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The Callahan Principle

"The Callahan Principle": Whenever someone tells you that "Doing nothing is not an option," you can be damned certain that doing nothing IS an option, and probably a pretty darn good one -- otherwise, why are these folks trying so hard to convince you that it's not one?


Sanity down south

Not all the headlines are dire lately: the President of Mexico submitted a proposal to Congress (the Mexican one) to legalize possession of small amounts of a variety of drugs.

I've often been frustrated by how underwhelming the popular support for legalization is in Mexico. The extreme Catholic influence is no doubt responsible for a lot of this, but on the other hand there is an incredible amount of prohibition-related violence that still doesn't prevent widespread drug availability. (The military appears to be somehow complicit in the trade, which might explain something.) Overall, it ought to be clear that prohibition does not work, cannot work, yet somehow drugs remain illegal.

This proposal appears to be a less radical version of one from several years ago which George Bush's influence quashed, but its reoccurrence is cause for optimism. Every important campaign for liberty failed at first.

The proposal emphasizes treating small amounts of possession more like substance abuse, which is legal but discouraged, and less like a criminal offense. In this way it suffers from the same mindset that underlies most official drug policy: certain substances simply cannot be used responsibly; all use is abuse. This is unfortunate, but legalization will gradually erode this political stance, so I won't get too worked up about it.

And yes, we should rejoice if this proposal passes, because it is a gateway to wider decriminalization. What conservatives fear, we should embrace. All drugs should be legal.


Sweet tea country

I swear I've seen something like this before, but not with so handy a map: the (porous) boundary between South and North determined by sweet tea availability. Regrettably they used McDonald's restaurants to draw the map, but that's probably the only realistic way to do it; you wouldn't call up every small restaurant in Virginia, but this information is easy to get from a big company.

For what it's worth, sweet tea is better.

Link via Strange Maps


Trees are alive and well on Planet Earth

The University of Chicago Magazine has a great article about the hidden reforestation going on in a great many deforested places, and why our official attitude about nature has made it hidden. The trees are right out in the open, but they're not the kind of growth that top-down thinkers appreciate.

Via Arts & Letters Daily


I'm No Biden Fan

But I thought he clearly won the debate. Palin's answers were pleasant, but platitudinous, often evasive. Biden's attacks were much more pointed and frequent. But nor did Palin defend herself particularly well--her main strategy when attacked was to change the subject, which is of course the political modus operandi, but employed much more frequently by the Governor than the Senator.

Perhaps must surprising was the degree of agreement hammered out between the two. Often positions were kept vague, so as to veil details where disagreements might appear, but still both candidates: spoke in favor of equitable treatment of homosexual and heterosexual unions, while protesting any redefinition of marriage; professed belief in anthropogenic global warming, though Palin stressed other non-human causes; promised to bring change to the government--particularly interesting coming from the Republican candidate; agreed to work on the Darfour crisis.

Indeed, I'm not sure what disagreements did exist. Palin did speak of government spending being excessive--Biden neither disagreed nor agreed. Palin spoke of financial benefits of cutting taxes, which Biden agreed with, if more out of considerations of fairness, but Palin went farther and allowed for positive general effects of lower corporate taxes. Biden never said anything quite so supply-sidey. But by and large, nuances like these were glossed over.

There was a clash over implementation of a timeline for Iraq withdrawal, with Palin wanting to delegate the decision to commanders on the ground; this was one of the few areas in foreign policy where she had the better of the argument. But Biden's knowledge was obviously deeper on the greater part of the subject matter. A spat over proposed surge tactics in Afghanistan was too vague to be useful.

All in all, Palin's answers seemed excuses to repeat certain terms again and again, despite the question or the statement being responded to: energy independence, lower taxes, main street, change. All this was peppered with stories of Alaskan politics that were utterly irrelevant. To be sure, Biden exhibited similar behavior, but less frequently, sticking closer to the topic and sometimes, amazingly, with seconds to spare, managing to give a question to the actual question asked.

But few reports I've seen share my opinion, so maybe I just don't understand the point of these things. I believe this is the first time I've ever watched a complete presidential election debate, and I don't have much interest in doing so again.


Figure this one out

A few days ago, bailout failed, market tanked 400 points. We were perplexed. Today, bailout passes, market drops 450 points. Explain that, bitches.

My tentative conjecture subject to future revision should more data arise: we're all fucked!


Did Someone Say Orgy?

Stephen Colbert Talks to Teens About Voter Abstinence:


Church Sign Generator

It's better than work: the Church Sign Generator. Also comes in Church of Scientology and Westboro Baptist Church flavors.

Here are some examples.




The Nature of the Firm is Organic

Too much central planning and too few market signals are the pesticides.

Roderick Long at AotP explains the basics behind the Austrian theory of the firm, how the socialist calculation debate has ramifications for determining the optimal size of private corporations, an idea also explored by Ronald Coase in his seminal 1937 article, "The Nature of the Firm."

In 1920, Ludwig von Mises published an argument against the workability of “socialism” (by which he meant state ownership of the means of production), an argument subsequently elaborated by himself and his student Friedrich Hayek. [...]

The Mises-Hayek account of the limits of state centralisation was subsequently extended, by Mises’s student Murray Rothbard, to cover the limits of private cartelisation as well. [...]

Everyone knows about economies of scale; after all, that’s why we have firms in the first place. What Rothbard’s analysis shows is that there are also diseconomies of scale, and that these grow more severe as vertical integration increases.

What happens when a firm grows so large, its internal operations so insulated from the price system, that the diseconomies of scale begin to outweigh the economies? Well, that depends on the institutional context. In a free market, if the firm doesn’t catch wise and start scaling back, it will grow increasingly inefficient and so will lose customers to competitors; markets thus serve as an automatic check on the size of the firm.

But what if friendly politicians rig the game so that favoured companies can reap the benefits associated with economies of scale while socialising the costs associated with diseconomies of scale? Then we might just possibly end up with an economy dominated by those bloated, bureaucratic, hierarchical corporate behemoths we all know and love.

The final takeaway?

So long as the confusion between free markets and plutocracy persist – so long as libertarians allow their laudable attraction to free markets to fool them into defending plutocracy, and so long as those on the left allow their laudable opposition to plutocracy to fool them into opposing free markets – neither libertarians nor the left will achieve their goals, and the state-corporate partnership will continue to dominate the political scene.

I look forward to reading Long's next post, which will be an application of Austrian price theory to the current financial crisis.


We Need These Democrats Today

These guys sound awesome.
The Locofocos

Lassiez-faire. Hard money. Labor unions.


The Nucular Option

Whenever Sarah Palin says "nucular weaponry," drink!

This message brought to you by Baroccoli Obama:



Recombinant Memetics

Meme complexes, "memeplexes", are groups of memes that are passed on together. Like genes, memes often coexist in groupings that further their collective survival and replication. The memeplexes with the fittest and most synergistic memes and are the ones that flourish in the memetic ecosystem, i.e. the collection of human minds.

One well adapted memeplex is the Mormon church I grew up in. The Church of Jesus Christ of Latter Day Saints is one of the fast growing religions in the world. What about the Mormon faith makes this possible?

For one, a collection of kick-ass memes. Mormons have lots of offspring, most of which adopt the LDS faith. Mormon doctrine and culture emphasizes marriage and encourages large families. Mormonism also encourages behavior that facilitates financial stability and accumulation of wealth. The church glorifies the small businessman and inculcates bourgeois values like saving money, getting and holding jobs, and low time preference. By avoiding the debt and divorce that attend financial hardship, Mormonism increases the fidelity with which the faith is transferred to offspring, makes Mormons respected and enviable members of the community--aiding conversion, and encourages satisfaction with the Mormon lifestyle status quo and the belief that the Mormons really are favored by god--thereby reducing apostasy and back-sliding.

In addition to powerful memes, the church also benefits from the multitude of ways that these memes work together to amplify their effects. The memes for financial success combine with the tithing meme to finance proselytism around the world as well as institutions like the Mormon welfare system that encourage organizational allegiance. The financial memes also help make possible Mormonism's most impressive meme: missionary work. Mormon families pay out of pocket for their young men to put their careers and educations on hold and devote two years of their lives to work more than full-time recruiting new members. These, and other elements of the Mormon memeplex, gives it a leg up against other religions--like the celibate, and unsurprisingly moribund, Shakers--in the competition for human mind space.

One comparatively poorly adapted memeplex is the libertarian movement. Much of this is our fault. We have bundled our ideological memes like "Don't initiate coercion." with incompatible and ineffective praxis memes like the Libertarian Party and electoral politics in general. In all fairness, libertarian memes also start out with several inherent disadvantages. The whole point of libertarianism is to combat a number of particularly virulent and pernicious memes. Richard Dawkins showed how genes, not organisms, are the basic unit of evolution and that the sole interest of genes, reproduction, does not always line up with the interest of their carriers, i.e. organisms, hence the title of his book “The Selfish Gene.” It's the same way with memes. The meme "The state is indispensable." is bad for the well being of individuals and societies, but it has achieved dominance because those with power and wealth accumulated through plunder have used these resources to disseminate it and have made holding it as a prerequisite for social advancement and some semblance of a normal life. By rejecting statist memes we renounce use of the reproductive power which made them such a common problem in the first place. The anti-politics political movement faces obvious challenges just as an anti-technology movement would have trouble getting its ideas heard. As a result, libertarian ideology, no matter how ironclad its arguments and beneficial its potential effects, languishes on the margins of the marketplace of ideas.

I think the solution to these problems for libertarians lies in superior memetic engineering.

Diabetics used to depend on insulin extracted from cattle and pig pancreases. In the late 70s, scientists figured out how to produce insulin by splicing animal insulin genes into bacteria that would then produce insulin as well as more insulin producing bacteria. Today most artificial insulin is produced with modified E. coli bacteria or yeast at lower cost and higher quality. This is called recombinant DNA.

E. coli genes co-evolved to create a highly efficient system for their rapid and accurate expression and reproduction. All scientists had to do was piggy-back another bit of evolved genetic machinery onto this complex and the resulting chimera would reproduce and express the desired genes for them.

If someone could put together a neutral carrier--a collection of memes that, like the E. coli genome, was an effective machine for reproducing itself--he could splice in whatever ideas he liked and set it loose. The recombinant memeplex would then, barring mutation, spread the message for him.

This already happens all the time. The basic self-reproducing ideas behind the chain letter or pyramid scheme have been used again and again in the service of many different ends. As our knowledge of how memes work improves, even more powerful and complex "recombinant memetics" should become possible. By swapping out different memes for L. Ron Hubbard's ravings, the Church of Scientology, stripped of its crazy-ass belief system leaving just the mechanisms used for churning out zealous Scientologists could be used for producing zealous vegans, zealous Pastafarians...or even zealous libertarians.


Channeling My Inner Boudreaux

I just sent the following letter to the New York Times:

Mark Buchanan informs us that "Financial crises may emerge naturally from the very makeup of markets", but the example he gives indicates that the current crisis emerged from government planning the economy, not from markets operating naturally ("This Economy Does Not Compute," October 1).

Buchanan correctly notes that "too much easy credit can be dangerous," a predictable result of central planning and mismanagement of the money supply and interest rates. He therefore calls on government to "exert broader control over the leverage," to counteract the speed and eventual breakdown of the economy.

But this is like saying that if my foot is stuck on the gas pedal, I should balance this out by getting my other foot stuck on the brake. A wiser strategy might be to remove my foot from the gas pedal entirely, and then hand over driving to someone else. Driving the economy apparently isn't the government's forte.

Sincerely,
Micha Ghertner

Friends don't let friends manage the economy. Pass it on!


Pork Chop Sandwiches!

Whenever things seem dire, I turn to GI Joe. You might remember the PSAs at the end of the show when a GI Joe would remind kids not to stick their tongues in electrical outlets or eat nails. Here are a couple more (NSFW - language):




Also:



I am getting old

My feeling about the bailout, which I believe is going to pass (though I hope that I am wrong) is that this is the turning point, the beginning of end of the United States. But stepping back, I think this may just be the turning point of my life, when I stop being a young person with hope for the future and become an old person who won't shut up about how bad things are today compared with the happy days of his youth. After all, this isn't really the first time government has deeply disappointed.

Here are four things that could have happened once the bailout was rejected in the House, ranked from best to worst.

1) No more was heard about the bailout.

2) A revised more helpful or at least less harmful bailout was submitted.

3) A revised bailout, no better than the first, and with a bunch of pork and other crap added to appeal to the corruption of the congress was submitted.

4) (3) was done but it was first passed in the Senate and submitted to the House from the Senate, in flagrant violation of the unmistakable intent of the Constitution.

Number (4) is, as we now know, what actually happened.

My problem is not as much with the bailout itself, as it is with what this reveals about Congress and about our government generally. If we assume 200 million adults in the United States, then the price of the bailout, which I will estimate at 2 trillion (not to be confused with the official price tag), is merely ten thousand dollars per adult. Painful but I'll survive - seeing as so far I survived the cost of the Iraq war, which is a sizable fraction of this.

So how do young people focused on hopes for the future turn into old people focused on disappointments of the past? It may be that a person can tolerate only so much disappointment before he breaks. A young person hasn't been on the planet long enough for many of his hopes to be dashed. The longer we remain on the planet, the greater the number of disappointments. Added to this, of course, is the approaching end of one's own life. The less time I have left to live, the less plausible is my hope that things will have turned around by my death.


Oppression: apparently a laughing matter

Another example of how U.S. police departments not only form the vanguard of the terror state, but relish their job.


Bailout sentiment

I first noticed it at the end of last week: most of the "average joes" on various message boards I visit were against the bailout. A WSJ article from today confirms what I found anecdotally.

The defeat in Congress of a proposed $700 billion economic-rescue package followed an intense outpouring of voter anger, fanned by politicians, interest groups and media on the left and right, that overwhelmed calls from the president and top lawmakers to pass the deal.


Economic laws of conservation

I do not have detailed knowledge of this situation, but I am pretty familiar with what might be called "economic laws of conservation", and the bailout violates several of these.

When some crackpot inventor claims that he has created a perpetual motion machine or similar impossible device, and he has a long, detailed argument as to how and why this machine works, you have two choices:

1) You can spend the next several hours or days of your life going through his argument to see whether it is correct. You are likely to get this wrong, because the errors in a long argument, especially one which fooled the inventor, may be subtle and easy to miss.

2) You can point out that a perpetual motion machine violates fundamental physical principles. One example I've seen is a machine which violates the law of conservation of momentum. The inventor claimed that his machine managed to accelerate without pushing back on anything or throwing anything back, which is a straightforward violation of the law of conservation of momentum. Another law which is likely violated by any perpetual motion machine is the law of entropy, the second law of thermodynamics.

One of the economic broad principles that I am familiar with is that, while the market can be wrong, you (whoever you are) are almost certainly unable reliably to do better than the market. Claims that the government will probably recoup its investment and even profit violate this principle.

Another of the economic broad principles that I am familiar with is that the market works by no other means than rewarding wise investment and punishing foolish investment. That is how it works. A more general broad principle, upon which this relies, is that you get more of what you reward. The bailout violates this principle as well. Miron appeals to this principle when he writes:

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

One can go on.

Miron, and other economists who have spoken out against the bailout, have tended to make arguments that I find comprehensible and persuasive, because they appeal to broad economic principles that I am familiar with and have long since accepted. Those who have spoken out in favor of the bailout - well, for one thing, rather than see actual arguments from them I have seen appeals to authority, appeals to hidden knowledge, sky-is-falling warnings that have no actual content but serve merely to shift the reader into panic mode, vehement attacks on those who disagree, and the like. I've seen glimpses, here and there, amidst the ocean of invalid argumentation, of something that looks like an actual argument, but what I have seen has displayed that narrow focus, that missing-the-forest-for-the-trees aspect, which I remember from arguments of the inventors of perpetual motion machines.

Good economics since Bastiat has been largely about noticing "that which is unseen" - i.e., noticing the forest while the rest of the world obsesses over the trees. The arguments against the bailout have that look to them. The arguments for, the ones that I have seen, do not.


Amen and Hallelujah

Jeffrey Miron:

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.


Question for Bailout Opponents

Suppose the bailout doesn't pass, in any form. What information would you need for you to conclude that you were more likely wrong than right in opposing it, at least in the sense of the economy being worse than it otherwise needed to be? (Setting aside purely moral libertarian concerns.) I.e., if GDP declines 25%, are you still sure that it would have been worse with a bailout? 99%? Is your rejection of the bailout falsifiable?

(I'm not supporting the bailout, by the way. But as someone who is continually, and increasingly, awestruck by the degree of certainty people express in their political beliefs, not to mention their predictions about the future state of the economy, I'm genuinely curious about what results would cause them to re-examine their opinions.)


Why did the markets like the bailout

As you can see from the graph in Scott's post, the markets plunged when the bailout failed to pass the House.

Why? I can understand the financials plunging, since the bailout would have been a transfer from taxpayers to them. But why the market as a whole? Does that mean the bailout would have been good for the economy?


Bailout Fail

With apologies to Failblog.


Bailout Dodged for Now

The compromised house bill has been defeated 227-206, in a bipartisan fit of doing well by doing nothing.

A few things:

First, despite the doomsday scenarios sketched out regarding the collapse of the credit/financial market, evidence of peril beyond Mass Hysteria is harder to come by- though I dont have it handy at the moment, I recall that McClatchy just managed to rollover a huge amount of debt; that and the fact that aside from investors pulling out of the stock market we don't see the big players acting like its Doomsday/ELE type crisis says to me that extraordinary actions aren't exactly called for, especially with the known downside risk of nationalization and corporatism that have stymied and stagnated economies all over the globe since WWII and the end of the Cold War.

Second, if there is to be bailout, let it be in the time-honored form of the conventional "safety nets" vs. massive intervention in how the economy works. The steel tariffs put more people out of work than were kept at work, meaning that if "we" (re: govt) just paid the affected workers their salaries, "we'd" come out better and with less distortion of the productive economy. Given that we're still seeing lending, albeit at much higher prices, I'm becoming convinced that the way forward here is the same- pick up the collateral damage instead of trying to game the whole system.

Third, via Arnold Kling, if this is a wealth shock at base, then all of this propping up of the financial markets via asset purchases, etc, is just reshuffling the deck chairs. If the economy loses $4-5 trillion in wealth, the economy is poorer and reality is going tor eflect that. The more we distort our indicators of reality, the worse (and longer) the adjustment will take.

Fourth, mea culpa as one of the "excitables" freaking out last weekend- fool me once, shame on you, fool me twice, shame on me. A tepid response is to say "well, I wasn't for what was proposed," but still, the impulse was there so my bad. I (and others excitable as I was) should have more faith in the US financial system, economy, and people that we can absorb and adjust to the shock.

So hopefully, the demise of the bill will allow time to muster a more substantive opposition to the bailout in principle, or at least get a better/less-distortionary policy.


The Lesser of Two Evils

I've been seeing a lot of libertarians reluctantly endorsing Barack Obama on the grounds that they really don't like John McCain. I think it's important to keep in mind that the relevant question is not whether John McCain or Barack Obama is the better person, or even who would make a better dictator, but rather who would do the least long-term damage given the current political context. It grieves me that it's comes to this, but damage control is really the best we can hope for right now.

With that in mind, I think that John McCain is the least-bad choice. A Democratic Congress—which we are likely to have for at least the next few years—with a cooperative president is almost guaranteed to raise taxes and spending significantly, and Obama is likely to nominate left-wing judges who will fail to oppose further expansion of the power of the Federal government to regulate the economy. McCain is likely to put up at least some resistance to the Congressional agenda, if not nearly as much as I would like.

Furthermore, Half Sigma once made what I think is a valid and important point: The damage done by Republicans tends not to last as long as the damage done by Democrats (That's a link to the front page—I can't find the specific post). Generations later, we're still paying for the folly of electing Roosevelt and Johnson, but the damage done by Nixon has mostly been rolled back by now.

I could be wrong. Clinton was voted in with a cooperative Democratic Congress, which prompted a backlash that led to 12 years of Republican domination of Congress and a golden age of fiscal restraint, which ended abruptly when Bush took office. Speaking of which, Bush may be an exception to Half Sigma's Law, as I don't see Medicare Part D going away. It is worth noting, though, that he did this with a same-party Congress.

So it's a tough call, but I believe that John McCain clears the very low bar of having slightly less potential than Barack Obama to do permanent damage, given the givens.


Works Cited

Lockstock
Of course, it wasn't long before the water turned silty, brackish and then disappeared altogether. As cruel as Caldwell B. Cladwell was, his measures effectively regulated water consumption, sparing the town the same fate as the phantom Urinetown. Hope chose to ignore the warning signs, however, preferring to bask in the people's love for as long as it lasted.

Little Sally
What kind of musical is this?! The good guys finally take over and then everything starts falling apart.

Lockstock
Like I said, Little Sally. This isn't a happy musical.

Little Sally
But the music's so happy!

Lockstock
Yes, Little Sally. Yes it is.

Josephine
Such a fever. If only I had a cool, tall glass of water, maybe I'd have a fighting chance.

Hope
But don't you see, Mrs. Strong? The glass of water's inside you, it always has been.

Josephine
It has?

Hope
Of course it has.

Mark Hollmann, Greg Kotis, Urinetown, perhaps the most libertarian musical ever written