Random Rant #1: What is money? What "Invisible Hand"?

I think it's fair to say the cost of housing relative to goods in general has gone way up in the last few decades, so it it tempting to say it has for some reason tended to become "overpriced".  Classical economists will then roll their eyes because it sounds like we are referring to some moralistically based "fair price".  But maybe we should say what has happened to housing is that it has become to some extent "monitized"; i.e. it has aquired characteristics of a generic symbol of value, and such acquisition by a good can result in a peculiar effect, in which some part of the potential (normal use-) value of the good is lost or "locked up".

What sort of effect might this be?  Gold has quite a few practical uses but due to its monetization, it is just incredibly expensive, and most of it is stashed away somewhere, so it is probably impractical to use for many, if not most, of its potential practical purposes.  When the same thing happens with houses, people are apt to overbuild, and normally the income threshold at which you can afford a house gets higher, while, like the gold sitting in storage vaults, we have an overabundance of empty, or underutilized rooms.  In my own neighborhood, the number of houses that added a floor during the middle of the last decade was pretty impressive.  Actually, thanks to foreclosures, we have an abnormal amount of totally empty dwellings many of which are literally decaying (one problem gold does not have).

In parts of Africa like Botswana, it is said that "cows are money", at least for those living the more traditional lifestyle.  In the heyday of classical aristocracy, real wealth consisted of land.  With my cultural background, it is hard to relate such ideas to the idea of money as coins, bills, or even entries in a bank ledger.  Then there are stocks and bonds; should they be thought of as money?  Maybe a useful and general theory of money would treat goods, like houses, as X% use-value and Y% money-value, where the ratios can best be thought of as a function of current market psychology.  This is not much use unless we can turn the vague idea of "market psychology" into things we can perhaps credibly measure, such as "consumer confidence".

My understanding of money has a long way to go, but I'm pretty sure the gold bugs and people who say "fiat money" with a hiss get it more wrong than I do.  The business cycle was a lot more violent and crashes were more frequent when much of the world was on the gold standard, and today with
the sort of wealth that is around in the world, someone would definitely go for cornering the market (as Steven Jay Gould's ancestor tried to do in the U.S. with silver).  I remember graphs showing how unstable the economy was on the gold standard in a book by Milton Friedman!

I think the idea that there *should* be some sort of objective measure of value for the whole world is just a nice dream, and there's no escaping the reality that the "wealth of nations" is largely a measure of collective confidence, but I wish I could say it more precisely and rigorously.  When close to half of Americans listen to pundits and media conglomerates whose program is preaching that "America as we know it" is on the verge of disappearing because we have a "Marxist" president, I would gladly bet, if there were any way to settle such a bet, that this "anti-confidence" game accounts for half or more of the drag on the economy.

The idea that whatever value you've created can be crystalized in such a way that value is guaranteed to flow back to you after you retire is a delusion.  If you've suppressed widely available education because you didn't want to pay taxes you will spend old age surrounded by unproductive idiots and UNLESS that is, you are really good at squeezing value out of the unproductive idiots -- making them work exclusively for you and not for themselves -- as the French aristocracy did so well in most of the 18th century, just before you know what happened. So the choice may be either a crumby old age, or, if you excel at imposing on others, an OK but precarious old age.

10 years ago, taking a history class at Rutgers, I read Economic Sentiments by Emma Rothschild. I had no idea who Amartya Sen was at the time Rothschild and Sen have been married since 1991.  The book convinced me that "Adam Smith's Invisible Hand" is something of a fetish.  In all of Smith's writings, he referred to the "invisible hand" pretty infrequently, and much more casually than one would think when one hears today's genuflections to "Adam Smith's Invisible Hand"  To me he seemed to be using the phrase more or less to mean "sometimes, things work pretty well when left alone", and not to state some ironclad law which is not for ordinary mortals to understand (seriously, what does "invisible hand" but an appeal to magic?).  That mythologizing of the phrase seemed, from Rothschild's book to be the work of some of Smith's immediate successors in the economist's pantheon.

Amartya Sen, the Nobel prize winning economist and, like Smith, moral philosopher, seems much in agreement with Rothschild about Adam Smith. He says "Some men are born to smallness; other men achieve smallness, but Adam Smith had smallness thrust upon him".

On Smart Division of Labour in a Propaganda Enterprise

 Email to a historian friend in February 2012 (concerning the at-the-time current "last nail in the coffin of the AGW Hoax" -- We have had many of these).

It seems like an interesting time to be doing history of ideas in real time.  I'm contemplating in much the same spirit as "Jacksonian Miscellanies".

I've never seen a time when so many normal seeming people readily swallowed so much totally unjustified and worthless nonsense.  My mother showed me a letter to the editor of her newspaper which started out characterizing Obama as a Marxist ex-street hustler and was telling me it had some good points, and not blinking at the crazy characterization.

I had one insight the other day when my wife Loretta passed me an article which appeared to say that a credible climatologist had shown there was no increase in carbon dioxide in the last 150 years.  Have you heard of this? Well everybody who reads some of the most popular "conservative" (Burke would roll over in his grave) blogs has heard of it the vast majority I am sure believe it.  The readers response areas are full of language like "final nail in the coffin of climategate".

The paper said the "atmosperic fraction" of CO2 hasn't changed significantly in 150 years.  I found some research papers which defined the term which is the ratio of how much excess generated CO2 is in the atmosphere vs how much is absorbed by the sea, etc.  It says that ratio has remained the same.  Some climatologists and activists believe the ability of the sea, soil, etc. to take up CO2 might break down resulting in an even bigger portion of what we're emitting to remain in the atmosphere, the paper says there's no sign of this happenning.  It doesn't change the fact that 40+% of the excess C02
we're generating with carbon based fuels IS accumulating in the atmosphere.  The author has made some effort to clarify his point, but it really looks as if he can't even conceive of the extent to which his finding is being distorted.

What was my insight?  Rush Limbaugh and Glenn Beck had not a word to say about it.  They truly couldn't have not heard about it as it was all over Lucianne.com, Hotair.com, MichelleMalkin.com, BigGovernment.com and all the other what might be called "second tier" right-leaning sources.  Now, practically everyone in their audiences is getting the message that "sound science" has demonstrated that carbon dioxide is NOT increasing as a portion of the atmosphere (and besides, it's good for plants as they like to say).  This should be the clinching argument.  Why would they NOT spread the good news?  I assume they take some care about their credibility by having SOME people check facts (mostly they stick to saying things
that are not provably true OR false).  So they let the gang of bloggers who have nothing to lose spread useful disinformation and neither confirm nor deny it.

The insight is that millions of people are being fed a steady stream of hardcore lies from these under the radar screen blogs, and the email manufacturies that make their output look like a friend of a friend just happenned to pick up on this, and if you're a good patriot you'll mail it to at least 10 more friends, so Limbaugh et al don't have to be caught
saying easily refutable specific nonsense, but it sets people up to agree with their general conclusions.

Where to Begin (a "Truth Project" worthy of the name)? (#5)

Over the years, my thinking on why I should bother have developed and gotten clearer.

Theoretically,  with the Internet, we have immediate access to almost infinitely more "information" than was at our fingertips even 30 years ago.  But most people will probably agree that "most people" (but a different "most people" from themselves) are systematically mislead by information sources they trust.

Where to Begin (a "Truth Project" worthy of the name)? (#4)

If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties. Francis Bacon, The Advancement of Learning (1605), Book I, v, 8. [Link on the right is to a free Kindle version - help yourself]

Over the years, my thinking on why I should bother have developed and gotten clearer.  Like most pithy sayings, Francis Bacon's overstates the case.  Still, I like it.

Where to Begin? #3

"I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power."

--Thomas Jefferson to W. Jarvis, 1820.

Where to Begin? #2

The vast majority of people would prefer a simple comfortable life.  Why are so many diverted into some radically different, destructive and self-destructive path?

Where to begin?

It is December 3, 11 years after "9/11".  What is the world like today?  There are so many contradictory opinions.