I will keep Wikileaks separate from Julian Assange, since I’m more  interested in the concept of Wikileaks than the person representing it.  I will also keep the specific content of the cables largely out of the discussion, since that is not central to my question either (btw, I didn’t find anything that damaging in what was released.  Secretary of Defense Robert Gates mirrors my sentiments).

Is it OK to publish secret/private information, even if it is potentially damaging?

Yes.  In fact, isn’t that what freedom of the press is all about?  I know that is what the founding fathers had in mind when they drafted the 1st amendment (not the 2nd or 3rd, the 1st): To allow We the People to hold those in power accountable for their actions.

I understand that leaking the information may have been criminal (Bradley Manning is being indicted), but obviously publishing previously leaked information is not.  In fact, Joe Lieberman is trying to make up a law to make it illegal.

I suppose politicians want freedom, openness, and transparency….as long as they themselves don’t have to abide by the same principles.

Since 9/11 and the PATRIOT act, the ability for the government to eavesdrop on our comings and goings has been greatly broadened (not that it wasn’t sufficient before I am sure).  I hear the argument all the time from politicians that if you have done nothing wrong you have nothing to worry about.

Touché Wikileaks

If the government has done nothing wrong, then why are they worried about leaking their internal memos?

The government argues that a) “diplomacy” is messy and requires secrecy, and b) that leaks of this kind may cause harm to those named in the documents.

A) Ok.  Diplomacy is messy.  I agree.  I also agree that parties may desire secrecy.  But in a country with free press that does not mean that they will GET secrecy; it just means they want it.  I see it as an operational failure….you couldn’t keep your information secret. Don’t shoot the messenger who has not broken any laws.

B) Leaks of this kind may cause harm to those named in the documents.  Hmm….they might.  However, there is not one documented case of this ever happening due to a Wikileak.  Not one.  To shut something down and put people in jail because it MIGHT cause harm…that is as bull headed as the idea of pre-emptive war (another puzzling policy).  You can’t attack someone because they might one day have the capability to attack you….that is a recipe for eternal war. To censor information that might be harmful is a recipe for blanket censorship.

Additionally, suppose there were some unfortunate harm caused by the publication of the cables? That is a thorny issue; however, not one that, in a blanket, fashion says publishing the material was bad.  If we’d had a Wikileak that proved the intelligence used to justify the invasion of Iraq was faulty, then that would’ve caused harm to those concocting the scheme, but it would have saved harm to many others.  Remember, no one has accused Wikileaks of publishing FALSE information, just inconvenient information.  The truth may occasionally cause harm; however, history teaches us that the truth serves the average person far better than government power and secrecy. It is hard to argue with that.

Finally, except in scale, how is this much different than other instances of investigative journalism with potentially harmful impact….like say Watergate?

Didn’t the Washington Post publish harmful information about the politics of our nation?  A president got impeached and Bob Woodward got a Pulitzer Prize.  Fast forward 27 years: no one is impeached or harmed and they want to shut down Wikileaks and put Julian Assange in jail (can you get a Pulitzer Prize from jail?).  My how times have changed.

I think the media is at least a little bit mad that they aren’t doing journalism anymore and some no name computer hacker from Australia is doing it for them.

—- Again, if the government is not doing anything wrong, then why do they care if their internal correspondence is made public?  It would simply be boring drivel (which it largely is this time, though that might not always be the case).

—- If they are doing something wrong, then Wikileaks is performing a journalistic service.

Thoughts?

Tags: freedom, government

I have discovered that I am a worrier.

Everyone worries I suppose….about paying rent each month, about their job, their kids, about lots of things.  That is normal.

I don’t worry so much about the day-to-day, but as if to point out that the brain (or at least my brain) is hard-wired to worry…..I invent worry about things I cannot control and most people would never even give a thought to.  These items consume much of my brain cycles and I write about them often (Democracy, Money, Work (in the abstract), Morals, Intelligence, etc.).  If only I could focus my brain on something more constructive instead of thinking about things I will never even influence, much less control.

I would like to introduce a concept and then develop a thought.

The Law of Conservation of Complexity (<– I made up the name):

The Law of Conservation of Complexity proposes:  When outcomes remain constant, Complexity is neither created nor destroyed; responsibility for it simply shifts.

Here is an example:

Computers have gotten easier to use over the years.  Remember command line, text interfaces?

Instead of making us remember tons of arcane text commands for doing simple things like copying, pasting, and/or renaming files, the software companies created a Graphical User Interface to allow us to do the same thing in simpler way.  The outcome is the same, copying/pasting, etc….but the complexity has moved behind the GUI interface.

Complexity actually increased.  Software engineers created a complicated graphics layer to allow us to interact more easily.  This layer didn’t exist before and creates lots of extra work for software folks.

In general, if something becomes less complex for you, it becomes more complex for someone else.  That is the law of conservation of complexity.

What this means is that complexity is always ramping UP….not down.  When something is “simplified”, generally it hasn’t been….the complicated work has simply shifted away from the people who are calling it “simplified” and toward another group that must maintain the “simplicity” with a bunch of complex processes and skilled labor.

If no one maintains the shifted complexity, you just get broken stuff as the people who think it has been simplified don’t realize that it was only simplified for them and don’t allocate sufficient resources to maintaining the newly shifted complexity.

The idea I’d like to develop is:

Civilization is limited by our ability to manage complexity….and complexity tends to crash, not unwind.

I’d wager people believe Civilization is a fairly stable thing.  The logic might run something like “There is just too much involved for it all to fail.  If some country falls apart or technology is lost,  it is replaced and relearned by others.  Civilization is robust.”

This is the global network theory, and is somewhat true on a limited scale.  Civilization is definitely built upon the remains of other civilizations and if one country fails, another replaces it.

HOWEVER, the analogy is less like a city or pyramid and more like a house of cards.

Civilization is a house of cards.

If you’ve ever built a very large house of cards (using multiple decks), you can occasionally have little sections collapse and rebuild fine; you can have it spread if you keep it near the floor….but as you build higher and the complexity of the structures rise, it becomes more difficult to rebuild collapsed sections.  Additionally it gets heavier,  more prone to larger issues, and it will eventually begin to collapse under its own weight no matter what you do.

If you get to this point, it is not possible to rewind your house of cards, to make it less complex.  The harder you try the more you will knock it down.

Things are really complex already; more than any one person can manage. Let’s take a concrete example:

The iPhone.  (I’m picking technology examples because technology is among the most complex things humans produce.)

No ONE person can make an iPhone.  No two people can.  In fact, no hundred people can.  You need cell networks to exist; you need miniature cameras; you need an army of expert software programmers, you need mp3s to exist; you need scratch proof touchscreen glass to exist; you need people with computers and iTunes and enough money to buy such devices; you need phones to exist; you need compression algorithms and IP protocols to send/receive data; you need sophisticated battery technology to power the device; you need cheap, available electricity to charge it; you need GPS satellites in space……..you need a shitload of stuff to exist to make an iPhone.

There are limits to the complexity humans can manage.

Now imagine a device 100 times as complex as the iPhone. How would it get made?  There are coordination costs of any large endeavor; eventually nothing gets done if the addition of extra complexity is eaten up by the lack of ability to manage it.

So when you reach this point, where each additional “unit” of complexity no longer adds to the end product, but subtracts from it….then what happens? Can you rewind?

Like a juggler, you can add extra balls and keep them all going and things are moving faster and they are more complicated…but then when you add that last ball, it doesn’t slow down….you drop all the balls and you have to start over.

How robust is Civilization?

I think not so much.  Though we have currently had a good row of 3000 years or so, that is paltry compared to the sum of mankind’s existence (modern humans have been around in fits and starts for about 100,000 years).  Events do happen that cause things to unravel, and unlike our linear conception of ramp up, then ramp down….in nature it is often an exponential rise, then a very steep drop off.  Complexity tends to crash, not fizzle.

Where does that leave us?  In the same spot we were before.  I know it exists and we (though probably not me) will bump up against the complexity limit someday…but we will not be able to do much about it.  I simply tend to think about things that I have no control over.

Tags: complexity

The Collapse of Complex Business Models.

People do change, or rather they age….which causes change.

Its been a while since I posted, and for good reason.  I’ve been gone 3 to 4 days a week for work since March.  Also, I went on my honeymoon and my wife and I are now pregnant.

So…I guess instead of writing about economics, I will write about becoming a father…in a roundabout way.

I like these kind of stories because they are stories.  Personal development is very rarely so clean as we tell it to be.  It is messy and we never realize it when it happens….then later we create a story to rationalize it to ourselves and that story becomes our truth.  It literally becomes true (in a sense) by making up the story.

When I was young my father told me I was part of a family unit and that my behavior reflected on the family so it was not my own to do with as I pleased.  Actually, that is my paraphrase of what he said.  My dad was never good at explaining things; he dictated rather than counseled.  I rarely listened, and still don’t.

I disagreed.  I am me.  I agreed that I was a family member but my behavior was my own to do with as I pleased.  I was vaguely aware that I disliked the idea that others had a charge on my behavior and rejected the idea that whether or not I made good grades, hung out with X person, or had an odd haircut had any bearing on what my parents did in their company.  I saw the two as separate and unrelated.

I largely maintained that point of view throughout my twenties.  I behaved like a self-contained unit…not overly selfish, just very much my own person.  That is a path we all go down; mine just lasted a long time.

I remember having a conversation with a guy in Tel Aviv in 1997.  He said the things you own, own you….so he’d given away his possessions (he was from California) and was now on this trip.  I said, “That’s ridiculous.  Are you telling me that if I asked you for your car, you would simply give it away?”.  He said, “Yes.  That’s exactly what I did before I left.”.  That was the end of the conversation as I had no pithy comeback for that.

My friends were all very independent self-contained people as well.  I didn’t understand “neediness”.  I mistook it for weakness.

I told a girlfriend one time (which was a bad move):  “Its like you’re looking for a reality-buffer, something or someone to stand in between you and whatever is happening in your life that is less than ideal to help you deal with it.  I don’t do that.  It’s just me and if I don’t do it or deal with it….it doesn’t get done.”.

I think that attitude was part of the reason I stayed single for so long; I didn’t understand very well the concept of taking full responsibility for something or someone else.  I take full responsibility for myself and if everyone did the same, then we’d all be taken care of.  I still rarely ask for help (though I am better at giving it); I have habituated myself to doing on my own.

Life doesn’t work like that though.  500 years ago John Donne wrote better than I ever could:

No man is an island entire of itself; every man
is a piece of the continent, a part of the main;
if a clod be washed away by the sea, Europe
is the less, as well as if a promontory were, as
well as any manner of thy friends or of thine
own were; any man’s death diminishes me,
because I am involved in mankind.
And therefore never send to know for whom
the bell tolls; it tolls for thee.

Though it is possible to be an island, much like the analogy would suggest being on an island by yourself is quite lonely and there is little of worth a man could ever accomplish there alone.

When I lived the island life (so to speak) it seemed reasonable.  I was very unattached and the lives of the attached seemed full of busyness and anxiety….and that is true.

However…..it seems a hard lesson to learn to realize that we are not meant to be unattached.  To be alive is to be attached to each other; my life is given weight and significance by the fact that others are here to witness it.  Civilization requires people who are attached to each other.  Nothing good is accomplished alone.  Even if you must make the case that it was accomplished alone….it is only enjoyed with others.  Without agreement on the fact that we are all here together, you implicitly advocate living in a cave alone, without law, without technology.

If you accept that we are in this together then there must be a certain amount of responsibility toward other people.  I’m not always certain of the degree or how that plays out in practice, but even the theoretical agreement that life requires other people and that we have a responsibility to them causes behavior change, it caused my behavior to change.

Unfortunately, I do not have a cute life story to illustrate how I came to realize that no man is an island.   I should make one up though as its a neater yarn to spin.

So….now I have a wife and she is pregnant.  I’m not really stressed about this anymore than is normal.  I’m good with taking responsibility for others.  Its a fair trade when the alternative is the island life.

Tags: family

Here is a question:

If the government can simply print money…….why do they need to tax us?

They don’t need our money at all.  They have the blank check of the printing press at all times.  They could simply spend new money into existence, and leave it at that.

As long as they didn’t print so much that it devalued the currency, it would work fine.  That’s the same basic issue they have now (even with taxes), so that isn’t much of a shift.

Honestly, I can’t think of an economic reason (can anyone else?).

The cynic in me says there are two good psychological reasons to tax:

1. Incentives:  If the government taxes one thing (or gives a tax credit on another) it can influence our behavior.  That’s what the government does…..governs/influences/controls.
2. Government spending and the value of money would be more obvious:  People would realize printing more money devalues the money they already have; it is like theft.  They would equate inflation with theft, knowing the government printed too much (perhaps for war) and that took part of the value of the money that they’d already saved.  On another note, tax evasion would be impossible, since there wouldn’t be any taxes.

Another good question is why we allow governments to run deficits.  The flip side of the original question is:

Why do we allow the government to run the printing press?  Why not force them to spend ONLY tax revenue?

This would produce an even more dramatic outcome than ceasing the printing press:  NO MORE FOREIGN WARS.  If we had to pay each year the full cost of our military and were forced to choose between wars and education or health care (or being taxed at 100% of our income so that we’d starve)….we would always choose domestic issues.  This would also naturally limit the size of the government (since they’d no longer have a blank check).  Government spending could only grow as the economy grew (or shrunk).

Economists argue against this as they cite that governments need to issue debt to undertake large scale activities (wars, stimulus, etc.) that would be impossible if they had to pay for it each year.  I understand this argument and agree to a certain extent….and will only point out that Economists are full of shit and can’t predict as a group whether the sun will come up tomorrow.  As the new day rose and even into the sunset they would still be arguing about whether the sun was actually there at all.

I say the government and its band of inbred, self-serving economists whose theories have no relation whatsoever to reality (and cause us to have to bail them out) should be limited in a natural way.  Perhaps tax-revenue-only spending would be the answer.

I actually know why governments don’t choose this option: it causes them to get overthrown.

In the old days of gold currencies, the governments could only spend the amount of gold they had.  They had to go find new gold to fight wars and they taxed until it impoverished their people.  The people then overthrew the government.

Then one day a nifty, smart group of revolutionaries figured out that with fiat currency they could get around the spending limit problem and just borrow continuously from people who weren’t born yet.  The first groups failed because they got greedy with the printing press, which also impoverished their people…..who then overthrew the government again (notice the theme?).

Then the governments figured out they needed a Goldilocks printing press….print enough, but not too much to impoverish their people.  It doesn’t matter though that they know; it is always easier to mortgage the future than it is to pay in the present….and so all governments will succumb to the temptation of the printing press…and get overthrown as they impoverish their people.

I guess the final question, if I were a government, would be:

Why not both tax us and print money?

Why not have the best of both worlds?  No need to limit yourself to just one of those two options.   Indeed, why not?  I guess, unfortunately, that is the answer.

Tags: economics, money

I write a lot about economics, and honestly I’ve come to understand a pretty good bit about how power is exerted at the macro level (remember economics is about levers and incentives, not money).

At work (and in life) I have no real macro power, but I have seen people who do.  Though I do not like politics from the perspective of Democrats vs. Republicans (since they are largely the same); I do like politics from the perspective of how to influence and how to barter power.

I read Nietzsche’s “Will to Power”; I read Machiavelli’s “The Prince”.  I even read the best-seller 48 Laws of Power.  Sadly I never read Sun-Tzu’s Art of War.

Here is some truth about Power:

– I will never have any….at least not enough to truly influence events on a macro level.  Influence at a local level is nice; however, it will not likely change the general circumstances of my life.

– Money is Power.  Information is Power.  Guns are Power.  I will pretty much never have those in any significant amount (and I don’t want them).

– We aren’t even in the game.  We are pawns.  The top 1% control 42% of wealth in the US.  The flip side is that 40% of the population vies for 1% of the wealth.

– We will never make enough money to escape the hedonic treadmill.  As our salary goes up, so will our lifestyle.  Some people make enough to get our of this trap…most don’t.  Working hard is not the answer.

– We will not be smart enough to “game the system”.  There are a few people at the bottom who draw social security disability that shouldn’t or get too many food stamps, but they are still certainly not the winners.  For us to begin to “game the system” at a higher level we will need more power/information than we’ll likely ever have.

So what is my advice?

CUT EXPENSES…and save.

That’s it.  You thought it was going to be some great revelation, but it isn’t.  We don’t have access to that kind of power.   We play by the rules; we don’t make the rules.

That’s the best most of us can do.  We cannot avoid taxes since we have no deductions.  There is no get rich quick scheme and we’re always faced with potentially crippling medical/education/unemployment/whatever costs.

We will not get ahead by making more money; our lifestyles will go up in lockstep with our salary, but we will be no better off (after about 40K there is no well-being bump from increased earnings).

We cannot pick stocks.  We will not win the lottery.  We will not become rappers and sports stars.  Most of us will never even become managers or VPs.

There are only two sides to the equation:  Expenses and Income.  We cannot affect our income in a way that will allow us to get ahead (where did your 2% raise last year go?), so that leaves Expenses…the only thing we control.

To get more concrete, it is FIXED expenses that kill us.

– A house.  Don’t buy a big, expensive house. A house is not an investment; it never was.  It is a place to live.  Living in a smaller house with a smaller monthly payment is key.  A smaller house will also help your energy bills.

– A car.  Don’t buy a nice car. A car is a waste of money.  Drive the worst car that your lifestyle will allow you to drive…then pick one a little crappier and older.  When you’re out of work and you have 15K extra because you didn’t buy the brand new Infiniti…you’ll be happy.  On a related note, pay cash for your car.  Do not take out a loan.  The car you can afford is the car you can pay for.

– Cable.  I fucking hate cable and as soon as I find a way to watch sports online, I will be ditching cable. I can already watch all the shows I want online.  I can get movies (which I can never find the time to watch anyway) through Netflix.   I still find it frightening that I drop nearly 100 bucks a month to watch a few sporting events.

– No debt: Don’t get trapped servicing debt, credit card or otherwise.

– Student Loans: Don’t go to a good school. They are expensive and will, at the best, get you a good paying job…which will not be all that beneficial for you.  It will be much more beneficial to have no debt and be a hard worker, which will make up for the fact your didn’t go to a good school.  However, do go to a GREAT school if you can get in (Harvard, Yale, MIT, etc.).  This is where the people that make the rules go to school.  If you become tight with them it is definitely worth the money.

What can you spend money on?

– Flat screen TVs, expensive beers, going out to eat, etc:  I’m not saying go crazy, but one time purchases can always be stopped.  Next month simply don’t buy a flat screen TV.  Easy enough. The expense is gone.  This crap about the American consumer being in trouble because they spend too much of frivolous junk is a load of shit.  Those kind of expenses, unless you have some sort of psychological shopping disorder, will not get you in trouble.  It is the recurring expenses, FIXED expenses, that will cause you to go bankrupt.

– Health Insurance:  Unless you’re 20 years old and invincible…buy some, at least a high deductible indemnity plan.  Just wait till you get unlucky and drop 100K on open heart surgery…then try for the rest of your life to recovery economically (and medically) from that.

So that’s it.  That’s being rich:  spending less than you make and having a piece of mind about it.

---

It occurs to me that I’m giving the above advice to myself and others in my income level, which would be pretty much everyone in maybe the 50 – 90th percentile of earnings.

If you are below that (and most people will be below the 50th percentile by definition)….its still good advice in general; however, there is very little you can do.  Sorry.

Your expenses are likely already cut (except on crap like cigarettes and lottery tickets, which you should definitely cut out), and your income will likely never rise high enough to give you significant options.  The US has poor income mobility, especially at the bottom end.

Not that any one person can’t rise above their station in life.  We can.  It just isn’t likely to happen on average.

There is advice I can give; however, it isn’t likely to have any affect for a good number (if advice could help people we’d all be millionaires as there is plenty of it out there).

It is not that I write off the bottom half.  I have been in it (and may be again), and there are plenty of good, nice hard-working people there.

The fact that so many have so few options is what is troubling…not for me, but the future of the country and our children.

Tags: advice, economics, power

There.  I said it.

And I mean it.  Not that certain stocks are a ponzi scheme….the entire concept of the stock market is a ponzi scheme.

Think of all the people that work in industries related to the stock market……are you thinking?  There are newspapers, magazines, and entire TV channels that employee only people talking about the stock market all day.

And they all have no fucking idea what they are talking about.  They are so spectacularly wrong, even weathermen are more accurate than these people….and if weathermen are wrong you simply get wet.  When all these clowns are wrong the global economy is wrecked.

Let’s examine some fundamental truths about the stock market:

Stock shares are fiat money (ie. THEY ARE WORTHLESS): A company issues stock, but what is a stock?  It is simply debt, and they raise public debt (issue stock), because it is cheaper than bank debt.  If they could raise money cheaper simply by borrowing from a bank….they would.  They issue stock debt to YOU because it is cheaper than asking a bank.

Why is stock so “cheap”?  Well….because it is FREE.  Bank debt is harder to get out of.  If the company fails, the liquidated assets of the company will go first to the banks (before the stockholders).  Since debt is concentrated with the bank, they can ask the company to do things (stock ownership is dispersed, so stockholders (unless you’re a really large one) aren’t well organized and have no power).

Do you understand? Companies give you a piece of paper (you can call it stock or you can call it currency), that gives you no charge on the company (you can’t trade it in for any product), puts you last in line for liquidated assets if the company goes bankrupt, and is worth something only because other yahoos agree to pay you for it (but it has no utility).

Stock is simply currency that a company has issued (like the government issues US Dollars)……except you can’t buy anything with it.  You simply own it, like art or baseball cards, until someone else agrees to buy it from you.

The exception to this is companies that issue a dividend (you do actually get something in this case); however, the companies that don’t issue a dividend are still bought and sold very regularly (Microsoft didn’t for years and Google still doesn’t).

Stock price changes do not make (or lose) any money for the company:

Companies issue the public debt of stocks once, at the IPO (Initial Public Offering).  At the IPO they sell a bunch of shares to us and we give them money.  They then spend that money.  They gave us “shares” (which are worthless; they are not “sharing” anything)…..we gave them money.

The stock market is simply a second hand swap meet.

Stocks are to companies as used cars are to car makers……they make NO MONEY when their stock goes up (just like a sold used Toyota makes no money for Toyota).

People investing in stocks do not help business or the economy:

You’re not creating jobs (except in finance) or helping the company; stocks (at their best) are supposed to reflect the underlying health of a company; they do not CAUSE the underlying health of the company.

Here is a thought experiment:

If everyone bought the stock of a company, what would the outcome be?  Nothing except an inflated stock price.  No one really has anything.  Nothing has been produced (except fees for finance companies).

If everyone bought the PRODUCT of a company, what would the outcome be?  Well, they would have something (the product), and the company would get that money.  That is something you can work with.

Stock market prices do not predict anything:

Stocks may reflect some things, though what they reflect I’m not sure (human psychology about the markets themselves perhaps?).  The smartest PHDs in the world have thrown every algorithm in the world at stock data.  It is random from one day to the next.

The only proven way to predict the stock market is to have INSIDE INFORMATION.  The rest of us will never do better than the market in general except by luck.

The capital gains tax reduction on stock investments is simply a tax break for the rich:

The average person gets almost no income from stocks; functionally we don’t really care about the capital gains tax rate….because we don’t have any significant capital gains.

1 percent of all taxpayers collect over two-thirds of all capital gains; that top 1% gets a tax break on their income; we don’t.  We pay 33% or whatever, and they pay 15% on their capital gains.

It is said that a reduced capital gains tax encourages investment.  Perhaps (I won’t go into the economic arguments here)…however, in the labor vs. business struggle…..labor has really been losing out over the past twenty years.  Its hard to have sympathy for the capital gains crowd (since they just wrecked the world economy).

What is good for the stock market is not what is good for America:

Correlation is not causation.  It is true that if the underlying reality of the the economy is good then you’ll probably have a decent market return; however, you CANNOT WAG THE DOG in this case.  Propping up the stock market will not cause a fundamentally sound economy.  It will simply cause the stock holders to get rich…while the underlying fundamentals (labor, jobs, etc) continue to worsen.

Chew on that.

Tags: economics, stock market

Rent Seeking:

Not to be confused with simply paying rent….rent seeking is an economic term to describe extracting an economic “rent” (i.e. some sort of value) on a transaction where the party adds no actual value.  Another definition (from investopedia.com) is when a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any benefits back to society through wealth creation.

This is easily applied to the current financial industry.  It is a simplification; however, if the high-finance industry simply ceased to exist, no harm would be done.  They don’t actually produce anything…they simply extract rent as a piece of other, hopefully productive, activities.

Finance claims to do risk assessment. That is almost laughable.  They failed to properly evaluate the risk they themselves created with their fancy debt instruments……and we ended up bailing them out.  If I were them….and they were smart….I would fire themselves.  They are obviously incompetent and a self-contradiction:  If their purpose is to mitigate financial risk and they themselves are the largest risk to global finance…the only logical conclusion is to close their doors and go home.

Rent seekers are bad. They produce nothing and extract a “rent’ (i.e. are a burden) on people who do.  If the rent seekers get bad enough….the producers simply stop producing.

Wealth creation:

Who then are the non-rent seekers?  What actually is a productive pursuit?  This is the more interesting question by far.

I argue that productive pursuits improve lives.

Productive:  Growing food is productive.  Building houses is productive.  Air conditioning, plumbing, refrigerators.

If you have these things….your life will be better.  No doubt.  Black and White.  It gets more difficult though.  Some things are necessary to make things that make life better.

Compliments to wealth creation:  Roads, electricity, computers, telephones, etc.

These are necessary to make the things that make life better.  It gets even harder.

Ambiguous:  What about lawyers?  Are they navigating the law for the wealth creators so they can do their job or are they using their special knowledge of our byzantine legal system to bend the rules in their favor….to rent seek?

What about the health insurance industry?  Are they helping people get health care or are they using their legally created special status to rent seek on people trying to get health care?  If the whole industry simply disappeared, would it really matter?

What about service industry jobs? Are barber shops and nail salons creating wealth? No.  They are not.  They are compliments.  Theses industries (and many others) do not create wealth; they exist solely because of the excess wealth of the industries which create things that make our lives better.

Only when the first dude created enough excess wealth from his labor would their ever be demand for a service job like laundry or cleaning.

After all…..imagine a society where everyone is cleaning for everyone else and cutting their hair….where do these people live?  What would they have to clean if nothing were being produced?  The service industry exists as a compliment.

So……I’ve probably lumped over half (forgive the imprecision) of US economy into non-wealth creating pursuits.  Most people work in service or rent seeking industries.

If this is the case, what about the US economy with its dwindling manufacturing base and increasing service sector?

Can a purely service economy exist?

No.  I don’t think so.  Not for any extended period of time and be prosperous.

There are a precious few things that truly make life better….and the vast, vast majority are all actual THINGS.  They are things enabled by advances in technology.

That’s what true wealth creation is:  Technology enabled stuff we produce that makes our lives better.

Everything else exists on the coattails of those very few items, because without those very few items all the other stuff wouldn’t NEED to exist.

Example:  It might be true that the greatness of the Seinfeld TV show made lives better.  I could agree with that; however, without food, a roof, warmth, indoor plumbing, electricity, etc….no one would care about TV.

What does all this mean?

1) Technology is the basis of everything that makes our life better.  Invest in it.  Waste money on it if needed (don’t waste money on foreign wars).

2) Make stuff that improves lives.  Everything else is either service for those that make things…..or rent seekers.  If you don’t make things, you’ll soon be lining up to be friends with those who do.

Tags: economics

Rand Paul has come under serious fire lately for his staunch libertarian stance on the Civil Rights Act.  The basic gist is:  Government doesn’t need to interfere in a business’s right to be racist if it wants.  The market can decide; if people don’t like racism, they won’t shop at or buy from racist businesses.

One site likened his somewhat naive comments to something college students might discuss in a coffee shop…not something politicians would discuss with any seriousness.

So…I’m a kid in a coffee shop…what would I say?

Let’s play the thought experiment:  pretend we let the market decide…and it decides that it wants to be racist.  This is probably the reality anyway, since why would you need to sign an anti-discrimination law if there weren’t any to begin with?

So is it ok for the market to be racist?

If I don’t like the businesses where I live that are discriminatory; I can just move somewhere else, participate in a different market, right?

Hmm…but you forced me to move. Someone else’s discrimination is affecting where I live, where I shop. And that is just me…what about the people that are being discriminated against?

The Libertarian argument that businesses (or anything else they are referring to) should be “free” to do what they like is bunk.  Your freedom is not always yours alone.  It affects other people; it doesn’t exist in a vacuum.

The extreme example is smoking.  You should not be free to smoke….because your smoke affects other people too.  If you want to smoke at your house or something…ok.  But a ban on smoking in planes, or in buildings, or restaurants is completely appropriate.  If your freedom to smoke means I get cancer, then you should not be free to do it.

Many things are like this.  A more subtle example is the time honored American “freedom” to be rich…really rich.  In America it is ok to be rich (not all countries are so positive about the rich).

But being rich comes at least somewhat at the expense of those who worked to make you rich.  The rest have to watch the rich move to the front of every line, drive nicer cars, live in better, safer houses.  People worry about their plight in life compared to the rich.  The rich simply existing is a source of anxiety which causes ill health.

I’m not saying it is bad to be rich…only that it isn’t in a vacuum.  The rich existing does affect the poor.  The larger the income disparity between the rich and poor, the more the effect.  Most countries have progressive tax schemes at least somewhat due to this.  It is a tax on the rich simply because they are rich (which affects everyone else).

So no.  Racism is not ok.

My grandfather is dying.  That stinks and I love him and its really hard on my family and my mom today asked me if I wanted to speak at the funeral.

Of course I said.  Its my place I think to say something as I was one of those that knew him best…at least as a grandfather.

Now I’m thinking, “What exactly do you say at your grandfather’s funeral”?

I could google it….and for anyone that knows me or reads the website….I google everything.  You can almost always get good information.  I googled songs for my wedding.  I google recipes, places to eat, etc.

But I won’t.  In this case, I don’t think it matters what makes a good speech at a funeral.  I’m not trying to make a good speech….i’m trying to make MY speech about MY grandfather.

I remember when Marc Whitfield was killed; they talked about the honor of serving as a policeman, but to me that was about police….not about Marc.

And I don’t think the speech is to the other people at the funeral…some lesson learned about death, or the importance of those still alive that we love.  I’m not moralizing to the attendees.  That doesn’t matter much and I’m not the person to do that.

In the end, I’m not sure there is much to be learned from death?  It happens.  It may point out some things about life, but death itself is pretty mundane, final, and self-explanatory.

I think I will speak to him directly; it is for him and my family.   Say something nice about how much I loved him; tell a funny story I remember growing up with him.

I’m not religious, but if he can hear…he knew how much I loved him….and it never hurts to hear it again.