Monday, October 11, 2010

Defending Gay Marriage by valuing Equality

Here's a video on marriage equality

As I see it, a person can come up with rather silly "discrimination" arguments. But just because they follow the same form doesn't mean they have any merit:

Pretend the following holds:

1. "Banning men from womens' restrooms does not discriminate against men because they still have the same right to use mens' restrooms as anyone else".


2. "Banning Mexicans from breathing air does not discriminate against Mexicans because they can still breathe water"

Clearly these two arguments have no relation to each other. Do we really have to choose between genocide and unisex restrooms?

But what about Gays who want to marry each other and have hot gay sex?

I post this because the concept of discrimination is problematic because we need to do two things:
1. Pick a well defined protected class
2. Have some standard of minimum harm

Instead of being generally frustrated, I'll give this one a shot using equality instead, something "easier" than discrimination. Its hard to precisely formulate what you mean when you say equality, and there will always be technical objections raised to arguments, even when these objections clearly come from a very cynical position within the debate.

Lets start with a simple definition of inequality (state of being unequal): Denying a thing to one person while it is provided to another. We can then define equality: if a situation is not one of inequality, it is a situation of equality. "Rights" are just a type of "thing" that can be equal or unequal. Now, you need to be talking about something that can be measured or else you can't apply this criterion at all. So I can't say that I'm equal to you unless we are comparing something, for instance the length of our toenails or right to trial by a jury of our peers.

You might start by arguing that two unmarried people have the right to consensually wed, regardless of genital type. Technically though, that isn't an argument for equality of the individual but equality of the pair. For me, this is a fine and dandy way of looking at it but I think it is somewhat unorthodox and in conflict with the fundamentally individual way we tend to look at rights.

So, what if we try to frame it as the rights of individuals? Here's how I see it:

Some Jerks say "Gays and straights have an equal right to marry because everyone has the right to marry a person of the opposite genitalia". However, this is like saying that F(A) = F(B) because F()=F(). If the function was not dependent on its inputs, that is to say you could determine F(X) without knowing if X=A or X=B, then yes it would be an equal standard, but of course it isn't.

Here's what the law says:
Men can marry women but not other men.
Women can marry men but not other women.
If I say "Who can person X marry" you can't answer yet, because you have to ask:
"Is person X a man or a woman?"

So at the very least, men and women do not have the same right to marry.
At this point we can't say that the situation is equal or unequal because I haven't also assumed that these two situations are of equal value. There is a nagging question though: Is the right to marry a man equal to the right to marry a woman?

Here's another argument that should shed some light on that point:
Suppose a racist southern town in the 1950s devised a means of discriminating against its black population. They pass an ordinance that reads:
White citizens may only use the public transit system that operates in the western half of the city.
Black citizens may only use the public transit system that operates in the eastern half of the city.

Even supposing that these two systems were perfectly equal, that the public transit usage rate was the same for whites and blacks, etc., discrimination still occurs. Whites who live, work, or play on the eastern half of the city would suffer an equal harm to the blacks who live, work, or play on the western half of the city. The discrimination still exists, regardless of whether it exists in an equal pair with some other discrimination! This situation could be a huge inconvenience for both blacks and whites, and it is clearly wrong.

Returning to the issue of Gay Marriage: Just as in the above example, some men are harmed by not being allowed to marry other men; and some women are harmed by not being allowed to marry other women. Gays aren't the *only* group harmed here, for instance two male friends might wish to get married just to get better financial aid status. But gays are definitely the most harmed group.

How can this be put into words as an explicit "helper" principle for equality? Doing so is always dangerous. I like this one (flawed though it is):

"Inequality under a given criterion between any two groups is unjust and can only be tolerated for the purpose of promoting equality under a higher criterion, and only when this is the best proven method"

Of course, a situation doesn't have to be unequal to be wrong. Imagine if there was an 11th commandment: "Thou shalt not use insulin". How would diabetics feel? They are being treated equally, right?

It is no secret that America continues to treat gays as second class citizens for reasons that have nothing to do with logic.

Tuesday, June 22, 2010

Unpleasant questions, Migration, Wealth, Secession, and the Common Good

Think out loud last week was about immigration rules in America, particularly the controversy surrounding Arizona's immigration law. As I lay in bed listening, I got to thinking about the underlying policy of immigration and emigration, the limits of liberal education, and how the many smaller issues that came to light throughout the discussion linked back to the philosophy that our Nation's laws are ostensibly based on. Although everyone agreed that reform was needed, there were essentially two visions of what the reform should be. One group put forward rather persuasive arguments that the large influx of new immigrants was undermining the bargaining power of workers in America and by the numbers this influx can account for all of the unemployment in America today. The other group essentially argued that we are all immigrants and that it is wrong to separate out the immigrants of yesterday from the immigrants of today. These arguments aren't mutually exclusive, and neither side really argued against what the other group said. It seemed that the commentators on each side approached a dark space within the rhetoric, a collection of unutterable assumptions underlying the worldview of the opposition, and chose to remain safely in the light rather than venture into new, dangerous territory.

Without dwelling on the implications of this behavior on the theory of progress through dialectic, this debate highlighted a clear deficiency in the liberal educational experience. Although the typical collegiate is bombarded with a few ideas from a smattering of philosophers and given many tools for justifying whatever opinion he or she might personally fancy, there is little effort made to confront the ideas of the student in a way that highlights systematic inadequacy and encourages the synthesis of new ideas and structured application of theory. Instead, the individual finds himself with many different ideas at his disposal that are mere instruments of justification, rendering the ideas of philosophy nothing more than tools to be used ad hoc to justify whatever decision the student fancies. In this way, the liberal experience functions as a preparation for corporate office culture because it deliberately deconstructs many of the individual's natural tools of moral decision making rather than integrating the philosophy into those notions. Thus, the individual is torn between a philosophy for which he or she has a poor understanding and his or her natural sense of fairness that has been stunted and alienated. Such an individual comes to experience the world from a state of permanent immaturity. When acting with authority, he or she tends to be unnecessarily cruel; when responding to authority, he or she tends to experience a much higher level of stress.

To illustrate, consider a thought experiment that one of my teachers used in a writing class that I took. In this experiment, a ship is sinking, and there is not enough space on the life boats to accept everyone. The question is then to determine who among the remaining passengers shall be saved. There are young people, old people, child prodigies, retards, lepers, etc. We each made our list and recorded our reasoning. The teacher then had a few of us present our views on the matter. After listening patiently to our presentations hinging on random dice rolls, who is first in line, and of course measures of the value of individuals based on characteristics, our teacher told us that the only ethical thing to do was to refuse to participate in the thought experiment entirely. I disagreed, and continue to disagree, and this is the core of my objection to the liberal educational program. My teacher had conflated two very similar but different things: the political impression of an action, and the moral impact of an action.

Anyone who we believe to be a good person has certain traits. Such a person respects diversity, cares for the less fortunate, shows kindness and compassion, etc. Our perception of the person as such comes from a relatively small data set. We typically only know of a few actions a person has taken that are good or bad. Additionally, we tend to see things in a self-centered way, so that our friends become good people because they have done thing that are good from our perspective, such as helping us to get a job over other people, hanging out with us rather than other people, and sharing with us rather than other people. I call this phenomenon - our impression of a person based on a relatively small data set, biased by our ideas of allegiance - our political impression. Therefore, when a person does something that strikes us as not being good, it doesn't necessarily mean that it is a bad action or that he or she is a bad person, even if we individually come to believe that it is so. He or she has left a bad political impression, but more investigation must be done to determine if the action is truly bad or if the person is truly bad.

Because it is highly likely that people actually can't be good or bad, and in the interest of brevity, I'll focus from here out on just actions. The political impression of an action is one thing, and it is an aspect of our individual perceptions. The actual moral impact of an action must be an object that does not depend on individual perceptions - we are striving to perceive an actual object that is ultimately constructable from a log of physical events (by "actual object" I don't mean something having physical substance, I just mean a collection of traits, eg. a doorway, a karate kick, to give $10, a collision, the color red).

So we can immediately approach the question in two ways - either we can have a paradigm of actions that are good and actions that are bad, match the action up to that paradigm and immediately label it, or we can have a valuation of world states in which the action occurs and in which some alternative occurs, and label the action as good iff the world state that results is the more valuable one. We want our approach to eventually solve the problem, and a little bit of thinking tends to reveal situations in which both approaches must be blended in order to arrive at the truth. But we can't pretend to have solved a problem by refusing to address it, nor can we act as if it is unsolvable simply because we haven't solved it.

Western philosophy is horribly tainted by Christian sentimentalism. When a group of firemen race toward a burning building only to find several people outside dying of smoke inhalation, knowing that several others remain inside, they may be faced with a choice: save those who have already escaped or try to rescue more from inside. The political impression of either choice cannot be bad, but the moral question is not necessarily neutral. It certainly isn't neutral for the author of the firefighter's training manual. Here, even when weighing lives equally, points of equivalence must arise. If nobody asks whether the life of an elderly man should be saved before the life of a child, whether a convicted felon should be saved before a Nobel Laureate, whether a healthy person should be left to die while a sick person is saved, nobody will know if the right thing was done. The christian answer seems to be to pray, that is to say to leave the decision to fate. But fate is not just.

This is all stated merely to argue that even though unpleasant questions may arise during philosophic discussions this is not an indication that the discussion has gone down the wrong track. Rather, this tends to mean that that these questions must be asked - a person who purports to have a solution must answer them. A person who doesn't offer solutions is not necessarily unwelcome in the discussion, but those who offer solutions deserve the highest honors, even if those proposals end up being flawed. The discussion must always be about finding solution, not just meandering talk.

Democratic decision making functions best when it is the most localized. That doesn't mean that the best decisions are made at the local level - but that when the democratic process does work correctly, it puts the decision in the hands of those who are affected by the problem. Of course, the process requires some level of dedication to the common good to be of use at all, and a real debate must occur. We tend to see this very little nowadays. This is probably symptomatic of the fact that modern states are so large that individual opinion really end up mattering very little, even for people like the President. It is only natural that people stop caring about the common good when their opinion seems irrelevant in the first place.

Nevertheless, as a democratic country, the United States gives each citizen a vote and collectively the citizens are sovereign from the laws of other countries. Even though our control is imperceptible at the individual level, collectively we control the destiny of our country. We determine the economic regulations that in turn create specific incentives that lead to specific business configurations. Collectively, the people's preferences, knowledge, and beliefs, in combination with the system of economic regulations, history, and institutions of business represent the object known as the economy. This economy, being the result of repeated democratic decisions reaching back into the past, is ultimately sovereign from other economies. This sovereignty is necessary if we are to exercise democratic control over the economy.

Other economies, existing within other sovereign states, are similarly free to determine their own compositions. As a result of different events in their history, some economies experience significantly lower standards of living than our economy does. So it might seem that accepting people from these other economies to come live within the United States is a good policy. But allowing this free exchange of peoples actually deals significant harm to the ability of the people to regulate the economy.

Immigration to this country has always imposed the greatest weight upon the poorest. The first immigrants to this country drove the indigenous peoples off of their ancestral lands, "spoiling the world" for them. So naturally I take the statement that "you should be for immigration because you are an immigrant" with a grain of salt. Regardless of my specific heritage, looking at the problem objectively it is clear that immigrants tend to inflict real harm to those whose economies they migrate to. While a new immigrant to our country might not have the right to take land away from us as we did from the Indians, they instead compete for jobs, and to a lesser degree, social services. There was a time (about 40 years ago now) when a young, middle class person like me could work in a factory producing the goods we consume, work in a field tending the crops we eat, or work in a kitchen washing dishes or the like. But nowadays it is not simply that we don't want to do this work, but that the wage for such jobs has been artificially depressed as a direct result of an influx of unskilled laborers as a result of a broken immigration policy and porous borders. For the wealthy and the educated elite, in fact for any member of our society who has a secure, white collar job, or even some secure blue collar jobs, these immigrants pose no danger - they are not in line to receive public welfare service or applying for jobs that take unskilled labor. In fact, these classes of our society benefit from unregulated immigration because there is a marginal lowering of prices that results from reduced labor costs.

The core of the problem is that resources are limited, meaning that only a certain maximum quantity of goods and services can be provided within our society at any particular time. Furthermore, the level of exploitation of resources is far below the theoretical maximum because environmentally harmful infrastructure must be built upon any natural resource that is to be exploited, or the resource itself is environmentally valuable. Thus, there is an environmental cost associated with any particular standard of living. Ultimately, too, these resources will one day be depleted. Our country has prudently decided to pursue meaningful environmental policies. These are predicated on controlled growth and a limited material standard of living. Inviting millions of additional people to this country means that either A) they will starve or B) they will receive some resources, either through additional environmental destruction or through competition - meaning reduced welfare for those already here.

The problem cannot be solved simply through increased welfare and raises to minimum wage. As more services make available to the poorest, and the more friendly we are toward immigration, the greater the incentive becomes to immigrate to this country. There are more than enough poor people in this world to overwhelm the limited resources that are available to the United States to feed, house, educate, and employ them, at least in our current economic configuration of market capitalism with debt-issue balanced budgets.

All of this drives me to ask whether the right of emigration - the right to leave one's country - truly is a fundamental human right. It is enumerated within the UN's Universal Declaration of Human Rights, so according to one authority it is fundamental. But as I have written before, it is problematic without a right to immigrate anywhere. I prefer the stance that the right to become a refugee and the right to amnesty are fundamental - but that there is no right to leave without first being seriously oppressed or under threat. Poverty alone cannot suffice. Certainly, being wealthy, gifted, or ambitious is also not a valid reason.

Wealth is only ownable by an individual because the laws of the state to which that individual is a citizen confer the privilege of ownership to the objects of property that are considered to have a wealth value. It certainly follows that an individual cannot take wealth from one country to another except by the consent of both governments. Whenever such a transfer is considered, the governments must ask whether the common good is served by allowing this exchange. The movement of currency from one state to another alters the market conditions in both states. As immigrants arrive in the United States, they bring currency with them that is exchanged for dollars, reducing the quantity of dollars held by the country from which they came and in turn encouraging imports from that country to the U.S. Prices are also bid up in the U.S. and down in that country. This price disparity exacerbates the inequality between nations. So it seems that a prudent policy is to heavily tax the movement of wealth between nations.

Finally, emigration can be seen as a special case of secession. If secession is disallowed, so ought be emigration. When a group of people secede from a nation, they declare themselves and certain of their property holdings to no longer fall under the jurisdiction of their former State. Secession generally disallowed by states because it poses significant problems to the process of law. Emigration is merely the movement outside of the geographic boundaries in which the state operates. That is, it accomplishes the aims of secession but only for the individual. However, individuals can still emigrate en masse, in which case emigration ceases to be the harmless, low level phenomenon that it was. Furthermore, the state's interest in controlling a person's behavior do not cease simply due to a person being in a specifc geographic place. This is particularly true if the person in question is, say, an unscrupulous industrialist intent of thwarting environmental regulators. So, individuals have no more right to emigrate than they have the right to secede, that is to say, they have no such right.

If emigration is not allowed, immigration cannot be allowed. Thus, there is no case to be made that a fundamental right to immigration exists.

Monday, May 17, 2010

The ironic pairing: Globalization and Deficit Terrorism

Globalization - here used synonymously with "free trade" - punishes countries which pay their workers too much. It lets a flood of cheaply manufactured goods into wealthy countries' markets - and these goods are cheaper precisely because of the difference in wages. In other words, each portion of wage in the importing country can capture more than an equal portion of wage in the exporter country.

Since wages are typically paid in national currencies, this effect sees its expression in currency exchange rates. Since currency can only be used to purchase goods within an economy, a nation that imports more than it exports will, ceteris paribus, find that over time its currency will decrease in value relative to those of nations that export more than they import. However, this measure of value is only meaningful if incomes and currency circulation patterns are also taken into account. The simple measure of literal exchange doesn't tell the full story of the value of a currency. If an hours' labor earned worker A 1000 yuan that were each worth 0.25 dollars, while worker B slaved for a pittance of 10 dollars per hour, can one really say that the yuan is a "weaker" currency?

For the typically encountered modern situation where one large consuming nation is served by several satellite nations that function as producers, any additional money entering the hands of an investor will tend to be invested in a satellite nation if it is invested in production and a few other outsourceable functions, and invested in the importer nation for purposes like distribution and retailing. Therefore, a true currency supply expansion, distributed uniformly (such as through tax relief) in an importing country would in part be transmitted to foreign countries and in part into the local economy. This ratio is determined by the nature of the goods that are intended to be produced and by incentive structures that apply to these goods. Thus, such a currency supply expansion will increase the wealth of both the importer and the exporter nation.

However, this effect is moderated - and can even be supplanted completely - by rent-seeking behavior. If wealthy individuals are able to cartelize or monopolize any stream of consumer necessities, acts of currency issuance instead lead to a near seamless increase in the costs of those necessities until the effect of the currency issuance is absorbed. If labor markets are sufficiently slack to keep workers from bargaining effectively, the system will essentially remain as it was, except that the price of goods in the importing country will rise or fall relative to each other, depending on the nature of the rent-seeking. If, on the other hand, labor markets are tight (and not necessarily because of low unemployment but also possibly because of a shortage of qualified workers) inflation will occur as the workers demand greater wages to counter the increase in cost of living and these wages motivate increases in prices. But here it is worth noting that price increases and wage increases in pair do sometimes serve a beneficial equalizing function in the society, if the worst off see these wage increases.

Anti-deficit hysteria hinges on value of currency as expressed not in the wages of workers but in exchange rates. But this means that nations which refuse to devalue their currency through deficit spending are essentially capitulating on trade deficits, agreeing to continue exporting industry and jobs. The sensible policy - indeed what appears to be the strategic equilibrium - is to have every nation locked in a currency devaluation race. Such a race would proceed until full employment was reached.

This strategy will doubtless lead to inflation, especially since workers who depend on cheap imports to maintain a low cost of living will see these imports increase in price due to the inferior exchange rate. However, this inflation should be moderated by the reduction of profits collected by the outsourced companies. The inflation is also beneficial in the sense that it forces workers to bargain for higher wages and undermines the total profits of the wealthy, delaying the rent-seeking behavior that would otherwise lead to increases in the value of real estate and other owner-income-stream-type assets. The inflation is necessary to stimulate the growth of local industry in the importer country - from the perspective of the entrepreneur, inflation has the same effect that tariffs would, except that the upward price trend will tend to make investment more favorable in the long term than tariffs would, especially since tariffs can be much more effectively countered by foreign government policies than currency devaluations.

Therefore, the pairing of Globalization with deficit terrorism is particularly odd. On the one hand, nations are expected to put up no resistance to the exporting of jobs overseas. On the other, expansions of money supply are criticized as irresponsible, even though such expansions would correct the imbalance caused by the strategy of globalization. In fairness, as has been noted before, government borrowing from wealthy investors doesn't really expand the money supply. However, it does effectively increase the money in circulation , but with a much more mild effect than non-parity currency issue. But in their economic ignorance, most deficit terrorists are blind to the actual workings of the money supply anyway. What we should never forgive them for is their willingness to blindly repeat political talking points as if they represent real analysis.

Monday, May 10, 2010

The role of bank capital scarcity on inflation

Increases in interest rates due to bank capital scarcity cannot generally lead to increases in prices, because interest rates are the arbiters of general employment levels which in turn control demand for goods. However, changes in interest rates can precipitate changes to market structure that cause increases in the cost of goods in individual markets, or occasionally precipitate both unemployment and inflation, given that economic growth within a region is sufficiently robust or the general population is sufficiently wealthy. To illustrate, begin with the following example of a single firm within a single industry.

Imperial Widgets (IW) is a widget factory facing capital replacement costs due to depreciation. The company is not profitable (zero net profit) and has no liquid assets that can be sold to finance such a purchase. Therefore, the company must take a loan to cover these replacement costs or cease operations. Supposing that IW takes such loans on a rolling basis and therefore faces similar monthly payments (without loss of generality) in each term.

Further, suppose that IW is making its price and quantity production decisions in a competent fashion, that is to say it is maximizing (or attempting to maximize) its profits. It expects an increase in price charged to lead to a decrease in sales sufficiently large to reduce profits and a decrease in price charged to similarly lead to an insufficiently higher volume of sales; additionally it is not likely to sell additional units produced, the marginal cost of production equals the marginal revenue, or IW is already producing at capacity. In other words, IW's profits would decline were it to maintain current capital stocks but change its price and/or quantity of production.

Now, suppose that interest rates increase. As IW considers its replacement schedule for depreciating capital, it realizes that it faces a change to its cost curve that could alter its price and quantity decisions. Depending on the capital objects to be replaced, IW may either curtail production and increase prices, or simply operate at a loss. In the first case, IW is likely to only obtain a partial replacement of capital, thus it is borrowing less. In the second case, IW is likely to finance these losses, causing an increase in borrowing.

The distribution between these two decisions across all firms is connected in a mutually causative way with the economic trend. At the macro level, some firms will move in one direction and some firms will move in the other, but a third option looms in the shadows. Here, long term expectations become significant - do firms that are operating at a loss hold out for better days or close shop? In any event, employment declines so long as at least one firm either cuts production or goes out of business.

The model case from here on will depend on market structure. It is virtually impossible to conceive of a monopoly enterprise that is not in the first place profitable, so we can focus instead on competitive and near-competitive markets. Within such a market some firms will be facing slightly higher cost curves and others slightly lower curves, but all firms will charge very similar prices for the same good, therefore some firms will be slightly profitable or have liquid asset reserves and some will be operating at a slight loss or have a deficiency in liquid asset reserves. When interest rates increase, some firms will face untenable finance positions and close. Therefore, interest rate increases can cause the breakdown of competitive market structures and lead to monopoly, cartel, or other degenerate market structures. This in turn allows the individual market to come to a higher price equilibrium due to the diminished competition within the market. This higher price equilibrium is generally accompanied by lower output.

However, if similar effects occur across too many markets at the same time, the reduction in employment level and wages that accompanies such restructuring leads to decreases in demand for goods through both revision of consumer budgets and increased incentives to save. In such a situation, the prices charged for goods must decrease as output declines, because prices follow a cost curve that is non-horizontal (due not just to the initial assumption of high interest rates and capital scarcity but also to the reduction in wages). A reduced output level must in turn exert downward pressure on interest rates.

Another under-appreciated aspect of this problem is the role that investment decisions play in the availability of capital to banks. Bank loans are a class of investment that competes with direct investment in corporations. During boom times, the increase of direct investment in corporations is a source of the very capital scarcity that leads to market consolidations as described above. However, during more stagnant economic times, companies cannot raise capital as easily because of the greater risk associated with direct investment. This means that capital is being held in bank accounts, implying a capital surplus - so interest rates should tend to fall as economic conditions deteriorate.

Economies go into crisis when prospects for direct investment become so bleak that essentially no direct investment occurs. Here, individuals will even settle for no interest and keep money in the bank, waiting for better times. These better times are caused by exogenous effects - technologies, government stimulus, and resource discoveries.

In contrast, economies also go into crisis when too few dollars are available for loans. If spending is sufficiently robust, investors will be unwilling to leave any money sitting. Capital for short term adjustments becomes too expensive for firms, and they are forced to curtail production. During times of especially strong demand, this can lead to prices increasing even as unemployment increases. Ultimately, the ability to spend is actually a function of wealth and not of income. Among other things, this explains the enigmatic "stagflation" of the 1970s.

In a previous post I have described these two contrasting situations as "disincentive" and "shortage". It is "shortage" that most closely corresponds with bank capital scarcity scenarios particularly the enigma of stagflation.

It is worth addressing whether such an effect - stagflation - can occur in a less developed country (I cringe and the imperialist heritage of this term. Is it conceptually much different than "less civilized" or "barbarian"?) due to the same forces as in a developed one. Here, banking and capital sources are primarily externally located. This is crucial, because it implies that any growth or decline in local demand will only have a marginal effect on the investing economy. These export economies do not get the benefit of profit capture or control, because the investors are not members of the economy itself and do not have a stake in the local community. It is the destabilization that the interests of the foreign investor bring to the political process that repeatedly dooms efforts at growth and social justice within a developing country. Generally, both loans and direct investment will always be available or unavailable in parity to the developing nation. It is not some economic law - but the political conditions of our time - that leads to suffering throughout the world.

Wednesday, May 5, 2010

Firefox Double Crashing

Dear firefox feedback,

Firefox is a very predictable product. If something causes it to crash, that same thing will cause it to crash again. Please forgive me for not sounding sophisticated here, but I don't have the statistics that your techie people have access to. This is because firefox is a computer program. It responds in a predictable fashion to the data that is fed into it.

The crash recovery option is designed to store, apparently in cached form rather than reloading them, all of the pages that were being viewed at the time of a crash. In 99.99% of situations, this means that when firefox is restarted, it simply crashes again. I reported this as a bug and was shut down:

Apparently, having a product that crashes a second time after every crash is not a bug but a feature.

So, at the very least, I would like to have an option to turn this "feature" off. I know from searching support that I can go to some internal settings page to fix the problem - and I have. But for everyone else out there who is a loyal firefox user and might not know about this fix, I am asking you and the other tech people to do two things:

1. Come up with a crash recovery procedure that works in a meaningful way.
2. Include an option in preferences that can be checked to disable this feature.

On the first point,

I suggest storing any form data and URLs and simply saving them to a text file in the event of crash. Naturally you can exclude credit card and password info. Then, on recovery, firefox should simply display these contents in a form that makes them easy to copy and paste.

Especially in crashes, your current standard is really unrealistic. Paul Oshannessy said "I'll say that the common case, people just want Firefox to start back up and figure it out on its own. They don't want to be shown this potentially confusing page after Firefox crashes - they want it to 'just work'."

But it doesn't "just work". Common sense indicates that it won't. Programs can't just start back up after crashes with no data loss, because as soon as the program executes that same line of code a second time, the same result occurs! In the case of web content, crashes are the result of errors in the generation of webpage scripts or firefox's interpretation of the contents of those scripts. If firefox doesn't ask the servers that generated the pages to re-generate them, it will simply run the same scripts on those pages that caused the original crash, and because firefox is such a nice and stable product, it will crash again! But even re-generating pages will still cause a lot of crashes, almost as many as loading the cashed pages. What you find, and this is very much CS315, is that each time you strip away a layer of data, that is step back from the most recent page, the fewer crashes there are, until you find the only way to really prevent any crash is to not reload the offending page at all.

That gets back to the comment of the poor user that Paul shut down: Why not let the user choose which tabs to restore on the first restart?

On the second point,

I suggest you make it so that whatever Crash Recovery "solution" you end up implementing, you make it easy to turn off so that grouchy people like me can avoid going batshit insane. Make this an advanced option. That way average users who have no functional literacy won't go bumbling into that option, accidentally turn it off, and subsequently leave nasty messages demanding to know why their firefox doesn't double crash anymore.

Also, I would suggest that you take the time to figure out whose idea this was, because you might want to take future ideas by this same person with a grain of salt. As a general rule, clever marketing comes after the product - it should never motivate the creation of the product itself, unless you intend to defraud consumers.

Thank you. I feel better now.

Sunday, May 2, 2010

The Business Cycle - another explanation

At a given time t, the total production within an economy is distributed according to payments made by purchasers. Calling the sum of these payments the dollar expression of production, the corresponding goods expression of purchases is the total production expressed as a very large goods bundle. Neither term implies actual value. The only determinant of actual value is a detailed analysis of the goods bundle itself by experts who can evaluate the total social benefit of each good. For sake of simplicity, services provided are also considered part of production. The term "goods" will refer to both goods and services.

Alongside the acts of production are speculative sales. Speculation is defined as "ownership for the purpose other than use or consumption". An object, such as an ox, could be purchased simultaneously for production (use of the ox for plowing), speculation (sell if prices reach a certain level) or consumption (eat if food is not available). Similarly, homes are purchased for both use (to live in) and for resale (under the assumption that property prices will rise). The holding of money, such as in a savings account, or any other asset, is also an act of speculation. The act of holding is, essentially, "exchange with oneself". The sum of production purchases and speculative purchases at time t is the entirety of economic exchange at that time period. Furthermore, the total supply of money within an economy therefore participates in exchange in each time period.

Suppose that the supply of money within an economy increases at a rate greater than the total level of production. Then it must follow that speculation within that economy increases. Similarly, if production booms at a greater rate than expansion of the money supply, the number of speculative exchanges must decrease. Here, "level of production" refers to actual production and not production capacity, while "money supply" refers to actual currency in circulation and bank accounts (m1). It is premature at this juncture to make policy recommendations, because increases in the money supply can be made in a variety of ways, some of which can spur increased production in excess of the increase in money supply.

In any market, some individuals will have large, speculative holdings, and will hereafter be referred to as "wealthy". What conditions must persist over time for these speculative holdings to diminish? Similarly, what conditions must persist for these holdings to increase? Which of the two scenarios are more likely?

These questions are answered by looking at the essential choice that the wealthy have in the investment of their money. Either they invest in a productive enterprise by purchasing capital for use by that enterprise, or they invest in speculative enterprise by purchasing assets that they believe will appreciate in value. The act of simply holding onto money is tantamount to saying that all other investments are inferior, i.e. that money will increase in value.

In a situation where the economy is rapidly expanding, speculative holding tends to fall behind productive investment in terms of profit levels. Therefore, the wealthy can be expected to reduce their speculative holdings during such periods, instead investing in capital. Conversely, the wealthy will tend to withdraw capital and invest in speculative holdings during economic downturns. Despite the use of the term "Speculation" to describe non-productive investments of money, it is speculation that gives more stable (lower risk) returns to the investor, at least with respect to general market trends. Part of this risk equation is the magnification of economic events at the level of production relative to the level of simple wealth holding. The wealthy will obtain peak wealth levels by switching to speculation at the exact point of market reversal. This ensures that even as wages fall for workers, the prices of goods and rental costs do not fall proportionately (due to decreases in number of suppliers and increases in speculation in land). Thus, workers are impoverished and must consume less, leading to a decrease in prices of all speculative assets and eventually uniform deflation. This process of decay continues without any theoretical bottom, however in practice governments change policies, new technologies are developed, or wars and revolutions occur. In a broad sense, the wealthy class will only diminish in wealth concentration as a result of unexpected losses, which are correlated with changes in the direction of the general economic trend - the frequency of which principally depends on government action, as described below.

Two key features of modern economies are the dependence of the vast majority on the market for their subsistence and the use of fiat monetary systems. Historically, two different factors moderated the inescapable spiral described above: 1. The agrarian economic system, and 2. The precious metal economies. These two had particular synergies, such as feudal patterns of land ownership and the "free market" expansion of currency supplies which served to reverse economic trends. However, these counterbalances have now been totally removed from our present economies. Instead, we have a government system in which a fiat money system is implemented in a dishonest way where national governments essentially pretend to be bound by invisible rules which force them to maintain a fairly limited expansion to actual currency supplies. Furthermore, political leaders tend to know little to nothing about the economy, and of course there are virtually no academics who can honestly claim to know much more. It is therefore an operation of pure chance that brings a modern society out of economic slump.

Ironically, the cycles of growth and collapse are initiated by an underappreciated phenomenon called saturation. In a "goods saturation" collapse scenario, additional wages cannot motivate increased purchasing. Wage workers instead become speculators, accelerating any pyramidal effects already occurring within the economy. In a "speculation saturation" growth scenario, available speculative assets suffer from a relative deflation in value due to vastly overinflated prices and widespread cost of living inflation. Investors have no choice but to invest in industry in order to preserve their wealth.

A prescription for our own economy in this situation follows from the identification of our stage within this crisis: we are currently facing a non-inflationary collapse of production capacity. It is a slow moving crisis that in many ways began in the 1980s. To address it, we must devise a way to destabilize the prices of fixed assets like real estate and bonds. A rather painless way to do this is simply to reduce their opportunity cost, that is, to expand the money supply through giveaways as part of social welfare programs. The additional spending that such policies would engender would make productive investment more profitable than mere speculation, and the economic trend could be reversed.

Tuesday, April 6, 2010

Laziness in economy: minimizing employment

When a human being sets to work on a task, he is compelled to complete that task in an efficient manner. In conceptualizing the task, he will have in mind some standard of quality, and go about the task with the goal of achieving that standard with the minimal expense of thought, time, resources, and muscular exertion that his expertise and available technology will allow, that is to say, to conserve effort. Typically the final result is somewhat below the standard of quality originally envisioned, but such results are tolerated by both the individual and society. This process, endlessly repeated through all the endeavors of human day-to-day life, is evidence of a governing principle of laziness that is more intimate and real, more potent in human events than any alleged "rationality" could ever be.

Here, the notion of laziness as a governing force does not imply a psychological or moral defect in the individual. Though the term technically refers only to the urge to shirk one's duties, laziness can also be seen as a pervasive force that expresses itself throughout our economic reality as a potent psychological drive to minimize effort. While a person who shirks an important duty is often punished by society, a person who does unnecessary work is often punishing himself. Even as those among us who work harder than the average win our praise and gain various types of prestige, they find themselves stressed, malnourished, culturally deprived, drug addicted, and even psychologically disturbed or physically injured. Laziness can be seen as a countervailing force, pushing back against desires to achieve and resisting unreasonable requests. Moreover, laziness is not the negative of effort, as it seems to play a role in the direction of effort. It is laziness that so often compels us to devise more efficient means in our day to day life.

Laziness is unfairly villainized within common discourse. Western society seems to retain ideas of work ethic that have their origins in feudal peasant agriculture. In such times, all work was of utmost importance. Each additional hour of labor either fulfilled a basic need or settled an obligation to a lord who dominated his vassals. Among the lowly peasants, there was never a need for each individual to independently judge others - the slackers would be dealt with systematically. However, among the more affluent, it was always possible to fake things in such a way that it brought harm and detriment to others. All social classes (distinct or arbitrarily divided) are lifted on a sea of secrets and conspiracies, by a political process. Rules are both protective and restrictive. As a person rises toward a position of power, additional burdens manifest themselves through the absence of these rules: the fledgling rule-maker discovers there are rules for making rules. In its essence, human power always flows from the consent of others to one's authority within an organized structure, that is to say, from unanimous consent of those who immediately receive orders. This consent is based primarily on evidence of ability to act in various capacities that illustrate the consent of others. It seems that all things that an individual seeks to acquire become objects not merely in themselves but symbols of the ability of that individual to acquire things, that is to say to obtain consent. Competition for acquisition sometimes develops over time, gaining conceptual depth and its own lexicon even as it remains fluid and somewhat undefined. Concepts of fashion and entertainment are examples of such competitive processes. Even though there is no wrong in losing such a competition, the losers must recognize the power of the winners, and in doing so, some agendas are advanced ahead of others. Moreover, the stakes can be very high: loyalty is itself a cardinal virtue (crimes such as treason come to mind), but in a broader sense loyalty to a cause is just one of many expressions of the authoritative consent required to further any ethical goal. Because of the limitations of the human mind and the limited flow of information, evaluations of the actual effect of any command passed down from an authority is typically exceedingly difficult or impossible for the average citizen. That is to say, our moral theory is subject to profound manipulation. It allows political processes controlled entirely by others to determine arbitrary tasks that we have a duty to complete. This in turn leads to a common perception of laziness that is based on the individual completion of these arbitrary tasks - and stacks endless obligations onto the psychology of the morally conscious individual. As an inevitable aspect of political reality, a profound skepticism of these obligations has likely been instilled into human nature - but ironically this skepticism is not expressed as a skeptic might express it. Though a skeptic might object by voicing technical objections to aspects of theory or illustrating absurd conclusions, he has still been captured by the structure, made to participate in its evolution. The only reprieve for the individual from these endless obligations is to focus on those concrete needs and wants in his immediate sphere - those things he can verify with his own eyes and address with his own hands. But as a person advances within society or as a society advances within a population, individuals find themselves more remote from both from suffering and from the means to address suffering.

In response to this dissonance, there is a great struggle within the discourse of a society, played out both on the public sphere and within the consciousness of participants and observers, to label factional allies (including the self) and enemies with politically charged descriptive terminology that imply various motives and behavioral tendencies. Within this context, the individual is compelled to labor. Even his freedom to pursue various leisure activities is in fact heavily structured: those things which individuals pursue for personal enjoyment within any society are invariably things which identify them with an immediate social group that wields some degree of political power and a more distant network of allegiances and animosities - consciously or unconsciously, an individual obtains dual purpose from his leisure. Indeed, all people have a secret and private set of vices that are publicly unmentionable, but in their own way these follow the same rules. It is questionable whether leisure itself is a motivating factor, or if some other psychological drive motivates the action, with the enjoyment of the activity being an internal aspect of some external, symbolic display. A motivational spectrum develops for the purpose of judging others, couched in a variety of explanatory terminologies, having both a negative aspect and a positive one. A person who does not labor enough can either be lazy (economics or business), of poor character (religion or philosophy) or mentally unhealthy (psychology). A learned person in any of these fields is less likely to emphasize such a concrete and real application of theory - he knows that the overwhelming lesson of education is the realization of how little is actually known in any of these disciplines. These terms and thinking techniques, rather than being illuminating of the problem, are rhetorical devices "painted over" the underlying logic of work ethic inherited from the agrarian peasantry. Ironically, the political act of judging laziness has lived on in (and is just one of many examples of) pedestrian misconceptions of academic discourse which preserve political devices that are detrimental to social welfare.

First, consider the negative aspect of this spectrum, expressed as various political acts harmful to the individual. The threat of these acts is ever present, as the typical member of a society sees their wrath visited on strangers, friends, coworkers, bosses, and subordinates. The fear, disgust, and stress that this induces forms a negative motivational spectrum that drives the members of a society to work hard, to present themselves as if they have done more work than they actually have, and to demonstrate their own allegiance to such values by joining in the ridicule and punishment of shirkers.

The positive motivational aspect, though superficially less harmful, shares many of the worst features with the negative. Here, the glittering jewels of recognition, promotion, and reward shimmer in the distance. The individual finds that recognition from unimportant individuals is easy to obtain, however it is problematic because it is typically meaningless and in a technical sense, false. As a result, he finds this recognition unsatisfying and thereby cultivates a torturous ambition, or he constructs a false belief that the recognition does have a deep meaning and thereby falsely elevates himself and the person who has recognized him beyond the position that the actual merit of his actions would normally imply. Within the relativistic soup of social reality, individuals will at times come to see the absence of punishment as reward, or the absence of reward as punishment. The only clear delineation between the two is in the mind of the authority responsible for declaring who will receive what. Promotion, properly speaking, is a type of reward but one implying potential rather than achievement. Therefore, its converse is also implied: a person passed up for a promotion is a person with less potential.

Over the ages, those who do work have applied their ingenuity to the tasks at hand, bringing about new ways of doing things (technologies) that reduce the load of work required for the completion of individual tasks. The effect of this development has been twofold: first, the individual finds that rather than being required to do less labor, the new technology is used to justify a higher level of production from each individual; secondly that as new technologies are developed, the complexity of production and therefore the hierarchical authority required to undertake each endeavor increases.

The cause of the first effect is the negotiating imbalance between the firms who offer the wages, and the workers, who provide the labor. It is not easy to summarize exactly why this persistent imbalance exists. In a deep and remote sense, the division of labor between the proletariat and capitalist class evolved from the division of labor between the lord and peasant. If the economy is seen as a dynamical system, could there simply be no force in effect to correct the initial imbalance, which has persisted like a standing wave to the present day? The proximate causes seem decidedly less satisfying but much more actionable: first, because there are many laborers, in persistent surplus and fewer firms; second, because firms are well informed relative to workers; third, because firms have the power to wait while workers must meet their immediate needs; fourth, because firms have political power. In the middle, there are revealing points, possibly the keys to the whole question: first, that the flow of currency through an economy is effectively constrained by the actions of the peak wealth accumulators, who desire to make money, meaning that the net flow is from the economy to them; second, that physical land and other essential resources of production are typically wholly partitioned in an unequal fashion, with firms investing to produce goods only when additional resource rights acquisition is unprofitable; third that worker budgets can never purchase the entire product of their own labor, thus only the constant increase in production from each worker can pay the rents associated with food, shelter, courtship, child raising, and everyday life.

The cause of the second effect is the basic nature of technology itself. Each element of a technology occupies a part of the human mind. The human mind is finite, thus, as technology developed, a threshold was reached beyond which a single mind could no longer contain all of the understanding required for technological processes. Those who share the process of understanding inherently engage in a political struggle for control of the means of production. In times when technology was simple, hierarchies could also be simple, but nowadays sophisticated management techniques are necessary.

The question of economic management is often posed as a question of how to increase production, raise the "standard of living", and limit unemployment. It is becoming clear that the unchecked desire to produce is destructive to the environment. Unexamined metrics that show increases in standard of living have also failed to correlate with individual happiness. Could it also be the case that increased employment can also be without benefit, or even harmful to the individual and the society?

Intuitively, the force of laziness indicates that there is a spectrum of employment within which an optimal point or region exists for a given level of production (unless production is measured poorly). Work has several dimensions: first, what type of work is being done; second, how are working hours distributed through the worker pool; third, how enjoyable is work for each worker?

The first question relates to appropriate levels of production and correct measurement of standards of living that reflects real quality of life. This question has been voluminously explored at and I will not devote much time to it here. The answers to questions about where production ought be directed are clear. If society has the capacity to produce sufficient food that nobody goes hungry, ought society do so? If society has the capacity to build and organize cities in a way that everyone can live in the type of community they enjoy, ought society do so? If society can implement policies to protect the natural environment without harming its citizens, ought it do so? And, if the accumulation of property, patent rights, capital, and political power becomes injurious to the public good, ought the society vigorously pursue measures to correct such imbalance?

The third question relates to the inherent hierarchy of work. While some jobs are not enjoyable, others are. Concepts like the "career"might be satisfying for professionals, but other, more flexible concepts of work duties might better serve blue collar workers who work in a factory and repeat the same motion mindlessly for 40 hours a week. Civic education does not need to stop after high school - blue collar workers could have rotations and exchange programs to break up the monotony of life and to add perspective and pride to their role in industry.

The second question relates to the utilization of technology - if production is constrained to only production that increases quality of life, then there is no guarantee - in fact there is evidence against the idea - that there will be sufficient demand to provide employment at current standards of working hours for all. Thus, work must be partitioned between individuals in some way. When compared to the previous two answers, this one is by far the most radical. Yet it is the most provable of all three, and the most easily addressed by public policy.

Creating institutions to enforce a fair division of work is preferable to creation of a welfare state. In the broadest possible terms, the most general analysis possible creates three categories of possible work policy for a society. The first category are the societies that do not enforce a fair division of labor or provide unemployment services. In this system, the persistently unemployed depend on the charity of private groups in order to survive. This grizzly state of affairs is surely bad for the society as a whole, as there is little, if any, marginal benefit to those who do work and those without it suffer tremendously. The second category are the societies that do not enforce fair labor division but do provide unemployment services. These economies are divided into two overlapping classes: the middle and upper classes (hereafter called just upper class) who work hard, make significantly more than the minimum wage, and are engaged in investment and savings; and the lower class who may work hard but make close to the minimum wage, are moving frequently from one job to the other, depend on unemployment, and have either building debt or a lack of coherent investment and savings strategy. These two classes overlap because some investments always fail, some households have bad money management, and because of luck. Here, the extra labor hours that the upper class work relative to the poor generate some amount of extra wages. The poor, who are persistently unemployed and depend on social services, absorb some of these wages through the costs of their social programs being paid through progressive taxes that are visited on the upper classes. Thus, the situation is unfair to both the upper class, who must to some degree labor without compensation, and to the lower class who must go without work and the opportunities for advancement and life enrichment that work offers. The third option, the division of labor between all individuals in a society, with no long term unemployment compensation necessary, is the preferred policy. In this system, a limit on each individual's working hours is strictly enforced. For instance, the work week can be defined (such as it is now) to be only, say, 40 hours in a week. But no individual would be exempt from this. For example, if a scientist wants to work 60 hours a week on his research, he must be compensated as if he worked 20 hours of overtime, that is, paid 1.75 times his normal salary. Therefore, Universities whose policy it is to work their scientists more than 40 hours a week would be encouraged to hire more of them. This policy would then be coupled with a definition of the workweek that could be reduced based on unemployment trends. Very roughly speaking, to correct for 10% unemployment, the work week need only be reduced 10%, provided that a means exists to ensure that salaried individuals also work 10% less. This system is superior because no wealth transfer is necessary between the upper and lower class. Thus, the labor and compensation are brought into harmony.

In order to bring about an economic system focused on the fair division of labor, the ideas of work ethic that have been inherited from ancient times must be challenged. The matrix of insidious concepts that are tied to the work ethic ideal mean that this debate will be played out in numerous academic topics that seem entirely unrelated to the ideal of work ethic. But when the underlying assumptions of academic theories are laid out in detail, so often the most innocuous and basic things turn out to be incredibly complex, hiding places for endless preconceived notions. Social sciences have in general strayed too far from philosophy, and philosophy has strayed too far from its own roots. In physics, it took over 1000 years for the basic ideas such as motion and inertia to root before Isaac Newton was able to introduce his core concepts in an almost entirely philosophic work, the Principia Mathematica. If social science is to follow natural science, it must focus for some time more on the building blocks, both in experiment and in discourse. This essay has been illustrative, in part, of the simple solutions that emerge to vexing social problems when the building blocks are examined in detail.

Monday, March 15, 2010

Measuring and aggregating incentives to work

In The Affluent Society, Galbraith asks whether it is the products of most laborer's work or the wages paid to them that have a greater positive social impact. By a strict Pareto analysis where market value is the only measure of worth, it must be the case that the product of the labor is more valuable. Rather than solving the problem, such a result is more of an example of absurdity, casting doubt on the Pareto Optimality concept.

The question can actually be broadened, as it has been by contemporary economists. Professor Randall Wray of UMKC looks at a variety of factors that workers gain from working rather than sitting idle, and argues that the social costs of unemployment are actually grossly underrated. Rather than utilize his analysis, which is not holistic enough for my tastes, I want to develop my own system for estimating the value of employment for the laborer.

Borrowing again and elaborating on arguments developed in The Affluent Society, Generally speaking, a worker will labor for some combination of the following reasons:

1. Pecuniary Compensation (wage, salary, bonuses)
2. Ideology (feelings of the righteousness, charity or necessity of his actions)
3. Fear (punishment awaits those that do not work)
4. Personal Education (Development of skills or specialized knowledge)
5. Conveyance of Status (The worker gains some status that is valuable, such as being considered "experienced" or being considered a brave or good person)
6. Leisure (The task is the preferred alternative to boredom)

Without this broad set of motivating factors, it becomes impossible to understand why some activities become ones that individuals pay for and others become ones that individuals desire to be paid for. These may be negative or positive.

An economy is actually a dynamical system, and so there are two more general considerations. First, that the relative value of each of these factors to an individual will be evaluated by that individual on the basis of net gains/losses from the individual's current position. Secondly, that a set of filters exist which limit the potential applicant pool for any given position. Once again, speaking generally, they are as follows:

1. Status (holding specific titles or claims to experience)
2. Education (having certain skills or knowledge)
3. Geographic proximity (worker and firm must be within a certain radius)
4. Cultural Conformity (being part of a sufficiently similar cultural group, in particular having a common language)
5. Search success (the firm or worker must search each other out and will not always find all matches)
6. Miscellaneous Hiring Filters (personality tests, interview "impressions", arbitrary limits to considered applicants, etc.)

These are not numerical values. They are subsets. The space that is the intersection of all of these constraints contains all the potential qualified applicants. Ideally, firms will then evaluate potential applicants within this space, and perform a cost-benefit analysis, ultimately hiring individuals who promise the greatest positive impact on the firm given their requested wage. But, to capture a real approximation of firm behavior in this respect requires an understanding of the internal politics of firms and empirical data for theories of internal politics to analyze.

The existence of so many constraints on worker pools harms the ability of firms and workers to to find matches that would work well for them. It is appalling, for instance, that so many individuals would happily work as CEOs or Doctors but are effectively prohibited from pursuing such careers. This has led, in once case, to vastly overinflated wages, and in the other case, to shortage.

Regardless of the cause, it is clear that the empirical state of the economy is far from ideal. Not only are many individuals who seek labor not finding it, but many tasks which would be highly enjoyable to a large sector of the population, such as philanthropic work, is not available to individuals. Finally, many people work extremely hard only to make enough for bare survival. Given our natural resource position, this can be due only to gluts in worker pools. Nobody should work only out of fear of poverty, homelessness, or starvation.

Thursday, March 11, 2010

Pigouvian taxes and subsidies

There is a theory in economics that an effective way to reduce the incidence of a bad behavior is to place a tax on it. The reasoning goes that this tax increases the cost of the behavior, thus by the law of supply and demand, the quantity demanded decreases. The use of taxes for the purpose of balancing out externality costs is referred to as a Pigouvian tax.

The implementation of these strategies in the real world tests both the entire regulatory framework and the economic theories. This naturally complicates things - are failures the result of the theory being wrong or merely due to flaws in implementation? Many public policies that seem to have great promise may actually be nothing more than the fiscal equivalent of building a levee on this mile of the river: flooding is prevented here but made worse downstream.

I have been approached on multiple occasions by bicycle advocates who have suggested that better bike policies and funding for bicycles can best be brought about through a campaign against car usage. The reasoning goes that by not funding more roads and by increasing taxes on gasoline, the "cost" of driving increases. By the Pigouvian reasoning, this will lead - nay, force - people to pursue alternative transportation options.

There is certainly some marginal effect, but it will not follow a uniform curve. This marginal effect will be a function of the attractiveness of alternatives, and these alternatives can be quite varied. The temptation is to be lazy, and to assume that some intersection of continuous curves defines the demand functions, meaning that each incremental cost increase of driving would have a similar, incremental decrease in driving. This, of course, is not the whole story, because the reality of the situation depends on the discrete decisions that are made. A small increase may not be enough to actually push a different transportation option into the top spot - people are actually quite uniform in their transportation situations and the biking/public transit system tends to have a more or less uniform cost. Furthermore, an additional "hump" that represents the force of habit may block people from changing habits for savings that are insignificant.

Therefore, there is a threshold below which only an insignificant portion of drivers would bother changing their plans. Above this threshold, a large number of drivers would seek to change their plans. And so, the question now arises, "What is the value of incremental driving disincentives both below and above the key threshold?"

Below the threshold, taxes on gasoline and congestion promoting policies amount to little more than regressive taxes. That is to say, the cost is passed through the drivers. Rather than changing their driving habits, it merely leads them to have less wealth available to purchase other goods in the economy. Owing to the dependence of many goods on gasoline transport, these taxes may also be expressed in the cost of goods.

The story is essentially the same above the threshold as well: those who are still driving with high taxes on driving are unlikely to change their behavior simply because driving starts to have a slightly higher cost.

The real effect occurs at the threshold, where the variable is actually sensitive. This is the only area where a case can actually be made that the pigouvian incentive concept is a good idea, because here the tax actually does bring about a reduction in the unwanted behavior. Here, the supply of the chosen alternative goods must be sufficiently flexible to absorb the relatively rapid change in habits that the cost increases bring about. But are public transit and bike networks actually capable of making these sudden changes? Not really. Here again, even at the threshold, the consumers will find they are unable to switch because the existing bike infrastructure is insufficient and the existing mass transit system is already operating at capacity.

A similar argument can be made for subsidies of public transit and bicycle infrastructure: they will be underutilized and fail cost/benefit tests without a complimentary policy of increasing the cost associated with existing behavior.

So, it is sensible to propose a steep tax, and to cut back severely on existing vehicle infrastructure, such that the effect is sufficient to bring incentives across the threshold, only if a comprehensive expansion of public transit and bicycle infrastructure is also implemented in parity.

In reality, the issue of cost pass-through is present in every tax and subsidy scheme. It can have a variety of unintended consequences. Generally, cost driven changes in consumer behavior come in the form of regressive policies. Care should be taken by well intentioned reformers to take the two steps outlined here: first, to find any thresholds in the discrete consumption bundles of actual goods; and second, to find and assess the role of potential bottlenecks in the desired new behavior pattern.

Additionally, there are two more potential problems in the basic implementation of such systems.

First, the shift in behaviors as a result of increasing costs may be unpredictable. Could increases in driving cost drive a portion of people to simply never leave their houses, instead becoming Television and Internet addicts? Could toxic waste disposal fees, instead of leading to reductions in toxic manufacturing processes, lead to the marketing of building material mixtures that contain these toxins (so that they do not need to be disposed)? The regulatory framework, as well as the nature of the goods in question, are the determinants of such results. Thus, taxes may need to be imposed on a large number of goods, and subsidies or other supply expansions may need to be effected on a similar scale.

Secondly, the political cost may be great. A politician in anything but a safe district would have to be incompetent to back a gasoline tax. Even safe politicians may want to vote against a gas tax simply to preserve the stream of automobile lobby dollars. At some point, advocates for social and environmental justice will need to assess the political realities. Though it is a difficult task, compromise will be necessary in all environmental agendas. For real political change, a great deal of consensus, log rolling, and popular awareness are essential.

In conclusion, there are four prerequisites for the use of a pigouvian tax/subsidy scheme:
1. Discrete understanding of the supply/demand for the goods to be taxed and subsidized in terms of the consumption bundles of the consumer demographics.
2. Ability of policies to simultaneously cross both the demand threshold for the good that is to be suppressed and any necessary subsidy to supply of the substitute good.
3. Adequate regulatory structure to ensure that new consumer behavior will actually be as planned. This may require a comprehensive set of many taxes and many subsidies across a large number of goods.
4. A strong political position for the elected officials responsible for the policies that bring about 1-3, as well as an electorate that is highly sympathetic with the cause that such policies represent.

Wednesday, February 24, 2010


Ultimately, ethical imperatives must be absolute in nature. That is to say, it is invalid to use a relative measure to determine the morality of an action, unless that relative measure is used as an inference to some absolute state of affairs.

Suppose a person were to assert that "college students have a duty to get good grades". This imperative would be invalid if grades were rated on a curve such that some students must get bad grades. However, many people actually intend this statement merely as a surrogate for the statement that "college students should study hard and learn the materials to the best of their ability", with the assumption that some will inevitably not study hard and be the same students who do poorly.

Additionally, the assertion that "only the best alternative among good alternatives is morally acceptable" is nonsensical, as it represents a double evaluation. If an alternative can be seen as good, then it cannot follow that it is also not good. Typically, examples that fit this definition suffer from a lack of sufficient parsing, stringing together series of actions into a single object. It may actually be possible to define actions in such a way that better alternatives do not exist, by looking at each decision point as a separate action in which only one choice is the good one.

Monday, February 22, 2010

Trade: Dangers and instabilities

The political and media game in the midst of this Second Great Depression is sadly fixated on real estate and banking. Certainly, these sectors have played a role in the collapse that we have experienced, but it is wrong to attribute the full force and persistence of our malaise on just these sectors. At the very core of the economic problem, it is not currencies that are to blame. Balances of income and expenditure between various regions of the globe and sectors of the economy are what actually determine things like unemployment rates and other numbers of political importance. Additionally, the degree of achievable prosperity is constrained by the rate at which key natural resources are exploited. These two determinants of economic outcomes are aspects of economic geography and market structure.

A firm that follows a neoclassical business strategy will seek to maximize production efficiency by minimizing costs per dollar value of finished goods. Such profit maximizing philosophies are clearly the norm among large scale businesses. This model takes both workers and consumers as essentially being factors of production. The final product of the firm, in the mind of the firm's owner, is not the product for sale but the income stream that firm profits bring to him.

This maximization is best achieved through locating of factories where the necessary natural resources can be plentifully obtained and where costs of labor are low. The degree to which real estate costs affect this calculation seems to be minimal, in part because low cost of labor tends to correlate with low cost of real estate. Delivery of natural resources to the factory and a means of moving finished goods to port are the required infrastructure developments and these are also expressed in the production cost. Low shipping and transport costs (primarily the low cost of shipping on large tanker ships) make the possible market for goods global in scope, making distance to consumer largely irrelevant in all cases except for goods that are perishable. Therefore, manufacturing for non-perishable goods will tend to be concentrated where costs of production are lowest.

Regions that offer ideal locations are invariably those that have both persistent poverty and a well organized government capable of and interested in providing the necessary infrastructure to the factory. The goods produced will be sold on a global scale, directly to nations which are not ideal locations for new factories.

All factories eventually become depreciated to the point of needing to be shut down. Therefore, new economic growth is not a prerequisite for the relocation of these factories to more optimal regions. Rather, over time, industry in general will naturally move into those regions.

Firms in these factories' host countries will have revenue in the goods importing country's currency, but pay their workers in the local currency. Therefore, they must exchange most of the imported currency for local currency. With a floating exchange rate, this is merely the sale of that currency on the market. The imported currency's value is equal to that of the goods it can purchase - that is the value of manufactured goods offered by the goods-importing country.

If a simple system of comparative advantage emerged from this relationship, two effects would result. First, the goods-importing country would experience relatively fewer working hours and relatively lower prices for goods when compared to wages (higher standard of living) than the exporting country. Secondly, over time the exporting country's higher level of savings and lower unemployment would reduce poverty to the point that wages would be bid up, while the importing country's lower (or negative) level of savings and higher unemployment would cause wages to be bid down, effectively leading to a trend toward equilibrium (or, more likely, an equilibrium-centered oscillation) and a progressive reduction in the level of wage differences between the two countries.

This simple system of comparative advantage is complicated by three factors. New technology that is developed will tend to dramatically slow the trend toward equilibrium. Shifting balances of trade with other countries will create chaotic effects that contribute a high degree of uncertainty to the analysis of eventual effect. Finally, changes in output levels will alter the purchasing power of consumers in both countries and lead to a non-unique equilibrium.

New technologies that are available tend to originate through the research of wealthy countries that have the resources to spend on comprehensive education systems and research funding. These technologies become a market good that is exported from the goods-importing countries and slow the rate of convergence toward the equilibrium described above. This effect has the following characteristics: first, firms must save up or receive loans in order to make the costly technology purchases and implement them. This leads to a financial market that mediates (with occasional speculation bubbles) the collection of currency in the goods-importing country's denomination. Firms are unlikely to take loans in their local currency and attempt to then save up imported currency because this time consuming process has a large opportunity cost and may involve costly interest payments as well.

These new technologies will bring about three types of improvement for the firm that implements them: 1. Labor usage reduction; 2. Natural resource usage reduction; 3. Greater market share. For this reason, new technologies can accelerate the rate at which markets become monopolized, and can actually lead to lower levels of employment within markets.

Additionally, this process will affect both economies in different ways at the macro level. For the goods-importing country, the tech industry will sustain higher levels of employment. This will sustain higher goods importation rates for longer. For the goods-exporting country, the higher rates of market monopolization and lower employment levels that technologies bring will actually slow the rate of poverty reduction. Thus, the trend toward equilibrium is slowed by technology. Both of these factors, however, will eventually dissipate unless new technologies are introduced at a constant rate, or if a technology development industry develops in the exporter country. Because new technologies are actually developed erratically, markets will tend to spurt toward equilibrium, then stall, then spurt again, rather than moving smoothly. This can lead to oscillatory effects that prevent the existence of steady states.

The comparative advantage equilibrium is further complicated by the effects of the comparative advantage of other countries. If natural resource costs increase, or if exports to another sector increase or decrease, the labor and natural resource markets will transmit these effects throughout the market, affecting the balance of trade between all trading partners. The demonstration of oscillatory effects in complex equilibrium systems is a topic of high mathematical sophistication, but oscillating reactions have been discovered in chemistry, a discipline in which the units are approximately 21 orders of magnitude finer and therefore statistically better behaved than an economy.

Finally, the simple model is inaccurate in part because drops in exports, caused either by a loss of relative currency value of the importing nation or a drop in incomes due to higher unemployment, typically leads to an increase in unemployment or decreases in wages in the exporting country. This effect implies that increases in measured comparative advantage can lead directly to a diminished economic outcome.

Taking these things into consideration, where does our current economic position fit into this model? Likely, the United States and most of Europe have survived the past decade only by taking a technology provider role. As China and India and other major exporters develop science and technology programs of their own, what we have to offer in exchange for the constant stream of cheap goods becomes increasingly limited. The uses for US dollars correspondingly diminishes. Most likely for geopolitical reasons, the Chinese government has artificially stimulated demand for US dollars by buying US treasury debts. This has lessened the loss to Chinese manufacturing to some degree. Similar activity by other exporter countries all over the world, concerned with preventing collapse of their industries, has propped up the exchange values of importer country currencies. This has, in turn, prevented oil prices from going up. Ultimately, though, these measures will reach their limit. This is not unlike the catastrophic collapse of the globalized markets in the first great depression, but in our case, the supply of oil is not as plentiful nor can it be readily expanded, making the situation dire.

The root cause of this problem is really the false steady state model that seems to dominate economic thought. This model typically takes aggregates as stable objects and firms as permanent fixtures. In reality, firms are not permanent fixtures. Rather, they have a finite but indeterminate lifespan. Employment results from specific tasks that are undertaken by the firm during its lifespan. The natural trend in economies is toward wealth concentrations and high productivity. This inevitably leads to low employment and low quality of life. This is where the "equilibrium" rests. In truth, there is no guarantee that a job will last for the 30 years that our tradition defines as a career. Nor is there a guarantee that a person will be able to live off of the wage they are paid. Nor is there a guarantee that housing will exist for each citizen. And amid all of these human concerns, the environment will be exploited to the point of complete destruction, permanently reducing the possible quality of life for all future generations, over and over again.

In order to lift the masses out of squalor, a government must be able to occupy a strong negotiating position. The guarantee of high employment is not really possible unless productivity is artificially reduced, a deliberate endorsement of waste. However, high quality of life is possible through rigorous efforts at wealth redistribution and rules limiting working hours (such as shorter work weeks). But regardless of the solution proposed, the actual production of goods cannot occur outside of the jurisdiction of the government, so that reasonable regulations can be imposed. For this reason, and this reason alone, foreign trade ought be severely confined. But if a thinking person looks in detail at its actual effect, it is also clear that it is undesirable for other reasons.

Thursday, February 11, 2010

The Infatuation with Elegance

Economics, as an institution, is one that has tended to have an infatuation with elegance, a notion that simple solutions will emerge from the proper approach, and that the layman's instinct to roll up his sleeves and fixate on minutae is a sign of simplemindedness. This tendency is most pronounced in the political gestures made by the prestigious minds at the forefront of the modern day's many schools of economic thought. They propose that an economy can be improved by some radical change to monetary policy, by a restructuring of the tax system, or by general policies of laissez-faire. Ironically, it takes but the smallest bit of critical thought to dispel this illusion, and to reveal the incredible complexity necessary in even the most rudimentary of public policies. It is not that these minds have an inability or unwillingness to think critically; rather, their very academic careers depend upon their continued championing of the school of thought to which their thesis represents an oath of allegiance.

Wealth is taken often to mean the total monetary value of an individual's assets. If this is the case, then the distribution of wealth alone can hardly be taken as an indicator of the general quality of life. Let us use a simple example, that of the production of bread, from overwintered wheat grains ready to be sown in the spring, to the point of consumption at the table. It is clear that one must look at details: what portion is the cost of a loaf of bread of a laborer's daily wage, and is this state of affairs inclined, without further intervention, to improve or to become more severe, threatening the laborer with starvation? Here again, it is not enough to simply look at the possible, to assess the amount of labor spent in baking the loaf - though a certain level of productivity is necessary for a given quality of life it is not a sufficient condition. Productivity gains can in theory be distributed in any way the firm owner wants between price reductions, cuts in number of labor hours, and expansions of the production level. If any part of the supply chain cannot expand to meet increased demand for its factor goods, prices will not tend to fall and output will not tend to increase, thus unemployment becomes inevitable. In some situations, prices may also rise.

It is also not the case that the combination of different industries, each with a certain level of complexity, is confined by a law of interrelation that limits the total effect to some predictable bounds. Though it is true that as new industries are added, complimentary pairing can arise that compensate for some supply issues, a survey of major economies today reveals a few "bottleneck" resources that can each prevent a smooth expansion of supply levels in every industry. Few industries can go without gasoline in the distribution of goods. Nor can industries go without at least one of electricity, water, fertile land, available real estate, healthy ecosystems, or a general public willing to be fleeced.

One must ask, what about technological advancement? But here, the general trend of history indicates that technology is correlated with increases in resource consumption rather than reductions. In any event, a fundamentally unpredictable thing such as technology cannot make the supply of essential goods more predictable. If, in theory, the economy can become predominantly information oriented, and a permanent, abundant supply of electricity can be secured, the massive production and replacement of electronic gadgets would remain a source of both uncertainty and toxic waste.

We can now turn to the specific limits of monetary measures in the prediction of economic conditions. The welfare of person A is wholly uncorrelated with the wealth of person B, so long as person A and person B consume the same goods and negotiate for the same prices on these goods. In fact, if person B has a great deal of wealth, he may even get a better deal on some goods than person A, simply because his wealth will open doors for him. Inevitably, though, person B will not consume the same goods that person A does, nor will he negotiate for the same prices.

If one charts the flow of money within an economy, one will find that it is constantly flowing from individuals to businesses, then from businesses to banks, and from banks back into businesses, who return a portion of it to individuals in their wages. Assume that times are prosperous and every sector is flourishing. Here, a few inequalities generally apply. Businesses must collect more from individuals (revenue) than they give out in wages and loan payments (we may leave out business to business transactions such as costs of services and utilities, as we are looking at businesses in aggregate; furthermore wages includes dividend payouts). Similarly, banks must collect more in loan payments than they give out in new loans and wages. Investors must collect more in dividends than they pay in loan payments. Finally, individual incomes (wages) must exceed loan payments and payments to businesses if individuals are to become more wealthy.

This is described symbolically as follows

I.Business > W.Business + L.Businesses
I.Banks > N.Loans + W.Banks
W.Business + W.Banks > I.Business + L.Individuals

Additionally, Loan payments by businesses plus loan payments by individuals is the sum of bank income. Thus,

I.Banks = L.Businesses + L.Individuals

But can this linear system be satisfied with positive values? Let us check:

Start by subbing out I.Banks:

I.Business > W.Business + L.Businesses
L.Businesses + L.Individuals > N.Loans + W.Banks

=> I.Business - W.Business > L.Business
L.Business > N.Loans + W.Banks - L.Individuals
=> I.Business - W.Business > N.Loans + W.Banks - L.Individuals (1)

W.Business + W.Banks > I.Business + L.Individuals
is equivalent to:
W.Banks - L.Individual > I.Business - W.Business (2)

(1) composed with (2) gives:
=> W.Banks - L.Individual > N.Loans + W.Banks - L.Individual

Which is equivalent to:
0 > N. Loans

Thus, the system cannot be all positive. In particular, new loan issues must be negative! In the real world, businesses and individuals actually accept new loans to offset various costs, meaning that many operate at a loss, hedging on better times ahead. However, these inequalities indicate that some sector is always going to lose out.

Indeed, these inequalities indicate that loans are being paid back in times of prosperity, such that eventually the banking system withers away and ceases to exist. Perhaps the banking system is a structural object, never intended to occupy a central place in economic life, but present only due to the persistent imperfections in the market. It is likely, then, that prosperity can be better insured through a policy of tight regulation of banking, and perhaps its confinement to single state charters or being an entirely government run enterprise.

Returning to the nice consumer pair A and B, what types of goods is the person B inclined to purchase? B will purchase the following:
  • Similar basic necessities to A
  • Real estate - B will bid up real estate that A is considering purchasing and lead to higher rental rates if A is renting
  • Land for its natural resources (This will benefit A if it expands economic growth, harm A if it causes environmental damage or the reverse if purchased for sake of squatting or conservation).
  • Luxury goods that do not appreciably increase B's quality of life but may compete for scarce resources and/or get A a better job.
  • Political favors, generally to give B an unfair advantage in the market place
  • Charitable donations
  • Investments in existing businesses (various effects, from good things like reduction of banking to bad things like monopolization)
  • New starting businesses
This last point, though, warrants some expansion. If a society has a coherent standard of civic virtue, B may develop his business for the sake of having a business. If he has ties to his community he may be content to run without a profit or with little profit (honest competition) simply because he will be cognizant of the benefits he is giving to the community. However, if the structure of industries is generally too concentrated (e.g. in megacorporations, box stores, etc.), B may not have any such opportunities. Furthermore, the society may be organized in such a way that genuine communities may be impossible (e.g. sprawling suburbs with no coherent design) or his culture may spend disproportionate amounts of time engaged in antisocial behavior (e.g. watching television or blogging).

Of course, having large amounts of money is different than having a high income. Assume the money supply in an economy expands in the following fashion: the dollars are distributed in an equal fraction to each member of the economy. Then any person who makes X more than the average income must have a total of Q individuals who make Y less than the average, such that X = Y*Q. In fact, net income within the economy (changes in dollar wealth) is equal only to the total amount of new money added to the money supply. Thus, unless prices drop as income becomes concentrated, the quality of life of those at the bottom tends to fall.

So on and so on, myriad details form a web of economic exchanges that has many dimensions and caveats. The interdisciplinary nature of proper analysis in this field ensures that those who focus primarily on mathematical models will not grasp the nuances necessary to make accurate predictions.