Archive for January, 2010

Minimal Consumption Entitlement: 02

January 31, 2010 8 comments

In the first part of this series I put forth a somewhat heretical concept, namely paying people to consume. A similar (but more primitive version of this) concept called ‘negative income tax’ was put forth in the Nixon presidency, but failed for two reasons- whites believed blacks (and ‘others’) were undeserving and money was still mostly physical, not electronic.

However things have changed since then. Today education, ‘good work ethic’, skill or competence do not ensure even whites a decent stable job, unlike the late 1960s-early 1970s. This phenomenon is often blamed on immigration, affirmative action and outsourcing but that is not the case for a simple but overlooked reason: technological changes have made many older jobs redundant, therefore the bulk of the poorly employed would still have the same shitty jobs even if they could stop ‘others’ from taking their jobs.

The real problem is that technology, in the last 30 years, has destroyed more well paying jobs than it has created.

However most of the economy of “rich” countries is based on high levels of internal consumption by average people, a situation with no real precedent in human history. For most of human history trade was mostly local, and most long distance trade was for a couple of essentials for the masses and luxuries for the rich. The majority of people had an existence that was barely above subsistence.

Paying money has been linked to jobs, because less productive civilizations could not afford many free riders. However today high productivity makes it necessary to have unproductive people who consume and support the productive. How can the jobless (and moneyless) still keep previously productive people gainfully employed? Any attempt to optimize this system via job cuts (in reality income cuts) causes a deflationary spiral that is much steeper than before because of high productivity.

The productive cannot exist without consumers in a system characterized by high productivity.

To put it bluntly..

We have to separate the idea of having a job with having a decent income.

While we should pay people with jobs more, those without jobs must make enough to keep a certain level of demand (and employment for those who still have jobs). Example: A person with a job can afford a BMW/ Lexus/ Porsche while the jobless can only afford to buy a Corolla. So both have cars, but the productive have much more luxurious cars than those who are jobless. It maintains the incentive to work and move up, without killing aggregate demand.

While I have a lot more to say about this subject in future posts, let me quickly discuss some of my ideas on implementing it.

It is my opinion that human beings have both ‘good’ and ‘bad’ sides. However these sides are merely different approaches to solve a problem, and are not inherently problematic. The problems arise not as a result of our sides but the context and possibilities in different eras. A society that encourages the ‘bad’ sides can muddle around upto a horse,  gunpowder and sail-ship civilization, and stay there for some time. Retaining those attitudes and further technological progress gives you ww1 and ww2. You see, such levels of technology require a different mindset to handle them without destroying each other in genocidal wars. Pre ww1 and ww2 attitudes led us into those wars. The world we live in today is far more constrained to act like in previous eras, precisely because we all have so much to lose in any significant war. However that does not mean that the ape mind won’t regain control, especially if people feel desperate and some group cracks. If that happens, the living will envy the dead in a manner that was never possible even thirty years ago.

Even if we do not reach that depth, a serious systemic defect in our system could cause enough bad faith to cause the system to come apart. Complex systems do not fail in predictable manners nor are they reproducibly rebootable.Simply put, many of our old ideas and attitudes are both outdated by technology and carry massive downside risks.

I have however no delusions that such a change will be easy or voluntary. It took ww1 to convince europeans that their old ways were dead, it took the great depression to discredit a lot of old fashioned morality and economics, and it took ww2 to get many nations to see the light. In each case, only a lot of suffering and mass casualties caused by adhering to old fashioned ideologies convinced the survivors that their “natural leaders” were out of it.

I do not think that any system can be made perfect, foolproof or impossible to abuse. The key is creating something that is less fucked up than what we now have. Moreover any system that does not consider human behavioral characteristics is doomed to fail.

So let us start with a blueprint of how to implement such a system:

1. The MCE should be paid in monthly installments, with month-to-month carryovers to buy big ticket items. However no year-to-year carryovers should be allowed.

2. The MCE cannot be used to pay any debts or invest in anything, no exceptions. It is meant for consumption, and that is all.

3. The reasons behind paying the MCE should be made very clear and transparent to everybody. It is not welfare, just a way to keep civilization working and progressing.

4. To implement the MCE properly, we require government paid education, healthcare and disability coverage (and legalized drugs).

5. You have to pay every adult, irrespective of whether they have a job or not. Their job earnings, if any, are extra. Therefore people are still motivated to work and improve their lifestyle.

6. The MCE should never be adjusted for the number of kids a person has… I repeat NEVER. The idea is to pay enough for a single person to live well OR a single person + 1 kid to live OK.

The idea is that it will be advantageous for people to form families to raise two-three kids, as opposed to getting a bigger check from the government.

7. Eliminate alimony and child support! If the government pays you enough to live a middle class level lifestyle and raise a kid nicely, you have no business asking your ex- for any money.

8. Misuse, stealing or abuse of any cards by others will be treated like any other felony. In any case the ID will be on multiple cards, so losing one won’t have any dire consequences.

9. Only you can accesses the money in your MCE account, even your spouse has to ask you to withdraw it for her. No joint MCE accounts!

10. The MCE cannot exist unless it pays every adult equally, and any basic inequality will kill the system. What you make above the MCE is your own business..

11. To keep things fair, extremely high progressive estate taxes are necessary. If you are billionaire, philanthropy is a good idea as very little (maybe 10-20 million equivalent) of it will reach your kids after your death.

Hereditary aristocracies do not lead to progressive societies.

12. The basic utilities such as sewage, water, electricity, hospitals, fire departments etc will be paid through taxes + user fees. So will education and comprehensive health coverage.

The MCE will support buying stuff like buying clothes, gadgets, cars, houses, vacations, restaurants, vacations etc.

13. Since the MCE is good enough for a middle class level lifestyle, we can eliminate large conventional pensions. The idea is to pay people enough to consume at a lower middle class level from adulthood to death.

14. It is extremely important that any such system is accompanied by the ability to fire governmental employees more easily. In any case, the ones without jobs will still have a decent lifestyle.

15.To keep people work ready, have job sharing schemes where the otherwise unemployed can still work a little and keep their skills and make some extra money.

More in another post, which is now up: Minimal Consumption Entitlement: 03

Minimal Consumption Entitlement: 01

January 30, 2010 22 comments

This post will introduce a concept that I have often briefly mentioned in my replies on other blogs. The idea is both heretical and somewhat hard to imagine, for most people.

I will start by defining my starting point, which are the ideas of Hyman Minsky. He believed that boom and bust cycles were an inherent feature of capitalism. Google the concept of a “Minsky moment”, if you are interested. His most heretical ideas were however two concepts, one of which has already become reality. He believed that the government should become the lender and employer of last resort if a bust paralyses confidence in the private sector. Underlying these ideas is one unspoken concept, namely economies can suffer crises of confidences so severe that it is not possible for the “free market” to reboot the system. Essentially if people lose confidence in the system they will stop participating in it crippling any attempts to re-equilibrate and causing a further wave of bad faith until the system becomes inoperable.

While a simpler system like an Egyptian or Roman level civilization can recover, more complex systems cannot recover if damaged beyond a certain level. Consider the effects of a nationwide electrical grid failure for two months. If you believe that everything will just “come back”, you are dreaming. Similarly cardiogenic shock lasting more than a few minutes will have a lasting effect of the person. Even if you could bring most organs back, the brain would not survive more than a few minutes of total hypoxia, at room temperature.

Which brings us to the whole business of what makes our economy function.. It is the flow of money, rather than the amount of money per se that makes the world go around. Now there are those who believe that only zero sum money, like gold, can survive over the long run. However we no longer live in a zero sum world, indeed every phase of the industrial revolution has made the world less zero sum and more productive than the last, and as Keynes famously said “in the long term we are all dead”.

The high and ever increasing productivity of our world creates some unique problems, not experienced by previous generations. You see, for most of human history productivity was so low that people who consumed but did not produce were rightly considered parasites. However we now live in a world where a fraction of the population can provide all the necessities and luxuries for everyone else. The real question then is: how can the rest of the population pay to buy these products and services. Part of the solution lies in price deflation, I am writing this on a 200$ iPhone, a concept that would have considered almost laughable a decade ago.

However this does not still solve the major problem:

How can you employ most of the people who do not perform any obviously important function?

Some might suggest eugenic genocide, but the problem still remains. A smaller population makes many people with previously useful jobs redundant, as high productivity removes the necessity for most people to work. The logical conclusion would be one human who could produce everything, but had nobody to sell it to. Don’t laugh, it may not be ultimately necessary for humans to do anything to produce everything.

The other option is paying people to consume.

I can immediately see your main objections to this idea, so let me go through them.

1. How do you motivate anybody to work?

A: The answer to this is quite simple. Pay people to work beyond their minimum consumption entitlement. So a person with a job makes x + y, instead of just x. He/ she is free to use ‘ y ‘ any way they see fit, including not spending it.

2. How do you stop this free money from being used for anything other than consumption?

A: In the old days, this was hard to enforce. But interac cards and income tax departments make it possible to track how people use their money. Plus it would be helpful if the true purpose of the free money was explained to it’s recipients.

3. Why should the “undeserving poor” receive free money?

A: Because you are only one job loss or innovation away from losing your fortune and importance for good. In any case, most high earners in society are rentier parasites.

4. How can you motivate people to innovate?

A: Easy! A stable life makes it more easier for people to develop truly revolutionary ideas and concepts. The big jumps in human innovation never came from micro managed projects with job instability. A decent and stable existence might actually help us innovate and dream further than is now possible. Scarcity encourages survivalism over speculative thinking, guess which one leads to big innovations.

5. How do you stop the “masses” from voting more stuff for themselves?

A: This one is easier than you think. Since more demand creates more jobs for producers, I fail to see the problem. Of course, we have to abandon old ideas about money supply, that originated in a gold standard based world.

6. What about inflation?

A: Technology will cause product/ service price deflation. Let me ask you a counter question:

Who does inflation hurt? Does more harm come from deflationary job and income loss or from inflationary destruction of savings? Inflation merely increases the numbers on a price tag, deflation causes misery and deprivation. Miserable and desperate people start looking for and supporting egomaniacal dictators. Read some history!

In any case, fiat money created by a stable government is far less inflationary than debt based money created by banksters. I will explain that concept in another post.

Stay tuned for my next part of this series, hopefully answering some of your feedback to this article. The next part is now up: Minimal Consumption Entitlement: 02

Linkfest (January 30, 2010)

January 30, 2010 Leave a comment

In other news..

Summers, Obama’s econ adviser, says despite recovery, US in “human recession” over job losses Manipulated numbers overrule human misery and suffering. Welcome to the ivy league vision of USA.

“What we see in the United States and some other economies is a statistical recovery and a human recession”. But the level of unemployment in the U.S. is disturbing, with one in five men between the ages of 25-54 not working.

In the Packaging of Loans, a Bust With Precedent Where did the roaring 20s lead to? Never mind..

The original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. Many investors saw how rapidly real estate prices were rising and wanted in on the action. The builders and brokers were only too happy to oblige.

The Tablets of Our Dreams Merge With Reality We are living sci-fi.

Today we have the iPhone, iPad, Tabletop GUIs and we will soon have “project natal” (xbox360). Once we fit a few more modules to the iPhone, we have a tricorder.. The best part is they are cheap enough for the average person to buy and use.

See this video: Link

A Growing Share of Americans’ Income Comes from the Government But most Libertarians and CONservatives will take the money, and blame poor colored people for their misery

As you can see from the following graph, while the relationship between personal income and GDP has not changed all that much over the course of the past six decades, the share of income accounted for by transfer payments has jumped more than 200 percent.

What happens when the world defaults? The one way out of this hole is a debt jubilee, mutually agreed or otherwise!

Taleb vs Asberger’s Syndrome Sorts

Note that the very same people who attack me, on grounds of political correctness, for discussing Asperger as a condition not compatible with risk-bearing, and its dangers to society, would be opposed to using a person with highly impaired eyesight as the driver of a school bus. All I am saying is that just as I read Milton, Homer, Taha Husain, and Borges (who were blind) but would prefer to not have them drive me on the A-4 motorway, I elect to use tools made by engineers but prefer to have society’s risks managed by someone who is not affected with risk-blindness.

Financial Services: From Servant to Lord of the Economy One picture can often say much more than a treatise.

Categories: Linkfest, MSM Idiocy

Irreversibility in Complex System: 01

January 29, 2010 4 comments

If given the choice, many people would like to live in an unchanging world. However the world, indeed the universe itself, changes and often takes directions that people do not like. While the desirability of living in past eras is debatable, many would like to somehow ‘reverse the clock’ and live in some era when people like them supposedly had a better life.

There is one major problem with that wish, namely:

Complex systems are not reversible, and they cannot reach an earlier equilibria (or anything even close to that).

Before we delve into the ‘why’ of irreversibility, let us define some concepts. So what is a complex system anyway?

I prefer to define a complex system as one in which the number of components, or their interactions, cannot be determined with any degree of certainty.

Therefore a rifle firing match grade ammunition is far closer to a simple system than a complex one. Let me explain.. We can create and manipulate metal, explosives and machines with an extremely high degree of confidence. It is also possible to compute the effects of gravity, wind and altitude to a degree allowing them to be factored. So while a good rifle can still fail, miss or jam, such occurrences are tractable and correctable. It is possible to hit the target with the 5th shot, even if you missed the 4th because of bad firing technique, after successful hits with the first three.

Complex systems either have many components that are poorly understood, unknown or whose interactions are not well characterized. An additional factor operating in complex systems is emergent phenomenon. Living Organisms, Cultures, Nations, Civilizations are easily understood examples of complex emergent systems.

Let me start with a few examples derived from living organisms:

While fish and some amphibians have gills, aquatic reptiles or mammals (either alive or extinct) never redeveloped gills. Mosasaurs, Plesiosaurs, Crocodilians, Aquatic Birds and Cetaceans would benefit from the ability to extract oxygen from the water like fish. But in each case adaptations were made in existing systems rather than evolve gills again. Considering that animals rarely lose genetic material altogether, it is paradoxical that inefficient solutions such as air sacs, better tolerance to hypoxia and blowholes were preferable over regression, even for truly aquatic genera like some prehistoric aquatic reptiles (mosasaurs) and cetaceans (whales/dolphins).

The answer to this question underlies the main reason why complex system are not reversible, and is paradoxically also the reason behind the success of x86 based CPUs.

The simple answer is: compatibility of existing applications. You see, both evolution and CPU architecture are constrained by the inability of older or newer de novo designs to run routines that were developed for the system in question (and which are poorly transferable to older or brand new architectures). Every new feature implemented in an existing system or architecture makes it harder and harder to revert to the ancestral forms. It is easier to add new routines to emulate a desirable feature, even if the result is mediocre than revert or go back to the drawing board. In living systems, the drawing board approach is especially problematic.

Changes in our civilization present a similar problem. You cannot uninvent birth control pills, electricity, automobiles, flush toilets, the internet and universal sufferage. These concepts (and technology) have diffused and any group which gave them up first might be at an disadvantage to one that did not. Though each innovation creates its own problems, many routines our world depends upon require their continued presence. Moreover many innovations, such as nuclear weapons, are game changers in that a world with many nuclear powers is very unlike a world with one or two nuclear powers. The mere presence of a few crude nukes can change the bargaining posture of larger nuclear powers, because such weapons are far more damaging to countries that depend on more complex and interconnected systems and supply chains to maintain high productivity than those who do not have them in the first place.

There is no way back, and even a collapse will give us a world that is unlike one that we have ever lived in. Many aspects of our age, such as top heavy demographic profiles, widespread diffusion of technology, near instantaneous communication on redundant networks and widespread technological diffusion have no historical precedent. Consider the effect of digital cameras in cellphones (barely a decade old) on aspects of our lives such as news reports, multiple records of incidents and teenage girls sexting their ‘boyfriends’. An innovation as cheap and small as fixed focus digital cellphone cameras has changed our world in ways that we have still not fully appreciated.

Everytime, we open a few new doors we close an old door for good. It is not intentional, but inherent in the very action of opening new doors. These new doors open up possibilities that are far more lucrative than retracing your steps and giving up the new possibilities.

Evolve or Die, Your Choice! If you choose to keep practicing old behaviors with negative survival value in this world, do not blame others for your demise. An ape mind with trans-human capabilities will kill itself, eventually. What worked for most of human history may now be counterproductive. It is important to be aware that a lot of “ingrained” behavior is actually choice, even if it is not evident at a conscious level.

Autophagy: 01

January 26, 2010 2 comments

Complex systems such as civilizations and economies share a lot of “behavioral” characteristics with multicellular organisms, of which are one. Autophagy, is a catabolic process involving degradation of a cells components, or whole cells to maintain a balance and keep the organism healthy and alive. However cancerous cells often pervert this process by encouraging catabolism of cellular components and cells, that are healthy.

To understand why such perverted autophagy is dangerous, one must consider the first issue namely: What makes multicellular organisms possible? If every cell in the body decided to act in it’s best interest, multicellular life would not be possible. Animals, who supposedly lack emotions, such as salt water crocodiles are not as cannibalistic as ‘rational self interest’ would predict. Even bacteria in biofilms often act in synchrony, and cooperate to ensure their collective best interest.

However our whole way of life is increasingly based on adversarialism, an ideology that has reached its greatest expression in the west, and some asian countries. I am not implying that other cultures are saintly or noble, merely that they have figured out what some groups ignore..

A race to the bottom has no floor, and ends in an abyss.

The question then is: Does unrestricted competition without any rules have any redeeming features, or does it merely lead to the ultimate implosion of a society.

One of the popular themes in conventional history is a concept that people are mean, selfish and deceptive (rational actors). However it does not take a genius to figure out that any subsistence level society would not survive if even a small minority behaved like ‘rational actors’. Given that humans have lived in subsistence level societies for most of our history, it is unlikely that adversarial behavior was the norm in our species.

Sociopathy is only viable in a society with significant surpluses. However sociopaths are like stupid parasites that keep on destroying their hosts, till none are left. Normal parasites almost never stress their hosts to the point of destruction, as they cannot exist without their current or future hosts. In many respects, human sociopathy is like a malignancy. It grows where it should not, appropriates resources that will ultimately destabilize the system and replace healthy and useful tissues with ‘rational actors’. Our financial sector, most of our legal system, law enforcement systems and overpaid medical professionals have much in common with terminal malignancies, as far as our civilization is concerned. What ‘new wealth’ is created by such groups? Does it lead to any advances that can stand up to objective measurements?

The more important questions are: Does the presence and activities of these groups enrich society, a concept dependant on continued cooperation amongst the actors? Are their activities not destroying healthy tissue (other occupations/ skillsets) and reducing nutrients to other vital tissues (wage cuts), thereby reducing the ability of that system to survive. Is the effect of these groups on our system not analogous to the effects of metastasized cancer on the body?

Some may justify this as fundamental human behavior, but is that really the case? In any case most of us no longer burn witches, sell slaves, empty chamberpots out of our windows or undergo surgical procedures without anesthesia. Whenever we find better ways to do things, we change and abandon the old ways.

Every empire in history ultimately failed because it overreached and functionally killed its host, and thereby starved itself. Empires also turn on themselves (internal looting) in their final stages, a process not unlike larger metastates blocking the growth of smaller metastates in cancers. Empires are cancers, and hence will ultimately die (along with the hosts). Any stable civilization, that is not dysfunctional, requires everybody involved to benefit to some degree.

Many white historians see the building projects in ancient egypt as expressions of Pharonic ego. I see them as public work projects to redistribute wealth, and keep people fed, cared for and involved in the system. Djoser, Kufu, Rameses etc were the original Keynesians who understood the social stability issues inherent in concentrating wealth. Building pyramids and necropolises might not increase productivity, but they sure increased aggregate demand. Ever wonder why they survived as a civilization for over 3,000 years? How long have you been a literate civilization?

Hayek vs Keynes Rap Anthem

January 25, 2010 1 comment

Problems with Evolutionary Psychology: 01

January 24, 2010 9 comments

This post is likely to rankle some readers, because they see that concept as gospel. But then again, I am the Devil’s Advocate. The methodology and concept behind many such “studies” will be attacked in later posts, but let us start with the most obvious problem. Even if we assume that the concept is true, it runs into major problems:

1. Throughout most of human history we lived in groups with sizes between 100 and 2,000. So how can behavior ‘optimized’ for that group size scale upto much larger groups. You may still behave that way, but the consequences will be very different.

2. Most people through most of history had very few personal possessions. How do you factor in the effect of material possessions and opportunities opened by such possessions on human behavior. Feedback loops.

3. Do we really have an accurate understanding of the social milieu, opportunities and constraints that supposedly shaped our behavior. We analyse history and other cultures through our viewpoint, but is that reasonable?

4. Were older societies and tribes as adversarial as ours? While they were just as stupid, vain, cruel and murderous as us, why did they not kill each other more? Lack of technology is not a good explanation, because the numbers involved were also much smaller. Why are primitive cultures generally more hospitable than ours? Why was assimilation more common than outright genocide?

5. Why is it so hard to find sexually deprived men or women in primitive cultures? Why are “losers” not shunned. They may not get the most attractive partners, but it actually takes effort to remain celibate in primitive cultures. Why?

6. Can you really be an arrogant guy in a tribe and not suffer an unfortunate “hunting accident”. Can you screw over others in small groups and not suffer consequences? So why were such men not selected out?

7. Do you actually believe that technologically lacking cultures are stupid or dumb? Could you survive and prosper if you were placed in a bountiful tropical paradise? Ever tried working it out, even mentally..

8. Do factors such as geographical mobility, communications, ability to have a non-subsistence level lifestyle alter the calculations. Is there any similarity between most of human history and the world we live in today?

Maybe the real issue is something else, namely:

People are just trying to use a made up “science” to justify their behavior. It is much easier to kill infidels if your respected priests can come up with a clever sounding justification.