Governance, Capitalism and Alleviating Misery

As discussed in previous posts, good governance makes it easier for free market economic systems to work their magic in generating wealth and lifting people out of poverty. Recognizing the benefit and/or harm of past actions might be helpful in making better decisions in the future. Drawing on a Thomas Sowell column, Mark Perry makes the following points: Political Solutions: Socialism on Installment Plan?

Sowell outlines a dangerous pattern:

1. Based on some perceived market failure, a political solution (regulation, subsidies, legislation, tariffs, price controls, property rights restrictions, below-market insurance programs, zoning laws, real estate regulations, etc.) is implemented to solve the "problem."

2. The political solution is inherently distortionary, introduces inefficiencies, and makes the original situation even worse.

3. Additional politcal solutions are then proposed to addresss the growing problems created by the previous political solutions.

Steps 1-3 continue to repeat, leading to the possibility of "socialism on the installment plan," or Hayek's concept of "The Road to Serfdom," because of the "fatal conceit" of policymakers.

Improving the rules and institutions that allow the private sector to work better without trying for a direct government solution would be a step forward in many cases. Milton Friedman reminds us of the primary source of wealth creation.

The Land of Makebelieve: Where are the Philosopher Kings?




HT: The Club For Growth Blog

Dr. Sanity deals with the significance of this and the global reach of the extended order in Helping The World Out Of Its Misery. She quotes Alvaro Vargas Llosa:

Ever since the Industrial Revolution, poverty has been significantly reduced throughout the world. Two hundred years ago, the average income per person worldwide was the equivalent of less than $2 a day; the figure is $17 today. This fact is relevant to the current discussion on globalization because, even though the information technology revolution, biotechnology, the emergence of new world players and outsourcing may give us the impression that we are in the midst of something entirely new, we are simply witnessing a new phase in the process of innovation that is the market economy -- and this began a few hundred years ago.

The fact that 20 percent of the world's population is extremely poor should not make us forget that millions of lives have improved dramatically in the last three decades. Illiteracy has dropped from 44 percent to 18 percent, and only three countries out of a total of 102 included in the U.N.'s Human Development Index have seen their socioeconomic conditions deteriorate. China's economy used to represent one-26th of the average economy of the countries that comprise the Organization for Economic Cooperation and Development; today it represents one-sixth.

These are not arcane facts. They are widely available and easy to understand. Publications such as Indur Goklany's "The Improving State of the World," David Dollar and Aart Kraay's report on the global economy, and Francois Bourguignon and Christian Morrisson's "Inequality Among World Citizens" -- to mention but three among many recent studies -- provide overwhelming evidence that the world is better off thanks to the increased flow of capital, goods, services and ideas.

All of which falls on the face of those who predict that in the next few years we will see a massive concentration of wealth among a few winners who will leave millions of losers behind. While it is probably true that the gap between low-skilled workers and those who are better educated will mean that different people will be impacted in very different ways by the continuing evolution of the global economy, the reality is that even those on the bottom rungs stand to benefit from the worldwide embrace of globalization.

Poverty was the natural condition of all of humanity until the market economy opened up the possibility of ever-increasing productivity.

The world was not rich and suddenly turned poor. The progress of the market economy that began to free the world of its shackles continues at an even faster pace today despite the many restrictions still faced by the people who create wealth and exchange it, and despite the fears that these momentous times understandably inspire in those who have difficulty adapting. What a heartening thought.

She then presents the following notion regarding people who would resist this approach:

An even more subtle approach is to insist that wealth and prosperity is directly correlated to unhappiness.

All these global luddites, along with their medievalist and jihadi brothers have one thing in common. They despise capitalism and are all deeply resentful of the modern era because despite all the material things available to make life easier and more enjoyable, they aren't happy!

But, guess what? Happiness is not related to the number of things one possesses. It has more to do with the power and energy that actually creates the wealth and technology--the free expression of that creative impulse that lies within every human. It has to do with taking responsibility for your own individual life and striving for the best that is within yourself.

This is the real opportunity that capitalism on a global scale brings--not the general wealth and better living conditions--those are just the by-product of unleashing the inner creative spirit and pursuing one's individual happiness; and by doing so, raising the general happiness.

Many of these anti-globalism elites mistakenly believe power over others is what will make them happy, and so they attempt to control and shackle that creative power--the best that is within others.

Their idea of "social justice" is intimately tied to making themselves feel good and establishing their own caliphate of the do-gooders, where happiness is mandated for all in equal measure. But they approach happiness from the wrong direction.

She draws upon a Robert Samuelson column and then continues:

What is most distressing is the desire on the part of the anti-globalists to oppose the very thing that will ease human misery; while their underlying socialist ideology encourages them to legislate or mandate happiness. This is more than just an illusion; it is a frank utopian delusion.

And, it is at the heart of why about half the population of this country isn't happy.

Happiness is not related to power over others; rather it is intimately connected to learning to have power over one's self in order to harness the capabilities within and become the best person you can be, or as Samuelson notes, "Happiness depends heavily on individual character and national culture."

And that last says it all. A culture that promotes victimhood and the entitlement mentality; and which fosters class consciousness and envy is going to be stuck in a hopeless "happiness quagmire." There are actually people who believe that they can not only "redistribute wealth", but that in doing so they will be "redistributing happiness".

But these do-gooder dictator wannabees can't have it both ways (and, of course, they do want it both ways; no matter how perverse the contradiction). They can't simultaneously morally condemn the materialism of capitalism and then at the same time redistribute the wealth it produces. So, instead they claim that they are trying to minimize human misery and promote social justice by opposing the very policies that are most likely to put the world out of its physical misery and give each person a fighting chance to tap into the potential within.

Global capitalism can't guarantee happiness; or an end to evil in the world. All it does is provide the conditions that enable the pursuit of happiness. It is the freedom to pursue that which one thinks will make one happy that, slowly but surely, decreases the level of misery in the world.

Without human freedom there can be no wealth created; because wealth is the product of the unfettered human mind. If the do-gooders really wanted to help poor of the world out of their misery, they would stand aside and let the market do what it does best.

There is quite a bit to this freedom thing, although it has a minority of serious defenders!

Consensus and Skepticism

Is it possible to both agree with the "scientific consensus"¹ regarding Anthropogenic Global Warming and be a skeptic at the same time? The answer is yes.

That's because the scientific consensus is fairly limited, at least where there is nearly complete agreement among scientists. That consensus includes the following:

1. Humans are extracting and burning carbon sequestered below the earth's surface in the form of coal and oil which causes CO₂ to be released into the atmosphere.
2. CO₂ is a greenhouse gas - it absorbs infrared radiation from the Earth's surface and therefore slows the radiation of that energy into outer space.
3. All other factors being equal, larger amounts of CO₂ in the atmosphere would lead to higher average global temperatures.
4. Assuming the temperature measurements are accurate and correctly calibrated, global warming has occurred during the last century.
   

I think that nearly all scientists agree with the above statements. I also agree with them. However, there are two important things to note: these statements contain remarkably little useful content because of qualifiers such as "all other factors being equal" (there probably not) and "assuming"; and as soon as there is deviation from the above statements (and a handful of others) the level of agreement in the scientific community drops. In other words, there's plenty of room for debate regarding the extent and impact of AGW. Indeed, even in the IPCC reports everything has ranges. For example, the predicted temperature increase in the report for the next 100 years ranges from 2.0 to 11.5 degrees Fahrenheit. That's quite a range!

A whole different level of the AGW debate is the risk of whether or not global warming will be catastrophic. Here the scientific consensus is far less overwhelming. Indeed, there's not even a consensus on the definition of "catastrophic". For some it means economic burdens. For others it means human misery and death. For still others it means increased extinction rates for various species.

I'm completely skeptical of the concept of Catastrophic Global Warming (CGW) for several reasons including the following:

1. The earth's climate system has been adequately stable for the past billion years to support life even through meteor strikes, tectonic upheavals, etc. It seems extraordinarily unlikely to me that the re-addition of CO₂ from fossil fuels to the atmosphere poses any significant risk of extinction of all life or even significant hardship to humans through climate instability. If the climate had the capacity for such instability from such a small change, it would've happened many times in the last billion years and we wouldn't be here to have this discussion.
   
2. My observations lead me to believe that warming is better than cooling. Land based life at the equator, on average, is far denser and more diverse than life at the poles. Humans are also more successful at inhabiting warming climates than colder climates. Therefore, while warming has costs, my guess is that the benefits of warming will end up outweighing the costs by a wide margin. Especially since the bulk of warming is predicted to occur away from the equator and over a long period of time which will enable us to easily adapt.
   

When scientists provide me with analyses that contradict my personal observations, they're basically asking, "Who're ya gonna believe? Scientists, or your lying eyes?" Unfortunately (for them), being a human I rely on first hand observations much more than I'm willing to rely on second hand analyses. Therefore, regarding CGW, I'm a skeptic and there's probably no non-experiential data that can convince me otherwise.

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¹ It's questionable whether it's correct to use "scientific" and "consensus" together, but since many scientists do it, who am I to argue?

Morality and Global Warming

Regarding Global Warming, a friend of mine recently wrote:

"But to do nothing, when there might be something that could be done, is wrong.

My friend's point is that like Al Gore, he thinks it would be immoral to do nothing.

Okay, I'll tell you what. I don't usually ride my bicycle to work this late in the year because of the shortness of the days, but I'll ride my bicycle to work once next week to avoid burning some gasoline in order to reduce global warming. Then I've done "something" about it which means that we collectively have done something about it.

Good enough?

No? I didn't think so.

So what someone really means when they say something like that is that it would be wrong not to do enough to address the issue. But what's enough? There are those who think that nothing short of causing the extinction of all humans via mass genocide and mass suicide is enough. Sure, they're crazy, but the point is that there is a continuous spectrum of opinion on what's enough that ranges from doing nothing to total human extermination.

This spectrum of opinion is based on subjective personal preferences based on the information available to each individual. Combining the personal preferences of a group is the job of politics and democracy and has nothing to do with morality.

Now some will say, "Let the scientists decide." And there's nothing wrong with taking input from scientists. But scientists aren't experts in economics, can't make subjective risk assessments for all six billion of us, and even the debate between scientist who more or less agree about the science will be fierce and political.

In a political debate, a common trick to convince people to join your side is to claim that the issue is a moral one and that you are on the right side of the issue. That is exactly what Mr. Gore is doing when he claims Global Warming to be a moral issue. Indeed, he takes this trick to new heights by claiming it to be the greatest moral issue of our time. Who'd want to be on the wrong side of that? Fortunately, most people with even a modicum of sophistication see right through that ploy.

However, I'm quite concerned with even considering something to be the "greatest" moral issue. That rather makes it sound like a trump card. That is, if two bits of morality conflict, this one wins. Unfortunately, that implies that if mass extermination of humans is required to solve the problem, then so be it.

For that even to be a possibility is immoral in my book.

It's the uncertainty, stupid!

Economic progress is about adapting to changing circumstances. While an individual or entity may try to act purposefully in pursuit of a defined goal, the unknowable future and not entirely known present leaves us grappling with substantial uncertainty. Freedom to take a trial and error approach across a wide array of opportunities is probably more important than any notion of efficiency.

This idea was at the heart of the Innovation and Adaptation post in which was included:

Mancur Olson addresses uncertainty, innovation, adaptation and institutions in the conclusion of his final book, Power and Prosperity:

Because uncertainties are so pervasive and unfathomable, the most dynamic and prosperous societies are those that try many, many different things. They are societies with countless thousands of entrepreneurs who have relatively good access to credit and venture capital. There is no way that a society can predict the future, but if it has a wide enough array of mutually advantageous transactions, including those for credit and venture capital, it can cover a lot of the options - more than any single person or agency could ever think of.

At least when a society has the appropriate institutions and government policies, the overwhelming majority of the firms that make huge profits are doing a huge service to the population. In a society with the right institutions and public policies, the prevailing prices will approximate the true values and costs of marginal quantities of the goods and productive inputs. A great excess of revenues over costs means that the enterprise is almost certainly putting more value into the society than it is taking out.

Economist Israel Kirzner discusses the vital role of the entrepreneur in coping with uncertainty and the problem this creates for most conventional economic thought which takes key factors as "givens" rather than outcomes of a discovery process.


Duke University Economist Mike Munger explains why a broader range of innovations will be created and the benefit of that can be realized if rules and institutions favor private enterprise most of the time in public vs private choice.

In the 1970s, even most of the non-socialist world wondered whether any system of private, decentralized innovation and development could stand up to the planning and market direction of the Japanese juggernaut. Central planning, whether of the socialist (U.S.S.R) or corporatist (Japan, Sweden) flavors, seemed to many to be the more powerful economic engine.

How times have changed! Nobody (well, nobody outside of college English departments) still believes that socialism outperforms markets, of course. And Japan has gone into the same muddy tank that Sweden has wallowed in for years. Even Alfred Kahn, Jimmy Carter's inflation guru, said by the end of the '70s that we should "Cast a skeptical eye on glib references to the alleged success of government interventions in other countries in picking and supporting industrial winners."

But we still face the same basic problem. The boundary we fight over today divides what is decided collectively for all of us from what is decided by each of us. You might think of it as a property line, dividing what is mine from what is ours. And all along that property line is a contested frontier in a war of ideas and rhetoric.

For political decisions, "good" simply means what most people think is good, and everyone has to accept the same thing. In markets, the good is decided by individuals, and we each get what we choose. This matters more than you might think.

On many kinds of policy, where one unique alternative must be selected from among many, and the legitimacy of that choice is at least as important as the choice itself, democracy has no equal. One defense budget, one speed limit on any one stretch of road, one standard width for railways, and one choice (left side or right side?) for driving automobiles.

But many choices aren't like that. There may not be a "we" that has to choose at all, imposing the median view on everyone. Instead, individuals can make their own choices. This is particularly true for innovations, or new ideas cooked up by some oddball. Some (in fact, most) of those ideas will fail, but we can't tell the winners from the losers in advance. The most significant innovations and advances in human history have been the result of the efforts of men and women too determined, or maybe just too strange and isolated, to know that the whole world was betting against them.

And that brings me to my final two points, the really key points I want the reader to take away from this essay. The first one is this: The conventional wisdom rejects innovation, and is usually right; that's why it's conventional. But the reason Median Joe is right to be skeptical is that most innovations are just balloon juice.

Still, a pessimist would then point out (and be right!) the flip side: the conventional wisdom is nearly always wrong, at least at first, about innovations that work. If you always say no, you do turn down all the bad ideas, but you turn down all the good ideas as well. Only if the innovation gets its chance, probably to fail but possibly to succeed, on its own merits and unconstrained by the views of Median Joe, will we find out what works and what doesn't.

Second, and no less important, this problem, this choice between collective and individual judgments, is at least as vital today as it was when Khrushchev was threatening burial, or Honda was nearly getting run off the road, or even when the two Steves were noodling in their garage. True, no one wants to return to a Soviet system, or an industrial policy with an agency of experts who make national investment decisions. But we still face the same basic problem: can I decide, and risk just my money, for great reward if I'm right? Or will we decide, and risk our whole future budget, on things we aren't very good at deciding?

We have become too accepting of the views of the middle, in too many aspects of our lives. Worse, we have fallen victim to a soft but encroaching political paternalism. In many cases, it isn't even the median citizen who enforces his views on everyone. Instead, special interests and "public" lobbyists dominate the making of rules and decisions that force all of us to act as if we all had the same views on risk, taste, and service.

The thing to keep in mind is that market processes, working through diverse private choice and individual responsibility, are a social choice process at least as powerful as voting. And markets are often more accurate in delivering not just satisfaction, but safety. We simply don't recognize the power of the market's commands on our behalf. As Ludwig von Mises famously said, in Liberty and Property, "The market process is a daily repeated plebiscite, and it ejects inevitably from the ranks of profitable people those who do not employ their property according to the orders given by the public."

Effective but limited government gives us the freedom to adapt and thrive. Some people still don't like this answer!

As an afterthought, here is a blog search of uncertainty.

Catching a break

In case you didn't hear it last weekend, Louisiana just got a huge upgrade in the office of governor.

Bobby Jindal can't hold down a job: That's the joke circulating around Louisiana today about the election of Mr. Jindal, a son of immigrants from India, as governor. Mr. Jindal, a 36-year-old Republican congressman from the New Orleans suburbs, won 54% of the vote in Saturday's election, avoiding the need for a runoff next month.

When he takes office in January he will be the nation's youngest governor. But he has already held a glittering array of other positions of responsibility in his short career. As an undergraduate he worked as an intern for Rep. Jim McCrery, now the ranking Republican on the House Ways and Means Committee. Then he became a Rhodes Scholar, got a master's degree, and did a stint at McKinsey & Co. Gov. Mike Foster appointed him head of the state's $4 billion health-care system at age 24. He went on to serve as director of a national commission on Medicare at 26, became president of the University of Louisiana system at 27, and a U.S. assistant secretary of health and human services at 29.

Four years ago, at age 32 ,he narrowly lost a race for governor to Democrat Kathleen Blanco, who dismissed his calls for reform of the state's creaking bureaucracy as unnecessary. The next year Mr. Jindal won his congressional seat, but he never really stopped campaigning for governor. In August 2005 Hurricane Katrina roared through New Orleans, and Gov. Blanco's response was so inadequate that she was effectively forced to retire.

Part of his philosophy is that the federal government can't be Louisiana's salvation. "New Orleans has suffered from the trauma of three crises," he told The Wall Street Journal last year. "First was Katrina, second was the levees breaking, and the third has been a case study in bureaucracy and red tape at its very worst."

Bureaucracy busting is Mr. Jindal's specialty, and he has already announced he will call the Legislature into special session shortly after he is sworn in and demand an up-or-down vote on his anticorruption agenda, which has 31 points. "Ethics reform is the linchpin for change," he told supporters Saturday night.

But while he prepares to take office with high hopes and good wishes, there are some sobering obstacles that could impede his agenda. Louisiana ranks third in the nation in the number of elected officials per capita convicted of crimes. That means that some power brokers will have real incentives to preserve the status quo. In 2004, the agent in charge of the FBI's New Orleans office described Louisiana's public corruption as "epidemic, endemic and entrenched. No branch of government is exempt."

Government is not the ultimate answer, but good governance helps and lousy governance can hinder mightily. Good luck Governor Jindal and the people of Louisiana.

Life Expectancy

U.S. Standardized Life Expectancy Highest in OECD

Two University of Iowa researchers, Robert L. Ohsfeldt and John E. Schneider, reviewed the data for the nations of the OECD to statistically account for the incidence of fatal injuries for the member countries. The dynamic table above presents their findings, showing both the average life expectancy from birth over the years 1980 to 1999 without any adjustment (the actual "raw" mean), and again after accounting for the effects of premature death resulting from a non-health-related fatal injury (the standardized mean).

Without accounting for the incidence of fatal injuries, the United States ties for 14th of the 16 OECD nations listed. But once fatal injuries are taken into account, U.S. "natural" life expectancy from birth (76.9 years) ranks first among the richest nations of the world.

source (chart and text)

I think this information is moderately interesting but of limited importance. Here is the reason for presenting it:

This low ranking in life expectancy(raw data) is often pointed to as being the result of the deficiencies of the health care system in the U.S. The problem with this thinking however is that it does not account for the fact that the U.S. has a disproportionate number of individuals who die as the result of fatal injuries compared to the other wealthy nations of the world. This does not reflect upon the quality of health care in the U.S., in that these events almost universally occur independently of the condition of health of the individuals who die as a result of these factors.

If you've sorted the data in the dynamic table, you find that without accounting for the incidence of fatal injuries, the United States ties for 14th of the 16 nations listed. But once fatal injuries are taken into account, U.S. "natural" life expectancy from birth ranks first among the richest nations of the world.

Many factors effect life expectancy that have nothing to do with health care or insurance coverage. Please don't use that line of reasoning in policy discussions and don't let anyone else get away with such nonsense.

Ignorance is Bliss

For 24 glorious months the writings of America's most disappointing columnist¹, Paul Krugman, were blissfully hidden behind the New York Times Select subscription wall. I hadn't realized just how much I enjoyed that interlude until I recently began encountering new flurries of poorly thought out Krugman quotes bouncing around the blogosphere now that the Times Select service has been cancelled.

A (liberal) friend emailed me some recent silliness from Krugman:

What is it about Al Gore that drives right-wingers insane? The worst thing about him, from the conservative point of view, is that he keeps being right.

My response was as follows:

Mr. Krugman has this completely backwards. It's from the leftist point of view that Mr. Gore keeps being right. From the conservative point of view, Mr. Gore is almost always wrong.

If conservatives are driven insane by Mr. Gore, it's apparently for a different reason.

It's disappointing that Krugman doesn't understand (or wish to acknowledge) human information processing and subjective decisions under uncertainty. My friend, who apparently has the same lack of understanding as Krugman, responded by asking how could conservatives consider Gore to not be right since he won an Oscar and the Nobel Peace Prize. Here's how it works:

1. There are numerous articles, posts, etc. (tens of thousands) both supporting and refuting the accuracy of various portions of Gore's documentary (An Inconvenient Truth) and other works available on the Internet.
2. Every sentient being has a political agenda, even film makers, nobel prize committees, scientists, politicians, etc., so there is no choice when aggregating information but to estimate the bias of all people and the entities they create and subjectively discount the information that is generated by those sources. This applies to every topic. Gore's documentary is only one example of such a topic.
3. For Gore's documentary, the lines are drawn pretty clearly. Liberal sources tend to support it and conservative sources tend to disagree with at least parts of it. This is caused by the subjective application of point (2) to the sources of the documentary and those debating it.
4. Liberals tend to read and be exposed to mostly liberal sources and conservatives tend to read and be exposed to mostly conservative sources. Thus, on average, each reaches a different, but rational yet subjective conclusion regarding the "rightness" of Al Gore.

For the reasons above, conservatives are not under the impression that Gore "keeps being right" as Krugman asserts. If Krugman could only understand this logic, his columns might greatly improve.
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¹ I call him "America's most disappointing columnist" because his work in economics was so innovative that I simply expect far more of him in his columns and he continually disappoints me.

It's Snowing in San Diego...

...er, uh, well, actually that white stuff coming down from the sky seems to be ash. It's fire season here in Southern California and unusually high winds are whipping up more than a dozen distinct fires into rapidly moving infernos.

We're perfectly safe here in the beach areas (landscape irrigation and concrete are wonderful things), but the ash that's produced by the fires blows over here and falls from the sky like snow (except warm, dry, and stinky).

The good news is that last time this happened, my rose bushes bloomed really well for a couple of years. They must've liked the ash.

Polly want a cracker?

One of the most basic ways of learning something new is to copy or imitate someone else. What if the action being imitated is not just any behavior, but the parroting of something said by other people? If the words being uttered are supposed to convey a sense that the speaker is wise and knowledgeable on the subject then there may be no motivation to really work at understanding the phrase being spoken. Even when what is being said is correct in a strict sense, other ideas flowing from a statement may be misleading. An economic platitude oft repeated is that consumption represent two thirds of GDP (perhaps a lesser portion in the past).

The implication is that consumption is all important, with another set of implications flowing from that observation. The whole point of producing is to consume either in the present or in the future. As economist Alfred Marshall stated, supply and demand work together like the blades of a scissor. Consumption and production are both important but I think that production is the more important driver of the economy under most circumstances. Furthermore, this perspective is more useful in any attempt to understand economic activity.

This article from a few years ago by Mark Skousen provides a good example.

Good news! The U.S. Department of Commerce, which compiles Gross Domestic Product (GDP), has just added a new national income statistic, Gross Output (GO), as a measure of total spending in the economy. I have been making the case for this new statistic for over ten years. Now it is a reality.

Most students of economics are unaware of the fact that GDP was created by Simon Kuznets during World War II to quantify final aggregate demand according to the new economics of Keynes. As such, GDP ignores all intermediate spending in the economy, based on the tenuous argument that earlier stages of production constitute double counting.

First, GDP is a Keynesian concept that measures only the output of final goods and services and excludes intermediate production. Second, government spending is included in GDP data, an autonomous addition to national output.

Both peculiarities of GDP have led to much mischief. In the first case, by focusing solely on final output, many economists and commentators in the media have concluded that consumer spending is more important than capital investment in an economy, based on the fact that consumption expenditures usually represent about two-thirds of GDP. In the second case, including government spending in GDP has led many pundits to believe that an increase in that spending—even if accomplished through deficit spending—will automatically increase economic growth (or conversely, a cut in government spending will inevitably lead to a recession). Both conclusions are false.

Intermediate Input (II) represents the sale of all products in the natural resource, manufacturing, and wholesale markets. GDP represents the final retail market.

I am currently working on a professional paper analyzing GO and II statistics and how they increase our understanding of the economy. Since this paper will not be published for some time, let me give you a few of my preliminary conclusions. Overall, much of the data appears to confirm several Austrian themes.

First, the data support the Austrian theory that the structure of production lengthens as an economy grows. Indeed, from 1987 until 1998 real GDP rose from $6.1 trillion to $8.8 trillion, or 39 percent (using 1996 as a base year). But real Intermediate Input (II) increased from $4.3 trillion to $6.5 trillion, or 53 percent, much faster than GDP. In other words, the producer/capital goods market grew more rapidly than the consumer/retail good market. This suggests that the number of stages of production increased.

Second, the data seem to confirm the Austrian view that production in the intermediate processes tends to be more volatile than final output and thus more sensitive to the business cycle. For example, during the 1990-91 recession, real GDP fell $31.5 billion, while real II fell $74.6 billion—more than twice retail sales. Since then, intermediate production has grown substantially faster (41 percent) than consumer spending (27 percent) from 1991 to 1998. I would like to test these statistics during previous boom-bust cycles (such as 1973-75 and 1980-82), but unfortunately, the data for II and GO are incomplete prior to 1987.

Third, GO data support the Austrian argument that business investment—not consumer spending—is the driving force behind economic growth. The Keynesian argument that consumer spending is the largest sector of the economy is specious and is based on a misunderstanding of GDP statistics. It is true that personal consumption expenditures typically represent 67 percent of GDP, but GDP is not total spending in the economy. On measuring total spending (GO), one sees that the capital/producer goods industry is substantially larger than the final consumer/retail goods industry. Using 1998 data, we find that personal consumption expenditures amount to $5.8 trillion, only 38 percent of GO, and gross business investment (which includes all intermediate production, plus gross fixed investment) amounts to $7.9 trillion, 52 percent of total spending.

In sum, intermediate production does matter, and GO is a better indicator of what is happening in the entire economy, not just the retail sector.

Some of the usual platitudes about consumption may be technically correct, but are ultimately misleading when striving for deeper economic understanding. As an aside, can you imagine a group of central planners orchestrating the deepening of the capital structure as implied above? Yeah, me neither!

Carver Mead on Computing

Listen to Carver Mead’s Gilder/Forbes Telecosm 2006 speech.

Excerpt:
"I’ve said this every year for the last ten years. With all of our yotta yottas we still can’t do the computation that’s done by a common housefly. The DARPA “grand challenge” which filled up an entire van with computing stuff of the latest sort was pathetic compared with a housefly. For those of you who have tried to kill them, they’re not too easy to get rid of … You may think they’re stupid, but not nearly as stupid as our computers. And they do all that on a few milliwatts.


"If you really want more bang for a given amount of energy – more information processed, the real metric of “goodness” in this world – you divide the computation into more and more parallel things that go slower. You don’t try to make each one go a little faster; you just put lots and lots of them in parallel. But actually, we don’t really know how to do that …


"What is it about that goo in the brain of a fly that can do that? We have all of our yotta yottas and we’re still not able to do it …


"There’s nothing about the physics of goo that works with ions and membranes that can’t work with electrons and insulars. There is no reason that if we understood what this absolutely fantastic, remarkable structure is doing, that we can’t learn from it and develop a computational paradigm, which is completely different from anything that we know or have even imagined. That’s what got me into neuroscience. Because in the end, we have to make more and more parallel systems. The degree if parallelism is, in the end, going to be the efficacy of our information processing systems, and here is a working system that has the ultimate parallelism.


“So as we look at the second decade of the Telecosm, I would submit to you that we’re not really burned out. I think there is plenty to think about."

Click here to listen to the audio. Just under an hour but worth it!

Confabulation Theory

How do we think? How does human cognition work? How can intelligence emanate from a bunch of cells seemingly randomly connected together? Even if the cells (neurons) and their interconnections are carefully arranged, how can that possibly be the basis for thinking?

Dr. Robert Hecht-Nielsen¹ is certain he has the answers to all these questions. These answers are contained in his recently released book, Confabulation Theory: The Mechanism of Thought.

There is absolutely no consensus in the neuroscience and artificial intelligence communities supporting Robert's theories. However, seeking consensus is not one of Robert's strong points. As an example, he was a leading proponent of the use of artificial neural networks (as they were called at the time) for various applications even though they had fallen into disfavor amongst most researchers (and funders) after Minsky proved that the popular neural net configurations at the time (called "perceptrons") were incapable of doing something as simple as an "exclusive or" operation:

This was followed in 1962 by the perceptron model, devised by Rosenblatt, which generated much interest because of its ability to solve some simple pattern classification problems. This interest started to fade in 1969 when Minsky and Papert [1969] provided mathematical proofs of the limitations of the perceptron and pointed out its weakness in computation. In particular, it is incapable of solving the classic exclusive-or (XOR) problem...

In my opinion, Minsky's main motivation for "proving" the ineffectiveness of neural networks was that his expertise was in different areas of artificial intelligence research and he wanted to stifle funding of neural net research so that his funding would be increased.

Robert persevered against the prevailing opinion and founded HNC Software in 1986 to develop neural net applications. By the late 1990s, HNC Software had gone public and achieved a market valuation of over a billion dollars because of its neural net applications in many areas such as credit card fraud detection (not to mention good timing relative to the Internet bubble). HNC Software later merged with Fair Isaac to continue as a market leader in these and other areas.

What I've learned is that while Robert's theories are often far-fetched and his certitude regarding those theories is sometimes unwarranted, it's still a bad idea to bet against him.

So what is the Confabulation Theory of cognition? Here's a fairly concise description for the layperson:

Hecht-Nielsen proposed a theory based on four key elements to account for all aspects of cognition. The first hypothesizes that the human cerebral cortex is divided into about 4,000 ‘modules,’ each of which is responsible for describing one ‘attribute’ that an object of the mental universe may possess. An object attribute is described by activating the one ‘symbol’ that is the most apt for that object. (Each module has thousands of symbols, each represented by a collection of about 60 neurons.) “Symbols represent the stable ‘terms of reference’ for describing the objects of the mental universe which clearly must exist if knowledge is to be accumulated over decades,” argued Hecht-Nielsen. “Past theories have avoided such ‘hard’ and ‘discrete’ terms of reference because they seem – but are not – at odds with the widely assumed ‘mushy’ or ‘fuzzy’ qualities of neuronal stimulus response.”

The theory’s second key element is also a hypothesis: that each item of cognitive knowledge takes the form of axonal links between pairs of symbols. These ‘knowledge links,’ the theory posits, are implemented using a two-stage version of the “synfire chain” structure hypothesized by Israeli neuroscientist Moshe Abeles. According to Hecht-Nielsen’s theory, the average human possesses billions of these links – a claim which, if true, would make humans enormously smarter than currently believed by philosophers, psychologists, and educators.

The third foundation of Hecht-Nielsen’s theory is that thinking is divided up into simple, discrete winner-take-all competitions called ‘confabulations.’ Each confabulation is carried out by a cortical module when it receives an externally-supplied ‘thought command’ input. The winner is whichever symbol of the module happens to have the highest level of excitation supplied to the symbols of the module by incoming knowledge links. “The winning symbol is the conclusion of the confabulation, and this simple confabulation operation is believed to happen in less than a tenth of a second,” said Hecht-Nielsen. “It is a widely applicable, general purpose, decision-making procedure, and the theory argues that all aspects of cognition can be carried out by means of a few tens of these confabulation operations per second, many of them in parallel.”

The final element of the UCSD neuroscientist’s Confabulation Theory hypothesizes that every time a confabulation reaches a conclusion, a ‘behavior’ (a set of thought processes and/or movement processes) is instantly launched. “This explains how humans seem to launch many behaviors during each waking moment,” said Hecht-Nielsen. “In other words, every conclusion reached by a confabulation represents a changed state of the mental world, and a behavioral response associated with that changed state is instantly launched.” The associations between each conclusion symbol and its ‘action commands’ are termed ‘skill knowledge,’ which decays rapidly if unused because it is learned by repeated practice trials (since skill learning is managed by a deeply buried part of the brain called the basal ganglia). Cognitive knowledge, on the other hand, is long lasting because knowledge links form in response to meaningful co-occurrence of the involved symbols (an astoundingly prescient idea first advanced by Canadian neuroscientist Donald Hebb over 50 years ago).

Using these elements, explains Hecht-Nielsen, brains can apply millions of relevant knowledge items in parallel to arrive at an optimal conclusion – in less than a tenth of a second. “Confabulation is an alien kind of information processing with no analogue in today’s computer science,” he noted. “Tens of these confabulation operations happen in our minds every waking second, with each conclusion reached launching new behaviors, and this occurs all day long.”

That's all there is to it!

Robert has done a number of very impressive computer simulations to back up his theory. My favorite is the "Plausible Next Sentence" experiment. In this experiment, two sentences are presented to a confabulation architecture consisting of the equivalent of a few hundred million neurons with a potential of around a trillion connections between them. The simulation then confabulates a "Plausible Next Sentence". Here's one example:

Input Sentences: Michelle strengthened from a Category 2 to a Category 4 storm Saturday, with winds reaching 140 mph, but it was expected to weaken before it reached Florida. The storm or its effects could strike the Keys and South Florida tonight or early Monday, said Krissy Williams, a meteorologist at the National Hurricane Center in Miami.

Confabulation Result: Forecasters warned residents to evacuate their homes as a precaution.

The confabulation result is a very reasonable and plausible next sentence. It clearly makes sense within the context of the previous sentences showing that the confabulation "understood" those input sentences. The confabulation result is completely novel - the simulation had never previously seen the result sentence. Other than "to" and "a", not a single word in the result is present in the input sentences. Yet it "knows" that those words make "sense" given the current context.

Also, note that the grammar, capitalization, and punctuation are perfect. This is particularly surprising because in this simulation architectures there are no:

1. Algorithms
2. Software routines (beyond the simulations of the functional elements)
3. Rules
4. Ontologies
5. Priors
6. Bayesian networks
   
7. Parsers

From this research, grammar, including capitalization and punctuation, seems to be an emergent property of language comprehension. No effort or mechanism was included to explicitly understand grammar in order to output the resulting sentence.

All knowledge contained within this system was derived from "reading" a corpus containing several billion words representing hundreds of millions of sentences contained in numerous novels, magazine articles, and other reference materials. In this case, "reading" consisted of translating each word and punctuation mark into a unique symbol number (for example, "the" might be symbol number 43,219) and strengthening the simulated axonal connections between symbols in various modules in the confabulation architecture as described above. It took the simulation several weeks to "read" the corpus.

The confabulator needed to "know" an impressive amount for the above example. It "knows" that there are homes in "South Florida" or the "Keys". It "knows" that it could be a good idea to evacuate in the case of storms like this. However, it "knows" that it's only a "precaution" because the storm is "expected" to "weaken". It "knows" that "forecasters" are probably involved and that "authorities" will be the ones to suggest the "evacuation".

In summary, the response was creative, knowledgeable, and intelligent. Anyone below a tenth grade reading comprehension level would be hard pressed to do as well and anyone, regardless of level, would be challenged to do materially better.

This is, by far, the most advanced example of a system based on a brain-like architecture. This is the only example I've seen of creative and intelligent language skills emerging from a massive number of simple connected symbolic elements. In fact, it's the only example I've seen of this level of language understanding by any computer ever. To me, this seems like the beginning of true artificial intelligence.

Here are several more examples from the Plausible Next Sentence experiment. For sure, some of the results are better than others, but in each case, the sentence is plausible and reasonably intelligent. If you take time to think about it, each result shows a remarkable amount of knowledge about the context and about the world given the vast diversity of topics.

Input Sentences: Several other centenarians at Maria Manor had talked about trying to live until 2000, but only Wegner made it. Her niece said that Wegner had always been a character – former glove model , buyer for Macy's, owner of Lydia's Smart Gifts downtown during the 1950s and '60s – and that she was determined to see 2000.

Confabulation Result: She was born in the Bronx Borough of New York City.

Input Sentences: A total of 22 defendants were convicted after the five-month trial of possessing explosives and plotting terrorist acts, but all were acquitted on charges that they were linked to the Al Qaeda terrorist network. Jordanian authorities now have a second chance on the Hijazi case.

Confabulation Result: The defendants are accused of conspiring with the outlawed rebel group.

Input Sentences: The doctrine is frank about Russia's economic weaknesses, calling for efforts to strengthen the economy in order for the country to remain a major power. It acknowledges that it is in Russia's interest to maintain its economic links to the outside world and there is no suggestion that it intends to abandon free market principles.

Confabulation Result: President Boris Yeltsin has expressed his willingness to compromise.

Input Sentences: Investigators say one man who got his license through a fixed test was Ricardo Guzman, the driver of a truck involved in a 1994 wreck in Wisconsin that killed six children in a burning minivan. Prosecutors say Bauer, now retired, hastily shut down the probe of the accident and blocked other investigations that might have embarrassed Ryan.

Confabulation Result: The driver fled the scene after the collision.

Input Sentences: The shortage has been attributed to rapid expansion of the prison system, low pay, a booming economy that makes the prospect of spending the day guarding convicts less attractive, and the risks of dealing with inmates who seem to be getting meaner and more violent. Prison officials are scrambling to keep penitentiaries staffed, recruiting at schools and from the Internet.

Confabulation Result: Prison officials are still debating what they have to do.

Input Sentences: Outside investigators announced the conclusions Tuesday as NASA's top scientist confirmed that the agency will cancel plans to launch a robot spacecraft in 2001 on a mission to land on Mars and indefinitely postpone all future launches to Mars, with one exception: a 2001 mission. With only its aging Mars Global Surveyor in orbit around Mars, the agency is reassessing its entire approach to the exploration of the planet after losing all four of its spacecraft bound for Mars last year – a package totaling $360 million.

Confabulation Result: Mars Global Surveyor will be mapping out the planet.

Input Sentences: Seeing us in a desperate situation, the Lahore airport authorities switched on the runway lights and allowed us to land with barely one to two minutes of fuel left in the aircraft, he said. At Lahore, Pakistani authorities denied Saran's request to accept wounded passengers and women and children, but they refueled the plane.

Confabulation Result: Airport authorities said they were not consulted beforehand.

Input Sentences: People protesting the INS decision gathered today in front of the agency's offices in Miami and the home of relatives who have cared for the boy since he was rescued on Thanksgiving Day . The boy was found clinging to an inner tube at sea after his mother and nine others died when their boat sank during their effort to leave Cuba for Florida.

Confabulation Result: Elian's mother and her grandparents perished in concentration camps.

Input Sentences: But the constant air and artillery attacks that precede the advance of Russian troops have left civilians trapped in southern mountain villages, afraid to venture under the bombs and shells raining on the roads, Chechen officials and civilians said. Residents of the capital Grozny who had fled the city in hopes of escaping to Georgia, which borders Chechnya to the south, have been stuck in the villages of Itum-Kale, 50 miles south of Grozny, and Shatoi, 35 miles south of Grozny.

Confabulation Result: Russian forces pounded the strongholds in the breakaway republic.

Input Sentences: The National Corn Growers Association says Gore is likely to have an ear of corn following him too if EPA sides with California officials, who oppose using ethanol. Ten days before the Iowa caucuses, Gore was more than 20 points ahead of Bradley in various Iowa presidential polls.

Confabulation Result: Gore's aides said they would not have any problems.

Input Sentences: The incident threatens relations between the Americans and Kosovo civilians, whom the peacekeepers were sent to protect after the 78-day NATO bombing campaign. We don't want them here to give us security if they are going to do this, said Muharram Samakova, a neighbor of the girl's family.

Confabulation Result: NATO has struck a military airfield near Pale.

Input Sentences: Now, I must admit that I'm not so sure the Palestinians really wanted to reach a framework agreement, Eran said Tuesday. Eran wondered aloud whether the Palestinian strategy might be to negotiate as much land as possible in the remaining transfers, then declare statehood unilaterally – as the Palestinians have threatened to do before when talks bog down.

Confabulation Result: Netanyahu said the Palestinians would be barred from jobs in Israel.

Ultimately, as impressed as I am with this research, I can't recommend Robert's book. It's a mish-mash of presentation slides and Robert's research papers which, since research is incremental, are rather repetitive. Also, links to all the papers and presentation are available for free from Robert's website if you're interested in more of the details.

Robert addresses why his theory hadn't been already discovered and embraced. Here's his answer from the book:

Since the mathematics of confabulation is simple, an obvious question is "Why wasn't confabulation theory discovered long ago?" A key reason is a decades-long intellectual constipation brought about by what might be called the "Bayesian religion."

Well, Robert, tell us how you really feel about other researchers! Robert's definitely not the most political or consensus oriented guy that ever lived, but he's quite a confabulator. And quite a humorist too (though not intentionally) - I laughed out loud when I read the above quote.

---

¹Full disclosure: Robert is a friend of mine, and yes, I am very biased regarding this particular topic so the reader should significantly discount everything in this post.

poor inheritance

In the going backwards post I lamented that Venezuela was headed even further off the course of progress. Quibbling over whether these regimes in Latin America were more of the left or right misses the bigger point. They are essentially operating in a manner antithetical to freedom as a result of their earlier history.

Western Europe had the initial common belief structure of Latin Christendom. But that initial belief structure evolved differently in different parts of Europe as a consequence of diverse experiences. In the Netherlands and England the experiences fostered the evolution of the belief structure in directions that led to modern perceptions of freedom. In contrast, Spanish experiences perpetuated not only an aversion to economic activity but also beliefs underlying the medieval hierarchical order.


The Latin American story starts with Spanish (and Portuguese) colonization of the new world. The entire pattern of settlement, trade, and development was geared to the extraction of precious metals for the Crown. It was an authoritarian system rules from Madrid. Neither self-government nor competitive markets existed. The Crown granted exclusive monopoly privileges to selected merchants and trade was confined to a small number of ports in the whole of South America. The objective of the Spanish mercantilist structure was to implement the movement of precious metals to Spain, not to promote the development of Latin America. Such a pattern of settlement and extractive economic policies had profound implications for Latin America after independence.

The defeat of Spanish armies resulted in the fragmentation of the former colonies into new republics. Many of these adapted a version of the United States Constitution as a model for independence, but the consequences were radically different. Without the heritage of colonial self-government and well-specified property rights, independence disintegrated into a violent struggle among competing groups for control of the polity and economy. Capturing the polity and using it as a vehicle of personal exchange in all markets was the result.

Establishing order became a goal in itself, thus creating and perpetuating authoritarian regimes -–the phenomenon of “caudillismo” became pervasive.


Under the royal system, rights were granted to individuals and groups based on personal ties to the Crown. The result was huge land grants to wealthy individuals and the church; rights and privileges to the military; and a series of local monopolies in production and trade. Self-government was completely absent.

There was no shared belief system about the role of government, the state, corporate privileges, and citizenship. There was, however, a common set of beliefs built on personal exchange which fostered strong personal relationships but undercut the construction of institutions of impersonal exchange. The absence of consensus about legitimate ends of government and how society should be organized resulted in failure to police limits to the state.

Yet inherent political instability did not completely halt economic growth. In Latin America it produced neither economic collapse nor stagnation but continuing instability, extensive rent seeking, political authoritarianism, adverse income distribution, and an inefficient provision of public goods, with slow economic growth.

The result was not a universal protection of property rights but a selective protection confined to the relevant asset holders. Two centuries after independence the historical contrast between North America and Latin America continues to provide the underlying basis for the contrasting performance. The United States retains a robust system of federalism, democracy, limited government, and thriving markets. Much of Latin America is still characterized by stop-and-go development, fragile democratic institutions, questionable foundations of citizens rights, personal exchange, and monopolized markets.

source

The economies of the region will continue to experience inconsistent progress until they can overcome this legacy. The needed institutional changes, if they are to occur, will require a change in beliefs and attitudes and some enlightened leadership either from a grass roots movement or elected officials. I'm not holding my breath.

Pontifications on the Extended Order: Part 4 - Power and Morality

The second law of thermodynamics postulates that the universe is becoming ever more random. Every significant closed system that's not already maximally random is continually converging towards a state of maximum entropy. So it's quite remarkable that everywhere we look we can find order emerging from the chaos: life, civilization, economies, etc. To be clear, the entropy of the universe as a whole is increasing, but in our little nook of the vast universe, some mysterious force is fighting back, temporarily enabling life and our extended order.

So what is this force? I think Nietzsche identifies it well:

"[the] world is the will to power -- and nothing besides!"

The self-organizing systems and extended orders we see are then the results of the interactions of competing entities, each with their own will-to-power:

"My idea is that every specific body strives to become master over all space and to extend its force (—its will to power) and to thrust back all that resists its extension. But it continually encounters similar efforts on the part of other bodies and ends by coming to an arrangement ("union") with those of them that are sufficiently related to it: thus they then conspire together for power. And the process goes on."

One of the critical things that will-to-power "thrusts back" is the natural pull towards randomness. Will-to-power is the basis for self-organizing systems and the extended order. The end of will-to-power means the end of the world and the acceleration (at least locally) of the trend towards randomness.

I find Nietzche somewhat impenetrable, so let's switch to an author/philosopher and story that's easier to relate to. Here's the key Nietzche-like quote from the story I have in mind:

There is no good or evil, only power and those too weak to seek it.

That is, of course, Lord Voldemort from "Harry Potter and the Sorcerer's Stone" by J.K. Rowling. This single quote encompasses a vast amount of Nietzche's work: Nietzche wrote a books called "Beyond Good and Evil" and "Will to Power" and also created the concept of the "Übermensch" who is someone clearly not "too weak to seek" power. If J.K. Rowling didn't intentionally create a character encompassing much of Nietzche's philosophy, it's a remarkable coincidence that such a key character is central in her 4,000 page epic tale.

Voldemort is terribly evil and is ultimately defeated. That might be seen as Rowling refuting Nietzche's philosophical constructs. However, Voldemort is not defeated because he is wrong about good, evil, and power. He is defeated because he doesn't understand where real power comes from in the wizarding world and he is too weak to seek that understanding. As Albus Dumbledore explains in "Harry Potter and the Deathly Hallows":

And his knowledge remained woefully incomplete, Harry! That which Voldemort does not value, he takes no trouble to comprehend. Of house-elves and children's tales, of love, loyalty, and innocence, Voldemort knows and understands nothing. Nothing. That they all have a power beyond his own, a power beyond the reach of any magic, is a truth he has never grasped.

So the complication is that Voldemort thought he knew where power comes from, but it turned out he was wrong and he ended up paying dearly (with all of his lives) for being wrong.

That's very important in our non-wizarding world as well. It's very difficult to know in our extremely complex world what actually creates power and how much power can be derived from any given source. Sources of power can only be discovered and tested through a process of trial and error over the millennia. This is true whether the source of power is economic, political, religious, etc.

Let's examine Voldemort's claims that there is no good an evil. On the surface, I disagree with that, but I suspect Voldemort would still agree with my outlook regarding good and evil. Something that increases the ability to exert and extend the power of the entity is good. Anything that dissipates that power is evil.

That's the basis for all morality. It's more fundamental than the golden rule or religion. If a self-organizing system violates this basic morality it will cease to exist in fairly short order and continue its journey toward chaos.

There are two different ways to extend power: cooperation and competition.

People or entities that cooperate usually each end up with more power than those that don't. Perhaps some of the entities end up with less relative power but since the power pie is bigger each still ends up with more power in an absolute sense. Many things are required for cooperation: trust, reliability, loyalty, etc. These things are universally recognized as good. Some other things by themselves are evil but as part of the extended order are actually beneficial. Greed in a free-market system is an example of this and this means that greed is good.

When thinking about extending power, competition in the form of domination and subjugation probably quickly comes to mind for many people. The alpha-male warrior, stopping at nothing, ruthlessly brutalizes and intimidates those around him until he emerges as the undisputed leader. That is certainly a form of exerting power and in some circumstances it does extend the leader's power through dominating others. In days of old dominating others was often a great way for an individual to extend power.

However, the overall power of the group is diminished by this arrangement. The additional power gained by the ruler is more than offset by the power lost by the rest of the members of the group. This weakens the group and makes it susceptible to domination by other groups. Thus, using power morality calculus, especially in the modern age, subjugation and domination is immoral. It was not, however, at an earlier point in the development of the extended order.

Humans are wonderful story tellers and masters of narrative so we weave stories about history and power to make things that historically increased power sound good and those which dissipated power sound bad. We rewrite history as needed to make those narratives fit the current knowledge regarding power. That's why the saying is "History is written by the winners".

For a somewhat more concrete definition for power, let's start with physics. Power in a mechanical system is work per unit time (P = W/t). Power in an economic system is similar: work (or output) per time which is annual Gross Domestic Product (GDP). Power in politics is the control of and/or ability to redirect economic power. Even military power is a subset of economic power. There are other forms of power as well. However, for self-organizing human systems, which inherently strive to exert and extend their power, most power can be related to economic power.

I believe that both the current state of, and every change to, the extended order over time can be explained by the extended order striving to exert and extend its power. The development of religion, trade, politics, diplomacy, war, slavery, human rights, self-sacrifice, altruism, etc. can all be traced to what worked to increase the power of one or more entities of the extended order, and, most importantly, the overall power of the extended order itself.

In Part 3 of this Pontifications series, I already gave a glimpse of this by looking at the fact that "Rights Make Might". In further Pontifications, I'm going to examine non-obvious examples of power driving events. For example, in one of the next essays in this series, I'm going to describe how the abolition of slavery in the United States was power enhancing and that it was inevitable that slavery would end for that reason. Many essays after that will be dedicated to creating a convincing argument that power is the central motivator of all self-organizing systems in our extended order.

Because the process of maximizing power requires trial and error and vast amounts of time, many of our current "trials" will turn out to be errors. Because the extended order is so complex, some of these current errors may be with us for centuries before they are rectified since nobody can really be sure whether various institutions and policies extend and enhance power or dissipate power. However, I think that from the perspective of maximizing power, certain institutions and policies are clearly negatives and could be rectified immediately. Future essays in this series will identify those policies and describe why they are counter productive.

The one thing I won't delve into is why will-to-power exists. I'm personally uninterested in what causes will-to-power and I'll leave it to the theists and atheists to explain it.

Remember the famous (and fraudulent) picture of the polar bears "clinging to life" while supposedly (but not actually) drifting away out to sea and facing certain death? I like this photoshopped version of it:(Hat tip: Tim Blair)

Diverse Research

In the debate about multiculturalism, new research sheds light on its benefits (or lack thereof):

But now a considerable amount of solid evidence about multiculturalism is in, and it suggests that far from something positive, it is a corroding and corrupting influence on just about everything that it comes in contact with, from social capital, trust, and community spirit to altruism, volunteering, friendship and even happiness.

That's the startling conclusion from Harvard's Robert Putnam...

Of course Putnam is in an awkward situation:

As a champion of multicultural diversity, Putnam finds his results disturbing and he has been reluctant to publish them. The only place to find them is in a speech reprinted in the academic journal Scandinavian Political Studies. And even there the data is not provided, only summarized. Putnam told the Financial Times that he "had delayed publishing his results until he could develop proposals to compensate for the negative effects of diversity."

Nothing like doing research expecting to find something wonderful but instead finding something awful. However, if one was truly an objective researcher, would one delay publishing one's results?

Always Exciting

Here's the headlines I woke up to this fine morning regarding a landslide that's about one-half mile from my house:

Evacuations Ordered After Hillside Buckles

Two dozen homes imperiled

Geology crew flees collapse

Mountain sliding into homes downhill

Mount Soledad hillside gives way

Well, I suppose since we don't get earthquakes, tornados, hurricanes, wind, snow, cold, or even too much heat, we deserve some class of occasional semi-natural disaster. I added the "semi" before "natural" because I'll bet that the incessantly leaking water and sewer mains in that area had at least something to do with the slide.

My house is far enough away and in much more stable rock formation so it won't affect me directly.

Oroborous predicted that housing prices in San Diego would drop and he's right! I'm sure the badly damaged ones will be down at least 60%!

poverty, charity and safety nets

There are people in need of help, but a realistic sense of the nature and the magnitude of the matter are needed if helping is truly our objective. Bill Steigerwald discusses poverty in america with Robert Rector of Heritage Foundation:

When you look at the people who John Edwards insists are poor, what you find is that the overwhelming majority of them have cable television, have air conditioning, have microwaves, have two color TVs; 45 percent of them own their own homes, which are typically three-bedroom homes with 1.5 baths in very good recondition. On average, poor people who live in either apartments or in houses are not crowded and actually have more living space than the average person living in European countries, such as France, Italy or England.

Also, a lot of people believe that poor people are malnourished. But in fact when you look at the average nutriment intake of poor children, it is virtually indistinguishable from upper-middle-class children. In fact, poor kids by the time they reach age 18 or 19 are taller and heavier than the average middle-class teenagers in the 1950s at the time of Elvis. And the boys, when they reach 18, are a full one inch taller and 10 pounds heavier than the GIs storming the beaches of Normandy. It’s pretty hard to accomplish that if you are facing chronic food shortages throughout your life.

Q: How many Americans would you define as “truly poor”?
A: If you are looking at people who do not have adequate warm, dry apartments that are in good repair, and don’t have enough food to feed their kids, you’re probably looking at one family in 100, not one family in eight.

Part of the reason the Census Bureau is telling us that we have 37 million poor people is that it judges families to be poor if they have incomes roughly less than $20,000 a year. But it doesn’t count virtually any welfare income as income. So food stamps, public housing, Medicaid -- all of the $600 billion that we spend assisting poor people (per year) is not counted as income when they go to determine whether a family is poor.

All of the data I provide come directly from government surveys. Those government surveys are not heavily publicized by the media, because since the beginning of the War on Poverty the politically correct thing to do is to just exaggerate the amount of poverty that exists in the United States as a way of encouraging more welfare spending.

Most of the money goes directly to poor people either as services or as something like a food stamp or medical care. The problem with these programs is that they reward individuals for not working and not being married. Essentially, they set up a very negative set of incentives that tends to push people deeper into poverty rather than helping them climb out of it.

The problem with the welfare state is not that it has huge overhead costs. In fact, the overhead costs are only about 15 percent of total costs. The problem is that aid is given in such a way that it encourages dependence rather than helping people to become self-sufficient.

Basically, we have spent a lot of money but we spent money in such a way that we displaced the work effort of the poor, so that we did not get very much net increase in income. Rather than bringing people’s incomes up, what we’ve done is supplanted work with welfare.

In 1996, we reformed one small welfare program -- Aid to Families with Dependent Children -- by requiring the recipients or part of the recipients to perform work in exchange for the benefits.

As a result of that, we got a huge decline in welfare rolls, a huge surge in employment and record drops in black child poverty. Unfortunately, the rest of the welfare system -- the remaining 69 programs -- remained unreformed. Until we reform those programs in a similar way, we will make no further progress against poverty.

In his Memoir on Pauperism Alexis Tocqueville gives us some salient ideas to the last point:

He starts out by surveying human history to determine why it should be the case that pauperism arises in advanced industrial societies, rather than in relatively backwards agrarian ones. He concludes that the phenomenon is paradoxically a result of the advances. Where a subsistence society requires the labor of the whole population just to feed itself, an industrial society can do so with less and less laborers.

The combination of idled hands among the many and a growing amount of disposable wealth among the few then leads to a situation where people will create new products in the hope that the wealthy will desire them. These endeavors are inherently more risky than basic food production, which must obviously go on regardless of changing tastes or hard times. In addition to forcing a significant portion of the population into a tenuous economic position, this manufacture of what are essentially superfluous goods creates a series of artificial desires. No one actually needs all of the consumer products of the modern economy, but once produce them and get the rich to buy them and soon they are viewed as necessities by the society as a whole. So, though the poorest in an industrial economy may be better off in terms of their standard of living than even the richest in a pre-industrial economy, they will nonetheless perceive themselves as destitute because they don't have all the gewgaws and doo dads that others have. Thus, societal wealth breeds desires, wants, "needs", which are unknown in cultures which must devote all of their energies to just satisfying true physical needs.

In the second part of the Memoir, Tocqueville considers what forms of welfare will best attenuate these evils. As a starting point it is important to note Tocqueville's rather blunt assessment of human nature :

Man, like all socially organized beings, has a natural passion for idleness. There are, however, two incentives to work: the need to live and the desire to improve the conditions of life. Experience has proven that the majority of men can be sufficiently motivated to work only by the first of these incentives. The second is effective only with a small minority.

It should also be noted that he does accept the notion that there is a legitimate role for charity :

I recognize not only the utility but the necessity of public charity applied to inevitable evils such as the helplessness of infancy, the decrepitude of old age, sickness, insanity. I even admit its temporary usefulness in times of public calamities which God sometimes allows to slip from his hand, proclaiming his anger to the nation. State alms are then as spontaneous as unforeseen, as temporary as the evil itself.

As is so often the case, de Tocqueville seems to have perceived social trends and understood where mankind's character would lead with the clarity of a prophet. To a remarkable degree, the arguments he presents in the Memoir have become the accepted wisdom that lay behind Welfare reform and ideas like President Bush's Faith-Based Initiative. We can only imagine how much different, how much better and more productive, the last two hundred years might have been had the industrialized world heeded his warning :

I am deeply convinced that any permanent, regular administrative system whose aim will be to provide for the needs of the poor will breed more miseries than it can cure, will deprave the population that it wants to help and comfort, will in time reduce the rich to being no more than the tenant-farmers of the poor, will dry up the sources of savings, will stop the accumulation of capital, will retard the development of trade, will benumb human industry and activity, and will culminate by bringing about a violent revolution in the State...

Precisely such a fate did claim many of the states of Europe, and most of the rest still groan beneath the suffocating weight of their cradle to grave welfare systems. As Tocqueville expected, America has been able to slow the onset of this fate, and the current climate of enthusiasm for privatizing social services offers some hope that we will be able to avoid it altogether, but until we actually do privatize Social Security and re-privatize health care, this sword of Damocles still dangles overhead.

If progress is to be made, we should keep in mind the same point reiterated about the poverty of welfare:

The citizenry are taught to distrust capitalism, distrust business, distrust successful people (except Liberal Fundamentalists), distrust religion and to place all responsibility for control of their lives in the government. The intellectually elite Liberal Fundamentalists control the government, as they largely control the media and the bureaucracy, but they remain aloof. They assign blame when things do not go right. They are never wrong, and technically they don't exist as an entity. Their ranks change with the wind.

In the 1960s the Liberal Fundamentalists came up with a "solution" called welfare. I once heard a Black man on television refer to welfare are one of the most poorly thought-out government programs of all time, as it took away self-respect. He went on to say that Affirmative Action was the worst program of all. That's because it caused people to achieve positions they were not due, and took away their pride of accomplishment. He also added that it caused every successful Black to acquire a stain, the question being whether the success he or she had achieved was deserved or not.

It would be nice to see how far we can advance if citizens and elected officials can learn.