A Renegade History of the United States: a brief response

Rick Weber Books, History , ,

A while ago I finished reading (by audiobook) A Renegade History of the United States. The overarching theme of this entertaining and interesting book often seems to be: “look at these fucking squares!”

And that’s important, because the author points out their illiberal, short sighted, and irrational views, the reactionary nature of those views. But the author turns it into yet another A vs. B situation; a linear spectrum. There’s the “renegades” and the “squares.” I’m absolutely on board with the idea that there are establishment squares to be derided. But just because The Man is stupid, doesn’t mean he’s got a monopoly on it.

The positive message is that “renegades” are exemplars of freedom, and especially the freedom to be wrong. If you aren’t free to make mistakes, you aren’t free. And the point of freedom (besides the fact that freedom is excellent) is that it allows a dispersed approach to figuring out the good life. I’m increasingly doubtful that The Hitchhikers’ Guide was anything but correct when it posited that Earth is a computer set in motion to determine the question that matches the answer to “Life, The Universe, and Everything” (the answer is 42, the question is something besides “What is 6×7?”). This history shows a number of instances that show how breaking from the status quo, actively doing what everyone else is convinced is wrong, contributes to the overall flourishing and success of later generations.

All told, I’m happy giving it 4 stars.

Slavery and the footnotes

Brandon Christensen History, Religion , , , , , , , , ,

I came across this old essay on slavery by economist Gordon Tullock (h/t Tyler Cowen) and what struck me (aside from an excellent presentation of the economics of slavery) was this footnote on the inevitable dissolution of Marxism (this paper was written in 1967):

It may be that the dissolution is not the first step toward the total elimination of this powerful religion, but merely a breaking away of the talmudic encrustation of the true scribes and pharisees of the Second and Third Internationals. Such a development is not uncommon in the history of other religions. My personal opinion is that the disintegration which we now see is more fundamental, however, and I doubt that Marxism will survive the century as a living faith.

In my own experience in the classrooms of powerful and plebeian universities alike, Marxism has indeed disintegrated into virtually nothing. Marxism has, rather, become a sort of an embarrassing older uncle that professors chuckle about in a manner that is more reminiscing than bitter. They all realize that Marxism led to very bad things, but they are unable to acknowledge that capitalism – Marxism’s Other – has brought about peace and prosperity for untold billions.

It would be wise for us, therefore, to continue to focus on this dead religion. Deep-seated beliefs are hard to let go of, even after these beliefs have been shown – theoretically and empirically – to lead to horrors of the worst kind. “Yes,” the embarrassed former adherents grudgingly admit, “communism has failed miserably, but socialism has not. It has not even been tried, and besides, it is capitalism that is responsible for the world’s ills today.”

This is not obstinance. This is deceit, plain and simple.

So how do we go about combating obvious deceit (rather than the sophisticated theories of 20th century Marxists)?

I think the answer is to just debunk their examples on a case by case basis, in as public as a forum as you can muster. Famines in east and central Africa, for example, have often been attributed to capitalism because of the policies of the World Bank and IMF. Libertarians ought to agree with most of this, and then simply point out that the World Bank and the IMF are central planning agencies designed, created, and supported by governments in the West. Once this fact -which is not quite as simple as it appears – is acknowledged, you can go from there and take a public choice route, an Austrian route, or even a populist libertarian route to explain why capitalism is not responsible for famines.

Wars, genocides, ethnic cleansing campaigns, etc., can all be explained (and eliminated) if libertarians focus on the role of the State in all of these ills rather than on the theoretical or empirical weaknesses of socialist explanations and proposals.

Eduardo Galeano Disavows ‘Open Veins of Latin America’

Brandon Christensen Books, Current Events , , , , , ,

I read this book a long time ago (it wasn’t required reading for any of my undergraduate courses) and found it to be much too hyperbolic and unsubstantiated, so I’m very pleased and surprised to see Galeano disavow it.

From the New York Times:

For more than 40 years, Eduardo Galeano’s “The Open Veins of Latin America” has been the canonical anti-colonialist, anti-capitalist and anti-American text in that region. Hugo Chávez, Venezuela’s populist president, even put a copy of the book, which he had called “a monument in our Latin American history,” in President Obama’s hands the first time they met. But now Mr. Galeano, a 73-year-old Uruguayan writer, has disavowed the book, saying that he was not qualified to tackle the subject and that it was badly written.

The reactions of factions, something I have become increasingly interested in, are predictable but maybe that’s why I am so interested in them. For example:

Michael Yates, the editorial director of Monthly Review Press [a socialist publishing outlet – bc], Mr. Galeano’s American publisher, dismissed the entire discussion as “nothing but a tempest in a teapot.” “Open Veins” is Monthly Review’s best-selling book — it surged, if briefly, into Amazon’s Top 10 list within hours of Mr. Obama’s receiving a copy — and Mr. Yates said he saw no reason to make any changes: “Please! The book is an entity independent of the writer and anything he might think now.”

Consider not only the reaction of a long-time socialist to the disavowal of one of his intellectual and – dare I say – spiritual bedrocks, but also the fact that a socialist is scrambling to keep his best-selling product from losing its quite subjective value. Read the whole report.

Piketty’s numbers on inequality don’t add up

Brandon Christensen Books, Current Events, History, Politics , , , , ,

The Financial Times, a center-Left British publication, has the story here.

Piketty, an economist at France’s most prestigious business school, recently wrote an almost 600-page treatise on the growth of economic inequality in the West. The book has earned him lots of fame and has been discussed ad nauseum for about a month now.

Here is what I have found most interesting up to this point on the debate about inequality: The factions and their strategies regarding data and how it is interpreted. I think Dr Delacroix’s approach to the way data is interpreted is best, namely that the study design itself should be analyzed first and foremost.

Regarding factions, remember when that graduate student from the heavily neo-Keynesian UMass-Amherst found discrepancies in the work of Kenneth Rogoff and Carmen Reinhart on austerity in the West? The Left attacked savagely. The Right came up with excuses that would have earned an ‘F’ on most undergraduate tests.

Now that the Left’s own preferred conclusions have been borne out by bad data, what do you think is going to happen? Who wants to bet that the roles of Left and Right will be reversed? When Rogoff’s and Reinhart’s mistakes went public, the graduate student was invited to speak on televised talk and radio shows around the world. His work was (justifiably) hailed in the national and international press, and also (much less justifiably) as an answer to the deplorable state of the discipline of economics. What do you think the odds will be that the researchers responsible for finding flaws in Piketty’s data will get the same reception?

My money is on the answer “not good.”

All of this discussion about austerity and inequality is great, of course. The fact that researchers are expanding their findings to include more than just the data within their own countries is perhaps the most satisfying development in regards to epistemological human progress. I will await further developments to lay down my own verdict on the matter of inequality in the West. With the mistake of Rogoff and Reinhart, I decided, after carefully reading the merits and weaknesses of both sides of the debate, that their mistake was small enough to overlook and that austerity generally leads to better economic outcomes in the near- and long-term and that public debt is a drag on economic growth.

Depending on how the Left responds to its critics, I will see if economic inequality is indeed growing in the West.

Обзор событий в России за последний месяц

Evgenii Grigorev Current Events ,

Привет, друзья! Что-то давно я ничего не писал здесь, так что постараюсь сейчас исправиться. Работа над собственным сайтом (я пишу про книги и Норвегию) отнимает все силы, да еще и запись собственного музыкального альбома в совокупности с ежедневной работой.

Сегодня я расскажу вам про события, которые имели определенный резонанс в России за последний месяц и слегка проясню ситуацию с дальнейшим форматом своих записей (I will welcome Brandon’s reaction in the comments if he’ll allow me to post link to my blog in the end of my posts, because I write political articles sometimes in my primary blog too).

Итак. Основное событие, про которое вы все наверняка знаете – это Международный Экономический Форум, который стартовал на днях. Переговоры, слегка расцвеченные сине-желтой украинской тематикой, уже принесли первые плоды, пусть и не очень хорошие. Слегка испортило впечатление то, что американские дипломатические представительства совершают давление на некоторые страны, чтобы они не присылали своих участников на форум, но в целом, по информации из газет, собралось много компаний. Параллельно с этим Санкт-Петербургу был присвоен самый низкий кредитный рейтинг…

Уже принято несколько важных решений. Например, Visa и MasterCard решили все-таки не уходить из России после принятия у нас нескольких жестких законов. Для них будут созданы специальные условия работы. При этом насколько я понял, продолжается разработка Национальной Платежной Системы России по аналогии с теми системами, которые уже есть и давно работают в Китае, Японии и, например, Белоруссии. Когда все это реализуется – пока непонятно, но тенденции к реализации есть. Это решение было принято после того, как Visa & MasterCard заблокировали карты нескольких банков, чьи владельцы попали под санкции США. Это показало, насколько политически-зависимой может оказаться работа частных компаний: в сущности они поступили так, как им приказали сверху, а пострадали сотни тысяч ни в чем не повинных граждан России, против которых санкции никто не вводил (напомню, хотя вы и так прекрасно знаете, что санкции вводятся избирательно против тех, кого считают повинными в эскалации противостояния на Украине, а также тех, кто по мнению Госдепа США повинен в присоединении Крыма к территории Российской Федерации).

Другим важным событием стало подписание “газового” договора с Китаем и перечислении аванса за газ. В последнее время отношения России и Китая вошли в новую стадию всеобъемлющего сотрудничества.

Параллельно с этим хочу рассказать про запуск нового российского интернет-поисковика “Спутник” (правда он пока что на стадии тестирования), который признан искать контент только по проверенным российским сайтам. Посмотрим, насколько удачной окажется эта идея, и как она сможет развиться в России.

Подвести итог хочу как в классических выпусках новостей, прогнозом погоды. В Санкт-Петербурге уже несколько дней стоит аномально высокая жара, которая не регистрировалась на таком высоком уровне (больше 30 градусов Цельсия) почти 130 лет. Учитывая что в начале мая у нас еще шел снег – такой резкий перепад температуры воспринимается очень тяжело. В ближайшие выходные в центре города около Петропавловской Крепости у нас начнутся Норвежские Выступления: традиционная музыка в живом исполнении, бои на мечах, исторические реконструкции, ярмарка, а также мастер-классы кузнецов, гончаров, кожевников и прочих представителей различных профессий. Будет интересно, и я собираюсь пойти!

Надеюсь у вас всё хорошо, и вы не болеете. Желаю приятных выходных!

Climate Change and Flat Earthers

Jacques Delacroix Current Events, Politics, Religion , , , , , , , ,

“There has been no universal trend in the overall extent of drought across the Unites States since 1900.”

“Trends in severe storms, including the intensity and frequency….are uncertain and being studied intensively.”

Both quotes are from the fine lines in the 829-page quadrennial National Climate Assessment. That’s the report Pres. Obama flogged on national television recently for nearly an hour. The president insisted something had to be done right now.

I have not read the report, of course, why should I ? (See below.)

(The first quote is in the report according to a Wall Street Journal editorial on 5/9/14. The second is in the report according to my frequent reader and commenter McHenry. He is a young man who does, or used to, believe in the threat of man-made climate change. He has good scientific training.)

A few months ago, when the Great Lakes were 90% frozen, that great scientist, Secretary of State Kerry relegated me to the ranks of “Flat Earthers.” He did this because I am very skeptical (and growing) of the climate change thesis. (See definition below.)

Of course, anyone who has been observing him from his political beginnings knows that John Kerry has no scientific competences, no competences about anything at all, except windsurfing and marrying rich widows. (I don’t knock either, no sir!) It’s also possible that he knows some French. That would tend to contribute to his misinformation, I think.

I suspect, in fact, I am almost sure, that Mr Kerry’s self-assurance is based on the belief that 97% of scientists, blah, blah, blah…

The climate change thesis deconstructs as follows:

1 There is a global rise in temperature.

That’s from some undetermined date. Hasn’t been any for the last fifteen years according to federal government’s own reports.

2 It’s caused by human activity.

This includes the burning of fossil fuels, of course but yet, there is no call for an increase in nuclear energy production which is a reliable and lasting way to relieve worldwide reliance on fossil fuels. No reason is ever given for this absence. Sometimes, perfectly serious climate change partisans also include among the causes of man-made global warming belching and flatulence by the large worldwide cattle population. The latter “cause,” of course, calls for a quick conversion to vegetarianism. (That is where secret evangelists show their hand.)

3 The world, or parts of it, or us, or some of us, are in imminent danger of a variety of catastrophes that will be caused by climate change.

Note that the three propositions are logically linked: If there is no global rise in temperature, we don’t care about human activity. If human activity does nothing to the globe ( to what, exactly?) there is no emergency. If there is a global rise in temperature and it’s not man-made, there is not much we can do. If there is global warming and it is the result of human activities and it does no harm, there is nothing we should do. If it does both harm and good (longer growing seasons in the north, access to minerals near the North Pole) then, there is something important to discuss internationally.

As the evidence in support of the thesis becomes more complicated and contradictory, the alarmist cries are becoming shriller. This makes a sort of macabre sense. Simple rationality is getting lost along the way. What we are told about urgent policy requirements does not fit with the evidence that is presented by the same people who demand urgently a new policy of de-industrialization. The climate change book is like a novel whose cover would proclaim “Joe Is the Killer” while the inside pages would sow doubt on the idea that Joe has ever killed, or even harmed anyone, has ever so much as spat on the sidewalk.

Sometimes, downright fraud is also prominently involved. That’s the case for the “97% of scientists” that I think certified incompetents like Sec. Kerry rely on. Personally, I have always known and said that there was nothing to the number. There is no 97% of anything anywhere, except in some banana republics and in North Korea. Now, we have good evidence of fraud on this matter.

In past postings on the climate change or global warming, I have been at great pains to declare, even to prove my ignorance in matters of climate science. I did this because I wanted to step resolutely away from jargon-filled experts’ and pseudo-experts’ discussions that can only befuddle people who have to make a living, rear children, prepare their taxes, pay a mortgage, go to the gym.

In fact, I have fair general scientific training: I easily recognize a good study design. (They don’t grow on trees!) I can spot bad measurements from a mile away, like a jealous wife a single long hair of the wrong color on her husband’s lapel. I also possess a skill that is rare in the general literate population but common among those who have acted as referees for scholarly journals: a keen sense of studies’ formal conclusions that shout when the findings would only merit whispering.

Note that I don’t claim I have ever committed this last little sin myself when I was a scholar. It’s damned tempting though. How can you admit, “Yes, I and two colleagues worked hard on this study for three years and, frankly, what we found does not amount to a hill of beans.”

And then, there is the vertiginous, nightmarish situation where you would have to report, “The consensus is that X causes Y. Our study, carefully conceived in every way – go ahead and check everything – suggests that X does not cause Y.” This is like yelling, “Go ahead, don’t publish my study!” (I actually published two such studies in my time, one at the beginning of my career, one at the end. The last one took twenty years! See on my vita linked to this blog: Delacroix, Jacques. “The export of raw materials and economic growth: a cross-national study.” American Sociological Review. 42:795-808. 1977. Delacroix, Jacques and François Nielsen. “The beloved myth: Protestantism and the rise of industrial capitalism in 19th century Europe.” Social Forces 80-2:509-553. 2001.)

There is also a general, well known anti “negative findings” bias in all scientific disciplines. Few journals have the intestinal fortitude to publish articles that proclaim: “We did not find anything.” I doubt that the climate sciences constitute an exception. Do you?

Here is a fictitious but realistic example of such a conclusion:

“Humans have been pumping ‘greenhouse gases’ into the atmosphere with increasing intensity* for one hundred and ten years and yet, there is no rise in the frequency of droughts.”

How does this work for your career, do you think?

Here is an example of bad design, specifically.

Several years ago in one of the respected American scientific magazines there appeared an article authored by three Australian professors with impeccable scientific credentials. (I am very sorry I don’t have the reference. However, my memory forgets but it does not make up stuff.) The article purported to tackle the issue of long term global warming. It was an attempt to recoup after the disaster of the “hockey stick scandal”** which involved downright cheating.

The issue is this: If it was warmer in 1000 that it is today, it’s hard to argue that gases specific to industrial societies are an exclusive or even a primary cause of global warming. (It’s difficult but not impossible; it would involve heavy scientific lifting.)

Anyway, that article relied on one form of measurement of temperature, tree rings, I think, for the longest period, extending from about year 1000, to about year 1800. Then the authors switched to other, probably better, more sensitive measurements, based on other than tree rings, for the period extending from about 1800 to the present.

That’s impossibly bad scientific design, of course. Here are the reasons. If the first measurement somehow underestimates temperature then, it’s necessarily true that temperatures in the other period from 1800, will appear higher. If the second type of measures somehow overstates or simply detects more accurately high temperatures, the years 1800 to present will necessarily seem warmer. Both false effects would tend to be seem true irrespective of the real temperatures in both periods .

It tuns out that 1800 to present is the period of interest. If you are going to prove a sharp rise of temperature coinciding with industrialization, you have to demonstrate a big uptick for that period . The design is thus not neutral with respect to results. It favors some rather than others.

It’s such breathtakingly bad design that I had to read the article twice to believe it. (That’s what caused me to check the authors’ academic credentials. As I said, they were excellent.)

The alert reader will have noticed that the potential bias I describe above can work either way: If the measurements to 1800 overestimate temperatures while the measurements from 1800 to present happen to underestimate temperatures, you may find that you have demonstrated that there is no warming that corresponds to the industrializing period although one exists. You might even show that temperature has declined on the whole although it has actually risen.

Now, suppose that the study of reference showed precisely either no change or change in the “wrong” direction. That would be no change in global temperatures, 1000 to 2000, or a slight decline of temperatures beginning, say, in 1810.

My educated first guess is that, in the intellectual climate of the past fifteen years, the authors would not then have presented their research for publication. My second, also well informed guess, is that if they had presented it, the journal editor would have turned them down. He would have turned them down irrespective of his religion toward climate change. That’s because, journals don’t like negative results of the form: “Nothing happened.” See above.

That’s in addition to the fact that many editors are members of the same intellectual class that has lost its way on climate as it lost its way previously on communism and on Third World revolutions (another story I plan to tell soon on this blog).

In conclusion: Our current system of scholarly publication almost guarantees that there is little chance that scientific findings of high quality that contradict the belief in the thesis described above will see the light of day. It does not take a real conspiracy to arrive at such a situation, just the perpetuation of well-established bad habits.

How about the three credentialed Australian professors who committed the dramatically faulty research design? Are they scum? That’s were religion comes in. It’s helpful in pretending that the bad actions you commit are not really sinful. Did you know that the crusaders who captured Jerusalem in 1099 put all its inhabitants to the sword while shouting “God wants it”?

So, OK, I am a Flat Earther. It’s not so bad, really. One of these days, I will figure out the truth by noticing that no one ever falls off the earth, no matter how far he travels. I might even figure out why some get back home simply by moving in a straight line. Paying attention to negative evidence like this pays off. On the other hand, those who live inside a square box will never learn anything. Their blindness is dangerous for everyone.

* I don’t know the actual numbers but I would be surprised if we did not, collectively, burn one hundred times more than we did in 1800. One thousand times would not surprise me, not even 10,000 times.

**Look it up. Great story!

A Warm Welcome Please

Brandon Christensen Current Events , , , ,

Ladies and germs, allow me to introduce Federico G.M. Sosa Valle:

Sosa Valle (follow him on Twitter) is an attorney and lecturer in law at the University of Buenos Aires. He has a Master in Economics and Political Science from ESEADE, and has published research in the areas of law, political economy and the history of ideas.

Sosa Valle is a practicing lawyer in the public sector and in the field of commercial law. In 2008 and 2009 he joined with the office of the Board Secretary of the Friedrich A. von Hayek Foundation, in Buenos Aires, Argentina. Currently, he is the Co-Founder and President of the “David Hume Institute Foundation” in Buenos Aires, Argentina.

I came across his work totally randomly. I was searching online for some work on Argentine economic development during the 20th century and came across Federico’s work on Hayek. His blog on Hayekian thought started out with “Notes On…” so I knew right away I was dealing with a genius.

His first two posts can be found here and here.

Thanks Federico, for your willingness to join this internationalist-oriented challenge.

Heads up Pennsylvanians you just became less free!

Adam Magoon Current Events, Economics, Liberty, Politics , , , , , , , , ,

Cops can now search your car without a warrant in Pa.

So much for due process?  Or unreasonable search and siezure…
That’s right, not only do police have the legal authority (thanks positivists!) to search a vehicle with absolutely no cause whatsoever but you can be arrested and charged for the simple act of having “secret compartments” in your vehicle.  I will leave it up to you to decide if this power will be abused or not.

Financial Literacy Test

Brandon Christensen Current Events ,

I’ve been studying (a bit too long, to be honest) for the GRE and the LSAT (just in case…) over the past little while and as a result I have been more focused on testing and the logic behind it. I recently came across a financial literacy test (h/t Alex Tabarrok) that I think is worth taking.

After Warren’s trick question is the ‘comments’ threads, I was a little bit worried that my reasoning skills had abated but fortunately I got five out of five on the short test (and I’ve never even wanted to deal with mortgages!).

How’d you do?

From the Comments: A Puzzle About Percentages

Brandon Christensen Comments , , , ,

Dr Gibson hands out a tough quiz in the ‘comments’ thread of Jacques’s latest post on comparative advantage:

Quiz: last year I earned no money from writing. This year I expect to make $5,000. By what percentage will my writing income have risen?

Jacques is stumped. I am too, but I think I’ll take a stab at it anyway. The worst that can happen is that I’m wrong, right? Warren, by the way, has a PhD in engineering as well as an MA in economics, so math is his forte (he is also the math reader for Econ Journal Watch).

I speculate that the percentage of his writing income has risen by 100%. I don’t see how it could be anything else. If you start out at zero, then even if Warren only made $1 this year an increase from $0 to $1 would have to be 100%, right?

Am I right? I need help.

Digression: Jacques is right that the Romans got along fine without the zero, but that’s not saying much. Here is Tocqueville:

If the Romans had been better acquainted with the laws of hydraulics, they would not have constructed all the aqueducts which surround the ruins of their cities – they would have made a better use of their power and their wealth. If they had invented the steam-engine, perhaps they would not have extended to the extremities of their empire those long artificial roads which are called Roman roads. These things are at once the splendid memorials of their ignorance and of their greatness. A people which should leave no other vestige of its track than a few leaden pipes in the earth and a few iron rods upon its surface, might have been more the master of nature than the Romans.

Where the World’s Unsold Cars Go To Die [Zerohedge]

Adam Magoon Current Events, Economics , , , , , , ,

I don’t have time to comment a ton on this (Life has just been absurd lately) but wanted to make sure more people saw this.

The guys over at Zerohedge noticed a surprising sight on google maps in the city of Sheerness, United Kingdom. West coast, below the River Thames and next to River Medway. Left of A249, Brielle Way. A car lot full of unsold, brand new cars. Zerohedge claims these are all new cars that cannot fit on overcapacity dealer lots. If true this would be a prime example of malinvestment spurred on by government bailout and subsidies. Quite literally a textbook case of the Austrian Business Cycle.

Further research is needed since I do not know whether these lots are standard practice or a new feature of our post-2008 crash world. It is possible that these are merely staging grounds for cars before they ship to dealers but at first glance I tend to agree with Zerohedge’s conclusion that “There is proof that the worlds recession is still biting and wont let go. All around the world there are huge stockpiles of unsold cars and they are being added to every day. They have run out of space to park all of these brand new unsold cars and are having to buy acres and acres of land to store them.”  

Something to keep an eye on regardless.

The Chinese Get Richer, I Become Poorer. Right? Dreaded Percentages!

Jacques Delacroix Current Events, Economics , , , , , , , ,

Elections season is on us again. On the talk shows, I hear more and more callers, and often hosts, grossly misusing percentages in the service of fallacious claims. Politicians won’t be far behind. Here we go again, I am thinking; I have been here before. Got to explain again.

This time, I am taking names. And there will be a quiz, and it will count toward the final grade.

Pay attention; slow down.

It’s 2000, I, JD, earn $60 as a machinist. My wife K earns $40 keeping accounts for others with the help of some sophisticate software. I am earning what percentage of our joint income?

60/60+40 = 60%

It’s 2010, I, JD, now earn $90 as a machinist, My wife K’s business has taken flight. She uses more sophisticated software. She has more customers than she can handle. She earns $120.

My share of our new joint income is now:

90/90+120 = 42%

The percentage of our joint income that I produce has declined. It has declined a lot; it has declined by almost 1/3.

Has the value of my production declined? Slow down!

The answer is clearly “no.” The value of my production has increased by half (from 60 to 90). That’s not bad at all. At any rate, it ‘s obviously an increase.

Think it through. Do the arithmetic yourself. There is no trick. It’s the simple math you did not learn in third grade because you hated the teacher.

In the simple example above, my income represents the value of American manufacturing. My wife’s income represents the value of the mysterious and illogical category “services.”

The percentage of the value of manufacturing relative to the total GDP of this country has been going down steadily because the value of US services has gone up even faster.

The absolute value of American manufacturing has only gone up and up, and going up. America has not become “de-industrialized,” contrary to a common but false perception.

The misperception has two main sources:

  1. Many media commentators and perhaps even more politicians don’t understand simple percentages. See above.
  2. The number of manufacturing jobs has declined even as the value of that which they manufacture has gone up.

Here is a solution to the drying up of manufacturing jobs: Take away machine tools from one metal worker in three; give him a hammer instead. You want even more manufacturing jobs, lots of them? Remove the software from textile weaving plants. Program their machines by hand as they did in 1910.

You don’t like the idea? Time for a serious discussion.

Now let’s go back up a little.

The quite good rise in the value of manufactures and the even greater rise in the value of whatever services produce, these two things are related. Better and better, more and more efficient manufacturing provides the resources for more services. We can afford more waiters, more surgeons, more teachers, more acupuncturists, more therapists, more life coaches, more “color advisers” (I live in Santa Cruz, California) because, collectively, we produce more hard necessities much more cheaply than our close ancestors did. Hard necessities include cars, soap, oatmeal, shovels, bricks and nails. Why, nails used to be forged by hand! I own some hand-forged nails from making repairs on my 1906 house.

When you hear, for example, that manufacturing now contributes only 30% of US GDP, it does not mean that there is less manufacturing being done in this country. To figure out the reality, you have to get out of percentages completely. Period!

If my income used to be $60 and it’s now $50 then, yes, it has declined. If it’s now $65, my income has risen. Period! That’s true irrespective of percentage contribution to anything.

Tech note: Don’t get tripped by the separate issue of the changing value of money. There are inflation/deflation calculators on the Internet that do a good enough job of dealing with this issue. I recommend that you consider one train of thought at a time.

Nearly everyone is overestimating himself. That’s the problem.

Speaking of GDP (Gross Domestic Product), a National Public Radio chickie announced breathlessly a couple of weeks ago that China would soon pass the US in GDP. I could hear fearful emotion in her voice, as if some bastard had threatened to cut up her credit card.

Here is the truth: We may soon see the day when 1,400 million Chinese produce as much together as…..314 million Americans.

Personally, I can’t wait for the Chinese to do better, to make their percentage of global joint production much higher.

Question: When the Chinese GDP reaches 60% of world joint GDP, will I be poorer?

Normas, decisiones y complejidad

Federico Sosa Valle Culture , , , , , , , , , , , ,

Hace pocos días, se publicó en el sitio americanscientist.org un ambicioso artículo sobre el concepto de lo aleatorio. El autor, Scott Aaronson, trataba de elucidar bajo qué criterio podíamos distinguir una serie aleatoria de números de otra serie de números ordenados conforme cierto patrón, difícil de determinar, pero estructurante al fin de un orden en la serie. En otras palabras, si una computadora arrojaba “aleatoriamente” un número “9” y luego otro número “9” y luego otro y otro, ¿estábamos ante el resultado del azar, que se juega en cada nueva jugada, o ante un patrón que podía expresarse en una fórmula? ¿Si de repente apareciera en la serie un número 4, eso confirmaría el azar, o nos indicaría que nos encontramos ante un patrón más complejo?

Aaronson propone en el referido artículo, como criterio identificatorio de un número aleatorio, la característica de no ser susceptible de reducción a un algoritmo más simple. La explicación aparece como plausible y tiene un gran poder de seducción. Sin embargo, desde nuestro punto de vista, tal conceptualización no permite distinguir azar de complejidad. Friedrich A. Hayek se inspiró en Kurt Gödel para proponer, como caracterización de un fenómeno complejo, aquél sobre el que, en atención a la heterogeneidad de sus elementos, ninguna teoría puede ofrecer su descripción completa, es decir, que no puede expresarse en un algoritmo más simple.

La noción de fenómeno complejo tiene sus raíces en el empirismo de David Hume: las relaciones entre los términos (una serie de números, por ejemplo) no se encuentran en los términos mismos, si no que son atribuidas por el sujeto (en nuestro ejemplo, le adjudicamos un patrón a aquella serie de números.) Desde el momento en el que el conocimiento general no proviene de los hechos si no que es atribuido a los mismos, tal conocimiento general no nos permitirá agotar el conocimiento de lo particular. En otras palabras, siempre habrá un elemento empírico en toda teoría.

Para continuar con nuestro ejemplo: podemos enunciar un patrón que explique la sucesión de una serie de números, pero estamos expuestos a que aparezca un nuevo número en la serie que nos obligue a revisar nuestra teoría. Cuando aparece un nuevo acontecimiento que se escapa a nuestras expectativas, lo que hacemos es reajustar la noción de orden que le atribuimos a la realidad. Lo que hace que una serie de acontecimientos configure un orden o estructura, y no sea caótica o aleatoria no es, por consiguiente, que las expectativas en torno a los acontecimientos siempre se cumplan, si no que exista un rango de acontecimientos que nunca se verifique, en otras palabras: que determinadas expectativas sean sistemáticamente frustradas.

Igualmente, la confusión entre azar y complejidad puede ser fecunda y arrojar más luz sobre la naturaleza de la segunda. Por ejemplo, Nicolás Maquiavelo culminaba “El Príncipe” con la afirmación de que la iniciativa era la virtud fundamental del político, ya que la fortuna tendía a favorecer más al arriesgado que al cauto. En términos poblacionales, vemos más hombres de éxito con iniciativa que sin ella ya que, para resultar exitosos, se tuvieron que conyugar dos situaciones: la decisión de asumir riesgos y que la oportunidad favorable efectivamente se haya presentado. En el conjunto de políticos sin éxito encontraremos a los cautos y también a los arriesgados (que no tuvieron suerte). Va de suyo que podemos sustituir “fortuna” por “complejidad” sin perder mucho del sentido de la idea.

Asimismo, The Economist publicó la semana pasada un interesante artículo sobre la relación entre la estructura del azar y laestructura de las decisiones. Todo parece indicar que efectivamente existen buenas y malas rachas, pero ello no se debe al azar si no a la estructura de decisiones que se toman frente a una situación difícil o imposible de comprender. Un jugador tiene a la suerte de su lado cuando, luego de ganar la primera apuesta, en las sucesivas va reduciendo su exposición al riesgo. Correlativamente en este caso, a menores riegos, menores ganancias pero también menores pérdidas, con lo que el resultado neto de todo el conjunto de jugadas es positivo. Paralelamente, si un jugador pierde en su primera apuesta, incrementar el riesgo de las sucesivas con la idea de compensar la primera pérdida sólo lo llevará a la ruina. En síntesis, una muy buena estrategia para lidiar con el riesgo es actuar como un sistema de retroalimentación negativa: a cada desvío del promedio estándar, responder con mayor moderación. Después de todo, la comparación con un sistema de retroalimentación negativa era la caracterización que F. A. Hayek hacía de la función del derecho y de todo sistema normativo en general, aportando mayor estabilidad y mejores resultados netos.

Publicado originariamente en http://www.ihumeblog.blogspot.com.ar , el blog institucional de la Fundación Instituto David Hume (www.ihume.org), de Buenos Aires, Argentina.

The concept of “dispersed knowledge” should be a commonplace!

Federico Sosa Valle Culture , , , , , , ,

I dare to state that the world would be a better place to live in if the concept of “dispersed knowledge” were a commonplace. Perhaps it is an elusive idea and that is why every now and then political intervention regards itself as the saviour from the “chaos of the market”.

But what most people are used to call “chaos” is, in fact, “complexity”. Every single rational agent is an administrator of the bits of information gathered by him from the limited range of his experience, using devices of perception, such as senses, social values, norms, and technologies. The said devices are mostly common to other agents and thus contribute to make the compatibility of several individual plans, the most of them unknown to each other, possible –and the stability of the social order rests on the degree of such compatibility.

As we said, social spontaneous conventions as language, monetary economy, trade, morals, and law systems –along with many others- are devices used by the these agents to cope with the complexity of an order of things built on a framework of plans of multiple individuals, most of them yet undiscovered. It is a complex order of facts, but it is an order still: spontaneous conventions make of the multiple bits of information from the different individual plans a coordinated set of resources applied to carry out the most of them. It is a complex system of coordination of knowledge, with gaps and perturbations, but it is a system that can deal with a higher amount of information than any individual or committee would be able to do.

Since our concept of rationality is mostly instrumental, regarding as “rational” a set of resources deliberately applied to attain a known aim, it is easy to consider the complex order resulting from spontaneous coordination of individual plans as “irrational” -and this charaterisation gains strength with every new crisis. At this point, what we have to notice is that the net benefits rendered by the extended society –i.e.: the spontaneous coordination of the dispersed knowledge from multiple individual plans and institutions- are higher than what any other alternative system of organization of human beings could bring about. The consequence of the argument is that dispersed knowledge is both a burden to central planning and lever to the open society.

We know that almost the whole work of F. A. Hayek is devoted to this quest, but if I had to choose a single paper that keeps the kernel of this philosophy I would choose “The Use of Knowledge in Society”. This would be a good starting point to make the idea of “dispersed knowledge” part of our cultural background, like heliocentrism or Gödel’s theorem.

Originally published on http://www.fgmsosavalle.blogspot.com

Neoliberalism: When French philosophy thinks about American economics

Brandon Christensen Economics, History, Philosophy , , , ,

From an economic perspective, the vision of man becomes very, very poor. Man is a being who responds to stimuli from the environment, and we can modify his behavior with a choice of stimuli. And what government is, what power is, is the use of different kinds of stimuli. The economic theory gives a set of tools, a “good manner” to use stimuli to obtain the right comportment. In this respect, the result of the theory, perhaps, is to produce a vision of man that is very impoverished.

This is French philosopher François Ewald taking a moment away from his task of explaining Foucault’s thoughts on Gary Becker’s work to elaborate his own thoughts on the discipline of economics. Read the whole thing (pdf). It’s a short paper on Michel Foucault’s thoughts about American liberalism (or neoliberalism) and particularly Gary Becker’s work.