Hoisted From My Own Comment Elsewhere: The Tyranny of the Middle-Man

I posted this comment over at Russ's place:

Fundamentally, I think you're arguing that liberty begins and ends with autonomy, which is inherently a local thing.  No market can be a "free market" if it depends on the coordination of far-flung resources by a middle-man, as the middle-man will of necessity become the top-dog.  All financialization ultimately boils down to creating a middle-man, an intermediary between market participants and what they seek to acquire.  Whether the commodity in question is money or food, the middle-man can create gluts and shortages at will, and does so to further his own self-interest.

An important point that economist Steve Keen has made about mainstream economics is that it models our economy as if there was no money, as if we were merely bartering.  He makes this point most forcefully here, but you should consider a more undertaking a more complete treatment of the topic in his book, Debunking Economics, most of which you can find in a much more complete but less cogent form here. 

In the movie (but not the book) The Wizard of Oz, Dorothy was admonished to ignore the man behind the curtain.  In modern economics, we're all implored to ignore the man between us and what we want.

And, sadly, we comply.

FYI -- I likely will have a burst of activity over the next week as I will be on vacation with my family.  Be warned, though, I'm trying to find a way to work blogging into my daily life while not distracting from the many other things I want to accomplish.  This inherently means that I'm going to be throwing a lot of seemingly half-formed things out there for consumption.  Trust me, though, I don't throw out half-formed ideas, only half-formed expressions of them.  Challenge me.  Question me.  I'll respond. 

Comments have been acting up lately (Russ, Mr. Falberg and I have all had problems), so feel free to contact me directly at taojonesing@gmail.com

"Efficiency" Is Tyranny; Scale Is Violence

These are a couple of thoughts that occurred to me as a result of my discussion with an economist friend on Tuesday. 

My friend's premise, with which I disagreed, was that society prefers a small number of producers that make a particular good because that is the most efficient outcome.  I argued that his conclusion assumed a definition of "efficiency" that simply did not have to be.  If we were to define efficiency differently and construct a different set of rules to enforce that new definition (i.e., reconfigure the accounting rules, tax laws, etc. that enforce the current definition of efficiency), then the outcome could be different; i.e., society would prefer several small producers over one or two.

That didn't set well with him.  He insisted that "this was physics," that economies of scale command industry consolidation into one or two firms.

I had to disagree again, and that's when the fun really began.  Having worked at both monopolists (Intel) and startups, I know that most of the vaunted economies of scale arise from the fact that large firms demand-- and get-- much lower prices from their vendors.  They likewise get much more favorable financing terms from banks and other financial institutions.  Because large firms tend to have much lower input costs, they have a better cost structure than their competition, who falls farther and farther behind.

Desparate to make a point that could not be countered, he trotted out the division of labor and Adam Smith's pin factory, arguing that in many industries there is a minimum capital expense required just to get started, and that the widget maker who made a million widgets a year has a cost per widget that is a lot lower than a widget maker who uses the same size factory to make just one widget.  Again, I disagreed, noting that it is accounting rules and tax laws regarding depreciation and amortization that drive his conclusion, not any law of nature. 

So he called me irrational, at which point I took him a bit deeper into Adam Smith's body of work to identify a major weakness of modern economics, which is that it assumes that humans make economic decisions purely in monetary terms.  Even Adam Smith recognized that was not the case, as his Invisible Hand was the manifestation of society's "moral sentiments," the set of rules that makes every citizen consider how his actions will be perceived by the rest of society.  And behavioral economists, leveraging off of recent advances in cognitive science, have confirmed Smith's fundamental insights.    As a result, I argued that modern economics is complete hogwash.  The saying in corporate America is "if it can't be measured, it doesn't exist." and economists refuse to measure anything other than money.

I then turned his economies of scale argument on its head, noting that the returns to scale a large firm receives can be viewed as a tax on the rest of the industry.  The vendor has its own success metrics, including profit margins that it will have to support by charging the large firm's competitors substantially more.

We quickly agreed to disagree and moved onto friendlier topics, but I have not been able to stop thinking about our conversation. 

One thought is that efficiency, as currently understood, is tyranny.  Economic efficiency is a prerequisite to maintaining the illusion of perpetual exponential growth.  It is always and everywhere the enemy of competition and self-determination.

Another thought is that scale is violence, at least in economic terms.  Too Big To Fail is a clear manifestation of this violence.

I'm Done With Mainstream Econo-Blogs

Naked Capitalism is the last mainstrream econoblog that I still frequent, and I've decided that continuing to visit the site is of little value to me.

It's bad enough that Yves has elected to give "air time" to the smug, self-celebrating Philip "I'm so fucking smart" Pilkington, a guy who pimps MMT in a way to make it sound hopelessly naive.

But the real problem is tha lack of any effort to define solutions to the problems that are now so very clear.  The aim of the blog appears merely to be to confirm, yet again, that people like "us" were right to say there's a problem because, well, there's a problem!  Mirable dictu!

Quelle surpise?  Not really.  You make money by exercising people's concerns, not by resolving them.

Why quit frequenting NC now?  I have found that all I care about are comments from attempter and DownSouth.  Everybody else is too stuck within the current paradigm to say anything of interest.  Like me, however, attempter and DownSouth don't comment nearly as much as they once did.

Harriet Beecher Stowe

I just took a quick glance at this story over at Salon.com regarding a review of a recent book about Harriet Beecher Stowe.  I think the history described by the author is, well, a bit wrong.

Generally, and let's be clear about this, slavery was indeed one of the twin pillars that formed the foundation (you like mixed metaphors, well there you go) of the U.S. Constitution.  That does not mean that there was any sort of agreement about slavery other than the fact that the mercantilist Northern elite agreed to allowing slavery to persist in exchange for the physiocratic Southern elite's agreement to accept tariffs.  Go back and read the Constitution (without the Bill of Rights, which was added later) and the compromise between tariffs and slavery is starkly obvious.  Indeed, in the run up to the Civil War, there was a book that made precisely this point.

What I find disturbing about the laudatory praise of Ms. Stowe is the notion that she was somehow "liberal" for her age.  The fact is that many Northern states had abolished slavery within their borders before ever entering into the Constitution, an argument that was made by Dred Scott's lawyers to the Supreme Court.

When you look at the historical pressures that led up to the Civil War, what you see is the fact that the Southern states were using the Constitution as a club to force Northern states to support and perpetuate the institution of slavery.  Abolitionism wasn't really an attempt to do away with slavery as much as it was an attempt to hold the line on slavery in the Northern states.  The abolitionist movement would never have arisen but for the fact that Southern states were constantly seeking to force Northern states to support slavery through fugitive slave laws, etc.  Indeed, the first proposed "papers please law" required freed slaves to carry papers with them to prove they were not fugitive slaves.  The failure to have such papers would have allowed fugitive slave hunters to kidnap free black men and women and "extradite" them to the Southern states, which they apparently did quite often.

Bottom line: the smaller Southern states had succeeded for decades in browbeating the larger Northern states into accepting and expanding the institution of slavery much more broadly than contemplated by the Constitution.  In this sense, the Civil War was really a war of aggression by the slaveholding Southern states: the abolitionist movement arose as a bulwark against extra-constitutional encroachment of slavery into the Northern states, something that the Dred Scott decision all but assured.  The Southern states could not abide a reversal of their fortune.

Against this backdrop, I have a real problem with the concept of portraying Ms. Stowe as some kind of "liberal" hero that the current "progressive" movement can take lessons from.  She was merely a representative of one of the dominant forces in the United States.  Yes, she was a particularly effective propagandist-- and I say this as somebody who enjoyed her book and agreed with her message-- but to lionize her as some kind of hero is to confuse the effectiveness of her presentation with her real aims.  Like the "pro-life" advocates of the present era, she did not care about or take responsibility for ensuring the quality of life of those she claimed to represent and protect.  She was far more interested in limiting the options available to her opponents than she was to helping the pawn she used to achieve that end.

And I say all this as somebody who believes that Harriet Beecher Stowe actually performed a real service to our country. 

Responding to the most recent comment

Blogger is puking on my attempt to provide a comment, so I'm responding to Mr. Falberg here.

I prefer to not resort to ideas like the "New World Order."

First, to the extent that a New World Order is actually contemplated, it is merely a new new New World Order (at least) meant to secure power in light of society evolving to a point where it wants to take that power away.

Second, the current NWO theory infuses far too much lifelike detail into what is at best a thumbnail sketch. Indeed, the ruling elite would be stupid to insist on a "one world government" because a key aspect of maintaining control without responsibility is to be behind the scenes and out of sight. The more people there between you and the audience, the less likely they'll be able to see you. The current system is already far more effective than a one world government would ever be.

And the worst part about it is that a lot of the people who believe in and push the NWO thesis love them thelr natural law, their John Locke, and their Thomas Jefferson, i.e., they just prefer the old NWO over the one they see coming.

I care less about the conspiracies and more about the mechanisms that allow us to be duped by them.  The only thing we can control is our own actions.  I can't stop somebody from trying to dupe me, but I don't have to allow myself to be duped.  The problem with the NWO theory is that it assumes its starting worldview is itself valid and true when, in fact, it appears to be just a prior version of the NWO, at least to me.

Explaining My Thesis Re: Locke and Jefferson

In response to my last post, where I said "my thesis is that both Locke and Jefferson crafted their ideas with the aim of controlling the masses, not empowering them,"  I was asked to explain how I came to that conclusion.

The journey to that conclusion has been a long one, but it ultimately comes back to Mark Twain's obervation "History doesn't repeat itself; it rhymes."  This is an aspect of what my own half-formed theory on the fractal nature of human cognition, which is based on the basic comparative mechanism by which human beings decide.  This mechanism is responsible for the fractal nature of markets observed by Mandelbrot, and for history rhyming with itself.

In every era, somebody rediscovers the basic mechanism of human decision making and seeks to use it, and the ruling elite invariably seeks to it to its advantage.  Knowledge of this mechanism, i.e., the comparing of what is experienced to what was expected (as filtered through cognitive bias), is something that predates cognitive science and behavioral economics by millenia.  Plato certainly seemed to understand it . . .

Neoliberalism has been relatively open in its purpose and its means for achieving it.  Its break from classical liberalism is marked by Walter Lippmann's The Good Society, which identifies and laments his perception of classical liberalism's shortfalls, which include the mistaken belief that educating the masses makes it easier to govern them.  Under Neoliberalism (and its offshoot. neoconservatism), we've seen a concerted dumbing down of the populace.  More importantly, however, we've seen the deliberate redefining and demeaning of important, visceral words such as "liberty," "freedom" and "democracy," all to the ends of securing the power of the elite that arose and flourished under classical liberalism.

When I realized that Neoliberalism merely recasts feudal doctrines of control such as the divine right of kings (the market is God and winners are chosen by God to win) and excommunication (the poor and unemployed have been cast out by God, the market), I recognized the possibility that classical liberalism itself was merely an earlier recasting of the same doctrines of elite control to secure the place of the then elite: the educated oligarchs like Locke and Jefferson.  The difference is that the transformation that took place in the Age of Reason was triggered by the Reformation and the realization that the Roman Catholic Church was corrupt, which resulted in classical liberalism focusing on God as man (i.e., Jesus) instead of the disembodied authority figure who will strike you dead if you do something wrong. 

Interestingly enough, however, Locked constructed his "natural law" to protect and preserve the "property" that a person already owned, regardless of how he came by that ownership, even though there is no such thing as property in nature.   Locke and Hobbes were merely two sides of the same coin, which requires a state to hold society together.  Both sought to achieve the same end of protecting the gains the elite had achieved under the prior system of feudalism.

One of the reasons that I'm worried about a new Dark Age is the fact that we are moving to completely digital media, which means that documents can be disappeared or altered without anybody being aware of it.  At least the Church of the Dark Ages had to go around burning books and killing people to purge the world of knowledge.  In another century or so, there will be no permanent record of anything.  All knowledge that is publicly available will be subject to censorship and manipulation that nobody can detect, even if they thought to look for it.

I realize that this post has been somewhat stream-of-consciousness, but I hope you get the giste of what I'm saying, which echoes and amplifies what people like Niebuhr and Myrdal have said: the ruling elite define the institutional values that set the baseline of decision making in a society.  Those values are only changed consciously in response to a clear an present danger to the elite themselves.  Marxism kicked classical liberalism in the head, which would have been fine but for the Great Depression.  So the ruling elite kicked things into overdrive to define neoliberalism, and they documented what they did every step of the way.

Why I See a New Dark Age and Not Merely A Greater Depression

To me, the Dark Ages are "dark" because of the knowledge that was lost, if not intentionally destroyed. In this sense, I do not view the coming new Dark Age as a return to subsistence farming or involving the complete loss of modern technology, but as the fulfillment of Neoliberalism's mission to engineer a "great forgetting" of classical liberalism and other fruits of the Age of Reason. The ideas of people like John Locke and Thomas Jefferson had a power beyond that which even those two intellectual giants could contain, and they must be destroyed in their raw form and viewed onlythrough the Neoliberal prism. (Note: my thesis is that both Locke and Jefferson crafted their ideas with the aim of controlling the masses, not empowering them.)

The sociopathic dogma of Neoliberalism drives narcissistic institutional values that prevent the masses from thinking beyond themselves, encouraging them instead to embrace selfishness, or "self interest, wrongly understood." The purpose of the coming Dark Age is to forget the classical liberal ideas that resulted in self interest, rightly understood, i.e., self interest that recognizes the good of the community as part of self interest. Mix in the "now-opia" (or is that "now-opiate") of the modern consumer culture, and you have a perfect set of conditions for a new closing of the Western mind.

It's Been Awhile, But I'm Still Here

I have started and shelved numerous posts since my last one.  If I ever get around to finishing all of them, I will have a healthy stock of content.

At this point, however, I'm not using this blog so much to communicate what I'm thinking as to record it.  Unfinished posts remain available to me on blogger as vectors indicating the magnitude and direction of my thinking at the time.

I break my silence now because of a recent series of articles posted up over at the Automatic Earth.  This series of posts, which is now in the third installment of four, appeals to me because of the intellectual challenge it poses to understanding the underlying message: the writing is not sugar-coated pablum but hardcore thinking steeped within a context not readily accessible to most and, therefore, subject to contemptuous dismissal.  But for the fact that the posts contravene the dogma of precious metals as money, one person with whom I correspond (who shall remain nameless because he'd likely complain that I was using his name to my own advantage) would argue that I'm a dupe, fooled by my predisposition towards the intellectual (he assumes because of my education, which is incorrect; I was a lousy student after high school and studied no social science, economics or philosophy until recently.  I write the way I think and speak.  If that comes across as intellectual, so be it.).

The game that is being played out right now is much deeper than the vast majority of people suspect.  I've been talking about "managed deflation" for months, and that's still my call.  What this means is cyclical variations in asset values over time with the absolute magnitude of the values being dampened over time such that we revert to a new, downward-sloping mean.  The powers that be can and will make a tremendous amount of money raping the "traders" chasing yield as a hedge against inflation that will never materialize.  Financialism is done.  Toast.  Kaput.  At least for the foreseeable future.  The point now is to maintain the illusion of normalcy while creating new memories of the horror created by the evil State that is but a puppet of larger, more powerful interests that pretend to be victims.

The bottom line is this: vast, multinational corporations have broken the individual v. collective dialectic.  These corporations are collectives masquerading as individuals victimized by the only collective that neoliberalis officially recognize outside of labor unions: the State, which typically is a Banana Republic or Company Town owned and controlled by these corporations.  The whole thing is a tragic farce that will end badly for all concerned.  We're not heading for a repeat of the Great Depression, but of the Dark Ages.

Anyway, after all that, you'll find what the Automatic Earth has to say quite uplifting, if you can manage to pick your way through it.