Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Power Page 13 of 15

Economic Theories are Prescriptive, not Descriptive

By

On March 10, 2014

41 Comments

One of the advantages of studying anthropology, sociology and archeology is that you know that while there’s probably such a thing as “human nature”  it has a vast range of expression.  Some societies are cooperative, sharing and kind, with virtually no hierarchy.  Others are hierarchical, cruel, domineering and full of people who ruthlessly compete with each other, and screw the hindmost.  And still others are in-between, with a vast spectrum of possibilities.

These societies have different ways of distributing goods.  In many hunter-gatherer societies, for example, they decide who gets the animal killed by looking at whose arrow killed it.  Seems very “screw the hindmost” until you find out that the hunters freely share the arrows they make.  The arrow that killed the animal probably didn’t come from the person who made the arrow.  And, in any case, they share much of the kill.

Every economic system, every way of distributing goods and services, requires a different ethic and it elevates a different ethic.  While merchants might have been wealthy, in many agricultural societies, including China and Japan through much of their history, they were considered parasites: they created nothing, after all.  Peasants might be poorer, but they were given higher status, including legally, than merchants.  In the European Middle Ages money made from trade was considered dirty, and strictly speaking, if a noble engaged in mercantile activities or took up a trade, they would lose their noble status.  Perhaps this honored more often in the breach, but history is full of nobles who did lose their status through working with their hands, or engaging in trade too openly.  (This was also true of Roman Patricians, by the way.)  Honorable wealth came from land, war or gifts from other nobles for service.

Modern economics is famous for believing in the rational economic actor, almost entirely concerned with his or her own utility.  (In normal parlance, a selfish bastard).  This is a model of how people behave, but it’s an oversimplification of human nature so severe as to be wrong.  Most people don’t behave like that most of the time: they cooperate, and they share and most of them don’t free ride.

There is an exception, however: economics students.  Multiple studies have found that economics students act as economic theory would predict far more than people not trained in economics.

Economics is, thus, prescriptive.  It tells people how they should behave.

Who else behaves that way?  Senior executives in large corporations and rich people.  The people who control the economy, act as economic theory says they should.

Be clear, all elites in all places and times have not acted this way: chieftains in status societies do not act like this. Potlach giving native Americans did not act this way.  The elders of hunter-gatherer tribes do not act this way.  Roman Patricians, Chinese Mandarins, and Medieval European nobles did not act this way—at least, not nearly as much as our modern economic leaders do.

It is not even the case that executives in the 50s and 60s acted this way.  When John Kenneth Galbraith investigated why executives back then didn’t pay themselves more, he came to the conclusion that they didn’t because they believed, as a group, that doing so would be wrong, and they took out anyone who tried to pay themselves more than they considered appropriate.

So why do executives act that way now?

Ideas lead culture and policy produces the outcomes one would expect.  Thatcher and Reagan and intellectuals like Dawkins made being greed and taking whatever you could get, screw the hindmost, acceptable.  “Greed was good” in the 80s, and has become better since.  We were told this is how humans are; and this is how humans should be; and that doing this would produce better outcomes for everyone.  This was legislated into law: the removal of protections from financial abuse put in place in the 30s, the lowering of top tax rates; the emphasis on consumption taxes over wealth taxes, the dropping of corporate tax rates; the “free trade” movement which allowed elites to avoid taxes and make goods in sweatshop nations.

The previous generation, those who experienced the Great Depression as adults, and who remembered the 20s and what the last great unregulated economy had wrought, were old, and out of power.  Those who believed; who knew; that economic success had nothing to do with any sort of virtue, were gone.  The new generations accepted a premise they desperately wanted to believe: that they could be selfish assholes, acting in their own interest and not caring about other people, and that it would all work out for the best.

This was twofold: it was the result of a concerted intellectual effort by people like Dawkins and Milton Friedman, pushed by business interests; and it was the result of a population who wanted to believe it; who wanted to be ethically lazy and stop helping other people and still feel good about themselves.

Ethics are socially bound, and are created and recreated by each generation.  To be sure, they are related to the means of production and the incentive system; but we create the incentive system. The executives of the 50s and 60s, by and large, chose something different than the executives of the 80s through today.

What has been chosen, can be changed.  If we want an economy which works for everyone, we can have it.

But we have to choose it, and we have convince or crush those who would chose otherwise.  And for those who wince at the word crush, remember, inequality means death and illness for many people.  The crushing has already happened, the class war occurred, and the rich won.  And the casualties are piling up.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

The Golden Rule: Why Bankers Are In Charge

By

On February 26, 2014

20 Comments

In our society, we determine much behaviour, and most economic behaviour, through the medium of money. This is not universal: many societies have not used money as their main means of determining who received goods, but we do.

If someone receives money for doing something, it is also a message which says “do more of this.” The more money, the stronger the message.

The most potent message, and the strongest effect on behaviour, is when someone has the right to create money. Money, in our society, is created by borrowing. Banks and other financial institutions which have the right to lend thus have the right to create money. They have to have some form of collateral, even if that collateral is just an expectation of future earnings “great business idea, we’ll lend you money, and use your expected profits as our collateral.”

This money can be loaned out at multiples of the underlying asset. During the 2000s some brokerages were allowed multipliers (leverage) of over 40X. Even better, often whatever you buy with a leveraged loan can then be used as an asset for another round of leverage, leading to extremely high levels of effective leverage.

Some organizations also have access to very low interest rates: they can borrow at close to “prime” the rate the central bank offers to the very best credit risks. Major banks are amongst those who can borrow at this rate. They can then lend out to other people, again, at a higher interest rate, and with leverage.

If you, personally, could borrow money at 1% annual interest rate, and lend out ten times that, do you think you could make a profit? What is your mortgage rate? What is your credit card’s interest rate?

This is as close as it comes to free money, and it takes a special genius to lose money when given these advantages.

The first rule of money is the rule of profits: if a group of people are making more profits than everyone else, they will come to control more and more of the society. Not only can they buy up other companies, but they can afford to donate to politicians, give politicians and regulators cushy jobs between government gigs, and they can afford to set up think tanks and endow university chairs and buy newspapers and television stations and so on in order to control the dissemination of ideas.

In theory profits are supposed to be self-limiting. If an industry makes more money than other industries, outsiders should see an opportunity, start up businesses, compete and drive down prices.

In the real world, that doesn’t happen as often as it does in theory, because you can’t just start up a bank with access to the Central Bank’s window. You can’t easily start up new pharmaceutical businesses, because it’s vastly expensive and there are huge regulatory hurdles. And when it does happen, why would you compete? Why not take the outsize profits? Why would you drive down profits? How does that benefit you?

The other check is supposed to be diminishing returns. The more money you have, the harder it is to find something to invest in: you run out of mortgages, or you run out of businesses to invest in which can make those returns. This does work, somewhat. It is at the heart of why the financial collapse happened: there weren’t enough assets for all the money chasing them, so widespread fraud occurred (liars loans, for example) and many people were given loans who couldn’t pay them back, while artificial assets were created which were not worth what they were sold for. Eventually this collapsed, but because the financial industry had already bought the political world, they were bailed out at a cost of trillions.

Behaviour you reward, is repeated. Bankers made millions of dollars, personally, in bonuses. This told them that what they did was valued, and they should do more of it. They did.

The fact that Wall Street and Fleet Street salaries and bonuses were so large also made financial executives not care about the future. When you make millions in a few years: enough to live on for the rest of your life, in high style, it isn’t important if you’re driving the firm to bankruptcy. You don’t need the bank or the firm to be there, you’ve already made your mint.

Now, as a politician, if you do what the financial industry (or any other wealth industry) wants, they donate to your reelection campaign. They make sure your friends and family have jobs. They invite you to the best parties. And if you’re defeated, and have voted the right way, well, they’ll take care of you afterwards as well, with a cushy job. Bill Clinton, who deregulated Wall Street, is worth 100 million dollars.

Because bankers control a lot of money, they control what other people do.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

The problem of resistance to the oligarchy

By

On January 12, 2014

55 Comments

is how to hurt their interests at an acceptable cost to those doing the harm.

The traditional answer to this was solidarity and martyrdom.  It is impossible to overstate how dangerous being a union activist right up to the middle of the 20th century was.  You had to accept that you would be beaten, jailed and possibly killed.  Violent confrontations with police and private cops were routine.  Outright battles were not unknown, as when miners squared off against the military in a multi-day battle with over ten thousand casualties.

Nor did the early unions wring their hands about violence, even “criminal” violence. Clarence Darrow was a union lawyer for years.  One of his most prominent cases was defending union members who set off explosives in a newspaper office, killing people in that office.  The unions did not abandon those workers, who had clearly committed what we would call terrorism: they hired a star lawyer, one of the best in the country, to defend them.

The general strike, even more than the strike, was another answer: just shut the entire economy down.  It was used because it inflicted real costs on employers: they still needed some workers. But a strike requires social solidarity: bringing in scabs must be socially unacceptable, either due to mores or because the scabs know they’ll have their kneecaps broken.  A general strike requires enough workers to be willing to do it to shut down an entire city, region, or country.

The Gandhian resistance method is very similar to general strikes: it requires hundreds of thousands to millions of people to be willing to shut down the economy and dare the police or army to kill or imprison them all.  When you have only a few hundred or thousand people, the police can deal with that easily enough: worst case they call in the national guard.  Hundreds of thousands: not so much.

What all of these actions had in common is that they genuinely hurt the interests of the rich where it mattered, in the pocketbook.

You can also get change through making the lives of the rich unpleasant, or making them fear for their very lives.  Social peace has often been bought by treating ordinary people better, when the rich genuinely feared the army and police couldn’t protect them.

But if the elites think that their security forces can protect them, and especially if they live in a bubble where they never have to face people whose lives they have made miserable, as is the case for most of our rich, who fly by private jet, travel about the city in helicopters or chauffered limos and live in gated enclaves; and if you can’t cost them any real money, why should they let you have any of the surplus of society beyond the bare minimum you need to remain useful to them? (Not to survive: as the cutting of food stamps in the US indicates, that’s not a priority for the oligarchy.)

Be clear that distribution of goods and money in an economy is almost entirely unrelated to any ethical idea of merit or deservedness.  The bankers, amongst the best paid people in the world economy, destroyed far more money than they earned in the 00s, and yet are still paid billions of dollars in bonuses every year.  They receive the money they do because they had the power to make the government make them whole after they lost everything, then the power to make the government make them even richer than before.  They control a bundle of valuable rights from the state: the right to borrow at prime, the right to value assets to model (fantasy); the right to huge leverage; and the right lend, which is how money is actually created in our economy (aka. they can print money.)

This is why they’re rich: not because they produce net value: they destroy value; but because they have the power to make the government do what they want it to do and to make it not prosecute them when they break the laws, and even to change the laws so they can take even more money.

Distribution in an economy is based, virtually entirely, on power. A group receives goods and money because it can force others to give it to them.  The libertarian fantasy of free markets and free choice is exactly that. They don’t exist today, they have rarely existed in the past, and to the extent they have existed they owe their existence entirely to government making sure they exist.  As soon as any group gains enough power to take over government, they do, and free markets cease to exist because they make the government give them special rights,whether those are rights to print money, borrow low and lend high, or so-called intellectual property rights that let them continue to profit from ideas created 80 years ago.

Power, power is all that matters.  Even distribution, or something close to it, happens only when there is relatively equality between groups in society or there is an existential threat to society which requires the willing participation of all parts of society.

If you ever want to see raises for ordinary people again, you must figure out how they will become powerful: and power means “what can they do to hurt people who cross them, hurt them really, really badly.”

Peace is the result of everyone knowing and believing in their hearts that if they break the conditions of the peace, others will react with overwhelming force.  When  it becomes clear that there is no cost for taking more of the pie, people will do so, and yes, did do so.

So: how do we punish the rich for what they have done?  How do we force them (not convince, force) to give up more of the surplus crated by society?

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

The Power Parable

By

On January 9, 2014

9 Comments

“The strong do what they will and the weak suffer what they must ” – Thucydides

Imagine that you have crawled out of the desert. You have not drunk in days, and if you do not have water soon you will die. Only one man has water, but he will not give it to you for free, he wants to be paid.

What is that water worth? To put it another way, what is your life worth?

One answer is that your life is worth everything you will ever earn, minus the cost of subsistence. The water-seller might say “if you die, you will never earn anything again. Therefore everything you earn is because I gave you water. So this water is worth your life’s income.”

Now you might not find life worth living under these circumstances, which amount to slavery. If the water-seller had many possible customers crawling out of the desert, he might find that too many people would rather die than pay, and might reduce his price somewhat to maximize his profit. If one quarter of people would rather die than pay, he might reduce the price to two-thirds of his customers life earnings, and see if most of them were willing to pay that.

Over time he might find that, knowing he’d take two-thirds, once saved his customers wouldn’t work very hard: just enough for subsistence and some alcohol, perhaps. So he might continue to experiment—how much could he take to maximize his profits?

But there is another possibility, back at the original bargain “your earnings, or your life?” What if you decide to take the water whether the water-seller wants you to have it or not? What if you’re willing to use violence? You’re weak, you might not win and if you lose you’re dead, but you might win and if you do you don’t have to pay anything. And if you win, you could start selling water yourself.

The water-seller has to take this into account. Which means he either has to reduce the price he charges so it’s not worth people trying to kill him, or he has to spend some of his profits on security. Thugs, pretty much.

But why pay for his own thugs? Why not pay government, and use its thugs? Everybody chips in some money, the government creates police and an army, and they make sure that customers don’t just take the water. They also solve another problem we hadn’t mentioned, making sure that people keep paying up later once they are no longer dying for thirst. The government enforces the water-seller’s contracts.

It should be pointed out that the water-payer is getting a lot more out of the governments thugs than most ordinary people are. Even if we assume the new police enforce all contracts and stop violence against everyone (as best they can), this guy has a lot more enforcement needs and a lot more people who want to kill him than an ordinary person. So even if everyone pays, say, 10% of income for the police, our water-seller is doing well out of this.

But why should the water-seller pay 10%? If the government has politicians whose money is separate from the government’s money, who can’t just use it as their purse, why not give them personally, say, 2% in gifts. That’s enough money to make them, personally, filthy rich. And they can lower water-seller taxes (after all, he saves lives and is a lynchpin of the economy) and raise them on other people. With a bit of work he might not pay any direct taxes, only gifts, and the rest of the population will pay for the enforcement of his contract rights. Yes, that reduces the post-subsistence money he gets from the people whose lives he saved, but for every dollar spent on enforcement he would have only gotten two-thirds anyway.

This is power pricing in a parable.

Back in the eighties I was very poor and did not have a phone. Ever try to get a job without a phone? It limits you to a set of very menial, low paying jobs. How much is a phone worth if you need it to get a better job? In the modern world, where job-hunting is done through the internet, how much is it worth to have email?

For years I didn’t have a credit card. I eventually got one because I needed to travel, and only the lowest grade of hotels will let you stay if you don’t have a credit card. Likewise you can’t rent a car without a credit card. How much is not having bedbugs and having blackout drapes and a good mattress worth to you? How much is being able to drive worth to you?

Let us say you live far from where you work, and there is no public transportation. How much can you be charged for gas before you refuse to pay? Probably just slightly less than the difference between your current job and the best paying job near where you live, minus whatever price you put on the annoyance of having to drive a long ways.

What if there aren’t any jobs near where you live that you can find because the economy is in a prolonged slump? How much can they charge you for gas, and repairs, and car insurance and driver’s license fees then? You have to have a car, you can’t make a living without it. Everyone who sells you something related to cars knows that.

There are two answers to these what-ifs. There’s the free market answer, and there’s the government-for-the-people answer.

The free market answer is that if it is easy for new suppliers of gas, or repairs, or insurance, to start a new business, if the current suppliers charge more than the cost of getting into the business, someone will start a new business and undercut them. The threat of that, and the actual occasional reality of that, will keep current suppliers from gouging you. If there are a lot of people selling, even without new people coming into the business, one of them may “betray” the others and sell for cheaper, so long as they can still make a profit (or to drive people out of the business they might sell for a loss, so they can later charge the full “power price”.)

The second answer is that the government says “that’s not fair” or “it is not in our interest to let you take such high profits, because it reduces economic activity and thus our tax base” and simply doesn’t allow businesses to take maximum profits.

If the government doesn’t stop it, and if the market doesn’t stop it, however, profit maximization will occur.

“What this is really worth to you is just slightly less than every dollar this will earn you or save you. And that’s what we’re going to charge.”

In the real world, of course, there are multiple demands on each consumer – food, water, housing, transportation, education, healthcare, entertainment. So even if in one field there is no government or market reason not to gouge, there is a limit to how much a business can gouge because there are so many businesses trying to do so.

But notice something about that list: food, water, housing, transportation, education, healthcare, entertainment—every one of those things, except entertainment, you either need to survive, or you need to maximize your income. You pretty much must have those things, so anyone who is in a position to take them away is in a position to profit maximize. Now, let us say that in many of those fields the businesses are constrained either by the market or the government so they can’t take almost all of the value of what they offer. In such a case, the field or fields which isn’t constrained is going to make much higher profits. So if water companies are not subject to the possibility of new competition, nor are they regulated that field is going to be making much higher profits than housing, food, education, healthcare and so on.

So every business wants other industries to be subject to regulation, and to be a free market, but they want themselves to be free of regulation and free of real competition. A small number of other firms in the industry, all of whom do business the same way, and none of whom seriously undercut each other is acceptable to profit maximizers, but if it is easy to enter their business, then there is a free market and that’s not good for profit maximization.

Whenever you see an industry where profits are routinely higher than the norm for the society there is a good chance it is neither properly regulated nor a free market.

Because ordinary citizens do not have market power, because they cannot individually break a major firm, they must take prices. If the phone company, or the water company sets a price, you pay, or you don’t have a phone, or water.

Now consumers do have power as a group. If large numbers of consumers move together they can destroy or make a company. However it’s hard for consumers to do this when there is collusion between companies. If they’re all basically the same, if the product and the service is the same, consumer revolts are unlikely, especially for any must-have products. You must have water, you must have food. If you want a good job you must have a phone and internet, and any place without good public transit, you must have a car.

Consumers have power as consumers in markets that are actually free, where there is actual competition. Citizens also have power to the extent that they have power in government, and thus can use government to control industry, either to make sure there are actual free markets, or to ensure that if there aren’t, they are regulated.

To go back to our initial example, if you come crawling out of the desert and anyone can give you water, not just one person or a few people colluding, you’ll probably get it for little more than it usually costs. Indeed, a good samaritan may give you wate for free. If the government is responsive to ordinary citizens sense of outrage and morality “that’s not fair!” then even if there is only one water-seller, the government won’t let him charge you more than anyone else.

Individual consumers are in a weak position. As consumers they have very little power. It is as citizens that they have power, and it is in actual free markets that the producers do not have enough power to take advantage of consumer weakness. Free markets, however, are very fragile things, and usually only exist if government makes sure they do, which comes back to consumers being weak, but citizens having power through government. Citizens who treat politics as consumption, however, will lose both power and prosperity.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

The Role of Violence and Coercion in Saving the World

By

On November 9, 2013

37 Comments

It will be impossible to save the world from climate change without coercion.  The problem of climate change is a problem of common sinks and limited resources: the atmosphere can only absorb so much carbon, the seas only have so many fish and can only withstand us dumping so much plastic and other pollutants into them.  The world has only so many forests, and so on.

These are genuinely limited resources.  Dumping into them, or chopping them down, or overfishing them is an advantage to whoever does it: they can burn dirty (cheap) fuels, they can use plastic packaging consumers like, they can have fish to eat now.

It is rational, in the sense that you receive a benefit, to destroy the world. It is especially rational to do so if you expect to be dead before the costs come to bear, or if you think you can use your money to avoid the worst of climate change.

We have an additional problem: no one has jurisdiction over all of the atmosphere, all of the seas, all of the forests.  If country A decides not to pollute or dump or cut down forests, someone else can do more of that and gain a short term benefit.  And by short term benefit I mean “some of the decision makers and their friends will personally get rich.  Filthy, stinking, rich.”  (This is also one  problem with refusing to have high marginal taxation, capital taxes, estate taxes and corporate taxes.  People are less interested in destroying the world when they’ll only make a little bit off it.  The calculus does change somewhat.)

So how do you ensure that Brazil doesn’t destroy the rest of the Amazon, that Japan doesn’t radically overfish, or that the US doesn’t dump obscene amounts of carbon into the air per capita?

There are three essential approaches.  The first is bribery: we’ll pay you not to do this.  Up to a certain point this is necessary: if Brazilians can make more money chopping down jungle than keeping it around, why wouldn’t they? But everyone has the ability to do destroy the world, everyone can hold you hostage, and once people start, they don’t stop.  Bribery only works if it is short term, if it becomes “we’ll pay for you to transition to a different economic model, but no more than that.”

The second is incentives.  Why are the Brazilians chopping down the jungle?  Because Americans want to eat beef.  If Americans change how they eat, much less reason for the jungles to be chopped down.  If we don’t want plastic to destroy the Oceans maybe we should just forbid most plastic packaging?  It can be done, I grew up with paper bags and glass bottles, for example.  I grew up in a culture where every food worker didn’t wear disposable plastic gloves.  I survived, I guarantee you will too, no  matter how much of a germphobe you are.

The third is coercion.  You will not do this, and if you do we will do bad things to you.  Lock you up, sink your ships, and if it comes to it, kill you.

Now let’s be clear, coercion underlies virtually all social relations.  You pay taxes because if you don’t, somebody with a gun will come along and throw you in jail.  You have property because men with guns enforce your property rights.  You go to school, because if you don’t… well, you get the picture.  No society has EVER existed that did not have some form of coercion available to it.  In many hunter-gatherer societies that coercion was the simplest of all: expulsion.  If you didn’t obey the rules, they kicked you out, and that meant death because no, most people cannot survive alone, and most people don’t want to.

Because there is an advantage to unilateral betrayal: to dumping your pollution on other people and letting them pay the cost, there will always be people who want to do it, and it’s not always worth trying to use incentives to get them not to: it swiftly becomes too expensive.  The best approach is often to unilaterally take certain actions off the table: none of us will unilaterally take each others stuff.  None of us will dump poisons into the air that kill other people we don’t know.  None of us will, on net, allow forests to decrease.  None of us will use plastic packaging.

This is the problem of collective action: if none of us do these things, we’re all better off.  But if one of us or a few of us do it, we have an advantage over other people, and if other people are doing it, we need to do it to keep up.

This brings us to my comment, in my 44 Points Post about needing an armed force to protect the Oceans, a comment which caused much screaming, since people thought it violated my point about not wanting large standing armies.

An army and a police force are not the same thing.  An international “Ocean Guard” is not a navy, it does not need destroyers with depth charges and nuclear submarines with missiles and Aircraft Carriers.  It needs ships capable of find trawlers and boarding them.  Police force.

But the key problem here is jurisdiction: no one has jurisdiction.  No one can say to the US or China or India or Japan, “you will not do this!”

We must create institutions which have the authority to say “you will not pollute, you will not destroy the environment.”  More than that, because we have gone too far, we are going to need institutions which can say “and you will also work to fix the environment.”  Again, countries will want to not contribute, because if someone else does it, and you don’t, you get most of the benefits without the costs.

Now we can create a world economy which is not harmful to the environment and in which everyone is fed, clothed, has shelter and has a meaningful life with a good chance at happiness.  We are going to have to, because people who are unhappy, who do not love, and are not loved, who are frightened, will do whatever they feel they must.  We must drain the swamp of true need, of hunger, of great fear.

But that’s the end point: that’s where we must commit to go.  Along the way, however, bad actors will have to be forced to stop what they are doing coercively.

Failure to do so means death and suffering.  More death and suffering than is caused by coercively, say, sinking Trawlers or trade embargoing countries which won’t stop using plastic containers.  We are in a situation where the median death estimate from climate change is probably a billion people.

We cannot entirely bribe and incentivize ourselves our way out of this problem, some coercion will be necessary.  How much money would you have to pay Wall Street, for example, to stop doing what they do?  As much, or more than they make doing what they do.  How much to stop Big Oil?  Same answer.  We can’t afford it, that money, those resources, must be spent fixing the problem and taking care of ordinary people.  So we must criminalize certain behaviour, on a world scale and then enforce it.

That is policing, if done right, not military action.

There are great big reasons to be scared of anything that looks like a world state.  I have a preference for nations, because a world state that turns totalitarian is a nightmare, and a world state is also likely to lead to stagnation.  My suggestion is to try federalization: specific bodies with specific enforcement, but they must have transnational police powers.  There is no reason these bodies can’t be run by democratic methods, no reasons the courts they run can’t be fair and open. Our current transnational bodies aren’t democratic, indeed are anti-democratic, precisely because our elites don’t want them to be, but that is, again, a social choice.

We figure this problem out, or we fry.  We need institutions for transnational action, institutions with police power, courts and which are democratically constituted.  This isn’t an insoluble problem, either in general, or specific, except that it challenges the people who currently have power and who are currently getting filthy rich by destroying the environment, and in so doing likely killing a billion or more people, and conceivably, risking the future existence of humanity entirely.

Given the stakes, we’d best grow up.  There is only one world, and until we get off it, it is a single point of failure. It must be dealt with as such.

 

Incentives

Why The Republicans Shut The Government Down and Threaten the Debt Ceiling

By

On October 6, 2013

21 Comments

HBR has an article by Justin Fox on the government shutdown in Washington in game theory terms.  It’s good as far as it goes, but it amounts to this:

  1. It works, they get some of what they want
  2. People keep doing what works.

Let’s add some more specifics.

The article mentions that the freezing of redistricting in most Republican states means that Republicans can’t lose the House.  What it fails to mention is this: they can lose their seats by losing the primary.  The Tea Party (unlike progressives) is very good at winning primaries.  Even if they don’t succeed in a primary challenge, their challenges are serious, and politicians don’t want to chance it.  Fighting a challenge is expensive, risky and time consuming.

Fox notes that Obama has repeatedly given in.

But has he?  Remember the famous FDR comment, “I agree with you, now make me do it?”

Obama has a long record of statements and actions which indicate he wants a lower deficit, wants to cut back on entitlement and spending and desires a grand bargain.

Were Republicans making him do things he really didn’t want to do?  Perhaps he might have chosen to do things somewhat differently (he wants mostly spending cuts but at least some new taxes, they want no new taxes).  But the goals of the Republicans (cut entitlements and the deficit) and Obama’s goals (cut the deficit and entitlements) aren’t that far apart.  What they differ on is the exact way in which it should be done.

Obama agreed to past debt negotiation events because he wanted to. He did have other options.  He could simply declare that the constitution says that debts must be paid, argue that one law (the debt-ceiling) does not outweigh another (the budget) and tell the treasury to keep on keeping on.  There is nothing the House, alone, could do about that.

Obama, in other words, to use a game theory term, has a unilateral move: something he can do that cannot (or will not) be stopped by other actors.  His BATNA (best alternative to a negotiated settlement) is to simply tell the House to suck it and keep spending.  He chose not to do so.

When you’re dealing with game theory you have to consider all the players possible moves and their goals.  Obama and the Republicans have been in an extended negotiation over not whether to do a Grand Bargain cutting entitlements or whether to cut the deficit, but what that bargain will look like and how the deficit will be cut.

Add in one more player: Democrats.  Obama cannot, using just Democratic votes, get the entitlement cuts he wants, this was true even when Democrats controlled the House.  Republicans can vote for entitlement cuts and get reelected, too many Democrats can’t.  To slash Social Security and Medicare Obama must have Republican votes.

In other words, this multi-year session of threats about the debt limit, the government shutdown, the furloughs, is a multi-year negotiation between Obama and Republicans.

The Beauty of Obama’s Clapper Appointment

By

On August 13, 2013

45 Comments

As you’ve probably heard, Obama has appointed James Clapper (the man who lied under oath to Congress about NSA spying) to review NSA spying.

I am in awe, few things have impressed me this deeply.

This isn’t just a middle finger to everyone to everyone who is against blanket surveillance (aka. the majority of Americans), it is Obama saying “Kiss My Ass.”

It’s really hard for most people to understand just how much contempt our lords and masters have for us.  They really don’t give a fuck what’s good for us, what we like, or what we think.  They are rich, or powerful, or famous because they deserve it, and if we aren’t any of those things then they don’t give two fucks what we think.  By not being rich, powerful or famous we have proven we don’t deserve any say.  After all, if we had any qualities that were worthwhile beyond the sort of qualities you praise in a dog, we wouldn’t be peons, would we.

In this, Obama is very similar to Bush, actually, but in general it’s a characteristic of everyone near the top of our current society.  Starting at about the Senior VP level, people decide that they deserve everything they’ve got and everyone else doesn’t.  If they did, they’d have it.

The media is full of studies showing that power decreases empathy, and I’ll bet that’s true throughout history. But I’ll also bet this, the degree to which it is true is social, and in many times and places it has been less true.  Over the last couple generations we’ve seen a significant, measurable fall in the general level of empathy in the population as a whole.  If you have an ideology which glorifies greed and which claims that society is a meritocracy when there is copious evidence to the contrary, those who win will believe they “deserve” what they have, and everyone else “deserves” what they have.  Add to that objective circumstances which amount to dog-eat-dop (there simply are not enough good jobs to go around) and people will either band together, or turn on each other.  Generally, we’ve chosen, for ideological reasons, to turn on each other.

This isn’t necessary: it isn’t what happened in the US in the Great Depression, for example.  It’s a choice, and our choice is to be bastards to each other.

 

Why Jeff Bezos Purchased the Washington Post

By

On August 5, 2013

19 Comments

Newspapers don’t make much money any more (though in the 90s they made returns in the teens regularly.)  What they do still have, though, is influence and power.  Even though newspapers don’t have the reach television does, they determine the stories of the day—they control the news cycle more than any other part of the media. More than that, newspapers are intelligence bureaus.  Rupert Murdoch, no fool, would spend hours on the phone with beat reporters, picking their brains.

Power leads to money.  Amazon is under what Bezos must consider attack (as in making Amazon pay sales taxes), and he needs influence, power and intelligence in DC.  The Washington Post, at 250 million, is an absolute steal, even if it loses money every day.

(Bezos letter to Washington Post staff.)

Page 13 of 15

Previous

Next

Powered by WordPress & Theme by Anders Norén