplaced Energies

At one point in the story Macx's French mistress broadcasts news that Macx is in town:

"Oh, and he's promised to invent three new paradigm shifts before breakfast every day, starting with a way to bring about the creation of Really Existing Communism by building a state central planning apparatus that interfaces perfectly with external market systems and somehow manages to algorithmically outperform the Monte Carlo free-for-all of market economics, solving the calculation problem. Just because he can, because hacking economics is fun, and he wants to hear the screams from the Chicago School."

In this passage Stross now makes the error of "solving" Mises's calculation problem with the band-aid solution of copying consumer goods prices from a market system and transplanting them into the command economy. The use of this technique only affirms Mises's position, and is hardly a novel solution considering that Soviet planners were regularly thumbing through Sears catalogs for their coefficients.[12]

But we can still make lemonade out of this sucker — in theory we would have no issue per se with the argument that a super[-human] intelligence could drive entrepreneurial activity, and make smarter choices than a mere human opportunity exploiter. This is where the present and future can possibly diverge: can a two-state computational engine ever approximate human intelligence?[13]

Bursting Bubbles

While discussing what to do with a guest in their spaceship, several characters meander off the deep end:

The orang-utan explains: "Economics 2.0 is more efficient than any human-designed resource allocation schema. Expect a market bubble and crash within twelve hours."

Stross is guilty here of the mainstream economic error of cum hoc ergo propter hoc, by attributing the phenomenon of the business cycle to the emergence of capital markets in the industrial revolution. Under such mistaken impressions, it would be then quite natural for him to assume that an immense acceleration of the market process would also speed up the rate of market boom and bust cycle, although never explaining how or why it occurred in the first place.

Contrary to the mainstream, the Austrian Business Cycle Theory posits that cycles are exogenous to the market, a creature wholly belonging to the governments manipulation of the money supply, which, by artificially lowering the rate of interest, misrepresents the general level of time preference and ultimately misleads entrepreneurs en masse into malinvestment of the capital stock in sub-marginal pursuits.[14]

In contrast to the tenets of the neo-classical error, the condition of a free market would tend toward the evenly rotating economy (ERE), although never achieving equilibrium, as the minor perturbations mirror the transient value preferences on the market.[15] Under such conditions, Stross is incorrect to think that ratcheting up the intelligence and computational speed of the market would have a bearing on the amplitude, rather than only the frequency of misallocation.

However a simpler question may be posed to Stross: if "Economics 2.0" is more efficient than human-based pricing and has perfected an all-encompassing algorithm that allocates resources with near-absolute precision, how can capital malinvestment ever occur?

What is a reputation worth, anyway?

One of the most intriguing concepts found in the novel is that of "reputation markets."[16] While Stross also does not deign to explain in detail how this concept would function, one can make some guesses, although none of the interpretations seem to add up to anything useful or novel.[17]

Apparently Stross imagines that reputations will supplant the usage of currency and markets in a post-scarcity world as one is lead to believe from passages such as the following:

His reputation is up two percent for no obvious reason today, he notices: Odd, that. When he pokes at it he discovers that everybody's reputation – everybody, that is, who has a publicly traded reputation – is up a bit. It's as if the distributed Internet reputation servers are feeling bullish about integrity. Maybe there's a global honesty bubble forming.

… She doesn't approve of Manfred's jetting around the world on free airline passes, making strangers rich, somehow never needing money. She can see his listing on the reputation servers, hovering about thirty points above IBM: All the metrics of integrity, effectiveness and goodwill value him above even that most fundamentalist of open-source computer companies.

While we can only guess at what Stross meant by reputation markets, there are only the two possibilities: either it is a commodity-backed market, or not.

The problem with the former scenario is two-fold. First, because we are supposedly dealing with a post-scarcity world, the concept of commodity-trading is absurd as would be the trading of air or ocean water in our present world. Goods that are in superabundance are not subject to the study of praxeology, and certainly not within the scope of catallactics.

It is clear, though, that the world that Stross has created cannot be a post-scarcity world, if one still has to exchange in order to acquire the use of goods and services. The exchange of a valued reputation sounds interesting, but is quite problematic as will be explained momentarily.

In the latter scenario, if we posit that reputation markets are not commodity-backed, (and ignoring for a moment his apparent confusion over what comprises a post-scarcity world), all Stross has managed to do is recreate the concept of money substitutes, with the nexus of reputation markets to facilitate the exchange of this currency.[18]

In both these scenarios then, the objective exchange value of this money or money substitute comes into question without the benefit of the regression theorem to explain its present monetary valuation by the economic actors.

There are other fundamental questions to be asked about a reputation-based currency, most notably, how are reputation monetary units quantified or graded, and who or what intelligence will determine that?[19]

One can make the case, however, that although "reputs" (the story's marketable reputation units) may presently hold no objective exchange value (as they are essentially mere data patterns stored on a server) they may still hold monetary value, if and only if they once held objective exchange value.[20][21]

As intriguing as the technological wizardry within the story may be, the plot is unfortunately riddled with economic misconceptions and non sequiturs.

---

Tim Swanson is a graduate student at Texas A&M University. Send him mail. See his archive. Isaac Bergman is a real-estate developer in New York City. Send him mail. Comment on the blog.

Notes

[1] For instance, from Arthur C. Clarke's imagination sprang the notion of placing communication satellites into geosynchronous orbit. And Gene Roddenberry was one of the first individuals to envisage an all-in-one handheld device, capable of measuring, communicating, and storing information.

[2] Accelerando can be viewed online for free at www.accelerando.org.

[3] While somewhat tangential, Charles Stross operates a Wiki to further explore and explain many of the ideas discussed in Accelerando. Of particular interest is his critique of libertarianism, in which he simply links to Mike Huben's smorgasbord of pro-statist arguments.

[4] The nomadic and quasi-Bohemian lifestyle that Macx lives has been described as a "serial entrepreneur"; however it is arguably closer to the life and times of grey hat hackers such as Adrian Lamo. These individuals attempt to highlight security vulnerabilities at companies, while having a credo of operating for little or no personal gain. In the story, Macx's character conveniently is able to side-step these economic uncertainties through the generosity of third-parties (e.g., "a grateful multinational consumer protection group" paid for his hotel visits). Note: one argument surrounding individuals such as Lamo is that they are, in fact, attempting to gain publicity in order to market themselves for monetary contracts.

[5] This is reminiscent of the classical argument that all monetary systems should be scrapped and replaced with a system of credits for hours of labor, as determined by the rate of a person laboring for an hour with a shovel. Not only is this average unrealistic but it also ignores the dissimilar, heterogeneous abilities and productive levels each individual is capable of. See also "labor notes" and the Cincinnati Time Store. Reading "Harrison Bergeron" by Kurt Vonnegut may also be instructive.

[6] Apropos Peter Klein, while we enjoy an entertaining storyline, we can only suspend our disbelief so far.

[7] See also Heterodox economics and Heterodox traditions.

[8] The academic discourse comparing the LTV and STV is voluminous. For instance, see chapter 5 in "Epistemological Problems of Economics" by Ludwig von Mises. For a recent layman's explanation of the STV see "Artwork and the Subjective Theory of Value" by Yumi Kim.

[9] See, "Praxeology: The Methodology of Austrian Economics" by Murray N. Rothbard, "Praxeology and Understanding" by G.A. Selgin, and Human Action by Ludwig von Mises.

[10] Prices themselves are not fixed points along a line, but rather temporally subjective valuations of goods and services. For more discussion on this paradigm of "perfect information" and what a price "should be" see "Knowledge vs. Calculation" from Stephan Kinsella.

[11] See Robert P. Murphy's "Cantor's Diagonal Argument: An Extension to the Socialist Calculation Debate" in The Quarterly Journal of Austrian Economics, Summer 2006, 9(2), pp. 3-11 (available in PDF).

[12] For the Sear's connection see, here. See also Gennady Gerasimov's joke of sparing the markets of New Zealand.

[13] Regarding the centralization of knowledge and prices, see: "Socialism: A Property or Knowledge Problem?" by Hans-Hermann Hoppe and "Why a Socialist Economy is "Impossible"" by Joseph T. Salerno. See also "Knowledge vs. Calculation" from Stephan Kinsella.

[14] For more discussion on the ABCT see, The Austrian Theory of the Trade Cycle compiled by Richard M. Ebeling, Money, Bank Credit, And Economic Cycles by Jesús Huerta de Soto, and "Expectations and Austrian Cycle Theory" by Frank Shostak.

[15] For more on the ERE see, chapter 14 in Human Action by Ludwig von Mises, and the Study Guide to Man, Economy, and State from Robert P. Murphy.

[16] This criticism can also be leveled towards the Whuffie system used in "Down in Out in the Magic Kingdom" by Cory Doctrow.

[17] Rating, risk analysis and credit scoring companies exist today; based upon a plethora of metrics they will rate the value of companies, bonds, etc. However these "reputation" companies are providing a service good, not a currency. Incidentally, both Standard & Poor's and Moody's have been erroneously sued in the past for providing debt ratings of government solvency. Stock market's themselves are institutions that — when free of regulation — can also accurately reflect and rate the health of organizations.

[18] One seemingly extraneous example that illustrates the difference between the hypothesized reputation currency and a money or money substitute system is Frequent Flier miles. These miles can arguably be called money, since they have monetary exchange value in which people acquire and maintain "cash" balances for future consumption or exchange. In the case of frequent flyer miles, the miles are initially valued for their objective exchange value, because they represents a claim on a specific good: transportation via airplane. However the reputation currency has no such explanation of any historical objective use balance, and is unlikely, if not entirely impossible, to become valued for its monetary function. See, The Theory of Money and Credit by Ludwig von Mises.

[19] "Reputs" are to reputation scales what 'utils' are to cardinal value scales. Furthermore, how exactly do you cash in a few points of reputation? Are they redeemable for any material object? As long as the reputation system is an exchange system, it is subject to economic laws. And assuming that Stross's reputation system somehow solves the "decider" problem, a number of other issues remain unresolved. For instance, how many "points" can each person use throughout the day? Do you get to give someone a point for every time someone does something? Every 5 seconds? Once an hour? Can you remove your vote? Is a point for yawning weighted as much as shooting a bulls-eye in archery? Ad nauseam.

[20] This aggregation mystery belies subjective indices such as BCS football rankings, college rankings, and even GDP. "What is up with GDP," by Frank Shostak, articulates perhaps the clearest account of why the GDP framework is fallacious and misleading.

[21] Regarding the present valuation of money, Ludwig von Mises writes in The Theory of Money and Credit:

Before an economic good begins to function as money it must already possess exchange value based on some other cause than its monetary function. But money that already functions as such may remain valuable even when the original source of its exchange value has ceased to exist. Its value then is based entirely on its function as common medium of exchange.

NYC to Plunder an Extra $1.9B in 2007

The city was helped by record Wall Street profits and a strong market for commercial real estate.

Reality Decoded By: Iceberg
Published: November 29, 2006 - 2:26 pm

New York City will have a record surplus of $1.9 billion in fiscal 2007, helped by [the] record [pillaging of] Wall Street profits and a strong [boom] market for commercial real estate, according to a report released Wednesday by state thug Comptroller Alan Hevesi.

"New York City is reaping the benefits of a [successful raid upon a] growing economy and [un]sound management [despite the anti-market] decisions made by the mayor and City Council over the past five years," said Mr. Hevesi in his report, adding that the surplus will cut the city's projected budget gap to $510 million from $3.8 billion [making people wonder how $3.8B - $1.9B is equal to $510 million!]

Real article found here (subscribers only)

Market Solutions

DECEMBER 06, 2006 -- New Brighton, Minnesota -- Spartan Protection Services, a Robbinsdale, Minn.-based property protection company, has instituted a dress code for residents of the Timbercrest Apartments, a 68-unit complex located here, in an effort to cut the number of calls the local police department receives regarding gang-related crime at the distressed property. Link to full article

The market may originate some weird ideas, but if this works expect to see it happen elsewhere.

And of course if this does work, some intrusive busybody will criminalize this form of discrimination.

the pen is mightier than the reality

To those within the halls of government power and her intellectual whores within the state-subsidized ivory towers, I hereby beseech your help in removing the difficulties that make life nasty, brutish, short, and generally uneasy.

Just like by the stroke of pen you create wealth, affordable homes, good paying jobs, eliminate poverty and hunger, et. al., I humbly request that you grant us some relatively easier boons.

First, as you may already know, NYC has a serious vermin problem. Please, if you would only pick up your quill and draft a law to ban all forms of vermin within city limits all our problems would go away by fiat, and they wouldn't dare disobey your holy writ.

Also, so many people die from cancers and vascular ailments- can't you ban those horrible illnesses too? It would be so much simpler than just banning the use of trans-fats as NYC just has, and would resolve our health problems immediately. If we just ban obesity, we will witness a transformation as suddenly our cities will feel roomier than before, the train less crowded, the streets easier to navigate, and everyone will trade in their cavernous SUV for some smaller hybrid car.

While you're at it, can you just ban all death, you know, like declare a moratorium on all forms of dying, which we all know does serious economic harm, tears families apart in bitter inheritance lawsuits, and is the greatest cause of involuntary widowhood. This will also greatly help raise the general living standards because people will no longer invest in life or health insurance and would be able to put that money to better, higher uses.

Why stop there? Let's ban divorces, which tie up our family court resources with puerile "he said, she said" controversy. If we ban childish bad behavior, our schools will be able to do their jobs and teach our children properly. We might enact a similar law which will make our students smarter by making it a crime to get anything less than an A+ on a test.

Let's join together to ban Co2-spewing volcanoes so we can end the rapid climate change that threatens to wreck our planet and drown our cities. At the same time, we should ban the ocean from tidal waves, and the winds from blowing devastating hurricanes, monsoons, and tornadoes.

I know that it seems might a lot to ask, but if all it costs is some ink and paper, couldn't you just conjure those up too?